In The Media

Canada Should Draw Lessons from Mongolia’s Foreign Deal Confusion

by Paul Vieira (feat. CDFAI) 

Wall Street Journal
December 4, 2012

With two big foreign deals in the balance, Canada is now being advised by a Calgary think tank not to follow in the path of another resource-rich nation that’s recently scared off international investors: Mongolia.

In a paper, the Canadian Defence and Foreign Affairs Institute cited Mongolia’s failed attempt last spring to clarify foreign-investment rules, in light of deep-seated concern in the Asian country about the role Chinese state-owned enterprises should play in the resource-heavy economy.

Canada’s Conservative government is undergoing a similar process, promising to release “general” guidelines on future foreign takeovers, at or around the same time it issues its much-anticipated rulings on two key energy deals: Cnooc Ltd.'s 0883.HK -0.72% $15.1 billion planned purchase of Nexen Inc. NXY.T +1.61%; and the proposed $5 billion-plus deal for Progress Energy Resources Corp. PRQ.T -0.60% led by Malaysia’s Petronas.

Mongolia policymakers implemented a law that requires a government review of foreign-led investments in sectors deemed to have “strategic importance,” including mining, banking and media. But it’s been difficult to decipher. In September, Beijing-controlled Chalco withdrew a bid for a miner there on concerns about getting Mongolian government approval.

Mongolia’s approach has “significantly raised the risks for foreign investors,” the paper argues, claiming a number of foreign investors have reportedly withdrawn from proposed resource projects. That should be a wake-up call for Ottawa, the report’s authors say. The pending foreign-takeover guidelines from Ottawa must bring some “predictability” to rules regarding state-owned enterprises to avoid a Mongolia-like quagmire, the authors argue.

To date, Canada’s record has been spotty, the paper said. The Cnooc review and the promise of clarity on foreign investment rules–a pledge first made in 2010 after BHP Billiton's BLT.LN +0.78% failed bid for Potash Corp. of Saskatchewan–have taken too long.

“As we have seen in the case of Mongolia, resource nationalism can trigger knee-jerk reactions bordering at times on the irrational,” the paper’s authors said. “Mongolia’s current resource policy is an example of getting it wrong. Let’s hope that Canada gets it right.”


Be the first to comment

Please check your e-mail for a link to activate your account.
Donate to Canadian Global Affairs Institute Subscribe
 

SEARCH


 

EVENTS

 

IN THE MEDIA


VIDEO: NAFTA Talks At An Impasse (00:24:00)
by Chris Hall (feat. John Weekes), CBC News, October 19, 2017

 

LATEST TWEETS


Donate | Submit | Media Inquiries
Making sense of our complex world. | Déchiffrer la complexité de notre monde.
 
HEAD OFFICE
Canadian Global Affairs Institute

Suite 1800, 421 7th Avenue SW
Calgary, Alberta, Canada  T2P 4K9
 
OTTAWA OFFICE
Canadian Global Affairs Institute

8 York Street, 2nd Floor
Ottawa, Ontario, Canada  K1N 5S6

Phone: (613) 288-2529 
Email: contact@cgai.ca 
Web: cgai.ca
 
2002-2015 Canadian Global Affairs Institute

Charitable Registration No.  87982 7913 RR0001