(Adds reaction throughout)
By Louise Egan
OTTAWA, June 26 Canada should lower barriers to
foreign investment in telecommunications, uranium mining and
air transport, and lift a ban on domestic bank mergers, an
expert panel commissioned by the government said on Thursday.
In a report that was prompted by widespread concerns that
home-grown businesses were being gobbled up by foreign
interests at an unprecedented rate, the Competition Policy
Review Panel warned against greater protectionism.
"We decided it would not be in Canada's interest to try to
erect more barriers, to play defense," the panel's chairman,
Lynton "Red" Wilson, told reporters after releasing the
Canada can only start "participating in international
consolidations in its own right" if it opens up its doors to
foreign capital and streamlines the approval process for
investment and takeovers, the five-member panel concluded.
"We would prefer to see the game go to the other end of the
rink," said Wilson, a well-known businessman and the former
chief executive of BCE Inc (BCE.TO), parent of Bell Canada.
The Conservative government commissioned the panel in July
2007. The report contained 61 recommendations.
Big business was supportive of the proposals, but many
wondered whether the minority government would let the
proposals die on paper, especially if there is an election
"The key now is to make sure that the government addresses
the report's recommendations with the seriousness they
deserve," said Perrin Beatty, head of the Canadian Chamber of
Commerce. "I'm optimistic. I'm hopeful," he said
One of the more contentious issues dealt with in the report
was that of big mergers in the domestic banking sector, which
have been on hold since 1998.
Wilson urged policy makers to reconsider. "We leave to
political masters the judgment involved in what they believe is
in the public interest from their point of view," he said.
But mergers may remain political taboo because Canada's
smaller-sized banks helped the industry emerge relatively
unscathed from the global credit crisis, experts say.
"Our banks, because they are more regulated, did not engage
in the same practices that led to the collapse of real estate
in the U.S.," said Peggy Nash, legislator with the New
On foreign investment restrictions in sensitive industries,
the report made specific proposals for each sector.
For airlines, it urged Ottawa to raise the ceiling on
foreign ownership to 49 percent of voting equity from 25
percent. The government should decide by the end of 2009
whether to allow foreign investors to set up domestic air
A two-stage easing of telecommunications and broadcasting
regulations was also recommended, in line with guidance given
by the government last year. Current rules limit foreign
ownership of a telecom provider to 20 percent in an operating
company and 33.3 percent in a holding firm.
In the uranium industry, the report said an easing of
foreign ownership rules should be subject to the passage of
national security legislation, and reciprocity agreements.
The national security legislation has yet to be drafted by
Industry Minister Jim Prentice, even though he advised the
panel last October that he was removing that issue from its
mandate because he wanted to act on it prior to the panel's
June 2008 deadline. "Canadians and non-Canadians are entitled
to clarity," he said at that time.
His foot-dragging has become a sore point for the political
opposition. "This minister's failure to act and his
dilly-dallying on the national security test issue is creating
more investor uncertainty, not less," Liberal legislator Scott
Brison told Reuters.
The panel also suggests a series of measures to speed up
the review process for mergers and foreign investment, although
it acknowledged that Ottawa has only ever vetoed one foreign
It recommended raising the threshold for authorities to
review foreign investment projects to C$1 billion from C$295
Instead of the current policy where companies must show
their investment is of "net benefit" to Canada, the onus would
fall on the industry minister to satisfy that it is contrary to
Canada's national interest before blocking a transaction.
(Editing by Frank McGurty)