In 2007, the Competition Policy Review Panel was created by the Minister of Industry to review and consult on Canada's competition and foreign investment policies as well as to recommend ways of improving Canada's productivity and competitiveness.
In its 2008 report, Compete to Win, the Panel recommended amending the Investment Canada Act (Act) to reduce barriers to foreign investment by increasing the review threshold and adopting enterprise value as the basis of calculation.
The Government agreed with the Competition Panel that foreign investment is beneficial to Canada. Amendments to the Act in 2009 proposed raising the threshold for reviews to $1 billion over a four-year period.
The Panel also proposed changing the basis for calculation of the review threshold from asset value to enterprise value. The concept of enterprise value better reflects the market value of a business and better captures the increasing importance of the service and knowledge-based industries of our economy.
The Government has been working to develop the methodology for calculating enterprise value. It is important to get such a critical change right, and will be bringing regulations into force for both these changes. State-owned enterprises, however, will remain subject to the existing net benefit review threshold of $330 million in asset value, adjusted annually to reflect the change in nominal gross domestic product in the previous year.
In doing so, the Government is liberalizing the review process for private sector businesses. We are focusing on the most significant transactions. In addition, we are modernizing the basis of calculation of the review threshold to more accurately reflect the true value of today's businesses by capturing intellectual property and other intangible assets.
These changes will in no way affect the Government's ability to protect Canada's national security. The national security provisions apply to a broader set of investments by foreign investors, including those that are not subject to the net benefit test. The Government has the authority to take any measures it considers necessary to protect national security.
Once the related changes are brought into force, they will enhance Canada's ability to attract the foreign capital and knowledge crucial to the growth of Canadian businesses while maintaining our ability to protect Canada's interests.
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