Reports that the Harper government blocked Chinese PC maker Lenovo’s recent efforts to proceed with purchase plans for BlackBerry are further clouding the prospects for foreign investment in Canada’s tech and telecom sectors.
A Globe & Mail report on Monday quoted sources who said the government told Lenovo it would not approve any buyout attempt due to concerns over national security. While BlackBerry devices have long been the technology of choice for government workers at all levels, it’s the back-end network that is especially sensitive for government planners. And with significant amounts of confidential government messaging traffic being routed through BlackBerry’s secure global network infrastructure, there was – and is – little appetite to hand the technological keys to a Chinese company.
Start of a trend?
The Lenovo turndown echoes the government’s refusal last month to green-light the proposed US$520 million purchase of the Manitoba Telecom Services (MTS) Allstream subsidiary to Accelero Capital Inc., an Egyptian investment company. At the time, Industry Minister James Moore said the deal violated the Investment Canada Act’s national security provisions. While no additional details were provided, the second government refusal in a row is raising the spectre of a chillier foreign investment environment – one that could hamper Canadian companies looking for investors to drive growth.
Accelero’s owner, Naguib Sawiris, had some harsh words for Canada in the wake of the government’s refusal to OK the buyout, telling Egyptian news organization Al-Ahram that he would no longer invest in Canada.
“The world is big and my money can go anywhere,” said Sawiris. “I regret that we wanted to invest in Canada.”
Sawiris was also at the helm of Orascom Holdings, which backstopped Wind Mobile’s entry into the Canadian wireless market as part of the AWS spectrum auction in 2008. An initial CRTC decision in 2009 to block Wind Mobile’s entry into Canada over claimed violations of foreign ownership rules was overturned by the federal government. Ottawa later loosened foreign ownership restrictions for telecom investors. But Sawiris, who no longer helms Orascom, has frequently blasted Canadian regulators for scaring foreign investors away.
On a trip to China in February 2012, Harper said Canada was indeed open to foreign investment, and was especially focused on broadening its focus beyond seeking strictly American sources of capital.
“Our governments, our business leaders and our peoples have worked diligently to identify and to seize opportunities for expanding mutually beneficial trade and investment,” he said.
Mark Goldberg, a Thornhill, Ont., telecom consultant and founder of the annual Canadian Telecom Summit, says the refusals signal a broader lack of vision for the sector. He points to then-Industry Minister Tony Clement’s call for a national digital economic strategy as an example of Ottawa’s failure to deliver on its promises.
“The question is: What are the rules? What is the strategy?” said Goldberg. Three-and-a-half years ago, Mr. Clement challenged Canadians: Now is the time for the private sector to step up and contribute their ideas for a digital strategy and, when that strategy is in place, to implement the plan.”
Goldberg says in a global economy that simply can’t wait for countries and companies to catch up, Canada’s policy strategy is woefully inadequate. He says while investors try to place billion-dollar bets to acquire companies like Mobilicity, Allstream or BlackBerry, the government fails to live up to its end of the bargain.
“The private sector stepped up,” said Goldberg. “The government has failed to deliver on what Clement's successor called, ‘One of its most important objectives.’ As a result, Canada has not had consistent policy guiding business decisions. This is creating uncertainty in the investment climate, which ultimately costs us jobs.”
Carmi Levy is a London, Ont.-based independent technology analyst and journalist. The opinions expressed are his own. email@example.com