Ottawa bid for investment by foreigners has caveat on Canadians' culture

Canada's watchdog over foreign investment has always had a worse bark than its bite. But the 15-month-old Progressive Conservative government of Prime Minister Brian Mulroney has wanted to muffle even the bark. It figured the bad reputation of the Foreign Investment Review Agency (FIRA) was scaring off foreign investors.

A year ago the Mulroney administration introduced legislation replacing FIRA with a new agency -- Investment Canada -- and less restrictive rules for foreign investors. ``We are going to make it clear,'' said Industry Minister Sinclair Stevens, ``that the Progressive Conservative government welcomes investment in Canada, because investment means jobs.''

Even so, investments that affect Canadian culture -- publishing and broadcasting especially -- will be scrutinized to be sure Canadian culture is not dominated by the Americans or British. ``The protection of our distinct cultural identity is of singular importance to Canada,'' External Affairs Minister Joseph Clark told a New York audience last month. ``Under no circumstances are we prepared to agree to any measures which weaken those Canadian industries or undermine their capacity to serve our cultura l needs.''

Investment Canada is examining two key cases as well as the question of whether cultural businesses will be included in freer trade talks the Mulroney government has proposed to the United States.

In one case, Gulf & Western Industries acquired book publisher Prentice-Hall Inc., and thus its Canadian subsidiary, Prentice-Hall Canada Ltd. Under the Investment Canada Act, which went into effect last July, Investment Canada can review any investment in ``culturally sensitive areas'' -- including book publishing and distribution, where Canadians own only about 20 percent of the industry. Though Gulf & Western made the acquisition last winter, the government has chosen to review the case.

The other case involves the takeover by Longman Holdings Ltd. of London of Pitman PLC, also of London, which is the parent of Copp Clark Pitman Ltd., a Toronto book publisher.

Both Canada's high commissioner in London, Roy McMurtry, and Canada's ambassador in Washington, Allan Gotlieb, have urged that the acquisitions be approved. They fear publicity surrounding these cases might deter other foreign investments in Canada.

(The US limits foreign investors to 20 percent ownership of individual broadcasting concerns but has no controls on foreign ownership of print publishing.)

Investment Canada president Paul Labb'e notes that the new law presumes that Canadian and non-Canadian investment will benefit the nation. FIRA, on the other hand, saw foreign control of Canadian industry as a matter of national concern.

FIRA reviewed all direct or indirect acquisitions. (An indirect acquisition occurs when a foreign company acquires the parent of a Canadian subsidiary.) Investment Canada reviews only those direct acquisitions where the assets acquired are worth $5 million or more, and, in the case of indirect acquisitions, $50 million or more. The new agency also requires notification on all new foreign businesses and on acquisitions below the thresholds.

Mr. Labb'e notes that the process is now speedier. A foreign investment review must be completed in 45 days. Extension beyond 75 days can be done only with the agreement of the investor. Since July, Investment Canada has received 350 notifications of foreign investments or acquisitions. Some 70 cases have been subject to review.

Should the foreign book publishing companies be required to sell their Canadian subsidiaries to Canadians, they will be the first negative reviews under the new law. Considering the controversy surrounding these cases, the decision will probably be taken by the Cabinet and before the end of January.