CANADA

Taking the bite out of FIRA

MARY JANIGAN September 27 1982
CANADA

Taking the bite out of FIRA

MARY JANIGAN September 27 1982

Taking the bite out of FIRA

CANADA

It was billed as a simple administrative shuffle that dealt a different face into a staid bureaucracy. But when Robert Richardson officially replaces Gorse Howarth as commissioner of the embattled Foreign Investment Review Agency next month, a behindthe-scenes shift in the federal approach to foreign investment will be sealed—at a time when international and domestic pressure to scrap the agency is mounting. The policy shift follows a cabinet battle last spring between hard-liners, who wanted to suspend agency operations, and nationalists, who fought to preserve it. Richardson is expected to put more emphasis on Canada’s need for foreign capital. The affable public servant at the top will attempt to steer FIRA on a fine line between the roles of watchdog and welcome wagon.

That balancing act will be a marked contrast to Howarth, who has been blamed for throwing FIRA into ever escalating conflict with the business community. Friends say that Howarth felt betrayed at FIRA because he was struggling to administer a policy that the government was subtly abandoning. Says Howarth: “You get a lot of abuse and criticism and very little thanks.” Richardson was selected by Privy Council Clerk Michael Pitfield, a longtime fan of Howarth who, nonetheless, recognized the need to repair the damaged relations with the business community. FIRA’s nominal boss—Industry Minister Herb Gray—was not consulted in the decision. Indeed, Richardson reportedly has received an informal guarantee that Gray will not be allowed to tamper extensively with FIRA recommendations—a constant problem for Howarth, who often had to shoulder industry outrage about delays that were caused by cabinet after his decisions.

Richardson was raised on an Ottawa Valley farm and he earned his master’s degree in economics at the “advanced” age of 36 while working for the trade department in Sydney, Australia. He has been deputy secretary at the Treasury Board since 1977. Seven years ago he and his wife, Irene, launched a business that has been producing and retailing reproductions of early Canadian furniture. “I found out that it is not easy to run a private business,” says Richardson. “My gut reaction now is that most government regulations are necessary—it’s the application of them that requires reasonable judgment.” Richardson’s philosophy reflects the changing government attitude toward foreign investment. To combat the pre-

vailing anti-FlRA mood, Richardson will have to reverse a tide of uniformly bad publicity which is only partially deserved. Although FIRA is routinely criticized for its copious red tape, Ottawa feels that some of the problems have been solved by changes announced in the June budget and by the addition of 11 FIRA employees. The budget changes enable about 85 per cent of all FIRA reviews to be done with a “short” form, instead of the complicated “standard” form, in an average of 21 days, as com-

pared to as many as 90 for most of the more complicated cases. The statistics tell a story of increased efficiency. In September, 1981, FIRA had a backlog of 436 cases. The current lag is 120.

FIRA’s image problems also stem from several dramatic rulings that have left the impression that the agency is insensitive, when it was cabinet, in fact, that pulled the strings. This fall J.B. Lippincott of Canada will close because FIRA would not allow the U.S. purchaser of its U.S. parent to buy the Toronto firm. And FIRA would not compromise—even though its action meant the loss of 12 jobs. Last week, after months of unfavorable publicity, the agency belatedly

managed to ensure that the jobs will be preserved as part of another foreign acquisition purchase.

Still, FIRA has to shoulder a share of the blame for its problems. Its dealings with the Montreal firm Imasco Ltd. epitomize the kind of rigidity that Richardson will have to overcome in order to placate businessmen. Last year, for example, Gray—the man who takes FIRA’s recommendations to cabinet—wanted to delay an Imasco request to buy the Lido Biscuit Cie. of Montreal. The rest of the powerful priorities and planning cabinet committee was aghast—delays could mean job losses. But Gray would not back down until the others overruled him after an hour of heated debate. Meanwhile, Imasco had applied in December, 1980—at the invitation of Gray—for a FIRA ruling that would free the company from scrutiny. Last month Gray finally refused, and Imasco warned that Canada may lose millions of investment dollars as a result. The bottom line appears to be that most senior ministers and bureaucrats backed Imasco’s drive for corporate citizenship. But since the rulings are left solely in the hands of the minister, even those powerful Ottawa estates could not convince Gray to amend the law or the regulations.

Despite the current pressure to dismantle FIRA, most businessmen argue that the agency merely requires an overhaul. Andrew Kniewasser, president of the Investment Dealers Association of Canada, argues, “It’s absolutely essential that Canada should have some way of looking at takeovers and large direct investments.” But he adds that “the current system is simply too laborious.” Some critics say, however, that FIRA has become a haven for wheeling and dealing by legal hotshots beyond the scrutiny of Parliament. Richard Schultz of the Centre for the Study of Regulated Industries at McGill University points out that FIRA rulings are actually made by cabinet. “It’s the best of all possible worlds for the politicians,” says Schultz, “since it allows them to make decisions and yet cover themselves because they don’t have to make the rules.”

Legislating FIRA rules is not on the Liberal agenda—and some businessmen argue that such a code could mean greater rigidity. While Prime Minister Pierre Trudeau has maintained that he will not disband FIRA— “We would be selling the birthright of our children”—the Liberals have been moving away from their 1980 campaign pledge to beef up the agency. The Richardson appointment may be the final signal that, with minimal admission, Ottawa has confirmed yet another major policy reversal.

-MARY JANIGAN in Ottawa.