TMX deal a threat to financing: Prentice

By Vikram Barhat | March 9, 2011 | Last updated on March 9, 2011
3 min read

Reader Alert: Make your views known on the TMX-LSE story. Post your thoughts at the bottom of this story and vote in our poll here.

With the right fiscal foundation, Canada can successfully meet the challenges of new domestic and global investment boom, according Jim Prentice, senior executive vice president and vice chairman of CIBC.

Speaking to the Canadian Club of Toronto in his first speaking engagement as a banker, the former Minster of Industry said Canada’s demand for capital has never been higher and that the country must retain regulatory control in the face of the proposed TMX-LSE merger.

“The proposed merger is less about ownership than it is about regulatory control,” said Prentice. “Canada has to retain the capacity to regulate in order to advance our national interest.”

Praising the role of Canadian regulations during the financial crisis, he insisted they must not be “watered down” as the result of the exchange consolidation.

“It’s not about ideology… it’s about advancing Canadian interests,” he said, demanding assurances that key Canadian interests will be kept front and centre.

One of them is continued access to both domestic and global capital that fuels a nation’s economic growth. “We are a small country with a huge appetite for capital.”

Canadian needs are distinctive, he stressed. “No other country in the world is leading energy projects on Canada’s scale.”

Prentice pointed out that the Canadian financial sector has performed well by playing to its own rules. “That has been to the benefit of Canadian consumers, businesses and, ultimately, Canadian taxpayers.”

He expressed concern over challenges presented by integration of Canadian provincial and national regulation into global framework. Current global events require Canadians to weigh the practical merits, not the ideology, of stock exchange mergers, he said.

“We should focus our efforts on determining what specific conditions this transaction or any future transaction must meet to ensure Canadian capital markets continue to succeed and prosper.”

Prentice underscored the need for assuring international investors that Canada remains open for business and Canadian firms continue to have the right access to capital.

“This is about competing in the international markets and winning; it is about being ready to capitalize on international investments that will transform our country and the planet.”

The global investment boom, he said, will bring significant competitive pressure from emerging markets both in terms of capital availability and cost.

Rapid urbanization in Asian countries is transforming the developing world as we know it. In 10 years China will have 44 cities larger than Toronto; India will have another 11. “Consider the investment required to meet the needs in the rest of China, in India, in Indonesia, in Mexico and in Brazil,” he said. “Imagine the rate of investment entailed by all of this as it continues, not just for years, but for decades.”

Global investment in infrastructure and production was about $4.5 trillion thirty years ago; in 2008 it stood at $10.7 trillion and by 2030 it is estimated to reach $24 trillion. “In a world such as this, Canada can’t hang back,” he said. “We need to be ambitious; we need to be entrepreneurial and we need to be practical-minded in terms of positioning ourselves in order to compete and win.”

Prentice detailed some key elements of the game plan needed for Canada to excel and prevail in the global arena. Diversifying Canada “beyond our safe North American market” topped the list. Also, Canada must continue to “move up the commodity value chain by doing more with our natural resources.”

The country must showcase its capacity for global leadership and enable local global champions to compete and win, he stressed, adding that Toronto must maintain its leadership position in world capital markets.

Opening and closing his speech with references to hockey, Prentice explicitly recommended that Canada continue to sharpen its competitive edge if it’s in it to win it.

Vikram Barhat