OTTAWA - A much delayed update of the Investment Canada Act promised by the federal government remains undelivered and makes the country a more difficult place to invest for a foreign company, the NDP says.

"It creates a very difficult atmosphere to actually invest," said NDP industry critic Guy Caron, who added that the opposition is moving to make an update to the act a greater priority.

Caron said Tuesday that foreign companies looking to invest in Canada need to have a clear idea of the rules that would apply before they spend millions or even billions of dollars.

The Quebec MP said a key change would be a clarification on what the "net benefit" test in the act really means. Only deals that are of "net benefit" to Canada are approved.

"The whole process is not very transparent. There is no clear definition," he said.

"The act is very subjective the way it is being applied right now. We need some consistency, not only for the future of Canadian companies, but also for the foreign companies and foreign capital which wants to invest in Canada but have to deal with very uncertain rules."

While the government promised an update and clarification of the law, Industry Minister Christian Paradis has said little about foreign takeovers in Canada since taking over the portfolio from Tony Clement last year.

Ontario Premier Dalton McGuinty renewed calls for a review of the legislation this week after the sudden shutdown of a locomotive plant in southwestern Ontario less than two years after it was bought by U.S. industrial giant Caterpillar Inc.

The sale of Illinois-based Electro-Motive Diesel by U.S. investment firms Greenbriar Equity Group and Berkshire Partners to Caterpillar subsidiary Progress Rail Services was not covered by the Investment Canada Act.

Economist Jim Stanford of the Canadian Auto Workers union, which represented the workers at the Electro-Motive plant in London, Ont., said the lack of review demonstrates the need for changes.

"We need a broader reach for the whole review process to ensure that episodes like Electro-Motive don't fall through the cracks," he said.

Stanford said investment in Canada is a good thing, but the government needs to be cautious.

"We have followed a very naive approach that foreign investment coming in is inherently good. I think we have underestimated the wide range of risks that we face with foreign investment," he said.

"There are many circumstances in which the loss of a Canadian asset or the integration of a Canadian asset into a bigger global system can pose enormous risks to our productive capacity and to the people who work in those places."

Speculation has swirled around potential takeovers for BlackBerry maker Research In Motion (TSX:RIM), which has faced serious difficulties and seen its stock fall sharply over the last year.

However, Prime Minister Stephen Harper has said that he would like to see RIM continue to succeed and grow as a Canadian company and noted that it wasn't in the country's interest to see the hostile takeover of key businesses.

Ottawa has blocked just two foreign takeovers under the act -- BHP Billiton's hostile bid for PotashCorp in 2010 and an attempt by MacDonald, Dettwiler and Associates Ltd. (TSX: MDA) to sell its space division to U.S. defence firm Alliant Techsystems Inc. in 2008 in a friendly deal.

Both deals were rejected after furious public outrage and in the case of the BHP bid for Potash, a campaign by Saskatchewan Premier Brad Wall, whose province faced the biggest impact by the potential deal.

The House of Commons Industry committee started a review of the act last February, but that process was aborted by the federal election.

Since then there has been little sign of progress on the review.

Proposals under consideration include the addition of public hearings to the process, clarification of how the minister determines a net benefit and changes to the net benefit test.

In a 2008 report on Canadian competitiveness by Red Wilson, a senior executive with experience in both the private and public sectors, it was recommended that the threshold for review under the act -- which stood at $312 million last year -- be increased to $600 million and eventually $1 billion.

The report also recommended that the onus be changed from the investor having to prove a net benefit to the minister having to show a net harm.

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