THE Canadian Government is counting on the North American Free Trade Agreement (NAFTA), low inflation and modest economic growth to attract investment from Asia. Secretary of State Douglas Peters said yesterday NAFTA - which created the large trading bloc of Canada, the United States and Mexico - provided unique opportunities for Asians seeking to make investments or sell products. He added that inflation of just 1.3 per cent and gross domestic product growth of 3.6 per cent last year were other strong reasons for Asians to consider Canada rather than investing in fast-growing economies in the region. Despite the optimistic political rhetoric, Mr Peters declined to outline specific programmes or strategies the Government would use to solicit capital from Asia. When asked if there were particular products the Government would focus on in terms of exports to Asia, Mr Peters said it was interested in ''anything at all'' and did not delve into further details. Mr Peters arrived in Hong Kong yesterday for a one-day visit and held meetings with government officials and businessmen. This followed a two-day stop in Tokyo. He said one of the reasons he came to Asia was to put a face to Canada's new Liberal Government and send out the message that the country was tackling its economic problems, highlighted by unemployment of 11.2 per cent. Several accountants in the territory argue Hong Kong emigrants to Canada will be hurt by Canada's recent budget, which will eliminate the capital gains tax exemption granted against profits on sales of listed stocks and real estate. But Mr Peters, formerly chief economist and senior vice-president with Toronto-Dominion Bank, said the treatment of capital gains in Canada was still favourable. Coopers and Lybrand tax partner Barry Macdonald said while Canada did, in fact, treat capital gains better than Australia and Britain, it paled in comparison to Asian countries where capital gains were tax-free. There has also been concern that changes to the taxation rules on foreign income will affect Hong Kong emigrants. Mr Macdonald said many wealthy Hong Kong emigrants to Canada hold their assets in offshore trusts, which had a five-year tax holiday. He said they had argued that after the holiday's expiration, the trust's assets were ''business'' rather than ''passive'' assets and still exempt. The new rules, however, had put a stop to this further exemption. Statistics Canada reported on Tuesday that the country's economy grew at a compounded annual rate of 3.8 per cent in the fourth quarter of last year. The Government has forecast growth of three per cent this year and 3.8 per cent for next.
