Tuesday, April 12, 2016

MIC issues "ominously broad" restrictions on foreign investment - really??

Consultants interviewed in a newspaper article are voicing concern about “ominously broad” investment restrictions, but we think that they got it a bit wrong. 

The article (http://tinyurl.com/zdyvjfs) refers to recent MIC Notification 26/2016 which contains a list of businesses in which foreign investment is restricted. It quotes advisors criticizing certain passages of the Notification as giving the MIC new power to arbitrarily deny foreign investments. However, this is wrong.

The Notification prohibits “economic activities endangering watershed forests, religious sites, traditional worship sites, farm and grazing lands, water resources”. While this prohibition was not in the previous notification, it was contained in a prior notification in force from 31 January 2013 to 13 August 2014. As far as is apparent, no investment was ever denied on these grounds.

Furthermore, the Notification states that “business activities which are not contained in this notification may be carried out as 100% foreign-invested business except business believed by the Commission to require permission of the relevant ministry”. The “except…” part was not in the previous notification, but it has always been the practice of the MIC to advise investors to obtain a recommendation letter from the relevant ministry first if it knew the ministry to have a policy at odds with the official notification. While this is not ideal, it is not a new difficulty and investors and their advisors have learned to live with it.

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