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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