India tightens foreign investment rules . . .
India amended its foreign direct investment (FDI) policy on April 17 to counter opportunistic foreign takeovers of domestic firms whose valuations have been hit hard by COVID-19. The Indian economy has suffered approximately C$330B in loss, equivalent to 8.1 per cent of its annual GDP. A recent move by The People’s Bank of China to increase its share in India’s Housing Development Finance Corporation, the largest non-banking mortgage provider in India, from 0.8 to 1.01 per cent triggered the policy revision. According to the new rule, India’s government requires not only any investment from countries that share a border with India to be scrutinized by the government, but also any Indian firm seeking to transfer its ownership directly or indirectly to any entity of those countries. In response to the changes, the Chinese embassy in India said that these new barriers violate the principles of non-discrimination.
Australia issued a similar amendment in March . . .
Australia was one of the first countries in the Asia Pacific to tighten its rules on foreign investors, announcing amendments at the end of March over concerns that strategic assets could be snapped up as a result of the pandemic’s economic repercussions. Now, all foreign takeovers and investment proposals must be scrutinized by Australia’s Foreign Investment Review Board – a measure intended to secure firms deemed in the national interest from opportunistic buyouts. Previously, Australia did not screen most overseas investments in private companies unless they were valued at more than C$245M.
Canada also wants to avoid risks to national security . . .
Even though Canada has not seen any of those ‘opportunistic’ investment flows from overseas, a statement by the Canadian government on April 18 put foreign investors on notice that Ottawa would conduct regulatory screening on foreign direct investments of any value in Canadian firms that are operated in public health or involved in the supply of critical goods and services to the country. The government said that the new policy will stay in force until the economy recovers from the effects of the pandemic. In 2019, Canada received a total of C$8.3B in foreign direct investment from the Asia Pacific.
- The Diplomat: The logic behind India’s new investment policy
- The Globe and Mail: Canada tightens foreign investment scrutiny, citing economic impact of COVID-19
- Nikkei Asian Review: Australia tightens foreign investment rules after market tumble