in Business Planning, Business Tax

Restrictions on foreign investment

Many countries impose restrictions on inward foreign investment as part of their foreign investment policy. Typically, restrictions are imposed on two types of foreign investments:

  • foreign equity in an enterprise established in the country; and
  • foreign direct investments in particular sectors of the economy of the country – usually transport, communications, real estate, finance and insurance and other business services sectors.

Types of Restrictions

The types of restrictions imposed may include the following:

  • outright ban on foreign investment;
  • obligatory screening and/or approval procedures;
  • constraints on foreign personnel;
  • constraints on operational freedom;
  • performance requirements;
  • requirement of local content;
  • other informal barriers

Most developed economies have eased restrictions and foreign investment restrictions are thought to be low in such countries, whether as a result of liberalisation of domestic foreign investment policy and through the utilisation of free trade agreements.

Whilst many developing countries have still have restrictions, competition for foreign investment has resulted in the easing of restrictions and the offering of investment incentives in an effort to attract foreign direct investment into their country. Malaysia for example, introduced 13 new service sectors to be opened to 100% foreign shareholding some years ago.

Foreign investment approval facilitation

Our team has vast experience in dealing with various government authorities in the Asia-Pacific region, specifically, in all South East Asia countries as well as in Southern Asia and East Asia (including India, China, South Korea, Taiwan and Hong Kong) and the Pacific Islands, Australia and New Zealand.

We work either by way of direct contact with the authorities or through our local agents and have successfully secured approvals and obtained concessions for our clients in respect of their investments and/or transactions, including negotiations with government authorities in respect of screening and foreign investment approvals, determination of constraints and easing of other regulatory barriers existing in many Asian countries.

We also facilitate in the application for approvals in other parts of the world by way of our affiliate program.

Foreign investment approval is usually required in conjunction with M&A transactions undertaken by our clients.