The increasing number and complexity of foreign direct investment (FDI) regimes requires careful navigation when planning and executing global M&A transactions, as well as greenfield cross-border investments. In recent years, governments around the world have shown an increasing desire to scrutinize and, if considered necessary, intervene in transactions involving FDI, motivated by a number of geo-political factors including rising protectionism, concern about cyber-security threats, and more recently the need to protect critical industries in response to the COVID-19 pandemic.
Asia-Pacific (APAC) jurisdictions have very different FDI regimes due in part to the different stages of development of their economies, and the goals pursued by their governments. The variety of cultural backgrounds also plays a role in shaping their FDI regimes. For example:
- In jurisdictions like the mainland of the People's Republic of China (Mainland China), India, Indonesia, Mongolia and Vietnam, the trend in the past many years has been a continual relaxation of the FDI regimes to attract more foreign investment (including during the COVID-19 pandemic, while most of the Western jurisdictions were instead tightening up their FDI regimes). To the contrary, jurisdictions like Australia and Japan have been strengthening their FDI regimes in recent times, particularly since the start of the COVID-19 pandemic, although there is an increasing trend of relaxation now that the COVID-19 pandemic is perceived less as an emergency and more like the new normal in some of these jurisdictions (the People's Republic of China is the notable outlier pursuing a "zero-COVID-19 policy").
- Developing economies typically try to channel foreign investment where it is most needed according to their own development goals, and encourage investments that allow the sharing of know-how and the development of domestic capabilities through joint ventures between foreign investors and local players. Hence "negative lists" or "positive lists" are used in Mainland China, India, Indonesia and Vietnam (a concept mostly unheard of in more developed economies). We are witnessing a trend of a continual relaxation of the foreign investment restrictions contained in these lists.
- Each of the jurisdictions covered by this guide has its own FDI procedures that are very different from one another. They are more complex in Mainland China where they involve several governmental authorities and comprise a multi-faceted regime encompassing national security review, negative lists on foreign investment, and governmental filing of projects falling into certain types or sectors. The Hong Kong Special Administrative Region of the People's Republic of China (Hong Kong) sits at the other end of the spectrum, as it does not restrict foreign investment in any sector apart from the broadcasting sector and does not implement a national security review of foreign investment.
This interactive guide compares the FDI regimes in the eight APAC jurisdictions in which Hogan Lovells has an office (Australia, Mainland China, Japan, Hong Kong, Indonesia*, Mongolia**, Singapore and Vietnam), plus India (content provided by our India focus group based in our Singapore office). It includes a summary table and a multijurisdictional questionnaire that provide an overview of the key features and related trends of these FDI regimes. It should be noted that merger control filing, foreign exchange controls, and tax are outside the scope of this guide.
Due to the complexity and intricacies in the regulations, navigating the FDI regimes is crucial for cross-border investors. Identifying the applicable laws and carefully assessing the potential concerns at an upfront stage can minimize the risks and are essential in strategic planning of any transaction. Taking the rapidly-evolving legal landscape into account, our offices in the APAC region can assist investors with our in-depth knowledge and comprehensive strategies in dealing with FDI issues.
Please refer the Contact page for a list of contributors able to assist.
* Associated office Hogan Lovells DFNP
** Associated office Melville Erdenedalai LLP
To access the guide, please click here.
Authored by Charles Bogle, Biswajit Chatterjee, Gaston Fernandez, Wataru Kamoto, Mochamad Kasmali, Stephanie Keen, Andrew McGinty, Chris Melville, Erdenedalai Odkhuu, Jacky Scanlan-Dyas, Liang Xu, Karina Antonio, Aldo Boni De Nobili, Kaustubh George, Bolormaa Gulguu, Viet Nguyen, Ray Dunn, Priscilla Pang, Valentina Zhuge, Chiyokazu Shindo, Duong Pham, Jia Zhan, Hillary Chung.