German minister wants tougher foreign investment rules

Economy Minister Brigitte Zypries said even small investors can ‘exert considerable influence on a business.’ (Reuters)
Updated 03 March 2018
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German minister wants tougher foreign investment rules

BERLIN: Germany’s economy minister on Saturday suggested tightening the rules on foreign investment, following concern over Chinese influence on European firms.
Last month it emerged that Chinese billionaire Li Shufu had quietly bought a near 10-percent stake worth around €7.2 billion ($8.9 billion) in German car giant Daimler — making him the group’s largest shareholder.
“We must always adapt our law on the external economy according to new developments, including the threshold at which (the government) can become involved,” Economy Minister Brigitte Zypries told the weekly Der Spiegel.
Currently, Berlin can scrutinize a transaction and possibly prevent it, if the foreign investor seizes a stake worth more than 25 percent of a company’s capital.
“The fact is, the investors can often exert considerable influence on a business, even with a smaller stake,” said Zypries, a Social Democrat.
China’s increasing interest in German companies has sparked unease in Europe’s biggest economy.
The distrust is all the greater as EU nations are more open to investment from abroad than Beijing allows on its territory.
The subject will “have to be on the agenda of the new government, particularly with regard to strategic infrastructures, such as energy, transport or Internet sectors,” Zypries said.
Germans are waiting to discover on Sunday whether the Social Democrats will approve a coalition with Chancellor Angela Merkel’s Christian Democratic Union, bringing an end to a five-month stalemate following inconclusive elections.
German ministers agreed last year to expand government powers to scrutinize takeover bids from abroad, especially in sectors affecting critical infrastructure, and to extend the range of deals eligible for official probes.
The move followed the 2016 Chinese takeover of industrial robotics firm Kuka and US-based Tesla Motors’ buying-up of factory automation specialist Grohmann Engineering.
That same year also saw Washington block a Chinese acquisition bid for German microchip maker Aixtron, warning its products could have military applications.
— AFP


Foreign investors hope India dials back policy shocks after Modi win

Updated 24 May 2019
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Foreign investors hope India dials back policy shocks after Modi win

  • Modi’s pro-business image and India’s youthful population have lured foreign investors
  • After Modi’s win, about a dozen officials of foreign companies in India and their advisers said they hoped he would ease his stance and dilute some of the policies

NEW DELHI: Foreign companies in India have welcomed Prime Minister Narendra Modi’s election victory for the political stability it brings, but now they need to see him soften a protectionist stance adopted in the past year.
Modi’s pro-business image and India’s youthful population have lured foreign investors, with US firms such as Amazon.com , Walmart and Mastercard committing billions of dollars in investments and ramping up hiring.
India is also the biggest market by users for firms such as Facebook Inc, and its subsidiary, WhatsApp.
But from around 2017, critics say, the Hindu nationalist leader took a harder, protectionist line on sectors such as e-commerce and technology, crafting some policies that appeared to aim at whipping up patriotic fervor ahead of elections.
“I hope he’s now back to wooing businesses,” said Prasanto Roy, a technology policy analyst based in New Delhi, who advises global tech firms.
“Global firms remain deeply concerned about the lack of policy stability or predictability, this has sent a worrying message to global investors.”
India stuck to its policies despite protests and aggressive lobbying by the United States government, US-India trade bodies and companies themselves.
Small hurdles
Modi was set to hold talks on Friday to form a new cabinet after election panel data showed his Bharatiya Janata Party had won 302 of the 542 seats at stake and was leading in one more, up from the 282 it won in 2014.
After Modi’s win, about a dozen officials of foreign companies in India and their advisers told Reuters they hoped he would ease his stance and dilute some of the policies.
Other investors hope the government will avoid sudden policy changes on investment and regulation that catch them off guard and prove very costly, urging instead industry-wide consultation that permits time to prepare.
Protectionism concerns “are small hurdles you have to go through,” however, said Prem Watsa, the chairman of Canadian diversified investment firm Fairfax Financial, which has investments of $5 billion in India.
“There will be more business-friendly policies and more private enterprise coming into India,” he told Reuters in an interview.
Tech, healthcare and beyond
Among the firms looking for more friendly steps are global payments companies that had benefited since 2016 from Modi’s push for electronic payments instead of cash.
Last year, however, firms such as Mastercard and Visa were asked to store more of their data in India, to allow “unfettered supervisory access,” a change that prompted WhatsApp to delay plans for a payments service.
Modi’s government has also drafted a law to clamp similar stringent data norms on the entire sector.
But abrupt changes to rules on foreign investment in e-commerce stoked alarm at firms such as Amazon, which saw India operations disrupted briefly in February, and Walmart, just months after it invested $16 billion in India’s Flipkart.
Policy changes also hurt foreign players in the $5-billion medical device industry, such as Abbott Laboratories, Boston Scientific and Johnson & Johnson, following 2017 price caps on products such as heart stents and knee implants.
Modi’s government said the move aimed to help poor patients and curb profiteering, but the US government and lobby groups said it harmed innovation, profits and investment plans.
“If foreign companies see their future in this country on a long-term basis...they will have to look at the interests of the people,” Ashwani MaHajjan, an official of a nationalist group that pushed for some of the measures, told Reuters.
That view was echoed this week by two policymakers who said government policies will focus on strengthening India’s own companies, while providing foreign players with adequate opportunities for growth.
Such comments worry foreign executives who fear Modi is not about to change his protectionist stance in a hurry, with one offical of a US tech firm saying, “I’d rather be more worried than be optimistic.”