India’s Latest Foreign Direct Investment Rules

Francisco A. Laguna

Last month, India further relaxed its laws governing foreign direct investment in various sectors.  This article summarizes the more significant amendments to the FDI Policy.

Broadcast Carriage Services & Cable Networks

Foreign investment in Broadcast Carriage Services and Cable Networks is now permitted up to 100% under the automatic route.  Previously, FDI above 49% required Government approval. However, change of control of the Indian company will require prior approval from the Government unless the same is subject to approval by the relevant sectoral regulator.

Civil Aviation

100% FDI is now permitted in existing airports and air transport services. Government approval is required for FDI above 74% in existing airports and 49% in air transport services. There is some debate as to whether airlines operated by Indian companies which are majority foreign owned will be permitted to fly international routes, but this should be resolved in a short while.

Defense

Until now, Foreign direct investment in the defense industry has be permitted up to 49% under the automatic route and above 49% with Government approval if such higher investment was likely to result in access to technology within India. The Press Note clarifies that defense products include small arms and ammunition and confers discretion on the Government to consider any other reasons deemed relevant for granting approval for FDI above 49%. All other conditions continue as before.

Hong Kong Kinder Joy - Made in India.  By Okstartnow (Own work) [CC BY-SA 4.0 (http://creativecommons.org/licenses/by-sa/4.0)], via Wikimedia Commons

Hong Kong Kinder Joy – Made in India. By Okstartnow (Own work) [CC BY-SA 4.0 (http://creativecommons.org/licenses/by-sa/4.0)%5D, via Wikimedia Commons

Foods “Made in India”

With government approval, 100% FDI is now permitted for companies selling food products wholly manufactured or produced in India, including sales through e-commerce.  This should allow for in-store cafés or shops in food courts and will add to the overall retail experience for Indian consumers.  Note, however, that the 100% FDI is only for foods manufactured or produced in India.  Foreign investors are hopeful that this liberalization will soon be applied to other food products.

Pharmaceuticals

While foreign investment in brownfield projects has been permitted up to 74% under the automatic route (it was earlier capped at 49% for the automatic route), the following new conditions are applicable to any investment in brownfield projects. These projects involve the purchase or lease by a company or government entity of existing production facilities to launch a new production activity.

  • Maintenance of production level of items falling within the National List of Essential Medicines for 5 years post investment at an absolute quantifiable level (bench marked to the highest production in the 3 financial years preceding the FDI);
  • Maintenance of R&D expenditure for 5 years post investment at an absolute quantifiable level (bench marked to the highest production in the 3 financial years preceding the FDI); and
  • Complete information on technology transfer, if any, must be provided to the relevant Ministry.

Private Security Agencies

The cap on FDI has been increased to 74%; FDI between 49% & 74% requires Government approval.

By Nazrila - Originally from en.wikipedia; description page is/was here, Public Domain, https://commons.wikimedia.org/w/index.php?curid=5843058

By Nazrila – Originally from en.wikipedia; description page is/was here, Public Domain, https://commons.wikimedia.org/w/index.php?curid=5843058

Technology Products

The new rules allow the Government discretion to relax sourcing norms for single-brand retailers that sell products using “state-of-art” or “cutting-edge” technology, in cases where local sourcing is not possible (Technology Products). The Department of Industrial Policy and Promotion (DIPP) issued Press Note 5 of 2016 Series on 24 June 2016 that states that sourcing norms will not apply for 3 years as of the commencement of business for such Technology Products. The Government’s approach of relaxing the norms, rather than providing a waiver, promotes its “Make in India” program.  It will be interesting to track whether FDI increases as a consequence of this provision, and, specifically, whether Apple and other tech companies will make FDIs in the country as a result.

All of the reforms discussed in this post are important and underline the incremental policy change which has long been hoped for. There is also a fair case to be made for the proposition that the FDI Policy is now fairly liberal and that the Government is open to considering proposals for FDI even more favorably where investment is coupled with capacity development and manufacturing.

TransLegal represents companies doing business in India in the biotechnology, foods and industrial sectors.  Call us with your questions related to doing business in India and how these new FDI rules may affect your business.

Investing in Jamaica

Francisco A. Laguna & Rolanzo White

After rebounding form the financial crisis of 2008, Jamaica is now welcoming foreign investors. The government has turned its attention to bolstering the economy and continuing impressive performance in tourism, logistics, and manufacturing.

The Jamaican Government, led by the Jamaica Promotions Corporation (JAMPRO), is creating an environment conducive to foreign direct investment. JAMPRO is an Agency of the Ministry of Industry, Investment and Commerce that promotes business opportunities in export and investment to the local and international private sector. With the debt to GDP ratio declining as a result of debt restructuring and fiscal contraction (estimated 140% at the end of fiscal year 2014/15), Jamaica is ripe with opportunity.

"Karibik Jamaika Position" by Raymond de - Raimond Spekking - Own work. Licensed under CC BY-SA 3.0 via Wikimedia Commons

“Karibik Jamaika Position” by Raymond de – Raimond Spekking – Own work. Licensed under CC BY-SA 3.0 via Wikimedia Commons

The Jamaican economy is driven by foreign direct investment (FDI). Jamaica received an estimated US$ 551 million in FDI inflows for 2014. The country has a strong relationship with the United States and the United Kingdom, and the levels of FDI can be partly attributed to these relationships. The World Bank has also been extending credit and development assistance to Jamaica through several projects in various sectors.

In May 2013, the Jamaican Government implemented the Growth Agenda Reform Program, supported by a four-year loan arrangement under the International Monetary Fund’s Extended Fund Facility (EFF), which provided Jamaica with Special Drawing Rights (SDR) of US$ 932.3 million. The program’s goal is to improve the business environment and facilitate strategic investments.

The Jamaican Government has made a point to create a legal atmosphere that supports private enterprise. Jamaica has an independent judicial system that is based in English Common Law which upholds the sanctity of contracts. Jamaica gives “National Treatment” to the profits foreign investors make on the island, and they do not put limits on the foreign control of companies nor do they restrict non-residents from buying real estate. Under the Omnibus Tax Incentive Framework, all investors benefit from a non-discriminatory and consistent tax incentive regime that seeks to catalyze foreign direct investment. As a result, Jamaica has jumped 27 places to achieve an overall ranking of 58 out of 189 economies, according to the 2015 Doing Business Report: the highest ranking in the Caribbean.

The most dynamic sectors in Jamaica have been tourism, logistics, and manufacturing.

TOURISM

"Doctors Cave Beach" Licensed under Public Domain via Commons

“Doctors Cave Beach” Licensed under Public Domain via Commons

Jamaica received just over 2.08 million stay-over tourist arrivals in 2014, according to newly-released data from the Ministry of Tourism. That represented a 3.6 % increase over 2013, when the country topped 2 million visitors for the first time and added US$ 2 billion to the local economy. Potential investors are invited to explore the opportunities that exist for the development of boutique, large scale and city hotels. The government is also working to complete Casino Gaming and Timeshare legislation, which will add new dimensions to Jamaica’s dynamic tourism industry.

LOGISTICS

"Kingston Harbour (cmakin) 2004-09-19" by Carey Akin (cmakin) from Manvel, Texas, USA Licensed under CC BY-SA 2.0 via Wikimedia Commons

“Kingston Harbour (cmakin) 2004-09-19” by Carey Akin (cmakin) from Manvel, Texas, USA Licensed under CC BY-SA 2.0 via Wikimedia Commons

Jamaica is home to the Kingston Harbor, the world’s seventh largest natural harbor. With the expansion of the Panama Canal, Jamaica is set to benefit from innovative and advanced commercial ventures in logistics. Jamaica will look to offer better logistic efficiencies to markets in the region by leveraging their existing infrastructure. The island enjoys a prime location in proximity to major East-West shipping lanes and direct connections to all regional ports, which has impressed other countries, including China. According to Prime Minister Portia Simpson Miller, China Harbor Engineering Company Limited and its parent company will invest between US$ 1.2 and 1.5 billion in the development of a transshipment port in Jamaica.

MANUFACTURING

Jamaica’s manufacturing sector is important to the national economy, accounting for 8.4 % of GDP and generating export earnings of US$ 772.5 million in 2013. The country boasts over 300 companies in the sector engaged in a varied range of manufacturing enterprise that include agro-processing, bedding, leather, stone and clay products.  Jamaica is also showing growth in mining, agriculture, and business process outsourcing (BPO).

Jamaica has shown resiliency and impressive growth to become an investor paradise. Investors may want to take a second look at the land of wood and water. They will be surprised by their economic growth.

With offices in Jamaica and throughout the Caribbean, contact TransLegal to learn more about FDI in Jamaica and the region.

Brazil: Fallen Market or Bright Future?

Francisco A. Laguna & Joshua Hassell

2014 was not the best year for Brazil.  Last year, Brazil, the world’s seventh largest economy, suffered a major economic downturn that threatened to become a full blown recession. There are some promising signs for Brazil’s future. The question is whether these signs are promising enough to make the country a good choice for foreign direct investment.

The International Monetary Fund projects a 0.1% growth in Q4 over Q4 for 2015 and a 2.2% growth in Q4 over Q4 in 2016. However, the majority of this projected growth can be attributed to factors outside the Brazilian economy and beyond the government’s control, such as falling oil prices and the general increase in the global economy.  The systematic opening of Iran will put further strain on oil prices, and all oil-producing nations will feel the effect.

National Congress, Brasilia Photo Credit: Eurico Zimbres via Wikimedia Commons

National Congress, Brasilia
Photo Credit: Eurico Zimbres via Wikimedia Commons

Additionally, most of Brazil’s projected numbers for economic growth are derived from the potential impact of harsh austerity measures. One such measure was a bill known as Provisional Measure 664, originally slated to tighten access to survivor pensions and worker compensation.  The measure was passed by the Brazilian Senate with a vote of 50 to 18.  However, it was extremely unpopular.  To garner public support, a series of riders that could result in an increase of public spending by up to 40 billion reais (~ US$ 12.4 billion) were attached to the draft measure allowing workers to qualify for full pensions at a younger age.  Brazilian President Dilma Rousseff is expected to veto these addenda.

President Dilma Rousseff Prime Minister of China, Li Keqiang By Marcelo Camargo/Agência Brasil (Agência Brasil) [CC BY 3.0 br (http://creativecommons.org/licenses/by/3.0/br/deed.en)], via Wikimedia Commons

President Dilma Rousseff Prime Minister of China, Li Keqiang
By Marcelo Camargo/Agência Brasil (Agência Brasil), via Wikimedia Commons

A second austerity measure, Provisional Measure 665, was passed in May 2015 and was originally supposed to save the Brazilian government 9 billion reais (~ US$ 2.4 billion) a year.  Again, however, riders attached to the bill effectively cut the government’s saving in half to 5 billion reais.  Currently, Brazil appears hesitant to pass the level of austerity measure required, and this could make it difficult for Brazil to achieve the results projected by the IMF.

Additionally the IMF’s recent consultation regarding Brazil illustrates that as of April 10, 2015 Brazil’s current account deficit had increased to 4.2% GDP a huge increase from the 2.4% GDP figure from 2012. Non-financial public debt also increased to 71% of GDP from almost half of that.

Furthermore, Brazil’s markets are highly noncompetitive due to a massive increase in interest rates to a six year high of 12.75 in order to combat rising inflation. Much of Brazil’s previous economic growth had been driven through consumption, and thus, the interest increases have a potentially huge impact on not only Brazilian corporations but the overall Brazilian economy. Many smaller businesses have reported significant losses from 2013 to 2015, which has resulted in a historically low consumer confidence rating.

Topographic Map of Brazil by Captain Blood at en.wikipedia (Transferred from en.wikipedia) [GFDL (http://www.gnu.org/copyleft/fdl.html) or CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0/)], from Wikimedia Commons

Topographic Map of Brazil by Captain Blood at en.wikipedia (Transferred from en.wikipedia) [GFDL (http://www.gnu.org/copyleft/fdl.html) or CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0/)%5D, from Wikimedia Commons

Despite all this, TransLegal clients continue to be drawn to the country because of its sheer size and potential.  This year, we have completed projects related to distribution agreements for animal feed, the registration of animal feed supplements, the sale of genetically modified products, the use of agricultural liming materials and a regulatory audit of a Brazilian company to be acquired by a foreign corporation to assure the company was in compliance with all regulations governing the manufacturing and sale of its products.

While Brazil may be doing better than in 2014, its short-term outlooks for 2015 and 2016 are not as bright as they might be.  Investors have to weigh for themselves whether the market is currently a viable candidate for FDI or, perhaps, whether they should use this period to establish their products in the market place and build brand recognition and in-country experience with conservative goals.

Call TransLegal with your questions concerning Brazil.  With offices in Brasilia and São Paulo, we are ready to assist you in Brazil.

Future Business Opportunities in Iran

Francisco A. Laguna & Wojciech Kornacki

Under normal conditions, a country with a well-educated population, a large middle-class, 9% of proven world oil reserves, 18% of proven global gas reserves and an abundance of strategic minerals would be an excellent place to invest.  Unless, the country is Iran, which is currently subject, rightly, to complex and multi-faceted international financial and other sanctions that have reduced its economy by about 15 to 20%.  This may change soon, however, as Iran attempts to end its economic isolation.

According to a 2007 Goldman Sachs report, Iran’s energy sector, technology, and human capital could make it particularly attractive for foreign direct investment.  Now that there is a possibility that sanctions may be lifted, many national and private investors want to position themselves to benefit from the new and very attractive market when (and if) it opens.  Countries such as China, Russia, Turkey and various European countries are already preparing for the sanctions to be lifted.

Currently, the United States and Iran are engaged in extensive negotiations over Iran’s nuclear program.  Depending on the outcome, certain sanctions could be lifted against Iran.  This would open its oil, gas, technology, human resources, natural resources, automotive, airline, hospitality and tourism, and many other industries to foreign direct investment, and it would create billions of dollars’ worth of business opportunities in Iran and the world.   Courtesy of http:// http://en.wikipedia.org

Currently, the United States and Iran are engaged in extensive negotiations over Iran’s nuclear program. Depending on the outcome, certain sanctions could be lifted against Iran. This would open its oil, gas, technology, human resources, natural resources, automotive, airline, hospitality and tourism, and many other industries to foreign direct investment, and it would create billions of dollars’ worth of business opportunities in Iran and the world. Courtesy of http:// http://en.wikipedia.org

The expectation is that once sanctions are removed, new opportunities will create billions of dollars’ worth of business for local and international companies.  Essentially, Iran could be the “next big thing” (once the sanctions are lifted) after the opening of the markets in Central and Eastern Europe.  Some of its regional trading partners expect that their economies will also grow once the sanctions are removed.

Investors are already holding discussing Iran’s oil industry and auto industry.  Indeed, many international energy companies are very interested in Iran, including Royal Dutch Shell Plc, British Petroleum and Total SA.

Not all sanctions will be lifted overnight, and some sanctions may continue for years to come.  In addition to keeping an eye on the international sanction regime, a prudent investor should also consider the following Iranian industries, once the sanctions are removed.

Banking: New businesses and residents will require both domestic and international banking services.  The international banking community has started looking at the country’s potential.  It will be interesting to see which banks move in first.  Will the Swiss join?

Iran’s domestically developed drone capable of traveling almost 2,500 miles.  Due to sanctions, Iran has been forced to develop its own technologies.  Collaboration between international and domestic businesses partners is estimated to create millions of dollars’ worth of business, once the sanctions are lifted.  Courtesy of http:// http://en.wikipedia.org

Iran’s domestically developed drone capable of traveling almost 2,500 miles. Due to sanctions, Iran has been forced to develop its own technologies. Collaboration between international and domestic businesses partners is estimated to create millions of dollars’ worth of business, once the sanctions are lifted. Courtesy of http:// http://en.wikipedia.org

Construction / Real Estate:  Many Middle Eastern businesses are interested in Iran’s real estate market.  The lifting of sanctions is likely to result in the return of some of the Iranian diaspora as well as representatives of multinationals and other companies that will invest in the country.  This will create the need for housing and, as the economy progresses, more luxury condominiums and residences with Western amenities.

Consulting Services: International businesses are likely to begin working to pre-position themselves in a post-sanctions Iran.  To be successful in the country, businesses will need reliable consultants to assist them navigate cultural nuances, language barriers and business practices, including the practice of gift-giving.

Natural Resources and Minerals: After years of sanctions, Iran desperately needs billions of dollars to make its oil industry profitable again.  In 1974, Iran pumped 6 million barrels per day; today, it only pumps 2.8 million.

Cube of Zoroaster.  Iran’s rich culture spans over thousands of years.   This tower-like construction was in the 5th Century BC.  Iran’s tourism and industry are likely to grow fast once the sanctions are removed.  Courtesy of http:// http://en.wikipedia.org

: Cube of Zoroaster. Iran’s rich culture spans over thousands of years.
This tower-like construction was in the 5th Century BC. Iran’s tourism and industry are likely to grow fast once the sanctions are removed. Courtesy of http:// http://en.wikipedia.org

Tourism and Hospitality: Before the Iranian Revolution, Tehran was touted as one of the most cosmopolitan cities in the region.  Years of isolation and religious extremism have crippled Iran’s tourism and hospitality sectors.  As Iran seeks to re-open itself to the world, it will have to modernize these sectors, and FDI is the perfect means of accomplishing this goal.  There is much work to be done, however, for these sectors to be viable contributors to the Iranian economy.  Currently, tourism in Iran accounts only for 2% of the entire GDP; in most countries, it is typically around 5%.

It will be interesting to see how the government will approach FDI in strategic sectors such as banking, minerals, natural gas and oil, as well as non-strategic sectors.  How will it allow such investments to be structured?  What ownership percentage will be permitted?  What about repatriation of capital / profits or termination of investments?  How will corruption manifest itself? Equally important, how will it treat different religious views and cultural morés?

If sanctions are lifted, Iran will be an emerging economy.  It will not have the bargaining power of economies such as China that can exact concessions from investors.  The manner in which the government treats international investors will largely determine the success of a post-sanctions Iran.  Given the political and religious turmoil plaguing the larger region and the very real threat of terrorism, corporations will be cautious of investing financial and human resources for a deal that is overly burdensome with uncertain financial returns.

If you are interested in learning more about future business opportunities in Iran and how to increase your chances of harnessing them, contact TransLegal or call 703-566-9427.

India: Legislative Updates Reforms to the Insurance Sector

Francisco A. Laguna

 This week, TransLegal continues our series on recent legislative changes in India, focusing on the recent reforms to the insurance sectors and how they affect foreign investors.

 In March 2015, the Indian Parliament reformed the insurance sector by approving the Insurance Laws (Amendment) Bill, 2015 (“Insurance Amendment Act”), which amended the Insurance Act, 1938, the General Insurance Business (Nationalization) Act, 1972 and the Insurance Regulatory and Development Authority Act, 1999 (“IRDA Act”). Although published in late March, the Insurance Amendment Act entered into force as of 26 December 2014.

The Insurance Amendment Act increases permissible foreign direct investment (“FDI”) in Indian insurance companies – clearly a significant change. However, the Act implements other noteworthy changes, discussed below.

Increase in FDI Cap

 

Symbol for Rupee (INR) Photo Credit: Wikimedia Commons

Symbol for Rupee (INR)
Photo Credit: Wikimedia Commons

The Insurance Amendment Act nearly doubles allowable FDI in the insurance sector from 26 % to 49 %. The new cap became effective as of 26 December 2014. The cap is applicable to direct and indirect FDI and to foreign portfolio investments. Foreign portfolio investments include investments by foreign institutional investors, qualified financial investors, foreign portfolio investors and non-resident investors.

FDI up to 26 % in an Indian insurance company is permitted under the “automatic route”, i.e., no government approval is required. FDI exceeding 26 % and up to 49 % must be approved by the Foreign Investment Promotion Board.

The FDI cap also applies to “other insurance intermediaries”. The Insurance Amendment Act does not define the term; however, the IRDA Act provides that intermediaries include insurance brokers, reinsurance brokers, insurance consultants, surveyors and loss assessors.

If applicable, foreign investors, at any level, must obtain necessary licenses from the Insurance Regulatory Development Authority of India (“IRDA”) to conduct insurance activities.

It is expected that the increased FDI limits will result in investments of up to INR 60,000 crores (~ US$ 9.5 billion) over the next 5 years.

Insurance Companies must be Indian Owned and Controlled 

India Gate, Delhi Photo Credit: Wikimedia Commons

India Gate, Delhi
Photo Credit: Wikimedia Commons

Insurance companies that accept FDA at any level must be Indian owned and controlled. Control is determined by the right to appoint a majority of the company’s board of directors, or to control management or policy decisions, including application of rights derived from shareholder or management rights or shareholder or voting agreements.

This is an important change because the Insurance Act, prior to being amended, did not require Indian insurance companies to be owned and controlled by individuals resident in-country. As such, it was possible for offshore strategic partners in the insurance sector to have substantial control, including reserved matters or veto rights on operational and financial policy decisions of the joint venture. This provision of the Insurance Amendment Act may affect offshore partners that currently have substantial control.

Structuring Promoter Investments

Before being amended, the Insurance Act only allowed insurance companies to issue one class of equity stock, which greatly curtailed the sector’s ability to structure investments. The Insurance Amendment Act gives the IRDA the ability to designate other classes of shares that can be issued by insurance companies. The IRDA is expected to publish a list of permitted classes in the near future.

Health Insurance

The Insurance Amendment Act defines the “health insurance business” as a business which provides for sickness benefits or medical, surgical or hospital expense benefits, including coverage for in-patient and out-patient travel and personal injury / accidents. The Act recognizes the health insurance sector, for the first time, as a separate vertical business.

Promoting Reinsurance in India

 

Flag of India Photo Credit: Wikimedia Commons

Flag of India
Photo Credit: Wikimedia Commons

The Insurance Amendment Act defines reinsurance as the insuring of part of one insurer’s risk by another insurer who accepts the risk for a mutually acceptable premium. The minimum capital requirement for a reinsurance company has been fixed at INR 200 crores (~ US$ 61.3 million). The Insurance Amendment Act also permits foreign reinsurance companies to establish branches in India, provided the net worth of the foreign company is at least INR 5,000 crores (~ US$ 790 million).

Corporate Governance

 The Insurance Amendment Act appears to place a priority on the interests of individual policy holders. For instance, the period during which an insurance company can cancel a policy on any ground has been restricted to 3 years as of the issuance thereof. The Act also has enabling provisions that allow for the imposition of penalties on intermediaries and insurance companies for misconduct. Penalties range from INR 1 crore to INR 25 crores (~ US$ 160,000 – 4 million).

Call TransLegal with your questions concerning Indian laws and regulations and how they may impact your proposed FDI projects.

India: Legislative Updates

Francisco A. Laguna

 This week, TransLegal begins a series on recent legislative changes in India. In the following posts, we will analyze some of the more significant ones for foreign investors.

 Capital Markets

 The Securities Exchange Board of India (“SEBI”) has revised insider trading regulations. The new rules, contained in the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015, enter into force 16 May 2015. One major change introduced by the new rules is that people not in the brokerage sector cannot obtain from an insider, directly or indirectly, any unpublished, price-sensitive information related to a company listed, or proposed to be listed, on an exchange. Insiders are defined as people who have been associated for the prior 6 months with a company that is listed, or proposed to be listed, on an exchange, and who are is in possession of the company’s unpublished, price-sensitive information.

Citizenship Law

The Parliament issued the Citizenship (Amendment) Bill, 2015, which purports to grant the same rights and privileges to persons of Indian Origin as well as Indian citizens living abroad.

Coal Mines Bill

Parliament of India Photo credit: Wikimedia Commons

Parliament of India
Photo credit: Wikimedia Commons

The Lower House of Parliament, the Lok Sabha, approved the Coal Mines (Special Provisions) Bill, 2015. The law seeks to make the process of granting coal mine leases more transparent. The Upper House, the Rajya Sabha, has yet to pass the law. The leasing process has been criticized for lack of transparency and corruption.

Foreign Direct Investment – Generally

The Department of Industrial Policy and Promotion (“DIPP”) is proposing to raise the FDI threshold from 12,000 million rupees to 30,000 million rupees. The Government may increase the threshold at which Cabinet approval for foreign investments becomes necessary, making India a more attractive venue for FDI. The goal is to attract foreign investments, particularly in infrastructure and manufacturing sectors. Currently, investments exceeding the 12,000 million limit require the approval of the Cabinet Committee on Economic Affairs.

TransLegal has advised clients on foreign direct investment regulations in the food & beverage as well as the hospitality sectors.

Foreign Direct Investment – Housing Sector

The Government has relaxed the rules related to repatriating FDI in the housing sector. In December 2014, the Government implemented these new rules by decreasing the required built-up area and capital needs. In March 2015, the DIPP clarified that the existing three-year lock-in will no longer apply, and under normal circumstances, an investor can exit on an automatic basis upon completion of the project or after the construction of basic infrastructure, such as roads, water supply and drainage. The Foreign Investment Promotion Board (“FIPB”) can approve earlier exits on a case by case basis.

The minimum built-up area requirement for development projects has been reduced from 50,000 square meters to 20,000 square meters, and minimum capital investment by foreign companies has been decreased substantially from US$ 10 million to US$ 5 million. In addition, the government has introduced an exemption to the minimum floor area and the capital requirements when an investor / joint venture company commits at least 30 % of the total project cost to low-cost housing.

 Foreign Direct Investment – Insurance and Pension Sectors

 In March 2015, the Indian Parliament passed the Insurance Laws (Amendment) Bill, 2015. The bill raises the foreign direct investment (“FDI”) cap in insurance companies from 26% to 49%. This increased FDI cap directly increases the allowable FDI in the pension sector: the Pension Fund Regulatory and Development Authority Act ties FDI limits in the pension sector to those in the insurance sector. This increase presents important opportunities for foreign companies in both sectors.

National Stock Exchange of India Photo credit: Wikimedia Commons

National Stock Exchange of India
Photo credit: Wikimedia Commons

Import / Export Documentary Requirements 

In March 2015, the Directorate General of Foreign Trade (“DGFT”) issued a notification drastically reduced the mandatory documents required for importing and exporting goods to three (3) documents. For imports, the mandatory documents are: bill of lading / airway bill; commercial invoice / packing list; and bill of entry. For exports, the mandatory documents are: bill of lading / airway bill; commercial invoice / packing list; and shipping bill / bill of export.

Intellectual Property

India’s IP Office now allows electronic filing for new applications for design & geographical indications. Previously, e-filing was only available for trademarks and patent applications.

Labor Law

 The 2015 Union Budget proposes the following amendments to applicable labor laws. First, the government seeks to provide increased flexibility for employee contributions to the Employee Provident Fund (“EPF”). Employees would be allowed to choose to participate in the EPF or a New Pension Scheme (to be developed). The proposal also provides that employees with incomes below certain monthly thresholds would have the option not to contribute to the EPF, without affecting or reducing the employer’s mandated contribution. In addition, the amendments would allow employers to offer employees participation in the Employee State Insurance (“ESI”) or a different health insurance product duly approved by the Insurance Regulatory Development Authority (“IRDA”).

Money Laundering

Presidential Standard of India Photo credit: Wikimedia Commons

Presidential Standard of India
Photo credit: Wikimedia Commons

Amendments to existing laws have been proposed to prevent money laundering. Two independent laws have been submitted to address unaccounted-for monies held offshore and dubious domestic transactions. Persons found to violate the law will be subject to prosecution and steep penalties. To implement these measures, amendments have been proposed to the Prevention of Money Laundering Act (“PMLA”), 2002 and the Foreign Exchange Management Act (“FEMA”). Under the proposed amendments, concealment of income and assets and evasion of tax related to foreign assets will be subject to prison sentences of up to 10 years. Each transaction in violation of the law will be treated separately, and offenders will not be allowed to reach an out-of-court resolution through the Settlement Commission. Those found guilty of tax evasion will be subject to penalties of 300% the tax that would have been paid on the concealed income and assets.

Call TransLegal with your questions concerning Indian laws and regulations and how they may impact your proposed FDI projects.

Colombia’s Path to Global Integration Depends on Effective Security and Trade Policies

Francisco A. Laguna & Jaime Ignacio Torres

 As many other countries, Colombia was severely affected by the 1998 Asian Financial Crisis. A 4.2% contraction of the economy in 1999 halted the economic development achieved during the past two decades. Economic turmoil in the country led to protectionist trade measures, such as tariff increases and the imposition of dumping duties. Simultaneously, national security was declining with FARC [Fuerzas Armadas Revolucionarias de Colombia] attacks increasing exponentially. This combination resulted in an isolated economy with no credibility for foreign investors. Continue reading

Mongolia’s Mega-Mines attract Foreign Investment

Francisco A. Laguna & Wojciech Kornacki

 Mongolia is a country about three times the size of France, with a population equal to that of Crimea, only 2.4 million people.  In contrast, France has a population of ~ 68 million people.  Mongolia is the least populated country in the world, surrounded by the Russian Federation in the North and China in the South, the so called “last frontier”.  The U.S. Department of State reports that since early 1990s, Mongolia has been enjoying a democratic government and a mining boom.  With the emergence of China as a growing industrial power, Mongolia has benefitted from its neighbor’s need for Mongolia’s abundant natural resources.  Besides China, its main trade partners have been the United States, Canada, the Russian Federation, and Japan.  According to the World Bank, Mongolia’s GDP is expected to grow in double digits between 2013 and 2017. The rise of mega-mines in Mongolia 

Ivanhoe, a UK based multi-national mining company, is one of the leading companies in Mongolia.  In addition to mining, and obtaining additional licenses, Ivanhoe is also exploring other parts of Mongolia.  There are dozen more companies seeking to explore and develop various mines in Mongolia.  All this creates an economic boom, but also environmental concerns.   Courtesy of http://www.guardian.co.uk

Ivanhoe, a UK based multi-national mining company, is one of the leading companies in Mongolia. In addition to mining, and obtaining additional licenses, Ivanhoe is also exploring other parts of Mongolia. There are dozen more companies seeking to explore and develop various mines in Mongolia. All this creates an economic boom, but also environmental concerns.
Courtesy of http://www.guardian.co.uk

Due to its massive and previously unexplored natural resources, Mongolia is quickly developing the world’s biggest mines to meet global demands.  Guardian reports that one of the first mega-mines is Telvan Tolgoi, where approximately 6 billion tons of coal are being excavated.  International mining companies from the United States, China, the Russian Federation, and elsewhere around the world compete for the mining and exploration rights.  Another huge mega-mine is Oyu Tolgoi, operated by Ivanhoue, a United Kingdom headquartered multi-national mining company.  Its total output is expected to reach $200 billion.  The Mongolian government and the United Nations support multiple projects designed to ensure equal distribution of wealth and development of its population based on the wealth generated by the mega-mines.  The U.N. Development Program has been increasing its presence in Mongolia to assist in monitoring and advice.   Continue reading

Suggestions for Improving Myanmar’s Current Investment Environment

This week, we conclude our series by TransLegal’s correspondent in Myanmar, Oliver Massmann.  Oliver was invited by His Excellence Minister Soe Thane to the President’s office on 22 January 2014 to present on current investment and trade issues faced by foreign investors in Myanmar.  Here are Oliver’s suggestions to improve the investment climate in Myanmar.

Contact TransLegal and Oliver to learn more about investment opportunities and challenges in Myanmar.

Oliver Massmann 

The Future – Recommendations for Myanmar

Myanmar Landscape Photo Credit: Colegota via Wikimedia Commons

Myanmar Landscape
Photo Credit: Colegota via Wikimedia Commons

Following our discussion last week of the challenges facing foreign investors in Myanman, we turn to specific recommendations for how the country can improve its current investment climate to attract foreign direct investment (FDI).

In general, we recommend that Myanmar align standards with international best practices to enhance the country’s competitiveness, pave the way for regional integration and improve the quality of products/level of services for the people of Myanmar. Continue reading

Key Challenges Facing Investors in Myanmar’s Current Investment Environment

This week, we are featuring a two-part guest blog prepared by TransLegal’s correspondent in Myanmar, Oliver Massmann.  Oliver was invited by His Excellence, Minister Soe Thane, to the President’s office on 22 January 2014 to discuss current investment and trade issues faced by foreign investors in Myanmar.  Below is the position paper Oliver drafted after the meeting.

This week, Oliver focuses on the issues facing foreign investors in Myanmar.  Next week’s blog will discuss possible solutions.

Contact TransLegal and Oliver to learn more about investment opportunities and challenges in Myanmar.

Oliver Massmann 

I           The Vision for Myanmar:

Map of Myanmar

Map of Myanmar

Historically, Myanmar was the wealthiest country in Southeast Asia and also once the world’s

largest exporter of rice. It produced 75% of the world’s teak and had a highly literate population.

After such a long time being closed off, however, it is now one of the poorest countries in Asia.

Everything has changed since Myanmar embarked on a major policy of reforms in 2011, and

Myanmar is now a new Asian emerging market.

Myanmar has all the elements required to create another Asian economic miracle, and it has strong potential.  Before realizing that potential, Myanmar has to solve the challenges and impediments hindering its development.

Myanmar must seize the opportunity to become what it once was: a country with a transparent and responsible investment and trade policy.  Continue reading