India planning legislation on foreign investment

By agencies   |   Friday, 25 August 2006, 07:00 Hrs
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KUALA LUMPUR: Keeping in line with the practice in developed economies, India is planning to legislation to require screening of foreign investment in certain industries.

“This is in line with what's there in Europe, the United States and every country," said Commerce Minister Kamal Nath, stating that such a practice would be aimed at curtailing security concerns that arise in certain sensitive sectors.

Nath, while announcing the development in Kuala Lumpur where a trade-minister level ASEAN (Association of Southeast Asian Nations) meet is being held however did not state when the proposed law would be introduced in Parliament. Further, the minister did not elaborate on the areas of sensitivity, adding that India's Home Ministry would determine the sectors where investments may be screened.

Significantly, a Dubai-owned company's bid to manage ports in the United States fell through earlier this year, as there were concerns over the Bush administration having ignored national security concerns in the transaction. Singapore Telecommunications Ltd. Was under the scanner in Australia after it purchased a key stake in Optus, one of Australia's biggest telecommunications companies.

According to a government-appointed commission of top industrialists, India will need investments exceeding $1.5 trillion over a five-year period, starting this fiscal year to sustain its current growth rate of 8 percent. The commission stated that $72 billion of foreign direct investment would be required to meet the investment need. The commission also pointed out that in order to attract higher investment flows, India needs to lift foreign investment restrictions in sectors like insurance, banking and retail and allow flexibility in labor laws.

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