INTRODUCTION


Investment policies and legislation Governments around the world are focused on fostering long-term growth, increasing employment, and improving the prosperity of their respective countries. With shifting wealth, increasing global competition, an ageing population in many countries (as life expectancy lengthens thanks to continued improvements in medical science), and intense competition for scarce natural resources, achieving these aims is increasingly challenging and pursuing FDI is to seen as an important tool for working towards these aims.


The attractiveness of a jurisdiction for FDI depends on a wide range of factors, including the size of the market, the level of integration with its neighbours, stability and certainty – both in the political and legal systems – and the availability of a workforce with relevant skills, education and experience. However, rules governing FDI, an attractive taxation regime, and incentives to invest and create employment in a jurisdiction are also critical to a jurisdiction’s attractiveness, and so governments and regulators have an important part to play in creating conditions which attract FDI to their jurisdiction and which create an environment in which the investment can succeed, thereby benefitting the investor and the host country.


Except in the most closed countries, public statements by governments


are generally supportive of FDI. Indeed, the results of this FDI Report show that governments across the board ‘welcome’, ‘are fully/strongly supportive of ’, and ‘are receptive to’ FDI, and are ‘even more open to foreign capital’.


However, this public support is not necessarily underpinned by the facts.


First, in 2000, 94% of new laws and regulations affecting FDI globally related to the liberalisation of FDI regimes, and only six percent imposed additional restrictions on FDI. By last year, the percentage of new laws and regulations imposing additional restrictions on FDI had increased to 25%.


“ 2 Second, the number of international investment agreements being


concluded has steadily decreased from a rate of four per week in the mid- 1990s to around one per week by 2011, and barely one per fortnight in 2012.


Third, in the last two years, more than 2,000 announced cross-border


M&A transactions, with a total gross value of more than $1.8 trillion, were withdrawn. In most cases, the transaction did not proceed because the parties could not agree commercial terms. But proposed transactions were also withdrawn for regulatory reasons (common regulations that thwart the transferability of companies include foreign ownership ceilings and national benefit tests) and political reasons (the industry in which this is most likely to be cited as the reason that the transaction did not take place is mining and extraction).


These factors give rise to a concern that, despite all the supportive words


encouraging FDI, and persistent calls to deregulate and relax rules restricting FDI, in difficult times the risk of governments taking (often populist) protectionist measures increases.


The OECD compiles an FDI Regulatory Restrictiveness Index which


gauges the restrictiveness of a country’s FDI rules through four types of restrictions: foreign equity limitations; screening or approval mechanisms; restrictions on key foreign employment; and operational restrictions. The Index marks the restrictiveness on a scale of 0 (least restrictive) to 1 (most restrictive), with an average of 0.106. Nine of the countries featured in this Report are also included in the FDI Regulatory Restrictiveness Index. Their respective Index scores are:


In the last two years more than 2,000 announced cross-border M&A transactions, with a total gross value of more than $1.8 trillion, were withdrawn


Garrett Hayes Partner, Paul Hastings


London, UK T: +44 20 3023 5153 E: garretthayes@paulhastings.com W: www.paulhastings.com


• Ireland – 0.043 • UK – 0.061 • Poland – 0.072 • Brazil – 0.086 • US – 0.089 • Australia – 0.128 • Canada – 0.163 • Russia – 0.180 • China – 0.407


It is interesting to bear these scores in mind while reviewing the results


of this FDI Report, to compare whether the key legal and practical considerations highlighted in our survey correlate to the outcome of the OECD survey.


About the author Garrett Hayes is a partner in the Corporate practice of the London office of Paul Hastings. Hayes’ experience covers a broad range of M&A, private equity, joint ventures and corporate advisory work across a range of sectors. Recent cross-border transactions include advising Shuanghui International Holdings on its $7.1 billion acquisition of Smithfields Foods – one of the most closely watched transactions of 2013 and the largest ever acquisition of a US company by a Chinese company; advising Corsair Communications on its acquisition of Simple Audio Limited; and advising Samsung Electronics on its $310 million acquisition of the wireless connectivity business of CSR and associated $35 million strategic investment into CSR.


IFLR REPORT | FOREIGN DIRECT INVESTMENT 2014


WWW.IFLR.COM


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48  |  Page 49  |  Page 50  |  Page 51  |  Page 52  |  Page 53  |  Page 54  |  Page 55  |  Page 56  |  Page 57  |  Page 58  |  Page 59  |  Page 60  |  Page 61  |  Page 62  |  Page 63  |  Page 64  |  Page 65  |  Page 66  |  Page 67  |  Page 68