Post-investment survey on foreign direct investment ahead – Economy News

The government is considering establishing an oversight mechanism for foreign direct investment (FDI) flowing into the country, drawing on similar systems in other countries that are high on the radar of global investors.

“It has been observed that most countries have systems for monitoring foreign direct investments after the investments have been realized (in addition to the approval mechanism). People are suggesting that there should be a similar mechanism in India too,” he added.

The proposal is in the “discussion phase” and what form it will ultimately take remains to be seen, a senior official said.

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In sectors such as telecom, information technology and surveillance equipment, the government has already imposed a condition that the purchase of equipment by the foreign investor must come from ‘trusted sources’. The Foreign Direct Investment Monitoring Mechanism will also address other vulnerabilities that could arise through this investment route, which is being promoted.

This mechanism will add an additional layer of post-investment scrutiny for foreign direct investment. Depending on the sectors, a pre-approval process for foreign direct investment already exists. Some sectors follow an automatic route, while proposals in others must be approved by the government. Some proposals also require detailed security clearance.

The European Union (EU) has a regulation on the screening of foreign direct investments in force from 2020. This provides a framework for screening incoming foreign direct investments from non-EU countries so that the EU can be better equipped to identify, assess and mitigate the potential risks that certain foreign direct investments pose to security or the economy to limit. public policy of the Union or its Member States.

These relate to access to sensitive information, security of supply of critical inputs and control of crucial technologies. The EU is now pushing for mandatory FDI screenings for all its member states.

In the US, the Committee on Foreign Investment in the United States (CFIUS) is the federal agency that oversees FDI. It assesses FDI transactions and certain real estate transactions to determine potential national security implications. The US also has a law that provides a framework for assessing different types of FDI transactions.

U.S. regulations even assess the transaction’s impact on the resilience of critical U.S. supply chains, technology leadership in certain sectors, investment trends that could impact a particular transaction’s impact on national security, cybersecurity risks, and risks to U.S. sensitive data persons.