Increased Global FDI Scrutiny Here for Long Term, Report Says
While some countries have loosened their more strict foreign investment review tools as they emerge from the COVID-19 pandemic, the majority of screening regimes are here to stay, Baker McKenzie and the International Forum of Sovereign Wealth Funds said in a June report. The report, which outlines strategies for navigating the new foreign investment landscape, calls the increasing scrutiny of foreign direct investment (FDI) a “global phenomenon.”
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“Policy changes are impacting investors from around the world,” the report said, pointing specifically to transactions with state-owned entities from “major emerging markets,” buyers from sensitive regions and purchasers from “all regions focused on sensitive technologies.” Investors should expect FDI restrictions to continue. “Even as the threat of COVID-19 subsides and economies start to recover, the prevalent trend in foreign investment restrictions will unlikely reverse its course,” it said. “The pandemic has highlighted the risk of foreign ownership of critical supply chains and key businesses, and governments previously focusing on national security will feel validated in their approach.”
The report also provides an overview of FDI screening regimes in the U.S., the United Kingdom, the European Union, Australia, China and Japan. It said the most scrutinized sectors generally tend to be those involving critical infrastructure, defense technologies and supply chains, culture and media, and critical technologies.