18 August 2023
A Landscape Survey of Foreign Investment Screening Measures and Relevance for Singapore
Executive Summary
The benefits of foreign direct investment (FDI) are usually broad-based and reciprocal. However, FDI may be used by states to exert political or other forms of influence, even coercion, within target countries through leveraging economic influence. A number of nations in recent years have responded to this reality by recalibrating or strengthening their foreign investment screening mechanisms.
This report provides a snapshot of the current FDI regulation and policy landscape of several countries (including some ASEAN nations) striving to balance FDI-related risks and benefits. Key reported international cases of perceived foreign interference or national security incidents arising from foreign investments are then discussed. Next, the paper examines the frameworks and related enforcement/application of the screening regimes of the European Union, the United States, and the United Kingdom, along with specific examples of the prohibitions or restrictions on foreign investment imposed under those regimes. As observed, all three regimes bear these hallmarks: (i) the identification of critical technologies/sectors; (ii) a unified screening process; (iii) extensive consultations conducted across industry and political sectors; (iv) cross-regulatory agency coordination and collaboration; (v) the use of adjustable limits, and (vi) imposition of preconditions in carrying out screening processes and arriving at decisions. Should Singapore decide to recalibrate its existing investment screening processes under sectoral regulation, a number of factors will have to be taken into account.
Executive Summary
The benefits of foreign direct investment (FDI) are usually broad-based and reciprocal. However, FDI may be used by states to exert political or other forms of influence, even coercion, within target countries through leveraging economic influence. A number of nations in recent years have responded to this reality by recalibrating or strengthening their foreign investment screening mechanisms.
This report provides a snapshot of the current FDI regulation and policy landscape of several countries (including some ASEAN nations) striving to balance FDI-related risks and benefits. Key reported international cases of perceived foreign interference or national security incidents arising from foreign investments are then discussed. Next, the paper examines the frameworks and related enforcement/application of the screening regimes of the European Union, the United States, and the United Kingdom, along with specific examples of the prohibitions or restrictions on foreign investment imposed under those regimes. As observed, all three regimes bear these hallmarks: (i) the identification of critical technologies/sectors; (ii) a unified screening process; (iii) extensive consultations conducted across industry and political sectors; (iv) cross-regulatory agency coordination and collaboration; (v) the use of adjustable limits, and (vi) imposition of preconditions in carrying out screening processes and arriving at decisions. Should Singapore decide to recalibrate its existing investment screening processes under sectoral regulation, a number of factors will have to be taken into account.
