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In recent years, several countries have introduced or tightened measures to subject foreign investments in strategically important sectors or companies to greater scrutiny.
Even traditionally open economies, such as Ireland and Switzerland, are mulling similar moves, said MTI in a written parliamentary reply in September.
In the United Kingdom, the National Security and Investment Act, which came into force in January 2022, allows the British government to scrutinise and intervene in foreign investments deemed to pose a national security risk.
China restricts or prohibits foreign investments in certain sectors listed on a “negative list” under its Foreign Investment Law. These sectors include mining, nuclear power plants, and the postal service.
More recently, United States President Joe Biden signed an executive order to prohibit new outbound investment into China in sensitive technologies like computer chips and artificial intelligence.
Germany has also said it wants to tighten the process for reviewing foreign investments with a new law that would aim to enhance economic security.
It is critical for Singapore to remain open and connected to the world, said Mr Gan, stressing that the country must continue to strengthen its position as a trusted hub for businesses.
“Over the next few weeks, we will be reaching out (to) engage the various industry stakeholders, particularly the entities that are being considered for designation, to share with them details of this Bill, and to assure them we will be working with them on the implementation details,” the minister told reporters.
“Most of our arrangements with them will be quite bespoke,” Mr Gan added, noting that these will be tailored to the “specific nature of that particular entity”.
SINGAPORE “NOT TURNING PROTECTIONIST”: EXPERT
Observers said the proposed regulation of both local and foreign investments into critical entities signals that Singapore remains welcoming to foreign investments.
“The signalling effect that this law is nationality agnostic is significant and will be appreciated,” said Mr Choi Shing Kwok, director and chief executive officer of the ISEAS-Yusof Ishak Institute.
“It sends the message that Singapore is not turning xenophobic or protectionist even in this current environment.”
The entity-based approach taken by the proposed legislation also offers regulators “greater flexibility” and efficiency, compared with a sectoral approach, he added.
By targeting a limited number of critical entities, investors can also be assured, with any uncertainty about regulatory burden being “relatively confined”, observers said.
The proposed regime is unlikely to impact Singapore’s attractiveness to foreign investors.
This is because businesses would already have due diligence processes in place as they make investment decisions around the world, said Mr Benjamin Ang, head of the Centre of Excellence for National Security at the S Rajaratnam School of International Studies (RSIS).
“I see this as really part of that due diligence process … it could even be beneficial because if the process is clear and transparent, it gives businesses a form of certainty and clarity and that (means) a better environment for investments,” he said.
Echoing that, Mr Kok Ping Soon, CEO of the Singapore Business Federation (SBF), said Singapore’s move is “par for the course” as other countries have also introduced or tightened their investment screening measures.
“You can actually say that such investment screening measures are just par for the course and increasingly very common in the global investment community,” he said.
“In fact, I will say that the introduction of this regime actually increases investors’ confidence in Singapore, because now we have adequate levers to ensure the security, as well as the reliability of critical entities that are supportive of our Singapore economy.”
That said, Mr Kok noted that further details will be needed on the implementation of the regime, for example, how long it will take for authorities to respond to queries and the criteria for a company to be designated.
“What companies want to look for is certain clarity of the process, certain fairness in the considerations, as well as certainty in the outcome. So we hope in the implementation, the government will continue to take a consultative approach,” he said.
Additional reporting by Michelle Teo and Nasyrah Abdul Rohim.
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