Regulation & trade round-up

India has announced new guidelines allowing both foreign and local banks to expand through mergers and acquisitions. The aim is to liberalise FDI in banking and finance. Foreign investors can hold up to 74% of the equity of an Indian bank but if a single investor wishes to hold more than a 5% stake, approval must be obtained from the Reserve Bank of India.
India’s patent law has been amended to make it compatible with the Trade-related Aspects of Intellectual Property Rights (TRIPS) agreement of the World Trade Organization. The new Ordinance covers patents for pharmaceutical products and computer programs.

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India is seeking to allow FDI in real estate projects, including housing. At present, full foreign ownership is permitted only in the case of integrated townships.

China plans to allow foreign investors into its mobile phone manufacturing sector, as long as they meet minimum levels of investment and research and development requirements. New guidelines will replace an older law that required foreign investors in that sector to obtain a licence prior to making an investment. While certain limits and requirements will still be in place, there will be no cap on the number of foreign investors allowed in the field.
New regulations were due in February relating to franchising, a non-equity form of foreign participation in business. The regulations, which intend to clarify how foreign franchise companies (FFCs) should operate businesses in China, are expected to help build an appropriate legal framework for franchise operators. FFCs will have to receive approval from the ministry of commerce after submitting an application and must submit their sample franchise agreements and operating brochures to the ministry.

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The Philippines has approved a new fiscal incentives bill aimed at improving the country’s investment environment by streamlining incentives. The bill includes a tax holiday for four, six or eight years, depending on the investor’s activity, plus incentives for the restoration of capital equipment, raw materials etc.

Russia plans to entice foreign investors in high-tech sectors into special economic zones (SEZs) by offering fiscal incentives. The plans include the creation of technology parks owned by the government in up to 10 SEZs in the next five years. The parks will offer high-tech investors tax breaks and lower customs duties on imported machinery and equipment. Draft legislation to create the SEZs is expected to be submitted to the Cabinet by March 1.

Bhutan is preparing regulations on information and communications technology, with the first draft expected at the end of January 2005. The regulations will also address a cap on foreign investment.

Nigeria has introduced new incentives for foreign investors in the gas sector, as part of its new national gas policy. Incentives include guarantees on total return on investment.

Eritrea has lifted a ban on exploration by foreign mineral companies. Several companies plan to resume exploration, especially in gold and copper. The ban was issued in September 2004.

Greece has drafted a law aimed at reducing bureaucracy for foreign investors in the manufacturing sector. If passed, the number of necessary licences would be reduced from 20 to eight and the overall time required to establish a company there would be cut by 80%. Corporate tax rates will be reduced gradually from 35% to 25% by 2007.

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