The Telegraph
Since 1st March, 1999
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Stricter FDI scan on menu

New Delhi, Dec. 9: The government is likely to revive moves to incorporate security aspects in FDI rules.

The move, a consequence of the terror attack in Mumbai, may lead to checks on foreign investment in sensitive sectors such as telecom, oil and aviation.

Debates on the restrictions have taken place many times, with pro-reform ministries arguing for minimum checks. On the other hand, the defence and home ministries have supported restrictions to prevent unwanted entities in sensitive segments.

Earlier this year, a note on the consequences of firms in “wrong hands” was circulated within government circles.

Possible threats under such situations include shutting down, or sabotaging, a facility; impeding national security investigations and enforcement agencies; and accessing sensitive data.

Among the other fears were limiting government access to information for surveillance and enforcement purposes, denying critical technology or key products to domestic industry and the government, and illegally transferring technology abroad.

Apprehensions were also voiced over the shifting of critical technology and key products offshore, which are important for national defence, intelligence operation and homeland security. An entity may improve the military and intelligence capability of an unfriendly country.

Officials said foreign players bidding to provide 3G telecom services and overseas firms with oil and gas blocks might be vetted by security agencies.

Multinationals who have been barred from operating in other countries will come under the scanner. The government may exchange intelligence with other countries on the MNCs.

This will be done by intelligence agencies and not be an official policy.

“We already have a system of screening investments in sensitive areas by taking the help of intelligence agencies. These agencies are also regularly exchanging information on a host of matters with their counterparts abroad. We need to extend that co-operation to economic intelligence, too,” the officials said.

The government may also consider screening large investments, beyond a threshold, as well as the vetting of mega-mergers and acquisitions involving foreign investments.

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