Home > Opinion > Columns > Opinion | Open, fair and non-discriminatory conditions key to foreign investment
Enterprises' investment is basically a mutually beneficial and win-win choice, and entrepreneurs know more naturally than government officials what business can be done and what cannot be done. Photo: iStock
Enterprises' investment is basically a mutually beneficial and win-win choice, and entrepreneurs know more naturally than government officials what business can be done and what cannot be done. Photo: iStock

Opinion | Open, fair and non-discriminatory conditions key to foreign investment

  • Adopting discriminatory restrictions against certain foreign investments will not achieve the desired policy results
  • Where companies choose to invest depends on economic fundamentals and business environment of a country/region

Recently, there has been a lot of discussion in the Indian media about how to boost the economy, attract more foreign investment into India and promote local investment in the context of the covid-19 pandemic.

The sudden outbreak of covid-19 poses a huge challenge to the global economy and human health. G20 Leaders “commit to do whatever it takes and to use all available policy tools to minimize the economic and social damage from the pandemic, restore global growth, maintain market stability, and strengthen resilience." In keeping with this consensus, economies around the world, including China, are taking active steps to boost their economy and expand investment. We hope India government's actions will yield positive results, because it is very important not only for India's recovery and growth, but for the global economy.

G20 leaders, in the meanwhile, "reaffirmed their goal of achieving a free, fair, non-discriminatory, transparent, predictable and stable trade and investment environment and maintaining open markets." This is also a crucial point. Not only because "now more than ever is the time for the international community to step up cooperation and coordination to protect human life and lay the foundations for a strong economic recovery and a sustainable, balanced, and inclusive growth after this crisis.", but because to any economy that wants more foreign investment, it squarely points out the importance of keeping trade and investment environment "free, fair and non-discriminatory, transparent, predictable and stable".

Open, fair and non-discriminatory business environment is the key element to attract foreign investment.

Where companies choose to invest and operate depends on economic fundamentals and business environment of a country/region. Enterprises make choices based on market principles and "vote" with their feet. Whether an enterprise invests or not, the biggest worry is that the policy is unstable and constantly changing. The most important concerns include whether the economic growth is stable, whether the infrastructure is perfect, whether the investment opportunities are equal, whether the treatment is fair, and whether they are friendly to foreign investments.

If an economy can do well in these aspects and make continuous improvement, it will gain the first opportunity and advantage in the international competition to attract foreign investment. Moreover, enterprises' investment in accordance with market conditions is basically a mutually beneficial and win-win choice, and entrepreneurs know more naturally than government officials what business can be done and what cannot be done.

Adopting discriminatory restrictions against certain foreign investments on grounds of ambiguous, trumped-up and even political suspicions, and interfering with the normal business investment behavior at wide range and without fair distinctions, is very likely not able to achieve the desired policy results in the end, but instead takes domestic enterprises and local economy hungry for outside capitals as the biggest sufferer.

Furthermore, unreasonable, discriminatory and arbitrary foreign investment restriction policies are to have a ripple effect and a chilling effect, arouse doubts about the overall stability, friendliness and attractiveness of foreign investment policies of a country, and discourage the confidence and enthusiasm of all foreign investments to enter this market, thus having a long-term negative impact. In this regard, certain Indian media once pointed out that “foreign capital remains crucial to the country’s economic success, and will be doubly important as India tries to revive its economy. A purely arbitrary method of deciding what types of investment is allowed would be a setback to India’s decades-long attempt to be more attractive to investors from all countries."

In the face of the economic downturn caused by the epidemic, countries should work together to create a sound investment environment. Discriminatory withdrawal of equal treatment for certain foreign investment is not conducive to the reputation of a country at the international investment market, is not conducive to attracting foreign investment, and is not conducive to the economic and industrial development of a country in a long run. In the process of further attracting foreign investment in India, an open, fair and non-discriminatory business environment should not be neglected as the core policy element.

LI Baijun is Economic and Commercial Minister at Embassy of China in India. The views here are his own and do not reflect those of Mint.

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