Finance:Foreign ownership

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Short description: Form of ownership

Foreign ownership refers to the ownership of a portion of a country's assets (businesses, natural resources, property, bonds, equity etc.) by individuals who are not citizens of that country or by companies whose headquarters are not in that country.[1]

Foreign ownership of assets is widespread in a modern, globally integrated economy, at both the corporate and individual levels. An example of the former is when a corporation acquires part, or all, of another company headquartered overseas, or when it purchases property, infrastructure, access rights or other assets in countries abroad.[2] If a multinational corporation acquires at least half of a foreign company, the multinational corporation becomes a holding company, and the company receiving the foreign investment becomes a subsidiary.[3]

At the individual level, foreign ownership occurs whenever a domestic asset is acquired by a foreign individual, such as an Indian businessman buying a house in Hong Kong, or a Russian citizen purchasing United States Treasury bonds.[4]

Benefits

  • The transfer of technology and organisational knowledge can lead to higher productivity,[5] and the company in the host country can learn from multinational corporations[6]
  • It increases employment and wages. Inward foreign direct investment has an overall positive effect in employment, as companies have more capital to expand.[7]
  • It lowers prices and improves the quality of products. That is a result of higher productivity, which is beneficial for consumers and the company's competitiveness for exports.[8]

Drawbacks

  • Foreign ownership can increase the demand of products, leading to price increases.[9]
  • The increase in productivity in the firms in foreign ownership can cause other domestic companies to become relatively less competitive, which reduces profits.[10]
  • Multinational corporations may use their power to influence government policies, especially in underdeveloped countries. That may have an adverse impact on economic development.[11]
  • A lowering of employment because of operational optimization or an increase by a planned expansion can occur. Wages can be reduced for new employees by new corporate policies, and an optimized employee benefits package can reduce benefits for all.
  • The demise of local economies can be caused by siphoning money from communities to global elites.

Policies

Map of United States Official Language Status By State
Map of countries where foreign land ownership is banned as of 2023

Belarus

According to the legislation of Belarus, a foreign citizen cannot own land and only has the right to rent it.[12][13]

Cambodia

Under Article 44 of the Cambodian Constitution, “only natural persons or legal entities of Khmer nationality shall have the right to land ownership.” foreigners are prohibited to own or possess land in Cambodia.[14][15]

China

Land in China is state-owned or collectively owned. Enterprises, farmers, and householders lease land from the state using long-term leases of 20 to 70 years.[16] Foreign investors are not allowed to buy or own land in China.

Georgia

Since 2017, A ban on foreigners owning farmland was introduced in the Georgia's new constitution. The new constitution states that, with a small number of exceptions, agricultural land can only be owned by the state, a Georgian citizen or a Georgian-owned entity.[17][18][19][20]

Indonesia

The House of Representatives of Indonesia passed the plantation bill to set stricter rules on foreign ownership in the plantation sector to prioritise smaller local plantation firms. There is no specific percentage value on the limit on foreign ownership, but a 30% foreign ownership ceiling had been demanded by the House's Commission IV.

Plantation business groups as well as the Ministry of Agriculture had previously voiced criticism of the bill, expressing concern that it would negatively impact plantation firms and growers, as foreign investment might be reduced.

Even though the bill was passed to limit foreign ownership, the law encourages cooperation research and development between domestic and foreign businesses, universities and individuals.

A reduction in foreign ownership limit may reduce foreign investment, but it can help boost revenue for domestic firms and economic development.[21]

Government Regulation No. 14 of 2018 limited foreign ownership in insurance companies to 80%. However, this rule is not applied retroactively for insurance companies with foreign ownership higher than 80% at the time of its implementation date of 20 January 2020.[22]

Israel

Approximately 7% of the allocated land in Israel is privately owned. The rest, i.e. 93%, is owned by the State and is known as “Israeli Land”. Israel’s Basic Law on real estate states that Israel’s Land is jointly owned by the State (69%), the Development Authority (12%), and the Jewish National Fund (12%).

Indonesia

Foreigners are not allowed to own freehold land in Indonesia.[23][24] Foreign investors can legally hold leasehold titles under Right-To-Use (Hak Pakai) or Building rights (Hak Guna Bangunan). This is based on Part 5 Article 36 Paragraph 1b of the Agrarian Law No 5 of 1960.[25]

Kazakhstan

In 2021, President Kassym-Jomart Tokayev signed into law a bill that bans the selling and leasing of agricultural land to foreigners.[26][27][28]

Kuwait

Foreigners in Kuwait with the exception of GCC nationals are prohibited from land ownership.

Laos

As foreigners are prohibited from permanent ownership of land. Foreigners can only lease land for a period of up to 30 year.[29][30]

Maldives

Foreigners are not allowed to own freehold land in Maldives. the land can only be leased to foreigners for 99 years.[31][32]

Mongolia

Only Mongolian citizens can own the land within the territory of Mongolia. foreign citizens can only lease the land.[33][34][35]

Myanmar

Though purchase of land is not permitted to foreigners, a real estate investor may apply for a 70 year leasehold with a Myanmar Investment Commission (MIC) permit.[36]

Philippines

Foreign citizens and companies are prohibited from fully owning land in the Philippines under the 1987 Constitution.[37][38][39]

There is also a 40 percent cap imposed on foreign ownership of companies with exemptions such as firms engaged in the telecommunications, airlines, shipping, railways and irrigation sectors.[40] An exemption also applies to the renewable energy sector.[41]

Qatar

As part of financial reforms, Qatar's emir has issued a law, allowing foreign investors to obtain up to 49% of listed Qatari companies for expansion in the stock market and to stimulate development in the financial industry.

Prior to the law, ceilings on listed Qatari firms restricted foreign ownership to 25%.

The reform aims to help attract more foreign investment in the long run. However, according to a wealth manager in the Gulf, "It's a step in the right direction, but it will have to be backed up by good performance from companies in order to attract foreign investment. Also, there should be limited impact from the law in the short term due to liquidity issues and limited numbers of shares available."[42]

Russia

In 2014, the Russian Duma passed a law reducing the foreign ownership ceiling for print publications and radio and television outlets from 50% to 20%; it was passed with a vote of 430-2. The legislation, which came into force in 2016, forbids foreign governments, organisations, companies and individuals from founding or holding more than a 20% stake in Russian media businesses.

According to Vadim Dengin, one of the bill's authors, "the tighter limit on foreign ownership would help protect Russia from western influence."[43] However, publishers and editors of independent media companies in Russia argued that the new law would further reduce diversity of opinion.

Sri Lanka

In 2014, the Sri Lankan parliament passed a law banning land purchases by foreigners. The new act will allow foreigners to acquire land only on a lease basis of up to 99 years with an annual 15 percent tax on the total rental paid upfront.[44][45][46][47]

Thailand

In Thailand foreigners are prohibited to own or possess land in Thailand.[48]

Vietnam

Foreigners cannot buy and own land, like in many other Southeast Asian countries. Instead, the land is collectively owned by all Vietnamese people, but governed by the state. As written in the national Land Law, foreigners and foreign organizations are allowed to lease land. The leasehold period is up to 50 years.[49][50]

See also

References

  1. ↑ Cambridge Business English Dictionary. Cambridge University Press. 28 Nov 2011. ISBN 978-0521122504. 
  2. ↑ Chau, Esther; Wu, Jayce (2013). Economics HL/SL - Study Guide for the IB Diploma. CANA Academy Limited. p. 166. ISBN 978-9881686824. 
  3. ↑ "Definition of subsidiary - Oxford Dictionaries (British & World English)". Oxford Dictionaries. http://oxforddictionaries.com/definition/subsidiary?view=uk. Retrieved 2014-10-23. [|permanent dead link|dead link}}]
  4. ↑ Royse, Roger. "Foreign Ownership of U.S. Real Estate". Royse Law Firm. http://www.rroyselaw.com/featured_articles_foreignownership-roger_article.html. Retrieved 2014-10-23. 
  5. ↑ "Impacts of Technological Change on Productivity". Boundless. 
  6. ↑ Grimsley, Shawn. "What Is Foreign Direct Investment? - Definition, Advantages & Disadvantages". Education Portal. http://education-portal.com/academy/lesson/what-is-foreign-direct-investment-definition-advantages-disadvantages.html. Retrieved 2014-10-23. 
  7. ↑ "Foreign ownership and consequences for British business". Economic & Social Research Council. Archived from the original on 2015-02-13. https://web.archive.org/web/20150213045656/http://www.esrc.ac.uk/_images/Evidence%20briefing%20-%20foreign%20ownership_tcm8-13313.pdf. Retrieved 2014-10-23. 
  8. ↑ Blink, Jocelyn; Dorton, Ian (2012-09-06). IB Economics Course Book 2nd edition: Oxford IB Diploma Programme (International Baccalaureate). OUP Oxford. ISBN 978-0198390008. 
  9. ↑ Heakal, Reem. "Economics Basics: Supply and Demand". Investopedia US. http://www.investopedia.com/university/economics/economics3.asp. Retrieved 2014-10-23. 
  10. ↑ Chau, Esther; Wu, Jayce (2013). Economics HL/SL - Study Guide for the IB Diploma. CANA Academy Limited. p. 167. ISBN 978-9881686824. 
  11. ↑ "The Impact of Direct Foreign Investment on Wages and Working Conditions". Organisation for Economic Co-operation and Development. https://www.oecd.org/investment/mne/40848277.pdf. Retrieved 28 May 2017. 
  12. ↑ "How can a foreigner buy property in Belarus". Legal Office "Leshchynski Smolski". https://en.lsl.by/how-can-a-foreigner-buy-property-in-belarus/. 
  13. ↑ "Property in Belarus | Belarusian Real Estate Investment". https://www.globalpropertyguide.com/Europe/Belarus. 
  14. ↑ "Can Foreigners Own Land in Cambodia? Here's How". October 2020. https://ips-cambodia.com/can-foreigners-own-land-in-cambodia-heres-how/. 
  15. ↑ "Can foreigners buy real estate in Cambodia? The 4 titles you must know". 16 September 2020. https://www.juwai.asia/main/news/3030. 
  16. ↑ Stuart Leavenworth and Kiki Zhao (May 31, 2016). "In China, Homeowners Find Themselves in a Land of Doubt". The New York Times. https://www.nytimes.com/2016/06/01/business/international/in-china-homeowners-find-themselves-in-a-land-of-doubt.html. "All land in China is owned by the government, which parcels it out to developers and homeowners through 20- to 70-year leases." 
  17. ↑ "Georgia's ban on foreign landowners leaves farmers in limbo". Reuters. 17 April 2019. https://www.reuters.com/article/us-georgia-landrights-agriculture-idUSKCN1RT03Y. 
  18. ↑ "Georgia Keeping Its Land Off-Limits for Foreigners | Eurasianet". https://eurasianet.org/georgia-keeping-its-land-off-limits-for-foreigners. 
  19. ↑ "Land reform - land settlement and cooperatives - Special Edition". http://www.fao.org/3/y5026e/y5026e09.htm. 
  20. ↑ "Georgia temporarily lifts ban on sale of agricultural land to foreign citizens". 7 December 2018. https://oc-media.org/georgia-temporarily-lifts-ban-on-sale-of-agricultural-land-to-foreign-citizens/. 
  21. ↑ The Jarkata Post (2014-09-30). "New plantation law limits foreign ownership". The Jakarta Post (The Jakarta Post). http://www.thejakartapost.com/news/2014/09/30/new-plantation-law-limits-foreign-ownership.html. Retrieved 2014-10-25. 
  22. ↑ Saleh, Tahir (27 January 2020). "Sah! Asing Boleh Punya Lebih 80% Saham Perusahaan Asuransi RI" (in id). CNBC Indonesia. https://www.cnbcindonesia.com/market/20200127125042-17-132992/sah-asing-boleh-punya-lebih-80-saham-perusahaan-asuransi-ri. 
  23. ↑ "Buying Property in Indonesia | How to Buy a House in Indonesia". 19 October 2018. https://www.globalpropertyguide.com/Asia/Indonesia/Buying-Guide. 
  24. ↑ "Foreign Ownership of Land and Property in Indonesia - BALI REALTY". https://www.balirealty.com/foreign-ownership-of-land-and-property-in-indonesia/. 
  25. ↑ "UNDERSTANDING LAW & REGULATIONS BEFORE BUYING LAND & PROPERTIES IN BALI (2023)". 8 November 2023. https://baliexception.com/understanding-law-regulations-before-buying-land-properties-in-bali-2023/. 
  26. ↑ "Kazakh President Signs into Law Long-Debated Bill Banning Land Ownership by Foreigners". https://www.rferl.org/a/kazakhstan-ban-on-foreigners-owning-land-becomes-law/31252826.html. 
  27. ↑ "Kazakhstan Bans Sale of Agricultural Lands to Foreigners". https://thediplomat.com/2021/05/kazakhstan-bans-sale-of-agricultural-lands-to-foreigners/. 
  28. ↑ "Kazakh president orders ban on foreign ownership of farmland". Reuters. 25 February 2021. https://www.reuters.com/article/us-kazakhstan-farming-land-ownership-idUSKBN2AP0MU. 
  29. ↑ "Laos Opens Real Estate Investment Opportunities to Foreigners". 15 October 2020. https://www.lexology.com/library/detail.aspx?g=387a95d8-6e8f-46e2-a912-f600227488fe. 
  30. ↑ "Want to Invest in Laos? Here's Why You Shouldn't". 10 August 2017. https://www.investasian.com/2017/08/10/invest-in-laos/. 
  31. ↑ "Maldives parliament repeals law allowing foreign land ownership". Reuters. 18 April 2019. https://www.reuters.com/article/us-maldives-land-idUSKCN1RU0MZ. 
  32. ↑ "Maldives parliament repeals law allowing foreign land ownership - ET RealEstate". https://realty.economictimes.indiatimes.com/news/industry/maldives-parliament-repeals-law-allowing-foreign-land-ownership/68941048. 
  33. ↑ "Land Law of Mongolia". http://www.anallp.com/index.php/index/article/aid/199.html#:~:text=Only%20Mongolian%20citizens%20can%20own,is%200.5%20hectares%20of%20land.. 
  34. ↑ "Buying property in Mongolia". March 2017. https://www.retalkasia.com/news/2017/03/01/buying-property-mongolia/1488333808. 
  35. ↑ "FAQs". 10 October 2015. https://www.mongolia-properties.com/faqs. 
  36. ↑ "Buying property in Myanmar". 21 March 2017. https://www.retalkasia.com/news/2017/03/21/buying-property-myanmar/1490067561. 
  37. ↑ "Can foreigners own land in the Philippines?". Manila Standard. https://www.manilastandard.net/opinion/columns/footnotes-by-tranquil-g-s-salvador-iii/350395/can-foreigners-own-land-in-the-philippines-.html. 
  38. ↑ "Real estate regulations in the Philippines". 7 April 2016. https://oxfordbusinessgroup.com/overview/real-estate-transaction-rules-look-key-regulations-real-estate-transactions. 
  39. ↑ "Solon pushes for limited land ownership for foreigners" (in en). CNN Philippines. 13 January 2024. https://www.cnnphilippines.com/news/2021/1/13/Philippine-constitution-foreign-land-ownership.html. 
  40. ↑ "Philippines to allow full foreign ownership in telecoms, airlines, shipping". Reuters. 22 March 2022. https://www.reuters.com/world/asia-pacific/philippines-allow-full-foreign-ownership-telecoms-airlines-shipping-2022-03-22/. 
  41. ↑ "DoE opens RE to full foreign ownership". BusinessWorld. 16 November 2022. https://www.bworldonline.com/top-stories/2022/11/17/487708/doe-opens-re-to-full-foreign-ownership/. 
  42. ↑ Bakr, Amena; Torchia, Andrew (2014-08-06). "UPDATE 1-Qatar emir issues law raising foreign ownership limits for stocks". Reuters (Thomson Reuters). https://www.reuters.com/article/qatar-stocks-ownership-idUSL6N0QC2DO20140806. Retrieved 2014-10-24. 
  43. ↑ Luhn, Alec (2014-09-26). "Russia tightens limit on foreign ownership of media". The Guardian (Guardian News and Media Limited). https://www.theguardian.com/world/2014/sep/26/russia-limit-foreign-ownership-media. Retrieved 2014-10-25. 
  44. ↑ "Sri Lanka enacts ban on foreigners buying land" (in en). Reuters. 2014-10-21. https://www.reuters.com/article/sri-lanka-land-foreigners-idUSL3N0SG5NB20141021. 
  45. ↑ "Sri Lanka passes law banning sale of land to foreign citizens | Tamil Guardian". https://www.tamilguardian.com/content/sri-lanka-passes-law-banning-sale-land-foreign-citizens. 
  46. ↑ "Citizen or Not: The Process and Concerns of Buying Property in Sri Lanka as an Expat" (in en). https://ceylontoday.lk/news/citizen-or-not-the-process-and-concerns-of-buying-property-in-sri-lanka-as-an-expat. 
  47. ↑ "A guide for foreigners wanting to buy real estate in Sri Lanka" (in en-US). https://www.thenewsrilankanhouse.com/foreigners-buying-guide. 
  48. ↑ "Thai real estate laws for foreigners". https://www.thailandlawonline.com/thai-real-estate-law/ownership-and-buying-real-estate-in-thailand. 
  49. ↑ "Can foreigner buy property in Vietnam?". 12 September 2019. https://vietnaminsider.vn/can-foreigner-buy-property-in-vietnam/. 
  50. ↑ "How to Buy Property in Vietnam: The Ultimate Guide". 30 January 2019. https://www.asiapropertyhq.com/buy-property-vietnam/. 



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