4 ms·

30% of the entire company must be locally owned? That seems unlikely to work out. Does any country have local ownership rules of this kind?

CompelTechnic 10y ago
I believe China has a rule similar to this.
morgante 10y ago
Yes, the UAE requires 51% Emirati ownership for all companies not located in free zones. It's a terrible policy which has significantly stifled entrepreneurship. Most businesses skirt around it by either funneling their revenue through a free zone or hiring an Emirati "owner." These sorts of policies are classic populist maneuvers which seem like a good idea, but impose a tax on business activity which outweighs any gains to be had.
- danmaz74 10y ago
  But UAE has free zones - plus lots of oil money going around...
  - johndoe34 10y ago
    The EPZ zones (Export Processing Zones) are indeed the best location to set up factories or warehouses. You can offer jobs to staff typically from India or so, or why not, from Kenya, to work there. Things tend to be entirely tax-free, and you do not need to worry about local politics. I would not put down a factory full of expensive equipment in Kenya. In terms of governance and risk evaluation, it really does not sound like a good idea to do that. The staff would have to come over to the EPZ to work from there.
adzicg 10y ago
is it really the entire company or 30% of the local office? seems fairly straightforward to burden the local office with IP payments to the mothership and have no local profit/ dividends then, kind of making the local owners little more than rubber stamping officials
- morgante 10y ago
  That's actually part of the problem. Such rules discourage forming companies directly in the local jurisdiction and encourage keeping local investment to a bare minimum.
kabouseng 10y ago
Yes, Zimbabwe introduced a similar rule of 51% ownership and shortly afterwards their economy utterly collapsed (that and they seized white owned farming land to redistribute to blacks citizens).
- finid 10y ago
  Zimbabwe had many problems that caused its economy to tank. The local ownership requirement was not even a major factor.
  - kabouseng 10y ago
    Ok please share what was in your opinion the major factors... I can remember when 51% ownership was announced that suddenly the grocery stores (which is international companies) didn't have basic products like maize and salt on their shelves anymore because the companies didn't want to invest operating capital into the stores anymore.
Gustomaximus 10y ago
China has a 50% cap on foreign ownership. I've been invoked in a few companies forced into this JV arrangement to do business there and its typically not been a great result. I'm amazed they are allowed this as a member of WTO. I imagine this will be a point of contention in coming years.
julienmarie 10y ago
For most industries, Philippines has a cap at 40%, and for some industries, 100% of the company should be filipino except if you put more than $2M in capital ( retail ) if I remember right. Apparently it is going to change with the new president, let's see.
55555 10y ago
Thailand has this. I believe it is 50% for a lot of forms of companies and land ownership.
- eis 10y ago
  It's 49% allowed foreign ownership for virtually all companies (apart from ones sponsored by the Bord Of Investment of Thailand). Land ownership for foreigners is not allowed. The land ownership is creating big problems for expats trying to build a future there as they either try to circumvent the law by holding the land in a companies name (which they are not really allowed to control) or in their wifes/girlfriends name which tends to end badly in many cases. Thailands court system is also not exactly stellar and tends to side with Thais. Combine that with visa troubles (even if you should be so lucky to get permanent residency, you'll still need a work permit to do any work even voluntary for free, what the?) and you can see that it's tough for foreigners to invest in Thailand and to put roots down and build a future. If they didn't have the BOI, Thailand would likely have no economy to speak of as none of the bigger companies would have set up their factories there. Similar (and arguably even bigger) issues are to be found in virtually all countries in south east asia apart from Singapore, Hong Kong and Japan.
markdown 10y ago
Fiji has some similar protectionism in place, but they aren't across the board. Eg: A foreigner can't own a taxi or handicraft business. If you want to start a business in the fisheries sector, you need 30% local ownership and there's a minimum investment $ amount (I believe USD$250k). Full list of Reserved and Restricted Businesses: http://imgur.com/a/zx31r http://imgur.com/a/zx31r
throwaway049 10y ago
Philippines does. It is not uncommon for a foreign entrepreneur to marry a local citizen and make them the co-owner. I have this anecdotally at SME level. I don't know if it holds true for, say, SM Corporation.

CompelTechnic 10y ago

I believe China has a rule similar to this.

morgante 10y ago

Yes, the UAE requires 51% Emirati ownership for all companies not located in free zones. It's a terrible policy which has significantly stifled entrepreneurship. Most businesses skirt around it by either funneling their revenue through a free zone or hiring an Emirati "owner." These sorts of policies are classic populist maneuvers which seem like a good idea, but impose a tax on business activity which outweighs any gains to be had.

danmaz74 10y ago
But UAE has free zones - plus lots of oil money going around...
- johndoe34 10y ago
  The EPZ zones (Export Processing Zones) are indeed the best location to set up factories or warehouses. You can offer jobs to staff typically from India or so, or why not, from Kenya, to work there. Things tend to be entirely tax-free, and you do not need to worry about local politics. I would not put down a factory full of expensive equipment in Kenya. In terms of governance and risk evaluation, it really does not sound like a good idea to do that. The staff would have to come over to the EPZ to work from there.

adzicg 10y ago

is it really the entire company or 30% of the local office? seems fairly straightforward to burden the local office with IP payments to the mothership and have no local profit/ dividends then, kind of making the local owners little more than rubber stamping officials

morgante 10y ago
That's actually part of the problem. Such rules discourage forming companies directly in the local jurisdiction and encourage keeping local investment to a bare minimum.

kabouseng 10y ago

Yes, Zimbabwe introduced a similar rule of 51% ownership and shortly afterwards their economy utterly collapsed (that and they seized white owned farming land to redistribute to blacks citizens).

finid 10y ago
Zimbabwe had many problems that caused its economy to tank. The local ownership requirement was not even a major factor.
- kabouseng 10y ago
  Ok please share what was in your opinion the major factors... I can remember when 51% ownership was announced that suddenly the grocery stores (which is international companies) didn't have basic products like maize and salt on their shelves anymore because the companies didn't want to invest operating capital into the stores anymore.

Gustomaximus 10y ago

China has a 50% cap on foreign ownership. I've been invoked in a few companies forced into this JV arrangement to do business there and its typically not been a great result. I'm amazed they are allowed this as a member of WTO. I imagine this will be a point of contention in coming years.

julienmarie 10y ago

For most industries, Philippines has a cap at 40%, and for some industries, 100% of the company should be filipino except if you put more than $2M in capital ( retail ) if I remember right. Apparently it is going to change with the new president, let's see.

55555 10y ago

Thailand has this. I believe it is 50% for a lot of forms of companies and land ownership.

eis 10y ago
It's 49% allowed foreign ownership for virtually all companies (apart from ones sponsored by the Bord Of Investment of Thailand). Land ownership for foreigners is not allowed. The land ownership is creating big problems for expats trying to build a future there as they either try to circumvent the law by holding the land in a companies name (which they are not really allowed to control) or in their wifes/girlfriends name which tends to end badly in many cases. Thailands court system is also not exactly stellar and tends to side with Thais. Combine that with visa troubles (even if you should be so lucky to get permanent residency, you'll still need a work permit to do any work even voluntary for free, what the?) and you can see that it's tough for foreigners to invest in Thailand and to put roots down and build a future. If they didn't have the BOI, Thailand would likely have no economy to speak of as none of the bigger companies would have set up their factories there. Similar (and arguably even bigger) issues are to be found in virtually all countries in south east asia apart from Singapore, Hong Kong and Japan.

markdown 10y ago

Fiji has some similar protectionism in place, but they aren't across the board. Eg: A foreigner can't own a taxi or handicraft business. If you want to start a business in the fisheries sector, you need 30% local ownership and there's a minimum investment $ amount (I believe USD$250k). Full list of Reserved and Restricted Businesses: http://imgur.com/a/zx31r http://imgur.com/a/zx31r

throwaway049 10y ago

Philippines does. It is not uncommon for a foreign entrepreneur to marry a local citizen and make them the co-owner. I have this anecdotally at SME level. I don't know if it holds true for, say, SM Corporation.