Curbs on significant investment need not hurt Singapore’s reputation for openness

AT FIRST glance, Singapore’s planned curbs on “significant investments into critical entities” might seem like a bold and even uncharacteristic move for an economy that prides itself upon openness. In the greater international context, however, the move is both understandable and not particularly alarming.

If the restrictions are reasonable in scope, and implemented with clarity and transparency, then they should not bruise the Republic’s reputation.

Granted, we have yet to know what form the curbs might take, nor even whether they will be legislative in nature.

Announcing – or at least foreshadowing – the upcoming move on Monday (Aug 28), Minister for Trade and Industry Gan Kim Yong was brief and circumspect. He referred only to “new tools” that would allow Singapore to “manage significant investments into critical entities”.

The aim is “to make sure that investments into critical entities do not affect Singapore’s economic resilience and our national security interest”.

He did, however, add that “many countries around the world are already doing this”, implying some similarity with investment controls that exist elsewhere.

This is the first reason that the upcoming curbs are unlikely to spook serious investors: there is plenty of precedent elsewhere, including in major economies such as the US and UK.

Investment screening laws in other countries tend to make similar reference to national security interests.

Australia, for instance, requires foreign persons to seek approval for starting or acquiring a direct interest in a “national security business”. These could involve critical infrastructure assets; goods or technology for military and intelligence use; or having access to information that has a national security classification.

Given this context, Singapore’s planned curbs are likely to affect only a limited range of “critical entities”, and thus a limited number of businesses and investors.

Major institutional investors will probably understand this, and may have had experience dealing with related legislation elsewhere.

Instead, it is important for other investors and companies – those that will not be affected – to be reassured that for them, it is business as usual.

Some reassurance is likely to be doled out in the coming months, at least behind closed doors. On Monday, Gan said that the government will “reach out and engage industries to better understand their own perspectives and to work with them to minimise the impact on businesses and investments”.

Such stakeholder engagement is of course welcome, but it would be helpful if public clarity could be provided as well.

In the absence of information, investors and companies may err on the side of caution, holding back on investment plans lest they be derailed. The sooner the government is able to reveal what may or may not fall under “critical entities”, the sooner they can soothe such worries and reduce any chilling effect from the news.

Beyond the business community, perceptions of another sort may also matter. In an increasingly fraught geopolitical environment, any policy change that seems directed at other countries – even if directed equally, at all and any foreign players – could be read with suspicion.

In this, however, Singapore has the advantage of an existing reputation for not taking sides. This stance has been emphasised repeatedly by its leaders, both to its own citizens and to its foreign partners. The Republic should continue to stress this, particularly as it takes further steps to defend its national interests.