A liberalization of foreign investment regulation is taking place across the Asia-Pacific region, according to a recent study conducted by international law firm Herbert Smith Freehills.  The study, entitled Asia-Pacific M&A Review, “considers performance in 2013 and looks forward to prospects for 2014 across Australia, China, Hong Kong, India, Indonesia, Japan, Myanmar, Singapore, South Korea and Thailand” according to information published on the law firms’ website.

Tony Damian, a Partner in Herbert Smith Freehills Sydney office, was interviewed last week about the report in which he outlined that he expected to see a continued relaxation of the rules governing foreign direct investment throughout the region.   He cited in particular China, Indonesia and Myanmar as reflecting significant reduction in regulation.

In Australia, Damian said, a relaxation  of rules under a new Korea-Australian Free Trade Agreement will create a 1 Billion AUS Dollar increase in investment.  The Trans-Pacific Partnership Agreement (TPP), Damian says, will likely be implemented, creating a globally important trading bloc and increasing inbound foreign direct investment flow into the region.  The Trans-Pacific Partnership, as the Washington Post reported last year, is a “free trade deal between the U.S., Canada, and 10 countries in the Asia-Pacific region that’s been under negotiation for nearly a decade.  It’s expected to eliminate tariffs on goods and services, a host of non-tariff barriers — and harmonize [numerous] regulations when it’s concluded in 2014.”

New relaxed investment rules in South Korea, for example, “would allow private equity firms to acquire a company’s entire business division, for example a lucrative shipping line, rather than restricting the firm to buying a stake in the entire company. That would make it easier to cherry-pick attractive businesses.” according to a report published in Asian Legal Business earlier this month.

The Herbert Smith Freehills report also outlined that:

  • “Deal value in the second half of 2013 was up by 45% compared to the first half of the year, with deal volume up by 23% in the same period.
  • Energy and Resources was again a key sector driving M&A activity in terms of both deal value and volume.
  • Private equity returned as a buy-side force in many countries, although higher deal volumes were primarily driven by higher mid-market activity.”

Looking at 2014, Herbert Smith Freehills anticipates:

  • “Increased divestitures of non-core business and assets across a number of jurisdictions will provide sell-side momentum.
  • M&A activity will continue to improve in 2014 and the volume of cross-border deals will increase compared to 2013.
  • There will be a continue focus on the balance between countries in the region remaining attractive investment destinations, and domestic developments in foreign investment, anti-trust and broader M&A law.”

According to Thomson Reuters data, “The Asia-Pacific region had the strongest [M&A] start of the year on record, with announced deals worth US$113 billion and 1,751 transactions.”  Based on analysis of the market, this appears likely to continue through 2014.

Posted by John Grimley

John Grimley edits and publishes Asia Law Portal and is the author of A Comprehensive Guide to the Asia-Pacific Legal Markets. He specializes in providing writing, editing, research and strategy services to the corporate and professional services sectors. Between 2002 and 2008, he established and directed the European representative business development office of US AmLaw 100 law and public policy firm Patton Boggs LLP. At the inception of his career, he served as a writer to the President of the United States in the White House. A licensed American lawyer, he holds a Juris Doctor from the University of San Diego School of Law.

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