TOKYO -- With short-term money in retreat, Asia's emerging markets are loosening restrictions on investment from abroad in hopes of securing more durable foundations for growth.
Indonesia is expected to take a number of steps in this direction soon. Southeast Asia's most populous nation stands poised to lift a ban on foreign investment in air- and seaport operators, allow foreign interests of nearly 50% in advertising and motion picture distribution, and permit bigger stakes in pharmaceuticals and some areas of finance.
As early as spring, Vietnam will raise the cap on foreign ownership of listed companies from 49% to 60%. Foreigners will also be allowed to own up to 20% of local banks.
Mineral-rich Mongolia has made it easier for foreign businesses, apart from state-owned firms, to gain majority stakes in mining, finance, media and other sectors. Since November, such deals no longer require parliamentary approval.
Taking a page from Thailand and Malaysia, India has allowed local subsidiaries of overseas companies to use loans from their parent companies to cover operating costs, such as materials and personnel, not just capital spending. This has broadened foreign firms' options for funding the growth of their local businesses.
Rates of change
Foreign money streamed into emerging-market assets as Western central banks eased credit to counter the post-financial-crisis recession. These inflows, which lifted local economic growth and equity prices, have been reversing since last spring, when signs emerged of a looming cutback to U.S. monetary stimulus.
Investment in emerging-market securities has dropped noticeably since the second quarter of last year, when the Indonesian rupiah, the Indian rupee and other Asian currencies began weakening against the dollar.
Some of these countries have hiked interest rates to try to prop up their currencies and retain short-term investment, moves some fear could harm economic growth. Indonesia's central bank has kept its policy rate steady at 7.5% for the past two months, pausing after 175 basis points of incremental increases since June.
Emerging Asia's greater openness to foreign capital comes as welcome news for global companies expanding in the region.
Japanese bearing maker NSK, which has factories in Indonesia and India, says deregulation in these countries "has made it easier to invest in new capacity."