Foreign Investment promotion Board

The Economic Times,9th July 2007
The Foreign Investment Promotion Board’s (FIPB’s) plans to impose restrictions on foreign brands entering the Indian market through the franchisee route will affect businesses banking on such arrangements as well as exports, these departments feel.
Finance ministry officials are of the view that the move will lead to discrimination since many foreign brands such as Chanel, Marks & Spencer and Tommy Hilfiger are already present here, and restrictions will deny a level playing field to those who are waiting to enter the Indian market.
The food processing ministry is worried that infusion of technology brought in by brands like Pizza Hut and McDonalds’ which operate here through franchisee arrangements’ will be hampered. Similar is the concern of the textile ministry since a number of global brands operate here through franchisees and their arrival here has led to introduction of modern technologies. Even the hotel sector will be affected since many properties operate with foreign brands through franchisee pacts.
Premium foreign brands do not compete with local brands, experts feel. They also create economic activity as they choose strong franchisee partners so that adequate investments go into marketing and branding, they argue.
In the global arena, companies from different regions opt for strategies specific to their business needs. Some prefer joint ventures while others go for franchisee arrangements. Industry’s view, therefore, is to leave the options open to companies rather than imposing restrictions.
Major brands such as Tommy Hilfiger and FCUK, for example, have provided business worth billions to India through sourcing without establishing their presence through the FDI route. It is felt that multinationals will not change their strategies due to government pressure.

The Economic Times, 6th Dec 2007:
Government is planning to obviate companies from seeking FIPB clearance while changing their equity structure, unless it is a fresh FDI proposal. Though, a company has to report to RBI every time it changes its equity structure. Foreign shareholders also would not require any govt clearance if they intend to diversify or expand their portfolio in their Indian Joint Ventures. However for a start up it will need FIPB approval. This proposal is likely to take shape in next year. According to analysts, this proposal will make life easier for companies that have to seek clearance from FIPB every time they make even minor equity changes.
But in the sensitive sectors like Real Estate, Telecom, the policies related to Foreign fund flows are getting stricter by government



Heard much about Foreign fund policies and FIPB, let’s get a basic idea about the board and its work…

The Foreign Investment Promotion Board is a special agency in India dealing with the matters relating to Foreign Direct Investment. Its objective is to promote FDI into India by undertaking investment promotion activities in India and abroad by facilitating investment in the country through international companies, non-resident Indians and other foreign investors.

Clearance of Proposals
Early clearance of proposals submitted to it through purposeful negotiation and discussion with potential investors. Reviewing policy and put in place appropriate institutional arrangements and transparent rules and procedures and guidelines for investment promotion and approvals.
On 18 February 2003, the board was transferred to the Department of Economic Affairs (DEA) Ministry of Finance.

Important functions of the Board are as follows:
•Formulating proposals for the promotion of investment.
•Steps to implement the proposals.
•Setting friendly guidelines for facilitating more investors.
•Inviting more companies to make investment.
•To recommend the Government to have necessary actions for attracting more investment.
•To ensure expeditious clearance of the proposals for foreign investment;

•To review periodically the implementation of the proposals cleared by the Board;

•To review, on a continuous basis, the general and sectoral policy regimes relating to FDI and in consultation with the Administrative Ministries and other concerned agencies, evolve a set of transparent guidelines for facilitating foreign investment in various sectors;

•To undertake investment promotion activities including establishment of contact with and inviting selected international companies to invest in India in the appropriate projects;

•To interact with the Industry Association/Bodies and other concerned government and non-government agencies on relevant issues in order to facilitate increased inflow of FDI;

•To identify sectors into which investment may be sought keeping in view the national priorities and also the specific regions of the world from which investment may be invited through special efforts;

•To interact with the Foreign Investment Promotion Council (FIPC) being constituted separately in the Ministry of Industry;

•To undertake all other activities for promoting and facilitating foreign direct investment, as considered necessary from time to time. The Board will submit its recommendations to the Government for suitable action.

With regards to the structure of the Foreign Investment Promotion Board, the board comprises the following group of secretaries to the Government:

•Secretary to Government Department of Economic Affairs, Ministry of Finance- Chairman.
•Secretary to Government Department of Industrial Policy and Promotion, Ministry of commerce and Industry.
•Secretary to Government, Department of Commerce, Ministry of Commerce and Industry.
•Secretary to Government, Economic Relations, Ministry of External Affairs.
•Secretary to Government, Ministry of Overseas Indian Affairs.