After criticism, NSC does a rewrite: No countries will be named on FDI ‘blacklist’

The NSCS draft guidelines — a copy of which is with The Indian Express — instead call for three separate “trigger lists” to identify foreign investors for special scrutiny “in a manner that would not send a negative signal to potential investors” but “help the concerned ministries, security and intelligence agencies in quickly identifying the entities which require special scrutiny”.

According to the NSCS, the first trigger list should be based on “investors of concern” such as those involved in money laundering and links with terrorists, the second on “sensitive sectors” and the third on “ sensitive locations” and areas within 50 km of the international border. The trigger lists must be reviewed annually.

“If an entity does not figure in any of the three lists, the FDI would continue unimpeded,” the guidelines suggest.

The Ministry of External Affairs had opposed the proposal to list “countries of concern” , saying “there are serious foreign policy implication of singling out China and other specific countries for security screening... Any targeting of Chinese companies apart from its political fallout is likely to affect our economic interests”.

The MEA also questioned another NSCS proposal: “The utility or desirability of an umbrella legislation like the National Security Exception Act is debatable.”

The guidelines which run into 13 pages — three months ago, a Committee of Secretaries went through the NSCS policy paper — make it clear that while India needs “uninterrupted flow of FDI”, there should be a security vetting mechanism guided by two principles: “genuine investors should not be subjected to harassment and second, investors whose activities may be inimical to national interests should not be allowed to operate.”

Incidentally, the guidelines state that the Ministry of Home Affairs (MHA) and not the Ministry of Finance must be the nodal agency to ensure that foreign entities “do not indulge in any anti-national activity”. The MHA will be assisted by intelligence agencies.

The NSCS wants the MHA to invoke the National Security Exception Act only when existing laws like FEMA and Companies Act do not address threats to national security from FDI.

... contd.