ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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FDI: Pragmatic Solution

Pragmatic Solution That press note 18 has been replaced by a modified version is welcome news, for it does away with an onerous restriction on the foreign partners of new joint ventures (JV). By requiring that the foreign party in a technology transfer, JV or trademark agreement obtain a no-objection certificate from the domestic partner, before entering into the same or allied business independently, press note 18 was intended to protect the interests of Indian business. The foreign partner was required to prove that the new venture would not jeopardise the interests of its existing domestic partner, thus effectively leaving the matter to the discretion of the Foreign Investment Promotion Board (FIPB). In a sense, the government took the matter into its own hands when, in fact, conditions of exit or that of entry into similar or related lines of businesses should have been included in the contractual agreement between the two parties. At the time the press note was issued (1998), the concern was that foreign partners would dump their domestic counterparts who would no longer be required as FDI caps were progressively liberalised to allow 100 per cent foreign ownership. The no-objection certificate was intended as much to protect the interests of shareholders and financial institutions who would be affected by the foreign firm

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