adminEconomic nationalism is a deliberate economic policy that emphasises domestic control of the economy, wealth, human and financial capital, capital formation and general means of production, which requires the imposition of tariffs and other restrictions on the movement of labour, goods and capital.Economic nationalists oppose globalisation and question the benefits of unrestricted free trade. Economic nationalism may include such direct policies as protectionism and import substitution. The country’s Indigenisation and Economic Empowerment policy qualifies as economic nationalism embedded in economic patriotism.
Economic patriotism
Economic patriotism refers to clearly co-ordinated, promoted, encouraged and rewarded behaviour of consumers or companies (both private and public) that consists of favouring the goods and services produced in their country or in their group of countries.
Economic patriotism can be implemented via demand stimulation (encouraging consumers to purchase the goods and services of their own country) and through supply protection, the shielding of the domestic market from foreign competition through tariffs or quotas restrictions.
The Indigenisation and Economic Empowerment policy took centre stage during the last election as it was Zanu-PF’s theme.
There is need to have a closer look at how similar policies have been implemented elsewhere and seek ways to fine tune and modify the policy to suit our situation.
Examples of majority domestic ownership requirements include airlines in the European Union and North American countries, telecommunications in Japan, and coastal and freshwater shipping in the United States.
Exclusive domestic ownership is also often applied to natural resource sectors with the aim of giving citizens access to the associated rents. For example, foreign ownership is banned in the fishing and energy sectors in Iceland, and in the oil sector in Mexico.
Botswana
On the Botswana Stock Exchange locals should own 51 percent of the shares available to the public. The foreign investment ceiling is 49 percent for free float listed stocks.
While generally open to foreign participation in its economy, Botswana does reserve some sectors solely for citizens. Most were imposed by Parliament out of a fear that other non-citizen African and South Asian residents were opening businesses in areas traditionally controlled by Botswana.
The restrictions are not retroactive, and businesses in existence prior to the law’s passage remain in the hands of their non-citizen owners. In addition, many foreign investors have continued to invest in certain areas, such as filling stations, through franchising to Botswana citizens.
The Ministry of Commerce in Botswana, which has responsibility for licensing businesses, has generally issued licences to foreigners to operate businesses related to these areas whenever there has been any ambiguity as to whether the licensing prohibition applied. At present, the law prohibits foreign participation in school furniture manufacturing, and the welding and bricklaying trades.
The law also states that licences will only be issued to citizens of Botswana or companies wholly owned by citizens of Botswana to carry on certain businesses.
South Korea
The Foreign Investment Promotion Act is the basic law pertaining to foreign investment in Korea. FIPA and related regulations categorise business activities as either open, conditionally or partly restricted, or closed to foreign investment.
Restrictions remain for 27 industrial sectors, three of which are entirely closed to foreign investment. The South Korean government reviews restricted sectors from time to time for possible further openings. According to the Ministry of Knowledge Economy, the number of industrial sectors open to foreign investors is well above the OECD average.
The Philippines
In general Philippine real estate law prohibits the foreign ownership of land. This prohibition on foreigners owning land in the Philippines is found in the Philippines Constitution. Former Filipinos and corporations of Philippine nationality may own land, buildings, condominiums and town houses.
A corporation is considered to be of Philippine nationality if at least 60 percent is owned by Filipinos. Foreign nationals may buy condominiums units in Philippine condos (shares in condominium corporations) as long as not more than 40 percent of the units in a project are acquired by foreigners (Republic Act No. 4726, otherwise known as the Condominium Act). Foreigners may own buildings or houses in the Philippines legally; as long as they do not own the land on which it is built.
Canada
Canada also has certain restrictions on foreign ownership in key cultural sectors, such as broadcasting and communications.
Foreigners are prohibited from owning more than 46,7 percent of the voting shares of a Canadian telecommunications company.
This is spelt out in Sections of Investment Canada Act. The government will also place limits on what the big incumbent companies can acquire in its new auction of wireless spectrum — which will allow telecoms firms to offer more video and broadband services.
The ICA sets out a number of factors as relevant to the “net benefit’ assessment, such as the effect on economic activity, the degree of participation by Canadians in the business, the effect on competition, productivity, product development and innovation, the compatibility of the investment with national industrial, economic and cultural policies, and the contribution of the investment to Canada’s ability to compete globally. In order to satisfy the above criteria, it is customary for the investor to submit binding undertakings as a condition for receiving approval.
Qatar
In Qatar foreign ownership of business is restricted. On June 5, 2013 Minister Yousef Hussain Kamal, Minister of Economy and Finance and Chairman of the Financial Markets Development Committee highlighted that the foreign ownership limit of several large listed companies is at or close to 25 percent of their market capitalisation. Doha Bank is the most recent example of this trend, recently changing their FOL to 25 percent of the market capitalisation in accordance with an amendment on the bank’s articles of association aimed at allowing this change.
While the maximum foreign ownership limit in Masraf Al Rayan is set at 49 percent.
He added that some other companies had expressed their willingness to amend the current FOL set at 25 percent of their free float shares to 25 percent of their full capital.
China
A foreign investor is not allowed to buy land in China. The land in China belongs to the state and the collectives. At the conclusion of annual high-level talks between Chinese and US officials recently, a statement from the US said China had agreed to allow foreign firms to own as much as 49 percent of joint ventures involved in securities underwriting. Foreign firms currently are limited to a 33 percent stake in such firms.
Limits on participation in China’s financial markets have long been a source of frustration for foreign firms, which see themselves as missing out on potentially lucrative opportunities as the financial needs of companies and individuals in the world’s second-largest economy increase.
Still, China says it is in compliance with the promises it made when it joined the World Trade Organisation to open its financial sector to overseas competition.
According to a OECD report on foreign ownership limits and controls in 1998-2000, barriers in the European Union were relatively low in all these industries, while in Canada, Korea, Mexico, Turkey and, to a lesser extent, Australia and New Zealand, they where at or above the OECD average in many of them. They were concentrated in the transport industry in the United States and in telecommunications in Japan.
Around 2000, equity restrictions were particularly heavy in Mexico, Turkey and Korea, but also remained relatively stringent in Canada and the United States. Management and operational restrictions were notably strong in Japan, Iceland and Canada. In a few countries (Iceland, Australia, New Zealand, Canada and Spain) statutory screening requirements were relatively pervasive.”
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