Category: International Business

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The Forecast for Foreign Investment in Russia: Should Investors Expect a Warm Climate or Cloudy Skies?

I. Introduction

"If you do business in Russia, you will lose all of your money, because your Russian business partner will steal it from you, because he or she is a thief. And you will die, because the Russian mafia will murder you in your hotel bedroom when you visit Moscow or St. Petersburg."
-Daniel Thorinley  [1] at the St. Petersburg International Economic Forum.

The above quote seems to reflect the Wall Street Journal and CNN view of conducting business in Russia, who  repeatedly caution their readers and viewers about investing in Russia's emerging markets.

According to Dr. Daniel Thorniley, Senior Vice President of the Economist Group, [2] an organization providing analysis on international business and world affairs, this view is unequivocally wrong.  [3] He cites business success in Russia as the world’s best kept business secret. Yet this economic giant is largely being ignored

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China approves bill to end preferential tax treatment for foreign companies

In a move toward a market economy, China recently approved a bill creating a unified enterprise income tax of 25% for companies, thereby ending nearly three decades of preferential tax treatment for foreign companies.  [1]  This new enterprise income tax (EIT) law will become effective on January 1, 2008. [2]  Under the new EIT law, foreign companies in China, currently benefiting from the present preferential tax regime, are expected to experience a significant increase in their tax costs while domestic companies in China will see a noticeable reduction in their tax burdens. [3]

Currently, domestic companies in China pay more income taxes than their foreign counterparts.  Although China’s present corporate income tax law imposes a statutory income tax rate of 33%, this rate applies mainly to domestic firms and very few foreign companies that do not qualify for preferential tax treatment e.g., foreign services companies. [4]  Foreign companies that invest

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China’s New M&A Regulations

I. Introduction

The first piece
in this series (A Warning to Foreign Companies Entering "Sensitive" U.S. Markets, in the September 6th, 2006 edition of this publication) discussed the attempts of foreign companies to enter "sensitive" areas of the US
economy, focusing on how the US government derailed the purchase of US
companies by foreign entities. [1] This
piece will discuss the Chinese government's new regulations covering
M&A transactions involving foreign investors purchases of Chinese
companies will affect the M&A market and possible motivations behind the new legislation.   

II. Analysis

On Aug. 8, 2006, the People's Republic of China ("PRC")'s  Ministry
of
Foreign Commerce ("MOC") issued new regulations ("Revised Provisions")
on M&A transactions in China. [2] These new regulations would
simultaneously ease and impede foreign acquisitions by allowing all
stock purchases, but also requiring government approval of most M&A
transactions involving offshore entities. [3] The Revised Provisions
went into effect

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A Warning to Foreign Companies Entering “Sensitive” U.S. Markets

I. Introduction

While the
United States generally pushes for more open access for its investors
to foreign markets, the sight of foreign companies trying to invest in
"sensitive" areas of the U.S. economy has drawn a very different
reaction.  Two recent acquisition attempts illustrate this point:
CNOOC's, a Chinese oil and gas company, attempted acqusition of Unocal
and Dubai Ports World's attempted takeover of security for a number of
eastern and southern ports.

II. Analysis

On
June 23, 2005, CNOOC announced its attempted acquisition of Unocal, an
California-based independent oil and gas company. [1]  The Chinese
company's offer was $18.5 billion, which was roughly $2 billion more
than Chevron,the next highest bidder, offered, reflecting a premium of
about $1.5 billion over the value of Chevron's offer. [2]  CNOOC made
an all-cash offer of $67 per share compared to Chevron's lower combined
cash and stock offer of $61.26. [3]

Even before

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Purchasing Beachfront Property in Mexico: How Americans Circumvent Mexico’s Constitutional Prohibition

Because of the high-cost of real estate in the most desirable areas of the United States, especially southern California, many Americans are searching for a cheaper, less crowded alternative both for vacation homes and for primary residences.  With thousands of miles of undeveloped coastline, and beachfront property costs at a fraction of those in the United States, Mexico has recently become a hot market for Americans wanting a laid-back atmosphere and an affordable vacation home with warm weather throughout the year.  Though Mexico is the perfect place to build an affordable beachfront home, there is one slight problem for foreigners wishing to re-locate there:  Article 27 of the Mexican Constitution prohibits ownership of beachfront property by foreigners and foreign corporations.  Only persons born in Mexico or corporations established in Mexico can gain title to property within Mexico's "Restricted Zone."  [1] 

How do Americans get around this prohibition?  The answer is

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