Favouring foreigners over locals

The National Assembly passed the Financial Services Bill last week. I voted against it. I did so because the Bill seems to favour foreign investors over our own people and companies.

Section 50, on restrictions on ownership of financial institution and investments by financial institutions, reads:

No person shall hold more than the following percentage of interest in shares of a financial institution:

(a) in case of an individual, 10 percent,

(b) in the case of a company not being a financial institution, 20 percent

(c) in the case of a company being a financial institution, as per the limit provided under section 53 below, and

(d) in case of a foreign financial institution, as per the RMA regulations in line with the foreign direct investment policy

According to Section 53:

No financial institution can have ownership in another financial institution exceeding 5 percent of the other financial institutions’ paid up capital.

And RMA regulations currently allow foreign financial institutions to own 51 percent of a financial institution’s paid up capital.

So, here’s what I took exception to:

Our people cannot own more than 10%, and our companies cannot own more than 20% of a financial institution. But a foreign company can own 51%.

Our financial institutions cannot own more than 5% of another financial institution. But a foreign financial institution can own 51%.

The Bill favours foreign companies over our own companies. And how did the government respond when they realized this bias? They protected government owned companies by inserting a new subsection under Section 50, one that reads:

(e)   in the case of Ministry of Finance, RGoB, 75%.

 

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  1. The logic of this Bill escapes me totally…

    Would someone please explain what the stated “official” logic behind these percentages are?

  2. In Bhutan, it should be Bhutanese first, period.

  3. Dear Zekom:

    Exactly! I’d asked for the rationale behind the numbers too…

    No “official” logic was presented. Instead the government offered ad-hoc reasons.

    51% for foreign banks, they said, was to attract foreign capital (but why, I asked, when our own people are willing to provide more than enough capital)

    5% for Bhutanese banks investing in another financial institution, they said, to prevent a financial crises in one bank spreading to another (so why, I asked, are foreign banks allowed to own as much as 51%)

    75% for RGOB (no answer)

    On why caps of 10% and 20% for Bhutanese individuals and companies respectively given 51% for FDI: no answer

    On why cap for foreign banks (currently at 51%) is not specified in the Bill: a convoluted, meandering answer about the need to keep FDI flexible (And flexibility for EDP and private sector develop policies are not desirable? And, anyhow, shouldn’t FDI be predictable?)

    The Bill goes to the National Council…so I’m nurturing a glimmer of hope.

    Tshering

  4. True! The final bill was totally distorted from the earlier version and my understanding is that every section of a law should have a positive reason for why it has been framed but in Bhutan looks like individual interest and short term adaptation overrides the general and long term interest.The bill is a thrash and it reflects the caliber of the lawmakers who endorses it.

  5. Dorji Tshering P says:

    Dear OL,

    I am happy that you have raised this issue. It totally fails me why this government is discriminating our own people.

    Maybe DPT is lost in its GNH world and suddenly thinks that all the hippies they attract are the citizens and our own people are not needed.

    It is sad to know that people like PM are not able to understand the meaning of their own laws.

    In Bhutan Bhutanese should be first.
    Stop discriminating Bhutanese DPT.

  6. Lyonpo OL, name same kadrinchela … but with a sinking feeling in my stomach …

    We are not perfect. But, we built a reputation among various international communities as a nation with sound and thoughtful policies …

    What happened to us? What on earth is going on … ?

    I hope that our government is not allowing some foreign interest to shape details of our policies.

    The Financial Services Bill on its own is too important for our economic strength. But, I am now troubled that issues might go well beyond this particular Bill …

  7. Dorji,
    where are thou? .You have always justified many of the issues brought by OL. What do you say about this? This too is happening all over the world?. The bold move of the Govt?

  8. Even a speck of dust when viewed under microscope looks very big and that’s what is happening here. I don’t really see the real issue of foreigners being given preference over the locals. The government has reiterated that it is the only way to attract meaningful and productive FDI into the country. Otherwise, we don’t have attractive incentives to offer them to come and develop our country. Besides, RMA regulation itself would undergo changes in the future depending on the circumstances and situation of our country. The rule allowing is one thing but practical implementation of it is quite another. Everybody here talks as if this has and is happening already. Let’s exercise our patience and see if what OL fears comes true.

  9. This is Bhutan, the country of Bhutanese. So we as Bhutanese should be given FIRST preference. But this is clearly not the case here. I wonder what so many HONORABLEs are doing in our Parliament. By the way I have not seen the MPs of other democratic nations addressed as HONORABLE. I have never heard Obama addressed as Honorable President. But in our Parliament, all the MPS have been lavishly addressing each other as Honorable this and that. I wonder if they know the meaning of this sacred word they so thoughlessly used.

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