Covid-19 is a game-changer for foreign investments
Countries fear that companies operating in sectors crucial to national security will require a quick infusion of capital through foreign investment, leading important assets in fighting off current and future health crises in the hands of out-of-state players, especially from China
Another fear is that foreign entities will attempt to acquire companies developing and manufacturing drugs, vaccines, and protective equipment. This could mean a greater dependence on outside entities in case of future coronavirus waves or outbreaks of other infectious diseases, for example, the new strain of swine flu identified in China earlier this month.
To address this concern, the European Union issued a guideline advising member countries to expand their regulatory oversight specifically for deals concerning the public health sector, especially the development and production of medicine and medical equipment. Japan also went as far as redefining the public health sector so that an investment in it would be considered as related to national security.
For now, it appears that Covid-19 is here to stay, at least for a while. The spread of the virus and the economic crisis that follows will undoubtedly impact the nature and volume of foreign investments in Israel and around the world.
Israel’s foreign investment regulation committee started operating on January 1, 2020, but it has now become apparent that it lacks the tools to handle the unique risks posed to the country’s national security by Covid-19. Israel must consider additional sectors that should be examined by the new regulatory body, including the tech industry and public health sector, to protect its interests in pharmaceutical and med-tech companies, which are constantly being wooed by Chinese investors.
Additionally, Israeli should pay extra attention to any investment that comes from entities controlled by another state as these deals always represent a political strategy aspect, in addition to the financial aspect.
Doron Ella is a post-doctoral fellow at the University of Toronto. Ella researches China, international institutions, and regulation on foreign investments.