Significant Investments Review Bill Passed to Screen Investments Critical to National Security

The Significant Investments Review Bill will establish a new government investment management regime to regulate significant local or foreign investments into entities that are critical to national security interests. The new law was passed by parliament on January 9. It will apply to entities that are deemed critical and are not yet covered by existing legislation. An example of a critical entity is a key provider of security-related functions with limited competition. While the Government has already reached out to all entities being considered for designation under the law, the full list of designated entities will be published in the Government Gazette after the law comes into force, which is expected to be in a few months. The new law will require designated entities to notify or seek approval from authorities for ownership or control changes (e.g., acquiring shares, ceasing control, dissolutions, and appointments).
 
Singapore has opted for an entity-focused strategy rather than sector-specific designations, aiming to minimize regulatory burdens and achieve a more favorable equilibrium between national security and the effects on businesses. The new law aims to complement existing sectoral regulations that impose ownership and control restrictions, including those in telecommunications, banking, and utilities. Several Members of Parliament (MPs) sought for a clear definition of “national security interest” to ensure against abuse of ministerial powers. Minister of Trade and Industry Gan Kim Yong emphasized that the definition of national security interests is intentionally broad because a more specific definition will not only constrain Singapore’s ability to swiftly address new risks that may emerge over time, but also exposes Singapore’s vulnerabilities. Furthermore, a number of MPs also voiced apprehensions regarding the potential repercussions on Singapore's appeal to foreign investors. The Ministry of Trade and Industry does not expect the Bill to have a significant impact on many non-designated entities and ensured that the Bill’s provisions are consistent with international trade organizations and are similar to existing sectoral guidelines, which most investors will be familiar with already. Singapore Business Federation Chairman Lim Ming Yan stated that the new approach is a balanced one that seeks to meet the Government’s objectives while ensuring that Singapore remains an open and competitive business location.
 
Singapore’s updated regulatory toolkit comes amidst geopolitical tensions that have prompted heightened protectionist measures. More recently, countries like Australia, China, Japan, Ireland, the United Kingdom, and the United States have either introduced or strengthened their investment management regimes, with others planning to follow suit.