4.2 Foreign investment-related barriers Foreign ownership regulations pertain to those regulations that either limit equity ownership in the firm or regulate the form of establishment, such as through a separately-capitalized subsidiary, representative office, or joint venture. Each country wants to protect its national interest. While some counties are quite liberal and allow foreign companies to have majority equity, other countries require local majority ownership. Such regulations inhibit foreign firms as they struggle to find the right partner for joint ventures. The lack of management control also results in lower quality and reliability of the service provided to shippers, thus leading to inefficiency in trade. Except for Singapore and Brunei, in all other ASEAN countries, regulations require some form of local participation in the management of the company. For instance, in Cambodia and Myanmar foreign companies can own up to 100 per cent equity, but it depends on the size of the company. For example, Schenker, a foreign LSP, owns 100 per cent equity in Myanmar because it provides employment for locals as well as foreign direct capital investment in the country. Usually, the larger LSPs are easily granted licences to operate in the country with 100 per cent equity. In Vietnam, foreign equity is restricted to less than 50 per cent and it is usually very difficult to find the right partners. In Laos, foreign ownership is restricted to less than 50 per cent. So far, there are hardly any foreign players in Laos. Laos and Vietnam are now opening up transportation sector to foreign LSPs. In Thailand, regulations allow foreign companies to invest (,50 per cent) and require that the foreign companies to have a minimum amount of paid-up capital and the board to have at least seven local directors. Investment is difficult in Indonesia. While warehousing and distribution is permitted transportation is not allowed. Foreign equity is restricted to less than 50 per cent. Malaysian regulations have local majority requiring bumiputra to own more than 50 per cent. Recently Malaysian regulations have reduced bumiputra ownership to around 30 per cent. In the case of larger investment, Malaysian regulations may allow for 100 per cent equity ownership to foreign firms. However, such policies are uncertain and the equity ownership ratio may change. The local partners in Indonesia and Malaysia are typically sleeping partners and a nest for retirement. For example, trucking licences in Malaysia are normally given to former government, military or civil service officials. When these officials retire, they can obtain 50-100 licences to operate. The government can then refrain from providing pensions to such high-ranking officials. These officials can earn $500-1,000/month on a licence. 4.2.1 Discriminatory licensing. Licensing requirements are present in every country except Singapore and are different from country to country. Indonesia allows foreign investment in warehousing and distribution but not transportation. The process of obtaining licences is quite time consuming and difficult as there are different kinds of licences, such as office licence, brand licence, export and import licences. The Philippines does not grant licences to foreigners and a company has to go through a long debate to obtain licence. There are also lobby groups such as the Philippines freight forwarders association which push local aviation regulators not to grant licence to international players. Moreover, local transportation delivery is given only to local firms. In Thailand, licensing requirements are mainly for transportation. Domestic transportation services can only be offered by local firms to those with majority local ownership. Next, foreign companies can purchase a truck for their own purposes, but they cannot lease it to other companies. For example, in Malaysia, foreign firms can apply licences through joint ventures. In Laos, once a company obtains a licence, it does not face any problem. It is difficult to get licence to set up a business in Vietnam. There are several licences such as branch licence, which does not permit the firm to import and export. In Cambodia, Myanmar, Laos, Vietnam and Brunei, a firm can obtain a licence, but local transport delivery is given only to local companies. In Malaysia, it is easier to obtain a licence through joint ventures.