The Liberalisation of Foreign Ownership and Cross-border M&A in South East Asia since the 1997 Financial Crisis

Since 1997 there has been significant liberalisation of foreign ownership regulations in most of the South East Asian economies. This has been associated with some major increases in the level of cross-border Mergers & Aquisitions (M&A). However, the 1997-2001 surge in cross-border M&A activity has to be seen in the context not only of liberalisation, but also of the short-term availability of distressed assets, the lowering of production costs and the final phases of a global FDI boom which had been increasingly driven by M&A. Similarly, the sharp decline in South East Asian cross-border M&A since 2002 can be explained in terms of the acquisition of the most easily purchased attractive assets and the sharp decline in global M&A activity. However, it is argued that post-1997 liberalisation left in place significant barriers to increased foreign ownership and operation in all the South East Asian economies. In addition to continuing direct restrictions on foreign ownership, a wide range of other regulations inhibit cross-border M&A - notably those effecting bankruptcy, M&A procedures and financial reporting. Perhaps more significant are the limitations on foreign ownership and operation that result from ownership patterns, forms of corporate governance, established business practices and the operation of the bureaucratic, judicial and political systems.