India warned on investor 'threat'

By Sunil Raman
BBC News, Delhi

New laws are urged on foreign investment

India's National Security Council has recommended new legislation to monitor investment from countries that may pose a threat to national security.

A report seen by the BBC says that there is currently no law to deal with foreign investment by companies that could have links with terrorism.

There are also no bars against firms involved in money and drug laundering.

The report expressed concern at investment from countries such as Pakistan, China and North Korea.

The National Security Council is the top government-appointed agency covering political, economic and strategic concerns in India.

Tax havens

With China emerging as India's second biggest trader, the council has warned that investments from certain countries and regions should be "watched closely".

China, Taiwan, Pakistan, Bangladesh, Afghanistan, North Korea and companies backed by the Sri Lankan Tamil Tigers separatist group will be overseen.

The council warns that some companies could register in a third country and use tax havens like Mauritius, the Cayman Islands and Cyprus to invest in the country.

India has fought wars with China and Pakistan and the council has warned the government to be cautious when clearing investments from these countries.

In recent months India has put plans on hold by a Dubai-based company to construct an international trans-shipment terminal in the southern state of Kerala.

India is concerned that the company has allegedly been operating in Pakistan's Gwadar deep-sea port, which was built with a Chinese partnership.

The government also refused to give the Chinese technological company, Huawei Technology, permission to expand because it is owned by a member of the Chinese Communist Party.