US seeks ideas to reform rules that govern foreign investors

• More FDI going to ‘sensitive’ sectors
• Consultation until March 18
• Gulf wants clearer criteria

The US Treasury has launched a preliminary public consultation as it considers how to facilitate foreign investment in sensitive American industries and companies.

For the Gulf, the issue is whether the US can provide greater certainty as capital flows into sectors subject to heightened national security scrutiny.

Middle Eastern governments, sovereign wealth funds and other potential investors may want to submit comments by the March 18 deadline to encourage maximum clarity and speed in any eventual regulation, according to analysts.

“This is very important for the GCC, given the huge amounts they are investing in the US,” said Justin Alexander, US-based director of Khalij Economics.

“They would likely want clearer criteria on what kinds of deals might be subject to scrutiny and a firm timeline for the process to inform investment decision-making.”

US officials first floated the idea of streamlining national security reviews by the Committee on Foreign Investment in the United States (CFIUS) last May. 

The original proposal – which is country-neutral but came just before President Donald Trump visited Qatar, Saudi Arabia and the UAE – was scant on details. 

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It called for the establishment of a pilot project as a prelude to a new CFIUS known investor programme. This would require eligible foreign parties to provide certain disclosures earlier so they could be screened more quickly. 

Industry experts told AGBI the pitch indicated “serious” interest by the White House in making it easier for Gulf sovereign wealth funds to put money in the US, but that the devil would be in the implementation details.

Trump’s trip to the region yielded hundreds of billions of dollars in investment pledges, some of which might trigger CFIUS oversight.

Alexander said revamping the review process could help turn some of those commitments “into reality”.

The Treasury Department, which chairs the inter-agency CFIUS, now says the pilot phase was launched “recently” and the committee has been working “with a representative sample” of “most frequent repeat filers” over the “past several months”. 

The department also released its so-called request for information, saying it wanted “a broad range of perspectives” on how it can support friendly foreign direct investment without relaxing its “rigorous” scrutiny of national security risks.

Chris Pilkerton, the Treasury’s assistant secretary for investment security, said the consultation “marks an important step” towards improving CFIUS reviews.

The move should be reassuring to Gulf investors that may have worried about the administration’s months-long silence on the issue, said Rachel Ziemba, a macro-strategy adviser in New York.

But any overhaul remains in the early stages and would still take months to complete, she cautioned.

Typically, US government departments will take several weeks to analyse responses to a request for information. They may then issue a proposed rule, take and crunch more public feedback and ultimately issue a final framework.

Ziemba said Gulf funds had been involved with US officials in the Trump and Biden administrations to establish a more comprehensive CFIUS regime, “or to just in general expedite investment or make it clear which investments are off limits”.

Engaging with the consultation “and also having their counterparts and co-investors engage with this, like the US recipients or the US asset managers or facilitators of some of these investments, may also be a wise thing”, she said.

CFIUS reviews are generally not public unless disclosed by the parties in question.

One such review last year complicated plans for an initial public offering by Cerebras, an artificial intelligence chipmaker that is linked to Emirati company G42. Cerebras cleared the process, but later withdrew its IPO. It plans to resubmit this year.

Mubadala Capital, a subsidiary of Abu Dhabi sovereign wealth fund Mubadala, took nearly a year to secure CFIUS approval to acquire a majority stake in Fortress Investment Group. It obtained consent in 2024 only after offering significant concessions, according to news reports at the time.  

“The review is particularly problematic in fast-moving sectors, such as AI, where delays in capital deployment could materially impact commercial outcomes,” said Alexander.

“It is possible that some deals have been considered but not pursued because of concerns about this.”