A Tonga Noble MP says both local and foreign businesses are likely to suffer after the passage of the Foreign Investment Act 2019.
The legislative change sparked concerns last year with at least one major business saying it may have to reduce its operation and lay off dozens of staff if new rules on foreign ownership were applied.
Noble MP Lord Fusitu'a is one of just three members to vote against the act.
He said the measure purported to protect local businesses and encourage foreign investment.
But Fusitu'a said it was likely to hamper local business operators because they will have no say over which companies get reserved or restricted status - the categories that aim to foster Tonga business.
"And it will disencourage foreign investment because it means that foreign investors cannot invest in local companies up to a certain threshold and still receive the benefits of being considered a local company. Assuming that wasn't the intention but unfortunately, in my estimation, that will be the net effect."
The act was passed last week.