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Openness to Foreign Investment

The Government of Burundi's (GOB) official policy toward foreign direct investment (FDI) is welcoming, generally free of restrictions on potential investors and designed to promote direct investment. The legal system upholds the sanctity of contracts, and specific provisions within the Civil and Commerce Code have been adopted to provide substantial incentives to FDI. They are a Code of Commerce, an investment code to encourage foreign investment, and laws intended to create a free trade economic zone. No overall economic or investment strategy exists that creates discriminatory effects on foreign-owned investors, and, in contrast to many states in the region, there are no limits on foreign ownership or control of business.

There is mandatory screening of foreign investment in specific circumstances. For example, if a company seeks any of the special incentives provided through the Investment Code, the project is screened by a panel of experts within the Ministry of Planning. The screening mechanisms are routine and nondiscriminatory, and serve to determine whether a company is eligible to receive benefits from the Investment Code or advantages from the Free Economic Zone. Any enterprise from any part of the country can be a member of the Free Economic Zone, as long as their products are for export only. All sectors within the economy are open to direct foreign investment, and foreign investors receive the same legal treatment as domestic companies.

Burundi is emerging from twelve years of civil war, during which little to no investment, foreign or domestic, was made. The National Assembly is preparing incentive legislation in hopes of attracting foreign direct investment. Burundi is also beginning privatization in certain sectors, notably coffee production and banking; foreign investors are allowed to participate in all stages of the privatization process. Bidding criteria for candidates for privatization are clear and transparent. There is no discrimination directed towards foreign investors either at the time of the initial investment, or after the investment is made. No laws or regulations exist which specifically authorize private firms to adopt articles of incorporation limiting or prohibiting FDI, nor do domestic firms maintain such practices.

Conversion and Transfer Policies

In principle, there are no restrictions on converting or transferring funds associated with FDI. In practice, however, there are limitations dependent on the availability of hard currency. Although hard currency is available, access is dependent to a large degree on foreign assistance. Burundi's exports account for around 30% of the country's hard currency needs. There have been no recent changes to remittance policies that have either tightened or relaxed access to foreign exchange for investment purposes. There is no average delay period for remitting investment returns such as dividends, return of capital, or interest and principle on private foreign debt. When foreign exchange is available delays are generally very short, averaging three working days.

The Government of Burundi has liberalized foreign exchange in Burundi, and there is no limitation on the flow of funds for remittances of profits, debt service, capital, capital gains, returns on intellectual property, or imported inputs.

Expropriation and Compensation

The Government of Burundi is authorized to expropriate private property for the purpose of eminent domain. The use of expropriation has not been exercised, however, in more than thirty years. No particular sector of the economy is considered more at risk than another for expropriatory or similar actions.

Dispute Settlement

A government tribunal appointed to oversee commerce has the authority to settle investment disputes. International arbitration for settling disputes is recognized by the tribunal if an arbitration clause is included in the business contract. In 2006, Burundi's government approved a domestic arbitration body. Burundi is a member of the International Center for the Settlement of Investment Disputes. It is not a member of the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards. There have been no disputes adjudicated by the tribunal concerning American firms. A Belgian company, AFFIMET, was involved in an investment dispute in Burundi. The dispute was amicably settled by an arbitration court in Belgium.

Contractual rights in Burundi are enforced and protected by law. However, the provisions of the law governing bankruptcy are considered obsolete, and have not been revised since 1949. At present, the United Nations Development Program (UNDP) is providing resources to update bankruptcy law.

Performance Requirements/Incentives

Burundi has not notified the World Trade Organization (WTO) of any measures that would be consistent with the Trade Related Investment Measures (TRIM) program. Performance requirements or incentives are applied fairly and uniformly to both international and domestic investors. To encourage investment Burundi applies investment incentives to both international and domestic companies in the form of income tax deferrals, and exemption from import and export duties. To qualify for these incentives, however, the investor must meet special requirements concerning the size of the investment, the number of jobs created, and the location of the business. For example, a business may be granted extra incentives to locate and invest in rural areas. There is no general requirement that the business purchase goods from local sources. An exception is made, though, for companies licensed for export only which operate in the Free Economic Zone (FEZ). Companies which take advantage of FEZ tax incentives are required to purchase goods in Burundi, where possible.

There is no requirement that Burundian nationals own shares in the foreign investment, or that technology be transferred to Burundian entities over the time of the investment. The share of the foreign-owned equity in the investment need not be reduced over time. No "offset" requirements, whereby major procurements are approved only if the foreign supplier invests in items related to the host country, are required.

Burundi does not impose conditions on permission to invest, except for companies that apply for special incentives, such as specialized tax advantages embedded in the Investment Code. The Government of Burundi does not impose enforcement procedures on companies, and investors are not required to disclose proprietary information to the government as part of the regulator process. Burundi does not impose any discriminatory or excessively onerous visa residence, or work permit requirements that would hinder a foreign investor's mobility, or operate tariff barriers that would constitute preferential or discriminatory export or import policies. U.S. and other foreign companies are, in theory, able to participate in government-financed research and development, but, as yet, there is no precedent for this.

Right to Private Ownership and Establishment

Burundian law recognizes the right of foreign and domestic private companies to establish and own business enterprises and engage in all forms of remunerative activity. Private businesses may freely establish, acquire, and dispose of interests in other business enterprises. A “competitive equality” standard is applied to private businesses in competition with public enterprises, with respect to access to markets, credit, and other business operations, such as licenses and supplies.

Protection of Property Rights

Secured interests in property, both movable and real, are recognized and enforced. The legal system protects and facilitates acquisition and disposition of all property rights, such as land, buildings, and mortgages. Burundi adheres to key international agreements on intellectual property rights. There is a law providing for protection of intellectual property, patents, copyrights, trademarks and trade secrets dating from 1962; Burundi is in the process of amending it to meet modern requirements. At present, the GOB can not guarantee that intellectual property rights are adequately protected.

Transparency of the regulatory System

The Government of Burundi uses transparent policies and effective laws to foster competition and establish "clear rules of the game", but there are some problems in public procurement. Burundi is currently updating the commercial law with special provisions governing competition. Tax, labor, environmental, health and safety, and other laws and policies do not act as an impediment to investment. Bureaucratic procedures, including with respect to licenses and permits, slow investment. According to Doing Business 2008, approximately eleven bureaucratic procedures are required to open a business, placing Burundi slightly above the sub-Saharan regional average; the country ranks 174 out of 178 countries in the ease of doing business. The GOB is currently searching for means to streamline the process to open a business, intending to introduce a single agency responsible for regulatory activities. Proposed laws and regulations have been published in draft form for public comment, and all interested have been invited to offer feedback on the proposed regulations. Legal, regulatory, and accounting systems are transparent and consistent with international norms, and there are no efforts to restrict foreign participation in industry standards-setting consortia or organizations.

Efficient Capital Markets and Portfolio Investments

Government policies facilitate and support the free flow of financial resources in the product and factor markets. Credit is allocated on market terms, and foreign investors are able to secure credit on the local market. The private sector has access to a variety of credit instruments, but there is no effective regulatory system established to encourage and facilitate portfolio investment. Burundi's largest banks have estimated total assets of $182 million, and approximately $103 million in outstanding loans. The banking system is considered sound, but receives limited government oversight.

There are no "cross-shareholding" or "stable shareholder" arrangements used by private firms to restrict foreign investment through mergers and acquisitions. There are no measures in place with respect to private firms’ defenses against hostile takeovers.

Political Violence

Burundi entered a period of political instability following the 1993 assassination of its first democratically-elected president. The peace process that began in 2000 culminated in democratic elections in 2005, and in the inauguration of Pierre Nkurunziza as President. In September 2006, the Government of Burundi signed a cease fire agreement with the PALIPEHUTU-FNL (FNL), the remaining rebel group. The two sides are currently working to implement provisions governing the demobilization and reintegrationof FNL forces, though progress has stalled following the July 2007 withdrawal of FNL negotiators. Small-scale skirmishes between rebel and government forces continue.

Having recently emerged from twelve years of civil war, Burundi's economy is slowly recovering. According to the International Monetary Fund, Burundi experienced six percent economic growth in 2007. During the conflict foreign investments were never an intentional target. Regional conflicts are not a direct impediment to FDI in Burundi; however, Burundi’s internal security deteriorated in 2007, and rising levels of crime could negatively affect FDI. The influx of former FNL rebels into the police, coupled with inadequate training, pay, discipline and professionalism, has created a condition in which the police are ineffective and often the source of criminal activity. The investigative capacity of Burundian law enforcement is, therefore, very limited, and crimes perpetrated against foreigners, especially theft of property, is not likely to be sufficiently investigated or appropriately adjudicated.

Corruption is perceived to be a problem particularly in the areas of government procurement and taxation, and some senior government officials have been implicated. Giving or receiving a bribe is a criminal act, punishable by up to five years in prison, and in 2006 the GoB established an anti-corruption commission and a specially designated anti-corruption court. Bribes by local companies to foreign officials are not adequately addressed by Burundian law; local businesses cannot deduct bribes made to a foreign official from their taxes. Within the Ministry of Good Governance an Inspector General operates as a "watchdog" against corruption in the government and private sector, and there are local NGOs who work specifically against corruption.

The government hired an independent auditor to investigate claims that it mishandled the 2006 sale of the Presidential aircraft. It subsequently appointed a governmental commission to review the firm's findings, and in autumn 2007 the National Assembly created a second commission to analyze the aircraft sale.

In 2007, the police arrested the Governor of the central Bank for embezzlement of public funds in connection with a scandal surrounding suspect payments of more $17 million to the private Burundian petroleum import and transport company INTERPETROL.

Bilateral Agreements

Burundi participates with regional economic entities, but has no specific bilateral investment protection agreements with countries in the region, or with the United States. There are no taxation issues of concern to U.S. investors.

OPIC and Other Investment Insurance Programs

Burundi signed an agreement with OPIC in 2006, and Burundi is a member of the Multilateral Investment Guarantee Agency. In the event that OPIC should pay an inconvertibility claim, it would use local currency, the Burundian Franc. As of January 2008, the exchange rate is 1135 Burundian Francs to $1. In January 2007, the exchange rate was 1043 Burundian Francs to $1. Data on the estimated annual U.S. dollar value of local currency circulating in the economy are unavailable. The risk for devaluation or depreciation over the next year is undetermined.

Labor

Burundi is a member of the International Labor Organization (ILO) and recognizes ILO conventions respecting worker's rights. In 2007, trade unions registered no complaints of government interference in worker’s rights. Unions represent approximately ten percent of the formal; private sector and 50 percent of the public sector. Workers have the right to join unions and to strike, though permission is required from the employer, and pre-notification of the Ministry of Labor is required. Burundi's economy is heavily dependent on subsistence agriculture. Non-skilled labor is abundant in Burundi. Burundi suffers from high unemployment in a workforce that is largely rural and almost completely lacking technical skills. Skilled labor in technology, and in general, is scarce.

Foreign Trade Zones/Free Ports

Burundi does not operate Free Ports or specifically designated Foreign Trade Zones.

Foreign Direct Investment Statistics

Statistics concerning FDI in Burundi are difficult to ascertain, and not readily available.