Policies towards Foreign Direct Investment

The government encourages FDI, particularly in the tourism and financial services sector. The country provides incentives for second home ownership and currently has over 270 licensed banks and trust companies, 120 broker dealers and investment advisory firms, and 60 fund administrators operating in the jurisdiction. The National Investment Policy (NIP) and the Commercial Enterprises Act (CEA) explicitly encourage foreign investment in certain sectors of the economy. These sectors are : touristic resorts; upscale villas, condominium, timeshare, and second home development; international business centers; aircraft and maritime services; marinas; information and data processing; information technology services; light industry manufacturing and assembly; agro-industries; mari-culture; food and beverage processing; banking and other financial services; offshore medical centers and services; e-commerce; arbitration; international arbitrage; computer programming; software design and writing; bioinformatics and analytics; and data storage and warehousing.

The Bahamas has an investment promotion strategy that includes multiple government agencies working to attract foreign direct investment. The Bahamas Investment Authority (BIA) (www.bahamas.gov.bs/bia) administers the NIP, functions as the investment facilitation agency and acts as a ‘one stop shop’ to assist investors in navigating a potentially cumbersome approvals process. The Embassy is not aware of any formal retention strategies, but each administration has consistently supported new investment and has generally honored agreements made by previous administrations. The current government has introduced policies and legislative support for Micro, Small and Medium Enterprises (MSMEs), defined as companies with fewer than 10 employees, representing 85 percent of registered businesses. In late 2018, the government created an MSME policy and the Small Business Development Centre (SBDC) which provides business advisory services for startups and entrepreneurs, training and entrepreneurial professional development opportunities, mentorship and incubation services, access to capital, and advocacy for individual businesses, sectors within the economy and MSMEs as a community.

The Bahamas still reserves certain sectors of the economy for Bahamian investors. The reserved areas are: wholesale and retail operations (although international investors may engage in the wholesale distribution of any product they produce locally); commission agencies engaged in import or export; real estate and domestic property management; domestic newspapers and magazine publications; domestic advertising and public relations firms; nightclubs and restaurants except specialty, gourmet, and ethnic restaurants and those operating in a hotel, resort or tourist attraction; security services; domestic distribution of building supplies; construction companies except for special structures; personal cosmetic/beauty establishments; commercial fishing including deep water fishing, shallow water scale fish, crustacean, mollusk, and sponge-fishing; auto and appliance service operations; public ground transportation, cabotage and the domestic gaming industry.

With the exception of these sectors, the Bahamian government does not give preferential treatment to investors based on nationality, and investors have equal access to incentives, which include land grants, tax concessions, and direct marketing and budgetary support. The government provides guidelines for investment through its NIP, which BIA administers in the Office of the Prime Minister, and through the Commercial Enterprises Act (CEA) administered through the Ministry of Financial Services, Trade & Industry and Immigration. The CEA provides incentives to domestic and foreign investors to establish specific investment projects, including approval of a specified number of work permits for senior posts and the expedited issuance of work permits.

Large foreign investment projects, particularly those that do not fit within the NIP or CEA require approval by the National Economic Council (NEC) of The Bahamas. This process generally requires environmental and economic impact assessments for review by multiple government agencies prior to NEC consideration.

Bureaucratic impediments are not limited to the NEC approvals process, and the country continues to lag on international metrics related to starting a business. According to the 2020 World Bank Doing Business rankings, The Bahamas scores 119 overall, 181 in registering property, 77 in getting construction permits, 152 in access to credit, and 71 in resolving insolvency. All these categories saw a decrease in ratings from 2018 metrics, with the exception of getting construction permits. The Embassy is aware of cases where the Bahamian government failed to respond to investment applications, and several cases where there have been significant delays in the approvals process. Despite challenges, investment continues to grow in tourism, finance, construction, and quick-serve restaurant franchises.

Efforts to accelerate Foreign Direct Investment (FDI) have been announced but remain unclear. In response to the losses from Hurricane Dorian and the economic fallout from COVID-19, the government announced requirements for domestic and foreign investment would be liberalized and eligible investment proposals under review would be accelerated to speed up economic recovery. Public pronouncements alluded to a streamlined approach for reviewing lower value applications that now go to the NEC for approval, prioritizing foreign investment proposals that could generate inflows and stimulate construction activity, and expediting investment applications to specifically assist Grand Bahama and the Abacos post-Hurricane Dorian. Despite these announcements, the Embassy is not aware of any formal guidelines concerning changes to investment procedures that have been made publicly available.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign investors have the right to establish private enterprises and, after approval, companies operate unencumbered. Key considerations for the Bahamian government include economic impact, job creation, infrastructural development, economic diversification, and environmental protection. With the assistance of a local attorney, investors can create the following types of businesses: sole proprietorship, limited or general partnership, joint stock company, or subsidiary of a foreign company. The most popular all-purpose vehicles for foreign investors are the International Business Company (IBC) and the Limited Duration Company (LDC). Both benefit from income, capital gains, gift, estate, inheritance, and succession tax exemptions. Investors are required to establish a local company and be registered to operate in The Bahamas.

Regarding the reserved sectors of the economy referenced above, the government has made exceptions to this policy on a case-by-case basis but generally, there is no guarantee of market access or right of establishment in these areas. The Embassy is aware of several cases in which the Bahamian government has granted foreign investors waivers to the policy and allowed full market access.

Other Investment Policy Reviews

The Bahamas ranks 119 out of 190 countries in terms of the ease of doing business in the 2020 World Bank Doing Business Report, with a Distance to Frontier score of 59.9,  indicating its economy was 40.1 percentage points away from the frontier constructed from the best performances across all economies and across time. (http://doingbusiness.org/rankings )

indicating its economy was 40.1 percentage points away from the frontier constructed from the best performances across all economies and across time. (http://doingbusiness.org/rankings )

The Bahamas has not benefitted from a WTO trade policy review as it is the only Western Hemisphere country that is not a member of the global organization. The current government has re-engaged with the Accessions Division of the WTO, initially announcing an aim of full membership by 2019 and formerly relaunching accession negotiations at the Fourth Working Party in April 2019. However, the Minister with responsibility for international trade later described the 2019 target as purely aspirational, confirming it was unlikely accession would take place before 2025. There is a growing and vocal domestic constituency against WTO accession that has likely slowed the government’s course.

Neither the OECD nor UNCTAD have conducted investment policy reviews. The Bahamas achieved the G-20 standard on transparency and cooperation on tax matters, a standard initially advanced by the OECD.

Business Facilitation

According to the 2020 World Bank Doing Business Index, starting a business in The Bahamas takes 12 days, requires seven separate procedures, and costs the same for both men and women. In 2017, the Bahamian government streamlined this process and launched an e-business portal, which facilitated limited liability companies to register online (http://inlandrevenue.finance.gov.bs/business-licence/copy-applying-b-l/ ). In early 2018, the government removed certain documentary requirements to register or renew registration of companies and is considering allowing company fees to be applicable on the date of incorporation to expedite the annual process.

All companies with an annual turnover of $100,000 or more are required to register with the government to receive a tax identification number. The registration process is generally viewed as an impediment to the ease of doing business. Additionally, companies are required to provide financial reports on a monthly or quarterly basis.

In mid-2019, as part of the business license application process, the government announced provisional licenses for “low-risk” businesses including home-based businesses, sole proprietors, and other small businesses in non-regulated sectors. The government also removed the fee for starting a new business and implemented a system to renew business licenses in under 48 hours. Foreign companies, as well as incorporated companies, businesses with storefronts or operating in regulated industries, are not eligible for provisional licenses, expedited renewals, or new business license fee exemptions.

Outward Investment

The Bahamian government does not promote nor incentivize outward investment. The government does not prohibit its citizens from investing internationally, however, all outward direct investments by residents require the prior approval of the Exchange Control Department of the Central Bank of The Bahamas (www.centralbankbahamas.com/exchange – controls). Applications are considered in light of the probable impact the investments may have on The Bahamas’ balance of payments, specifically business activities that promote the receipt of foreign currency.

During the COVID-19 pandemic, in an effort to maintain adequate foreign reserves to support the Bahamian dollar fixed exchange rate and preserve access to foreign exchange for priority international transactions, on May 4, 2020, the Central Bank announced the suspension of approvals of applications to purchase foreign currency for transactions via the Investment Currency Market (ICM) and the Bahamas Depositary/Depository Receipt (“BDR”) program. The Central Bank announced foreign exchange access through the channels would resume once market uncertainties around the COVID-19 pandemic subsided. Meanwhile, the ICM was expected to continue to facilitate the repatriation of foreign currency income, capital gains, and liquidated capital at the appropriate premium.

Capital Markets and Portfolio Investment

The Bahamian government encourages the free flow of capital to markets, and the Central Bank of The Bahamas supports this flow through its functions. The Bahamas is an Article VIII member of the IMF and has agreed not to place restrictions on currency transactions, such as payments for imports. The Bahamas Securities Commission regulates the activities of investment funds, securities, and capital markets (www.scb.gov.bs ). The fledgling local stock market excludes foreign investors but is effectively regulated by the Securities Commission.

There are no legal limitations on foreigners’ access to the domestic credit market, and commercial banks make credit available on market terms. The government encourages Bahamian-foreign joint venture businesses, which are eligible for financing through both commercial banks and the Bahamas Development Bank (http://www.bahamasdevelopmentbank.com/ ).

Customarily the government does not prohibit its citizens from investing internationally. However, all outward direct investments by residents, including foreign portfolio investments, require the prior approval of the Exchange Control Department of the Central Bank of The Bahamas (www.centralbankbahamas.com/exchange – controls). Applications are assessed considering the probable impact the investments may have on The Bahamas’ balance of payments, specifically business activities that promote the receipt of foreign currency.

During the COVID-19 pandemic, in an effort to maintain adequate foreign reserves to support the Bahamian dollar fixed exchange rate and preserve access to foreign exchange for priority international transactions, on May 4, 2020, the Central Bank announced the suspension of approvals of applications to purchase foreign currency for transactions via the Investment Currency Market (ICM) and the Bahamas Depositary/Depository Receipt (“BDR”) program. Both programs fund foreign portfolio investments, the latter also promoting deepening of domestic capital markets. The Central Bank announced foreign exchange access through the channels would resume once market uncertainties around the COVID-19 pandemic subsided. Meanwhile, the ICM was expected to continue to facilitate the repatriation of foreign currency income, capital gains, and liquidated capital at the appropriate premium.

Money and Banking System

The financial sector of The Bahamas is highly developed and dynamic and consists of savings banks, trust companies, offshore banks, insurance companies, a development bank, a publicly controlled pension fund, a housing corporation, a public savings bank, private pension funds, cooperative societies, credit unions, commercial banks, and the majority state-owned Bank of The Bahamas. These institutions provide a wide array of services via several types of financial intermediaries. The Central Bank of The Bahamas, the Securities Commission, Insurance Commission, the Inspector of Financial and Corporate Service Providers, and the Compliance Commission regulate the financial sector.

According to the Central Bank’s Quarterly Economic Review ending December 2019, bolstered by the receipt of re-insurance proceeds, both bank liquidity and external reserves expanded during the fourth quarter, with the growth in the deposit base outpacing the rise in domestic credit. However, the latest indicators for the third quarter of 2019 indicated a decline in overall bank profitability, largely reflecting a rise in bad debt provisioning. Banks maintained robust capital levels during the fourth quarter, although the average ratio of capital to risk-weighted assets moved lower by 90 basis points, to 30.4 percent; remaining well in excess of the Bank’s regulatory prescribed target and trigger ratios of 17 percent and 14 percent, respectively. The ratios of provisions to both non-performing loans and total arrears, firmed by 6.0 percentage points each, to 94.4 percent and 62.5 percent, respectively. Further, banks also wrote-off an estimated $29.3 million in delinquent loans and recovered approximately $6.2 million, during the review quarter.

In the domestic banking sector, four of the eight commercial banks are subsidiaries of Canadian banks, three are locally owned, and one is a branch of a U.S.-based institution. Continued reorganization by the Canadian banks has severely limited banking services on some of the less populated islands.

The Central Bank’s strategic goals include responding to the loss of brick-and-mortar banks, particularly in the Family Islands, by implementing electronic funds transfer across the country and providing access for individuals to basic financial services through digital media. To this end, the Bank introduced a digital currency called the Sand Dollar in December 2019, with a pilot phase in the Exuma islands, extending to the Abaco islands during the first quarter of 2020. This initiative, known as Project Sand Dollar, targets improved outcomes for financial inclusion and access, making the domestic payments system more efficient and non-discriminatory in access to financial services. The project has the support of the domestic financial community, which welcomes the opportunity for financial inclusion of unbanked and underbanked residents. Authorized financial institutions participating in the pilot include clearing banks, money transfer services, and payment service providers. Additional information on the Sand Dollar can be accessed via www.sanddollar.bs/ .

Foreign Exchange and Remittances

Foreign Exchange Policies

The Bahamas maintains a fixed exchange rate policy, which pegs the Bahamian dollar one-to-one with the U.S. dollar. The legal basis for the policy is the Exchange Control Act of 1974 and Exchange Control Regulations. The controls ensure adequate foreign exchange flows are always available to support the fixed parity of the Bahamian dollar against the U.S. dollar. For the tourism-dependent economy, the peg removes issues of rate conversions and allows for unified pricing of goods and services for tourists and residents. To maintain this structure, individuals and corporations resident in The Bahamas are subject to capital or exchange controls.

Exchange controls are not an impediment to foreign investment in the country. The government requires all non-resident investors in The Bahamas to register with the Central Bank, and the government allows non-resident investors who finance their projects substantially from foreign currency transferred into The Bahamas to convert and repatriate profits and capital gains freely. They do this with minimal bureaucratic formalities and without limitations on the inflows or outflows of funds.

In the administration of exchange controls, the Central Bank does not withhold or delay approval for legitimate foreign exchange purchases for currency transactions and, in the interest of facilitating international trade, it delegates this authority to major commercial banks and selected trust companies. International and local commercial banks, which are registered by the Central Bank as ‘Authorized Dealers,’ may administer and conduct foreign currency transactions with residents of The Bahamas. Similarly, private banks and trust companies which are designated as ‘Authorized Agents’ are permitted to act as depositories for foreign securities of residents and to conduct securities transactions for non-resident companies under their management.

The Central Bank directly approves foreign exchange transactions that fall outside of the delegated authority, including loans, dividends, issues and transfer of shares, travel facilities, and investment currency. The government has continued gradual liberalization of exchange controls over the years with the most recent measure implemented in April 2016. The most recent measures delegated increased authority to commercial banks for exchange control and seek to regularize nationals holding accounts in the United States by allowing nationals to open U.S. dollar denominated accounts within the jurisdiction.

As mentioned, during the COVID-19 pandemic, in an effort to maintain adequate foreign reserves to support the Bahamian dollar fixed exchange rate and preserve access to foreign exchange for priority international transactions, on May 4, 2020, the Central Bank announced the suspension of approvals of applications to purchase foreign currency for transactions via the Investment Currency Market (ICM) and the Bahamas Depositary/Depository Receipt (“BDR”) program. The Central Bank announced foreign exchange access through the channels would resume once market uncertainties around the COVID-19 pandemic subsided. Meanwhile, the ICM was expected to continue to facilitate the repatriation of foreign currency income, capital gains, and liquidated capital at the appropriate premium.

Remittance Policies

There are no restrictions on investment remittances. Foreign investors who receive a Central Bank designation as a non-resident may open foreign currency-denominated bank accounts and repatriate those funds freely. In addition, with Central Bank approval, a foreign investor may open an account denominated in Bahamian currency to pay local expenses. As mentioned, increased authority has been delegated to commercial banks and money transfer businesses.

The Bahamas is a member of the Caribbean Financial Action Task Force (CFATF). Its most recent peer review evaluation and follow-up reports can be found at (https://www.cfatf-gafic.org/index.php/member-countries/the-bahamas ).

Sovereign Wealth Funds

The Bahamian government passed omnibus legislation for the effective management of the oil and gas sector in 2017, which included the creation of a sovereign wealth fund, but has not yet promulgated supporting regulations. Discussions on a possible sovereign wealth fund have been reignited as the Bahamas Petroleum Company, an Isle of Man-registered company, received Bahamian government approval to begin drilling a test well in southern Bahamian waters off the north coast of Cuba.

State-Owned Enterprises (SOEs) are active in the utilities and services sectors of the economy. There is a published list of the 25 SOEs available on www.bahamas.gov.bs . Key SOEs include:

Bahamasair Holdings Ltd. (National Airline); Public Hospitals Authority; Civil Aviation Authority; Nassau Airport Development Authority; University of The Bahamas; Health Insurance Authority; Bank of The Bahamas (65 percent Bahamian government); Bahamas Power and Light (BPL); Water and Sewerage Corporation (WSC); Broadcasting Corporation of The Bahamas (ZNS); Nassau Flight Services; and the Hotel Corporation of The Bahamas.

Within the past decade, no SOE has returned profits or paid dividends. The government’s 2018-2019 budget listed $398m in subsidies allocated to SOEs and agencies for the 2018-2019 fiscal year, down slightly from the prior year’s $410m. The bulk of this sum, some $216m or more than 50 percent, was due to the Public Hospitals Authority (PHA) to cover its operational costs.

The government’s budget revealed the acquisition of, and investment in, the Grand Lucayan resort through the government’s capitalization of the special purpose vehicle, Lucayan Renewal Holdings incurring a $47m cost as at end-March 2019. The budget also disclosed transfers to non-financial SOEs rose by $29.2m to $75.8m during the first nine months of the 2018-2019 fiscal year. The government also facilitated the budgeted settlement of $7.2m in interest payment on Bahamas Resolve’s $167.7m promissory note to the Bank of The Bahamas.  In April 2019, the government announced plans to introduce a State-Owned Enterprises Bill to impose proper corporate governance, accountability, and discipline and to address the risk loss-making, inefficient SOEs pose to its financial health.

The government has permitted investment in sectors where SOEs operate and has approved licenses to private suppliers of electrical and water and sewerage services. These licenses have been issued for private real estate developments or in locations in which there is limited government capacity to provide services. An exception is the city of Freeport on the island of Grand Bahama, which has its own licensing authority and maintains monopolies for the provision of electricity, water, and sanitation services.

In May 2019, the Bahamian government issued a Request for Proposal for the purchase or franchise agreement for Nassau Flight Services. Bahamian investor groups were targeted by the FNM administration, adding that only Bahamians needed to apply for the ground handling services provider’s takeover. However, in February 2019 the government announced its decision to ‘maintain the status quo’ in deciding against the privatization of Nassau Flight Services.

Privately owned domestic and foreign airlines have complained of the market distortions created by Bahamasair, claiming the national airline sells key routes below market value and benefits from not remitting licensing and other fees required by private companies. The airline has recorded annual losses for more than two decades.

Privatization Program

The Bahamian government has not taken definitive steps to implement its proposed privatization plans but has indicated a preference for public-private partnerships as the model for privatizing SOEs. The government divested 49 percent of the Bahamas Telecommunication Company in 2011, but issued a second license for cellular services and retained 51 percent equity in the new company. In his February 2018 speech, the Deputy Prime Minister serving as Minister of Finance announced the government’s intention to divest additional equity in the Bahamian telecommunications sector. In February 2019, the Bahamian government selected UK-based Global Ports Holding’s $250 million proposal to redevelop the New Providence cruise terminal, entering a 25-year lease agreement with the company. In early 2019, the company announced a bond offering which is expected to fund $130 million of the capital for the new Port of Nassau.

The government has laws to combat corruption of and by public officials, but they have been inconsistently applied. Reports of corruption, including allegations of widespread patronage, the routine directing of contracts to party supporters and benefactors, and wealthy and/or politically connected foreign nationals and permanent residents receiving favorable treatment have plagued the political system for decades.

In The Bahamas, giving a bribe to, or accepting a bribe from, a government official is a criminal act under the Prevention of Bribery Act. The penalty under this act is a fine of up to $10,000, or a maximum prison term of four years, or both. In October 2015, the government charged and convicted a former state energy company board member under the Prevention of Bribery Act, the first significant case brought under the Act since 1989. In May 2017, the current government won election on a mandate to end corruption. Early in the administration, the government charged a former senator with extortion and bribery, although the Chief Magistrate dismissed the case for lack of evidence. In May 2017, a former Deputy Speaker of the House of Assembly and former Chairman of the Bahamas Agricultural and Industrial Corporation was among nine people arrested for theft by reason of employment. Formal charges were never brought against them.

In late 2017, a former Senator and Public Hospitals Authority (PHA) Chairman was charged with bribery and extortion over the award of a 2016 contract. At trial, the magistrate found that prima facie case had not been made and dismissed the case in February 2019. A writ has been filed in the Supreme Court while awaiting a Privy Council hearing following the Crown’s appeal of the acquittal.  In August 2017, a former Minister of Labor and National Insurance was charged with soliciting and accepting bribes to expedite payments owed to a service provider under the former administration. He was acquitted on all counts in November 2019 and the government confirmed it had no intention to appeal the acquittal. Following the acquittals, the former PHA Chairman and former Labor Minister sued the government for malicious prosecution and are seeking aggravated and exemplary damages and disciplinary proceedings for the Commissioner of Police, the Director of Public Prosecutions, and an Assistant Superintendent of Police.

seeking aggravated and exemplary damages and disciplinary proceedings for the Commissioner of Police, the Director of Public Prosecutions, and an Assistant Superintendent of Police.

In February 2019, the government arraigned a former Urban Renewal Deputy Director on charges related to defrauding the government. The case is ongoing.

The Public Disclosure Act requires senior public officials, including senators and members of Parliament, to declare their assets, income, and liabilities on an annual basis. The government publishes a summary of the individual declarations.

According to Transparency International’s 2019 Corruption Perceptions Index, The Bahamas ranked 29 out of 180 countries with a score of 64 out of 100. There are no protections for NGOs involved in investigating corruption. U.S firms have identified corruption as an obstacle to FDI and have reported perceived corruption in government procurement and in the FDI approvals process.

The government does not, as a matter of government policy, encourage or facilitate illicit drug production or distribution, nor is it involved in laundering the proceeds of the sale of illicit drugs.  No charges of drug-related corruption were filed against government officials in 2019.

The Bahamas ratified major international corruption instruments, including the Inter-American Convention against Corruption since signing in 1998 (ratified in 2000), and has been a party to the Mechanism for Follow-Up on the Implementation of the Inter-American Convention against Corruption (MESICIC) since June 2001. The Bahamas is not party to the OECD Convention on Combatting Bribery of Foreign Public Officials in International Business Transactions.

Resources to Report Corruption

Contact at government agency or agencies responsible for combating corruption:

Royal Bahamas Police Force
Anti- Corruption Unit
P.O. Box N-458
(242) 322-4444
Email: info@rbpf.bs

Contacts at “watchdog” organizations:

Citizens for a Better Bahamas
Transparency International (Bahamas Chapter)
(242) 322-4195
Website: www.abetterbahamas.org 
Email: info@abetterbahamas.org

Organization for Responsible Governance (ORG)
Bay Street Business Center, Bethell Estates
East Bay Street (at Deveaux St.)
Website: www.orgbahamas.com 
Phone: 1-242-828-4459
Email: info@orgbahamas.com

Policies Towards Foreign Direct Investment

The Government of Bahrain (GOB) has a liberal approach to foreign investment and actively seeks to attract foreign investors and businesses. Increasing foreign direct investment (FDI) is one of the government’s top priorities. The GOB permits 100 percent foreign ownership of a business or branch office, without the need for a local partner. The GOB does not tax corporate income, personal income, wealth, capital gains, withholding or death/inheritance. There are no restrictions on repatriation of capital, profits or dividends, aside from income generated by companies in the oil and gas sector, where profits are taxable at the rate of 46 percent. The Bahrain Economic Development Board (EDB), charged with promoting FDI in Bahrain, places particular emphasis on attracting FDI to the manufacturing, logistics, information and communications technology (ICT), financial services and tourism and leisure sectors. As a reflection of the Kingdom’s openness to FDI, the EDB won the 2019 United Nations Top Investment Promotion Agency in the Middle East award for its role in attracting large-scale investments.

To date, U.S. investors have not alleged any legal or practical discrimination against them based on nationality.

Limits on Foreign Control and Right to Private Ownership and Establishment

The GOB permits foreign and domestic private entities to establish and own business enterprises and engage in all forms of remunerative activity. The GOB imposes only minimal limits on foreign control, and the right of ownership and establishment of a business. The Ministry of Industry, Commerce and Tourism (MoICT) maintains a small list of business activities that are restricted to Bahraini ownership, including press and publications, Islamic pilgrimage, clearance offices, and workforce agencies. The U.S.-Bahrain Free Trade Agreement (FTA) outlines all activities in which the two countries restrict foreign ownership.

U.S citizens may own and operate companies in Bahrain, though many such individuals choose to integrate influential local partners into the ownership structure to facilitate quicker resolution of bureaucratic issues such as labor permits, issuance of foreign visas, and access to industrial zones. The most common challenges faced by U.S firms are those related to bureaucratic government processes, lack of market information, and customs clearance.

Other Investment Policy Reviews

The World Trade Organization (WTO) has conducted a formal Trade Policy Review of Bahrain every seven years. Its last formal review was in 2014 (see link below). https://docs.wto.org/dol2fe/Pages/FE_Search/FE_S_S006.aspx?Query=(@Symbol=%20wt/tpr/g/*)%20and%20((%20@Title=%20bahrain%20)%20or%20(@CountryConcerned=%20bahrain))&Language=ENGLISH&Context=FomerScriptedSearch&languageUIChanged=true# 

https://docs.wto.org/dol2fe/Pages/FE_Search/FE_S_S006.aspx?Query=(@Symbol=%20wt/tpr/g/*)%20and%20((%20@Title=%20bahrain%20)%20or%20(@CountryConcerned=%20bahrain))&Language=ENGLISH&Context=FomerScriptedSearch&languageUIChanged=true# 

Business Facilitation

Bahrain ranked 43rd out of 190 countries on the World Bank’s overall Ease of Doing Business Indicator in 2019.

The Central Bank of Bahrain’s regulatory sandbox allows local and international FinTech firms and digitally focused financial institutions to test innovative solutions in a regulated environment, allowing successful firms to obtain licensing upon successful product application.

The MoICT operates an online commercial registration portal, “Sijilat” (www.sijilat.bh ) to facilitate the commercial registration process. Through Sijilat, businesspeople can obtain a business license and requisite approvals from relevant ministries. The business registration process normally takes two to three weeks but can take longer if a business requires specialized approvals. In practice, some businesspeople retain an attorney or clearing agent to assist them through the commercial registration process.

In addition to obtaining primary approval to register a company, most business owners must also obtain licenses from the following entities to operate their businesses:

• MoICT
• Ministry of Electricity and Water
• The Municipality in which their business will be located
• Labour Market Regulatory Authority
• General Organization for Social Insurance
• The National Bureau for Revenue (Mandatory if the business revenue expected to exceed BD 37,500)

The GOB provides industrial lands at reduced rental rates for short periods of time to incentivize foreign investment in Bahrain’s targeted investment zones.

Outward Investment

The GOB neither promotes nor incentivizes outward investment. The GOB does not restrict domestic investors from investing abroad.

Capital Markets and Portfolio Investment

Consistent with the GOB’s liberal approach to foreign investment, government policies facilitate the free flow of financial transactions and portfolio investments. Expatriates and Bahrainis alike have ready access to credit on market terms. Generally, credit terms are variable, but often are limited to 10 years for loans under USD 50 million. For major infrastructure investments, banks often offer to assume a part of the risk, and Bahrain’s wholesale and retail banks have shown extensive cooperation in syndicating loans for larger risks. Commercial credit is available to private organizations in Bahrain but has been increasingly crowded out by the government’s local bond issuances.

In 2016, the GOB launched a new fund designed to inject greater liquidity in the Bahrain Bourse, worth USD 100 million. The Bahrain Liquidity Fund is supported by a number of market participants and will act as a market maker, providing two-way quotes on most of the listed stocks with a reasonable spread to allow investors to actively trade their stocks. Despite these efforts, the market remains relatively small compared to others in the region.

Additionally, in October 2019 the GOB established a BD 130 million Liquidity Fund to assist distressed companies in restructuring financial obligations, which was expanded to BD 200 million during the Covid-19 crisis in March 2020.

The GOB and the Central Bank of Bahrain are members of the IMF and fully compliant with Article VIII.

Money and Banking System

The Central Bank of Bahrain (CBB) is the single regulator of the entire financial sector, with an integrated regulatory framework covering all financial services provided by conventional and Islamic financial institutions. Bahrain’s banking sector remains quite healthy despite sustained lower global oil prices. Bahrain’s banks remain well capitalized, and there is sufficient liquidity to ensure a healthy rate of investment. Bahrain remains a financial center for the GCC region, though many financial firms have moved their regional headquarters to Dubai over the last decade. The GOB continues to be a driver of innovation and expansion in the Islamic finance sector. In 2018, Bahrain ranked as the GCC’s leading Islamic finance market and placed second out of 92 countries worldwide, according to the ICD-Thomson Reuters Islamic Finance Development Indicator.

Bahrain has an effective regulatory system that encourages portfolio investment, and the CBB has fully implemented Basel II standards, while attempting to bring Bahraini banks into compliance with Basel III standards. Bahrain’s banking sector includes 94 retail banks, of which 63 are wholesale banks, 17 are branches of foreign banks, and 14 are locally incorporated. Of these, eight are representative offices, and twenty are Islamic banks.

There are no restrictions on foreigners opening bank accounts or corporate accounts. Bahrain is home to many prominent financial institutions, among them Citi, American Express, and JP Morgan.

Ahli United Bank is Bahrain’s largest bank with total assets estimated at USD 40.3 billion in December 2019, and is expected to complete a merger with Kuwait Financial House in 2020.

Bahrain implemented the Real-Time Gross Settlement (RTGS) System and the Scripless Securities Settlement (SSS) System in 2007 to enable banks to carry out their payment and securities-related transactions securely on a real time basis. In 2018, the CBB was in the process of introducing a private network as an alternative communication network for the RTGS-SSS Systems.

In 2017, Bahrain became the first in the GCC to introduce Financial Technology “sandbox” regulations that enabled the launch of cryptocurrency and blockchain startups. The same year, the CBB released additional regulations for conventional and Sharia-compliant, financing-based crowdfunding businesses.  Any firm operating electronic financing/lending platforms must be licensed in Bahrain under the CBB Rulebook Volume 5 – Financing Based Crowdfunding Platform Operator.  In February 2019, the CBB also issued cryptocurrency  regulations.

Foreign Exchange and Remittances

Foreign Exchange

Bahrain has no restrictions on the repatriation of profits or capital and no exchange controls. Bahrain’s currency, the Bahraini Dinar (BD), is fully and freely convertible at the fixed rate of USD 1.00 = BD 0.377 (1 BD = USD 2.659). There is no black market or parallel exchange rate.

There are no restrictions on converting or transferring funds, whether or not associated with an investment.

Remittance Policies

The Central Bank of Bahrain is responsible for regulating remittances, and its regulations are based on the Central Bank Law ratified in 2006. Foreign workers comprise the majority of the workforce in the Kingdom of Bahrain, many of whom remit large amounts of money to their countries of origin. Commercial banks and currency exchange houses are licensed to provide remittances services.

Commercial banks and currency exchange houses require two forms of identification before processing a routine remittance request, and any transaction exceeding USD 10,000 must include a documented source of the income.

Bahrain enables foreign investors to remit funds through a legal parallel market, with no limitations on the inflow or outflow of funds for remittances of profits or revenue. The GOB does not engage in currency manipulation tactics.

Bahrain is a member of the Gulf Cooperation Council (GCC), and the GCC is a member of the Financial Action Task Force (FATF). Additionally, Bahrain is a member of the Middle East and North Africa Financial Action Task Force (MENAFATF), whose headquarters are located in Bahrain. Participating countries commit to combat the financing of terrorist groups and activities in all its forms and to implement FATF recommendations. The Government of Bahrain hosted the MENAFATF’s 26th Plenary Meeting Manama in 2017 and was due to host the now-postponed MENAFATF Plenary Meeting in April 2020.

the MENAFATF’s 26th Plenary Meeting Manama in 2017 and was due to host the now-postponed MENAFATF Plenary Meeting in April 2020.

Sovereign Wealth Funds

The Kingdom of Bahrain established Mumtalakat, its sovereign wealth fund, in 2006. Mumtalakat, which maintains an investment portfolio valued at roughly USD 16.8 billion as of 2018, conducts its business transparently, including by issuing an annual report online. The annual report follows international financial reporting standards and is audited by external, internationally recognized auditing firms. By law, state-owned enterprises (SOEs) under Mumtalakat are audited and monitored by the National Audit Office. In 2019, Mumtalakat received the highest-possible ranking in the Linaburg-Maduell Transparency Index for the fifth consecutive year, which specializes in ranking the transparency of sovereign wealth funds. However, Bahrain’s sovereign wealth fund does not follow the Santiago Principles.

The sovereign wealth fund holds majority stakes in several firms. Mumtalakat invests 63 percent of its funds in the Middle East, 29 percent in Europe, and eight percent in the United States. The fund is diversified across a variety of business sectors including real estate and tourism, financial services, food & agriculture, and industrial manufacturing.

Mumtalakat often acts more as an active asset management company than a sovereign wealth fund, including by taking an active role in managing SOEs. Most notably, Mumtalakat has been instrumental in helping Gulf Air, Bahrain’s flagship air carrier, restructure and contain losses. A significant portion of Mumtalakat’s portfolio is invested in 33 Bahrain-based SOEs.

Through 2016, Mumtalakat had not been directly contributing to the National Budget. Beginning in September 2017, however, Mumtalakat began distributing profits of BD 20 million to the National Budget each year.

Bahrain’s major state-owned enterprises (SOEs) include the Bahrain Petroleum Company (BAPCO), Aluminum Bahrain (ALBA), Gulf Petrochemical Industries Company (GPIC), Gulf Air, Bahrain Telecommunications Company (BATELCO), the National Bank of Bahrain (NBB) Bahrain Flour Mills, Tatweer Petroleum, and the Arab Shipbuilding & Repair Yard (ASRY). While the GOB maintains full ownership of oil production, refineries, and heavy industries, it allows investment in ALBA, BATELCO, and ASRY, and encourages private sector competition in the banking, manufacturing, telecommunications, shipyard repair, and real estate sectors.

The SOEs are managed by two government-run holding companies: the National Oil and Gas Authority (NOGA) Holding Company, which owns nine energy sector companies, and Mumtalakat, which owns 38 domestic companies in all other sectors. The full portfolio of the NOGA Holding Company can be viewed at www.nogaholding.com/portfolio/ , while the full portfolio of Mumtalakat companies can be viewed at www.bmhc.bh .

Bahrain is not a party to the WTO Government Procurement Agreement (GPA), however, in 2008 Bahrain was granted “observer” status in the GPA committee.

Private enterprises can, in theory, compete with SOEs under the same terms and conditions with respect to market share, products/services, and incentives. In practice, however, given the relatively small size of Bahrain’s economy, large SOEs such as ALBA, BAPCO, GPIC and ASRY have an outsized influence in the market.

In 2002 the GOB instituted guidelines to ensure its SOEs were in line with OECD policies on corporate governance. SOEs produce quarterly reports. The National Audit Office monitors all SOEs and annually reports any irregularities, mismanagement, and corruption.

Both funds are managed by government-appointed boards: Mumtalakat’s board is chaired by the Deputy Prime Minister, Sh. Khalid bin Abdulla AlKhalifa, and NOGA Holding’s board is chaired by the Minister of Oil, Sh. Mohammed bin Khalifa AlKhalifa.

All Bahraini SOEs have an independent board of trustees with well-structured management. The Mumtalakat Holding Company is represented by a Board of Trustees appointed by the Crown Prince, while NOGA Holding’s Board of Trustees is appointed by a Royal Decree. Each holding company then appoints the Board of Trustees for the SOEs under its authority. In some cases, the appointment of the Board of Trustees is politically driven.

Privatization Program

The GOB has been supportive of privatization as part of its Vision 2030 economic development plan, and advocates for increased foreign investment as a means of driving private sector growth. The GOB’s decision to privatize the telecommunications sector in the early 2000s is an example of incentivizing private sector growth in Bahrain. In 2018, the GOB began to privatize some medical services, such as pre-employment screenings that it previously had conducted. It has also begun the process of privatizing certain support services at GOB medical facilities, such as transportation, cleaning, laundry, textiles, maintenance, and security.

In May 2019 the GOB loosened foreign ownership restrictions in the oil and gas sector, allowing 100-percent foreign ownership in oil and gas extraction projects, under certain production-sharing agreements.

The King and Crown Prince have advocated publicly in favor of reducing corruption and some ministries have initiated clean-up efforts. Legislation regulating corruption is outlined in Bahrain’s “Economic Vision 2030” plan, and in the National Anti-Corruption Strategy. Bahrain joined the United Nations Convention Against Corruption (UNCAC) in 2003. Accordingly, Bahrain ratified its penal code on combatting bribery in the public and private sectors in 2008, mandating criminal penalties for official corruption. Under law, government employees at all levels are subject to prosecution and punishments of up to 10 years imprisonment if they use their positions to engage in embezzlement or bribery, either directly or indirectly. The law does not require government officials to make financial disclosures. In 2010, Bahrain ratified the UNCAC and the Arab Convention Against Corruption, and in 2016, it joined the International Anti-Corruption Academy. In 2019, the Public Prosecution initiated proceedings on 178 economic corruption cases. In 23 cases, offenders have been sentenced to prison; one was cleared; and 13 are pending investigation. The remaining 129 cases have been classified as administrative contraventions and closed.

Giving or accepting a bribe is illegal. The government, however, has not fully implemented the law, and some officials reportedly continue to engage in corrupt practices with impunity. Officials have at times been dismissed for what is widely believed to be blatant corruption, but the grounds for dismissal rarely have been tied to corruption.

The National Audit Office, established in 2002, is mandated to publish annual reports that highlight fiscal irregularities within government ministries and other public-sector entities. The reports enable legislators to exercise oversight and call for investigations of fiscal discrepancies in government accounts. In 2013, the Crown Prince established an Investigation Committee to oversee cases highlighted within the National Audit Office’s annual report.

The Minister of Follow-Up Affairs at the Royal Court was designated in 2015 to execute recommendations made in that year’s National Audit Report. At the same time, the Crown Prince urged all government entities and the Council of Representatives to work closely to implement the recommendations made in the report. Bahrain’s National Audit Office issues annual reports that list violations committed by various Bahraini state bodies and agencies.

As a result of the 2011 National Dialogue process, the Ministry of Interior established an anti-corruption directorate. In 2011, the Ministry of Interior signed a Memorandum of Understanding with the United Nations Development Programme to enhance the anti-corruption directorate’s capabilities.

Bahrain has conflict-of-interest laws in place, however, in practice, their application in awarding contacts is not fully enforced.

Local NGOs generally do not focus their efforts on corruption-related issues, and human rights activists and members of the political opposition who have spoken out about corruption have at times been detained, prosecuted, and banned from travel for reasons related to their broader political activism. All civil society groups are required to register with the Ministry of Labour and Social Development, which has the discretion to reject registration if it determines the organization’s services unnecessary, already provided by another society, or contrary to state security.

Few cases have been registered by U.S. companies reporting corruption as an obstacle to their investments in Bahrain.

Bahrain signed and ratified the UN Anticorruption Convention in 2005 and 2010, respectively. Bahrain, however, is not a signatory to the OECD Convention on Combating Bribery. In 2018, Bahrain joined the OECD’s Inclusive Framework on Base Erosion and Profit Shifting (BEPS).

Resources to Report Corruption

Contact at government agency or agencies responsible for combating corruption:

General Directorate of Anti- Corruption & Economic & Electronic Security
Ministry of Interior
P. O. Box 26698, Manama, Bahrain
Hotline: 992

Contact at “watchdog” organization:

Sharaf AlMosawi
President
Bahrain Transparency Association
P.O. Box 26059
Phone: +973 39640929
Email: Sharaf115@gmail.com
Website: www.alshafafeyabh.org 

Policies Towards Foreign Direct Investment

Bangladesh actively seeks foreign investment, particularly in the agribusiness, garment and textiles, leather and leather goods, light manufacturing, electronics, light engineering, energy and power, information and communications technology (ICT), plastic, healthcare, medical equipment, pharmaceutical, ship building, and infrastructure sectors. It offers a range of investment incentives under its industrial policy and export-oriented growth strategy with few formal distinctions between foreign and domestic private investors.

Foreign and domestic private entities can establish and own, operate, and dispose of interests in most types of business enterprises. Four sectors, however, are reserved for government investment:

• Arms and ammunition and other defense equipment and machinery;
• Forest plantation and mechanized extraction within the bounds of reserved forests;
• Production of nuclear energy; and
• Security printing.

The Bangladesh Investment Development Authority (BIDA) is the principal authority tasked with supervising and promoting private investment. The BIDA Act of 2016 approved the merger of the now-disbanded Board of Investment and the Privatization Committee. BIDA is directly supervised by the Prime Minister’s office and the Executive Chairman of BIDA holds a rank equivalent to Senior Secretary, the highest rank within the civil service. BIDA performs the following functions:

• Provides pre-investment counseling services;
• Registers and approves private industrial projects;
• Issues approval of branch/liaison/representative offices;
• Issues work permits for foreign nationals;
• Issues approval of royalty remittances, technical know-how, and technical assistance fees;
• Facilitates import of capital machinery and raw materials; and
• Issues approvals of foreign loans and supplier credits.

BIDA’s website has aggregated information regarding Bangladesh investment policies, incentives, and ease of doing business indicators: http://bida.gov.bd/ 

In addition to BIDA, three other Investment Promotion Agencies (IPAs) – the Bangladesh Export Processing Zone Authority (BEPZA), Bangladesh Economic Zones Authority (BEZA), and Bangladesh Hi-Tech Park Authority (BHTPA) — promote domestic and foreign investment. BEPZA promotes investments in Export Processing Zones (EPZs). The first EPZ was established in the 1980s and there are currently eight EPZs in the country. BEZA plans to establish approximately 100 Economic Zones (EZs) throughout the country over the next several years, of which 11 are currently fully or partially operational. Site selections for 77 additional EZs have been completed as of March 2020. While EPZs accommodate exporting companies only, EZs are open for both export- and domestic-oriented companies. Additionally, Bangladesh is setting up several Hi-Tech Parks across the country under the supervision of the Bangladesh Hi-Tech Park Authority.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign and domestic private entities can establish and own, operate, and dispose of interests in most types of business enterprises. Bangladesh allows private investment in power generation and natural gas exploration, but efforts to allow full foreign participation in petroleum marketing and gas distribution have stalled. Regulations in the area of telecommunication infrastructure currently include provisions for 60 percent foreign ownership (70 percent for tower sharing).In addition to the four sectors reserved for government investment, there are 17 controlled sectors that require prior clearance/ permission from the respective line ministries/authorities. These are:

a) Fishing in the deep sea

b) Bank/financial institutions in the private sector

c) Insurance companies in the private sector

d) Generation, supply, and distribution of power in the private sector

e) Exploration, extraction, and supply of natural gas/oil

f) Exploration, extraction, and supply of coal

g) Exploration, extraction, and supply of other mineral resources

h) Large-scale infrastructure projects (e.g. flyover, elevated expressway, monorail, economic zone, inland container depot/container freight station)

i) Crude oil refinery (recycling/refining of lube oil used as fuel)

j) Medium and large industries using natural gas/condensate and other minerals as raw material

k) Telecommunications service (mobile/cellular and land phone)

l) Satellite channels

m) Cargo/passenger aviation

n) Sea-bound ship transport

o) Seaports/deep seaports

p) VOIP/IP telephone

q) Industries using heavy minerals accumulated from sea beaches

While discrimination against foreign investors is not widespread, the government frequently promotes local industries and some discriminatory policies and regulations exist. For example, the government closely controls approvals for imported medicines that compete with domestically-manufactured pharmaceutical products and it has required majority local ownership of new shipping and insurance companies, albeit with exemptions for existing foreign-owned firms, following a prime ministerial directive. In practical terms, foreign investors frequently find it necessary to have a local partner even though this requirement may not be statutorily defined.

In certain strategic sectors, the GOB has placed unofficial barriers on foreign companies’ ability to divest from the country.

BIDA is responsible for screening, reviewing, and approving investments in Bangladesh, except for investments in EPZs, EZs, and High-Tech Parks, which are supervised by BEPZA, BEZA, and BHTPA respectively. Both foreign and domestic companies are required to obtain clearance certificates from relevant ministries and agencies with regulatory oversight. In certain sectors (e.g., healthcare) foreign companies may be required to obtain a No Objection Certificate (NOC) from the relevant ministry or agency stating the specific investment will not hinder local manufacturers and is in line with the guidelines of the ministry concerned. Since Bangladesh actively seeks foreign investments, instances where one of the Investment Promotion Agencies (IPAs) declines investment proposals are rare.

Other Investment Policy Reviews

In 2013 Bangladesh completed an investment policy review (IPR) with the United Nations Conference on Trade and Development (UNCTAD): https://unctad.org/en/pages/PublicationWebflyer.aspx?publicationid=756 

A Trade Policy Review was done by the World Trade Organization in April 2019 and can be found at: https://www.wto.org/english/tratop_e/tpr_e/tp485_e.htm 

Business Facilitation

In February 2018, the Bangladesh Parliament passed the “One Stop Service Bill 2018,” which aims to streamline business and investment registration processes. The four IPAs — BIDA, BEPZA, BEZA, and BHTPA — are mandated to provide one-stop services (OSS) to local and foreign investors under their respective jurisdictions. Expected streamlined services include: company registration, taxpayer’s identification number (TIN) and value added tax (VAT) registration, work permit issuance, power and utilities connections, capital and profit repatriation, and environment clearance. In 2019 Bangladesh made reforms in three key areas: starting a business, getting electricity, and getting credit. These and other regulatory changes led to an improvement of eight ranks on the World Bank’s Doing Business score. BIDA offers 18 services under its online OSS as of April 2020, and has a plan to expand to 154 services covering 35 agencies. The Bangladesh government is also planning to integrate the services of all four investment promotion agencies under a single online platform. Progress on realizing a comprehensive OSS for businesses has been slowed by bureaucratic delays and a lack of interagency coordination.

Companies can register their businesses at the Office of the Registrar of Joint Stock Companies and Firms (RJSC): www.roc.gov.bd . However, the online business registration process can be unclear and inconsistent. Additionally, BIDA facilitates company registration services as part of its OSS, which is available at: https://bidaquickserv.org/ . BIDA also facilitates other services including office set-up approval, work permits for foreign employees, and tax registration with National Board of Revenue. Other agencies with which a company must typically register are:

City Corporation – Trade License

National Board of Revenue – Tax & VAT Registration

Chief Inspector of Shops and Establishments – Employment of Workers Notification

It takes approximately 20 days to start a business in the country according to the World Bank. The company registration process at the RJSC now takes one or two days to complete. The process for trade licensing, tax registration, and VAT registration requires seven days, one day, and one week, respectively.

Outward Investment

Outward foreign direct investment is generally restricted through the Foreign Exchange Regulation Act of 1947. As a result, the Bangladesh Bank plays a key role in limiting outbound investment. In September 2015, the government amended the 1947 Act by adding a “conditional provision” that permits outbound investment for export-related enterprises. Private sector contacts note that the few international investments approved by the Bangladesh Bank have been limited to large exporting companies with international experience.

Capital Markets and Portfolio Investment

Capital markets in Bangladesh are still developing and the financial sector remains highly dependent on bank lending. Current government policy inhibits the creation of reliable benchmarks for long-term bonds and prevents the development of a tradable bond market.

Bangladesh is home to the Dhaka Stock Exchange (DSE) and the Chittagong Stock Exchange (CSE). The Bangladesh Securities and Exchange Commission (BSEC), a statutory body formed in 1993 and attached to the Ministry of Finance, regulates both. As of March 25, 2020, the DSE market capitalization stood at $36.7 billion, a 24.6 percent drop year-on-year caused by an acute shortage of liquidity and reduced investor confidence.

Although the Bangladeshi government has a positive attitude towards foreign portfolio investors, participation remains low due to limited liquidity and the lack of publicly available and reliable company information. The DSE has attracted some foreign portfolio investors to the country’s capital market; however, the volume of foreign investment in Bangladesh remains a small fraction of total market capitalization. As a result, foreign portfolio investment has had limited influence on market trends and Bangladesh’s capital markets have been largely insulated from the volatility of international financial markets. Bangladeshi markets continue to rely primarily on domestic investors.

In 2019, BSEC undertook a number of initiatives to launch derivatives products, allow short selling, and activate the bond market. To this end, BSEC introduced three rules in May 2019: Exchange Traded Derivatives Rules 2019, Short-Sale Rules 2019, and Investment Sukuk Rules 2019. Other recent, notable BSEC initiatives include forming a central clearing and settlement company named Central Counterparty Bangladesh Limited (CCBL) and promoting private equity and venture capital firms under the 2015 Alternative Investment Rules. In December 2013, BSEC became a full signatory of the International Organization of Securities Commissions (IOSCO) Memorandum of Understanding.

BSEC has taken steps to improve regulatory oversight, including installing a modern surveillance system, the “Instant Market Watch,” that provides real time connectivity with exchanges and depository institutions. As a result, the market abuse detection capabilities of BSEC have improved significantly. A mandatory Corporate Governance Code for listed companies was introduced in August 2012 but the overall quality of corporate governance remains substandard. Demutualization of both the DSE and CSE was completed in November 2013 to separate ownership of the exchanges from trading rights. A majority of the members of the Demutualization Board, including the Chairman, are independent directors. Apart from this, a separate tribunal has been established to resolve capital market-related criminal cases expeditiously. However, both domestic and foreign investor confidence remains low.

The Demutualization Act 2013 also directed DSE to pursue a strategic investor who would acquire a 25 percent stake in the bourse. DSE opened bids for a strategic partner in February 2018 and, in September 2018, the Chinese consortium of the Shenzhen and Shanghai stock exchanges became DSE’s strategic partner after buying a 25 percent share of DSE for taka 9.47 billion ($112.7 million).

According to the International Monetary Fund (IMF), Bangladesh is an Article VIII member and maintains restrictions on the unapproved exchange, conversion, and/or transfer of proceeds of international transactions into non-resident taka-denominated accounts. Since 2015, authorities have relaxed restrictions by allowing some debits of balances in such accounts for outward remittances, but there is currently no established timetable for the complete removal of the restrictions.

Money and Banking System

The Bangladesh Bank (BB) acts as the central bank of Bangladesh. It was established on December 16, 1971 through the enactment of the Bangladesh Bank Order of1972. General supervision and strategic direction of BB has been entrusted to a nine–member Board of Directors, which is headed by the BB Governor. BB has 45 departments and 10 branch offices.

According to the BB, four types of banks operate in the formal financial system: State Owned Commercial Banks (SOCBs), Specialized Banks, Private Commercial Banks (PCBs), and Foreign Commercial Banks (FCBs). Some 60 “scheduled” banks in Bangladesh operate under the full control and supervision of the central bank as per the Bangladesh Bank Order of 1972. The scheduled banks including six SOCBs, three specialized government banks established for specific objectives such as agricultural or industrial development or expatriates’ welfare, 42 PCBs, and nine FCBs as of March 2019. The scheduled banks are licensed to operate under the Bank Company Act of 1991 (Amended 2013). There are also five non-scheduled banks in Bangladesh, including Nobel Prize recipient Grameen Bank, established for special and definite objectives and operating under legislation that is enacted to meet those objectives.

Currently, 34 non-bank financial institutions (FIs) are operating in Bangladesh. They are regulated under the Financial Institution Act, 1993 and controlled by the BB. Of these, two are fully government-owned, one is a subsidiary of an SOCB, 15 are private domestic initiatives, and 15 are joint venture initiatives. Major sources of funds for these financial institutions are term deposits (at least three months’ tenure), credit facilities from banks and other financial institutions, call money, as well as bonds and securitization.

The major differences between banks and FIs are:

FIs cannot issue checks, pay-orders, or demand drafts;

FIs cannot receive demand deposits; and

FIs cannot be involved in foreign exchange financing.

Microfinance institutions (MFIs) remain the dominant players in rural financial markets. According to the Bangladesh Microcredit Regulatory Authority, as of June 2018, there were 705 licensed micro-finance institutions operating a network of 18,196 branches with 31.2 million members. Additionally, Grameen Bank had 830,000 million microfinance members as of June 2018. A 2014 Institute of Microfinance survey study showed that approximately 40 percent of the adult population and 75 percent of households had access to financial services in Bangladesh.

The banking sector has had a mixed record of performance over the past several years. Industry experts have reported shrinking liquidity and a rise in risky assets. Total domestic credit stood at 45.22 percent of gross domestic product at end of June 2019. With total assets of $15.4 billion, the state-owned Sonali Bank is the largest bank in the country while Islami Bank Bangladesh ($11.7 billion) and Standard Chartered Bangladesh ($4.5 billion) are the largest local private and foreign banks respectively as of December 2018, the latest data available. The gross non-performing loan (NPL) ratio was 9.3 percent at the end of December 2019 but was as high as 12.0 percent in the previous quarter. At 23.9 percent SCBs had the highest NPL ratio, followed by 15.1 percent of Specialized Banks, 5.8 percent of PCBs, and 5.7 percent of FCBs as of December 2019. Following the outbreak of COVID-19, the central bank directed all banks in March 2020 not to classify any new clients as non-performing until June 30. However, industry contacts predict NPLs will increase sharply after the exemption expires.

On December 26, 2017, the BB issued a circular, warning citizens and financial institutions about the risks associated with cryptocurrencies. The circular noted that using cryptocurrencies may violate existing money laundering and terrorist financing regulations and that users may incur financial losses. The BB issued similar warnings against cryptocurrencies in 2014.

Foreign investors may open temporary bank accounts called Non-Resident Taka Accounts (NRTA) in the proposed company name without prior approval from the BB in order to receive incoming capital remittances and encashment certificates. Once the proposed company is registered, it can open a new account to transfer capital from the NRTA account. Branch, representative, or liaison offices of foreign companies can open bank accounts to receive initial suspense payments from headquarters without opening an NRTA account. In May 2019, the BB relaxed regulations on the types of bank branches foreigners could use to open NRTAs, removing a previous requirement limiting use of NRTA’s solely to Authorized Dealers (ADs).

Foreign Exchange and Remittances

Foreign Exchange

Free repatriation of profits is legally allowed for registered companies and profits are generally fully convertible. However, companies report the procedures for repatriating foreign currency are lengthy and cumbersome. The Foreign Investment Act guarantees the right of repatriation of invested capital, profits, capital gains, post-tax dividends, and approved royalties and fees for businesses. The central bank’s exchange control regulations and the U.S.-Bangladesh Bilateral Investment Treaty (in force since 1989) provide similar investment transfer guarantees. BIDA may need to approve repatriation of royalties and other fees.

Bangladesh maintains a de facto managed floating foreign exchange regime. Since 2013, Bangladesh has tried to manage its exchange rate vis-à-vis the U.S. dollar within a fairly narrow range. Until 2017, the Bangladesh taka traded between 76 and 78.8 taka to the dollar. The taka has depreciated relative to the dollar since October 2017 reaching 84.95 taka per dollar as of March 2020, despite interventions from the Bangladesh Bank from time to time. The Bangladesh currency, the taka, is approaching full convertibility for current account transactions, such as imports and travel, but not for financial and capital account transactions, such as investing, currency speculation, or e-commerce.

Remittance Policies

There are no set time limitations or waiting periods for remitting all types of investment returns. Remitting dividends, returns on investments, interest, and payments on private foreign debts do not require approval from the central bank and transfers are typically made within one to two weeks. For repatriating lease payments, royalties and management fees, some central bank approval is required, and this process can take between two and three weeks. If a company fails to submit all the proper documents for remitting, it may take up to 60 days. Foreign investors have reported difficulties transferring funds to overseas affiliates and making payments for certain technical fees without the government’s prior approval to do so. Additionally, some regulatory agencies have reportedly blocked the repatriation of profits due to sector-specific regulations. The U.S. Embassy also has received complaints from American citizens who were not able to transfer the proceeds of sales of their properties.

In September 2019, BB simplified the profit repatriation process for foreign firms. Foreign companies and their branches, liaison, or representative offices no longer require prior approval from the central bank to remit funds to their parent offices outside Bangladesh. However, banks need to submit applications for ex post facto approval within 30 days of profit remittance.

The Financial Action Task Force (FATF) notes that Bangladesh has established the legal and regulatory framework to meet its Anti-Money Laundering/Counterterrorism Finance (AML/CTF) commitments. The Asia/Pacific Group on Money Laundering (APG), an independent and collaborative international organization based in Bangkok, conducted its mutual evaluation of Bangladesh’s AML/CTF regime in September 2018 and found that Bangladesh had made significant progress since the last Mutual Evaluation Report (MER) in 2009, but still faces significant money laundering and terrorism financing risks. The APG reports are available online: http://www.fatf-gafi.org/countries/#Bangladesh 

http://www.fatf-gafi.org/countries/#Bangladesh 

Sovereign Wealth Funds

The Bangladesh Finance Ministry first announced in 2015 that it was exploring the possibility of establishing a sovereign wealth fund to invest a portion of Bangladesh’s foreign currency reserves. In February 2017, the Cabinet initially approved a $10 billion “Bangladesh Sovereign Wealth Fund,” (BSWF) to be created with funds from excess foreign exchange reserves but the plan was subsequently scrapped.

Bangladesh’s 49 non-financial SOEs are spread among seven sectors – industrial; power, gas and water; transport and communication; trade; agriculture; construction; and services. The list of non-financial SOEs and relevant budget details are published in Bangla in the Ministry of Finance’s SOE Budget Summary 201-20: http://www.mof.gov.bd/site/page/5eed2680-c68c-4782-9070-13e129548aac/SOE-Budget 

The current government has taken steps to restructure several SOEs to improve their competitiveness. The GOB converted Biman Bangladesh Airline, the national airline, into a public limited company that initiated a rebranding and fleet renewal program, including the purchase of twelve aircraft from Boeing, all of which have been delivered. Five of six state-owned commercial banks (SCBs) – Sonali, Janata, Agrani, Rupali, and BASIC – were converted to public limited companies, of which only Rupali is publicly listed.

The contribution of SOEs to gross domestic product, value-added production, employment generation, and revenue earning is substantial. SOEs usually report to the ministries, though the government has allowed some enhanced autonomy for certain SOEs, such as Biman Bangladesh Airline. SOEs maintain control of rail transportation whereas private companies compete freely in air and road transportation. The corporate governance structure of SOEs in Bangladesh has been restructured as per the guidelines published by the Organization for Economic Cooperation and Development (OECD), but the country’s practices are not up to OECD standards.  There are no guidelines regarding ownership of SOEs, and while SOEs are required to prepare annual reports and make financial disclosures, disclosure documents are often unavailable to the public. Each SOE has an independent board of directors composed of both government and private sector nominees. The boards report to the relevant regulatory ministry.  Most SOEs have strong ties with the government, and the ruling party nominates most SOE leaders.  As the government controls most of the SOEs, domestic courts tend to favor the SOEs in investment disputes.

The Bangladesh Petroleum Act of 1974 grants authority for the government to award natural resources contracts and the Bangladesh Oil, Gas and Mineral Corporation Ordinance of 1984 gives Petrobangla, the state-owned oil and gas company, authority to assess and award natural resource contracts and licenses, to both SOEs and private companies. Currently, oil and gas firms can pursue exploration and production ventures only through production sharing agreements with Petrobangla.

Privatization Program

The Bangladeshi government has privatized 74 state-owned enterprises (SOEs) over the past 20 years, but SOEs still retain an important role in the economy, particularly in the financial and energy sectors. Of the 74 SOEs, 54 were privatized through outright sale and 20 through offloading of shares.

Since 2010, the government’s privatization drive has slowed. Previous privatization drives were plagued by allegations of corruption, undervaluation, political favoritism, and unfair competition. Nonetheless, the government has publicly stated its goal is to continue the privatization drive. SOEs can be privatized through a variety of methods including: sales through international tenders; sales of government shares in the capital market; transfers of some portion of the shares to the employees of the enterprises when shares are sold through the stock exchange; sales of government shares to a private equity company (restructuring); mixed sales methods; management contracts; leasing; and direct asset sales (liquidation). In 2010, 22 SOEs were included in the Privatization Commission’s (now the BIDA) program for privatization. However, a study on privatized industries in Bangladesh conducted by the Privatization Commission in 2010 found that only 59 percent of the entities were in operation after being privatized and 20 percent of them were permanently closed down – implying a lack of planning or business motivation of their private owners. In 2014, the government declared SOEs would not be handed over to private owners by direct selling. Offloading shares of SOEs in the stock market can be a viable way to ensure greater accountability of the management of the SOEs and minimize the government’s exposure to commercial activities. The offloading of shares in an SOE, unless it involves more than 50 percent of its shares, does not divest the government of the control over the enterprise. Both domestic and foreign companies can participate in privatization programs. Additional information is available on the BIDA website at: http://bida.gov.bd/?page_id=4771

Corruption remains a serious impediment to investment and economic growth in Bangladesh. While the government has established legislation to combat bribery, embezzlement, and other forms of corruption, enforcement is inconsistent. The Anti-Corruption Commission (ACC) is the main institutional anti-corruption watchdog. With amendments to the Money Prevention Act, the ACC is no longer the sole authority to probe money-laundering offenses. Although it still has primary authority for bribery and corruption, other agencies will now investigate related offenses, including:

• The Bangladesh Police (Criminal Investigation Department) – Most predicate offenses.
• NBR – VAT, taxation, and customs offenses.
• The Department of Narcotics Control – Drug related offenses.

The current Awami League-led government has publicly underscored its commitment to anticorruption efforts and reaffirmed the need for a strong ACC, but opposition parties claim that the ACC is used by the government to harass political opponents. Efforts to ease public procurement rules and a recent constitutional amendment that reduced the independence of the ACC may undermine institutional safeguards against corruption. Bangladesh is a party to the UN Anticorruption Convention, but has not joined the OECD Convention on Combating Bribery of Public Officials. Corruption is common in public procurement, tax and customs collection, and among regulatory authorities. Corruption, including bribery, raises the costs and risks of doing business. By some estimates, off-the-record payments by firms may result in an annual reduction of two to three percent of GDP. Corruption has a corrosive impact on the broader business climate market and opportunities for U.S. companies in Bangladesh. It also deters investment, stifles economic growth and development, distorts prices, and undermines the rule of law.

Resources to Report Corruption

Mr. Iqbal Mahmood
Chairman
Anti-Corruption Commission, Bangladesh
1, Segun Bagicha, Dhaka 1000
+88-02-8333350
chairman@acc.org.bd

Contact at “watchdog” organization:

Mr. Iftekharuzzaman
Executive Director
Transparency International Bangladesh (TIB)
MIDAS Centre (Level 4 & 5), House-5, Road-16 (New) 27 (Old),

Dhanmondi, Dhaka -1209
+880 2 912 4788 / 4789 / 4792
edtib@ti-bangladesh.org, info@ti-bangladesh.org, advocacy@ti-bangladesh.org

Policies Towards Foreign Direct Investment

The government of Barbados, through Invest Barbados, welcomes foreign direct investment with the stated goals of creating jobs, earning foreign exchange, transferring technology, enhancing skills, and contributing to economic growth.

Barbados encourages investment in the following key sectors: international financial services, manufacturing, information technology, and ship registration, as well as developing areas like financial technology, creative industries, agro processing, medical schools, medical tourism and renewable energy.  In the international financial services sector, the government maintains its regulatory oversight to prevent money laundering and tax evasion.

Through Invest Barbados, the government facilitates domestic and foreign private investment.  Invest Barbados’ mandate is to actively promote Barbados as a desirable investment location, to provide advice, and to assist prospective investors.  Invest Barbados also provides customized support for investors to ensure the expansion and sustainability of the initial investment.  It also serves as the primary liaison for existing investors.  As part of the government’s plans to mitigate the impact of the coronavirus pandemic, the government announced the establishment of a Jobs and Investment Council which seeks to mobilize investments and create jobs during and after the pandemic.

Limits on Foreign Control and Right to Private Ownership and Establishment

There are no limits on foreign control in Barbados.  Nationals and non-nationals may establish and own private enterprises and private property in Barbados.  These rights extend to the acquisition and disposition of interests in private enterprises.

No industries are closed to private enterprise, although the government reserves the right not to allow certain investments.  Some activities, such as telecommunications, utilities, broadcasting, franchises, banking, and insurance require a government license.  There are no quotas or other restrictions on foreign ownership of a local enterprise or participation in a joint venture.

Other Investment Policy Reviews

Barbados has not conducted a trade policy review in the last three years.

Business Facilitation

Invest Barbados is the main investment promotion agency that attracts and facilitates foreign investment.  All potential investors must submit their proposals for review by Invest Barbados to ensure the projects are consistent with national interests and provide economic benefits to the country.

Invest Barbados offers guidance and direction to new and established investors seeking to pursue investment opportunities in Barbados.  The process is transparent and takes into account the size of capital investment as well as the economic impact of a proposed project.

Invest Barbados offers a website that is useful for navigating applicable laws, rules, procedures, and registration requirements for foreign investors.  This is available at http://www.investbarbados.org .  In February 2020, Invest Barbados launched the Barbados iGuide website, an online guide which provides both local and foreign investors with up-to-date information required to make certain investment decisions, including steps to setting up a business, opportunities for investment, labor and other business costs, and legal requirements, among other data.  This is available at https://www.theiguides.org/public-docs/guides/barbados .

The Corporate Affairs and Intellectual Property Office (CAIPO) maintains an online e-registry filing service for matters pertaining to the Corporate Registry.  It is available to registered agents (usually attorneys).  Information is available at www.caipo.gov.bb .

Barbados ranks 102nd out of 190 countries in the indicator of the ease of starting a business, which takes seven procedures and approximately 16 days to complete at the cost of 7.35 percent of income per capita, according to the 2020 World Bank Doing Business report.  The general practice is to retain an attorney to prepare relevant incorporation documents.  The business must register with the CAIPO, the Barbados Revenue Authority, the Customs and Excise Department, and the National Insurance Scheme.

The government of Barbados continues to facilitate programs and partnerships to assist women entrepreneurs and people with disabilities.  The government of Barbados remains committed to working with civil society and other organizations to meet the UN Sustainable Development Goals by 2030.

Outward Investment

While no incentives are offered, Barbados generally encourages local companies to invest in other countries, particularly within the region.  Local companies in Barbados are actively encouraged to take advantage of export opportunities specifically related to the country’s membership in the Caribbean Community (CARICOM) and the Caribbean Single Market and Economy (CSME).  The Barbados Investment Development Corporation (BIDC) provides market development support for domestic companies seeking to enhance their export potential.

Capital Markets and Portfolio Investment

Barbados has a small stock exchange, an active banking sector, and opportunities for portfolio investment.  Local policies seek to facilitate the free flow of financial resources, although some restrictions may be imposed during exceptional periods of low liquidity.  Historically, the CBB independently raised or lowered interest rates without government intervention.  There are a variety of credit instruments in the commercial and public sectors that local and foreign investors may access.

Barbados continues to review legislation in the financial sector to strengthen and improve the regulatory regime and attract and facilitate retention of foreign portfolio investments.  The government continues to improve its legal, regulatory, and supervisory frameworks to strengthen the banking system.  The Anti-Money Laundering Authority and its operating arm, the government’s Financial Intelligence Unit, review anti-money laundering policy documents and analyze prudential returns.

The Securities Exchange Act of 1982 established the Securities Exchange of Barbados, which was reincorporated as the Barbados Stock Exchange (BSE) in 2001.  The BSE operates a two-tier electronic trading system comprised of a regular market and an innovation and growth market (formerly the junior market).  Companies applying for listing on the regular market must observe and comply with certain requirements.  Specifically, they must have assets at least USD 500,000 and adequate working capital, based on the last three years of their financial performance, as well as three-year performance projections.  Companies must also demonstrate competent management and be incorporated under the laws of Barbados or another regulated jurisdiction approved by the Financial Services Commission.  Applications for listing on the innovation and growth market are less onerous, requiring minimum equity of one million shares at a stated minimum value of USD 100,000.  Reporting and disclosure requirements for all listed companies include interim financial statements and an annual report and questionnaire.  Non-nationals must obtain exchange control approval from the CBB to trade securities on the BSE.

The BSE publicized its intent to fully immobilize traditional share certificates and to computerize clearance and settlement through the Barbados Central Securities Depository Inc., a wholly owned subsidiary of the BSE.  The FSC under the Property Transfer Tax Act, can accommodate investors requiring a traditional certificate for a small fee.  The Financial Services Commission also regulates mutual funds in accordance with the Mutual Funds Act.

The BSE adheres to rules in accordance with International Organization of Securities Commissions guidelines designed to protect investors, ensure a fair, efficient, and transparent market, and reduce systemic risk.  Public companies must file audited financial statements with the BSE no later than 90 days after the close of their financial year.  The authorities may impose a fine not exceeding USD 5,000 for any person under the jurisdiction of the BSE who contravenes or is not in compliance with any regulatory requirements.

The BSE launched the International Securities Market (ISM) in 2016.  It is designed to operate as a separate market, allowing issuers from Barbados and other international markets.  The ISM is founded on a strong regulatory framework.  To date, the ISM has five listing sponsors.

The BSE collaborates with its regional partners, the Jamaica Stock Exchange and the Trinidad and Tobago Stock Exchange, through shared trading software.  The capacity for this inter-exchange connectivity provides a wealth of potential investment opportunities for local and regional investors.  The BSE obtained designated recognized stock exchange status from the United Kingdom in 2019.  It is also a member of the World Federation of Exchanges.

Barbados has accepted the obligations of Article VIII, Sections 2, 3, and 4 of the IMF Articles of Agreement and maintains an exchange system free of restrictions on current account transactions.

Money and Banking System

The government established the Central Bank of Barbados in 1972.  The CBB manages Barbados’ currency and regulates its domestic banks.

The Barbados Deposit Insurance Corporation (BDIC) provides protection for depositors.  Oversight of the entire financial system is conducted by the Financial Oversight Management Committee, which consists of the CBB, the BDIC, and the FSC.  The private sector has access to financing on the local market through short-term borrowing and credit, asset financing, project financing, and mortgage financing.

Commercial banks and other deposit-taking institutions set their own interest rates.  The CBB requires banks to hold 17.5 percent of their domestic deposits in stipulated securities.

Bitt, a Barbadian company, introduced a blockchain-based digital mobile wallet service for consumers.  Bitt offers a digital asset exchange, remittance channel, and merchant-processing gateway available via a mobile application.  The CBB and the FSC established a regulatory sandbox in 2018 where financial technology entities can do live testing of their products and services.  This allowed regulators to gain a better understanding of the product or service and to determine what, if any, regulation is necessary to protect consumers.  Bitt completed its participation and formally exited the sandbox in July 2019.  The CBB concluded that the company’s digital wallet service is a good candidate for regulation under legislation that is currently being drafted.

International banks domiciled in the United States, Canada, and Europe are reviewing their correspondent banking relationships in regions they deem high-risk for financial services.  The Caribbean region has witnessed a withdrawal of correspondent banking services by U.S. and European banks.  CARICOM remains committed to engaging with key stakeholders on the issue.

Foreign Exchange and Remittances

Foreign Exchange

Barbados’ currency of exchange is the Barbadian dollar (BBD).  It is issued by the CBB.  Barbados’ foreign exchange operates under a liberal system.  The Barbadian dollar has been pegged to the United States dollar at a rate of BBD 2.00: USD 1.00 since 1975.  This creates a stable currency environment for trade and investment in Barbados.

Remittance Policies

Companies can freely repatriate profits and capital from foreign direct investment if they are registered with the CBB at the time of investment.  The CBB has the right to stagger these conversions depending on the level of international reserves available to the CBB at the time capital repatriation is requested.

The Ministry of Finance, Economic Affairs and Investment controls the flow of foreign exchange and the Exchange Control Division of the CBB executes foreign exchange policy under the Exchange Control Act.  Individuals may apply through a local bank to convert the equivalent of USD 10,000 per year (effective July 1, 2019) for personal travel and up to a maximum of USD 25,000 for business travel.  The CBB must approve conversion of any amount over these limits.  International businesses, including insurance companies, are exempt from these exchange control regulations.

Barbados is a member of the CFATF.  In 2014, the government of Barbados signed an Intergovernmental Agreement in observance of FATCA, making it mandatory for banks in Barbados to report the banking information of U.S. citizens.

Sovereign Wealth Funds

Currently, the CBB does not maintain a sovereign wealth fund.  In the past, the government announced plans to create a sovereign wealth fund to ensure national wealth is available for present and future generations of Barbadians.  Barbadians 18 years and older are expected to gain a stake in the fund after it is established.  It is envisioned that the fund will hold government assets, including on- and offshore real property, revenues from oil and gas products, and non-tangible assets such as trademarks, patents, and intellectual property.  As part of the government’s pandemic response, the prime minister has signaled plans to reengage on this issue.

State-owned enterprises (SOEs) in Barbados work in partnership with ministries, or under their remit, and carry out certain specific ministerial responsibilities.  There are currently about 70 SOEs in Barbados operating in areas such as tourism, investment services, broadcasting and media, sanitation services, sports, and culture.

SOEs in Barbados are not found in the key areas earmarked for investment.  They are all wholly owned government entities.  They are headed by boards of directors to which their senior management reports.

As part of the ongoing BERT Program, the government of Barbados is addressing the expenditure position of the SOEs by defining clear objectives for SOE reform, reducing the wage bill of these entities, and implementing other necessary reform measures.

Privatization Program

Barbados does not have a targeted privatization program.  However, the government has announced plans for public-private partnerships in airport and broadcasting services which will still see government retaining ownership of these entities.  The process remains open to foreign investors and is transparent.  More information can be obtained from www.gisbarbados.gov.bb  .

The law provides criminal penalties for official corruption, and the government generally implemented these laws effectively.  Barbados signed but did not yet ratify the UN Convention on Corruption and the Inter-American Convention against Corruption.

In 2012, Barbados enacted the Prevention of Corruption Act, which includes standards of integrity in public life.  However, it has not been proclaimed by the governor-general and consequently was not in force.  The Integrity in Public Life Bill 2018 remains pending in parliament.  This Bill seeks to establish an integrity commission, to promote the integrity of government officials, and strengthen measures for the prevention, detection, investigation, and prosecution of acts of corruption.  The law also requires public officials to declare income and assets and makes provisions for whistleblower protection.  Upon assuming power in 2018, the prime minister required all high-level public officials to disclose income and assets to the government.  While the government claimed officials complied with this directive, the disclosures were not published.

A government minister with the previous administration was arrested in the United States on charges of laundering proceeds from bribes paid in Barbados.  He was found guilty of two counts of money laundering and one count of conspiracy to commit money laundering.  He intends appeal the conviction.

Barbados is a member of the regional Association of Integrity Commissions and Anti-Corruption Bodies in the Commonwealth Caribbean.

Resources to Report Corruption

The Director
Financial Intelligence Unit
P.O. Box 1372, Bridgetown
246-436-4734
director@barbadosfiu.gov.bb

The Chairman
Anti-Money Laundering Authority
P.O. Box 1372, Bridgetown
246-436-4734
amla@sunbeach.net

Policies Towards Foreign Direct Investment

Attracting FDI is one of the government’s foreign policy priorities; net inflows of FDI have been included in the list of government performance targets since December 2015.  The GOB has no specific requirements for foreigners wishing to establish a business in Belarus.  Investors, whether Belarusian or foreign, reportedly benefit from equal legal treatment and have the same right to conduct business operations in Belarus by incorporating separate legal entities.  However, selective application of existing laws and practices often discriminate against the private sector, including foreign investors, regardless of the country of their origin.

Limits on Foreign Control and Right to Private Ownership and Establishment

While the GOB asserts foreign and domestic private entities have the right to establish and own business enterprises and engage in all forms of remunerative activity,  in reality, the GOB imposes limits on a case-by-case basis.  The limits on foreign equity participation in Belarus are above the average for the 20 countries covered by the World Bank Group’s Investing Across Borders indicators for Eastern Europe and the Central Asia region.  Belarus, in particular, limits foreign equity ownership in service industries.  Sectors such as fixed-line telecommunications services, electricity transmission and distribution, and railway freight transportation are closed to foreign equity ownership.  In addition, a comparatively large number of sectors are dominated by government monopolies, including, but not limited to, those mentioned above.  Those monopolies make it difficult for foreign companies to invest in Belarus.  Finally, the government may restrict investments in the interests of national security (including environmental protection, historical and cultural values), public order, morality protection, and public health, as well as rights and freedoms of people.

While Belarus has no formal investment screening mechanism for national security purposes, it retains elements of a Soviet-style command economy and does screen investments through an informal and hierarchical process that escalates through the bureaucracy depending on the size of the investment or the size of incentives an investor seeks from the Belarusian government.  The President and his administration prescreen and approve all significant (multi-million dollar) foreign investment.

Additionally, Belarus’ Ministry of Antimonopoly Regulation and Trade is responsible for reviewing transactions for competition-related concerns (whether domestic or international).

Other Investment Policy Reviews

The UN Conference on Trade and Development reviewed Belarus’ investment policy in 2009 and made recommendations regarding the improvement of its investment climate. http://unctad.org/en/Docs/diaepcb200910_en.pdf 

Business Facilitation

Individuals and legal persons can apply for business registration via the web portal of the Single State Register (http://egr.gov.by/egrn/index.jsp?language=en ) – a resource that includes all relevant information on establishing a business.

Belarus has a regime allowing for a simplified taxation system for small and medium-sized and foreign-owned businesses.

Belarus defines enterprises as follows:
Micro enterprises – fewer than 15 employees;
Small enterprises – from 16 to 100 employees;
Medium-sized enterprises – from 101 to 250 employees.

Belarus’ investment promotion agency is the National Agency of Investments and Privatization (NAIP).  https://investinbelarus.by/en/naip-and-what-we-do/  NAIP is tasked with representing the interests of Belarus as it seeks to attract FDI into the country.  The Agency states it is a one-stop shop with services available to all investors, including:  organizing fact-finding missions to Belarus, assisting with visa formalities; providing information on investment opportunities, special regimes and benefits, state programs, and procedures necessary for making investment decisions; selecting investment projects; and providing solutions and post-project support, i.e., aftercare.

To maintain an ongoing dialogue with investors, Belarus has established the Foreign Investment Advisory Council (FIAC) chaired by the Prime Minister.  FAIC activities include, but are not limited to:  developing proposals to improve investment legislation; participating in examining corresponding regulatory and legal acts; and approaching government agencies for the purpose of adopting, repealing or modifying the regulatory and legal acts that restrict the rights of investors.  The FIAC includes the heads of government agencies and other state organizations subordinate to the GOB, as well as heads of international organizations and foreign companies and corporations.

Outward Investment

The government does not promote or incentivize outward investment, nor does it restrict domestic investors from investing abroad.  According to government statistics, Belarusian businesses’ outward investments in 2019 totaled USD 5.8 billion.

Capital Markets and Portfolio Investment

The Belarusian government welcomes portfolio investment and has taken steps to safeguard such investment and ensure a free flow of financial instruments. The Belarusian Currency and Stock Exchange is open to foreign investors, but it is still largely undeveloped because the government only allows companies to trade stocks if they meet certain but often burdensome criteria. Private companies must be profitable and have net assets of at least EUR 1 million. In addition, any income from resulting operations is taxed at 24 percent. Finally, the state owns more than 70 percent of all stocks in the country, and the government appears hesitant and unwilling to trade in them freely. Bonds are the predominant financial instrument on Belarus’ corporate securities market.

In 2001, Belarus joined Article VIII of the IMF’s Articles of Agreement, undertaking to refrain from restrictions on payments and transfers under current international transactions. Loans are allocated on market terms and foreign investors are able to get them. However, the discount rate of 8.75 percent (as of February 2020) makes credit too expensive for many private businesses, which, unlike many SOEs, do not receive subsidized or reduced-interest loans.

Since 2016, businesses buy and sell foreign exchange at the Belarusian Currency and Stock Exchange through their banks. Belarus used to require businesses to sell 10-20 percent of foreign currency revenues through the Belarusian Currency and Stock Exchange, however in late 2018 the National Bank abolished the mandatory sale rule.

Money and Banking System

Belarus has a central banking system. The country’s main bank, the National Bank of the Republic of Belarus, represents the interest of the state and is the main regulator of the country’s banking system. The President of Belarus appoints the Chair and Members of the Board of the National Bank, designates auditing organizations to examine its activities, and approves its annual report.

As of January 2020, the banking system of Belarus included 24 commercial banks and three non-banking credit and finance organizations. According to the National Bank, the share of non-performing loans in the banking sector was 4.2 percent in 2019. The country’s five largest commercial banks, all of which have some government share, accounted for 67 percent of the approximately USD 36 billion in total assets across the country’s banking sector. There are five representative offices of foreign banks in Belarus, with China’s Development Bank opening most recently in 2018. To the best of the Embassy’s knowledge, rules on hostile take-overs are clear, and applied on a non-discriminatory basis.

Foreign Exchange and Remittances

Foreign Exchange

According to the GOB, Belarus’ foreign exchange regulations do not include any restrictions or limitations regarding converting, transferring, or repatriating funds associated with investment. Foreign exchange transactions related to FDI, portfolio investments, real estate purchasing, and opening bank accounts are carried out without any restrictions. Foreign exchange is freely traded in the domestic foreign exchange market. Foreign investors can purchase foreign exchange from their Belarusian accounts in Belarusian banks for repaying investments and transferring it outside Belarus without any restrictions.

Since 2015, the Belarusian Currency and Stock Exchange has traded the U.S. dollar, the euro, and the Russian ruble in a continuous double auction regime. Local banks submit their bids for buying and selling foreign currency into the trading system during the entire period of the trading session. During the trades the bids are honored if and when the specified exchange rates are met. The average weighted exchange rate of the U.S. dollar, the euro, and the Russian ruble set during the trading session is used by the National Bank as the official exchange rate of the Belarusian ruble versus the above-mentioned currencies from the day on which the trades are made. The cross rates versus other foreign currencies are calculated based on the data provided by other countries’ central banks or information from Reuters and Bloomberg. The stated quotation becomes effective on the next calendar day and is valid till the new official exchange rate of the Belarusian ruble versus these foreign currencies comes into force. The IMF has listed Belarus’ exchange rate regime in the floating exchange rate category.

Remittance Policies

There have not been reports of problems exchanging currency and/or remitting revenues earned abroad.

Sovereign Wealth Funds

Belarus has the State Budget Fund of National Development, which is used for implementing major economic and social projects in the country.

Although SOEs are outnumbered by private businesses, SOEs dominate the economy in terms of assets. According to independent economic experts, the share of Belarus’ GDP derived from SOEs is at least 75 percent. Belarus does not consider joint stock companies, even those with 100 percent government ownership of the stocks, to be state-owned and generally refers to them as part of the non-state sector, rendering official government statistics regarding the role of SOEs in the economy as misleading.

According to independent economic media reports, SOEs receive preferential access to government contracts, subsidized credits, and debt forgiveness. While SOEs are generally subject to the same tax burden and tax rebate policies as their private sector competitors, private enterprises do not have the same preferential access to land and raw materials. Since Belarus is not a WTO member, it is not a party to the Government Procurement Agreement (GPA).

Privatization Program

Belarusian officials welcome “strategic investors,” including foreign investors, and claim that any state-owned or state-controlled enterprise can be privatized. However, Belarus’ privatization program is in practice extremely limited. Notably, in April 2020, the government sold its controlling share in Belarus’ fifteenth-largest bank, Paritetbank. Otherwise, there was no privatization of state-controlled companies in either 2018 or 2019, one SOE was bought by private investors in 2017, and no companies or shares were privatized in 2016.  In early 2019, Belarus’ State Property Committee approved a list of 23 joint stock companies for full or partial privatization in 2019. Also in 2019, the World Bank concluded a pilot SOE privatization project that identified and helped prepare 12 Belarusian SOEs for privatization. However, the GOB allowed sale of the government share in these companies on the condition that the purchasing investors preserve existing jobs and production lines. The State Property Committee reported that the government sold its minority share (under 25 percent) in two enterprises in 2019.

For a list of open-joint stock companies whose shares are available for privatization, as well as a description of the assets and conditions for privatization, visit: http://gki.gov.by/en/inf_for_investors-ifi_on_priv/ 

Investors interested in assets on the published privatization list are encouraged to forward a brief letter of interest to the State Property Committee. A special commission reviews offers and makes a recommendation to the President on the process of privatization – via tender, auction, or direct sale. Investors may also send a letter of interest regarding assets that are not on the State Property Committee list and the government will examine such offers.

Additionally, the State Property Committee occasionally organizes and holds privatization auctions. Many of the auctions organized by the State Property Committee have low demand as the government conditions privatizations with strict requirements, including preserving or creating jobs, continuing in the same line of work or production, or launching a successful business project within a limited period of time, etc.

In 2016, Belarusian joint stocks were allowed trans-border placement via issuing depositary receipts. However, to the Embassy’s knowledge, this instrument of attracting investments has not been put to the test in Belarus.

According to official sources, most corruption cases involve soliciting and accepting bribes, fraud, and abuse of power, although anecdotal evidence indicates such corruption usually does not occur as part of day-to-day interaction between citizens and minor state officials. In Belarus, bribery is considered a form of corruption and is punishable with a maximum punishment of 10 years in jail and confiscation of property. The most corrupt sectors are considered to be state administration and procurement, the industrial sector, the construction industry, health care, and education. In the first half of 2020, Belarusian courts convicted 463 individuals “on corruption-related charges.” However, the absence of independent judicial and law enforcement systems, the lack of separation of powers, and a harried independent press largely barred from interaction with a nontransparent state bureaucracy make it virtually impossible to gauge the true scale of corruption.

Belarus has anti-corruption legislation consisting of certain provisions of the Criminal Code and Administrative Code as well as the Law on Public Service and the Law on Combating Corruption. The latter is the country’s main anti-corruption document and was adopted in 2015. Belarusian anti-corruption law covers family members of government officials and political figures. The country’s regulations require addressing any potential conflict of interests of parties seeking to win a government procurement contract. The list of such regulations include the July 13, 2012, law “On public procurement of goods (works, services),” the December 31, 2013, presidential decree “On conducting procurement procedures,” and the March 15, 2012, Council of Ministers resolution on the procurement of goods (works, services). Government organizations directly engaged in anti-corruption efforts are prosecutors’ offices, internal affairs, state security and state control agencies.

Belarus is a party to a number of international anti-corruption conventions and agreements. The Republic of Belarus has consistently ratified and complied with requirements of main international anti-corruption acts, such as the Convention of the Council of Europe 173 On criminal liability for corruption (S 173) (concluded in Strasbourg on 27 January, 1999); the United Nations Convention Against Transnational Organized Crime, signed by Belarus in Palermo on 24 December, 2000, and the United Nations Convention Against Corruption (concluded in New York on 31 October, 2003); and the Civil Law Convention on Corruption (concluded in Strasbourg on 4 November, 1999) (ratified in 2005). Belarus also signed a number of the intergovernmental agreements to address this problem. Belarus is currently considering joining the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

In 2019, the Council of Europe’s (COE) Group of States against Corruption (GRECO) publicly declared Belarus non-compliant with GRECO’s anti-corruption standards.  This was GRECO’s first ever declaration of non-compliance. According to the COE, Belarus failed to address 20 out of 24 recommendations made in 2012; had not authorized the publication of the 2012 report or related compliance reports; and was non-responsive since 2017 to requests from GRECO to organize a high-level mission to Belarus. The majority of GRECO’s recommendations related to fundamental anti-corruption requirements, such as strengthening the independence of the judiciary and of the prosecution office, as well as increasing the operational autonomy of the law enforcement and limiting immunity protection of certain categories of persons. However, the COE contends that limited reporting indicates that corruption is particularly alarming higher up in the government hierarchy and in procurement for state-run enterprises.

According to Transparency International’s 2019 Corruption Perception Index, Belarus climbed from 70 to 66 out of 180 countries in the rankings.  In Belarus’ region, Poland ranked 36, Lithuania 38, Latvia 41, Ukraine 120, and Russia 138.

Resources to Report Corruption

General Prosecutor’s Office
Internatsionalnaya Street 22
Minsk, Belarus
+375 17 337-43-57
info@prokuratura.gov.by

Ms. Oksana Drebezova
Belarus National Contact
Transparency International
Levkova Street 15-113
Minsk, Belarus
+375 29 619 71 25
drebezovaoksana@gmail.com

Policies Towards Foreign Direct Investment

Belgium has an open economy that is highly dependent on international trade. Since WWII, making Belgium attractive to foreign investors has been the cornerstone of successive Belgian governments’ foreign and commercial policy. Competence over policies that weigh on the attractiveness of Belgium as a destination for foreign direct investment (FDI) lie predominantly with the federal government, which is responsible for domestic competition policy, wage setting policies, labor law and most of the energy policy. Attracting FDI is, however, a responsibility of Belgium’s three regional governments. Flanders Investment and Trade (FIT), Wallonia Foreign Trade and Investment Agency (AWEX) and Brussels Invest and Export (BIE) are the three investment promotion agencies that are responsible for attracting FDI to Belgium. One of their most visible activities is the organization of the Royal Trade Missions, which are led by Princess Astrid, as well as the economic part of the state visits by King Philippe. Neither the federal government, nor the regional governments currently maintain an formal dialogue with investors.

There are no laws in place that discriminate against foreign investors. Belgian authorities are working on a national security investment screening mechanism, but due to Belgian institutional challenges, it will likely not be finalized until October 2020, the deadline set by the EU for such national security regulation to be fully implemented in all EU member states. In practice, this legislation will allow the European Commission to issue opinions when an investment poses a threat to the security or public order of more than one member state. Furthermore, the regulation sets certain requirements for member states that wish to maintain or adopt a screening mechanism at the national level. Member states will keep the last word on whether or not a specific investment should or should not be allowed in their territory.

Limits on Foreign Control and Right to Private Ownership and Establishment

There are currently no limits on foreign ownership or control in Belgium and there are no distinctions between Belgian and foreign companies when establishing or owning a business, or setting up a remunerative activity. The forthcoming investment screening mechanism may establish some limits based on national security.

Other Investment Policy Reviews

In July 2019 the OECD published an in-depth productivity review of Belgium: https://www.oecd.org/belgium/in-depth-productivity-review-of-belgium-88aefcd5-en.htm 

https://www.oecd.org/belgium/in-depth-productivity-review-of-belgium-88aefcd5-en.htm  Belgium was included in the WTO Trade Policy Review of the European Union which took place February 18-20, 2020: https://www.wto.org/english/tratop_e/tpr_e/tp495_e.htm 

Belgium was included in the WTO Trade Policy Review of the European Union which took place February 18-20, 2020: https://www.wto.org/english/tratop_e/tpr_e/tp495_e.htm 

Business Facilitation

In order to set up a business in Belgium, one must:

1. Deposit at least 20 % of the initial capital with a Belgian credit institution and obtain a standard certification confirming that the amount is held in a blocked capital account;

2. Deposit a financial plan with a notary, sign the deed of incorporation and the by-laws in the presence of a notary, who authenticates the documents and registers the deed of incorporation. The authentication act must be drawn up in either French, Dutch or German (Belgium’s three official languages);

3. Register with one of the Registers of legal entities, VAT and social security at a centralized company docket and obtain a company number.

In most cases, the business registration process can be completed within one week. https://www.business.belgium.be/en/setting_up_your_business

Based on the number of employees, the projected annual turnover and the shareholder class, a company will qualify as a small or medium-sized enterprise (SME) according to the meaning of the Promotion of Independent Enterprise Act of February 10, 1998. For a small or medium-sized enterprise, registration will only be possible once a certificate of competence has been obtained. The person in charge of the daily management of the company must prove his or her knowledge of business management, with diplomas and/or practical experience. In the Global Enterprise Register, Belgium currently scores 7 out of 10 for ease of setting up a limited liability company.

Business facilitation agencies provide for equitable treatment of women and under-represented minorities in the economy.

A company is expected to allow trade union delegations when employing 20 or more full-time equivalents (FTEs).

The three Belgian regions each have their own investment promotion agency, whose services are available to all foreign investors.

Outward Investment

Belgium does not actively promote outward investment. There are no restrictions for domestic investors to invest in certain countries, other than those that fall under UN or EU sanction regimes.

Capital Markets and Portfolio Investment

Belgium has policies in place to facilitate the free flow of financial resources. Credit is allocated at market rates and is available to foreign and domestic investors without discrimination. Belgium is fully served by the international banking community and is implementing all relevant EU financial directives. At the same time, in 2020 Belgium ranks 67th out of 190 for “getting credit” on the World Bank’s “Doing Business” rankings, and in the bottom quintile among OECD high income countries.

Bruges established the world’s first stock market almost 600 years ago, and the Belgian bourse is well-established today. On Euronext, a company may increase its capital either by capitalizing reserves or by issuing new shares. An increase in capital requires a legal registration procedure, and new shares may be offered either to the public or to existing shareholders. A public notice is not required if the offer is to existing shareholders, who may subscribe to the new shares directly. An issue of bonds to the public is subject to the same requirements as a public issue of shares: the company’s capital must be entirely paid up, and existing shareholders must be given preferential subscription rights. Details on the shareholders of the Bel20 (benchmark stock market index of Euronext Brussels) can be found on http://www.gresea.be/Qui-sont-les-actionnaires-du-BEL-20 .

In 2016, the Belgian government passed legislation to improve entrepreneurial financing through crowdfunding and more flexible capital venture rules.

Money and Banking System

Because the Belgian economy is directed toward international trade, more than half of its banking activities involve foreign countries. Belgium’s major banks are represented in the financial and commercial centers of dozens of countries by subsidiaries, branch offices, and representative offices. The country does have a central bank, the National Bank of Belgium (NBB), whose governor is also a member of the Governing Council of the European Central Bank (ECB). Being a Eurozone member state, the NBB is part of the Euro system, meaning that it has transferred the sovereignty over monetary policy to the ECB.

Belgium is one of the countries with the highest number of banks per capita in the world. The banking system is considered sound but was hard hit by the financial crisis that began in the fall of 2008, when federal and regional governments had to step in with lending and guarantees for the three largest banks. Following a review of the 2008 financial crisis, the Belgian government decided in 2012 to shift the authority of bank supervision from the Financial Market Supervision Authority (FMSA) to the NBB. In 2017, supervision of systemically important Belgian banks shifted to the ECB. The country has not lost any correspondent banking relationships in the past three years, nor are there any correspondent banking relationships currently in jeopardy.

The developments since September 2008 have also resulted in a major de-risking of the Belgian banks’ balance sheets, on the back of a rising share of exposure to the public sector – albeit more concentrated on Belgium – and a gradual further expansion of the domestic mortgage loan portfolio. Since the introduction of the Single Supervisory Mechanism (SSM), the vast majority of the Belgian banking sector’s assets are held by banks that come under SSM supervision, including the “significant institutions” KBC Bank, Belfius Bank, Argenta, AXA Bank Europe, Bank of New-York Mellon and Bank Degroof/Petercam. Other banks governed by Belgian law – such as BNP Paribas Fortis and ING Belgium – are also subject to SSM supervision as they are subsidiaries of non-Belgian “significant institutions.”

In 2018, the banking sector conducted its business in a context of gradual economic recovery and persistently low interest rates. That situation had two effects: it put pressure on the sector’s profitability and caused a credit default problem in some European banks. The National Bank of Belgium designated eight Belgian banks as domestic systemically important institutions, and divided them into two groups according to their level of importance. A 1.5 % capital surcharge was imposed on the first group (BNP Paribas Fortis, KBC Group and Belfius Bank). The second group (AXA Bank Europe, Argenta, Euroclear and The Bank of New York Mellon) is required to hold a supplementary capital buffer of 0.75 %. These surcharges are being phased in over a three-year period.

Under pressure from the European Union, bank debt has decreased in volume overall, from close to 1.6 trillion euros in 2007 to just over 1 trillion euros in 2018, according to the National Bank of Belgium, particularly in the risky derivative markets.

It remains to be seen how the economic fallout of the COVID-19 crisis will impact banks in Belgium.

Belgian banks use modern, automated systems for domestic and international transactions. The Society for Worldwide Interbank Financial Telecommunications (SWIFT) is headquartered in Brussels. Euroclear, a clearing entity for transactions in stocks and other securities, is also located in Brussels.

Opening a bank account in the country is linked to residency status. The U.S. FATCA (Foreign Account Tax Compliance Act) requires Belgian banks to report information on U.S. account holders directly to the Belgian tax authorities, who then release the information to the IRS.

Some Belgian banks have already made great progress with blockchain technology: for instance, one Belgian bank offers a product called MyCar, a digital ecosystem that connects all the players in a car purchase with blockchain technology, creating a single, trusted source of confidence and a centralized workflow that reportedly makes it easier to buy a car.

With regard to cryptocurrencies, the National Bank of Belgium has no central authority overseeing the network.

Unlike most other EU countries, there are no cryptocurrency ATMs, and the NBB has repeatedly warned about potential adverse consequences of the use of cryptocurrencies for financial stability.

Belgium does not have a virtual assets exchange platform, but they intend to transpose the Fifth Anti-Money Laundering (AML) directive in June 2020 when the Financial Services and Markets Authority (FSMA) will be the supervisory authority.

Foreign Exchange and Remittances

Foreign Exchange

Payments and transfers within Belgium and with foreign countries require no prior authorization. Transactions may be executed in euros as well as in other currencies.

Remittance Policies

Dividends may be remitted freely except in cases in which distribution would reduce net assets to less than paid-up capital. No further withholding tax or other tax is due on repatriation of the original investment or on the profits of a branch, either during active operations or upon the closing of the branch.

Sovereign Wealth Funds

Belgium has a sovereign wealth fund (SWF) in the form of the Federal Holding and Investment Company, a quasi-independent entity created in 2004 and now mainly used as a vehicle to manage the banking assets which were taken on board during the 2008 banking crisis. The SWF has a board whose members reflect the composition of the governing coalition and are regularly audited by the “Cour des Comptes” or national auditor. At the end of 2019, its total assets amounted to € 2.35 billion. The majority of the funds are invested domestically. Its role is to allow public entities to recoup their investments and support Belgian banks. The SWF is required by law to publish an annual report and is subject to the same domestic and international accounting standards and rules. The SWF routinely fulfills all legal obligations. However, it is not a member of the International Forum of Sovereign Wealth Funds.

Belgium has about (around) 80,000 employees working in SOEs, mainly in the railways, telecoms and general utility sectors. There are also several regional-owned enterprises where the regions often have a controlling majority: for a full listing on the companies located in Wallonia, see www.actionnariatwallon.be. There is no equivalent website for companies located in Flanders or in Brussels. Private enterprises are allowed to compete with SOEsunder the same terms and conditions, but since the EU started to liberalize network industries such as electricity, gas, water, telecoms and railways, there have been regular complaints in Belgium about unfair competition from the former state monopolists. Complaints have ranged from lower salaries (railways) to lower VAT rates (gas and electricity) to regulators with a conflict of interest (telecom). Although these complaints have now largely subsided, many of these former monopolies are now market leaders in their sector, due mainly to their ability to charge high access costs to legacy networks that were fully amortized years ago. However, former telecom monopolist Proximus still features on the EU’s list of companies receiving state aid.

Privatization Program

Belgium currently has no scheduled privatizations. There are ongoing discussions about the relative merits of a possible privatization of the state-owned bank Belfius and the government share in telecom operator Proximus, . There are no indications that foreign investors would be excluded from these eventual privatizations.

Belgian anti-bribery legislation was revised completely in March 1999, when the competence of Belgian courts was extended to extraterritorial bribery. Bribing foreign officials is a criminal offense in Belgium. Belgium has been a signatory to the OECD Anti-Bribery Convention since 1999, and is a participating member of the OECD Working Group on Bribery. In the Working Group’s Phase 3 review of Belgium in 2013 it called on Belgium to address the lack of resources available for fighting foreign bribery.

Under Article 3 of the Belgian criminal code, jurisdiction is established over offenses committed within Belgian territory by Belgian or foreign nationals. Act 99/808 added Article 10 related to the code of criminal procedure. This Article provides for jurisdiction in certain cases over persons (foreign as well as Belgian nationals) who commit bribery offenses outside the territory of Belgium. Various limitations apply, however. For example, if the bribe recipient exercises a public function in an EU member state, Belgian prosecution may not proceed without the formal consent of the other state.

Under the 1999 Belgian law, the definition of corruption was extended considerably. It is considered passive bribery if a government official or employer requests or accepts a benefit for him or herself or for somebody else in exchange for behaving in a certain way. Active bribery is defined as the proposal of a promise or benefit in exchange for undertaking a specific action. Until 1999, Belgian anti-corruption law did not cover attempts at passive bribery. The most controversial innovation of the 1999 law was the introduction of the concept of “private corruption,” or corruption among private individuals.

Corruption by public officials carries heavy fines and/or imprisonment between 5 (five) and 10 years. Private individuals face similar fines and slightly shorter prison terms (between six months and two years). The current law not only holds individuals accountable, but also the company for which they work. Contrary to earlier legislation, the 1999 law stipulates that payment of bribes to secure or maintain public procurement or administrative authorization through bribery in foreign countries is no longer tax deductible. Recent court cases in Belgium suggest that corruption is most serious in government procurement and public works contracting. American companies have not, however, identified corruption as a barrier to investment.

The responsibility for enforcing corruption laws is shared by the Ministry of Justice through investigating magistrates of the courts, and the Ministry of the Interior through the Belgian federal police, which has jurisdiction in all criminal cases. A special unit, the Central Service for

Combating Corruption, has been created for enforcement purposes but continues to lack the necessary staff. Belgium is also an active participant in the Global Forum on Asset Recovery.

The Belgian Employers Federation encourages its members to establish internal codes of conduct aimed at prohibiting bribery. To date, U.S. firms have not identified corruption as an obstacle to FDI.

UN Anticorruption Convention, OECD Convention on Combatting Bribery

Belgium has signed and ratified the UN Anticorruption Convention of 1998, and is also party to the OECD Convention on Combatting Bribery of Foreign Public Officials in International Business Transactions.

Office of the Federal Prosecutor of Belgium
Transparency International Belgium
Resources to Report Corruption
Wolstraat 66-1 – 1000 Brussels
T 02 55 777 64
F 02 55 777 94

Transparency Belgium
Nijverheidsstraat 10, 1000 Brussels
tel: +32 (0)2 893 2584
email: infoa@transparencybelgium.be

Policies Towards Foreign Direct Investment

Belize’s government encourages FDI to relieve fiscal pressure and diversify the economy.  While the central government is interested in attracting FDI, certain bureaucratic and regulatory requirements impede investment and growth.

There are no laws that explicitly discriminate against foreign investors.  In practice, however, investors complain that lack of transparency, land insecurity, bureaucracy, delays, and corruption are factors that make it difficult to do business in Belize.

The Belize Trade and Investment Development Service (BELTRAIDE; www.belizeinvest.org.bz ) is the investment and export promotion agency.  It promotes FDI through various incentive packages and identified priority sectors for investment such as agriculture, agro-processing, fisheries and aquaculture, logistics and light manufacturing, food processing and packaging, tourism and tourism-related industries, business process outsourcing (BPOs), and sustainable energy.

The Economic Development Council is a public-private sector advisor body established to advance public sector reforms, to promote private sector development and to inform policies for growth and development.  The Cabinet has also created a Sub–Committee on Investment composed of ministers whose portfolios are directly involved in considering and approving investment proposals.  Additionally, there is an Office of the Ombudsman who addresses issues of official wrongdoing.

Limits on Foreign Control and Right to Private Ownership and Establishment

Belize acknowledges the right for foreign and domestic private entities to establish and own business enterprises and engage in remunerative activities.  Foreign and domestic entities must first register their business before engaging in business.  They must also register for the appropriate taxes, including business tax and general sales tax, as well as obtain a social security number and trade license.

Generally, Belize has no restrictions on foreign ownership and control of companies; however, foreign investments must be registered with the Central Bank of Belize.  To register a business name with the government, foreigners must apply with a Belizean partner or someone with a permanent residence.  Additionally, persons seeking to open a bank account must also comply with Central Bank regulations.  These may differ based on the applicant’s residency status and whether the individual is seeking to establish a local or foreign currency account.  Note: many Belizeans perceive foreigners to receive favorable treatment from the government over access to capital during the start-up process.

Foreign investments must be registered and obtain an “Approved Status” from the Central Bank to facilitate inflows and outflows of foreign currency.  Investments with “Approved Status” are generally granted permission to repatriate funds gained from profits, dividends, loan payments and interest.  The Central Bank also reserves the right to request evidence supporting applications for repatriation.

Some investment incentives show preference to Belizean-owned companies.  For example, to qualify for a tour operator license, a business must be majority-owned by Belizeans or permanent residents of Belize (http://www.belizetourismboard.org ).  This qualification is negotiable particularly where a tour operation would expand into a new sector of the market and does not result in competition with local operators.  The government does not impose any intellectual property transfer requirements.

The Government’s Cabinet Sub-Committee on Investment investigates investment projects which do not fall within Belize’s incentive regime or which may require special considerations.  For example, an investment may require legislative changes, a customized memorandum of understanding or agreement from the government, or a public–private partnership.  The government assesses proposals based on size, scope, and the incentives requested.  In addition, proposals are assessed on a five-point system that analyses: 1) socio-economic acceptability of the project; 2) revenues to the government; 3) employment; 4) foreign exchange earnings; and 5) environmental considerations.  The Cabinet Sub-Committee is composed of five cabinet ministers, including the Minister with responsibility for Investment, Trade and Commerce as Chairperson.  The other members include the ministers with responsibility for Tourism and Civil Aviation; Agriculture, Fisheries, Forestry, the Environment and Immigration Services and Refugees; and Natural Resources, along with the Attorney General.  There is no statutory timeframe for considering projects as the process largely depends on the nature and complexity of the project.

When considering investment, foreign investors undertaking large capital investments must be aware of environmental laws and regulations.  Government requires project developers to prepare an Environmental Impact Assessment (EIA), should a project meet certain parameters such as land area, location, or industry criteria.  When purchasing land or planning to develop in or near an ecologically sensitive zone, government recommends that the EIA fully address any measures by the investor to mitigate environmental risks.  Developers must obtain environmental clearance prior to the start of site development.  The Department of Environment website, http://www.doe.gov.bz  has more information on the Environmental Protection Act and other regulations, applications and guidelines.

Other Investment Policy Reviews

In the past three years, there has been no investment policy review of Belize by the Organization for Economic Cooperation and Development (OECD) or the United Nations Conference on Trade and Development (UNCTAD).  Belize concluded its third Trade Policy Review in the World Trade Organization (WTO) in 2017.

Business Facilitation

BELTRAIDE (http://www.belizeinvest.org.bz  ), a statutory body of the Government of Belize, operates as the country’s investment and export promotion agency.  Its investment facilitation services are open to all investors – foreign and domestic.  While there are support measures to advance greater inclusion of women and minorities in entrepreneurial initiatives and training, the business facilitation measures do not distinguish by gender or economic status.

The Belize Companies and Corporate Affairs Registry (tel: +501 822 0421; email: info@belizecompaniesregistry.gov.bz) is responsible for the registration process of all local businesses and companies.  This office does not have a public website to provide online services.  Belize does not operate a single-window registration process.

Businesses must register with the tax department to pay business and general sales tax.  They must also register with their local city council or town board to obtain a trade license to operate a business.  An employer should also register employees for social security.  The 2020 Doing Business report (http://www.doingbusiness.org  ) estimates it takes on average 48 days to start a company in Belize.  The same report ranks Belize at 135 of 190 economies, losing ten spots compared to 2019.

Outward Investment

Belize does not promote or incentivize outward investments.  Its government does not restrict domestic investors from investing abroad.  However, the Central Bank places currency controls on investment abroad, with Central Bank approval required prior to foreign currency outflows.

Capital Markets and Portfolio Investment

Belize’s financial system is small with little to no foreign portfolio investment transactions.  It does not have a stock exchange and capital market operations are rudimentary.  The government securities market is underdeveloped and the market for corporate bonds is almost non-existent.  While foreign investments must be registered at the Central Bank, the government respects IMF Article VIII and does not restrict payments and transfers for current international transactions.

Additionally, credit is made available on market terms with interest rates largely set by local market conditions prevailing within the commercial banks.  The credit instruments accessible to the private sector include loans, overdrafts, lines of credit, credit cards, and bank guarantees.  Foreign investors can access credit on the local market.  However, the Central Bank must approve the granting of any advance, whether a loan or overdraft, to a locally incorporated company with foreign shareholders or to non-residents.

The Belize Development Finance Corporation (DFC), a state-owned development bank, offers loan financing services in various sectors.  To qualify for a loan from DFC, an individual must be a Belizean resident or citizen, while a company must be majority 51 percent Belizean owned.  The National Bank of Belize is a state-owned bank that provides concessionary credit primarily to public officers, teachers, and low income Belizeans.  NOTE: This Belize Development Finance Corporation is NOT the same as the U.S. re-branded Overseas Private Investment Company (OPIC).

Money and Banking System

A financial inclusion survey undertaken by the Central Bank of Belize in 2019 showed that approximately 65.5 percent of respondents had access to a financial account.  Belize’s financial system remains underdeveloped with a banking sector that may be characterized as stable but fragile.  The Central Bank of Belize (CBB) (https://www.centralbank.org.bz ) is responsible for formulating and implementing monetary policy focusing on the stability of the exchange rate and economic growth.

Non-performing loans stood at 2.23 percent of total loans at the end of February 2020, significantly below the 5.0 percent threshold.  Additionally, the estimated total assets of the country’s largest bank were USD 0.625 billion at the end of February 2020.

Generally, there are no restrictions on foreigners opening bank accounts in Belize.  However, persons seeking to open a bank account must comply with Central Bank regulations, which differ based on residency status and whether the individual is seeking to establish a local bank account or a foreign currency account.   Foreign banks and branches are allowed to operate in the country with all banks subject to Central Bank measures and regulations.  Since 2015, all banks have regained correspondent banking relations.  These relationships are still tenuous, with delays in transactions, and fewer services offered at higher costs.

In the last few years, Belize has enacted a number of reforms to strengthen the anti-money laundering and counterterrorism-financing regime, including amendments to the Money Laundering and Terrorism (Prevention) Amendment Act and the International Business Companies (Amendment) Act.  In addition, the National Anti-Money Laundering Committee (NAMLC) is headed by the Financial Intelligence Unit with inter-agency support from key financial and law enforcement authorities.

Foreign Exchange and Remittances

Foreign Exchange

Belize has a stable currency, with the Belize dollar pegged to the United States Dollar since May 1976 at a fixed exchange rate of BZ $2.00 to the USD $1.00.

The Government of Belize has established currency controls, and foreign investors seeking to convert, transfer, or repatriate funds must comply with Central Bank regulations.  Foreign investments must be registered at the Central Bank to facilitate inflows and outflows of foreign currency.  Foreign investors must register their inflow of funds to obtain an “Approved Status” for their investment and generally are approved for repatriation of funds thereafter.  The Central Bank does, however, reserve the right to request evidence supporting applications for repatriation.

Remittance Policies

There are no changes to investment remittance policies.  As mentioned above, foreign investors must obtain an “Approved Status” for their investment and register their inflow and outflow of funds with the Central Bank.  There are no time limitations on remittances.  Where there is a waiting period, it depends on the availability of foreign exchange, but does not generally exceed 60 days.

Sovereign Wealth Funds

Belize does not have a sovereign wealth fund.

State Owned Enterprises (SOEs) exist largely in the utilities sectors, usually as a result of the government nationalization.  The Government is the majority shareholder in the Belize Water Services Limited, the country’s sole provider of water services, the Belize Electricity Limited, the sole distributor of electricity, and the Belize Telemedia Limited, the largest telecommunications provider in the country. The Public Utilities Commission regulates all utilities.

To staff these companies’ boards of directors, SOEs usually select senior government officials, members of local business bureaus and chambers of commerce, labor organizations, and quasi-governmental agencies.  The board serves to direct policy and shape business decisions of the SOE that is ostensibly independent.  Current and previous administrations have been accused of nepotism and cronyism, and have been criticized for having conflicts of interest when board members or directors are also represented in organizations that do business with the SOEs.

There is no published list of SOEs.  The following are the major SOEs operating in the country.  Information relating to their operations is available on their websites:

• Belize Electricity Limited at http://www.bel.com.bz ;
• Belize Telemedia Limited at http://www.belizetelemedia.net ;
• Belize Water Services Limited at http://www.bws.bz 

There are no third-party market analysis sources that evaluate whether SOEs receive non-market advantages by the government.  The Belize Electricity Limited and the Belize Water Services Limited are the only service providers in their respective sectors.  The Belize Telemedia Services, on the other hand, competes with one other provider for mobile connectivity and there are multiple players that provide internet and data services.

Privatization Program

The Government does not currently have a privatization program.  

Belize has anti-corruption laws that are seldom enforced.  Under the Prevention of Corruption in Public Life Act, public officials are required to make annual financial disclosures.  The Act criminalizes acts of corruption by public officials and includes measures on the use of office for private gain; code of conduct breaches; the misuse of public funds; and bribery.  Section 24 of the Act covers punishment for breach, which may include a fine of up to USD $5,000, severe reprimand, forfeiture of property acquired by corruption, and removal from office.  This Act also established an Integrity Commission mandated to monitor, prevent, and combat corruption by examining declarations of physical assets and financial positions filed by public officers.  The Commission is able to investigate allegations of corrupt activities by public officials, including members of the National Assembly, Mayors and Councilors of all cities, and Town Boards.  In practice, the office is understaffed, and charges are almost never brought against officials.  It is not uncommon for politicians disgraced in corruption scandals to return to government after a short period of time has elapsed.

The Money Laundering and Terrorism (Prevention) Act identifies “politically exposed persons” to include family members or close associates of the politically exposed person.

The Ministry of Finance issues the Belize Stores Orders and Financial Orders – policies and procedures for government procurement.  The Manual for the Control of Public Finances provides the framework for the registration and use of public funds to procure goods and services.

Despite these legislative and regulatory measures, many businesspeople complain that both major political parties practice partisanship bias that affects businesses in terms of receiving licenses, the importation of goods, winning government contracts for procurement of goods and services, and transfer of government land to private owners.  Some middle-class citizens and business owners throughout the country have complained of government officials, including police, soliciting bribes.  A Select Senate Committee on Immigration deliberated for most of 2017 on such allegations by known members of the ruling United Democratic Party.  It concluded its inquiry in December 2017 but has not published its findings and recommendations.            Private companies are not required to establish internal codes of conduct.  There are few non-governmental institutions that monitor government activities; two of which are: the Citizens Organized for Liberty through Action (COLA) and the National Trade Union Congress of Belize (NTUCB).  The first is comprised of concerned private citizens; the latter is an umbrella organization comprised of the various Belizean workers’ unions.  Environmental NGOs and the Belize Chamber of Commerce and Industry often make statements regarding government policy as it affects their respective spheres of activity.  The Government does not provide protection to NGOs investigating corruption.

Private companies are not required to establish internal codes of conduct.  There are few non-governmental institutions that monitor government activities; two of which are: the Citizens Organized for Liberty through Action (COLA) and the National Trade Union Congress of Belize (NTUCB).  The first is comprised of concerned private citizens; the latter is an umbrella organization comprised of the various Belizean workers’ unions.  Environmental NGOs and the Belize Chamber of Commerce and Industry often make statements regarding government policy as it affects their respective spheres of activity.  The Government does not provide protection to NGOs investigating corruption.

Private companies do not use internal controls, ethics or compliance programs to detect and prevent bribery of government officials.  Bribery is officially considered a criminal act in Belize, but laws against bribery are rarely enforced. Complaints related to government corruption relating to customs, land, and immigration are quite common.

In June 2001, the Government of Belize signed the Organization of American States (OAS) Inter-American Convention on Corruption, which undergoes periodic review as provided for under the Convention.  In December 2016, Belize acceded to the United Nations Convention Against Corruption (UNCAC) amid public pressure and demonstrations from the teachers’ unions.  Government continues to be criticized for the lack of political will to fully implement UNCAC.

Resources to Report Corruption

Office of the Ombudsman
91 Freetown Road
Belize City, Belize
T: +501-223-3594
E:  ombudsman@btl.net
W:  www.ombudsman.gov.bz

For specific complaints within the police force:

Professional Standards Branch
1902 Constitutions Drive
Belmopan, Belize
T: +501-822-2218 or 822-2674

Policies Towards Foreign Direct Investment

The Beninese government actively encourages foreign investment, which it views as critical for economic development and successful implementation of the $15 billion PAG. APIEX, situated in the Presidency, aims to promote foreign direct investment and reduce administrative barriers to doing business. APIEX serves as the single investment promotion center and conduit of information between foreign investors and the Beninese government. It is the technical body responsible for reviewing applications for approval under the Investment Code and the administrative authority for special economic zones (SEZs). The agency has significantly reduced stated processing times for registration of new companies (from 15 days to one day) and construction permits (from 90 to 30 days). In practice, APIEX faces capacity constraints, processing times can be longer than stated, and its website is often out of date and lacks information on the latest regulations and laws. The Investment Code, amended in 2020, establishes conditions, advantages, and rules applicable to domestic and foreign direct investment.

Limits on Foreign Control and Right to Private Ownership and Establishment

Beninese law guarantees the right to own and transfer private property. The court system enforces contracts, but the judicial process is inefficient and suffers from corruption. Enforcement of rulings is problematic. Most firms entering the market work with an established local partner and retain a competent Beninese attorney. A list of English-speaking lawyers and legal counselors is available on the Embassy’s website:

Other Investment Policy Reviews

In 2015, the Beninese government conducted a joint investment policy review (IPR) with the Organization for Economic Cooperation and Development (OECD), the World Trade Organization (WTO), and the United Nations Conference on Trade and Development (UNCTAD). Further to a 2016 fact-finding mission, the UNCTAD Report on the Implementation of the IPR of Benin assesses progress in implementing the original recommendations of the IPR and highlights policy issues to be addressed in the investment climate. The full report may be found at: https://investmentpolicy.unctad.org/investment-policy-review/23/benin 

Business Facilitation

Benin ranked 149 out of 190 countries on the 2020 World Bank Doing Business rankings, rising five spots from 2019. APIEX is responsible for facilitating business startups and reducing administrative barriers for investors and businesses. APIEX states that new businesses can be opened online through its website in as little as 24 hours (https://monentreprise.bj/ ).

In an effort to facilitate business travel and tourism, Benin implements a visa-free system for African nationals and an online e-visa system for holders of other passports (). The country is working to open four new trade offices abroad to enhance Benin’s international business opportunities. One is already underway in Shenzhen, China; others are planned for Europe, the United States, and the Middle East.

Benin’s 2017 Property Code made property registration simpler and less expensive in order to boost the real estate market, improve access to credit, and reduce corruption in the registration process. The measures apply to real personal property, estate and mortgage taxes, and property purchase receipts. In order to register property, individuals and businesses must present a taxpayer identification number (registration for which is free). Land registration and property purchase certifications are free, but there is a fee for obtaining a property title.

Benin Control – a private company operating under the supervision of the Ministry of Infrastructure and Transport – is charged with expediting customs clearances and minimizing processing barriers to clearing cargo at the Port of Cotonou. Benin Control makes it possible to obtain cargo clearance within as little as 48 hours after its off-loading at the Port of Cotonou, though in practice this can take longer. The reinstitution of the cargo inspection and scanning program known as PVI, first tried in 2012, resumed operations at the Port of Cotonou in 2017. Under the PVI program, Benin Control scans 10 percent of all imports, with containers selected randomly for scanning. Benin Control bills all containers exiting the Port of Cotonou – regardless of whether they are selected for scanning – at the rate of 35,000 FCFA ($68) for a 20-foot container, and 45,000 FCFA ($78) for a 40-foot container.

The government, through the state-owned Benin Water Company (SONEB) and Beninese Electric Energy Company (SBEE), provides service connections to potable water and electricity free of charge to Small and Medium Size Enterprises and Industries.  Eligible companies are responsible for paying the water and electricity meter installation fees.  Online application is available at https://www.soneb.bj/soneb15/pme-pmi-raccordement-gratuit and https://www.sbee.bj/site/demande-de-raccordement-des-pme-pmi-conditions/

Outward Investment

The Beninese government has no policies or incentives in place to encourage the country’s businesspeople to invest abroad. The Beninese government does not restrict domestic investors from investing abroad.

Capital Markets and Portfolio Investment

Government policy supports free financial markets, subject to oversight by the Ministry of Finance and the West African States Central Bank (BCEAO). Foreign investors may seek credit from Benin’s private financial institutions and the WAEMU Regional Stock Exchange (Bureau Regional des Valeurs Mobilieres – BRVM) headquartered in Abidjan, Cote d’Ivoire with local branches in each WAEMU member country. There are no restrictions for foreign investors to establish a bank account in Benin and obtain loans on the local market. However, proof of residency or evidence of company registration is required to open a bank account

Money and Banking System

The banking sector is generally reliable. Thirteen private commercial banks operate in Benin in addition to the BCEAO and a planned subsidiary of the African Development Bank. Taking into account microfinance institutions, 22.5 percent of the population had access to banking services in 2018. In recent years, non-performing loans have been growing; 15 percent of total banking sector assets are estimated to be non-performing. The BCEAO regulates Beninese banks. Foreign banks are required to obtain a banking license before operating branches in Benin. They are subject to the same prudential regulations as local or regional banks. Benin has lost no correspondent banking relationships during the last three years. There is no known current correspondent banking relationship in jeopardy. Foreigners are required to present proof of residency to open bank accounts.

Foreign Exchange and Remittances

Foreign Exchange

All funds entering the country from abroad for investment purposes require reporting and registration with the Ministry of Finance at the time of arrival of funds. Evidence of registration is required to justify remittances of investment capital, earnings, loan/lease repayments, or royalties. Such remittances are allowed without restrictions. Funds entering the country from abroad for investment purposes must be converted into local currency. For the purposes of repatriating such funds, either the invested funds or the interest/earnings or royalties can be converted into any world currency.

The currency of Benin is BCEAO-CFA Franc (international code: XOF). XOF has a fixed parity with the Euro and fluctuates against all other currencies based on this parity. This parity was established at the time of the Euro’s creation (January 1, 1999) and has not changed since then. The parity stands at XOF 655.957= EUR 1.00, guaranteed by the French government under an arrangement between the Treasury of France and the European Union.

Remittance Policies

There have been no recent changes to investment remittance policies. Banks require documents to justify remittances related to investments. The waiting time to remit investment returns does not exceed 60 days in practice.

Sovereign Wealth Funds

Benin does not have a sovereign wealth fund.

There are several wholly owned SOEs operating in the country, including public utilities (electricity and water), fixed and mobile telecommunications, postal services, port and airport management, gas distribution, pension funds, agricultural production, and hotel and convention center management. There is also a number of partially owned SOEs in Benin. Some of these receive subsidies and assistance from the government. There are no available statistics regarding the number of individuals employed by SOEs.

With the exception of public utilities (including electricity and water), pension funds, and landline telephone service for which the public telephone company retains a monopoly, many private enterprises compete with public enterprises on equal terms.

SOE senior management may report directly to a government ministry, a parent agency, or a board of directors comprised of senior government officials along with representatives of civil society and other parastatal constituencies. SOEs are required by law to publish annual reports and hold regular meetings of their boards of directors. Financial statements of SOEs are reviewed by certified accountants, private auditors, and the government’s Bureau of Analysis and Investigation (BAI). The government audits SOEs, though it does not make available information on financial transfers to and from SOEs.

SOEs are established pursuant to presidential decrees, which define their mission and responsibilities. The government appoints senior management and members of the Board of Directors. SOEs are generally run like private entities and are subject to the same tax policies as the private sector. The courts process disputes between SOEs and private companies or organizations.

Privatization Program

Foreign investors may participate in privatization programs. The Talon administration has targeted divestiture programs rather than total privatization of state-owned enterprises.  The state-owned telecommunications company, Benin Telecom Infrastructure, is targeted for either a divestiture program or dissolution by 2021.  With support from MCC, the state-owned electricity utility, Société Beninoise d’Energie Electrique (SBEE), is managed privately through a management contract through 2023, even though the government retains full ownership.  The government is pursuing major transactions to attract private investment into thermal and solar power generation, as well as natural gas supply for power generation. In 2017, the government signed a three-year renewable management contract for the Port of Cotonou with the Belgian firm Port of Antwerp International (PAI).  PAI took over management of the port in May 2018. The move was intended to improve port management and attract foreign investors to fund a planned project to modernize and expand the port.

Benin has laws aimed at combatting corruption, though corruption remains a recurring problem in areas including public administration, government procurement, customs and taxation, and the judiciary. The ANLC is the lead government entity on corruption issues and has the authority to refer corruption cases to court. The ANLC also has the authority to combat money laundering, electoral fraud, and economic fraud in the public and private sectors. Benin’s State Audit Office is also responsible for identifying and acting against corruption in the public sector. The CRIET processes cases related to economic crimes, which can include corruption. In 2018, the National Assembly approved the lifting of parliamentary immunity of a small number of opposition parliamentarians accused of corruption or embezzlement during their past positions in former governments.

Bribery is illegal and subject to up to ten years’ imprisonment, but enforcement is uneven. Private companies often establish their own codes of conduct.

Beninese procurement law allows for open and closed bid processes. Contracts are often awarded based on government solicitations to short-listed companies with industry-specific expertise, often identified based on companies’ commercial activities conducted in other overseas markets. The government often uses sole sourcing for projects, including for PAG implementation, and in these cases does not publish procurement requests before selecting a vendor. Foreign companies have expressed concerns about unfair treatment, biased consideration, and improper practices specific to the process of selecting short-listed companies.

Benin is a signatory of the UN Anticorruption Convention and the OECD Convention on Combatting Bribery of Foreign Public Officials in International Business Transactions.

Resources to Report Corruption

Contact at government agency or agencies responsible for combating corruption:

NAME: JeanBaptiste Elias
TITLE: President
ORGANIZATION: ANLC
ADDRESS:01 BP 7060 Cotonou, Benin
TELEPHONE NUMBER: +229 21 308 686
EMAIL ADDRESS: anlc.benin@yahoo.fr

NAME: Ms. Blanche Sonon
TITLE: President
ORGANIZATION: Social Watch
ADDRESS: 02 BP 937, Cotonou, Benin
TELEPHONE NUMBER: +229 21042012 229 95961644
EMAIL ADDRESS swbenin@socialwatchbenin.org;

Policies Towards Foreign Direct Investment

In general, Bolivia remains open to FDI.  The 2014 investment law guarantees equal treatment for national and foreign firms, however it also stipulates that public investment has priority over private investment (both national and foreign) and that the Bolivian Government will determine which sectors require private investment.

U.S. companies interested in investing in Bolivia should note that in 2012 Bolivia abrogated the BIT it signed with the United States and a number of other countries.  The Bolivian Government of former President Evo Morales claimed the abrogation was necessary for Bolivia to comply with the 2009 Constitution.  Companies that invested under the U.S.–Bolivia BIT will be covered until June 10, 2022, but investments made after June 10, 2012 are not covered.

Pursuant to Article 320 of the 2009 Constitution, Bolivia no longer recognizes international arbitration forums for disputes involving the government.  The parties also cannot settle the dispute in an international court.  However, the implementation of this article is still uncertain.

Specifically, Article 320 of the Bolivian Constitution states:

1. Bolivian investment takes priority over foreign investment.
2. Every foreign investment will be subject to Bolivian jurisdiction, laws, and authorities, and no one may invoke a situation for exception, nor appeal to diplomatic claims to obtain more favorable treatment.

III. Economic relations with foreign states or enterprises shall be conducted under conditions of independence, mutual respect and equity.  More favorable conditions may not be granted to foreign states or enterprises than those established for Bolivians.

1. The state makes all decisions on internal economic policy independently and will not accept demands or conditions imposed on this policy by states, banks or Bolivian or foreign financial institutions, multilateral entities or transnational enterprises.
2. Public policies will promote internal consumption of products made in Bolivia.

Article 262 of the Constitution states:

“The fifty kilometers from the border constitute the zone of border security.  No foreign person, individual, or company may acquire property in this space, directly or indirectly, nor possess any property right in the waters, soil or subsoil, except in the case of state necessity declared by express law approved by two thirds of the Plurinational Legislative Assembly.  The property or the possession affected in case of non-compliance with this prohibition will pass to the benefit of the state, without any indemnity.”

The judicial system faces a huge backlog of cases, is short staffed, lacks resources, has problems with corruption, and is believed to be influenced by political actors.  Swift resolution of cases, either initiated by investors or against them, is unlikely.  The Marcelo Quiroga Anti-Corruption law of 2010 makes companies and their signatories criminally liable for breach of contract with the government, and the law can be applied retroactively.  Authorities can use this threat of criminal prosecution to force settlement of disputes.  Commercial disputes can often lead to criminal charges and cases are often processed slowly.  See our Human Rights Report as background on the judicial system, labor rights and other important issues.

Article 129 of the Bolivian Arbitration Law No. 708, established that all controversies and disputes that arise regarding investment in Bolivia will have to be addressed inside Bolivia under Bolivian Laws.  Consequently, international arbitration is not allowed for disputes involving the Bolivian Government or state-owned enterprises.

Bolivia does not currently have an investment promotion agency to facilitate foreign investment.  However, the transitional government is working to create such an agency in order to attract investment in the non-traditional and industrial sectors.  The former government also launched an investment promotion website (www.investbolivia.gob.bo ) in order to provide information about investment opportunities in Bolivia.

Limits on Foreign Control and Right to Private Ownership and Establishment

There is a right for foreign and domestic private entities to establish and own business enterprises and engage in remunerative activity.

There are some areas where investors may judge that preferential treatment is being given to their Bolivian competitors, for example in key sectors where private companies compete with state owned enterprises.  Additionally, foreign investment is not allowed in matters relating directly to national security.  And only the government can own most natural resources.

The Constitution specifies that all hydrocarbon resources are the property of the Bolivian people and that the state will assume control over their exploration, exploitation, industrialization, transport, and marketing (Articles 348 and 351).  The state-owned and operated company, Yacimientos Petrolíferos Fiscales Bolivianos (YPFB) manages hydrocarbons transport and sales and is responsible for ensuring that the domestic market demand is satisfied at prices set by the hydrocarbons regulator before allowing any hydrocarbon exports.  YPFB benefitted from government action in 2006 that required operators to turn over their production to YPFB and to sign new contracts that gave YPFB control over the distribution of gasoline, diesel, and liquid petroleum gas (LPG) to gas stations.  The law allows YPFB to enter into joint venture contracts for limited periods with national or foreign individuals or companies wishing to exploit or trade hydrocarbons or their derivatives.  For companies working in the industry, contracts are negotiated on a service contract basis and there are no restrictions on ownership percentages of the companies providing the services.

The Constitution (Article 366) specifies that every foreign enterprise that conducts activities in the hydrocarbons production chain will submit to the sovereignty of the state, and to the laws and authority of the state.  No foreign court case or foreign jurisdiction will be recognized, and foreign investors may not invoke any exceptional situation for international arbitration, nor appeal to diplomatic claims.

According to the Constitution, no concessions or contracts may transfer the ownership of natural resources or other strategic industries to private interests.  Instead temporary authorizations to use these resources may be requested at the pertinent ministry (Mining, Water and Environment, Public Works, etc.).  The Bolivian Government needs to renegotiate commercial agreements related to forestry, mining, telecommunications, electricity, and water services, in order to comply with these regulations.

The Telecommunications, Technology and Communications General Law (Law 164, Article 28) stipulates that the licenses for radio broadcasts will not be given to foreign persons or entities.  Further, in the case of broadcasting associations, the share of foreign investors cannot exceed 25 percent of the total investment, except in those cases approved by the state or by international treaties.

The Central Bank of Bolivia is responsible for registering all foreign investments.  According to the 2014 investment law, any investment will be monitored by the ministry related to the particular sector.  For example, the Mining Ministry is in charge of overseeing all public and private mining investments.  Each Ministry assesses industry compliance with the incentive objectives.  To date, only the Ministry of Hydrocarbons and Energy has enacted a Law (N 767) to incentivize the exploration and production of hydrocarbons.

Other Investment Policy Reviews

Bolivia underwent a World Trade Organization (WTO) trade policy review in 2017.  In concluding remarks by the Chairperson, the Chairperson noted that several WTO members raised challenges impacting investor confidence in Bolivia, due primarily to Bolivia’s abrogation of 22 BITs following the passage of its 2009 constitution.  However, some WTO members also commended Bolivia for enacting a new investment promotion law in 2014 and a law on conciliation and arbitration, both of which increased legal certainty for investors, according to those members.

Business Facilitation

According to the World Bank’s Doing Business 2020 rankings, Bolivia ranks 150 out of 190 countries on the ease of doing business, much lower than most countries in the region.  Bolivia ranks 175 out of 190 on the ease of starting a business.

FUNDEMPRESA is a mixed public/private organization authorized by the central government to register and certify new businesses.  Its website is www.fundempresa.org.bo  and the business registration process is laid out clearly within the tab labeled “processes, requirements and forms,” however the registration cannot be completed entirely online. A user can download the required forms from the site and can fill them out online, but then has to mail the completed forms or deliver them to the relevant offices.  A foreign applicant would be able to use the registration forms.  The forms do ask for a “cedula de identidad,” which is a national identification document; however, foreign users usually enter their passport numbers instead.  Once a company submits all documents required to FUNDEMPRESA, the process takes between 2-4 working days.

The steps to register a business are: (1) register and receive a certificate from Fundempresa; (2) register with the Bolivian Internal Revenue Service (Servicio de Impuestos Nacionales) and receive a tax identification number; (3) register and receive authorization to operate from the municipal government in which the company will be established; (4) if the company has employees, it must register with the national health insurance service and the national retirement pension agency in order to contribute on the employees’ behalf;  and (5) if the company has employees, it must register with the Ministry of Labor.  According to Fundempresa, the process should take 30 days from start to finish.  All steps are required and there is no simplified business creation regime.

Outward Investment

The Bolivian Government does not promote or incentivize outward investment.  Nor does the government restrict domestic investors from investing abroad.

Capital Markets and Portfolio Investment

The government’s general attitude toward foreign portfolio investment is neutral.  Established Bolivian firms may issue short or medium-term debt in local capital markets, which act primarily as secondary markets for fixed-return securities.  Bolivian capital markets have sought to expand their handling of local corporate bond issues and equity instruments.  Over the last few years, several Bolivian companies and some foreign firms have been able to raise funds through local capital markets.  However, the stock exchange is small and is highly concentrated in bonds and debt instruments (more than 95 percent of transactions).  The amount of total transactions in 2019 was around 29 percent of GDP.

Since 2008, the financial markets have experienced high liquidity, which has led to historically low interest rates.  However, liquidity has been returning to normal levels in recent years and there are some pressures to increase interest rates.  The Bolivian financial system is not well integrated with the international system and there is only one foreign bank among the top ten banks of Bolivia.

In October 2012, Bolivia returned to global credit markets for the first time in nearly a century, selling USD 500 million worth of 10-year bonds at the New York Stock Exchange.  The sovereign bonds were offered with an interest rate of 4.875 percent and demand for the bonds well surpassed the offer, reaching USD 1.5 billion.  U.S. financial companies Bank of America, Merrill Lynch, and Goldman Sachs were the lead managers of the deal.  In 2013, Bolivia sold another USD 500 million at 5.95 percent for ten years.  HSBC, Bank of America, and Merrill Lynch were the lead managers of the deal.  In 2017, Bolivia sold another USD 1 billion at 4.5 percent for ten years, with Bank of America and JP Morgan managing the deal.  According to the Ministry of Economy, the resources gained from the sales will be used to finance infrastructure projects.

The government and central bank respect their obligations under IMF Article VIII, as the exchange system is free of restrictions on payments and transfers for international transactions.

Foreign investors legally established in Bolivia are able to get credits on the local market.  However, due to the size of the market, large credits are rare and may require operations involving several banks.  Credit access through other financial instruments is limited to bond issuances in the capital market.  A recent financial services law directs credit towards the productive sectors and caps interest rates.

Money and Banking System

The Bolivian banking system is small, composed of 16 banks, 6 banks specialized in mortgage lending, 3 private financial funds, 30 savings and credit cooperatives, and 8 institutions specialized in microcredit.  Of the total number of personal deposits made in Bolivia through December 2019 (USD 26.5 billion), the banking sector accounted for 80 percent of the total financial system.  Similarly, of the total loans and credits made to private individuals (USD 26.8 billion) through December 2018, 80 percent were made by the banking sector, while private financial funds and the savings and credit cooperatives accounted for the other 20 percent.

Bolivian banks have developed the capacity to adjudicate credit risk and evaluate expected rates of return in line with international norms.  The banking sector was stable and healthy with delinquency rates at less than 1.9 percent in 2019. In 2020, delinquency rates rose after the interim government permitted clients to defer bank loan payments until the end of 2020 without penalty as a mitigating measure for the COVID-19 pandemic.  While delinquency rates still remain relatively low, there are concerns this measure could potentially harm the banking sector’s stability.

In 2013, a new Financial Services Law entered into force.  This new law enacted major changes to the banking sector, including deposit rate floors and lending rate ceilings, mandatory lending allocations to certain sectors of the economy and an upgrade of banks’ solvency requirements in line with the international Basel standards.  The law also requires banks to spend more on improving consumer protection, as well as providing increased access to financing in rural parts of the country.

Credit is now allocated on government-established rates for productive activities, but foreign investors may find it difficult to qualify for loans from local banks due to the requirement that domestic loans be issued exclusively against domestic collateral.  Since commercial credit is generally extended on a short-term basis, most foreign investors prefer to obtain credit abroad.  Most Bolivian borrowers are small and medium-sized enterprises (SMEs).

In 2007, the government created a Productive Development Bank to boost the production of small, medium-sized and family-run businesses.  The bank was created to provide loans to credit institutions which meet specific development conditions and goals, for example by giving out loans to farmers, small businesses, and other development focused investors.  The loans are long term and have lower interest rates than private banks can offer in order to allow for growth of investments and poverty reduction.

In September 2010, the Bolivian Government bought the local private bank Banco Union as part of a plan to gain control of part of the financial market.  Banco Union is one of the largest banks, with a share of 10.8 percent of total national credits and 12.7 percent of the total deposits; one of its principal activities is managing public sector accounts.  Bolivian Government ownership of Banco Union was illegal until December 2012, when the government enacted the State Bank Law, allowing for state participation in the banking sector.

There is no strong evidence of “cross-shareholding” and “stable-shareholding” arrangements used by private firms to restrict foreign investment, and the 2009 Constitution forbids monopolies and supports antitrust measures.  In addition, there is no evidence of hostile takeovers (other than government nationalizations that took place from 2006-14).

The Financial sector is regulated by ASFI (Supervising Authority of Financial Institutions), a decentralized institution that is under the Ministry of Economy.  The Central Bank of Bolivia (BCB) oversees all financial institutions, provides liquidity when necessary, and acts as lender of last resort.  The BCB is the only monetary authority and is in charge of managing the payment system, international reserves, and the exchange rate.

Foreigners are able to establish bank accounts only with residency status in Bolivia.

Blockchain technologies in Bolivia are still in the early stages.  Currently, the banking sector is analyzing blockchain technologies and the sector intends to propose a regulatory framework in coordination with ASFI in the future.

Three different settlement mechanisms are available in Bolivia:  (1) the high-value payment system administered by the Central Bank for inter-bank operations; (2) a system of low value payments utilizing checks and credit and debit cards administered by the local association of private banks (ASOBAN); and (3) the deferred settlement payment system designed for small financial institutions such as credit cooperatives.  This mechanism is also administered by the Central Bank.

Foreign Exchange and Remittances

Foreign Exchange

The Banking Law (#393, 2013) establishes regulations for foreign currency hedging and authorizes banks to maintain accounts in foreign currencies.  A significant, but dropping, percentage of deposits are denominated in U.S. dollars (currently less than 14 percent of total deposits).  Bolivian law currently allows repatriation of profits, with a 12.5 percent withholding tax.  However, a provision of the 2009 Constitution (Article 351.2) requires reinvestment within Bolivia of private profits from natural resources.  Until specific implementing legislation is passed, it is unclear how this provision will be applied.  In addition, all bank transfers in U.S. dollars within the financial system and leaving the country must pay a Financial Transaction Tax (ITF) of .03 percent.  This tax applies to foreign transactions for U.S. dollars leaving Bolivia, not to money transferred internally.

Any banking transaction above USD 10,000 (in one operation or over three consecutive days) requires a form stating the source of funds.  In addition, any hard currency cash transfer from or to Bolivia equal to or greater than USD 10,000 must be registered with the customs office.  Amounts between USD 50,000 and USD 500,000 require authorization by the Central Bank and quantities above USD 500,000 require authorization by the Ministry of the Economy and Public Finance.  The fine for underreporting any cash transaction is equal to 30 percent of the difference between the declared amount and the quantity of money found.  The reporting standard is international, but many private companies in Bolivia find the application cumbersome due to the government requirement for detailed transaction breakdowns rather than allowing for blanket transaction reporting.

Administrative Resolution 398/10 approved in June 2010 forces Bolivian banks to reduce their investments and/or assets outside the country to an amount that does not exceed 50 percent of the value of their net equity.

The Central Bank charges a fee for different kinds of international transactions related to banking and trade.  The current list of fees and the details can be found at:

https://www.bcb.gob.bo/webdocs/01_resoluciones/RD%20152%202019.pdf 

Law 843 on tax reform directly affects the transfer of all money to foreign countries.  All companies are charged 25 percent tax, except for banks which can be charged 37.5 percent, on profits under the Tax Reform Law, but when a company sends money abroad, the presumption of the Bolivian Tax Authority is that 50 percent of all money transmitted is profit.  Under this presumption, the 25 percent tax is applied to half of all money transferred abroad, whether actual or only presumed profit.  In practical terms, it means there is a payment of 12.5 percent as a transfer tax.

Currency is freely convertible at Bolivian banks and exchange houses.  The Bolivian Government describes its official exchange system as an “incomplete crawling peg.”  Under this system, the exchange rate is fixed, but undergoes micro-readjustments that are not pre-announced to the public.  There is a spread of 10 basis points between the exchange rate for buying and selling U.S. dollars.  The Peso Boliviano (Bs) has remained fixed at 6.96 Bs/USD  1 for selling and 6.86 Bs/USD  1 for buying since October 2011.  The parallel rate closely tracks the official rate, suggesting the market finds the Central Bank’s policy acceptable.  In order to avoid distortions in the exchange rate market, the Central Bank requires all currency exchange to occur at the official rate ±1 basis point.

Remittance Policies

Each remittance transaction from Bolivia to other countries has a USD 2,500 limit per transaction, but there is no limit to the number of transactions that an individual can remit.  The volume of remittances sent to and from Bolivia has increased considerably in the past five years, and the central bank and banking regulator are currently analyzing whether to impose more regulations sometime in the future.  Foreign investors are theoretically able to remit through a legal parallel market utilizing convertible, negotiable instruments, but, in practice, the availability of these financial instruments is limited in Bolivia.  For example, the Bolivian Government mainly issues bonds in Bolivianos and the majority of corporate bonds are also issued in Bolivianos.

The official exchange rate between Bolivianos and dollars is the same as the informal rate.  The government allows account holders to maintain bank accounts in Bolivianos or dollars and make transfers freely between them.  Business travelers may bring up to USD 10,000 in cash into the country.  For amounts greater than USD 10,000, government permission is needed through sworn declaration.

Sovereign Wealth Funds

Neither the Bolivian Government nor any government-affiliated entity maintains a sovereign wealth fund.

The Bolivian Government has set up companies in sectors it considers strategic to the national interest and social well-being, and has stated that it plans to do so in every sector it considers strategic or where there is either a monopoly or oligopoly.

The Bolivian Government owns and operates more than 60 businesses including energy and mining companies, a telecommunications company, a satellite company, a bank, a sugar factory, an airline, a packaging plant, paper and cardboard factories, and milk and Brazil nut processing factories, among others.  In 2005, income from state-owned business in Bolivia other than gas exports represented only a fraction of a percent of Gross Domestic Product (GDP).  As of 2015, public sector contribution to GDP (including SOEs, investments, and consumption of goods and services) has risen to over 40 percent of GDP.

The largest SOEs are able to acquire credit from the Central Bank at very low interest rates and convenient terms.  Some private companies complain that it is impossible for them to compete with this financial subsidy.  Moreover, SOEs appear to benefit from easier access to licenses, supplies, materials and land; however, there is no law specifically providing SOEs with preferential treatment in this regard.  In many cases, government entities are directed to do business with SOEs, placing other private companies and investors at a competitive disadvantage.

The government registered budget surpluses from 2006 until 2013, but began experiencing budget deficits in 2014.  Close to 50 percent of the deficit was explained by the performance of SOEs, such as Bolivia’s state-owned oil and gas company.  According to the 2009 Constitution, all SOEs are required to publish an annual report and are subject to financial audits.  Additionally, SOEs are required to present an annual testimony in front of civil society and social movements, a practice known as social control.

Privatization Program

There are currently no privatization programs in Bolivia.

Resources to Report Corruption

Contact at government agency or agencies are responsible for combating corruption:

Vice Minister of Justice and the Fight Against Corruption
Ministry of Justice
Calle Capitan Ravelo 2101, La Paz
+591-2-115773
http://www.transparencia.gob.bo/ 

Bolivian law stipulates criminal penalties for corruption by officials, but the laws are not often implemented properly.  Governmental lack of transparency, and police and judicial corruption, remain significant problems.  The Ministry of Justice and Transparency and the Prosecutor’s Office are both responsible for combating corruption.  In September 2014, the former Transparency Minister reported that the Ministry was investigating 388 complaints against public servants.  The Ministry has obtained 100 convictions since 2006.  Cases involving allegations of corruption against the president and vice president require congressional approval before prosecutors may initiate legal proceedings, and cases against pro-government public officials are rarely allowed to proceed.  Despite the fact that the courts found that the awarding of immunity for corruption charges is unconstitutional, their rulings were ignored by the government.

Police corruption remains a significant problem.  There are also reports of widespread corruption in the country’s judiciary.

There is an Ombudsman appointed by Congress and charged with protecting human rights and guarding against government abuse.  In his 2014 annual report, the Ombudsman cited the judicial system, the attorney general’s office, and the police as the most persistent violators of human rights due to widespread inefficiencies and corruption.  Public opinion reflected the Ombudsman’s statements.  The 2017 Transparency International corruption perception index ranked Bolivia as 112 of 180 countries and found that Bolivian citizens believe the most corrupt institutions in Bolivia are the judiciary, the police, and executive branch institutions

Bolivia has laws in place which govern public sector-related contracts (Law 1178 and Supreme Decree 181), including contracts for the acquisition of goods, services, and consulting jobs.  Bribery of public officials is also a criminal offense under Articles 145 and 158 of Bolivia’s Criminal Code.  Laws also exist that provide protection for citizens filing complaints against corruption.

Bolivia signed the UN Anticorruption Convention in December 2003 and ratified it in December 2005.  Bolivia is also party to the OAS Inter-American Convention against Corruption.  Bolivia is not a signatory of the OECD Convention on Combating Bribery of Foreign Public Officials.

Policies Towards Foreign Direct Investment

Bosnia and Herzegovina struggles to attract foreign investment.  Complex labor and pension laws, the lack of a single economic space, and inadequate judicial and regulatory protections deter investment.  Under the BiH constitution, established through the Dayton Accords that ended the 1990s war, Bosnia and Herzegovina (henceforth “the state”) is divided into two “entities,” the Federation of BiH (the Federation) and the Republika Srpska (RS).  A third, smaller area, the Brčko District, operates under a separate administration.  The Federation is further divided into ten cantons, each with its own government and responsibilities.  There are also 143 municipalities in BiH:  63 in the RS and 80 in the Federation.  As a result, BiH has a multi-tiered legal and regulatory framework that can be duplicative and contradictory, and is not conducive to attracting foreign investors.

Employers bear a heavy burden toward governments.  They must contribute 69 percent on top of wages in the Federation and 52 percent in the RS to the health and pension systems.  The labor and pension laws are also deterrents to investment, though both are being reformed to decrease burdens on employers.  While corporate income taxes in the two entities and Brčko District are now harmonized at 10 percent, entity business registration requirements are not harmonized.  The RS has its own registration requirements, which apply to the entire entity.  Each of the Federation’s ten cantons has different business regulations and administrative procedures affecting companies.  Simplifying and streamlining this framework is essential to improving the investment climate.  The EU Reform Agenda targets changes that should improve the investment climate by clarifying and simplifying regulation and procedures while decreasing fees faced by businesses at the entity, canton, and municipal levels.

Generally, BiH’s legal framework does not discriminate against foreign investors.  However, given the high level of corruption, foreign investors can be at a significant disadvantage in relation to entrenched local companies, especially those with formal or informal backing by BiH’s various levels of government.

The Foreign Investment Promotion Agency (FIPA) is a state-level organization mandated by the Council of Ministers to facilitate and support FDI (www.fipa.gov.ba ).  FIPA provides data, analysis, and advice on the business and investment climate to foreign investors.  All FIPA services are free of charge.

BiH does not maintain an ongoing, formal dialogue with foreign investors.  Sporadically, high-ranking government officials give media statements inviting foreign investments in the energy, transportation, and agriculture industries; however, the announcements are rarely supported by tangible, commercially-viable investment opportunities.

Limits on Foreign Control and Right to Private Ownership and Establishment

According to the Law on the Policy of FDI, foreign investors are entitled to invest in any sector of the economy in the same form and under the same conditions as those defined for local residents.  There are two exceptions:  the defense industry and some areas of publishing and media where foreign ownership is restricted to 49 percent, and electric power transmission, which is closed to foreign investment.  In practice, additional sectors are dominated by government monopolies (such as airport operation), or characterized by oligopolistic market structures (such as telecommunications and electricity generation), making it difficult for foreign investors to engage.  There have been no significant privatizations of government-owned enterprises in the past few years.

Other Investment Policy Reviews

In the past three years, the BiH government has not conducted an investment policy review through the Organization for Economic Cooperation and Development (OECD); the World Trade Organization (WTO); or the United Nations Conference on Trade and Development (UNCTAD).

Business Facilitation

Establishing a business in BiH can be an extremely burdensome and time-consuming process for investors.  The World Bank estimates there are an average of 13 procedures (actual number depends on the type of business), taking a total of 81 days, to register a new business in the capital city of Sarajevo.  Registration in BiH can sometimes be expedited if companies retain a local lawyer to follow up at each step of the process.  The RS established a one-stop shop for business registration in the entity.  On paper, this dramatically reduced the time required to register a business in the RS, bringing the government-reported time to register a company down to an average of 7 to 14 days.  Some businesses, however, report that in practice it can take significantly longer.

The entity, cantonal, and municipal levels of government each establish their own laws and regulations on business operations, creating redundant and inconsistent procedures that enable corruption.  It is often difficult to understand all the laws and rules that might apply to certain business activities, given overlapping jurisdictions and the lack of a central information source.  It is therefore critical that foreign investors obtain local assistance and advice.  Investors in the Federation may register their business as a branch in the RS and vice versa.

The most common U.S. business presence found in BiH are representative offices.  A representative office is not considered to be a legal entity and its activities are limited to market research, contract or investment preparations, technical cooperation, and similar business facilitation activities.  The BiH Law on Foreign Trade Policy governs the establishment of a representative office.  To open a representative office, a company must register with the Registry of Representative Offices, maintained by the BiH Ministry of Foreign Trade and Economic Affairs (MoFTER) and the appropriate entity’s ministry of trade.

Additional English-language information on the business registration process can be found at:

BiH Ministry of Foreign Trade & Economic Relations (MoFTER):
Ph: +387-33-220-093
www.mvteo.gov.ba 

BiH Foreign Investment Promotion Agency (FIPA):
Ph: + 387 33 278 080
www.fipa.gov.ba 

Republika Srpska Company Registration Website:
http://www.investsrpska.net 

Outward Investment

The government does not restrict domestic investors from investing abroad.  There are no programs to promote or incentivize outward investment.

Capital Markets and Portfolio Investment

Capital markets remain underdeveloped in BiH.  Both entities have created their own modern stock market infrastructure with separate stock exchanges in Sarajevo (SASE) and Banja Luka (BLSE), both of which started trading in 2002.  The small size of the markets, lack of privatization, weak shareholder protection, and public mistrust of previous privatization programs has impeded the development of the capital market.  During the global economic crisis, foreign investment dwindled and investors saw previous gains dissipate on both exchanges.  Foreign investment has shown few signs of growth since 2008, shaped not only by the global financial crisis but also by BiH’s lack of political stability and slowdown of reforms.

Both the RS and Federation issued government securities for the first time during 2011, as part of their plans to raise capital in support of their budget deficits during this period of economic stress.  Both entity governments continue to issue government securities in order to fill budget gaps.  These securities are also available for secondary market trading on the stock exchanges.

In April 2020,  The international rating agency Standard and Poor’s (S&P) affirmed the credit rating of Bosnia and Herzegovina as “B” with a stable outlook.  The agency noted that the economy of Bosnia and Herzegovina continued to grow despite its longstanding political fragmentation. Prior to the COVID-19 pandemic, the Agency forecasts real GDP growth of 2.7 percent over the next four years. Fiscal performance is a major contributor to credit rating, as the general government net debt is expected to remain below 30 percent of GDP and to have a favorable maturity structure.  The quality of banking regulations was also positively evaluated.   Positive reforms, according to analysts’ expectations, could include reducing the labor cost burden on business and enhancing governance of the country’s state-owned enterprise sector.

Money and Banking System

The banking and financial system has been stable with the most significant investments coming from Austria.  As of March 2020, there are 23 commercial banks operating in BiH: 15 with headquarters in the Federation and 8 in the Republika Srpska.  Twenty-two commercial banks are members of a deposit insurance program, which provides for deposit insurance of KM 50,000 (USD 28,000).  The banking sector is divided between the two entities, with entity banking agencies responsible for banking supervision.  The BiH Central Bank defines and controls the implementation of monetary policy (via its currency board) and supports and maintains payment and settlement systems.  It also coordinates the activities of the entity Banking Agencies, which are in charge of bank licensing and supervision. Reforms of the banking sector, mandated by the IMF and performed in conjunction with the IMF and World Bank, are in progress.

BiH passed a state-level framework law in 2010 mandating the use of international accounting standards, and both entities passed legislation that eliminated differences in standards between the entities and Brčko District.  All governments have implemented accounting practices that are fully in line with international norms.

Foreign Exchange and Remittances

Foreign Exchange

The Law on Foreign Direct Investment guarantees the immediate right to transfer and repatriate profits and remittances.  Local and foreign companies may hold accounts in one or more banks authorized to initiate or receive payments in foreign currency.  The implementing laws in both entities include transfer and repatriation rights.  The Central Bank’s adoption of a currency board in 1997 guarantees the local currency, the convertible mark or KM (aka BAM), is fully convertible to the euro with a fixed exchange rate of KM 1.95583 = €1.00.

Remittance Policies

BiH has no remittance policy, although remittances are generally high due to a large diaspora.  Remittances are estimated to range up to 15 percent of total GDP.  Based on the two entities’ Laws on Foreign Currency Exchange, all payments in the country must be in national currency.

Sovereign Wealth Funds

BiH does not have a government-affiliated Sovereign Wealth Fund.

In BiH, subnational governments own the vast majority of government-owned companies:  the two entities and ten cantons.  Private enterprises can compete with state-owned enterprises (SOEs) under the same terms and conditions with respect to market share, products/services, and incentives.  In practice, however, SOEs have the advantage over private enterprises, especially in sectors such as telecommunications and electricity, where government-owned enterprises have traditionally held near-monopolies and are able to influence regulators and courts in their favor.  Generally, government-owned companies are controlled by political parties, increasing the possibilities for corruption and inefficient company management.  With the exception of SOEs in the telecom,  electricity, and defense sectors, many of the remaining public companies are bankrupt or on the verge of insolvency, and represent a growing liability to the government.

The country is not party to the Government Procurement Agreement within the framework of the WTO.

Privatization Program

There have been no significant privatizations in the past few years.  Privatization offerings are scarce and often require unfavorable terms.  Some formerly successful state-owned enterprises have accrued significant debts from unpaid health and pension contributions, and potential investors are required to assume these debts and maintain the existing workforce.  Under the state-level FDI Law, foreign investors may bid on privatization tenders.  International financial organizations, such as the European Bank for Reconstruction and Development (EBRD) are seeking to be engaged on privatization and restructuring efforts across the remaining portfolio of state owned enterprises.  Historically, the privatization process in BiH has resulted in economic loss due to corruption.  From 1999 to 2015, more than 1,000 companies were fully privatized, while around 100 were partially privatized.  Some privatizations led to the loss of value of state property and many of the privatized companies were weakened or ruined in the privatization process.  The history of corrupt privatizations has raised concerns that further privatization would only lead  to additional unemployment and the enrichment of a few politically-connected individuals.  Successful  privatizations and restructurings that improve service delivery, business productivity, and employment would be very beneficial for the BiH economy, could help the image of privatization, and would build support for a long overdue shift away from a government-led economy.

The Federation government is focused on privatizing or restructuring some SOEs based on the Federation Agency for Privatization’s 2019 privatization plan.  The privatization plan includes the fuel retailer Energopetrol dd. Sarajevo, the engineering company Energoinvest, the aluminum smelter Aluminij Mostar and the insurer Sarajevo-Osiguranje.  In 2016, the Federation Government sold its stake in the Sarajevo Tobacco Factory (39.9 percent stake), and BiH’s largest pharmaceutical company, Bosnalijek (19 percent stake).  The remaining companies listed in the privatization plan have posted losses and suffered significant declines in their value, while others have only a small amount of government ownership.  The Federation government rejected media speculation that it plans to privatize the two majority government-owned telecom companies, BH Telecom (90 percent stake) and HT Mostar (50.1 percent stake).  At the same time, it has completed due diligence on the two telecom companies as part of its arrangement with the IMF.

The privatization process in the RS is carried out by the RS Investment Development Bank (IRBRS).  Many prospective companies have been already privatized, and out of 163 not yet privatized companies, many are being liquidated or undergoing bankruptcy.  In 2016, the RS government announced plans to sell its capital in 22 companies but the plan has not been implemented yet.  The plan envisions the privatizations to take place via the sale of government shares on the stock exchange.  Although the RS National Assembly passed a decision that the entity has no plans to privatize the energy sector, the RS government maintains the possibility of joint ventures in the energy sector.

Corruption remains prevalent in many political and economic institutions in Bosnia and Herzegovina and raises the costs and risks of doing business.  BiH’s overly complex business registration and licensing process is particularly vulnerable to corruption.  The multitude of state, entity, cantonal, and municipal administrations, each with the power to establish laws and regulations affecting business, creates a system that lacks transparency and opens opportunities for corruption via parafiscal fees.  Paying bribes to obtain necessary business licenses and construction permits, or simply to expedite the approval process, occurs regularly.  Foreign investors have criticized government and public procurement tenders for a lack of openness and transparency.

Transparency International’s (TI) 2019 Corruption Perception Index ranked BiH 101 out of 180 countries.  According to TI, relevant institutions lack the will to actively fight corruption; law enforcement agencies and the judiciary are not effective in the prosecution of corruption cases and are visibly exposed to political pressures; and prosecutors complain that citizens generally do not report instances of corruption and do not want to testify in these cases.  In 2011, BiH established a state level agency to prevent and coordinate efforts to combat corruption; while officially active, the agency has shown limited results.

Corruption has a corrosive impact on both market opportunities overseas for U.S. companies and the broader business climate.  It deters foreign investment, stifles economic growth and development, distorts prices, and undermines the rule of law.  U.S. companies must carefully assess the business climate and develop an effective compliance program and measures to prevent and detect corruption, including foreign bribery.  U.S. individuals and firms should take the time to become familiar with the relevant anticorruption laws of both BiH and the United States in order to properly comply, and where appropriate, seek the advice of legal counsel.

The U.S. government seeks to level the global playing field for U.S. businesses by encouraging other countries to take steps to criminalize their own companies’ acts of corruption, including bribery of foreign public officials, and uphold obligations under relevant international conventions.  A U.S. firm that believes a competitor is seeking to use bribery of a foreign public official to secure a contract should bring this to the attention of appropriate U.S. agencies.

U.S. firms should become familiar with local anticorruption laws, and, where appropriate, seek legal counsel.  While the U.S. Department of Commerce cannot provide legal advice on local laws, the Department’s U.S. and Foreign Commercial Service can provide assistance with navigating the host country’s legal system and obtaining a list of local legal counsel.

The U.S. Department of Commerce offers a number of services to aid U.S. businesses.  For example, the U.S. and Foreign Commercial Service can provide services that may assist U.S. companies in conducting due diligence when choosing business partners or agents overseas and provide support for qualified U.S. companies bidding on foreign government contracts.  For a list of U.S. Foreign and Commercial Service offices, please visit the Commercial Service website:  www.trade.gov/cs 

Alleged corruption by foreign governments or competitors can be brought to the attention of appropriate U.S. government officials, including U.S. Embassy personnel or through the Department of Commerce Trade Compliance Center “Report a Trade Barrier” Website at: https://tcc.export.gov/Report_a_Barrier/index.asp 

Contact at government agency or agencies responsible for combating corruption:

BiH Agency for the Prevention of Corruption and Coordination of the Fight against Corruption
Phone: +387 57 322 540
email: kontakt@apik.ba
www.apik.ba 

Contact at “watchdog” organization (international, regional, local or nongovernmental organization operating in the country/economy that monitors corruption):

Transparency International BiH
Phone: +387 51 216928
Fax: +387 51 216369
email: info@ti-bih.org
www.ti-bih.org 

BiH signed and ratified the UN Anticorruption Convention in October 2006.  BiH is also party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

Policies Towards Foreign Direct Investment

The GoB publicly emphasizes the importance of attracting (FDI) and drafted an investment facilitation law recommended by the 2014 Organisation for Economic Co-operation and Development (OECD) Investment Review. The draft was completed in 2016 with technical assistance from UNCTAD but was never enacted. The GoB plans to revise the draft in 2020 before presenting it to Parliament. The GoB has launched initiatives to promote economic activity and foreign investment in specific areas, such as the establishment of a diamond hub which has brought more value-added businesses (i.e., cutting and polishing), into the country. Additional investment opportunities in Botswana include large water, electricity, transportation, and telecommunication infrastructure projects.  Economists have also noted Botswana’s considerable potential in the mining, mineral processing, cattle, tourism, and financial services sectors.  BITC assists foreign investors with projects intended to diversify export revenue, create employment, and transfer skills to Botswana citizens. The High Level Consultative Council (HLCC), chaired by the president, and an Exporter Roundtable organized by BITC and Botswana’s Exporters and Manufacturers Association (BEMA), are mechanisms employed by the GoB to maintain a focus on a healthy businesses environment for FDI.    

Limits on Foreign Control and Right to Private Ownership and Establishment

Botswana’s 2003 Trade Act reserves licenses in 35 sectors for citizens, including butcheries, general trading establishments, gas stations, liquor stores, supermarkets (excluding chain stores), bars (other than those associated with hotels), certain types of restaurants, boutiques, auctioneers, car washes, domestic cleaning services, curio shops, fresh produce vendors, funeral homes, hairdressers, various types of rental/hire services, laundromats, specific types of government construction projects under a certain dollar amount, certain activities related to road and railway construction and maintenance, and certain types of manufacturing activities including the production of furniture for schools, welding, and bricklaying.  The law allows foreigners to participate in these sectors as minority joint venture partners in medium-sized businesses.  Foreigners can hold the majority share if they obtain written approval from the trade minister.

The Ministry of Investment, Trade, and Industry (MITI), which administers the citizen participation initiative, has taken an expansive interpretation of the term chain stores, so that it encompasses any store with more than one outlet.  This broad interpretation has resulted in the need to apply exemptions to certain supermarkets, simple specialty operations, and general trading stores.  These exceptions were generally granted prior to 2015 and many large general merchandise markets, restaurants, and grocery networks are owned by foreigners as a result. Since 2015, the GoB has denied some exception requests, but reports they have approved some based on localization agreements directly negotiated between the ministry and the applying company.  These agreements reportedly include commitments to purchase supplies locally and capacity building for local workers and industry.  BITC conducts due diligence on companies that are looking to invest in the country and the Directorate of Intelligence Services (DIS) handles background checks for national security.

Other Investment Policy Reviews

In December of 2014, the OECD released an Investment Policy Review on Botswana. (http://www.oecd-ilibrary.org/finance-and-investment/oecd-investment-policy-reviews-botswana-2014_9789264203365-en ).

Botswana has been a World Trade Organization (WTO) member since 1995. As a member of the Southern African Customs Union, the WTO last conducted a trade policy review in 2016. (https://www.wto.org/english/tratop_e/tpr_e/tp322_e.htm )

Business Facilitation

To operate a business in Botswana, one needs to register a company with the GoB’s CIPA through the OBRS at: https://www.cipa.co.bw/home.html 

According to CIPA, the company registration process can be completed in a day and is integrated with BURS which allows for a fast-tracked tax registration in 30 days. Additional work is required to open bank accounts and obtain necessary licenses and permits.  The World Bank ranked Botswana 159 out of 190 in the ease of starting a business category.

BITC (www.bitc.co.bw ), the GoB’s investment promotion agency, was designed to serve as a one-stop shop to assist investors in setting up a business and finding a location for operation.  BITC’s ability to streamline procedures varies based on GoB entity and bureaucratic requirements.  The organization’s criteria for support for investment projects is whether the project will diversify the economy away from dependence on diamond mining, and whether it will create jobs for, and transfer skills to, Batswana citizens.  BITC also hosts the Botswana Trade Portal (https://www.botswanatradeportal.org.bw ) that is designed to ease trade across borders.  It is a single point of contact for all information relating to import and export to and from Botswana, and represents a number of ministries and parastatals.

Botswana has several incentives and preferences for both citizen-owned and locally based companies.  Foreign-owned companies can benefit from local procurement preferences which are usually required for government tenders.  MITI instituted a program in 2015 to give locally based small companies a 15 percent preferential price margin in GoB procurement, with mid-sized companies receiving a 10 percent margin, and large companies a five percent margin.  Under this policy, MITI defines small companies as having less than five million pula in annual revenue reflected in their financial statements, medium companies with 5,000,001 to 19,999,999 pula in revenue, and large companies with 20 million pula or more. The directive applies to 27 categories of goods and services ranging from textiles, chemicals, and food, in addition to a broad range of consultancy services.

For Companies Act registration purposes, enterprises are classified as follows: Micro Enterprises – less than six employees including owner and annual turnover of up to 60,000 pula; Small Enterprises – less than 25 employees and annual revenue between 60,000 and 1,500,000 pula; Medium Enterprises – less than 100 employees and annual revenue between 1,500,000 and 5,000,000 pula; Large Enterprises – more than 100 employees and annual revenue of 5,000,000 pula or more.  This classification system permits foreigner participation as minority shareholders in medium-sized enterprises in the 35 business sectors reserved for citizens.

Outward Investment

The GoB neither promotes nor restricts outward investment.

Capital Markets and Portfolio Investment

The government encourages foreign portfolio investment, although there are limits on foreign ownership in certain sectors.  It also embraces the establishment of new and diverse financial institutions to support increased foreign and domestic investment and to fill existing gaps where finance is not commercially available.  There are nine commercial banks, one merchant bank, one offshore bank, two statutory deposit-taking institutions, and one credit union operating in Botswana.  All have corresponding relationships with U.S. banks. Additional financial institutions include various pension funds, insurance companies, microfinance institutions, stock brokerage companies, asset management companies, statutory finance institutions, collective investment undertakings, and statutory funds. Historically, commercial banks have accounted for 92 percent of total deposits and 98 percent of total loans in Botswana.  A large portion of the population does not participate in the formal banking sector.

Money and Banking System

The central bank, the Bank of Botswana, acts as banker and financial advisor to the GoB and is responsible for the management of the country’s foreign exchange reserves, the administration of monetary and exchange rate policies, and the regulation and supervision of financial institutions in the country.  Monetary policy in Botswana is widely regarded as prudent, and the GoB has successfully managed to maintain a sensible exchange rate and a stable inflation rate, generally within the target of three to six percent.

Banks may lend to non-resident-controlled companies without seeking approval from the Bank of Botswana.  Foreign investors usually enjoy better access to credit than local firms do.  In July 2014, USAID’s Development Credit Authority (now DFC – U.S. International Development Finance Corporation), in collaboration with ABSA (formerly Barclays Bank of Botswana), implemented a program to allow small and medium-sized enterprises (SME) to access up to USD 15 million in loans in an effort to diversify the economy.

At the end of 2019, there were 25 companies on the Domestic Board and eight companies on the Foreign Equities Board of the Botswana Stock Exchange (BSE).  In addition, there were 46 listed bonds and three exchange traded funds listed on the Exchange.  The total market capitalization for listed companies at year-end 2019 was USD 37 billion, though one company constitutes the majority of that figure, Anglo-American plc, which has a market capitalization of approximately USD 30 billion. The BSE is still highly illiquid compared to larger African markets and is dominated by mining companies which adds to index volatility.  Laws prohibiting insider trading and securities fraud are clearly stipulated under Section 35 – 37 of the Securities Act, 2014 and charges for contravening these laws are listed under Section 54 of the same Act.

The government has legitimized offshore capital investments and allows foreign investors, individuals and corporate bodies, and companies incorporated in Botswana, to open foreign currency accounts in specified currencies.  The designated currencies are U.S. Dollar, British Pound sterling, Euro, and the South African Rand.  There are no known practices by private firms to restrict foreign investment participation or control in domestic enterprises.  Private firms are not permitted to adopt articles of incorporation or association which limit or prohibit foreign investment, participation, or control.

In general, Botswana exercises careful control over credit expansion, the pula exchange rate, interest rates, and foreign and domestic borrowing.  Banking legislation is largely in line with industry norms for regulation, supervision, and payments.  However, the country failed to meet compliance requirements of the Financial Action Task Force (FATF) resulting in a grey listing in October 2018.  Botswana is currently implementing an action plan to remedy the situation. The Non-Bank Financial Institutions Regulatory Authority (NBFIRA) was established in 2008 and provides regulatory oversight for the non-banking sector.  It extends know-your-customer practices to non-banking financial institutions to help deter money laundering and terrorist financing.  NBFIRA is also responsible for regulating the International Financial Services Centre, a hub charged with promoting the financial services industry in Botswana.

Foreign Exchange and Remittances

Foreign Exchange

There are no foreign exchange controls in Botswana or restrictions on capital outflows through financial institutions.  Commercial banks are required to ensure customers complete basic forms indicating name, address, purpose and other details prior to processing funds transfer requests or loan applications.  The finance ministry monitors data collected on the forms for statistical information on capital flows, but the form does not require government approval prior to the processing of a transaction and does not delay capital transfers.

To encourage portfolio investment, develop domestic capital markets, and diversify investment instruments, non-residents are able to trade in and issue Botswana pula-denominated bonds with maturity periods of more than one year, provided such instruments are listed on the Botswana Stock Exchange (BSE).  Only Botswana citizens can purchase Botswana’s Letlole National Savings Certificate (equivalent to a U.S. Treasury bond).  Foreigners can hold shares in BSE-listed Botswana companies.

Travelers are not restricted to the amount of currency they may carry, but they are required to declare to customs at the port of departure any cash amount in excess of 10,000 pula (~USD 950).  There are no quantitative limits on foreign currency access for current account transactions.

Bank accounts denominated in foreign currency are allowed in Botswana.  Commercial banks offer accounts denominated in U.S. Dollars, British Pounds, Euros and South African Rand.  Businesses and other bodies incorporated or registered domestically may open accounts without prior approval from the Bank of Botswana.  The GoB also permits the issuance of foreign currency denominated loans.

Upon disinvestment by a non-resident, the non-resident is allowed immediate repatriation of all proceeds including profits, rents, and fees.

The Botswana Pula has a crawling peg exchange rate and is tied to a basket of currencies of major trading partner countries.  In 2018 the weights of the Pula basket currencies were maintained at 45 percent for the South African Rand and 55 percent for the Special Drawing Rights (consisting of the U.S. Dollar, the Euro, British Pound, Japanese Yen, and Chinese Renminbi) respectively.  Movements of the South African Rand against the U.S. Dollar heavily influence the Pula.  There is no difficulty in obtaining foreign exchange.  Shortages of foreign exchange that would lead banks to block transactions are highly unlikely.

Remittance Policies

There are no restrictions or limitations placed on foreign investors in converting, transferring, or repatriating funds associated with an investment.

Sovereign Wealth Funds

The Bank of Botswana maintains a long-term sovereign wealth fund, known as the Pula Fund, in addition to a regular foreign reserve account providing basic import cover. The Pula Fund, with an estimated value of some USD 4.74 billion as of 2018, was established under the Bank of Botswana Act and forms part of the country’s foreign exchange reserves, which are primarily funded by diamond revenues.  The Pula Fund is wholly invested in foreign currency-denominated assets and is managed by the Bank of Botswana Board with input from recognized international financial management and investment firms.  All realized market and currency gains or losses are reported in the Bank of Botswana’s income statement.  Botswana is among the founding members of the International Forum of Sovereign Wealth Fund and was one of the architects of the Santiago Principles in 2008.  More information is available at: http://www.bankofbotswana.bw/assets/uploaded/BOTSWANA percent20PULA percent20FUND percent20- percent20SANTIAGO percent20PRINCIPLES percent20(2).pdf 

State-owned enterprises (SOEs), known as “parastatals,” are majority or 100 percent owned by the GoB.  There is a published list of SOEs at the GoB portal (www.gov.bw) with profiles of financial and development SOEs. Some SOEs are state-sanctioned monopolies, including the Botswana Meat Commission, the Water Utilities Corporation, Botswana Railways, and the Botswana Power Corporation.

The same business registration and licensing laws govern private and government-owned enterprises.  No law or regulation prohibits or restricts private enterprises from competing with SOEs.  Botswana law requires SOEs to publish annual reports, and private sector accountants or the Auditor General audits SOEs depending on how they are constituted.  GoB ministries together with their respective SOEs are compelled on an annual basis to appear before the Parliamentary Public Accounts Committee to provide reports and answer questions regarding their performance.  Some SOEs are not performing well and have been embroiled in scandals involving alleged fraud and mismanagement.

Botswana is not party to the Government Procurement Agreement within the framework of the WTO.

Privatization Program

The GOB has committed to privatization on paper.  It established a task force in 1997 to privatize all of its state-owned companies and formed a Public Enterprises Evaluation and Privatization Agency (PEEPA) to oversee this process.  Implementation of its privatization commitments has been limited to the January 2016 sale offer of 49 percent of the stock of the state-owned Botswana Telecommunications Corporation to Botswana citizens only.  In February 2017, the GoB issued an Expressions of Interest for the privatization of its national airline, but progress stopped due to the decision to re-fleet the airline before privatization.  In early 2019, President Masisi announced the Botswana Meat Commission was being placed in the hands of a private management company prior to privatization. Conversely, the GoB has created new SOEs such as the Okavango Diamond Company, the Mineral Development Company, and Botswana Oil Limited in recent years.

Botswana has a reputation for a relative lack of corruption and a willingness to prosecute corrupt officials.  Transparency International ranks Botswana as the least corrupt country in Africa (34th worldwide).  Investors with experience in other developing nations describe the relative lack of obstruction or interference by law enforcement or other government agents as among the country’s most important assets.  Nevertheless, private sector representatives note rising corruption levels in government tender procurements.

The major corruption investigation body is the Directorate on Corruption and Economic Crime (DCEC).  Anecdotal reports on the DCEC’s effectiveness vary.  The DCEC has embarked on an education campaign to raise public awareness about the cost of corruption and is also working with GoB departments to reform their accountability procedures. Corruption is punishable by a prison term of up to 10 years, a fine of USD 50,000, or both.  The GoB has prosecuted high-level officials.  Corruption allegations have surfaced recently around pension fund management and government procurement procedures and are still under investigation.

The 2000 Proceeds of Serious Crime Act expanded the DCEC’s mandate to include combatting money laundering.  The 2009 Financial Intelligence Act provides a comprehensive legal framework to address money laundering and establishes a financial intelligence agency (FIA).  The FIA, which operates under the Ministry of Finance and Development Planning, cooperates with various institutions, such as Directorate of Public Prosecutions, Botswana Police Service, Bank of Botswana, the Non-Banking Financial Institutions Regulatory Authority, the DCEC, and foreign FIAs to uncover and investigate suspicious financial transactions.  Botswana is a member of the Eastern and Southern Africa Anti-Money Laundering Group, a regional standards-setting body for ensuring appropriate laws, policies, and practices to fight money laundering and the financing of terrorism.  In October 2018, Botswana was “gray-listed” by the Financial Action Task Force and is currently implementing an action plan to address shortcomings that led to the listing.

UN Anticorruption Convention, OECD Convention on Combatting Bribery

Botswana is not a party to the OECD Anti-Bribery Convention, but is a party to the 2005 United Nations Convention against Corruption.

Resources to Report Corruption

Contacts for agencies responsible for combating corruption:

Name: Brigadier Joseph Mathambo
Tittle: Director General
Organization: Directorate on Corruption and Economic Crime
Address: Madirelo Extension 6, Gaborone, Botswana
Telephone Number: +267 3914002/+267 3604200
Email:  dcec@gov.bw

Name: Mr. Elijah Motshidi
Tittle: Executive Director
Organization: Public Procurement and Asset Disposal Board
Address: Private Bag 0058, Gaborone, Botswana
Telephone Number: +267 3602000
Email:  webmaster@ppadb.co.bw

Name: Mr. Abraham Sethibe
Tittle: Director
Organization: Financial Intelligence Agency
Address: Private Bag 0190, Gaborone, Botswana
Telephone Number: +267 3998400
Email:  asethibe@gov.bw

One can also reach out to the Minister of the relevant Ministry for a particular tender and provide a copy of the complaint to the Public Procurement and Asset Disposal Board (PPADB) Executive Director.

Policies Towards Foreign Direct Investment

Brunei has an open economy favorable to foreign trade and FDI as the government continues its economic diversification efforts to limit its long reliance on oil and gas exports.

FDI is important to Brunei as it plays a key role in the country’s economic and technological development. Brunei encourages FDI in the domestic economy through various investment incentives offered by the Ministry of Finance and Economy.

Improving Brunei’s Ease of Doing Business status by upgrading the domestic business regulatory environment through a whole-of-nation approach has been a priority for the government. The World Bank Ease of Doing Business report indicated that Brunei ranked 66th overall out of 190 world economies in 2019. Brunei ranked first in the report’s “Getting Credit” category, tied with New Zealand, indicative of Brunei’s strong credit reporting mechanisms.

Brunei amended its laws to make it easier and quicker for entrepreneurs and investors to establish businesses. The Business License Act (Amendment) of 2016 exempts several business activities (eateries, boarding and lodging houses or other places of public resort; street vendors and stalls; motor vehicle dealers; petrol stations, including places for storing petrol and inflammable material; timber store and furniture factories; and retail shops and workshops) from needing to obtain a business license. The Miscellaneous License Act (Amendment) of 2015 reduced the wait times for new business registrants to start operations, with low-risk businesses like eateries and shops able to start operations immediately.

Limits on Foreign Control and Right to Private Ownership and Establishment

There is no restriction on foreign ownership of companies incorporated in Brunei. The Companies Act requires locally incorporated companies to have at least one of the two directors—or if more than two directors, at least two of them—to be ordinarily resident in Brunei, but exemptions may be obtained in some circumstances. The corporate income tax rate is the same whether the company is locally or foreign owned and managed.

All businesses in Brunei must be registered with the Registry of Companies and Business Names at the Ministry of Finance and Economy. Foreign investors can fully own incorporated companies, foreign company branches, or representative offices, but not sole proprietorships or partnerships.

More information on incorporation of companies can be found on the Ministry of Finance and Economy website: https://www.mofe.gov.bn/divisions/incorporation-of-companies.aspx  .

Other Investment Policy Reviews

The World Trade Organization (WTO) Secretariat prepared a Trade Policy Review of Brunei in December 2014 and a revision in April 2015.

Business Facilitation

As part of Brunei’s effort to attract foreign investment, the government established the Brunei Economic Development Board (BEDB) and Darussalam Enterprise (DARe) as facilitating agents under the Ministry of Finance and Economy. These organizations work together to smooth the process of obtaining permits, approvals, and licenses. Facilitating services are now consolidated into one government website: https://business.mofe.gov.bn/SitePages/Home.aspx .

BEDB is the government’s frontline agency that promotes and facilitates foreign investment into Brunei. BEDB is responsible for evaluating investment proposals, liaising with government agencies, and obtaining project approval from the government’s Foreign Direct Investment and Downstream Industry Committee.

Outward Investment

A major share of outward investment is made by the government through its sovereign wealth funds, which are managed by the Brunei Investment Agency (BIA) under the Ministry of Finance and Economy. No data is available on the total investment amount due to a strict policy of secrecy. It is believed that the majority of sovereign wealth funds are invested in foreign portfolio investments and real estate. Despite the limited availability of public information regarding the amount, the funds are generally viewed positively and managed well by BIA.

Capital Markets and Portfolio Investment

In 2013, Brunei signed a Memorandum of Understanding (MOU) with the Securities

Commission Malaysia (SCM) designed to strengthen collaboration in the development of fair and efficient capital markets in the two countries. It also provided a framework to facilitate greater cross-border capital market activities and cooperation in the areas of regulation as well as capacity building and human capital development, particularly in the area of Islamic capital markets. In March 2019, the Minister of Finance and Economy II announced a USD $292 million national budget, which will fund infrastructure, technology, and socio-economic studies related to the implementation of Brunei’s own stock exchange.

Money and Banking System

Brunei has a small banking sector which includes both conventional and Islamic banking. The Monetary Authority of Brunei Darussalam (AMBD) is the sole central authority for the banking sector, in addition to its role as the country’s central bank. Banks in the country have high levels of liquidity, good capital adequacy ratios, and well-managed levels of non-performing loans. A handful of foreign banks have established operations in the country such as Standard Chartered and Bank of China (Hong Kong). In March 2018, HSBC officially ended its operations in Brunei after announcing its planned departure from Brunei in late 2016. All banks fall under the supervision of AMBD, which has also established a credit bureau that centralizes information on applicants’ credit worthiness.

The Brunei dollar (BND) is pegged to the Singapore dollar, and each currency is accepted in both countries.

Foreign Exchange and Remittances

Foreign Exchange

In June 2013, the Financial Action Task Force (FATF) announced that Brunei would no longer be subject to FATF’s monitoring process under its global Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) compliance process. Brunei’s Mutual Evaluation Report cited Brunei’s significant progress in improving its AML/CFT regime and noted that Brunei had established the legal and regulatory framework to meet its commitments in its Action Plan regarding strategic deficiencies that the FATF identified in June 2011.

Remittance Policies

Any person or company providing services for the transmission of money must be licensed by the Brunei government. Only Brunei citizens may hold remittance licenses. Local financial institutions such as Bank Islam Brunei Darussalam (BIBD) and Standard Chartered Bank provide remittance services. Remittance companies require the customer’s full name, identification number, address, and purpose of the remittance. They are also required to file suspicious transaction reports with AMBD.

Sovereign Wealth Funds

The Brunei Investment Agency (BIA) manages Brunei’s General Reserve Fund and their external assets. Established in 1983, BIA’s assets are estimated to be USD $60-75 billion. BIA’s activities are not publicly disclosed and are ranked the lowest in transparency ratings by the Sovereign Wealth Fund Institute.

Brunei’s state-owned enterprises (SOEs), managed by Darussalam Assets under the Ministry of Finance and Economy, lead key sectors of the economy including oil and gas, telecommunications, transport, and energy generation and distribution. These enterprises also receive preferential treatment when responding to government tenders. Some of the largest SOEs include the following:

The telecommunications industry is dominated by government-linked companies Telekom Brunei (TelBru), Data Stream Technologies (DST) Communications, and Progresif Cellular. In 2019 the government consolidated the infrastructure of all three companies under a state-owned wholesale network operator called Unified National Networks (UNN).

Royal Brunei Technical Services (RBTS), established in 1988 as a government owned corporation, is responsible for managing the acquisition of a wide range of systems and equipment.

Brunei National Petroleum (PB) is the national oil company owned by the Brunei government. The company was granted all mineral rights in eight prime onshore and offshore petroleum blocks totaling 20,552 sq. km. PB manages contracts with Shell and Petronas, which are exploring Brunei’s onshore and deep water offshore blocks. The government continues to modify PB’s role in the oil and gas industry. In 2019, the government established Petroleum Authority as the oil and gas sector’s regulatory body, a function which had been filled by PB.

Royal Brunei Airlines started operations in 1974 and is the country’s national carrier. The airline flies a combination of Boeing and Airbus aircraft.

Privatization Program

Brunei’s Ministry of Transportation and Info-Communication has made corporatization and privatization part of its Strategic Plan, which calls for the Ministry to shift its role from a service provider to a regulatory body with policy-setting responsibilities. The Ministry is studying initiatives to privatize a number of state-owned agencies, including the Postal Services Department and public transportation services. These services are not yet completely privatized and there is no timeline for privatization. Guidelines regarding the role of foreign investors and the bidding process are not yet available.

Since 1982, Brunei has enforced the Emergency (Prevention of Corruption) Act. In 1984, the Act was renamed the Prevention of Corruption Act (Chapter 131). The Anti-Corruption Bureau (ACB) was established in 1982 for the purpose of enforcing the Act. The Prevention of Corruption Act provides specific powers to the ACB for the purpose of investigating accusations of corruption. The Act authorizes ACB to investigate certain offences under other written laws, provided such offences were disclosed during the course of ACB investigation. Corrupt practices are punishable under the Prevention of Corruption Act, which also applies to Brunei citizens abroad. Brunei is a member of the International Association of Anti-Corruption Authorities.

In 2019, Brunei was ranked 35th of 180 countries worldwide in Transparency International’s corruption perception index. U.S. companies do not generally identify corruption as an obstacle to conducting business in Brunei. The level and extent of reported corruption in Brunei is generally low. In January 2020, however, the government convicted two former judges with embezzling large sums from the court system. The Sultan has made repeated statements to the effect that corruption is unacceptable.

Apart from the Anti-Corruption Bureau, there are no international, regional, local, or nongovernmental organizations operating in Brunei that monitor corruption.

Brunei has signed and ratified the UN Anticorruption Convention.

Resources to Report Corruption

Government Point of Contact:
Name: Hjh Suhana binti Hj Sudin
Title: Acting Director
Organization: Anti-Corruption Bureau Brunei Darussalam
Address: Old Airport Berakas, BB 3510 Brunei Darussalam
Tel: +673 238-3575
Fax: +673 238-3193
Mobile: +673 8721002 / +673 8130002
Email: info.bmr@acb.gov.bn

Policies Towards Foreign Direct Investment  

There are no legal limits on foreign ownership or control of firms. With some exceptions, foreign entities are given the same treatment as national firms and their investments are not screened or otherwise restricted.  There is strong growth in software development, business process outsourcing, and building services for technical maintenance.  The IT and back office outsourcing sectors have attracted a number of U.S. and European companies to Bulgaria, and many have established global and regional service centers in the country.  U.S. and foreign investors have also been attracted to the automotive sector in recent years.

While Bulgaria generally affords national treatment to foreign investors, some U.S. investors have encountered significant problems.  Two major U.S. investors in Bulgaria have had to enter into negotiations to end their  long-term government contracts.  In another instance, a U.S. company has faced bureaucratic hurdles in its efforts to compete in the energy sector with a monopolistic state-owned Russian incumbent, but now seems to be making some headway.  More often, however, investors cite general problems with corruption, rule of law, frequently changing legislation, and weak law enforcement.  Transparency International’s (TI) Corruption Perception Index for 2018 ranked Bulgaria as the worst- performing EU member in the 74th place out of 180 surveyed countries, up three places from last year’s 77th, and scoring 43 on a 100-point scale, well below the EU average of 66.

The Invest Bulgaria Agency (IBA), the government’s investment attraction body, provides information, administrative services, and incentive assessments to prospective foreign investors. Its website http://www.investbg.government.bg/  contains general information for foreign investors.

Limits on Foreign Control and Right to Private Ownership and Establishment  

Generally, there are no existing limits for foreign and domestic private entities to establish and own a business in Bulgaria. The Offshore Company Act lists 28 activities (including government procurement, natural resource exploitation, national park management, banking, insurance) banned for business by companies registered in offshore jurisdictions with more than ten percent foreign participation. The law, however, allows those companies to do business if the physical owners of the parent company are Bulgarian citizens and known to the public, if the parent company’s stock is publicly traded, or if the parent company is registered in a jurisdiction with which Bulgaria enjoys a bilateral tax treaty  (including the United States).  Bulgaria has no specific law or established mechanism in place for screening individual foreign investments.  A potential foreign investment can be scrutinized on the grounds of its potential national security risk or through the Law on the Measures against Money Laundering.  As of April 2020, Bulgaria has not taken concrete action to implement the EU’s April 2019 directive on investment screening.

Other Investment Policy Reviews  

There have been no recent Investment Policy Reviews of Bulgaria by multilateral economic organizations.  In 2019 the OECD published reviews of Bulgaria’s healthcare sector and state-owned enterprises.  As part of Bulgaria’s Action Plan for deeper cooperation, the OECD is expected to conduct an economic survey of Bulgaria, a public governance review and an investment policy review.

Business Facilitation  

Bulgaria typically supports small- and medium-sized business creation and development in conjunction with EU-funded innovation and competitiveness programs and with a special emphasis on export promotion . The state-owned Bulgarian Development Bank has committed to support small- and medium-sized businesses in Bulgaria, but its recent track record of lending targeted at large- scale enterprises has called this into question.  Typically, a new business is expected to register an account with the state social security agency and, in some cases, with the local municipality as well. Electronic company registration is available at: https://public.brra.bg/Internal/Registration.ra?0 .

Bulgaria dropped two places to 61st  (out of 190 surveyed economies worldwide) in the World Bank’s 2020 Doing Business Index, scoring lowest in the Starting a New Business category, in113th place, and in the Getting Electricity category, in 151st place.  The relatively large number of administrative procedures, along with the associated delays, contributed to the low score in both categories.

Outward Investment  

There is no government agency promoting outward investment promotion, and no restrictions exist for any local business to invest abroad.

Capital Markets and Portfolio Investment  

The Bulgarian Stock Exchange (BSE), the only securities-trading venue in Bulgaria, operates under a license from the Financial Supervision Commission and is majority-owned by the Ministry of Finance. The 1999 Law on Public Offering of Securities regulates the issuance of securities, securities transactions, stock exchanges, and investment intermediaries.

Since its 2007 entry in the EU, Bulgaria has aligned its regulation of securities markets with EU standards under the Markets in Financial Instruments Directive (MiFID). The BSE is a full member of the Federation of European Stock Exchanges (FESE) and operates under the Deutsche Boerse’s trading platform Xetra.  Overall, however, Bulgarian companies strongly prefer obtaining financing from local banks to going to the local financial markets.
Money and Banking System  

As of February 2020, there were 24 commercial banks (19 subsidiaries and 5 branches), with total assets of BGN 105111.5.6 billion (USD 6164.8 billion), equivalent to 94 percent of the full 2019 GDP. Approximately 73 percent of the banking system is owned by foreign banking groups, mostly EU-based. The top five banks’ weight in the banking system was 59.460 percent. In 2018, there was a visible trend toward consolidation.  As of late September 2019, non-performing loans stood at 7.4 percent of the total loan portfolio of the banking system.

The Bulgarian government has raised funds by issuing both Euro-denominated and Leva- denominated bonds . Commercial banks,  and private pension funds and insurance companies are the primary purchasers of these instruments. EU-based banks are eligible to be primary dealers of Bulgarian government bonds.

Repatriation of profits is possible after presenting documentation that taxes have been paid.

In 2014, United States and Bulgaria signed an intergovernmental agreement that implements provisions of the Foreign Account Tax Compliant Act (FATCA), which targets tax non-compliance by U.S. persons who do business with Bulgarian financial institutions. The Parliament ratified the agreement in 2015.

Foreign Exchange and Remittances  

Foreign Exchange  

Bulgaria operates a Currency Board Arrangement (CBA) whereby the lev (BGN) is fixed to Euro, exchanging EUR 1 for BGN 1.95583. Foreign exchange is freely accessible. The Foreign Currency Act stipulates that anyone may import or export up to EUR 10,000 or its foreign exchange equivalent without filling out a customs declaration. The import or export of over EUR 10,000 or its equivalent in Bulgarian leva or another currency across the border to or from a non-EU country must be declared to the customs authorities; in the case of an EU country, it must be declared if requested by the customs authorities. Exporting over BGN 30,000 (USD 17,340) in cash requires a declaration about the source of the funds, supported by documents certifying that the exporter does not owe taxes (unless the funds were earlier imported and declared).

As of April 2020, Bulgaria is preparing to formally apply for membership in the Eurozone’s precursor mechanism ERM II  and the EU Banking Union.

Remittance Policies  

There is no official policy regarding remittances. Remittances are an increasingly important source of funding for Bulgarian families with relatives overseas; in recent years, remittances have exceeded FDI flows.

Sovereign Wealth Funds  

Bulgaria does not have a sovereign wealth fund.

Upon EU accession, Bulgaria was recognized as a market economy, in which the majority of the companies are private. Significant state-owned enterprises (SOEs) remain, however, such as railways and the postal service. SOEs also predominate in the healthcare, infrastructure, and energy sectors; many of these are collectively managed by the same holding company (also an SOE).   Bulgaria’s roughly 220 SOEs account for about five percent of employment in the country, and their revenues amount to about 13.5 percent of the GDP.  In 2019 Parliament approved the State Enterprise Act, introducing updated corporate standards and management practices.   A list of all SOEs can be found on: http://www.minfin.bg/bg/page/948 .

Some of the SOEs receive annual government subsidies for current and capital expenditures, regardless of their actual performance.   SOEs’ budgets and audit reports are posted on the Ministry of Finance website.  The law treats equally public and private sector companies vis-à-vis bidding on concessions, taxation, or other government-controlled processes.  Bulgaria became party to the WTO’s Government Procurement Agreement (GPA) upon its entry into the EU in 2007.

Privatization Program  

No major privatizations are currently planned.  All majority or minority state-owned properties are eligible for privatization, with the exception of those included in a specific list of companies, including water management companies, state hospitals, and state sports facilities. State-owned military manufacturers can be privatized with Parliamentary approval.

Municipally-owned property can be privatized upon decision by a municipal council, or authorized body and upon publication of the municipal privatization list in the national gazette. Foreign companies may participate. The 2010 Privatization and Post-Privatization Act created a single Privatization and Post-Privatization Agency (http://www.priv.government.bg ) responsible for privatization oversight. The new State Enterprise Act in 2019 reshuffled and renamed the agency into Agency for Public Enterprises and Control.

Bribery is a criminal act under Bulgarian law for both the giver and the receiver. Individuals who mediate and facilitate a bribe are also held accountable. With the gradual introduction of technology in public administration, some progress has been made in addressing petty corruption.  However, widespread higher-level corruption, particularly in public procurement and use of EU funds, continues to be one of the most difficult problems in Bulgaria’s investment climate. Human trafficking, narcotics, and contraband smuggling channels contribute to corruption in Bulgaria. Bulgaria has laws, regulations, and specialized institutions penalties on the books to combat corruption, but its law enforcement investigative capacity remains limited and the authorities often opt for easy-to-prove, low-level cases. As a result, Bulgaria has yet to convict a senior corrupt official.  There have been a few cases of high public interest, such as involving alleged siphoning of millions from the state coffers or EU funds, and in particular those involving public tenders for large energy and infrastructure projects.  The high-profile prosecutions that do take place are often seen as selective or politically motivated and typically end in acquittals after a lengthy judicial process.  Bulgaria ranks 77th  out of 180 countries in Transparency International’s Corruption Perception Index for 2019, the most challenging environment among EU members.

In early 2018, the government established a new Anti-Corruption Commission as an Center for Prevention and Countering Corruption and Organized Crime became the umbrella agency incorporating previously independent bodies combating corruption.

Bulgaria has ratified the Anti-Bribery Convention and is a participating member of the OECD Working Group on Bribery. Bulgaria has also ratified the Council of Europe’s Convention on Laundering, Search, Seizure, and Confiscation of Proceeds of Crime (1994) and Civil Convention on Corruption (1999). Bulgaria has signed and ratified the UN Convention against Corruption (2003); the Additional Protocol to the Council of Europe’s Criminal Law Convention on Corruption; and the UN Convention against Transnational Organized Crime. In 2018, the Bulgarian Parliament adopted the Anti-Money Laundering Act, which transposes the 2015 EU Directive on the prevention of the use of the financial system for the purposes of money laundering and terrorist financing.
Resources to Report Corruption  

Organizations or agencies responsible for reporting on or combating corruption:

Mr. Plamen GeorgievSotir Tsatsarov, Chairman
Commission on Corruption Prevention and Illegal Assets Forfeiture
Rakovski Blvd, Sofia, 1000
ciaf@ciaf.government.bg
Mr. Ognyan Minchev, Board President

Transparency International Bulgaria
50 Sandor Petofi Str., Sofia
mbox@transparency.bg

Policies Towards Foreign Direct Investment

In his policy statement delivered on February 18, 2019 at the National Assembly, the newly appointed Prime minister Christophe Dabire focused on the resolution of Burkina Faso’s economic difficulties and offered six measures to boost economic activity and improve the business and investment climate.  He also promised that the government would strengthen reforms, including those contained in the minimum matrix of business climate reform, in order to improve Burkina Faso’s Doing Business ranking and foster the development of the private sector.

The World Bank’s 2019 Doing Business Report (DB/2019) announced a slight drop for Burkina Faso in its ranking for “ease of doing business for small and medium-sized businesses” from 148th place out of 190 in 2018 to 151st in 2019.

The government of Burkina Faso adopted the National Program for Economic and Social Development (PNDES) with the aim to structurally transform the Burkinabe economy in order to generate strong, sustainable, resilient, and inclusive growth and thus create decent jobs for all and improve social well-being.  The total amount of funding required for the implementation of the PNDES is CFAF 15,395.4 billion, or about USD 27 billion.  Of this sum, it is expected that 63.8 percent (CFAF 9,825.2 billion or USD 17 billion) of the amount be mobilized by Burkina’s own resources, namely the mobilization of taxes. The other 36.2 percent (CFAF 5,570.2 billion or USD 10 billion) represents the need for funding from Public Private Partnership (PPP) projects, the mobilization of funds from the Burkinabe diaspora and technical and financial partners, and  voluntary contributions.

Article 8 of the investment code stipulates there is to be no discrimination against US foreign investors.  However, in order for any foreign investor to benefit from the exemptions provided for by the investment code, they are required to submit a request to the General Directorate for the Promotion of the Private Sector.

Limits on Foreign Control and Right to Private Ownership and Establishment

Burkina Faso is a member of the Organization for the Harmonization of Corporate Law in Africa (OHCLA).  All the Uniform Acts enacted by this organization are applicable in the country. Regarding business structures, OHCLA allows most forms of companies admissible under French business law, including: public corporations, limited liability companies, limited share partnerships, sole proprietorships, subsidiaries, and affiliates of foreign enterprises.  With each scheme, there is a corresponding set of related preferences, duty exceptions, corporate tax exemptions, and operation-related taxes.

From 1995 to 2018, Law 062-95, which was amended several times, governed investments in Burkina Faso.  However, in order to adapt this code to the new exigencies of the world economy and to respond to the fierce competition between states to attract foreign investment, the National Assembly adopted a new Investment Code by Law 038 on October 30, 2018.  It replaces Law 062-95 of December 14, 1995, which had several shortcomings, including the non-coverage of investments in renewable energies and hydraulics.  According to Article 5 of the Investment Code, certain sectors of activity may be subject to restrictions on foreign direct investment. Foreign companies wishing to invest in these sectors must follow a specific procedure specified by decree.  Burkina Faso has not established a procedure to scrutinize foreign direct investment.  Under the investment code, all personal and legal entities lawfully established in Burkina Faso, both local and foreign, are entitled to the following rights: fixed property; forest and industrial rights; concessions; administrative authorizations; access to permits; and participation in government procurement process.

The investment code establishes a special tax and customs regime for investment agreements signed by the state with large investors (between 100,000,000 FCFA and 1,000,000,000 FCFA).  This scheme provides significant tax benefits.  U.S. investors are not specifically targeted regarding ownership or control mechanisms.

Other Investment Policy Reviews

In March 2013, the GoBF created the Burkina Faso Investment Promotion Agency (API-BF).  The establishment of the Presidential Council fulfilled recommendations of a 2009 UNCTAD Investment Policy Review.  The website is www.investburkina.com .

To simplify the registration process for companies wishing to establish a presence in Burkina Faso, the government created eight enterprise registration centers called Centres de Formalités des Entreprises, known by their French acronym as CEFOREs.  The CEFOREs are one-stop shops for company registration.  On average, a company can register its business in nine days according to the Doing Business report 2019.  The CEFOREs are located in Ouagadougou, Bobo-Dioulasso, Ouahigouya, Tenkodogo, Koudougou, Fada N’Gourma, Kaya, Dedougou and Gaoua.

In 2018, Burkina Faso strengthened protections for minority investors by enhancing access to shareholder actions and by increasing disclosure requirements on related-party transactions.  The 2019 Doing Business report ranked Burkina Faso 149th of 190 in minority investor protection.

Other sites of interest:

Chamber of Commerce business registration: http://cci.bf/?q=fr/creation-dentreprise 

Mining Chamber of Commerce: http://chambredesmines.bf/ 

Investment Promotion Agency of Burkina Faso or l’Agence de Promotion des Investissements du Burkina Faso (API-BF): http://www.investburkina.com 

Tax and administrative procedures: https://burkinafaso.eregulations.org/ 

World Bank Investing Across Borders: http://iab.worldbank.org/data/exploreeconomies/burkina-faso 

Among the 21 countries covered by the World Bank’s Investing across Sectors indicators in the Sub-Saharan Africa region, Burkina Faso is one of the more open economies to foreign equity ownership.  Most of its sectors are fully open to foreign capital participation, although the law requires companies providing mobile or wireless communication services to have at least one domestic shareholder.  Furthermore, the state automatically owns 10 percent of the shares of all companies active in the mining sector.  The government is entitled to nominate one member of the board of directors for such companies.  Select additional strategic sectors are characterized by monopolistic market structures.  In particular, the oil and gas sector, and the electricity transmission and distribution sectors.

Outward Investment

The Burkinabe Government tries to promote outward investment via the Investment Promotion Agency of Burkina Faso or l’Agence de Promotion des Investissements du Burkina Faso (API-BF), which sits under the Presidential Council for Investment (Conseil Presidentiel pour l’Investissement).  The API-BF’s mission is to promote the economic potential of Burkina Faso to attract investment and spur economic development.

Burkina Faso currently imposes no restrictions for investors interested in investing abroad, within the framework of the Economic Community of West African States (ECOWAS) and West African Economic and Monetary Union (WAEMU) regional markets.

Capital Markets and Portfolio Investment

The government of Burkina Faso is more focused on attracting FDI and concessionary lending for development than it is on developing its capital markets.  Net portfolio inflows were estimated at around 1.67 percent of GDP in 2018.  While the government does issue some sovereign bonds to raise capital in the WAEMU regional bond market, in general the availability of different kinds of investment instruments is extremely limited.

Money and Banking System

The banking system is sound, relatively profitable and well capitalized, but credit is highly concentrated to a small number of clients and a few sectors of the economy, according to the IMF’s March 2018 Country Report.  Only 15 percent of the population has a checking account.  Like all member states of WAEMU, Burkina Faso is a member of the Central Bank of West African States.  Many foreign banks have branches in the country.  The traditional banking sector is composed of twelve commercial banks and five specialized credit institutions called “établissements financiers.”  The use of mobile money is becoming more prevalent.

Foreign Exchange and Remittances

Foreign Exchange

Burkina Faso is a member of the West African Economic and Monetary Union (WAEMU, or UEMOA when referred to by its French acronym), whose currency is the CFA franc (XOF), or FCFA.  The FCFA is freely convertible into euros at a fixed rate of 655.957 FCFA to 1 euro.  Investors should consider the advantages offered by the WAEMU, which allows the FCFA to be used in all eight member countries: Senegal, Togo, Cote d’Ivoire, Mali, Benin, Guinea Bissau, Niger, and Burkina Faso.

Burkina Faso’s investment code guarantees foreign investors the right to the overseas transfer of any funds associated with an investment, including dividends, receipts from liquidation, assets, and salaries.  Such transfers are authorized in the original currency of the investment.  Once the interested party presents the request for transfer, accompanied by all relevant bank documents, Burkinabe banks transfer the funds directly to the recipient banking institution.  Foreign exchange is readily available at all banks and most hotels in Ouagadougou and Bobo-Dioulasso.

Remittance Policies

The GoBF is not expected in the near future to change its current remittance policy concerning purchasing foreign currency in order to repatriate profits or other earnings.

As a member of a regional currency union (WAEMU), Burkina Faso does not engage in currency manipulation.

Burkina Faso is a member of the Intergovernmental Action Group against Money Laundering in West Africa (GIABA), a FATF-style regional body.

Sovereign Wealth Funds

Burkina Faso does not have a sovereign wealth fund.

Privatization Program

GoBF announcements for privatization bids are widely distributed, targeting both local and foreign investors.  Bids are published in local papers, international magazines, mailed to different diplomatic missions, e-mailed to interested foreign investors, and published on the Internet on sites such as http://www.dgmarket.com .

Transparency International’s 2019 Corruption Perceptions Index indicates that Burkina Faso ranks 85 out of 180 countries.  The State Supreme Audit Authority (ASCE-LC) is the leading government anti-corruption body that publishes an annual report documenting financial irregularities, embezzlement, and improper use of public funds in various ministries, government agencies, and state-run companies.  In 2018, the ASCE-LC opened at least two high profile corruption investigations against the Ministers of Defense and Infrastructure, still under review. The Burkinabe government continues to grant access within its own ministries to the non-governmental watchdog National Network to Fight against Corruption (REN-LAC) that examines the management of private and public-sector entities and publishes annual reports on corruption levels within the country.

Legislation requires government officials, including the president, lawmakers, ministers, ambassadors, members of the military leadership, judges, and anyone charged with managing state funds, to declare their assets as well as any gifts or donations received while in office.  Infractions are punishable by a maximum jail term of 20 years and fines of up to USD 41,670. In May 2020, former Minister of Defense, Jean-Claude Bouda, was arrested on “money laundering” and “illicit enrichment” charges following a complaint by the National Anti-Corruption Network.  On June 18, State Prosecutor Harouna Yoda announced that the Deputy Director General of Customs, William Alassane Kaboré, was placed under “judicial control,” for acts of illicit enrichment and money laundering amounting to 1.3 billion CFA (USD 2.2 million).  Additionally, investigations are underway on the mayor of Ouagadougou and some magistrates who allegedly tried to bury this case.

According to public perception, civil servants who most commonly engage in corruption include customs officials, members of the police force and gendarmerie, justice officials, healthcare workers, educators, tax collectors, and civil servants working in government procurement.

One of the main governmental bodies for fighting official corruption is the Superior Authority of State Control (ASCE), an entity under the authority of the Prime Minister.  ASCE has the authority to investigate ethics violations and mismanagement of public funds in the public sector, including state civil service employees, local and public authorities, state-owned companies, and all national organizations involved with public service missions.  ASCE publishes an annual report of activities, which provides details on its investigations and issues recommendations on how to resolve them.  Many of its findings are followed by judicial action.

The Autorité de Régulation de la Commande Publique (ARCOP), established in July 2008, is the regulatory oversight body that ensures fairness in the procurement process by monitoring the execution of all government contracts.  ARCOP may impose sanctions, initiate lawsuits, and publish the names of fraudulent or delinquent businesses.  It also educates communities benefiting from public investment monies to take a more active part in monitoring contractors.  ARCOP works with the media to strengthen journalists’ capacity to investigate suspected fraud cases.  Since 2012, the media has noticeably increased its coverage of high-profile corruption cases.

The Reseau National de Lutte Contre la Corruption (REN-LAC) publishes an annual report on the state of corruption in the country, and has established a wide range of anti-corruption initiatives and tools.  REN-LAC has a 24-hour hotline that allows it to gather information on alleged corrupt practices anonymously reported by citizens. African Parliamentarians’ Network against Corruption also has a local chapter in Burkina Faso and cooperates with REN-LAC.

As a member of the West African Economic and Monetary Union (WAEMU), Burkina Faso has agreed to enforce a regional law against money laundering and has issued a national law against money laundering and financial crimes.

Burkina Faso has taken steps to fully adopt regional and international anti-corruption frameworks, and the country ratified the UN Convention against Corruption in October 2006.

However, the World Bank rating for control of corruption for Burkina Faso has declined since 2003 from the 56th percentile to the 33rd percentile.  This means that while Burkina Faso was once rated much more favorably than its regional peers for limiting corruption, it is now close to the average for sub-Saharan African countries.

Resources to Report Corruption

REN-LAC hotline: (+226) 8000 1122

Or contact:

Sagado NACANABO
Executive Secretary
REN-LAC
Telephone: +226 25 36 32 15

Luc Marius Ibriga
Contrôleur Général d’Etat
Autorité Supérieure de Contrôle d’Etat et de la Lutte contre la Corruption (ASCE-LC)
Telephone: +226 25 30 10 91 or +226 25 33 60 39

Policies Toward Foreign Direct Investment

Burma recognizes the value of investment to boost economic growth and development, and it is open to foreign investors in some sectors. That said, implementation of liberal investment laws and policies are often slowed and sometimes blocked by local rent-seeking economic actors who benefit from the status quo. In 2016, Burma passed the Myanmar Investment Law (MIL) to attract more investment from both foreign and domestic businesses. The MIL simplified the rules and regulations for investment to bring Burma more in line with international standards. The MIL includes a “negative list” of prohibited, restricted, and special sectors. Burma also has three Special Economic Zones (SEZs) in Thilawa, Dawei, and Kyauk Phyu with preferential policies for businesses that locate there, including “one-stop-shop” service. Of the three SEZs, Thilawa is the only SEZ currently in operation.

The new Companies Law went into effect on August 1, 2018. Under the law, foreign investment of up to 35 percent is allowed in domestic companies— which also opens the stock exchange to limited foreign participation.  It also updated and streamlined business regulations. The Companies Law makes it easier to start and operate small businesses and provides the government with tools to enforce corporate governance rules and regulations.

The Directorate for Investment and Company Administration (DICA), which is part of the Ministry of Investment and Foreign Economic Relations (MIFER) serves as Burma’s investment promotion agency. DICA encourages and facilitates foreign investment by providing information, fostering networks between investors. DICA has its head office in Yangon and has 14 branches throughout the country, including in Nay Pyi Taw, Mandalay, Taunggyi, Mawlamyine, Pathein, Monywa, Dawei, Hpa-an, Bago, Magway, Loikaw, Myitkyina, Sittwe, and Hakha. DICA uses seminars, workshops, investment fairs and other events to promote investment, as well as its website: http://www.dica.gov.mm/en .

The government maintains active dialogue with chambers of commerce (including the American Chamber of Commerce) and foreign companies on investment.

Limits on Foreign Control and Right to Private Ownership and Establishment

Generally, foreign and domestic private entities have the right to establish and own business enterprises and engage in remunerative activity with some sectoral exceptions. Under Article 42 of the Myanmar Investment Law, the Burmese government restricts investment in certain sectors. Some sectors are only open to government or domestic investors. Other sectors require foreign investors to set up a joint-venture with a citizen of Burma or citizen-owned entity or obtain a recommendation from the relevant ministries.

The State-Owned Economic Enterprises Law, enacted in March 1989, stipulates that SOEs have the sole right to carry out a range of economic activities in certain sectors, including teak extraction, oil and gas, banking and insurance, and electricity generation. However, in practice many of these areas are now open to private sector investment. For instance, the 2016 Rail Transportation Enterprise Law allows foreign and local businesses to make certain investments in railways, including in the form of public-private partnerships.

More broadly, the Myanmar Investment Commission (MIC), “in the interest of the State,” can make exceptions to the State-Owned Enterprises Law. The MIC has routinely granted exceptions, including through joint ventures or special licenses in the areas of insurance, banking (for domestic investors only), mining, petroleum and natural gas extraction, telecommunications, radio and television broadcasting, and air transport services.

As one of their key functions, the Directorate of Investment and Company Administration (DICA) and the MIC are responsible for screening inbound foreign investment to ensure it does not pose a risk to national security, as well asto make a determination that such investment sufficiently furthers Burma’s growth and development.

Other Investment Policy Reviews

The World Bank’s Doing Business 2020 report includes an analysis of Burma’s investment sectors and business environment, and can be found at: https://www.doingbusiness.org/en/data/exploreeconomies/myanmar/

Business Facilitation

The government through the Directorate of Investment and Company Administration (DICA) provides limited business facilitation services.

The government instituted online company registration through “MyCo” (https://www.myco.dica.gov.mm ). Investors are able to submit forms, pay registration fees, and check availability of a company name through a searchable company registry on the “MyCo” website.

The Myanmar Investment Commission (MIC) is responsible for verifying and approving certain investment proposals and regularly issues notifications about sector-specific developments. The MIC is comprised of representatives and experts from government ministries, departments and governmental and non-governmental bodies. Companies can use the DICA website to retrieve information on requirements for MIC permit applications and submit a proposal to the MIC. If the proposal meets the criteria, it will be accepted within 15 days. If accepted, the MIC will review the proposal and reach a decision within 90 days. The MIC issued a March 2016 statement granting authority to state and regional investment committees to approve any investment with capital of under USD 5 million.

Outward Investment

The Burmese government does not directly promote or incentivize outward investment. However, the Burmese business community has responded positively to U.S. investment messaging under SelectUSA promotional efforts.  The Burmese delegations to the SelectUSA U.S. Investment Summits in Washington, D.C. numbered 15 delegates in 2018 and 36 delegates in 2019, highlighting growing interest.  Tourism/hospitality, oil & gas, ICT, and food processing investment opportunities were of the most interest to the Burmese investors. Burma does not restrict domestic investors from investing abroad.

Capital Markets and Portfolio Investment

The Burmese government has gradually opened up to foreign portfolio investment but both the stock and bond markets are small and lack sufficient liquidity to enter and exit sizeable positions. In July 2019, the Securities and Exchange Commission announced that foreign individuals and entities are permitted to hold up to 35 percent of the equity in Burmese companies listed on the Yangon Stock Exchange. As of March 2020, six companies are listed on the exchange. The Securities Exchange Law came into effect in 2013, establishing a securities and exchange commission and helping clarify licensing for securities businesses (such as dealing, brokerage, underwriting, investment advisory and company representation).

Burma has a very small publicly-traded debt market. Banks have been the primary buyers of government bonds issued by Burma’s Central Bank, which has established a nascent bond market auction system. The Central Bank issues government treasury bonds with maturities of two, three, and five years.

Burma enacted the Foreign Exchange Management Law in 2012 in order to improve foreign exchange management and to broaden international economic relations and cooperation. Domestic businesses and investors are able to obtain loans from local and foreign banks. According to the Myanmar Investment Law and Foreign Exchange Management Law, foreign investors need the approval of the Central Bank of Myanmar (CBM) to take a bank loan. The Central Bank allows loans with a maximum maturity of three years. The CBM also allows overdraft lending. Instead of using traditional loans, borrowers can take out overdrafts with collateral which can be rolled over every year without a maturity date. As per CBM regulations, banks are required to clear overdraft facilities within three years; otherwise such overdrafts will be classified as non-performing loans (NPLs).

Money and Banking System

There is limited penetration of banking services in the country but the usage of mobile payment systems is growing rapidly. An estimated 25 percent of the population has access to a savings account through a traditional bank. As of April 2020, Burma’s banking sector consisted of four state-owned banks, 27 domestic private banks, 17 foreign bank branches, and three foreign bank subsidiaries. The banking system is fragile with a high volume of non-performing loans. Financial analysts estimate that NPLs at some local banks account for 40 to 50 percent of outstanding credit.

The 2013 Central Bank of Myanmar Law made the Central Bank an independent institution headed by a Minister-level governor. The Central Bank of Myanmar (CBM) is responsible for the country’s monetary and exchange rate policies as well as regulating and supervising the banking sector.

The government has gradually opened the banking sector to foreign investors. The government began awarding limited banking licenses to foreign banks in October 2014. In November 2018, the CBM published new guidelines that permit foreign banks with local licenses to offer “any financing services and other banking services” to local corporations. Previously, foreign banks were only allowed to offer export financing and related banking services to foreign corporations.

In November 2019, the CBM announced that foreign banks will be allowed to apply for licenses to operate subsidiaries or branches. Under new directives, any foreign bank applying for a subsidiary license would be allowed to provide wholesale banking services at the start of operation. From January 2021, foreign banks with a subsidiary license will be allowed to offer retail banking services. The CBM will allow existing foreign bank branches to convert to subsidiaries starting from June 2020. In January 2020, the CBM announced foreign banks would be permitted to hold more than 35 percent of the capital in joint ventures with domestic banks.

No U.S. banks have correspondent relationships with Burmese banks.

Foreigners are allowed to open a bank account in Burma in either U.S. dollars or Burmese kyat. To open a bank account, foreigners must provide proof of a valid visa along with proof of income or a letter from their employer.

Foreign Exchange and Remittances

Foreign Exchange

According to Chapter 15 of the Myanmar Investment Law, foreign investors are able to convert, transfer, and repatriate profits, dividends, royalties, patent fees, license fees, technical assistance and management fees, shares and other current income resulting from any investment made under this law. Nevertheless, in practice, the transfer of money in or out of Burma has been difficult, as many international banks have internal prohibitions on conducting business in Burma given the long history of sanctions and significant money-laundering risks. The majority of foreign currency transactions are conducted through banks in Singapore.

Under the Foreign Exchange Management Law, transfer of funds can be made only through licensed foreign exchange dealers, using freely usable currencies. The Central Bank of Myanmar (CBM) grants final approval on any new loans or loan transfers by foreign investors. According to a new regulation in the Foreign Exchange Management Law, foreign investors applying for an offshore loan must get approval from the CBM. Applications are submitted through the Myanmar Investment Commission by providing a company profile, audited financial statements, draft loan agreement, and a recent bank credit statement.

Since February 5, 2019, the Central Bank calculates a market-based reference exchange rate from the volume-weighted average exchange rate of interbank and bank-customer deals during the day.

Remittance Policies

According to the Myanmar Investment Law, foreign investors can remit foreign currency through authorized banks. Nevertheless, in practice, the transfer of money in or out of Burma has been difficult, as many international banks have internal prohibitions on conducting business in Burma given the long history of sanctions and significant money-laundering risks. The majority of foreign currency transactions are conducted through banks in Singapore.

The difficulties presented by the formal banking system are reflected in the continued use of informal remittance services (such as the “hundi system”) by both the public and businesses. In November 15, 2019, the Central Bank of Myanmar adopted the Remittance Business Regulation in order to bring these informal networks into the official financial system. The regulations require remittance business licenses to conduct inward and outward remittance businesses from the Central Bank of Myanmar.

Sovereign Wealth Funds

Burma does not have a sovereign wealth fund.

State-owned enterprises (SOEs) in Burma are active in various sectors, including natural resource extraction, print news, energy production and distribution, banking, mobile telecommunications, and transportation. SOEs employ approximately 145,000 people, according to a 2018 report by the Natural Resource Governance Institute. The 1989 State-Owned Economic Enterprises Law does not establish a system of monitoring enterprise operations, hence detailed information on Burmese SOEs are difficult to obtain. However, according to commercial statements, the total net income of all SOEs during fiscal year 2018-19 was approximately USD 1.1 billion. The top profit-making SOEs are found in the natural resource sector, namely the Myanma Oil and Gas Enterprise, Myanma Gems Enterprise, and Myanma Timber Enterprise. Within Burma, there are 32 SOEs that are managed directly by six ministries without independent boards.

State-Owned Enterprises enjoy several advantages including serving in some cases as the market regulator, preferential land access, and access to low-interest credit. According to the State-Owned Economic Enterprises Law, SOEs wield regulatory powers that provide SOEs a significant market advantage, including through an ability to recommend specific tax exemptions to the Myanmar Investment Commission on behalf of private sector joint-venture partners and to monitor private sector companies’ compliance with contracts. In addition, the law stipulates that SOE managers have sole discretion in awarding contracts and licenses to private sector partners with limited oversight. SOEs can secure loans at low interest rates from state-owned banks, with approval from the cabinet. Private enterprises, unlike SOEs, are forced to provide land or other real estate as collateral in order to be considered for a loan. SOEs have historically had an advantage over private entities in land access because under the Constitution the State owns all the land.

Privatization Program

In May 2016, the government formed a privatization committee on SOEs, which is headed by a Vice-President, to examine measures such as public-private partnerships (PPP) to develop and operate infrastructure as well as to sell-off inefficient state-owned factories. The Minister for Planning, Finance, and Industry serves as secretary of the commission. Privatization can take the form of system-sharing, public-private partnership, private-private partnership, franchise, joint-venture, and sales of assets in line with international standards. In October 2017, the government sought to privatize state-owned factories in the ceramic, garment, plastic, and stainless-steel sectors, according to state media. According to government data and media reports, 55 state-owned factories have been restructured under various PPPs as of November 2019. The privatization committee does not have a website describing its current activities but general information in the Burmese language about the committee can be found at: https://www.mopfi.gov.mm/my/page/planning/committee/638 .

The Burmese government has continued to prioritize fighting corruption, and resources have been allocated to facilitate the growth of the Anti-Corruption Commission (ACC) into an institution vested with the authority to lead that fight. In 2018, the government amended its anti-corruption law to give the ACC authority to scrutinize government procurements. The ACC has used that authority to initiate criminal cases even in the absence of victim complaints, leading to cases against several high-ranking and some mid-ranking officials for financial impropriety and abuse of office. Family members of politicians can also be prosecuted under the anti-corruption law, though office holders face higher penalties. The ACC opened branch offices in Yangon and Mandalay in 2019, as it continues to increase its investigative capacity.

Some companies are legally required to have compliance programs to detect and prevent bribery of government officials. Under Burma’s Anti-Money Laundering Law, law firms, banks, and companies operating in the insurance and gemstone sectors are required to appoint compliance officers and conduct heightened due diligence on certain customers.

There have also been non-legislative actions to counter corruption. Burma does not have laws to counter conflicts-of-interest in awarding contracts or government procurement. However, the President’s office has issued orders to prevent conflicts-of-interest for construction contracts and several ministries have put in place internal rules to avoid conflicts-of-interest in awarding tenders. In the private sector, some of Burma’s largest companies have developed anti-corruption policies, which they have published on-line.

Enforcement of Burma’s anti-corruption laws remains a challenge. While there have been efforts to reduce some opportunities for higher-level corruption, the lack of transparency regarding military budgets and expenditures remains a substantial impediment to reforms. In addition, a large swath of the economy is engaged in illegal activities beyond the control of the government. These include the production, transportation and distribution of narcotics, and the smuggling of jade, gemstones, timber, wildlife, and wildlife products. NGOs are working with the government to assist in fighting corruption in these areas, but lack any formal role in conducting investigations. There are efforts to promote accountability for government officials, but the lack of resources for key government functions, including law enforcement and civil service salaries, remains a driver for low-level corruption. In its 2019 Corruption Perceptions Index, Transparency International rated Burma 130 out of 175 countries. Investors might encounter corruption when seeking investment permits, during the taxation process, when applying for import and export licenses, and when negotiating land and real estate leases.

Burma signed the UN Anticorruption Convention in 2005, and ratified it on December 20, 2012.

Burma is not party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

Resources to Report Corruption

Anti Corruption Commission
Cluster (1), Sports’ Village, Wunna Theikdi Ward,*
Nay Pyi Taw
Phone: + 95 67 810 334 7
Email: myanmaracc2014@gmail.com
http://www.accm.gov.mm/acc/index.php?route=common/home 

* A new Anti Corruption Commission head office is currently under construction. However, the above address is still used for all official communications until the new office becomes operational.

Policies Towards Foreign Direct Investment

The Government of Burundi (GoB) is generally favorable to FDI and seeks investment as a means to promote economic growth. Uneven implementation of laws and regulations, however, limits the predictability of the environment for Burundian and foreign investors alike. The GoB has not implemented laws, regulations, or economic or industrial strategies that limit market access or discriminate against foreign investors. There is a minimum foreign initial investment of USD 50,000, which does not apply to domestic investors. An overview of the legal framework for foreign investment can be found at http://www.eatradehub.org/burundi_investment_policy_assessment_2018_presentation 

Based on the Burundi Investment Code enacted in 2008, the government established the Burundi Investment Promotion Agency (API) in 2009. API’s main objective is to boost local investment and attract foreign investment, especially for projects serving long-term development goals and improving competitiveness. API provides investors with information on investment and export promotion, assists them with legal formalities, including obtaining the required documents, and intervenes when laws and regulations are not properly applied. API also designs reforms required for the improvement and the ease of doing business environment and ensures that the impact of investments on development is beneficial and sustainable.

The GoB conducts dialogue with national and foreign investors to promote investment. API is the initial and primary point of entry for investors, but government ministries meet regularly with private investors to discuss regulatory and legal issues. For example, at the beginning of 2020, the API brought together stakeholders in the horticultural sector with the aim of creating a platform of professionals responsible for supporting farmers in order to promote exports of horticultural products. The Burundian horticultural sector being confronted with several challenges related especially to non-compliance with the requirements of the export market, the API allowed the stakeholders to brainstorm ideas on the basis of which a plan support and supervision measures for producers will be developed and submitted to the authority to support this sector.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign and domestic companies have the same rights to establish and own businesses in the country and engage in all forms of activities. However, there are restrictions on foreign investments in weaponry, ammunition, and any sort of military or para-military enterprises. There is no other restriction nor are there any sectors in which foreign investors are denied the same treatment as domestic firms. There are no general limits on foreign ownership or control.

Article 63 of the 2013 mining code stipulates that the GoB must own at least 10 percent of shares in any foreign company with an industrial mining license and state participation cannot be diluted in the event of an increase in the share capital.

Burundi does not maintain an investment screening mechanism for inbound foreign investment.

Other Investment Policy Reviews

No investment policy review from a multilateral organization has taken place in the last three years. The most recent review was performed in 2010 by UNCTAD.

Business Facilitation

In addition to fiscal advantages provided in the investment code, Burundi has implemented reforms, including reinforcing its single window for starting a business, simplifying tax procedures for small and medium enterprises, launching an electronic single window for business transactions, and harmonizing commercial laws with those of the East African Community.

The Investment Promotion Agency (API) is a government authority in charge of promoting investment, improving the business climate and facilitating market entry for investors in Burundi. API offers a range of services to potential investors, including assistance in acquiring the licenses, certificates, approvals, authorizations, and permits required by law to set up and operate a business enterprise in Burundi. API has set up a one-stop shop to facilitate and simplify business registration in Burundi. For now, investors must be physically present in country to register with API.

The business registration takes approximately four hours and costs 40,000 Burundian frances (around USD 21). For more details and information on registration procedures, time and costs, investors may visit API’s website on https://www.investburundi.bi/ .

There is no specific mechanism for ensuring equitable treatment of women and underrepresented minorities.

Outward Investment

The host government does not have mechanisms for promoting or incentivizing outward investment. The host government does not restrict domestic investors from investing abroad.

Capital Markets and Portfolio Investment

Although there are no regulatory restrictions on foreign portfolio investment, Burundi does not have capital markets that would enable it. Capital allocation within Burundi is entirely dependent on commercial banks.

The country does not have its own stock market. There is no regulatory system to encourage and facilitate portfolio investment. There is insufficient liquidity in the markets to enter and exit sizeable positions. Existing policies do not actively facilitate nor impede the free flow of financial resources into product and factor markets.

There is no regulation restricting international transactions. In practice, however, the government restricts payments and transfers for international transactions due to a shortage of foreign currency.

In theory, foreign investors have access to all existing credit instruments and on market terms. In practice, available credit is extremely limited.

Money and Banking System

Burundi has very limited banking services penetration according to the most recent national survey on financial inclusion conducted by the central bank. In this 2016 survey, the Bank of the Republic of Burundi (BRB) found a penetration level of approximately 22 percent.  Several local commercial banks have branches in urban centers. Micro-finance institutions mostly serve rural areas. The Burundian government is a minority shareholder in three banks.The banking sector’s soundness has improved with capitalization and liquidity ratios above regulatory standards and profitability indicators on the rise. However, bank portfolio quality remains a concern, with the level of non-performing loans (NPLs) reaching nine percent when five percent is the benchmark rate among East African Community states. The sector also suffered from shortages of foreign currency following the Central Bank’s establishment of de facto capital controls in 2019.

The financial sector includes 12 credit institutions, 37 microfinance institutions, 15 insurance companies, three social security institutions and three payment institutions. In April 2020, a new youth investment bank began operations. Two other banks under creation are an agricultural bank and a bank for women. All three aim at reducing unemployment by creating job opportunities. The banking sector remains predominant with 82.5 percent of total assets, while microfinance institutions and insurance companies represent 11.2 percent and 6.4 percent respectively. Financial intermediation continues to increase, the total assets of the financial sector as a percentage of GDP being 52.1 percent in 2018 compared to 49.3 percent in 2017. The banking market is dominated by the three largest and systemically important banks: Credit Bank of Bujumbura (BCB), Burundi Commercial Bank (BANCOBU), and Interbank Burundi (IBB).Foreign banks are allowed to establish operations in the country.  Foreign banks operating in the country include ECOBANK (Panafrican Bank-West Africa), CRDB (Tanzanian Bank), DTB and KCB (both Kenyan Banks).  The central bank directs banking regulatory policy, including prudential measures for the banking system.  The country has kept all its foreign corresponding banks during the last three years. Foreigners and locals are subject to the same conditions when opening a bank account; the only requirement is the presentation of identification.

Foreign Exchange and Remittances

Foreign Exchange

According to the law, after paying taxes, there are no restrictions on expatriating funds associated with investment. In practice, foreign investors have encountered difficulties in converting funds associated with investments into foreign currency due to de facto capital controls implemented by the BRB in 2019.

According to the GoB, funds associated with an investment can be converted into a freely usable currency at a legal market rate, pending their availability. Due to a shortage of foreign currency, the central bank prioritizes companies in specific strategic industries for access to foreign exchange accommodation. In practice, the Burundian franc is not freely convertible at the official government rate.

The BRB publishes the daily exchange rate on its website each morning. In practice, the national currency (BIF) fluctuates, and the government has imposed de facto capital controls to prevent abrupt exchange rate movements; there is a gap between the official rate and a floating parallel market rate.

Remittance Policies

The government has not passed any new laws regarding a change to investment remittances policies. The average delay for remitting investment returns (once all taxes have been paid) is three months due to general inefficiency in the banking sector and the rarity of such transactions in an environment with very little foreign direct investment.

Sovereign Wealth Funds

Burundi does not have a sovereign wealth fund.

There are five SOEs in Burundi with 100 percent government ownership: REGIDESO (public utility company), ONATEL (telecom), SOSUMO (sugar), OTB (tea), and COGERCO (cotton). No statistics on assets are available for these companies as their reports are not available to the public. Board members for SOEs are appointed by the GoB and report to its ministries. The GoB has a minority (40 percent) share in Brarudi, a branch of the Heineken Group, and in three banking companies.

There is no published list of SOEs.

SOEs have no market-based advantages and compete with other investors under the same terms and conditions; however, Burundi does not adhere to the OECD guidelines on corporate governance for SOEs.

Privatization Program

In 2002, Burundi entered an active phase of political stabilization, national reconciliation and economic reform. In 2004, it received an emergency post-conflict program from the IMF and the World Bank, paving the way for the development of the Strategic Framework for Growth and Poverty Alleviation (PRSP). After the 2005 elections, the GoB made the decision to convert several state-owned enterprises different sectors of the economy to private investment, including foreign investment. The Burundian government, considering coffee a strategic sector of its economy, decided to opt for the privatization of the coffee sector first in an effort to modernize it. However, following the crisis of 2015, the GoB decided to suspend immediately the privatization program. At that time, it had not yet privatized other sectors such as tea or sugar. In late 2019, the GoB retook control of the coffee sector, citing as its rationale perceived mismanagement on the part of the privatized company during the 2015-2019. It is unclear if or when the privatization program will continue.

The privatization program was open to all potential buyers, including foreigners, and there was no explicit discrimination against foreign investors at any stage of the investment process. Public bidding was mandatory. The process is transparent and non-discriminatory. When the government intends to sell a business or shares in a business, offers are published in local newspapers.

The government has an anti-corruption law and an enforcement organization, the Anti-Corruption Brigade, responsible for enforcing this legislation. Cabinet members, parliamentarians, and officials appointed by presidential decree have immunity from prosecution on corruption charges, insulating them from accountability. Laws designed to combat corruption do not extend to family members of officials or to political parties.

Article 60 of the April 2016 law “Bearing Measures for the Prevention and Punishment of Corruption and Related Offenses” regulates conflicts of interest, including in awarding government procurement. Burundian legislation criminalizes bribery of public officials, but there is no specific requirement for private companies to establish internal codes of conduct.

Burundi is a signatory to the UN Anti-Corruption Convention and the OECD Convention on Combating Bribery. Burundi has also been a member of the East African Anti-Corruption Authority since joining the EAC in 2007. The country does not provide protections to NGOs involved in investigating corruption.

A number of U.S. firms have specifically noted corruption as an obstacle to direct investment in Burundi. Corruption is most pervasive in the award of licenses and concessions, which takes place in a non-transparent environment with frequent allegations of bribery and cronyism. Customs officials are also reportedly corrupt, regularly extorting bribes from exporters and importers.

Resources to Report Corruption

Contact at the government agency or agencies that are responsible for combating corruption:

Name: Roger Ndikumana
Title: Commissaire Général
Organization: Anti-Corruption Brigade
Address: PO Box 890 Bujumbura
Telephone Number: (+257) 22 25 62 37
Email Address: brigadeanticorruption@yahoo.fr

Contact at a “watchdog” organization (international, regional, local, or nongovernmental organization operating in the country/economy that monitors corruption, such as Transparency International):

Name: Gabriel Rufyiri
Title: President
Organization: OLUCOME
Address: 47, Chaussée Prince Louis Rwagasore, n°47, 1st Floor
Telephone Number: (+257) 22 25 20 20 /22 25 89 00
Email Address: rufyirig@gmail.com / olucome2003@gmail.com