Albanian government leaders have acknowledged that private sector development and increased levels of foreign investment are critical to supporting sustainable economic development. Albania maintains a liberal foreign investment regime designed to attract FDI. The Law on Foreign Investment outlines specific protections for foreign investors and allows 100 percent foreign ownership of companies, except in the areas of domestic and international air passenger transport and television broadcasting. Albanian legislation does not distinguish between domestic and foreign investments.

The Law on Strategic Investments approved in 2015 offers incentives and fast-track administrative procedures, depending on the size of the investment and number of jobs created, to both foreign and domestic investors who apply before December 31, 2023.

The Albanian Investment Development Agency (AIDA) is the entity responsible for promoting foreign investments in Albania. Potential U.S. investors in Albania should contact AIDA to learn more about services AIDA offers to foreign investors (  http://aida.gov.al/  ). The Law on Strategic Investments stipulates that AIDA, as the Secretariat of the Strategic Investment Council, serves as a one-stop-shop for foreign investors, from filing the application form to granting the status of strategic investment/investor. Despite supporting legislation, very few foreign investors have benefited from the “Strategic Investor” status, and almost all projects have been granted to domestic companies operating in the tourism sector.

Foreign and domestic investors have equal rights of ownership of local companies, based on the principle of “national treatment.” There are only a few exemptions regarding ownership restrictions:

Domestic and international air passenger transport: foreign interest in airline companies is limited to 49 percent ownership by investors outside the Common European Aviation Zone, for both domestic and international air transportation.

Audio and audio-visual broadcasting: An entity, foreign or domestic, that has a national audio or audio-visual broadcasting license cannot hold more than 20 percent of shares in another audio or audio-visual broadcasting company. Additional restrictions apply to the regional or local audio and audio-visual licenses.

Agriculture: No foreign individual or foreign incorporated company may purchase agricultural land, though land may be leased for up to 99 years. However, if the company registers in Albania, this limitation on agricultural land does not apply.

Albania currently lacks an investment-review mechanism for inbound FDI. However, in 2017, the government introduced a new provision in the Petroleum Law, which allows the government to reject a petroleum-sharing agreement or the sale of shares in a petroleum-sharing agreement to any prospective investor due to national security concerns.

Albanian law permits private ownership and establishment of enterprises and property. To operate in certain sectors, licenses are required but foreign investors do not require additional permission or authorization beyond that required of domestic investors. Commercial property may be purchased, but only if the proposed investment is worth three times the price of the land. There are no restrictions on the purchase of private residential property. Foreigners can acquire concession rights on natural resources and resources of the common interest, as defined by the Law on Concessions and Public Private Partnerships.

Foreign and domestic investors have numerous options available for organizing business operations in Albania. The 2008 Law on Entrepreneurs and Commercial Companies and Law Establishing the National Business Center (NBC) allow for the following legal types of business entities to be established through the NBC: sole proprietorship; unlimited partnership; limited partnership; limited liability company; joint stock company; branches and representative offices; and joint ventures.

The World Trade Organization (WTO) completed a Trade Policy Review of Albania in May 2016 (  https://www.wto.org/english/tratop_e/tpr_e/tp437_e.htm   ). In November 2017, the United Nations Conference on Trade and Development (UNCTAD) completed the first Investment Policy Review of South-East European (SEE) countries, including Albania (  http://unctad.org/en/pages/PublicationWebflyer.aspx?publicationid=1884   ).

The National Business Center (NBC) serves as a one-stop shop for business registration. All required procedures and documents are published online http://www.qkb.gov.al/information-on-procedure/business-registration/  . Registration may be done in person or online via the e-Albania portal. Many companies choose to complete the registration process in person, as the online portal requires an authentication process and electronic signature and is only available in the Albanian language. When a business registers in the NBC it is also automatically registered with the Tax Office, Labor Inspectorate, Customs, and the respective municipality. According to the 2020 World Bank Doing Business Report, it takes 4.5 days and five procedures to register a business in Albania.

Albania neither promotes nor incentivizes outward investment, nor does it restrict domestic investors from investing abroad.

Albania’s legal, regulatory, and accounting systems have improved in recent years, but there are still many serious challenges. Endemic corruption, uneven enforcement of legislation, cumbersome bureaucracy, distortion of competition, and a lack of transparency all hinder the business community.

Albanian legislation includes rules on disclosure requirements, formation, maintenance, and alteration of firms’ capitalization structures, mergers and divisions, takeover bids, shareholders’ rights, and corporate governance principles. The Competition Authority (  http://caa.gov.al   ) is an independent agency tasked with ensuring fair and efficient competition in the market. However, business groups have raised concerns about unfair competition and monopolies, rating the issue as one of the most concerning items damaging the business climate.

The Law on Accounting and Financial Statements includes reporting provisions related to international financial reporting standards (IFRS) for large companies, and national financial reporting standards for small and medium enterprises. Albania meets minimum standards on fiscal transparency, and debt obligations are published by the Ministry of Finance and Economy. Albania’s budgets are publicly available, substantially complete, and reliable.

In August 2020, Albania approved the law for the establishment of the register of the Ultimate Beneficiary Owners. The law aims to ensure transparency on the ultimate beneficiary owners, who directly and indirectly own more than 25 percent of shares, voting rights, or ownership interests in all entities registered to do business in Albania, and was adopted following the recommendations of MONEYVAL.

The rulemaking process in Albania meets the minimum requirements of transparency. Ministries and regulatory agencies develop forward regulatory plans that include changes or proposals intended to be adopted within a set timeframe. The law on notification and public consultation requires the GoA to publish draft laws and regulations for public consultation or notification and sets clear timeframes for these processes. Such draft laws and regulations are published at the following page:   http://www.konsultimipublik.gov.al/ . The business community frequently complains that final versions of laws and regulations fail to address their comments and concerns and that comment periods are frequently not respected.

The Albania Assembly ( www.parlament.al ) publishes a list of both proposed and adopted legislation. All laws, by-laws, regulations, decisions by the Council of Ministers (the government), decrees, and any other regulatory acts are published at the National Publication Center at the following site:  https://qbz.gov.al/

Independent agencies and bodies, including but not limited to, the Energy Regulatory Entity (ERE), Agency for Electronic and Postal Communication (AKEP), Financial Supervising Authority (FSA), Bank of Albania, Competition Authority (CA), National Agency of Natural Resources (NARN), and Extractive Industries Transparency Initiative (EITI), oversee transparency and competition in specific sectors.

Albania acceded to the WTO in 2000 and the country notifies the WTO Committee on Technical Barriers to Trade of all draft technical regulations.

Albania signed a Stabilization and Association Agreement (SAA) with the EU in 2006. The EU agreed to open accession talks on March 25, 2020, and the country is awaiting to hold the first Inter-Governmental Conference (IGC), which would mark the official opening of accession talks. Albania has long been involved in the gradual process of legislation approximation with the EU acquis. This process is expected to accelerate with the opening of accession negotiations.

The Albanian legal system is a civil law system. The Albanian constitution provides for the separation of legislative, executive, and judicial branches, thereby supporting the independence of the judiciary. The Civil Procedure Code, enacted in 1996, governs civil procedures in Albania. The civil court system consists of district courts, appellate courts, and the High Court (the supreme court). The district courts are organized in specialized sections according to the subject of the claim, including civil, family, and commercial disputes.

The administrative courts of first instance, the Administrative Court of Appeal, and the Administrative College of the High Court adjudicate administrative disputes. The Constitutional Court, reviews cases related to the constitutionality of legislation and, in limited instances, protects and enforces the constitutional rights of citizens and legal entities.

Parties may appeal the judgment of the first-instance courts within 15 days of a decision, while appellate court judgments must be appealed to the High Court within 30 days. A lawsuit against an administrative action is submitted to the administrative court within 45 days from notification and the law stipulates short procedural timeframes, enabling faster adjudication of administrative disputes.

Investors in Albania are entitled to judicial protection of legal rights related to their investments. Foreign investors have the right to submit disputes to an Albanian court. In addition, parties to a dispute may agree to arbitration. Many foreign investors complain that endemic judicial corruption and inefficient court procedures undermine judicial protection in Albania and seek international arbitration to resolve disputes. It is beneficial to U.S. investors to include binding international arbitration clauses in any agreements with Albanian counterparts. Albania is a signatory to the New York Arbitration Convention and foreign arbitration awards are typically recognized by Albania. However, the government initially refused to recognize an injunction from a foreign arbitration court in one high-profile case in 2016. The Albanian Civil Procedure Code outlines provisions regarding domestic and international commercial arbitration.

Albania does not have a specific commercial code but has a series of relevant commercial laws, including the Entrepreneurs and Commercial Companies Law, Bankruptcy Law, Public Private Partnership and Concession Law, Competition Law, Foreign Investment Law, Environmental Law, Law on Corporate and Municipal Bonds, Transport Law, Maritime Code, Secured Transactions Law, Employment Law, Taxation Procedures Law, Banking Law, Insurance and Reinsurance Law, Concessions Law, Mining Law, Energy Law, Water Resources Law, Waste Management Law, Excise Law, Oil and Gas Law, Gambling Law, Telecommunications Law, and Value-Added Law.

There is no one-stop-shop that lists all legislation, rules, procedures, and reporting requirements for investors. However, foreign investors should visit the Albania Investment Development Agency webpage (  www.aida.gov.al   ), which offers broad information for foreign investors.

Major laws pertaining to foreign investments include:

Law on Foreign Investments

Law on Strategic Investments: Defines procedures and rules to be observed by government authorities when reviewing, approving, and supporting strategic domestic and foreign investments in Albania

Law on Foreigners

Law on Concessions and Public Private Partnerships: Establishes the framework for promoting and facilitating the implementation of privately financed concessionary projects

Law on Entrepreneurs and Commercial Companies: Outlines general guidelines on the activities of companies and the legal structure under which they may operate

Law on Cross-Border Mergers: Determines rules on mergers when one of the companies involved in the process is a foreign company

Law on Protection of Competition: Stipulates provisions for the protection of competition, and the concentration of commercial companies; and

Law on Collective Investment Undertakings: Regulates conditions and criteria for the establishment, constitution, and operation of collective investment undertakings and of management companies.

The Law on Foreign Investments seeks to create a hospitable legal climate for foreign investors and stipulates the following:

No prior government authorization is needed for an initial investment.

Foreign investments may not be expropriated or nationalized directly or indirectly, except for designated special cases, in the interest of public use and as defined by law.

Foreign investors enjoy the right to expatriate all funds and contributions in kind from their investments.

Foreign investors receive most favored nation treatment according to international agreements and Albanian law.

There are limited exceptions to this liberal investment regime, most of which apply to the purchase of real estate. Agricultural land cannot be purchased by foreigners and foreign entities but may be leased for up to 99 years. Investors can buy agricultural land if registered as a commercial entity in Albania. Commercial property may be purchased, but only if the proposed investment is worth three times the price of the land. There are no restrictions on the purchase of private residential property.

To boost investments in strategic sectors, the government approved a new law on strategic investments in May 2015. Under the new law, a “strategic investment” may benefit from either “assisted procedure” or “special procedure” assistance from the government to help navigate the permitting and regulatory process. Despite supporting legislation, very few foreign investors have benefited from the “Strategic Investor” status, and almost all projects have been granted to domestic companies operating in the tourism sector.

Authorities responsible for mergers, change of control, and transfer of shares include the Albanian Competition Authority ACA:   http://www.caa.gov.al/laws/list/category/1/page/1   , which monitors the implementation of the competition law and approves mergers and acquisitions when required by the law; and the Albanian Financial Supervisory Authority FSA: http://www.amf.gov.al/ligje.asp   , which regulates and supervises the securities market and approves the transfer of shares and change of control of companies operating in this sector.

Albania’s tax system does not distinguish between foreign and domestic investors. Informality in the economy, which may be as large as 40 percent of the total economy, presents challenges for tax administration.

Visa requirements to obtain residence or work permits are straightforward and do not pose an undue burden on potential investors. Generally, U.S. passport holders are entitled to a one year stay in Albania without a residence permit, a special provision the GoA reaffirmed in March 2022. The government approved a new Law on Foreigners in July 2021, which partially aligns the domestic legislation, including that on migration, with the EU Directives. The new law introduces a single application procedure for permits in general. For investors there is a special permit called “Unique Investor Permit.” Foreign investors are issued a 2-year unique investor permit if they invest in Albania and meet certain criteria, including a quota ratio of one to five, of foreign and Albanian workers. In addition, same ratio should be preserved in the Board of Directors and other leading and supervisory structures of the company. Salaries of the Albanian workers should match the average of last year for equivalent positions. The permit can be renewed for an additional three years and after that the investor is eligible to receive a permanent permit provided that they fulfil the criteria outlined above and prove that the company is properly registers, has paid taxes and is not incurring losses. The Council of Ministers approves the annual quota of foreign workers following a needs assessment by sector and profession. However, work permits for staff that occupy key positions, among other categories, can be issued outside the annual quota.

Foreign investors can obtain the single permit by the immigration authorities following the initial approval for employment from the National Agency for Employment and Skills https://www.akpa.gov.al/ . U.S. citizens along with EU, Western Balkans, and Schengen-country citizens are exempt from this requirement. In addition, U.S., EU, and Kosovo citizens when applying for residency permit for the first time, have a term of 5 years. The new law also introduced the National Electronic Register for Foreigners (NERF), which is a state database on foreigners, who enter or intend to enter Albania, with purpose of staying, transiting, working, or studying in Albania. NERF will register data on foreign nationals, who have an entry visa, stay, or transit in the Republic of Albania, have a temporary or permanent residence permit, and have a have a unique permit (residence and employment) in Albania.

The Law on Entrepreneurs and Commercial Companies sets guidelines on the activities of companies and the legal structure under which they may operate. The government adopted the law in 2008 to conform Albanian legislation to the EU’s Acquis Communitaire. The most common type of organization for foreign investors is a limited liability company.

The Law on Public Private Partnerships and Concessions establishes the framework for promoting and facilitating the implementation of privately financed concessionary projects. According to the law, concession projects may be identified by central or local governments or through third party unsolicited proposals. To limit opportunities for corruption, the 2019 amendments prohibited unsolicited bids, beginning in July 2019, on all sectors except for works or services in ports, airports, generation and distribution of electricity, energy for heating, and production and distribution of natural gas. In addition, the 2019 amendments removed the zero to 10 percent bonus points for unsolicited proposals, which gave companies submitting unsolicited bids a competitive advantage over other contenders. Instead, if the party submitting the unsolicited proposal does not win the bid, it will be compensated by the winning company for the cost of the feasibility study, which in no case shall exceed 1 percent of the total cost of the project.

The Albanian Competition Authority http://www.caa.gov.al/?lng=en    is the agency that reviews transactions for competition-related concerns. The Law on Protection of Competition governs incoming foreign investment whether through mergers, acquisitions, takeovers, or green-field investments, irrespective of industry or sector. In the case of share transfers in insurance, banking and non-banking financial industries, the Financial Supervisory Authority (  http://amf.gov.al/   ) and the Bank of Albania https://www.bankofalbania.org/    may require additional regulatory approvals. Transactions between parties outside Albania, including foreign-to-foreign transactions, are covered by the competition law, which states that its provisions apply to all activities, domestic or foreign, that directly or indirectly affect the Albanian market. Parties can appeal the decision of the CA to the Tirana First Instance Court within 30 days of receiving the notification. The appeal does not suspend the enforcement of the decision that authorize concentrations and the temporary measures.

The Albanian constitution guarantees the right of private property. According to Article 41, expropriation or limitation on the exercise of a property right can occur only if it serves the public interest and with fair compensation. During the post-communist period, expropriation has been limited to land for public interest, mainly infrastructure projects such as roads, energy infrastructure, water works, airports, and other facilities. Compensation has generally been reported as being below market value and owners have complained that the compensation process is slow, and unfair. Civil courts are responsible for resolving such complaints.

Changes in government can also affect foreign investments. Following the 2013 elections and peaceful transition of power, the new government revoked, or renegotiated numerous concession agreements, licenses, and contracts signed by the previous government with both domestic and international investors. This practice has occurred in other years as well.

There are many ongoing disputes regarding property confiscated during the communist regime. Identifying ownership is a longstanding problem in Albania that makes restitution for expropriated properties difficult. The restitution and compensation process started in 1993 but has been slow and marred by corruption. Many U.S. citizens of Albanian origin have been in engaged in long-running restitution disputes. Court cases go on for years without a final decision, causing many to refer their case to the European Court of Human Rights (ECHR) in Strasbourg, France. A significant number of applications are pending for consideration before the ECHR. Even after settlement in Strasbourg, enforcement remains slow.

To address the situation, the GOA approved new property compensation legislation in 2018 that aims to resolve pending claims for restitution and compensation. The 2018 law reduces the burden on the state budget by changing the cash compensation formula. The legislation presents three methods of compensation for confiscation claims: restitution; compensation of property with similarly valued land in a different location; or financial compensation. It also set a ten-year timeframe for completion of the process. In February 2020, the Albanian parliament approved a law “On the Finalization of the Transitory Process of Property Deeds in the Republic of Albania,” which aims to finalize land allocation and privatization processes contained in 14 various laws issued between 1991 and 2018.

The GOA has generally not engaged in expropriation actions against U.S. investments, companies, or representatives. There have been limited cases in which the government has revoked licenses, specifically in the mining and energy sectors, based on contract violation claims.

The Law on Strategic Investments, approved in 2015, empowers the government to expropriate private property for the development of private projects deemed special strategic projects. Despite the provision that the government would act when parties fail to reach an agreement, the clause is a source of controversy because it entitles the government to expropriate private property in the interest of another private party. The expropriation procedures are consistent with the law on the expropriation, and the cost for expropriation would be incurred by the strategic investor. The provision has yet to be exercised.

Albania maintains adequate bankruptcy legislation, though corrupt and inefficient bankruptcy court proceedings make it difficult for companies to reorganize or discharge debts through bankruptcy.

A 2016 law on bankruptcy aimed to close loopholes in the insolvency regime, decrease unnecessary market exit procedures, reduce fraud, and ease collateral recovery procedures. The Bankruptcy Law governs the reorganization or liquidation of insolvent businesses. It sets out non-discriminatory and mandatory rules for the repayment of the obligations by a debtor in a bankruptcy procedure. The law establishes statutory time limits for insolvency procedures, professional qualifications for insolvency administrators, and an Agency of Insolvency Supervision to regulate the profession of insolvency administrators.

Debtors and creditors can initiate a bankruptcy procedure and can file for either liquidation or reorganization. Bankruptcy proceedings may be invoked when the debtor is unable to pay the obligations at the maturity date or the value of its liabilities exceeds the value of the assets.

According to the provisions of the Bankruptcy Law, the initiation of bankruptcy proceedings suspends the enforcement of claims by all creditors against the debtor subject to bankruptcy. Creditors of all categories must submit their claims to the bankruptcy administrator. The Bankruptcy Law provides specific treatment for different categories, including secured creditors, preferred creditors, unsecured creditors, and final creditors whose claims would be paid after all other creditors were satisfied. The claims of the secured creditors are to be satisfied by the assets of the debtor, which secure such claims under security agreements. The claims of the unsecured creditors are to be paid out of the bankruptcy estate, excluding the assets used for payment of the secured creditors, following the priority ranking as outlined in the Albanian Civil Code.

Pursuant to the provisions of the Bankruptcy Law, creditors have the right to establish a creditors committee. The creditors committee is appointed by the Commercial Section Courts before the first meeting of the creditor assembly. The creditors committee represents the secured creditors, preferred creditors, and the unsecured creditors. The committee has the right (a) to support and supervise the activities of the insolvency administrator; (b) to request and receive information about the insolvency proceedings; (c) to inspect the books and records; and (d) to order an examination of the revenues and cash balances.

If the creditors and administrator agree that reorganization is the company’s best option, the bankruptcy administrator prepares a reorganization plan and submits it to the court for authorizing implementation.

According to the insolvency procedures, only creditors whose rights are affected by the proposed reorganization plan enjoy the right to vote, and the dissenting creditors in reorganization receive at least as much as what they would have obtained in a liquidation. Creditors are divided into classes for the purposes of voting on the reorganization plan and each class votes separately. Creditors of the same class are treated equally. The insolvency framework allows for the continuation of contracts supplying essential goods and services to the debtor, the rejection by the debtor of overly burdensome contracts, the avoidance of preferential or undervalued transactions, and the possibility of the debtor obtaining credit after commencement of insolvency proceedings. No priority is assigned to post-commencement over secured creditors. Post-commencement credit is assigned over ordinary unsecured creditors.

The creditor has the right to object to decisions accepting or rejecting creditors’ claims and to request information from the insolvency representative. The selection and appointment of insolvency representative does not require the approval of the creditor. In addition, the sale of substantial assets of the debtor does not require the approval of the creditor. According to the law on bankruptcy, foreign creditors have the same rights as domestic creditors with respect to the commencement of, and participation in, a bankruptcy proceeding. The claim is valued as of the date the insolvency proceeding is opened. Claims expressed in foreign currency are converted into Albanian currency according to the official exchange rate applicable to the place of payment at the time of the opening of the proceeding.

The Albanian Criminal Code contains several criminal offenses in bankruptcy, including (i) whether the bankruptcy was provoked intentionally; (ii) concealment of bankruptcy status; (iii) concealment of assets after bankruptcy; and (iv) failure to comply with the obligations arising under bankruptcy proceeding.

According to the World Bank’s 2020 Doing Business Report, Albania ranked 39th out of 190 countries in the insolvency index. A referenced analysis of resolving insolvency can be found at the following link:

 http://documents.worldbank.org/curated/en/255991574747242507/Doing-Business-2020-Comparing-Business-Regulation-in-190-Economies-Economy-Profile-of-Albania

The Albanian Investment Development Agency (AIDA; www.aida.gov.al) is the best source to find incentives offered across a variety of sectors. Aside from the incentives listed below, individual parties may negotiate additional incentives directly with AIDA, the Ministry of Finance and Economy, or other ministries, depending on the sector.

To boost investments in strategic sectors, the GoA approved a Law on Strategic Investments in May 2015 that outlines the criteria, rules, and procedures that state authorities employ when approving a strategic investment. The GoA has extended the deadline to apply to qualify as a strategic investment to December 2023. A strategic investment is defined as an investment of public interest based on several criteria, including the size of the investment, implementation time, productivity and value added, creation of jobs, sectoral economic priorities, and regional and local economic development. The law does not discriminate between foreign and domestic investors.

The following sectors are defined as strategic sectors: mining and energy, transport, electronic communication infrastructure, urban waste industry, tourism, agriculture (large farms) and fishing, economic zones, and development priority areas. Investments in strategic sectors may obtain assisted procedure and special procedure, based on the level of investment, which varies from EUR one million to EUR 100 million, depending on the sector and other criteria stipulated in the law.

In the assisted procedure, public administration agencies coordinate, assist, and supervise the entire administrative process for investment approval and makes state-owned property needed for the investment available to the investor. Under the special procedure, the investor also enjoys state support for the expropriation of private property and the ratification of the contract by parliament.

The law and bylaws that entered into force on January 1, 2016, established the Strategic Investments Committee (SIC), a commission in charge of approving strategic investments. The Committee is headed by the prime minister and members include ministers covering the respective strategic sectors, the state advocate, and relevant ministers whose portfolios are affected by the strategic investment. AIDA serves as the Secretariat of SIC and oversees providing administrative support to investors. The SIC grants the status of assisted procedure and special procedure for strategic investments and investors based on the size of investments and other criteria defined in the law.

Major Incentives Albania Offers:

Energy and Mining, Transport, Electronic Communication Infrastructure, and Urban Waste Industry:  Investments greater than EUR 30 million enjoy the status of assisted procedure, while investments of EUR 50 million or more enjoy special procedure status.

The government offers power purchasing agreements (PPA) for 15 years for electricity produced from hydroelectric plants with an installed capacity of less than 15 megawatts. The government also offers feed-in-premium tariff for solar installations with installed capacity of less than two megawatts and for wind installation of less than three megawatts. Exemption from custom duties and VAT is available for the manufacturing or the mounting of solar panel systems for hot water production.

Certain machinery and equipment imported for the construction of hydropower plants are VAT exempt. The government supports the construction of small wind and photovoltaic parks with an installed capacity of less than three megawatts and two megawatts, respectively, by offering feed-in-premium tariffs for 15 years. The Energy Regulatory Authority (ERE;  http://www.ere.gov.al/  ) conducts an annual review of the feed-in-premium tariffs for wind and photovoltaic parks. The ERE also conducts an annual review of the feed-in-tariffs for small hydroelectric plants with an installed capacity of less than 15 megawatts. Imports of machinery and equipment for investments of greater than EUR 400,000 for small wind and solar parks with an installed capacity of less than three megawatts and two megawatts, respectively, enjoy a VAT exemption. Imports of hot water solar panels for household and industrial use are also VAT exempt.

Tourism and Agritourism:  Investments of five million euro or more enjoy the status of assisted procedure, while investments greater than EUR 50 million enjoy the status of special procedure. In 2018, the GoA introduced new incentives to promote the tourism sector. International hotel brands that invest at least USD 8 million for a four-star hotel and USD 15 million for a five-star hotel are exempt from property taxes for 10 years, pay no profit taxes, and pay a VAT of 6 percent for any service on their hotels or resorts. For all other hotels and resorts, the GoA reduced the VAT on accommodation from 20 percent to 6 percent. Profit taxes for agritourism ventures were reduced to 5 percent from 15 percent previously, while VAT for accommodation is now 6 percent, down from 20 percent. Five star hotels and agritourism facilities are exempt from the tax on impact on infrastructure while both four and five start hotels are exempt from tax on buildings.

Agriculture (Large Agricultural Farms) and Fishing:  Investments greater than EUR three million that create at least 50 new jobs enjoy the status of assisted procedure, while investments greater than EUR 50 million enjoy the status of special procedure. In addition, the GoA offers a wide range of incentives and subsidies for investments in the agriculture sector. The funds are a direct contribution from the state budget and the EU Instrument of Pre-Accession for Rural Development Fund (IPARD.) IPARD funds allocated for the period 2018-2020 totaled EUR 71 million. The program is managed by the Agricultural and Rural Development Agency (  http://azhbr.gov.al/  ). Agricultural inputs, agricultural machinery, and veterinary services are exempt from VAT. The government offers other subsidies to agricultural farms and wholesale trade companies that export agricultural products.

Some incentives offered in the agriculture sector include: Zero VAT for agricultural machineries and for 27 fishing industry items including ships, nets, electronic equipment, refrigerators, ship engines, etc. Zero tariff for the registration and compulsory vaccination of livestock. Zero tax for the purchase of diesel from fishing vessels (0 excise, 0 fuel tax, 0 carbon tax.) A reduction of profit tax up to 5 percent for Agricultural Cooperative Societies and 10 percent VAT for supply of agricultural inputs including chemical fertilizers, pesticides, seeds, and seedlings. In addition, those investing in agriculture sector can rent agriculture land from 10 to 99 years.

Development Priority Areas:  Investments greater than EUR one million that create at least 150 new jobs enjoy the status of assisted procedure. Investments greater than EUR 10 million that create at least 600 new jobs enjoy the status of special procedure.

Foreign Tax Credit: Albania applies foreign tax credit rights even in cases where no double taxation treaty exists with the country in which the tax is paid. If a double taxation treaty is in force, double taxation is avoided either through an exemption or by granting tax credits up to the amount of the applicable Albanian corporate income tax rate (currently 15 percent).

In 2019, the GoA reduced the dividend tax from 15 percent to 8 percent.

Corporate Income Tax Exemption:  Film studios and cinematographic productions, licensed and funded by the National Cinematographic Center, are exempt from corporate income tax.

Loss Carry Forward for Corporate Income Tax Purposes:  Fiscal losses can be carried forward for three consecutive years (the first losses are used first). However, the losses may not be carried forward if more than 50 percent of direct or indirect ownership of the share capital or voting rights of the taxpayer is transferred (changed) during the tax year.

Lease of Public Property:  The GoA can lease public property of more than 500 square meters or grant a concession for the symbolic price of one euro if the properties will be used for manufacturing activities with an investment exceeding EUR 10 million, or for inward processing activities. The GoA can also lease public property or grant a concession for the symbolic price of one euro for investments of more than EUR two million for activities that address certain social and economic issues, as well as activities related to sports, culture, tourism, and cultural heritage. Criteria and terms are decided on an individual basis by the Council of Ministers.

Incentives for the Manufacturing Sector and ICT:  The GoA reduced the profit tax from 15 percent to 5 percent for software development companies and the automotive industry. Manufacturing activities are exempt from 20 percent VAT on imports of machinery and equipment. The government offers a one-euro symbolic rent for government-owned property (land and buildings) for investments exceeding USD 2.7 million that create a minimum of 50 jobs. No VAT is charged for products processed for re-exports. Employers are exempt from paying social security tax for one year for all new employees. The GoA pays the first four months of salaries for new employees and offers various financing incentives for job training.

The manufacturing sector obtains VAT refunds immediately in the case of zero risk exporters, within 30 days if the taxpayer is an exporter, and within 60 days in the case of other taxpayers.

Apparel and footwear producers are exempt from 20 percent VAT on raw materials if the finished product is exported. In 2011, the GoA also removed customs tariffs for imported apparel and raw materials in the textile and shoe industries (e.g., leather used for clothes, cotton, viscose, velvet, sewing accessories, and similar items).

Technological and Development Areas (TEDA):  The Law on Economic Development Areas provides fiscal and administrative incentives for companies that invest in this sector and for firms that establish a presence in these areas. Major incentives include: Developers and users benefit from a 50 percent deduction of profit tax for five years, exemption from the infrastructure impact tax, and exemption from real estate tax for five years. A full list of incentives can be found at:   TEDA (aida.gov.al)  

Albania has no functional duty-free import zones or free trade zones, although legislation exists for their creation. The May 2015 amendments to the Law on the Establishment and Operation of Technological and Development Areas (TEDAs) created the legal framework to establish TEDAs, defining the incentives for developers investing in the development of these zones and companies operating within the zones.

The Albanian government has granted the status of the Technological and Development Areas to TEDA Spitalle (49.1 ha), Koplik (61 ha) and Kashar (35 ha) (Tirana) but none has been developed to date.

There are no performance requirements for foreign investors or minimum requirements for domestic content in goods or technology. Investment incentives are equally available to foreign and domestic investors. Investments in certain sectors require a license or authorization and procedures are similar for foreign and domestic investors.

Visa, residence, and work permit requirements are straightforward and generally do not pose an undue burden on potential investors.

The government approved a new Law on Foreigners in June 2021, which partially aligns the domestic legislation, including that on migration, with the EU Directives. The new law introduces a single application procedure for permits. For investors there is a special permit called “Unique Investor Permit.” Foreign investors are issued a 2-year unique investor permit if they invest in Albania and meet certain criteria, including a quota ratio of one to five of foreign and Albanian workers. In addition, same ratio should be preserved in the Board of Directors and other leading and supervisory structures of the company. Salaries of the Albanian workers should match the average of last year for equivalent positions. The permit can be renewed for an additional three years and after that the investor is eligible to receive a permanent permit provided that they fulfil the criteria outlined above and prove that the company is properly registered, has paid taxes and is not incurring losses. The U.S. citizens when applying for the first time receives a five-year permit. Foreign investors can obtain the single permit by the immigration authorities following the initial approval for employment from the National Agency for Employment and Skills ( https://www.akpa.gov.al/https://www.akpa.gov.al/  .) U.S. citizens along with EU, Western Balkans, and Schengen-country citizens are exempt from this requirement. In addition, U.S., EU, and Kosovo citizens when applying for residency permit for the first time, have a term of 5 years. The new law also introduced the National Electronic Register for Foreigners (NERF), which is a state database on foreigners, who enter or intend to enter Albania, with purpose of staying, transiting, working, or studying in Albania. NERF will register data on foreign nationals, who have an entry visa, stay, or transit in the Republic of Albania, have a temporary or permanent residence permit, and have a have a unique permit (residence and employment) in Albania.

The Council of Ministers approved an annual quota of foreign workers following a needs assessment by sector and profession. However, work permits for staff that occupy key positions, among other categories, can be issued outside the annual quota.

Albanian legislation regulating the functioning of the National Agency of Information (AKSHI) requires that every company contracted by the government to develop a computer system provide the source code and all related technical documents of the system. In addition, every government system and its data must be hosted at the government datacenter maintained by AKSHI.

There are no legal restrictions to transferring business-related data abroad, except for a few cases that need prior consent. There are more stringent requirements for personal data. Albania has comprehensive legislation for the protection of personal data: the Law on the Protection of Personal Data, including by-laws, as well as the 1981 Convention for the Protection of Individuals with regard to Automatic Processing of Personal Data, and the Additional Protocol to the Convention regarding Supervisory Authorities and Trans-border Flows of Personal Data, ratified by Albania in 2004. The authority in charge of the protection of personal data is the Information and Data Protection Commissioner https://www.idp.al/?lang=en   .

Based on Albanian legislation, international transfers of personal data in countries deemed to have an adequate level of protection are not restricted. However, companies must notify the Commissioner in advance of any processing of personal data and any intention to transfer data to third countries. This applies to companies in foreign jurisdictions that operate in Albania using any means located within the country. To transfer data to third countries that do not have an adequate protection level, companies need prior authorization from the Commissioner. There are exemptions to this policy for certain data categories defined by the Commissioner as well as when certain conditions are met. Countries with an adequate protection level include EU member states, European Economic Area countries, members of the 1981 Convention and related protocol, and all countries approved by the European Commission.

Many foreign companies operating in Albania that process sensitive data opt to keep their data in Albania.

Individuals and investors face significant challenges with protection and enforcement of property rights. Despite some improvements, procedures remain cumbersome, and registrants have complained of corruption during the process. Over the last three decades, the GoA has drafted and passed much, though not all, of its property legislation in a piecemeal and uncoordinated way. However, the GoA is working to complete the process for registration and compensation of properties, and the law on the finalization of transitional ownership processes adopted in March 2020, specifically aims to consolidate property rights by finalizing land allocation and privatization processes contained in 14 various laws issued between 1991 and 2018. According to the European Commission Report 2021 on Albania, progress on property rights should be made on further first registration of properties and transitional ownership processes, in a transparent and inclusive manner. The GoA aims to fully digitize property documents within 2023, however, the poor state of the data is a risk for title security and a constraint to investment. To streamline the property management process, the GoA established in April 2019 the State Cadaster Agency (ASHK), which merged different agencies responsible for property registration, compensation, and legalization, including the Immovable Property Registration Office (IPRO), the Agency of Inventory and Transfer of Public Properties (AITPP), and the Agency for the Legalization and Urbanization of Informal Areas (ALUIZNI).

The property registration system has improved thanks to international donor assistance, but the process has moved forward very slowly as Albania has yet to complete the initial registration of property titles in the country. In total, about 3.54 million properties were registered as part of the initial registration process. In December 2021, GoA launched a two-year project which aims to complete the digitization of the about 2.3 million remaining properties however plot records for many of these properties are still only in paper form and often in poor and outdated condition. Approximately half a million properties have still not been registered for the first time, which includes the southern coastal area. In 2020, the State Cadaster Agency initiated the process of first registration for eight zones in the Himara municipality area that holds significant potential for the tourism industry.

The Agency for the Treatment of Property (ATP) continued assessing requests and distributing funds for compensation of properties. In 2021, it distributed around USD 9.5 million from the financial fund and an area of around 100 hectares from the land fund.

Albania has registered an estimated 440,000 illegal structures, built without permits, and illicit construction continues to be a major impediment to securing property titles. A process that aims to legalize or eliminate such structures started in 2006 but is not complete. Around 200,000 legalization permits were issued through the end of 2020. The fluid situation has led to clashes between squatters, owners of allegedly illegal buildings, and the Albanian State Police including during the demolition of these structures to make way for public infrastructure projects.

According to the 2020 World Bank’s “Doing Business Report,” Albania performed poorly in the property registration category, ranking 98th out of 190 countries.  It took an average of 19 days and five procedures to register property, and the associated costs could reach 8.9 percent of the total property value. The civil court system manages property rights disputes, but verdicts can take years, authorities often fail to enforce court decisions, and corruption concerns persist within the judiciary.

Albania is not included on the U.S. Trade Representative’s (USTR’s) Special 301 Report or Notorious Markets List. That said, intellectual property rights (IPR) infringement and theft are common due to weak legal structures and poor enforcement. Counterfeit goods are present in some local markets and shopping malls, including software, garments, machines, and cigarettes. Albanian law protects copyrights, patents, trademarks, industrial designs, and geographical indications, but enforcement of these laws remains weak. Regulators are ineffective at collecting fines and prosecutors rarely press charges for IPR theft. U.S. companies should consult an experienced IPR attorney and avoid potential risks by establishing solid commercial relationships and drafting strong contracts. According to the 2021 International Property Right Index published by Property Right Alliance, Albania ranks 98th out of 129 countries evaluated, registering an improvement compared to the previous year when ranked 112th. It ranked 79th in the subcategory of copyright protection and 23rd in trademark protection.

Amendments to the Albanian Industrial Property Law, introducing new provisions regarding trade secrets and trademarks entered into force in August 2021. The most significant change is the transposition of Directive (EU) 2016/943 on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure. Trade secrets were previously regulated by the Law on Entrepreneurs and Companies, and Labor Code, and their subject matter was defined in broader terms. Now, under the amended IP law, a trade secret is defined as undisclosed expert knowledge, experience or business information that is not generally known or easily accessible, that has a certain market value, and for which sufficient measures have been taken to keep it a secret.  In 2019, the Criminal Code was amended to include harsher punishments of up to three years in prison for IPR infringement.

In the areas of copyright, patent, and trademarks, the two main bodies responsible are the Copyright Directorate at the Ministry of Culture and the General Directorate of Industrial Property (GDIP), which is in charge of registering, administering, and promoting IPR. Other institutions responsible for IPR enforcement include the Copyright Division of the State Inspectorate for Market Surveillance (SIMS), the Audiovisual Media Authority (AMA), the General Directorate for Customs, the Tax Inspectorate, the Prosecutor’s Office, the State Police, and the courts. In 2018, the National Council of Copyrights was established as a specialized body responsible for monitoring the implementation of the law and certifying the methodology for establishing the tariffs. Two other important bodies in the protection and administration of IPR are the agencies for the Collective Administration (AAK) and the Copyrights Department within the Ministry of Culture. Four different AAKs have merged in 2017 to provide service into a sole window for the administration of IPR.

The 2021 amendments to the IP law also define the role and duties of the State Inspectorate for Market Surveillance (SIMS), the main responsibility of which is to ensure the safety of non-food consumer products by instigating internal market inspections. The SIMS, established in 2016, is responsible for inspecting, controlling, and enforcing copyright and other related rights.  Despite some improvements, actual law enforcement on copyrights continues to be problematic and copyright violations are persistent.  The number of copyright violation cases brought to court remains low. While official figures are not available this year, Customs does usually report the quantity of counterfeit goods destroyed annually.  In cases of seizures, the rights holder has the burden of proof and so must first inspect the goods to determine if they are infringing.  The rights holder is also responsible for the storage and destruction of the counterfeit goods.

Cigarettes are traditionally the most common counterfeited product seized by Customs. According to the EU 2021 report on Albania, the high number of counterfeit products in the country remains a cause for concern. Last year the customs administration suspended the release of more than 23,000 products suspected of infringing IPR.

The GDIP is responsible for registering and administering patents, commercial trademarks and service marks, industrial designs, and geographical indications. In 2020, the number of applications for registration of trademarks continued to rise, amounting to 1,164 national applications and 2,936 international applications. As for patents, 897 patent applications were filed at the GDIP in 2020, of which 12 were national patent applications with Albanian national applicants, and 885 patent applications were patents issued by the European Patent Office seeking protection in Albania.

Albania is party to the World Intellectual Property Organization (WIPO) Patent Law Treaty, the Patent Cooperation Treaty, the Berne Convention, the Paris Convention, and is a member of the European Patent Organization. The government became party to the London Agreement on the Implementation of Article 65 of the European Convention for Patents in 2013. In 2018, Parliament approved the Law 34/2018 on Albania’s adherence to the Vienna Agreement for the International Classification of the Figurative Elements of Marks as well as the agreements of Lisbon and Locarno on international classification and protection of industrial designs. In June 2019, Albania joined the Geneva Act of WIPO’s Lisbon Agreement on Appellations of Origin and Geographical Indications.

For additional information about national laws and points of contact at local IPR offices, please see WIPO’s country profiles at https://www.wipo.int/directory/en/  .

Resources for Rights Holders

Contact at Embassy Tirana on IPR issues:

E-mail: USALBusiness@state.gov 

Country resources:

American Chamber of Commerce

Address: Rr. Deshmoret e shkurtit, Sky Tower, kati 11 Ap 3 Tirana, Albania

Email:  info@amcham.com.al

Phone: +355 (0) 4225 9779

Fax: +355 (0) 4223 5350

(amcham.com.al) 

List of local lawyers:

tirana.usembassy.gov

The government has adopted policies to promote the free flow of financial resources and foreign investment in Albania. The Law on “Strategic Investments” is based on the principles of equal treatment, non-discrimination, and protection of foreign investments. Foreign investors have the right to expatriate all funds and contributions of their investment.  In accordance with IMF Article VIII, the government and Central Bank do not impose any restrictions on payments and transfers for international transactions. Despite Albania’s shallow foreign exchange market, banks enjoy enough liquidity to support sizeable positions.  Portfolio investments continue to be a challenge because they remain limited mostly to company shares, government bonds, and real estate as the Tirana stock market remains non-operational

In recent years, the constant reduction of non-performing loans has allowed commercial banks to loosen lending standards and increase overall lending especially as the economy has recovering from the severe COVID-19 economic disruption in 2020. Non-performing loans (NPL) at the end of 2021 dropped to 5.65 percent compared to 8.1 percent one year ago. Overall lending has steadily increased since 2019 and at the end of 2021 reached about USD 6 billion marking a 10 percent increase compared to 2020. The credit market is competitive, but interest rates in domestic currency can be high. Most mortgage and commercial loans are denominated in euros because rate differentials between local and foreign currency average 1.5 percent. Commercial banks operating in Albania have improved the quality and quantity of services they provide, including a large variety of credit instruments, traditional lines of credit, and bank drafts, etc.

In the absence of an effective stock market, the country’s banking sector is the main channel for business financing.  The sector is sound, profitable, and well capitalized. The Bank of Albania, the country’s Central Bank, is responsible for the licensing and supervision of the banking sector in Albania. The banking sector is 100 percent privately owned and its total assets have steadily increased over the years reaching USD 17 billion at the end of 2021 mostly based on customers deposits.  The banking sector has continued the consolidation process as the number of banks decreased from 16 in 2018 to 11 at the end of 2021 when the Greek Alpha Bank was purchased by OTP Bank. As of December 2021, the Turkish National Commercial Bank (BKT) was the largest bank in the market with 26 percent market share, followed by Albanian Credins Bank with 15.8 percent, and Austrian Raiffeisen Bank third with 15.3 percent.  The American Investment Bank is the only bank with U.S. shareholders and ranks sixth with 5.5 percent percent of the banking sector’s total assets.

The number of bank outlets has also decreased over the recent years also due to the consolidation. In December 2021, Albania had 417 bank outlets, down from 446 from 2019 and the peak of 552 in 2016. Capital adequacy, at 18 percent in December 2021, remains above Basel requirements and indicates sufficient assets.  At the end of 2021, the return on assets increased to 1.42 percent compared to 1.2 percent one year ago. As part of its strategy to stimulate business activity, the Bank of Albania has adopted a plan to ease monetary policy by continuing to persistently keep low interest rates. However, due to the recent inflationary pressure in March 2021, Bank of Albania increased the base interest rate to 1 percent, up from a historical low rate of 0.5 percent which was in place since June 2018.

Many of the banks operating in Albania are subsidiaries of foreign banks. Only three banks have an ownership structure whose majority shareholders are Albanian. However, the share of total assets of the banks with majority Albanian shareholders has increased because of the sector’s ongoing consolidation. There are no restrictions for foreigners who wish to establish a bank account. They are not required to prove residency status. However, U.S. citizens must complete a form allowing for the disclosure of their banking data to the IRS as required under the U.S. Foreign Account Tax Compliance Act.

Parliament approved a law in October 2019 to establish the Albanian Investment Corporation (AIC). The law entered in force in January 2020. The AIC would develop, manage, and administer state-owned property and assets, invest across all sectors by mobilizing state owned and private domestic and foreign capital, and promote economic and social development by investing in line with government-approved development policies.

The GoA plans to transfer state-owned assets, including state-owned land, to the AIC and provide initial capital to launch the corporation. In December 2021, the GoA transferred to the AIC close to USD 20 million. There is no publicly available information about the activities of the AIC for 2020 or 2021.

The IMF https://www.imf.org/en/News/Articles/2019/11/26/mcs11262019-albania-staff-concluding-statement-of-the-2019-article-iv-mission Staff Concluding Statement  of November 26, 2019, warned that the law would allow the government to direct individual investment decisions, which could make the AIC an off-budget spending tool that risks eroding fiscal discipline and circumventing public investment management processes.

State-owned enterprises (SOEs) are defined as legal entities that are entirely state-owned or state-controlled and operate as commercial companies in compliance with the Law on Entrepreneurs and Commercial Companies. SOEs operate mostly in the generation, distribution, and transmission of electricity, oil and gas, railways, postal services, ports, and water supply. There is no published list of SOEs.

The law does not discriminate between public and private companies operating in the same sector. The government requires SOEs to submit annual reports and undergo independent audits. SOEs are subject to the same tax levels and procedures and the same domestic accounting and international financial reporting standards as other commercial companies. The High State Audit audits SOE activities. SOEs are also subject to public procurement law.

Albania is yet to become party to the Government Procurement Agreement (GPA) of the WTO but has obtained observer status and is negotiating full accession (see  https://www.wto.org/english/tratop_e/gproc_e/memobs_e.htm  ).  Private companies can compete openly and under the same terms and conditions with respect to market share, products and services, and incentives.

SOE operation in Albania is regulated by the Law on Entrepreneurs and Commercial Companies, the Law on State Owned Enterprises, and the Law on the Transformation of State-Owned Enterprises into Commercial Companies. The Ministry of Economy and Finance and other relevant ministries, depending on the sector, represent the state as the owner of the SOEs. SOEs are not obligated by law to adhere to Organization for Economic Cooperation and Development (OECD) guidelines explicitly. However, basic principles of corporate governance are stipulated in the relevant laws and generally accord with OECD guidelines. The corporate governance structure of SOEs includes the supervisory board and the general director (administrator) in the case of joint stock companies. The supervisory board comprises three to nine members, who are not employed by the SOE. Two-thirds of board members are appointed by the representative of the Ministry of Economy and Finance, and one-third by the line ministry, local government unit, or institution to which the company reports. The Supervisory Board is the highest decision-making authority and appoints and dismisses the administrator of the SOE through a two-thirds vote.

The privatization process in Albania is nearing conclusion, with just a few major privatizations remaining. Entities to be privatized include OSHEE, the state-run electricity distributor; 16 percent of ALBtelecom, the fixed-line telephone and mobile company; and state-owned oil company Albpetrol. Other sectors might provide opportunities for privatization in the future.

The bidding process for privatizations is public, and relevant information is published by the Public Procurement Agency at   www.app.gov.al  . Foreign investors may participate in the privatization program. The Agency has not published timelines for future privatizations.

Public awareness of corporate social responsibility (CSR) and Responsible Business Conduct (RBC) in Albania is low, and CSR and RBC remains new concepts for much of the business community. The small level of CSR and RBC engagement in Albania comes primarily from international corporations operating in the energy, telecommunications, heavy industry, and banking sectors, and tends to focus on philanthropy and environmental issues. International organizations have recently improved efforts to promote CSR. Thanks to efforts by the international community and large international companies, the first Albanian CSR network was founded in March 2013 as a business-led, non-profit organization. The American Chamber of Commerce in Albania also formed a subcommittee in 2015 to promote CSR among its members.

Legislation governing CSR, labor, and employment rights, consumer protection, and environmental protection is robust, but enforcement and implementation are inconsistent. The Law on Commercial Companies and Entrepreneurs outlines generic corporate governance and accounting standards. According to that law and the Law on the National Business Registration Center, companies must disclose publicly when they change administrators and shareholders and to disclose financial statements. The Corporate Governance Code for unlisted joint stock companies incorporates the OECD definitions and principles on corporate governance but is not legally binding. The code provides guidance for Albanian companies and aims to provide best-practices while assisting Albanian companies to develop a governance framework.

Albania has been a member of the Extractive Industries Transparency Initiative (EITI) since 2013.

Department of State

• Country Reports on Human Rights Practices;
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities;
• U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises; and;
• Xinjiang Supply Chain Business Advisory 

Department of the Treasury

• OFAC Recent Actions

Department of Labor

• Findings on the Worst Forms of Child Labor Report;
• List of Goods Produced by Child Labor or Forced Labor;
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World and;
• Comply Chain.

Albania signed and ratified the Paris Agreement in 2016 and the Solidarity and Just Transition, Silesia Declaration in 2018. The country has committed to an effective transition to low GHG emissions. In 2019, Albania became member to the Nationally Determined Contribution (NDC) Partnership, showing its commitment to ambitious implementation of its NDC under the Paris Agreement and the 2030 Sustainable Development Goals. In July 2020, Albania submitted its National Energy and Climate Plan (NECP) for the period 2021-2030 to the Energy Secretariat for formal recommendations. In December 2020, the country approved the law on Climate Change and is the process of approving its bylaws defining the mechanism for monitoring and reporting of GHG emissions. The government has drafted the National Plan for Energy and Climate 2021-2030, which outlines plans of the government to reduce GHG emissions. Albania has one of the lowest emissions per capita in Europe in part due hydropower dominating electricity generation and in part due to limited levels of industrial manufacturing.

Endemic corruption continues to undermine the rule of law and jeopardize economic development. Foreign investors cite corruption including in the judiciary, a lack of transparency in public procurement, lack of transparency and competition, informal economy, and poor enforcement of contracts as some of the biggest problems in Albania. Despite some improvement in Albania’s score from 2013 to 2016, progress in tackling corruption has been slow and unsteady. In 2021, Albania’s Corruption Perceptions Index (CPI) score was 35 and its ranking fell by six slots from 104 to 110, a significant decline from the 2016 score and rank of respectively 39 and 83. Albania is still one of the most corrupt countries in Europe, according to the CPI and other observers.

The country has a sound legal framework to prevent conflict of interest and to fight corruption of public officials and politicians, including their family members. However, law enforcement is jeopardized by a heavily corrupt judicial system.

The passage of constitutional amendments in July 2016 to reform the judicial system was a major step forward, and reform, once fully implemented, is expected to position the country as a more attractive destination for international investors. Judicial reform has been described as the most significant development in Albania since the end of communism, and nearly one-third of the constitution was rewritten as part of the effort. The reform also entails the passage of laws to ensure implementation of the constitutional amendments. Judicial reform’s vetting process will ensure that prosecutors and judges with unexplained wealth or insufficient training, or those who have issued questionable verdicts, are removed from the system. As of publication, more than half of the judges and prosecutors who have faced vetting have either failed or resigned. The establishment of the Special Prosecution Office Against Corruption (SPAK) and Organized Crime and of the National Investigation Bureau, two new judicial bodies, will step up the fight against corruption and organized crime. Once fully implemented, judicial reform will discourage corruption, promote foreign and domestic investment, and allow Albania to compete more successfully in the global economy.

The government has ratified several corruption-related international treaties and conventions and is a member of major international organizations and programs dealing with corruption and organized crime. Albania has ratified the Civil Law Convention on Corruption (Council of Europe), the Criminal Law Convention on Corruption (Council of Europe), the Additional Protocol to Criminal Law Convention on Corruption (Council of Europe), and the United Nations Convention against Corruption (UNCAC). Albania has also ratified several key conventions in the broader field of economic crime, including the Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime (2001) and the Convention on Cybercrime (2002). Albania has been a member of the Group of States against Corruption (GRECO) since the ratification of the Criminal Law Convention on Corruption in 2001 and is a member of the Stability Pact Anti-Corruption Initiative (SPAI). Albania is not a member of the OECD Anti-Bribery Convention. Albania has adopted legislation for the protection of whistleblowers.

To curb corruption, the government announced a new online platform in 2017, “  Shqiperia qe Duam  ” (“The Albania We Want”), which invites citizens to submit complaints and allegations of corruption and misuse of office by government officials. The platform has a dedicated link for businesses. The Integrated Services Delivery Agency (ADISA), a government entity, provides a second online portal to report corruption. Effectiveness of the portal is minimal.

In February 2020, GoA approved the establishment of the Special Anticorruption and Anti-Evasion Unit which operates under the Council of Ministers. The mission of the unit is the coordination between the main public institutions, agencies, and state-owned companies in order to discover, investigate and punish corruption and abusive practices. During 2021, the National Network of Anti-Corruption Coordinators, a structure that is under the Minister of Justice, who also serves as the National Coordinator against corruption, became functional. The coordinators are placed in seventeen institutions that have the highest public perception of corruption. The coordinators collect, process, and analyze complaints filed by the citizens and businesses and report to the law enforcement authorities if necessary.

Despite progress, corruption remains pervasive. Albania has yet to build a solid track record of investigations, prosecution, conviction, and confiscation of criminal assets resulting from corruption-related offences.

Interested parties can file a complaint related to corruption directly to the coordinators embedded in the various institutions or by writing directly to them in the following e-mail, koordinatori.ak@drejtesia.gov.al  They can also use the anti-corruption platform by filing a complaint at shqiperiaqeduam.al 

Political violence is rare, the more recent instances being an attempt led by a former Albanian leader designated by the USG for corruption to breach a party headquarters in January 2022 that required police intervention and political protests in 2019 that included instances of civil disobedience, low-level violence and damage to property, and the use of tear gas by police. Albania’s April 2021 elections and transition to a new government were peaceful, as were its June 2019 local elections. On January 21, 2011, security forces shot and killed four protesters during a violent political demonstration. In its external relations, Albania has usually encouraged stability in the region and maintains generally friendly relations with neighboring countries.

Albania’s labor force numbers around 1.2 million people, according to official data. After peaking at 18.2 percent in the first quarter of 2014, the official estimated unemployment rate has significantly decreased in recent years. In December 2021, unemployment reached 11.4 percent compared to 11.8 percent at the end of 2020 marking an improvement following the economic disruption due to the COVID-19 pandemic. Unemployment among people aged 15-29 remains high, at 20.6 percent. Around 40 percent of the population is self-employed in the agriculture sector. According to the International Labor Organization (ILO), share of informal employment in the employed population was almost 57 percent in 2019, the highest in the region.

The institutions that oversee the labor market include the Ministry of Finance, Economy and Labor, the Ministry of Health and Social Protection, the National Employment Service, the State Labor Inspectorate, and private entities such as employment agencies and vocational training centers.  Albania has adopted a wide variety of regulations to monitor labor abuses, but enforcement is weak.

Outward labor migration remains an ongoing problem affecting the Albanian labor market especially in the IT and health sector. There is a growing concern about labor shortage for both skilled and unskilled workforces.  In recent years, media outlets have reported that a significant number of doctors and nurses have emigrated to the European Union, especially Germany. According to the World Bank, Albania has the lowest number of doctors per capita in the region with just 1.647 doctors per 1,000 inhabitants in 2019. In December 2021, the average public administration salary was approximately 70,531 lek (approximately USD 650) per month. The GoA has announced it will increase the minimum wage by 6.5 percent to 32,000 lek per month (approximately USD 300) in April 2022, which remains the lowest in the region.

In March 2019, parliament approved a new law on employment promotion, which defined public policies on employment and support programs. Albania has a tradition of a strong secondary educational system, while vocational schools are viewed as less prestigious and attract fewer students.  However, the government has more recently focused attention on vocational education. In the 2020-2021 academic year, about 19,000, or 18.5 percent, of high school pupils were enrolled in vocational schools.

The Law on Foreigners 79/2021 that was approved in July 2021 and various decisions of the Council of Ministers regulate the employment regime in Albania.  Employment can also be regulated through special laws in the case of specific projects, or to attract foreign investment.  The Law on TEDA’s provides financial and tax incentives for investments in the zone. Law on Foreigners extends the same employment and self-employment rights of Albanian citizens to citizens of the five Western Balkan countries and provides the same benefits that the original law provided to the citizens of EU and Schengen countries.

The Labor Code includes rules regarding contract termination procedures that distinguish layoffs from terminations.  Employment contracts can be limited or unlimited in duration, but typically cover an unlimited period if not specified in the contract. Employees can collect up to 12 months of salary in the event of an unexpected interruption of the contract. Unemployment compensation is approximately 50 percent of the minimum wage.

Pursuant to the Labor Code and the recently amended “Law on the Status of the Civil Employee,” both individual and collective employment contracts regulate labor relations between employees and management.  While there are no official data recording the number of collective bargaining agreements used throughout the economy, they are widely used in the public sector, including by SOEs. Albania has a labor dispute resolution mechanism as specified in the Labor Code, article 170, but the mechanism is considered inefficient. Strikes are rare in Albania, mostly due to the limited power of the trade unions and they have not posed a significant risk to investments.

Albania has been a member of the International Labor Organization since 1991 and has ratified 54 out of 189 ILO conventions, including the eight Fundamental Conventions, the four Governance Conventions, and 42 Technical Conventions. The implementation of labor relations and standards continues to be a challenge, according to the ILO.

See the U.S. Department of State Human Rights Report: https://www.state.gov/reports-bureau-of-democracy-human-rights-and-labor/country-reports-on-human-rights-practices/; and the U.S. Department of Labor Child Labor Report: http://www.dol.gov/ilab/reports/child-labor  .

U.S. Embassy Tirana, Albania
Rruga Stavro Vinjau, Nr. 14
Tirana, Albania
+355 4 224 7285
USALBusiness@state.gov  

The Algerian economy is challenging yet potentially highly rewarding. While the Algerian government publicly welcomes FDI, a difficult business climate, an inconsistent regulatory environment, and sometimes contradictory government policies complicate foreign investment. There are business opportunities in nearly every sector, including agribusiness, consumer goods, conventional and renewable energy, healthcare, mining, pharmaceuticals, power, recycling, telecommunications, and transportation.

The urgency for Algeria to diversify its economy away from reliance on hydrocarbons has increased amid low and fluctuating oil prices since mid-2014, a youth population bulge, and increased domestic consumption of energy resources. The government reiterated its intention to diversify in its August 2020 plan to recover from the COVID-19 crisis. The government has sought to reduce the country’s persistent trade deficit through import substitution policies, currency depreciation, and import tariffs as it attempts to preserve rapidly diminishing foreign exchange reserves. On January 29, 2019, the government implemented tariffs, known as DAPs, between 30-200 percent on over 1,000 goods it assessed were destined for direct sale to consumers. In January 2022, the Ministry of Commerce said it would expand the number of items subject to DAPs to 2,600; it has yet to publish the new list of affected goods.  Companies that set up local manufacturing operations can receive permission to import materials the government would not otherwise approve for import if the importer can show materials will be used in local production. Certain regulations explicitly favor local firms at the expense of foreign competitors, and frequent, unpredictable changes to business regulations have added to the uncertainty in the market.

There are two main agencies responsible for attracting foreign investment, the National Agency of Investment Development (ANDI) and the National Agency for the Valorization of Hydrocarbons (ALNAFT).

ANDI is the primary Algerian government agency tasked with recruiting and retaining foreign investment. ANDI runs branches in Algeria’s 58 states (wilayas) which are tasked with facilitating business registration, tax payments, and other administrative procedures for both domestic and foreign investors. U.S. companies report that the agency is understaffed and ineffective. Its “one-stop shops” only operate out of physical offices and do not maintain dialogue with investors after they have initiated an investment. The agency’s effectiveness is undercut by its lack of decision-making authority, particularly for industrial projects, which is exercised by the Ministry of Industry in general, the Minister of Industry specifically, and in many cases the Prime Minister. While the government operates an ombudsman’s office (Mediateur de la Republique), the office’s activities are not explicitly targeted toward investment retention.

ALNAFT is charged with attracting foreign investment to Algeria’s upstream oil and gas sector. In addition to organizing events marketing upstream opportunities to potential investors, the agency maintains a paid-access digital database with extensive technical information about Algeria’s hydrocarbons resources.

Establishing a presence in Algeria can take any of four basic forms: 1) a liaison office with no local partner requirement and no authority to perform commercial operations, 2) a branch office to execute a specific contract, with no obligation to have a local partner, allowing the parent company to conduct commercial activity (considered a resident Algerian entity without full legal authority), 3) a local company with 51 percent of capital held by a local company or shareholders, or 4) a foreign investor with up to 100% ownership in non-strategic sectors. A business can be incorporated as a joint stock company (JSC), a limited liability company (LLC), a limited partnership (LP), a limited partnership with shares (LPS), or an undeclared partnership. Groups and consortia are also used by foreign companies when partnering with other foreign companies or with local firms.

Foreign and domestic private entities have the right to establish and own business enterprises and engage in all forms of remunerative activity. However, the 51/49 rule requires majority Algerian ownership in all projects involving foreign investments in the “strategic sectors” of energy, mining, defense, transportation infrastructure, and pharmaceuticals (with the exception of innovative products), as well as for importers of goods for resale in Algeria.

The 51/49 investment rule poses challenges for investors. For example, the requirement hampers market access for foreign small and medium-sized enterprises (SMEs), as they often do not have the human resources or financial capital to navigate complex legal and regulatory requirements. Large companies can find creative ways to work within the law, sometimes with the cooperation of local authorities who are more flexible with large investments that promise significant job creation and technology and equipment transfers. SMEs usually do not receive this same consideration. There are also allegations that Algerian partners sometimes refuse to invest the required funds in the company’s business, require non-contract funds to win contracts, and send unqualified workers to job sites. Manufacturers are also concerned about intellectual property rights (IPR), as foreign companies do not want to surrender control of their designs and patents. Several U.S. companies have reported they have policies that preclude them from investing overseas without maintaining a majority share, out of concerns for both IPR and financial control of the local venture, which thus prevent them from establishing businesses in Algeria.

Algerian government officials defended the 51/49 requirement as necessary to prevent capital flight, protect Algerian businesses, and provide foreign businesses with local expertise. For sectors where the requirement remains, officials contend a range of tailored measures can mitigate the effect of the 51/49 rule and allow the minority foreign shareholder to exercise other means of control. Some foreign investors use multiple local partners in the same venture, effectively reducing ownership of each individual local partner to enable the foreign partner to own the largest share.

The Algerian government does not officially screen FDI, though Algerian state enterprises have a “right of first refusal” on transfers of foreign holdings to foreign shareholders in identified strategic industries. Companies must notify the Council for State Participation (CPE) of these transfers. In addition, initial foreign investments remain subject to approvals from a host of ministries that cover the proposed project, most often the Ministries of Commerce, Health, Pharmaceutical Industry, Energy and Mines, Telecommunications and Post, and Industry. U.S. companies have reported that certain high-profile industrial proposals, such as for automotive assembly, are subject to informal approval by the Prime Minister. In 2017, the government instituted an Investments Review Council chaired by the Prime Minister for the purpose of “following up” on investments; in practice, the establishment of the council means FDI proposals are subject to additional government scrutiny. According to the 2016 Investment Law, projects registered through the ANDI deemed to have special interest for the national economy or high employment generating potential may be eligible for extensive investment advantages. For any project over 5 billion dinars (approximately USD 35 million) to benefit from these advantages, it must be approved by the Prime Minister-chaired National Investments Council (CNI). The CNI previously met regularly, though it is not clear how the agenda of projects considered at each meeting is determined. Critics allege the CNI is a non-transparent mechanism which could be subject to capture by vested interests. In 2020 the operations of the CNI and the CPE were temporarily suspended pending review by the former Ministry of Industry, and in November 2021 the Prime Minister reported that almost 2,500 projects are awaiting approval from the council once it resumes activities.

Algeria has not conducted an investment policy review through the Organization for Economic Cooperation and Development (OECD) or the World Trade Organization (WTO). The last investment policy review by a third party was conducted by the United Nations Conference on Trade and Development (UNCTAD) in 2003 and published in 2004. Civil society organizations have not provided reviews of investment policy-related concerns.

Algeria offers an online information portal dedicated to business creation, www.jecreemonentreprise.dz, though the business registration website www.cnrc.org.dz is under maintenance and has been for more than two years. The Ministry of Commerce is currently developing a new electronic portal at https://cnrcinfo.cnrc.dz/qui-somme-nous/ . The websites provide information about several business registration steps applicable for registering certain kinds of businesses. Entrepreneurs report that additional information about requirements or regulation updates for business registration are available only in person at the various offices involved in the creation and registration process. The Ministry of Foreign Affairs also recently established an Information Bureau for the Promotion of Investments and Exports (BIPIE) to support Algerian diplomats working on economic issues abroad, as well as provide local points of contact for Algerian companies operating overseas.

Algeria does not restrict domestic investors from investing overseas, though the process for accessing foreign currency for such investments is heavily regulated. The exchange of Algerian dinars outside of Algerian territory is illegal, as is the carrying abroad of more than 10,000 dinars in cash at a time (approximately USD 72; see section 7 for more details on currency exchange restrictions).

Algeria’s National Agency to Promote External Trade (ALGEX), housed in the Ministry of Commerce, is the agency responsible for supporting Algerian businesses outside the hydrocarbons sector that want to export abroad. ALGEX controls a special promotion fund to promote exports, but the funds can only be accessed for limited purposes. For example, funds might be provided to pay for construction of a booth at a trade fair, but travel costs associated with getting to the fair – which can be expensive for overseas shows – would not be covered. The Algerian Company of Insurance and Guarantees to Exporters (CAGEX), also housed under the Ministry of Commerce, provides insurance to exporters. In 2003, Algeria established a National Consultative Council for Promotion of Exports (CCNCPE) that is supposed to meet annually. Algerian exporters claim difficulties working with ALGEX including long delays in obtaining support funds, and the lack of ALGEX offices overseas despite a 2003 law for their creation. The Bank of Algeria’s 2002 Money and Credit law allows Algerians to request the conversion of dinars to foreign currency in order to finance their export activities, but exporters must repatriate an equivalent amount to any funds spent abroad, for example money spent on marketing or other business costs incurred.

The national government manages all regulatory processes. Legal and regulatory procedures, as written, are considered consistent with international norms, although the decision-making process is at times opaque.

Algeria implemented the Financial Accounting System (FAS) in 2010. Though legislation does not make explicit references, FAS appears to be based on International Accounting Standards Board and International Financial Reporting Standards (IFRS). Operators generally find accounting standards follow international norms, though they note that some particularly complex processes in IFRS have detailed explanations and instructions but are explained relatively briefly in FAS.

There is no mechanism for public comment on draft laws, regulations, or regulatory procedures. Copies of draft laws are generally not made publicly accessible before enactment, although the Ministry of Finance published drafts of the 2021 and 2022 Finance Laws in advance of consideration by Parliament. Government officials often give testimony to Parliament on draft legislation, and that testimony typically receives press coverage. Occasionally, copies of bills are leaked to the media. All laws and some regulations are published in the Official Gazette (www.joradp.dz ) in Arabic and French, but the database has only limited online search features and no summaries are published. Secondary legislation and/or administrative acts (known as “circulaires” or “directives”) often provide important details on how to implement laws and procedures. Administrative acts are generally written at the ministry level and not made public, though may be available if requested in person at a particular agency or ministry. Public tenders are often accompanied by a book of specifications only provided upon payment. The government does not specifically promote or require companies’ environmental, social, and governance (ESG) disclosure.

In some cases, authority over a matter may rest among multiple ministries, which may impose additional bureaucratic steps and the likelihood of either inaction or the issuance of conflicting regulations. The development of regulations occurs largely away from public view; internal discussions at or between ministries are not usually made public. In some instances, the only public interaction on regulations development is a press release from the official state press service at the conclusion of the process; in other cases, a press release is issued earlier. Regulatory enforcement mechanisms and agencies exist at some ministries, but they are usually understaffed, and enforcement remains weak.

The National Economic, Social, and Environmental Council (CNESE) studies the effects of Algerian government policies and regulations in economic, social, and environmental spheres. CNESE provides feedback on proposed legislation, but neither the feedback nor legislation are necessarily made public.

Information on external debt obligations up to fiscal year 2019 is publicly available online via the Central Bank’s quarterly statistical bulletin. The statistical bulletin describes external debt and not public debt, but the Ministry of Finance’s budget execution summaries reflect amalgamated debt totals. The Ministry of Finance is planning to create an electronic, consolidated database of internal and external debt information, and in 2019 published additional public debt information on its website. A 2017 amendment to the 2003 law on currency and credit covering non-conventional financing authorizes the Central Bank to purchase bonds directly from the Treasury for a period of up to five years. The Ministry of Finance indicated this would include purchasing debt from state enterprises, allowing the Central Bank to transfer money to the treasury, which would then provide the cash to, for example, state owned enterprises in exchange for their debt. In September 2019, the Prime Minister announced Algeria would no longer use non-conventional financing, although the Ministry of Finance stressed the program remains available until 2022. In 2021, the non-profit Cercle d’Action et de Réflexion pour l’Entreprise (CARE) launched an online dashboard compiling key economic figures published by various ministries within the Algerian government.

Algeria is not a member of any regional economic bloc or of the WTO. The structure of Algerian regulations largely follows European – specifically French – standards.

Algeria’s legal system is based on the French civil law tradition. The commercial law was established in 1975 and most recently updated in 2007 ( www.joradp.dz/TRV/FCom.pdf). The judiciary is nominally independent from the executive branch, but U.S. companies have reported allegations of political pressure exerted on the courts by the executive. Organizations representing lawyers and judges have protested during the past year against alleged executive branch interference in judicial independence. Regulation enforcement actions are adjudicated in the national courts system and are appealable. Algeria has a system of administrative tribunals for adjudicating disputes with the government, distinct from the courts that handle civil disputes and criminal cases. Decisions made under treaties or conventions to which Algeria is a signatory are binding and enforceable under Algerian law.

The 51/49 investment rule requires a majority Algerian ownership in “strategic sectors” as prescribed in the 2020 Complementary Finance Law (see section 2), as well as for importers of goods available for resale domestically as prescribed in the 2021 Finance Law. There are few other laws restricting foreign investment. In practice, the many regulatory and bureaucratic requirements for business operations provide officials avenues to informally advance political or protectionist policies. The investment law enacted in 2016 charged ANDI with creating four new branches to assist with business establishment and the management of investment incentives. ANDI’s website (www.andi.dz/index.php/en/investir-en-algerie ) lists the relevant laws, rules, procedures, and reporting requirements for investors. Much of the information lacks detail – particularly for the new incentives elaborated in the 2016 investments law – and refers prospective investors to ANDI’s physical “one-stop shops” located throughout the country.

There is an ongoing effort by the customs service, under the Ministry of Finance, to establish a new digital platform featuring one-stop shops for importers and exporters to streamline bureaucratic processes. The Ministry announced the service would begin in 2021, but the Ministry of Industry clarified in February 2022 that the one-stop shop would be set up with the approval of the new investment law.

The National Competition Council (www.conseil-concurrence.dz/) is responsible for reviewing both domestic and foreign competition-related concerns. Established in late 2013, it is housed under the Ministry of Commerce. Once the economic concentration of an enterprise exceeds 40 percent of a market’s sales or purchases, the Competition Council is authorized to investigate, though a 2008 directive from the Ministry of Commerce exempted economic operators working for “national economic progress” from this review.

The Algerian state can expropriate property under limited circumstances, with the state required to pay “just and equitable” compensation to the property owners. Expropriation of property is extremely rare, with no reported cases within the last 10 years. In late 2018, however, a government measure required farmers to comply with a new regulation altering the concession contracts of their land in a way that would cede more control to the government. Those who refused to switch contract type by December 31, 2018, lost the right to their land.

Algeria’s bankruptcy system is underdeveloped. While bankruptcy per se is not criminalized, management decisions (such as company spending, investment decisions, and even procedural mistakes) can be subject to criminal penalties including fines and incarceration, so decisions that lead to bankruptcy could be punishable under Algerian criminal law. However, bankruptcy cases rarely proceed to a full dissolution of assets. The Algerian government generally props up public companies on the verge of bankruptcy via cash infusions from the public banking system. According to the World Bank’s Doing Business report, debtors and creditors may file for both liquidation and reorganization.

Since the resignation of former President Abdelaziz Bouteflika in early 2019, the courts have given the government authority to put several companies in receivership and have appointed temporary heads to direct them following the arrests of their CEOs as part of a broad anti-corruption drive. The government has since nationalized some of the companies following the conviction of the owners.

While the government previously required 51 percent Algerian ownership of all investments, the 2020 budget law restricted this requirement to the energy, mining, defense, transportation infrastructure, and pharmaceuticals manufacturing sectors, and the 2021 budget law extended the requirement to importers of goods for resale in Algeria.

Any incentive offered by the Algerian government is generally available to any company, though there are multiple tiers of “common, additional, and exceptional” incentives under the 2016 investments law (www.joradp.dz/FTP/jo-francais/2016/F2016046.pdf). “Common” incentives available to all investors include exemption from customs duties for all imported production inputs, exemption from value-added tax (VAT) for all imported goods and services that enter directly into the implementation of the investment project, a 90 percent reduction of tenancy fees during construction, and a 10-year exemption on real estate taxes. Investors also benefit from a three-year exemption on corporate and professional activity taxes and a 50 percent reduction for three years on tenancy fees after construction is completed. Additional incentives are available for investments made outside of Algeria’s coastal regions, to include the reduction of tenancy fees to a symbolic one dinar (USD .01) per square meter of land for 10 years in the High Plateau region and 15 years in the south of Algeria, plus a 50 percent reduction thereafter. The law also charges the state to cover, in part or in full, the necessary infrastructure works for the realization of the investment. “Exceptional” incentives apply for investments “of special interest to the national economy,” including the extension of the common tax incentives to 10 years. The sectors of “special interest” have not yet been publicly specified. An investment must receive the approval of the National Investments Council in order to qualify for the exceptional incentives. There are no specific investment incentives for investors from underrepresented groups.

Regulations passed in a March 2017 executive decree exclude approximately 150 economic activities from eligibility for the incentives (www.joradp.dz/FTP/jo-francais/2017/F2017016.pdf). The list of excluded investments is concentrated on the services sector but also includes manufacturing for some products. All investments in sales, whether retail or wholesale, and imports business are ineligible.

The 2016 investments law also provided state guarantees for the transfer of incoming investment capital and outgoing profits. Pre-existing incentives established by other laws and regulations also include favorable loan rates well below inflation from public banks for qualified investments.

The government does not issue guarantees for private investments, or jointly financed foreign direct investment projects. In practice, however, the government is disinclined to allow companies that employ significant numbers of Algerians – whether private or public – to fail and may take on fiscal responsibilities to ensure continued employment for workers. President Tebboune’s administration also indicated more flexibility in considering alternative financing methods for future projects, which might include joint financing. The government does not offer specific incentives for clean energy investments, although the government announced in February 2022 that companies bidding on solar energy tenders would not be subject to the 51/49 investment rule.

Algeria does not have any foreign trade zones or free ports.

The Algerian government does not officially mandate local employment, but companies usually must provide extensive justification to various levels of the government as to why an expatriate worker is needed. Any person or legal entity employing a foreign citizen is required to notify the Ministry of Labor. Some businesses have reported instances of the government pressuring foreign companies operating in Algeria, particularly in the hydrocarbons sector, to limit the number of expatriate middle and senior managers so that Algerians can be hired for these positions. Contacts at multinational companies have alleged this pressure is applied via visa applications for expatriate workers, or via specific restrictions applicable to expatriate employees that are not applicable to Algerian employees. U.S. companies in the hydrocarbons industry have reported that, when granted, expatriate work permits are usually valid for no longer than six months and are delivered up to three months late, requiring firms to apply perpetually for renewals. Government-imposed restrictions on routine international travel since March 2020 in response to COVID-19 initially caused difficulties for foreign companies attempting to rotate their expatriate staff into and out of Algeria, though the situation has improved since June 2021.

In 2017, the Algerian government began instituting forced localization in the auto sector. New regulations governing the sector issued in September 2020 would require companies producing or assembling cars in the country to achieve a local integration rate of at least 30 percent within the first year of operation, rising to 50 percent by the company’s fifth year of operation, however, the regulations remain under government review and have not gone into effect. Since 2014, the government has required car dealers to invest in industrial or “semi-industrial” activities as a condition for doing business in Algeria. Dealers seeking to import new vehicles must obtain an import license from the Ministry of Commerce. Since January 2017, the Ministry has not issued any licenses, and the process of assigning new import quotas to qualified importers under the new 2020 specifications are on hold pending review by the government. As the Algerian government further restricts imports, localization requirements are expected to broaden to other manufacturing industries over the next several years. For example, specifications released in 2020 governing consumer appliance manufacturing mandate local content thresholds, and a tender launched in December 2021 for 1000MWs of solar projects mandated local content thresholds.

Information technology providers are not required to turn over source codes or encryption keys, but all hardware and software imported to Algeria must be approved by the Agency for Regulation of Post and Electronic Communications (ARPCE), under the Ministry of Post and Telecommunications. In practice, the Algerian government requires public sector entities to store data on servers within the country.

Secured interests in property are generally recognized and enforceable, but court proceedings can be lengthy and results unpredictable. All property not clearly titled to private owners remains under government ownership. As a result, the government controls most real property in Algeria, and instances of unclear titling have resulted in conflicting claims of ownership, which has made purchasing and financing real estate difficult. Several business contacts have reported significant difficulty in obtaining land from the government to develop new industrial activities; the state prefers to lease land for 33-year terms, renewable twice, rather than sell outright. The procedures and criteria for awarding land contracts are opaque.

Property sales are subject to registration at the tax inspection and publication office at the Mortgage Register Center and are part of the public record of that agency. All property contracts must go through a notary.

Patent and trademark protection in Algeria remains covered by a series of ordinances dating from 2003 and 2005, and representatives of U.S. companies operating in Algeria reported that these laws were satisfactory in terms of both the scope of what they cover and the penalties they mandate for violations. A 2015 government decree increased coordination between the National Office of Copyrights and Related Rights (ONDA), the National Institute for Industrial Property (INAPI), and law enforcement to pursue patent and trademark infringements. An Algerian court ruled in favor of a U.S. pharmaceutical company in late 2020 in the first case of alleged patent infringement by a local producer pursued in the courts by a U.S. company.

ONDA, under the Ministry of Culture, and INAPI, under the Ministry of Industry, are the two entities within the Algerian government that protect IPR. ONDA covers literary and artistic copyrights as well as digital software rights, while INAPI oversees the registration and protection of industrial trademarks and patents. Despite strengthened efforts at ONDA, INAPI, and the General Directorate for Customs (under the Ministry of Finance), which have seen local production of pirated or counterfeit goods nearly disappear since 2011, imported counterfeit goods are prevalent and easily obtained. Algerian law enforcement agencies annually confiscate hundreds of thousands of counterfeit items, including clothing, cosmetics, sports items, foodstuffs, automotive spare parts, and home appliances. The government is currently drafting new legislation on counterfeiting and intellectual property to improve enforcement and interagency coordination.

Algeria is listed on the Watch List of USTR’s 2022 Special 301 Report (https://ustr.gov/issue-areas/intellectual-property/Special-301)for, among other reason, ineffective enforcement efforts against trademark counterfeiting and copyright piracy.

Resources for Intellectual Property Rights Holders:

Peter Mehravari
Patent Attorney
Intellectual Property Attaché for the Middle East & North Africa
U.S. Embassy Abu Dhabi | U.S. Department of Commerce U.S. Patent & Trademark Office
Tel: +965 2259 1455 Peter.Mehravari@trade.gov

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at www.wipo.int/directory/en/ .

The Algiers Stock Exchange has five stocks listed – each at no more than 35 percent equity. There is a small and medium enterprise exchange with one listed company. The exchange has a total market capitalization representing less than 0.1 percent of Algeria’s GDP. Daily trading volume on the exchange averages around USD 2,000. Despite the lack of tangible activity, the market is regulated by an independent oversight commission that enforces compliance requirements on listed companies and traders.

Government officials have previously expressed their desire to reach a capitalization of USD 7.8 billion and enlist up to 50 new companies. Attempts to list additional companies have been stymied by a lack both of public awareness and appetite for portfolio investment, as well as by private and public companies’ unpreparedness to satisfy due diligence requirements that would attract investors. Proposed privatizations of state-owned companies have also been opposed by the public. Algerian society generally prefers material investment vehicles for savings, namely cash. Public banks, which dominate the banking sector (see below), are required to purchase government securities when offered, meaning they have little leftover liquidity to make other investments. Foreign portfolio investment is prohibited – the purchase of any investment product in Algeria, whether a government or corporate bond or equity stock, is limited to Algerian residents only.

The banking sector is roughly 85 percent public and 15 percent private as measured by value of assets held and is regulated by an independent central bank. Publicly available data from private institutions and U.S. Federal Reserve Economic Data show estimated total assets in the commercial banking sector in 2017 were roughly 13.9 trillion dinars (USD 116.7 billion) against 9.2 trillion dinars (USD 77.2 billion) in liabilities. In response to liquidity concerns caused by the oil price decline and COVID-19 crisis, the bank progressively decreased the reserve requirement from 12 percent to 3 percent between March and September 2020.

The IMF and Bank of Algeria have noted moderate growth in non-performing assets since 2015, currently estimated between 12 and 13 percent of total assets. The quality of service in public banks is generally considered low as generations of public banking executives and workers trained to operate in a statist economy lack familiarity with modern banking practices. Most transactions are materialized (non-electronic). Many areas of the country suffer from a dearth of branches, leaving large amounts of the population without access to banking services. ATMs are not widespread, especially outside the major cities, and few accept foreign bankcards. Outside of major hotels with international clientele, hardly any retail establishments accept credit cards. Algerian banks do issue debit cards, but the system is distinct from any international payment system. The Minister of Commerce has announced multiple plans to require businesses to use electronic payments for all commercial and service transactions, though the most recent government deadline for all stores to deploy electronic payment terminals by the end of 2021 was indefinitely delayed. In addition, analysts estimate that between one-third and one-half  of the money supply circulates in the informal economy.

Foreigners can open foreign currency accounts without restriction, but proof of a work permit or residency is required to open an account in Algerian dinars. Foreign banks are permitted to establish operations in the country, but they must be legally distinct entities from their overseas home offices.

In 2015, the Financial Action Task Force (FATF) removed Algeria from its Public Statement, and in 2016 it removed Algeria from the “gray list.” The FATF recognized Algeria’s significant progress and the improvement in its anti-money laundering/counter terrorist financing (AML/CFT) regime. The FATF also indicated Algeria has substantially addressed its action plan since strategic deficiencies were identified in 2011.

Algeria’s sovereign wealth fund (SWF) is the “Fonds de Regulation des Recettes (FRR).” The Finance Ministry’s website shows the fund decreased from 4408.2 billion dinars (USD 37.36 billion) in 2014 to 784.5 billion dinars (USD 6.65 billion) in 2016. The data has not been updated since 2016. Algerian media reported the FRR was spent down to zero as of February 2017. Algeria is not known to have participated in the IMF-hosted International Working Group on SWFs.

State-owned enterprises (SOEs) comprise more than half of the formal Algerian economy. SOEs are amalgamated into a single line of the state budget and are listed in the official business registry. To be defined as an SOE, a company must be at least 51 percent owned by the state.

Algerian SOEs are bureaucratic and may be subject to political influence. There are competing lines of authority at the mid-levels, and contacts report mid- and upper-level managers are reluctant to make decisions because internal accusations of favoritism or corruption are often used to settle political and personal scores. Senior management teams at SOEs report to their relevant ministry; CEOs of the larger companies such as national hydrocarbons company Sonatrach, national electric utility Sonelgaz, and airline Air Algerie report directly to ministers. Boards of directors are appointed by the state, and the allocation of these seats is considered political. SOEs are not known to adhere to the OECD Guidelines on Corporate Governance.

Legally, public and private companies compete under the same terms with respect to market share, products and services, and incentives. In reality, private enterprises assert that public companies sometimes receive more favorable treatment. Private enterprises have the same access to financing as SOEs, but they work with private banks, and they are less bureaucratic than their public counterparts. Public companies generally refrain from doing business with private banks and a 2008 government directive ordered public companies to work only with public banks. The directive was later officially rescinded, but public companies continued the practice. However, the heads of Algeria’s two largest state enterprises, Sonatrach and Sonelgaz, both indicated in 2020 that given current budget pressures they are investigating recourse to foreign financing, including from private banks. SOEs are subject to the same tax burden and tax rebate policies as their private sector competitors, but business contacts report that the government favors SOEs over private sector companies in terms of access to land.

SOEs are subject to budget constraints. Audits of public companies can be conducted by the Court of Auditors, a financially autonomous institution. The constitution explicitly charges it with “ex post inspection of the finances of the state, collectivities, public services, and commercial capital of the state,” as well as preparing and submitting an annual report to the President, heads of both chambers of Parliament, and Prime Minister. The Court makes its audits public on its website, for free, but with a time delay, which does not conform to international norms.

The Court conducts audits simultaneously but independently from the Ministry of Finance’s year-end reports. The Court makes its reports available online once finalized and delivered to the Parliament, whereas the Ministry withholds publishing year-end reports until after the Parliament and President have approved them. The Court’s audit reports cover the entire implemented national budget by fiscal year and examine each annual planning budget that is passed by Parliament.

The General Inspectorate of Finance (IGF), the public auditing body under the supervision of the Ministry of Finance, can conduct “no-notice” audits of public companies. The results of these audits are sent directly to the Minister of Finance, and the offices of the President and Prime Minister. They are not made available publicly. The Court of Auditors and IGF previously had joint responsibility for auditing certain accounts, but they are in the process of eliminating this redundancy. Further legislation clarifying whether the delineation of responsibility for particular accounts which could rest with the Court of Auditors or the Ministry of Finance’s General Inspection of Finance (IGF) unit has yet to be issued.

There has been limited privatization of certain projects previously managed by SOEs, and so far restricted to the water sector and possibly a few other sectors. However, the privatization of SOEs remains publicly sensitive and has been largely halted.

Multinational, and particularly U.S. firms operating in Algeria, are spreading the concept of responsible business conduct (RBC), which has traditionally been less common among domestic firms. Companies such as Occidental, Cisco, Microsoft, Boeing, Dow, Halliburton, Pfizer, and Berlitz have supported programs aimed at youth employment, education, and entrepreneurship. RBC activities are gaining acceptance as a way for companies to contribute to local communities while often addressing business needs, such as a better-educated workforce. The national oil and gas company, Sonatrach, funds some social services for its employees and supports desert communities near production sites. Still, many Algerian companies view social programs as the government’s responsibility. While state entities welcome foreign companies’ RBC activities, the government does not factor them into procurement decisions, nor does it require companies to disclose their RBC activities. Algerian laws for consumer and environmental protections exist but are weakly enforced.

Algeria does not adhere to the OECD or UN Guiding Principles and does not participate in the Extractive Industries Transparency Initiative. Algeria ranks 73 out of 89 countries for resource governance and does not comply with rules set for disclosing environmental impact assessments and mitigation management plans, according to the most recent report by National Resource Governance Index published in 2017.

Department of State

• Country Reports on Human Rights Practices;
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities;
• U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises; and;
• Xinjiang Supply Chain Business Advisory 

Department of the Treasury

• OFAC Recent Actions

Department of Labor

• Findings on the Worst Forms of Child Labor Report;
• List of Goods Produced by Child Labor or Forced Labor;
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World and;
• Comply Chain.

The current anti-corruption law dates to 2006. In 2013, the Algerian government created the Central Office for the Suppression of Corruption (OCRC) to investigate and prosecute any form of bribery in Algeria. The number of cases currently being investigated by the OCRC is not available. In 2010, the government created the National Organization for the Prevention and Fight Against Corruption (ONPLC) as stipulated in the 2006 anti-corruption law. The Chairman and members of this commission are appointed by a presidential decree. The commission studies financial holdings of public officials, though not their relatives, and carries out studies. Since 2013, the Financial Intelligence Unit has been strengthened by new regulations that have given the unit more authority to address illegal monetary transactions and terrorism funding. In 2016, the government updated its anti-money laundering and counter-terrorist finance legislation to bolster the authority of the financial intelligence unit to monitor suspicious financial transactions and refer violations of the law to prosecutorial magistrates. Algeria signed the UN Convention Against Corruption in 2003.

The new Algerian constitution, which the President approved in December 2020, includes provisions that strengthen the role and capacity of anti-corruption bodies, particularly through the creation of the High Authority for Transparency, Prevention, and Fight against Corruption. This body is tasked with developing and enabling the implementation of a national strategy for transparency and preventing and combatting corruption.

The Algerian government does not require private companies to establish internal codes of conduct that prohibit bribery of public officials. The use of internal controls against bribery of government officials varies by company, with some upholding those standards and others rumored to offer bribes. Algeria is not a participant in regional or international anti-corruption initiatives. Algeria does not provide protections to NGOs involved in investigating corruption. While whistleblower protections for Algerian citizens who report corruption exist, members of Algeria’s anti-corruption bodies believe they need to be strengthened to be effective.

International and Algerian economic operators have identified corruption as a challenge for FDI. They indicate that foreign companies with strict compliance standards cannot effectively compete against companies which can offer special incentives to those making decisions about contract awards. Economic operators have also indicated that complex bureaucratic procedures are sometimes manipulated by political actors to ensure economic benefits accrue to favored individuals in a non-transparent way. Anti-corruption efforts have so far focused more on prosecuting previous acts of corruption rather than on institutional reforms to reduce the incentives and opportunities for corruption. In October 2019, the government adopted legislation which allowed police to launch anti-corruption investigations without first receiving a formal complaint against the entity in question. Proponents argued the measure is necessary given Algeria’s weak whistle blower protections.

Currently the government is working with international partners to update legal mechanisms to deal with corruption issues. The government also created a new institution to target and deter the practice of overbilling on invoices, which has been used to unlawfully transfer foreign currency out of the country.

The government imprisoned numerous prominent economic and political figures in 2019 and 2020 as part of an anti-corruption campaign. Some operators report that fear of being accused of corruption has made some officials less willing to make decisions, delaying some investment approvals. Corruption cases that have reached trial deal largely with state investment in the automotive, telecommunications, public works, and hydrocarbons sectors, though other cases are reportedly under investigation.

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

Central Office for the Suppression of Corruption (OCRC)
Mokhtar Lakhdari, General Director
Placette el Qods, Hydra, Algiers +213 21 68 63 12
+213 21 68 63 12 www.facebook.com/263685900503591/
www.facebook.com/263685900503591/  no email address publicly available
no email address publicly available

National Organization for the Prevention and Fight Against Corruption (ONPLC)
Tarek Kour, President
14 Rue Souidani Boudjemaa, El Mouradia, Algiers +213 21 23 94 76
+213 21 23 94 76 www.onplc.org.dz/index.php/
www.onplc.org.dz/index.php/  contact@onplc.org.dz
contact@onplc.org.dz 

Contact at a “watchdog” organization:

Djilali Hadjadj
President
Algerian Association Against Corruption (AACC) www.facebook.com/215181501888412/
www.facebook.com/215181501888412/  +213 07 71 43 97 08
+213 07 71 43 97 08
aaccalgerie@yahoo.fr 

Following nearly two months of massive protests, known as the hirak, former President Abdelaziz Bouteflika resigned on April 2, 2019, after 20 years in power. His resignation launched an eight-month transition, resulting in the election of Abdelmadjid Tebboune as president in December 2019. Voter turnout was approximately 40 percent and the new administration continues to focus on restoring government authority and legitimacy. Following historically low turnout of 24 percent in the November 2020 constitutional referendum and President Tebboune’s lengthy medical absences in late 2020 and early 2021, hirak protests resumed in February 2021 before government security services brought them to a halt in May 2021. Demonstrations have taken place in Algeria’s major wilayas (states) and have focused largely on political reform, as protestors continue to call for an overhaul of the Algerian government. President Tebboune dissolved parliament in February 2021 and Algeria held parliamentary elections in June 2021 and local elections in November 2021.

Prior to the hirak, which began in 2019, demonstrations in Algeria tended to concern housing and other social programs and were generally smaller than a few hundred participants. While most protests were peaceful, there were occasional outbreaks of violence that resulted in injuries, sometimes resulting from efforts of security forces to disperse the protests. Hirak protests were relatively peaceful, though security forces occasionally use heavy-handed tactics to suppress protesters. In 2021, the government adopted laws that give authorities more leeway to arrest political opponents.

In 2013, a terrorist group now known as al-Murabitoun claimed responsibility for the attack against the Tiguentourine gas facility near In Amenas, in southeastern Algeria.  More than 800 people were taken hostage during the four-day siege, resulting in the deaths of 39 civilians, including 3 U.S. citizens, and resulting in damage to the facilities.  Seven other U.S. citizens escaped.  Since the attack, the Algerian government has increased security personnel and preventative security procedures in Algeria’s oil and gas producing regions.

Government reactions to public unrest typically include tighter security control on movement between and within cities to prevent further clashes, significant security presence in anticipated protest zones, temporary detention of protestors, and promises of either greater public expenditures on local infrastructure or increased local hiring for state-owned companies. During the first few months of 2015, there were a series of protests in several cities in southern Algeria against the government’s program to drill test wells for shale gas. These protests were largely peaceful but sometimes resulted in clashes, injury, and rarely, property damage. Government pronouncements in 2017 that shale gas exploration would recommence did not generate protests.

On April 27, 2020, an Algerian court sentenced an expatriate manager and an Algerian employee of a large hotel to six months in prison on charges of “undermining the integrity of the national territory” for allegedly sharing publicly available security information with corporate headquarters outside of Algeria.

The Algerian government requires all foreign employees of foreign companies or organizations based in Algeria to contact the Foreigners Office of the Ministry of the Interior before traveling in the country’s interior so that the government can evaluate security conditions. The Algerian government also requires U.S. Embassy employees to coordinate travel with the government on any trip outside of the Algiers wilaya (state). The Algerian government continues to limit the weekly number of authorized international flights in response to the COVID-19 outbreak, and they remain at less than 40 percent of pre-COVID levels two years after the onset of the pandemic.

In February 2020, ISIS claimed responsibility for a suicide bomber who attacked a military barrack in southern Algeria, killing a soldier. This was met with a swift response by Algerian security services against the militants responsible for the attacks, and the Algerian army continues to carry out counterterrorism operations throughout the country.

According to official Defense Ministry announcements, Algerian security forces “neutralized” 37 terrorists (21 killed, 9 arrested, and 7 surrendered) and arrested an additional 108 “supporters” of terrorism in 2020.  Army detachments also destroyed 251 terrorist hideouts and seized a large quantity of ammunition and explosives during the year. In 2021, the government broadened the definition of terrorism to include any act – peaceful or otherwise – that undermines Algeria’s national unity, prompting a slew of terrorism arrests for acts not necessarily in line with the internationally recognized definition of terrorism.

U.S. citizens living or traveling in Algeria are encouraged to enroll in the Smart Traveler Enrollment Program (STEP) via the State Department’s travel registration website, https://step.state.gov/step, to receive security messages and make it easier to be located in an emergency.

There is a shortage of skilled labor in Algeria in all sectors. Business contacts report difficulty in finding sufficiently skilled plumbers, electricians, carpenters, and other construction/vocational related areas. Oil companies report they have difficultly retaining trained Algerian engineers and field workers because these workers often leave Algeria for higher wages in the Gulf. Some white-collar employers also report a lack of skilled project managers, supply chain engineers, and sufficient numbers of office workers with requisite computer and soft skills.

Official unemployment figures are measured by the number of persons seeking work through the National Employment Agency (ANEM). According to the most recent official figures in 2019, Algeria had an unemployment rate of 11.4%.  Following the pandemic, the real unemployment rate is likely much higher with some sources estimating it to be above 30 percent in the youth population.  In January 2021, Minister of Employment, Labor, and Social Security El Hachemi Djaaboub said that new job offers in 2020 fell by 30% compared to 2019 (from 437,000 to 306,000).  Djaaboub also said recently that the closure of auto assembly and household appliance plants as a result of the halt in imports for the necessary assembly kits (semi-knock-down kits, or SKDs) since 2019 has resulted in the loss of 51,000 jobs. The 2022 Finance Law included a provision to establish an unemployment allowance, which applies to first-time job seekers between 19 and 40 years of age, paid monthly for six months, renewable only once, with baseline benefit levels of 13,000 dinars (USD 92) adjustable for geographical location. Approximately 300,000 Algerians qualified for the initial benefit, slated to go into effect on March 28. Additionally, the subsidy allotted to finance vocational integration (le dispositif d’insertion professionnelle) decreased from 135 billion dinars in 2013 to 32 billion in 2021.

The government has undertaken efforts to protect formal sector employment throughout the COVID-19 crisis, focusing particularly on unemployment benefits, as well as increasing relative wages by 14 to 16 percent in the 2022 Finance Law by reducing income taxes. In general, finding a job is regulated by the government and is bureaucratically complex. Prospective employees must register with the labor office, submit paper resumes door to door, attend career fairs, and comb online job offerings. According to the Office of National Statistics, 81 percent of university graduates say that they favor “family relationships” or “the family network” as the best way to look for a job.

The private sector accounts for 62.2 percent of total employment with 7.014 million people, with 37.8 percent in the public sector, employing 4.267 million people. Additionally, the International Labor Organization (ILO) estimates that more than one-third of all employment in Algeria takes place in the informal economy. The informal sector is estimated to comprise up to 50 percent of Algeria’s non-hydrocarbon economy. The Ministry of Vocational Training sponsors programs that offer training to at least 300,000 Algerians annually, including those who did not complete high school, in various professional programs.

Companies must submit extensive justification to hire foreign employees, and report pressure to hire more locals (even if jobs could be replaced through mechanization) under the implied risk that the government will not approve visas for expatriate staff. There are no special economic zones or foreign trade zones in Algeria.

The constitution provides workers with the right to join and form unions of their choice provided they are Algerian citizens. The country has ratified the ILO’s conventions on freedom of association and collective bargaining but failed to enact legislation needed to implement these principles fully. The General Union of Algerian Workers (UGTA) is the largest union in Algeria and represents a broad spectrum of employees in the public sectors. The UGTA, an affiliate of the International Trade Union Conference, is an official member of the Algerian “tripartite,” a council of labor, government, and business officials that meets annually to collaborate on economic and labor policy. The Algerian government liaises almost exclusively with the UGTA, however, unions in the education, health, and administration sectors do meet and negotiate with government counterparts, especially when there is a possibility of a strike. Collective bargaining is legally permitted but not mandatory.

Algerian law provides mechanisms for monitoring labor abuses and health and safety standards, and international labor rights are recognized under domestic law, but are only effectively regulated in the formal economy. Typical labor inspections were greatly reduced in 2020 due to COVID-19 restrictions, but largely resumed in 2021 at normal rates. The government has shown an increasing interest in understanding and monitoring the informal economy, evidenced by its 2018 partnerships with the ILO and current cooperation with the World Bank on several projects aimed at better quantifying the informal sector.

Sector-specific strikes occur often in Algeria, though general strikes are less common. The law provides for the right to strike, and workers exercise this right, subject to conditions. Striking requires a secret ballot of the whole workforce, and the decision to strike must be approved by a majority vote of the workers at a general meeting. The government may restrict strikes on several grounds, including economic crisis, obstruction of public services, or the possibility of subversive actions. Furthermore, all public demonstrations, including protests and strikes, must receive prior government authorization. By law, workers may strike only after 14 days of mandatory conciliation or mediation. The government occasionally offers to mediate disputes. The law states that decisions agreed to in mediation are binding on both parties. If mediation does not lead to an accord, workers may strike legally after they vote by secret ballot. The law requires that a minimum level of essential public services must be maintained, and the government has broad legal authority to requisition public employees. The list of essential services includes banking, radio, and television. Penalties for unlawful work stoppages range from eight days to two months imprisonment.

Since the beginning of the COVID-19 crisis, there have been periodic strikes affecting companies in various sectors as a result of the economic recession caused by the pandemic. Several strikes were initiated by workers in the northern regions, particularly in the industrial zones of Tizi-Ouzou, Béjaïa, and Bordj Bou Arreridj. In January 2021, employees of the electronics and household appliance group Condor demanded the firing of the director of the company appointed by the courts and back payment for salaries from December 2020.

Stringent labor-market regulations likely inhibit an increase in full-time, open-ended work. Regulations do not allow for flexibility in hiring and firing in times of economic downturn. For example, employers are generally required to pay severance when laying off or firing workers. Unemployment insurance eligibility requirements may discourage job seekers from collecting benefits due to them, and the level of support claimants receive is minimal. Employers must have contributed up to 80 percent of the final year salary into the unemployment insurance scheme in order for the employees to qualify for unemployment benefits.

The law contains occupational health and safety standards, but enforcement of these standards is uneven. There were no known reports of workers dismissed for removing themselves from hazardous working conditions. If workers face hazardous conditions, they may file a complaint with the Ministry of Labor, which is required to send out labor inspectors to investigate the claim. Nevertheless, the high demand for unemployment in Algeria gives an advantage to employers seeking to exploit employees.

Because Algerian law does not provide for temporary legal status for migrants, labor standards do not protect economic migrants from sub-Saharan Africa and elsewhere working in the country without legal immigration status. However, migrant children are protected by law from working.

The Ministry of Labor enforces labor standards, including compliance with the minimum wage regulation and safety standards. Companies that employ migrant workers or violate child labor laws are subject to fines and potentially prosecution.

The law prohibits participation by minors in dangerous, unhealthy, or harmful work or in work considered inappropriate because of social and religious considerations. The minimum legal age for employment is 16, but younger children may work as apprentices with permission from their parents or legal guardian. The law prohibits workers under age 19 from working at night. While there is currently no list of hazardous occupations prohibited to minors, the government reports it is drafting a list which will be issued by presidential decree. Although specific data was unavailable, children reportedly worked mostly in the informal sector, largely in sales, often in family businesses. They are also involved in begging and agricultural work. There were isolated reports that children were subjected to commercial sexual exploitation.

The Ministry of Labor is responsible for enforcing child labor laws. There is no single office charged with this task, but all labor inspectors are responsible for enforcing laws regarding child labor. In 2018, the Ministry of Labor focused one month specifically on investigating child labor violations, and in some cases prosecuted individuals for employing minors or breaking other child-related labor laws. While the government claims to monitor both the formal and informal sectors, contacts note that their efforts largely focus on the formal economy.

The National Authority of the Protection and Promotion of Children (ONPPE) is an inter-agency organization, created in 2016, which coordinates the protection and promotion of children’s rights. As a part of its efforts, ONPPE continues to hold educational sessions for officials from relevant ministries, civil society organizations, and journalists on issues related to children, including child labor and human trafficking.

U.S. Embassy Algiers
Political and Economic Section
5 Chemin Cheikh Bachir El-Ibrahimi, El Biar Algiers, Algeria (+213) 0770 082 153
(+213) 0770 082 153
Algiers_polecon@state.gov

Andorra has established an open framework for foreign investments, allowing non-residents to create companies in the country, open businesses, and invest in all kinds of assets.

The Foreign Investment Law came into force in July 2012, completely opening the economy to foreign investors. Since then, foreigners, whether resident or not, may own up to 100 percent of any Andorra-based company. The law also liberalizes restrictions on foreign professionals seeking to work in Andorra. Previously, a foreigner could only begin to practice in Andorra after twenty years of residency. Under the current regulations, any Andorran legal resident from a country that has a reciprocal standard can work in Andorra, although special working permits are required for specific professions.

The government of Andorra created Andorra Business ( https://www.andorrabusiness.com ), Andorra’s economic development and promotion office, to provide counseling services to both Andorran companies looking to grow and foreign investors wanting to start new businesses in Andorra. Andorra Business’ mission is to increase competitiveness, innovation, and the sustainability of the economy.

Andorra Business’ five key objectives are:

Promoting key sectors for the diversification of the economy.

Being a motor in the improvement of the public sector and microeconomic environment.

Attracting and supporting both foreign and local investment in key sectors.

Providing support to Andorran businesses to be more competitive on a National and International scale.

Creating favorable conditions for innovation and entrepreneurship, in both the public and private sectors, to create an environment for testing new innovations at the country level.

The Andorran Chamber of Commerce, Industry, and Services of Andorra ( https://www.ccis.ad/ ) aims to promote and strengthen Andorra’s financial and business activity as well as provide services to foreign companies. The Chamber’s activities include organizing a census of commercial, industrial, and service activities; the protection of the general interests of commerce, industry, and services; promoting fair competition; and issuing certificates of origin and other commercial documents.

The Andorran Business Confederation (CEA) provides support to national companies to navigate within Andorra’s new legal, labor, and fiscal framework and facilitates companies’ international expansion projects. CEA also works to foster international investment into the country through its Iwand project , which provides information about Andorra’s economic and fiscal environment ( www.cea.ad ).

The Andorran legal framework has also adapted to international standards. The most relevant laws passed by Parliament to accompany the economic openness include the law of Companies (October 2007), the Law of Business Accounting (December 2007), and the Law of Foreign Investment (April 2008 and June 2012).

The OECD removed Andorra from its “tax haven list” in 2009 after the country signed the Paris Declaration, formally committing to sharing fiscal information outlined by the agreement. With the approval of the Law 19/2016, of November the 30th, on automatic exchange of information on tax matters, Andorra will exchange financial information with signatories of the “Common Reporting Standard” (CRS), developed by the G20 and approved by the OECD Council in July 2014.

From 2011 to 2019, the Parliament approved direct corporate, non-resident, capital gains, and personal income taxes. At 10 percent, well below the European average, Andorra’s corporate tax is more competitive than rates in neighboring Spain or France.

While foreigners may own 100 percent of a trading enterprise or a holding company, the Government must approve the establishment of any private enterprise. The approval can take up to one month and can be rejected if the proposal is found to negatively impact the environment, the public order, or the general interests of the principality.

On June 2021, the IMF released a report  detailing Andorra’s macro-economic trends and investment climate. In the past five years the Organization for Economic Cooperation and Development (OECD), World Trade Organization (WTO), or the United Nations Conference on Trade and Development (UNCTAD) have not conducted an investment policy review. The government of Andorra, in responding to the economic downturn of COVID, released Horizon 23, an economic recovery roadmap to increase investment competitiveness

In the past five years, civil society organizations have not provided reviews of investment policy-related concerns.

Andorra established Andorra Business, a public/private agency, made up of several ministries, government agencies, associations, and organizations from the private sector. It aims to increase competitiveness, innovation, and sustainability. It provides counseling services to Andorran companies and potential foreign investors to facilitate investment and economic diversification.

Andorran regulations allow for two types of commercial companies: Limited Liability Company (Societat de Responsabilitat Limitada – SL), which has a minimum capital requirement of 3,000 euros; and Joint Stock Company (Societat Anonima – SA) which is normally required for multiple shareholders and has a minimum capital requirement of 60,000 euros.

The business establishment procedures and for share acquisitions or transfers are quite similar to those of other countries, requiring the filling of a simple application form, with the additional unique condition of the presentation of any prior investment authorization received in the country. This same procedure is applicable for incorporation, establishment, extension, branching, or other form of business expansion. Once the company is registered, the foreign investment is established, and the investor is required to deposit the share capital with an Andorran banking entity and proceed to public deed of incorporation before a notary.

The Government’s Andorra Business programs provide grants, counseling, and online resourced to small and medium size companies to foster competitiveness and facilitate internationalization.

The Andorran Chamber of Commerce ( www.ccis.ad ) helps companies search for business opportunities abroad and organizes, with the government, trade missions to explore international business exchanges.

Andorra has bilateral agreements with France (2003), Spain (2003), and Portugal (2007). No bilateral investment treaty exists between Andorra and the United States.

Andorra has signed Tax Information Exchange agreements for the exchange of fiscal information with 24 countries. All those agreements have been ratified and are in force.

In 2014, Andorra became the 48th signatory to the OECD Declaration on Automatic Exchange of Information in Tax Matters, which commits countries to end bank secrecy for tax evasion purposes. Andorra is a member of the OECD’s Inclusive Framework base erosion profit shifting (BEPS). Additionally, Andorra ratified the Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting, which came into effect January 1, 2022. Andorra signed a Non-Double Taxation agreement with France, Spain, Portugal, Luxembourg, Liechtenstein, Malta, Cyprus, United Arab Emirates, San Marino, and Hungary and is currently negotiating other such agreements.

Andorra set out transparent policies and laws, which have significantly liberalized all economic sectors in Andorra. New foreign-owned businesses must be approved by the government and the process can take up to a month. Andorra is committed to a transparent process. Andorra has begun to relax labor and immigration standards; previously, foreign professionals had to establish 20 years of residency before being eligible to own 100 percent of their business in Andorra. This restriction has been lifted for nationals coming from countries that have reciprocal standards for Andorran citizens.

Following approval of the new Accounting Law in 2007, individuals carrying out business or professional activities, trading companies, and legal persons or entities with a profit purpose must file financial statements with the administration.

Although not a member of the European Union (EU), Andorra is a member of the European Customs Union and is subject to all EU free trade regulations and arrangements regarding industrial products. Concerning agriculture, the EU allows duty free importation of products originating in Andorra.

Andorra is negotiating a new association agreement with the European Union alongside Monaco and San Marino that will allow Andorrans to establish themselves in Europe and Andorran companies will be able to trade in the EU market.

Andorra holds observer status at the WTO, although it took steps in the past for full membership of the World Trade Organization (WTO). Andorra became the 190th member of the International Monetary Fund (IMF) in October 2020.

Andorra has a mixed legal system of civil and customary law with the influence of canon law. The judiciary is independent from the executive branch. The Supreme Court consists of a court president and eight judges, organized into civil, criminal, and administrative chambers. Four magistrates make up the Constitutional Court. The Tribunal of Judges and the Tribunal of the Courts are lower courts. Regulations and enforcement actions can be appealed in the national court system.

The Law on Foreign Investment (10/2012) entered into force in 2012, opening the country’s economy by removing the sectorial restrictions stipulated in the prior legislation. In this way, Andorra has positioned itself on equal terms with neighboring economies, enabling it to become more competitive for new sectors and enterprises. On March 2022, Andorra approved a sanctions package in line with EU sanctions against designated Russian and Belarusian individuals and entities.

Andorra Business is responsible for economic promotion and provides information on relevant laws, rules, procedures to set up a business in Andorra, as well as reporting requirements to investors. The organization also provides other services to facilitate foreign and local investments in strategic sectors.

The Law on Effective Competence and Consumer Protection (13/2013) protects investors against unfair practices. The Ministry of Economy is responsible for administering anti-trust laws and reviews transactions for both domestic and international competition-related concerns.

The Law of Expropriation (1993) allows the Government to expropriate private property for public purposes in accordance with international norms, including appropriate compensation. We know of no incidents of expropriation involving the U.S. entities in Andorra.

ICSID Convention and New York Convention

Andorra became a party to the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards in September 2015, requiring Andorran courts to enforce financial awards. Andorra is not a member of the International Center for the Settlement of Investment Disputes (ICSID).

Investor-State Dispute Settlement

Andorran legislation establishes mechanisms to resolve disputes if they arise and its judicial system is transparent. The constitution guarantees an independent judiciary branch, overseen by a High Council of Justice. The prosecution system allows for successive appeals to higher courts. The European Court of Justice is the ultimate arbiter of unsettled appeals.

Contractual disputes between U.S. individuals or companies and Andorran entities are rare, but when they arise are handled appropriately. There have been no reported cases of U.S. investment disputes.

International Commercial Arbitration and Foreign Courts

Parties to a dispute can also resolve disputes contractually through arbitration. The Arbitration Court of the Principality of Andorra (TAPA) was established in July 2020 by the Chamber of Commerce, Industry and Services and the Andorran Bar Association in accordance with Law 16/2018. The main goal of this institution is to mediate both national and international business disputes to reach a fair settlement for both parties without having to go to court.

Andorra’s bankruptcy decree dates to 1969. Other laws from 2008 and 2014 complement the initial text and further protect workers’ rights to fair salaries and sets up mechanisms to monitor the implementation of judicial resolutions. Additionally, Law 8/2015 outlines urgent measures allowing Government intervention of the banking sector in a crisis.

Andorra has been known for its favorable tax regime, which investors have used to promote products such as tobacco, alcohol, jewelry, cosmetics, and dairy. In recent years, Andorra has reached agreements with neighboring countries to limit and regulate duty-free sales with a view towards promoting economic integration, though smuggling continues to be an issue. Andorra is a member of the European Customs Union and therefore has no tariffs on EU-manufactured goods.

Andorra is actively seeking to attract foreign investment and to become a center for entrepreneurs, talent, innovation, and knowledge. For example, Grifols, a large Spanish pharmaceutical multinational, announced that they will establish a new immunology research hub in Andorra.

Andorra Business provides grants for small and medium-sized companies to foster competitiveness and facilitate their internationalization. The ActuaTech Foundation was created in 2015, in collaboration with the Media Lab of the Massachusetts Institute of Technology (MIT), with the aim of employing Andorra’s unique economy as a “living lab” to promote innovation at the country level. Andorra, thanks to its size, recent liberalizing legislation, relative affluence, and its eight million visitors per year, offers ideal conditions to test this technology (https://ari.ad/en).

The United States Embassy and Consulate in Spain launched the Academy for Women Entrepreneurs (AWE) in April 2022 aimed at fostering women entrepreneurship in Andorra ( https://www.andorrabusiness.com/programa-awe/).

In May 2021, three of the country´s research and innovation entities merged to become a single public body: Andorra Research + Innovation, integrated by the Andorran Studies Institute, Andorra´s Sustainability Observatory, and Actua Innovation. This public entity seeks to generate knowledge, provide solutions for sustainable development, and contribute to the diversification of the Andorran economy.

Although not a full member of the European Union (EU), Andorra, as a member of the European Customs Union, is subject to all EU free trade regulations and arrangements regarding industrial products. Moreover, the EU allows duty free importations of products acquired by visitors in Andorra in the framework of the franchises covered in the Customs Union Agreement (1990). Concerning agriculture, the EU allows duty free importation of products originating in Andorra. No free trade zones exist in the country.

All employees wishing to work in Andorra must have work permits issued by annual quotas established by the Andorran government.

Both domestic and foreign private entities have the right to establish and own business enterprises. While foreigners may now own 100 percent of a trading enterprise or a holding company, the Government must approve the establishment of any private enterprise. For a foreign resident, the process for obtaining permissions takes up to one month and is automatically approved if there are no objections. An application can be rejected if the proposal is found to negatively impact the environment, the public order, or the general interests of the principality. As soon as the foreign investor receives authorization to invest in the country, national laws are applicable just like any other national investor.

Andorra does not follow a “forced localization” policy.

The constitution guarantees the right to private ownership for citizens and residents. Both domestic and foreign private entities now have the right to establish and own business enterprises.

Andorran law protects property rights with enforcement carried out at the administrative and judicial levels. Foreign investments for the purchase of property are possible in Andorra, subject to prior authorization. There is a four percent asset-transfer tax.

Secured property loans are available through the Andorran banking sector. The Andorran Financial Authority (AFA) oversees the banking sector, including mortgages ( https://www.afa.ad/en ).

Andorra joined the World Intellectual Property Organization (WIPO) in 1994 and is party to the Paris Convention, the Berne Convention, as well as the Rome Convention since 2004. Andorra is not a member of the World Trade Organization (WTO) but holds observer status. The country’s intellectual property rights (IPR) regime is not in compliance with the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).

Protection of IPR in Andorra is weak. The legal framework includes the Trademarks Act of May 1, 1995, the Law 26/2014 on Patents of October 30 the Law on Authors’ and Neighboring Rights of June 1999, and Law 23/2011, of December 29, 2011, on the Creation of the Society of Collective Management of Copyright and Neighboring Rights.

In 2012, the Society for the Administration of Authors’ Rights (SDADV) was created to manage the economic rights, neighboring rights, and the interests of copyright holders. Right holders can choose whether to participate in this voluntary collective arrangement though in some cases, the collective arrangement system is compulsory.

Businesses seeking to register a trademark or patent should contact the Andorran Trademarks Office and Patents Office.

Trademarks and Patents Office of the Principality of AndorraMinistry of EconomyEdifici Administratiu del Prat del RullCami de la Grau s/nAD 500 Andorra La VellaTel. (376) 875 600Email: ompa@govern.ad http://www.ompa.ad/ 

Andorra is not listed in the U.S. Trade Representative (USTR) Special 301 Report nor included in the Notorious Markets List.

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .

The Andorran financial sector is efficient and is one of the main pillars of the Andorran economy, representing 20 percent of the country’s GDP and over 5 percent of the workforce.

Created in 1989, and redefined with more responsibilities in 2003, the Andorran Financial Authority (AFA; www.afa.ad ) is the supervisory and regulatory body of the Andorran

financial system and the insurance sector. The AFA is a public entity with its own legal status, functionally independent from the Government. AFA has the power to carry out all necessary actions to ensure the correct development of its supervision and control functions, disciplinary and punitive powers, treasury and public debt management services, financial agency, international relations, advice, and studies.

The Andorran Financial Intelligence Unit (UIFAND) was created in 2000 as an independent organ to deal with the tasks of promoting and coordinating measures to combat money laundering, terror financing, and the proliferation of weapons ( www.uifand.ad ).

The State Agency for the Resolution of Banking Institutions (AREB) is a public-legal institution created by Law 8/2015 to take urgent measures to introduce mechanisms for the recovery and resolution of banking institutions ( www.areb.ad ).

Andorra adopted the use of the Euro in 2002 and in 2011 signed a Monetary Agreement with the EU making the Euro the official currency. Since July 1, 2013, Andorra has had the right to mint Euro coins.

The Andorra banking system is sound and considered the most important part of the financial sector. It represents 20 percent of the country’s GDP. The Andorran banks offer a variety of services at market rates. The main lines of business in the banking sector are retail banking, private banking, and asset management and insurance. The country also has a sizeable and growing market for portfolio investments. The country does not have a central bank. The sector is regulated and supervised by the Andorran Financial Authority (AFA).

The U.S. Internal Revenue Service has certified all the Andorran banks as qualified intermediaries.

Founded in 1960, the Association of Andorran Banks (ABA; https://www.andorranba nking.ad/) represents Andorran banks. Among its tasks are representing and defending interests of its members, watching over the development and competitiveness of Andorran banking at national and international levels, improving sector technical standards, cooperation with public administrations, and promoting professional training, particularly dealing with money laundering prevention. At present, all five Andorran banking groups are ABA members, totaling an estimated 51.7 billion Euros in combined assets for 2021.

Foreign Exchange

Andorra adopted the Euro in 2002 and in 2011 signed a Monetary Agreement with the EU making the Euro the official currency. Since 2013, Andorra has the authority to mint Euro coins.

Remittance Policies

There are no limits or restrictions on remittances provided that they correspond to a company’s official earning records.

Andorra has no Sovereign Wealth Fund (SWF).

Andorra has taken steps to promote responsible business conduct, including Law 35/2008, which establishes a protocol for non-discrimination and equal opportunities for men and women and a gender-equality law approved in April 2022 that among other requirements sets a 60% ceiling for gender representation on governing boards.

Over the years, the Andorran banking sector has been consolidating its voluntary responsible business conduct practices, mainly through their foundations. Rather than focus on a due diligence approach to lower risks, as promoted by international guidelines such as the OECD Guidelines for Multinational Enterprises or UN Guidance on Business and Human Rights, the banking sector establishes private initiatives to promote responsible business conduct in a variety of areas like culture, sports, solidarity, education, and the environment. There are no reported cases of human or labor rights concerns related to responsible business conduct.

The government of Andorra updated its National Energy Strategy Against Climate Change in February 2021. The national strategy commits to reducing greenhouse gas emissions (GHG) by a minimum of 37 percent by 2030 and pursuing carbon neutrality by 2050.

Andorra is responsible for an estimated 0.001 percent of global emissions, a figure that has continued to decrease since 2005. Since 2018, Andorra has implemented an energy transition law, approved the national strategic plan for the implementation of the United Nations 2030 Agenda for Sustainable Development, approved the declaration of a state of climate and ecological emergency, established a National Commission for Energy and Climate Change, and updated the National Energy Strategy for the Fight Against Climate Change

The government of Andorra approved the Green Fund, through Law 21/2018, to encourage plans and actions for the development of climate change mitigation and adaptation initiatives. Earmarked green taxes, complementary budgetary allocations, donations and contributions received, and any other potential income sustains the fund ( https://www.govern.ad/taxaverda ).

Andorra has created a price for carbon as an additional element of the general branch of the excise tax on hydrocarbons whose use generates or is likely to generate greenhouse gas emissions.

Andorra’s laws penalize corruption, money laundering, drug trafficking, hostage taking, sale of illegal arms, prostitution, terrorism, as well as the financing of terrorism. Additional amendments were added in 2008, 2014, 2015, and 2016 to the Criminal Code and the Criminal Procedure Code that modify and introduce money laundering and terrorism financing provisions.

In 1994, Andorra joined the Council of Europe, an institution that oversees the defense of democracy, the rule of law, and human rights. That same year, the Justice Ministers of the Member States decided to fight corruption at the European level after considering that the phenomenon posed a serious threat to the stability of democratic institutions.

In early 2005, Andorra joined the Council of Europe’s Group of States against Corruption (GRECO) in its fight against corruption. Andorra has gradually built its internal regulations and relevant legal instruments and has undertaken numerous initiatives to improve the State’s response to reprehensible acts and conduct committed internally and internationally.

Andorra created the Unit for the Prevention and the Fight against Corruption (UPLC) in 2008 to centralize and coordinate actions that might concern local administrations, national bodies, and entities with an international scope. UPLC is responsible for implementing the recommendations made by GRECO.

Andorra has not signed the UN Anticorruption Convention or the OECD Convention on Combatting Bribery of Foreign Public Officials in International Business Transactions.

There are explicitly defined rules for the ethical behavior of all participating bodies within the Andorran financial system. The Andorran Financial Authority (AFA) has also established rules regarding ethical behavior in the financial system.

The Andorran government modified and implemented new laws to comply with international corruption standards. The Andorran Financial Intelligence Unit (UIFAND), created in 2000 is an independent body charged with mitigating money laundering and terrorist funding ( www.uifand.ad ).

Resources to Report Corruption:

Unitat de Prevencio i Lluita contra la Corrupcio
Ministeri de Justicia i Interior
Govern d’Andorra
Ctra.de l’Obac s/n
AD700 Escaldes-Engordany
Phone: +376 875 700
Email: uplc_govern@govern.ad 

Andorra has not experienced any politically motivated damage to projects or installations, or destruction of private property. There are no nascent insurrections, belligerent neighbors, or other politically motivated activities. The likelihood of widespread civil disturbances is very low. Civil unrest is generally not a problem in Andorra. No anti-American sentiment is evident in the country.

All employees wishing to work in Andorra must have work permits, issued by annual quotas established by the government. The tourism sector is the largest labor sector.

The Andorran constitution recognizes workers’ rights to form trade unions to defend their economic and social interests. Alternative dispute mechanisms such as mediation and arbitration do exist. Despite these rights, union membership is relatively low.

Andorra is not a member of the International Labor Organization (ILO).

There were a total of 42,931 employed workers in Andorra in December 2021. As a result of the COVID-19 pandemic, the unemployment rate increased from 1.8 percent in 2019 to 3 percent in 2020 but improved to 2.2 percent as of the fourth quarter of 2021. The government of Andorra approved a 3.3 percent increase in the minimum wage that went into effect January 1, 2022, bringing it to 6.68 euros (roughly USD 7.40) per hour and 1,158 euros (roughly USD 1,283) per month.

Data unavailable.

Data unavailable.

ECON Officer, Omar Medina, medinao@state.gov 
POL/ECON Specialist, Eulalia d’Ortado; OrtadoE@state.gov 
United States Consulate General Barcelona
tel. (34) 93 280 22 27

Angola is actively seeking FDI to diversify capital inflows, boost economic growth, and diversify the country’s economy. Angola has maintained its privatization program (PROPRIV), started in 2019, despite the difficulty attracting investment during the COVID-19 pandemic. PROPRIV offers investment opportunities for foreign investment in state-owned enterprises and other publicly owned assets as the government seeks to liquidate its stake in assets across sectors such as transportation, telecommunications, and banking. Angola has also modernized its tendering process to make it more transparent. Despite the increased openness and concerted effort to attract foreign investors, Angola passed local content regulations for the oil sector in October 2020 restricting the concept of “national company” to companies fully owned by Angolan citizens, as opposed to a companies with at least 51 percent ownership by Angolan entities. The regulation has three regimes determining the types of services that must be contracted with local entities and which can be contracted with foreign entities. The local content regulations apply to all companies providing goods and services to oil sector as well as oil companies.

Angola’s trade and investment promotion agency AIPEX  provides an online investment window platform for investors to register their investment proposals. AIPEX and the Institute of State Assets and Shares work together on roadshows to promote PROPRIV for foreign investors. AIPEX is also responsible for providing institutional support and monitoring investment project execution.

Foreign and domestic private entities can establish and own business enterprises with limitations on foreign entities holding the majority stake in companies in specific sectors. The 2018 Private Investment Law (PIL) establishes the general principles of private investment in Angola for domestic and foreign investors and applies to private investments of any value. Under the PIL, the acquisition of shares of an Angolan entity by a foreign investor is deemed to be a private investment operation. If the investor wishes to transfer funds abroad, the private investment project must be properly registered and executed, and appropriate taxes must be paid before transferring.

Majority foreign shareholding restrictions persist in specific industries such as the oil and gas sector (49 percent cap) and the maritime sector, specifically for shipping, due to their significance in the Angolan economy. Mining rights are granted to private investors by the national diamond company ENDIAMA. The PIL lifted restrictions on having Angolan partners for several strategic sectors such as he telecommunications, hospitality and tourism, transportation and logistics, and information technology.

At the government’s request, the last Investment Policy Review (IPR) of Angola’s business and economic environments was completed in 2019 by the United Nations Conference on Trade and Development (UNCTAD). The full report and policy recommendations are accessible at UNCTAD TPR . The WTO’s last IPR was more than five years ago; OECD has never conducted an IPR of Angola.

There are no recent policy recommendations by civil society organizations based on reviews of investment policy related concerns.

Presidential Decree No 167/20, of June 15, 2020, created the “ Single Investment Window ” (Janela Única de Investimento, or JUI), which is aimed at simplifying the contact between the investor and all the public entities involved in the approval of foreign investment projects.

To incorporate a company, investors must obtain a certificate of availability of the corporate name from the Ministry of Justice and Human Rights; deposit share capital and show proof of deposit to a notary; submit a draft incorporation deed, articles of association, and shareholder documents. The company must then register with the Commercial Registrar to register the company’s incorporation in the Angola’s Official Gazette (Diário da República).

Despite efforts to reduce the bureaucracy related to incorporating a business, it still takes around 30 days to incorporate. The business then must register with Tax Authority , the National Institute for Statistics , and the National Institute for Social Security . The business can then initiate licensing procedures.

Angola is also negotiating with the EU on a Sustainable Investment Facilitation Agreement , the EU’s first bilateral agreement on investment facilitation. The sides have had two rounds of negotiations in June and December 2021. The agreement intends to simplify procedures and encourage e-governance and public-private dialogue, while diversifying Angola’s economy and helping small and medium sized enterprises invest. Its goal is to support Angola’s ability to attract and retain investment by improving the investment climate for foreign and local investors.

The Angolan government does not promote or incentivize outward investment, nor does it restrict Angolans from investing abroad. Investors are free to invest in any foreign jurisdiction.

Domestic investors often prefer to invest in Portuguese-speaking countries, with few investing in neighboring countries in Sub-Saharan Africa. The bulk of investment is in real estate, fashion, fashion accessories, and domestic goods.

Due to foreign exchange constraints, there has been very limited investment abroad by domestic investors.

Angola’s regulatory system is complex, vague, and inconsistently enforced. In many sectors, no effective regulatory system exists due to a lack of institutional and human capacity. The banking system is slowly beginning to adhere to International Financial Reporting Standards (IFRS). SOEs are still far from practicing IFRS. The public does not participate in draft bills or regulations formulation, nor does a public online location exist where the public can access this information for comment or hold government representatives accountable for their actions. The Angolan Communications Institute (INACOM) is the regulatory authority for the telecommunications sector and regulates prices for telecommunications services such as mobile telephone, internet, and TV services, particularly in sectors without much competition. Revised energy-sector licensing regulations have permitted some purchase power agreements (PPA) participation.

Overall, Angola’s regulatory system does not conform to other international regulatory systems.

Angola became a member of the WTO in 1996. However, it is not party to the Plurilateral Agreements on Government Procurement, or the Trade in Civil Aircraft Agreement and it has not yet notified the WTO of its state-trading enterprises under Article XVII of the GATT. A government procurement management framework introduced in late 2010 stipulates a preference for goods produced in Angola and/or services provided by Angolan or Angola-based suppliers. Technical Barriers to Trade regimes are not coordinated. Angola conducts distinct bilateral negotiations with seven of the nine full members of the Community of Portuguese Language countries (CPLP), Cuba, and Russia and extends trade preferences to China due to previously negotiated credit facilitation terms, while attempting to encourage and protect local content.

Regulatory reviews are based on scientific, or data driven assessments or baseline surveys. Evaluations are based on data, but not made available for public comment.

The state reserves the right to have the final say in all regulatory matters and relies on sectorial regulatory bodies for supervision of institutional regulatory matters concerning investment. The Economic Commission of the Council of Ministers oversees investment regulations that affect the country’s economy including the ministries in charge. Other major regulatory bodies responsible for getting deals through include:

• The National Petroleum, Gas and Biofuels Agency (ANPG) is the government regulatory and oversight body responsible for regulating oil exploration and production activities. On February 6, 2019, the parastatal oil company Sonangol launched ANPG through Presidential decree 49/19. The ANPG is the national concessionaire of hydrocarbons in Angola, authorized to conduct, execute, and ensure oil, gas, and biofuel operations run smoothly, a role previously held by state owned Sonangol. The ANPG must also ensure adherence to international standards and establish relationships with other international agencies and sector relevant organizations.
• The Regulatory Institute of Electricity and Water Services (IRSEA) is the regulatory authority for renewable energies and enforcing powers of the electricity regulatory authority. Revised energy-sector licensing regulations have improved legal protection for investors to attract more private investment in electrical infrastructure, such as dams and hydro distribution stations.
• The Angolan Communications Institute (INACOM) is the regulatory authority for the telecommunications sector including for prices for telecommunications services.
• As of October 1, 2019, a 14 percent VAT regime came into force, replacing the existing 10 percent Consumption Tax. For The General Tax Administration (AGT) oversees tax operations and ensures taxpayer compliance. The new VAT tax regime aimed to boost domestic production and consumption and reduce the incidence of compound tax for businesses unable to recover the consumption tax. The government introduced a temporary reduction of the VAT in October 2021 for key items in the basic basket of goods to 7 percent. The temporary measure should run at least through 2022. Corporate taxpayers can be reimbursed for the VAT on the purchase of good and services, including imports.

There are no informal regulatory processes managed by nongovernmental organizations or private sector associations, and the government does not allow the public to engage in the formulation of legislation or to comment on draft bills. Procurement laws and regulations are unclear, little publicized, and not consistently enforced. Oversight mechanisms are weak, and no audits are required or performed to ensure internal controls are in place or administrative procedures are followed. Inefficient bureaucracy and possible corruption frequently lead to payment delays for goods delivered, resulting in an increase in the price the government must pay.

No regulatory reform enforcement mechanisms have been implemented since the last ICS report. The Diário da República (the Federal Register equivalent) publishes official regulatory action.

The Ministry of Finance’s Debt Management Unit has a portal with quarterly public debt reports, debt strategy, annual debt plan, bond reports, and other publications in Portuguese and in English for the quarterly reports and the debt plan, though it does not have regular reporting on contingent liabilities.

Regionally, Angola is a member of SADC and ECCAS, though it is not a member of SADC’s Free Trade Area or of the Economic and Monetary Community of Central Africa (CEMAC) the customs union associated with ECCAS. New regulations are generally developed in line with regulatory provisions set by AfCTA, SADC, and ECCAS. Standards for each organization can be found at their respective websites: AfCTA: https://au.int/en/cfta ; SADC: SADC Standards and Quality Infrastructure ; ECCAS: https://ceeac-eccas.org/en/#presentation 

Angola is a WTO member but does not notify all draft technical regulations to the WTO Committee on Technical Barriers to Trade (TBT). Technical Barriers to Trade (TBT) regimes are not coordinated and often trade regulations are passed and implemented without the due oversight of the WTO.

Angola’s legal system follows civil law tradition and is heavily influenced by Portuguese law, though customary law often prevailed in rural areas. Legislation is the primary source of law. Precedent is accepted but not binding as it is in common-law countries. The Angolan Constitution is at the top of the hierarchy of legislation and establishes the general principle of separation of powers between the judicial, executive, and legislative power. Primary judicial authority in Angola is vested in its courts, which have institutional weaknesses that include lack of independence from political influence in the decision-making process at times.

The Angolan justice system is slow, arduous, and often partial. Legal fees are high, and most businesses avoid taking commercial disputes to court in the country. The World Bank’s Doing Business 2020 survey ranked Angola 186 out of 190 countries on contract enforcement, and estimated that commercial contract enforcement, measured by time elapsed between filing a complaint and receiving restitution, takes an average of 1,296 days, at an average cost of 44.4 percent of the claim.

Angola has commercial legislation that governs all contracts and commercial activities but no specialized court. On August 5, 2020, the Economic Council of Ministers approved the opening of the Court for Litigation on Commercial, Intellectual, and Industrial Property Matters, at the Luanda First Instance Court. With the introduction of this commercial court, the GRA hopes the business environment and trust in public institutions will improve. Prior to this arrangement, trade disputes were resolved by judges in the Courts of Common Pleas. The commercial legislation provides that before going to court, investors can challenge the decision under the terms of the administrative procedural rules, either through a complaint (to the entity responsible for the decision) or through an appeal (to the next level above the entity responsible for the decision). In the new system, investors will be able, in general, to appeal to civil and administrative courts. Investors exercising their right to appeal, however, should expect decisions to take months, or even years, in the case of court decisions.

Angola enacted a new Criminal Code and a new Criminal Procedure Code which entered into force on February 9, 2021, to better align the legal framework with internationally accepted principles and standards, with an emphasis on white-collar crimes and corruption. The legal reforms extend criminal liability for corruption offenses and other crimes to legal entities; provide for private sector corruption offenses to face similar fines and imprisonment to the punishments applicable to the public sector, and modernize and broaden the list of criminal offenses against the financial system. The legal system lacks resources and independence, limiting the effectiveness of the reforms.

There is a general right of appeal to the Court of First Instance against decisions from the primary courts. To enforce judgments/orders, a party must commence executive proceedings with the civil court. The main methods of enforcing judgments are:

• Execution orders (to pay a sum of money by selling the debtor’s assets).
• Seizure of assets from the party and
• Provision of information on the whereabouts of assets.

The Civil Procedure Code also provides for ordinary and extraordinary appeals. Ordinary appeals consist of first appeals, review appeals, interlocutory appeals, and full court appeals, while extraordinary appeals consist of further appeals and third-party interventions. Generally, an appeal does not operate as a stay of the decision of the lower court unless expressly provided for as much in the Civil Procedure Code.

Angola’s legal system is becoming more favorable to FDI and has generally not allowed FDI in specific sectors such as military and security, activities of the Central Bank, and key infrastructure port and airport infrastructure. Under PROPRIV the government has encouraged FDI in ports and airports through management and operation tenders. Investment values exceeding $10 million require an investment contract that needs to be authorized by the Council of Ministers and signed by the President.

AIPEX, Angola’s investment and export promotion agency, maintains the Janela Única do Investimento  (Single Investment Window), which serves as Angola’s one-stop-shop for investment.

Mergers and acquisitions, including those which take place through the sale of state-owned assets, are reviewed by the Institute of Asset Management and State Holdings (IGAPE) and competition related concerns receive oversight by the Competition Regulatory Authority (the “CRA”) which is also responsible for prosecuting offenses. Competition is also regulated by the Competition Act of 2018, which prohibits cartels and monopolistic behavior. A leniency regime was added in September 2020 to reduce fines for the first party to come forward under specific conditions.

CRA decisions are subject to appeal, though Angola does not have special courts of jurisdiction to deal with competition matters.

Angola’s Competition Act creates a formal merger control regime. Mergers are subject to prior notification to the CRA, and they must meet certain specified requirements. The thresholds requiring prior notification are the following:

• the creation, acquisition, or reinforcement of a market share which is equal to or higher than 50 percent in the domestic market or a substantial part of it; or
• the parties involved in the concentration exceeded a combined turnover in Angola of 3.5 billion Kwanzas in the preceding financial year; or
• the creation, acquisition, or reinforcement of a market share which is equal to or higher than 30 percent, but less than 50 percent in the relevant domestic market or a substantial part of it, if two or more of the undertakings achieved more than 450 million Kwanzas individual turnover in the preceding financial year.

Mergers must not hamper competition and must be consistent with public interest considerations such as:

• a particular economic sector or region.
• the relevant employment levels.
• the ability of small or historically disadvantaged enterprises to become competitive; or

the capability of the industry in Angola to compete internationally.

Under the revised Law of Expropriations by Public Utility (LEUP), which came into force in October 2021, real property and any associated rights can be expropriated for specific public purposes listed in the LEUP in exchange for fair and prompt compensation to be calculated pursuant to the act. Only property strictly indispensable to achieve the relevant public purpose can be expropriated. The LEUP does not apply to compulsory eviction, nationalization, confiscation, easements, re-homing, civil requisition, expropriation for private purpose, temporary occupation of buildings, destruction for public purpose and revocation of concessions. Save for the urgent expropriation instances specifically set forth in the act, the LEUP enshrines the primacy of acquisition through private-law mechanisms, providing for a negotiation process between the expropriating entity – national or local government – and the relevant citizen or private-law entity.

Despite the reforms, expropriation without compensation remains a common practice with idle or underdeveloped areas frequently reverting to the state with little or no compensation to the claimants who paid for the land, who in most cases allege unfair treatment and at times lack of due process.

Angola’s Law on Corporate Restructuring and Insolvency went into force on May 10, 2021, representing the first amendment to bankruptcy legislation since 1961. The law regulates the legal regime of extrajudicial and judicial recovery of the assets of natural and legal persons in economic distress or imminent insolvency, provided recovery is viable and the legal regime of insolvency proceedings of natural and legal persons. The law permits the conservation of national and foreign investment since investors know they have a legal remedy that has as its purpose the preservation of the company.

The Private Investment Law (PIL) of 2021 included amendments allowing for negotiation of tax incentives between state and potential investors. The PIL also eliminated the investment value and the value required to qualify for incentives in foreign and local investments, previously set at USD 1,000,000 and USD 500,000 respectively. It also eliminates the requirement for foreign investors to establish a partnership with an Angolan entity with at least a 35 percent stake in the capital structure of investments in the electricity and water, tourism, transport and logistics, construction, media, telecommunications, and IT sectors. Investors can determine their own capital structure in those sectors under the current law.

Angola does not yet have a legislation which offers incentives to green investment.

The PIL restructures the country into three economic development zones (zones A through C) determined by political and socio-economic factors, up from two as per the 2015 investment law. For Zone A, investors have a three-year moratorium on taxes reduced between 25- 50 percent of the tax levied on the distribution of profits and dividends. For Zone B, it is between three to six years with a 50 to 60 percent tax reduction, and for Zone C between six to eight years with a tax reduction between 60-70 percent of the tax levied on distribution of profits and dividends.

The Free Trade Zones Law (FTZL) passed October 12, 2020. The FTZL establishes benefits to be offered to investors by the Angolan Government in exchange for meeting specific monetary, job creation, or other investment requirements on a per contract basis. Investors are granted use of the Free Zone for 25 years and can receive industrial tax and VAT benefits, customs rights, as well as land and capital benefits for investing in a Free Zone. Investments made in Free Zones must consider environmental protection interests.

Investors are allowed to carry out industrial activities, agriculture, technology activities, as well as commercial and service activities. It is possible to carry out other activities which are not specified by the FTZL, provided that such activities target an international market and relevant authorities authorize the activities. Industrial activities should use Angolan raw materials and be focused on exports).

The GRA follows “forced localization” in the oil and gas sector where foreign investors in the sector must use domestic goods and tertiary services as stipulated in decree 271/20 of October 20, 2020. The Local Content Law covers all companies providing goods and services to oil sector, as well as the oil companies themselves. Commercial relations for the oil and gas sector continue to be divided into an “Exclusivity Regime”, “Preference Regime”, and a “Competitive Regime. Under the Exclusivity Regime, oil and gas companies must contract wholly owned Angolan commercial companies. Under the Preference Regime, the contracted company must be incorporated in Angola, and under the Competitive Regime, there is contractual freedom in sourcing the company. The specific goods and services falling under the Exclusivity and Preference regimes must be listed by the National Oil, Gas and Biofuels Agency (ANPG) – the national concessionaire – annually. In addition, all companies operating in any segment of the petroleum-sector value chain are required to present an Annual Local Content Plan to the ANPG.

Local content regulations offer guidelines that are only loosely enforced, and companies lack clarity on how to satisfy the Angolan government’s requirements. While the lack of enforcement may make it easier for foreign companies to comply with local content regulations, the lack of specificity challenges their business planning. For example, it is difficult for companies to compare their competitive position against each other when competing for lucrative concessions and licenses from the government, as local content is sometimes considered during competition for government tenders. Legal guidance to get the guarantees for investors under the PIL is strongly encouraged.

Regulations around data storage, management, and encryption are still at nascent stages. The Institute for Communications of Angola (INACOM) oversees and regulates data in liaison with the Ministry of Telecommunications. The President of Angola passed Decree No. 214/16 on October 10, 2016, establishing the organizational framework of the data protection authority. The Ministry of Telecommunications and Information Technology (‘MTTI’) announced, on October 9, 2019, that the National Database Protection Agency (APD) had become operational. The APD issued the first license to a private credit agency in February and collaborates with other governments and private sector entities to train Angolan public officials on data protection.

Property rights enforcement remains difficult, given that the Land Law (Lei de Terras de Angola) has not been revised since its approval in December 2004 and two-thirds of Angolans are directly dependent on land property rights due to their work in agriculture. Normalization of land ownership in Angola persists with problems such as difficulties in completing land claims, land grabbing, lack of reliable government records, and unresolved status of traditional land tenure. Among other provisions, the Land Law includes a formal mechanism for transforming traditional land property rights into legal land property rights (clean titles), since a transparent system of land property rights enforcement did not exist before the civil war ended in 2002.

Foreigners are permitted to hold land in Angola through acquisition or lease under the 2004 Land Law. The Land Law sets out requirements for all potential landholders to acquire land, with the main distinctions for foreign entities being the type of identification (passport) a foreign citizen must produce.

Mortgages exist but can be difficult to obtain.

According to the Land Law, the State may transfer or constitute, for the benefit of Angolan natural or legal persons, a multiplicity of land rights on land forming part of its private domain. Although, it is possible to transfer ownership over some categories of land, the transfer of State land almost never implies the transfer of its ownership, but only the formation of minor land rights with leasehold being the most common form. The recipient of private property rights from the State can only transfer those rights with the consent of the local authority and after a period of five years of effective use of the land. Weak land tenure legislation and lack of secure legal guarantees (clean titles) are the reasons given by most commercial banks for their greater than 80 percent refusal rate for loans since land is used as collateral. Foreign real-estate developers therefore seek out public-private partnership (PPP) arrangements with State actors who can provide protection against land disputes and financial risks involved in projects that require significant cash outlays to get started.

Registering parcels of land over 10,000 hectares must be approved by the Council of Ministers. Registering property takes 190 days on average, ranking 167 out of 173 according to the World Bank’s Doing Business 2020 survey, with fees averaging three percent of property value. Owners must wait five years after purchasing before reselling land. There are no written regulations setting out guidelines defining different forms of land occupation, including commercial use, traditional communal use, leasing, and private use. Over the years, the government has given out large parcels of land to individuals to support the development of commercial agriculture. However, this process has largely proceeded in an unsystematic way and does not follow any formal rule change on land tenure by the State.

Before obtaining proof of title nationwide, an Angolan citizen or an Angolan legal entity must also obtain the Real or Leasing Rights (“Usufruct”) of the Land from the Institute of Planning and Urban Management of Luanda (IPGUL), an often-time-consuming procedure that can take up to a year or more. However, if a company already owns the land, it must secure a land property title deed from the Real Estate Registry in Luanda. The local registry – if the property is not in the capital – then produces an updated property certificate (certidão predial) with the complete description of the property including owner(s) information and any charges, liens, and/or encumbrances pending on the property. The complex administration of property laws and regulations that govern land ownership and transfer of real property as well as its tedious registration process may reduce investor appetite for real estate investments in Angola. Dispatch no. 174/11 of March 11, 2011, mandates the total fees for the property certificate include stamp duty (calculated according to the Law on Stamp Duty); justice fees (calculated according to the Law on Justice Fees); fees to justice officers (according to the set contributions for the Justice budget); along with notary and other fees. The total fee is also dependent on the current value of the fiscal correction unit (UCF), set at 88 kwanzas.

Domestic enforcement of Intellectual Property Rights can be difficult due to lack of resources and competing priorities, but the National Authority of Economic Inspection and Food Safety (ANIESA) was able to identify and break up a network of businesses selling counterfeit cosmetic products in early 2021. Authorities traced the source of the products to DRC, highlighting concerns about lack of border measures to intercept counterfeits. The Angolan Government signed an agreement with Portugal in October 2021 to jointly combat counterfeit medicines. In December 2021, ANIESA suspended the operations of three factories (located in Viana, Kikuxi, and Benfica) for producing counterfeit Havaianas-branded sandals. Trademark registration is mandatory to be granted rights over a mark. Angolan trademarks are valid for 10 years from the filing date and renewable for further periods of 10 years.

The Instituto Angolano de Propriedade Intelectual (IAPI) is the governmental body within the Ministry of Industry & Commerce charged with implementing patent and trademark law. The Ministry of Culture, Tourism & Environment oversees copyright law.

Regarding patents, additional fees are due for each claim after the 15th. Additionally, the request for the anticipation or postponement of the publication of a patent is now provided by the new applicable fees.

Angola is not listed in United States Trade Representative’s (USTR) Special 301 report nor the notorious market report.

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/. 

Foreign portfolio investment is still new in Angola, but the government is seeking to increase it. The National Bank of Angola (BNA) abolished the licensing previously required to import capital from foreign investors allocated to the private sector and export income associated with such investments. This measure compliments the need to improve the capture of FDI and portfolio investment and it is in line with the privatization program for public companies (PROPRIV) announced through Presidential Decree No. 250/19 of August 5, 2019, which encourages foreign companies to purchase state-owned assets the government is liquidating. BNA has also stopped requiring a license to export capital resulting from the sale of investments in securities traded on a regulated market and the sale of any investment, in which the buyer is also not – foreign exchange resident, pursuant to Notice No. 15/2019. The BNA is increasingly removing restrictions on payments and transfers for current international transactions.

Angola’s Debt and Securities Stock Exchange (BODIVA), planned to be privatized by 2022, trades an equivalent in local currency (kwanzas) of USD 2 billion a year. In view of policies adopted by the institution, BODIVA predicts an increase in the volume of trades. The stock exchange has 23 commercial banks and two brokerages as members, which operate mainly in government denominated Treasury Bonds. BODIVA allows the trading of different types of financial instruments through an electronic auction platform to investors with rules (self-regulation), systems (platforms), and procedures that assure market fairness and integrity to facilitate portfolio investment. The Capital Markets Commission, the regulator, is updating its own supervisory framework while looking to provide new services and attract more individual investors to the capital markets. Presently, only local commercial banks can list on the nascent stock exchange. According to the Capital Markets Commissioner, portfolio investment by individuals only represents 16 percent of BODIVA’s equity.

Through the ongoing privatization program, the government announced in February its intent to sell 30 percent of the stocks it has invested in BODIVA by the end of 2022, with plans to sell the rest in phases in 2023 and 2024.

Credit is partially allocated on market terms. Since the revision of the PIL in 2021, domestic credit is accessible to foreign investors and companies that are majority foreign held (this was previously only possible after implementation of the investment project). For Angolan investors, credit access remains limited. In 2020, however the BNA directed commercial banks to increase the minimum amount of subsidized credit that they must make available to borrowers 2 percent of their assets to 2.5 percent by the end of 2020 to accelerate the diversification of domestic production. The private sector has access to a variety of conventional credit instruments provided by commercial banks.

Forty-seven percent of Angola’s income-earners utilize banking services, with 80 percent being from the urban areas. Angola is over-banked for the size of its economy. Although four banks have been closed since 2018, 26 banks still operate in Angola. The banking market remains marked by concentration and limited financial inclusion. The top six banks control nearly 80 percent of sector assets, loans and deposits, but the rest of the sector includes many banks with minimal scale and weak franchises. The total number of customers in the six largest banks is 9.9 million. Angola’s largest bank Banco Angolano de Investimentos has an asset value of approximately USD 5.5 billion.

Angola has a central banking system. The banking sector largely depends on monetary policies established by Angola’s central bank, the National Bank of Angola (BNA). Thanks to the ongoing IMF economic and financial reform agenda, the BNA is adopting international best practices and slowly becoming more autonomous. On February 13, 2021, President Joao Lourenco issued a decree granting autonomy to the BNA in line with IMF recommendations. Since that time, the bank has made decision on monetary, financial, credit, and foreign exchange policies without political influence, while also maintaining its oversight, regulatory, and supervisory role of the institutions in the financial system. The reforms taken under the Lourenco administration have lessened the political influence over the BNA and allowed it to more freely adopt strategies to build resilience from external shocks on the economy. As Angola’s economy depends heavily on oil to fuel its economy, so does the banking sector. The BNA periodically monitors minimum capital requirements for all banks and orders the closure of non-compliant banks.

Credit availability is limited and often supports government-supported programs. The GRA obliges banks to grant credit more liberally in the economy, notably by implementing a Credit Support Program (PAC). For instance, the BNA first issued a notice obliging Angolan commercial banks to grant credit to national production equivalent at a minimum to 2.5 percent of their net assets in 2020 and extended the notice through the end of 2022. Although the RECREDIT Agency purchased non-performing loans (NPLs) of the state’s parastatal BPC bank, NPLs remain high at 23 percent, a decrease of 9 percent since 2017.

The country has not lost any additional correspondent banking relationships since 2015. At the time of issuing this report no correspondent banking relationships were in jeopardy. The Eastern and Southern Africa Anti-Money Laundering Group is evaluating Angola’s anti-money laundering regime. A positive result could lead private foreign banking institutions to reestablish correspondent banking relationships. Most transactions go via third party correspondent banking services in Portugal banks, a costly option for all commercial banks.

Foreign banking institutions are allowed to operate in Angola and are subject to BNA oversight.

The Angolan Sovereign Wealth Fund (FSDEA) was established in 2012 with $5 billion USD in support from the petroleum sector. The fund was established in accordance with international governance standards and best practices as outlined in the Santiago Principles. As of March 2021, the FSDEA reported $2.97 billion USD. Angola is a full member  of the International Forum of Sovereign Wealth Funds

There are currently 81 public enterprises listed on the State Institute of Asset and Shares Management website; 70 are wholly owned by the state, 8 with majority-ownership for the state and 3 with minority stakes for the government. A list of all of Angola’s SOEs can be found at the following link: https://igape.minfin.gov.ao/PortalIGAPE/#!/sector-empresarial-publico/universo-do-sep . Based on the IMF definition of government owning at least 50 percent equity and revenue being greater than 1 percent of GDP, SONANGOL, the state oil company, and Sodiam, the state diamond company qualify as SOEs.

There is no law mandating preferential treatment to SOEs, but in practice they have access to inside information and credit. Currently, SOEs are not subject to budgetary constraints and quite often exceed their capital limits. All SOEs in Angola are required to have boards of directors, and most board members are affiliated with the government.

Other public enterprises operate in the agribusiness, oil and gas, financial services, and construction sectors as well as others.

The GRA considers SOE debt as indirect public debt, and only accounts in its state budget for direct government debt, thus effectively not reflecting some substantial obligations in fact owed by the government. President Lourenço has launched various reforms to improve financial sector transparency, enhance efficiency in the country’s SOEs as part of the National Development plan 2018-2022 and Macroeconomic Stability Plan

Angola is not a party to the WTO’s Government Procurement Agreement (GPA). Angola does not adhere to the OECD guidelines on corporate governance for SOEs.

Angola began its privatization program (PROPRIV) in 2019, with an aim to privatize 195 assets by 2022. By January, the government had privatized 73 assets and raised $1.7 billion in revenue through the program despite COVID-19 pandemic-imposed hurdles. The program is supervised by State Institute of Asset and Shares Management (IGAPE) and will implemented through the Angolan Debt and Securities Exchange Market (BODIVA). The government plans to partially privatize the state-owned telecommunications company and the national oil company Sonangol, as well as the national airline TAAG, and companies in the extractives sector, health, manufacturing, and agriculture.

The privatization process is open to interested foreign investors and the government has improved the transparency of the bidding process. The government has an “electronic auction” site where investors can submit their bids for the various tenders: https://leilaoigape.minfin.gov.ao/ .

There is a general awareness of expectations of or standards for responsible business conduct (RBC) or obligation to conduct due diligence to ensure no harm with regards to environment, social and governance issues. Projects that could have an impact on the environment are subject to an environmental impact assessment (EIA) depending on their nature, size or location, on a case-by-case basis. Presidential Decree No 117/20 of April 22, 2021 establishes the:

• Rules and procedures for EIAs for public and private projects.
• Environmental licensing procedure for activities that are likely to cause significant environmental and social impacts.
• Applicable fees.
• Fines for non-compliance.

The government has few initiatives to promote responsible business conduct. In March 2019, the UNDP launched the National Network of Corporate Social Responsibility, “RARSE,” to create a platform to reconcile responsible business conduct with the needs of the population. The government, through the Ministry of Education, also held a campaign under the theme, “Countries that have a good education, that enforce laws, condemn corruption, privilege and practice citizenship, have as a consequence successful social and economic development” in 2020.

The government has enacted laws to prevent labor by children under 14 and forced labor, although resource limitations hinder adequate enforcement. In June 2018, the government passed a National Action Plan for the Eradication of Child Labor (PANETI) (2018-2022) to eradicate the worst forms of child labor. This plan was updated on March 17, 2022 and is implemented by the Multisectoral Commission for the Prevention and Eradication of Child Labor. The National Plan aims to eliminate child labor in Angola, by creating strategies, prevention policies, a favorable environment for the harmonious development of children, and creating institutional capacity to solve the problem of worst forms of child labor in the country.

With limitations, the laws protect the rights to form unions, collectively bargain, and strike. Government interference in some strikes has been reported. The Ministry of Public Administration, Employment, and Social Security has a hotline for workers who believe their rights have been infringed. Angola’s Chamber of Commerce and Industry established the Principles of Ethical Business in Angola.

The GRA does not fully meet the minimum standards for the elimination of trafficking in persons but is made significant efforts to do so, especially considering the impact of the COVID-19 pandemic on its anti-trafficking capacity. Those efforts led to Angola remain on Tier 2 in 2021. Some of the efforts taken by Angolan authorities include convicting multiple traffickers, including five complicit officials, and sentencing all to imprisonment; offering long-term protective services that incentivized victims to participate in trials against their traffickers; dedicating funds specifically for anti-trafficking efforts, including for implementation of the national action plan; and conducting public awareness campaigns against trafficking.

In 2015, Angola organized an interagency technical working group to explore Angola’s possible membership in the Voluntary Principles on Security and Human Rights (VPs) and the Extractive Industries Transparency Initiative (EITI). Angola formally announced its intention to join the EITI in September 2020 and in November 2021 announced its intention to formally present its candidacy in March 2022. Angola has been a member of the Kimberley Process (KP) since 2003 and chaired the KP in 2015. Angola is not a party to the WTO’s GPA and does not adhere to the OECD guidelines on corporate for SOEs.

Department of State

• Country Reports on Human Rights Practices;
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities;
• U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises; and;
• Xinjiang Supply Chain Business Advisory 

Department of the Treasury

• OFAC Recent Actions 

Department of Labor

• Findings on the Worst Forms of Child Labor Report ;
• List of Goods Produced by Child Labor or Forced Labor ;
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World  and;
• Comply Chain .

According to Article 5 of Decree No. 51/04 of July 23, 2004, every project (private or public) must present an Environmental Impact Study to the Ministry of Environment for their approval.

Angola aims to address the impacts of climate change as stated in its National Development Plan . It includes the main goals and actions to tackle current and future impacts on important sectors for economic development and for environmental sustainability. In addition, the National Strategy for Climate Change (2018–2030) includes five pillars on mitigation, adaptation, capacity building, funding, and institutional coordination. In addition, the Government of Angola has ratified the UNFCCC and developed and submitted its National Adaptation Plans of Action (NAPAs).

Angola has not made firm commitments or introduced policies to reach net-zero carbon emissions by 2050. Angola prioritizes the implementation of adaptation measures in coastal zones, land use, forests, ecosystems and biodiversity, and water resources. On mitigation, Angola aims to reach 70 percent of installed renewable energy  by 2025 and to sequester 5 million tons of CO2e per year through reforestation by 2030. Angola, like many African countries, needs access to abundant, always available, and cost-effective power to support economic growth. As part of a path towards sustainable transition, Angola needs to reduce emissions from its existing fossil fuel facilities.

The Forest and Fauna law 06/17 of January 24, 2017, has significantly changed how natural forests are managed in the country, introducing the concept of forest concessions for the first time, allowing for a more rational use of forest resources. Recognizing the potential of the blue economy, the government has expanded the mandate of the Ministry of Fisheries to cover issues of the sea, launched a marine spatial plan to address conflicting uses of marine resources, and is planning to establish the first marine protected area in the country. In addition, the government has started the preparation of guidelines to regulate private concessions in protected areas, as an effort to attract private investments in nature-based tourism and has also established the Kavango Agency to ensure further multi-sectoral coordination in the management of the high-sensitive Kavango watershed.

The Strategic Plan for the Protected Areas System of 2018 (PESAP 2018) is the most recent policy document for protected areas. The plan focuses on measures to allow fundraising, train staff, and strengthen institutions such as the National Institute for Biodiversity and Protected Areas. It also emphasizes the importance of maintaining the socioeconomic and financial sustainability of conservation areas.

Corruption remains a strong impediment to doing business in Angola and has had a corrosive impact on international market investment opportunities and on the broader business climate. The Lourenço administration has developed a comprehensive anti-corruption and anti-money laundering legal framework, but implementation remains a challenge. Angola has made several arrests of former officials and family members of the former president who were accused of embezzling state funds and has made a concerted effort to recover assets it accuses those individuals of stealing.

Some of the recent anti-corruption legislation includes:

• The revised Criminal Law Code and Criminal Procedure Code, which both entered into force in February 2021: The updated laws include corporate criminal liability; harsh penalties for active and passive corruption by public officials, their family members, and political parties; criminalization of private sector corruption; and seizure of proceeds.
• The updated Public Procurement Law, which entered into force on December 23, 2020, emphasizes the management of potential conflicts of interest in awarding public contracts, including the requirement for foreign investors to have a local partner, which historically made procurement ripe for bribery and kickbacks.
• The Whistleblower Protection Law, which came into force on January 1, 2020, provides a protection system – including anonymity – for victims, witnesses, and the accused during judicial proceedings that involve corruption and/or money laundering allegations.

The government does not require the private sector to establish internal codes of conduct and does not provide a mechanism for reporting irregularities related to public officials.

U.S. firms in Angola are aware of cases of corruption in Angola despite efforts to combat the phenomenon and view it as a significant impediment to FDI. Corruption in Angola is pervasive in public institutions, government procurement customs and taxation. Foreign investors seeking to do business in Angola must remain mindful of the corruption risks and the extraterritorial reach of the U.S. FCPA.

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

Hélder Pitta Grós
Procurador Geral da Republica (Attorney General of the Republic)
Procurador Geral da Republica (Attorney General’s Office)
Travessa Antonio Marques Monteiro 22, Maianga
Telephone: 244-222333 172

Sebastiao Domingos Gunza
Inspector General of State Administration
Office of the Inspector General of State Administration
Rua 17 de Setembro, Luanda, Angola
+244 993 666 338

Angola maintains a stable political environment, though demonstrations and workers strikes occur with regularity, particularly in the last two years due to increased socio-economic difficulty. Politically motivated violence is not a high risk, and incidents are rare. The Front for the Liberation of the Enclave of Cabinda—Military Position (FLEC MP) based in the northern province of Cabinda threatened Chinese workers in Cabinda in 2015 and claimed in 2016 that they would return to active armed struggle against the Angolan government forces. No attacks have since ensued and the FLEC has remained relatively inactive to date.

Local elections were anticipated to take place in 2020 but have not yet occurred due to the COVID-19 pandemic and the lack of key legislation governing the elections. General elections are scheduled to occur in August 2022. Young people take to the streets occasionally to protest economic hardship and what they view as unrealized political pledges. Large pockets of the population live in poverty without adequate access to basic services. Crimes of opportunity such as muggings, robberies and car-jackings occur across the country.

In the fourth quarter of 2021, the unemployment rate for economically active Angolans 15 years and older – who represent half of Angola’s 33 million people – was 32.9 percent. The labor market in Angola is largely characterized by high unemployment and a high level of informality. There is also a deficit of skilled and well-trained labor, especially in the industrial sector due to the low level of vocational training. The foreign/migrant labor force bridges the gap in specialized labor. The Angolan labor force also has limited technical skills, English language capabilities, and management training.

Companies in the construction and manufacturing sectors are significant sources of formal and informal mechanisms for workers to acquire skills and abilities particularly relevant to public and private construction works and manufacturing industry.

In the fourth quarter of 2021, the economically active population in Angola age 15 years and older was estimated to be approximately 16.2 million people (48.3 percent male and 51.7 female). Over 80 percent of the employed population in Angola was estimated to work in the informal sector as of the fourth quarter of 2021, equal to around 8.8 million people out of the 10.9 million people 15 years of age and older and employed in the same period. Informal employment was highest among Angolans aged 15-24 years and 65 years or older – reaching over 90 percent. The unemployment rate for women was also 90 percent for women and 71.5 percent for men.

There are gaps in compliance with international labor standards which may pose a reputational risk to investors. Children are sometimes employed in agriculture, construction, fishing, and coal industries. There have been reports of forced labor in agriculture, construction, artisanal diamond mining, and domestic work, each sometimes as a result of human trafficking. Additional information is available in the 2021 Trafficking in Persons Report, (https://www.state.gov/reports/2021-trafficking-in-persons-report/angola/), 2020 Country Report on Human Rights Practices (https://www.state.gov/reports/2021-country-reports-on-human-rights-practices/angola/), and 2020 Findings on the Worst Forms of Child Labor.

The General Labor Law 7 of September 15, 2015, governs all aspects of the employment relationship and provides guidelines on employment adjustments to respond to fluctuations in market or economic conditions. The law differentiates between layoffs and firing. However, there are unemployment insurance mechanisms in place or social safety net programs for workers laid off for economic reasons. All forms of termination must rely on Social Security contributions along the years of employment in due course as the benefits are not readily available at termination but only when the beneficiaries reach retirement age or become physically impaired to maintain employment status.

All employers and unions may enter into collective bargaining agreements under the Law on the Right to Collective Bargaining (20-A/92). Where there is no union representation, the employees may set up an ad hoc commission aimed at negotiating and concluding a collective bargaining agreement with the employer, subject to complex requirements. If more than one union represents an employer’s employees, the unions must set up a joint negotiation committee composed of representatives from each union in the same proportion as the employees are represented.

The negotiation process for a collective bargaining agreement must be finalized within 90 days of the employer receiving the union/employees’ initial proposal. If this process is unsuccessful, the Law on the Right to Collective Bargaining provides for alternative dispute resolution mechanisms to resolve collective labor conflicts – notably conciliation, mediation and arbitration. Unions/employees may call a strike if the negotiations are deadlocked when the deadline for reaching an agreement passes.

A collective bargaining agreement requires all the parties to maintain social peace while it is in force, rendering illegal any strike action or collective labor conflict during that period. Once the effective period has elapsed, the agreement shall continue to bind the parties until it is replaced by a new or amended collective bargaining agreement. Collective labor disputes are to be settled through compulsory arbitration by the Ministry of Labor, Public Administration and Social Security. The law does not prohibit employer retribution against strikers, but it does authorize the government to force workers back to work for “breaches of worker discipline” or participation in unauthorized strikes. The law prohibits anti-union discrimination and stipulates that worker complaints be adjudicated in the labor court. Under the law, employers are required to reinstate workers who have been dismissed for union activities.

Dorcas Makaya
Economic Specialist
United States Embassy Luanda
+244 222 641 000
MakayaDC@state.gov

The Government of Antigua and Barbuda encourages foreign direct investment, particularly in industries that create jobs, enhance economic activity, earn foreign currency, and have a positive impact on its citizens. Diversification of the economy remains a priority.

Through the ABIA, the government facilitates and supports foreign direct investment in the country and maintains an open dialogue with current and potential investors. All potential investors are afforded the same level of business facilitation services. ABIA offers complementary support services to investors exploring business opportunities, including facilitation of incentives and concessions, project monitoring, and general assistance. The government launched an additional website in early 2021 to serve as a “business hub for potential investors,” http://antiguabarbuda.com .

While the government welcomes all foreign direct investment, it has identified tourism and related services, manufacturing, agriculture and fisheries, information and communication technologies, business process outsourcing, financial services, health and wellness services, creative industries, education, yachting and marine services, real estate, and renewable energy as priority investment areas. Uncertainty about the trajectory of economic recovery of the tourism, commercial aviation, and cruise industries impacts the potential for projects in those sectors.

Local laws do not place any limits on foreign control of investment and ownership in Antigua and Barbuda. Foreign investors may hold up to 100 percent of an investment. Local and foreign entrepreneurs need approximately 40 days from start to finish to transfer the title on a piece of property. In 1995, the government established a permanent residency program to encourage high-net-worth individuals to establish residency in Antigua and Barbuda for up to three years. As residents, their income is free of local taxation. In 2020, the government established the Nomad Digital Residence Visa program in which eligible remote workers can apply for a two-year special resident authorization. Under this program, the visa holders are also exempt from paying local income taxes. These programs are separate from the Citizenship by Investment program.

The ABIA evaluates all foreign direct investment proposals applying for government incentives and provides intelligence, business facilitation, and investment promotion to establish and expand profitable business enterprises. The ABIA also advises the government on issues that are important to the private sector and potential investors to increase the international competitiveness of the local economy.

The government of Antigua and Barbuda treats foreign and local investors equally with respect to the establishment, acquisition, expansion, management, conduct, operation, and sale or other disposition of investments in its territory.

The OECS, of which Antigua and Barbuda is a member, has not conducted a World Trade Organization (WTO) trade policy review since 2014. There have also not been any investment policy reviews by civil society organizations in the past five years.

Established in 2006, the ABIA facilitates foreign direct investment in priority sectors and advises the government on the formation and implementation of policies and programs to attract investment. The ABIA provides business support services and market intelligence to all investors. It also offers an online guide that is useful for navigating the laws, rules, procedures, and registration requirements for foreign investors. The guide is available at https://www.theiguides.org/public-docs/guides/antiguabarbuda .

All potential investors applying for government incentives must submit their proposals for review by the ABIA to ensure the project is consistent with national interests and provides economic benefits to the country.

To register a business. the general practice is to retain a local attorney who prepares all the relevant incorporation documents. A business must register with the Intellectual Property and Commercial Office, the Inland Revenue Department, the Medical Benefits Scheme, the Social Security Scheme, and the Board of Education.

The Antigua and Barbuda Science Innovation Park (ABSIP) launched in 2019 to support and create business startup opportunities that will generate sustainable business enterprises. ABSIP provides business incubation and financing, access to business financing, branding, training, partnership establishment, and other services. ABSIP’s website is  http://absip.gov.ag  .

The Prime Minister’s Entrepreneurial Development Programme (EDP) supports the creation of micro and small businesses with the intent of increasing the Antiguan and Barbudan ownership share of the country’s economy. Priority sectors in which EDP grants loans are agriculture and agro-processing, manufacturing, information technology, e-business, and tourism.

Although the government of Antigua and Barbuda prioritizes investment return as a key component of its overall economic strategy, there are no formal mechanisms in place to achieve this. To sustain future economic growth, Antigua and Barbuda’s economy depends on significant foreign direct investment.

Local laws do not place any restrictions on domestic investors seeking to do business abroad. Local companies in Antigua and Barbuda are actively encouraged to take advantage of export opportunities specifically related to the country’s membership in the OECS Economic Union and the Caribbean Community Single Market and Economy (CSME).

The government of Antigua and Barbuda publishes laws, regulations, administrative practices, and procedures of general application and judicial decisions that affect or pertain to investments or investors in the country. Where the government establishes policies that affect or pertain to investments or investors that are not expressed in laws and regulation or by other means, the national government has committed to make them publicly available.

Rulemaking and regulatory authority lie with the bicameral parliament of the government of Antigua and Barbuda. The House of Representatives has 19 members, 17 of whom are elected for a five-year term in single-seat constituencies, one of whom is an ex-officio member, and one of whom is Speaker. The Senate has 17 appointed members.

Respective line ministries develop relevant national laws and regulations, which are then drafted by the Ministry of Legal Affairs. Laws relating to the ABIA and the Citizenship by Investment program are the main laws relevant to foreign direct investment. This website contains the full text of laws already in force, as well as those Parliament is currently considering.

While some draft bills are not subject to public consideration, input from stakeholder groups may be considered. The government encourages stakeholder organizations to support and contribute to the legal development process by participating in technical committees and providing comments on drafts.

Accounting, legal, and regulatory procedures are generally transparent and consistent with international norms. The International Financial Accounting Standards, which stem from the General Accepted Accounting Principles, govern the accounting profession.

The constitution provides for the independent Office of the Ombudsman to guard against abuses of power by government officials. The Ombudsman is responsible for investigating complaints about acts or omissions by government officials that violate the rights of members of the public.

The ABIA has primary responsibility for investment supervision, and the Ministry of Finance, Corporate Governance and Public-Private Partnerships monitors investments to collect information for national statistics and reporting purposes. The ABIA can revoke an issued Investment Certificate if the holder fails to comply with certain stipulations detailed in the Investment Authority Act and its regulations.

Antigua and Barbuda’s membership in regional organizations, particularly the OECS and its Economic Union, commits the state to implement all appropriate measures to fulfill its various treaty obligations. The eight member states and territories of the ECCU tend to enact laws uniformly, though minor differences in implementation may exist. The enforcement mechanisms of these regulations include penalties and other sanctions.

The February 2022 Caribbean Financial Action Task Force (CFATF) Mutual Evaluation assessment found Antigua and Barbuda to be largely compliant.

The ECCB is the supervisory authority over financial institutions in Antigua and Barbuda registered under the Banking Act of 2015.

As a member of the OECS and the ECCU, Antigua and Barbuda subscribes to principles and policies outlined in the Revised Treaty of Basseterre. The relationship between national and regional systems is such that each participating member state is expected to coordinate and adopt, where possible, common national policies aimed at the progressive harmonization of relevant policies and systems across the region. Thus, Antigua and Barbuda is obligated to implement regionally developed regulations such as legislation passed under the authority of the OECS, unless it seeks specific concessions to do otherwise.

As a member of the WTO, Antigua and Barbuda is a signatory to the WTO Agreement on the Technical Barriers to Trade and is obligated to notify the Committee of any draft new and updated technical regulations. The Antigua and Barbuda Bureau of Standards is a statutory body that prepares and promulgates standards in relation to goods, services, processes, and practices. Antigua and Barbuda ratified the WTO Trade Facilitation Agreement (TFA) in 2017. The TFA is intended to improve the speed and efficiency of border procedures, facilitate trade costs reduction, and enhance participation in the global value chain. Antigua and Barbuda has implemented a number of TFA requirements, but it has also missed two implementation deadlines.

Antigua and Barbuda bases its legal system on the British common law system. The Attorney General, the Chief Justice of the Eastern Caribbean Supreme Court, junior judges, and magistrates administer justice. The Eastern Caribbean Supreme Court Act establishes the Supreme Court of Judicature, which consists of the High Court and the Eastern Caribbean Court of Appeal. The High Court hears criminal and civil matters and rules on constitutional law issues. Parties may appeal first to the Eastern Caribbean Supreme Court, an itinerant court that hears appeals from all OECS members. The final appellate authority is the Judicial Committee of the UK Privy Council.

The Caribbean Court of Justice (CCJ) has original jurisdiction to interpret and apply the Revised Treaty of Chaguaramas. Antigua and Barbuda is only subject to the original jurisdiction of the CCJ.

As a member of the WTO, Antigua and Barbuda is a party to the WTO Dispute Settlement Panel and Appellate Body which resolves disputes over WTO agreements. Courts of appropriate jurisdiction in both countries resolve private disputes. Antigua and Barbuda brought a case before the WTO against the United States concerning the cross-border supply of online gambling and betting services. The WTO ruled in favor of Antigua and Barbuda, but agreement on settlement terms remains outstanding.

The ABIA provides guidance on the relevant laws, rules, procedures, and reporting requirements for investors. These are available at  http://www.theiguides.org/public-docs/guides/antiguabarbuda  .

The ABIA may grant concessions as specified in the Investment Authority Act Amended 2019. These concessions are listed on Antigua and Barbuda’s iGuide website. Investors must apply to ABIA to take advantage of these incentives.

Under the Citizenship by Investment program, foreign individuals can obtain citizenship in accordance with the Citizenship by Investment Act of 2013, which grants citizenship (without voting rights) to qualified investors. Applicants are required to undergo a due diligence process before citizenship can be granted. The minimum contribution for investors under the program is $100,000 (270,225 Eastern Caribbean dollars) to the National Development Fund for a family of up to four people and $125,000 (337,818 Eastern Caribbean dollars) for a family of five, with additional contributions of $15,000 (40,538 Eastern Caribbean dollars) per person for up to four additional family members. Individual applicants can also qualify for the program by buying real estate valued at $400,000 (1,081,020 Eastern Caribbean dollars) or more or making a business investment of $1.5 million (4,053,825 Eastern Caribbean dollars). Alternatively, at least two applicants can propose to make a joint investment in an approved business with a total investment of at least $5 million (13.5 million Eastern Caribbean dollars). Each investor must contribute at least $400,000 (1,081,020 Eastern Caribbean dollars) to the joint investment. Citizenship by investment investors must own real estate for a minimum of five years before selling it. A fourth option involves a contribution of $150,000 (405,383 Eastern Caribbean dollars) to the University of the West Indies (UWI) Fund for a family of six people, which entitles one member of the family to a one-year tuition-only scholarship at UWI’s Five Islands campus. All applicants must also pay relevant government and due diligence fees, and provide a full medical certificate, police certificate, and evidence of the source of funds.

Chapter 8 of the Revised Treaty of Chaguaramas outlines the competition policy applicable to CARICOM states. Member states are required to establish and maintain a national competition authority for implementing the rules of competition. CARICOM established a Caribbean Competition Commission (CCC) to rule on complaints of anti-competitive cross-border business conduct. CARICOM competition policy addresses anti-competitive business conduct such as collusion between enterprises, decisions by associations of enterprises, and concerted practices by enterprises that have as their object or effect the prevention, restriction, or distortion of competition within the Community, and actions by which an enterprise abuses its dominant position within the Community. Antigua and Barbuda does not have any legislation regulating competition. The OECS agreed to establish a regional competition body to handle competition matters within its single market. The draft OECS bill has been submitted to the Ministry of Legal Affairs for review.

According to the Investment Authority Act of 2006, investments in Antigua and Barbuda will not be nationalized, expropriated, or subject to indirect measures having an equivalent effect, except as necessary for the public good, in accordance with the due process of law, on a non-discriminatory basis, and accompanied by prompt, adequate, and effective compensation. Compensation in such cases is the fair market value of the expropriated investment immediately before the expropriation or the impending expropriation became public knowledge, whichever is earlier. Compensation includes interest from the date of dispossession of the expropriated property until the date of payment and is required to be paid without delay.

There is an unresolved dispute regarding the 2007 expropriation of an American-owned property. Following the expropriation, the owners initiated legal action to enforce their rights under Antigua and Barbuda’s Land Acquisition Act. A 2014 Privy Council court decision ordered the Government of Antigua and Barbuda to pay the former property owners $39.8 million in compensation. The government has only paid approximately $20 million as of June 2021, and the property owners have continued to pursue multiple legal remedies to compel the government to pay the outstanding balance. Antigua and Barbuda appealed a 2018 court decision in favor of the claimants; legal proceedings are ongoing. The government has not made any additional payments to the claimants since 2015. The claimants continue to pursue recourse in other jurisdictions and in Antigua and Barbuda, with the latest legal filings in 2020. The outstanding debt is currently $19.1 million with daily accruing interest. Because of Antigua and Barbuda’s failure to fully compensate the owners as required by its own laws, the U.S. government recommends continued caution when investing in real estate or any other venture in Antigua and Barbuda.

Under the Bankruptcy Act (1975), Antigua and Barbuda has a bankruptcy framework that grants certain rights to debtors and creditors. The full text of the legislation can be found on the government’s website .

The Government of Antigua and Barbuda granted certain concessions specified in the Investment Authority Act Amended 2019. These concessions provide exemption or reduction on various taxes and fees, including corporate income tax, withholding tax, stamp duty on land transfers, and import duties on vehicles and construction materials. The length and/or scale of concession is based on company and investment size. These incentives cover capital investment in agriculture, fisheries, agribusiness, business process outsourcing, energy, health and wellness, manufacturing, creative, financial services, information and communications technology, and tourism sectors. Investors must apply to the ABIA to take advantage of these incentives. Investments in healthcare, tourism, infrastructure development, renewable energy, education, and other projects considered important for economic development may receive incentives and/or concessions determined by the ABIA and Cabinet of Antigua and Barbuda if they are over $55.6 million (150.26 million Eastern Caribbean dollars) in size.

The Government of Antigua and Barbuda has been proactively pursuing public-private partnerships through the National Asset Management Company (NAMCO). NAMCO is a wholly owned government entity that holds the government’s stake in joint ventures and manages the investment proceeds that accrue.

The government established the Antigua and Barbuda Free Trade and Processing Zone (Free Zone) in 1994. A commission, acting as a private enterprise, administers the Free Zone. The Free Zone is part of a government initiative to diversify the economy. The commission is mandated to attract investment in priority areas.

As a member of the WTO, Antigua and Barbuda is party to the Agreement to the Trade Related Investment Measures. While there are no formal performance requirements, the government encourages investments that will create jobs and increase exports and foreign exchange earnings. There are no requirements for participation either by nationals or by the government in foreign investment projects. There is no requirement that enterprises must purchase a fixed percentage of goods or technology from local sources, but the government encourages local sourcing. Foreign investors receive the same treatment as citizens. There are no requirements for foreign information technology providers to turn over source code and/or provide access to surveillance (for example, backdoors into hardware and software or keys for encryption).

The government owns 55 percent of Antigua’s land, and the remaining 45 percent is privately owned. The Lands Division in the Ministry of Agriculture, Lands, Fisheries and Barbuda Affairs is the custodian of Crown lands on behalf of the government.

Historically, the residents of Barbuda owned all land on Barbuda communally, however the recent appropriation of land for new development projects has resulted in legal challenges to this system. In the aftermath of 2017’s Hurricane Irma, the government attempted to introduce a private property system by amending and repealing the Barbuda Land Act and replacing it with the Crown Land Regulation Act, which would allow private ownership of land in Barbuda by non-Barbudans. Barbudan representatives have filed a legal challenge to the constitutionality of this legislation in the Eastern Caribbean Supreme Court. Therefore, the Crown Land Regulation Act has not yet taken effect.

Citizens and non-citizens can lease or buy land on the island of Antigua from the government or the private sector. Land sold to non-citizens is subject to the Non-Citizen Land Holding Regulation Act, which requires buyers to obtain a license to purchase land. Buyers are advised to consult with a local attorney. All land titles and purchases must be registered at the Land Registry.

The Town and Country Planning office of the Development Control Authority designates land use areas, including for commercial, agricultural, industrial, or tourism use. The government’s Free Trade and Processing Zone manages land and facilities which are geared towards attracting foreign direct investment in export sectors.

Because Antigua and Barbuda is a member of the ECCU, lending institutions in Antigua and Barbuda generally follow the guidelines published by the ECCB. However, the lack of capital market depth in the sub-region makes the use of securitization difficult.

Antigua and Barbuda has an extensive legislative framework supporting the protection of intellectual property rights (IPR), however, enforcement efforts are inconsistent. Antigua and Barbuda is a member of the United Nations World Intellectual Property Organization (WIPO). It is a signatory to the Paris Convention for the Protection of Industrial Property, the Patent Cooperation Treaty, the Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks, and the Berne Convention for the Protection of Literacy and Artistic Works.

Article 66 of the Revised Treaty of Chaguaramas establishing the CSME commits all 15 members to implement stronger intellectual property protection and enforcement. The CARIFORUM-EU EPA contains the most detailed obligations regarding intellectual property in any trade agreement to which Antigua and Barbuda is a party. The EPA recognizes the protection and enforcement of IPR. Article 139 of the EPA requires parties to “ensure an adequate and effective implementation of the international treaties dealing with intellectual property to which they are parties, and of the WTO Agreement on Trade Related Aspects of Intellectual Property (TRIPS).” As a member of the WTO, Antigua and Barbuda recognizes the WTO TRIPS Agreement.

The Comptroller of Customs leads enforcement and prevention efforts against counterfeit goods, which include detention, seizure, and forfeiture. The Royal Police Force of Antigua and Barbuda has extensive powers of search and seizure in the investigation of alleged infringements and has the power to confiscate suspected infringing copies.

Antigua and Barbuda is not included in the United States Trade Representative 2022 Special 301 Report or the 2021 Review of Notorious Markets for Counterfeiting and Piracy.

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at  http://www.wipo.int/directory/en/ .

As a member of the ECCU, Antigua and Barbuda is also a member of the Eastern Caribbean Stock Exchange (ECSE) and the Regional Government Securities Market. The ECSE is a regional securities market established by the ECCB and licensed under the Securities Act of 2001, a uniform regional body of legislation governing securities market activities. As of March 2021, there were 164 securities listed on the ECSE, comprising 140 sovereign debt instruments, 13 equities, and 11 corporate debt securities. Market capitalization stood at $703 million (1.9 billion Eastern Caribbean dollars), representing a 6.9 percent increase from 2020. Antigua and Barbuda is open to portfolio investment.

Antigua and Barbuda accepted the obligations of Article VIII of the International Monetary Fund Agreement Sections 2, 3, and 4, and maintains an exchange system free of restrictions on making international payments and transfers. The government normally does not grant foreign tax credits except in cases where taxes are paid in a Commonwealth country that grants similar relief for Antigua and Barbuda taxes, or where an applicable tax treaty provides a credit. The private sector has access to credit on the local market through loans, purchases of non-equity services, and trade credits, as well as other accounts receivable that establish a claim for repayment.

Antigua and Barbuda is a signatory to the 1983 agreement establishing the ECCB. The ECCB controls Antigua and Barbuda’s currency and regulates its domestic banks.

The Banking Act (2015) is a harmonized piece of legislation across the ECCU member states. The ECCB and the Ministers of Finance of member states jointly carry out banking supervision under the act. The Minsters of Finance usually act in consultation with the ECCB with respect to those areas of responsibility within the Minister of Finance’s portfolio.

Domestic and foreign banks can establish operations in Antigua and Barbuda. The Banking Act requires all commercial banks and other institutions to be licensed. The ECCB regulates financial institutions. As part of supervision, licensed financial institutions are required to submit monthly, quarterly, and annual performance reports to the ECCB. In its latest annual report, the ECCB listed the commercial banking sector as stable. Assessments including effects of the pandemic are not yet available. Assets of commercial banks totaled $2.07 billion (5.6 billion Eastern Caribbean dollars) at the end of December 2019 and remained relatively consistent during the previous year. The reserve requirement for commercial banks was 6 percent of deposit liabilities.

Antigua and Barbuda is well-served by bank and non-bank financial institutions. There are minimal alternative financial services offered. Some people still participate in informal community group lending, but the practice is declining.

The Caribbean region has witnessed a withdrawal of correspondent banking services by U.S., Canadian, and European banks due to risk management concerns. CARICOM remains committed to engaging with key stakeholders on the issue and appointed a Committee of Ministers of Finance on Correspondent Banking to continue to monitor the issue.

Antigua and Barbuda’s Digital Assets Business Bill 2020 created a comprehensive regulatory framework for digital asset businesses, clients, and customers. The bill states that all digital asset businesses in the country must obtain a license for issuing, selling, or redeeming virtual coins, operating as a payment service or electronic exchange, providing custodial wallet services, among other activities. The government aspires to develop Antigua and Barbuda into a regional center for blockchain and cryptocurrency. At the end of 2020, over 40 major businesses accepted bitcoin cash.

Bitt, a Barbadian company, developed digital currency DCash in partnership with the ECCB. The first successful DCash retail central bank digital currency (CDBC) consumer-to-merchant transaction took place in Grenada in February 2021 following a multi-year development process. 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 2019. Bitt launched DCash in Antigua and Barbuda in March 2021. In January 2022, the platform experienced a system interruption, and its operation was suspended. The platform regained full functionality at the end of March 2022 following system upgrades.

Neither the government of Antigua and Barbuda nor the ECCB, of which Antigua and Barbuda is a member, maintains a sovereign wealth fund.

State-owned enterprises (SOEs) in Antigua and Barbuda are governed by their respective legislation and do not generally pose a threat to investors, as they are not designed for competition. The government established many SOEs to create economic activity in areas where the private sector is perceived to have little interest.

SOEs are headed by boards of directors to which senior managers report. In 2016, Parliament passed the Statutory Corporations (General Provisions) Act, which specifies ministerial responsibilities in the appointment and termination of board members, decisions of the board, and employment in these SOEs. To promote diversity and independence on SOE boards, professional associations, non-governmental organizations (NGOs), and civil society may nominate directors for boards.

Antigua and Barbuda does not have a targeted privatization program.

Responsible business conduct by producers and consumers is positively regarded in Antigua and Barbuda. The private sector is involved in projects that benefit society, including in support of environmental, social, and cultural causes.

The NGO community, while comparatively small, is involved in fundraising and volunteerism in gender, health, environmental, and community projects. The government at times partners with NGOs in their activities and encourages philanthropy.

Antigua and Barbuda is not a signatory of the Montreux Document on Private Military and Security Companies or a participant in the International Code of Conduct for Private Security Service Providers’ Association.

Antigua and Barbuda remains susceptible to natural disasters and other effects due to climate change. Antigua and Barbuda has developed a multi-stakeholder policy on the environment that focuses on climate resilience and adaptation, disaster risk reduction, protection of biodiversity, effective natural resources and environmental management through the enforcement of policies, legislation and regulations. The Environment Protection and Management Act was amended in 2019 to create an updated institutional and administrative framework that codifies all decisions on environmental and climate-related issues. Antigua and Barbuda is party to the Paris Agreement. In 2021, the government updated its Nationally Determined Contribution to the United Nations to signal its commitment to becoming a low- emission resilient country.

The law provides criminal penalties for corruption by officials, and the government generally implements these laws if corruption is proven. Allegations of corruption against government officials in Antigua and Barbuda are common. Both major political parties frequently accuse the other of corruption, but investigations yield few results. Antigua and Barbuda is party to the Inter-American Convention Against Corruption and the UN Anti-Corruption Convention.

The Integrity in Public Life Act requires all public officials to disclose all income, assets (including those of spouses and children), and personal gifts received while in public office. An integrity commission, established by the act and appointed by the Governor General, receives and investigates complaints regarding noncompliance with or violations of this law or of the Prevention of Corruption Act. As the only agency charged with combatting corruption, the commission was independent but understaffed and under-resourced. Critics stated the legislation was inadequately enforced and that the act should be strengthened.

The Office of National Drug and Money Laundering Control Policy is the independent law enforcement agency with specific authority to investigate reports of suspicious activity concerning specified offenses and the proceeds of crime.

The Freedom of Information Act granted citizens the statutory right to access official documents from public authorities and agencies and created a commissioner to oversee the process. In practice, citizens found it difficult to obtain documents, possibly due to government funding constraints rather than obstruction. The act created a special unit mandated to monitor and verify disclosures. By law, the disclosures are not public. There are criminal and administrative sanctions for noncompliance.

Antigua and Barbuda does not have a recent history of politically motivated violence or civil disturbance. Elections are peaceful and regarded as being free and fair. The next general elections are constitutionally due by May 2023.

Updated figures for the employed labor force for 2021 remain unavailable.

According to available World Bank statistics, the adult literacy rate is 99 percent. The labor code dictates that the minimum working age is 16 years. People under 18 must have a medical clearance to work and may not work later than 10 p.m. The Ministry of Legal Affairs, Public Safety, and Labour conducts periodic workplace inspections to enforce this law. The labor commissioner’s office also has an inspectorate that investigates child labor allegations.

The labor code dictates that workers have the right to associate freely and to form labor unions. Approximately 60 percent of formal sector workers belong to a union. Unions are free to conduct activities without government interference. Labor unions form an important part of the membership of both political parties. The law provides for the right of public and private sector workers to organize and bargain collectively without interference.

The labor code provides for the right to bargain collectively and conduct legal strikes, though there are several restrictions on the right to strike. Essential workers must provide two weeks’ notice of intent to strike. Once the party to a dispute requests court mediation, strikes are prohibited under penalty of imprisonment. Because of the delays associated with this process, unions often resolve labor disputes before calling a strike. The Industrial Relations Court may issue an injunction against a legal strike when the national interest is threatened or affected. The law prohibits retaliation against strikers. The law prohibits antiunion discrimination by employers, but it does not specifically require reinstatement of workers illegally fired for union activity.

The labor code provides that the Minister of Legal Affairs, Public Safety, and Labour may issue orders, which have the force of law, to establish a minimum wage. The minimum wage is $3.03 (8.18 Eastern Caribbean dollars) an hour for all categories of labor. In practice, the great majority of workers earn substantially more than minimum wage.

The customary standard workweek is 40 hours in five days. The law provides that the employer may not require workers to work more than a 48-hour, six-day workweek, and provides for 12 paid annual holidays. The law requires that employees be paid one and a half times the employees’ basic wage per hour for overtime work in excess of the standard workweek. The Ministry of Legal Affairs, Public Safety, and Labour put few limitations on overtime, allowing it in temporary or occasional cases, but did not allow employers to make regular overtime compulsory.

Investors in Antigua and Barbuda are required to maintain workers’ rights and safeguard the environment. While there are no specific health and safety regulations, the Labour Code provides general health and safety guidelines to labor inspectors. The Labour Commission settles disputes over labor abuses, health, and safety conditions. The law gives the ministry the authority to require special safety measures, not otherwise defined in the law, to be put in place for worker safety. Antigua and Barbuda is party to the International Labor Convention on Occupational Health and Safety No. 155 of 1981.

Workers have the right to report unsafe work environments without jeopardy to continued employment. Inspectors then investigate such claims, and workers may leave such locations without jeopardy to their continued employment.

Table 3
Table 3: Sources and Destination of FDI
Data not available.

Political/Economic Section
U.S. Embassy to Barbados, the Eastern Caribbean and the Organization of Eastern Caribbean States
Telephone Number: 246-227-4000
Email: BridgetownPolEcon@state.gov 

The Government of Argentina identified its top economic priorities for 2022 as reaching an agreement with the IMF to renegotiate the 2018 Stand-By Arrangement, controlling inflation, and continuing the post-pandemic economic recovery. When the Fernandez administration took office in late 2019, the Ministry of Foreign Affairs, International Trade, and Worship became the lead governmental entity for investment promotion.  The Fernandez administration does not have a formal business roundtable or other dialogue established with international investors, although it does engage frequently with domestic and international companies.

Market regulations such as capital controls, trade restrictions, and price controls enhance economic distortion that hinders the investment climate in the country.

Foreign and domestic investors generally compete under the same conditions in Argentina. However, foreign investment is restricted in specific sectors such as aviation and media. Foreign ownership of rural productive lands, bodies of water, and areas along borders is also restricted.

Argentina has a National Investment and Trade Promotion Agency that provides information and consultation services to investors and traders on economic and financial conditions, investment opportunities, and Argentine laws and regulations. The agency also helps small and medium- sized companies (SMEs) export their products, provides matchmaking services, and organizes roadshows and trade delegations. Upon the change of administration, the government placed the Agency under the direction of the Ministry of Foreign Affairs (MFA) to improve coordination between the Agency and Argentina´s foreign policy. The Under Secretary for Trade and Investment Promotion of the MFA works as a liaison between the Agency and provincial governments and regional organizations. The new administration also created the National Directorate for Investment Promotion under the Under Secretary for Trade and Investment Promotion, making the Directorate responsible for promoting Argentina as an investment destination. The Directorate´s mission also includes determining priority sectors and projects and helping Argentine companies expand internationally and/or attract international investment.

The agency’s web portal provides information on available services ( https://www.inversionycomercio.org.ar/ ). The 23 provinces and the City of Buenos Aires also have their own provincial investment and trade promotion offices.

Foreign and domestic commercial entities in Argentina are regulated by the Commercial Partnerships Law (Law 19,550), the Argentina Civil and Commercial Code, and rules issued by the regulatory agencies. Foreign private entities can establish and own business enterprises and engage in all forms of remunerative activity in nearly all sectors.

Full foreign equity ownership of Argentine businesses is not restricted, for the most part, with exceptions in the air transportation and media industries. The share of foreign capital in companies that provide commercial passenger transportation within the Argentine territory is limited to 49 percent per the Aeronautic Code Law 17,285. The company must be incorporated according to Argentine law and domiciled in Buenos Aires. In the media sector, Law 25,750 limits foreign ownership in television, radio, newspapers, journals, magazines, and publishing companies to 30 percent.

Law 26,737 (Regime for Protection of National Domain over Ownership, Possession or Tenure of Rural Land) establishes that a foreigner cannot own land that allows for the extension of existing bodies of water or that are located near a Border Security Zone. In February 2012, the government issued Decree 274/2012 further restricting foreign land ownership to a maximum of 30 percent of national land and 15 percent of productive land. Foreign individuals or foreign company ownership is limited to 1,000 hectares (2,470 acres) in the most productive farming areas. In June 2016, the Government of Argentina issued Decree 820 easing the requirements for foreign land ownership by changing the percentage that defines foreign ownership of a person or company, raising it from 25 percent to 51 percent of the social capital of a legal entity. Waivers are not available.

Argentina does not maintain an investment screening mechanism for inbound foreign investment. U.S. investors are not at a disadvantage to other foreign investors or singled out for discriminatory treatment.

Argentina was last subject to an investment policy review by the OECD in 1997 and the fifth trade policy review by the WTO in September 2021 ( https://www.wto.org/english/tratop_e/tpr_e/tp512_e.htm ). The United Nations Conference on Trade and Development (UNCTAD) has not done an investment policy review of Argentina.

In 2019, automotive sector representatives, including the Association of Automobile Manufacturers (ADEFA, or Asociación de Fábricas de Automotores) and the Asociación of Auto Parts Manufacturers (AFAC, or Asociación de Fábricas Argentinas de Componentes), published Plan 2030, a strategic plan for investment and development in the automotive sector. (http://www.cafas.org.ar/assets/img/noticias/Plan2030.pdf ) In 2022, the Industrial Union of Argentina (UIA, or Unión Industrial Argentina) published a White Book of recommendations to promote development and increase productivity in Argentina. (https://www.uia.org.ar/general/3889/propuestas-para-un-desarrollo-productivo-federal-sustentable-e-inclusivo-libro-blanco/ ) The Rosario Board of Trade (BCR, or Bolsa de Comercio de Rosario) published regular reports and recommendations for agricultural trade and investment policies. ( https://www.bcr.com.ar/es )

In 2019, stemming from the country’s deteriorating financial and economic situation, the Argentine government re-imposed capital controls on businesses and consumers, limiting their access to foreign exchange.  The government continued to update and increase both capital controls and taxes on imports and exports throughout 2021, generating continued uncertainty in the business climate.

With the stated aim of keeping inflation under control and avoiding production shortages during the COVID-19 pandemic, the government increased market interventions in 2020, creating further market distortions that may deter investment. During 2021, bans and other limits on beef exports were introduced to address rising domestic prices. Argentina currently has s a consumer goods price control program, “Precios Cuidados,” a voluntary program established in 2014.The Argentine Congress also passed the Shelves Law (No. 27,545), which regulates the supply, display, and distribution of products on supermarket shelves and virtual stores. Key articles of the Law are still pending implementing regulations. Private companies expressed concern over the final regulatory framework of the Law, which could affect their production, distribution, and marketing business models.

In August 2020, the government issued an edict freezing prices for telecommunication services (mobile and land), cable and satellite TV, and internet services until December 2020, later extending the measure into 2021. Some telecommunication companies appealed through the courts and were granted protection from the edict. The health sector was also subject to limits on price increases. In February 2021, the Secretary of Trade took administrative action against major consumer firms and food producers for purportedly causing supermarket shortages by withholding production and limiting distribution. Companies are currently contesting this decision. In March 2021, the Secretary of Domestic Trade issued Resolution 237/2021 establishing a national registry to monitor the production levels, distribution, and sales of private companies. If companies fail to comply, they could be subject to fines or closure. Tighter import controls imposed by the Fernandez administration have affected the business plans of private companies that need imported inputs for production. The private sector noted increased discretion on the part of trade authorities responsible for both approving import licenses and obtaining access to the foreign exchange market to pay for imports.

The Ministry of Production eased bureaucratic hurdles for foreign trade through the creation of a Single Window for Foreign Trade (“VUCE” for its Spanish acronym) in 2016. The VUCE centralizes the administration of all required paperwork for the import, export, and transit of goods (e.g., certificates, permits, licenses, and other authorizations and documents). The Argentine government has not fully implemented the VUCE for use across the country.

Argentina subjects imports to automatic or non-automatic licenses that are managed through the Comprehensive Import Monitoring System (SIMI, or Sistema Integral de Monitoreo de Importaciones), established in December 2015 by the National Tax Agency (AFIP by its Spanish acronym) through Resolutions 5/2015 and 3823/2015. The SIMI system requires importers to submit detailed information electronically about goods to be imported into Argentina. Once the information is submitted, the relevant Argentine government agencies can review the application through the VUCE and make any observations or request additional information. The list of products subject to non-automatic licensing has been modified several times since the beginning of the SIMI system. Due to the Covid-19 pandemic, the government reclassified goods needed to combat the health emergency previously subject to non-automatic import licenses to automatic import licenses. During 2021, the number of non-automatic import licenses did not significantly change, although obtaining dollars from the Argentine Central Bank to pay for imports was often difficult for importers. Approximately 1,500 tariff lines are currently subject to non-automatic licenses.

The Argentine Congress approved an Entrepreneurs’ Law in March 2017, which allows for the creation of a simplified joint-stock company (SAS, or Sociedad por Acciones Simplificada) online within 24 hours of registration. However, in March 2020, the Fernandez administration annulled the 24-hour registration system. Industry groups said this hindered the entrepreneurship ecosystem by revoking one of the pillars of the Entrepreneurs’ Law.

In December 2020, the government issued the regulatory framework for the Knowledge Based-Economy Law, which was passed in October 2020. The Law establishes tax benefits for entrepreneurs until December 2029. The complete list of activities included in the tax benefit can be found at: http://servicios.infoleg.gob.ar/infolegInternet/verNorma.do;jsessionid=56625A2FC5152F34ECE583158D581896?id=346218 .

Foreign investors seeking to set up business operations in Argentina follow the same procedures as domestic entities without prior approval and under the same conditions as local investors. To open a local branch of a foreign company in Argentina, the parent company must be legally registered in Argentina. Argentine law requires at least two equity holders, with the minority equity holder maintaining at least a five percent interest. In addition to the procedures required of a domestic company, a foreign company establishing itself in Argentina must legalize the parent company’s documents, register the incoming foreign capital with the Argentine Central Bank, and obtain a trading license.

A company must register its name with the Office of Corporations (IGJ, or Inspección General de Justicia). The IGJ website describes the registration process, and some portions can be completed online (https://www.argentina.gob.ar/justicia/igj/guia-de-tramites ). Once the IGJ registers the company, the company must request that the College of Public Notaries submit the company’s accounting books to be certified with the IGJ. The company’s legal representative must obtain a tax identification number from AFIP, register for social security, and obtain blank receipts from another agency. Companies can register with AFIP online at www.afip.gob.ar  or by submitting the sworn affidavit form No. 885 to AFIP.

Details on how to register a company can be found at the Ministry of Productive Development’s website: https://www.argentina.gob.ar/produccion/crear-una-empresa . Instructions on how to obtain a tax identification code can be found at: https://www.argentina.gob.ar/obtener-el-cuit-por-internet .

The enterprise must also provide workers’ compensation insurance for its employees through the Workers’ Compensation Agency (ART, or Aseguradora de Riesgos del Trabajo). The company must register and certify its accounting of wages and salaries with the Secretariat of Labor, within the Ministry of Labor, Employment, and Social Security.

The Ministry of Productive Development offers attendance-based courses and online training for businesses. The training menu can be viewed at: https://www.argentina.gob.ar/produccion/capacitacion .

The National Directorate for Investment Promotion under the Under Secretary for Trade and Investment Promotion at the MFA assists Argentine companies in expanding their business overseas, in coordination with the National Investment and Trade Promotion Agency. Argentina does not have any restrictions regarding domestic entities investing overseas, nor does it incentivize outward investment.

The Secretary of Strategic Affairs under the Cabinet is in charge of transparency policies and the digitalization of bureaucratic processes as of December 2019.

Argentine government authorities and a number of quasi-independent regulatory entities can issue regulations and norms within their mandates. There are no informal regulatory processes managed by non-governmental organizations or private sector associations. Rulemaking has traditionally been a top-down process in Argentina, unlike in the United States where industry organizations often lead in the development of standards and technical regulations.  The Constitution establishes a procedure that allows for citizens to draft or propose legislation, which is subject to Congressional and Executive approval before being passed into law.

Ministries, regulatory agencies, and Congress are not obligated to provide a list of anticipated regulatory changes or proposals, share draft regulations with the public, or establish a timeline for public comment. They are also not required to conduct impact assessments of the proposed legislation and regulations.

All final texts of laws, regulations, resolutions, dispositions, and administrative decisions must be published in the Official Gazette (https://www.boletinoficial.gob.ar ), as well as in the newspapers and the websites of the Ministries and agencies. These texts can also be accessed through the official website Infoleg (http://www.infoleg.gob.ar/ ), overseen by the Ministry of Justice and Human Rights. Interested stakeholders can pursue judicial review of regulatory decisions.

In September 2016, Argentina enacted a Right to Access Public Information Law (27,275) that mandates all three governmental branches (legislative, judicial, and executive), political parties, universities, and unions that receive public funding are to provide non-classified information at the request of any citizen. The law also created the Agency for the Right to Access Public Information to oversee compliance.

During 2017, the government introduced new procurement standards including electronic procurement, formalization of procedures for costing-out projects, and transparent processes to renegotiate debts to suppliers. The government also introduced OECD recommendations on corporate governance for state-owned enterprises to promote transparency and accountability during the procurement process. The regulation may be viewed at: http://servicios.infoleg.gob.ar/infolegInternet/verNorma.do?id=306769 .

In April 2018, Argentina passed the Business Criminal Responsibility Law (27,041) through Decree 277. The decree establishes an Anti-Corruption Office in charge of outlining and monitoring the transparency policies with which companies must comply to be eligible for public procurement.

The Argentine government has sought to increase public consultation in the rulemaking process; however, public consultation is non-binding and has been done in an ad-hoc fashion. In 2017, the Government of Argentina issued a series of legal instruments that seek to promote the use of tools to improve the quality of the regulatory framework. Amongst them, Decree 891/2017 for Good Practices in Simplification establishes a series of tools to improve the rulemaking process. The decree introduces tools on ex-ante and ex-post evaluation of regulation, stakeholder engagement, and administrative simplification, amongst others. Nevertheless, no formal oversight mechanism has been established to supervise the use of these tools across the line of ministries and government agencies, which make implementation difficult and severely limit the potential to adopt a whole-of-government approach to regulatory policy, according to a 2019 OECD publication on Regulatory Policy in Argentina.

Some ministries and agencies developed their own processes for public consultation by publishing drafts on their websites, directly distributing the draft to interested stakeholders for feedback, or holding public hearings.

In November 2017, the Government of Argentina launched a new website to communicate how the government spends public funds in a user-friendly format (https://www.argentina.gob.ar/economia/transparencia/presupuesto ).

The Argentine government also made an effort to improve citizens’ understanding of the budget, through the citizen’s budget “Presupuesto Ciudadano” website: https://www.economia.gob.ar/onp/presupuesto_ciudadano/seccion6.php . The initiative aligns with the Global Initiative for Fiscal Transparency (GIFT) and UN Resolution 67/218 on promoting transparency, participation, and accountability in fiscal policy.

Argentina requires public companies to adhere to International Financial Reporting Standards (IFRS). Argentina is a member of UNCTAD’s international network of transparent investment procedures.

The government of Argentina does not promote or require environmental, social, and governance (ESG) disclosures to facilitate transparency and/or help investors and consumers distinguish between high and low-quality investments.

Argentina is a founding member of MERCOSUR and has been a member of the Latin American Integration Association (ALADI for Asociación Latinoamericana de Integración) since 1980.  Once any of the decision-making bodies within MERCOSUR agrees to apply a certain regulation, each of the member countries must incorporate it into its legislation according to its own legislative procedures. Once a regulation is incorporated in a MERCOSUR member’s legislation, the country must notify MERCOSUR headquarters.

Argentina has been a member of the WTO since 1995, and it ratified the Trade Facilitation Agreement in January 2018. Argentina notifies technical regulations, but not proposed drafts, to the WTO Committee on Technical Barriers to Trade.  Argentina submitted itself to an OECD regulatory policy review in March 2018, which was released in March 2019.  The Fernandez administration has not actively pursued OECD accession.  Argentina participates in all 23 OECD committees.

Additionally, the Argentine Institute for Standards and Certifications (IRAM) is a member of international and regional standards bodies including the International Standardization Organization (ISO), the International Electrotechnical Commission (IEC), the Pan-American Commission on Technical Standards (COPAM), the MERCOSUR Association of Standardization (AMN), the International Certification Network (i-Qnet), the System of Conformity Assessment for Electrotechnical Equipment and Components (IECEE), and the Global Good Agricultural Practice network (GLOBALG.A.P.).

Argentina follows a Civil Law system. In 2014, the Argentine government passed a new Civil and Commercial Code that has been in effect since August 2015. The Civil and Commercial Code provides regulations for civil and commercial liability, including ownership of real and intangible property claims. The current judicial process is lengthy and suffers from significant backlogs. In the Argentine legal system, appeals may be brought from many rulings of the lower courts, including evidentiary decisions, not just final orders, which significantly slows all aspects of the system. The Justice Ministry reported in December 2018 that the expanded use of oral processes had reduced the duration of 68 percent of all civil matters to less than two years.

According to the Argentine constitution, the judiciary is a separate and equal branch of government. In practice, there are continuous instances of political interference in the judicial process. Companies have complained that courts lack transparency and reliability, and that the Argentine government has used the judicial system to pressure the private sector. Media revelations of judicial impropriety and corruption feed public perception and undermine confidence in the judiciary.

Many foreign investors prefer to rely on private or international arbitration when those options are available. Claims regarding labor practices are processed through a labor court, regulated by Law 18,345 and its subsequent amendments, and implementing regulations by Decree 106/98. Contracts often include clauses designating specific judicial or arbitral recourse for dispute settlement.

According to the Foreign Direct Investment Law 21,382 and Decree 1853/93, foreign investors may invest in Argentina without prior governmental approval, under the same conditions as investors domiciled within the country. Foreign investors are free to enter into mergers, acquisitions, greenfield investments, or joint ventures. Foreign firms may also participate in publicly financed research and development programs on a national treatment basis. Incoming foreign currency must be identified by the participating bank to the Central Bank of Argentina (www.bcra.gob.ar ).

All foreign and domestic commercial entities in Argentina are regulated by the Commercial Partnerships Law (Law No. 19,550) and the rules issued by the commercial regulatory agencies. Decree 27/2018 amended Law 19,550 to eliminate regulatory barriers and reduce bureaucratic burdens, expedite and simplify processes in the public domain, and deploy existing technological tools to better focus on transparency. Full text of the decree can be found at: http://servicios.infoleg.gob.ar/infolegInternet/anexos/305000-309999/305736/norma.htm.  All other laws and norms concerning commercial entities are established in the Argentina Civil and Commercial Code, which can be found at: http://servicios.infoleg.gob.ar/infolegInternet/anexos/235000-239999/235975/norma.htm 

Further information about Argentina’s investment policies can be found at the following websites:

Ministry of Productive Development (https://www.argentina.gob.ar/produccion )

Ministry of Economy (https://www.argentina.gob.ar/economia )

The Central Bank of the Argentine Republic (http://www.bcra.gob.ar/ )

The National Securities Exchange Commission (https://www.argentina.gob.ar/cnv )

The National Investment and Trade Promotion Agency (https://www.inversionycomercio.org.ar/ )

Investors can download Argentina’s investor guide through this link: https://www.investargentina.org.ar/ 

The National Commission for the Defense of Competition and the Secretariat of Domestic Trade, both within the Ministry of Productive Development, have enforcement authority of the Competition Law (Law 25,156). The law aims to promote a culture of competition in all sectors of the national economy. In May 2018, the Argentine Congress approved a new Defense of Competition Law (Law 27,442), which would have, among other things, established an independent competition agency and tribunal. The new law incorporates anti-competitive conduct regulations and a leniency program to facilitate cartel investigation. The full text of the law can be viewed at: http://servicios.infoleg.gob.ar/infolegInternet/verNorma.do?id=310241 . The Government of Argentina, however, has thus far not taken steps to establish the independent agency or tribunal. In February 2021, a bill introducing amendments to the Defense of Competition Law was passed by the Senate and is currently under study in the Lower House. The main changes are related to the removal of the “Clemency Program,” which encourages public reports of collusive and cartel activities, and the elimination of public hearings to appoint members of the Competition Office. The private sector has expressed concern over this bill, stating these changes are contrary to transparency standards embodied in the Law.

In September 2014, Argentina amended the 1974 National Supply Law to expand the ability of the government to regulate private enterprises by setting minimum and maximum prices and profit margins for goods and services at any stage of economic activity. Private companies may be subject to fines and temporary closure if the government determines they are not complying with the law. Although the law is still in effect, the U.S. Government has not received any reports of it being applied since December 2015.  However, the Fernandez administration has expressed its potential use when resisted compliance with price control programs, even if the program was supposed to be voluntary.

In March 2020, the Government of Argentina enacted the Supermarket Shelves Law (Law 27,545) that states that any single manufacturer and its associated brands cannot occupy more than 30 percent of a retailer’s shelf space devoted to any one product category.  The law’s proponents claim it will allow more space for domestic SME-produced products, encourage competition, and reduce shortages. U.S. companies have expressed concern over the pending regulations, seeking clarification about issues such as whether display space percentages would be considered per brand or per production company, as it could potentially affect a company’s production, distribution, and marketing business model.

Section 17 of the Argentine Constitution affirms the right of private property and states that any expropriation must be authorized by law and compensation must be provided. The United States-Argentina BIT states that investments shall not be expropriated or nationalized except for public purposes upon prompt payment of the fair market value in compensation.

Argentina has a history of expropriations under previous administrations. The most recent expropriation occurred in March 2015 when the Argentine Congress approved the nationalization of the train and railway system. A number of companies that were privatized during the 1990s under the Menem administration were renationalized under the Kirchner administrations. Additionally, in October 2008, Argentina nationalized its private pension funds, which amounted to approximately one-third of total GDP and transferred the funds to the government social security agency.

In May 2012, the Fernandez de Kirchner administration nationalized oil and gas company Repsol-YPF. Most of the litigation between the Government of Argentina and Repsol was settled in 2016.  An American hedge fund still holds a claim against YPF and is in litigation in U.S. courts.

ICSID Convention and New York Convention

Argentina is signatory to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitration Awards, which the country ratified in 1989. Argentina is also a party to the International Center for Settlement of Investment Disputes (ICSID) Convention since 1994.

There is neither specific domestic legislation providing for enforcement under the 1958 New York Convention nor legislation for the enforcement of awards under the ICSID Convention. Companies that seek recourse through Argentine courts may not simultaneously pursue recourse through international arbitration.

Investor-State Dispute Settlement

The Argentine government officially accepts the principle of international arbitration. The United States-Argentina BIT includes a chapter on Investor-State Dispute Settlement for U.S. investors.

In the past ten years, Argentina has been brought before the ICSID in 7 cases involving U.S. or other foreign investors. Argentina currently has seven pending arbitration cases, three of them filed against it by U.S. investors. For more information on the cases brought by U.S. claimants against Argentina, go to: https://icsid.worldbank.org/en/Pages/cases/AdvancedSearch.aspx #.

Local courts cannot enforce arbitral awards issued against the government based on the public policy clause. There is no history of extrajudicial action against foreign investors.

Argentina is a member of the United Nations Commission on International Trade Law (UNCITRAL) and the World Bank’s Multilateral Investment Guarantee Agency (MIGA).

Argentina is also a party to several bilateral and multilateral treaties and conventions for the enforcement and recognition of foreign judgments, which provide requirements for the enforcement of foreign judgments in Argentina, including:

Treaty of International Procedural Law, approved in the South American Congress of Private International Law held in Montevideo in 1898, ratified by Argentina by law No. 3,192.

Treaty of International Procedural Law, approved in the South American Congress of Private International Law held in Montevideo in 1939-1940, ratified by Dec. Ley 7771/56 (1956).

Panama Convention of 1975, CIDIP I: Inter-American Convention on International Commercial Arbitration, adopted within the Private International Law Conferences – Organization of American States, ratified by law No. 24,322 (1995).

Montevideo Convention of 1979, CIDIP II: Inter-American Convention on Extraterritorial Validity of Foreign Judgments and Arbitral Awards, adopted within the Private International Law Conferences – Organization of American States, ratified by law No. 22,921 (1983).

International Commercial Arbitration and Foreign Courts

Alternative dispute resolution (ADR) mechanisms can be stipulated in contracts. Argentina also has ADR mechanisms available such as the Center for Mediation and Arbitrage (CEMARC) of the Argentine Chamber of Trade. More information can be found at: http://www.intracen.org. 

Argentina does not have a specific law governing arbitration, but it has adopted a mediation law (Law 24.573/1995), which makes mediation mandatory prior to litigation. Some arbitration provisions are scattered throughout the Civil Code, the National Code of Civil and Commercial Procedure, the Commercial Code, and three other laws. The following methods of concluding an arbitration agreement are non-binding under Argentine law: electronic communication, fax, oral agreement, and conduct on the part of one party. Generally, all commercial matters are subject to arbitration. There are no legal restrictions on the identity and professional qualifications of arbitrators. Parties must be represented in arbitration proceedings in Argentina by attorneys who are licensed to practice locally. The grounds for annulment of arbitration awards are limited to substantial procedural violations, an ultra petita award (award outside the scope of the arbitration agreement), an award rendered after the agreed-upon time limit, and a public order violation that is not yet settled by jurisprudence when related to the merits of the award. On average, it takes around 21 weeks to enforce an arbitration award rendered in Argentina, from filing an application to a writ of execution attaching assets (assuming there is no appeal). It takes roughly 18 weeks to enforce a foreign award. The requirements for the enforcement of foreign judgments are set out in section 517 of the National Procedural Code.

No information is available as to whether the domestic courts frequently rule in cases in favor of state-owned enterprises (SOE) when SOEs are party to a dispute.

Argentina’s bankruptcy law was codified in 1995 in Law 24,522. The full text can be found at: http://www.infoleg.gov.ar/infolegInternet/anexos/25000-29999/25379/texact.htm .

Under the law, debtors are generally able to begin insolvency proceedings when they are no longer able to pay their debts as they mature. Debtors may file for both liquidation and reorganization. Creditors may file for insolvency of the debtor for liquidation only. The insolvency framework does not require approval by the creditors for the selection or appointment of the insolvency representative or for the sale of substantial assets of the debtor. The insolvency framework does not provide rights to the creditor to request information from the insolvency representative, but the creditor has the right to object to decisions by the debtor to accept or reject creditors’ claims. Bankruptcy is not criminalized; however, convictions for fraudulent bankruptcy can carry two to six years of prison time.

Financial institutions regulated by the Central Bank of Argentina (BCRA) publish monthly outstanding credit balances of their debtors; the BCRA National Center of Debtors (Central de Deudores) compiles and publishes this information. The database is available for use of financial institutions that comply with legal requirements concerning protection of personal data. The credit monitoring system only includes negative information, and the information remains on file through the person’s life. At least one local NGO that makes microcredit loans is working to make the payment history of these loans publicly accessible for the purpose of demonstrating credit history, including positive information, for those without access to bank accounts and who are outside of the Central Bank’s system. Equifax, which operates under the local name “Veraz” (or “truthfully”), also provides credit information to financial institutions and other clients, such as telecommunications service providers and other retailers that operate monthly billing or credit/layaway programs.

Government incentives do not make any distinction between foreign and domestic investors.

The Argentine government offers a number of investment promotion programs at the federal, provincial, and municipal levels to attract investment to specific economic sectors such as capital assets and infrastructure, innovation and technological development, and energy, with no discrimination between national or foreign-owned enterprises. Some of the investment promotion programs require investments within a specific region or locality, industry, or economic activity. Some programs offer refunds on Value-Added Tax (VAT) or other tax incentives for local production of capital goods. The Investment and International Trade Promotion Agency provides cost-free assessment and information to investors to facilitate operations in the country. Argentina’s investment promotion programs and regimes can be found at: https://www.inversionycomercio.org.ar/es/inversores , https://www.investargentina.org.ar/, and https://www.argentina.gob.ar/produccion .

The National Fund for the Development of Micro, Small, and Medium Enterprises provides low- cost credit to small and medium-sized enterprises for investment projects, labor, capital, and energy efficiency improvement with no distinction between national or foreign-owned enterprises. More information can be found at: https://www.argentina.gob.ar/produccion/financiamiento 

The Ministry of Productive Development supports employment training programs that are frequently free to the participants and do not differentiate based on nationality.

Argentina has two types of tax-exempt trading areas: Free Trade Zones (FTZ), which are located throughout the country, and the more comprehensive Special Customs Area (SCA), which covers all of Tierra del Fuego Province and is scheduled to expire at the end of 2023.

Argentine law defines a FTZ as a territory outside the “general customs area” (GCA, i.e., the rest of Argentina) where neither the inflows nor outflows of exported final merchandise are subject to tariffs, non-tariff barriers, or other taxes on goods. Goods produced within a FTZ generally cannot be shipped to the GCA unless they are capital goods not produced in the rest of the country. The labor, sanitary, ecological, safety, criminal, and financial regulations within FTZs are the same as those that prevail in the GCA. Foreign firms receive national treatment in FTZs.

Merchandise shipped from the GCA to a FTZ may receive export incentive benefits, if applicable, only after the goods are exported from the FTZ to a third country destination. Merchandise shipped from the GCA to a FTZ and later exported to another country is not exempt from export taxes. Any value added in a FTZ or re-export from a FTZ is exempt from export taxes. For more information on FTZ in Argentina see: http://www.afip.gob.ar/zonasFrancas/ .

Products manufactured in the SCA may enter the GCA free from taxes or tariffs. In addition, the government may enact special regulations that exempt products shipped through the SCA (but not manufactured therein) from all forms of taxation except excise taxes. The SCA program provides benefits for established companies that meet specific production and employment objectives.

The Argentine national government does not have local employment mandates, nor does it apply such schemes to senior management or boards of directors. However, certain provincial governments do require employers to hire a certain percentage of their workforce from the provincial population. There are no excessively onerous visa, residence, work permit, or similar requirements inhibiting mobility of foreign investors and their employees. Under Argentine law, conditions to invest are equal for national and foreign investors. As of March 2018, citizens of MERCOSUR countries can obtain legal residence within five months and at little cost, which grants permission to work. Argentina suspended its method for expediting this process in early 2018.

Argentina has local content requirements for specific sectors. Requirements are applicable to domestic and foreign investors equally. Argentine law establishes a national preference for local industry for most government procurement if the domestic supplier’s tender is no more than five to seven percent higher than the foreign tender. The amount by which the domestic bid may exceed a foreign bid depends on the size of the domestic company making the bid. In May 2018, Argentina issued Law 27,437, giving additional priority to Argentine small and medium-sized enterprises and, separately, requiring that foreign companies that win a tender must subcontract domestic companies to cover 20 percent of the value of the work. The preference applies to procurement by all government agencies, public utilities, and concessionaires.  There is similar legislation at the sub-national (provincial) level.

In November 2016, the government passed a public-private partnership (PPP) law (27,328) that regulates public-private contracts. The law lowered regulatory barriers to foreign investment in public infrastructure projects with the aim of attracting more foreign direct investment. Several projects under the PPP initiative have been canceled or put on hold due to an ongoing investigation on corruption in public works projects during the last administration. The PPP law contains a “Buy Argentina” clause that mandates at least 33 percent local content for every public project.

Argentina is not a signatory to the WTO Agreement on Government Procurement (GPA), but it became an observer to the GPA in February 1997.

In July 2016, the Ministry of Production and Labor and the Ministry of Energy and Mining issued Joint Resolutions 123 and 313, which allow companies to obtain tax benefits on purchases of solar or wind energy equipment for use in investment projects that incorporate at least 60 percent local content in their electromechanical installations.  In cases where local supply is insufficient to reach the 60 percent threshold, the threshold can be reduced to 30 percent.  The resolutions also provide tax exemptions for imports of capital and intermediate goods that are not locally produced for use in the investment projects.

In 2016, Argentina passed law 27,263, implemented by Resolution 599-E/2016, which provides tax credits to automotive manufacturers for the purchase of locally produced automotive parts and accessories incorporated into specific types of vehicles. The tax credits range from 4 percent to 15 percent of the value of the purchased parts.  The list of vehicle types included in the regime can be found here: http://servicios.infoleg.gob.ar/infolegInternet/anexos/260000-264999/263955/norma.htm . In 2018, Argentina issued Resolution 28/2018, simplifying the procedure for obtaining the tax credits. The resolution also establishes that if the national content drops below the minimum required by the resolution because of relative price changes due to exchange rate fluctuations, automotive manufacturers will not be considered non-compliant with the regime. However, the resolution sets forth that tax benefits will be suspended for the quarter when the drop was registered.

The Media Law, enacted in 2009 and amended in 2015, requires companies to produce advertising and publicity materials locally or to include 60 percent local content. The Media Law also establishes a 70 percent local production content requirement for companies with radio licenses. Additionally, the Media Law requires that 50 percent of the news and 30 percent of the music that is broadcast on the radio be of Argentine origin. In the case of private television operators, at least 60 percent of broadcast content must be of Argentine origin. Of that 60 percent, 30 percent must be local news and 10 to 30 percent must be local independent content.

Argentina establishes percentages of local content in the production process for manufacturers of mobile and cellular radio communication equipment operating in Tierra del Fuego province.  Resolution 66/2018 maintains the local content requirement for products such as technical manuals, packaging, and labeling. The percentage of local content required ranges from 10 percent to 100 percent depending on the process or item. In cases where local supply is insufficient to meet local content requirements, companies may apply for an exemption that is subject to review every six months. A detailed description of local content percentage requirements can be found at: http://servicios.infoleg.gob.ar/infolegInternet/verNorma.do;jsessionid=0CA1B74C2D7EC353E66F1CC6CFD8B41D?id=255494 .

There are no requirements for foreign IT providers to turn over source code and/or provide access to encryption, nor does the government prevent companies from freely transmitting customer or other business-related data outside the country’s territory.

Argentina does not have forced localization of content in technology or requirements of data storage in country.

There is no discrimination between domestic and foreign investors in investment incentives. There are no performance requirements. A complete guide of incentives for investors in Argentina can be found at: https://www.inversionycomercio.org.ar/es/inversores .

Secured interests in property, including mortgages, are recognized in Argentina. Such interests can be easily and effectively registered. They also can be readily bought and sold. Argentina manages a national registry of real estate ownership (Registro de la Propiedad Inmueble) at http://www.dnrpi.jus.gov.ar/ . No data is available on the percent of all land that does not have clear title. There are no specific regulations regarding land lease and acquisition of residential and commercial real estate by foreign investors. Law 26,737 (Regime for Protection of National Domain over Ownership, Possession or Tenure of Rural Land) establishes the restrictions of foreign ownership on rural and productive lands, including water bodies. Foreign ownership is also restricted on land located near borders.

Legal claims may be brought to evict persons unlawfully occupying real property, even if the property is unoccupied by the lawful owner. However, these legal proceedings can be quite lengthy, and until the legal proceedings are complete, evicting squatters is problematic. The title and actual conditions of real property interests under consideration should be carefully reviewed before acquisition.

Argentine Law 26.160 prevents the eviction and confiscation of land traditionally occupied by indigenous communities in Argentina or encumbered with an indigenous land claim. Indigenous land claims can be found in the land registry. Enforcement is carried out by the National Institute of Indigenous Affairs, under the Ministry of Justice and Human Rights.

The Government of Argentina adheres to some treaties and international agreements on intellectual property (IP) and belongs to the World Intellectual Property Organization and the World Trade Organization. The Argentine Congress ratified the Uruguay Round agreements, including the provisions on intellectual property, in Law 24425 in 1995.

The U.S. Trade Representative (USTR)’s 2021 Special 301 Report listed Argentina on the Priority Watch List. Trading partners on the Priority Watch List present the most significant concerns regarding inadequate or ineffective IP protection or enforcement or actions that otherwise limit market access for persons relying on IP protection. For a complete version of the 2021 Report, see: https://ustr.gov/sites/default/files/2020_Special_301_Report.pdf .

Argentina continues to present long-standing and well-known challenges to intellectual property (IP)-intensive industries, including those from the United States.  A key deficiency in the legal framework for patents is the unduly broad limitations on patent eligible subject matter.  Pursuant to a highly problematic 2012 Joint Resolution establishing guidelines for the examination of patents, Argentina rejects patent applications for categories of pharmaceutical inventions that are eligible for patentability in other jurisdictions, including in the United States.  Additionally, to be patentable, Argentina requires that processes for the manufacture of active compounds disclosed in a specification be reproducible and applicable on an industrial scale.  Stakeholders assert that Resolution 283/2015, introduced in September 2015, also limits the ability to patent biotechnological innovations based on living matter and natural substances.  These measures have interfered with the ability of companies investing in Argentina to protect their IP and may be inconsistent with international norms.

Another ongoing challenge to the innovative agricultural chemical and pharmaceutical sectors is inadequate protection against the unfair commercial use, as well as unauthorized disclosure, of undisclosed test or other data generated to obtain marketing approval for products in those sectors.  Argentina made progress on eliminating the patent application backlog, however, this did not include the backlog for pharmaceutical or biotechnology innovations. The number of patent examiners remains insufficient with retention and recruitment hampered by low public sector salaries. Argentina did not extend the Patent Prosecution Highway signed between the National Institute of Industrial Property’s (INPI) and the U.S. Patent and Trademark Office, which expired in March 2020.

Enforcement of IP rights in Argentina continues to be a challenge, and stakeholders report widespread unfair competition from sellers of counterfeit and pirated goods and services.  La Salada in Buenos Aires remains the largest counterfeit market in Latin America and is cited in USTR’s 2021 Review of Notorious Markets for Piracy and Counterfeiting.  Argentine police generally do not take ex officio actions, prosecutions can stall and languish in excessive formalities, and, when a criminal case does reach final judgment, criminal infringers rarely receive deterrent sentences. Hard goods counterfeiting and optical disc piracy are widespread, and online piracy continues to grow due to nearly nonexistent criminal enforcement against such piracy.  As a result, IP enforcement online in Argentina consists mainly of right holders trying to convince Argentine internet service providers to agree to take down specific infringing works, as well as attempting to seek injunctions in civil cases, both of which can be time-consuming and ineffective.  Rights holders also cite widespread use of unlicensed software by Argentine private enterprises and the government.

Argentina made limited progress in IP protection and enforcement in a year marked by high inflation, sovereign debt negotiations with the IMF, and political conflicts within the ruling coalition.  The pressing economic situation led to an increase of counterfeit products sales in informal markets once the confinement measures enacted during the COVID-19 pandemic were relaxed in the second semester of 2020. Online sales of counterfeit products, especially apparel and footwear spiked amidst the pandemic. The Argentine Confederation of Small and Medium-Sized Enterprises noted an increase of national production of counterfeit sportswear, while sales of counterfeit luxury goods such as handbags decreased. Flight and border crossing restrictions applied during the COVID-19 health emergency prevented purchases of counterfeit products from China, Paraguay, and Bolivia, but were removed by November 2021.

INPI began accepting electronic filing of patent, trademark, and industrial designs applications in 2018. During 2020, the agency successfully transitioned to an all-electronic filing system.  Argentina continued to improve procedures for trademarks, with INPI reducing the time for a trademark opposition from an average of 3.5 years to one year.  On trademarks, the law provides for a fast-track option that reduces the time to register a trademark to four months.

Argentina formally created the Federal Committee to Fight Against Contraband, Falsification of Trademarks, and Designations, formalizing the work on trademark counterfeiting under the National Anti-Piracy Initiative launched in 2017.  In November 2020, Argentina and the United States held a virtual bilateral meeting under the Innovation and Creativity Forum for Economic Development, part of the U.S.-Argentina Trade and Investment Framework Agreement, to continue discussions and collaboration on IP topics of mutual interest.  The United States intends to monitor all the outstanding issues for progress and urges Argentina to continue its efforts to create a more attractive environment for investment and innovation.

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ 

The Argentine Constitution sets as a general principle that foreign investors have the same status and the same rights as local investors. Foreign investors have free access to domestic and international financing.

After a three-year recession (2018-2020), the economy rebounded with 10.3 percent growth in 2021. However, the government did not ease the capital controls introduced in September 2019 to slow the outflow of dollars. Central Bank capital controls prohibiting transfers and payments are likely in conflict with IMF Article VIII. The government has maintained trade restrictions, price controls, distortive taxes, and high spending. Unable to access international capital markets (despite restructuring private debt in 2020) and with a shallow domestic market, the government relied on Central Bank money printing to finance the deficit. The excessive liquidity resulted in high inflation (50.9 percent in 2021) and deteriorating social conditions, with the poverty rate exceeding 40 percent.

In August 2020, the government of Argentina formally notified the International Monetary Fund (IMF) of its intent to renegotiate $45 billion due to the Fund from the 2018 Stand-By Arrangement. On March 3, 2022, IMF Staff and Argentine authorities reached a staff-level agreement on the economic and financial policies required for an Extended Fund Facility (EFF) Arrangement. In broad terms, the key objectives of the new EFF include a reduction in the fiscal deficit and monetary financing, tackling inflation, and the accumulation of foreign reserves. The IMF Executive Board approved the EFF on March 25, after the Argentine National Congress approved the measure.

The Argentine Securities and Exchange Commission (CNV or Comisión Nacional de Valores) is the federal agency that regulates securities markets offerings. Securities and accounting standards are transparent and consistent with international norms. Foreign investors have access to a variety of options on the local market to obtain credit. Nevertheless, the domestic credit market is small – credit is 11 percent of GDP. Private sector credit gained some momentum in 2021, driven by the reopening of the economy after the pandemic and government support measures such as subsidized credit lines for businesses. Nevertheless, the stock of credit shrank in real terms as the nominal credit growth increased by 41 percent in 2021, below the inflation rate of 50.7 percent. The Buenos Aires Stock Exchange is the organization responsible for the operation of Argentina’s primary stock exchange, located in Buenos Aires city. The most important index of the Buenos Aires Stock Exchange is the MERVAL (Mercado de Valores).

U.S. banks, securities firms, and investment funds are well-represented in Argentina and are dynamic players in local capital markets. In 2003, the government began requiring foreign banks to disclose to the public the nature and extent to which their foreign parent banks guarantee their branches or subsidiaries in Argentina.

Argentina has a relatively sound banking sector based on diversified revenues, well-contained operating costs, and a high liquidity level. Argentina’s banking sector has been resilient in the face of a multi-year economic recession (2018-2020). Limited financial intermediation combined with high inflation and interventionist interest rate regulations (mainly for small businesses) dented bank profitability in 2021. Banks compensated for this by controlling expenses and increasing digitalization of the sector. Non-performing private sector loans constitute 4.4 percent of banks’ portfolios. During 2021, financial entities maintained adequate solvency indicators. The banking sector is well positioned due to macro and micro-prudential policies introduced since 2002 that have helped to reduce asset-liability mismatches. The sector is highly liquid and its exposure to the public sector is modest, while its provisions for bad debts are adequate.

Private banks have total assets of approximately ARS 8.4 trillion (USD $83.3 billion). Total financial system assets are approximately ARS 13.7 trillion (USD $135.7 billion). The Central Bank of Argentina acts as the country’s financial agent and is the main regulatory body for the banking system.

Foreign banks and branches can establish operations in Argentina. They are subject to the same regulation as local banks. Argentina’s Central Bank has many correspondent banking relationships, none of which are known to have been lost in the past three years.

In November 2020, the Central Bank launched a new payment system, “Transfers 3.0,” seeking to reduce the use of cash. This system will boost digital payments and further financial inclusion in Argentina, expanding the reach of instant transfers to build an open and universal digital payment ecosystem. The government has expressed support for the process of digitization of payments to improve efficiency, reduce costs, and safeguard financial stability.

The Central Bank has enacted a resolution recognizing cryptocurrencies and requiring that they comply with local banking and tax laws. No implementing regulations have been adopted. Block chain developers report that several companies in the financial services sector are exploring or considering using block chain-based programs externally and are using some such programs internally.

Foreign Exchange

Beginning in September 2019, the Argentine government and Central Bank issued a series of decrees and norms to extend or amend the government’s ability to regulate and restrict access to foreign exchange markets.

As of October 2019, the Central Bank (Notice A6815) limits cash withdrawals made abroad with local debit cards to foreign currency bank accounts owned by the client in Argentina. Pursuant to Notice A6823, cash advances made abroad using local credit cards are limited to a maximum of USD $50 per transaction.

As of September 2020, and pursuant to Notice A7106, Argentine individuals must limit purchases of foreign currency (or of goods and services denominated in foreign currency) to no more than USD $200 per month on a rolling monthly basis. Individuals must receive Central Bank approval to purchase foreign currency in excess of the $200 quota. Purchases of goods and services abroad with credit and debit cards issued by Argentine banks count against the USD $200 per month quota. Although no limit on credit or debit card purchases is imposed, if monthly expenditures surpass the USD $200 limit, the card owner will be prevented from purchasing foreign currency in Argentina for the number of months needed to cover the amount of excess spending. Also, the regulation prohibits individuals who receive government assistance and high-ranking federal government officials from purchasing foreign exchange.

Pursuant to Public Emergency Law 27,541, issued December 23, 2019, all dollar purchases and individual expenses incurred abroad, in person or online, including international online purchases from Argentina, paid with credit or with debit cards will be subject to a 30 percent tax. Pursuant to AFIP Resolution 4815 a 35 percent withholding tax in advance of the payment of income and/or wealth tax is also applied.

Non-Argentine residents are required to obtain prior Central Bank approval to purchase more than USD $100 per month, except for certain bilateral or international organizations, institutions and agencies, diplomatic representation, and foreign tribunals.

Companies and individuals need to obtain prior clearance from the Central Bank before transferring funds abroad. In the case of individuals, if transfers are made from their own foreign currency accounts in Argentina to their own accounts abroad, they do not need to obtain Central Bank approval.

Per Notice A6869 issued by the Central Bank in January 2020, companies will be able to repatriate dividends without Central Bank authorization equivalent to a maximum of 30 percent of new foreign direct investment made by the company in the country. To promote foreign direct investment the Central Bank announced in October 2020 (Notice A7123) that it will allow free access to the official foreign exchange market to repatriate investments as long as the capital contribution was transferred and sold in Argentine Pesos through the foreign exchange market as of October 2, 2020, and the repatriation takes place at least two years after the transfer and settlement of those funds.

Exporters of goods are required to transfer the proceeds from exports to Argentina and settle in pesos in the foreign currency market. Exporters must settle according to the following terms: exporters with affiliates (irrespective of the type of good exported) and exporters of certain goods (including cereals, seeds, minerals, and precious metals, among others) must convert their foreign currency proceeds to pesos within 15 days (or 30 days for some products) after the issuance of the permit for shipment; other exporters have 180 days to settle in pesos. Despite these deadlines, exporters must transfer the funds to Argentina and settle in pesos within five business days from the actual collection of funds. Argentine residents are required to transfer to Argentina and settle in pesos the proceeds from services exports rendered to non-Argentine residents that are paid in foreign currency either in Argentina or abroad, within five business days from collection of funds.

Payment of imports of goods and services from third parties and affiliates require Central Bank approval if the company needs to purchase foreign currency. Since May 2020, the Central Bank requires importers to submit an affidavit stating that the total amount of payments associated with the import of goods made during the year (including the payment that is being requested). The total amount of payments for importation of goods should also include the payments for amortizations of lines of credit and/or commercial guarantees.

In September 2020, the Central Bank limited companies’ ability to purchase foreign currency to cancel any external financial debt (including other intercompany debt) and dollar denominated local securities offerings. Companies were granted access to foreign currency for up to 40 percent of the principal amount coming due from October 15, 2020, to December 31, 2020. For the remaining 60 percent of the debt, companies had to file a refinancing plan with the Central Bank. In February 2021, the Central Bank extended the regulation through 2021, and in March 2022 extended it again to include maturities through December 31, 2022. Indebtedness with international organizations or their associated agencies or guaranteed by them and indebtedness granted by official credit agencies or guaranteed by them are exempted from this restriction.

The Central Bank (Notice A7001) prohibited access to the foreign exchange market to pay for external indebtedness, imports of goods and services, and saving purposes for individuals and companies that have made sales of securities with settlement in foreign currency or transfers of these to foreign depositary entities within the last 90 days. They also should not make any of these transactions for the following 90 days.

Pre-cancellation of debt coming due abroad in more than three business days requires Central Bank approval to purchase dollars.

Per Resolution 36,162 of October 2011, locally registered insurance companies are mandated to maintain all investments and cash equivalents in the country. The Central Bank limits banks’ dollar-denominated asset holdings to 5 percent of their net worth.

In December 2021, the Central Bank presented its monetary, financial, lending, and foreign exchange program. On monetary policy, the Central Bank committed to I) manage liquidity to prevent any imbalances that may directly or indirectly affect the disinflation process; II) set the path of the policy interest rate to obtain positive real returns on investments in domestic currency and preserve monetary and foreign exchange stability; and III) contribute to the development of the capital market and adjust minimum reserve requirements to strengthen the channel of monetary policy transmission. On foreign exchange, the Central Bank will maintain the gradual crawling peg of the exchange rate consistent with the pace of inflation. With the goal of strengthening international reserves, the Central Bank will manage capital control regulations to ensure monetary and foreign exchange stability. The credit policy objectives include encouraging financial intermediation and promoting the growth of the peso credit market to boost lending to micro, small- and medium-sized enterprises (MSMEs) and to the sectors most affected by the pandemic.

Remittance Policies

In response to the economic crisis in Argentina, the government introduced capital controls in September 2019 and tightened them in 2020.  Under these restrictions, companies in Argentina (including local affiliates of foreign parent companies) must obtain prior approval from the Central Bank to access the foreign exchange market to purchase foreign currency and to transfer funds abroad for the payment of dividends and profits.  In January 2020, the Central Bank amended the regime for the payment of dividends abroad to non-residents. The new regime allows companies to access the foreign exchange market to transfer profits and dividends abroad without prior authorization of the Central Bank, provided the following conditions are met:

(1) Profits and dividends are to be declared in closed and audited financial statements.

(2) The dividends in foreign currency should not exceed the dividends determined by the shareholders’ meeting in local currency.

(3) The total amount of dividends to be transferred cannot exceed 30 percent of the amount of new capital contributions made by non-residents into local companies since January 2020.

(4) The resident entity must be in compliance with filing the Central Bank Survey of External Assets and Liabilities.

The Argentine government does not maintain a Sovereign Wealth Fund.

There is an increasing awareness of corporate social responsibility (CSR) and responsible business conduct (RBC) among both producers and consumers in Argentina. RBC and CSR practices are welcomed by beneficiary communities throughout Argentina. There are many institutes that promote RBC and CSR in Argentina, the most prominent being the Argentine Institute for Business Social Responsibility (http://www.iarse.org/ ), which has been working in the country for 20 years and includes among its members many of the most important companies in Argentina.

Argentina is a member of the United Nation’s Global Compact. Established in April 2004, the Global Compact Network Argentina is a business-led network with a multi-stakeholder governing body elected for two-year terms by active participants. The network is supported by the United Nations Development Program (UNDP) Argentina in close collaboration with other UN Agencies. The Global Compact Network Argentina is the most important RBC/CSR initiative in the country with a presence in more than 20 provinces. More information on the initiative can be found at: http://pactoglobal.org.ar .

Foreign and local enterprises tend to follow generally accepted CSR/RBC principles. Argentina subscribed to the Declaration on the OECD Guidelines for Multinational Enterprises in April 1997.

Many provinces, such as Mendoza and Neuquén, have or are in the process of enacting a provincial CSR/RBC law. There have been many previously unsuccessful attempts to pass a CSR/RBC law. Distrust over the State’s role in private companies had been the main concern for legislators opposed to these bills.

In February 2019, the Argentine government joined the Extractive Industries Transparency Initiative (EITI).  Argentina published its first report in 2020 (https://eiti.org/document/argentina-2018-eiti-report ). Argentina´s next Validation against the 2019 EITI Standard started January 1, 2022.

Additional Resources

Department of State

• Country Reports on Human Rights Practices;
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities;
• U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises; and;
• Xinjiang Supply Chain Business Advisory

Department of the Treasury

• OFAC Recent Actions

Department of Labor

• Findings on the Worst Forms of Child Labor Report;
• List of Goods Produced by Child Labor or Forced Labor;
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World and;
• Comply Chain

Climate Issues

The Government of Argentina created its national climate strategy, the National Plan for Adaptation and Mitigation (PANyMCC), to implement its Nationally Determined Contribution (NDC). This plan calls for developing a long-term strategy under the Paris Agreement as well as delineating the revision, improvement, and monitoring of the Sector Action Plans for the main emissions sectors. Multiple laws exist to control water and air pollution and to protect natural ecosystems. Despite the existing strategy and monitoring framework, stakeholders note limited transparency around both climate-related and energy sector planning and policymaking.

Challenges in the business and investment climate impact the country’s attractiveness for developing renewable energy projects, despite the potential for both wind and solar power. The fossil fuel industry is strongly supported by the government through public subsidies, which impair the cost-competitiveness of renewable energy technologies.

Renewable energy development is still a focus for the government. Law 27.191 set a goal that 20 percent of the energy matrix needed to come from renewable sources by 2025, this was later updated in the energy sector’s action plan under PANyMCC to 25 percent by 2030. The 2021 updated NDC submitted at COP26 set a goal of 30 percent by 2030. Several tax benefits exist to support renewable energy projects through Law 27.191. No new projects have been approved since the previous administration through the RenovAr program, which offered IFC funding and World Bank guarantees. The RenovAr program has faced multiple hurdles such as increased capital costs, currency volatility, and the impact of capital controls. Given the current state of energy transmission infrastructure in the country, smaller scale projects for on-site energy consumption are more likely to succeed.

The Government of Argentina has historically focused on the transportation sector by encouraging the use of biofuels and electric vehicles. The country requires all gasoline to be a mixture between petroleum products and biofuels. In 2021, the Biofuels Regulatory Framework extended tax exemptions and benefits for biofuel producers but at the same time reduced the quantity of biofuels that are required to be used. The reduction in biofuel use is inconsistent with the climate change mitigation commitments Argentina has made.

While still not approved, the draft Law for the Promotion of Sustainable Mobility includes incentives and objectives to promote the use of technologies with less environmental impact for mobility. The proposed scheme would be temporary but offers benefits over 20 years for the production and importation of electric vehicles and parts.

There are regulatory requirements for labelling of products according to energy efficiency standards. Products including home construction supplies, vehicles, gas powered appliances, and domestic electronics are required to be labeled, some with minimum efficiency standards. Additionally, incandescent light bulbs are no longer permitted to be produced or imported into the country to encourage the use of more energy-efficient lighting sources. More information on labeling standards can be found here: https://www.argentina.gob.ar/economia/energia/eficiencia-energetica/etiquetado-en-eficiencia-energetica

Argentina’s legal system incorporates several measures to address public sector corruption. The foundational law is the 1999 Public Ethics Law (Law 25,188), the full text of which can be found at: http://servicios.infoleg.gob.ar/infolegInternet/verNorma.do?id=60847 . A March 2019 report by the OECD’s Directorate for Public Governance underscored, however, that the law is heterogeneously implemented across branches of the government and that the legislative branch has not designated an application authority, approved an implementing regulation, or specified sanctions. It also noted that Argentina has a regulation on lobbying, but that it only applies to the executive branch, and only requires officials to disclose meetings with lobbyists. With regards to political parties, the report noted anonymous campaign donations are banned, but 90 percent of all donations in Argentina are made in cash, making it impossible to identify donors. Furthermore, the existing regulations have insufficient controls and sanctions, and leave gaps with provincial regulations that could be exploited.

Within the executive branch, the government institutions tasked with combatting corruption include the Anti-Corruption Office (ACO), the National Auditor General, and the General Comptroller’s Office. Public officials are subject to financial disclosure laws, and the Ministry of Justice’s ACO is responsible for analyzing and investigating federal executive branch officials based on their financial disclosure forms—which require the disclosure of assets directly owned by immediate family members. The ACO is also responsible for investigating corruption within the federal executive branch or in matters involving federal funds, except for funds transferred to the provinces. While the ACO does not have authority to independently prosecute cases, it can refer cases to other agencies or serve as the plaintiff and request that a judge initiate a case.

Argentina enacted a new Corporate Criminal Liability Law in November 2017 following the advice of the OECD to comply with its Anti-Bribery Convention. The full text of Law 27,401 can be found at: http://servicios.infoleg.gob.ar/infolegInternet/anexos/295000-299999/296846/norma.htm  . The new law entered into force in early 2018. It extends anti-bribery criminal sanctions to corporations, whereas previously they only applied to individuals; expands the definition of prohibited conduct, including illegal enrichment of public officials; and allows Argentina to hold Argentines responsible for foreign bribery. Sanctions include fines and blacklisting from public contracts. Argentina also enacted an express prohibition on the tax deductibility of bribes.

Official corruption remains a serious challenge in Argentina. In its March 2017 report, the OECD expressed concern about Argentina’s enforcement of foreign bribery laws, inefficiencies in the judicial system, politicization, and perceived lack of independence at the Attorney General’s Office, and lack of training and awareness for judges and prosecutors. According to the World Bank’s worldwide governance indicators, corruption remains an area of concern in Argentina. In the latest Transparency International Corruption Perceptions Index (CPI), Argentina ranked 96 out of 180 countries in 2020, dropping 12 places compared to 2019. Allegations of corruption in provincial as well as federal courts remained frequent. Few Argentine companies have implemented anti-foreign bribery measures beyond limited codes of ethics.

In September 2016, Congress passed a law on public access to information. The law explicitly applies to all three branches of the federal government, the public justice offices, and entities such as businesses, political parties, universities, and trade associations that receive public funding. It requires these institutions to respond to citizen requests for public information within 15 days, with an additional 15-day extension available for “exceptional” circumstances. Sanctions apply for noncompliance. As mandated by the law, the executive branch created the Agency for Access to Public Information in 2017, an autonomous office that oversees access to information. In early 2016, the Argentine government reaffirmed its commitment to the Open Government Partnership (OGP), became a founding member of the Global Anti-Corruption Coalition, and reengaged the OECD Working Group on Bribery.

Argentina is a party to the Organization of American States’ Inter-American Convention against Corruption. It ratified in 2001 the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (Anti-Bribery Convention). Argentina also signed and ratified the UN Convention against Corruption (UNCAC) and participates in UNCAC’s Conference of State Parties. Argentina also participates in the Mechanism for Follow-up on the Implementation of the Inter-American Convention against Corruption (MESICIC).

Since Argentina became a party to the OECD Anti-Bribery Convention, allegations of Argentine individuals or companies bribing foreign officials have surfaced. A March 2017 report by the OECD Working Group on Bribery indicated there were 13 known foreign bribery allegations involving Argentine companies and individuals as of that date. According to the report, Argentine authorities investigated and closed some of the allegations and declined to investigate others. The authorities determined some allegations did not involve foreign bribery but rather other offenses. Several such allegations remained under investigation.

Resources to Report Corruption

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

Felix Pablo Crous
Director
Government of Argentina Anti-Corruption Office
Oficina Anticorrupción, 25 de Mayo 544, C1002ABL, Ciudad Autónoma de Buenos Aires.
Phone: +54 11 5300 4100
Email:  anticorrupcion@jus.gov.ar  and http://denuncias.anticorrupcion.gob.ar/ 

Contact at a “watchdog” organization:
Poder Ciudadano (Local Transparency International Affiliate)
Piedras 547, C1070AAK, Ciudad Autónoma de Buenos Aires
Phone: +54 11 4331 4925 ext. 225
Fax: +54 11 4331 4925
Email: comunicaciones@poderciudadano.org 
Website: http://www.poderciudadano.org 

Demonstrations are common in metropolitan Buenos Aires and in other major cities and rural areas. Nevertheless, political violence is not widely considered a hindrance to the investment climate in Argentina.

Protesters regularly block streets, highways, and major intersections, causing traffic jams and delaying travel. While demonstrations are usually non-violent, individuals sometimes seek confrontation with the police and vandalize private property. Groups occasionally protest in front of the U.S. Embassy or U.S.-affiliated businesses. In March 2022, thousands protested in front of Congress against a bill approving a new agreement with the IMF.

In December 2017, while Congress had called an extraordinary session to address the retirement system reforms, several demonstrations against the bill turned violent, causing structural damage to public and private property, injuries to 162 people (including 88 policemen), and arrests of 60 people. The demonstrations ultimately dissipated, and the government passed the bill.

Union disputes and politicized worker movements are common in CABA and the Provinces. In 2019 and early 2020, foreign-owned diamond mining companies in Neuquén were targeted by work stoppages and insider attacks in failed attempts to intimidate and force employers to increase salaries and benefits. These protesters were seemingly allowed to act without fear of response from local police forces, even after direct requests for assistance had been made. The companies believe the unions and protesters feel emboldened by the government’s stance towards Western companies and were forced to shut down operations for weeks in December 2019 and January 2020, in fear of the safety of their personnel at the local headquarters.

Argentine workers are among the most highly educated and skilled in Latin America. Foreign investors often cite Argentina’s skilled workforce as a key factor in their decision to invest in Argentina. Argentina has relatively high social security, health, and other labor taxes, however, high labor costs are among foreign investors’ most often cited operational challenges. The unemployment rate dropped to 8.6 percent at the end of 2021, according to official statistics. The government estimated unemployment for workers below 29 years old as more than double the national rate. Exacerbated by the COVID-19 pandemic, analysts estimate informality that it stands between 20 to 40 percent.

During 2020, the Argentine government implemented measures to alleviate the impact of the COVID-19 pandemic on the economy and employment. The government introduced measures to stimulate the economy and employment through public works and price limits; to protect workers in the workplace by promoting telework and offering leave for workers; and to support jobs and worker income by prohibiting employers from terminating employment. The government also facilitated social dialogue between the private sector and unions. The government has postponed implementation of Argentina’s ambitious Teleworking Contracts Regime, Law 27555, passed by Congress on July 30, 2020, and ratified by President Fernandez on August 14, 2020. The law entered into force on April 1, 2021. This law provides the legal framework for teleworking in employment settings that allow it.

Labor laws are comparatively protective of workers in Argentina, and investors cite labor-related litigation as an important factor increasing labor costs in Argentina. For example, one of the first measures passed by President Fernandez after he took office was Decree 34/2019 which established that employees dismissed without cause have the right to double the legal severance payment, the measure was extended until December 31, 2021, through Decree 39/2021. There are no special laws or exemptions from regular labor laws in the Foreign Trade Zones. Organized labor plays an important role in labor-management relations and in Argentine politics. Under Argentine law, the Ministry of Labor recognizes one union per sector per geographic unit (e.g., nationwide, a single province, or a major city) with the right to negotiate a collective bargaining agreement for that sector and geographic area. Roughly 40 percent of Argentina’s formal workforce is unionized. The Ministry of Labor ratifies collective bargaining agreements. Collective bargaining agreements cover workers in a given sector and geographic area whether they are union members or not, so roughly 70 percent of the workforce was covered by an agreement. While negotiations between unions and industry are generally independent, the Ministry of Labor often serves as a mediator. Argentine law also offers recourse to mediation and arbitration of labor disputes.

During 2021, the Ministry of Labor registered 855 labor and collective bargaining agreements. These agreements covered approximately 5.4 million workers.

Tensions between management and unions occur. Many managers of foreign companies say they have good relations with their unions. Others say the challenges posed by strong unions can hinder further investment by their international headquarters. Depending on how sectors are defined, some activities such as oil and gas production or aviation involve multiple unions, which can lead to inter-union power disputes that can impede the companies’ operations.

The Fernandez government does not intend to pursue a broad labor reform bill, preferring instead to allow firms and workers to negotiate any adjustments to labor conditions through the collective bargaining process. The Ministry of Labor has indicated interest in proposing a “gig economy” bill (ley de plataformas) that would extend basic labor rights to, e.g., delivery workers coordinated through information technology applications. Labor-related demonstrations in Argentina occurred periodically in 2021. Reasons for strikes include job losses, high taxes, loss of purchasing power, and wage negotiations. Labor demonstrations may involve tens of thousands of protestors. Past demonstrations have essentially closed sections of a city for a few hours or impeded traffic.

The Ministry of Labor has hotlines and an online website to report labor abuses, including child labor, forced labor, and labor trafficking. The Superintendent of Labor Risk (Superintendencia de Riesgos del Trabajo) has oversight of health and safety standards. Unions also play a key role in monitoring labor conditions, reporting abuses and filing complaints with the authorities. Argentina has a Service of Mandatory Labor Conciliation (SECLO), which falls within the Ministry of Labor. Provincial governments and the city government of Buenos Aires are also responsible for labor law enforcement.

The minimum age for employment is 16. Children between the ages of 16 and 18 may work in a limited number of job categories and for limited hours if they have completed compulsory schooling, which normally ends at age 18. The law requires employers to provide adequate care for workers’ children during work hours to discourage child labor. The Department of Labor’s 2020 Worst Form of Child Labor for Argentina can be accessed here: https://www.dol.gov/agencies/ilab/resources/reports/child-labor/argentina 

The Department of State’s 2020 Human Rights Report for Argentina can be accessed here:

https://www.state.gov/reports/2020-country-reports-on-human-rights-practices/argentina/

Argentine law prohibits discrimination on the grounds of sex, race, nationality, religion, political opinion, union affiliation, or age. The law also prohibits employers, either during recruitment or time of employment, from asking about a worker’s political, religious, labor, and cultural views or sexual orientation. These national anti-discrimination laws also apply to labor relations and other social relations.

Argentina has been a member of the International Labor Organization since 1919.

* Source for Host Country Data: Not available

Economic Section
U.S. Embassy Buenos Aires
Avenida Colombia 4300
(C1425GMN)
Buenos Aires, Argentina
+54-11-5777-474
ECONBA@state.gov

The government of Armenia officially welcomes foreign investment. The Ministry of Economy is the main government body responsible for the development of investment policy in Armenia. Armenia has achieved respectable rankings on some global indices measuring the country’s business climate. Armenia’s investment and trade policy is relatively open; foreign companies are entitled by law to the same treatment as Armenian companies. Armenia has strong human capital and a well-educated population, particularly in the science, technology, engineering, and mathematics fields, leading to significant investment in the high-tech and information technology sectors. Many international companies have established branches or subsidiaries in Armenia to take advantage of the country’s pool of qualified specialists and position within the Eurasian Economic Union (EAEU). However, many businesses have identified challenges with Armenia’s investment climate in terms of the country’s small market (with a population of less than three million), limited consumer buying power, relative geographic isolation due to closed borders with Turkey and Azerbaijan, and concerns related to weaknesses in the rule of law.

Following a peaceful revolution in 2018 fueled in large measure by popular frustration with endemic corruption, Armenia’s government launched a high-profile anti-corruption campaign. The fight against corruption needs to be institutionalized in the long term, especially in critical areas such as the judiciary, tax and customs operations, and health, education, military, and law enforcement sectors. Foreign investors remain concerned about the rule of law, equal treatment, and ethical conduct by government officials. U.S companies have reported that the investment climate is tainted by a failure to enforce intellectual property rights. There have been concerns regarding the lack of an independent and strong judiciary, which undermines the government’s assurances of equal treatment and transparency and reduces access to effective recourse in instances of investment or commercial disputes.  Representatives of U.S. entities have raised concerns about the quality of stakeholder consultation by the government with the private sector and government responsiveness in addressing concerns among the business community. 

Government officials have publicly responded to private sector concerns about perceptions of slow movement in the government bureaucracy as a function of needing to guard against corruption-related risks. The Armenian National Interests Fund and Investment Support Center (Enterprise Armenia) are responsible for attracting and facilitating foreign direct investment.

There are generally very few restrictions on foreign ownership or control of commercial enterprises. There are some restrictions on foreign ownership within the media and commercial aviation sectors. Local incorporation is required to obtain a license for the provision of auditing services.

The Armenian government does not maintain investment screening mechanisms in general, and for foreign direct investment, in particular. Government approval is required to take advantage of certain tax and customs privileges, and foreign investors are subject to the same requirements as domestic investors where regulatory approvals may be involved.

An Armenian ecological NGO recently published an article claiming that many mines in Armenia do not have corporate social responsibility obligations, which are required by law. However, it was unclear from the article if the mines in question were still actively operating.    

https://www.business-humanrights.org/en/latest-news/?&language=en

Link to Global Witness country-specific reports: https://www.globalwitness.org/en/all-countries-and-regions/

Link to conflicts listed on Environmental Justice Atlas, under “basic data,” select country: https://ejatlas.org/

In 2019, the U.N. Conference on Trade and Development (UNCTAD) published its first investment policy review for Armenia. The World Trade Organization (WTO) published a Trade Policy Review for Armenia in 2018.

Companies can register electronically here.  This single window service was launched in 2011 and allows individual entrepreneurs and companies to complete name reservation, business registration, and tax identification processes all at once.  The application can be completed in one day.  An electronic signature is needed in order to be able to register online.  Foreign citizens can obtain an e-signature and more detailed information from the e-signature portal.  In 2019, the government launched an e-regulations platform that provides a step-by-step guide for business and investment procedures.  The platform is available at https://armenia.eregulations.org/ . According to the latest estimates, it takes four days to complete the company registration process in Armenia.

The Armenian government does not restrict domestic investors from investing abroad.

The Armenian government increasingly makes efforts to uses transparent policies and laws to foster competition. Some contacts have reported that over the last few years the Armenian government has pursued a more consistent execution of these laws and policies in an effort to improve market competition and remove informal barriers to market entry, especially for small- and medium-sized enterprises. Armenia’s legislation on the protection of competition has been improved with clarifications regarding key concepts. There have been some procedural improvements for delivering conclusions and notifications of potential anti-competitive behavior via electronic means. However, companies regard the efforts of the State Commission for the Protection of Economic Competition (SCPEC) alone as insufficient to ensure a level playing field. They indicate that improvements in other state institutions and authorities that support competition, like the courts, tax and customs, public procurement, and law enforcement, are necessary. Numerous studies observe a continuing lack of contestability in local markets, many of which are dominated by a few incumbents. Banking supervision is relatively well developed and largely consistent with the Basel Core Principles. The Central Bank of Armenia (CBA) is the primary regulator of the financial sector and exercises oversight over banking, securities, insurance, and pensions. Armenia has adopted IFRS as the accounting standard for enterprises. Data on Armenia’s public finances and debt obligations are broadly transparent, and the Ministry of Finance publishes periodic reports that are available online.

Safety and health requirements, many of them holdovers from the Soviet period, generally do not impede investment activities. Nevertheless, investors consider bureaucratic procedures to be sometimes burdensome, and discretionary decisions by individual officials may present opportunities for petty corruption. A unified online platform for publishing draft legislation was launched in March 2017.  Proposed legislation is available for the public to view. Registered users can submit feedback and see a summary of comments on draft legislation. However, the time period devoted to public comments is often regarded as insufficient to solicit substantive feedback. The results of consultations have not been reported by the government in the past. The government maintains other portals, including http://www.e-gov.am and http://www.arlis.am, that make legislation and regulations available to the public. The governmental https://www.aipa.am/en/ portal is a comprehensive platform for a range of services including registering intellectual property, opening a company, or applying for a construction permit. It also provides links to key regulatory institutions and laws and regulations. The government does not require environmental and social disclosures to help investors and consumers distinguish between high- and low-quality investments. Some regulations that affect Armenia are developed within the Eurasian Economic Commission, the executive body for the EAEU.

Armenia is a member of the EAEU and adheres to relevant technical regulations. Armenia’s entry into CEPA will lead it to pursue harmonization efforts with the EU on a range of laws, regulations, and policies relevant to economic affairs. Armenia is also a member of the WTO, and the Armenian government notifies draft technical regulations to the WTO Committee on Technical Barriers to Trade. Armenia is a signatory to the Trade Facilitation Agreement and has already sent category “A”, “B,” and “C” notifications to the WTO.

Armenia has a hybrid legal system that includes elements of both civil and common law. Although Armenia is developing an international commercial code, the laws regarding commercial and contractual matters are currently set forth in the civil code. Thus, because Armenia lacks a commercial court, all disputes involving contracts, ownership of property, or other commercial matters are resolved by litigants in courts of general jurisdiction, which handle both civil and criminal cases. Judges that handle civil matters may be overwhelmed by the volume of cases before them and are frequently seen by the public as corrupt. Despite the ability of courts to use the precedential authority of the Court of Cassation and the European Court of Human Rights, many judges who specialize in civil cases do not do so, increasing the unpredictability of court decisions in the eyes of investors.

Businesses tend to perceive that many Armenian courts suffer from low levels of efficiency, independence, and professionalism, which drives a need to strengthen the judiciary. Very often in proceedings when additional forensic expertise is requested, the court may suspend a case until the forensic opinion is received, a process that can take several months. Businesses have noted that many judges at courts of general jurisdiction may be reluctant to make decisions without getting advice from higher court judges. Thus, the public opinion is that decisions may be influenced by factors other than the law and merits of individual cases. In general, the government honors judgments from both arbitration proceedings and Armenian national courts.

Due to the nature and complexity of commercial and contractual issues and the caseload of judges who specialize in civil cases, many matters involving investment or commercial disputes take months or years to work their way through the courts. In addition, businesses have complained of the inefficiencies and institutional corruption of the courts. Even though the Armenian constitution provides investors the tools to enforce awards and their property rights, investors claim that there is little predictability in what a court may do.

Basic legal provisions covering foreign investment are specified in the 1994 Law on Foreign Investment. Foreign companies are entitled by law to the same treatment as Armenian companies. A Law on Public-Private Partnership (PPP), adopted in 2019, establishes a framework for the government to attract investment for projects focused on infrastructure. In 2021, the Law on PPP has been amended to introduce clear criteria for PPP project selection by the Government, as well as enabled investors to apply to the government with PPP project proposals. 

The Investment Support Center (Enterprise Armenia) is Armenia’s national authority for investment and export promotion. It provides information to foreign investors on Armenia’s business climate, investment opportunities, and legislation; supports investor visits; and serves as a liaison for government institutions. More information is available via the Investment Support Center’s website.

SCPEC reviews transactions for competition-related concerns. Relevant laws, regulations, commission decisions, and more information can be found on SCPEC’s website. Concentrations, including mergers, acquisitions of shares or assets, amalgamations, and incorporations, are subject to ex ante control by SCPEC in accordance with the law. Whenever a concentration gives rise to concerns about harm to competition, including the creation or strengthening of a dominant position, SCPEC can prohibit such a transaction or impose certain remedies. Armenia’s Law on Protection of Economic Competition has been amended several times in recent years to bring Armenia’s competition framework into alignment with EAEU and CEPA requirements. The law was changed in 2020 to improve SCPEC’s capabilities to investigate anti-competitive behavior, in collaboration with Armenia’s investigative bodies, whereas before SCPEC had to rely primarily on document studies and request information from other state bodies. 

Amendments to the competition law made in 2021 strengthened SCPEC’s preventive measures by allowing private sector representatives to obtain SCPEC’s advisory opinion on market concentration risks prior to a planned transaction or activity (formerly available only to state bodies). The most recent changes to competition law also defined the order to conduct sectoral market studies to identify potential competition violations and enlarged the scope of market transactions that can be assessed as market concentrations.

Under Armenian law, foreign investment cannot be confiscated or expropriated except in extreme cases of natural or state emergency upon obtaining an order from a domestic court. According to the Armenian constitution, equivalent compensation is owed prior to expropriation.

According to the Law on Bankruptcy adopted in 2006, creditors and equity and contract holders (including foreign entities) have the right to participate and defend their interests in bankruptcy cases. Armenia decided with the passage of a new Judicial Code in 2018 to adopt a new, specialized bankruptcy court, which began operations in 2019. Creditors have the right to access all materials relevant to cases, submit claims to court, participate in meetings of creditors, and nominate candidates to administer cases. Monetary judgments are usually made in local currency. The Armenian Criminal Code defines penalties for false and deliberate bankruptcy, concealment of property or other assets of the bankrupt party, or other illegal activities during the bankruptcy process. UNCTAD observes that Armenia’s framework for bankruptcy procedures needs improvement, adding that insolvency cases are expensive and almost always result in liquidation. Armenia amended its bankruptcy law in December 2019 to reduce the cost of bankruptcy proceedings. In addition, premiums have been set for bankruptcy managers for submitting financial recovery plans, as well as for the recovery of a bankrupt person, with the aim of raising rates of financial recovery. In 2020, the debt threshold to launch bankruptcy proceedings was raised to grant companies a greater ability to pay off debts rather than having their assets frozen.

Armenia offers incentives for exporters (e.g., no export duty, VAT refund on goods and services exported) and foreign investors (e.g., income tax holidays, the ability to carry forward losses indefinitely, VAT deferral, and exemptions from customs duties for investment projects). Starting in 2018, the Armenian government began exempting imports of capital investment-related goods from VAT payments at the border. In 2015, the Armenian government began exempting from customs duties investment-related imports of equipment and raw materials from non-EAEU member countries. VAT and customs duties exemptions are implemented by government decisions made on a case-by-case basis. Also, in accordance with the Law on Foreign Investment, several ad hoc incentives may be negotiated on a case-by-case basis for investments that are targeted at certain sectors of the economy or are of strategic interest. As part of its response to COVID-19, the government launched several economic response and social support measures in 2020, some of them, including several support programs in the agriculture sector, are still active in 2022.  In May 2022, the government had initiated changes in energy regulations to allow multiple usage points for solar panel installations. The Law on Licensing was amended in 2021 to simplify the licensing requirements for foreign companies to engage in 13 types of business activities in Armenia, including security/encashment and postal services, railroad and taxi services, urban development and engineering, and technical supervision of construction.

In 2011, Armenia adopted a Law on Free Economic Zones (FEZ), amended in 2018, and developed several key regulations to attract foreign investments into FEZs: exemptions from VAT, profit tax, customs duties, and property tax. The Alliance FEZ was opened in 2013 to focus on high-tech industries, including information and communication technologies, electronics, pharmaceuticals and biotechnology, architecture and engineering, industrial design, and alternative energy. In 2014, the government expanded operations in the Alliance FEZ to include industrial production. In 2015, the Meridian FEZ, focused on jewelry production, watchmaking, and diamond cutting, opened in Yerevan. The Meghri FEZ, located on Armenia’s border with Iran, opened in 2017. A new FEZ, located in Hrazdan, opened in late 2018 and is focused on the high-tech and information technology sectors. Armenia has signaled an interest in developing logistics hubs, including one in Gyumri, to facilitate goods trade.

There are no performance requirements for investment in terms of mandating local employment. The processes for obtaining visas, residence, or work permits are straightforward. There are no government-imposed conditions on permission to invest.

Armenia does not follow any policy that would force foreign investors to use domestic content in goods and technology. There are no requirements for foreign information technology providers to turn over source code or provide keys for encryption. There are no requirements to store data within the country.

Armenian law protects secured interests in property, both personal and real. Armenian law provides a basic framework for secured lending, collateral, and pledges and provides a mechanism to support modern lending practices and title registration. According to Armenia’s constitution, foreign citizens are prohibited from owning land, though they may take out long-term leases.

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/.

Armenia has a strong legislative and regulatory framework to protect intellectual property rights (IPR). Domestic legislation, including the 2006 Law on Copyright and Related Rights, provides for the protection of copyright with respect to literary, scientific, and artistic works (including computer programs and databases), patents and other rights of invention, industrial design, know-how, trade secrets, trademarks, and service marks. The Intellectual Property Agency (IPA) in the Ministry of Economy is responsible for granting patents and overseeing other IPR-related matters. The collective management organization ARMAUTHOR manages authors’ economic rights. Trademarks and patents require state registration by the IPA, but copyright does not. There is no special trade secret law in Armenia, but the protection of trade secrets is covered by Armenia’s Civil Code. Formal registration is straightforward, the database of registered IPR is public, and applications to register IPR are published online for two months for comment by third parties. Armenia’s legislation has been harmonized with the World Trade Organization’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). In 2005, Armenia created an IPR Enforcement Unit in the Organized Crime Department of the Armenian Police, which acts only based on complaints from right holders and does not exercise ex-officio powers.

Despite the existence of relevant legislation and executive government structures, the concept of IPR remains unrecognized by a large part of the local population. The onus for IPR complaints rests with the offended party. Law enforcement assert that the majority of cases are settled through out-of-court proceedings. While the Armenian government has made some progress on IPR issues, strengthening enforcement mechanisms remains necessary. UNCTAD reports that low awareness and poor monitoring of IPR violations harm the business climate.

A new Law on Copyright has been drafted and submitted for government’s approval. It includes provisions from new international agreements (Marrakesh and Beijing Treaties). A new Law on Patents and Law on Industrial Design entered into force in July 2021. The new Law on Patents strengthens the requirement for substantive examination before rights registration and introduces the concept of a short-term patent. The new Law on Industrial Design includes some procedural changes, including publishing applications for industrial designs and objects during the state registration process.

Armenia is not included in USTR’s Special 301 Report or Notorious Markets List. For additional information about national laws and points of contact at local IP offices, please WIPO’s country profiles at http://www.wipo.int/directory/en/.

The banking system in Armenia is sound and well-regulated, but the financial sector is not highly developed, according to investors. Banking sector assets account for over 80 percent of total financial sector assets. Financial intermediation tends to be poor. Nearly all banks require collateral located in Armenia, and large collateral requirements often prevent potential borrowers from entering the market. U.S. businesses have noted that this creates a significant barrier for small- and medium-sized enterprises and start-up companies.

The Armenian government welcomes foreign portfolio investment and there is a supporting system and legal framework in place. Armenia’s securities market is not well developed and has only minimal trading activity through the Armenia Securities Exchange, though efforts to grow capital markets are underway. Liquidity sufficient for the entry and exit of sizeable positions is often difficult to achieve due to the small size of the Armenian market. The Armenian government hopes that as a result of pension reforms in 2014, which brought two international asset managers to Armenia, capital markets will play a more prominent role in the country’s financial sector. Armenia adheres to its IMF Article VIII commitments by refraining from restrictions on payments and transfers for current international transactions. Credit is allocated on market terms and foreign investors are able to access credit locally.

Since 2020, the banking sector has withstood the twin shocks created by COVID-19 and the Nagorno-Karabakh conflict. Indicators of financial soundness, including capital adequacy and non-performing loan ratios, have remained broadly strong. The sector is well capitalized and liquid. Non-performing loans have ticked upward slightly from rates of around five percent of all loans. Dollarization, historically high for deposits and lending, has been falling in recent years. Seventeen commercial banks operate in Armenia.  In 2021, all commercial banks in Armenia generated net profits and all had a positive return on average equity (the financial ratio that measures the performance of a bank based on its average shareholders’ equity outstanding).  Total bank assets in Armenia at the end of 2021 were $14 billion; Armenia’s 2021 GDP was approximately $13.6 billion.  As such, the ratio of banks’ total assets to GDP – approximately one-to-one – is average compared to peer countries.  Concentration of banks’ assets is considered to be very low, with the three largest banks holding less than fifty percent of total banking sector assets.  Market share of the largest five banks was 56 percent in 2021.  Overall, Armenia’s banking sector is viewed by international financial institutions (IFIs) as relatively healthy. 

The minimum capital requirement for banks is 30 billion AMD (around $59 million). There are no restrictions on foreigners to open bank accounts. Residents and foreign nationals can hold foreign currency accounts and import, export, and exchange foreign currency relatively freely in accordance with the Law on Currency Regulation and Currency Control. Foreign banks may establish a subsidiary, branch, or representative office, and subsidiaries of foreign banks are allowed to provide the same types of services as domestically owned banks.

The CBA is responsible for the regulation and supervision of the financial sector. The authority and responsibilities of the CBA are established under the Law on the Central Bank of Armenia. Numerous other articles of legislation and supporting regulations provide for financial sector oversight and supervision.

Armenia does not have a sovereign wealth fund.

Most of Armenia’s state-owned enterprises (SOEs) were privatized in the 1990s and early 2000s, but SOEs are still active in a number of sectors. SOEs in Armenia operate as state-owned closed joint stock companies that are managed by the Department of State Property Management and state non-commercial organizations. There are no laws or rules that ensure a primary or leading role for SOEs in any specific industry. Armenia is party to the WTO Government Procurement Agreement, and SOEs are covered under that agreement. SOEs in Armenia are subject to the same tax regime as their private competitors, and private enterprises in Armenia can compete with SOEs under the same terms and conditions. The Department of State Property Management maintains a public list of state-owned closed joint stock companies on its website.

Most of Armenia’s SOEs were privatized in the 1990s and early 2000s. Many of the privatization processes for Armenia’s large assets were reported to be neither competitive nor transparent, and political considerations in some instances prevailed over fair tender processes. The most recent law on privatization, the fifth, is the Law on the 2017-2020 Program for State Property Privatization, which lists 48 entities for privatization. The Department of State Property Management oversees the management of the state’s shares in entities slated for privatization. Details of the privatization program are available on the Department of State Property Management website.

Comprehension of responsible business conduct (RBC) in Armenia is still developing, but several larger companies with foreign ownership or management have been operating under the concept in recent years. Initiatives, where they do exist, are primarily limited to corporate social responsibility efforts. However, RBC programs that do exist are viewed favorably. Some civil society groups and business associations are playing a more active role to promote RBC and develop awareness. Major pillars of corporate governance in Armenia include the Law on Joint Stock Companies, the Law on Banks and Banking Activity, the Law on Securities Market, and a Corporate Governance Code. International observers note inconsistencies in this legislation and generally rate corporate governance practices as weak to fair. Specific areas for potential improvement cited by the local business community include improving internal and external auditing for firms, enhancing the powers of independent directors on company boards, and boosting shareholders’ rights. Armenia has outlined commitments to corporate governance reforms, including with regard to mandatory audit, accounting, and financial reporting, within the context of an ongoing Stand-By Arrangement with the International Monetary Fund.

Armenia joined the Extractive Industries Transparency Initiative (EITI) in March 2017 as a candidate country. The first EITI national report for Armenia was published in January 2019. As part of its EITI membership aspirations, the government in March 2018 adopted a roadmap to disclose beneficial owners in the metal ore mining industry. Relevant implementing legislation, including for beneficial ownership disclosure, was adopted in 2019.

Armenia is not a signatory to the Montreux Document on Private Military and Security Companies, and no Armenian party is a member of the International Code of Conduct for Private Security Providers’ Association.

Domestic laws and regulations related to labor, employment rights, consumer protection, and environmental protection are not always enforced effectively. These laws and regulations cannot be waived to attract foreign investment.

Department of State

• Country Reports on Human Rights Practices; 
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities;
• U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises; and
• Xinjiang Supply Chain Business Advisory.

Department of the Treasury

• OFAC Recent Actions

Department of Labor

• Findings on the Worst Forms of Child Labor Report;
• List of Goods Produced by Child Labor or Forced Labor;
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World; and
• Comply Chain.

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

Anti-Corruption Committee (ACC)
13A Vagharsh Vagharshyan Street Yerevan, Armenia
+374 11 900 002
press@investigatory.am

Contact at a “watchdog” organization: Sona Ayvazyan Executive Director

Transparency International
Anti-Corruption Center 12 Saryan Street Yerevan, Armenia
+374 10 569 589
sona@transparency.am

Following 2021 parliamentary elections that international monitors assessed as upholding fundamental rights and freedoms, the Armenian government’s commitment to eradicating corruption continues. Policy action and systemic change remain strong, and the government has pressed forward with legislative actions to establish investigative, prosecutorial and judicial anti-corruption institutions. The government’s anti-corruption agenda is outlined in a 2019–2022 strategy and action plan. These documents establish a new anti-corruption institutional framework with separate entities tasked with preventive, investigative, and prosecutorial functions as well as the Specialized Anti-Corruption Court. Established in 2019, the Corruption Prevention Commission (CPC) is the main entity responsible for preventing corruption and building integrity across government and society. CPC continued to make progress in the areas of asset declaration and integrity checks but has yet to fulfill its mandates for oversight of political party financing and prevention of conflicts of interest. The Anti-Corruption Committee, as an investigative body, was established in September 2021 to lead pre-trial criminal proceedings on alleged corruption crimes by carrying out both investigative and operative intelligence activities. The amendments to the Judicial Code on establishing the Specialized Anti-Corruption Court (SACC) were adopted on April 14, 2021, thus marking the completion of the creation of the government’s new institutional framework to fight corruption. The SACC is the first instance court, and the judges specialized in anti-corruption cases will sit at the Criminal Court of Appeals and the Anti-Corruption Chamber of the Cassation Court. As a follow-up to the passage of the Law “On Civil Forfeiture of Illegal Assets,” the department dealing with cases of civil forfeiture of illegal assets was established in September 2020 within the General Prosecutor’s Office. 

Civil society actors are divided in their opinions about the effectiveness of the government’s anti-corruption measures. Some assess the implementation of the anti-corruption program is on track, while others contend that the work of law enforcement and judiciary on corruption cases is not effective enough, citing already opened criminal cases on corruption and embezzlement that do not reach completion. 

Corruption remains an obstacle to U.S. investment in Armenia, particularly as it relates to critical areas such as the justice system and concerns related to the rule of law, enforcement of existing legislation and regulations, and equal treatment. Investors claim that the health, education, military, corrections, and law enforcement sectors lack transparency in procurement and have in the past used selective enforcement to elicit bribes. Judges who specialize in civil cases are still widely perceived by the public to be corrupt and under the influence of former authorities. The effectiveness and independence of newly formed anti-corruption institutions remains to be seen.  Some individuals have voiced concerns around whether certain judicial representatives and law enforcement leaders have been selected objectively. The potential for politically motivated, outside influence on these anti-corruption institutions, as well as law enforcement bodies and prosecutorial services, also remains a concern. 

Transparency International released its Corruption Perception Index (CPI) 2021, ranking Armenia 58th among 180 countries.  According to the report, Armenia’s CPI score in 2021 remained unchanged compared to 2020 (score of 49).  Armenia’s rating is higher than the CPI global average of 43, indicating Armenia’s public sector was perceived by experts and businesspeople to be less corrupt than the global average.  Among 19 countries in Eastern Europe and Central Asia, Armenia ranked the second highest.  The report cited Armenia as among the countries which has registered significant progress in the last decade. (In his December 2021 Summit for Democracy speech, Prime Minister Pashinyan noted Armenia aims to rise from a score of 49 to 60 in Transparency International’s Corruption Perception Index by 2026.)

Various laws prohibit the participation of civil and municipal servants, as well as local government elected officials such as mayors and councilors, in commercial activities. However, powerful officials at the national, district, and local levels often acquire direct, partial, or indirect control over private firms. Such control is often exercised through a hidden partner or majority ownership of fully private parent companies. This involvement can occur through close relatives and friends. According to foreign investors, these practices reinforce protectionism, hinder competition, and undermine the image of the government as a facilitator of private sector growth. Because of the historically strong interconnectedness of the political and economic spheres, Armenia has often struggled to introduce legislation to encourage strict ethical codes of conduct and the prevention of bribery in business transactions. In 2016, Armenia adopted legislation on criminal penalties for illicit enrichment and noncompliance or fraud in filing declarations.

Armenia is a member of the UN Convention against Corruption. While not a party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, Armenia is a member of the OECD Anti-Corruption Network for Eastern Europe and Central Asia and has signed the Istanbul Action Plan.  Armenia is also a member of the global Open Government Partnership initiative.

No specific law exists to protect NGOs dealing with anti-corruption investigations.

Armenia has a history of political demonstrations, most of which have remained peaceful. There have been some instances, however, of violent confrontations between police and protesters, or of attacks on government officials. The last major violent protest occurred in November 2020 following the release of a tripartite ceasefire statement by Armenia, Azerbaijan, and Russia, which brought an end to the fall 2020 intensive fighting in and around NK. Individuals and groups displeased with the announcement stormed government buildings and destroyed property. Protestors assaulted the speaker of parliament in the streets of Yerevan and broke into the prime minister’s residence. Since the release of the tripartite statement, groups opposed to the government have organized regular marches and rallies in Yerevan that have remained largely peaceful and caused minimal disruption to ordinary business. Pro-government groups have also organized peaceful rallies, although less frequently. Throughout Armenia, protestors use road blockades as a common tactic to register discontent, most often with the government over community-level issues. The disruption created by such road blockades is usually minimal. Protests have not resulted in any damage to projects of installations of international businesses. It is unlikely that civil disturbances, should they occur, would be directed against U.S. businesses or the U.S. community.

During 44 days of intensive fighting from September 27 to November 10 in 2020 involving Azerbaijan, Armenia, and Armenia-supported separatists, significant casualties and atrocities were reported by all sides. After Azerbaijan, with Turkish support, reestablished control over four surrounding territories controlled by separatists since 1994, a Russian-brokered ceasefire arrangement announced by Azerbaijan and Armenia on November 9 resulted in the peaceful transfer of control over three additional territories to Azerbaijan, as well as the introduction of Russian peacekeepers to the region. The ceasefire has largely held, with frequent but localized violations. Tensions remain high, particularly along the international border, which has not been fully demarcated.

Russian forces have played a role in controlling access along highways near the border and into the Nagorno-Karabakh region from Armenia and Azerbaijan. The Azerbaijani government has suspended or threatened to suspend the operations of U.S. companies in Azerbaijan whose products or services are provided in the area of Nagorno-Karabakh currently under the administration of the Russian peacekeepers and has banned the entry into Azerbaijan of some persons who have visited NK. The U.S. government is unable to provide emergency services to U.S. citizens in and around NK as access is restricted.

Armenia’s human capital is one of its strongest resources. The labor force is generally well educated, particularly in the science, technology, engineering, and mathematics fields. Nearly 100 percent of Armenia’s adult population is literate. According to official data, enrollment in secondary school is over 90 percent, and enrollment in senior school (essentially equivalent to American high school) is approximately 85 percent. Despite this, official statistics indicate a high rate of unemployment, at around 20 percent. Unemployment is particularly pronounced among women and youth, and significant underemployment is also a problem.

Considerable foreign investment in Armenia has occurred in the high-tech sector. High-tech companies have established branches or subsidiaries in Armenia to take advantage of the country’s pool of qualified specialists in electrical and computer engineering, optical engineering, and software design. There is a shortage of workers with vocational training. About 20 percent of the non-agricultural workforce is employed in the informal economy, primarily in the services sector. Armenian law protects the rights of workers in the formal sector to form and to join independent unions, with exceptions for personnel of the armed forces and law enforcement agencies. The law also provides for the right to strike, with the same exceptions, and permits collective bargaining. The law stipulates that workers’ rights cannot be restricted because of membership in a union. It also differentiates between layoffs and firing with severance. According to some reports, labor organizations remain weak because of employer resistance, high unemployment, and unfavorable economic conditions; collective bargaining is not common in Armenia. Experts observe that the right to strike, although enshrined in the constitution, is difficult to realize due to mediation and voting requirements. Labor unions are generally inactive with the exception of those connected with the mining and chemical industries, and a few small grassroot movements to create unions in the fields of education and public health have sprung up over the last few years. Labor laws cannot be waived to retain or attract investment.

The current Labor Code is considered to be largely consistent with international standards. The law sets a standard 40-hour workweek, with 20 days of mandatory annual paid leave. However, there are consistent reports that many private sector employees, particularly in the service sector, are unable to obtain paid leave and are required to work more than eight hours a day without additional compensation. The treatment of labor in FEZs is no different than elsewhere in the country. Employers are generally able to adjust employment in light of fluctuating market conditions. Severance in general does not exceed 60 working days. Benefits for workers laid off for economic reasons are mostly limited to receiving qualification trainings and job search assistance.

Individual labor disputes can usually be resolved through courts; however, the courts are often overburdened, causing significant delays. Collective labor disputes should be resolved through collective bargaining.

Since 2019, Armenia’s Health and Labor Inspection Body (HLIB) has gradually begun to exercise more robust enforcement of labor legislation and fulfill its oversight function. Its full mandate came into force in July 2021. Throughout 2021, the government continued to adopt inspection checklists and risk assessment methodologies in various sectors to enable HLIB to carry out inspections. HLIB also continued to add new inspectors throughout the year.

Amendments to the Labor Code that entered into force in 2015 clarified the procedures for making changes in labor contracts and further specified the provisions required in labor contracts, notably those relating to probationary periods, vacation, and wage calculations.

The current legal minimum wage is AMD 68,000 (approximately $135) per month. Most companies pay an unofficial extra-month bonus for the New Year’s holiday. Wages in the public sector are often significantly lower than those in the private sector.

Economic & Commercial Officer
U.S. Embassy Yerevan
American Avenue 1 Yerevan, Armenia
+374 10 494 200
YerevanBusiness@state.gov

Australia is generally welcoming to foreign direct investment (FDI), with foreign investment widely considered to be an essential contributor to Australia’s economic growth. Other than certain required review and approval procedures for designated types of foreign investment described below, there are no laws that discriminate against foreign investors.

A number of investment promotion agencies operate in Australia. The Australian Trade Commission (often referred to as Austrade) is the Commonwealth Government’s national “gateway” agency to support investment into Australia. Austrade provides coordinated government assistance to promote, attract, and facilitate FDI, supports Australian companies to grow their business in international markets, and delivers advice to the Australian Government on its trade, tourism, international education and training, and investment policy agendas. Austrade operates through a number of international offices, with U.S. offices primarily focused on attracting foreign direct investment into Australia and promoting the Australian education sector in the United States. Austrade in the United States operates from offices in Boston, Chicago, Houston, New York, San Francisco, and Washington, DC. In addition, state and territory investment promotion agencies also support international investment at the state level and in key sectors.

Within Australia, foreign and domestic private entities may establish and own business enterprises and may engage in all forms of remunerative activity in accordance with national legislative and regulatory practices. See Section 4: Legal Regime – Laws and Regulations on Foreign Direct Investment below for information on Australia’s investment screening mechanism for inbound foreign investment.

Other than the screening process described in Section 4, there are few limits or restrictions on foreign investment in Australia. Foreign purchases of agricultural land greater than AUD 15 million (USD 11 million) are subject to screening. This threshold applies to the cumulative value of agricultural land owned by the foreign investor, including the proposed purchase. However, the agricultural land screening threshold does not affect investments made under the Australia-United States Free Trade Agreement (AUSFTA). The current threshold is AUD 1.25 billion (USD 925 million) for U.S. non-government investors. Investments made by U.S. non-government investors are subject to inclusion on the foreign ownership register of agricultural land and to Australian Tax Office (ATO) information gathering activities on new foreign investment.

The Foreign Investment Review Board (FIRB), which advises Australia’s Treasurer, may impose conditions when approving foreign investments. These conditions can be diverse and may include: retention of a minimum proportion of Australian directors; certain requirements on business activities, such as the requirement not to divest certain assets; and certain taxation requirements. Such conditions are in keeping with Australia’s policy of ensuring foreign investments are in the national interest.

Australia has not conducted an investment policy review in the last three years through either the OECD or UNCTAD system. The WTO reviewed Australia’s trade policies and practices in 2019, and the final report can be found at: https://www.wto.org/english/tratop_e/tpr_e/tp496_e.htm .

The Australian Trade Commission compiles an annual “Why Australia Benchmark Report” that presents comparative data on investing in Australia in the areas of Growth, Innovation, Talent, Location, and Business. The report also compares Australia’s investment credentials with other countries and provides a general snapshot on Australia’s investment climate. The 2021 Benchmark Report can be found at: http://www.austrade.gov.au/International/Invest/Resources/Benchmark-Report .

Australia’s private sector frequently provides policy recommendations to the government, including as part of annual federal budget reviews and ad hoc policy reviews. In 2021 the American Chamber of Commerce in Australia published a report titled “The Opportunity is Now: Attracting U.S. Investors to Australia,” which provides a range of recommendations to government relating to Australia’s investment screening and general investment environment. The report is available via the following link: https://www.pwc.com.au/amcham-pwc-opportunity-is-now.html

Business registration in Australia is relatively straightforward and is facilitated through a number of government websites. The government’s business.gov.au website provides an online resource and is intended as a “whole-of-government” service providing essential information on planning, starting, and growing a business. Foreign entities intending to conduct business in Australia as a foreign company must be registered with the Australian Securities and Investments Commission (ASIC). As Australia’s corporate, markets, and financial services regulator, ASIC’s website provides information and guides on starting and managing a business or company in the country.

In registering a business, individuals and entities are required to register as a company with ASIC, which then gives the company an Australian Company Number, registers the company, and issues a Certificate of Registration. According to the World Bank “Starting a Business” indicator, registering a business in Australia takes two days, and Australia ranks 7th globally on this indicator.

Australia generally looks positively towards outward investment as a way to grow its economy. There are no restrictions on investing abroad. Austrade, Export Finance Australia (EFA), and various other government agencies offer assistance to Australian businesses looking to invest abroad, and some sector-specific export and investment programs exist. The United States is the top destination, by far, for Australian investment overseas.

The Australian Government utilizes transparent policies and effective laws to foster national competition and is consultative in its policy making process. The government generally allows for public comment of draft legislation and publishes legislation once it enters into force. Details of the Australian government’s approach to regulation and regulatory impact analysis can be found on the Department of Prime Minister and Cabinet’s website: https://www.pmc.gov.au/regulation 

Regulations drafted by Australian Government agencies must be accompanied by a Regulation Impact Statement when submitted to the final decision maker (which may be the Cabinet, a Minister, or another decision maker appointed by legislation.) All Regulation Impact Statements must first be approved by the Office of Best Practice Regulation (OBPR) which sits within the Department of Prime Minister and Cabinet, prior to being provided to the relevant decision maker. They are required to demonstrate the need for regulation, the alternative options available (including non-regulatory options), feedback from stakeholders, and a full cost-benefit analysis. Regulations are subsequently required to be reviewed periodically. All Regulation Impact Statements, second reading speeches, explanatory memoranda, and associated legislation are made publicly available on Government websites. Australia’s state and territory governments have similar processes when making new regulations.

The Australian Government has tended to prefer self-regulatory options where industry can demonstrate that the size of the risks are manageable and that there are mechanisms for industry to agree on, and comply with, self-regulatory options that will resolve the identified problem. This manifests in various ways across industries, including voluntary codes of conduct and similar agreements between industry players.

The Australian Government has recognized the impost of regulations and has undertaken a range of initiatives to reduce red tape. This has included specific red tape reduction targets for government agencies and various deregulatory groups within government agencies. In 2019, the Australian Government established a Deregulation Taskforce within its Treasury Department, stating its goal was to “drive improvements to the design, administration and effectiveness of the stock of government regulation to ensure it is fit for purpose.” The taskforce’s work is ongoing.

Australian accounting, legal, and regulatory procedures are transparent and consistent with international standards. Accounting standards are formulated by the Australian Accounting Standards Board (AASB), an Australian Government agency under the Australian Securities and Investments Commission Act 2001. Under that Act, the statutory functions of the AASB are to develop a conceptual framework for the purpose of evaluating proposed standards; make accounting standards under section 334 of the Corporations Act 2001, and advance and promote the main objects of Part 12 of the ASIC Act, which include reducing the cost of capital, enabling Australian entities to compete effectively overseas and maintaining investor confidence in the Australian economy. The Australian Government conducts regular reviews of proposed measures and legislative changes and holds public hearings into such matters.

Australian government financing arrangements are transparent and well governed. Legislation governing the type of financial arrangements the government and its agencies may enter into is publicly available and adhered to. Updates on the Government’s financial position are regularly posted on the Department of Finance and Treasury websites. Issuance of government debt is managed by the Australian Office of Financial Management, which holds regular tenders for the sale of government debt and the outcomes of these tenders are publicly available. The Australian Government also publishes and adheres to strict procurement guidelines. Australia formally joined the WTO Agreement on Government Procurement in 2019.

Environmental Social Governance (ESG) reporting is not currently mandated for companies in Australia. However, companies are required to disclose any information that shareholders may deem relevant in assessing the performance of value of the company and this may include ESG components. Companies are also increasingly disclosing ESG aspects of their operations in response to shareholder demands and in order to secure an advantage over competitors. Further, financial services companies are required to disclose their exposure to climate risk as part of their standard risk disclosures (see further detail here: https://asic.gov.au/about-asic/news-centre/speeches/corporate-governance-update-climate-change-risk-and-disclosure/ )

Australia is a member of the WTO, G20, OECD, and the Asia-Pacific Economic Cooperation (APEC), and became the first Association of Southeast Nations (ASEAN) Dialogue Partner in 1974. While not a regional economic block, Australia’s free trade agreement with New Zealand provides for a high level of integration between the two economies with the ultimate goal of a single economic market. Details of Australia’s involvement in these international organizations can be found on the Department of Foreign Affairs and Trade’s website: https://www.dfat.gov.au/trade/organisations/Pages/wto-g20-oecd-apec 

The Australian legal system is firmly grounded on the principles of equal treatment before the law, procedural fairness, judicial precedent, and the independence of the judiciary. Strong safeguards exist to ensure that people are not treated arbitrarily or unfairly by governments or officials. Property and contractual rights are enforced through the Australian court system, which is based on English Common Law. Australia’s judicial system is fully independent and separate from the executive branch of government.

Information regarding investing in Australia can be found in Austrade’s “Guide to Investing” at http://www.austrade.gov.au/International/Invest/Investor-guide . The guide is designed to help international investors and businesses navigate investing and operating in Australia.

Foreign investment in Australia is regulated by the Foreign Acquisitions and Takeovers Act 1975 and Australia’s Foreign Investment Policy. The Foreign Investment Review Board (FIRB) is a non-statutory body, comprising independent board members advised by a division within the Treasury Department, established to advise the Treasurer on Australia’s foreign investment policy and its administration. The FIRB screens potential foreign investments in Australia above threshold values, and based on advice from the FIRB the Treasurer may deny or place conditions on the approval of particular investments above that threshold on national interest grounds. In January 2021 new legislation, the Foreign Investment Reform (Protecting Australia’s National Security) Act 2020, took effect. This legislation tightened Australia’s investment screening rules by introducing the concept of a “national security business” and “national security land,” the acquisition of which trigger a FIRB review. Further details on national security considerations, including the definitions of national security businesses, are available on the FIRB website: https://firb.gov.au/guidance-resources/guidance-notes/gn8.

The Australian Government applies a “national interest” consideration in reviewing foreign investment applications. “National interest” covers a broader set of considerations than national security alone and may include tax or competition implications of an investment. Further information on foreign investment screening, including screening thresholds for certain sectors and countries, can be found at FIRB’s website: https://firb.gov.au/ . Under the AUSFTA agreement, all U.S. greenfield investments are exempt from FIRB screening.

The Australian Competition and Consumer Commission (ACCC) enforces the Competition and Consumer Act 2010 and a range of additional legislation, promotes competition, and fair trading, and regulates national infrastructure for the benefit of all Australians. The ACCC plays a key role in assessing mergers to determine whether they will lead to a substantial lessening of competition in any market. The ACCC also engages in consumer protection enforcement and has, in recent years, been given expanded responsibilities to monitor energy assets, the national gas market, and digital industries.

Private property can be expropriated for public purposes in accordance with Australia’s constitution and established principles of international law. Property owners are entitled to compensation based on “just terms” for expropriated property. There is little history of expropriation in Australia.

Bankruptcy is a legal status conferred under the Bankruptcy Act 1966 and operates in all of Australia’s states and territories. Only individuals can be made bankrupt, not businesses or companies. Where there is a partnership or person trading under a business name, it is the individual or individuals who make up that firm that are made bankrupt. Companies cannot become bankrupt under the Bankruptcy Act though similar provisions (called “administration and winding up”) exist under the Corporations Act 2001. Bankruptcy is not a criminal offense in Australia.

Creditor rights are established under the Bankruptcy Act 1966, the Corporations Act 2001, and the more recent Insolvency Law Reform Act 2016. The latter legislation commenced in two tranches over 2017 and aims to increase the efficiency of insolvency administrations, improve communications between parties, increase the corporate regulator’s oversight of the insolvency market, and “improve overall consumer confidence in the professionalism and competence of insolvency practitioners.” Under the combined legislation, creditors have the right to: request information during the administration process; give direction to a liquidator or trustee; appoint a liquidator to review the current appointee’s remuneration; and remove a liquidator and appoint a replacement.

The Australian parliament passed the Corporations Amendment (Corporation Insolvency Reforms) Act 2020 in December 2020. The legislation is a response to the economic impacts of the COVID-19 pandemic and is designed to both assist viable businesses remain solvent and simplify the liquidation process for insolvent businesses. The new insolvency process under this legislation came into effect in January 2021.

Australia ranks 20th globally on the World Bank’s Doing Business Report “resolving insolvency” measure.

The Commonwealth Government and state and territory governments provide a range of measures to assist investors with setting up and running a business and undertaking investment. Types of assistance available vary by location, industry, and the nature of the business activity. Austrade provides coordinated government assistance to attracting FDI and is intended to serve as the national point-of-contact for investment inquiries. State and territory governments similarly offer a suite of financial and non-financial incentives.

The Commonwealth Government also provides incentives for companies engaging in research and development (R&D) and delivers a tax offset for expenditure on eligible R&D activities undertaken during the year. R&D activities conducted overseas are also eligible under certain circumstances, and the program is jointly administered by government’s AusIndustry program and the Australian Taxation Office (ATO). The Australian Government typically does not offer guarantees on, or jointly finance projects with, foreign investors.

The Australian government announced a new USD 1.1 billion Modern Manufacturing Strategy in 2020 in response to the COVID-19 pandemic. The Strategy is primarily grants-based and provides funding to businesses to commercialize ideas and scale-up production in six target industries: resources technology and critical minerals processing; food and beverage; medical products; clean energy; defense; and space industry. Further details of the Strategy can be found on the Department of Industry, Science, Energy and Resources’ website:

https://www.industry.gov.au/data-and-publications/make-it-happen-the-australian-governments-modern-manufacturing-strategy/our-modern-manufacturing-strategy 

The Australian government provides a range of incentives for business investments in clean energy technologies, administered by the Clean Energy Regulator within the Department of Industry, Science, Energy and Resources and funded through the Emission Reduction Fund. Details on the Fund and how to apply are available on the Department’s website via the following link: https://www.industry.gov.au/policies-and-initiatives/emissions-reduction-fund . The government also encourages voluntary investment in emission reduction, including through certifying carbon reductions resulting from business investments as part of the Climate Active initiative: https://www.industry.gov.au/regulations-and-standards/climate-active.

Australia does not have any free trade zones or free ports.

As a general rule, foreign firms establishing themselves in Australia are not subject to local employment or forced localization requirements, performance requirements and incentives, including to senior management and board of directors. Proprietary companies must have at least one director resident in Australia, while public companies are required to have a minimum of two resident directors. See Section 12 below for further information on rules pertaining to the hiring of foreign labor.

Under the Telecommunications (Interception and Access) Amendment (Data Retention) Bill 2015, telecommunications service providers are required to: retain and secure, for two years, telecommunications data (not including content); protect retained data through encryption; and prevent unauthorized interference and access. The Bill limits the range of agencies allowed to access telecommunications data and stored communications, and establishes a “journalist information warrants regime.” Australia’s Personally Controlled Electronic Health Records Act prohibits the transfer of health data out of Australia in some situations.

Australia has a strong framework for the protection of intellectual property (IP), including software source code. Foreign providers are not required to provide source code to the government in exchange for operating in Australia. In February 2021, the Australian parliament passed the Treasury Laws Amendment (News Media and Digital Platforms Mandatory Bargaining Code) Bill 2021, which among other things requires designated digital platforms to notify media companies of significant changes to their algorithms with at least 14-days’ notice of such changes. However, technology companies are not required to provide source code for algorithms, or any other such IP, to the government for any purpose.

Companies are generally not restricted in terms of how they store or transmit data within their operations. The exception to this is the Personally Controlled Electronic Health Records Act (2012) which does require that certain personal health information is stored in Australia. The Privacy Act (1988) and associated legislation place restrictions on the communication of personal information between and within entities. The requirements placed on international companies, and the transmission of data outside of Australia, are not treated differently under this legislation. The Australian Attorney-General’s Department is the responsible agency for most legislation relating to data and storage requirements.

Strong legal frameworks protect property rights in Australia and operate to police corruption. Mortgages are commercially available, and foreigners are allowed to buy real property subject to certain registration and approval requirements. Property lending may be securitized, and Australia has one of the most highly developed securitization sectors in the world. Beyond the private sector property market, securitization products are being developed to assist local and state government financing. Australia has no legislation specifically relating to securitization, although issuers are governed by a range of other financial sector legislation and disclosure requirements.

Australia generally provides strong intellectual property rights (IPR) protection and enforcement through legislation that, among other things, criminalizes copyright piracy and trademark counterfeiting. Australia is not listed in USTR’s Special 301 report or on USTR’s Notorious Markets report.

Enforcement of counterfeit goods is overseen by the Australian Department of Home Affairs through the Notice of Objection Scheme, which allows the Australian Border Force to seize goods suspected of being counterfeit. Penalties for sale or importation of counterfeit goods include fines and up to five years imprisonment.

IP Australia is the responsible agency for administering Australia’s responsibilities and treaties under the World Intellectual Property Organization (WIPO). Australia is a member of a range of international treaties developed through WIPO. Australia does not have specific legislation relating to trade secrets, however common law governs information protected through such means as confidentiality agreements or other means of illegally obtaining confidential or proprietary information.

Australia was an active participant in the Anti-Counterfeiting Trade Agreement (ACTA) negotiations and signed ACTA in October 2011. It has not yet ratified the agreement. ACTA would establish an international framework to assist Parties in their efforts to effectively combat the infringement of intellectual property rights, in particular the proliferation of counterfeiting and piracy.

Under the AUSFTA, Australia must notify the holder of a pharmaceutical patent of a request for marketing approval by a third party for a product claimed by that patent. U.S. and Australian pharmaceutical companies have raised concerns that unnecessary delays in this notification process restrict their options for action against third parties that would infringe their patents if granted marketing approval by the Australian Therapeutic Goods Administration (TGA). In March 2020 the government recommended changes to the notification process whereby generic product owners must notify the patent holder of an intent to market a new product at the point they lodge an application for evaluation with the TGA. These changes have not been legislated at the time of writing.

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at: http://www.wipo.int/directory/en/ .

The Australian Government takes a favorable stance towards foreign portfolio investment with no restrictions on inward flows of debt or equity. Indeed, access to foreign capital markets is crucial to the Australian economy given its relatively small domestic savings. Australian capital markets are generally efficient and able to provide financing options to businesses. While the Australian equity market is one of the largest and most liquid in the world, non-financial firms face a number of barriers in accessing the corporate bond market. Large firms are more likely to use public equity, and smaller firms are more likely to use retained earnings and debt from banks and intermediaries. Australia’s corporate bond market is relatively small, driving many Australian companies to issue debt instruments in the U.S. market. Foreign investors are able to obtain credit from domestic institutions on market terms. Australia’s stock market is the Australian Securities Exchange (ASX).

Australia’s banking system is robust, highly evolved, and international in focus. Bank profitability is strong and has been supported by further improvements in asset performance. Total assets of Australian banks at the end of 2020 was USD4.2 trillion and the sector has delivered an annual average return on equity of around 10 percent (only falling to six percent in 2020 during the COVID-19 pandemic, before rebounding to 11 percent in 2021).

According to Australia’s central bank, the Reserve Bank of Australia (RBA), the ratio of non-performing assets to total loans was approximately one percent at the end of 2021, having remained at around that level for the last five years after falling from highs of nearly two percent following the Global Financial Crisis. The RBA is responsible for monitoring and reporting on the stability of the financial sector, while the Australian Prudential Regulatory Authority (APRA) monitors individual institutions. The RBA is also responsible for monitoring and regulating payments systems in Australia.

Further details on the size and performance of Australia’s banking sector are available on the websites of the Australian Prudential Regulatory Authority (APRA) and the RBA:
https://www.apra.gov.au/statistics 
https://www.rba.gov.au/chart-pack/banking-indicators.html 

Foreign banks are allowed to operate as a branch or a subsidiary in Australia. Australia has generally taken an open approach to allowing foreign companies to operate in the financial sector, largely to ensure sufficient competition in an otherwise small domestic market.

Australia’s main sovereign wealth fund, the Future Fund, is a financial asset investment fund owned by the Australian Government. The Fund’s objective is to enhance the ability of future Australian Governments to discharge unfunded superannuation (pension) liabilities. As a founding member of the International Forum of Sovereign Wealth Funds (IFSWF), the Future Fund’s structure, governance, and investment approach is in full alignment with the Generally Accepted Principles and Practices for Sovereign Wealth Funds (the “Santiago principles”).

The Future Fund’s investment mandate is to achieve a long-term return of at least inflation plus 4-5 percent per annum. As of December 2021, the Fund’s portfolio consists of: 23 percent global equities, 8 percent Australian equities, 25 percent private equity (including 8 percent in infrastructure and 7 percent in property), and the remaining 37 percent in debt, cash, and alternative investments.

In addition to the Future Fund, the Australian Government manages five other specific-purpose funds: the DisabilityCare Australia Fund; the Medical Research Future Fund; the Emergency Response Fund; the Future Drought Fund; and the Aboriginal and Torres Strait Islander Land and Sea Future Fund. In total, these five funds have assets of AUD 50 billion (USD 37 billion), while the main Future Fund has assets of AUD 204 billion (USD 150 billion) as of December 31, 2021.

Further details of these funds are available at: https://www.futurefund.gov.au/ 

In Australia, the term used for a Commonwealth Government State-Owned Enterprise (SOE) is “government business enterprise” (GBE). According to the Department of Finance, there are nine GBEs: two corporate Commonwealth entities and seven Commonwealth companies. (See: https://www.finance.gov.au/resource-management/governance/gbe/ ) Private enterprises are generally allowed to compete with public enterprises under the same terms and conditions with respect to markets, credit, and other business operations, such as licenses and supplies. Public enterprises are not generally accorded material advantages in Australia. Remaining GBEs do not exercise power in a manner that discriminates against or unfairly burdens foreign investors or foreign-owned enterprises.

Australia does not have a formal and explicit national privatization program. Individual state and territory governments may have their own privatization programs. Foreign investors are welcome to participate in any privatization programs subject to the rules and approvals governing foreign investment.

There is general business awareness and promotion of responsible business conduct (RBC) in Australia. The Commonwealth Government states that companies operating in Australia and Australian companies operating overseas are expected to act in accordance with the principles set out in the OECD Guidelines for Multinational Enterprises and to perform to the standards they suggest. In seeking to promote the OECD Guidelines, the Commonwealth Government maintains a National Contact Point (NCP), the current NCP being currently the General Manager of the Foreign Investment and Trade Policy Division at the Commonwealth Treasury, who is able to draw on expertise from other government agencies through an informal inter-governmental network. An NCP Web site links to the “OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas” noting that the objective is to help companies respect human rights and avoid contributing to conflict through their mineral sourcing practices. The Commonwealth Government’s export credit agency, EFA, also promotes the OECD Guidelines as the key set of recommendations on responsible business conduct addressed by governments to multinational enterprises operating in or from adhering countries.

Australian companies have very few instances of human rights or labor rights abuses and domestic law prohibits such actions. In 2018 the Australian parliament passed the Modern Slavery Act, new legislation requiring large companies to assess risks of modern slavery in their supply chains and take action to limit these risks.

Australia began implementing the principles of the Extractive Industries Transparency Initiative (EITI) in 2016.

Australia has ratified the Montreux Document on Private Military and Security Companies, and was a founding member of the International Code of Conduct for Private Security Service Providers Association.

The Australian government announced a net-zero emissions target for 2050 in October 2021. Since 2015, the government has not revised its interim target of a 26-28 percent reduction in emissions from 2005 levels by 2030, which its own projections indicate Australia is likely to exceed. The opposition Labor Party has a 2030 target of a 43 percent reduction relative to 2005 levels.

Australia’s climate policies are set out on a sector-by-sector basis and Australia does not have an economy-wide carbon tax or emissions trading scheme. Companies considered to be large emitters are subject to the Safeguard Mechanism, a regulatory requirement that places caps on the emissions intensity of a company’s output. Companies may face penalties for exceeding their regulated emissions intensity level. Further details of the Safeguard Mechanism, along with the government’s other emissions reductions policies, are available on the Department of Industry, Science, Energy and Resources website at: https://www.industry.gov.au/policies-and-initiatives/australias-climate-change-strategies 

The Australian government has a strong emphasis on investing in clean energy technologies and has set out its technology priorities in its Technology Investment Roadmap. The Roadmap incentivizes research, investment and deployment of emissions reducing equipment through the Australian Renewable Energy Agency, which invests in new technologies in the early stage of development, and the Emissions Reduction Fund which provides funding to companies with eligible projects. Details on these programs are available through the link above.

Australia has a strong focus on emission reduction through improved land use management and has supported initiatives aimed at better measuring soil carbon. The Department of Agriculture, Water, and the Environment has also implemented an Agriculture Biodiversity Stewardship Package. This program allows farmers to receive payments not only for carbon abatement, but also now for delivering improvements in biodiversity on-farm.  The package also aims to create a trading platform to help farmers connect with buyers and kick-start private sector biodiversity markets.

Although Australia has a range of policies to achieve its emission reduction targets, it typically ranks low on various measure of climate and environmental sustainability. The MIT Green Future Index ranks Australia 36th out of 76 countries and 49th on the carbon emissions sub-index.

Department of State

• Country Reports on Human Rights Practices;
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities;
• U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises; and;
• Xinjiang Supply Chain Business Advisory 

Department of the Treasury

• OFAC Recent Actions

Department of Labor

• Findings on the Worst Forms of Child Labor Report;
• List of Goods Produced by Child Labor or Forced Labor;
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World and;
• Comply Chain.

Australia maintains a comprehensive system of laws and regulations designed to counter corruption. In addition, the government procurement system is generally transparent and well regulated. Corruption has not been a factor cited by U.S. businesses as a disincentive to investing in Australia, nor to exporting goods and services to Australia. Non-governmental organizations interested in monitoring the global development or anti-corruption measures, including Transparency International, operate freely in Australia, and Australia is perceived internationally as having low corruption levels.

Australia is an active participant in international efforts to end the bribery of foreign officials. Legislation exists to give effect to the anti-bribery convention stemming from the OECD 1996 Ministerial Commitment to Criminalize Transnational Bribery. Legislation explicitly disallows tax deductions for bribes of foreign officials. At the Commonwealth level, enforcement of anti-corruption laws and regulations is the responsibility of the Attorney General’s Department.

The Attorney-General’s Department plays an active role in combating corruption through developing domestic policy on anti-corruption and engagement in a range of international anti-corruption forums. These include the G20 Anti-Corruption Working Group, APEC Anti-Corruption and Transparency Working Group, and the United Nations Convention against Corruption Working Groups. Australia is a member of the OECD Working Group on Bribery and a party to the key international conventions concerned with combating foreign bribery, including the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (Anti-Bribery Convention).

The legislation covering bribery of foreign officials is the Criminal Code Act 1995. Under Australian law, it is an offense to bribe a foreign public official, even if a bribe may be seen to be customary, necessary, or required. The maximum penalty for an individual is 10 years imprisonment and/or a fine of AUD 2. million (approximately USD 1.6 million). For a corporate entity, the maximum penalty is the greatest of: 1) AUD 22.2 million (approximately USD 16.4 million); 2) three times the value of the benefits obtained; or 3) 10 percent of the previous 12-month turnover of the company concerned.

A number of national and state-level agencies exist to combat corruption of public officials and ensure transparency and probity in government systems. The Australian Commission for Law Enforcement Integrity (ACLEI) has the mandate to prevent, detect, and investigate serious and systemic corruption issues in the Australian Crime Commission, the Australian Customs and Border Protection Service, the Australian Federal Police, the Australian Transaction Reports and Analysis Center, the CrimTrac Agency, and prescribed aspects of the Department of Agriculture.

Various independent commissions exist at the state level to investigate instances of corruption. Details of these bodies are provided below.

UN Anticorruption Convention, OECD Convention on Combatting Bribery

Australia has signed and ratified the United Nations Convention against Corruption and is a signatory to the OECD Anti-Bribery Convention.

Resources to Report Corruption

Western Australia – Corruption and Crime Commission
86 St Georges Terrace
Perth, Western Australia
Tel. +61 8 9215 4888
https://www.ccc.wa.gov.au/ 

Queensland – Corruption and Crime Commission
Level 2, North Tower Green Square
515 St Pauls Terrace
Fortitude Valley, Queensland
Tel. +61 7 3360 6060
https://www.ccc.qld.gov.au/ 

Victoria – Independent Broad-based Anti-corruption Commission
Level 1, North Tower, 459 Collins Street
Melbourne, Victoria
Tel. +61 1300 735 135
https://ibac.vic.gov.au 

New South Wales – Independent Commission against Corruption
Level 7, 255 Elizabeth Street
Sydney NSW 2000
Tel. +61 2 8281 5999
https://www.icac.nsw.gov.au/ 

South Australia – Independent Commission against Corruption
Level 1, 55 Currie Street
Adelaide, South Australia
Tel. +61 8 8463 5173
https://icac.sa.gov.au 

Political protests (including rallies, demonstrations, marches, public conflicts between competing interests) form an integral, though generally minor, part of Australian cultural life. Such protests rarely degenerate into violence.

Australia’s unemployment rate peaked at 7.5 percent during the COVID-19 pandemic but had fallen to 4 percent by early 2022. Average weekly earnings for full-time workers in Australia were AUD 1,748 (approximately USD 1,290) as of November 2021. The minimum wage is set annually and is significantly higher than that of the United States, currently sitting at AUD 2033 (USD 15.00). Overall wage growth has been low in recent years, growing at approximately the rate of inflation.

The Australian Government and its state and territory counterparts are active in assessing and forecasting labor skills gaps across industries. Tertiary education is subsidized by both levels of governments, and these subsidies are based in part on an assessment of the skills needed by industry. These assessments also inform immigration policy through the various working visas and associated skilled occupation lists. Occupations on these lists are updated annually based on assessment of the skills most needed by industry.

Immigration has always been an important source for skilled labor in Australia. The Department of Home Affairs publishes an annual list of occupations with skill shortages to be used by potential applicants seeking to work in Australia. The visas available to applicants, and length of stay allowed for, differ by occupation. The main working visa is the Temporary Skills Shortage visa (subclass 482). Applicants must have a nominated occupation when they apply which is applicable to their circumstances, and applications are subject to local labor market testing rules. These rules preference the hiring of Australian labor over foreign workers so long as local workers can be found to fill the advertised job.

Most Australian workplaces are governed by a system created by the Fair Work Act 2009. Enterprise bargaining takes place through collective agreements made at an enterprise level covering terms and conditions of employment. Such agreements are widely used in Australia. A Fair Work Ombudsman assists employees, employers, contractors, and the community to understand and comply with the system. The Fair Work Act 2009 establishes a set of clear rules and obligations about how this process is to occur, including rules about bargaining, the content of enterprise agreements, and how an agreement is made and approved. Unfair dismissal laws also exist to protect workers who have been unfairly fired from a job. Australia is a founding member of the International Labour Organization (ILO) and has ratified 58 of the ILO’s conventions.

Chapter 18 of the AUSFTA agreement deals with labor market issues. The chapter sets out the responsibilities of each party, including the commitment of each country to uphold its obligations as a member of the ILO and the associated ILO Declaration on Fundamental Principles and Rights at Work and its Follow-up (1998).

* Source for Host Country Data: Australian Bureau of Statistics

Economic Counselor Doug Sonnek
U.S. Embassy Canberra
21 Moonah Place, Yarralumla, ACT+61 2 6214 5759
SonnekDE@state.gov 

The Austrian government welcomes foreign direct investment, particularly when such investments have the potential to create new jobs, support advanced technology fields, promote capital-intensive industries, and enhance links to research and development.

There are limited restrictions on foreign investment. American investors have not complained of discriminatory laws against foreign investors. Austria’s investment screening law, which requires government approval of transactions leading to 10 percent or more foreign ownership in sensitive sectors, has resulted in an increase in the number of investments screened, from less than three per year, to 50 completed screenings from July 2020 to July 2021, the first full year law has been in effect. The majority of these screenings (31 in total) were for U.S.-based investments. Please see the “Laws and Regulations on Foreign Investment” section below for further details on the law and its applications.

The corporate tax rate, a 25 percent flat tax, is above the EU average. The government is planning to reduce it to 24 percent in 2023 and 23 percent in 2024. U.S. citizens and investors have occasionally reported that it is difficult to establish and maintain banking services since the U.S.-Austria Foreign Account Tax Compliance Act (FATCA) Agreement went into force in 2014, as some Austrian banks have been reluctant to take on this reporting burden.

Potential investors should also be aware of Austria’s lengthy environmental impact assessments in their investment decision-making. Some sectors also suffer from heavy regulation that may affect certain investments. For example, the requirement that over 50 percent of energy providers must be publicly owned places a potential cap on investments in the energy sector. Strict liability and co-existence regulations in the agriculture sector restrict research and virtually outlaw the cultivation, marketing, or distribution of biotechnology crops. The mining and transportation sectors are also heavily regulated.

Austria’s national investment promotion organization, the Austrian Business Agency (ABA), is a useful first point of contact for foreign companies interested in establishing operations in Austria. It provides comprehensive information about Austria as a business location, identifies suitable sites for greenfield investments, and consults in setting up a company. ABA provides its services free of charge.

The Austrian Economic Chamber (WKO) and the American Chamber of Commerce in Austria (Amcham) are also good resources for foreign investors. Both conduct annual polls of their members to measure their satisfaction with the business climate, thus providing early warning to the government of problems identified by investors.

There is no principal limitation on establishing and owning a business in Austria. A local managing director must be appointed to any newly established enterprise. For non-EU citizens to establish and own a business, the Austrian Foreigner’s Law mandates a residence permit that includes the right to run a business. Many Austrian trades are regulated, and the right to run a business in regulated trade sectors is only granted when certain preconditions are met, such as certificates of competence, and recognition of foreign education.

There are limited restrictions on foreign ownership of private businesses. Austria’s investment screening law, requires an investment screening process to review potential foreign acquisitions of 25 percent or more of a company essential to the country’s infrastructure, lowering the threshold to 10 percent for sensitive sectors (see the “Laws and Regulations on Foreign Investment” section below for further details). In April 2019, the EU Regulation on establishing a framework for the screening of foreign direct investments into the Union entered into force. It creates a cooperation mechanism through which EU countries and the European Commission will exchange information and raise concerns related to specific investments which could potentially threaten the security of EU countries.

The American Chamber of Commerce (AmCham) commented on Austria’s strengthened investment screening law following implementation in 2020, that the two-month screening process takes too long and places an undue administrative burden on companies. The AmCham advocated for expedited screenings for proposed investments with no clear threat to national security. Business interest groups, such as the Austrian Economic Chamber and the Federation of Austrian Industries also commented during the legislation’s draft and review process that the strengthened screening measures would impose an undue administrative burden on businesses, the definition of sectors requiring screening was too wide, and the updated legislation would reduce the attractiveness of Austria as an investment location.

Austria generally ranked in the top 30 countries in the world in the past World Bank “Ease of Doing Business” reports, but starting a business takes time. The average time to set up a company is 21 days, while the average time in OECD high income countries is 9.2 days.

To register a new company or open a subsidiary in Austria, a company must first be listed on the Austrian Companies Register at a local court. The next step is to seek confirmation of registration from the Austrian Economic Chamber (WKO) establishing that the company is really a new business. The investor must then notarize the “declaration of establishment,” deposit a minimum capital requirement with an Austrian bank, register with the tax office, register with the district trade authority, register employees for social security, and register with the municipality where the business will be located. Finally, membership in the WKO is mandatory for all businesses in Austria.

For sole proprietorships, it is possible under certain conditions to use an online registration process via government websites in German to either found or register a company: https://www.usp.gv.at/Portal.Node/usp/public/content/gruendung/egruendung/269403.html, or www.gisa.gv.at/online-gewerbeanmeldung. It is advisable to seek information from ABA or the WKO before applying to register a firm.

The website of the ABA contains further details and contact information and is intended to serve as a first point of contact for foreign investors in Austria: https://investinaustria.at/en/starting-business/.

The Austrian government encourages outward investment. Advantage Austria, the “Austrian Foreign Trade Service,” is a special section of the WKO that promotes Austrian exports and also supports Austrian companies establishing an overseas presence. Advantage Austria operates five offices in the United States (Washington D.C., New York, Atlanta, Los Angeles, and San Francisco). Overall, it has about 100 trade offices in 70 countries across the world, reflecting Austria’s strong export focus and the important role the WKO plays. (https://www.wko.at/service/aussenwirtschaft/aussenwirtschaftscenter.html#heading_aussenwirtschaftscenter) The Ministry for Digital and Economic Affairs and the WKO run a joint program called “Go International,” providing services to Austrian companies that are considering investing for the first time in foreign countries. The program provides grants for market access costs and provides “soft subsidies,” such as counseling, legal advice, and marketing support.

Austria’s legal, regulatory, and accounting systems are transparent and consistent with international norms. The government does not provide assistance in distinguishing between high- and low-quality investments, leaving this up to the market.

Federal ministries generally publish draft laws and regulations, including investment laws, for public comment prior to their adoption by Austria’s cabinet and/or Parliament. Relevant stakeholders such as the “Social Partners” (Economic Chamber, Agricultural Chamber, Labor Chamber, and Trade Union Association), the Federation of Industries, and research institutions are invited to provide comments and suggestions on draft laws and regulations, directly online, which may be taken into account before adoption of laws. These comments are publicly available. Austria’s nine provinces can also adopt laws relevant to investments; their review processes are generally less extensive, but local laws are less important for investments than federal laws. The judicial system is independent from the executive branch, helping ensure the government follows administrative processes. The government is required to follow administrative processes and its compliance is monitored by the courts, primarily the Court of Auditors. Individuals can file proceedings against the government in Austria’s courts, if the government did not act in accordance with the law. Similarly, the public prosecution service can file cases against the government.

Draft legislation by ministries (“Ministerialentwürfe”) and resulting government draft laws and parliamentary initiatives (“Regierungsvorlagen und Gesetzesinitiativen”) can be accessed through the website of the Austrian Parliament: https://www.parlament.gv.at/PAKT/ (all in German). The parliament also publishes a history of all law-making processes. All final Austrian laws can be accessed through a government database, partly in English: https://www.ris.bka.gv.at/defaultEn.aspx.

The effectiveness of regulations is not reviewed as a regular process, only on an as-needed basis. Austrian regulations governing accounting provide U.S. investors with internationally standardized financial information. In line with EU regulations, listed companies must prepare their consolidated financial statements according to the International Financial Reporting Standards (IAS/IFRS) system.

Public finances are transparent and easily accessible, through the Finance Ministry’s website, Austria’s Central Bank, and various economic research institutes. Overall, Austria has no legal restrictions, formally or informally, that discriminate against foreign investors.

Austria is a member of the EU. As such, its laws must comply with EU legislation and the country is therefore subject to European Court of Justice (ECJ) jurisdiction. Austria is a member of the WTO and largely follows WTO requirements. Austria has ratified the Trade Facilitation Agreement (TFA) but has not taken specific actions to implement it.

The Austrian legal system is based on Roman law. The constitution establishes a hierarchy, according to which each legislative act (law, regulation, decision, and fines) must have its legal basis in a higher legislative instrument. The full text of each legislative act is available online for reference. All final Austrian laws can be accessed through a government database, partly in English: https://www.ris.bka.gv.at/defaultEn.aspx.

Commercial matters fall within the competence of ordinary regional courts except in Vienna, which has a specialized Commercial Court. The Commercial Court also has nationwide competence for trademark, design, model, and patent matters. There is no special treatment of foreign investors, and the executive branch does not interfere in judicial matters.

The legal system provides an effective means for protecting property and contractual rights of nationals and foreigners. Sensitive cases must be reported to the Ministry of Justice, which can issue instructions for addressing them. Austria’s civil courts enforce property and contractual rights and do not discriminate against foreign investors. Austria allows for court decisions to be appealed, first to a Regional Court and in the last instance, to the Supreme Court.

Austria has restrictions on investments in industries designated as critical infrastructure, technology, resources, and industries with access to sensitive information and involved in freedom and plurality of the media. The government must approve any foreign acquisition of a 25 percent or higher stake in any companies that generally fall within these areas. The threshold is 10 percent for sensitive sectors, defined as military goods and technology, operators of critical energy or digital infrastructure and water, system operators charged with guarding Austria’s data sovereignty and R&D in medicine and pharmaceutical products. Additional screenings are required when an investor in the above categories plans to increase the stake above the thresholds of 25 percent or 50 percent. The investment screening review period generally takes 2 months. The number of filed applications has increased significantly since the law was implemented, from three per year to 50 completed screenings in the first 12 months after the updated investment screening law went into effect (from July 2020 to July 2021). None of the completed screenings were rejected, and two were approved with amendments to safeguard domestic supply of the product/service in question.

There is no discrimination against foreign investors, but businesses are required to follow numerous local regulations. Although there is no requirement for participation by Austrian citizens in ownership or management of a foreign firm, at least one manager must meet Austrian residency and other legal requirements. Expatriates may deduct certain expenses (costs associated with moving, maintaining a double residence, education of children) from Austrian-earned income.

The “Law to Support Investments in Municipalities” (published in the Federal Law Gazette, 74/2017, available online in German only on the federal legal information system www.ris.bka.gv.at), allows federal funding of up to 25 percent of the total investment amount of a project to “modernize” a municipality. The Austrian Business Agency serves as a central contact point for companies looking to invest in Austria. It does not serve as a one-stop-shop but can help answer any questions potential investors may have (https://investinaustria.at/en/).

Austria’s Antitrust Act (ATA) is in line with European Union antitrust regulations, which take precedence over national regulations in cases concerning Austria and other EU member states. The Austrian Antitrust Act prohibits cartels, anticompetitive practices, and the abuse of a dominant market position. The independent Federal Competition Authority (FCA) and the Federal Antitrust Prosecutor (FAP) are responsible for administering antitrust laws. The FCA can conduct investigations and request information from firms. The FAP is subject to instructions issued by the Justice Ministry and can bring actions before Austria’s Cartel Court. Additionally, the Commission on Competition may issue expert opinions on competition policy and give recommendations on notified mergers. The most recent amendment to the ATA was in 2017. This amendment facilitated enforcing private damage claims, strengthened merger control, and enabled appeals against verdicts from the Cartel Court.

Companies must inform the FCA of mergers and acquisitions (M&A). Special M&A regulations apply to media enterprises, such as a lower threshold above which the ATA applies, and the requirement that media diversity must be maintained. A cartel court is competent to rule on referrals from the FCA or the FCP. For violations of antitrust regulations, the cartel court can impose fines of up to the equivalent of 10 percent of a company’s annual worldwide sales. The independent energy regulator E-Control separately examines antitrust concerns in the energy sector but must also submit cases to the cartel court.

Austria’s Takeover Law applies to friendly and hostile takeovers of corporations headquartered in Austria and listed on the Vienna Stock Exchange. The law protects investors against unfair practices, since any shareholder obtaining a controlling stake in a corporation (30 percent or more in direct or indirect control of a company’s voting shares) must offer to buy out smaller shareholders at a defined fair market price. The law also includes provisions for shareholders who passively obtain a controlling stake in a company. The law prohibits defensive action to frustrate bids. The Shareholder Exclusion Act allows a primary shareholder with at least 90 percent of capital stock to force out minority shareholders. An independent takeover commission at the Vienna Stock Exchange oversees compliance with these laws. Austrian courts have also held that shareholders owe a duty of loyalty to each other and must consider the interests of fellow shareholders in good faith.

According to the European Convention on Human Rights and the Austrian Civil Code, property ownership is guaranteed in Austria. Expropriation of private property in Austria is rare and may be undertaken by federal or provincial government authorities only based on special legal authorization “in the public interest” in such instances as land use planning, and infrastructure project preparations. The government can initiate such a procedure only in the absence of any other alternatives for satisfying the public interest; when the action is exclusively in the public interest; and when the owner receives just compensation. For example, in 2017-18, the government expropriated Hitler’s birth house in order to prevent it from becoming a place of pilgrimage for neo-Nazis, paying the former owner EUR 1.5 million (USD 1.8 million) in compensation. The expropriation process is non-discriminatory toward foreigners, including U.S. firms. There is no indication that further expropriations will take place in the foreseeable future.

The Austrian Insolvency Act contains provisions for business reorganization and bankruptcy proceedings. Reorganization requires a restructuring plan and the debtor to be able to cover costs or advance some of the costs up to a maximum of EUR 4,000 (USD 4,720). The plan must offer creditors at least 20 percent of what is owed, payable within two years of the date the debtor’s obligation is determined. The plan must be approved by a majority of all creditors and a majority of creditors holding at least 50 percent of all claims.

If the restructuring plan is not accepted, a bankruptcy proceeding is begun. Bankruptcy proceedings take place in court upon application of the debtor or a creditor; the court appoints a receiver for winding down the business and distributing proceeds to the creditors. Bankruptcy is not criminalized, provided the affected person performed all his documentation and reporting obligations on time and in accordance with the law.

Austria’s major commercial association for the protection of creditors in cases of bankruptcy is the “KSV 1870 Group”, www.ksv.at, which also carries out credit assessments of all companies located in Austria. Other European-wide credit bureaus, particularly “CRIF” and “Bisnode”, also monitor the Austrian market.

Financial incentives and business subsidies provided by Austrian federal, state, and local governments to promote investments are equally available to domestic and foreign investors and include tax incentives, preferential loans, loan guarantees, and grants. Most incentives are targeted to investments that meet specified criteria, including job-creation and promotion of education, use of cutting-edge technology, improving regional infrastructure, strengthening SMEs, promoting research and development, supporting environmental protection, increasing renewable energy production, and promoting startups. Under these conditions, the EU ban on state aid would not apply.

Austria’s Wirtschaftsservice (AWS) is the governmental institution that provides most federal government financial incentives for businesses. Information on targeted investment incentives is available at https://www.aws.at/en/. More detailed information on investment incentives and promotion in English language is also available on the ABA website (see chapter 1) at http://investinaustria.at/en/.

The AWS also focuses on promoting investments, particularly for small and medium-sized companies (SMEs), providing guarantees of up to EUR 25 million (USD 29.5 million) over 5 to 10 years for investments in Austria. Companies can also profit from growing their already existing investments, resulting in a 10 to 15 percent additional grant for this expansion.

Various government agencies in Austria offer incentives for research and development (R&D) activities, including grants of up to 14 percent of investors’ total research expenditures. The incentives are also available for foreign-owned enterprises. The agencies providing incentives include: The Austrian Research Promotion Agency (FFG) (https://www.ffg.at/en); the Austrian Science Fund (FWF), which is the country’s central body for the promotion of basic research (https://www.fwf.ac.at/en/); and AWS (above).

Austria’s 2022 tax reform, as of January 2023, foresees a new 10-15 percent (eco-) investment tax allowance for purchasing new commodities or business assets that have a life span of at least four years and/or have an ecological impact on the business of the company (which the government will further define by ordinance before this aspect of the tax reform enters into force).

In 2022, Austria plans to fund investments in the life sciences sector with up to EUR 29 million (USD 34 million), particularly for production of pharmaceuticals such as penicillin.

A law to expand the production of renewable energy provides for investment subsidies and subsidies to sell renewable energy on the market for investors installing new wind, solar, biomass, and hydropower plants, which entered into force in February 2022. The subsidies are subject to installed capacities and environmental conditions.

Not applicable

If investors want to employ foreign workers from outside the EU in Austria, they need to apply for a work permit with the immigration authority in one of the Austrian provinces. The Austrian Labor Service (AMS) then certifies whether there is no comparable person in the pool of registered unemployed persons in Austria, which is a prerequisite for employing non-EU workers. This does not apply to senior management positions, researchers, highly qualified personnel, and a limited set of other categories.

Austria offers several non-immigrant business visa classifications, including intra-company transfers/rotational workers, and employees on temporary duty. Recruitment of long-term, overseas specialists or those with managerial duties is governed by a points-based immigration scheme to attract skilled workers and specialists in individual sectors (points are available for qualification, education, age, and language skills). This Red-White-Red card (RWR) model allows firms to react flexibly to rising demand for talent in different occupations. It is available to highly qualified individuals, qualified specialists/craftsmen in certain understaffed professions (qualified labor and registered nurse jobs), and key personnel/professionals. Applicants must have an offer of employment to apply for the RWR. Highly qualified individuals holding U.S. citizenship may apply locally in Austria or opt to find a potential employer from abroad and have the company apply in Austria on their behalf.

Austrian immigration law requires those applying for residency permits in some categories to take German language courses and exams. There is a specific visa category under the RWR model for independent key specialists and founders of start-up enterprises to support Austria’s push to expand its innovation economy.

A less bureaucratic alternative is the EU Blue Card, which entitles applicants to a fixed-term residency of 24 months, and employment is tied to a specific employer. However, there is a threshold of a gross annual income of at least one and a half times the average gross annual income for full-time employees (in 2021: at least EUR 66,563 (USD 78,544); annual salary plus special payments).

While there is no requirement for foreign IT providers to turn over source code and/or provide access to encryption, EU and Austrian data protection stipulations apply. The EU General Data Protection Regulation (GDPR) as adopted by Austria in 2018, places restrictions on companies’ ability to store and use customer data. It also requires specific user consent for companies to send out promotional materials (previously, implied consent was sufficient). Transmission of customer or business-related data is therefore subject to EU GDPR regulations. Austria’s Data Protection Authority is in charge of enforcing all GDPR-related matters, which include GDPR rules on data storage.

In January 2022, the Austrian Data Protection Authority ruled that the website netdoktor.at violated EU GDPR rules for its use of Google Analytics. The Data Protection Authority found that using Google Analytics violated the GDPR in two key ways: 1) the transfer of personalized data to third countries that do not have stricter than or equal data protection rights as the EU is not allowed under the EU GDPR; and 2) users do not have the opportunity to willfully consent to the transfer. The data privacy organization noyb, which brought the case forward, filed over 100 similar cases across the EU. Similar rulings across EU countries are expected to follow over the course of the year.

The Austrian government may impose performance requirements when foreign investors seek financial or other assistance from the government, although there are no performance requirements to apply for tax incentives. There is no requirement that Austrian nationals hold shares in foreign investments or for technology transfer, and no requirement for foreign investors to use domestic content in the production of goods or technology.

The Austrian legal system protects secured interests in property. For any real estate agreement to be effective, owners must register with the land registry. Mortgages and liens must also be registered. As a rule, property for sale must be unencumbered. In case of rededication of land, approval of the land transfer commission or the office of the state governor is required. The land registry is a reliable system for recording interests in property, and access to the registry is public.

Non-EU/EEA citizens need authorization from administrative authorities of the respective Austrian province to acquire land. Provincial regulations vary, but in general there must be a public (economic, social, cultural) interest for the acquisition to be authorized. Often, the applicant must guarantee that he does not want to build a vacation home on the land in order to receive the required authorization.

Austria has a strong legal structure to protect intellectual property rights, including patent and trademark laws, a law protecting industrial designs and models, and a copyright law. Austria is a party to the World Intellectual Property Organization (WIPO), the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), and several international property conventions. Austria also participates in the Patent Prosecution Highway (PPH) program with the USPTO (started in 2014), which allows filing of streamlined applications for inventions determined to be patentable in other participating countries.

Austria’s Copyright Act conforms to EU directives on intellectual property rights. It grants authors exclusive rights to publish, distribute, copy, adapt, translate, and broadcast their work. The law also regulates copyrights of digital media (restrictions on private copies), works on the Internet, protection of computer programs, and related damage compensation. Infringement proceedings, however, can be time-consuming and costly. Austria implemented the EU Directive on Copyright in the Digital Single Market (2019/790) by adopting an amendment to the Austrian Copyright Act in December 2021, with the Austrian music and film industry lauding it as “modern, balanced, and taking into account the interests of the related business sector.”

Following a High Court decision from 2014, Austrian Internet providers must prevent access to illegal music and streaming platforms once they are made aware of a copyright violation. They must also block workaround websites from these platforms. In 2020 they registered 27,000 reports of illegal content.

Austria also has a law against trade in counterfeit articles in place (amended 2020, streamlining the customs authorities in charge of tracking violations). In 2020 (latest available report), Austrian customs authorities confiscated pirated goods worth EUR 24 million (USD 28.3 million), which was a 50 percent increase from the previous year.

Austria is not listed in USTR’s Special 301 or notorious markets reports, but its trade secrets regime has historically been a concern for some U.S. businesses. Austrian and U.S. companies have voiced specific concerns about both the scope of protection and the difficulty of adjudicating breaches. Following years of steady U.S. government advocacy, and because Austria was required to implement the 2016 EU Directive on Trade Secrets, the country improved its trade secrets regime in the Law Against Unfair Competition (entered into force in February 2019) to address these concerns. The most relevant change in the law is a requirement for safeguarding the confidentiality of trade secrets (and other business confidential information) in court procedures. The new law also defines injunctive relief and claims for damages in case of breach of trade secrets. The 2020 government program includes a plan to further toughen prosecution of violation of trade secrets that have an impact on Austria as a business location and to tackle industrial espionage, but no specific actions to implement the plan have been taken yet.

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/.

Austria has sophisticated financial markets that allow foreign investors access without restrictions. The government welcomes foreign portfolio investment. The Austrian National Bank (OeNB) regulates portfolio investments effectively.

Austria has a national stock exchange that currently includes 64 companies on its regulated market and several others on its multilateral trading facility (MTF). The Austrian Traded Index (ATX) is a price index consisting of the 20 largest stocks on the market and forms the most important index of Austria’s stock market. The size of the companies listed on the ATX is roughly equivalent to those listed on the MDAX in Germany. The market capitalization of Austrian listed companies is small compared to the country’s western European counterparts, accounting for 31 percent of Austria’s GDP, compared to 59 percent in Germany or 194 percent in the United States.

Unlike the other market segments in the stock exchange, the Direct Market and Direct Market Plus segments, targeted at SMEs and young, developing companies, are subject only to the Vienna Stock Exchange’s general terms of business, not more stringent EU regulations. These segments have lower reporting requirements but also greater risk for investors, as prices are more likely to fluctuate, due to the respective companies’ low level of market capitalization and lower trading volumes.

Austria has robust financing for product markets, but the free flow of resources into factor markets (capital, raw materials) could be improved. Overall, financing is primarily available through banks and government-sponsored funding organizations with very little private venture capital available. The Austrian government is aware of this issue but has taken few tangible steps to improve the availability of private venture capital.

Austria is fully compliant with IMF Article VIII, all financial instruments are available, and there are no restrictions on payments. Credit is available to foreign investors at market-determined rates.

Austria has one of the most fragmented banking networks in Europe with more than 3,800 branch offices registered in 2021. The banking system is highly developed, with worldwide correspondent banks and representative offices and branches in the United States and other major financial centers. Large Austrian banks also have extensive networks in Central and Southeast European (CESEE) countries and the countries of the former Soviet Union. Total assets of the banking sector amounted to EUR 1.0 trillion (USD 1.2 trillion) in 2020 (approximately 2.5 times the country’s GDP). Approximately EUR 460 billion (USD 543 billion) of banking sector assets are held by Austria’s two largest banks, Erste Group and Raiffeisen Bank International (RBI). The Austrian banking sector is considered one of the most stable in the world. Austria’s banking sector is managed and overseen by the Austrian National Bank (OeNB) and the Financial Market Authority (FMA). Four Austrian banks with assets in excess of EUR 30 billion (USD 34 billion) are subject to the Eurozone’s Single Supervisory Mechanism (SSM), as is Sberbank Europe AG, a Russian bank subsidiary headquartered in Austria (which was declared insolvent in March 2022, and its operations are now being wound down in a bankruptcy proceeding), and Addiko Bank AG due to their significant cross-border assets, as well as Volksbank Wien AG, due to its importance for the economy. All other Austrian banks continue to be subject to the country’s dual-oversight banking supervisory system with roles for the OeNB and the FMA, both of which are also responsible for policing irregularities on the stock exchange and for supervising insurance companies, securities markets, and pension funds. Foreign banks are allowed to establish operations in the country with no legal restrictions that place them at a disadvantage compared to local banks.

Due to U.S. government financial reporting requirements, Austrian banks are very cautious in committing the time and expense required to accept U.S. clients and U.S. investors without established U.S. corporate headquarters.

Austria has no sovereign wealth funds.

Austria has two major wholly state-owned enterprises (SOEs): The OeBB (Austrian Federal Railways) and Asfinag (highway financing, building, maintenance, and administration). Other government industry holding companies are bundled in the government holding company OeBAG (http://www.oebag.gv.at)

The government has direct representation in the supervisory boards of its companies (commensurate with its ownership stake), and OeBAG has the authority to buy and sell company shares, as well as purchase minority stakes in strategically relevant companies. Such purchases are subject to approval from an audit committee consisting of government-nominated independent economic experts.

OeBAG holds a 53 percent stake in the Post Office, 51 percent in energy company Verbund, 33 percent in the gambling group Casinos Austria, 31.5 percent in the energy company OMV, 28 percent in the Telekom Austria Group, as well as a handful of smaller ventures. Local governments own most utilities, the Vienna International Airport, and more than half of Austria’s 270 hospitals and clinics.

Private enterprises in Austria can generally compete with public enterprises under the same terms and conditions with respect to market access, credit, and other such business operations as licenses and supplies. While most SOEs must finance themselves under terms similar to private enterprises, some large SOEs (such as OeBB) benefit from state-subsidized pension systems. As a member of the EU, Austria is also a party to the Government Procurement Agreement (GPA) of the WTO, which indirectly also covers the SOEs (since they are entities monitored by the Austrian Court of Auditors).

The five major OeBAG-controlled companies (Postal Service, Verbund AG, Casinos Austria, OMV, Telekom Austria), are listed on the Vienna Stock Exchange. Senior managers in these companies do not directly report to a minister, but to an oversight board. However, the government often appoints management and board members, who usually have strong political affiliations.

The government has not privatized any public enterprises since 2007. Austrian public opinion is skeptical regarding further privatization, and there are no indications of any government privatizations on the horizon. In prior privatizations, foreign and domestic investors received equal treatment. Despite a historical government preference for maintaining blocking minority rights for domestic shareholders, foreign investors have successfully gained full control of enterprises in several strategic sectors of the Austrian economy, including in telecommunications, banking, steel, and infrastructure.

Austrian Responsible Business Conduct (RBC)/Corporate Social Responsibility (CSR) standards are laid out in the Austrian Corporate Governance Codex, which is based on the EU Commission’s 2011 “Strategy for Corporate Social Responsibility.” The Austrian Standards Institute’s ONR 192500 acts as the main guidance for CSR and is based on the EU Commission’s published Strategy, which is also compliant with UN guidelines. Major Austrian companies follow generally accepted CSR principles and publish a CSR chapter in their annual reports; many also provide information on their health, safety, security, and environmental activities.

Austria adheres to the OECD’s Guidelines for Multinational Enterprises. The Ministry for Labor, Social Affairs, Health, and Consumer Protection is represented in national and international CSR-relevant associations and supports CSR initiatives while working closely together with the Austrian Standards Institute.

The Austrian export credit agency promotes information on CSR issues, principles and standards, including the OECD Guidelines, on its website.

https://www.oekb.at/en/oekb-group/our-claim/corporate-governance.html 

Austria is a signatory to the Montreaux Document on Private Military and Security Companies, which it ratified in 2008.

Austria has a National Climate and Energy Plan in place. It was last updated in 2019, and the government is currently preparing an update that it should have reported to the European Commission by end of 2020, according to the EU Climate and Energy Package, but it has not done so yet. The government, in its 2020 program, set the goal that Austria must be climate-neutral by 2040. According to the EU goals as outlined in the “Green Deal,” Austria is aiming to reduce greenhouse gas emissions by 48 percent by 2030.

To implement the climate goals, Austria introduced a law to expand production and supply of renewable energies (photovoltaics, wind, hydropower, biomass) with annual subsidies of around USD 1 million until 2030. The government plans to invest EUR 17.5 billion (USD 20.7 billion) in the expansion of rail infrastructure and is subsidizing train tickets and the purchase of electric cars (around USD 5,900 per purchase). The Parliament, in 2021, adopted a “green tax reform,” introducing a new CO2 emissions pricing system as of July 2022, that phases in a fixed price, rising from EUR 30 (USD 34) per ton of CO2 in 2022 to EUR 55 (USD 62) in 2025. The tax reform will affect energy-intensive production of the private sector, but the government has not set specific emissions reduction goals for businesses.

In April 2021, the government introduced a comprehensive “biodiversity monitoring” system to provide an overview over the number of (endangered) species and habitats in Austria. The Ministry for Climate, Environment, Energy, Mobility, Innovation and Technology set up a EUR 50 million (USD 59 million) “Biodiversity Fund” to support the monitoring system to be implemented with input from universities and environmental NGOs.

In 2021, the government adopted an “Action Plan Sustainable Procurement,” providing 16 binding ecological criteria for all public procurement beginning in 2022. It includes requiring emission-free cars for the government’s fleet, providing all public buildings with 100 percent electricity from renewable sources, and purchasing organic food for hospitals and school cafeterias.

Austria is a member of the Council of Europe’s Group of States against Corruption (GRECO) and also ratified the UN Convention against Corruption (UNCAC) and the OECD Anti-Bribery Convention. As part of the UNCAC ratification process, Austria has implemented a national anti-corruption strategy. Central elements of the strategy are promoting transparency in public sector decisions and raising awareness of corruption. Austria ranked 13th (out of 180 countries) in Transparency International’s latest Corruption Perceptions Index. Despite this ranking, the Group of States Against Corruption (GRECO) February 2021 report criticized Austria for only fully implementing two of 19 recommendations since the last report was issued in 2017. The criticism largely focused on a lack of transparency on lobbying, receipt of donations, and the income of Members of Parliament.

Bribery of public officials, their family members and political parties, is covered under the Austrian Criminal Code, and corruption does not significantly affect business in Austria. However, the public’s belief in the integrity of the political system was shaken by the 2019 Ibiza scandal, when a 2017 video surfaced in which Vice Chancellor and chair of the right populist Freedom Party (FPOe) Heinz Christian Strache and the FPOe floor leader in Parliament Johann Gudenus were filmed discussing providing government contracts in exchange for favors and political party donations with a woman posing as the niece of a Russian oligarch. This was compounded by further revelations in 2019 that the FPOe had allegedly promised gambling licenses to Casinos Austria in exchange for placing a party loyalist on the company’s executive board. Strache was convicted of corruption and bribery by the Vienna District Court in August 2021 following a separate health care fraud investigation. In October 2021, then-Chancellor Sebastian Kurz of the center-right People’s Party (OeVP) announced his resignation amid allegations that, while he was Foreign Minister in 2016, his inner circle paid newspapers to publish falsified opinion polls in his favor; that investigation by anti-corruption prosecutors is still ongoing. Finance Minister Bluemel (OeVP) also resigned, and prosecutors continue to investigate allegations that he may have facilitated political party donations by Casinos Austria subsidiary Novomatic, in exchange for government assistance with the company’s tax problems.

Anti-corruption cases are often characterized by slow-moving investigations and trials that drag on for years. The trial of former Finance Minister Grasser, which started in 2017, concluded in late 2020, with Grasser receiving a sentence of eight years in prison from the trial court judge. The official verdict was published in January 2022, and Grasser is expected to appeal the sentence.

Bribing members of Parliament is considered a criminal offense, and accepting a bribe is a punishable offense with the sentence varying depending on the amount of the bribe. The 2018 Austrian Federal Contracts Act implements EU guidelines prohibiting participating in public procurement contracts if there is a potential conflict of interest and requires measures to be put in place to detect and prevent such conflicts of interest. This required public authorities to set up compliance management systems or amend their existing structures accordingly. Virtually all Austrian companies have internal codes of conduct governing bribery and potential conflicts of interest.

Corruption provisions in Austria’s Criminal Code cover managers of Austrian public enterprises, civil servants, and other officials (with functions in legislation, administration, or justice on behalf of Austria, in a foreign country, or an international organization), representatives of public companies, members of parliament, government members, and mayors. The term “corruption” includes the following in the Austrian interpretation: active and passive bribery; illicit intervention; and abuse of office. Corruption can sometimes include a private manager’s fraud, embezzlement, or breach of trust.

Criminal penalties for corruption include imprisonment ranging from six months to ten years, depending on the severity of the offence. Jurisdiction for corruption investigations rests with the Austrian Federal Bureau of Anti-Corruption and covers corruption taking place both within and outside the country. The Lobbying Act of 2013 introduced binding rules of conduct for lobbying. It requires domestic and foreign organizations to register with the Austrian Ministry of Justice. Financing of political parties requires disclosure of donations exceeding EUR 2,500 (USD 2,950). No donor is allowed to give more than EUR 7,500 (USD 8,850) and total donations to one political party may not exceed EUR 750,000 (USD 885,000) in a single year. Foreigners are prohibited from making donations to political parties. Private companies are subject to the Austrian Act on Corporate Criminal Liability, which makes companies liable for active and passive criminal offences. Penalties include fines up to EUR 1.8 million (USD 2.1 million).

To date, U.S. companies have not reported any instances of corruption inhibiting FDI.

Contacts at government agencies responsible for combating corruption:

Wirtschafts- und Korruptionsstaatsanwaltschaft (Central Public Prosecution for Business Offenses and Corruption)
Dampfschiffstraße 4
1030 Vienna, Austria
Phone: +43-(0)1-52 1 52 0
E-Mail: wksta.leitung@justiz.gv.at

BAK – Bundesamt zur Korruptionsprävention und Korruptionsbekämpfung (Federal Agency for Preventing and Fighting Corruption)
Ministry of the Interior
Herrengasse 7
1010 Vienna, Austria
Phone: +43-(0)1-531 26 – 6800
E-Mail: BMI-III-BAK-SPOC@bak.gv.at

Contact at “watchdog” organization:

Transparency International – Austrian Chapter
Gertrude-Fröhlich-Sandner-Straße 1
1100 Vienna, Austria
Phone: +43-(0)1-960 760

Generally, civil disturbances are rare and the overall security environment in the country is considered to be safe. There have been no incidents of politically motivated damage to foreign businesses. Austria suffered a terrorist attack on November 2, 2020, when a gunman shot and killed four civilians and injured 23 in the center of Vienna.

Austria has a well-educated and productive labor force of 4.3 million, of whom 3.8 million are employees and 500,000 are self-employed or farmers. In line with EU regulations, the free movement of labor from all member states is allowed.

The COVID-19 crisis has led to an increase in unemployment, which reached 5.4 percent in 2020, but has since returned to near-pre-crisis levels. As of February 2022, the unemployment rate was 4.9 percent, compared to 4.5 percent in 2019. At the same time, the number of people unemployed for longer than 12 months has increased by 23 percent since the start of the pandemic. The Labor Ministry is developing initiatives to reintegrate long-term unemployed in the job market and combat the current shortage of skilled labor. To combat the effects of lockdown-related business closures, the government implemented a subsidized reduced hours work program, enabling employers to reduce employees’ hours by up to 90 percent, with assistance to cover up to 80-90 percent of regular pay, which was in place until March 2022 and helped keep the unemployment rate under control.

Foreigners account for almost one-quarter of Austria’s labor force; around 840,000 foreign workers are employed in Austria. Migrant workers come largely from the CEE region, but there are also many workers who arrived during the Syrian refugee crisis who have entered the labor market. Migrant workers often occupy lower-paying jobs and make up a large percentage of workers in the tourism and healthcare sectors.

Youth unemployment is relatively low, compared to European reference countries. Austria’s successful dual-education apprenticeship system, combining on-the-job training with classroom instruction in vocational schools, has helped bring youth into the labor market. The program includes guaranteed placement by the Public Employment Service for those 15–24-year-olds who cannot find an apprenticeship. Austria and the United States signed a Memorandum of Understanding to foster cooperation on apprenticeships and workforce development in April 2022. Austria has a well-balanced labor market but, like many of its neighbors, suffers from a shortage of skilled IT personnel, particularly in the banking and financial sector. Social insurance is compulsory in Austria and is comprised of health insurance, old-age pension insurance, unemployment insurance, and accident insurance. Employers and employees contribute a percentage of total monthly earnings to a compulsory social insurance fund. Austrian laws closely regulate terms of employment, including working hours, minimum vacation time, holidays, maternity leave, statutory separation notice, severance pay, dismissal, and an option for part-time work for parents with children under the age of seven. Problematic areas include increased deficits in the pension and health insurance systems, the shortage of healthcare personnel to care for the increasing number of elderly, and escalating costs for retirement and long-term care. Due to its generous social welfare system, Austria has a high rate of employer non-wage labor costs, amounting to approximately 30 percent of gross wages. Labor laws are commonly adhered to and strictly enforced.

Labor-management relations are relatively harmonious in Austria, which traditionally enjoys a low incidence of industrial unrest. Strikes are uncommon with only two notable incidents over the past decades (2011, 2018). Additionally, all employees are automatically members of the Austrian Labor Chamber.

Collective bargaining revolves mainly around wages and fringe benefits. Approximately 90 percent of the labor force works under a collective bargaining agreement. In 2017, Austria implemented a national minimum wage of EUR 1,500 (approx. USD 1,770) per month, with monthly wages paid 14 times per year. This equates to an hourly wage of EUR 10.09 (approx. USD 11.91), placing Austria in the upper tier among European countries with a minimum wage, ahead of France, Germany and the UK.

Austrian law stipulates a 40-hour maximum workweek limit, but collective bargaining agreements also allow for a workweek of 38 or 38.5 hours per week. Firms may increase the maximum regular hours from 40 to 60 per week in special cases, with no more than 12 hours in a single day. Responsibility for agreements on flextime or reduced workweeks is at the company level. Overtime is paid at an additional 50 percent of the employee’s salary, and, in some cases, such as work on public holidays, 100 percent. Austrian employees are generally entitled to five weeks of paid vacation (and an additional week after 25 years in the workforce); the rate of absence due to illness/injury averages 13 workdays annually.

Andreas Lerch
Economic Specialist
U.S. Embassy Vienna, Vienna 1090, Boltzmanngasse 16
+43 1 31339-2387
lercha@state.gov

The Azerbaijani government actively seeks foreign direct investment.  Flows of foreign direct investment to Azerbaijan have risen steadily in recent years, primarily in the energy sector.  Foreign investment in the government’s priority sectors for economic diversification (agriculture, transportation, tourism, and ICT) has thus far been limited.

Foreign investments enjoy complete and unreserved legal protection under the Law on the Protection of Foreign Investment, the Law on Investment Activity, and guarantees contained within international agreements and treaties.  In accordance with these laws, Azerbaijan will treat foreign investors, including foreign partners in joint ventures, in a manner no less favorable than the treatment accorded to national investors.  Azerbaijan’s Law on the Protection of Foreign Investments protects foreign investors against nationalization and requisition, except under specific circumstances.  The Azerbaijani government has not shown any pattern of discriminating against U.S. persons or entities through illegal expropriation.

Azerbaijan’s primary body responsible for investment promotion is the Azerbaijan Export and Investment Promotion Agency (AzPromo).  AzPromo is a joint public-private initiative, established by the Ministry of Economy and Industry in 2003 to foster the country’s economic development and diversification by attracting foreign investment into the non-oil sector and stimulating non-oil exports.  A January 2018 decree called for new legislation, which has not yet been introduced, to ensure Azerbaijan conforms to international standards to protect foreign investor rights.  The Azerbaijani government meets regularly with the American Chamber of Commerce (AmCham) to solicit the input from the business community, particularly as part of AmCham’s biennial white paper process.  In June 2021, AmCham Azerbaijan organized a press conference for publicly presenting subsequent publication of its White Paper on observations and recommendations for improving Azerbaijan’s business climate. The 2021 White Paper covered issues in several fields, including taxation, customs procedures, finance, and information and communications technology. 

Foreigners are allowed to register business entities by opening a fully owned subsidiary, acquiring shares of an existing company, or by creating a joint venture with a local partner.  Foreign companies are also permitted to operate in Azerbaijan without creating a local legal entity by registering a representative or branch office with the tax authorities.

Foreigners are not permitted to own land in Azerbaijan but are permitted to lease land and own real estate.  Under Azerbaijani laws, the state must retain a controlling stake in companies operating in the mining, oil and gas, satellite communication, and military arms sectors, limiting foreign or domestic private ownership to a 49 percent share of companies in these industries.  Foreign ownership in the media sector is also strictly limited.  Furthermore, a special license to conduct business is required for foreign or domestic companies operating in telecommunications, sea and air transportation, insurance, and other regulated industries.  Azerbaijan does not screen inbound foreign investment, and U.S. investors are not specifically disadvantaged by any existing control mechanisms.

Azerbaijan has not conducted an Organization for Economic Cooperation and Development (OECD) investment policy review, a United Nations Conference on Trade and Development (UNCTAD) investment policy review, or a WTO Trade Policy Review.

Azerbaijani law requires all companies operating in the country to register with the tax authorities.  Without formal registration, a company may not maintain a bank account or clear goods through customs.  Registration takes approximately three days for commercial organizations.  Companies may e-register at http://taxes.gov.az.

Azerbaijan does not actively promote or incentivize outward investment, though Azerbaijani entities, particularly the State Oil Company of Azerbaijan (SOCAR) and the State Oil Fund of Azerbaijan (SOFAZ), have invested in various countries, including the United States.  SOFAZ investment is typically limited to real estate, precious metals, and low-yield government securities.  SOCAR has invested heavily in oil and gas infrastructure and petrochemicals processing in Turkey and Georgia, as well as gas pipeline networks in Greece, Albania, and Italy as part of the Southern Gas Corridor that transports Azerbaijani gas to European markets.  The government does not restrict domestic investors from investing overseas.

Azerbaijan’s central government is the primary source of regulations relevant to foreign businesses.  Azerbaijan’s regulatory system has improved in recent years, although enforcement is inconsistent, and decision-making remains opaque.  Private sector associations do not play a significant role in regulatory processes.  The draft legislation process typically does not include public consultations and draft legislation text is rarely made available for public comment.  The government has in some cases engaged business organizations, such as AmCham, and consulting firms on various draft laws.  The website of Azerbaijan’s National Parliament, http://meclis.gov.az/ lists all the country’s laws, but only in the Azerbaijani language.

Legal entities in Azerbaijan must adhere to the International Financial Reporting Standards (IFRS).  These are only obligatory for large companies.  Medium-sized companies can choose between reporting based on IFRS or IFRS-SME standards, which are specially designed for large and medium enterprises.  Small and micro enterprises can choose between reporting based on IFRS, IFRS-SME, or simplified accounting procedures established by the Finance Ministry.

Several U.S. companies with operations and investments in Azerbaijan previously reported they had been subjected to repeated tax audits, requests for prepayment of taxes, and court-imposed fines for violations of the tax code.  These allegations have markedly decreased since 2017.

On October 19, 2015, Azerbaijan suspended inspections of entrepreneurs for two years, but inspections still may occur if a complaint is lodged.  This suspension was subsequently extended through January 1, 2023. Medicine quality and safety, taxes, customs, financial markets, food safety, fire safety, construction and safe usage of hazardous facilities, radioactive substances, and mining fields are not subject to this suspension order and are inspected for quality and safety.

The government has also simplified its licensing regime.  All licenses are now issued with indefinite validity through ASAN service centers and must be issued within 10 days of application.  The Economy Ministry also reduced the number of activities requiring a license from 60 to 32.  

Azerbaijan has held observer status at the World Trade Organization (WTO) since 1997 but has not made significant progress toward joining the WTO for the past several years.  A working party on Azerbaijan’s accession to the WTO was established on July 16, 1997 and Azerbaijan began negotiations with WTO members in 2004.  The WTO Secretariat reports Azerbaijan is less than a quarter of the way to full membership.  In 2016, Azerbaijan imposed higher tariffs on a number of imported goods, including agricultural products, to promote domestic production and reduce imports.  In February 2020, Azerbaijani President Ilham Aliyev made public remarks outlining Azerbaijan’s “cautious” approach to the WTO, saying that “the time [had] not come” for Azerbaijan’s membership.  Currently, Azerbaijan is negotiating bilateral market access with 19 economies.

Azerbaijan’s legal system is based on civil law.  Disputes or disagreements arising between foreign investors and enterprises with foreign investment, Azerbaijani state bodies and/or enterprises, and other Azerbaijani legal entities, are to be settled in the Azerbaijani court system or, upon agreement between the parties, in a court of arbitration, including international arbitration bodies.  The judiciary consists of the Constitutional Court of the Republic of Azerbaijan, the Supreme Court of the Republic of Azerbaijan, the appellate courts of the Republic of Azerbaijan, trial courts, and other specialized courts.  Trial court judgments may be appealed in appellate courts and the judgments of appellate courts can be appealed in the Supreme Court.  The Supreme Court is the highest court in the country.  Under the Civil Procedure Code of Azerbaijan, appellate court judgments are published within three days of issuance or within ten days in exceptional circumstances.  The Constitutional Court has the authority to review laws and court judgments for compliance with the constitution.  

Businesses report problems with the reliability and independence of judicial processes in Azerbaijan.  While the government promotes foreign investment and the law guarantees national treatment, in practice investment disputes can arise when a foreign investor or trader’s success threatens well-connected or favored local interests.

Foreign investment in Azerbaijan is regulated by a number of international treaties and agreements, as well as domestic legislation.  These include the Bilateral Investment Treaty (BIT) between the United States and Azerbaijan, the Azerbaijan-European Commission Cooperation Agreement, the Law on Protection of Foreign Investment, the Law on Investment Activity, the Law on Investment Funds, the Law on Privatization of State Property, the Second Program for Privatization of State Property, and sector-specific legislation.  Azerbaijani law permits foreign direct investment in any activity in which a national investor may also invest, unless otherwise prohibited (see “Limits on Foreign Control and Right to Private Ownership and Establishment” for further information).

A January 2018 Presidential decree called for drafting a new law on investment activities to conform to international standards.  The decree also established mechanisms to protect investor rights and regulate damages, including lost profit caused to investors.  The details of the proposed new law have not been publicized as of April 2022.

The State Service for Antimonopoly Policy and Consumer Protection under the Economy Ministry is responsible for implementing competition-related policy.  The law on Antimonopoly Activity was amended in April 2016 to introduce regulations on price fixing and other anti-competitive behavior.  Parliament began revising a new version of the Competition Code in late 2014, but it has not yet been adopted.  Azerbaijan’s antimonopoly legislation does not constrain the size or scope of the handful of large holding companies that dominate the non-oil economy.

The Law on the Protection of Foreign Investments forbids nationalization and requisition of foreign investment, except under certain circumstances.  Nationalization of property can occur when authorized by parliamentary resolution, although there have been no known cases of official nationalization or requisition against foreign firms in Azerbaijan.  By a decision of the Cabinet of Ministers, requisition is possible in the event of natural disaster, an epidemic, or other extraordinary situation.  In the event of nationalization or requisition, foreign investors are legally entitled to prompt, effective, and adequate compensation.  Amendments made to Azerbaijan’s Constitution in September 2016 enabled authorities to expropriate private property when necessary for social justice and effective use of land.  In one recent case U.S. citizen property owners were pressured by local authorities to relinquish property rights at rates perceived to be well below fair market value.  The case has not yet been tested in the courts and the owners maintained their property, resisting government communications regarding an imminent takeover and indicating that the attempted expropriation was not being lawfully carried out under the terms of the Bilateral Investment Treaty or Azerbaijani law.  The Azerbaijani government has not shown any pattern of discriminating against U.S. persons by way of direct expropriations. 

Azerbaijan’s Bankruptcy Law applies only to legal entities and entrepreneurs, not to private individuals.  Either a debtor facing insolvency or any creditor may initiate bankruptcy proceedings.  In general, the legislation focuses on liquidation procedures.  The bankruptcy law in Azerbaijan is underdeveloped, which restricts private sector economic development by deterring entrepreneurship.  Amendments to Azerbaijan’s bankruptcy law adopted in 2017 extended the obligations of bankruptcy administrators and defined new rights for creditors.

Since early 2016, the government has introduced tax and investment incentives for entrepreneurs and legal entities in non-oil export sectors as part of the overall economic reform and economic diversification efforts.  These measures include certain partial, temporary exemptions from corporate and property taxes; favorable tax treatment for manufacturing facilities and imports of manufacturing equipment; and subsidies for certain exports.  Investment certificate holders are exempt from paying 50 percent of the assessed income tax, 100 percent of the land tax, and 100 percent of customs duties on imported machinery, equipment, and devices.  Certificates are issued for seven years to projects in priority non-oil sectors.

The Law of Azerbaijan “On the Use of Renewable Energy Sources in the Production of Electricity”, was signed into law by the President and published on July 14, 2021, together with a Presidential Decree on the implementation of the Renewable Energy Law. The Renewable Energy Law addresses guaranteed tariffs, foreign investment and other support mechanisms, such as scientific research and the promotion of active consumers. The law prescribes two methods for selecting investors for the generation of electricity using renewable energy sources (RES): auctions and direct negotiations.

If the selection of an investor is conducted in the form of an auction, the winner of the auction shall be the lowest bidder in relation to the purchase price for electricity subject to guaranteed offtake. The Ministry of Energy is the authorized body to organize RES auctions. In addition, the government is considering other incentives for investors in RES projects in Azerbaijan, including guaranteed offtake, guaranteed connection, priority in transmission and distribution and long-term land leases.

A government decree established the Alat Free Economic Zone (AFEZ) next to the Port of Alat, located approximately 50 miles south of Baku in March 2016.  President Aliyev signed legislation setting forth the incentives and regulations governing the AFEZ in June 2018.  The law exempts all businesses in the AFEZ from taxes and customs; charges the AFEZ’s administration with setting up its own employment, migration, dispute resolution, and arbitration regulations; provides protections from nationalization; and guarantees the free flow of funds in and out of the free trade area.  While the legal framework is in place and initial construction has begun, the AFEZ is not yet fully operational.

The Ministry of Digital Development and Transport has discussed plans to create other special economic zones, including a petrochemical complex and regional innovation zones to boost telecommunications sector development.  Currently, legal entities and individuals involved in entrepreneurial activities in one of five state-designated industrial or technological parks are exempt from income tax, property tax, land tax, and VAT on imported machinery and equipment until 2023.

The Azerbaijani government does not mandate local employment, although some Production Sharing Agreements (PSAs) in the oil sector include localization provisions.  While performance requirements are not generally imposed on new investments, the government is seeking to increase the number of value-added services and processes performed in Azerbaijan.  American companies have reported that government-connected companies often pressure current or potential partners to establish joint ventures, initiate local production of certain components, facilitate technology transfer, or otherwise invest in Azerbaijan in order to maintain or expand cooperation.

Azerbaijan does not have any data localization requirements.

International organizations, foreign citizens, and foreign legal entities may not own land or be granted a purchase option on a lease, but they are permitted to lease land.  Following independence, the government implemented land reforms that divided state-owned farms into privately held small plots.  Due to poor recordkeeping and titling in rural areas, it is often difficult to determine definitively who owns a plot.  Amendments made to Azerbaijan’s Constitution in September 2016 enabled authorities to expropriate private property with compensation in instances where necessary for “social justice and efficient use of the land.”

Azerbaijan’s State Real Estate Registry Service at the Committee for Property Issues registers real estate.  April 2016 amendments to the Law on Immovable Property Register cut the time to register property from 20 to 10 working days. 

The legal structure covering intellectual property protections in Azerbaijan is relatively strong, but experts and businesspeople report the level of enforcement within the country is weak.  Piracy and blatant infringements on intellectual property rights (IPR) of both digital and physical goods are commonplace and stifle foreign investment and local entrepreneurship.  The Business Software Alliance estimated the prevalence of software piracy at 84 percent in 2015, including in government ministries.  U.S. companies routinely list weak IPR protections as a key concern.  With strong Embassy encouragement, the government is taking steps to increase the use of licensed software in government institutions, but progress thus far has been uneven.

IPR in Azerbaijan are regulated by the Law on Copyrights and Related Rights, the Law on Trademarks and Geographic Designations, the Law on Patents, the Law on the Topology of Integrated Microcircuits, the Law on Unfair Competition, and the Law on Securing Intellectual Property Rights and Combating Piracy.

Azerbaijan is a party to the Convention Establishing the World Intellectual Property Organization (WIPO), the Paris Convention for Protection of Industrial Property, and the Berne Convention for the Protection of Literary and Artistic Works.  Azerbaijan is also a party to the Geneva Phonograms Convention and acceded to the two WIPO Internet treaties in 2005. 

Violation of IPR can result in civil, criminal, and administrative charges.  Azerbaijan tracks and reports on seizures of counterfeit goods but does not publish statistics on this effort.  Azerbaijan is not listed in USTR’s Special 301 Report, nor is it included in USTR’s Notorious Markets List.  For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/.

Access to capital is a critical impediment to business development in Azerbaijan.  An effective regulatory system that encourages and facilitates portfolio investment, foreign or domestic, is not fully in place.  Though the Baku Stock Exchange opened in 2000, there is insufficient liquidity in the market to enter or exit sizeable positions.  The Central Bank assumed control over all financial regulation in January 2020, following disbandment of a formerly independent regulator.  Non-bank financial sector staples such as capital markets, insurance, and private equity are in the early stages of development.  The Capital Market Modernization Project is an attempt by the government to build the foundation for a modern financial capital market, including developing market infrastructure and automation systems, and strengthening the legal and market frameworks for capital transactions.  One major hindrance to the stock market’s growth is the difficulty in encouraging established Azerbaijani businesses to adapt to standard investor-friendly disclosure practices, which are generally required for publicly listed companies.

Azerbaijan’s government and Central Bank do not restrict payments and transfers for international transactions.  Foreign investors are permitted to obtain credit on the local market, but smaller companies and firms without an established credit history often struggle to obtain loans on reasonable commercial terms.  Limited access to capital remains a barrier to development, particularly for small and medium enterprises.

The country’s financial services sector – of which banking comprises more than 90 percent – is underdeveloped, which constrains economic growth and diversification.  The drop in world oil prices in 2014-2015 and the resulting strain on Azerbaijan’s foreign currency earnings and the state budget exacerbated existing problems in the country’s banking sector and led to rising non-performing loans (NPLs) and high dollarization.  Subsequent reforms have improved overall sector stability.  President Aliyev signed a decree in February 2019 to provide partial relief to retail borrowers on foreign-currency denominated loans that meet certain criteria.

As of January 1, 2022, 26 banks were registered in Azerbaijan, including 12 banks with foreign capital and two state-owned banks.  These banks employ 20,601 people and have a combined 480 branches and 2,920 ATMs nationwide.  Total banking sector assets stood at approximately USD 22.3 billion as of January 2022, with the top five banks holding almost 60 percent of this amount.

In December 2019, Azerbaijan carried out a banking management reform that gave the Central Bank of Azerbaijan control over banks and credit institutions, closing the Chamber for Control over Financial Markets, which had held regulatory powers following Azerbaijan’s 2014/2015 economic crisis and resulting currency devaluations.  Concurrently, the Central Bank announced “recovery of the banking sector” would be one of the main challenges it would tackle in 2020.  The Central Bank closed four insolvent banks (Atabank, AGBank, NBCBank, and Amrah Bank) in April/May 2020, bringing the number of banks in the country down from 30 to 26.  Only six banks are able to conduct correspondent banking transactions with the United States.

Foreign banks are permitted in Azerbaijan and may take the form of representative offices, branches, joint ventures, and wholly owned subsidiaries.  These banks are subject to the same regulations as domestic banks, with certain additional restrictions.  Foreign individuals and entities are also permitted to open accounts with domestic or foreign banks in Azerbaijan.

Azerbaijan’s sovereign wealth fund is the State Oil Fund of Azerbaijan (SOFAZ).  Its mission is to transform hydrocarbon reserves into financial assets generating perpetual income for current and future generations and to finance strategically important infrastructure and social projects of national scale.  While its main statutory focus is investing in assets outside of the country, since it was established in 1999 SOFAZ has financed several socially beneficial projects in Azerbaijan related to infrastructure, housing, energy, and education.  The government’s newly adopted fiscal rule places limits on pro-cyclical spending, with the aim of increasing hydrocarbon revenue savings.  SOFAZ publishes an annual report which it submits for independent audit.  The fund’s assets totaled USD 45 billion as of January 1, 2022. 

In Azerbaijan, state-owned enterprises (SOEs) are active in the oil and gas, power generation, communications, water supply, railway, and air passenger and cargo sectors, among others.  There is no published list of SOEs.  While there are no SOEs that officially have been delegated governmental powers, companies such as the SOCAR, Azerenerji (the national electricity utility), and Azersu (the national water utility) – all of which are closed joint-stock companies with majority state ownership and limited private investment – enjoy quasi-governmental or near-monopoly status in their respective sectors.

SOCAR is wholly owned by the government of Azerbaijan and takes part in all oil and gas activities in the country.  It publishes regular reports on production volumes, the value of its exports, estimates of investments in exploration and development, production costs, the names of foreign companies operating in the country, production data by company, quasi-fiscal activities, and the government’s portion of production-sharing contracts.  SOCAR is also responsible for negotiating PSAs with all foreign partners for hydrocarbon development.  SOCAR’s annual financial reports are audited by an independent external auditor and include the consolidated accounts of all SOCAR’s subsidiaries, although revenue data is incomplete.

There have been instances where state-owned enterprises have used their regulatory authority to block new entrants into the market.  SOEs are, in principle, subject to the same tax burden and tax rebate policies as their private sector competitors.  However, in sectors that are open to both private and foreign competition, SOEs generally receive a larger percentage of government contracts or business than their private sector competitors.  While SOEs regularly purchase or supply goods or services from private sector firms, domestic and foreign private enterprises have reported problems competing with SOEs under the same terms and conditions with respect to market share, information, products and services, and incentives.  Private enterprises do not have the same access (including terms) to financing as SOEs.  SOEs are also afforded material advantages such as preferential access to land and raw materials – advantages that are not available to private enterprises.  There is little information available on Azerbaijani SOEs’ budget constraints, due to the limited transparency in their financial accounts.

A renewed privatization process started with the May 2016 presidential decree implementing additional measures to improve the process of state property privatization and the July 2016 decree on measures to accelerate privatization and improve the management efficiency of state property.  The State Committee on Property Issues launched a portal to provide privatization information in July 2016.  The portal contains information about the properties, their addresses, location, and initial costs with the aim of facilitating privatization.  Azerbaijan’s current privatization efforts focus on smaller state-owned properties.  While there are no immediate plans to privatize large SOEs, Azerbaijan is moving 21 major government-owned companies to a new state holding company tasked to improve efficiency and corporate governance as well as prepare them for possible privatization.  However, the government has no plans to sell stakes in state companies in 2022, including in state oil company SOCAR.

Responsible business conduct (RBC) is a relatively new concept in Azerbaijan.  Producers and consumers tend not to prioritize responsible business conduct, including environmental, social, and governance issues.  No information is available on legal corporate governance, accounting, and executive compensation standards to protect shareholders in Azerbaijan.  Larger foreign entities tend to follow generally accepted RBC principles consistent with parent company guidelines and aim to educate their local partners, who generally consider basic charitable donations and paying taxes as acts of social responsibility.

AmCham established a Corporate Social Responsibility (CSR) Committee in October 2011 to encourage companies to embrace social responsibility through activities and dialogue with relevant stakeholders.  AmCham also published a corporate social responsibility guide on CSR for businesses in Azerbaijan.  In 2011, the Economy Ministry established standards for corporate governance, which included an evaluation methodology for these standards and a code of ethical behavior.  The Economy Ministry has been tasked with explaining the importance of corporate governance standards to entrepreneurs.  Some companies report that government restrictions on NGO registration have complicated CSR corporate social responsibility efforts.

Azerbaijan’s Extractive Industries Transparency Initiative (EITI) status was downgraded from “compliant” to “candidate” in April 2015, due to concerns about Azerbaijani civil society’s ability to engage critically in the EITI process.  Following the EITI Secretariat’s evaluation in March 2017 that Azerbaijan had not sufficiently implemented required “corrective actions,” Azerbaijan withdrew from the EITI and established a domestic Extractive Industries Transparency Commission in April 2017 to ensure transparency and accountability in the extractive industries of the country.  The Commission has published two Reports on Transparency in the Extractive Industries but has not met since 2019 and does not conform with EITI standards.

Azerbaijan has signed and ratified the Paris Climate Agreement.  In its 2017 Nationally Determined Contributions, the country outlined climate change mitigation actions in several sectors and set a goal to reduce carbon emissions by 35 percent (from 1990 levels) by 2030.  

Department of State

• Country Reports on Human Rights Practices;
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities;
• U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises; and;
• Xinjiang Supply Chain Business Advisory 

Department of the Treasury

• OFAC Recent Actions

Department of Labor

• Findings on the Worst Forms of Child Labor Report;
• List of Goods Produced by Child Labor or Forced Labor;
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World and;
• Comply Chain.

Azerbaijan has signed and ratified the Paris Climate Agreement.  In its 2017 Nationally Determined Contributions, the country outlined climate change mitigation actions in several sectors and set a goal to reduce carbon emissions by 35 percent (from 1990 levels) by 2030.  

Corruption is a major challenge for firms operating in Azerbaijan and is a barrier to foreign investment despite government efforts to reduce low-level corruption.  Azerbaijan does not require that private companies establish internal codes of conduct to prohibit bribery of public officials, nor does it provide protections to NGOs involved in investigating corruption.  U.S. firms have identified corruption in government procurement, licensing, dispute settlement, regulation, customs, and taxation as significant obstacles to investment.

The Azerbaijani government publicly acknowledges problems with corruption but does not effectively or consistently enforce anticorruption laws and regulations.  Azerbaijan has made modest progress in implementing a 2005 Anti-corruption Law, which created a commission with the authority to require full financial disclosure from government officials.  The government has achieved a degree of success reducing red tape and opportunities for bribery through a focus on e-government and government service delivery through centralized ASAN service centers, which first opened in February 2013.  ASAN centers provide more transparent, efficient, and accountable services through a “one window” model that reduces opportunities for rent-seeking and petty government corruption and have become a model for other initiatives aimed at improving government service delivery.

Despite progress in reducing corruption in public services delivery, the civil service, public procurement apparatus, and the judiciary still suffer from corruption.  Tax reforms announced in January 2019 were aimed partially at reducing corruption in tax administration and received praise from the local business community.

Azerbaijan signed and ratified the UN Anticorruption Convention and is a signatory to the Council of Europe Criminal and Civil Law Conventions.  Azerbaijan is not currently a party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

On multiple occasions in 2019 and 2020, authorities selectively blocked mobile and fixed-line internet access, temporarily restricted access to foreign media and social networking sites and imposed blocks on virtual private network (VPN) services, apparently in response to political protests and as part of national restrictions during and after Azerbaijan’s armed conflict with Armenian forces in September-November 2020.  Radio Free Europe/Radio Liberty are among the sites permanently blocked in Azerbaijan.  The increase in frequency and lack of transparency regarding internet disruptions raise serious concerns about future Azerbaijani government efforts to control access to information in ways that impede foreign business interests.  

There have been no known acts of political violence against U.S. businesses or assets, nor against any foreign owned entity.  It is unlikely that civil disturbances, should they occur, would be directed against U.S. businesses or the U.S. community.

During 44 days of intensive fighting from September 27 to November 10, 2020, involving Azerbaijan, Armenia, and Armenia-supported separatists, significant casualties and atrocities were reported by all sides.  After Azerbaijan, with Turkish support, reestablished control over four surrounding territories controlled by separatists since 1994, a Russian-brokered ceasefire arrangement announced by Azerbaijan and Armenia on November 9 resulted in the peaceful transfer of control over three additional territories to Azerbaijan, as well as the introduction of Russian peacekeepers to the region.  The ceasefire has largely held, but tensions remain high, particularly along the international border, which has not been fully demarcated.  

Russian forces have played a role in controlling access along highways near the border and into the Nagorno-Karabakh region from Armenia and Azerbaijan.  The Azerbaijani government has suspended or threatened to suspend the operations of U.S. companies in Azerbaijan whose products or services are provided in the area of Nagorno-Karabakh in which Russian peacekeepers are currently deployed and has banned the entry into Azerbaijan of some persons who have visited Nagorno-Karabakh.  The U.S. government is unable to provide emergency services to U.S. citizens in and around Nagorno-Karabakh as access is restricted.

The 1999 Labor Code regulates overall labor relations and recognizes international labor rights.  The work week generally is 40 hours.  The right to strike exists, though industrial strikes are rare.  Azerbaijan is a member of the International Labor Organization (ILO) and has ratified more than 57 ILO Conventions.  In practice, labor unions are strongly tied to political interests of the government.  Collective bargaining is not practiced.  Azerbaijan has regulations to monitor labor abuses, health, and safety standards in low-wage assembly operations, but enforcement is less effective.

Employment relations are established by an employment contract, which, in most cases, does not necessarily indicate a fixed term of employment.  While a number of workers still work without contracts in Azerbaijan’s informal economy, recent tax and customs reforms have provided incentives for individuals to register their employment to benefit from state financial support.  Under national law, an employer must give an employee two months’ notice of termination, with certain exceptions.  An employee can terminate his/her employment contract at any time but must give one month’s notice.  Upon termination of formally registered employment, employers must pay departing employees monetary compensation for unused vacation leave.  A formally registered employee who becomes unemployed is entitled to 70 percent of his/her average monthly wage, calculated over the past 12 months at the last place of work.  An employee must have worked under a valid labor contract in order to obtain unemployment benefits.  The law “On Unemployment Insurance” signed in August 2017 allows for payments to unemployed individuals registered with the State Employment Fund.  

Azerbaijan has an abundant supply of semi-skilled and unskilled laborers.  An estimated 35 percent of the Azerbaijani population works in agriculture, although this sector only contributes around 6 percent of the country’s GDP.  The construction sector tends to use temporary and contract workers; reportedly many of these workers’ agreements are not formally registered with the government.  The relatively limited supply of highly skilled labor is one of the biggest challenges in Azerbaijan’s labor market.  The average monthly wage as of January 2022 was AZN 766 (USD 451), and the official minimum wage increased in 2022 to AZN 300 (USD 176) per month, compared to the previous level of AZN 250 (USD 147) per month.  The Ministry of Labor and Social Protection took measures to avoid unjustified dismissals, redundancies of employees in a public sector, as well as to preserve salaries of the employees sent on vacation and ensured expansion of unemployment insurance benefits, and the establishment of a proactive support mechanism in this area.  Part of the reform program was to expand services to ensure employment, ensure transparency and prevent corruption.  The number of legalized labor contracts increased by 30 percent during 2017-2021. 

In Azerbaijan, the COVID-19 crisis has deepened socio-economic vulnerabilities and widened disparities across regions, firm sizes, and between the formal and informal sides of the economy.  To respond to the pandemic, a Presidential Decree outlining the emergency response package of measures was signed in March 2020, and the COVID-19 Response Action Plan was agreed by the Cabinet of Ministers in April 2020.  The government extended and scaled up existing support programs and designed new schemes. The initial size of the support package in 2020 was AZN 3.3 billion (around 4.8 per cent of GDP), later increased to include additional tax benefits and a one-off extension of social assistance. The package included social protection measures such as direct cash transfers and an expansion of unemployment insurance to support the unemployed and informal workers, more targeted social assistance to support low-income households and vulnerable groups, the creation of additional public jobs, and energy and education subsidies. The main interventions to support businesses were cash payments to entrepreneurs and employers in COVID-19-affected areas, interest rate subsidies and guarantees for both new and old loans in affected sectors, as well as support to the transport sector and subsidized government rents.

* Source for Host Country Data:  Azerbaijan State Statistical Committee

*Source: Central Bank of Azerbaijan

Courtney Brasier
Economic and Commercial Officer
U.S. Embassy in Baku, Azerbaijan
+994-12-488-3300
BakuCommercial@state.gov

The GOB has a liberal approach to foreign investment and actively seeks to attract foreign investors and businesses. Increasing FDI is a top GOB priority. The GOB permits 100 percent foreign ownership of a business or branch office, without the need for a sponsor or local business 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. Bahrain Economic Development Board (EDB), charged with promoting FDI in Bahrain, places particular emphasis on attracting FDI to the manufacturing, logistics, ICT, financial services, tourism, health, and education sectors. As a reflection of Bahrain’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. U.S. investors have never alleged any legal or practical discrimination against them based on nationality.

In January 2021, the U.S. Commerce Secretary and the Bahraini Commerce Minister signed an MOU to establish the United States Trade Zone (USTZ) in Bahrain. Located near Bahrain’s critical port, aviation, and logistics facilities, the USTZ will enable U.S. companies to own and operate full turnkey industrial manufacturing, logistics, and distribution facilities in a unified commercial zone in order to access the wider GCC market. In February 2022, the Bahraini government allocated a small land plot and organized an expedited groundbreaking ceremony to formally open the USTZ to accommodate initial U.S. company interest. The Bahraini government must now tender out dredging and other construction services to reclaim land from the sea before building out the bulk of the USTZ’s infrastructure, which could take up to three years.

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 – such as expeditors and document clearance companies — and workforce agencies. The U.S.-Bahrain 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, customs clearance, and preregistration requirements to bid on local tenders.

The World Trade Organization (WTO) conducted a Trade Policy Review of Bahrain in November 2021.

Bahrain ranked 43 out of 190 countries on the World Bank’s overall Ease of Doing Business Indicator in 2020.

The CBB’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 the online commercial registration portal “Sijilat” ( www.sijilat.bh ) to facilitate the commercial registration process. Through Sijilat, local and foreign business owners can obtain a business license and requisite approvals from relevant ministries. The business registration process normally takes two to three weeks, from start to finish, but can take longer if a business requires specialized approvals. In practice, some business owners 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:

1. MoICT
2. Electricity and Water Authority
3. The Municipality in which their business will be located
4. Labour Market Regulatory Authority
5. General Organization for Social Insurance
6. National Bureau for Revenue (Mandatory if the business revenue exceeds BD 37,500)

To incentivize foreign investment in Bahrain’s targeted sectors and investment zones, the GOB provides industrial lands at reduced rental rates; customs duty exemptions for industrial and manufacturing projects, including imports of raw material, plant machinery equipment, and spare parts; and a five-year exemption of the “Bahrainization” recruitment restriction.

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

In 2018, the GOB issued a competition law, a personal data protection law, a bankruptcy law, and a health insurance law to enhance the country’s investment eco-system. The Law of Commerce (Legislative Decree No. 7, passed in 1987) addresses the concept of unfair competition and prohibits acts that would have a damaging effect on competition. Companies also are forbidden from undertaking practices detrimental to their competitors or from attracting the customers of their competitors through anti-competitive means. There is no official competition authority in Bahrain and the country has yet to institute comprehensive anti-monopoly laws or an independent anti-corruption agency.

Bahrain’s industrial sector is dominated by state-controlled companies such as Aluminum Bahrain (ALBA), Bahrain Petroleum Company (BAPCO), and Gulf Petrochemical Industries Company (GPIC). De facto monopolies also exist in some industries led by individuals or family-run businesses.

The GOB uses International Financial Reporting Standards (IFRS) as part of its implementation of Generally Accepted Accounting Principles (GAAP). IFRS are used by domestic listed and unlisted companies in their consolidated financial statements for external financial reporting.

Bahrain adopted International Accounting Standard 1 (IAS 1) in 1994 in the absence of other local standards. Non-listed banks and other business enterprises use IASs in the preparation of financial statements.

The 2001 Bahrain Commercial Companies Law requires each registered entity to produce a balance sheet, a profit-and-loss account and the director’s report for each financial year. All branches of foreign companies, limited liability companies and corporations, must submit annual audited financial statements to the Directorate of Commerce and Company Affairs at the MoICT, along with the company’s articles and /or articles of association.

Depending on the company’s business, financial statements may be subject to other regulatory agencies such as the Bahrain Monetary Agency (BMA) and the Bahrain Stock Exchange (banks and listed companies).

Bahrain encourages firms to adhere to both the International Financial Reporting Standards (IFRS) and Bahrain’s Code of Corporate Governance. Bahrain-based companies by and large remain in compliance with IAS-1 disclosure requirements.

There are no informal regulatory processes managed by non-governmental organizations or private sector associations.

According to the World Bank, the GOB does not have the legal obligation to publish the text of proposed regulations before their enactment but bills that are discussed by Parliament may be reported in the local news. The text of the proposed regulations is publicly available one day, two weeks or thirty days after it is published in the Official Gazette. Bahrain, therefore, ranks among the countries with low rule-making transparency.

Bahrain’s laws can be drafted or proposed by the Cabinet or originate in the bicameral National Assembly, comprised of an elected, lower house Council of Representatives (COR) and an appointed, upper house Consultative Council (“Shura”). The independent Legislation and Legal Opinion Commission drafts legislation based on the proposals. The King’s signature is required to ratify any laws following parliamentary approval; laws are in force once published in the Official Gazette. The King may issue royal orders and royal decrees that are immediately effective once issued. For matters deemed urgent, the King can also decree-laws when COR is in recess. These decree-laws must be approved by both chambers with no changes within a month of the COR resuming session, or they are considered null. GOB ministers and heads of agencies are authorized to issue regulations that pertain to the administration of their respective bodies.

Bahrain is a member of the GCC, which created a Unified Economic Agreement to expedite trade and the movement of people and goods within GCC borders.  The GCC has also adopted several unified model laws, such as the GCC Trademark Law.  Bahrain is a signatory to the Apostille Convention and is a member of the Permanent Court of Arbitration.  It is a dualist state, therefore, international treaties are not directly incorporated into its law and must be approved by the National Assembly and ratified by the King.

Commercial regulations can be proposed by the EDB, MoICT, Cabinet, or COR. Draft regulations are debated within the COR and Shura Council. The Bahrain Chamber of Commerce and Industry board of directors may raise concerns over draft legislation at committee meetings or send written comments for review by Members of Parliament; bills are otherwise not available for public comment. The Cabinet issues final approval of regulations.

The e-Government portal and the Legislation and Legal Opinion Commission website list laws by category and date of issuance. Some laws are translated into English. The National Audit Office publishes results of its annual audits of government ministries and parastatals.

As a GCC member, Bahrain has agreed to enforce GCC standards and regulations where they exist, and not to create any domestic rules that contradict established GCC-wide standards and regulations.  In certain cases, the GOB applies international standards where domestic or GCC standards have not been developed.  Bahrain is a member of the WTO and notifies all draft technical regulations to the WTO Committee on Technical Barriers to Trade. Bahrain ratified the Trade Facilitation Agreement (TFA) in September 2016 through Law No. 17 of 2016.

Bahrain’s Constitution defines the Kingdom as a sovereign, independent, Arab Muslim State. Article 2 of the Constitution states that Islamic Sharia (Islamic law) is the main source of legislation; however, general matters and private transactions are governed mainly by laws derived from international law. Three types of courts are present in Bahrain: civil, criminal, and family (Sharia) courts. The civil court system consists of lower courts, courts of appeal, and the Court of Cassation – the highest appellate court in the Kingdom, hearing a variety of civil, criminal, and family cases. Civil courts deal with all administrative, commercial, and civil cases, as well as disputes related to the personal status  of non-Muslims. Family courts deal primarily with personal status matters, such as marriage, divorce, custody, and inheritance.

High-ranking judges in Bahrain are often from prominent families but may be non-Bahraini citizens. On January 19, 2022, the king appointed nine English-speaking foreign judges and legal experts to the Court of Cassation, all of whom are commercial arbitration specialists. Bahraini law borrows elements from European or other Arab states’ legal codes.

Bahrain has a long-established framework of commercial law. English is widely used, and several well-known international (including U.S.) law firms, working in association with local partners, are authorized to practice law in Bahrain and provide expert legal services nationally and regionally. Fees are charged according to internationally accepted practices. Non-Bahraini lawyers can represent clients in Bahraini courts. In April 2007, the government permitted international law firms to be established in Bahrain. These firms provide services such as commercial and financial consultancy in legal matters.

Investors report general satisfaction with government cooperation and support. Foreign competitors have occasionally perceived that legal interpretation and application varied between Ministries and was influenced by prominent local business interests or the stature and connections of an investor’s local partner. Such departures from the consistent, transparent application of regulations and the law are uncommon.

The GOB is eager to develop its legal framework. The U.S. Department of Commerce’s Commercial Law Development Program (CLDP) has conducted training and capacity-building programs in Bahrain for years, in cooperation with the National Assembly; Ministry of Justice, Islamic Affairs, and Endowments; Supreme Judicial Council; Bahrain Chamber for Dispute Resolution; Judicial and Legal Studies Institute; and MoICT.

Judgments of foreign courts are recognized and enforceable under local courts. Article nine of the U.S.-Bahrain BIT outlines the disposition of U.S. investment cases within the Bahraini legal system. The most common investment-related concern in Bahrain has been the slow or incomplete application of the law. Although some international law and human rights monitoring organizations have collected anecdotal evidence pointing to a lack of transparency, the judicial process in civil courts is generally considered fair, and cases can be appealed.

The U.S.-Bahrain BIT provides benefits and protection to U.S. investors in Bahrain, such as most-favored nation and national treatment, the right to make financial transfers freely and immediately, the application of international legal standards for expropriation and compensation cases, and access to international arbitration. The BIT guarantees national treatment for U.S. investments across most sectors, with exceptions of a limited list of activities, including ownership of television, radio or other media, fisheries, real estate brokerages, and land transportation. Bahrain provides most-favored nation or national treatment status to U.S. investments in air transportation, the purchase or ownership of land, and the purchase or ownership of shares traded on the Bahrain Bourse.

The national treatment clause in the BIT ensures American firms interested in selling products exclusively in Bahrain are no longer required to appoint a commercial agent, though they may opt to do so. A commercial agent is any Bahraini party appointed by a foreign party to represent the foreign party’s product or service in Bahrain.

Bahrain generally permits 100 percent foreign ownership of new industrial entities and the establishment of representative offices or branches of foreign companies without local sponsors or business partners. Wholly foreign-owned companies may be set up for regional distribution services and may operate within the domestic market provided they do not exclusively pursue domestic commercial sales. Private investment (foreign or Bahraini) in petroleum extraction is permitted.

Expatriates may own land in designated areas in Bahrain. Non-GCC nationals, including Americans, may own high-rise commercial and residential properties, as well as properties used for tourism, banking, financial and health projects, and training centers.

Bahrain issued Bankruptcy Law No. 22 in May 2018 governing corporate reorganization and insolvency. The law is based on U.S. Chapter 11 insolvency legislation and provides companies in financial difficulty with an opportunity to restructure under court supervision.

Below is a link to a site designed to assist foreign investors to navigate the laws, rules, and procedures related to investing in Bahrain: http://cbb.complinet.com/cbb/microsite/laws.html 

The GOB issued Competition Law No. 31 in July 2018 to prevent the formation of monopolies or the practice of anti-competitive behavior. This law makes it easier for new businesses to enter existing markets and compete with significant players.

MoICT’s Consumer Protection Directorate is responsible for ensuring that the law determining price controls is implemented and that violators are punished.

There have been no expropriations in recent years, and there are no cases in contention. The U.S.-Bahrain BIT protects U.S. investments by banning all expropriations (including “creeping” and “measures tantamount to”) except those for a public purpose. Such transactions must be carried out in a non-discriminatory manner, with due process, and prompt, adequate, effective compensation.

ICSID Convention and New York Convention

Bahrain uses multiple international and regional conventions to enhance its commercial arbitration legal framework. Bahrain is a party to the UNCITRAL Model Law on International Commercial Arbitration, the New York Convention, the International Centre for the Settlement of Investment Disputes (ICSID), and the GCC Convention for Execution of Judgments, among others. These conventions and international agreements established the foundation for the GCC Arbitration Centre, and the Bahrain Chamber for Disputes & Resolution (BCDR). Bahrain’s Constitution stipulates international conventions and treaties have the power of law.

Investor-State Dispute Settlement

Article 9 of The U.S.-Bahrain BIT provides for three dispute settlement options:

1. Submitting the dispute to a local court or administrative tribunals of the host country.
2. Invoking dispute-resolution procedures previously agreed upon by the foreign investor or company and the host country government; or,
3. Submitting the dispute for binding arbitration to the International Center for Settlement of Investment Disputes (ICSID) or, the Additional Facility of ICSID, or ad hoc arbitration using the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL), or any other arbitral institution or rules agreed upon by both parties.

Bahrain Chamber for Dispute Resolution Court

The Bahrain Chamber for Dispute Resolution (BCDR) Court was established by Legislative Decree No. 30 of 2009. It operates in partnership with the American Arbitration Association (AAA). BCDR’s casework emanates from disputes brought before the BCDR Court and BCDR’s international arbitration wing, BCDR-AAA.

The BCDR Court administers disputes in excess of 500,000 Bahraini Dinars (approximately $1.3 million) in which at least one party is a financial institution licensed by the Central Bank of Bahrain, or the dispute is of an international commercial nature.

Since its establishment in 2010, BCDR has administered more than 350 cases under its jurisdiction as a court with monetary claims totaling over $6.2 billion.

In February 2022, the Minister of Justice clarified the use of travel bans against insolvent debtors (individuals and companies). The new Enforcement Law  in Civil and Commercial Matters 22/2021 stated that the insolvent debtor must disclose any owned assets, within seven days from the beginning of the judicial proceedings. Companies can settle their debts within 21 days. The justice ministry said it would coordinate with debt collectors from the private sector to expedite the enforcement process.

BCDR-AAA International Arbitration Center

BCDR-AAA is an international arbitration center with jurisdiction over disputes with respect to which the parties have agreed in writing that the BCDR-AAA Arbitration Rules shall apply.

As of December 2020, BCDR-AAA registered 17 cases under its jurisdiction as an international arbitration center, one in 2013, one in 2015, three in 2016, five in 2017, two in 2019, and five in 2020. Of these cases, only seven are ongoing: one that was filed in 2017 and one filed in 2019, five that were filed in 2020. The remainder were awarded or settled.

Bahrain Chamber for Dispute Resolution
Suite 301, Park Plaza
Bldg. 247, Road 1704
P.O. Box 20006
Manama, Kingdom of Bahrain
Tel: + (973) 17-511-311
Website: www.bcdr-aaa.org 

The United Nations Conference on Trade and Development (UNCTAD) reported that Bahrain faced its first known Investor-State Dispute Settlement (ISDS) claim in 2017. The case involved investor claims over the CBB’s 2016 move to close the Manama branch of Future Bank, a commercial bank whose shareholders included Iranian banks. Bahrain and Iran are party to a BIT. UNCTAD reported another investor-state dispute case involving Qatar Airways in 2020.

International Commercial Arbitration and Foreign Courts

Arbitration procedures are largely a contractual matter in Bahrain. Disputes historically have been referred to an arbitration body as specified in the contract, or to the local courts. In dealings with both local and foreign firms, Bahraini companies have increasingly included arbitration procedures in their contracts. Most commercial disputes are resolved privately without recourse to the courts or formal arbitration. Resolution under Bahraini law is generally specified in all contracts for the settlement of disputes that reach the stage of formal resolution but is optional in those designating the BCDR. Bahrain’s court system has adequately handled occasional lawsuits against individuals or companies for nonpayment of debts.

Bahrain Law No. 9 of 2015 promulgating the Arbitration Law (the “New Arbitration Law”) came into effect on August 9, 2015. The law provides that the UNCITRAL 1985 Model Law with its 2006 amendments on international commercial arbitration (the “UNCITRAL Law”) will apply to any arbitration, taking place in Bahrain or abroad, if the parties to the dispute agreed to be subject to the UNCITRAL Law.

The GCC Commercial Arbitration Center, established in 1995, serves as a regional specialized body providing arbitration services. It assists in resolving disputes among GCC countries or between other parties and GCC countries. The Center implements rules and regulations in line with accepted international practice. Thus far, few cases have been brought to arbitration. The Center conducts seminars, symposia, and workshops to help educate and update its members on any new arbitration-related matters.

GCC Commercial Arbitration Center
P.O. Box 2338
Manama, Kingdom of Bahrain
Arbitration Boards’ Secretariat
Tel: + (973) 17278000
Email: case@gcccac.org 
Website: http://www.gcccac.org/en/ 

The GOB enacted its original bankruptcy and insolvency law through Decree by Law No. 11 in 1987.  In May 2018, the GOB issued and ratified Law No. 22, updating the original legislation. Modeled on U.S. Chapter 11 legislation, the law introduces reorganization whereby a company’s management may continue business operations during the administration of a case. The Bankruptcy Law also includes provisions for cross-border insolvency, and special insolvency provisions for small and medium-sized enterprises that were further amended in July 2020 and enhanced creditors rights and expediting liquidation proceedings. The Bahrain credit reference bureau, known as “BENEFIT,” is licensed by the CBB and operates as the credit monitoring authority in Bahrain.

As part of a wider effort to promote sustainability and transparency in Bahrain’s capital market, Bahrain’s national stock market, the Bahrain Bourse (BHB), announced in 2020 new Environmental Social & Governance (ESG) reporting guidelines for listed companies . The voluntary reporting guidance aims to assist listed companies to integrate ESG issues in their reporting cycle and better meet the demands of institutional investors for material ESG information. The ESG reporting guidance encourages listed companies to disclose a set of 32 ESG metrics and indicators in alignment with the recommendations of the Sustainable Stock Exchanges (SSE) initiative and the World Federation of Exchanges, Global Reporting Initiatives (GRI) standards, and the United Nations Sustainable Development Goals. The guidance explains the key regional and international drivers for adoption of ESG reporting, the importance of ESG reporting, the ways to report on ESG, and emphasizes Bahrain Bourse’s efforts in promoting sustainability.

The GOB offers a variety of incentives to attract FDI. The Bahrain EDB, the Bahrain Logistics Zone (BLZ), Bahrain Development Bank (BDB), Bahrain International Investment Park (BIIP), U.S. Trade Zone (USTZ), and labor market fund Tamkeen offer incentives to encourage FDI. Some examples of incentives include assistance in registering and opening business operations, financial grants, exemption from import duties on raw materials and equipment, and duty-free access to other GCC markets for products manufactured in Bahrain.

Khalifa bin Salman Port, Bahrain’s primary commercial seaport, provides a free transit zone to facilitate the duty-free import of equipment and machinery. The GOB has developed two main industrial zones, one to the north of Sitra and the other in Hidd. The Hidd location, known as BIIP, is adjacent to a logistics zone, known as BLZ. Foreign-owned firms have the same investment opportunities in these zones as Bahraini companies.

MoICT operates BIIP, a 2.5 million square-meter, tax-free zone located minutes from Bahrain’s main Khalifa bin Salman port. Many U.S. companies operate out of this park. BIIP is most suited to manufacturing and services companies interested in exporting from Bahrain. The park offers manufacturing companies the ability to ship their products duty free to countries in the Greater Arab Free Trade Area. BIIP has space available for potential investors, including some plots of vacant land designated for new construction, and some warehouse facilities for rental. BIIP offers several incentives for international companies, including: competitive land-lease rental rates starting at $2.66 sqm/year; competitive utility costs; 100 percent foreign ownership; corporate and income tax exemptions; duty-free access to the GCC and U.S. markets; 5 percent customs duty exemption on raw materials, plant machinery, and spare parts imported for manufacturing; grants for funding, machinery, training, and employment; and a five year exemption from hiring Bahraini nationals.

BLZ is a boutique logistics park. Regulated and managed by the Ports and Maritime Affairs at the Ministry of Transportation and Telecommunications, BLZ offers local and international companies a base from which to operate in a customs-bonded area to export products and services to the northern Gulf and GCC markets. The park accommodates logistics companies engaged in:

• Third-party logistics (3PL) and freight forwarding services.

• General and specialized storage and distribution activities for re-export purposes.

• Value-added logistics services such as component assembly, packing and packaging, labeling, testing and repair, mixing, weighing and filling, and other light manufacturing activities.

BLZ offers several incentives for international companies, including: competitive land-lease rental rates starting at $11 sqm/year; 100 percent foreign ownership; corporate and income tax exemptions; 12-month grace period on utility payments for water, sewage, electricity, and telecommunication services.

A 1999 law requires investors in industrial or industry-related zones to launch a project within one year from the date of receiving the land, and development must conform to the specifications, terms, and drawings submitted with the application. Changes are not permitted without approval from MoICT.

In February 2021, MoICT inaugurated the USTZ to attract U.S. companies to build, own, and operate full turnkey industrial manufacturing, logistics, and distribution facilities in a unified commercial zone that will facilitate streamlined access to the wider GCC market. MoICT expects the USTZ to include many of the same land lease discounts, customs exemptions, and other incentivized features as the BIIP and BLZ.

Companies in Bahrain are obliged to comply with so-called “Bahrainization” employment targets, under which the Labour Market Regulatory Authority (LMRA) mandates that a certain percentage of each company’s employees are Bahraini nationals. Companies may contact LMRA to determine the “Bahrainization” rate, which differs based on sector, or use a calculator to determine the rate: http://lmra.bh/portal/en/page/show/193 . The applicable Bahrainization rate is mandatory across a company’s corporate structure. Per Cabinet Resolution Number 27 of 2016, LMRA announced that companies unable to comply with the rates would only be eligible to apply for new work permits and sponsorship transfers by paying an additional annual fee of BD 250 ($663) per non-Bahraini worker. LMRA may apply fines to companies that do not comply with “Bahrainization” requirements.

The GOB introduced the National Employment Program initiative in 2019 to enhance Bahraini nationals’ employment through trainings and qualification programs. The program, in its two versions, worked on replacing expat employment with Bahraini nationals in several occupations, mainly, in the health, education, and telecommunication sectors.

The GOB issued Law No. 1 in March 2019 amending Article 14 of the Private Health Establishments Law, which gives priority to recruiting qualified Bahraini physicians, technicians, and nursing staff in private health establishments.

There is no excessively onerous visa, residence, work permit, or similar requirement inhibiting the mobility of foreign investors or their employees in Bahrain. Americans and citizens of many other countries can obtain a two-week visa with relative ease upon arrival in Bahrain or online. Bahrain also offers American citizens a five-year, multiple-entry visa, if required.

Bahrain has a liberal approach to foreign investment and actively seeks to attract foreign investors and businesses; no product localization is enforced, and foreign investors are not obliged to use domestic content in goods or technology. There are no government-imposed conditions on permission to invest, including tariff and non-tariff barriers, on American investments.

There are no special performance requirements imposed on foreign investors. The U.S.-Bahrain BIT forbids mandated performance requirements as a condition for the establishment, acquisition, expansion, management, conduct, or operation of a covered investment. Foreign and Bahraini-owned companies must meet the same requirements and comply with the same environmental, safety, health, and labor requirements. Officials at the Ministry of Labor and Social Development, LMRA, and MoICT supervise companies operating in Bahrain on a non-discriminatory basis.

The CBB regulates financial institutions and foreign exchange offices. Foreign and locally owned companies must comply with the same rules, policies, and regulations.

There are no requirements for foreign IT providers to turn over source code and/or to provide access to surveillance.

Bahrain enacted Law No. 30 of 2018 with respect to Personal Data Protection on July 12, 2018. The nationwide Data Protection Law, which went into force on August 1, 2019, promotes the efficient and secure processing of big data for commercial use and provides guidelines for the effective transfer of data across borders.

The GOB enforces property rights protections for land and homeowners. Most land has a clear title. Ownership of land is highly concentrated among royal family members; certain areas may be closed to Bahraini investors as well as expatriates. Foreign firms and GCC nationals are permitted to purchase land in certain areas in Bahrain. Non-GCC nationals can acquire high-rise commercial and residential properties in designated areas. Foreign investors may purchase property to operate businesses in various fields of business including, but not limited to, manufacturing, tourism, banking and financial services, education and training, design, and advertising.

Foreign investors may own commercial property in the following geographic areas:

1. Ahmed Al-Fateh (Juffair) district
2. Hoora district
3. Bu Ghazal district
4. Seef district
5. Northern Manama, including the Diplomatic Area, where the main international corporations are located

Foreign investors may own residential property in the following tourist areas:

1. Durrat Al Bahrain
2. Riffa Views
3. Amwaj Islands
4. Bahrain Financial Harbor
5. Bahrain Bay
6. Reef Island
7. Diyyar Al Muharraq
8. Some areas in Saar

Most of the new development projects in Bahrain permit expatriates and international investors to own houses, buildings, outlets, or freehold apartments.

Legally purchased property cannot revert to other owners, even if such property is unoccupied.

Under the U.S.-Bahrain FTA, the GOB committed to enforce intellectual property rights (IPR) protections. Bahrain signed the Berne Convention for the Protection of Literary and Artistic Works, Patent Cooperation Treaty, Nice Agreement, Madrid Agreement, Budapest Treaty, Trademark Law Treaty, and the Paris Convention for the Protection of Industrial Property in 1996. The GOB ratified revised legislation in 2006 to implement Bahrain’s obligations under the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). The GOB has passed laws related to IPR to bring Bahrain’s local laws into compliance with its Paris Convention commitment, and in anticipation of acceding to the Singapore Treaty on the Law of Trademarks and the Locarno Agreement on establishing an international classification for industrial designs, and the International Patent Classification (IPC). Bahrain has acceded to the World Intellectual Property Organization (WIPO) Copyright Treaty and the WIPO Performances and Phonograms Treaty. Bahrain ratified Law No. 31 on the Protection of New Plants Varieties in 2021 and is expected to accede to the International Union for the Protection of New Varieties of Plants by the end of 2022.

The GOB has made progress in reducing copyright piracy and there are few reports of significant violations of U.S. patents and trademarks in Bahrain. The GOB’s copyright enforcement campaign began in late 1997 and was based on inspections, closures, and improved public awareness. The campaign targeted the video, audio and software industries with impressive results. Commercially pirated video and audio markets have been mostly eliminated. However, audio, video, and software piracy by end-users remain problematic. There are no technology transfer requirements that force firms to share or divulge technology through compulsory licensing to a domestic partner, nor are firms required to undertake research and development activities in Bahrain.

In May 2016, the GOB issued the Implementing Regulations for the Trademark Law of the GCC, which had originally been approved by Law No. 6 of 2014. Law No. 6 provided a unified trademark regime for all six GCC countries.

Bahrain is not included in the United States Trade Representative (USTR) Special 301 Report or the Notorious Markets List. Bahrain does not track or report on seizures of counterfeit goods. For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ . The Embassy’s webpage also offers a link to local lawyers, some of whom specialize in IPR and/or patent law: https://bh.usembassy.gov/u-s-citizen-services/local-resources-of-u-s-citizens/attorneys/

Resources for Intellectual Property Rights Holders:

Peter Mehravari
Patent Attorney
Intellectual Property Attaché for the Middle East & North Africa
U.S. Embassy Abu Dhabi | U.S. Department of Commerce U.S. Patent & Trademark Office
Tel: +965-2259-1455
Peter.Mehravari@trade.gov

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ 

Consistent with the GOB’s liberal approach to foreign investment, government policies facilitate the free flow of financial transactions and portfolio investments. Expatriates and Bahraini nationals have ready access to credit on market terms. Generally, credit terms are variable, but often are limited to 10 years for loans under $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 $100 million. The Bahrain Liquidity Fund is supported by several market participants and acts 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 small in comparison to others in the region.

In October 2019, the GOB established a BD 130 million ($344 million) Liquidity Fund to assist distressed companies in restructuring financial obligations, which was expanded in March 2020 to BD 200 million ($530 million) in response to the Covid-19 pandemic.

The GOB and the CBB are members of the IMF and fully compliant with Article VIII.

The 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 remained healthy despite sustained lower global oil prices. Bahrain’s banks are 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 moved their regional headquarters to Dubai over the last decade. The GOB continues to drive innovation and expansion in the Islamic finance sector. In 2021, Bahrain ranked as the second in the MENA Islamic finance market and placed fourth globally, according to the ICD-Thomson Reuters Islamic Finance Development Indicator (IFDI).

Bahrain has an effective regulatory system that encourages portfolio investment. The CBB has fully implemented Basel II standards and is attempting to bring Bahraini banks into compliance with Basel III standards. Bahrain’s banking sector includes 89 banks, of which 30 are retail banks, 59 are wholesale banks, 17 are branches of foreign banks, and 13 are locally incorporated. Of these, nine are representative offices, and 16 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 Citibank, American Express, and JP Morgan Chase. Ahli United Bank is Bahrain’s largest bank with total assets estimated at $41.9 billion as of December 2021.

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 2017, Bahrain became the first in the GCC to introduce fintech “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 issued cryptocurrency regulations.

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, regardless of whether they are associated with an investment.

Remittance Policies

The CBB is responsible for regulating remittances, and its regulations are based on the Central Bank Law ratified in 2006. Foreign workers comprise most of the labor force in Bahrain and many remit significant quantities of funds 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 $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.

The GCC is a member of the Financial Action Task Force (FATF). Bahrain is a member of the Middle East and North Africa Financial Action Task Force (MENAFATF) which is headquartered in Bahrain. Participating countries commit to combat the financing of terrorist groups and activities in all its forms and to implement FATF recommendations.

Bahrain established a sovereign wealth fund, Mumtalakat, in 2006. Mumtalakat, which maintains an investment portfolio valued at roughly BD 6.6 billion ($17.6 billion) as of 2020, issues an annual report online. The annual report follows international financial reporting standards and is audited by external auditing firms. By law, subsidiaries of Mumtalakat are audited and monitored by the National Audit Office. In 2020, Mumtalakat received the highest-possible ranking in the Linaburg-Maduell Transparency Index for the seventh consecutive year, which specializes in ranking the transparency of sovereign wealth funds. However, Bahrain’s sovereign wealth fund does not follow the Santiago Principles.

Mumtalakat holds majority stakes in several firms. Mumtalakat invests 62 percent of its funds in the Middle East, 30 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 and agriculture, and industrial manufacturing.

Mumtalakat acts more like 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 state-owned airline, restructure and contain losses. A significant portion of Mumtalakat’s portfolio is invested in 29 Bahrain-based SOEs.

Mumtalakat did not directly contribute to the State Budget through 2016. However, beginning in September 2017, Mumtalakat annually contributed $53 million to the State Budget, which was increased to $106 million in the 2021-2022 State Budget.

The Ministry of Labour and Social Development in 2011 authorized the creation of the Bahrain Corporate Social Responsibility Society (BCSRS) as a social and cultural entity. Though there are no measures in Bahrain to compel businesses to follow codes of responsible business conduct, the BCSRS has sought to raise awareness of corporate social responsibility in the business community, and in 2021 hosted the GCC International Conference on Social Responsibility and Sustainable Development. The Society is a founding member of the Arab Association for Social Responsibility, which includes representatives of most Arab countries.

In 2003, Bahrain established a National Steering Committee on Corporate Governance to improve corporate governance practices. The MoICT promulgated the new Corporate Governance Code pursuant to Decree No. 19 of 2018. The new code expanded the base of companies obligated to implement responsible governance, as per the country’s Corporate Governance Code issued in 2010, to include all locally incorporated closed joint stock companies. The law stipulates minimum standards required for corporate governance and applies to all companies incorporated in Bahrain, other than companies that provide regulated financial services licensed by the CBB.

The GOB drafted a Corporate Governance Code to establish a set of best practices for corporate governance and provide protection for investors and other company stakeholders through compliance with those principles. The GOB enforces the code through a combined monitoring system comprising the MoICT, CBB, Bahrain Stock Exchange (BSE), Bahrain Courts, and other professional firms, including auditors, lawyers, and investment advisers. The code does not create new penalties for non-complying companies, but states that the MoICT (working closely with the CBB and the BSE) may exercise penalty powers granted to it under the Commercial Companies Law 2001.

The GOB has put in place advanced regulations and laws protecting labor rights, including vulnerable categories such as migrant workers from South and Southeast Asia. Despite legislative guarantees of certain rights, workers may be exposed to unfair labor practices such as unpaid overtime, denied vacation, or nonpayment of wages. Labor courts have not been fully effective in settling labor disputes between employers and employees. However, there have been reports of cases that were settled in favor of employees in Bahraini labor courts. Bahrain is a class five country on the International Trade Union Confederation (ITUC) Global Rights Index for freedom of association and workers’ rights, with the index ranging from one to five in ascending order from best to worst.

Beginning in 2022, all companies must integrate into the Wage Protection System (WPS) to pay employees’ salaries via prepaid card or financial transfers through a bank or financial institution approved by the Central Bank of Bahrain. Domestic workers and Flexi-Permit holders are exempt from the mandate. The LMRA has the authority to review employer-employee transactions in the system.

Law Number 35 of 2012, the Consumer Protection Law, ensures quality control, combats unfair business practices, and imposes sanctions for breaches of the law’s provisions. MoICT is highly effective in implementing the law.

Bahrain’s amended Corporate Governance Law enhances transparency and ethical business conduct standards. Among the changes, the GOB urged companies to submit audited ratified accounts to the MoICT.

The GOB does not maintain a National Contact Point (NCP) for the Organization for Economic Cooperation and Development (OECD) guidelines, nor does it participate in the Extractive Industries Transparency Initiative (EITI).

Additional Resources

Department of State

• Country Reports on Human Rights Practices;
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities;
• U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises; and;
• Xinjiang Supply Chain Business Advisory

Department of the Treasury

• OFAC Recent Actions

Department of Labor

• Findings on the Worst Forms of Child Labor Report;
• List of Goods Produced by Child Labor or Forced Labor;
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World and;
• Comply Chain

Climate Issues

Bahrain’s Vision 2030 outlines measures to protect the natural environment, reduce carbon emissions, minimize pollution, and promote sustainable energy. Bahrain’s Sustainable Energy Authority (SEA), within the Ministry of Electricity and Water Affairs, designs energy efficiency policies and promotes renewable energy technologies that support Bahrain’s long-term climate action and environmental protection ambitions. Endorsed by Bahrain’s Cabinet and monitored by SEA, the National Energy Efficiency Action Plan (NEEAP) and the National Renewable Energy Action Plan (NREAP) set national energy efficiency and national renewable energy 2025 targets of 6 and 5 percent, respectively, with the NREAP target increasing to 10 percent by 2035.

Senior GOB officials have advocated publicly to reduce corruption. Legislation countering corruption is outlined in Bahrain’s Economic Vision 2030 and National Anti-Corruption Strategy. Bahrain joined the United Nations Convention Against Corruption (UNCAC) in 2003. Bahrain ratified its penal code on combatting bribery in the public and private sectors in 2008, mandating criminal penalties for official corruption. In December 2013, the Ministry of Interior launched the National Strategy to Combat Corruption. Under Bahraini law, government employees 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 GOB officials to make financial disclosures. In 2010, Bahrain ratified the UNCAC and the Arab Convention Against Corruption, and in 2016, joined the International Anti-Corruption Academy. In December 2021, the Ministry of Interior General Directorate of Anti-Corruption and Economic and Electronic Security initiated 96 embezzlement, bribery and abuse of authority cases and three economic infractions that were referred from the Cabinet. In January 2022, the Public Prosecution Office referred seven corruption cases, 12 tax evasion and 10 money laundering cases to the courts, in addition to two tax evasion cases and five money laundering cases that have been pending since 2021. Giving or accepting a bribe is illegal. The GOB, however, has not fully implemented the law, and some officials reportedly continue to engage in corrupt practices with impunity.

The National Audit Office, established in 2002, is mandated to publish annual reports that highlight fiscal irregularities within GOB ministries and other public sector entities. The reports enable legislators to exercise oversight and call for investigations of fiscal discrepancies in GOB accounts. In 2013, the Crown Prince established an Investigation Committee to oversee cases noted in the National Audit Office annual report, which lists violations by GOB state bodies. On March 1, 2022, Deputy Prime Minister Shaikh Mohammed bin Mubarak Al Khalifa stressed the importance of consolidating responsibility and accountability to protect public funds and directed all agencies to cooperate with the National Audit Office.

The Minister for Follow-Up Affairs was designated in 2015 to execute recommendations made in that year’s National Audit Office annual report. The Crown Prince, who concurrently has served as Prime Minister since November 2020, urged all GOB entities and the COR to work closely to implement the report’s recommendations.

The Ministry of Interior’s Anti-Corruption and Economic and Electronic Security Directorate signed an MOU with the United Nations Development Programme to enhance the anti-corruption directorate’s capabilities.

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

Local non-governmental organizations generally do not focus on corruption-related issues, though civil society activists have spoken out against corrupt practices in the public sector.

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

Bahrain signed and ratified the United Nations 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:

Dr. Hussain al-Rubaie
President
Bahrain Transparency Society
P.O. Box 26059
Adliya, Bahrain
Phone: +973 39642452

Bahrain is an open, liberal Gulf state that enjoys close diplomatic ties with the United States. Bahrain has experienced intermittent cycles of violence, with the most recent period of unrest taking place in 2011-2014. In 2017 and 2018, the GOB dissolved the country’s two largest opposition political societies and closed the country’s only opposition-leaning independent newspaper in 2017. On May 13, 2018, the Parliament passed a law banning members of political societies dissolved by the GOB from running in elections that took place later that year. Since 2017, protests centered on sociopolitical or economic demands have occurred in isolated neighborhoods but have largely been controlled by GOB authorities. Elections of the popularly elected lower house of the National Assembly, also known as the Council of Representatives, are scheduled for November 2022.

Neither demonstrators nor violent extremists have generally targeted Americans or other Western expatriates. American citizens visiting Bahrain and companies interested in investing in Bahrain should visit the Embassy’s website to receive the most up-to-date information about the security situation and register with the Embassy’s consular section.

In 2006, the King ratified the Labor Reforms Law, which established the LMRA and the capacity-building labor fund known as Tamkeen. The law imposed a monthly fee of BD 10 ($26.67) on each expatriate employed by any company registered in Bahrain. The revenues collected under this program are earmarked to provide job training for Bahraini nationals. Companies pay BD 5 ($13.35) for the first five foreign workers and BD 10 ($26.67) for every additional employee. The COR regularly discusses amending the fee structure.

Bahrain’s Labor Law No. 36 of 2012 guarantees employees’ rights by requiring clear contractual terms for employing domestic staff, and prohibiting discrimination practices of wages based on gender, ethnicity, religion, or language. Bahrain’s Labor Law has introduced enhancements for annual leave, maternity leave, sick leave entitlement, and resolution of labor disputes.

Expatriate workers should be registered by their employer with LMRA to receive a valid residence permit and work permit. Employers are prohibited from employing foreigners without a valid work permit. To work in Bahrain, foreign employees should be medically fit, have entered the country lawfully, possess a valid passport, and retain residence and work permits.

As of the first quarter of 2021, the LMRA estimated Bahrain’s labor force in the private sector to be 522,164 foreign workers (including housekeepers). Eighty percent of Bahrain’s total workforce is comprised of foreigners, the majority being unskilled construction workers. According to Bahrain’s Information and eGovernment Authority, foreigners comprised about 53 percent of Bahrain’s population in 2020.

The GOB’s primary initiative for combating unemployment among Bahraini nationals is “Bahrainization,” a policy that mandates employers hire Bahraini nationals instead of foreign workers.

Companies occasionally experience difficulty obtaining mandatory work permits and residence visas for expatriate employees due to “Bahrainization” policies. Bahrain’s Ministry of Labor and Social Development reported that 2,775 private companies have implemented the “Bahrainization” system as of June 2020. According to the Minister of Labour and Social Development, over 26,000 jobseekers and 12,000 recent graduates were hired in 2021. The GOB stipulated through Decree No. 1 of 2019 that priority will be given to Bahraini physicians, technicians, and nurses with the required qualifications and experience. Since July 2020, the LMRA requires private sector companies to advertise job vacancies in local newspapers for two weeks and provide Bahraini nationals with priority access to applying, before considering expatriates. “Bahrainization” requirements may be temporarily waived for FDI in Bahrain’s special economic zones, including BIIP and BLZ.

According to the LMRA, as of March 2021 there are nearly 50,000 out-of-status workers in Bahrain – that is, workers without a visa or valid work permit. This number is down from nearly 65,000 out-of-status workers in early 2020. In April 2020, the GOB implemented a temporary amnesty to allow thousands of out-of-status workers to regularize their immigration status. In August 2020, the Cabinet approved new regulations for the flexible work permit, also known as the “flexi” permit, which allows foreign workers to live freely and work in a non-specialized occupation without a sponsor for a renewable period of one to two years. The new regulations empower LMRA to increase inspection visits on “flexi” permit employers to ensure they are not working in professional activities that require a specialized work permit.

The Labor Law of 2012 allows an employer to terminate an employee in the event of the total or partial closure of an establishment. The employer must render a notice and reason for termination to the Ministry of Labour and Social Development at least 30 days prior to serving notice of termination to the affected employee. The amount of compensation due an employee for termination is set by law and is based in part on length of service.

In September 2021, migrant workers contracted by Bahrain Petroleum Company (BAPCO) gathered to protest poor living and working conditions. An agreement was reached among the employer, contractor, and workers.

In 2007, the Minister of Labour and Social Development introduced an unemployment allowance to be paid from a general labor fund. The fund is financed by deducting one percent from the wages of all workers and is the first such program in the GCC.

In 2002, the King approved the Workers Trade Union Law of 2002 that recognizes the right of workers to collectively organize, to form trade unions, and to strike, with some restrictions. The law prohibits workers from striking in certain sectors deemed vital by the Prime Minster, including security, aviation, ports, hospitals, and utilities. The law does not provide for the right to collective bargaining. With the exception of domestic workers, foreign employees are allowed to join trade unions. The law prohibits employers from dismissing an employee for trade union activities. In 2011, the King issued a decree that changed Bahrain’s labor law as it pertained to trade unions and federations. Union leadership criticized the new law for provisions that appear to inhibit freedom of association. The 2012 law prohibits multi-sectoral labor federations and prohibits individuals convicted of felonies from holding union leadership posts. While the amendment allowed for the formation of multiple trade union federations, it gave the Ministry of Labour and Social Development the right to select the federation to represent the country’s workers in international fora and in national-level bargaining.

In 2010, the U.S. Department of Labor and Bahrain Ministry of Labour and Social Development convened the first meeting of the U.S.-Bahrain Sub-Committee on Labor Affairs, as established under the U.S.-Bahrain FTA. At the meeting, they reaffirmed their obligations under the FTA related to internationally recognized labor rights, including their obligations as members of the International Labor Organization (ILO) and commitments stated in the ILO Declaration on Fundamental Principles and Rights at Work (1998).

Bahrain has maintained “Tier 1” status in the U.S. Department of State’s Trafficking in Persons Report since 2018. There were no instances of child labor and no violence against labor rights defenders during the most recent reporting period. Forced labor including nonpayment of wages, debt bondage, involuntary sex work, and other instances of human trafficking are documented in the report.

During the civil unrest of 2011, Bahraini employees were dismissed from private and public-sector jobs. In June 2011, the AFL-CIO filed a petition with the Department of Labor accusing Bahrain of violating the labor rights terms of the U.S.-Bahrain FTA. The November 2011 Bahrain Independent Commission of Inquiry report concluded that most of these dismissals were motivated by retaliation against employees suspected of being involved in civil demonstrations. By the end of 2012, the majority of the dismissed workers in the public and private sectors were reinstated, with the GOB working to resolve the remaining cases. In March 2014, the Minister of Labour and Social Development, Bahrain Chamber of Commerce and Industry, and the General Federation of Bahrain Trade Unions signed a tripartite agreement to resolve the remaining worker reinstatement cases. Subsequently, the ILO dropped a related complaint it initiated in 2011. Bilateral consultations are ongoing between the U.S. and Bahrain – invoked under the Labor Chapter of the FTA in response to the 2011 AFL-CIO complaint.

Manama Commercial Office
U.S. Embassy Manama
P.O. Box 26431
Bldg. 979, Rd. 3119
Block 331, Zinj
Kingdom of Bahrain
Telephone No. +973 1724-2700
E-mail address: manamacommercial@state.gov 

Bangladesh actively seeks foreign investment. Sectors with active investments from overseas include agribusiness, garment and textiles, leather and leather goods, light manufacturing, electronics, light engineering, energy and power, ICT, plastic, healthcare, medical equipment, pharmaceutical, ship building, and infrastructure. 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.
• Security printing (items such as currency, visa foils, and tax stamps).

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.
• Issues approvals of foreign loans and supplier credits.
• Provides aftercare facilities.

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, there are three other Investment Promotion Agencies (IPAs) responsible for promoting investments in their respective jurisdictions.

• Bangladesh Export Processing Zone Authority (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. Website:
• Bangladesh Economic Zones Authority (BEZA) plans to establish approximately 100 Economic Zones (EZs) throughout the country over the next several years. Site selections for 97 EZs have been completed as of February 2022, of which 10 private EZs are already licensed and operational while development of several other public and private sector EZs are underway. While EPZs accommodate exporting companies only, EZs are open for both export- and domestic-oriented companies. Website:
• Bangladesh Hi-Tech Park Authority (BHTPA) is responsible for attracting and facilitating investments in the high-tech parks Bangladesh is establishing across the country. Website:

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:

• Fishing in the deep sea.
• Bank/financial institutions in the private sector.
• Insurance companies in the private sector.
• Generation, supply, and distribution of power in the private sector.
• Exploration, extraction, and supply of natural gas/oil.
• Exploration, extraction, and supply of coal.
• Exploration, extraction, and supply of other mineral resources.
• Large-scale infrastructure projects (e.g., elevated expressway, monorail, economic zone, inland container depot/container freight station).
• Crude oil refinery (recycling/refining of lube oil used as fuel).
• Medium and large industries using natural gas/condensate and other minerals as raw material.
• Telecommunications service (mobile/cellular and land phone).
• Satellite channels.
• Cargo/passenger aviation.
• Sea-bound ship transport.
• Seaports/deep seaports.
• VOIP/IP telephone.
• 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. 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 approval 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.

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   

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. BIDA offers 56 services under its OSS as of February 2022and has a plan to expand to 154 services covering 35 agencies. The GOB 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, while improving, can at times 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, environmental clearance, outward remittance approval, 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 generally takes one or two days to complete. The process for trade licensing, tax registration, and VAT registration required as of 2021 seven days, one day, and one week respectively.

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 Foreign Exchange Regulation Act of 1947 by adding a “conditional provision” that permits outbound investment for export-related enterprises. Private sector contacts note the few international investments approved by the Bangladesh Bank have been limited to large exporting companies with international experience. However, the government is considering an overseas investment guideline to allow outbound investment opportunities for local exporters and any company operating in the domestic market for 10 years. This will allow local companies and NGOs with outbound investments to enlist in foreign stock markets. However, Bangladesh’s total outbound investment in a single fiscal year would be capped at 5 percent of the central bank’s foreign exchange reserves for that fiscal year under the regulation being considered. Bangladesh Investment Development Authority (BIDA) has been working to formulate a workable policy regarding this since 2016.

Since 1989, the government has gradually moved to decrease regulatory obstruction of private business. Various chambers of commerce have called for privatization and for a greater voice for the private sector in government decisions, but at the same time many chambers support protectionism and subsidies for their own industries. The result is policy and regulations which are often unclear, inconsistent, or little publicized. Registration and regulatory processes are frequently alleged by businesses to be used as rent-seeking opportunities. The major rule-making and regulatory authority exists at the national level under each Ministry with many final decisions being made at the top-most levels, including the Prime Minister’s Office (PMO). The PMO is actively engaged in directing policies, as well as foreign investment in government-controlled projects.

Bangladesh has made incremental progress in using information technology both to improve the transparency and efficiency of some government services and develop independent agencies to regulate the energy and telecommunication sectors. Some investors cited government laws, regulations, and lack of implementation as impediments to investment. The government has historically limited opportunities for the private sector to comment on proposed regulations. In 2009, Bangladesh adopted the Right to Information Act providing for multilevel stakeholder consultations through workshops or media outreach. Although the consultation process exists, it is still weak and in need of further improvement.

The Environment Conservation Act 1995 (ECA ’95) as amended in 2010 and the Biodiversity Act of 2018 are the main acts governing environmental protection in Bangladesh. The ECA ’95 replaced the earlier environment pollution control ordinance of 1992 and provides the legal basis for Environment Conservation Rules, 1997 (ECR’97). The objective of the Biodiversity Act is equitable sharing of benefits arising out of the use of biological resources. The main objectives of ECA’95 are conservation of the natural environment, improvement of environmental standards, and control and mitigation of environmental pollution. According to the act, all industrial projects require before being undertaken an Environmental Clearance Certificate from the Director General. In issuing the certificate, the projects are classified into the following four categories – Green, Orange-A, Orange-B, and Red.

Environmental Clearance for the Green category is through a comparatively simple procedure. In the case of Orange-A, Orange-B and Red Categories, site clearance is mandatory at the beginning, then Environmental Impact Assessment approval and finally Environmental Clearance is issued. The Environment Clearance is to be renewed after three years for the Green category and one year for Orange-A, Orange-B and Red categories. Red Category projects require an Environmental Impact Statement prior to approval.

Ministries and regulatory agencies do not generally publish or solicit comments on draft proposed legislation or regulations. However, several government organizations, including the Bangladesh Bank (the central bank), Bangladesh Securities and Exchange Commission, BIDA, the Ministry of Commerce, and the Bangladesh Telecommunications Regulatory Commission have occasionally posted draft legislation and regulations online and solicited feedback from the business community. In some instances, parliamentary committees have also reached out to relevant stakeholders for input on draft legislation. The media continues to be the main information source for the public on many draft proposals. There is also no legal obligation to publish proposed regulations, consider alternatives to proposed regulation, or solicit comments from the general public.

The government printing office, The Bangladesh Government Press ( http://www.dpp.gov.bd/bgpress/ ), publishes the “Bangladesh Gazette” every Thursday and Extraordinary Gazettes as and when needed. The Gazette provides official notice of government actions, including issuance of government rules and regulations and the transfer and promotion of government employees. Laws can also be accessed at  http://bdlaws.minlaw.gov.bd/ .

Bangladesh passed the Financial Reporting Act of 2015 which created the Financial Reporting Council in 2016 aimed at establishing transparency and accountability in the accounting and auditing system. The country follows Bangladesh Accounting Standards and Bangladesh Financial Reporting Standards, which are largely derived from International Accounting Standards and International Financial Reporting Standards. However, the quality of reporting varies widely. Internationally known firms have begun establishing local offices in Bangladesh and their presence is positively influencing the accounting norms in the country. Some firms can provide financial reports audited to international standards while others maintain unreliable (or multiple) sets of accounting records. Regulatory agencies do not conduct impact assessments for proposed regulations; consequently, regulations are often not reviewed based on data-driven assessments. Not all national budget documents are prepared according to internationally accepted standards.

The Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) aims to integrate regional regulatory systems among Bangladesh, India, Burma, Sri Lanka, Thailand, Nepal, and Bhutan. However, efforts to advance regional cooperation measures have stalled in recent years and regulatory systems remain uncoordinated.

Local laws are based on the English common law system but most fall short of international standards. The country’s regulatory system remains weak and many of the laws and regulations are not enforced and standards are not maintained.

Bangladesh has been a member of the World Trade Organization (WTO) since 1995. WTO requires all signatories to the Agreement on Technical Barriers to Trade (TBT) to establish a National Inquiry Point and Notification Authority to gather and efficiently distribute trade-related regulatory, standards, and conformity assessment information to the WTO Member community. The Bangladesh Standards and Testing Institute (BSTI) has been working as the National Enquiry Point for the WTO-TBT Agreement since 2002. There is an internal committee on WTO affairs in BSTI and it participates in notifying WTO activities through the Ministry of Commerce and the Ministry of Industries.

General Contact for WTO-TBT National Enquiry Point:
Email: bsti_std@bangla.net;  bsti_ad@bangla.net 
Website:  http://www.bsti.gov.bd/  

Focal Point for TBT:
Mr. Md. Golam Baki,Deputy Director (Certification Marks), BSTI
Email: bakibsti@gmail.comTel: +88-02-48116665Cell: +8801799828826, +8801712240702

Focal Point for other WTO related matters, except sanitary and phytosanitary systems:
Mr. Md. Hafizur Rahman,Director General, WTO Cell, Ministry of Commerce
Email: dg.wto@mincom.gov.bdTel: +880-2-9545383Cell: +88 0171 1861056

Mr. Mohammad Ileas Mia,Director-1, WTO Cell, Ministry of Commerce
Email: director1.wto@mincom.gov.bdTel: +880-2-9540580Cell: +88 01786698321

Bangladesh is a common law-based jurisdiction. Many of the basic laws, such as the penal code, civil and criminal procedural codes, contract law, and company law are influenced by English common law. However, family laws, such as laws relating to marriage, dissolution of marriage, and inheritance are based on religious scripts and therefore differ among religious communities. The Bangladeshi legal system is based on a written constitution and the laws often take statutory forms that are enacted by the legislature and interpreted by the higher courts. Ordinarily, executive authorities and statutory corporations cannot make any law, but can make by-laws to the extent authorized by the legislature. Such subordinate legislation is known as rules or regulations and is also enforceable by the courts. However, as a common law system, the statutes are short and set out basic rights and responsibilities but are elaborated by the courts in the application and interpretation of those laws. The Bangladeshi judiciary acts through: (1) The Superior Judiciary, having appellate, revision, and original jurisdiction; and (2) The Sub-Ordinate Judiciary, having original jurisdiction.

Since 1971, Bangladesh has updated its legal system concerning company, banking, bankruptcy, and money loan court laws, and other commercial laws. An important impediment to investment in Bangladesh is its weak and slow legal system in which the enforceability of contracts is uncertain. The judicial system does not provide for interest to be charged in tort judgments, which means procedural delays carry no penalties. Bangladesh does not have a separate court or court division dedicated solely to commercial cases. The Joint District Judge court (a civil court) is responsible for enforcing contracts.

Some notable commercial laws include:

• The Contract Act, 1872 (Act No. IX of 1930).
• The Sale of Goods Act, 1930 (Act No. III of 1930).
• The Partnership Act, 1932 (Act No. IX of 1932).
• The Negotiable Instruments Act, 1881 (Act No. XXVI of 1881).
• The Bankruptcy Act, 1997 (Act No. X of 1997).
• The Arbitration Act, 2001 (Act No. I of 2001).

The judicial system of Bangladesh has never been completely independent from interference by the executive branch of the government. In a significant milestone, the government in 2007 separated the country’s judiciary from the executive but the executive retains strong influence over the judiciary through control of judicial appointments. Other pillars of the justice system, including the police, courts, and legal profession, are also closely aligned with the executive branch. In lower courts, corruption is widely perceived as a serious problem. Regulations or enforcement actions are appealable under the Appellate Division of the Supreme Court.

Major laws affecting foreign investment include: the Foreign Private Investment (Promotion and Protection) Act of 1980, the Bangladesh Export Processing Zones Authority Act of 1980, the Companies Act of 1994, the Telecommunications Act of 2001, and the Bangladesh Economic Zones Act of 2010.

Bangladesh industrial policy offers incentives for “green” (environmental) high-tech or “transformative” industries. It allows foreigners who invest $1 million or transfer $2 million to a recognized financial institution to apply for Bangladeshi citizenship. The GOB will provide financial and policy support for high-priority industries (those creating large-scale employment and earning substantial export revenue) and creative industries – architecture, arts and antiques, fashion design, film and video, interactive laser software, software, and computer and media programming. Specific importance is given to agriculture and food processing, RMG, ICT and software, pharmaceuticals, leather and leather products, and jute and jute goods.

In addition, Petrobangla, the state-owned oil and gas company, has modified its production sharing agreement contract for offshore gas exploration to include an option to export gas. In 2019, Parliament approved the Bangladesh Flag Vessels (Protection) Act 2019 with a provision to ensure Bangladeshi flagged vessels carry at least 50 percent of foreign cargo, up from 40 percent. In 2020, the Ministry of Commerce amended the digital commerce policy to allow fully foreign-owned e-commerce companies in Bangladesh and remove a previous joint venture requirement.

The One Stop Service (OSS) Act of 2018 mandated the four IPAs to provide OSS to local and foreign investors in their respective jurisdictions. The move aims to facilitate business services on behalf of multiple government agencies to improve ease of doing business. In 2020, BIDA issued time-bound rules to implement the Act of 2018. Although the IPAs have started to offer a few services under the OSS, corruption and excessive bureaucracy have held back the complete and effective roll out of the OSS. BIDA has a “one-stop” website that provides information on relevant laws, rules, procedures, and reporting requirements for investors at:  http://www.bida.gov.bd/ .

Aside from information on relevant business laws and licenses, the website includes information on Bangladesh’s investment climate, opportunities for businesses, potential sectors, and how to do business in Bangladesh. The website also has an eService Portal for Investors which provides services such as visa recommendations for foreign investors, approval/extension of work permits for expatriates, approval of foreign borrowing, and approval/renewal of branch/liaison and representative offices.

Bangladesh formed an independent agency in 2011 called the “Bangladesh Competition Commission (BCC)” under the Ministry of Commerce. Parliament then passed the Competition Act in 2012. However, the BCC has not received sufficient resources to operate effectively.

In 2018, the Bangladesh Telecommunication Regulatory Commission (BTRC) finalized Significant Market Power (SMP) regulations to promote competition in the industry. In 2019, BTRC declared the country’s largest telecom operator, Grameenphone (GP), the first SMP based on its revenue share of more than 50 percent and customer shares of about 47 percent. Since the declaration, the BTRC has attempted to impose restrictions on GP’s operations, which GP has challenged in the judicial system.

Since the Foreign Investment Act of 1980 banned nationalization or expropriation without adequate compensation, Bangladesh has not nationalized or expropriated property from foreign investors. In the years immediately following independence in 1971, widespread nationalization resulted in government ownership of more than 90 percent of fixed assets in the modern manufacturing sector, including the textile, jute and sugar industries and all banking and insurance interests, except those in foreign (but non-Pakistani) hands. However, the government has taken steps to privatize many of these industries since the late 1970s and the private sector has developed into a main driver of the country’s sustained economic growth.

Many laws affecting investment in Bangladesh are outdated. Bankruptcy laws, which apply mainly to individual insolvency, are sometimes disregarded in business cases because of the numerous falsified assets and uncollectible cross-indebtedness supporting insolvent banks and companies. A Bankruptcy Act was passed by Parliament in 1997 but has been ineffective in addressing these issues. Some bankruptcy cases fall under the Money Loan Court Act-2003 which has more stringent and timely procedures.

Current regulations permit a tax holiday for designated “thrust” (strategic) sectors and infrastructure projects established between July 1, 2019 and June 30, 2024. The thrust sectors enjoy tax exemptions graduated from 90 percent to 20 percent over a period of five to ten years depending on the zone where the business is established. Industries set up in Export Processing Zones (EPZs) and Special Economic Zones (SEZs) are also eligible for tax holidays. Details of fiscal and non-fiscal incentives are available on the following websites:

BIDA: http://bida.gov.bd/?page_id=146 

BEPZA: https://www.bepza.gov.bd/content/incentives-facilities 

BEZA: https://www.beza.gov.bd/investing-in-zones/incentive-package/ 

Strategic sectors eligible for tax exemptions include: certain pharmaceuticals, automobile manufacturing, contraceptives, rubber latex, chemicals or dyes, certain electronics, bicycles, fertilizer, biotechnology, commercial boilers, certain brickmaking technologies, compressors, computer hardware, home appliances, insecticides, pesticides, petrochemicals, fruit and vegetable processing, textile machinery, tissue grafting, tire manufacturing industries, agricultural machineries, furniture, leather and leather goods, cell phones, plastic recycling, and toy manufacturing.

Eligible physical infrastructure projects are allowed tax exemptions graduated from 90 percent to 20 percent over a period of 10 years. Physical infrastructure projects eligible for exemptions include deep seaports, elevated expressways, road overpasses, toll roads and bridges, EPZs, gas pipelines, information technology parks, industrial waste and water treatment facilities, liquefied natural gas (LNG) terminals, electricity transmission, rapid transit projects, renewable energy projects, and ports.

Independent non-coal fired power plants (IPPs) commencing production after January 1, 2015 are granted a 100 percent tax exemption for five years, a 50 percent exemption for years six to eight, and a 25 percent exemption for years nine to 10. For new coal-fired IPPs commencing production before June 30, 2023 (provided operators contracted with the government before June 30, 2020), the tax exemption rate is 100 percent for the first 15 years of operations. For power projects, import duties are waived for imports of capital machinery and spare parts.

The valued-added tax (VAT) rate on exports is zero. For companies exporting only, duties are waived on imports of capital machinery and spare parts. For companies primarily exporting (80 percent of production and above), an import duty rate of 1 percent is charged for imports of capital machinery and spare parts identified and listed in notifications to relevant regulators. Import duties are also waived for EPZ industries and other export-oriented industries for imports of raw materials consumed in production.

The GOB provides special incentives to encourage non-resident Bangladeshis to invest in the country. Incentives include the ability to buy newly issued shares and debentures in Bangladeshi companies. Further, non-resident Bangladeshis can maintain foreign currency deposits in Non-resident Foreign Currency Deposit (NFCD) accounts.

In the past several years, U.S. companies have experienced difficulties securing the investment incentives initially offered by Bangladesh. Several companies have reported instances where infrastructure guarantees (ranging from electricity to gas connections) are not fully delivered or tax exemptions are delayed, either temporarily or indefinitely. These challenges are not specific to U.S. or foreign companies and reflect broader challenges in the business environment.

Bangladesh government does not provide any specific incentives for businesses owned by women.

In 2020, the Government of Bangladesh established that all power generation companies will enjoy full tax exemption with the exception of coal-based generation. This incentive will be available to all power generation companies who start operation before December 31, 2022. The government is seeking to increase use of renewable energy and has offered incentives such as tax breaks for net-metered solar rooftop installation.

Under the Bangladesh Export Processing Zones Authority Act of 1980, the government established the first EPZ in Chattogram in 1983. Additional EPZs now operate in Dhaka (Savar), Mongla, Ishwardi, Cumilla, Uttara, Karnaphuli (Chattogram), and Adamjee (Dhaka). Korean investors are also operating a separate and private EPZ in Chattogram.

Joint ventures, wholly foreign-owned investments, and wholly Bangladeshi-owned companies are all permitted to operate and enjoy equal treatment in the EPZs.

In 2010, Bangladesh enacted the Special Economic Zone Act allowing for the creation of privately owned SEZs to produce for export and domestic markets. The SEZs provide special fiscal and non-fiscal incentives to domestic and foreign investors in designated underdeveloped areas throughout Bangladesh.

Although land, whether for purchase or lease, is often critical for investment and as security against loans, antiquated real property laws and poor record-keeping systems can complicate land and property transactions. Instruments take effect from the date of execution, not the date of registration, so a bona fide purchaser can often be uncertain of title. Land registration records have been historically prone to competing claims. Land disputes are common, and both U.S. companies and citizens have filed complaints about fraudulent land sales. For example, sellers fraudulently claiming ownership have transferred land to good faith purchasers while the actual owners were living outside of Bangladesh. In other instances, U.S.-Bangladeshi dual citizens have purchased land from legitimate owners only to have third parties make fraudulent claims of title to extort settlement compensation. A 2015 study by leading Bangladeshi think tank Policy Research Institute (PRI) revealed one in seven households in the country faced land disputes. Bangladesh ranks 184 among 190 countries for ease of registering property in the World Bank’s Doing Business 2020 Report.

While property owners can obtain mortgages, parties generally avoid registering mortgages, liens, and encumbrances due to the high cost of stamp duties (i.e., transaction taxes based on property value) and other charges. There are also concerns that non-registered mortgages are often unenforceable.

Article 42 of the Bangladesh Constitution guarantees a right to property for all citizens, but property rights are often not protected due to a weak judicial system. The Transfer of Property Act of 1882  and the Registration Act of 1908  are the two main laws regulating transfer of property in Bangladesh but these laws have no specific provisions covering foreign and/or non-resident investors. Currently, foreigners and non-residents can incorporate a company with the Registrar of Joint Stock Companies and Firms. The company would be considered a local entity and would be able to buy land in its name.

Intellectual property rights (IPR) and rights enforcement is not a priority for the Government of Bangladesh and it has not invested heavily in IPR protection. As a result, counterfeit goods are readily available in Bangladesh, and a significant portion of business software is pirated. Several U.S. firms, including fast-moving consumer goods manufacturers, film studios, pharmaceutical products, apparel goods, and software firms, have reported systematic violations of their IPRs. Investors note police are willing to investigate counterfeit goods producers when informed but are unlikely to initiate independent investigations.

The Government of Bangladesh has recently taken steps to develop its IP system. In February 2021, the Cabinet gave its final approval of a draft Bangladesh Patents Bill and in-principal approval of a draft Bangladesh Industry-Designs Bill to replace the Patents and Designs Act 1911. The bills aim to make necessary updates to existing regulations and improve IPR in Bangladesh. However, as of March 2022 the potential impact of the bills remains uncertain because the government had yet to make the drafts public for stakeholder review. The bills require approval by the Parliament before going into effect. A National IP policy was developed in 2018 but has not been fully implemented. Public awareness of IPR is slowly growing through efforts from industry associations like the Intellectual Property Rights Association of Bangladesh, AMCHAM, Bangladesh, and REACT. Bangladesh is a member of the World Intellectual Property Organization (WIPO) and acceded to the Paris Convention on Intellectual Property in 1991.

Bangladesh has slowly made progress toward bringing its legislative framework into compliance with the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). The government enacted a Copyright Law in 2000 (amended in 2005), a Trademarks Act in 2009, and a Geographical Indication of Goods (Registration and Protection) Act in 2013, in addition to the recent action on bills replacing the Patents and Designs Act.

Several government agencies are empowered to act against counterfeiting, including the National Board of Revenue (NBR), Customs, Mobile Courts, the Rapid Action Battalion (RAB), and the Bangladesh Police. However, enforcement agencies do not have appropriate resources nor are given the appropriate attention or priority to execute complaints filed by IP right holders. Accordingly, enforcement actions such as raids and seizures have become costly, time-consuming, and often nonproductive. In a positive development, in December 2019, the National Board of Revenue implemented the Intellectual Property Rights of Receipts of Imports: Rules of Implementation 2018. The rules intend to help stakeholders, though the bond requirement, for taking any enforcement action is a concern for the stakeholders. As per Rule 5 of the Intellectual Property Rights (Imported Goods) Enforcement Rules,2007, Industry is required to execute a specific bond of an amount equal to 110 percent of the value of the goods and furnish security in the form of a Bank Guarantee of an amount equal to 25 percent of the bond value within three days from date of confiscation of the goods. It is an issue as it is challenging to get all internal approval and get the bond executed within three days. Secondly, the bond is on hold until the case is disposed of, and thirdly it isn’t easy to do the valuation of a product.

The Department of National Consumer Rights Protection (DNCRP) is charged with tracking and reporting on counterfeit goods, and the NBR/Customs tracks counterfeit goods seizures at ports of entry. However, reports are not publicly available.

Resources for Intellectual Property Rights Holders:

John Cabeca
Intellectual Property Counselor for South Asia
U.S. Patent and Trademark Office
Foreign Commercial Service
email: john.cabeca@trade.gov
website: https://www.uspto.gov/ip-policy/ip-attache-program
tel: +91-11-2347-2000

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .

Capital markets in Bangladesh are still developing, and the financial sector remains highly dependent on bank lending. Current regulatory infrastructure inhibits the development of a tradeable bond market.

Bangladesh is home to the Dhaka Stock Exchange (DSE) and the Chittagong Stock Exchange (CSE), both of which are regulated by the Bangladesh Securities and Exchange Commission (BSEC), a statutory body formed in 1993 and attached to the Ministry of Finance. The DSE market capitalization stood at $64.8 billion at the end of January 2022, rising 16.3 percent year-over-year as stock prices rose amid speculative behavior and increased liquidity due to relaxed monetary policy.

Although the Bangladeshi government has a positive attitude toward foreign portfolio investors, participation in the exchanges remains low due to what is still limited liquidity for shares 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 invigorate the bond market. To this end, BSEC introduced three rules: 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 – the Central Counterparty Bangladesh Limited (CCBL) – and promoting private equity and venture capital firms under the 2015 Alternative Investment Rules. In 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,” providing 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 2012 but the overall quality of corporate governance remains substandard. Demutualization of both the DSE and CSE was completed in 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 on the stock exchanges’ governance standards remains low.

The Demutualization Act 2013 also directed DSE to pursue a strategic investor who would acquire a 25 percent stake in the bourse. Through a bidding process DSE selected a consortium of the Shenzhen and Shanghai stock exchanges in China as its strategic partner, with the consortium buying the 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.

The Bangladesh Bank (BB) acts as the central bank of Bangladesh. It was established through the enactment of the Bangladesh Bank Order of 1972. General supervision and strategic direction of the BB has been entrusted to a nine-member Board of Directors, which is headed by the BB Governor. A list of the bank’s departments and branches is on its website: https://www.bb.org.bd/aboutus/dept/depts.php .

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 61 “scheduled” banks in Bangladesh operate under the control and supervision of the central bank as per the Bangladesh Bank Order of 1972. The scheduled banks, include six SOCBs, three specialized government banks established for specific objectives such as agricultural or industrial development or expatriates’ welfare, 43 PCBs, and nine FCBs as of February 2021. 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 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 a state-owned commercial bank, and the rest are private financial institutions. Major sources of funds for these financial institutions are term deposits (at least three months’ tenure), credit facilities from banks and other financial institutions, and call money, as well as bonds and securitization.

Unlike banks, FIs are prohibited from:

• Issuing checks, pay-orders, or demand drafts.
• Receiving demand deposits.
• Involvement in foreign exchange financing.

Microfinance institutions (MFIs) remain the dominant players in rural financial markets. The Microcredit Regulatory Authority (MRA), the primary regulator of this sector, oversees 746 licensed microfinance institutions as of October 2021, excluding Grameen Bank which is governed under a separate law. In 2020, the MRA-listed microfinance institutions had 33.3 million members while Grameen Bank had an additional 9.3 million members.

The banking sector has had a mixed record of performance over the past several years. Industry experts have reported a rise in risky assets because of poor governance as well as the economic fallout of the COVID-19 pandemic. Total domestic credit stood at 50.4 percent of gross domestic product at end of November 2021. The state-owned Sonali Bank is the largest bank in the country while Islami Bank Bangladesh and Standard Chartered Bangladesh are the largest local private and foreign banks respectively. The gross non-performing loan (NPL) ratio was 8.1 percent at the end of September 2021, down from 8.9 percent in September 2020. However, the decline in the NPLs was primarily caused by regulatory forbearance rather than actual reduction of stressed loans. At 20.1 percent SCBs had the highest NPL ratio, followed by 11.4 percent of Specialized Banks, 5.5 percent of PCBs, and4.1 percent of FCBs as of September 2021.

In 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 cautioned 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 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 NRTA accounts. In 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).

In 2015, the Bangladesh Finance Ministry announced it was exploring establishing a sovereign wealth fund in which to invest a portion of Bangladesh’s foreign currency reserves. In 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 by the Finance Ministry.

The business community is increasingly aware of and engaged in responsible business conduct (RBC) activities with multinational firms leading the way. While many firms in Bangladesh fall short on RBC activities and instead often focus on philanthropic giving, some of the leading local conglomerates have begun to incorporate increasingly rigorous environmental and safety standards in their workplaces. U.S. companies present in Bangladesh maintain diverse RBC activities. Consumers in Bangladesh are generally less aware of RBC, and consumers and shareholders exert little pressure on companies to engage in RBC activities.

While many international firms are aware of OECD guidelines and international best practices concerning RBC, many local firms have limited familiarity with international standards. There are currently two RBC NGOs active in Bangladesh:

• CSR Bangladesh:
• CSR Centre Bangladesh:

Along with the Bangladesh Enterprise Institute, the CSR Centre is the joint focal point for the United Nations Global Compact (UNGC) and its corporate social responsibility principles in Bangladesh. The UN Global Compact is the world’s largest corporate citizenship and sustainability initiative. The Centre is a member of a regional RBC platform called the South Asian Network on Sustainability and Responsibility, with members including Bangladesh, Afghanistan, India, Nepal, and Pakistan.

While several NGOs have proposed National Corporate Social Responsibility Guidelines, the government has yet to adopt any such standards for RBC. As a result, the government encourages enterprises to follow generally accepted RBC principles but does not mandate any specific guidelines.

Bangladesh has natural resources, but it has not joined the Extractive Industries Transparency Initiative (EITI). The country does not adhere to the Voluntary Principles on Security and Human Rights.

Department of State

• Country Reports on Human Rights Practices;
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities;
• U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises; and;
• Xinjiang Supply Chain Business Advisory 

Department of the Treasury

• OFAC Recent Actions

Department of Labor

• Findings on the Worst Forms of Child Labor Report;
• List of Goods Produced by Child Labor or Forced Labor;
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World and;
• Comply Chain.

Bangladesh is one of the most climate-vulnerable countries in the world. The government established the Bangladesh Climate Change Strategy and Action Plan (BCCSAP) to address the adverse effects of climate change. In this plan, 44 programs under six thematic areas were identified. The Bangladesh Climate Change Trust Fund (BCCTF) was created in 2010 from the Government’s own revenue sources to combat climate change impacts as well as to implement the BCCSAP. The BCCTF has funded $449.3M in approximately 800 projects to implement key aspects of the BCCSAP. Taking into account the challenges of environment, environment and biodiversity conservation and management, the government has finalized the National Environment Policy 2018 and published it in 2019 with the aim of developing the overall environmental conservation management of the country. The Department of Environment, under the Ministry of Environment, Forest and Climate Change, has adopted a “blue-economy” action plan to conserve marine environment, prevent marine pollution, ensure environmental management, and conserve marine and coastal biodiversity while ensuring marine resource extraction and mainstream development activities.

Bangladesh aims to reach 30 percent renewable energy by 2030 and at least 40 percent by 2041. Bangladesh launched the Mujib Climate Prosperity Plan (MCPP) in November 2021. The MCPP is built on the foundation of the Eighth Five Year Plan (2021-2025) and shifts Bangladesh’s trajectory from one of vulnerability to resilience and then prosperity. The plan highlights engagement with domestic implementation partners including the Public Private Partnership (PPP) Authority and the Bangladesh Investment Development Authority (BIDA). The MCPP expects investment opportunities of approximately $80 billion in resilient projects in energy, water, transport, supply chains and value chains. Optimized finance structures to attract FDI and mobilize domestic private sector capital include the use of public private partnerships as a key solution to climate investment with the PPP Authority. The Bangladesh Bank can use different tools to incentivize investment in low-carbon and climate-resilient infrastructure.

The MCPP further outlines opportunities for technology-transfer partnerships and building manufacturing capacity in Bangladesh including in areas such as green hydrogen, solar, electric vehicles, modernized power grid and other resilient infrastructure.

According to a BloombergNEF’s Climatescope report, in 2021 Bangladesh ranked 24 among 109 countries as an emerging attractive market for energy transition investment. Bangladesh ranks 69th in the MIT Technology Review’s Green Future Index. The overall ranking shows the performance of the economies relative to each other and aggregates scores generated across the following five pillars: carbon emissions, energy transition, green society, clean innovation and climate policy. In the Global Green Growth Institute’s Global Green Growth Index, Bangladesh Ranked 18th among 33 Asian countries. This index measures sustainability targets for four green growth dimensions – efficient and sustainable resource use, natural capital protection, green economic opportunities, and social inclusion.

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 Laundering 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.
• The National Board of Revenue – 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 fighting corruption and reaffirmed the need for a strong ACC, but opposition parties claim the ACC is used by the government to harass political opponents. Efforts to ease public procurement rules and a recent constitutional amendment diminishing 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.

Mohammad Moinuddin AbdullahChairmanAnti-Corruption Commission, Bangladesh1, 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

Prime Minister Hasina’s ruling Awami League party won 289 parliamentary seats out of 300 in a December 30, 2018 election marred by wide-spread vote-rigging, ballot-box stuffing and intimidation. Intimidation, harassment, and violence during the pre-election period made it difficult for many opposition candidates and their supporters to meet, hold rallies, and/or campaign freely. The clashes between rival political parties and general strikes that previously characterized the political environment in Bangladesh have become far less frequent in the wake of the Awami League’s increasing dominance and crackdown on dissent. Many civil society groups have expressed concern about the trend toward a one-party state and the marginalization of all political opposition groups.

Americans are advised to exercise increased caution due to crime and terrorism when traveling to Bangladesh. Travel in some areas have higher risks. For further information, see the State Department’s travel website for the  Worldwide Caution,  Travel Advisories, and  Bangladesh Country Specific Information.

Bangladesh’s comparative advantage in cheap labor for manufacturing is partially offset by lower productivity due to poor skills development, inefficient management, pervasive corruption, and inadequate infrastructure.  According to the 2016-2017 Labor Force Survey, 85 percent of the Bangladeshi labor force is employed in the informal economy.  Bangladeshi workers have a strong reputation for hard work, entrepreneurial spirit, and a positive and optimistic attitude.  With an average age of 26 years, the country boasts one of the largest and youngest labor forces in the world.  However, training is not well aligned with labor demand. Bangladesh’s labor laws specify acceptable employment conditions, working hours, minimum wage levels, leave policies, health and sanitary conditions, and compensation for injured workers.  Freedom of association and the right to join unions are guaranteed in the constitution.  In practice, however, compliance and enforcement of labor laws are weak, and companies frequently discourage or prevent formation of worker-led labor unions, preferring pro-factory management unions. In a notable exception to the national labor law, Export Processing Zones (EPZs) do not allow trade unions and heavily restrict other labor activity normally permitted under the broader Bangladesh Labor Act. The EPZ labor law does allow worker welfare associations, to which 74 percent of workers belong, according to the government.

Since two back-to-back tragedies killed over 1,250 workers – the Tazreen Fashions fire in 2012 and the Rana Plaza collapse in 2013 – Bangladesh made significant progress in garment factory fire and structural safety remediation, thanks mostly to two Western brand-led initiatives, the Alliance for Bangladesh Worker Safety (Alliance), comprised of North American brands, and the Accord on Fire and Building Safety in Bangladesh (Accord), which was formed by European brands. Major accidents and workplace deaths in the garment sector dropped precipitously as a result – only four workers died in 2021.  Monitoring and remediation of RMG factories exporting to non-Western countries was overseen by the government, with assistance from the International Labor Organization (ILO) under the National Initiative.  By 2021, fewer than half the factories under the National Initiative had completed initial remediation of safety issues, and both the Alliance and Accord had closed their Bangladesh operations.  North American brands continued to monitor manufacturers’ safety maintenance and training through a new organization, Nirapon. The Accord, under High Court order, transitioned its staff and operations to the newly formed RMG Sustainability Council (RSC), overseen by a board consisting of manufacturers, brands, and worker representatives.  The government has announced plans to form an Industrial Safety Unit to oversee factory safety in National Initiative garment factories as well as all manufacturing. On July 8, 2021, a devastating fire at the Hashem Foods Factory Ltd took the lives of 54 workers including 19 children. In the wake of the fire on July 15, the Prime Minister’s Office announced the formation of a 24-member national committee led by the Bangladesh Investment Development Authority (BIDA) and headed by the Prime Minister’s Private Sector Advisor Salman Rahman. The committee prioritized 32 industrial sectors considering their propensity for and likelihood of accidents. BIDA announced in December 2021 it would produce a sector-wide report after analyzing the inspection data and will take steps to enforce workplace safety compliance in the non-export sectors.

The U.S. government suspended Bangladesh’s access to the U.S. Generalized System of Preferences (GSP) over labor rights violations following a six-year formal review conducted by the U.S. Trade Representative. The decision, announced in 2013 in the months following the Rana Plaza collapse, was accompanied by a 16-point GSP Action Plan to help start Bangladesh’s path to reinstatement of the trade benefits.  While some progress was made in the intervening years, several key issues have not been adequately addressed.  Despite revisions intended to make Bangladesh more compliant with international labor standards, the Bangladesh Labor Act (BLA) and EPZ Labor Act (ELA) still restrict the freedom of association and formation of unions and maintain separate administrative systems for workers inside and outside of export processing zones.

Under the current BLA, legally registered unions are entitled to submit charters of demands and bargain collectively with employers, but this has rarely occurred in practice.  The government counts nearly 1,000 registered trade unions, but labor leaders estimate there are fewer than 100 active trade unions in the country’s dominant sector, RMG, and only 30 to 40 are capable enough to negotiate with owners.  The law provides criminal penalties for conducting unfair labor practices such as retaliation against union members for exercising their legal rights, but charges are rarely brought against employers and the labor courts have a large backlog of cases.  Labor organizations reported most workers did not exercise their rights to form unions, attend meetings, or bargain collectively due to fear of reprisal.  From January to December 2021, a total of 6 workers died and 163 were injured due to police interference and about 137 of them belonged to the garment sector.  The garment sector is reeling from the skilled labor crisis and missing opportunities to secure new orders from eager buyers coming to Bangladesh to procure garments after COVID-19-related factory closures in Vietnam, Cambodia, and Burma.  The local apparel industry has long courted buyers who historically have sourced from other countries to buy from Bangladesh producers.  However, in 2020, at the peak of Covid-19, Bangladesh apparel industries furloughed around 357,000 workers; following lockdown restrictions, the sector re-hired just a handful of the workers.  Some of those furloughed returned to their villages and others switched to new professions.  Industry groups are focusing on developing automation technologies and processes to boost productivity and increase production capacity.

The labor law differentiates between layoffs and terminations; no severance is paid if a worker is fired for misconduct.  In the case of downsizing or “retrenchment,” workers must be notified and paid 30 days’ wages for each year of service.  The law requires factories and establishments to notify Bangladesh’s Department of Inspection for Factories and Establishments a week prior to temporarily laying off workers due to a shortage of work or material.  Laid off workers are entitled to their full housing allowance.  For the first 45 days, they are also entitled to half their basic wages, then 25 percent thereafter.  Workers who were employed for less than one year are not eligible for compensation during a layoff.  However, the press and trade unions report employers not only fail to pay workers their severance or benefits, but also their regular wages.  In 2021 alone, workers and organizers staged 172 labor protests in the garment sector over back wages, factory layoffs, and demands to reopen closed factories.  No unemployment insurance or other social safety net programs exist, although the government had begun discussing how to establish them with the help of development partners and brands.  In early 2022, the Government of Bangladesh announced a universal pension scheme from fiscal year (FY) 2022-23.

The government does not consistently and effectively enforce applicable labor laws.  For example, the law establishes mechanisms for conciliation, arbitration, and dispute resolution by a labor court and workers in a collective bargaining union have the right to strike in the event of a failure to reach a settlement.  In practice, few strikers followed the cumbersome and time-consuming legal requirements for settlements and strikes or walkouts often occur spontaneously.  The government was partnered with the ILO to introduce a dispute settlement system within its Department of Labor.

The BLA guarantees workers the right to conduct lawful strikes, but with many limitations.  For example, the government may prohibit a strike deemed to pose a “serious hardship to the community” and may terminate any strike lasting more than 30 days.  The BLA also prohibits strikes at factories in the first three years of commercial production, and at factories controlled by foreign investors.

The U.S. government funds efforts to improve occupational safety and health alongside labor rights in the readymade garment sector in partnership with other international partners, civil society, businesses, and the Bangladeshi government.  The United States works with other governments and the International Labor Organization (ILO) to discuss and assist with additional labor reforms needed to fully comply with international labor conventions.  In early 2021, the government submitted a draft action plan to the EU and ILO describing how it planned to bring its laws and practices into compliance with international labor standards over time.  In February 2022, the government submitted the progress report to ILO and the report will be discussed in the ILO Governing Body on March 21.  The U.S. government is closely monitoring the development and implementation of the plan to ensure it sufficiently addresses long-standing recommendations.

*Host Country Source:  Bangladesh Bank, Bangladesh Bureau of Statistics

Economic/Commercial Section
Embassy of the United States of America
Madani Avenue, BaridharaDhaka — 1212
Tel: +880 2 5566-2000
Email: USTC-Dhaka@state.gov 

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. In 2021, the government announced plans to focus on encouraging foreign direct investment in renewable energy, manufacturing, technology, and biogenetic engineering.

According to Invest Barbados, Barbados encourages investment in the following key sectors: international financial services, information technology, and ship registration, as well as emerging sectors like financial technology, creative industries, agricultural processing, medical schools, medical tourism, and renewable energy. In the international financial services sector, the government maintains regulatory oversight via the Central Bank of Barbados 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 assist with the expansion and sustainability of the initial investment. It also serves as the primary liaison for existing investors. In 2021, the government announced plans to establish a Barbados Free Economic Zone to help attract foreign direct investment.

Investors interested in doing business in Barbados must register with the country’s Corporate Affairs and Intellectual Property Office (CAIPO). In 2021, the Government of Barbados fully digitized the registration process and all other services provided by CAIPO.

Local laws do not place any 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.

In 2012, the government introduced a special entry permit for high net-worth individuals who wish to reside in Barbados while working remotely. Individuals must have one of the following to apply: a net worth of USD five million, property valued above USD two million, and skills of critical need to the development of the country. Applicants must generally be 60 years or older although special provisions can be made for applicants under 60 years of age. The program is administered by the Barbados Immigration Department.

In 2020, the government introduced the Barbados Welcome Stamp visa program, which allows eligible remote workers to apply for special residency status for up to one year. Under this program, the visa holder is exempt from local income taxes. The visa holder can also apply for an extension of the visa with the repayment of applicable fees. The program is administered through the Ministry of Tourism and International Transport.

Barbados has not conducted a trade policy review in the last three years. No civil society organization has provided a review of investment policy-related concerns in the past five years.

Invest Barbados is the main investment promotion agency that attracts and facilitates foreign investment. Invest Barbados offers guidance and direction to new and established investors seeking to pursue investment opportunities in Barbados. The process is transparent and considers 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 . Invest Barbados’ iGuide website is an online guide that provides local and foreign investors with up-to-date information required to make certain investment decisions, including steps for 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, who are usually attorneys. Information is available at  www.caipo.gov.bb .

In general, when starting a business, companies retain an attorney to prepare relevant incorporation documents. The business must register with CAIPO, the Barbados Revenue Authority, the Customs and Excise Department, and any relevant sector-specific licensing agencies.

The Government of Barbados continues to facilitate programs and partnerships to assist entrepreneurs who are women and/or 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.

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

Barbados’ legal framework establishes clear rules for foreign and domestic investors regarding tax, labor, environmental, health, and safety concerns. These regulations are in accord with international standards. The Ministry of Finance, Economic Affairs, and Investment and Invest Barbados provide oversight aimed at ensuring the transparency of investment.

Rulemaking and regulatory authority rest with the bicameral parliament of the Government of Barbados. The House of Assembly consists of 30 members who are elected in single-seat constituencies. The Senate consists of 21 members who are appointed by the President. Responsibility for Senate appointments shifted in 2021 when Barbados removed the UK’s Queen Elizabeth as head of state and became a republic.

Foreign investment into Barbados is governed by a series of laws and implementing regulations. These laws and regulations are developed with the participation of relevant ministries, drafted by the Office of the Attorney General, and enforced by the relevant ministry or ministries.

Additional compliance supervision is delegated to specific agencies, by sector, as follows:

• Banking and financial services – Central Bank of Barbados (CBB)
• Insurance and non-banking financial services – Financial Services Commission (FSC)
• International business – International Business Unit, Ministry of International Business and Industry
• Business incorporation and intellectual property – CAIPO

The Ministry of Finance, Economic Affairs and Investment monitors investments to collect information for national statistics and reporting purposes.

All foreign businesses must be registered or incorporated through CAIPO and will be regulated by one of the other agencies depending on the nature of the business.

Although Barbados does not have formal legislation that guarantees access to information or freedom of expression, access to information is generally available. The government maintains a website and an information service to facilitate the dissemination of information such as government office directories and press releases. The government also maintains a parliamentary website at http://www.barbadosparliament.com  where it posts legislation prior to parliamentary debate and live streams House sittings. The government budget is also available on this website.

Although some bills are not subject to public consultation, input from various stakeholder groups and agencies is enlisted during the initial drafting of legislation. Public awareness campaigns, through print and electronic media, are used to inform the public. Copies of regulations are circulated to stakeholders and are published in the Official Gazette after passage in parliament. The Official Gazette is available at  https://gisbarbados.gov.bb/the-official-gazette .

Accounting, legal, and regulatory procedures are transparent. Publicly listed companies publish annual financial statements and changes in portfolio shareholdings, including share value. Service providers are required to adhere to international best practice standards including International Financial Reporting Standards, International Standards on Auditing, and International Public Sector Accounting Standards for government and public sector bodies.

They must also comply with the provisions of the Money Laundering and Financing of Terrorism Prevention and Control Act. Accounting professionals must engage in continuous professional development. The Corporate and Trust Service Providers Act regulates Barbados financial service providers. Failure to adhere to these laws and regulations may result in the revocation of

a company’s business license and/or cancellation of work permit(s). The most recent Caribbean Financial Action Task Force (CFATF) Mutual Evaluation assessment found Barbados to be largely compliant. The government does not promote or require companies’ environmental, social, and governance disclosures.

The Office of the Ombudsman is established by the constitution to guard against abuses of power by government officers in the performance of their duties. The Office of the Ombudsman aims to provide quality service in an impartial and expeditious manner when investigating complaints by Barbadian nationals or residents who consider the conduct of a government body or official unreasonable, improper, inadequate, or unjust.

The Office of the Auditor General is also established by the constitution and is regulated by the Financial Administration and Audit Act. The Auditor General is responsible for the audit and inspection of all public accounts of the Supreme Court, the Senate, the House of Assembly, all government ministries, government departments, government-controlled entities, and statutory bodies. The Office of the Auditor General’s annual reports can be found on the Barbados Parliament website.

The OECD recognized Barbados as largely compliant with international regulatory standards. Barbados is a signatory to the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, the Multilateral Competent Authority Agreement, and the Multilateral Convention to Implement Tax Treaty Related Matters to Prevent Base Erosion and Profit Sharing.

The Barbados National Standards Institution (BNSI) oversees a laboratory complex housing metrology, textile, engineering, and chemistry/microbiology laboratories. The primary functions of the BSNI include the preparation, promotion, and implementation of standards in all sectors of the economy, including the promotion of quality systems, quality control, and certification.

The Standards Act (2006) and the Weights and Measures Act (1977) and Regulations (1985) govern the work of the BNSI. As a signatory to the World Trade Organization (WTO) Agreement to Technical Barriers to Trade, Barbados is obligated to harmonize all national standards through the BNSI to international norms to avoid creating technical barriers to trade.

Barbados ratified the WTO Trade Facilitation Agreement in 2018. The Agreement improves the speed and efficiency of border procedures, facilitates trade costs reduction, and enhances participation in the global value chain. In 2019 Barbados implemented the Automated System for Customs Data, which streamlined document compliance and inspections by port authorities. The government also increased issuance fees for certificates of origin, making trade more expensive.

Barbados’ legal system is based on the British common law. Modern corporate law is modeled on the Canadian Business Corporations Act. The Attorney General, the Chief Justice, junior judges, and magistrates administer justice in Barbados. The Supreme Court consists of the Court of Appeal and the High Court. The High Court hears criminal and civil (commercial) matters and makes determinations based on interpretation of the constitution.

The Caribbean Court of Justice (CCJ) is the regional judicial tribunal. The CCJ has original jurisdiction to interpret and apply the Revised Treaty of Chaguaramas (RTC). In 2005, Barbados became a full member of the CCJ, making the body its final court of appeal and original jurisdiction of the RTC.

The United States and Barbados are both parties to the WTO. The WTO Dispute Settlement Panel and Appellate Body resolve disputes over WTO agreements, while courts of appropriate jurisdiction in both countries resolve private disputes.

Invest Barbados’ foreign direct investment policy is to promote Barbados as a desirable investment location, to provide advice, and to assist prospective investors. The main laws concerning investment in Barbados are the Barbados International Business Promotion Act (2005), the Tourism Development Act (2005), and the Companies Act. There is also a framework of legislation that supports the jurisdiction as a global hub for business including insurance, shipping registration, and wealth management.

All proposals for investment concessions are reviewed by Invest Barbados to ensure proposed projects are consistent with the national interest and provide economic benefits to the country.

Invest Barbados provides complimentary “one-stop shop” facilitation services for investors to guide them through the investment process. It offers a website useful for navigating the laws, rules, procedures, and registration requirements for foreign investors:  http://www.investbarbados.org .

Chapter 8 of the RTC outlines the competition policy applicable to CARICOM states. Member states are required to establish and maintain a national competition authority for facilitating the implementation of the rules of competition. At the CARICOM level, a regional Caribbean Competition Commission (CCC) applies the rules of competition. The CARICOM competition policy addresses anticompetitive business conduct such as agreements between enterprises, decisions by associations of enterprises, and concerted practices by enterprises that have as their object or effect the prevention, restriction, or distortion of competition within the Community and actions by which an enterprise abuses its dominant position within the Community. The Fair Competition Act codified the establishment of the Barbados Fair Trading Commission (FTC) in 2001. The FTC is responsible for the promotion and maintenance of fair competition participates in the CCC. The FTC regulates the principles, rates, and standards of service for public utilities and other regulated service providers. The Telecommunications Act regulates competition in the telecommunications sector.

The Barbados constitution and the Companies Act (Chap. 308) contain provisions permitting the government to acquire property for public use upon prompt payment of compensation at fair market value. U.S. Embassy Bridgetown is not aware of any outstanding expropriation claims or nationalization of foreign enterprises in Barbados.

Under the Bankruptcy and Insolvency Act (2002), Barbados has a bankruptcy framework that recognizes certain debtor and creditor rights. The act gives a potentially bankrupt company three options: bankruptcy (voluntary or involuntary), receivership, or reorganization of the company. The Companies Act provides for the insolvency and/or liquidation of a company incorporated under this act. In 2019, the Supreme Court of Judicature Act was amended to include the establishment of a commercial division in the High Court which will oversee proceedings connected to bankruptcy and insolvency.

In 2019, Barbados repealed its Fiscal Incentives Act, bringing the country into conformity with its obligations under the WTO and the Agreement on Subsidies and Countervailing Measures. Manufacturers may still benefit from some concessions. Further information is available from Invest Barbados.

The Small Business Development Act (1999) defines a small business as having no more than 25 employees. Small businesses must be registered under the Companies Act, which applies to domestic and foreign-owned micro- and small enterprises. Small businesses are not eligible for incentives under the Tourism Development Act, the Special Development Areas Act, or the Shipping Incentives Act.

Enterprises generating export profits (other than from exports within CARICOM) may receive an export allowance expressed as a rebate of corporate tax on those profits. The maximum rebate of 93 percent applies if more than 81 percent of an enterprise’s profits result from extra-regional exports. The export development allowance permits a company to deduct from taxable income an additional 50 percent of what the company spends in developing export markets outside CARICOM.

Initial allowances or investment allowances of up to 40 percent on capital expenditure are available for businesses making capital expenditures on machinery and plants or on an industrial building or structure. The government also allows annual depreciation allowances on such expenditures.

In the tourism sector, the government’s market development allowance permits a company to deduct an additional 50 percent of what it spends to encourage tourists to visit Barbados. Under the Tourism Development Act of 2002, businesses and individuals that invest in the tourism sector can write off capital expenditures and 150 percent of interest. These entities are also exempt from import duties and environmental levies on furniture, fixtures and equipment, building materials, supplies, and equity financing. The act expands the definition of the tourist sector beyond accommodation to include restaurants, tourist recreational facilities, and tourism-related services. The act encourages the development of attractions that emphasize the country’s natural, historic, and cultural heritage, and encourages construction of properties in non-coastal areas.

Barbados has harmonized the legislative and tax frameworks for domestic and international companies in the international business sector. Companies conducting international business operate with a tax rate from 1 to 5.5 percent. Companies exporting 100 percent of their services or products can apply for a foreign currency permit. All corporate entities are taxed on a sliding scale:

There are no withholdings taxes on dividends, interest, royalties, or management fees paid to non-residents.

The Government of Barbados offers various incentives to business owners engaged in the renewable energy and energy efficiency sectors. A pamphlet outlining these incentives is available  on the Invest Barbados website.

There are currently no foreign trade zones or free ports in Barbados. In 2021, the government announced plans to establish a Barbados Free Economic Zone to help attract foreign direct investment.

Foreign investors must finance their investments from external sources or from income that the investment generates. When a foreign investment generates significant employment or other tangible benefits for Barbados, the authorities may allow the company to borrow locally for working capital. Invest Barbados may provide a training grant to qualifying manufacturing and information and communication technology enterprises during the initial operating period.

Except in the case of its medicinal cannabis and renewable energy industries, Barbados does not require that its citizens own shares of a foreign investor’s enterprise. Some restrictions may apply to share transfers. The Companies Act does not permit bearer shares. Foreign investors do not need to establish facilities in any specific location, although there are some zoning restrictions on residential and commercial construction for environmental reasons. There is no requirement that enterprises must purchase a fixed percentage of goods from local sources. Investors, particularly within the hospitality industry, are encouraged to use local products whenever possible.

Barbados labor and immigration laws stipulate that non-nationals seeking to work in Barbados must apply for work permits, including for all managerial and technical staff. Nationals from CARICOM member states are exempt from this requirement. The work permit is specific to the job and employer and the permit may be granted for a period of up to five years. Short-term permits of up to six months are also available. To grant a work permit, the government requires that the expatriate must bring to the job special skills or knowledge not readily available in Barbados. While work permits are generally granted to senior management, the government may restrict the number of permits approved depending on the number of people employed by the local company. There are no restrictions regarding foreign directors of boards. More information is available at  http://www.immigration.gov.bb/pages/WorkPermit.aspx .

There are no requirements for foreign information technology providers to turn over source codes and/or provide access to surveillance.

The Barbados Data Protection Act (BDPA) became law in 2021. The BDPA created a data protection authority under a Data Protection Commissioner responsible for the general administration of the act. The BDPA prohibits the transfer of personal data out of Barbados unless the destination country or territory ensures an adequate level of protection for the rights and freedoms of data subjects vis-à-vis the processing of their personal data. Violations under the BDPA are subject to fines ranging from $5,000 to $250,000 (10,000 to 500,000 Barbados dollars) and allow for criminal convictions resulting in prison sentences ranging from two months to three years.

As a member of the WTO, Barbados is party to the Agreement to the Trade Related Investment Measures.

There are no restrictions on foreign ownership of property in Barbados. Foreign investors and locals are treated equally regarding property taxes. Civil law protects physical property and mortgage claims. The CBB must verify real property purchases for non-residents. If a non-resident uses foreign funds and pays for the property in Barbados, the CBB will normally endorse the transaction. The sale of property is subject to a 2.5 percent property transfer tax in addition to a one percent stamp duty. Brokerage and legal fees are not included in these levies. Buyers should seek the advice of a local attorney when purchasing property.

Commercial, industrial, hotel, and villa properties are subject to a 0.95 percent land tax on the improved value of the property. Holders of a certificate from the Barbados Tourism Authority enjoy rebates of 50 percent for hotels and 25 percent from villas. The Commissioner of Land Tax charges an annual fee based on the assessed property value on residential property as follows:

• 0% on the first $75,000 (150,000 Barbados dollars)
• 0% on the first $75,000 (150,000 Barbados dollars)
• 0.1% on amounts between $75,001 and $225,000 (150,001 and 550,000 Barbados dollars)
• 0.7% on amounts between $225,001 and $425,000 (550,001 and 850,000 Barbados dollars)
• 1.0% on amounts greater than $425,000 (850,000 Barbados dollars)
• 0.8% on vacant land under 4,000 square feet
• 1.0% on all other vacant land

The government has included an additional procedure that has increased the time to record the conveyance at the Land Registry and pay transfer fees and stamp duties. This has made transferring property more onerous. The Land Registry has digitized records dating back to 1952 and plans to further digitize deeds dating back to 1640. A landowner may lose his or her title to land if a trespasser or squatter takes possession for a period of ten years.

Barbados has a legislative framework governing intellectual property rights (IPR), though enforcement needs improvement. Barbados is a member of the World Intellectual Property Organization (WIPO) and is party to the Berne Convention for the Protection of Literary and Artistic Works, the Paris Convention for the Protection of Industrial Property, and the Nice Agreement Concerning the International Classification of Goods and Services for the Purposes of the Registration of Marks. The Government of Barbados has enacted IPR legislation on topics including patents, copyrights, trademarks, industrial designs, integrated circuits topography, plant breeders’ rights, geographical indications, and protection against unfair competition. Barbados’ Trademark and Industrial Designs Act meets international standards.

Barbados remains on the Office of the United States Trade Representative (USTR) Special 301 Report Watch List in 2021. Barbados acceded to the WIPO Internet Treaties in 2019 and has convened a public-private Advisory Committee on Intellectual Property Rights to redraft its Copyright Act. Once passed by Parliament, this will enable Barbados to implement its WIPO Internet Treaties obligations. CAIPO will be reorganized into two separate entities, one for business registration and one for IPR registration. The former CAIPO director was appointed as Master of the High Court in 2020, which deepened the court’s IPR expertise. These measures, along with the updates and upgrades to CAIPO’s database in 2021, were intended to strengthen IPR enforcement.

Currently, Barbados’ judicial system is unable to provide timely and effective relief on IPR violations due to a serious case backlog across all types of civil and criminal matters. Ongoing cases include the unauthorized transmission of U.S. broadcasts and cable programming by local cable operators, including state-owned broadcasters, without adequate compensation to U.S. right holders, and the refusal of Barbadian television and radio broadcasters and cable and satellite operators to pay for public performances of music.

Article 66 of the Revised Treaty of Chaguaramas establishing the CSME commits all 15 members to implement stronger intellectual property rights protection and enforcement. The CARIFORUM-EU EPA contains the most detailed obligations regarding intellectual property in any trade agreement to which Barbados is a party. The EPA provides for protection and enforcement of IPR. Article 139 of the EPA requires parties to “ensure an adequate and effective implementation of the international treaties dealing with intellectual property to which they are parties and of the Agreement on Trade Related Aspects of Intellectual Property.”

It is the responsibility of the importer to pay for and destroy counterfeit goods. Failure to observe certain standards regarding the importation of goods may result in a recommendation to the Comptroller of Barbados’ Custom and Excises Department to have the goods destroyed. If the goods fall under the Ministry of Health’s jurisdiction, they are destroyed under that ministry’s guidance. If the goods are prohibited and do not pertain to the Ministry of Health, the Customs and Excise Department will destroy them as appropriate. Information on the prevalence of counterfeit goods in the local market is not readily available, as there is no tracking method in place to collect data. Barbados is not listed in USTR’s 2022 Review of Notorious Markets for Counterfeiting and Piracy.

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at  http://www.wipo.int/directory/en .

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. The CBB independently raises or lowers 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 of at least $500,000 (1 million Barbados dollars) 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 $100,000 (200,000 Barbados dollars). 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 has computerized clearance and settlement of share certificates through the Barbados Central Securities Depository Inc., a wholly owned subsidiary of the BSE. Under the Property Transfer Tax Act, the FSC can accommodate investors requiring a traditional certificate for a small fee. The FSC 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 $5,000 (10,000 Barbados dollars) 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. To date, the ISM has four 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 UK 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.

The government established the CBB 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, developed digital currency DCash in partnership with the Eastern Caribbean Central Bank. The first successful DCash retail central bank digital currency consumer-to-merchant transaction took place in Grenada in 2021 following a multi-year development process. The CBB and the FSC established a regulatory sandbox in 2018 where financial technology entities could 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 2019. According to Bitt, it has no immediate plans to launch DCash in Barbados and focused first on Barbados’ Eastern Caribbean neighbors. Bitt also offers a digital access exchange, remittance channel, and merchant-processing gateway available via mMoney, a mobile application. In early 2022, the DCash platform crashed for almost two months, raising questions about the initiative’s long-term prospects.

The Caribbean region has witnessed a withdrawal of correspondent banking services by U.S., Canadian, and European banks in recent years due to concerns that the region is high-risk.

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 Barbados. 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 governmental assets, including on- and offshore real property, revenues from oil and gas products, and non-tangible assets such as trademarks, patents, and intellectual property.

State-owned enterprises (SOEs) in Barbados work in partnership with ministries, or under their remit, and carry out certain ministerial responsibilities. There are 33 SOEs in Barbados operating in areas such as travel and tourism, investment services, broadcasting and media, sanitation services, sports, and culture. Pre-pandemic total net income was estimated at $60 million (120 million Barbados dollars).

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 IMF BERT program, the Government of Barbados is addressing the expenditure position of the SOEs by defining clear objectives for SOE reforms, reducing the wage bill of these entities, and implementing other necessary reform measures.

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

The private sector is involved in projects that benefit society, including in support of environmental, social, and cultural causes. The non-governmental organization (NGO) community, while comparatively small, is involved in fundraising and volunteerism in gender, health, environmental, and community projects. The government periodically partners with NGOs and encourages philanthropy.

Barbados was on the Tier 2 Watch List for trafficking in persons for from 2019-2021, however, there are no known human or labor rights concerns relating to responsible business conduct of

which foreign businesses should be aware.

Adoption of broad corporate governance codes such as the OECD guidelines is voluntary, as is disclosure of corporate governance practices. In practice, many companies in Barbados are influenced by international best practices. CBB and FSC guidelines regulate the purpose and role of the board of directors. The accounting profession is regulated by the Institute of Chartered Accountants of Barbados, which is a member of the International Federation of Accountants.

Barbados is not a signatory of the Montreux Document on Private Military and Security Companies or a participant in the International Code of Conduct for Private Security Service Providers’ Association.

Department of State

• Country Reports on Human Rights Practices;
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities;
• U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises; and;
• Xinjiang Supply Chain Business Advisory 

Department of the Treasury

• OFAC Recent Actions

Department of Labor

• Findings on the Worst Forms of Child Labor Report;
• List of Goods Produced by Child Labor or Forced Labor;
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World and;
• Comply Chain.

Barbados published a national climate change strategy in 2012. Since then, the government has submitted both an initial and updated Nationally Determined Contribution (NDC). It does not have a specific strategy for monitoring natural capital, including biodiversity and ecosystem services. The government hopes to achieve a fossil fuel-free economy by 2030. The government has also indicated that substantial support from the international community will be necessary to achieve this goal. Public procurement policies do not include environmental and green growth considerations. The Government of Barbados offers various incentives to business owners engaged in the renewable energy and energy efficiency sectors. A pamphlet outlining these incentives is available  on the Invest Barbados website.

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. It has not been proclaimed by the President and consequently is not in force. The Integrity of Public Life Bill 2020, which mandated declaration of assets by all politicians, senior public officers, chair people, and high-ranking managers of SOEs, passed in Barbados’ Parliament but was ultimately defeated in the Senate. Prime Minister Mia Mottley’s administration plans to bring the bill back to Parliament in 2022 but has acknowledged the need to reach agreement with opposing forces in the Senate.

The Government of Barbados has announced its intention to establish a public investment dashboard to provide information relevant to public sector investment projects, including cost overruns, procurement procedures, and company selection. The government also plans to establish an independent statistics and data analytics authority and to introduce a Freedom of Information Act.

A government minister with the previous administration was arrested in the United States on charges of laundering proceeds from bribes paid in Barbados. In 2020, he was found guilty on two charges of money laundering and one count of conspiracy to commit money laundering.

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

The Director
Financial Intelligence Unit
P.O. Box 1327, Bridgetown
246-436-4734
director@barbadosfiu.gov.bb  

Barbados does not have a recent history of politically motivated violence or civil unrest.

Barbados’ labor force was 141,940 people at the end of 2020. In the first quarter of 2021, the total average unemployment rate was approximately 40 percent, an increase of 30 percent from the same period the previous year due to ongoing economic distress caused by the COVID-19 pandemic. The economy began to recover in 2021 with 1.4 percent growth, and the IMF forecasts 2022 growth at 8.5 percent, a faster rate of recovery than previously expected.

Labor regulations in Barbados are guided by a framework of laws including the Holidays with Pay Act, the Sick Leave Act, the Public Holidays Act, and the Protection of Wages Act, as well as policies regarding maternity leave, national insurance (social security) contributions, unemployment benefits, and severance pay. Barbados has ratified the eight core conventions of the International Labor Organization (ILO). Barbados upholds the ratified conventions and is guided by the ILO’s other conventions.

Wages in Barbados are some of the highest in the Caribbean. Minimum wages are administratively established for only a few categories of workers and are enforced by the Ministry of Labour’s Labour Department. The minimum wage for shop assistants is currently $4.25 (8.50 Barbados dollars) per hour. The Ministry of Labour recommends that companies recognize this as the de facto minimum wage, though most employees earn more than this. The standard legal workweek is 40 hours in five days, and the law provides employees with three weeks of paid holiday for persons with less than five years’ service and four weeks of paid holiday leave after five years’ service. The law requires overtime payment of time and a half for hours worked in excess of the legal standard and prescribes that all overtime must be voluntary.

The law does not set a maximum number of overtime hours. Workers are covered by unemployment benefits legislation and national insurance legislation after 52 weeks of continuous employment. The government sets occupational safety and health standards.

Workers are legally allowed to form and join unions and conduct strikes, but there is no specific legal recognition of the right to collective bargaining. Most major employers choose to recognize unions when more than 50 percent of employees request recognition. Smaller companies are less frequently unionized. Companies are sometimes hesitant to engage in collective bargaining with recognized unions, but in most instances they eventually do so. The law prohibits antiunion discrimination and protects workers engaged in union activity. Private-sector employees can strike, but strikes are prohibited by workers in essential services such as police, firefighting, electricity, and water.

In general, the government effectively enforces labor laws, and penalties are sufficient to deter violations. The law gives employees the right to have allegations of unfair dismissal tried before the Employment Rights Tribunal, but the process often has lengthy delays. Workers’ rights are generally respected. Unions receive periodic complaints of violations of collective bargaining agreements, but most complaints are resolved through established mechanisms.

The law provides for a minimum working age of 16. Compulsory primary and secondary education policies reinforce minimum age requirements. The Labour Department has a small cadre of labor inspectors who conduct spot investigations of enterprises and check records to verify compliance with the law. These inspectors may take legal action against an employer who is found to have underage workers.

Under the Severance Payments Act, an employer is obligated to pay an employee a severance payment where the employee is terminated on account of redundancy. The Employee Rights Act, section 31, provides that dismissal of an employee on account of redundancy does not contravene the right not to be unfairly dismissed. Qualifying workers who are laid off for economic reasons are generally entitled to receive a severance payment on a graduating scale that starts at 2.5 weeks’ pay for every completed year of employment. All unemployed workers are eligible for unemployment benefits upon meeting the qualifying contribution periods established by the National Insurance and Social Security scheme.

The Occupational Health at Work Act governs the general health and safety of workers in all workplaces except the armed forces and private household domestic service. The law requires firms employing more than 50 workers (fewer in certain sectors) to create a safety committee that may challenge the decisions of management concerning occupational safety and health. The Labour Department also enforces health and safety standards and follows up to ensure that management corrects problems. Trade union monitors can identify safety problems for government factory inspectors. The Labour Department’s Inspection Unit conducts routine annual inspections of government-operated corporations and manufacturing plants. Workers have the right to remove themselves from dangerous or hazardous job situations without jeopardizing their continued employment.

According to government figures, the growing informal economy represents between 30 and 40 percent of GDP. The government has stated that by avoiding taxes and regulations, informal firms have an unfair advantage over more efficient formal firms, undermining economic growth and progress. In general, most sectors of the Barbados informal economy do not overlap with potential investment sectors for U.S. and other foreign businesses.

* Source for Host Country Data: Central Bank of Barbados (CBB)  http://www.centralbank.org.bb  

Table 3: Sources and Destination of FDI
Data not available.

Table 4: Sources of Portfolio Investment
Data not available.

Political/Economic Section
U.S. Embassy to Barbados, the Eastern Caribbean and the Organization of Eastern Caribbean States
Phone Number: 246-227-4000
Email:  BridgetownPolEcon@state.gov  

Attracting FDI is one of the government’s stated foreign policy priorities. Net inflows of FDI have been included in the list of government performance targets since December 2015.  The GOB plans to attract a total of $5.5 billion net FDI in 2021-2025, largely through the China-Belarus “Great Stone” industrial park and Belarus’ six free economic zones.

The imposition of wide-ranging sanctions by the United States and many likeminded countries due to Belarus’ facilitation of the Russian invasion of Ukraine has made Belarus a less attractive destination for FDI. So, too, have the numerous restrictions and fees placed on investments from “unfriendly countries” by the GOB. An official decree signed by Lukashenka on March 14 provides for special fees for any early termination of contracts; prevents business partners from “unfriendly” countries from selling their shares in Belarusian joint stocks; increases taxation on any income of foreign partners, including dividends, royalties, and interests; and orders all debts to foreign partners be paid in Belarusian rubles.

Belarus does not have any specific requirements for foreigners wishing to establish a business. On paper, investors, whether Belarusian or foreign, receive legal protections and have the same right to conduct business operations in Belarus by incorporating 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.

Belarus’ investment promotion agency is the National Agency of Investments and Privatization (NAIP). The NAIP is tasked with representing the interests of Belarus as it seeks to attract FDI. The NAIP 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, and procedures necessary for making investment decisions; selecting investment projects; and providing solutions and post-project support.  NAIP has a 24/7 support hotline service via a Telegram channel and email account to help foreign investors address their problems and concerns in Belarus.

To maintain an ongoing dialogue with investors, Belarus has established the Foreign Investment Advisory Council (FIAC), chaired by the Prime Minister. FIAC activities include 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. 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. According to representatives of major foreign investors in Belarus, there were no reports of FIAC taking any meaningful effort to promote the FDI agenda in 2021 or 2022.

While the GOB claims 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 in terms of the size of individual investments are above average for the 20 countries covered by the World Bank Group’s Investing Across Borders indicators for Eastern Europe and the Central Asia region. In particular, Belarus limits foreign equity ownership in service industries. Sectors such as fixed-line telecommunications services, electricity generation, 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. These 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 national security investment screening mechanism, it retains significant elements of a Soviet-style command economy and screens 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 GOB. Lukashenka and his administration review and approve even multi-million-dollar foreign investments.

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

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   

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 and provides a single window for securing all necessary clearances and permissions from municipal authorities, tax and social security administrations, etc. Business registration normally takes no more than one day.

Belarus has a regime allowing for a simplified taxation system for all foreign-owned businesses.  Under the 2010 law on supporting small and medium-sized entrepreneurship 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.

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 January-June 2021 totaled USD 2.78 billion, of which FDI was 94 percent. The GOB classified investment data following this period and no further investment information is publicly available.

According to Belarusian law, drafts of laws and regulations pertaining to investment and doing business are subject to public discussion, though authorities rarely pay heed to public views. The government alleges its policies are transparent, and the implementation of laws is consistent with international norms to foster competition and establish clear rules of the road. However, independent economic experts note that private sector businesses are often discriminated against in favor of public sector businesses. In particular, SOEs often receive government subsidies, benefits, and exemptions like cheaper loans and debt forgiveness that are generally unavailable to private sector companies unless such companies have close connections with Belarus’ ruling circles.

International Financial Reporting Standards (IFRS) have been a part of Belarus’ legislative framework since 2016. Public-interest entities, which include banks, insurance companies, and public corporations with subsidiary companies, are required to publish their financial statements, which comply with the IFRS. Such statements are subject to statutory audit. The IFRS in Belarus can be accessed at  http://www.minfin.gov.by/ru/accounting/inter_standards/docs/  

Belarus’ Ministry of Finance posts regular updates and information on budgetary policy, public finances, and debt obligations on its website: http://www.minfin.gov.by/en/budgetary_policy/  and http://www.minfin.gov.by/en/public_debt/ .

On March 24, 2022, the WTO announced it had suspended Belarus’ application to join the organization because of the GOB’s support for the Russian invasion of Ukraine. Belarus had been working to join the WTO since 1993.

Belarus is a member of the Eurasian Economic Union (EAEU); EAEU regulations and decisions supersede the national regulatory system.

Belarus has a civil law system with a legal separation of branches and institutions and with the main source of law being legal acts, not precedent. For example, Article 44 of Belarus’ Constitution guarantees the inviolability of property. Article 11 of the Civil Code officially safeguards property rights, but presidential edicts and decrees, controlled exclusively by Lukashenka, typically carry more force than legal acts adopted by the legislature. This weakens investor protections and incentives previously passed into law. There is sometimes a public comment process during drafting of legislation or presidential decrees, but the process is not transparent or sufficiently inclusive of investors’ concerns. Belarus has broadly codified commercial laws, but the laws contain inconsistencies and are not considered business friendly.

According to the 2021 Human Rights Report, “The constitution provides for an independent judiciary, but authorities did not respect judicial independence and impartiality. Observers believed corruption, inefficiency, and political interference with judicial decisions were widespread.” Businesses complain the authorities selectively enforce regulations and criminal laws and that cases are often politically motivated. At the February 2021 All Belarusian People’s Assembly, for example, Lukashenka announced he had ordered the closure of over 200 private businesses because of their “illegal support” for the political opposition.

Each of Belarus’ six regions and the capital city of Minsk have economic courts to address commercial and economic issues.  In addition, the Supreme Court has a judicial panel on economic issues.  In 2000, Belarus established a judicial panel to enforce intellectual property rights.  Under the Labor Code, any claims of unfair labor practices are heard by regular civil courts or commissions on labor issues.  However, the judiciary’s lack of independence from the executive branch prevents it from acting as a reliable and impartial mechanism for resolving disputes, whether labor, economic, political, commercial, or otherwise.  According to Freedom House’s 2021 Nations in Transit report, for example, thousands of people were brutally repressed by Belarusian authorities following the fraudulent August 2020 presidential elections. No security officials were ever investigated for wrongdoing and none of the protestors who were prosecuted by the state received a fair trial.

Local economic court proceedings normally do not exceed two months.  Court cases involving foreign persons are typically resolved within seven months unless an international agreement signed by Belarus dictates the resolution must take place sooner.

Foreign investment in Belarus is governed by the 2013 laws “On Investments” and “On Concessions,” the 2009 Presidential Decree No. 10 “On the Creation of Additional Conditions for Investment Activity in Belarus,” and other legislation as well as international and investment agreements signed and ratified by Belarus.

Issued in 2016, Presidential decree number 188 authorizes the Ministry of Antimonopoly Regulation and Trade to counteract monopolistic activities and promote market competition.

According to Article 12 of the Investment Code, neither party may expropriate or nationalize investments both directly and indirectly by means of measures similar to expropriation or nationalization, for other purposes than for the public benefit and on a nondiscriminatory basis; according to the appropriate legal procedure; and on conditions of compensation payment. However, Belarus has no law provisions that establish clear procedures for fair and timely compensation of an investor’s nationalized property. Belarus has signed 70 bilateral agreements on the mutual protection and encouragement of investments which include obligations regarding expropriation.

In 2021, there were no nationally-reported cases of nationalization, and there have been no instances of confiscation of business property as a penalty for violations of law. It should be noted, however, an official decree signed by Lukashenka on March 14 provides for special fees and penalties for businesses from “unfriendly” countries, including the United States, looking to leave the Belarusian market.

Belarus’ recent actions in response to Western sanctions indicate the government is prepared to violate its commitments under international agreements and domestic law. However, Belarus is party to the following dispute resolution mechanisms:

Belarus and the United States signed a Bilateral Investment Treaty (BIT), but entry into force is pending exchange of instruments of ratification. This is unlikely to take place in the near future given the breakdown of relations between the two countries over Belarus’ continued human rights abuses and support for Russia’s invasion of Ukraine. Most of the BITs concluded by Belarus include a provision on international investment arbitration as a mechanism for settling investor-State disputes and recognize the binding force of the awards issued by tribunals. Under Belarusian law, if an international treaty signed by Belarus establishes rules other than those established by local law, the rules of the international treaty prevail.

Since 2017, Belarus has faced three investment arbitration claims involving investors from the Netherlands and Russia. There were no known investment disputes between Belarusian government authorities and U.S. investors in 2021.

Judgments of foreign courts are accepted and enforced if there is a relevant international agreement signed by Belarus. Courts recognize and enforce foreign arbitral awards. The Belarusian Chamber of Commerce and Industry has an International Arbitration Court. The 2013 “Law on Mediation,” as well as codes of civil and economic procedures, established various alternative ways of addressing investment disputes.

Belarus’ 2012 bankruptcy law, related presidential edicts, and government resolutions are not always consistently applied. Additional legal acts, such as the Civil Code and Code of Economic Procedures, also include certain regulations on bankruptcy-related issues. Under the bankruptcy law, foreign creditors have the same rights as Belarusian creditors. Belarusian law criminalizes false and intentional insolvency as well as concealing insolvency. According to the World Bank’s 2020 Doing Business Index, Belarus was ranked 74 in Resolving Insolvency.

According to the GOB’s Strategy for Attracting FDI, priority sectors include pharmaceuticals, biotechnology, medical equipment, nanotechnologies and nanomaterials, optics and electronics, production of construction materials, electric transport vehicles and light industry products, 5G communications networks, and the information technology and telecommunications sector generally. Potential investors should be aware, however, that following the February 2022 Russian invasion of Ukraine, approximately one-third of all IT workers in Belarus have left the country. Industry insiders expect the outflow of tech workers to continue.

The GOB offers various incentives and programs for FDI depending on the sector and industry.  GOB enters into specific investment agreements with other governments and may accord preferential incentives and benefits including but not limited to:

• Allocation of a land plot without auctioning the right to lease it;
• Removal of vegetation without compensation during construction;
• Full VAT deduction for the purchase of goods, services (works), or property rights;
• Exemption from import tariffs and VAT on the imports of production equipment;
• Exemption from fees for the right to conclude a land lease;
• Exemption from duties for employing foreign nationals;
• Exemption from compensation for losses sustained by the agriculture and/or forestry industries due to the use of a land plot under the investment agreement;
• Exemption from land tax on land plots in government or private ownership, and from rent on land plots in government ownership, for a period starting from the first day of the month in which the investment agreement came into effect until December 31 of the year following the year in which the last of the facilities scheduled under the investment agreement started operations.

Investment agreements concluded under the decision of the Belarusian Council of Ministers and with the permission of the President of Belarus may offer additional incentives and benefits not expressly provided for in legislation. Such incentives are provided on a case-by-case basis.

In 2021, Belarus did not develop or introduce any incentives for investment in green energy production or distribution.

Each of Belarus’ six regions has its own free economic zone (FEZ): Minsk, Brest, Gomel-Raton, Mogilev, Grodno Invest, and Vitebsk. The tax and regulatory pattern applicable to businesses in these zones is simpler and lower than elsewhere in Belarus. To become a FEZ resident, an investor needs to make a minimal investment of EUR 1 million, or at least EUR 500,000 provided the entire sum is invested during a three-year period, as well as engage in the production of import-substituting products or goods for export.

In 2005, Lukashenka signed the edict that established uniform rules for all FEZs. The list of main tax benefits for FEZ residents was revised in 2016 to include certain exemptions from the corporate profit tax (CPT), real estate tax, land tax, and rent on government-owned land plots located within the boundaries of the FEZ, among others. As of 2017, FEZ residents benefit from a simplified procedure of export-import operations. Resident enterprises are exempt from customs duties and taxes on facilities, construction materials, other equipment used in implementation of their investment projects. They are also exempt from customs duties and taxes on raw materials and materials used in the process of manufacture of the products sold outside the territory of the Eurasian Economic Union. Otherwise, FEZ residents pay VAT, excise duties, ecological tax, natural resource extraction tax, state duty, patent duties, offshore duty, stamp duty, customs duties and fees, local taxes and duties, and contributions to the Social Security Fund according to the general guidelines. For more details please visit:

FEZ Minsk:   http://www.fezminsk.by/en/  
FEZ Gomel: http://www.gomelraton.com/en/  
FEZ Vitebsk:   http://www.fez-vitebsk.com/en/  
FEZ Brest:   http://fezbrest.com/en/  
FEZ Mogilev:   http://www.fezmogilev.by/    
FEZ GrondoInvest:   https://grodnoinvest.by/en/   
FEZ Brest:   http://fezbrest.com/en/  

Employing five percent of Belarus total workforce in 2021, Belarus’ six FEZs attracted 23 percent of all FDI, accounted for 21 percent of total exports, generated 18 percent of all industrial production, and contributed five percent of the country’s GDP.

Created in 2005 to foster development of the IT and software industry, the High Technology Park (Hi-Tech Park or HTP) is a “virtual” legal regime that extends over the entire territory of Belarus. A physical campus of the HTP is found in the eastern part of Minsk and a satellite campus is located in Hrodna. The legislation behind the HTP was updated in 2017 with the signing of Presidential Decree No. 8 “On the Development of the Digital Economy.” The decree extended the HTP preferences from 2022 until 2049 and expanded the list of business activities in which HTP residents may engage, including but not limited to software development; data processing; cryptocurrency and token-related activity; data center services; development and deployment of Internet-of-Things technologies; ICT education; and cybersports.

The HTP provides residents with beneficial tax preferences, including but not limited to exemptions from VAT and CPT on sale of goods or services; exemptions from customs duty and VAT on certain kinds of equipment imported into Belarus for use in investment projects; immovable property tax and land tax benefits with regard to buildings and land within the boundaries of the HTP campuses; and caps on personal income tax at five percent for foreign entities. However, a cap on personal income tax at nine percent for employees was removed in late 2020 and the HTP’s employees must now pay a regular income tax of 13 percent. Following continued human rights abuses by Belarusian authorities in response to the protests and the February 2022 Russian invasion of Ukraine, approximately one-third of all IT professionals have relocated outside of Belarus. Industry insiders expect the outflow to continue as the government continues its repressive tactics and as Western sanctions make doing business with international partners more difficult.

In a January 28, 2022 address to parliament, Lukashenka suggested tech workers employed by foreign companies were disloyal and likely received politically-motivated instructions from their employers. Lukashenka said he was weighing whether the HTP was doing the country more good or harm. He hinted that he would insist on a renegotiation of many of the benefits of residency at the HTP, but the exodus of IT professionals caused the government to change course and offer as yet undeclared incentives for companies to keep their employees at the park.

Foreign nationals who are hired on contract by an HTP resident company, who are founders of a HTP resident company, or who are employed by such founders are eligible for visa-free entry into Belarus for a stay of up to 180 days per year. Foreigners employed by HTP residents are not required to have working permit in Belarus and are entitled to apply for a temporary residence permit for the duration of their contract.

For more information on HTP, please visit:   http://www.park.by/  

The Great Stone Industrial Park is a special economic zone of approximately 112.5 square kilometers located adjacent to the Minsk National Airport and Belarusian highway M1, which extends from Moscow to Berlin. Before the launch of Western sanctions against Belarus and the start of Russia’s invasion of Ukraine, Great Stone resident companies had access to Lithuania’s Klaipeda seaport on the Baltic Sea.  According to a master plan approved in 2013, Great Stone was planned to eventually include production facilities, dormitories and residential areas for workers, offices and shopping malls, and financial and research centers. Great Stone is primarily a Belarus-China joint venture but any company – regardless of its country of origin – can apply to join the industrial park. Interested companies must submit either a business project worth at least USD 500,000, to be invested within three years from the moment of the business’ registration; submit a business project worth at least USD 5 million without any time limit for investment; or submit a business project worth at least USD 500,000 tied to research and development.

As of 2020, Great Stone residents receive, among other preferences, certain exemptions on income tax, real estate and land taxes, and dividend income; the right to import goods, including raw materials, under a preferential customs regime; full VAT repayment on goods used for the design, building, and equipment of facilities in Great Stone; exemptions from environmental compensatory payments; and a preferential entry/exit program allowing Great Stone residents and their employees to stay in Belarus without a visa for up to 180 days. Great Stone residents are also exempt from any new taxes or fees through 2027 should the government make adverse changes to the tax code. Great Stone residents are permitted to purchase land in the zone whereas foreign land ownership in the rest of Belarus is highly restricted. The special preferential legal regime of Great Stone will be valid until 2062. The list of priorities planned for implementation in the park include projects in electronics, biomedicine, chemistry, and mechanical engineering.

Following the start of the war in Ukraine in late February 2022, several residents of Great Stone have terminated their operations in the special economic zone and departed Belarus.

Small and medium-sized cities and rural areas in Belarus are defined by a 2012 presidential decree as settlements with populations under 60,000. Individual entrepreneurs and legal entities working in rural settlements of less than 2,000 people receive additional tax benefits and exemptions.

Since 2012, companies and individual entrepreneurs operating in all rural areas and towns enjoy the following benefits in the first seven years after registration: exemption from profit tax on the sale of goods, work, and services of a company’s own production; exemption from other taxes and duties, except for VAT, excise tax, offshore duty, land tax, ecological tax, natural resources tax, customs duties and fees, state duties, patent duties, and stamp duty; exemption from mandatory sale of foreign currency received from sale of goods, work, and services of a company’s own production, and from leasing property; no restrictions on insuring risks with foreign insurers; exemption from import tariffs on certain goods brought into Belarus that contribute to the charter fund of a newly established business. The special legal regime does not apply to banks, insurance companies, investment funds, professional participants in the securities market, businesses operating under other preferential legal regimes (e.g. FEZ or HTP), and certain other businesses.

The GOB does not mandate local employment. Foreign investors have the right to invite foreign citizens and stateless persons, including those without permanent residence permits, to work in Belarus provided their labor contracts comply with Belarusian law. The GOB often imposes various conditions on permission to invest and pursues localization policies. Other performance requirements are often applied uniformly to both domestic and foreign investors.

According to official Belarusian sources, licenses are not required for data storage. Law enforcement regulations governing electronic communications do not include any requirements specifically for foreign internet service providers. Beginning in 2016, internet service providers are required by law to maintain all electronic communications for a one-year period. IT companies operating in Belarus were not aware of any requirements for IT providers to turn over source code and/or provide access to encryption.

According to the 2021 Human Rights Report, the government monitored internet communications without appropriate legal authority and filtered and blocked internet traffic. For several days following the August 2020 election, internet access and mobile communications were severely restricted. While authorities blamed foreign cyberattacks for the disruptions, independent experts attributed the disruptions to the government. Since August 2020, there have been repeated internet and mobile communications disruptions, usually coinciding with major protests and police actions to disperse them. Private internet service providers notified customers that the shutdowns were requested by the government on national security grounds. Telecommunications companies reported that authorities ordered them to restrict mobile internet data severely on the days when large-scale demonstrations occurred. On March 24, 2022, Lukashenka instructed authorities to explore banning YouTube and social media applications because they were ostensibly casting Belarus’ facilitation of the Russian invasion of Ukraine in a bad light.

Property rights are enforced by the Civil Code. Mortgages and liens are available, and the property registry system is reliable. Investors and/or duly established commercial organizations with the participation of a foreign investor (investors) have the right to rent plots of land for up to 99 years. According to the Belarusian Land Code, foreign legal persons and individuals are denied land ownership except for land in the Great Stone Industrial Park, which foreign persons can acquire. The 2020 World Bank Doing Business Report ranked Belarus 14th on ease of property registration (  http://www.doingbusiness.org/en/data/exploreeconomies/belarus  ).

Belarus has made progress in improving legislation to protect intellectual property rights (IPR) and prosecute violators. However, challenges for effective enforcement include a lack of sufficiently qualified officers. According to information provided by Belarus’ National Center of Intellectual Property, Belarus adopted a law upon Belarus’ accession to the World Intellectual Property Organization (WIPO) Marrakesh Treaty on facilitating access for the blind and visually impaired persons or people with other disabilities to printed information. Belarus received the status of a full member under this agreement in October 2020. In 2018, the government amended Article 4.5 of the Administrative Code to allow greater prosecution of industrial property and IPR violations. Authorities reported there was one criminal and 89 administrative cases pursued in 2020. No criminal and 178 administrative cases were prosecuted in 2021. In 2020 and in 2021 the National Center of Intellectual Property registered no complaints from U.S. companies or their representatives regarding violations of intellectual property rights.

In July 2021, the Geneva Act of the Hague Agreement Concerning the International Registration of Industrial Designs of July 2, 1999 (the Geneva Act) came into effect in Belarus and the country became the 66th member state to accede to the Geneva Act and became the 75th member of the Hague Union. In November 2021, Belarus adopted an IPR strategy through 2030 defining significant aspects of the country’s IPR system that need to be strengthened. In December 2021, Belarus acceded to the Industrial Design Protection Protocol to the September 9, 1994 Eurasian Patent Convention. The accession is set to come into effect in April 2022.

Belarus was removed from USTR’s Special 301 Report in 2016 and is not included in the Notorious Markets List.

Belarus is a member of the World Intellectual Property Organization (WIPO) and party to the Bern Convention, the Paris Convention, the Patent Cooperation Treaty (PCT), the WIPO Copyright Treaty, and the WIPO Performances and Phonograms Treaty, among others. For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at   http://www.wipo.int/directory/en/ .

The Belarusian government officially claims to welcome portfolio investment. There have been no reports in 2021 on any impediments to such investment. In 2019 and 2020, Belarus received $500 million and $1.34 billion worth of portfolio investments, respectively. 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 and 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 are available to foreign investors. However, the discount rate of 12 percent established in March, 2022 makes credit too expensive for many private businesses, which, unlike many SOEs, do not receive subsidized or reduced-interest loans. Belarus’ National Bank had predicted a rate of 9-10 percent in 2022 but the war in Ukraine, which prompted the fall of the Belarusian ruble against major foreign currencies, combined with a year-on-year inflation rate of 10 percent in January-February forced the National Bank to revise its outlook.

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.

The Belarus Affairs Unit at U.S. Embassy Vilnius
Economic Section
telephone: +370 (5) 266-5500;
e-mail:   usembassyminsk@state.gov  

Sanctions imposed by the United States have prohibited any commercial activity with some Belarusian banks, including Dabrabyt Bank and Belinvestbank. Belarusian subsidiaries of sanctioned Russian banks are also under sanctions and include Bel/VEB, VTB Bank Belarus, and Sberbank Belarus. Potential investors should review the Department of Treasury website at https://home.treasury.gov/  for updates as trade restrictions on Belarusian banks continue to develop.

Sanctions introduced by the EU prohibit contact with the National Bank of Belarus and have blocked access to the SWIFT secure messaging system for a number of banks, including Dabrabyt Bank, the Development Bank of Belarus, and Belagroprombank. Potential investors should review the website of the European Commission for updates and further details at https://ec.europa.eu/info/index_en .

Belarus has a central banking system led by the National Bank of the Republic of Belarus, which 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. Although the National Bank officially operates independently from the government, there is a history of government interference in monetary and exchange rate policies.

In February 2021, the banking system of Belarus included 23 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 5.3 percent as of January 1, 2022. At the beginning of 2022, the country’s six largest commercial banks of systemic importance, all of which have some government share, accounted for 85 percent of the approximately 92.3 billion Belarusian rubles 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. Regular banking services are widely available to customers regardless of national origin.

Belarusian law does not allow foreign banks to establish branches in Belarus. Subsidiaries of foreign banks are allowed to operate in Belarus and are subject to prudential measures and other regulations like any Belarusian bank. The U.S. Embassy is not aware of Belarus losing any correspondent banking relationships in the past three years. Foreign nationals are allowed to establish a bank account in Belarus without establishing residency status.

According to the IMF, Belarus’ state-dominated financial sector faces deep domestic structural problems and external sector challenges. Domestic structural problems include heavy state involvement in the banking and corporate sector, the lack of hard budget constraints for SOEs given state support, and high dollarization. Externally, Belarus’ economy remains exposed to spillovers from the Russian economy and Belarus’ foreign currency reserves offer a limited buffer to potential external shocks. The banking sector remains vulnerable to external shocks, given the high level of dollarization and the exposure to government and SOE debt. In March 2022, S&P, Fitch, and Moody’s ratings services all downgraded Belarus’ debt rating to CCC or Ca “highly vulnerable to defaults.”

Belarus does not have a Sovereign Wealth Fund. The GOB manages the State Budget Fund of National Development, which supports major economic and social projects in the country.

Although SOEs are outnumbered by private businesses, SOEs dominate the economy in terms of value. According to the Belarusian ministry of taxes and duties, the share of small and medium-sized private enterprises in the revenues of the country’s consolidated budget was 35 percent in 2021, the same as in 2020. 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 misleading. According to 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).

The GOB officially claims to welcome “strategic investors,” including foreign investors, and says that any state-owned or state-controlled enterprise can be privatized. However, Belarus’ privatization program is extremely limited in practice as the government only sells enterprises which operate at a loss and in which the state holds a minority share of less than 25 percent. Lukashenka has expressed skepticism of privatization and during the All-Belarusian People’s Assembly in February 2021 claimed privatization in Belarus was only in the interests of his political opposition.

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 from 2018 to 2020.

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 often places strict requirements on privitizations, including preserving or creating jobs, continuing in the same line of work or production, or launching a successful business project within a limited timeframe.

In 2016, Belarusian joint stocks were allowed trans-border placement via issuing depositary receipts, but to date this instrument of attracting investments has not been used in Belarus.

Belarusian laws and policies include no notion or definition of responsible business conduct and, consequently, take no measures to encourage it. Independent trade unions and business associations promote the concept of responsible business conduct.

In the aftermath of the fraudulent 2020 presidential elections, civil society organizations and opposition political figures sought to draw the attention of multinational companies and foreign investors to the human rights situation in Belarus. For example, the Belarusian Congress of Democratic Trade Unions worked with a Norwegian fertilizer company Yara through its relationship with state-owned potash producer Belaruskali to improve respect for workers’ rights and safety at Belaruskali. Yara later suspended its dealings with Belaruskali due in large part to Western sanctions. Civil society organizations outside of Belarus continue to engage foreign investors and companies on political considerations inside the country. Many multinational corporations decided in 2021 and 2022 to withdraw from the Belarusian market and terminate advertising contracts with state-owned Belarusian media because of continued human rights abuses by the GOB and its support for the Russian invasion of Ukraine.

Belarus does not allow private military or security companies.

Department of State

• Country Reports on Human Rights Practices;
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities;
• U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises; and;
• Xinjiang Supply Chain Business Advisory 

Department of the Treasury

• OFAC Recent Actions

Department of Labor

• Findings on the Worst Forms of Child Labor Report;
• List of Goods Produced by Child Labor or Forced Labor;
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World and;

Comply Chain.

While Belarus officially recognizes the need to develop and implement environmentally friendly economic policies, no significant action was taken by the GOB in 2021.

Official sources claim that 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 sentence of 10 years in jail and confiscation of property. The most corrupt sectors are considered to be state administration and procurement, the industrial sector, agriculture, trade, and the construction industry. In 2020, Belarusian courts convicted 684 individuals “on corruption-related charges.” However, corruption and financial crimes charges are often used by the government for political purposes. Furthermore, the absence of independent judicial and law enforcement systems, the lack of separation of powers, and the lack of independent press make it difficult 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. In December 2021, Belarus’ parliament adopted in the first reading amendments to its anti-corruption law, seeking to improve prevention and streamline the interaction of government agencies in fighting corruption.

The country’s regulations require addressing any potential conflict of interest of parties seeking to win a government procurement contract. The list of these regulations includes 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 party to several international anti-corruption conventions and agreements. The Republic of Belarus has ratified major international anti-corruption treaties, 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 several the intergovernmental agreements to address corruption.

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 the prosecutor’s office, as well as increasing the operational autonomy of law enforcement and limiting the immunity protections provided to 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 2021 Corruption Perception Index, Belarus fell from 63rd down to 82nd place out of 180 countries in the rankings and received 41 of 100 possible points on its scale, down from 47 in 2020. For comparison in 2021, Poland ranked 42nd, Lithuania 34th, Latvia 37th, Ukraine 122nd, and Russia 136th.

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, 220007
Minsk, Belarus+375 29 619 71 25
drebezovaoksana@gmail.com  

In 2021, the GOB repressed, imprisoned, or forced out of the country tens of thousands of peaceful protestors who had taken to the streets in opposition to the fraudulent August 2020 presidential election. There were numerous reports of beatings and torture of those arrested at the hands of security forces. Politically motivated trials against members of the opposition and rival presidential candidates and their supporters resulted in prison sentences of up to 17 years for organizing and taking part in protests. Protests against Belarus’ facilitation of the Russian invasion of Ukraine similarly resulted in repression, arrests, and unjust prison terms for protestors across Belarus. As of March 2022, human rights organizations report at least 1,100 political prisoners in Belarus. Many international businesses have suspended their operations in Belarus as a result of the ongoing human rights violations.

Belarus has a highly skilled, well-educated workforce due to its advanced system of higher and specialized education. Wages are lower than in Western Europe, the United States, and Russia.

Belarus has been a member of the International Labor Organization (ILO) since 1954 and is a party to almost 50 ILO conventions. In 2004, the ILO made several recommendations regarding workers’ rights to organize and freedom of association. However, Belarus has not adequately responded to the 2004 ILO Commission of Inquiry.

The Constitution, the Labor Code, and presidential decrees are the main documents regulating the Labor Market in Belarus. Prior to the 1999 Presidential Decree No. 29, most labor contracts in the country were open-ended work agreements. Decree No. 29 established a new option to employ workers on 1-5 year-long term contracts and to transfer current employees to these new type contracts. Provisions of Decree No 29 were included in the country’s Labor Code in January 2020.

In 2020, more than 90 percent of employees in Belarus were working on term contracts. The term contract system generally favors the employer. The employer can choose not to renew a contract upon its expiration without giving the employee a cause for dismissal. Technically, the employer can also refuse an employee’s proposed resignation before the contract term is up, which would then require the employee to argue their case in court. The employer, on the other hand, can terminate the contract at will. There are several protected employee groups that are exempt from early termination: pregnant women, women with children of up to 3 years old, and single parents with children under 14 years old. Additionally, the employer is obligated to renew contracts with women on maternity leave and with those employees who are approaching retirement age at the end of their prior contract.

Retirement age in 2021 was 58 years for women and 63 years for men.

Severance pay in the case of reduction in force is prescribed in law as 13 weeks of salary and eight weeks’ notice is required for dismissal. However, severance pay only applies to workers on open-ended work agreements which comprise less than 10 percent of all labor contracts in 2020. The law provides a standard workweek of 40 hours and at least one 24-hour rest period per week. Under the law, Belarusians receive mandatory overtime and nine days of holiday pay. Overtime is limited to 10 hours a week, with a maximum of 180 hours of overtime per year. A non-standard work regime is allowed provided that the employee is provided with up to seven days of additional annual leave. In general, employees must be granted at least 24 calendar days of paid leave per year.

There are special provisions for employing foreign citizens without a permanent residence permit. Such citizens must secure a work permit, which is usually granted only if an unemployed Belarusian citizen cannot perform the required work. This is verified by local Belarusian employment offices. In practice, however, few firms, excluding Belarus’ IT sector, employ significant numbers of foreigners. Those that do, tend to hire Russian citizens, who benefit from Russia’s and Belarus’ common employment regulations, streamlined thanks to the developing Union State of Russian and Belarus, and Belarus’ membership in the EAEU.

Although the law provides for the rights of workers, except state security and military personnel, to form and join independent unions and to strike, it places serious restrictions on the exercise of these rights. The government severely restricts independent unions. The law provides for the right to organize and bargain collectively, but does not protect against anti-union discrimination and the government does not respect freedom of association or collective bargaining. Following the post-presidential election protests in late 2020 and early 2021, the GOB ordered the Federation of Trade Unions of Belarus to push private firms and companies across the country form pro-government unions. Independent economic experts say at least half of all privately-owned businesses in Belarus made a show of establishing these unions to satisfy the government, but the new unions are ineffectual and unpopular.

The Department of State’s Report on Human Rights Practices for 2020 provides more information:  https://www.state.gov/reports/2020-country-reports-on-human-rights-practices/belarus/

The official unemployment rate in Belarus has been steady at or just below one percent for many years. According to ILO methodology, unemployment in Belarus was approximately four percent.

Belarus has been a member of the Multilateral Investment Guarantee Agency (MIGA) of the World Bank since December 1992. In July 2011, Belarus ratified amendments to the Convention on Establishing MIGA and concluded agreements on the legal protection of guaranteed foreign investment and the use of local currency. According to the Belarusian Ministry of Economy, these agreements finalized procedures for Belarus to become a full member of MIGA.

The U.S. International Development Finance Corporation (IDFC – formerly known as the Overseas Private Investment Corporation) is not active in Belarus and does not provide political risk insurance for investments in this country. Under Section 5 (Sense of Congress Relating to Sanctions Against Belarus), paragraph C (Prohibition on Loans and Investment) of the Belarus Democracy Act signed by the president on October 20, 2004, no loan, credit guarantee, insurance, financing, or other similar financial assistance should be extended by any agency of the United States government (including the Export-Import Bank and the Overseas Private Investment Corporation) to the Government of Belarus, except with respect to the provision of humanitarian goods and agricultural or medical products. The Belarus Democracy Act of 2020 updates this provision of the 2004 law to extend these restrictions to the IDFC.

In 2021, Belarus received $1.33 billion worth of FDI, much of which came from reinvested profits from foreign investments in the manufacturing and banking sectors. Following the introduction of sanctions in response to Belarus’ facilitation of the Russian invasion of Ukraine, the GOB classified all information about FDI ostensibly for national security reasons. Available statistics indicate FDI in 2021 was down 6.2 percent from the previous year and down 26.7 compared to 2014. The banking sector, in particular, saw a drop in FDI of 42.5 percent in 2021 which independent economic experts attribute to sanctions on Belarusian state-owned banks.

Russia, the Netherlands, Cyprus, the Baltic countries, and Germany were the largest investors in Belarusian economy in 2021. Minsk and the Minsk region accounted for approximately two thirds of all FDI in 2021.

* Please note, some data from host country data sources is not currently available outside of Belarus due to government restrictions on internet access. This includes data from the National Bank of Belarus (  http://www.nbrb.by  ); Ministry of Economy (  https://www.economy.gov.by/  ); and National Statistical Committee (  https://www.belstat.gov.by/en/  ).

Belarus Affairs Unit, U.S. Embassy Vilnius
Political/Economic Section
Akmenu g. 6
Vilnius, 03106, Lithuania
tel. +370 (5) 266-5500
email: usembassyminsk@state.gov  

Belgium maintains an open economy, and its prosperity 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 developing domestic competition policy, wage setting policies, labor law, and most of the energy and fiscal policies.  Attracting FDI, however, is the responsibility of Belgium’s three regional governments in Flanders, Wallonia, and the Brussels-Capital Region.  Flanders Investment and Trade (FIT), Wallonia Foreign Trade and Investment Agency (AWEX) and Brussels Invest and Export (BIE) are the three investment promotion agencies responsible for attracting FDI to Belgium.  One of their most visible activities is organizing the Royal Trade Missions, which are led by Princess Astrid (the king’s sister), as well as the economic part of the state visits by King Philippe.  In June 2022, Princess Astrid plans to lead a Royal Trade Mission to Atlanta, New York City, and Boston with more than 500 participants. Neither the federal nor the regional governments currently maintain a formal dialogue with investors.

There are no laws in place that discriminate against foreign investors.  [While U.S. companies continue to play key and long-standing roles in the development of the Belgian economy, a major U.S.-based multinational firm operating in the chemical cluster near the Port of Antwerp has raised concerns that Flemish government officials have unfairly regulated the company and subjected it to strict limitations not applied to other companies operating in the same sector and space.  The firm and the Flemish government remain in regular contact to seek a fair and equitable solution; however, the perceived lack of regulatory certainty could lead to a reduction of industry investment and operations in Belgium if unresolved.

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.

Belgian authorities are, however, developing a national security-based investment screening law that will likely establish certain restrictions based on national security concerns.  The draft law is not expected to be finalized and delivered to Parliament for vote before the end of 2022.

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 .  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 . In June 2021, Belgium was subject of an IMF Article IV mission: https://www.imf.org/en/News/Articles/2021/06/29/mcs062921-belgium-staff-concluding-statement-of-the-2021-article-iv-mission 

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, and 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 French, Dutch, or German (Belgium’s three official languages); and

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 terms of the Promotion of Independent Enterprise Act of February 10, 1998. For a small or medium-sized enterprise, registration is 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.

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.

• Flanders: Flanders Investment & Trade, https://www.flandersinvestmentandtrade.com/en 
• Wallonia: Invest in Wallonia, http://www.investinwallonia.be/home 
• Brussels: Why Brussels, http://why.brussels/ 

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.  In June 2022, the Belgian government plans to lead a Royal Trade Mission to Atlanta, New York City, and Boston with more than 500 participants. The mission will promote both Belgian investment into the United States and encourage foreign direct investment into Belgium.

The Belgian government has adopted a generally transparent competition policy.  The government has implemented tax, labor, health, safety, and other laws and policies to avoid distortions or impediments to the efficient mobilization and allocation of investment, comparable to those in other EU member states. While U.S. companies continue to play key and long-standing roles in the development of the Belgian economy, a major U.S.-based multinational firm operating in the chemical cluster near the Port of Antwerp has raised concerns that Flemish government officials have unfairly regulated the company and subjected it to strict limitations not applied to other companies operating in the same sector and space.  The firm and the Flemish government remain in regular contact to seek a fair and equitable solution; however, the perceived lack of regulatory certainty could lead to a reduction of industry investment and operations in Belgium if unresolved.

Political competences in Belgium are shared between the federal government, the three regions – Flanders, Wallonia, and Brussels-Capital – and the French and German linguistic communities. (Note. Flanders merged the Flemish linguistic community into its regional government. End Note.) Notwithstanding the fact that the regions in Belgium are responsible for attracting foreign investors, most regulations impacting the business environment (taxes, labor market, energy) are controlled at the federal level. In contrast, environmental regulations are developed mostly at the regional level. A regulatory impact assessment (RIA) is mandatory for all primary and some subordinate legislation submitted to the Cabinet of Ministers at the federal level and is usually shared with social partners as a basis for consultation. Belgium publishes all its relevant legislation and administrative guidelines in an official Gazette, called Het Staatsblad/Le Moniteur Belge (https://www.ejustice.just.fgov.be/cgi/welcome.pl ).

Recognizing the need to streamline administrative procedures in many areas, in 2015 the federal government set up a special task force to simplify official procedures.  Traditionally, scientific studies or quantitative analysis conducted on the impact of regulations are made publicly available for comment. However, not all stakeholder comments received by regulators are made public.

Accounting standards are regulated by the Belgian law of January 30, 2001, and balance sheet and profit and loss statements are in line with international accounting norms. Cash flow positions and reporting changes in non-borrowed capital formation are not required.  However, contrary to IAS/IFRS standards, Belgian accounting rules do require an extensive annual policy report.

Regarding Environmental, Social and Governance Impacts reporting (ESG), the EU’s Non-Financial Reporting Directive (NFRD) was transposed into Belgian law in 2017. The NFRD requires very large public interest entities (PIEs) to report environmental, social and employee, human rights, anti-bribery, and corruption information on an annual basis. On April 21, 2021, the European Commission adopted a proposal for a Corporate Sustainability Reporting Directive (CSRD), which will update the NFRD. The CSRD aims to be applicable as of fiscal year 2023 and will significantly extend the scope of reporting requirements to all large companies and all companies listed on regulated markets (except listed micro-enterprises).

Regarding oversight or enforcement mechanisms to ensure governments follow administrative processes, local courts are expected to enforce foreign arbitral awards issued against the government.  Recourse to the courts is available if necessary.

Public finances and debt obligations are generally transparent. Details on government budgets are available online, and the debt agency (https://www.debtagency.be/en ) publishes all relevant data concerning government debt.

Belgium is a founding member of the EU, whose directives and regulations are enforced.  On May 25, 2018, Belgium implemented the General Data Protection Regulation (GDPR) (EU) 2016/679, an EU regulation on data protection and privacy for all individuals within the European Union.

Through the European Union, Belgium is a member of the WTO, and notifies all draft technical regulations to the WTO Committee on Technical Barriers to Trade (TBT).  Belgium does not maintain any measures that are inconsistent with the Agreement on Trade-Related Investment Measures (TRIMs) obligations.

Belgium’s (civil) legal system is independent of the government and is a means for resolving commercial disputes or protecting property rights.  Belgium has a wide-ranging codified law system since 1830.  There are specialized commercial courts which apply the existing commercial and contractual laws. As in many countries, the Belgian courts labor under a growing caseload and ongoing budget cuts causing backlogs and delays. There are several levels of appeal.

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.

Belgium has no debt-to-equity requirements.  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.

Belgian authorities are currently developing a national security-based investment screening law that will likely establish certain restrictions based on national security concerns.  The law likely will not be finalized and delivered to Parliament for a vote before the end of 2022.

There are three different regional Investment Authorities:

• Flanders: http://www.flandersinvestmentandtrade.com 
• Wallonia: http://www.awex.be 
• Brussels: https://be.brussels/brussels 

The contact address for competition-related concerns:

Federal Competition Authority
City Atrium, 6th floor
Vooruitgangsstraat 50
1210 Brussels
tel: +32 2 277 5272
fax: +32 2 277 5323
email: info@bma-abc.be

EU member states are responsible for competition and anti-trust regulations if there are cross-border dimensions. If cross-border effects are present, EU law applies, and European institutions are competent.

There are no outstanding expropriation or nationalization cases in Belgium with U.S. investors. There is no pattern of discrimination against foreign investment in Belgium.

When the Belgian government uses its eminent domain powers to acquire property compulsorily for a public purpose, current market value is paid to the property owners. Recourse to the courts is available if necessary.  The only expropriations that occurred during the last decade were related to infrastructure projects such as port expansions, roads, and railroads.

Belgian bankruptcy law falls is under the jurisdiction of the commercial courts.  The commercial court appoints a judge-auditor to preside over the bankruptcy proceeding and whose primary task is to supervise the management and liquidation of the bankrupt estate, in particular with respect to the claims of the employees.  Belgian bankruptcy law recognizes several classes of preferred or secured creditors.  A person who has been declared bankrupt may subsequently start a new business unless the person is found guilty of certain criminal offences that are directly related to the bankruptcy.  The Business Continuity Act of 2009 provides the possibility for companies in financial difficulty to enter into a judicial reorganization.  These proceedings are to some extent similar to Chapter 11 as the aim is to facilitate business recovery.  In the World Bank’s 2020 Doing Business Index, Belgium ranks number 9 (out of 190) for the ease of resolving insolvency.

In Belgium, investment incentives and subsidies are the responsibility of Belgian’s three regions: Flanders, Wallonia, and Brussels-Capital.  Nonetheless, most tax measures remain under the control of the federal government as do the parameters (social security, wage agreements) that govern general salary and benefit levels.  In general, all regional and national incentives are available to foreign and domestic investors alike.   The government does not have a practice of issuing guarantees or jointly financing foreign direct investment projects.

Belgian investment incentive programs at all levels of government are limited by EU regulations and are normally kept in line with those of the other EU member states.  The European Commission has tended to discourage certain investment incentives in the belief that they distort the single market, impair structural change, and threaten EU convergence, as well as social and economic cohesion.

In their investment policies, the regional governments emphasize innovation promotion, research and development, energy savings, environmental protection, exports, and employment. In order achieve this, a wide variety of tax benefits and incentives is available at both the federal and regional levels. The three regional agencies have staff specializing on specific regions of the world, including the United States, and have representation offices in different countries.  In addition, the Finance Ministry has a foreign investment tax unit to provide assistance and to make the tax administration more “user friendly” to foreign investors.

More information about investing in Belgium, the Belgian tax system, tax benefits and incentives can be found at:  https://business.belgium.be/en .

Tax advice and support can be requested, free of charge at the Foreign Investment Tax Unit of the Federal Public Service Finance ( taxinvest@minfin.fed.be ).

There are no foreign trade zones or free ports as such in Belgium.  However, the country utilizes the concept of customs warehouses.  A customs warehouse is approved by the customs authorities where imported goods may be stored without payment of customs duties and VAT.  Only non-EU goods can be placed under a customs warehouse regime.  In principle, non-EU goods of any kind may be admitted, regardless of their nature, quantity, and country of origin or destination.  Individuals and companies wishing to operate a customs warehouse must be established in the EU and obtain authorization from the customs authorities.  Authorization may be obtained by filing a written request and by demonstrating an economic need for the warehouse.

Performance requirements in Belgium usually relate to the number of jobs created. There are no national requirement rules for senior management or board of directors. There are no known cases where export targets or local purchase requirements were imposed, with the exception of military offset programs.  While the government reserves the right to reclaim incentives if the investor fails to meet his employment commitments, enforcement is rare.  However, in 2012, with the announced closure of an automotive plant in Flanders, the Flanders regional government successfully reclaimed training subsidies that had been provided to the company.

There is currently no requirement for foreign IT providers to share source code and/or provide access to surveillance agencies.

Property rights in Belgium are well protected by law, and the courts are independent and considered effective in enforcing property rights. Mortgages and liens exist through a reliable recording system operated by the Belgian notaries. Industrial spaces that are unused and neglected can be subject to levies. Owners of building plots are not required to build on them within a certain period. However, exceptions exist for plots that retain construction obligations. On those plots, owners are obliged to build within a certain timeframe.

Belgium generally meets very high standards for the protection of intellectual property rights (IPR). The EU has issued a number of directives to promote the protection and enforcement of IPR, which EU Member States are required to implement.  National laws that do not conflict with those of the EU also apply.  Belgium is a member of the World Trade Organization (WTO) and so is party to the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).  Belgium is also a member of the World Intellectual Property Organization (WIPO) and party to many of its treaties, including the Berne Convention, the Paris Convention, the WIPO Copyright Treaty, and the WIPO Performances and Phonograms Treaty.

IPR is administered by the Belgian Office of Intellectual Property (OPRI), which is part of the Directorate-General for Economic Regulation  in the Ministry for Economic Affairs: https://economie.fgov.be/en/themes/intellectual-property/institutions-and-actors/belgian-office-intellectual .  This office manages and provides Belgian IPR titles, oversees public awareness campaigns, drafts legislation, and advises Belgian authorities with regard to national and international issues.  The Belgian Ministry of Justice is responsible for enforcement of IPR.  Belgium experiences a rate of commercial and digital infringement – particularly internet music piracy and illegal copying of software – similar to most EU Member States.

Belgium is not included on USTR’s Special 301 Report.

For additional information about treaty obligations and points of contact at local IP offices, please see the WIPO’s country profiles at http://www.wipo.int/directory/en/ .

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.

Bruges established the world’s first stock market almost 600 years ago, and the Belgian stock exchange 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.

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

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.

Since 2017, the supervision of systemically important Belgian banks lies with 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 Belgian non-performing Loan Ratio stood at 0.7% in 2021. Total bank assets amount to about 90% of GDP.

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.  Belgium implemented a basic banking service law in 2021 which aims to give entrepreneurs otherwise unable to open a bank account the right to do so. For example, companies that have been refused the ability to open a bank account by three credit institutions are entitled to a basic banking service. According to the law, a basic banking service room – administered by the government – will confirm evidence of three refusals, and designate a credit institution in Belgium that must offer the basic banking service to the company.  Even though the law is still not fully implemented, authorities anticipate nationwide implementation in 2022.

Belgium has a sovereign wealth fund (SWF) in the form of the Federal Holding and Investment Company (FPIM-SFPI), a quasi-independent entity created in 2006 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 2020, its total assets amounted to €1.96 billion. Most 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 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.  Private enterprises are allowed to compete with SOEs under 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.

Belgium currently has no scheduled privatizations. There are no indications that foreign investors would be excluded from eventual privatizations.

The Belgian government encourages both foreign and local enterprises to follow generally accepted Corporate Social Responsibility principles such as the OECD Guidelines for Multinational Enterprises and the United Nations Guiding Principles on Business and Human Rights. The Belgian government also encourages adherence to the OECD Due Diligence guidance for responsible supply chains of minerals from conflict-affected areas.

When it comes to human rights, labor rights, consumer and environmental protection, or laws/regulations which would protect individuals from adverse business impacts, the Belgian government is generally considered to enforce domestic laws in a fair and effective manner.

There is a general awareness of corporate social responsibility among producers and consumers. Boards of directors are encouraged to pay attention to corporate social responsibility in the 2009 Belgian Code on corporate governance. This Code, also known as the ‘Code Buysse II’ stresses the importance of sound entrepreneurship, good corporate governance, an active board of directors and an advisory council. It deals with unlisted companies and is complementary to existing Belgian legislation. However, adherence to the Code Buysse II is not factored into public procurement decisions. For listed companies, far stricter guidelines apply, which are monitored by the Financial Services and Markets Authority.

Belgium is part of the Extractive Industries Transparency Initiative.  There are currently no alleged or reported human or labor rights concerns relating to responsible business conduct (RBC) that foreign businesses should be aware of. In cases of violations, the Belgian government generally enforces domestic laws effectively and fairly. NGOs and unions that promote or monitor RBC can do so freely.

Department of State

• Country Reports on Human Rights Practices
• Trafficking in Persons Report
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities
• U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises
• Xinjiang Supply Chain Business Advisory

Department of the Treasury

• OFAC Recent Actions 

Department of Labor

• Findings on the Worst Forms of Child Labor Report ;
• List of Goods Produced by Child Labor or Forced Labor ;
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World and;
• Comply Chain .

Due to the federal state structure of Belgium and the different areas of competence and responsibility, climate policy is divided between the regions and the federal state. More information about Belgian climate policies, as well as the implementation of EU and UN climate-related agreements and guidelines, can be found here: https://klimaat.be/klimaatbeleid/belgisch/nationaal/langetermijnstrategie#:~:text=De%20Belgische%20langetermijnstrategie&text=Deze%20strategie%20omvat%20streefdoelen%20voor,om%20deze%20streefdoelen%20te%20bereiken .

As a member of the EU, Belgium subscribes to the system of emissions trading (the European Emissions Trading System or EU ETS) for industrial installations. The system is applicable to large installations (with a thermal input of more than 20 MW) in industries such as electricity production and aviation, among others. Depending on the concrete activities and characteristics of a company, different environmental permits may be required. Being a regional matter, these requirements can differ depending on the region in which a company is active:

• Flanders: https://www.vlaanderen.be/omgevingsvergunning 
• Wallonia: https://www.wallonie.be/fr/demarches/demander-un-permis-denvironnement-ou-un-permis-unique-pour-un-etablissement-de-classe-1-ou-2 
• Brussels-Capital: https://urbanisme.irisnet.be/lepermisdurbanisme/autres-premis-et-certificats/le-permis-unique?set_language=fr 

Belgian has extensive anti-bribery laws in place. Bribing foreign officials is a criminal offense in Belgium. Belgium has been a signatory to the OECD Anti-Bribery Convention and is a participating member of the OECD Working Group on Bribery.

Anti-bribery legislation 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 Belgian law bribery is considered passive 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.

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. Recent court cases in Belgium suggest that corruption is most prevalent 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 over 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

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

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: info@transparencybelgium.be

NOTE TO DRAFTER: In preparation of this section, drafters should consult with the Post Human Rights Reporting Officer, to ensure consistency with the Corruption section and other sections of the Department’s annual Country Reports on Human Rights Practices.

Belgium is a peaceful, democratic nation comprised of federal, regional, and municipal political units: the Belgian federal government, the regional governments of Flanders, Wallonia, the Brussels-Capital region, and communes (municipalities). Political divisions do exist between the Flemish and the Walloons, but they are addressed in democratic institutions and generally resolved through compromise. The Federal Council of Ministers, headed by the prime minister, remains in office as long as it retains the confidence of the lower house (Chamber of Representatives) of the bicameral parliament.

In 2021, a seven-year-long investigation into an attempted sabotage of the Doel nuclear power plant – perpetrated in 2014 – ended inconclusively in 2021. Investigators concluded that the incident was likely carried out by a plant employee or subcontractor who had a legitimate reason to be in the area where the sabotage occurred.

The Belgian labor force is generally well trained, highly motivated and very productive. Workers have an excellent command of foreign languages, particularly in Flanders. There is a low unemployment rate among skilled workers. EU Enlargement facilitated the entry of skilled workers into Belgium from newer member states. Non-EU nationals must apply for work permits before they can be employed. Minimum wages vary according to the age and responsibility level of the employee and are adjusted for the cost of living.

Belgian workers are highly unionized and usually enjoy good salaries and benefits. Belgian wage and social security contributions, along with those in Germany, are among the highest in Western Europe. For 2019, Belgium’s harmonized unemployment figure was 5.4 percent, below the EU28 average of 6.4 percent (OECD). High wage levels and pockets of high unemployment coexist, reflecting both strong productivity in new technology sector investments and weak skills of Belgium’s long-term unemployed, whose overall education level is significantly lower than that of the general population. There are also significant differences in regional unemployment levels (2019 figures): 3.3 percent in Flanders, against 7.2 percent in Wallonia and 12.7 percent in Brussels.  At the same time, shortages exist, mainly of workers with a degree in the sciences, mathematics, ICT, and engineering.

Given the nature of the informal economy, relatively few reliable figures are available. However, according to the IMF, the importance of the Belgian informal sector stood at around 17% of GDP at the end of 2015. This relatively high percentage can be attributed mainly to the high Belgian personal income tax rates that often make it financially worthwhile to avoid the payment of such taxes through formalized employers. The Belgian Central Bank states the informal economy is mainly based in the construction, catering, and household services sectors.

Belgian’s comprehensive social security package is composed of five major elements: family allowance, unemployment insurance, retirement, medical benefits and a sick leave program that guarantees salary in event of illness. Currently, average employer payments to the social security system stand at 25 percent of salary while employee contributions comprise 13 percent. In addition, many private companies offer supplemental programs for medical benefits and retirement.

Belgian labor unions, while maintaining a national superstructure, are, in effect, divided along linguistic lines. The two main confederations, the Confederation of Christian Unions and the General Labor Federation of Belgium exert a strong influence in the country, politically and socially. A national bargaining process covers inter-professional agreements that the trade union confederations negotiate biennially with the government and the employers’ associations. In addition to these negotiations, bargaining on wages and working conditions takes place in the various industrial sectors and at the plant level. About 51 percent of employees from the public service and private sector are labor union members. Wage negotiations in Belgium often lead to large manifestations and strikes, which sometimes force public transport and major roads to close temporarily.

Firing a Belgian employee can be very expensive. An employee may be dismissed immediately for cause, such an illegal activity, but when a reduction in force occurs, the procedure is far more complicated. In those instances where the employer and employee cannot agree on the amount of severance pay or indemnity, the case is referred to the labor courts for a decision. To avoid these complications, some firms include a “trial period” (of up to one year) in any employer-employee contract. Belgium is a strict adherent to ILO labor conventions.

Belgium was one of the first countries in the EU to harmonize its legislation with the EU Works Council Directive of December 1994. Its flexible approach to the consultation and information requirements specified in the Directive compares favorably with that of other EU member states.

In 2015, the Belgian government increased the retirement age from the current age of 65 to 66 as of 2027 and 67 as of 2030.  Under the 2015 retirement plan, various schemes for early retirement before the age of 65 will be gradually phased out, and unemployment benefits will decrease over time as an incentive for the unemployed to regain employment.

Wage increases are negotiated by sector within the parameters set by automatic wage indexation and the 1996 Law on Competitiveness. The purpose of automatic wage indexation is to establish a bottom margin that protects employees against inflation: for every increase in consumer price index above 2 percent, wages must be increased by (at least) 2 percent as well. The top margin is determined by the competitiveness law, which requires the Central Economic Council (CCE) to study wage projections in neighboring countries and make a recommendation on the maximum margin that will ensure Belgian competitiveness. The CCE is made up of civil society organizations, primarily representatives from employer and employee organizations, and its mission is to promote a socio-economic compromise in Belgium by providing informed recommendations to the government. The CCE’s projected increases in neighboring countries have historically been higher than their real increases, however, and have caused Belgium’s wages to increase more rapidly than its neighbors. Since 2016 however, that wage gap has decreased substantially.

Belgian labor law provides for dispute settlement procedures, with the labor minister appointing an official as mediator between the employers and employee representatives.

In February 2022, the federal government reached an agreement on a plan to reform aspects of the labor market, including the introduction of a voluntary four-day work week, relaxed rules allowing employees to work longer into the night (8:00 p.m. – 12:00 a.m.) and the right to “disconnect,” a privilege already afforded to civil servants who are no longer obliged to respond to work-related messages during off-hours.

Pieter-Jan VAN STEENKISTE
Economic Specialist
Regentlaan, 27 – BE1000 Brussels
0032 475 706 529
vansteenkistepj@state.gov

Belize’s government encourages FDI to relieve fiscal pressure and transform the economy.  In November 2021, the Government of Belize hosted its first national Investment Summit under the theme “Belize: Open for Business.” The Government of Belize also conducted trade missions to the United States to promote itself as an investment destination and credible export market. In April 2022, senior Belizean government representatives hosted a diaspora tour in the United States to encourage Belizean-Americans to invest in Belize. The estimated Belize diaspora is 300,000 persons. While the government is interested in attracting FDI, certain bureaucratic and regulatory requirements impede investment and growth.

Public debt declined from 133 percent of GDP in 2020 to 108 percent in 2021. This was in large part due to the Blue Bond Agreement, a successful marine protection and conservation-driven financial transaction. Under this deal, The Nature Conservancy (TNC) lent funds to Belize to buy back its Superbond (totaling US $553 million or 30 percent of GDP) at a discounted price of 55 cents per dollar. In exchange, Belize committed to increase expenditure on marine conservation until 2041 and to expand its Biodiversity Protection Zones to 30 percent by 2026.

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. U.S. firms have identified challenges in participating and competing in areas related to the bidding, procurement, and dispute settlement processes, in particular relating to State Owned Enterprises (SOEs).

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.  Export-orientated businesses operating in less developed areas also receive preferential treatment. The Economic Development Council, https://edc.gov.bz , is a public-private sector advisory body established to advance public sector reforms, to promote private sector development and to inform policies for growth and development.

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 and adhere to the Exchange Control Act and related regulations.  To register a business name, foreigners must apply with a Belizean partner or someone with a permanent residence. Requirements differ based on the applicant’s residency status and whether the individual is seeking to establish a local or foreign currency account.

Foreign investments must be registered and obtain an “Approved Status” from the Central Bank to facilitate inflows and outflows of foreign currency and repatriate funds gained from profits, dividends, loan payments, and interest.  The Exchange Control Regulation Act was amended in 2020 to relax the requirement for non-residents to obtain prior permission from the Central Bank to conduct transaction in securities and real estate. The amendment now requires for prior written notice to the Central Bank with full particulars of the transaction.

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.

Foreign investors seeking to avail themselves of various incentives programs are required to adhere to screening guidelines outlined in the specific program. These may include updating their shareholders registry, obtaining requisite Central Bank of Belize approvals, and fulfilling performance requirements. Foreign investors undertaking large capital investments are also advised to adhere to environmental laws and regulations.  The government requires developers to prepare an Environmental Impact Assessment (EIA) for certain projects. When purchasing land or planning to develop in or near an ecologically sensitive zone, the government recommends the EIA fully address any measures by the investor to mitigate environmental risks.  The Department of Environment website, http://www.doe.gov.bz  has more information on the Environmental Protection Act and other regulations, applications, and guidelines.

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.

In the past five years, civil society organizations concerned with investment policy lobbied directly with government. As an example, the Belize Chamber of Commerce and Industry, the Belize Network of NGOs, and the opposition were represented on the National Oversight Committee during the height of the COVID- 19 pandemic.

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 generally distinguish by gender or economic status.

The GoB made progress on the ease of doing business through trade license, stamp duty, exchange control, and land reforms to streamline business applications and related processes. Myriad government services are going digital. Business and personal income tax offices amalgamated into the Belize Tax Service which launched an online tax payment system. Belize’s Financial Inclusion Strategy also expands access of financial services to underserved populations. Businesses must register with the tax department and local government to pay business and general sales tax and obtain a trade license.  An employer should also register employees for social security. Permission from the Central Bank is required for all overseas investments between residents and non-residents

The Belize Companies and Corporate Affairs Registry (tel: +501 822 0421; email: info@belizecompaniesregistry.gov.bz ; website: https://belizecompaniesregistry.gov.bz ) is responsible for the registration process of all local businesses and companies.

Belize does not promote or incentivize outward investments.  The 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.

There are no reports of government policies, processes, or laws significantly distort or discriminate against foreign investors.  Nonetheless, some investors have complained of systematic shortfalls such as unreliable land titles and bureaucratic delays or corruption, which hinder doing business in Belize. U.S. firms have also identified challenges in participating and competing in areas related to the bidding, procurement, and dispute settlement processes, particular to State Owned Enterprises (SOEs). There are no nongovernmental organizations (NGOs) or private sector associations that manage regulatory processes.  NGOs and private sector associations do lobby on behalf of their members but have no statutory authority.

Regulatory authority exists both at the local and national levels with national laws and regulations being most relevant to foreign businesses.  The cabinet dictates government policies that are enacted by the legislature and implemented by the various government authorities.  Some quasi-governmental organizations are also mandated by law to manage specific regulatory processes, e.g., the Belize Tourism Board, BELTRAIDE, and the Belize Agricultural Health Authority.  Regulations exist at the local level, primarily relating to property taxes and registering for trade licenses to operate businesses in the municipality.

Some supra-national organizations and regulatory structures exist.  For example, some elements of international trade affecting U.S. businesses are affected by CARICOM treaties, as in the case of the export of sugar within CARICOM.

Accounting, legal, and regulatory systems are consistent with international norms.  Publicly owned companies generally receive audits annually, and the reports are in accordance with International Financial Reporting Standards and International Standards on Auditing.

The government does not promote or require companies’ environmental, social and governance disclosure to facilitate transparency or help investors and consumers distinguish between high- and low-quality investments.

Draft bills or regulations are generally made available for public comment through a public consultation process.  Once introduced in the House of Representatives, draft bills are sent to the relevant standing committee, which then meet and invite the public and interested persons to review, recommend changes, or object to draft laws prior to further debate.  The mechanism for drafting bills, and enacting regulations and legislation generally applies across the board and includes investment laws and regulations.  Public comments on draft legislation are not generally posted online nor made publicly available.  In a few instances, laws are passed quickly without meaningful publication, public review, or public debate. The government does not generally disclose the basis on which it reviews regulations.  Some government agencies make scientific studies publicly available.

Printed copies of the Belize Government Gazette contain proposed as well as enacted laws and regulations and are publicly available for a subscription fee.  Additionally, enacted laws are published free of cost on the website of the National Assembly or Parliament, but there is a delay in updating the website.

Regulations and enforcement actions are appealable with regulatory decisions subject to judicial review.  The Office of the Ombudsman also may investigate allegations of official wrongdoing but has no legal authority to bring judicial charges.  Reports of wrongdoing are submitted to the affected ministry. Additionally, the Annual Report of the Ombudsman is presented to the National Assembly and is a publicly available document.

The offices for business and personal income tax amalgamated into the Belize Tax Service, which launched an online tax payment system in August 2021. The Companies Registries, along with the court system, are being digitized to facilitate e-filing of documents and online payment of fees. In March 2022, the government lowered business tax on the net interest income charged to banks and financial institutions with a view to incentivizing lending in strategic foreign exchange earning sectors and at the same time increased the tax on specific sectors to disincentivize personal and distribution loans. The amendments to the tax system will improve tax collection and a stem leakage. Other anticipated reforms are expected to improve the ease of doing business, provide greater transparency and stimulate economic growth with lending to foreign exchange earning sectors.

Information on public finance, both the government’s budget and its debt obligations (including explicit and contingent liabilities) are widely accessible to the public, with most documents available online.  The budget documents do not include information on contingent or state-owned enterprise (SOE) debt unless the GoB guarantees or is paying these debts. Nonetheless, the audited annual reports of all major SOEs were publicly available on their websites.  The Auditor General’s report on government spending, however, is often significantly delayed.

As a full member of the Caribbean Community (CARICOM), Belize’s foreign, economic and trade policies vis-a-vis non-member states are coordinated regionally.  The country’s import tariffs are largely defined by CARICOM’s Common External Tariff.

Besides CARICOM, Belize is a member of the Central American Integration System (SICA) at a political level, but is not a part of the Secretariat of Central American Economic Integration (SIECA) that supports economic integration with Central America.  Belize is also a member of the WTO and adheres to the Organization’s agreements and reporting system.

The Belize Bureau of Standards (BBS) is the national standards body responsible for preparing, promoting, and implementing standards for goods, services, and processes.  The BBS operates in accordance with the WTO Agreement on Technical Barriers to Trade and the CARICOM Regional Organization for Standards and Quality.  The BBS is also a member of the International Electrotechnical Commission (IEC), the International Organization for Standardization (ISO), and Codex Alimentarius.

As a former British colony, Belize follows the English Common Law legal system. The Belize Constitution is the supreme law and founded on the principle of a separation of powers with independence of the judiciary from the executive and legislative branches of government. Belize has a written Contract Act, but no specialized courts to deal with commercial disputes or cases.

The judicial system remains generally independent of the executive branch.  Case law exists where the judiciary has ruled against the government, and its judgements are respected and authoritative.  The highest appellate court exists outside of Belize at the Caribbean Court of Justice, providing a level of independence for the judiciary.  The judiciary remains underfunded and understaffed resulting in frequent adjournments, delays, poor case-flow management and a backlog of cases.  General information relating to Belize’s judicial and legal system, including links to Belize’s Constitution, Laws and judicial decisions are available at the Judiciary of Belize website www.belizejudiciary.org .

Businesses and citizens may appeal regulations and enforcement actions.  Regulatory decisions are also subject to judicial review.  Judgments by the Belize Supreme Court and the Court of Appeal are available at http://www.belizejudiciary.org .

The Caribbean Court of Justice has two jurisdictions, appellate and original, in relation to CARICOM Members States. In its appellate jurisdiction, the CCJ is the final court of appeal for both civil and criminal matters emanating from CARICOM Member States. In its original jurisdiction, this Court is responsible for interpreting and applying the Revised Treaty of Chaguaramas, the treaty establishing the Caribbean Community and CARICOM Single Market and Economy.

The country has an English Common Law legal system supplemented by local legislation and regulations.  The legal system does not generally discriminate against foreign investment and there are no restrictions to foreign ownership.  The Exchange Control Act and its subsidiary laws and regulations, however, provide the legal framework that applies to foreign ownership and control. Other laws stipulate that foreign investment can qualify for incentives; citizens have the right to private property; contracts are legally binding and enforceable, and regulations are subject to judicial review among other provisions favorable to foreign investment.

Major laws enacted or amended are generally available in the National Assembly’s website at www.nationalassembly.gov.bz .  For the previous year, these include the Blue Bond Loan Act, 2021; Companies (Amendment) Act, 2021; Data Protection Act, 2021; Electronic Evidence Bill, 2021; Electronic Transactions Act, 2021; Electronic Transfer of Funds Crime Act, 2021; Immigration (Amendment) Act,, 2021; Patents (Amendment) Act, 2021; Public Sector Data Sharing Act, 2021; Securities Industry Act, 2021; Stamp Duties (Amendment) Act, 2021; Sugar Industry (Amendment) Act, 2021; Trademarks (Amendment) Act, 2021; Tax Administration and Procedures (Amendment) Act, 2021; Central Bank of Belize (Amendment) Act, 2022; and Income and Business Tax (Amendment) Act, 2022.

There is no “one-stop-shop” website for investment, and the laws, rules, procedures, and reporting requirements related to investors differ depending on the nature of the investment.  BELTRAIDE provides advisory services for foreign investors relating to procedures for doing business in Belize and what incentives might be available to qualifying investors.  Further information is available at the BELTRAIDE website:  http://www.belizeinvest.org.bz 

Belize does not have any laws governing competition, but there are attempts to limit outside competition in certain industries (such as food and agriculture) by levying high import duties and import licensing requirements.

The government used the right of eminent domain in several cases to expropriate private property, including land belonging to foreign investors.  There were no new expropriation cases in 2021. However, claimants in previous cases of expropriation assert the GoB failed to honor agreements entered into by a previous administration.  Belizean law requires that the government assess and compensate according to fair market value.  Expropriation cases can take several years to settle and there are a few cases where compensation is still pending.  Belize nationalized two companies in public-private partnership: Belize Electricity Limited and Belize Telemedia Limited.  These actions were challenged in the courts and resolved in 2015 and 2017, respectively.

The Caribbean Court of Justice delivered a judgment relating to the Belmopan Land Development Corporation Limited (BLDCL) in January 2022, wherein it upheld the decision of the trial judge in favor of BLDCL. The case pertained to compensation owed by the government for 1,394 acres of land expropriated in 2013. After negotiations for market value failed, the matter was taken before local courts. The CCJ upheld the trial judge’s quantum of damages to BLDCL for just over US $8 million.

The Bankruptcy Act of Belize provides for bankruptcy filings.  The Act provides for the establishment of receivership, trustees, adjudication, and seizures of the property of the bankrupt.  The court may order the arrest of the debtor as well as the seizure of assets and documents in the event the debtor may flee or avoid payment to creditors.  The Director of Public Prosecutions may institute proceedings for offenses related to the bankruptcy proceedings.   The bankruptcy law generally outlines actions a creditor may take to recoup losses.  Bankruptcy protections are not as comprehensive as U.S. bankruptcy law.

The legal framework authorizing and providing for investment incentives include the Fiscal Incentives Act, the Designated Processing Areas Act, the Free Zones Act, the International Business Companies Act, the Retired Persons Incentives Act, the Diaspora Retiree Incentive Program, the Trusts Act, the Offshore Banking Act, and the Gaming Control Act.  These acts offer a range of incentives including tax deferments, tax reductions, access to land and capital, and preferential access to some government concessions.

While government policies support public private partnerships, they do not generally issue guarantees or joint financing of foreign direct investment projects.  In exceptional circumstances, guarantees have been issued for SOE investments to purse funding from development institutions. In October 2021, the GoB approved a draft public private partnership policy (PPP) and the creation of the PPP unit to mobilize private sector capital to support large-scale investments in infrastructure and other development projects.

In March 2022, the government amended the Income and Business Tax Act to decrease the incentive lending rate from 15 percent to 12 percent in strategic foreign exchange earning sectors including tourism, agriculture, and business processing outsourcing. The Central Bank of Belize and the Government of Belize also established the Emergency Business Support Program (EBSP) in the last year to provide financing through domestic banks and the Development Finance Corporation to businesses affected by the COVID –19 pandemic.

The Designated Processing Areas Act (DPA) was passed in 2018 to replace the former Export Processing Zone Act.  The DPA remains a tool to attract local and foreign investments that follow value-added business models to boost production for export markets.  Approved companies under this program receive a DPA status for a period of up to ten years and may qualify for various tax exemptions.  Approved companies are given certain exemptions, including from the Trade Licensing Act requirements for operating in a municipality and the Supplies Control Act, in relation to the importation of raw materials for production that are not available in Belize.  Companies may maintain a foreign currency account in a domestic or international bank located in Belize as well as sell, lease, or transfer goods and services between DPA companies.  While subject to the Income and Business Tax, businesses may qualify for a preferential tax rate on chargeable income.  They may also be eligible for an annual quota for fuel solely for specified uses.

A Free Zone Act passed in 2019 amended the Commercial Free Zone (CFZ) Act.  Belize currently has two CFZs, one on the northern border with Mexico and a small zone on the western border with Guatemala.  The legislation limited the activities allowed in CFZ to specific sectors. Banks and financial institutions licensed under the laws of Belize are allowed to operate within a CFZ, but their transactions are limited to only CFZ-centered business.

Companies may operate both in the national customs territory and in the Free Zone, but must maintain separate accounts in respect of business activities.  Additionally, goods entering the customs territory are subject to customs duties.  The Commercial Free Zone Management Agency (CFZMA) monitors and administers the free zones.  Incentives include exemptions from import duties, income tax, taxes on dividends, capital gains tax, or any new corporate tax levied by the government during the first ten years of operation.  In addition, imports and exports of a CFZ are exempt from customs duties, consumption taxes, excise taxes, or in-transit taxes, except those destined for or directly entering areas subject to the national customs territory.

Domestic and foreign investors seeking to access incentives offered under the various incentive programs must comply with the program conditions including performance requirements. Investments that have been approved for incentives generally report to the authorizing agency, namely BELTRAIDE or the Ministry of Finance, Economic Development and Investment, to ensure they meet stipulations on the concession.

The Fiscal Incentives Act awards a qualified entity a development concession during the start-up or expansion stages to foster growth by offsetting custom duties.  According to BELTRAIDE (www.belizeinvest.org.bz), two programs are offered under this Act: the Regular Program for investments exceeding US $150,000 and the Small and Medium Enterprise (SME) program for investments of less than US $150,000.

In general, investment incentives are applicable to both domestic and foreign investors.  The Fiscal Incentives SME Program, however, is aimed at smaller enterprises with a minimum of 51 percent Belizean ownership.  The SME Program offers the same benefits of the Regular Program, except for the allowable timeframe for duty exemptions.  Under this program, companies are allowed a maximum of five years of development concessions, with the expectation that after this period, companies can mature into the Regular Program.

The Qualified Retirement Program (QRP) was created to facilitate eligible persons who have met the income requirements to permanently live and retire in Belize.  The Belize Tourism Board oversees this program designed to benefit retired persons over 45 years of age.  To qualify, applicants need proof of income not less than US $2,000 per month through a pension or annuity generated outside of Belize.  An approved QRP is allowed to import personal effects as well as approved means of transportation, free of customs duties and taxes.  Under the program, beneficiaries cannot engage in employment, own a business or invest in Belize. 

In November 2021, Belize passed the Data Protection Act, which is partially aligned with Europe’s General Data Protection Regulation (GDPR). The Act mandates the sharing of data between governmental agencies and categorizes financial records as sensitive personal data. It also lays out fines are as high as US $250,000. The Act creates a carve-out for international transfers of data to cloud storage outside Belize whereby no consent is required from data subjects. Additionally, the Act gives a three-day window as the default for notifying the Commissioner and data subjects of breaches.

The preamble of the Belize Constitution preserves the right of the individual to own private property to operate private businesses.  Common law, Belize legislation, and case law all reinforce property rights and interests.  Private entities, whether foreign or local, have the right to freely establish, acquire, and dispose of interests in property and business enterprises.  Generally, the country has no restrictions on foreign ownership and control; however, foreign investments in Belize must be registered at the Central Bank of Belize and adhere to the Exchange Control Act and related regulations.

Mortgages and liens exist, and related real estate is recorded with the registry of the Lands and Survey Department.  The Lands and Survey Department has a history of corruption, and there have been charges of land fraud, abuses, and cronyism leveled against the Department during each administration.  As part of its land reform policy, the Lands Department continues to engage with the public through mobile clinics, where Lands Department personnel visit communities across to country to address land concerns, including issuing freehold titles. Investors are nonetheless advised to perform due diligence prior to purchasing property.

Foreign and/or non-resident investors are not allowed to acquire national lease property but may acquire titled privately owned property.  The Central Bank regulates real estate transactions involving non-residents for exchange control purposes.  Additionally, the rate of stamp duty chargeable on land transfers involving foreign persons or a foreign controlled company is 8 percent for land transfers valued in excess of US $10,000, as opposed to 5 percent on transfers involving Belizeans and CARICOM nationals.

There are three different types of titles to freehold property in Belize: Deed of Conveyance, Transfer of Certificate of Title, and Land Certificate.  Leasehold property from the government is available to Belizeans who can then apply for conversion to a fee simple title. Squatters’ rights exist but are only enforceable by order of the Supreme Court after the resident has proven uninterrupted possession for at least 30 years on national lands or at least 12 years on registered lands.

Belize is a member of the WTO and has implemented the Agreement on Trade-Related Aspects of Intellectual Property (TRIPS).  Generally, Intellectual Property (IP) rights must be registered and enforced in Belize.  IP protections are enforceable through civil proceedings initiated by the IP holder.  The Belize Intellectual Property Office (BELIPO) (http://belipo.bz) was established to administer IP laws and functions as the country’s national intellectual property registry.  Its mandate covers the protection of copyrights, industrial designs, patents, trademarks, new plant varieties, and topographies of integrated circuits.

In practice, however, there is no active enforcement of IP protections, though there is active pursuit and prosecution of contraband.  Bootleg CDs and DVDs are widespread and are marketed throughout the country and are especially prevalent in the Free Zones. During the past year, Belize enacted the Patents (Amendment) Act, 2021 and the Trademarks (Amendment) Act, 2021. Both amendments allow the Registrar of Intellectual Property to delegate certain function to the Deputy Registrar. There has been no report on seizures of counterfeit goods and no prosecution of IPR violations in the last year. Belize is not listed in the 2021 USTR’s Special 301 report nor the 2021 notorious market report.

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/. 

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.  In 2021, Belize passed the Securities Industry Act for the modernization of the laws on securities and capital markets. The Central Bank of Belize must approve capital transactions, such as the purchase and sale of land, company shares, financial assets, and other investments that the transfer of assets between foreign and local entities. The Central Bank advised that, effective April 2022, it would only accept electronic applications for the approval of portfolio and capital investments and land transfers.

Belize accepted the obligations of Article VIII, and the exchange regime is free of restrictions or multiple currency practices.

Credit is made available on market terms with interest rates largely set by prevailing local market conditions 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.  Under the International Banking Act, foreign investors/nonresidents may access credit from international banks registered and licensed in Belize. However, permission to access credit from the domestic banks requires Central Bank approval. 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.

A financial inclusion survey undertaken by the Central Bank of Belize in 2019 showed that approximately 65.5 percent of adult Belizeans had access to a financial account. In response, the banking sector has begun introducing digital wallet solutions to reach “unbanked” segments of the population.

Belize’s financial system remains underdeveloped with a banking sector that may be characterized as stable but fragile. International reserves increased from US $348 million (3.8 months of imports) in 2020 to US $420 million (3.9 months of imports) in 2021, partly due to the IMF’s Special Drawing Rights (SDR) 25.6 million allocation, which Belizean authorities are keeping as reserve.

Regulatory capital is still well above minimum requirements, while the gross non-performing loan (NPL) ratio at the end of February 2022 stood at 5.58 percent of loans. However, the Central Bank is reviewing domestic banks and credit unions self-assessments as the expired forbearance measures from 2020 could represent a risk as a fraction of their loan portfolio could turn into NPLs.

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.

Generally, there are no restrictions on foreigners opening bank accounts in Belize. Regulations 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 January 2020 to present, a domestic bank and an international bank each lost a correspondent bank. Belize’s financial system comprises five domestic banks, three international banks, and ten credit unions. Correspondent banks discontinued offered correspondent banking relationships (CBR) to Scotiabank (Belize) Limited following the acquisition of the Scotiabank (Belize) Limited by the Caribbean International Holdings Limited. As of February 2022, the estimated total assets of the country’s largest bank were US $1.09 billion.

In the last few years, Belize continues reforms to strengthen the anti-money laundering and counterterrorism-financing regime, including conducting an interagency national money laundering and terrorist financing (ML/TF) risk assessment.

Belize does not have a sovereign wealth fund.

State Owned Enterprises (SOEs) exist largely in the utilities sectors, generally as a result of 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.

SOEs usually select senior government officials, members of local business bureaus and chambers of commerce, labor organizations, and quasi-governmental agencies to staff these companies’ boards of directors.  The board serves to direct policy and shape business decisions of the ostensibly independent SOE.  Current and previous administrations have been accused of nepotism and cronyism and 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 http://www.bel.com.bz ; Belize Telemedia Limited at https://www.livedigi.com ;  Belize Water Services Limited http://www.bws.bz 

There is no public third-party market analysis 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 Limited, on the other hand, competes with one other provider for mobile connectivity and there are multiple players that provide internet and data services.  U.S. firms have identified challenges in participating and competing in areas related to the bidding, procurement and dispute settlement processes, particular to SOEs.

The Government of Belize does not currently have a privatization program.

Belize generally lacks broad awareness of the expectations and standards for responsible business conduct (RBC).  However, many foreign and local companies engage in responsible corporate behaviors and partner with NGOs or international organizations to reinvest in community development and charitable work.  Companies sponsor educational scholarships, sports-related activities, community enhancement projects, and entrepreneurship activities, among other programs.  There is a strong thread of environmental awareness that also impacts business decision-making.  BELTRAIDE, in its official public outreach, promotes civic responsibility, especially in its outreach to entrepreneurs and aspiring businesspeople.

The Office of the Ombudsman is responsible for investigating complaints of official corruption and abuse of power.  As required by law, the Ombudsman is active in filing annual reports to the National Assembly and investigating incidents of alleged misconduct, particularly of police abuses.   This office continues to be constrained by the lack of enforcement powers, political pressure, and limited resources.

Belize has no recent cases of private-sector impact on human rights and no NGOs, investment funds, worker organizations/unions, or business associations specifically promote or monitor RBC.

Certain projects require the Department of the Environment’s approval for Environmental Impact Assessments or Environmental Compliance Plans. The Department of Environment website, http://www.doe.gov.bz , has more information on the Environmental Protection Act, various regulations, applications, and guidelines.

Belize has not adopted a particular accounting framework as its national standard. The International Financial Reporting Standards (IFRS) are required for domestic banks under the Domestic Bank and Financial Institutions Act (DBFIA) of Belize. Also, under the DBFIA, the Central Bank of Belize issues practice direction, directives, guidance, and advisories on corporate governance applicable to all banks and financial institutions operating and supervised by the Central Bank.

For other companies, Belize permits the use of IFRS Standards and the IFRS for SMEs as the standard financial reporting framework for preparing financial statements. The Institute of Chartered Accountants of Belize regards IFRS Standards as an allowed accounting framework under its professional standards. Alternatively, non-bank companies are permitted to use other internationally recognized standards. The U.S. Generally Accepted Accounting Principles (GAAP) and Canadian GAAP are often used. There are no government measures relating executive compensation standards and RBC policies are not factored into procurement decisions.  Opposition party political pronouncements often target official malfeasance in procurement and cronyism in government contracts, but these concerns are historically muted once the opposition takes power.

There are similarly no alleged or reported human or labor rights concerns relating to RBC. In recent years, labor unions and business associations have become actively engaged in advocating for stronger measures against corruption.

Belize does not have a developed mineral sector and is not a conflict or high-risk country.  As such, it does not adhere to the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Afflicted and High-Risk Areas.  Belize’s extractive/mining industry is not developed, and it does not participate in the Extractive Industries Transparency Initiative (EITI) and/or the Voluntary Principles on Security and Human Rights.

The country is not a signatory of The Montreux Document on Private Military and Security Companies, nor is it a supporter of the International Code of Conduct or Private Security Service Providers and is not a participant in the International Code of Conduct for Private Security Service Providers’ Association.

Over the last decade, Belize has developed several important climate policy frameworks. These include the National Climate Resilience Investment Plan, Growth and Sustainable Development Strategy 2012 – 2017, and the National Climate Change Policy, Strategy and Action Plan (2015 – 2020. More recently in 2021, Belize submitted its updated National Determined Contributions (NDC), as well as its National Climate Finance Strategy, to reduce national greenhouse gas emissions as it responds to climate change.

Belize is categorized as a small island developing state (SIDS) that is highly vulnerable to the effects of climate changes and is a relatively minor contributor to global greenhouse gas emissions. Belize’s updated National Determined Contributions (NDC) is nonetheless committed to developing a long-term strategy aligned with achieving net zero global emissions by 2050. Government strategies do specify expectations on private sector contributions as well as support required to the private sector to achieve climate targets, particularly as they relate to the electricity, transportation, and waste management sectors.

Belize has a wide array of government policies that contribute to its climate and conservation agenda, including over one hundred terrestrial and marine protected areas through co-management arrangements between the government, non-government organizations, and community-based organizations. These are complemented by sustainable forest management, fisheries management, and other ecosystem management plans. Belize is hopeful for greater climate financing from multilateral institutions and creditors to implement climate change mitigation and adaptation policies.  In January 2022, the government established the Climate Finance Unit (CFU) to maximize Belize’s access to climate finance to enhance resilience and sustainable development. Some procurement policies do include environment and green growth considerations, particularly if projects are funded by external donors.

Belize has anticorruption laws that are seldom enforced.  Under the Prevention of Corruption in Public Life Act, public officials are required to make annual financial disclosures, but there is little adherence and poor enforcement.  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.  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.  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 any politician.

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. Private companies are neither required to establish internal codes of conduct, ethics, or compliance programs, nor is it common to use them.

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

There are few non-governmental institutions that monitor government activities. The most active, the National Trade Union Congress of Belize (NTUCB), lobbies within narrow labor-related areas.  Environmental NGOs and the Belize Chamber of Commerce and Industry (BCCI) often make statements regarding government policy as it affects their respective spheres of activity.  The government does not provide protection to NGOs investigating corruption.

Despite these measures, many businesspeople complain that both major political parties practice bias that creates an unlevel playing field related to businesses seeking 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 have complained of government officials, including police, soliciting bribes.

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

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

Office of the Auditor General
Corner of Douglas Jones Street & New Road
Belize City, Belize
Mountain View Boulevard
Belmopan City, Belize
501-222-5181, 222-5086, 822-2850, 822-0208

Belize Integrity Commission
National Assembly Building, Independence Hill
Belmopan, Belize
501-822-0121

For specific complaints within the police force:

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

Belize has traditionally enjoyed one of the most stable political environments in the region, having held peaceful and transparent democratic elections since gaining independence on September 21, 1981.  In general elections, the two major political parties usually trade leadership. The current People’s United Party gained an overwhelming majority in the November 2020 General Elections, winning twenty-six of the thirty-one electoral divisions. The few times political candidates have questioned the result of elections, these have been settled by the court.

There were incidents of property destruction at two American companies involved in sugar cane industry in the last year. In December 2021, cane farmers from Belize’s largest cane farmers association blockaded the access road to a major American investment in Orange Walk for three days, preventing other farmers from delivering cane to the factory. An impasse between the cane farmer association and the sugar mill for a contract to deliver cane sparked the incident. The American investment subsequently initiated two legal suits against the cane farmer’s association for destruction to property and economic losses incurred. The second company located in the Cayo District, suffered arson in January 2022, presumably related to a conflict associated with land rights. Over 1,200 acres of sugar cane was lost in the fire, an estimated loss of US $1.15 million. In response, a prominent agro-productive organization wrote to the Government in January 2022 expressing concerns that the Belizean government’s failure to protect and support private sector investors in these instances led to damaging the investment climate and Belizean economy still further.

Neighboring Guatemala’s long-standing territorial claim on Belize has persisted for almost two centuries.  The International Court of Justice (ICJ) is currently deliberating the territorial dispute.  In December 2020, Guatemala filed its claim to Belize’s continental land, islands, and seas, and Belize will file its counter claim in June 2022. Despite legal efforts to resolve the claim, the Friends for Conservation and Development (FCD), a local Belizean NGO, continues to document illegal encroachments and settlements in and beyond the adjacency zone in Belize. In July 2021, FCD rangers accompanied by Belize Defence Force (BDF) members were fired upon by Guatemalan civilians as the former attempted to destroy illegal plantations in the Chiquibul forest reserve in Belize. The BDF retaliated, which in turn instigated the response of the Guatemalan Armed Forces (GAF). The incident did not escalate further and there were no casualties.

The second major security concern is the high level of crime countrywide. While Belize has a high murder rate per capita, it is primarily focused on the urban areas of Belize City. Corruption, human and drug trafficking, money laundering (institutional and trade-based), and local criminal gang activity remain significant problems exacerbated by the low conviction rate.

According to the Statistical Institute of Belize (SIB), the population was estimated to be 432,516 as of September 2021.  The labor force was 191,881 as of September 2021.  Of this, the unemployed amounted to 17,644 persons for an unemployment rate of 9.2 percent, representing a 4.5 percent decrease from September 2020. The report noted that about 48 percent of working aged women participated in the labor force and 76.1 percent of men. The main reason women did not look for work was due to personal or family responsibilities, while men did not look for work mainly due to school or training.

In its Labor Force Survey of September 2021, the Statistical Institute of Belize estimated the number of persons in informal employment was 72,433 accounting for about 41.6 percent of all employed persons. Persons in informal employment earned about US $420 per month. A 2018/2019 Household Budget Survey assessed the country’s poverty level had increased from 41.3 percent in 2009 to 52 percent in 2012. The poverty line in 2018 was assessed at US $3,980 per annum or US $331.66 monthly. The Government of Belize asserts the COVID-19 pandemic raised the poverty rate, which hovers at almost 60 percent, and sparked significant growth of the informal sector. The agriculture sector has identified shortage of unskilled labor in the agriculture sector. The health sector faces a shortage of qualified nurses and high.

In general, there are no restrictions on employers adjusting their labor force in response to fluctuating market conditions.  Employers are flexible in offering salary increases, which are normally justified based on cost of living and prevailing practice consideration.  Severance payment is subject to local labor law, the Labour Act Chapter 297.  This Act differentiates between layoffs (voluntary termination and redundancy) and firing (dismissal).  In the cases of voluntary termination and redundancy, the law provides for an appropriate notice period, payment in lieu of notice, severance, etc.  In the case of redundancy, the employer must notify, where applicable, the recognized trade union or workers’ representative as well as the Labour Commissioner.

In addition to the general Social Security system, the government maintains a National Health Insurance scheme in certain marginalized communities throughout the country.  The government also provides some assistance to unemployed persons who represent marginalized sectors of the community, e.g., single women, single mothers, and young unemployed persons.

Foreign investors who have a development concession are permitted to bring in skilled personnel to complement their local labor force and, if appropriate, establish training programs for Belizean nationals. Labor laws are not generally waived to attract or retain investment.

Belize has eleven trade unions and an umbrella organization, the National Trade Union Congress of Belize (NTUCB).  Belize has ratified 50 International Labor Organization (ILO) conventions, of which 45 are in force, including Convention 182 against the worst forms of child labor.  Trade unions are independent of the government and employers both in practice and in law.  The Department of Labour recognizes registered unions and employers’ associations.  Trade union laws establish procedures for the registration and status of trade unions and employers’ organizations and for collective bargaining.  Unions are common in the public sector (teachers, general public servants), the Social Security Board, the utility and agriculture sectors, and among port stevedores.

Where employees are unionized, employers must refer to the laws relating to the operation of unions as well as the terms of existing collective bargaining agreements between the employer and unions. Where disputes arise between an employer and employee in the private sector and where the employee is not represented by a union, both parties may approach the Labour Department to mediate discussions for an amicable solution. Failing a resolution, the matter is then first referred to the labor tribunal then to the court.

The national fire service, postal service, monetary and financial services, civil aviation and airport security services, and port authority pilots and security services are all deemed essential services. The law allows authorities to refer disputes involving employees who provide “essential services” to compulsory arbitration, prohibit strikes, and terminate actions.   On January 21, 2022, stevedores at the port in Belize City undertook industrial action against the port. The Essential Services Arbitration Tribunal delivered a notice on January 27, 2022, mandating the port management confirm the selected stevedores as registered stevedores, pay contributions to retirement savings for stevedores, and commence negotiations for the payment of redundancy packages. Port management countered with a lawsuit that remains before the courts, claiming US $500,000 in damages and loss of business.

Belize does have laws and regulations relating to international labor standards.  There is also a system in place for labor inspectors to advocate on labor-related concerns and complaints, as well as to visit and inspect business facilities to ensure adherence to local labor laws. Belize’s legislation does not address a situation in which child labor is contracted between a parent and the employer. The penalty for employing a child below minimum age is a fine not exceeding US $10 or imprisonment not exceeding two months.

Additionally, while there are laws that prohibit a wide range of discrimination in the workplace, they are not effectively enforced and do not explicitly provide protections for persons with disabilities or against discrimination related to sexual orientation and/or gender identity. There is anecdotal evidence that certain vulnerable sectors, particularly migrant workers, undocumented persons, young service workers, and agricultural laborers, were regularly paid below the minimum wage and classified as contract and nonpermanent employees to avoid providing certain benefits.

The GoB established a minimum wage task force to oversee the implementation of the five-dollar minimum wage in a phased approach, which is expected to commence by July 1, 2022.

Andrea De Arment
Chief of Political/Economic Section
4 Floral Park Road
Belmopan, Belize
T: +501-822-4011
BelmopanPolEcon@state.gov 

Vincent Lowney
Environmental, Science, Technology and Health Officer
4 Floral Park Road
Belmopan, Belize
T: +501-822-4011
BelmopanPolEcon@state.gov 

Carmen Silva
Economic/Commercial Assistant
4 Floral Park Road
Belmopan, Belize
T: +501-822-4011
BelmopanPolEcon@state.gov 

The Beninese government encourages foreign investment, which it views as critical for economic development and successful implementation of the $20.6 billion PAG. In 2021 alone, the GOB raised €1.5 billion on the international Eurobond market. APIEX is dedicated to increasing Beninese exports and foreign direct investment and reducing 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 SEZs. The agency has significantly reduced processing times for registering new companies (from 15 days to one day) and issuing 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. Additional information on business startup is available at https://monentreprise.bj/  .

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.

In 2015, the Beninese government conducted the most recent 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 

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 other foreign nationals. 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

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. The GOB has announced that as of 2023 real personal property transactions cannot take place without producing a land title.

Benin Control 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, 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 in 2017. Under the PVI program, Benin Control scans between 30 and 45 randomly selected shipping containers per hour. Benin Control bills all containers exiting the Port– regardless of whether they are selected for scanning – at the rate of $60 (XOF 35,400) for a 20-foot container and $79 (XOF 47,200) for a 40-foot container (https://benincontrol.com/services/scanning).

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/. 

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

Benin is a member of UNCTAD’s international network of transparent investment procedures. Foreign and domestic investors can find detailed information on administrative procedures applicable to investment and income generating operations at https://unctad.org/news/how-un-helped-benin-become-worlds-fastest-place-start-business-mobile-phone , including the number of steps, name and contact details of the entities and persons in charge of procedures, required documents and conditions, costs, processing time, and legal bases justifying the procedures. There is no rule to prevent a monopoly over a particular business sector. The Benin Private Investment Council ( http://www.cipb.bj/ ) is the only business-related think-tank or body that advocates for investors. Generally, draft bills are not available for public comment though promulgated laws are available at https://sgg.gouv.bj/documentheque/lois/ . Individuals, including non-citizens, have the option to file appeals about or challenge enacted laws with the Constitutional Court.

Benin is a member of WAEMU and the Organization for the Harmonization of African Business Law (OHADA) and has adopted OHADA’s Universal Commercial Code (codified law) to manage commercial disputes and bankruptcies within member countries. Benin is also a member of OHADA’s Common Court of Justice and Arbitration and the International Center for the Settlement of Investment Disputes (ICSID). OHADA provisions govern bankruptcy. Debtors may file for reorganization only, and the creditors may file for liquidation only. Benin is a member of the WTO and notifies all draft technical regulations to the organization’s Committee on Technical Barriers to Trade (TBT).

Benin has a civil law system. The legal framework includes various legislative and regulatory texts covering family law, land law, labor law, criminal law, criminal procedure, and civil, commercial, social, and administrative proceedings. The Cotonou commercial court, created in 2017, enforces commercial laws and regulations. In 2018, Benin created an anti-terrorism, drugs, and economic crimes court (CRIET), which until recently lacked a mechanism for substantive appeal. The CRIET has convicted and sentenced numerous government detractors and political opponents, raising concerns about its independence. In February 2020, Benin created an appeals chamber within the CRIET. In general, judicial processes are slow, and challenges to the enforcement of court decisions are common. Magistrates and judges are appointed by the President of the Republic. Benin’s courts enforce rulings of foreign courts and international arbitration.

The Investment Code provides the legal framework for foreign direct investment. The Code establishes conditions, advantages, and rules applicable to domestic and foreign direct investment. The GOB websites https://benindoingbusiness.bj/  and https://gdiz-benin.com/  make available online information on foreign direct investment regulations and procedures, though at times these websites may be out of date. Benin is a member of OHADA’s Common Court of Justice and Arbitration (CCJA) and the International Center for the Settlement of Investment Disputes (ICSID). Investors may include arbitration provisions in their contracts in order to avoid prolonged entanglements in the Beninese courts. The United Nations investment guide for Benin ( https://www.theiguides.org/public-docs/guides/benin/ ) provides a general guide for foreign direct investment steps and procedures.

Benin’s legal framework does not address anti-trust or competition issues. The government does not have an agency or office that reviews transactions for competition-related concerns.

Local laws forbid the government from nationalizing private enterprises operating in Benin. In July 2020 West African hotel developer Teyliom International filed a request for arbitration with the World Bank International Center for Settlement of Investment Disputes (ICSID) in relation to the Beninese government’s expropriation of a hotel the company had been constructing in Cotonou. This arbitration case is currently pending at ICSID.

OHADA provisions govern bankruptcy. Debtors may file for reorganization only, and creditors may file for liquidation only.

Depending on the size of the investment, investors may benefit from reduced tax liability on profits or imported industrial equipment for up to one year from the date of business registration. Investors must meet several criteria including employing a minimum number of Beninese nationals, safeguarding the environment, and meeting nationally accepted accounting standards. The Investment Control Commission monitors companies that receive these incentives to ensure compliance. The GDIZ also offers many investment incentives, notably tax breaks and government services located on-site to expedite business start-up requests.

The Investment Code allows for the creation of SEZs and establishes incentives such as tax reductions for investors. SEZ investors may benefit from reduced tax liability on profits and exemptions for import and export duties. Investors must meet several criteria including employing a minimum number of Beninese nationals, safeguarding the environment, and meeting nationally accepted accounting standards. Local entities and foreign investors enjoy the same opportunities.

There are no government-imposed conditions on permission to invest and there is no “forced localization” policy pertaining to the use of domestic content in goods or technology. Moreover, there are no requirements in place for foreign IT providers to turn over source code and/or provide access to encryption.

The Benin Post and Communications Regulatory Authority (ARCEP) ensures the confidentiality of the content of all communications by the service provider or operator, whether this is information or other data the service provider obtains in the course of providing the services offered. No information may be disclosed without the written consent of ARCEP or a signed order of the competent judicial authority. Additional information may be found at www.arcep.bj .

The Land Act, amended in 2017, codifies real property rights. Land ownership disputes account for roughly 80 percent of the cases seen by Beninese tribunals. The Land Act is designed to ensure fair access to land and protect ownership rights. The Land Act establishes a transparent legal procedure for obtaining and documenting ownership, reduces property speculation in urban and rural areas, and encourages land development. The Land Act stipulates that development projects financed by international or multinational agencies cannot implement or result in forced evictions. The state is obligated to do everything possible at each stage of project development to ensure due respect of economic, social, and cultural rights recognized by international conventions and the Beninese constitution.

Secured interests in real and personal property are recognized and enforced. Secured interests in property are registered with the Land Office of the Ministry of Economy and Finance. However, it is recommended that foreign and non-resident investors buy land with title deeds and the services of a notary public in order to avoid land disputes that may result from the acquisition process. Large land leases for investment in rural areas are enforced by local city halls in conformity with the Land Act. Additional information regarding the acquisition of property may be found at the Beninese Land Agency’s website at https://www.andf.bj/. Beginning in 2023, the government will require a title deed for all transactions involving real property.

The 2005 Law on Copyright and Related Rights regulates intellectual property rights. Benin is a member of the World Intellectual Property Organization (WIPO) and has acceded to WIPO treaties and conventions on copyrights and intellectual property protection. However, enforcement of intellectual property rights in Benin is constrained by the government’s limited capacity.

Benin is not included in the United States Trade Representative (USTR) Special 301 Report or the Notorious Markets List.

For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en .

Government policy supports free financial markets, subject to oversight by the Ministry of Economy and Finance and the Central Bank of West African States (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.

The banking sector is generally reliable. Twelve private commercial banks operate in Benin in addition to the BCEAO; planning is under way to open a subsidiary of the African Development Bank. Taking into account microfinance institutions, roughly 31.2 percent of the population had access to banking services in 2020, the latest year for which data is available. 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.

Benin does not maintain a sovereign wealth fund.

In general, government policies and public tenders are made public online and in the newspapers. Anti-corruption and human rights NGOs and activists are active in Benin, though their ability to report misconduct and violations of good governance has weakened under the Talon administration. The government-funded agencies in charge of monitoring business conduct include the High Commission for the Prevention of Corruption (HCPC), the Court of Accounts, the National Financial Information Processing Unit, and the National Commission on Systems and Freedom.

Department of State

• Country Reports on Human Rights Practices;
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities;
• U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises; and;
• Xinjiang Supply Chain Business Advisory 

Department of the Treasury

• OFAC Recent Actions

Department of Labor

• Findings on the Worst Forms of Child Labor Report;
• List of Goods Produced by Child Labor or Forced Labor;
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World and;
• Comply Chain.

Benin has a 2016-2025 national climate change strategy. It is a cross-sectorial, thematic, short to medium-term strategy and responds to Benin’s dual needs to address the adverse effects of climate through the identification, adoption, dissemination, ownership of adaptation measures, and the reduction of greenhouse gas emissions. The vision of the strategy is “By 2025, Benin is a country of low carbon instensity and resilient to climate change.” This vision stems from Benin’s longer 25-year strategy, known locally as Alafia, which calls for “Benin by 2025 to be a flagship, well-governed, united and peaceful country that enjoys a prosperous and competitive economy.” Through its climate change strategy and Alafia, Benin seeks to contribute to sustainable development through the integration of climate considerations in strategic sectorial operational plans of the country. The strategy focuses on reducing emissions resulting from deforestation, reducing human activity-induced greenhouse gas emission, and increasing carbon capture. As part of this strategy, the GOB is offering incentives for private investment in the renewable energy sector. The second PAG’s public procurement policies include environmental and green growth considerations such as resource efficiency, pollution abatement, and climate resilience.

Benin has laws aimed at combatting corruption and has made progress combatting the most common forms of corruption, but work remains in rooting it out. The new HCPC is the lead government entity on corruption issues and has the authority to refer corruption cases to court. The HCPC 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 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 10 years’ imprisonment, but enforcement remains inconsistent.

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.

Government of Benin

Haut-Commissariat a la Prevention de la Corruption (HCPC)
01 BP 7060 Cotonou, Benin
+229 21 308 686
anlc.benin@yahoo.fr

Social Watch Benin

Ms. Blanche Sonon, President
02 BP 937, Cotonou, Benin
+229 21042012 – 229 95961644
swbenin@socialwatch-benin.org

Benin transitioned to a democracy in 1990, enjoying a reputation for regular, peaceful, and, until recently, inclusive elections. In 2018, the National Assembly adopted, and the government implemented stringent rules for political parties to qualify to participate in legislative elections. In 2019 and 2021 the government held legislative and presidential elections, respectively, neither of which was fully competitive. The National Assembly is currently made up exclusively by two pro-government parties. Elections-related unrest in 2019 and 2021 resulted in several deaths. In April 2021, President Patrice Talon was re-elected for a second and final five-year term, pursuant to Benin’s constitution. The largest security issues facing Benin are the threat of terrorism spilling across its porous northern borders and piracy offshore in the Gulf of Guinea.

The government adheres to internationally recognized rights and labor standards. Benin’s constitution guarantees workers’ freedom to organize, assemble, and strike. Government authorities may declare strikes illegal if they are deemed a threat to public order or the economy and may require those on strike to maintain minimum services. In 2018, the Constitutional Court reinstated a law prohibiting public employees in the defense, health, justice, and security sectors from striking. A 2018 law limited strikes to a maximum of 10 days per year for private-sector workers and public employees not covered by the existing ban. Approximately 75 percent of salaried employees belong to unions. Unions are obliged to operate independently of government and political parties. Benin’s labor code, as revised in 2017, is favorable to employers.

The World Bank official unemployment rate for Benin in 2020 was 2.54 percent, though estimates of actual unemployment figures are significantly higher. Unskilled and skilled labor and qualified professionals are generally available. Nearly 90 percent of youth between the ages of 15 and 29 work in the informal sector. The standard legal workweek is 40 hours and payment of overtime is allowed.

In 2017, the government adopted a law enshrining the framework for private sector and government employment, termination of employment, and placement of labor in Benin.  The law sets a maximum limit of three to nine months’ salary (calculated using the last 12 months of salary) to be paid to an employee in case of abusive termination of employment or layoffs.  If fired for cause (not including a crime or crimes), an employee with a minimum of one year on the job is entitled to receive two months’ salary as severance pay.  The law also allows for multiple renewals of limited term contracts. Under the former law, private companies who dismissed employees for unsatisfactory performance were routinely sued.

Benin’s Ministry of Economy and Finance reported in 2012 (the most recent year available) that the informal sector contribution to the country’s annual GDP rangeds between 60 and 70 percent. Additionally, according to a 2020 International Labour Organization report, 95 percent of businesses operating in Benin are estimated to be in the informal economy.

* Source for Host Country Data: Recent GOB data not available

Political and Economic Section
U.S. Embassy, Boulevard de la Marina, Cotonou
00229-21300650
Elliot Repko and Marius Lotsu: RepkoEM@state.gov and LotsuML@state.gov

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.

Bolivia abrogated the BIT it signed with the United States in 2012.  The government under 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 under its terms 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.

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.
3. 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.
4. The state makes all decisions on internal economic policy and will not accept demands or conditions imposed on this policy by states, banks or Bolivian/foreign financial institutions, multilateral entities, or transnational enterprises.
5. 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, limited staffing, scarce resources. It is also 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 (SOEs).

Bolivia does not have an investment promotion agency to facilitate foreign investment.

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

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.

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).  Yacimientos Petrolíferos Fiscales Bolivianos (YPFB) is an SOE that 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 joint venture contracts with national or foreign individuals, and with companies wishing to exploit/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, to comply with these regulations.

The Telecommunications, Technology and Communications General Law from 2012 (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 relevant ministry for each sector.  Each Ministry assesses industry compliance with the incentive objectives.  To date, only the Ministry of Hydrocarbons and Energy proposed incentives that were enacted by Congress to incentivize the exploration and production of hydrocarbons.

Bolivia underwent a World Trade Organization (WTO) trade policy review in 2017.  In his concluding remarks, the WTO Chair noted 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.

As of April 2022, the functions of FUNDEMPRESA, which used to register and certify new businesses, were turned over to the Servicio Plurinacional de Registro de Comercio (SEPREC). SEPREC is a public entity overseen by the Ministry of Productive Development and Plural Economy.

The steps to register a business are: (1) register and receive a certificate from SEPREC; (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) register with the Ministry of Labor (if the company has employees).  The process takes about 30 days from start to finish.  All steps are required, and there is no simplified business creation regime. A user can download the required forms from the website and fill them out online but then must either mail or deliver the completed forms to the relevant offices. The forms ask for a national identification card, but foreign users can enter their passport numbers instead.  The registration process takes between 2-4 working days after all requirements are submitted.

Bolivia does not have a national investment screening mechanism.

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

Bolivia abrogated the BIT it signed with the United States and 22 other countries. The BIT with Bolivia was the first to be terminated by a U.S. treaty partner.  In October 2007, Bolivia became the first country to withdraw from the World Bank’s International Centre for Settlement of Investment Disputes (ICSID).  Bolivia does not have a bilateral taxation treaty with the U.S.  Bolivia has various agreements with other countries aimed at avoiding double taxation, including: Argentina, France, Germany, Spain, Sweden, the United Kingdom, and Andean Community countries.

Bolivia is not a member of the OECD Inclusive Framework on Base Erosion and Profit Shifting.

Bolivia has no laws or policies that directly foster competition on a non-discriminatory basis.  However, Article 66 of the Commercial Code (Law 14379, 1977) states that unfair competition, such as maintaining an import, production, or distribution monopoly, should be penalized according to criminal law.  There are no informal regulatory processes managed by nongovernmental organizations or private sector associations. Regulatory authority regarding investment exists solely at the national level in Bolivia.  There are no subnational regulatory procedures.

The Commercial Code requires that all companies keep adequate accounting records and legal records for transparency.  However, there is a large informal sector that does not follow these practices.  Most accounting regulations follow international principles, but the regulations do not always conform to international standards.  Large private companies and some government institutions, such as the Central Bank and the Banking Supervision Authority, have transparent and consistent accounting systems.

Formal bureaucratic procedures have been reported to be lengthy, difficult to manage and navigate, and sometimes debilitating.  Many firms complain that a lack of administrative infrastructure, corruption, and political motives impede their ability to perform. The one exception has been when registering a new company in Bolivia.

There is no established public comment process allowing social, political, and economic interests to provide advice and comment on new laws and decrees.  However, the government generally — but not always — discusses proposed laws with the relevant sector.  The lack of laws to implement the 2009 Constitution creates legal discrepancies between constitutional guarantees and the dated policies currently enforced, and thus an uncertain investment climate.

Online regulatory disclosures by the Bolivian government can be found in the Official Gazette (  http://www.gacetaoficialdebolivia.gob.bo/ ).

Supreme Decree 71 in 2009 created a Business Auditing Authority (AEMP), which is tasked with regulating the business activities of public, private, mixed, or cooperative entities across all business sectors.  AEMP’s decisions are legally reviewable through appeal.  However, should an entity wish to file a second appeal, the ultimate decision-making responsibility rests with the Bolivian government ministry with jurisdiction over the economic sector in question.  This has led to a perception that enforcement mechanisms are neither transparent nor independent.

Environmental regulations can slow projects due to the constitutional requirement of “prior consultation” for any projects that could affect local and indigenous communities.  This has affected projects related to the exploitation of natural resources, both renewable and nonrenewable, as well as public works projects.  Issuance of environmental licenses has been slow and subject to political influence and corruption.

In 2010, the new pension fund was enacted increasing companies’ contributions from 1.71 percent of payroll to 4.71 percent.

Bolivia is a full member of the Andean Community of Nations (CAN), which includes Colombia, Ecuador, and Peru.  Bolivia is also in the process of joining the Southern Common Market (MERCOSUR) as a full (rather than associate) member.  The CAN’s norms are considered supranational in character and have automatic application in the regional economic block’s member countries.  The government does notify the WTO Committee on Technical Barriers to Trade regarding draft technical regulations.

Property and contractual rights are enforced in Bolivian courts under a civil law system, but some have complained that the legal process is time consuming and has been subject to political influence and corruption.  Although many of its provisions have been modified and supplanted by more specific legislation, Bolivia’s Commercial Code continues to provide general guidance for commercial activities.  The constitution has precedence over international law and treaties (Article 410) and stipulates that the state will be directly involved in resolving conflicts between employers and employees (Article 50).  Corruption within the judiciary is pervasive.  Regulatory and enforcement actions are appealable.

No major laws, regulations, or judicial decisions impacting foreign investment came out in the past year.  There is no primary, central point-of-contact for investment that provides all the relevant information to investors.

Bolivia does not have a competition law, but cases related to unfair competition can be presented to AEMP.  Article 314 of the 2009 Constitution prohibits private monopolies.  Based on this article, in 2009 the Bolivian government created an office to supervise and control private companies ( http://www.autoridadempresas.gob.bo/ ). Among its most important goals are:

• regulating, promoting, and protecting free competition.
• trade relations between traders; implementing control mechanisms, social projects, and voluntary corporate responsibility.
• corporate restructuring, supervising, verifying, and monitoring companies with economic activities in the country in the field of commercial registration and seeking compliance with legal and financial development of its activities.
• qualifying institutional management efficiency, timeliness, transparency, and social commitment to contribute to the achievement of corporate goals.

The Bolivian Constitution allows the central government or local governments to expropriate property for the public good or when the property does not fulfill a “social purpose” (Article 57).  In the case of land, “Economic Social Purpose” (known as FES in Spanish) is understood as “sustainable land use to develop productive activities, according to its best use capacity, for the benefit of society, the collective interest and its owner.”  The Bolivian government has no official definition of “collective interest” and makes decisions on a case-by-case basis.  Noncompliance with the social function of land, tax evasion, or the holding of large acreage is cause for reversion, at which point the land passes to “the Bolivian people” (Article 401).  In cases where the expropriation of land is deemed a necessity of the state or for the public good, just indemnification is required by law. However, in cases where there is non-compliance in fulfilling this “Economic Social Purpose,” the Bolivian government is not required to pay for the land and the land title reverts to the state.

The Constitution also gives workers the right to reactivate and reorganize companies that are in the process of bankruptcy, insolvency, or liquidation, or those closed in an unjust manner, into employee-owned cooperatives (Article 54).  The mining code of 1997 (last updated in 2007) and hydrocarbons law of 2005 both outline procedures for expropriating land to develop underlying concessions.

The Bolivian government between 2006 and 2014, nationalized companies in the hydrocarbons sector, most of the electricity sector, some mining companies (including mines and a tin smelting plant), and a cement plant.  To do so, the government forced private entities to sell shares to the government, often at below market prices.  Some of the affected companies have cases pending with international arbitration bodies.  All outsourcing, private contracts were canceled and assigned to public companies (such as airport administration and water provision).

Countries affected included the United States, France, the United Kingdom, Spain, Argentina, and Chile.  Bolivian governments have previously nationalized private interests to appease social groups protesting.

The average time to complete bankruptcy procedures to close a business in Bolivia is 20 months.  The Bolivian Commercial Code includes (Article 1654) three different categories of bankruptcy:

1. No Fault Bankruptcy – when the owner of the company is not directly responsible for its inability to pay its obligations.
2. At-Fault Bankruptcy – when the owner is guilty or liable due to the lack of due diligence to avoid harm to the company.
3. Bankruptcy due to Fraud – when the owner intentionally tries to cause harm to the company.

In general, the application of laws related to commercial disputes and bankruptcy has been perceived as inconsistent, and corruption charges are common.  Foreign creditors often have little redress beyond Bolivian courts, and judgments are generally more favorable to local claimants than international ones.  If a company declares bankruptcy, the company must pay employee benefits before other obligations.  Workers have broad-ranging rights to recover pay and benefits from foreign firms in bankruptcy, and criminal actions can be taken against individuals the Bolivian government deems responsible for failure to pay in these matters.

No credit bureaus or credit monitoring authorities serve the Bolivian market.

In 2018, the Bolivian government enacted a new law (No. 1055) called the Creation of Social Enterprises.  The law allows for employees of a company to assert ownership rights over companies under financial distress heading into bankruptcy.  Passage of the law was controversial, with numerous business chambers asserting that the law could incentivize employees and labor unions to undermine the performance of companies in order to force bankruptcy and gain control of company assets.

To attract more investment, the government enacted an investment law in 2014 stating each Ministry will provide incentives for sector-specific investment.

Article 14 of the 2014 investment law requires technology transfer from foreign companies operating in Bolivia to Bolivian workers and institutions.  The law also specifies that Bolivians should work in operational, administrative, and executive offices of foreign companies.  Finally, Article 14 states companies investing in Bolivia should donate equipment and machinery to universities and technical schools in the same area as the investment, and conduct research activities that will find solutions that contribute to public welfare.

Article 21 of the investment law stipulates that the government can incentivize investment in certain sectors that contribute to the economic and social development of the country.

Law 767 from 2015 aims to promote investments in the exploration and exploitation of hydrocarbons.  However, many companies considered this regulation as skewed to production and insufficient to incentivize new exploration.  In 2016, Supreme Decree 2830 was issued, providing a 12 percent reduction in the payment of the direct tax on hydrocarbons and other incentives in order to better incentive exploration.

The Bolivian government does not offer business incentives for direct foreign investment. It also does not offer any direct green investment or clean energy incentives. There are opportunities to obtain such green incentives through private funding.

In 2016, Supreme Decree 2779 was enacted, approving regulations for a new system of free trade zones in Bolivia.  The decree establishes a period of one year for existing free trade zones to transform into free industrial zones, which allow for industrial operations and assembly.  Free industrial zones exist in El Alto, Patacamaya, Oruro, Puerto Suarez, and Warnes.  Cobija is the only remaining free trade zone under this new system, with operations approved until 2038.  Concessions within free industrial zones last 15 years and are renewable.  The decree also eased customs procedures for goods entering the zones and established stronger government support for the promotion of productive investments in the zones. Bolivia does not have special economic zones.

Bolivian labor law requires businesses to limit foreign employees to 15 percent of their total work force and requires foreign hires be technical staff.  These workers require a work visa that can be obtained in any Bolivian consulate, and in the case that they work for a Bolivian company, both the company and the workers should also contribute to the Bolivian Pension System (Pension Law Article 104.1)

Supreme Decree 27328 regulates national and local level government procurement, which give priority to national sourcing.  If an item required is not produced in Bolivia, buying decisions are made based on price.  Supreme Decree 28271 (Article 10), establishes the following preference margins for sourcing with Bolivian products:

Except for national tenders, 10 percent preference margin for Bolivian products regardless of the origin of materials.

For national public tenders, if the cost of Bolivian materials represents more than 50 percent of the total cost of the product, the producers receive a 10 percent preference margin over other sellers.

In national and international public tenders, if Bolivian inputs and labor represent more than the 50 percent of the total cost of the product, the seller receives a 25 percent preference margin over other sellers.  If the Bolivian inputs and labor represent between 30-50 percent of the total cost of the product, the seller receives a 15 percent preference margin over other sellers.

Under the Bolivian Criminal Code (Article 226), it is a crime to raise or lower the price of a product based on false information, interests, or actions.  For those caught doing so, punishment is six months to three years in prison.  It is also a crime to hoard or conceal products in order to raise prices.  The Bolivian government has applied these provisions in a number of cases, applying regulations that allow them to request accounting records and audit companies’ financial actions looking for evidence of speculation.

Property rights are legally protected and registered in the Real Estate Office, where titles or deeds are recorded, and mortgages/liens are registered.  The recording system is reliable, although there have been complaints regarding the amount of time required to register a property.

The Office of Property Registry oversees the acquisition and disposition of land, real estate, and mortgages.  Mortgages usually take no more than 60 days to obtain a standard loan.  However, challenges to land titles are common due to bureaucratic delays encountered while registering properties, especially in rural areas.  Competing claims to land titles and the absence of a reliable dispute resolution process create risk and uncertainty in real property acquisition.  Nevertheless, illegal occupation of rural private property is decreasing since the passage of Law 477 combatting land seizures.

The Bolivian Constitution grants citizens and foreigners the right to private property but stipulates that the property must serve a social or economic function.  If the government determines that a given property is not sufficiently useful (according to its own unclear criteria), the constitution allows the government to expropriate.  The agricultural sector has been most hard hit by this policy due to uncertainty from year-to-year about whether farmland would be productive.  In 2015, the government eliminated annual productivity inspections, reducing their frequency to every five years.  There are other laws that limit access to land, forest, water, and other natural resources by foreigners in Bolivia.

The constitution also grants formal, collective land titles to indigenous communities, to restore their former territories (Article 394.3), stating that public land will be granted to indigenous farmers, migrant indigenous communities, Afro-Bolivians, and small farmer communities that do not possess or who have insufficient land (Article 395).  Foreigners cannot acquire land from the Bolivian government (Article 396).  Under law 3545, passed in 2006, the government will not grant public lands to non-indigenous people or agriculture companies.  The Mother Earth Integral Development Law to Live Well (Mother Earth Law, or Law #300) passed in October 2012 specifies that the state controls access to natural resources, particularly when foreign use is involved.  In action, the law limits access to land, forest, water, and other natural resources by foreigners in Bolivia.

According to Bolivia’s Agrarian Reform Institute (INRA), approximately 25 percent of all land in Bolivia lacks clear title, and as a result, squatting is a problem.  In some cases, squatters can make a legal claim to the land.  While the Criminal Code criminalizes illegal occupation, the judicial system is slow and ineffective in its enforcement of the law.  Financial mechanisms are available for securitization of properties for lending purposes, although the threat of reversion for properties failing to fulfill a social function discourages the use of land as collateral.

The Bolivian Intellectual Property Service (SENAPI) leads the protection and enforcement of intellectual property rights (IPR) within Bolivia.  SENAPI maintains and regularly updates a complete set of IPR regulations currently in force within Bolivia.  The list is available on SENAPI’s website:  https://www.senapi.gob.bo/normas . SENAPI also maintains an updated version of the services they provide, along with associated costs, at:  https://www.senapi.gob.bo/propiedad-intelectual/tasas .

The existing copyright law recognizes copyright infringement as a public offense and the 2001 Bolivian Criminal Procedures Code provides for the criminal prosecution of IPR violations.  However, it is not common for prosecutors to file criminal charges, and civil suits, if pursued, face long delays.  Criminal penalties carry a maximum of five years in jail, and civil penalties are restricted to the recovery of direct economic damages.  SENAPI has established a conciliation process to solve IPR controversies to prevent parties from going to trial, which is now the most common procedure to solve these disputes.

Bolivia does not have an area of civil law specifically related to industrial property, but it has a century-old industrial privileges law still in force.  Bolivia is a signatory of the Agreement on Trade-Related Aspects of Intellectual Property (TRIPS).  SENAPI is aware of Bolivia’s obligations under the TRIPS Agreement, and it sets out the minimum standards of IPR protection in compliance with this agreement.  SENAPI sustains its position that Bolivia complies with the substantive obligations of the main conventions of the World Intellectual Property Organization (WIPO), the Paris Convention for the Protection of Industrial Property (Paris Convention), and the Berne Convention for the Protection of Literary and Artistic Works (Berne Convention) in their most recent versions.  According to SENAPI, Bolivia complies with WTO’s dispute settlement procedures in accordance with its TRIPS obligations.  However, Bolivia falls short on the implementation of domestic procedures and providing legal remedies for the enforcement of intellectual property rights.

Bolivia is a signatory country of the 1996 WIPO Copyright Treaty and the WIPO Performances and Phonograms Treaty; however, it did not ratify any of those treaties domestically.  Bolivia is not a member of the Madrid Protocol on Trademarks, the Hague Agreement Concerning the International Registration of Industrial Designs, or the Patent Law Treaty.

Bolivia is a signatory of Andean Community (CAN) Decision 486, which deals with industrial property and trade secrets and is legally binding in Bolivia.  Decision 486 states that each member country shall accord the Andean Community countries, the World Trade Organization, and the Paris Convention for the Protection of Industrial Property, treatment no less favorable than it accords to its own nationals regarding IPR protection.  Besides its international obligations, Bolivia has not passed any domestic laws protecting trade secrets.

CAN Decision 486 also enforces patent registrations in Bolivia. SENAPI reviews patent registrations for form and substance and publishes notices of proposed registrations in the Official Gazette.  If there are no objections within 30 working days, the organization grants patents for a period of 20 years.  The registration of trademarks parallels that of patents.  Once obtained, a trademark is valid for a 10-year renewable period.  It can be cancelled if not used within three years of the date of grant.

Law 1134, the “Bolivian Cinema and Audiovisual Arts Law” created a fund to promote Bolivian cinema by charging foreign movie distributors and exhibitors’ three percent of their total monthly revenue.   Article 27 of the law strengthens IPR protections for visual works and allows Bolivian Customs to pursue criminal prosecution, but it is unlikely that foreign works would be protected in practice.

Bolivian Customs lacks the human and financial resources needed to intercept counterfeit goods shipments at international borders effectively.  Customs authorities act only when industries trying to protect their brands file complaints.  Moreover, the informal sector has a sense of unregulated capitalism regarding the sale of counterfeit goods.  Many importers believe the payment of customs fees will “legalize” the sale of counterfeit products.   Sellers either do not know about or consider IPR, particularly in the textile, electrical appliances, and entertainment markets.  Large quantities of counterfeit electrical appliances imported from China bearing well-known and clearly non-original brands are available for purchase in local markets.  There is also a flourishing market of textile products made in Bolivia and marketed using counterfeit labels of major U.S. brands.  While most counterfeit items come with the illegal brand already attached, brands and logos are available for purchase on the street and can easily be affixed to goods.

Although court actions against IPR infringements are infrequent, there have been some significant cases.  The Industrial Property Director at SENAPI reported that the number of indictments related to counterfeit products increased steadily over the years.  According to SENAPI, this does not necessarily represent an increase in the total volume of counterfeit products.  Rather, the increase in indictments is due to SENAPI’s emphasis on enforcement efforts and the public’s greater awareness of IPR rights.  Because of publicly reported problems of counterfeit COVID-19 medicines in 2020 and 2021, the Bolivian Police task force launched several raids to counter groups of counterfeit medicine smugglers. These groups reportedly smuggled products from Peru, Paraguay, and Brazil.

Bolivia is listed on the Watch List of the U.S. Trade Representative’s 2022 Special 301 Report and is not named in its 2021 Review of Notorious Market for Counterfeiting and Piracy.

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at  http://www.wipo.int/directory/en/ 

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 number of total transactions in 2021 was around 28 percent of GDP.

From 2008-2019, the financial markets experienced high liquidity, which led to historically low interest rates.  However, liquidity has been more limited 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.  In 2017, Bolivia sold USD 1 billion at 4.5 percent for ten years, with U.S. financial institutions managing the deal.  The resources gained from the sales were largely used to finance infrastructure projects. A sovereign bond issuance of up to $2 billion was approved by the National Assembly for 2022 but had not yet occurred as of April 2022. The Bolivian government’s attempt to refinance $2 billion in sovereign debt in February 2022 fell short, with only $850 million sold. The government had also hoped the new issuance would be for a 10-year term but had to settle for eight years (a 2030 maturity) for all the resold bonds. The interest rate for the new bonds is 7.5%, compared to interest rates of approximately 5% for the original bonds.

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 can 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.  The 2013 Financial Services Law directs credit towards the productive sectors and caps interest rates.

The Bolivian banking system is small, composed of 16 consumer banks, six banks specialized in mortgage lending, three private financial funds, 30 savings and credit cooperatives, and eight institutions specialized in microcredit.  Of the total number of personal deposits made in Bolivia through December 2021 (USD 30 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 29 billion) through December 2021, 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 1.6 percent in 2021. In 2021, delinquency rates rose after the government permitted clients to defer bank loan payments until June 2021 and to reprogram their debt through 2022 without penalty as a mitigating measure for the COVID-19 pandemic. While delinquency rates 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 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 partial control of the financial sector.  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 oversees managing the payment system, international reserves, and the exchange rate.

Foreigners can 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.

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. It has also 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 SOEs in Bolivia other than gas exports represented only a fraction of a percent of GDP.  As of 2019, 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 can 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. The 2009 Constitution requires all SOEs to publish an annual report and makes them 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.

There are currently no privatization programs in Bolivia.

Bolivia has laws that regulate aspects related to corporate social responsibility (CSR) practices.   Both producers and consumers in Bolivia are generally aware of CSR, but consumer decisions are ultimately based on price and quality.  The Bolivian Constitution stipulates that economic activity cannot damage the collective good (Article 47).

Though Bolivia is not part of the OECD, it has participated in several Latin American Corporate Governance Roundtables since 2000.  Neither the Bolivian government nor its organizations use the OECD Guidelines for CSR.  Instead, Bolivian companies and organizations are focused on trying to accomplish the UN’s Millennium Development Goals, and they use the Global Reporting Initiative (GRI) methodology in order to show economic, social and environmental results.  While the Bolivian government, private companies, and non-profits are focused on the UN’s Millennium Development Goals, only a few private companies and NGOs focus on following the UN standard ISO 26000 guidelines and methodologies.  Another methodology widely accepted in Bolivia is the one developed by the ETHOS Institute, which provides measurable indicators accepted by PLARSE (Programa Latinoamericano de Responsabilidad Social Corporativa), the Latin American Program for CSR. The Bolivian government issued a 2013 supreme decree that requires financial entities to allocate six percent of profits to CSR-related projects.

The 1942 General Labor Law is the basis for employment rights in Bolivia, but this law has been modified more than 2,000 times via 60 supreme decrees since 1942.  As a result of these modifications, the General Labor Law has become a complex web of regulations that is difficult to enforce or understand.  An example of the lack of enforcement is the Comprehensive System for Protection of the Disabled (Law 25689), which stipulates that at least four percent of the total work force in public institutions, SOEs, and private companies should be disabled.  Neither the public nor private sectors are close to fulfilling this requirement, and most buildings lack even basic access modifications to allow for disabled workers.

In support of consumer protection rights, the Vice Ministry of Defense of User and Consumer Rights was created in 2009 (Supreme Decree 29894) under the supervision of the Ministry of Justice (which became the Ministry of Justice and Transparency in 2017).  Also in 2009, the Consumer Protection Law (Supreme Decree 0065) was enacted, which gave the newly created Vice Ministry the authority to request information, verify, and follow up on consumer complaints.

The Mother Earth Law (Law 071) approved in October 2012 promotes CSR elements as part of its principles (Article 2), such as collective good, harmony, respect, and defense of rights.  The Ministry of Environment and Water oversees the implementation of this law, but the implementing regulations and new institutions needed to enforce this law are still incomplete. Although there are no specific claims regarding improper allocation of land or natural resources, indigenous communities do object to the government giving mine concessions in national parks and in areas where indigenous communities live, contaminating their water and destroying the environment.

Even though Bolivia promotes the development of CSR practices in its laws, the government gives no advantage to businesses that implement these practices.  Instead, businesses implement CSRs in order to gain the public support necessary to pass the prior consultation requirements or strengthen their support when mounting a legal defense against claims that they are not using land to fulfill a socially valuable purpose, as defined in the Community Land Reform laws (# 1775 and #3545).

In April 2009, the Bolivian government reorganized the supervisory agencies of the government (formerly “Superintendencias”) to include social groups, thus creating the “Authorities of Supervision and Social Control” (Supreme Decree 0071).  This authority controls and supervises the following sectors: telecommunications and transportation, water and sanitation, forests and land, pensions, electricity, and enterprises.  Each sector has an Authority of Supervision and Social Control assigned to its oversight, and each Authority has the right to audit the activities in the sectors and the right to request the public disclosure of information, ranging from financial disclosures to investigation of management decisions.

Department of State

• Country Reports on Human Rights Practices;
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities;
• U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises; and;
• Xinjiang Supply Chain Business Advisory 

Department of the Treasury

• OFAC Recent Actions

Department of Labor

• Findings on the Worst Forms of Child Labor Report;
• List of Goods Produced by Child Labor or Forced Labor;
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World and;
• Comply Chain.

Under the Mother Earth Law, the Ministry of Environment and Water oversees climate change mitigation, with a Sub-Secretary of Climate Change. Bolivia’s Intended Nationally Determined Contributions (INDC) include increasing water, energy, forest, and agriculture capacities.

Specifically, Bolivia intends to increase renewable energy use to 81 percent by 2030. Bolivia does not have a fossil-fuel phase out policy. Bolivia does not have regulatory incentives to achieve policy outcomes that preserve biodiversity or other ecological benefits. Public procurement policies do not include environmental and green growth considerations.

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.  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 court ruling that awarding 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.In August 2021, the Interdisciplinary Group of Independent Experts (GIEI), formed from an agreement between the Bolivian government and the Inter-American Commission on Human Rights, found that the Bolivian government needs to implement profound reforms in its justice system to guarantee that the judiciary and attorney general’s office are not used for political purposes by the government in power, to guarantee due process, and so that preventive detention is only used as a last resort in criminal proceedings.   The 2021 Transparency International corruption perception index ranked Bolivia 128 out of 180 countries and found that Bolivian citizens believe the most corrupt institutions in Bolivia are the judiciary, the police, and executive branch,

Bolivia has laws in place that 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.

Contact at government agency or agencies 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/ 

Bolivia is prone to social unrest, which can include violence.  Given the country’s reliance on a few key thoroughfares, conflict often disrupts transportation and distribution networks.  Most civil disturbances are related to domestic issues, usually workers pressuring the government for concessions by marching or closing major transportation arteries.  Bolivia held peaceful and transparent elections in 2020 that gave a victory to Movement Towards Socialism (MAS) presidential candidate Luis Arce with over 55 percent of the vote. During his administration, political tensions in Bolivia have remained high, but there have been relatively few multi-day protests. While Bolivia has low levels of personal crime, with a homicide rate well below the regional average, there is a growing concern about increased criminality, especially a recent increase in femicides. Production of coca leaf is legal in Bolivia, and the country is a known source and transit country for cocaine and other illicit drugs that are mostly destined for Brazil and Europe but may also find their way to the United States.

Approximately two-thirds of Bolivia’s population is considered “economically active.”  Between 60 and 80 percent of workers participate in the informal economy, where no contractual employer-employee relationship exists.  Relatively low education and literacy levels limit labor productivity, a fact reflected in wage rates.  Unskilled labor is readily available, but skilled workers are often harder to find.

The labor market experienced a recovery during 2021. In June 2020, due to the pandemic and the quarantine from March-May, the unemployment rate reached almost 12 percent. During 2021, with the normalization of the economy, the unemployment rate dropped to 5.4 percent. Male unemployment was 4.8 percent while women’s unemployment reached 6 percent. There is a 26 percent gap in the labor market between men and women, with women taking the brunt of domestic duties and childcare. Most labor creation during the current recovery is in the informal sector.

Article 3 of the Labor Code limits to 15 percent the number of foreign nationals that can be employed by any business.  Due to the limited number of labor inspectors, enforcement of the law is uneven.

The 2009 Constitution specifies that unjustified firing from jobs is forbidden and that the state will resolve conflicts between employers and employees (Articles 49.3 and 50).  Bolivian labor law guarantees workers the right of association and the right to organize and bargain collectively.  Most companies are unionized, and nearly all unions belong to the Confederation of Bolivian Workers (COB).

Labor laws, including related regulations and statutory instruments, provide for the freedom of association, the right to strike, and the right to organize and bargain collectively.  The law prohibits antiunion discrimination and requires reinstatement of workers fired for union activity.   The law does not require government approval for strikes and allows peaceful strikers to occupy businesses or government offices.  General and solidarity strikes are protected by the constitution, as is the right of any working individual to join a union.

Workers may form a union in any private company of 20 or more employees, but the law requires that at least 50 percent of the workforce be in favor of forming a union.  The law requires prior

government authorization to establish a union and confirm its elected leadership, permits only one union per enterprise, and allows the government to dissolve unions by administrative fiat.  The law also requires that members of union executive boards be Bolivian by birth.  The labor code prohibits most public employees from forming unions, but some public-sector workers (including teachers, transportation workers, and health-care workers) were legally unionized and actively participate as members of the Bolivian Workers’ Union without penalty.

Freedom of association is limited by the government and under-resourced labor courts.  Moreover, the 20-worker threshold for forming a union proved an onerous restriction, as an estimated 72 percent of enterprises had fewer than 20 employees.  Labor inspectors may attend union meetings and monitor union activities.  Collective bargaining and voluntary direct negotiations between employers and workers without government participation was limited.  Most collective bargaining agreements were restricted to addressing wages.

Originally passed in 1942, Bolivia’s labor law has changed frequently due to new regulations.  Labor attorneys estimate that the law has been amended over two-thousand times, with many amendments directly contradicting others.  Attorneys comment that it is virtually impossible to understand the rules clearly, creating significant uncertainty for both employers and employees.

Bolivia has no unemployment insurance or employment-related social, safety net programs.  However, if an employee is laid off due to economic or technical reasons, employers are required to pay three months of salary as compensation.  Nevertheless, employees generally have more negotiating leverage in Bolivia than employers, and many employers choose to pay additional compensation to avoid retaliation.

The Ministry of Labor has labor-related conflict resolution mechanisms, but, these processes are skewed towards employees.  If parties cannot reach an agreement, employees are able to initiate legal proceedings, with appeals to Bolivia’s Supreme Court possible.

The National Labor Court handles complaints of antiunion discrimination, but rulings generally take a year or more.  In some cases, the court rules in favor of discharged workers and requires their reinstatement.  Union leaders state that problems are often resolved or are no longer relevant by the time the court rules.  For this reason, government remedies and penalties are often ineffective and insufficient to deter violations.

Violence during labor demonstrations continues to be a serious problem.  In August 2016, striking miners kidnapped and murdered Vice Minister Rodolfo Illanes during a conflict between miners and the government on the La Paz-Oruro highway.  Several miners were also shot and killed.  The case is still under investigation.

* Source for Host Country Data: BEA, UNCTAD, World Bank

Maridela Ortiz
Economic Officer
OrtizMM@state.gov

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 comprised of two “entities,” the Federation of BiH (the Federation) and the Republika Srpska (RS). A third, smaller area, the Brčko District, operates under a special status. The Federation includes 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, unemployment, 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. EU reforms target 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 — but lack of political will has stalled even the most basic of reforms.

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 as well as some foreign investors, such as the People’s Republic of China, 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.

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. Exceptions include 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.

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).

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 facilitate 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 

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

The government has adequate laws to foster competition; however, due to corruption, laws are often not implemented transparently or efficiently. Additionally, political dysfunction results in lengthy delays in adapting and/or updating regulations necessary to implement legislation. The multitude of state, entity, cantonal (in the Federation only), and municipal administrations – each with the power to establish laws and/or regulations affecting business – creates a heavily bureaucratic, non-transparent system. Ministries and/or regulatory agencies are not typically obligated to publish the text of proposed regulations before they are enacted. Some local and international companies have expressed frustration with generally limited opportunities to provide input and influence/improve draft legislation that impacts the business community.

Foreign investors have criticized government and public procurement tenders for a lack of openness and transparency. Dispute resolution is also challenging as the judicial system moves slowly, often does not adhere to existing deadlines, and provides no recourse if the company in question re-registers under a different name.

In an effort to promote the growth of business in its entity, the Republika Srpska government created a RS one-stop-shop for business registration in 2013. This institution centralizes the process of registering a business, ostensibly making it easier, faster, and cheaper for new business owners to register their companies in the RS. The Federation’s announced plans to establish a one-stop-shop have long been delayed.

Businesses are subject to inspections from a number of entity and cantonal/municipal agencies, including the financial police, labor inspectorate, market inspectorate, sanitary inspectorate, health inspectorate, fire-fighting inspectorate, environmental inspectorate, institution for the protection of cultural monuments, tourism and food inspectorate, construction inspectorate, communal inspectorate, and veterinary inspectorate. Some investors have complained about non-transparent fees levied during inspections, changing rules and regulations, and an ineffective appeals process to protest these fines.

BiH is not a part of the EU, the WTO, nor a signatory to the Trade Facilitation Agreement (TFA).

BiH has an overloaded court system and it often takes many years for a case to be brought to trial. Moreover, commercial cases with subject matter that judges do not have experience adjudicating, such as intellectual property rights, are often left unresolved for lengthy periods of time. Most judges have little to no in-depth knowledge of adjudicating international commercial disputes and require training on applicable international treaties and laws. Regulations or enforcement actions can be appealed, and appeals are adjudicated in the national court system.

The U.S. government has provided training to judges, trustees, attorneys, and other stakeholders at the state and entity levels to assist in the development of bankruptcy and intellectual property laws. Those laws are now in effect at both the entity and state levels, but have not been fully implemented.

The state-level Law on the Policy of Foreign Direct Investment accords foreign investors the same rights as domestic investors and guarantees foreign investors national treatment, protection against nationalization/expropriation, and the right to dispose of profits and transfer funds. In practice, most business sectors in Bosnia and Herzegovina are fully open to foreign equity ownership. Notable exceptions to this general rule are select strategic sectors, such as defense; electric power transmission, which is closed to foreign investment; and some areas of publishing and media, where foreign ownership is restricted to 49 percent (see below). However, the sub-national governments — Federation of BiH, Republika Srpska — may decide to exempt companies from these restrictions.

According to legal amendments adopted in March 2015, foreign investors can own more than 49 percent of capital business entities dealing with media activities, such as publishing newspapers, magazines and other journals, publishing of periodical publications, production and distribution of television programs, privately owned broadcasting of radio and TV programs, and other forms of daily or periodic publications. The 2015 law maintains the restriction that foreign investors cannot own more than 49 percent of public television and radio services. It also sets conditions to enhance legal security and clarity for foreign direct investment flows. The Foreign Investment Promotion Agency maintains a list of laws relevant to investors on its website:

http://www.fipa.gov.ba/publikacije_materijali/zakoni/default.aspx?id=317&langTag=en-US 

The complex legal environment in BiH underscores the utility of local legal representation for foreign investors. Attorneys in BiH have limited experience with respect to legal questions and the issues that arise in a market-oriented economy. However, local lawyers are quickly gaining experience in working with international organizations and companies operating in BiH. Companies’ in-house legal counsel should be prepared to oversee their in-country counsel, with explicit explanations and directions regarding objectives. The U.S. Embassy maintains a list of local lawyers willing to represent U.S. citizens and companies in BiH. The list can be accessed at https://ba.usembassy.gov/u-s-citizen-services/attorneys/

BiH has a Competition Council, designed to be an independent public institution to enforce anti-trust laws, prevent monopolies, and enhance private sector competition. The Council reviews and approves foreign investments in cases of mergers and acquisitions of local companies by foreign companies. The Competition Council consists of six members appointed for six-year terms of office with the possibility of one reappointment. The BiH Council of Ministers appoints three Competition Council members, the Federation Government appoints two members, and the RS Government appoints one member. From the six-member Competition Council, the BiH Council of Ministers affirms a president of the Council for a one-year term without the possibility of reappointment.

BiH investment law forbids expropriation of investments, except in the public interest. According to Article 16, “Foreign investment shall not be subject to any act of nationalization, expropriation, requisition, or measures that have similar effects, except where the public interest may require otherwise.” In such cases of public interest, expropriation of investments would be executed in accordance with applicable laws and regulations, be free from discrimination, and include payment of appropriate compensation. Neither the entity governments nor the state government have expropriated any foreign investments to date.

Both the Federation and Republika Srpska entities have Laws on Bankruptcy. However, bankruptcy proceedings are not resolved in a timely manner, and there is insufficient emphasis placed on companies’ rehabilitation and/or reorganization. The entities’ laws define the rights of creditors, equity shareholders, and holders of other financial contracts. Foreign contract holders enjoy the same rights as local contract holders. Bankruptcy is not criminalized. The U.S. government provided recent training to judges on international bankruptcy principles.

There are some incentives for foreign direct investment, including exemptions from payment of customs duties and customs fees. Bosnia and Herzegovina is divided into three jurisdictions for direct tax purposes: the Federation, the RS, and the Brčko District.

In the Federation, RS, and Brčko District, the corporate income tax allows offsetting of losses against profits over a five-year period. The corporate tax rate is 10 percent across the country. Foreign investors can open bank accounts in all jurisdictions and transfer their profits abroad without any restrictions. The rights and benefits of foreign investors granted and obligations imposed by the Law on the Policy of Foreign Direct Investment cannot be terminated or overruled by subsequent laws and regulations. Should a subsequent law or regulation be more favorable to foreign investors, the investor has the right to choose the most beneficial regulations.

In addition to the BiH-wide incentives listed above, the two entities and the Brčko District have specific incentives. In the Brčko District, investments in fixed assets are subject to tax relief.

In the Federation:

A taxpayer who invests KM 20 million (approx. USD 12 million) over a period of five years is exempted from paying corporate income tax for the period of five years beginning from the first investment year. A taxpayer who does not make the prescribed investment in the period of five years loses the right of tax exemption. In that case, unpaid corporate income tax is determined in accordance with the provisions of the Law on Corporate Income Tax augmented with a penalty and interest for late payment of public revenues.

Qualifying investments include fixed assets such as real estate, plants, and equipment for carrying out production activity. A taxpayer loses the right to tax exemption if the corporation makes a dividend payment during first three years of investment. A taxpayer whose workforce is more than 50 percent disabled persons and persons with special needs in any given year is exempted from paying corporate income tax. The exemption applies to the applicable year in which disabled persons and persons with special needs met the required threshold. Employees must have been with the company for longer than one year to be considered.

In the Republika Srpska:

In its Amendments to the Law on Profit Tax, the RS reduced taxes on investments in equipment intended for company production and investment in plants and immovable property used for manufacturing and processing.

For employers with at least 30 workers during a calendar year, there is a tax base reduction in personal income tax and mandatory employer contribution of the employer. Employees must be officially listed with the RS Employment Office.

The 2012 RS Decree on Conditions and Implementation of the Investment and Employment Support Program (Official Gazette of RS No. 70/12) also established incentives meant to encourage and support direct investments, employment growth, and transfer of new knowledge and technologies. To qualify for the incentives, participants must have existing investment projects in the RS manufacturing sector, a minimum investment value of KM 2 million (USD 1.2 million), and new employment for at least 20 workers. The total funding awarded is proportional to the investment value, the number of newly employed, and the development level of the investment location.

In 2015, the RS government passed the Law on Property Tax, which imposes a flat rate for property taxes in all municipalities; the Law on Income Tax, which exempts dividends and profit shares from taxation; the Law on Corporate Income Tax, which broadens the scope of deductible expenses and harmonizes taxes for foreign investors; and the Law on Contributions, which decreases tax contributions employers pay on salaries by 1.4 percent.

The BiH’s renewable energy incentives use a feed-in tariff model, under which the producer must obtain the status of privileged producer of electricity and meet other prescribed requirements. All the technologies in the system are based on a feed-in tariff.

The BiH Law on Free Trade Zones allows the establishment of free trade zones (FTZs) as part of the customs territory of BiH. Currently there are four free trade zones in BiH: Vogošća, Visoko, Herzegovina-Mostar, and Holc Lukavac. One or more domestic or foreign legal entities registered in BiH may create a FTZ.

FTZ users do not pay taxes and contributions, with the exception of those related to salaries and wages. Investors are free to invest capital in the FTZ, transfer their profits, and retransfer capital. Customs and tariffs are not paid on imports into FTZs. An FTZ is considered economically justified if the submitted feasibility study and other evidence can prove that the value of goods exported from a free zone will exceed at least 50 percent of the total value of goods imported to the free zone within the period of 12 months.

The BiH government does not have a “forced localization” policy in which foreign investors must use domestic content or sourcing in goods, human capital, or technology. Also, there are no requirements for foreign IT providers to turn over source code and/or provide access to surveillance. There are no mechanisms in place used to enforce rules on maintaining a certain amount of data storage within the country.

The 2020 World Bank Doing Business Report ranked BiH at number 96 out of 190 in the ease of registering property, which takes 7 procedures and an average of 35 days. Registration of real property titles is generally acknowledged as a significant barrier to the real property and mortgage market development. The present system consists of separate geodetic administrations for the Federation and the RS, which are responsible for real property cadasters. Real property cadasters describe and certify the legal object, e.g. land, house, etc. Separately, the land registry establishes legal ownership and rights for the specific object and is maintained by the municipal courts. A significant portion of land and real estate property does not have a clear title due to restitution issues. Foreigners must register a local company to purchase property; the company then makes the purchase and is recorded as the landowner. The exception to this rule is if the foreigners’ country of citizenship has a reciprocal land ownership agreement with BiH. In that case, the foreigner may directly own land.

Companies should have a comprehensive intellectual property rights (IPR) strategy in BiH since rights must be registered and enforced according to local law. BiH’s IPR framework consists of seven laws adopted and put into force by the Parliament in 2010. This legislation is compliant with the World Trade Organization (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) and EU legislation. BiH is a member of the World Intellectual Property Organization (WIPO) and party to a number of its treaties, including the Berne Convention, the Paris Convention, the Patent Cooperation Treaty, the WIPO Copyright Treaty, and the WIPO Performance and Phonograms Treaty. Registration of patents and trademarks is on a first-in-time, first-in-right basis, so businesses should consider applying for trademark and patent protection prior to introducing their products or services in the BiH market. Companies may wish to seek advice from local attorneys who are experts in IPR law. Although existing legislation provides a basic level of protection, BiH’s civil and criminal enforcement remains weak.

Jurisdiction over IPR investigations is split between customs officials, entity inspectorates, and state and entity law enforcement agencies, none of which has specialized IPR investigation teams. IPR crimes are prosecuted primarily at the state level. Cases in which companies are indicted often involve fairly low-level violators. More significant cases have sometimes languished for years with little action from prosecutors or judges.

Some BiH government entities have been using licensed software for a number of years, such as the state-level government which came into compliance in 2009, a significant step forward in the government’s commitment to IPR protection. However, some of the Cantonal governments continue using unlicensed software as some officials still do not understand the implications for IPR infringement.

In BiH’s private sector, awareness of IPR, particularly the importance of copyright protection, remains low, though the emergence of a local software development industry is helping to raise awareness. Curbing business software piracy could significantly improve the local economy by creating new jobs and generating tax revenue. The failure to recognize the importance of preventing copyright infringement makes software producers and official distributors less competitive and the establishment of a legitimate market more difficult. According to the Business Software Alliance (BSA), the rate of illegal software installed on personal computers in BiH currently remains at 66 percent, which is the regional average.

Collective copyright protection and enforcement also remains a challenge in BiH. There is no established local representative to collect and distribute royalties for visual artists, filmmakers, and literary authors. The Association of Composers and Musical Authors is the only licensed collective management organization for music authors in BiH, and it faces enforcement challenges since both musical artists and consumers remain skeptical and unfamiliar with collective management protection.

The U.S. Government, in conjunction with local partners, has made IPR awareness within the BiH enforcement community a priority through judicial engagement and public awareness programs.

Bosnia and Herzegovina is not included in the U.S. Trade Representative’s (USTR’s) Special 301 Report or the Notorious Markets List.

For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at www.wipo.int/directory/en/ 

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.

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 February 2022, 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 stated that “the stable outlook balances the risks stemming from BiH’s complex and confrontational political dynamics over the next 12 months against some comparatively strong economic fundamentals, such as contained net general government debt, an improving external position, and a resilient banking sector. The outlook is based on the expectation that the ongoing political crisis between RS on one side and the Federation of Bosnia and Herzegovina (FBiH) and the central government on the other will ultimately deescalate, with RS remaining in BiH on largely the same terms as previously. The ratings on BiH are supported by the modest level and favorable structure of public debt.”

The banking and financial system has been stable with the most significant investments coming from Austria.  As of March 2022, there are 20 commercial banks operating in BiH: 13 with headquarters in the Federation and 7 in the Republika Srpska.  Twenty-one 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 maintains monetary stability through its currency board arrangement 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.

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

In BiH, subnational governments (the two entities and ten cantons) own the vast majority of government-owned companies. 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.

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. Since 1999 more than 1,000 companies have been fully privatized, while around 100 have been 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, and the insurer Sarajevo-Osiguranje. 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 entity 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. 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.

Foreign and local companies conduct some corporate social responsibility activities and there is a general awareness of standards for responsible business conduct. More could be done in this area to respond to BiH’s various social and economic needs. In general, consumers tend to view favorably companies that initiate and carry out charitable activities in the local market. Corporate governance is not part of the broader economic mindset, and shareholder protection is not a priority. The financial system is not yet developed enough to understand and apply principles of corporate governance and shareholder protection. The BiH Consumer Ombudsman leads efforts to ensure that consumers are aware of their rights and takes action against organizations that have been accused of violating consumer rights. The local American Chamber of Commerce (AmCham) has an Ethics and Compliance Committee to raise awareness about responsible business conduct and make it a more routine part of doing business in BiH.

Department of State

• Country Reports on Human Rights Practices;
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities;
• U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises; and;
• Xinjiang Supply Chain Business Advisory 

Department of the Treasury

• OFAC Recent Actions 

Department of Labor

• Findings on the Worst Forms of Child Labor Report ;
• List of Goods Produced by Child Labor or Forced Labor ;
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World  and;
• Comply Chain .

Bosnia and Herzegovina (BiH) adopted an Environmental Approximation Strategy in 2017, laying out a broad framework for the country’s transposition of EU environmental legislation into domestic law, but implementation is lagging. A countrywide Environmental Protection Strategy remains pending. In 2013, BiH adopted its first Strategy for Adaptation to Climate Change and Low-Emission Development. An updated strategy for 2020-2030 is being finalized. The strategy’s goal is to increase BiH’s resilience to climate variability and climate change, prevent environmental degradation, gradually reduce greenhouse gas emissions, and ensure economic progress.

As a signatory of the Paris Agreement, BiH submitted its revised Nationally Determined Contribution (NDC) for 2020-2030 to the UNFCCC in April 2021. According to the revised NDC, BiH plans to reduce GHG emissions by slightly over a third by 2030, and almost two thirds by 2050 (compared to 1990 levels). By signing on to the Sofia Declaration on the Green Agenda for the Western Balkans in November 2020, BiH committed to develop and implement an integrated National Energy and Climate Plan outlining clear measures designed to reduce greenhouse gas (GHG) emissions by integrating climate action into all relevant sectoral policies. At the same time, BiH committed to develop and implement a Western Balkans 2030 Biodiversity Strategic Plan together with Western Balkan counterparts. However, BiH continues to lack a legal framework at the state level that would facilitate meeting and monitoring implementation of its climate obligations. The role of BiH’s private sector in meeting relevant targets also remains largely undefined.

BiH is currently committed to aligning with the EU’s Emissions Trading Scheme. Following the EU’s announcement of a new Carbon Border Adjustment Mechanism (CBAM), some discussions have begun about introducing a similar mechanism in BiH that may secure BiH’s opt-out from the CBAM. However, no legislative activities have been launched in that respect. BiH’s public procurement policies do not specifically stipulate any environmental and green growth considerations. BiH has recently made certain progress in declaring protected areas at the level of the two entities, and BiH joined the Glasgow Leaders’ Declaration on Forests and Land Use at the COP26 summit. The country’s Green Growth Index is among the lowest in Europe per Global Green Growth Institute indicators (Green Growth Index 2020).

Corruption remains endemic 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. 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. Public procurement reform, which would establish rules and regulations to close off some of the avenues for corruption in public contracting, has been stalled due to opposition from leading political parties.

Transparency International’s (TI) 2021 Corruption Perception Index ranked BiH 110 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 or under the outright control of politicians and their patronage networks; 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 coordinate efforts to combat corruption; while officially active, the agency has shown limited results. Nascent efforts to, with U.S. support, establish cantonal-level Anti-Corruption Offices are underway throughout the FBiH, but efforts to undermine their independence and obstruct investigations are widespread.

Corruption has a corrosive impact on both market opportunities overseas for U.S. companies and the broader business climate. Several BiH individuals and one business entity are under OFAC sanctions for destabilizing activities and corruption, while others have been designated by the Department of State under 7031(c) authorities barring their entry to the United States. Most prominent among these is Serb member of the BiH Presidency and President of the SNSD political party Milorad Dodik. Other individuals have been sanctioned for war crimes. Corruption 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 the United States and of BiH at all levels of government 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.

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.

Bosnia and Herzegovina has been at peace since the conclusion of the Dayton Peace Accords in November 1995. There have been no attacks targeting foreign investments. In mid-June 2013 and early 2014, large groups of citizens protested the country’s economic stagnation and the government’s apparent inability to improve the situation. The vast majority of protests were peaceful with relatively small numbers of participants, but some protests in Sarajevo, Mostar, and Tuzla resulted in attacks on government buildings, destruction of government property, and injuries. There were no reports of foreign investors being directly targeted in the protests. However, there are still risks from occasional, localized political and criminal violence.

The political environment in BiH has deteriorated since July 2021 when the RS entity began blockading the work of state level institutions and agencies and in October 2021 proceeded with unconstitutional steps to withdraw from state-level institutions and create parallel institutions and agencies. Since this blockade began, little progress has been made by state level institutions to enact necessary reforms strengthening the business environment. RS moves to pull out of state level institutions and form parallel entity level institutions, such as the Medicine and Medical Equipment Agency, threaten to create legal ambiguities that further complicate the business environment, disrupt the economy, and hinder investment. The Federation of Bosnia and Herzegovina entity also has functionality issues, including a government that has not yet implemented 2018 election results.

BiH has a workforce with low labor costs by Western standards, and university enrollments have been increasing for a number of years. However, several sectors such as construction, information technology, and health care have experienced a significant loss of skills over the past decade due to a lack of education and job training opportunities, as well as emigration. Mandatory contributions on labor are high, discouraging employment of new workers and increasing incentives for unregistered employment.

Each entity has its own pension and health care systems, and the systems are not harmonized. Companies working in both entities have two sets of rules to follow related to employment, wages, and contributions. Employees and employers share the costs of health care, pension, and unemployment insurance in the Federation, while in the Republika Srpska employers cover all of these costs, as well as childcare and unemployment contributions. Many employers underreport their labor force to avoid paying taxes and benefits, creating a significant gray market.

The official rate of registered unemployment according to the BiH Statistical Agency was approximately 31.2 percent in January 2022. However, unemployment based on the International Labor Organization (ILO) definition, which factors in unregistered workers in the “gray economy,” was approximately 20.5 percent, and estimates the share of informal employment in total employment was 30 percent in 2021. The youth unemployment rate is among the highest in the world at 36.6 percent, driven by widespread corruption, nepotism, and economic stagnation. BiH suffers from mass emigration to European countries as citizens see limited opportunities for employment and securing a better future for their families. The majority of unemployed persons are skilled workers.

*Source: BiH Statistics Agency

According to the BiH Central Bank preliminary data for 2021, FDI inflow in Bosnia and Herzegovina increased significantly by 65% comparing to the same period of 2020 and amounted to USD 617 million. The all-time high for FDI was USD 2.1 billion in 2007. Most investments in 2014-2021 came from Croatia, Austria, Russia, Serbia, Germany, The Netherlands, UAE, and the United Kingdom.

United States Embassy Sarajevo
Economic/Commercial Section
Robert C. Frasure 1
71000 Sarajevo
Bosnia and Herzegovina
tel. +387-33-704-000
fax. +387-33-659-722
email: sarajevocommercialservice@state.gov
website: https://ba.usembassy.gov/business/

The GoB publicly emphasizes the importance of attracting Foreign Direct Investment (FDI) and drafted an investment facilitation law recommended by the 2014 Organization for Economic Co-operation and Development (OECD) Investment Review.  While the draft was completed in 2016 with technical assistance from UNCTAD, it was never enacted.  The draft is still under review and will be presented to Parliament for approval.  The GoB has launched initiatives to promote economic activity and foreign investment in specific areas, such as establishing a diamond hub which brought more value-added businesses (i.e., cutting and polishing) into the country.  Additional investment opportunities in Botswana include large water projects, electricity, transportation, telecommunication infrastructure projects, horticultural production, and agro processing. Economists have also noted Botswana’s considerable potential in the mining, mineral processing, beef, tourism, solar energy, and financial services sectors.  BITC assists foreign investors with projects intended to diversify export revenue, create employment, and transfer skills to the citizens of Botswana.  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 focus on a healthy business environment for FDI.

Botswana’s 2003 Trade Act reserves licenses for citizens in 19 sectors, including 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.  Foreign companies have access to about 46 trading licenses in different categories.  It takes approximately five working days to obtain a license.

The Ministry of Investment, Trade, and Industry (MITI) administers the citizen participation initiative and takes 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.

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

Botswana underwent an ICT Policy Review and e-Commerce strategy review with UNCTAD and the report was released in October 2021 (https://unctad.org/system/files/official-document/dtlstict2021d4_en.pdf).  Botswana sees this as a critical move to diversify the economy and position the country to be a bigger player in the global economy.

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/types-of-entities 

CIPA asserts that 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.

BITC ( www.bitc.co.bw ), the GoB’s integrated investment and trade promotion authority, 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.  BITC assesses investment projects on their ability to diversify the economy away from its continued dependence on diamond mining, contribute towards export-led growth, and job creation for and skills transfer 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 relevant 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 five to 20 million pula in revenue, and large companies with revenues exceeding 20 million pula.  The directive applies to 27 categories of goods and services ranging from textiles, chemicals, and food, as well as a broad range of consultancy services.  The government can also offer up to 50 million pula in funding through the Citizen Entrepreneurial Development Agency (CEDA) to joint ventures between foreign and citizen owned companies.

For Companies Act registration purposes, enterprises are classified as:  Micro Enterprises – fewer than six employees including the owner and an annual revenue below 60 thousand pula; Small Enterprises – fewer than 25 employees and an annual revenue between 60 thousand and 1.5 million pula; Medium Enterprises – fewer than 100 employees and annual revenue between 1.5 and 5 million pula; Large Enterprises – over 100 employees and an annual revenue of at least 5 million pula.  This classification system permits foreigners to participate as minority shareholders in medium-sized enterprises in the 35 business sectors reserved for citizens.

The GoB neither promotes nor restricts outward investment.

Bureaucratic procedures necessary to start and maintain a business tend to be transparent, though slow, and regulatory procedures can be cumbersome to navigate.  In 2018, Botswana launched a Regulatory Impact Assessment Strategy to improve the regulatory environment, ensure legislation is necessary and cost effective, reduce administrative burdens imposed by the regulatory environment to businesses, and to improve transparency, consultation, and government accountability.  Most complaints by foreign investors are about the inefficiency and/or unresponsiveness of mid- and low-level government bureaucrats.  The GoB has introduced a Performance Management System to improve the service and accountability of its employees.  Additionally, President Masisi presented a Reset Agenda in May 2021 and one of its priorities is to align government’s machinery to the presidential agenda.  This will ensure transformation and improved service delivery in the public service by bringing significant reforms in all public institutions.  Unfair business practices or conduct can be reported to the Competition Authority, which seeks to level the playing field for all business operators and foster a conducive environment for business.  The GoB does not require companies’ environmental, social, and governance (ESG) disclosure to facilitate transparency and/or help investors and consumers to distinguish between high- and low-quality investments.  However, Environmental Impact Assessments (EIA) are a requirement and taken very seriously when undertaking infrastructural developments projects.  Bills in Botswana, including investment laws, go through a public consultation process and are available for public comment.  Bills are also debated in Parliament sessions that are open to the public.

The Companies Act of 2004 requires all companies registered in Botswana to prepare annual financial statements on the basis of generally accepted accounting principles.  It further requires every public company, including non-exempt private companies, to prepare their Financial Statement in accordance with the International Financial Reporting Standards.

The GoB’s procuring entity, Public Procurement and Asset Disposal Board (PPADB) has since April 1, 2022, transitioned to a regulatory authority, Public Procurement and Regulatory Authority (PPRA), under a new procurement act.  The new act dictates for all government procurements to be adjudicated and awarded from the relevant procuring ministries/government entities. PPRA will play an oversight role, ensuring that all procurement processes are followed according to the new act.  Further, PPRA will provide necessary and relevant training and capacity building to align the local procurement processes with international best practices.  Prospective government contractors are still required to register with the PPRA.  An independent body from the PPRA known as the Public Procurement Tribunal will be established to adjudicate on any disputes.  The PPRA will use a national eProcurement system which will serve as an electronic end-to-end One Stop information and transaction portal for any public procurement.  Since 2014, PPADB has partnered with the United States Trade and Development Agency’s (USTDA) Global Procurement Initiative in a shared commitment to utilize best-value determination procurement practices and to professionalize procurement.  Through training, USTDA also assisted PPADB’s transition to PPRA.

Online services are available at https://ipms.ppadb.co.bw/login 

The PPRA Act shall from time-to-time call for preferential procurement of citizen-owned contractors for works, service, and supplies.  To be eligible for a specific reservation or preference the contractor is required to attach to the bidding package proof of eligibility from the issuing authority.  Parliament enacted an Economic Inclusion Act to provide for the establishment of the office of the Coordinator of the Economic Empowerment office that will promote the effective participation of targeted citizens in the growth and development of the economy and facilitate enforcement of the economic empowerment initiatives.  Targeted citizen according to this act means a citizen whose access to economic resources has been constrained by various factors as may be prescribed by the minister from time to time.

Health and safety laws, embodied in the Factories Act of 1973, provide basic protection for workers from unsafe working conditions.  Minimum working conditions required on work premises include cleanliness of the premises, adequate ventilation and sanitation, sufficient lighting, and the provision of safety precautions.  Health inspectors and the Botswana Bureau of Standards carry out periodic checks at both new and operating factories.

Botswana is a member of SACU and SADC.  Neither has authority over member state national regulatory systems.  Botswana is a member of the World Trade Organization (WTO) and notifies all draft technical regulations to the WTO’s Technical Barriers to Trade (TBT) Committee.

The Constitution provides for an independent judiciary system.  Botswana’s legal system is based on Roman-Dutch law as influenced by English common law.  This type of system exists with legislation, judicial decisions, and local customary law.  The courts enforce commercial contracts, and the judicial system is widely regarded as being fair.  Both foreign and domestic investors have equal access to the judicial system.  Botswana does not have a dedicated commercial court.  The Industrial Court, set up by the Trade Dispute Act of 2004, primarily addresses labor matters.

The GoB is planning to create a corps of commercially specialized judges within the civil court system.  Under the new system, commercial cases will be overseen by these commercial judges to expedite handling and ensure relevant expertise.  Botswana already has a specialized anti-corruption court that handles all corruption cases.

Some U.S. litigants have reported that the time to obtain and enforce a judgment in a commercial dispute is unreasonably long.  The turnaround time for civil cases is approximately two years.  To improve adjudications efficiency, the GoB has established a land tribunal, and industrial, small claims, and corruption courts.  In the past several years, some dockets have improved, but progress has been uneven.

Local laws are accessible through the Botswana Attorney General’s Office website ( www.elaws.gov.bw ).  It can take up to 24 months for a law, once passed, to appear on the website.

Under Botswana’s Company Act, foreigners who wish to operate a business are required to register, as well as obtain, the relevant licenses and permits as prescribed by the Trade Act of 2008.

Licenses are required for a wide spectrum of businesses, including banking, non-bank financial services, transportation, medical services, mining, energy provision, and alcohol sales.  Although amendments to the Trade Act have eliminated the catchall miscellaneous business license category, investors have reported on local authorities insisting a business apply for a license even when it does not fall within the established categories.  In addition, some businesses have observed the enforcement of licenses, as well as the time taken for inspections to comply with licensing requirements, varies widely across local government authorities.

Botswana has anti-trust legislation and policies to ensure appropriate and fair competition in business.  Under the Competition Act, the Competition Authority (CA) monitors mergers and acquisitions.  In 2019, the CA expanded its mandate by taking over the operations of the Consumer Protection Act from MITI and rebranded itself as the Competition and Consumer Authority (CCA).  The CCA’s mandate is to prevent and rectify anti-competitive practices and protect the interests of consumers through the control of unfair business practices.  During the year 2020/2021, the CCA engaged in the Financial Inclusion Program with other stakeholders.  While the aim of the program is to reach out to populations that are excluded from financial services, the CCA’s participation ensures that consumers’ interests are taken into consideration, especially the interests of people in remote areas or with limited education.

On the competition side, the authority ramped up its public outreach using digital platforms and increased its engagement on public platforms, resulting in an increase in the number of complaints lodged online.  The authority handled 41 mergers in 2020/21 financial year, a 26 percent decrease from 56 mergers handled in 2019/20.  The decrease could be attributable to the 18-month COVID-19 related State of Emergency that started in March 2020, under which the authority temporarily suspended receipt of new mergers.  The CCA investigated a total of 25 competition related cases with 15 of them being carried over from the previous financial year, while 10 were new cases and successfully closed off four cases; the remaining 21 cases are under investigation and have been carried over to the 2021/22 financial year.  The CCA is empowered to reject mergers deemed not in the public interest.  CCA interprets this power to mean that it can prohibit mergers that concentrate most shares in the hands of foreign investors.  For consumer complaints, a total of 1,158 cases were lodged in the year under review with most complaints related to motor vehicles, motor parts and services (mostly involving grey imports) at 23.7 percent, followed by cellphones and accessories at 18.7 percent, electronic category at 16.2 percent, furniture complaints at 11.2 percent, and e-commerce transactions at 0.45 percent.  A total of 1,267 of these complaints or 90.3 percent were resolved while 136 of these were still pending at the end of the financial year.  During the 2020/21 financial year, the CCA also carried out a research study on cement as a policy advisory instrument to the Ministry of Investment, Trade and Industry (MITI) and will use the policy paper to shape the development of a cement sector in Botswana.

Section 8 of Botswana’s Constitution prohibits the nationalization of private property.  The Constitution is currently under review and a committee has been set up to do consultations and gather public opinion across the country.  The GoB has never pursued a forced nationalization policy and is highly unlikely to adopt one.  The Acquisition of Property Act provides a process for any expropriation, including parameters to determine market value and receive compensation.  The 2007 Amendment to the Electricity Supply Act allows the GoB to revoke an Independent Power Producer’s license and confiscate the operations, with compensation, for public interest purposes.

Botswana’s commercial and bankruptcy laws are comprehensive.  Secured and unsecured creditors enjoy similar rights under bankruptcy proceedings as those they would enjoy in the United States.

Botswana has several mechanisms in place to attract FDI.  BITC assists local and foreign investors.  BITC is responsible for promoting FDI, investor aftercare, and promoting locally manufactured goods in export markets.  Through its one-stop service center, BITC assists investors with company registration, land acquisition, factory shells, utility connections, and work and residence permit for essential staff.  Investors’ requests for support from BITC and other agencies are evaluated based on the proposed project’s potential to diversify Botswana’s economy, grow priority sectors, and provide employment and training to Botswana citizens.  The GoB also makes grants available to investors who partner with citizens and will extend credit to investors presenting proposals that have undergone appropriate due diligence and that have completed a feasibility study.  Foreign investors are encouraged to transfer technology to Botswana and skills to Botswana citizens with a view to preparing them for promotion into management positions.

Botswana’s tax rates are relatively low at 22 percent on corporate taxable income of resident companies and 10 percent withholding tax on all dividends distributed.  However, non-resident companies’ tax is charged at 30 percent.  MITI can grant manufacturing companies the reduced level of 15 percent taxable income.  Companies can pay the reduced rate of 15 percent of profit with accreditation from the Innovation Hub or the International Financial Services Centre on approved operations.

The Minister of Finance and Economic Development has the authority to issue development approval orders that are used for specific projects, which include providing tax holidays, education, and training grants.  The Minister must be satisfied the proposed project will benefit Botswana’s economy.  Any firm, local or foreign, may apply for a Development Approval Order through the Permanent Secretary at the finance ministry.  Applications are evaluated against the following criteria: job creation for Botswana citizens; the company’s training plans for Botswana citizens; the company’s plans to localize non-citizen positions; Botswana citizen participation in company management; amount of equity held by Botswana citizens in the company; the location of the proposed investment; the project’s effect on the stimulation of other economic activities; and the project’s effect on reducing local consumer prices.  MITI also offers rebates on imported materials for manufacturers that produce products for export.

In 2017, Parliament approved and implemented a special incentive package for Selebi-Phikwe geared to promote economic growth and diversification.  Some of the incentives include reduced corporate tax of five percent for the first five years and 10 percent thereafter (versus the 22 percent national tax rate), zero customs duty on imported raw materials, rebates for customs duty and value-added tax for any exports outside the SACU, and a minimum of 50 years on land leases (instead of the standard lease of 25 years).

The GoB is actively encouraging green energy investment through independent power producer (IPP) developed renewable energy projects that have been outlined in the Integrated Resource Plan, and these include solar power plants, wind energy power projects, and biogas.  In 2020 the GoB, with the assistance of USAID’s Southern Africa Energy Program (SAEP), launched the Rooftop Solar program.  The program allows domestic consumers to install their own solar systems to generate electricity and permits consumers to sell their excess electricity to the Botswana Power Corporation (BPC).  The Botswana Energy Regulatory Authority (BERA) regulates investment in the energy sector and is responsible for setting feed-in tariffs for IPPs.  The GoB includes the Mega Solar Program (a multi-donor partnership coordinated by the USG through Power Africa) in its renewable energy plans and will be using it to fast-track existing renewable energy (solar and wind) projects.

The Special Economic Zones Authority (SEZA) was established with the mandate to develop and operate special economic zones around the country.  It earmarked five geographic areas with a total of eight zones and is actively recruiting investors, private developers, and manufacturers.  In 2015, Parliament approved a Special Economic Zones (SEZ) law to streamline investment in sector-targeted geographic areas including two Gaborone area SEZs (multi-use, diamond processing, and financial services); two Selebi-Phikwe SEZs (mineral processing and horticulture); and additional SEZs in Lobatse (beef, leather, biogas); Palapye (energy); Pandamatenga (agriculture); and Francistown (mining and logistics).  The Gaborone financial services zone is fully operational, servicing of land has begun in the Gaborone multi-use/diamond zone, construction of silos and factory shells is underway in the Pandamatenga zone, while the rest are still to be developed.  The Special Economic Zones Act is available for sale in hard copy at the GoB bookshop.

The Selebi-Phikwe Economic Diversification Unit (SPEDU), another economic diversification agency, though regional and only focused in the greater Selebi-Phikwe region (eastern part of the country), was set up to transform its region into a vibrant economic zone.  The region has its own special incentive packet that was approved by parliament in 2017.  Some of the incentives include a five percent corporate tax for the first five years and 10 percent thereafter, zero customs duty on imported raw materials, minimum 50-year land leases, dedicated One-Stop Services for the region, etc.  BURS has also introduced an electronic Customs Management System to replace the Automated System for Customs Data and launched the National Single Window, an electronic trade platform that makes trading more secure and efficient.

Performance requirements are not imposed as a condition for establishing, maintaining, or expanding an investment in Botswana.  Foreign investors are encouraged, but not compelled, to establish joint ventures with citizens or citizen-owned companies. Several incentives have been set for local companies, encouraging foreign companies in a way to register companies locally.  Foreign investors wishing to invest in Botswana are required to register the company in accordance with the Companies Act and comply with other applicable legislation. Investors are encouraged, but not required, to purchase from local sources.  The GoB does not require investors to locate in specific geographical areas, use a specific percentage of local content, permit local equity in projects, manufacture substitutes for imports, meet export requirements or targets, or use national sources of financing for private-sector investments.  However, GoB entities, including BITC, use the criteria of diversifying the economy, creating employment, and transferring skills to Botswana citizens in determining whether to assist foreign investors. As a matter of policy, the GoB encourages foreign firms to hire qualified Botswana nationals rather than expatriates.  The granting of work permits for foreign workers may be made contingent upon establishment of demonstrable localization efforts.  The government may additionally require evidence that a local is being trained to assume duties currently being fulfilled by a foreign worker, specially focused at the middle-management level.  The GoB offers incentives to companies that train local employees, including the deduction of 200 percent of training expenses when an accredited institution conducts the training.

Business leaders cite difficulty securing work permits combined with local skills deficits and constrained labor productivity among the foremost business constraints in Botswana. However, since President Masisi assumed power in April 2018, GoB reports indicate permits for foreign workers have increased with approval rates exceeding 90 percent.  Select grants are available to foreign investors who partner with Botswana citizens.  The Citizen Entrepreneurial Development Agency has established a venture capital fund to provide equity to citizens and ventures between citizens and foreign investors.  Most GoB loans and grants are designed specifically for citizen-owned contracting firms or for small enterprises and are therefore not available to foreign investors.  However, the National Development Bank (NDB) finances both citizens and non-citizens, joint ventures, partnerships, and locally registered foreign owned companies, and covers different sectors of the economy (agriculture, property, education, retail, commerce, etc.).

The GoB, the largest procuring entity in the country, has directed central government, local authorities, and state-owned enterprises to purchase all products and services from locally based manufacturers and service providers if the goods and services are locally available, competitively priced, and meet tender specifications in terms of quality standards as certified or recognized by the Botswana Bureau of Standards.  Local preferences arise from numerous sources.  In 2015, MITI instituted a preferential procurement program for local companies based on company size – small companies receive a 15 percent preferential price margin on GoB procurement, mid-sized companies receive a 10 percent margin, and large companies a five percent margin.  The directive applies to 27 categories of goods and services ranging from textiles to chemicals, and food, in addition to a broad range of consultancy services.  In 2014, the GoB and the Chamber of Mines created a committee to oversee the purchase of mining supplies with a 10 percent preference towards those produced locally.  The 2012 Citizen Economic Empowerment Policy also emphasized the preference for local companies. In 2020, the GoB announced a new policy that all government contracts less than $900,000 were reserved for citizen-owned businesses.  The GoB has recently enacted the Economic Inclusion Act to make provision for the establishment of an Economic Empowerment Office, whose mandate is to empower targeted citizens by facilitating their participation in the development and growth of the economy and facilitating the enforcement of various sets of economic empowerment initiatives such as the ones mentioned above.

For a foreign firm to qualify with the Department of Industrial Affairs as a local manufacturer or service provider to sell goods or services to the GoB, the firm must be registered with the Registrar of Companies and possess a relevant license or waiver letter.  These procedures can be completed online, however, companies may choose to engage the services of a Company Secretary to perform these and other required documentation services.  Tenders are generally designed based on the products available in the local market and with locally based companies in mind.  In addition, many tenders require local registration as a prerequisite for bids and the GoB frequently breaks up large-scale projects into a series of tenders.  These requirements make it difficult to compete for tenders from outside Botswana.

Property rights are enforced in Botswana.  There are three main categories of land in Botswana: freehold, state land, and tribal land.  Tribal and state land cannot be sold to foreigners.  There are no restrictions on the sale of freehold land, but only an approximate five percent of land in Botswana is freehold.  All minerals in Botswana, even those on private lands, are viewed as property of the State.  In the capital city of Gaborone, the number of freehold plots is limited.  In 2019, the GoB increased the rate of Transfer Duty on the sale and transfer of property to non-citizens (both individuals and companies) from five percent to 30 percent.

State land represents about 25 percent of land in Botswana.  On application to the Department of Lands, both foreign-owned and local enterprises registered in Botswana may lease state land for industrial or residential use.  Commercial use leases are for 50 years, and residential leases are for 99 years.  Waiting periods tend to be long for leasehold applications, but subleases from current leaseholders are available.  In 2014, the GoB changed its implementing regulation to allow companies with fewer than five employees to operate in residential areas if their operations do not pose a health or safety risk to residents.

Tribal land represents 70 percent of land in Botswana.  To obtain a lease for tribal land, the investor must approach the relevant local Land Board.  Processes are unlikely to be streamlined or consistent across Land Boards.

Since independence, the trend in Botswana has been to increase the area of tribal land at the expense of both state and freehold land.  Landlord-tenant law in Botswana tends to be moderately pro-landlord.

In addition to helping investors who meet its criteria obtain appropriate land leaseholds, BITC has also built factory units for lease to industrialists with the option to purchase at market value.

Botswana’s legal intellectual property rights (IPR) structure is adequate, although some improvements are needed.  The key challenge facing the GoB is effective implementation. CIPA was established in 2014 and is comprised of three offices: the Companies and Business Office, the Industrial Property Office, and the Copyright Office.  Intellectual property is registered through CIPA.  CIPA’s priorities are to strengthen and implement Botswana’s IPR regime and to improve interagency cooperation.  IPR infringement occurs in Botswana primarily through the sale of counterfeit items in low-end sales outlets.  According to CIPA, targeted raids by local law enforcement have reduced the availability of counterfeit goods across the country.  Several spot checks that were conducted in Gaborone revealed that most of the shops that used to sell counterfeit products were no longer selling them.  Of the raids that were done, 456 were works with no holograms, 34 pirated works and 1,454 were products infringing on trademarks such as Nike, Fila, Soviet, Adidas, Puma, Converse, etc.  Most of these were found with street hawkers.   The U.S. government continues to work with the GoB to modernize and improve enforcement of IPR.

IPR is protected under the Industrial Property Act of 2010, which provides protections on patents, trademarks, utility designs, handicrafts, traditional knowledge, and geographic indicators.  The 2000 Copyright and Neighboring Rights Act also protects art and literary works, and the 1975 Registration of Business Names Act oversees corporate name and registration procedures.  On March 31, 2022, the Parliament passed the Intellectual Property Policy which was developed with the assistance of the World Intellectual Property Authority (WIPO).  Its primary aim is to leverage Botswana’s IP potential for inclusive and sustainable economic growth and development.  Other IPR-related laws include the Competition Act, the Value Added Tax Act, the Botswana Penal Code, the Customs and Excise Duty Act, the Monuments and Relics Act, the Broadcasting Act, and the Societies Act.

Botswana is not included in the United States Trade Representative (USTR) Special 301 Report or the Notorious Markets List.

Botswana is a signatory to the Beijing Treaty on Audiovisual Performances, the Hague Agreement Concerning the International Deposit of Industrial Designs, the Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks, the Convention establishing the World Intellectual Property Organization (WIPO), the WIPO Copyright Treaty, the WIPO Performances and Phonograms Treaty, the Patent Cooperation Treaty, the Berne Convention for the Protection of Literary and Artistic Works, and the Paris Convention for the Protection of Industrial Property.

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/. 

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, three 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 93.7 percent of total deposits and 93.5 percent of total loans in Botswana.  Access to banking services measured by the number of depositors on adult population improved from 72 percent in 2019 to 76.6 percent in 2020.  Additionally, banks introduced new products and services that included enhancement of transactional accounts, introduction of cross border payment services, collaborative arrangements with money-transfer service providers to widen the financial inclusion efforts for the unbanked population.

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 historically managed to maintain a sensible exchange rate and a stable inflation rate, generally within the target of three to six percent.  But the COVID-19 pandemic pushed inflation to new heights, reaching 10.6 percent in January and February 2022, the highest level on record in over a decade.

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 seven-year program to allow small and medium-sized enterprises (SME) to access up to US$ 15 million in loans in an effort to diversify the economy.  So far, the program that was initially scheduled to come to an end in June 2021 is at 83 percent utilization and has been extended to July 2024. To date ABSA has disbursed US$ 12.5 million and has up to June 2023 to disburse the remaining US$ 2.5 million.

At the end of 2020, there were 24 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 Domestic Company Index (DCI) declined by 8.2 percent in 2020, while it declined by 4.6 percent in 2019, reflecting how the pandemic affected the economy.  According to the BSE 2020 Annual Report, all sectors in the domestic equity board experienced a decline which contributed a negative 8.4 percent points to the DCI’s depreciation of 8.2 percent except for one sector, Retail & Wholesale.  The total market capitalization for listed companies at year-end 2020 was US$ 33.5 billion, with domestic companies’ capitalization standing at US$ 3 billion while foreign companies’ capitalization stood at US$ 30.5 billion.  The Mining and Minerals sector continued to dominate the foreign equity board as it contributed 94.7 percent of the foreign companies’ market capitalization in 2020 and contributed 0.97 percentage points to the Foreign Company Index (FCI) depreciation of 1 percent.  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, Botswana failed to meet the compliance requirements of the Financial Action Task Force (FATF), resulting in a grey listing in October 2018.  Botswana worked to implement the necessary regulatory legislations to address the identified technical compliance deficiencies and was subsequently removed from the FATF grey list in October 2021, and then in February 2022, removed from the EU blacklist of high risk third countries with regard to AML/CFT.  The government continues to work on its regulatory environment to avoid falling back into the grey list.   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.

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 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.  The Fund has been affected severely by the COVID-19 pandemic, with the GoB making withdrawals to address significant COVID-19-related revenue shortfalls.  As a result, the Pula Fund, which provides long fiscal cushion against economic shocks, is significantly depleted from 20 percent of GDP in 2011 to seven percent of GDP as of mid-2020 – from $1.69 billion to $510 million – a decline of more than 70 percent.  Botswana is a founding member 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: https://www.bankofbotswana.bw/sites/default/files/BOTSWANA-PULA-FUND-SANTIAGO-PRINCIPLES.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.

The GOB has committed to privatization on paper.  It established a task force in 1997 to privatize all 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 2019, President Masisi announced the Botswana Meat Commission would be placed in the hands of a private management company prior to privatization, but this has yet to occur.  Conversely, the GoB has created new SOEs such as the Okavango Diamond Company, the Mineral Development Company, and Botswana Oil Limited in recent years.   A Rationalization Strategy covering all parastatals has been developed and its implementation will address issues such as duplication of activities, overlapping mandates and issues of corporate governance.  This may finally result in some SOEs being privatized or merged while some may be closed.

The GoB, some foreign and local firms, and customers, recognized and embraced Responsible Business Conduct (RBC), although Botswana is not an adherent of the OECD’s RBC Guidelines for Multinational Enterprises and has not specified its definition of RBC.  Large companies in the mining, communications technology, food supply, and financial services sectors have established RBC programs, sponsor projects, and support local nonprofit concerns.  However, the ethos has not taken hold in many smaller firms.  The U.S. Embassy worked with the local chamber of commerce, Business Botswana, on the issue of corporate social responsibility and ethical compliance, to help enlist companies to sign onto a Corporate Code of Conduct that covers, among other things, conflicts of interest, bribery, political interference, political party funding, procurement and bidding, and issues surrounding residence and work permits.  To date more than 300 firms have signed the Code of Conduct.

The Companies Act also sets out the expectations of business conduct and governance for directors and shareholders for both private and public companies.  Botswana is not a member of the Extractive Industries Transparency Initiative.  Botswana’s Mines and Minerals Act and associated regulations govern mineral contracts and licenses.  Botswana’s laws and procedures for awarding mining contracts are fairly well developed.  Mining licenses are required to undergo a public comment period before they are awarded, and that rule is followed.

Department of State

• Country Reports on Human Rights Practices;
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities;
• U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises; and;
• Xinjiang Supply Chain Business Advisory 

Department of the Treasury

• OFAC Recent Actions

Department of Labor

• Findings on the Worst Forms of Child Labor Report;
• List of Goods Produced by Child Labor or Forced Labor;
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World and;
• Comply Chain.

The GoB is committed to reducing carbon emissions to 15 percent by 2030 and thus adopted a Climate Change Policy in April 2021.  The policy promotes access to carbon markets, climate finance, and clean technologies such as solar and wind energy.  Botswana has mobilized $30 million from the Green Climate Fund to implement agriculture related adaptation interventions for three districts (Ngamiland, Bobirwa, and Kgalagadi).  The GoB has also, in collaboration with the UNDP, been rolling out a Biogas Technology program that aims to deliver small scale digester plants to reduce greenhouse gas emissions by 1,650,000 million tons of carbon dioxide by 2023.  The gas is used for cooking, heating, and lighting.  231 units have been installed, mostly in the southern part of the country.  Standards have been developed to monitor emission concentrations in the country and the GoB has expanded its air monitoring network to cover more areas in the country.  The level of ambient air quality in the country is 95 percent.

Botswana’s Corruption Perception Index (CPI) has deteriorated significantly, eroding its previously held reputation as the ‘least corrupt country in Africa’.  Transparency International ranks Botswana at 45 out of 180 countries in 2021 falling from 35th place in 2020 with a score of 55 out of 100, a change of negative 5 from the previous year.  The Human Rights Report (HRR) 2020 for Botswana also notes increased media reports of government corruption, mostly related to COVID-19 projects.  The HRR also states that a poll conducted by Transparency International in 2019, indicated that 7 percent of those polled had paid bribes to government officials, jumping from only 1 percent in 2015.  Private sector representatives also 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 $50,000, or both.  The GoB has prosecuted high-level officials.  Corruption trials and investigations of some government officials on cases of money laundering, abuse of office, receiving bribes and embezzlement of funds continued during 2020 and are still on-going. Human rights issues reported in the HRR included restrictions on press and internet freedom of expression, interference with freedom of association, child labor including commercial sexual exploitation of children.  On a positive note, while such crimes exist, the GoB officials were reported to be cooperative and responsive to domestic NGO’s views on most subjects and placed no restrictions on domestic and international human rights groups nor did they interfere with their investigations and publishing findings on human rights cases.

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 2021, Botswana was removed from the FATF grey list on which it had been placed on in October 2018 and was subsequently removed from the EU blacklist.

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

Contacts for agencies responsible for combating corruption:

Mr. Tymon Katlholo
Director General
Directorate on Corruption and Economic Crime
Madirelo Extension 6, Gaborone, Botswana
+267 3914002/+267 3604200
dcec@gov.bw 

Ms. Tumelo Motsumi (Acting)
Executive Director
Public Procurement and Asset Disposal Board
Private Bag 0058, Gaborone, Botswana
+267 3602000
bmaster@ppadb.co.bw
tmotsumi@ppadb.co.bw 

Ms. Bopelokgale Soko
Director
Financial Intelligence Agency
Private Bag 0190, Gaborone, Botswana
+267 3998400
ethibe@gov.bw
kmosimanengaka@gov.bw 

Complainants can also reach out to ministers of the relevant ministries for a particular tender and provide a copy of the complaint to the Public Procurement and Asset Disposal Board (PPADB) Executive Chairperson.

The threat of political violence is low in Botswana.  Public demonstrations are rare and seldom turn violent.  The last large-scale strikes, which involved public sector employees, occurred April-June 2011 and were not violent.  In September 2015, roughly 200 people participated in a peaceful march organized by an opposition political party to protest water shortages in the capital.  In August 2016, police forcefully dispersed a small demonstration protesting unemployment outside the National Assembly.  In February and March 2017, some student-led protests occurred at tertiary institutions necessitating police deployment but were not overtly political.  There were multiple reports of police brutality, including the use of rubber whips and rubber bullets.  Another peaceful march against corruption was held in March 2018.  This followed allegations of embezzlement of the National Petroleum Fund by a company charged with the management of the funds together with some GoB officials.  In late 2019, following general election, the Umbrella for Democratic Change (UDC) held a peaceful march of no more than 200 people protesting the election results.

Botswana has a high unemployment rate and a constricted worker skills base.  In her 2022 budget speech, the Minister of Finance and Economic Development reported an unemployment rate of 26 percent, up from 20 percent reported by Statistics Botswana in 2019, showing the effects of the COVID-19 pandemic on the economy.  Employers can expect to engage in significant training efforts, depending on the industry, due to shortage of skills.  Retention of workers and absenteeism can pose problems.  In addition, managers often cite workforce productivity as a point of frustration.  The lack of trained local citizen professionals is generally addressed by contracting expatriates if they can secure work permits.  There is minimal labor strife in Botswana.  In 2015, there were a handful of small and peaceful strikes, the most notable of these was by a portion of BURS officials, but as with most unions across sectors, only a portion of BURS officials were unionized, allowing the GoB to maintain customs operations.

The Employment Act provides basic guidelines for employment in Botswana.  The legislation sets requirements for a minimum wage, length of the workweek, annual and maternity leave, hiring and termination.  Standards set by the Act are consistent with international best practice as described by International Labor Organization (ILO) model legislation and guidelines.

Employment-related litigation occurs and is both an example of trust in the court system and a cost to doing business in Botswana.  Employers avoid considerable expense and frustration if they observe the provisions of the Employment Act, relevant labor regulations, and prudence in advance of potential litigation.  Before a potential litigant goes to one of 11 labor courts, the parties must attempt mediation through the Department of Labor.  Court cases offering severance terms for employees laid off due to fluctuating market conditions are also common.  Section 25 of the Employment Act allows employers to terminate contracts for reducing the size of their work force, known as redundancy, using the first-in-last-out principle.  This method of terminating contracts is separate from firing for serious misconduct as specified by Section 26 of the Act. The GoB has social safety net programs in place to assist the unemployed and destitute.

Collective bargaining is common in government and the private sector, and the Labor Commissioner can grant collective bargaining authority upon request.  The largest unions are comprised of public sector workers.

In August 2016 Parliament passed a Trade Disputes Act with a list of services deemed “essential” and barred from striking that exceeds international labor standards.  The Ministry of Employment, Labor Productivity, and Skills Development is coordinating with the ILO and other partners to review labor laws to ensure they align with ILO standards.  The tri-partite labor law committee recommended that all services listed as essential be cancelled except aviation, health, electrical, water and sanitation, fire, and air traffic control services.

Goitseone Montsho
Economic/Commercial Specialist
+267 395-3982 / 373-2431
MontshoG@state.gov