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 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.

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.

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.

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.

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.

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 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.

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 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.

Data unavailable.

Data unavailable.

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.

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/ .

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.

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 .

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.

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.

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

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.

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.

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.

* Source for Host Country Data: Not available

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.

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.

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.

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 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.

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.

* Source for Host Country Data: Australian Bureau of Statistics

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.

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.

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.

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.

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.

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.

* Source for Host Country Data:  Azerbaijan State Statistical Committee

*Source: Central Bank of Azerbaijan

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.

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.

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.

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.

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.

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.

*Host Country Source:  Bangladesh Bank, Bangladesh Bureau of Statistics

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.

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  .

Barbados does not have a recent history of politically motivated violence or civil unrest.

* 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.

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.

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.

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.

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.

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.

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.

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 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.

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.

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.

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.

* Source for Host Country Data: Recent GOB data not available

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 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.

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 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.

* Source for Host Country Data: BEA, UNCTAD, World Bank

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.

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.

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.

*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.

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.

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 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.

Brazil was the world’s seventh-largest destination for foreign direct investment (FDI) in 2019, with inflows of $58 billion, according to the United Nations Conference on Trade and Development (UNCTAD). The GoB actively encourages FDI – particularly in the automobile, renewable energy, life sciences, oil and gas, mining, and transportation infrastructure sectors – to introduce greater innovation into Brazil’s economy and to generate economic growth. GoB investment incentives include tax exemptions and low-cost financing with no distinction made between domestic and foreign investors in most sectors. Foreign investment is restricted in the health, mass media, telecommunications, aerospace, rural property, maritime, and insurance sectors.

The Brazilian Trade and Investment Promotion Agency (APEX-Brasil) plays a leading role in attracting FDI to Brazil by working to identify business opportunities, promoting strategic events, and lending support to foreign investors willing to allocate resources to Brazil. APEX-Brasil is not a “one-stop shop” for foreign investors, but the agency can assist in all steps of the investor’s decision-making process, to include identifying and contacting potential industry segments, sector and market analyses, and general guidelines on legal and fiscal issues. Their services are free of charge. The website for APEX-Brasil is: http://www.apexbrasil.com.br/en . 

In 2016, the Ministry of Economy created the Direct Investments Ombudsman (OID) at the Board of Foreign Trade and Investments (CAMEX), to provide assistance to foreign investors through a single body for issues related to FDI in Brazil. This structure aims to help and eventually speed up foreign investments in Brazil, providing foreign and national investors with a simpler process for establishing new businesses and implementing additional investments in their current companies. Since 2019, the OID has acted as a “single window” of the Brazilian government for FDI. It supports and guides investors in their requests, recommending solutions to their complaints (Policy Advocacy) as well as proposing improvements to the legislation or administrative procedures to public agencies whenever necessary. The OID is responsible for receiving requests and inquiries on matters related to foreign investments, to be answered together with government agencies and entities (federal, state and municipal) involved in each case (Focal Points Network). This new structure provides a centralized support system to foreign investors, and must respond in a timely manner to investors’ requests.

A 1995 constitutional amendment (EC 6/1995) eliminated distinctions between foreign and local capital, ending favorable treatment (i.e. tax incentives, preference for winning bids) for companies using only local capital. However, constitutional law restricts foreign investment in healthcare (Law 8080/1990, altered by 13097/2015), mass media (Law 10610/2002), telecommunications (Law 12485/2011), aerospace (Law 7565/1986 a, Decree 6834/2009, updated by Law 12970/2014, Law 13133/2015, and Law 13319/2016), rural property (Law 5709/1971), maritime (Law 9432/1997, Decree 2256/1997), and insurance (Law 11371/2006).

Brazil does not have a national security-based foreign investment screening process. Foreign investors in Brazil must electronically register their investment with the Central Bank of Brazil (BCB) within 30 days of the inflow of resources to Brazil. In cases of investments involving royalties and technology transfer, investors must register with Brazil’s patent office, the National Institute of Industrial Property (INPI). Since the approval of the Doing Business Law in 2021, companies are no longer required to have an administrator residing in Brazil, but they must appoint a local proxy attorney to receive legal notifications. Portfolio investors must have a Brazilian financial administrator and register with the Brazilian Securities Exchange Commission (CVM). Brazil does not have an investment screening mechanism based on national security interests. A bill was proposed in the Chamber of Deputies in 2020 (PL 2491) to change the parameters under which to review foreign investments could be reviewed, but the bill has not yet been analyzed by the necessary commissions.

To enter Brazil’s insurance and reinsurance market, U.S. companies must establish a subsidiary, enter a joint venture, acquire a local firm, or enter a partnership with a local company. The BCB reviews banking license applications on a case-by-case basis. Foreign interests own or control 20 of the top 50 banks in Brazil, but Santander is the only major wholly foreign-owned retail bank.

Since June 2019, foreign investors may own 100 percent of capital in Brazilian airline companies.

While 2015 and 2017 legislative and regulatory changes relaxed some restrictions on insurance and reinsurance, rules on preferential offers to local reinsurers remain unchanged. Foreign reinsurance firms must have a representational office in Brazil to qualify as an admitted reinsurer. Insurance and reinsurance companies must maintain an active registration with Brazil’s insurance regulator, the Superintendence of Private Insurance (SUSEP), and maintain a solvency classification issued by a risk classification agency equal to Standard & Poor’s or Fitch ratings of at least BBB-.

Foreign ownership of cable TV companies is allowed, and telecom companies may offer television packages with their service. Content quotas require every channel to air at least three and a half hours per week of Brazilian programming during primetime. Additionally, one-third of all channels included in any TV package must be Brazilian.

The National Land Reform and Settlement Institute administers the purchase and lease of Brazilian agricultural land by foreigners. Under the applicable rules, the area of agricultural land bought or leased by foreigners cannot account for more than 25 percent of the overall land area in a given municipal district. Additionally, no more than 10 percent of agricultural land in any given municipal district may be owned or leased by foreign nationals from the same country. The law also states that prior consent is needed for purchase of land in areas considered indispensable to national security and for land along the border. The rules also make it necessary to obtain congressional approval before large plots of agricultural land can be purchased by foreign nationals, foreign companies, or Brazilian companies with majority foreign shareholding. In December 2020, the Senate approved a bill (PL 2963/2019; source: https://www25.senado.leg.br/web/atividade/materias/-/materia/136853 ) to ease restrictions on foreign land ownership and the Chamber of Deputies began to deliberate on the bill; however, the bill was shelved with no plans to advance it further after President Bolsonaro expressed concerns regarding the legislation.

Brazil is not yet a signatory to the World Trade Organization (WTO) Agreement on Government Procurement (GPA), but submitted its application for accession in May 2020. In February 2021, Brazil formalized its initial offer to start negotiations.  The submission establishes a series of thresholds above which foreign sellers will be allowed to bid for procurements. Such thresholds vary for different procuring entities and types of procurements. The proposal also includes procurements by some states and municipalities (with restrictions) as well as state-owned enterprises, but it excludes certain sensitive categories, such as financial services, strategic health products, and specific information technologies. Brazil’s submission is currently under review with GPA members.

By statute, a Brazilian state enterprise may subcontract services to a foreign firm only if domestic expertise is unavailable. Additionally, U.S. and other foreign firms may only bid to provide technical services when there are no qualified Brazilian firms. U.S. companies need to enter into partnerships with local firms or have operations in Brazil in order to be eligible for “margins of preference” offered to domestic firms participating in Brazil’s public sector procurement to help these firms win government tenders. Nevertheless, foreign companies are often successful in obtaining subcontracting opportunities with large Brazilian firms that win government contracts, and since October 2020 foreign companies are allowed to participate in bids without the need for an in-country corporate presence (although establishing such a presence is mandatory if the bid is successful). A revised Government Procurement Protocol of the trade bloc Mercosul (Mercosur in Spanish) signed in 2017 would entitle member nations Brazil, Argentina, Paraguay, and Uruguay to non-discriminatory treatment of government-procured goods, services, and public works originating from each other’s suppliers and providers. However, none of the bloc’s members have ratified the protocol, so it has not entered into force. Despite the restrictions within Mercosul, in January 2022 Brazil and Chile entered into an agreement which includes government procurement.

The Organization for Economic Co-operation and Development’s (OECD) December 2021 Economic Forecast Summary of Brazil summarized that with the COVID-19 vaccination campaign accelerating throughout the year, economic activity underpinned by reduced private consumption and investment restarted as restrictions were lifted, and exports benefited from the global recovery, the robust demand for commodities, and a weak exchange rate. However, supply bottlenecks, lower purchasing power, higher interest rates, and policy uncertainty have slowed the pace of recovery. The labor market is experiencing a lag in recovering from the pandemic, and by the end of 2021 unemployment remained above pre-pandemic levels. The residual effect of the government’s significant fiscal stimulus spending in 2020 to reinvigorate the economy contributed to inflationary pressure, further compounded by constrained global supply chains pushing prices up. In response, the COPOM chose to incrementally increase its benchmark SELIC rate from 2 percent in March 2021 to 11.75 percent in March 2022. The COPOM announced that it would continue tightening its monetary policy in an effort to curb inflation and anchor expectations. Prospects for economic growth are weak for 2022 and 2023. The OECD recommended that Brazil strengthen and adhere to its fiscal rules to increase market confidence in establishing sustainable finances and exercising more efficient public spending to create fiscal space for growth-enhancing policies, along with developing a more inclusive social protection program.

The IMF’s 2021 Country Report No. 2021/217 (published in September 2021) for Brazil highlighted that its economic performance for the year had been better than expected, partly due to the government’s fiscal response to the pandemic which propelled the economy back to pre-pandemic levels for most sectors. In addition, the IMF noted a favorable economic momentum supported by booming trade and robust private sector credit growth. The IMF assessed that currency depreciation and a surge in commodity prices had led to headline inflation, and that expectations remained negative. The report noted Brazil’s lagging labor market, especially among youths, women, and Afro-Brazilians. The IMF also expressed concerns that emergency cash transfers (which expired in December 2021) were only a short-term solution, and recommended addressing poverty and inequality by strengthening a more permanent social safety net. The IMF concluded that near-term fiscal risks were low, but the high level of public debt continued to pose a medium-term risk. Restoring high and sustained growth, increasing employment, raising productivity, improving living standards, and reducing vulnerabilities would require longer-term policy efforts to eliminate bottlenecks and foster private sector-led investment.

The WTO’s 2017 Trade Policy Review of Brazil noted the country’s open stance towards foreign investment, but also pointed to the many sector-specific limitations (see above). The three reports listed below, with links to the reports, highlight the uncertainty regarding reform plans as the most significant political risk to the economy.

1. OECD Report:
2. IMF Report:
3. WTO Report:

A company must register with the National Revenue Service (Receita Federal) to obtain a business license and be placed on the National Registry of Legal Entities (CNPJ). Brazil’s Export Promotion and Investment Agency (APEX) has a mandate to facilitate foreign investment in Brazil. The agency’s services are available to all investors, foreign and domestic. Foreign companies interested in investing in Brazil have access to many benefits and tax incentives granted by the Brazilian government at the municipal, state, and federal levels. Most incentives target specific sectors, amounts invested, and job generation. Brazil’s business registration website can be found at: https://www.gov.br/pt-br/servicos/inscrever-ou-atualizar-cadastro-nacional-de-pessoas-juridicas  .

Brazil enacted its “Doing Business” law, which entered into force on August 26, 2021. The law simplified the process to open a business, sought to facilitate foreign trade by eliminating redundancy as well as further automating its trade processes, and expand the powers of minority shareholders in private companies.

Adopted in September 2019, the Economic Freedom Law 13.874 established the Economic Freedom Declaration of Rights and provides for free market guarantees. The law includes several provisions to simplify regulations and establish norms for the protection of free enterprise and free exercise of economic activity.

On August 20, 2021, the Brazilian government included the Foreign Trade Secretariat (SECEX) in the Brazilian Authorized Economic Operator Program (Programa OEA), run by Receita Federal (Internal Federal Revenue service), allowing Government of Brazil-designated OEA certified operators to maintain a low-level risk to achieve benefits in their foreign trade operations related to drawback suspension and exemption regimes.

Through the digital transformation initiative in Brazil, foreign companies can open branches via the internet. Since 2019, it has been easier for foreign businesspeople to request authorization from the Brazilian federal government. After filling out the registration, creating an account, and sending the necessary documentation, business entities can make the authorization request on the Brazilian government’s online portal through a legal representative. The electronic documents will then be analyzed by the Brazilian National Department of Business Registration and Integration (DREI) team. DREI will inform the applicant of any missing documentation via the portal and e-mail and give a 60-day period for the applicant to submit any additional information. The legal representative of the foreign company, or another third party who holds a power of attorney, may request registration through this link: https://acesso.gov.br/acesso/#/primeiro-acesso?clientDetails=eyJjbGllbnRVcmkiOiJodHRwczpcL1wvYWNlc3NvLmdvdi5iciIsImNsaWVudE5hbWUiOiJQb3J0YWwgZ292LmJyIiwiY2xpZW50VmVyaWZpZWRVc2VyIjp0cnVlfQ%3D%3D    

The regulation of foreign companies opening businesses in Brazil is governed by article 1,134 of the Brazilian Civil Code and article 1 of DREI Normative Instruction 77/2020. English-language general guidelines to open a foreign company in Brazil are not yet available, but the Portuguese version is available at the following link: https://www.gov.br/economia/pt-br/assuntos/drei/empresas-estrangeiras  .

For foreign companies that will be a partner or shareholder of a Brazilian national company, the governing regulation is DREI Normative Instruction 81/2020 (https://www.in.gov.br/en/web/dou/-/instrucao-normativa-n-81-de-10-de-junho-de-2020-261499054 ). The contact information of the DREI is drei@economia.gov.br and +55 (61) 2020-2302.

References:

1. provides investment measures, laws and treaties enacted by selected countries.
2. provides links to business registration sites worldwide.

Brazil does not restrict domestic investors from investing abroad. APEX-Brasil supports Brazilian companies’ efforts to invest abroad under its “internationalization program”: http://www.apexbrasil.com.br/como-a-apex-brasil-pode-ajudar-na-internacionalizacao-de-sua-empresa  . APEX-Brasil frequently highlights the United States as a worthwhile destination for outbound investment. APEX-Brasil and SelectUSA (U.S. Department of Commerce) signed a memorandum of cooperation in February 2014 to promote bilateral investment.

Brazil incentivizes outward investment. APEX-Brasil organizes several initiatives aimed at promoting Brazilian investments abroad. The agency´s efforts include trade missions, business round tables, promoting the participation of Brazilian companies in major international trade fairs, and arranging technical visits for foreign buyers to Brazil as well as facilitating travel for decision-makers seeking to learn about the Brazilian market and performing other commercial activities designed to strengthen the country’s branding abroad.

The main sectors of Brazilian investments abroad are financial services and assets (totaling 62.9 percent of total investments abroad); oil and gas extraction (12 percent); and mineral metal extraction (6.5 percent). Including all sectors, Brazilian investments abroad totaled $448 billion in 2020. The regions that received the largest share of Brazilian outward investments are the Caribbean (43.3 percent), concentrated in the Cayman Islands, British Virgin Islands and Bahamas, and Europe (37.9 percent), primarily the Netherlands and Luxembourg.

Regulations on investments abroad are outlined in BCB Ordinance 3,689/2013 (foreign capital in Brazil and Brazilian capital abroad): https://www.bcb.gov.br/pre/normativos/busca/downloadNormativo.asp?arquivo=/Lists/Normativos/Attachments/48812/Circ_3689_v1_O.pdf

Sales of cross-border mutual funds are only allowed to certain categories of investors, not to the general public. In 2020, international financial services companies active in Brazil submitted a proposal to Brazilian regulators to allow opening these mutual funds to the general public, and the Brazilian Securities and Exchange Commission is expected to approve their recommendation by June 2022. Discussions with regulators about increasing the share percentages that pension funds and insurers can invest abroad (currently 10 percent for pension funds, 20 percent for insurers, and 40 percent for qualified investors) are ongoing, along with discussions about tax deferral mechanisms to incentivize Brazilian investment abroad.

According to the World Bank, it takes approximately 17 days to start a business in Brazil. Brazil is seeking to streamline the process and decrease the amount of time it takes to open a small- or medium-sized enterprise (SME) to only five days through its RedeSimples Program. Similarly, the government has reduced regulatory compliance burdens for SMEs through the continued use of the SIMPLES program, which simplifies the collection of up to eight federal, state, and municipal-level taxes into one single payment. The Doing Business law (14.195/2021) included provisions to streamline the process, such as unifying federal, state and municipal registrations and eliminating requirements such as address analysis and pre-checking business names.

In 2020, the World Bank noted that Brazil’s lowest-ranked component in its Ease of Doing Business score was the annual administrative burden for a medium-sized business to comply with Brazilian tax codes with an average of 1,501 hours per year, a significant improvement from 2019’s 1,958 hour average but still much higher than the 160.7 hour average of OECD high-income countries. The total tax rate for a medium-sized business in Brazil is 65.1 percent of profits, compared to the average of 40.1 percent in OECD high-income countries. Business managers often complain of not being able to understand complex and sometimes contradictory tax regulations, despite having large local tax and accounting departments in their companies.

Tax regulations, while burdensome and numerous, do not generally differentiate between foreign and domestic firms. However, some investors complain that in certain instances the processing of rebates for exported goods of the value-added tax collected by individual states (ICMS) favors local companies. Exporters in many states report difficulty receiving their ICMS rebates when their goods are exported. Taxes on commercial and financial transactions are particularly burdensome, and businesses complain that these taxes hinder the international competitiveness of Brazilian-made products.

Of Brazil’s ten federal regulatory agencies, the most prominent include:

1. ANVISA, the Brazilian counterpart to the U.S. Food and Drug Administration, which has regulatory authority over the production and marketing of food, drugs, and medical devices
2. ANATEL, the country’s telecommunications regulatory agency, which handles telecommunications as well as the licensing and assigning of radio spectrum bandwidth (the Brazilian FCC counterpart)
3. ANP, the National Petroleum Agency, which regulates oil and gas contracts and oversees auctions for oil and natural gas exploration and production
4. ANAC, Brazil’s civil aviation agency
5. IBAMA, Brazil’s environmental licensing and enforcement agency
6. ANEEL, Brazil’s electricity regulator that regulates Brazil’s power sector and oversees auctions for electricity transmission, generation, and distribution contracts

In addition to these federal regulatory agencies, Brazil has dozens of state- and municipal-level regulatory agencies.

The United States and Brazil conduct regular discussions on customs and trade facilitation, good regulatory practices, standards and conformity assessment, digital issues, and intellectual property protection. Discussions in all these areas occurred during the 19th plenary of the Commercial Dialogue which took place virtually in October 2021, and continue through ongoing regular exchanges at the working level between the U.S. Department of Commerce, Brazil’s Ministry of Economy, and other agencies and regulators throughout the year.

Regulatory agencies complete Regulatory Impact Analyses (RIAs) on a voluntary basis. The Brazilian congress passed Law 13.848 in June 2019 on Governance and Accountability (PLS 52/2013 in the Senate, and PL 6621/2016 in the Chamber). Among other provisions, the law makes RIAs mandatory for regulations that affect “the general interest.”

The Chamber of Deputies, the Federal Senate, and the Office of the Presidency maintain websites providing public access to both approved and proposed federal legislation. Brazil is seeking to improve its public comment and stakeholder input process. In 2004, the GoB opened an online “Transparency Portal” with data on funds transferred to and from federal, state, and city governments, as well as to and from foreign countries. It also includes information on civil servant salaries.

In December 2021, Brazil’s Securities and Exchange Commision (CMV) issued Resolution 59/2021, establishing the first transparency mechanism for environmental, social, and corporate governance (ESG) practices in the country. The goal of the change was to provide more comprehensive information to potential investors, therefore allowing the market environment to drive changes in business behavior. According to the resolution, starting in January 2023, listed companies will be required to inform the CVM whether they disclose information on ESG indicators and provide details on their reports, such as existence of independent audits, which indicators were used, and if UN Sustainable Development Goals (SDGs) have been considered. The new requirement will also include questions regarding the companies’ consideration of the Task Force on Climate Change-Related Financial Disclosures or other recognized entities’ recommendations, the existence of a gas emission inventory, and the role of management bodies in assessing climate-related risks. Regarding diversity issues, companies will be required to disclose information showing the diversity of the body of administrators and employees as well as salary disparities between executives and staff.

In 2022, the Department of State concluded in its annual 2021 Fiscal Transparency Report that Brazil had met minimum fiscal transparency requirements. The International Budget Partnership’s Open Budget Index ranked Brazil slightly ahead of the United States in terms of budget transparency in its most recent (2019) index. The Brazilian government demonstrates adequate fiscal transparency in managing its federal accounts, although there is room for improvement in terms of completeness of federal budget documentation. Brazil’s budget documents are publicly available, widely accessible, and sufficiently detailed. They provide a relatively full picture of the GoB’s planned expenditures and revenue streams. The information in publicly available budget documents is considered credible and reasonably accurate.

Brazil is a member of Mercosul – a South American trade bloc whose full members include Argentina, Paraguay, and Uruguay. Brazil routinely implements Mercosul common regulations.

Brazil is a member of the WTO and the government regularly notifies draft technical regulations, such as potential agricultural trade barriers, to the WTO Committee on Technical Barriers to Trade (TBT).

Brazil has a civil legal system with state and federal courts. Investors can seek to enforce contracts through the court system or via mediation, although both processes can be lengthy. The Brazilian Superior Court of Justice (STJ) must accept foreign contract enforcement rulings for the rulings to be considered valid in Brazil. Among other considerations, the foreign judgment must not contradict any prior decisions by a Brazilian court in the same dispute. The Brazilian Civil Code regulates commercial disputes, although commercial cases involving maritime law follow an older Commercial Code which has been otherwise largely superseded. Federal judges hear most disputes in which one of the parties is the Brazilian State, and also, rule on lawsuits between a foreign state or international organization and a municipality or a person residing in Brazil.

The judicial system is generally independent. The Supreme Federal Court (STF), charged with constitutional cases, frequently rules on politically sensitive issues. State court judges and federal level judges below the STF are career officials selected through a meritocratic examination process. The judicial system is backlogged, and disputes or trials frequently take several years to arrive at a final resolution, including all available appeals. Regulations and enforcement actions can be litigated in the court system, which contains mechanisms for appeal depending upon the level at which the case is filed. The STF is the ultimate court of appeal on constitutional grounds; the STJ is the ultimate court of appeal for cases not involving constitutional issues.

In 2019, Brazil established a “one-stop shop” for international investors. The one-stop shop, the Direct Investments Ombudsman (DIO), is a ‘single window’ for investors provided by the Executive Secretariat of CAMEX. It is responsible for receiving requests and inquiries about investments, to be answered jointly with the public agency responsible for the matter (at the federal, state and municipal levels) involved in each case (the Network of Focal Points). This new structure allows for supporting the investor via a single governmental body in charge of responding to investor requests within a short time. Private investors have noted the single window is better than the previous system, but does not yet provide all the services of a true “one-stop shop” to facilitate international investment. The DIO’s website in English is: http://oid.economia.gov.br/en/menus/8  

The Administrative Council for Economic Defense (CADE), which falls under the purview of the Ministry of Justice, is responsible for enforcing competition laws, consumer protection, and carrying out regulatory reviews of proposed mergers and acquisitions. CADE was reorganized in 2011 through Law 12529, combining the antitrust functions of the Ministry of Justice and the Ministry of Finance. The law brought Brazil in line with U.S. and European merger review practices and allows CADE to perform pre-merger reviews, in contrast to the prior legal framework that directed the government to review mergers after they had already been completed. In October 2012, CADE performed Brazil’s first pre-merger review.

In 2021, CADE conducted 611 total formal investigations. It approved 165 merger and/or acquisition requests and did not reject any requests.

Article 5 of the Brazilian Constitution assures property rights of both Brazilians and foreigners that own property in Brazil. The Constitution does not address nationalization or expropriation. Decree-Law 3365 allows the government to exercise eminent domain under certain criteria that include, but are not limited to, national security, public transportation, safety, health, and urbanization projects. In cases of eminent domain, the government compensates owners at fair market value.

There are no signs that the current federal government is contemplating expropriation actions in Brazil against foreign interests. Brazilian courts have previously ruled in U.S. citizens’ favor for some claims regarding state-level land expropriations. However, as states have filed appeals of these decisions, the compensation process for foreign entities can be lengthy and have uncertain final outcomes.

ICSID Convention and New York Convention

In 2002, Brazil ratified the 1958 Convention on the Recognition and Enforcement of Foreign Arbitration Awards. Brazil is not a member of the World Bank’s International Center for the Settlement of Investment Disputes (ICSID). Brazil joined the United Nations Commission on International Trade Law (UNCITRAL) in 2010, and its membership will expire in 2022.

Investor-State Dispute Settlement

Article 34 of the 1996 Brazilian Arbitration Act (Law 9307) defines a foreign arbitration judgment as any judgment rendered outside of the national territory. The law established that the Superior Court of Justice (STJ) must ratify foreign arbitration awards. Law 9307, updated by Law 13129/2015, also stipulates that a foreign arbitration award will be recognized or executed in Brazil in conformity with the international agreements ratified by the country and, in their absence, with domestic law. A 2001 Brazilian Supreme Federal Court (STF) ruling established that the 1996 Brazilian Arbitration Act, permitting international arbitration subject to STJ ratification of arbitration decisions, does not violate the federal constitution’s provision that “the law shall not exclude any injury or threat to a right from the consideration of the Judicial Power.”

Contract disputes in Brazil can be lengthy and complex. Brazil has both a federal and a state court system, and jurisprudence is based on civil code and contract law. Federal judges hear most disputes in which one of the parties is the State and rule on lawsuits between a foreign State or international organization and a municipality or a person residing in Brazil. Five regional federal courts hear appeals of federal judges’ decisions.

International Commercial Arbitration and Foreign Courts

Brazil ratified the 1975 Inter-American Convention on International Commercial Arbitration (Panama Convention) and the 1979 Inter-American Convention on Extraterritorial Validity of Foreign Judgments and Arbitration Awards (Montevideo Convention). Law 9307/1996 amplifies Brazilian law on arbitration and provides guidance on governing principles and rights of participating parties. Brazil developed a new Cooperation and Facilitation Investment Agreement (CFIA) model in 2015 (https://concordia.itamaraty.gov.br/  ), but it does not include ISDS mechanisms. (See sections on bilateral investment agreements and responsible business conduct.)

Brazil’s commercial code governs most aspects of commercial association, while the civil code governs professional services corporations. In December 2020, Brazil approved a new bankruptcy law (Law 14.112) which largely models the UNCITRAL Model Law on International Commercial Arbitration and addresses criticisms that its previous bankruptcy legislation favored holders of equity over holders of debt. The new law facilitates the judicial and extrajudicial resolution process between debtors and creditors and accelerates reorganization and liquidation processes. Both debtors and creditors are allowed to provide reorganization plans that would eliminate non-performing activities and sell-off assets, thus avoiding bankruptcy. The new law also establishes a framework for cross-border insolvencies that recognizes legal proceedings outside of Brazil.

The Brazil Central Bank (BCB) in October 2016 implemented a sustained monetary easing cycle, lowering the Special Settlement and Custody System (Selic) baseline reference rate from a high of 14 percent in October 2016 to a record-low 2 percent by the end of 2020. The downward trend was reversed by an increase to 2.75 percent in March 2021 and reached 10.75 percent in February 2022. Brazil’s banking sector projects that the Selic will reach 12.25 percent by the end of 2022. Inflation for 2021 ended at an annualized 10.06 percent, above the target of 4 percent plus/minus 1.5 percent. The BCB’s Monetary Policy Committee (COPOM) set the BCB’s inflation target at 3.5 percent for 2022 and .25 percent in 2023 (plus/minus 1.5 percent), but as of February 2022 the BCB estimates that inflation will reach 5.4 percent in 2022, above the target again. As of mid-March 2022, Brazil’s annual inflation rate is at 10.75 percent. Brazil’s muddled fiscal policy and heavy public debt burden factor into most analysts’ forecasts that the “neutral” policy rate will remain higher than target rates among Brazil’s emerging-market peers (around five percent) over the reporting period.

According to the BCB, in 2021 the ratio of public debt to GDP reached 81.1 percent, compared to a record 89.4 percent in 2020. Analysts project that the debt/GDP ratio may rise to around 85 percent by the end of 2023.

The role of the state in credit markets grew steadily beginning in 2008, but showed a reduction in 2020 due to the pandemic. As of January 2022, public banks accounted for about 50 percent of total loans to the private sector (compared to 48.9 percent in 2018). Directed lending (that is, to meet mandated sectoral targets) also rose, and accounts for almost half of total lending. Brazil is paring back public bank lending and trying to expand a market for long-term private capital.

While local private sector banks are beginning to offer longer credit terms, state-owned development bank BNDES is a traditional source of long-term credit in Brazil. BNDES also offers export financing. Approvals of new financing by BNDES decreased 4 percent in 2021 from 2020, with the infrastructure sector receiving the majority of new capital.

The sole stock market in Brazil is B3 (Brasil, Bolsa, Balcão), created through the 2008 merger of the São Paulo Stock Exchange (Bovespa) with the Brazilian Mercantile & Futures Exchange (BM&F), forming the fourth-largest exchange in the Western hemisphere, after the NYSE, NASDAQ, and Canadian TSX Group exchanges. In 2020, there were 463 companies traded on the B3 exchange. The B3’s broadest index, the Ibovespa, decreased 11.93 percent in valuation during 2021, due to economic uncertainties related to rising and persistent inflation, particularly in the second half of the year. Foreign investors, both institutional and individuals, can directly invest in equities, securities, and derivatives; however, they are limited to trading those investments only on established markets.

Wholly-owned subsidiaries of multinational accounting firms, including the major U.S. firms, are present in Brazil. Auditors are personally liable for the accuracy of accounting statements prepared for banks.

The Brazilian financial sector is large and sophisticated. Banks lend at market rates that remain relatively high compared to other emerging economies. Reasons cited by industry observers include high taxation, repayment risk, concern over inconsistent judicial enforcement of contracts, high mandatory reserve requirements, and administrative overhead, as well as persistently high real (net of inflation) interest rates. According to BCB data collected for 2020, the average rate offered by Brazilian banks to non-financial corporations was 11.7 percent.

The banking sector in Brazil is highly concentrated, with BCB data indicating that the five largest commercial banks (excluding brokerages) account for approximately 82 percent of the commercial banking credit market totaling $800 billion by the end of 2020. Three of the five largest banks by assets in the country, Banco do Brasil, Caixa Econômica Federal, and BNDES, are partially or completely federally-owned. Large private banking institutions focus their lending on Brazil’s largest firms, while small- and medium-sized banks primarily serve small- and medium-sized companies. Citibank sold its consumer business to Itaú Bank in 2016, but maintains its commercial banking interests in Brazil. It is currently the only U.S. bank operating in the country. Increasing competitiveness in the financial sector, including in the emerging fintech space, is a vital part of the Brazilian government’s strategy to improve access to and the affordability of financial services in Brazil.

On November 16, 2020, the BCB launched its instant payment system called “PIX”. PIX is a 24/7 system that offers transfers of any value for people-people (P2P), people-business (P2B), business-people (B2P), business-business (B2B), and government-government (G2G). Brazilian customers in 2021 overwhelmingly embraced PIX, particularly for P2P transfers (which are free), replacing both cash payments and legacy bank electronic transfers which charged relatively high fees and could only take place during business hours.

In February 2021, the BCB implemented the first two of four phases of its Open Banking Initiative in an effort to open Brazil’s insulated banking system dominated by relatively few players. The first phase required Brazilian financial institutions to facilitate digitized access to their customer service channels, products, and services related to demand deposit or savings accounts, payment accounts, and credit operations. The second phase of the initiative expanded sharing customer data across a widening scope of bank products including loans. The other two phases, which are scheduled to go into effect in 2022, seek to include sharing customer data on foreign exchange, investments, and pension funds. The BCB expects that increased access to customer information will allow other financial institutions, including competitor banks and fintechs, to offer better and cheaper banking services to incumbent banks’ clients, thereby breaking up the dominance of the six large, incumbent banking institutions.

In recent years, the BCB has strengthened bank audits, implemented more stringent internal control requirements, and tightened capital adequacy rules to reflect risk more accurately. It also established loan classification and provisioning requirements. These measures apply to private and publicly owned banks alike. In December 2020, Moody’s upgraded a collection of 28 Brazilian banks and their affiliates to stable from negative after the agency had lowered the outlook on the Brazilian system in April 2020 due to economic difficulties. As of March 2021, the rating remained as stable. The Brazilian Securities Commission (CVM) independently regulates the stock exchanges, brokers, distributors, pension funds, mutual funds, and leasing companies, assessing penalties in instances of insider trading.

To open an account with a Brazilian bank, foreign account holders must present a permanent or temporary resident visa, a national tax identification number (CPF) issued by the Brazilian government, either a valid passport or identity card for foreigners (CIE), proof of domicile, and proof of income. On average, this process from application to account opening can take more than three months.

Foreign Exchange

Brazil’s foreign exchange market remains small. The latest Triennial Survey by the Bank for International Settlements conducted in December 2019 showed that the net daily turnover on Brazil’s market for OTC foreign exchange transactions (spot transactions, outright forwards, foreign-exchange swaps, currency swaps, and currency options) was $18.8 billion, down from $19.7 billion in 2016. This was equivalent to around 0.22 percent of the global market in 2019, down from 0.3 percent in 2016.

On December 29, 2021, Brazil approved a new Foreign Exchange Regulatory framework, to go into effect in December 2022, which replaces more than 40 separate regulations with a single law and eases foreign investments in the Brazilian market incentivizing increased foreign investment and assisting Brazilian businesses in integrating into global value chains. The new law aims to streamline currency exchange operations and authorizes more enterprises, including fintechs and small businesses, to conduct operations in foreign currencies bypassing retail banks and increasing their competitiveness. In addition, the law expands the list of qualifying activities transacted in foreign-currency denominated accounts (previously restricted only to import/export firms and for loans in which the debtor or creditor was based outside Brazil).

Brazil’s banking system has adequate capitalization and has traditionally been highly profitable, reflecting high interest rate spreads and fees. According to an October 2021 Central Bank Financial Stability Report, the banking system remains solid, with growing capitalization indices, and continues to rebuild its capital base. All institutions are able to meet the minimum prudential requirements, and solvency does not pose a risk to financial stability. Stress testing demonstrated that the banking system has adequate loss-absorption capacity in all simulated scenarios.

There are few restrictions on converting or transferring funds associated with a foreign investment in Brazil. Foreign investors may freely convert Brazilian currency in the unified foreign exchange market, where buy-sell rates are determined by market forces. All foreign exchange transactions, including identifying data, must be reported to the BCB. Foreign exchange transactions on the current account are fully liberalized.

The BCB must approve all incoming foreign loans. In most cases, loans are automatically approved unless loan costs are determined to be “incompatible with normal market conditions and practices.” In such cases, the BCB may request additional information regarding the transaction. Loans obtained abroad do not require advance approval by the BCB, provided the Brazilian recipient is not a government entity. Loans to government entities require prior approval from the Brazilian senate as well as from the Economic Ministry’s Treasury Secretariat, and must be registered with the BCB.

Interest and amortization payments specified in a loan contract can be made without additional approval from the BCB. Early payments can also be made without additional approvals if the contract includes a provision for them. Otherwise, early payment requires notification to the BCB to ensure accurate records of Brazil’s stock of debt.

Remittance Policies

Brazilian Federal Revenue Service regulates withholding taxes (IRRF) applicable to earnings and capital gains realized by individuals and legal entities residing or domiciled outside Brazil. Upon registering investments with the BCB, foreign investors are able to remit dividends, capital (including capital gains), and, if applicable, royalties. Investors must register remittances with the BCB. Dividends cannot exceed corporate profits. Investors may carry out remittance transactions at any bank by documenting the source of the transaction (evidence of profit or sale of assets) and showing payment of applicable taxes.

Under Law 13.259/2016 passed in March 2016, capital gain remittances are subject to a 15 to 22.5 percent income withholding tax, with the exception of capital gains and interest payments on tax-exempt domestically issued Brazilian bonds. The capital gains marginal tax rates are 15 percent for up to $1,000,000 in gains; 17.5 percent for $1,000,000 to $10,000,000 in gains; 20 percent for $10,000,000 to $60,000,000 in gains; and 22.5 percent for more than $60,000,000 in gains.

Repatriation of a foreign investor’s initial investment is also exempt from income tax under Law 4131/1962. Lease payments are assessed a 15 percent withholding tax. Remittances related to technology transfers are not subject to the tax on credit, foreign exchange, and insurance, although they are subject to a 15 percent withholding tax and an extra 10 percent Contribution for Intervening in Economic Domain (CIDE) tax.

Brazil had a sovereign fund from 2008 – 2018, when it was abolished, and the money was used to repay foreign debt.

Strikes and demonstrations occasionally occur in urban areas and may cause temporary disruption to public transportation. Brazil has over 41,000 murders annually, with low rates of murder investigation case completions and convictions.

Non-violent pro- and anti-government demonstrations have occurred periodically in recent years.

Although U.S. citizens usually are not targeted during such events, U.S. citizens traveling or residing in Brazil are advised to take common-sense precautions and avoid any large gatherings or any other event where crowds have congregated to demonstrate or protest. For the latest U.S. State Department guidance on travel in Brazil, please consult www.travel.state.gov.

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

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

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

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

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

All businesses in Brunei must be registered with the Registry of Companies and Business Names at the Ministry of Finance and Economy. Foreign investors can fully own incorporated companies, foreign company branches, or representative offices, but not sole proprietorships or partnerships. Brunei does maintain its right to screen investment to ensure that foreign investments do not contradict and cause negative impact to the overall National Development Plan and to the national interest.

More information on incorporation of companies can be found on the Ministry of Finance and Economy website .

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

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

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

Outward Investment

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

Brunei’s regulatory system has limited transparency, particularly in lawmaking processesand impact assessments. Each ministry is responsible for coordinating with the Attorney General’s Chambers to draft proposed legislation. Legislation does not receive broad review and little input is provided from outside of the originating ministry. The sultan has final authority to approve proposed legislation. Laws and regulations are readily accessible on the Attorney General’s Chambers website .

Brunei encourages environment, social, and governance (ESG) disclosure but does not mandate it.

Brunei is an active member of ASEAN, through which it has concluded FTAs with Australia & New Zealand, China, India, Japan and South Korea. Brunei became a WTO member in 1995 and a signatory to the General Agreement on Tariffs and Trade (GATT) in 1993.

Brunei’s constitution does not specifically provide for judicial independence, but in practice the court system operates without government interference. Brunei’s legal system includes two parallel systems: one based on common law and the other based on Islamic law. The common law judicial system is presided over by the Supreme Court, which comprises the Court of Appeal and the High Court.

Recognizing the importance of protecting investors’ rights and contract enforcement, Brunei established a Commercial Court in 2016.

In 2014, Brunei implemented the first phase of its Sharia Penal Code (SPC), which expanded existing restrictions on minor offenses—such as eating during Ramadan—that are punishable by fines or imprisonment. On April 3, 2019 Brunei commenced full implementation of the SPC, introducing the possibility of harsher punishments such as stoning to death for rape, adultery, or sodomy, and execution for apostasy, contempt of the Prophet Muhammad, or insult of the Quran. However, these forms of punishment require higher standards of proof than the common-law-based penal code (for example, four pious men must personally witness an act of fornication to support a sharia-based harsh sentence), placing them under a de facto moratorium. The sultan confirmed the moratorium in a 2019 public statement.

The basic legislation on investment includes the Investment Incentive Order 2001 and the Income Tax (As Amended) Order 2001. Investment Order 2001 supports economic development in strategically important industrial and economic enterprises and, through the Ministry of Finance and Economy, offers investment incentives through a favorable tax regime. Although Brunei does not have a stock exchange, the government is reportedly planning to establish a securities market.

Foreign ownership of companies is not restricted, although under the Companies Act, at least one of two directors of a locally incorporated company must be a resident of Brunei, unless granted an exemption from the appropriate authorities.

Brunei’s Competition Order, published in 2015 to promote and maintain fair and healthy competition to enhance market efficiency and consumer welfare, entered into force on January 1, 2020. The sultan also announced the establishment of the Competition Commission in 2017 to oversee and act on competition issues that include adjudicating anti-competitive cases and imposing penalties on companies that violate the Competition Order.

Brunei is a signatory to the 1987 ASEAN Agreement for the Promotion and Protection of Investments. There is no history of expropriation of foreign owned property in Brunei, but there have been cases of domestically owned private property being expropriated for infrastructure development. The government provided compensation in such cases and claimants were afforded due process.

In 2012, amendments to Brunei’s Bankruptcy Act increased the minimum threshold for a creditor to present a bankruptcy petition against a debtor from BND 500 to BND 10,000 (USD350 to USD7,060) and enabled an appointed bankruptcy trustee to direct the Controller of Immigration to impound and retain the debtor’s passport, certificate of identity, or travel document to prevent the debtor from leaving the country. The amendment also requires the debtor to deliver all property under the debtor’s possession to the trustee. Information about Brunei’s bankruptcy laws is available on the judiciary’s website .

In March 2021, the Minister of Finance and Economy II renewed its annual budget of USD292 million to fund infrastructure, technology, and socio-economic studies related to the implementation of Brunei’s own stock exchange, which is expected to launch in the next few years.

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

Commission Malaysia (SCM) designed to strengthen collaboration in the development of fair and efficient capital markets in the two countries. It also provided a framework to facilitate greater cross-border capital market activities and cooperation in the areas of regulation as well as capacity building and human capital development, particularly in Islamic capital markets.

The capital market industry in Brunei is primarily governed by the Securities Markets Order, 2013 and the Securities Markets Regulations, 2015 which are both administered by Brunei Darussalam Central Bank. In addition, securities with any Shariah or Islamic component would be additionally governed by the Syariah Financial Supervisory Board Order, 2006.

Brunei has accepted the obligations under IMF Article VIII, Sections 2(a), 3 and 4, and maintains an exchange system that is free of restrictions on the making of payments and transfers for current international transactions and multiple currency practices.

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

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

The Brunei Investment Agency (BIA) manages Brunei’s General Reserve Fund and their external assets. Established in 1983, BIA’s assets are estimated to be USD60-75 billion. BIA’s activities are not publicly disclosed and are ranked the lowest in transparency ratings by the Sovereign Wealth Fund Institute.

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

The telecommunications industry is dominated by government-linked companies. The service providers are Datastream Digital, Imagine, and Progresif. In 2019, the government consolidated the infrastructure of all three companies under a state-owned wholesale network operator called Unified National Networks (UNN).

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

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

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

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

Brunei is an absolute monarchy and has no recent history of political violence. Sultan Hassanal Bolkiah is an experienced and popular monarch who rules the country as Prime Minister while also retaining the titles of Minister of Finance and Economy, Minister of Defense, and Minister of Foreign Affairs. The country experienced an uprising in 1962 when it was a British protectorate, which ended through the intervention of British troops. The country has been ruled peacefully under emergency law ever since. Brunei has managed to avoid demands for political reform by making use of its hydrocarbon revenues to provide its citizens with generous welfare benefits and subsidies.

* Source for Host Country Data: Department of Economic Planning and Statistics, Ministry of Finance and Economy Brunei Darussalam 

Source: IMF Coordinated Direct Investment Survey (2020)

There are no legal limits on foreign ownership or control of firms. With some exceptions, foreign entities are given the same treatment as national firms and their investments are not screened or otherwise restricted.

The Invest Bulgaria Agency (IBA), the government’s investment attraction body, provides information, administrative services, and incentive assessments to prospective foreign investors. Its website (www.investbg.government.bg/en)  contains general information for foreign investors. IBA serves as a one-stop shop for foreign investors and certifies proposed investments for eligibility for administrative services.

There are no limits to foreign and domestic private entities establishing and owning businesses in Bulgaria. The Offshore Company Act lists 28 activities (including government procurement, natural resource exploitation, national park management, banking, insurance) in which companies registered in offshore jurisdictions with more than 10 percent foreign participation are banned from participating. The law, however, allows those companies to do business if the physical owners of the parent company are Bulgarian citizens and known to the public, if the parent company’s stock is publicly traded, or if the parent company is registered in a jurisdiction with which Bulgaria enjoys a bilateral tax treaty for the avoidance of double taxation (including the United States).

Bulgaria has no specific law or coordinated mechanism in place for screening individual foreign investments. A potential foreign investment can be scrutinized on the grounds of its potential national security risk or through the Law on the Measures against Money Laundering. As each ministry is responsible for screening investments within its purview, interagency coordination is lacking, and there are no common standards. As of April 2022, Bulgaria has not publicly reported any initiative on the introduction of a national investment screening mechanism.

There have been no recent Investment Policy Reviews of Bulgaria by multilateral economic organizations. An Investment Policy Review by the Organization for Economic Cooperation and Development (OECD) is planned for 2022. In January 2022 the OECD decided to open accession discussions with Bulgaria. A key milestone toward Bulgaria’s overarching OECD Action Plan was its having joined the Nuclear Energy Agency (NEA) in January 2021. In 2019, the OECD published reviews of Bulgaria’s healthcare sector and state-owned enterprises, and in January 2021 the OECD published an Economic Assessment in which it acknowledged the successful integration of Bulgarian manufacturing firms into global production chains and sound macroeconomic policies prior to the pandemic. At the same time the report highlighted as key policy challenges Bulgaria’s high income inequality, relative poverty, and an ageing and rapidly shrinking population. In February 2021 the OECD published a study of Bulgarian municipalities that acknowledged solid progress in local governance standards but also noted insufficient progress in bridging regional disparities.

Bulgaria typically supports small- and medium-sized business creation and development in conjunction with EU-funded innovation and competitiveness programs and with a special emphasis on export capacity. The state-owned Bulgarian Development Bank has committed to supporting small- and medium-sized businesses in Bulgaria, including through the post-COVID-19 recovery period. Typically, a new business is expected to register an account with the state social security agency and, in some cases, with the local municipality as well. Electronic company registration is available at: https:// portal.registryagency.bg/commercial-register . Women receive equitable treatment to men, and the Bulgarian law does not discriminate against minorities doing business.

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

In general, the regulatory environment in Bulgaria is characterized by complexity, lack of transparency, and arbitrary or weak enforcement. These factors create incentives for public corruption. Public procurement rules are at times tailored to match certain local business interests. Bulgarian law lists 38 operations subject to licensing. The law requires all regulations to be justified by defined need (in terms of national security, environmental protection, or personal and material rights of citizens), and prohibits restrictions merely incidental to the stated purposes of the regulation. The law also requires the regulating authority, or the member of Parliament sponsoring the draft law containing the regulation, to perform a cost-benefit analysis of any proposed regulation. This requirement, however, is often ignored when Parliament reviews draft bills. With few exceptions, all draft bills are made available for public comment, both on the central government website and the respective agency’s website, and interested parties are given 30 days to submit their opinions.

The government maintains a web platform, www.strategy.bg , on which it posts draft legislation. Тhe government posts all its decisions on: pris.government.bg .

In addition, the law eliminates bureaucratic discretion in granting requests for routine economic activities and provides for silent consent (default judgement in favor of the requestor) when the government does not respond to a request in the allotted time. Local companies in which foreign partners have controlling interests may be requested to provide additional information or to meet additional mandatory requirements in order to engage in certain licensed activities, including production and export of arms and ammunition, banking and insurance, and the exploration, development, and exploitation of natural resources. The Bulgarian government licenses the export of dual-use goods and bans the export of all goods under international trade sanctions lists. The Bulgarian government’s budget is assessed as transparent and in accordance with international standards and principles. Central government debt and debt guarantees are published monthly, and debt obligations by individual state-owned enterprises (SOEs) are published every three months on the website of the Agency for Public Enterprises and Control.

The first and only Bulgarian think tank for sustainable finance and energy, the Green Finance & Energy Centre , was launched in March 2021 by the Bulgarian Stock Exchange (BSE) and the Independent Bulgarian Energy Exchange (IBEX), in partnership with the Ministries of Finance and Energy, the Financial Supervision Commission, and the Fund of Funds. The mission of the Green Centre includes raising business awareness and upgrading corporate governance codes with environmental and social responsibility provisions. Major banks and investors increasingly recognize the importance of sustainable finance and investment in supporting economic growth while reducing environmental degradation.

Bulgaria became a member of the World Trade Organization (WTO) in December 1996. Under the provisions of Article 207 of the Treaty on the Functioning of the European Union (Lisbon Treaty), common EU trade policies are exclusively the responsibility of the EU and the European Commission (EC), which coordinates them with the 27 member states. The EC negotiates in the WTO on behalf of the Member States and coordinates issues with them within the Trade Policy Committee of the Council of the EU. The United States supports EU measures to increase digital market competition through the EU’s future Digital Market Act.

Following systemic government-controlled prosecutions during Bulgaria’s communist era, the 1991 Constitution created an independent judicial branch comprised of judges, prosecutors, and magistrate-investigators.  The system is governed by a 25-member Supreme Judicial Council (SJC), which is responsible for the selection and disciplining of magistrates; however, according to local and international observers its decisions have been opaque and politically influenced.  Eleven of the SJC members are appointed by a supermajority in Parliament, a process often leading to behind-the-scenes distribution of seats to politically convenient candidates.  All 1,500 prosecutors are administratively subordinate through their chiefs to the Prosecutor General, who is also a voting member of the SJC and as such has significant decision-making power over judicial selections.  Numerous well documented media and civil society investigations in recent years have alleged nepotism, corruption, and undue political and business influence over prosecutions, including with the purpose to take over lucrative businesses.  Prosecutors’ decisions to dismiss cases are not subject to review by a judge, and trials, especially in criminal cases, often take years to complete because of the inefficient procedures laid out in the criminal procedure code.  Polls show a consistent lack of public confidence in the Prosecutor General and the courts.

There are three levels of courts. Bulgaria’s 113 regional courts exercise jurisdiction over civil and criminal cases. Above them, 28 district courts, including the Sofia City Court, serve as courts of appellate review for regional court decisions and have trial-level (first-instance) jurisdiction in serious criminal cases and in civil cases where claims exceed BGN 25,000 (USD 14,320), excluding alimony, labor disputes, and financial audit discrepancies, or in property cases where the property’s value exceeds BGN 50,000 (USD 28,640). Five appellate courts review the first-instance decisions of the district courts. The Supreme Court of Cassation is the court of last resort for criminal and civil appeals. There is a separate system of 28 specialized administrative courts which rule on the legality of local and national government decisions, with the Supreme Administrative Court serving as the court of final instance. The Constitutional Court, which is separate from the rest of the judiciary, issues final rulings on the compliance of laws with the Constitution.

Bulgaria’s legislation has been largely aligned with EU directives to provide adequate means of enforcing property and contractual rights. In practice, however, investors regularly complain about regulatory impediments, prosecutorial intervention in administrative cases, and inconsistent jurisprudence. Overall, the government’s handling of investment disputes has been slow, interagency coordination is poor, and intervention at the highest political level is often required.

The 2004 Investment Promotion Act stipulates equal treatment of foreign and domestic investors. The law encourages investment in manufacturing and high technology, knowledge intensive services, education, and human resource development. It creates investment incentives by helping investors purchase land, providing state financing for basic infrastructure, training new staff, and facilitating tax incentives and opportunities for public-private partnerships (PPPs) with the central and local governments. The most common form of PPPs are concessions, which include the lease of government property for private use for up to 35 years for a construction and service concession. The term of the concession may be extended by a maximum of one-third of the original term. In 2021, defense and security were excluded from concession-eligible sectors.

Foreign investors must comply with the 1991 Commercial Law, which regulates commercial and company enterprise law, and the 1951 Law on Obligations and Contracts, which regulates civil transactions.

The Invest Bulgaria Agency (IBA) is the government’s investment attraction body and serves as a one-stop-shop for foreign investors. It provides information, administrative services, and incentive assessments to prospective foreign investors.

The Commission for Protection of Competition (the “Commission”) oversees market competition and enforces the Law on the Protection of Competition (the “Competition Law”). The Competition Law, enacted in 2008, is intended to implement EU rules that promote competition. The law forbids monopolies, restrictive trade practices, abuse of market power, and certain forms of unfair competition. Monopolies can only be legally established in enumerated categories of strategic industries. In practice, the Competition Law has been applied inconsistently, and some of the Commission’s decisions are questionable and appear subject to political influence.

Private real property rights are legally protected by the Bulgarian Constitution. Only in the case where a public need cannot be met by other means may the Council of Ministers or a regional governor expropriate land, in which case the owner is compensated at fair market value. Expropriation actions by the Council of Ministers, by regional authorities, or by municipal mayor can be appealed at a local administrative court. In its Bilateral Investment Treaty (BIT) with the United States, Bulgaria committed to international arbitration to judge expropriation claims and other investment disputes.

The 1994 Commercial Law Chapter on Bankruptcy provides for reorganization or rehabilitation of a legal entity, maximizes asset recovery, and provides for fair and equal distribution among all creditors. The law applies to all commercial entities, except public monopolies or state-owned enterprises (SOEs). The 2015 Insurance Code regulates insurance company failures, while bank failures are regulated under the 2002 Bank Insolvency Act and the 2006 Credit Institutions Act. The 2014 bankruptcy of the country’s fourth-largest bank, Corporate Commercial Bank, was a test case that showed serious deficiencies in the process of recovery and preservation of bank assets during bankruptcy proceedings.

Non-performance of a financial obligation must be adjudicated before the bankruptcy court can determine whether the debtor is insolvent. There is a presumption of insolvency when the debtor is unable to perform an executable obligation under a commercial transaction or public debt or related commercial activities, has suspended all payments, or is able to pay only the claims of certain creditors. The debtor is deemed over-indebted if its assets are insufficient to cover its short-term monetary obligations.

Bankruptcy proceedings may be initiated on two grounds: the debtor’s insolvency, or the debtor’s excessive indebtedness. Under Part IV of the Commercial Law, debtors or creditors, including state authorities such as the National Revenue Agency, can initiate bankruptcy proceedings. The debtor must declare bankruptcy within 30 days of becoming insolvent or over-indebted. Bankruptcy proceedings supersede other court proceedings initiated against the debtor except for labor cases, enforcement proceedings, and cases related to receivables securitized by third parties’ property. Such cases may be initiated even after bankruptcy proceedings begin.

Creditors must declare to the trustee all debts owed to them within one month of the start of bankruptcy proceedings. The trustee then has seven days to compile a list of debts. A rehabilitation plan must be proposed within one month after publication of the list of debts in the Commercial Register. After creditors’ approval, the court endorses the rehabilitation plan, terminates the bankruptcy proceeding, and appoints a supervisory body for overseeing the implementation of the rehabilitation plan. The court must endorse the plan within seven days and put it forward to the creditors for approval. The creditors must convene to discuss the plan within a period of 45 days. The court may renew the bankruptcy proceedings if the debtor does not fulfill its obligations under the rehabilitation plan.

The Bulgarian National Bank may revoke the operating license of an insolvent bank when the bank’s own capital is negative, and the bank has not been restructured according to the procedure defined in Article 51 in the Law on the Recovery and Resolution of Credit Institutions and Investment Firms. The license of a bank may be withdrawn under the conditions set out in Article 36 of the Law on Credit Institutions.

The Bulgarian Stock Exchange (BSE), the only securities-trading venue in Bulgaria, operates under license from the Financial Supervision Commission and is majority owned by the Ministry of Finance. The 1999 Law on Public Offering of Securities regulates the issuance of securities, securities transactions, stock exchanges, and investment intermediaries.  The law is aimed at providing investor protection and at developing a transparent local capital market. In 2004 BSE performed its first IPO transaction. In 2018 BSE acquired 100 percent of the Independent Bulgarian Energy Exchange (IBEX), Bulgaria’s first independent electricity platform trader.

Since its 2007 entry into the EU, Bulgaria has aligned its regulation of securities markets with EU standards under the Markets in Financial Instruments Directive (MiFID).  The BSE is a full member of the Federation of European Stock Exchanges (FESE) and operates under the Deutsche Boerse’s trading platform Xetra.  The BSE’s total market capitalization comprised 23 percent of Bulgaria’s GDP in 2021, down slightly from 2020.

Bulgarian companies strongly prefer to obtain financing from local banks instead of drawing from the local financial markets. At the end of 2018, the Financial Supervision Commission approved the ‘SME beam market,’ a special market that provides small and medium-sized businesses the opportunity to raise new capital more easily.

Bulgaria’s first “unicorn” company Payhawk, a technological start-up, raised USD 1 billion of capital in 2022.

Foreign investors can access credit on the local market.

The Bulgarian bank system is well capitalized and liquid. As of the end of September 2021, the total capital adequacy ratio was 22.4 percent, above the EU average and adequately shielding domestic banks against potential macroeconomic risks. In 2020 the Bulgarian National Bank imposed a temporary payment deferral of existing loans as an anti-COVID-19 measure. As of September 2021, there were 25 banks (including 7 branches), with total assets of BGN 132.7 billion (USD 76 billion), equivalent to 100 percent of GDP. The market share of the five significant banks (directly supervised by the ECB) was 66.1 percent, the share of less significant banks was 30.6 percent, and the share of foreign bank branches was 3.3 percent.  Non-performing loans were equal to 5.01 percent of the total loan portfolio of the banking system.

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

Bulgaria does not have a sovereign wealth fund. The government maintains a multiannual fiscal savings reserve, a farmer subsidy fund, and an electricity price premium fund. Their annual budgeting is compliant with the government’s budget plans.

Upon EU accession, Bulgaria was recognized as a market economy, in which the majority of the companies are private. Significant state-owned enterprises (SOEs) remain, however, such as railways and the postal service. SOEs also predominate in the healthcare, infrastructure, and energy sectors; many of these are collectively managed by holding companies, which are also SOEs. Some of the SOEs receive annual government subsidies for current and capital expenditures, regardless of their actual performance. SOEs’ budgets and audit reports are posted on the website of the Agency for Public Enterprises and Control. The list of all SOEs can be found here: reports.appk.government.bg/public/pubic/organizations . According to the Bulgarian National Statistical Institute (NSI), there is a sizeable state-owned sector consisting of approximately 350 SOEs held by the central government and 580 by subnational governments. In 2020, SOEs accounted for 10.6 percent of the overall economy.

Cross-subsidization is common within some government holding companies. In the energy sector, for example, the debts of some energy producers are covered by more lucrative entities within the holding structure.

In 2019 Parliament approved the State Enterprise Act, introducing updated corporate standards and management practices. The law lists timeline and criteria for SOE senior management approval. SOEs are typically run by government elected boards. Public and private sector companies are in theory equally treated vis-à-vis bidding on concessions, taxation, or other government-controlled processes.  Bulgaria became party to the WTO’s Government Procurement Agreement (GPA) upon its entry into the EU in 2007.

No major privatizations are currently planned in Bulgaria. Parliament must approve government proposals to privatize any company with over 50 percent government ownership. All majority or minority state-owned properties are eligible for privatization, with the exception of those included in a specific list, including water management companies, state hospitals, and state sports facilities. The sale of specific parts of such companies follows a Council of Ministers decision or a decision of the Agency for Public Enterprises and Control, after a proposal made by the government-owned majority holder of the company. State-owned military manufacturers can be privatized with Parliamentary approval.

Municipally owned property can be privatized upon decision by a municipal council or authorized body, and upon publication of the municipal privatization list in the national gazette.

The 2010 Privatization and Post-Privatization Act created a single Privatization and Post-Privatization Agency responsible for privatization oversight. The new State Enterprise Act in 2019 reshuffled and renamed the agency into the Agency for Public Enterprises and Control ( www.appk.government.bg/bg/17 ).

Foreign investors can participate in privatization programs.

Daily anti-government protests that took place throughout the summer of 2020 in Sofia generated sporadic reports of excessive force by protestors and police, but otherwise there has been no significant political violence in recent years.

Following the 2020 reelection of former President Kabore for his second term, a new national socioeconomic development plan (PNDES-II, 2021-2025) was adopted to replace a previous plan (2016-2020). The plan covered four strategic goals: (1) the consolidation of resilience, security, social cohesion, and peace, (2) the deepening of institutional reforms and modernization of public administration, (3) improving sustainable human development, and (4) promoting high impact sectors of the economy and jobs. However, it remains unclear how PNDES II will be impacted by the January 24 coup d’état.

After overthrowing the government on January 24, 2022, LTC Paul-Henri Sandaogo Damiba met with the private sector on February 1 to allay the concerns of the business community and other investors. A Transitional legislative assembly, a transitional government and a transitional charter and agenda were adopted on March 1, 2022, for a 36-month transition that would lead to presidential and legislative elections. However, in an April 1 address to the nation, interim president LTC Damiba indicated that the 36-month transition timeline to democracy could be revised, should the security situation improve.

In a speech to the Transitional Legislative Assembly on April 04, 2022, Prime Minister (PM) Albert Ouedraogo laid out four major pillars or priorities for his government: (1) fighting terrorism and restoring territorial integrity, (2) Responding to the humanitarian crisis, (3) refoundation (or restoration) of the state and improving governance, (4) working towards national reconciliation and social cohesion. PM Ouedraogo indicated plans for a new development plan for the transition period that would incorporate major strategic projects from the PNDES II.

Article 8 of the investment code stipulates that there is to be no discrimination against foreign investors. For any foreign investor to benefit from the exemptions provided for by the investment code, it is required to submit a request to the General Directorate for the Promotion of the Private Sector.

Burkina Faso hosts a certain number of trade fairs and exhibitions to attract foreign investments. These initiatives encompass several sectors, including the bi-annual International Cotton and Textile Fair (SICOT), the annual West Africa Mining Activities Week (SAMAO), the bi-annual Ouagadougou International Arts and Crafts Fair (SIAO) and the bi-annual Panafrican Film and Television Festival of Ouagadougou (FESPACO). SICOT—which was supposed to place on January 27-29 but was postponed due to the coup d’état—convenes cotton sector actors to advance the cotton value chain in Burkina Faso, Africa and globally. SICOT aspires to be the international forum for promoting African cotton by marketing the sector to the world, promoting industrial processing, attracting investment, and boosting industrial cotton production. Burkina Faso is the third largest producer of cotton in Africa, producing 518,545 tons in the 2021-2022 harvest. Burkina Faso also organizes the Burkina Economic days (JEB) to engage potential investors and foster mutually beneficial partnership opportunities. Previous JEB events have been held in Ouagadougou and across the world, including Canada, Paris, Vienna, and Seoul, among others.

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

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

The Investment Code establishes a special tax and customs regime for investment agreements signed by the state with large investors—from approximately US$ 162,000 (100,000,000 FCFA) to $1.62 million (1,000,000,000 FCFA). This scheme provides significant tax benefits. U.S. investors are not specifically targeted regarding ownership or control mechanisms.

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

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

In 2018, Burkina Faso strengthened protections for minority investors by enhancing access to shareholder actions and by increasing disclosure requirements on related-party transactions. The 2020 Doing Business report ranked Burkina Faso 151 of 190 in minority investor protection.

Other sites of interest:

• Chamber of Commerce business registration: http://cci.bf/?q=fr  
• Burkina Chamber of Mines: http://chambredesmines.bf/ 
• Investment Promotion Agency of Burkina Faso or l’Agence de Promotion des Investissements du Burkina Faso (API-BF): http://www.investburkina.com 
• Tax and administrative procedures: https://burkinafaso.eregulations.org/ 

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

The Burkinabe Government tries to promote inward investment via the Investment Promotion Agency of Burkina Faso or l’Agence de Promotion des Investissements du Burkina Faso (API-BF), which sits under the Presidential Council for Investment (Conseil Presidentiel pour l’Investissement). The API-BF’s mission is to promote the economic potential of Burkina Faso to attract investment and spur economic development. Burkina Faso currently imposes no restrictions for investors interested in investing abroad, within the framework of the Economic Community of West African States (ECOWAS) and West African Economic and Monetary Union (WAEMU) regional markets.

The government of Burkina Faso aims for transparency in law and policy to foster competition. By law, prices of goods and services must be established according to fair and sound competition. The Burkinabe government does not promote or require environmental, social, and governance disclosure to help investors and consumers distinguish between high and low quality investments. However, the government believes that cartels, the abuse of dominant position, restrictive practices, refusal to sell to consumers, discriminatory practices, unauthorized sales, and selling at a loss are practices that distort free competition. At the same time, the price of some staple goods and services are still regulated by the government, including fuel, essential generic drugs, tobacco, cotton, school supplies, water, electricity, and telecommunications, and bread (e.g. baguettes). There are regulatory authorities for government procurement, for electronic communication and posts, for electricity, and for quality standards. Provinces and municipalities have the power to regulate in their jurisdiction, but that regulation has a minimal effect on business entities. There are several regulatory bodies at the national level, and they usually internalize regulations enacted by international organizations. Regulations exist at the supra-national level mostly through WAEMU and ECOWAS.

Burkina Faso’s legal, regulatory, and accounting systems are transparent and consistent with international norms. Since January 2018, Burkina Faso, as a member state of the Organization for the Harmonization of Corporate Law in Africa (OHCLA), adopted the revised version of the OHCLA accounting system. It is composed of the Uniform Act on Accounting and Financial Law (AUDCIF); the OHADA General Accounting Plan (PCGO); the OHADA Accounting System (SYSCOHADA) application guide, and the International Financial Reporting Standards (IFRS) application guide. The OHCLA accounting system complies with the IFRS norms.

There is no online Regulatory Disclosure. However, the regulations of the National Assembly allow the various commissions to hear civil society organizations wishing to share information to inform parliamentarians when they are examining bills.

Burkina Faso is a member of the West African Economic Monetary Union (WAEMU) and the Economic Community of West African States (ECOWAS). There is a supranational relationship between these organizations and their state members. Burkina Faso is also a member of the Organization for the Harmonization of Corporate Law in Africa (OHCLA). As such, Uniform Laws adopted by the OHCLA are automatically part of the national legal system.

The Government of Burkina Faso regularly notifies all the draft technical barriers to the relevant WTO Committee. In the October 2017 Trade Policy Review, the WTO congratulated WAEMU countries for their continued efforts to improve their international trading environment, especially through the implementation of the Trade Facilitation Agreement (TFA). Burkina Faso has begun the ratification process of the TFA, but it has not yet completed it. However, WAEMU and ECOWAS members already implement many of the TFA provisions.

The legal system of Burkina Faso is the civil law. Contracts must always be performed in good faith. Burkina Faso has commercial courts and commercial law is constituted by the uniform acts of the OHADA. The Commercial Code governs all matters that are not covered by the OHADA law. The Burkinabe judiciary is independent although there are press reports of cases of corruption of judges. The Disciplinary Commission of the Judiciary has sanctioned corrupt judges. There are three degrees of jurisdiction in Burkina Faso allowing the loser to appeal a decision rendered in first instance. In the event of a dispute over the execution of a contract, the plaintiff must first obtain a judgment from a court and if the loser does not execute, the winner can retain a bailiff.

The investment code adopted by law 038-2018 demonstrates the government’s interest in attracting FDI to create industries that produce export goods and provide training and jobs for its domestic workforce. The code provides standardized guarantees to all legally established firms operating in Burkina Faso, whether foreign or domestic. It contains four investment and operations preference schemes, which are equally applicable to all investments, mergers, and acquisitions. Burkina Faso’s regulations governing the establishment of businesses include most forms of companies admissible under French business law, including public corporations, limited liability companies, limited share partnerships, sole proprietorships, subsidiaries, and affiliates of foreign enterprises. With each scheme, there is a corresponding set of related preferences, duty exceptions, corporate tax exemptions, and operation-related taxes.

Under the investment code, all personal and legal entities lawfully established in Burkina Faso, both local and foreign, are entitled to the following rights: fixed property, forest and industrial rights, concessions, administrative authorizations, access to permits, and participation in state contracts.

The National Commission for Competition and Consumption (Commission Nationale pour la Concurrence et la Consommation) reviews competition matters. Some competition matters are under the aegis of the West African Economic and Monetary Union (WAEMU). Law No. 016-2017/AN of 27 April 2017 on organizing competition in Burkina Faso governs market competitiveness. This law is intended to create a free and transparent market, a guarantee of the development of a market economy driven by competitive and wealth-creating businesses.

The Burkinabe constitution guarantees basic property rights. These rights cannot be infringed upon except in the case of public necessity, as defined by the government. This has rarely occurred. Until 2007, all land belonged to the government but could be leased to interested parties. The government reserves the right to expropriate land at any time for public use. In instances where property is expropriated, the government must compensate the property holder in advance, except in the event of an emergency.

In 2007, Burkina Faso drafted a national land reform policy that recognizes and protects the rights of all rural and urban stakeholders to land and natural resources. It also clarifies the institutional framework for conflict resolution at a local level, establishes a viable institutional framework for land management, and strengthens the general capacities of the government, local communities, and civil society on land issues. A 2009 rural land management law provides for equitable access to rural lands to promote agricultural productivity, manage natural resources, encourage investment, and reduce poverty. It enables legal recognition of rights legitimated by traditional rules and practices. In rural areas, traditional land tenure rules have long governed land transactions and allocations. The 2009 law reinforces the decentralization and devolution of authority over land matters and provides for formalization of individual and collective use rights and the possibility of transforming these rights into private titles.

In 2012, the government revised the 2009 law, marking the end of exclusive authority of the state over all land. The new law includes provisions to recognize local land use practices. The new law provides conciliation committees to resolve conflicts between parties prior to any legal action. There are several property rights recognition and protection acts, such as land charters, individual or collective land ownership certificates, and loan agreements that govern the nature, duration, and counterparties for transfer rights between a landowner and a third party.

The first Millennium Challenge Corporation (MCC) compact (2010-2014) supported the establishment of local authorities and the issuance of titles as part of the land tenure reform process.

Since Burkina Faso is a member of the OHADA, the Uniform Act on Bankruptcy is applicable.

There are no bankruptcy courts in Burkina Faso. The World Bank’s 2019 “Doing Business” report ranked Burkina Faso 107 out of 190 countries for Resolving Insolvency.

The government of Burkina Faso is more focused on attracting FDI and concessionary lending for development than it is on developing its capital markets. Net portfolio inflows were estimated at US$ 148.6 million ( 0.83 percent of GDP) in 2020, per the World Bank. While the government does issue some sovereign bonds to raise capital in the WAEMU regional bond market, in general the availability of different kinds of investment instruments is extremely limited. As part of its mechanism to fund its fiscal budget, the Burkina Faso government regularly issues 182-day maturity treasury bills (BAT) on the regional financial market of the West African Economic and Monetary Union (WAEMU, or UEMOA in French).

The banking system is sound, relatively profitable, and well capitalized, but credit is highly concentrated to a small number of clients and a few sectors of the economy, according to the IMF. Only an estimated 15 percent of the population are believed to have checking accounts. Like all member states of WAEMU, Burkina Faso is a member of the Central Bank of West African States. Many foreign banks have branches in the country. The traditional banking sector is composed of twelve commercial banks and five specialized credit institutions called “établissements financiers.” In Burkina, the national strategy for inclusive finance was adopted on April 23, 2019. The use of mobile money is becoming more prevalent. In addition to two of the three main mobile carriers offering mobile money services, in 2021 other companies, both foreign and local have launched mobile money service operations and are conquering an important client base. This trend has forced traditional banks to install own mobile transfer planforms.

Burkina Faso does not have a sovereign wealth fund. However, in 2017, the government created the Deposit and Consignment Fund (CDC-BF), an autonomous legal and financial entity whose mandate is to receive and manage assets of various funds and entities, in particular funds from dormant accounts transferred to the Public Treasury (National Social Security Fund, Autonomous Retirement Fund for Civil Servants, National Post Office). Its mandate is to invest the funds locally. The CDC-BF is not yet fully rolled out.

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

Rampant insecurity and the government’s inability to stem violent extremism contributed to the military overthrow of the democratically elected government of President Roch Marc Christian Kaboré on January 24, 2022. In 2021, Burkina Faso recorded the highest number of attacks during its five-plus year battle with violent extremism. The result has led to a crisis resulting in the closure of schools and the massive displacement of people from their homes and communities. President Roch Marc Christian Kabore had been reelected to a second and final term in November 2020. This was the first time a democratic handover of power occurred in Burkina Faso’s history since it gained independence in 1960. During the same period legislative elections were organized and results were accepted by all political parties.

However, Violent extremists remain very active in Burkina Faso. Both the Islamic State for the Greater Sahara and the Jama’ at Nasr Al Islam wal Muslimin (JNIM) coalition have expanded their operation footprints in recent years. Security incidents include violence using tactics such as, improvised explosive devices, kidnapping, attacks, and targeted killings in an expanding part of the country in the north, east, and south. Targets appeared to shift from military and gendarmerie units to civilians and volunteer defense groups. In May 2022, VEOs carried out 61 attacks against civilians and security forces, killing a total of 173 people and injuring 40 others, The number of terrorist incidents in Burkina Faso’s southwestern Boucle du Mouhoun region rose significantly in May compared to the numbers reported for the three previous months. Since October 2021, over 799 people died in terrorist incidents, and an additional 600 individuals sustained injuries during the same period. On June 4, 2021, VEOs killed 160 civilians in Solhan in the Sahel region near the border with Niger. This was the second deadliest terrorist attack globally in 2021, according to the 2022 Global Terrorism Index. The report also indicates that 732 people died from terrorist incidents in Burkina Faso in 2021. The African Center for Strategic Studies noted in its July 2021 report that most violent attacks in the Sahel in 2020 were carried out in Burkina Faso (516 versus 361 in Mali and 118 in Niger).

In April 2022, a U.S. citizen was reportedly abducted in Burkina’s Centre-Nord,. In 2018, an American citizen was abducted but was later discovered by French operatives during an unrelated mission to recover French nationals abducted by extremists. Three Europeans – two Spanish and one Irish – were killed in an attack on an anti-poaching patrol in eastern Burkina Faso on April 27, 2021. In 2021, attacks spiked in the southern part of Burkina Faso, contiguous to the north of Cote d’Ivoire. The Cascades region border area, which has suffered several attacks in the past, is seen by experts as a hide-out for armed terrorist groups and a threat for coastal countries. As of April 2022, terrorist attacks have generated around 1.9 million Internally Displaced Persons (IDPs) mostly in Burkina Faso’s Sahel, Centre-Nord, Nord, and Est regions. Since 2018, the Government of Burkina Faso has maintained a state of emergency due to insecurity in many parts of the country

As of May 2022, the U.S. State Department’s travel advisory to Burkina Faso is at Level 4: Do Not Travel due to terrorism, crime, and kidnapping.

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

Although the military regime has told investors and foreign chambers of commerce it welcomes foreign investment, its actions have undercut pre-coup efforts to improve the enabling environment for investment. A number of foreign investors have withdrawn from the market, evacuated foreign national employees, or suspended their operations in Burma.

The 2016 Myanmar Investment Law (MIL) and the 2018 Companies Law continue to govern treatment of foreign investment. The MIL includes a “negative list” of prohibited and restricted sectors for foreign investment. The Companies Law implemented August 1, 2018, permits foreign investment of up to 35 percent in domestic companies— which also opened the stock exchange to limited foreign participation.

The Directorate for Investment and Company Administration (DICA), which is part of the Ministry of Investment and Foreign Economic Relations (MIFER), serves as Burma’s investment promotion agency. However, following the coup, the regime named former military major Aung Naing Oo to lead the Ministry and he terminated staff he deemed unsupportive of the regime. DICA as a consequence has limited operations because of staff boycotts and firings. Previously, DICA encouraged and facilitated foreign investment by providing information, fostering networks between investors, and providing market advice to potential investors.

The regime maintains a private sector advisory forum with the Union of Myanmar Chamber of Commerce and Industry, which principally includes domestic businesses. However, military authorities have summoned business leaders for command appearances rather than to conduct voluntary consultations. The U.S. Trade Representative suspended the U.S.-Myanmar Trade and Investment Framework in March 2021. Foreign Chambers of Commerce have limited interactions with the military regime following the coup, mainly by issuing letters of protest to regime economic policies that undermine the private sector. Regime-controlled media regularly praises PRC and Russian business cooperation.

Limits on Foreign Control and Right to Private Ownership and Establishment

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

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

The Myanmar Investment Commission (MIC), “in the interest of the State,” can also make exceptions to the State-Owned Enterprises Law. The MIC has routinely granted exceptions, including through joint ventures or special licenses in the areas of insurance, mining, petroleum and natural gas extraction, telecommunications, radio and television broadcasting, and air transport services, although whether such exceptions will continue to be granted after the coup is unclear.

As one of their key functions, DICA and the MIC are responsible for screening and approving inbound foreign investment to ensure it does not pose a risk to national security, as well as to determine if the investment furthers Burma’s growth and development. However, since the coup, the military regime has independently approved many foreign investments, including electricity generation projects, for example, that were not submitted to the DICA or MIC.

The regime frequently favors regime-owned or affiliated businesses as well as those run by cronies.

In 2020, the OECD conducted an investment review for Myanmar, which can be found at http://www.oecd.org/investment/countryreviews.htm 

In February 2021, the World Trade Organization produced a trade policy review for Myanmar based on pre-coup information, which can be found at http://www.wto.org/english/tratop_e/tpr_e/tpr_e.htm 

Following the coup, the military regime’s approach to governance has caused a sharp reduction in commercial activities including in Yangon and Mandalay. Many routine services that businesses require like customs, ports, and banks were not fully operational as of April 2022. Many companies report difficulty accessing bank funds to pay employees and suppliers, and there is limited foreign and local currency available. The security situation is volatile and unpredictable, and some companies’ local staff have been killed by security forces and foreign-owned factories have been burned. The civilian government previously provided limited business facilitation services through DICA, but services are restricted at present.

The previous civilian government instituted online company registration through “MyCo” ( https://www.myco.dica.gov.mm ). Investors were able to submit forms, pay registration fees, and check availability of a company name through a searchable company registry on the “MyCo” website. However, military regime officials have publicly threatened to take down the company registration website so it may not continue to operate, and military-imposed restrictions on internet and mobile access limit businesses’ ability to access this website.

The MIC is responsible for verification and approval of investment proposals above USD5 million. Companies can use the DICA website to retrieve information on requirements for MIC permit applications and submit a proposal to the MIC. If the proposal meets the criteria, it is supposed to be accepted within 15 days. If accepted, the MIC will review the proposal and is supposed to reach a decision within 90 days. In 2016, state and regional investment committees were granted the right to approve any investment of less than USD5 million. The World Bank assessed pre-coup that it takes on average seven days to start a business in Burma involving six procedures. Following the coup, it is likely to take substantially longer to register a business because of the suspension of many government services, bank closures, and internet access restrictions and suspensions. Post-coup, the MIC has approved several pending investment applications. According to DICA data, the number of new companies registered has declined 87 percent in the last 12 months compared to the year earlier.

The military regime has not demonstrated an interest in providing, or an ability to provide, clear rules. Regulatory and legal transparency are significant challenges for foreign investors in Burma. The military established the SAC, which is vested with authority to make and issue laws, regulations, and notifications with no oversight or transparency. Previously, government ministries drafted most laws and regulations relevant to foreign investors, which were reviewed by the Attorney General and then voted on and discussed by Parliament. The current law-making process is opaque and amendments to laws have been made without public consultation.

Burma is not legally obligated to share regulatory development plans with the public or conduct public consultations.

There is not a centralized online location where key regulatory actions are published similar to the Federal Register in the United States. The Burmese government previously published new regulations and laws in government-run newspapers and “The State Gazette,” and also sometimes posted new regulations on government ministries’ official Facebook pages. Presently, the military regime announces some regulatory changes via state media or in the Commander-in-Chief’s public addresses, but copies of the changes are not easily accessibly or routinely posted anywhere.

There are no oversight or enforcement mechanisms to ensure the government follows administrative processes.

Foreign investors previously could appeal adverse regulatory decisions. For instance, under the Myanmar Investment Law, the MIC serves as the regulatory body and has the authority to impose penalties on any investor who violates or fails to comply with the law. Investors have the right to appeal any decision made by the MIC to the government within 60 days from the date of decision.

Under the military regime, there is no demonstrated action or espoused commitment to transparent public finance and debt obligations. There are allegations that the military is incurring off-budget debt and using government funds beyond which was allocated in the government budget. Prior to the coup, public finance, and debt obligations, exclusive of contingent liabilities, were public and transparent. Budget reports were published on the Ministry of Planning, and Finance website ( https://myanmar.gov.mm/ministry-of-planning-finance ). Prior to 2021, the budget was published on the Ministry of Planning, Finance, and Industry website (https://www.mopfi.gov.mm/en/content/budget-news). Burma has issued the annual Citizen Budget in the Burmese language since FY 2015-16. The Ministry of Planning, Finance, and Industry has published quarterly budget execution reports, six-month-overview-of-budget-execution reports, and annual budget execution reports on its website since FY 2015-16. However, details regarding the budget allocations for defense expenditures were not transparent, a problem that has been exacerbated since the military coup. The Burmese government also previously published its debt obligation report on the Treasury Department’s Facebook page. (See:  https://www.facebook.com/pages/biz/Treasury-Department-of-Myanmar-777018172438019/  ). The Public Expenditure and Financial Accountability (PEFA) program reviewed Burma’s public finance system in 2020 ( https://www.pefa.org/about ).

The government does not promote or require environmental, social, and governance disclosure to help investors and consumers distinguish between high- and low-quality investments. Businesses seeking to legally extract mineral resources, however, are required to prepare an environmental management plan to receive a license to mine from the regime.

Burma has been a member of the Association of Southeast Asian Nations (ASEAN) since July 1997. However, there is not a consistent relationship between ASEAN and Burma regulatory standards. As an ASEAN member state, Burma’s regulatory systems are expected to conform to harmonization principles established in the ASEAN Trade in Goods Agreement (ATIGA) to support regional economic integration.

Burma’s regulatory system does not consistently use international norms or standards. It contains a mix of unique Burma-developed standards and some British-colonial era standards. Prior to the coup, the government had been making progress on legal reforms to ensure the country’s regulations and standards reflected international norms or standards, including ASEAN-developed standards. In an example of ASEAN regulatory harmonization, Burma officially joined the ASEAN Single Window in March 2020 with the launch of the National Single Window Routing Platform, which streamlined the import process by adopting the ASEAN Certificate of Origin Form D.

Burma is a WTO member, but it does not regularly notify draft technical regulations to the WTO Committee on Technical Barriers to Trade.

Burma’s legal system is a unique combination of customary law, English common law, statutes introduced through the pre-independence India Code, and post-independence Burmese legislation. Where there is no statute regulating a particular matter, courts are to apply Burma’s general law, which is based on English common law as adopted and modified by Burmese case law.  Each state and region has a High Court, with lower courts in each district and township. High Court judges are appointed by the President while district and township judges are appointed by the Chief Justice through the Office of the Supreme Court of the Union. The Union Attorney General’s Office law officers (prosecutors) operate sub-national offices in each state, region, district, and township.

Immediately following the 2021 coup, the military regime replaced several members of the Supreme Court with judges seen as more reliable to its interests. After several weeks of largely peaceful protest and increasingly violent responses by security forces including arbitrary detentions, the military regimes placed several Yangon townships under martial law, where court proceedings are conducted by military judges who have meted out harsh punishments with limited to no due process rights for those accused.

The Ministry of Home Affairs, led by an active-duty military minister appointed by the Commander-in-Chief, controls the Myanmar Police Force, which files cases directly with the courts. The Attorney General prosecutes criminal cases in civilian court and reviews pending legislation. The current Attorney General, Dr Thida Oo, was appointed the day after the coup by Commander-in-Chief Min Aung Hlaing . The Attorney General’s Office was reorganized as a ministry  on August 30, 2021. On January 31, 2022, the U.S. Department of the Treasury  added Attorney General, Dr Thida Oo to its Specially Designated Nationals list. While foreign companies have the right to bring cases to and defend themselves in local courts, there are deep concerns about the impartiality and lack of independence of the courts.

Burma does not have specialized civil or commercial courts.

To address long-standing concerns of foreign investors regarding dispute settlement, the government acceded in 2013 to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”). In 2016, Burma’s parliament enacted the Arbitration Law, putting the New York Convention into effect and replacing arbitration legislation that was more than 70 years old. Since April 2016, foreign companies can pursue arbitration in a third country. However, the Arbitration Law does not eliminate all risks. There is a limited track record of enforcing foreign awards in Burma and inherent jurisdictional risks remain in any recourse to the local legal system.

Certain regulatory actions are appealable and are adjudicated with the respective ministry. For instance, according to the Myanmar Investment Law, investment disputes that cannot be settled amicably are “settled in the competent court or the arbitral tribunal in accord with the applicable laws.” An investor dissatisfied with any enforcement action made by the regulatory body has the right to appeal to the government within 60 days from the date of administrative decision. The government may amend, revoke, or approve any decision made by the regulatory body. This decision is considered final and conclusive.

The Myanmar Investment Law outlines the procedures the MIC must take when considering foreign investments. The MIC evaluates foreign investment proposals and stipulates the terms and conditions of investment permits. The MIC does not record foreign investments that do not require MIC approval. Many smaller investments may go unrecorded. Foreign companies may register locally without an MIC license, in which case they are not entitled to receive the benefits and incentives provided for in the Myanmar Investment Law.

There is no “one-stop-shop” for investors except in Special Economic Zones. Burma has three Special Economic Zones (SEZs) in Thilawa, Dawei, and Kyauk Phyu with preferential policies for businesses that locate there, including “one-stop-shop” service. Of the three SEZs, Thilawa is the only SEZ currently in operation.

A Competition Law went into effect in 2017. The objective of the law is to protect public interest from monopolistic acts, limit unfair competition, and prevent abuse of dominant market position and economic concentration that weakens competition. The Myanmar Competition Commission serves as the regulatory body to enforce the Competition Law and its rules. The Commission is chaired by the Minister of Commerce, with the Director General of the Department of Trade serving as Secretary. Members also include a mixture of representatives from relevant line ministries and professional bodies, such as lawyers and economists.

The 2016 Myanmar Investment Law prohibits nationalization and states that foreign investments approved by the MIC will not be nationalized during the term of their investment. In addition, the law stipulates that the Burmese government will not terminate an enterprise without reasonable cause, and upon expiration of the contract, the Burmese government guarantees an investor the withdrawal of foreign capital in the foreign currency in which the investment was made. Finally, the law states that “the Union government guarantees that it shall not terminate an investment enterprise operating under a Permit of the Commission before the expiry of the permitted term without any sufficient reason.”

However, under previous military regimes, private companies have been nationalized. The current military regime has threatened private banks with nationalization if they fail to reopen, including threatening to transfer certain deposits in private banks to state-owned or military-affiliated banks. In addition, security forces have physical cut private company’s fiber wires and the military regimes onerous restrictions and suspension of mobile internet service have deprived private telecommunication operators and internet service providers of their property without any compensation offered. The military regime has also banned a number of private media print outlets from publication and restricted citizen’s access to other private company’s internet platforms.

There is a significant risk of nationalization and expropriation by the military regime, particularly in the financial and telecommunications sectors. There is no expectation of due process should the military regime pursue nationalization of private companies despite the provisions in the Myanmar Investment Law prohibiting nationalization and expropriation.

In February 2020, the government of Burma passed the new Insolvency Law. The law adopted the UNCITRAL Model Law on cross-border insolvency, providing greater legal certainty on transnational insolvency issues.

The legislation established an insolvency regime that addresses both corporate and personal insolvency, with a focus on protecting micro, small and medium-sized enterprises. With regards to personal insolvency, the new law encourages debtors to enter into a voluntary legally binding arrangement with their creditors. This agreement allows part or all of the debt to be written off over a fixed period of time. The law also provides equitable treatment for creditors by enabling an efficient liquidation process to ensure creditors receive maximum financial recovery from the property value of a non-viable business.

The law also established the Myanmar Insolvency Practitioners’ Regulatory Council to act as an independent regulatory body and assigned DICA the role of Registrar with the authority to fine individuals contravening the law. In addition, the court with legal jurisdiction can order an individual to make good on the default within a specified time.

The military regime’s attitude towards foreign portfolio investment is unknown. Previously, the Burmese government had gradually opened to foreign portfolio investment, but both the stock and bond markets are small and lack sufficient liquidity to enter and exit sizeable positions.

Burma has a small stock market with infrequent trading. In July 2019, the Securities and Exchange Commission announced that foreign individuals and entities are permitted to hold up to 35 percent of the equity in Burmese companies listed on the Yangon Stock Exchange.

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

The CBM sets commercial loan interest rates and saving deposit rates that banks can offer, so banks cannot conduct risk-based pricing for credit. Consequently, credit is not strictly allocated on market terms. Foreign investors generally seek financing outside of Burma because of the lack of sophisticated credit instruments offered by Burmese financial institutions and lack of risk-based pricing.

There is limited penetration of banking services in the country, but the usage of mobile payments had grown rapidly prior to the coup. A government 2020 census found 14 percent of the population has access to a savings account through a traditional bank. The banking system is fragile with a high volume of non-performing loans (NPLs). Financial analysts estimate that NPLs at some local banks account for 40 to 50 percent of outstanding credit but accurate calculations are hard because of accounting inconsistencies about what constitutes a non-performing loan.

According to Central Bank of Myanmar’s report for FY 2020-2021, total assets in Burma’s banking system were 75 trillion kyat (USD 40.5 billion).

The CBM is responsible for the country’s monetary and exchange rate policies as well as regulating and supervising the banking sector.

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

No U.S. banks have a correspondent relationship with Burmese banks. Following the military coup and the imposition of U.S. sanctions on Burma, including on two large military holding companies, some non-U.S. international banks are considering whether to terminate their correspondent banking relationship with Burmese banks.

Foreigners are allowed to open a bank account in Burma in either U.S. dollars or Burmese kyat. In April 2022, the CBM issued rules requiring most accounts with foreign currency holdings to be converted into Myanmar kyat at a fixed rate within one business day excluding foreign investment businesses, diplomatic missions, UN missions and international development partners. To open a bank account, foreigners must provide proof of a valid visa along with proof of income or a letter from their employer.

The Germany development agency GIZ published the fifth edition the GIZ Banking Report in January 2021.

According to Chapter 15 of the Myanmar Investment Law, foreign investors can convert, transfer, and repatriate profits, dividends, royalties, patent fees, license fees, technical assistance and management fees, shares and other current income resulting from any investment made under this law. Nevertheless, in practice, the transfer of money in or out of Burma has been difficult, as many international banks have internal prohibitions on conducting business in Burma given the long history of sanctions and significant money-laundering risks. The intermittent closure of banks following the coup, shortage of U.S. dollars, and low cash withdrawal limits, and CBM restrictions on holding foreign currency have further limited investors’ ability to conduct foreign exchange transactions and other necessary business operations.

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

In April 2022, the Central Bank fixed the exchange rate at 1850 kyat/1 USD. In April 2022, the black-market exchange rate was roughly 2010 kyat/1 USD.

According to the Myanmar Investment Law, foreign investors can remit foreign currency through authorized banks. Nevertheless, in practice, the transfer of money in or out of Burma has been difficult, as many international banks have internal prohibitions on conducting business in Burma given the long history of sanctions and significant money-laundering risks. The military coup and the regime’s economic policies, including restrictions placed on holding and transferring foreign currencies, has further exacerbated these investment remittance challenges.

The challenge of repatriating remittances through the formal banking system are also reflected in the continued use of informal remittance services (such as the “hundi system”) by both the public and businesses. On November 15, 2019, the CBM adopted the Remittance Business Regulation in order to bring these informal networks into the official financial system. The regulations require remittance business licenses to conduct inward and outward remittance businesses from the Central Bank. It is unclear how the military regime will proceed with this regulation and the training of businesses to grant them a license to conduct remittances.

Burma does not have a sovereign wealth fund.

State-owned enterprises (SOEs) in Burma are active in various sectors, including natural resource extraction, print news, energy production and distribution, banking, mobile telecommunications, and transportation. SOEs employ approximately 145,000 people, according to a 2018 report by the Natural Resource Governance Institute. The 1989 State-Owned Economic Enterprises Law does not establish a system of monitoring enterprise operations, hence detailed information on Burmese SOEs is difficult to obtain. However, according to commercial statements, the total net income of all SOEs during fiscal year 2020`21 was approximately USD 828 million. The top profit-making SOEs are found in the natural resource sector, namely the Myanma Oil and Gas Enterprise, Myanma Gems Enterprise, and Myanma Timber Enterprise. Within Burma, there are 32 SOEs managed directly by six ministries without independent boards.

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

In April 2021, the U.S. Department of Treasury sanctioned three Burmese SOEs for their roles in financing the military regime: the Myanma Gems Enterprise, the Myanma Timber Enterprise; and the Myanmar Pearl Enterprise. In March 2021, the U.S. Department of Treasury also sanctioned two Myanmar military holding companies: Myanmar Economic Corporation and Myanmar Economic Holdings Limited, and those sanctions also apply to entities that are owned, directly or indirectly, 50 percent or more by one or more blocked entities or persons. Investors should conduct careful due diligence, including by consulting the Special Designated National list, to identify which entities are subject to U.S. sanctions given the broad scope of these firms and their privileged position in the economy.

The military regime has not publicly announced any plans or timeline for privatization and in the past has preferred nationalization and supporting state-owned enterprises. Prior to the coup, the civilian government had been implementing a privatization plan, which permitted foreign investment.

Burma has a long history of civil wars and military coups marked by violence. In the aftermath of the February coup, Burmese security forces launched a brutal crackdown against the people of Burma, who peacefully protested the coup and the military’s upending of their democratic transition. In the face of brutal force by the regime, the people of Burma have disrupted the military’s ability to govern by launching a nationwide Civil Disobedience Movement, including general strikes and protests. Burma is also home to multiple long-running insurgencies in border regions, where the military competes for control with various ethnic armed organizations (EAOs). Shortly after the February 2021 coup, the military launched brutal and unprovoked attacks against EAOs, perceived opponents, and peaceful demonstrators across the country seeking to terrorize the public into submission. On September 7, 2021, the National United Government (NUG) announced a “People’s Defensive War against the military regime.” Violence is widespread and could continue to escalate.

There have been several reported fires and explosion targeting foreign businesses since the coup, including at Chinese-owned factories, an agricultural storage facility, and military related companies. Attacks resulting in destruction of property and injuries have also been reported at banks and ATMs as well. Foreign businesses are concerned about the potential for violence and destruction of property to escalate, although principally the targets have been companies or infrastructure associated with the military or companies that are perceived to be supportive of the military. The Chinese government has reportedly sought increased regime protection for an oil and gas pipeline that runs through Burma to China because of the deteriorating security situation.

The military regime has also declared martial law in several industrial townships in Yangon, suspending even the veneer of civil liberties and allowing security forces to be more aggressive in response to protests.

Protestors and military opponents have organized boycotts of businesses that have ties to the military regime with great success.

* Source for Host Country Data

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

The Government of Burundi (GoB) is generally supportive of FDI and seeks investments to promote economic growth.  During the reporting period, the GoB implemented new laws and regulations, including a revised June 2021 investment code (last updated in 2008), and the first national industrialization policy and its accompanying implementation strategy.  These regulations offer the same advantages to both Burundian and foreign investors.  The regulations also raised the minimum investment amounts to be eligible for certain benefits in the investment code from $50,000 to $500,000 for all investors, with the stated purpose of attracting only quality investments that will create decent jobs.  Industry experts believe the new investment regulations will boost development of the industrial sector, which so far contributes only about 17 percent of GDP.  An overview of the legal framework for foreign investment can be found at: https://www.investburundi.bi/index.php/espace-medias1/publications/depliants-et-brochures

Along with the new investment code, the Burundi Development Agency (ADB) officially replaced the Investment Promotion Agency (API). The ADB has taken over all the missions of the API and is currently the only entry portal and interlocutor for all investors looking for business opportunities in Burundi.  The ADB is the government authority responsible for promoting investment, improving the business climate, and facilitating market entry for investors in Burundi.  ADB offers a range of services to potential investors, including assistance in acquiring the licenses, certificates, approvals, authorizations, and permits required by law to set up and operate a business enterprise in Burundi. ADB has set up a “one-stop shop” to facilitate and simplify business registration in Burundi, although investors must be physically present in country to register with ADB.  ADB is also tasked with providing investors with information on investment and export promotion, assisting them with legal formalities, including obtaining the required documents, and intervening when laws and regulations are not properly applied.  While ADB is the initial and primary point of entry for investors, relevant government ministries also regularly meet with private investors to discuss regulatory and legal issues.

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

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

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

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

In addition to fiscal advantages provided in the new investment code, Burundi has approved reforms designed to improve ease of doing business, including reinforcing the capabilities of the one-stop shop at ADB, simplifying tax procedures for small and medium enterprises, reducing the time and cost of registering a business (about four hours at the cost of approximately $21), launching an electronic single window for business transactions, and harmonizing commercial laws within the East African Community.  For more details and information on registration procedures, deadlines and costs, investors can visit the ADB at https://www.investburundi.bi/.

The ADB is also responsible for assisting investors in obtaining entry visas, work permits and operating licenses, connections to water and electricity, amicable resolution of disputes between investors and state-owned entities, as well as any other related appropriate assistance.

During the reporting period, the ADB indicates it assisted registering more than 4,000 Burundian companies, certified eight foreign investors with a capital of more than $25 million and granted 21 certificates of eligibility for the advantages provided in the 2021 investment code to investors with a combined capital of more than $170 million.  ADB reports the companies created and during the rating period have already invested more than $85 million in Burundi and have created more than 2,327 jobs.

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

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

Although parts of the government are working to create more transparent policies for fostering competition, Burundi lacks much of the necessary regulatory framework.  Many policies for foreign investment are not transparent, and laws or regulations on the books are often ineffective or unenforced.  Burundi’s regulatory and accounting systems are generally transparent and consistent with international norms on paper, but a lack of capacity or training for staff and political constraints sometimes limit the regularity and transparency of their implementation.

Rule-making and regulatory authority is exercised exclusively at the national level.  Relevant ministries and the Council of Ministers exercise regulatory and rule-making authority, based on laws passed by the Senate and National Assembly.  In practice, government officials sometimes exercise influence over the application and interpretation of rules and regulations outside of formal structures.  The government sometimes discusses proposed legislation and rule-making with private sector interlocutors and civil society but does not have a formal public comment process.  There are no informal regulatory processes managed by non-governmental organizations (NGOs) or private sector associations.

Draft bills or regulations are not subject to a public consultation process.  There are no conferences that involve citizens in a consultative process to give them an opportunity to make comments or contributions, especially at the time of project development, and, even if this were the case, the public does not have access to the detailed information needed to participate in this process.

Burundi does not have a centralized online location where key regulatory actions are published; however, regulatory actions are sometimes posted on the websites of GoB institutions (typically that of the Office of the President or respective ministries).

Burundi has sectoral regulatory agencies covering taxes and revenues, mining and energy, water, and agriculture.  Regulatory actions are reviewable by courts.  There have been no recent reforms to the regulatory enforcement system.

The government generally issues terms of reference and recruits private consultants who prepare a study on the draft legislation for review and comment by the private sector.  The government analyzes these comments and takes them into consideration when drafting new regulations.  New regulations can be issued by a presidential decree or Parliament can make them into a law.  This mechanism applies to laws and regulations on investment.

Information on public finances and debt obligations (including explicit and contingent liabilities) is published in the Burundi Central Bank’s Reports and on its website: https://www.brb.bi/ . However, some publications on the website are not up to date.

Burundi is a member of the East African Community (EAC), a regional economic bloc composed of seven member states, the republics of Burundi, Kenya, Rwanda, South Sudan, Tanzania, Uganda and the recently admitted Democratic Republic of the Congo.  The EAC integration process is anchored on four pillars: a customs union, a common market, a monetary union, and political federation. Each member state must harmonize its national regulatory system with that of the EAC.

Burundian law and regulations reference several standards, including the East African Standards, Codex Alimentarius Standards, the International Organization for Standardization (ISO), and Burundi’s own standards.  ISO remains the main standard of reference.

The country joined the WTO on July 23, 1995.  According to the Ministry of Trade, Transport, Industry and Tourism, Burundi has not notified the WTO Committee on Technical Barriers to Trade of all its draft technical regulations.

The country’s legal system is civil (Roman), based on German and French civil codes.  For local civil matters, customary law also applies.  Burundi’s legal system contains standard provisions guaranteeing the right to private property and the enforcement of contracts.  The country has a written commercial law and a commercial court.  The investment code offers plaintiffs recourse in the national court system and to international arbitration.

The judicial system is not effectively independent of the executive branch.  A lack of capacity hinders judicial effectiveness, and judicial procedures are not rigorously observed.

In June 2021, the GoB adopted a revised investment code and the first national industrialization policy and its accompanying implementation strategy.  Along with the new investment code, the Burundi Development Agency (ADB) officially replaced the Investment Promotion Agency (API) (See Policies Towards Foreign Direct Investment above).

There is no agency in charge of reviewing transactions for competition-related concerns.

Burundian law allows the GoB to expropriate property for exceptional and state-approved reasons, but the GoB is then committed to provide compensation based on the fair market value prior to expropriation.

There are no recent cases involving expropriation of foreign investments nor do any foreign firms have active pending complaints regarding compensation in Burundian courts.

Burundi has two laws governing or pertaining to bankruptcy:  Law N°1/07 of March 15, 2006, on bankruptcy and Law N°1/08 of March 15, 2006, on legal settlement of insolvent companies.  Under Burundian law, creditors have the right to file for liquidation and the right to request personal or financial information about the debtors from the legal bankruptcy agent.  The bankruptcy framework does not require that creditors approve the selection of the bankruptcy agent and does not provide creditors the right to object to decisions accepting or rejecting creditors’ claims.

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

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

There is no regulation restricting international transactions.  In practice, however, the government restricts payments and transfers for international transactions due to a shortage of foreign currency, which impedes doing business in a number of ways.

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

The financial sector includes 15 credit institutions, 40 microfinance institutions, 16 insurance companies, three social security institutions and three payment institutions.  All these institutions aim at reducing unemployment by creating job opportunities, particularly small and medium-scale entrepreneurship.  The banking market is dominated by the three largest and systemically important banks: Credit Bank of Bujumbura (BCB), Burundi Commercial Bank (BANCOBU), and Interbank Burundi (IBB).

Burundi’s population has very limited access to banking services, according to the most recent national survey on financial inclusion conducted by the central bank.  In this 2016 survey, the Bank of the Republic of Burundi (BRB) found a penetration level of approximately 22 percent, although the government opened two banks, one for youth entrepreneurs and one for women, over the last 1.5 years in an effort to address this challenge.

The government is a minority shareholder in six banks, including the country’s three largest banks and is the main shareholders in the two new banks BIJE (Banque d’Investissement des Jeunes/Youth Investment Bank) and BIDF (Banque d’Investissement et de Développement pour les Femmes/Investment and Development Bank for Women).  Several local commercial banks have branches in urban centers and micro-finance institutions mostly serve rural areas.

Foreign banks can establish operations in the country.  Foreign banks operating in the country include ECOBANK (Pan African Bank-West Africa), CRDB (Tanzanian Bank), DTB and KCB (both Kenyan Banks).  The central bank directs banking regulatory policy, including prudential measures for the banking system.  Foreigners and locals are subject to the same conditions when opening a bank account; the only requirement is the presentation of identification.

Burundi does not have a sovereign wealth fund.

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

There is no published list of SOEs.

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

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

Burundi has experienced cycles of ethnic and political violence since its independence in 1962.  Periods before and after national elections have often been marked by political violence and civil disturbance.  The May 2020 elections were largely peaceful, and the GoB has since consolidated power and security gains.  Political tensions between the ruling party and opposition remain.  The new administration has made efforts to reduce tensions with neighboring countries, including Rwanda, and to increase participation in regional security cooperation.

Cabo Verde seeks both domestic and foreign investment to drive economic recovery, diversification, and growth following the COVID-19 crisis. The government’s Ambition 2030 strategy emphasizes development of sustainable tourism, transformation of the country into a transportation and logistics platform, renewable energy, blue and digital economy, and export-oriented industries. The government promotes a market-oriented economic model under which all investors, regardless of nationality, have the same rights and are subject to the same duties and obligations under the law. Improving the business climate to attract investment remains an economic priority, as does reducing the state’s role in the economy, though the COVID-19 pandemic has pushed back plans to privatize state-owned enterprises.

In 2021, approved investment projects reached an all-time high of USD 1.9 billion, confirming continued investor confidence in Cabo Verde despite pandemic uncertainties. Foreign investment continues to be concentrated in tourism and light manufacturing. In 2021, over 98 percent of the approved investment projects were in the tourism sector.

Cabo Verdean law offers tax benefits and grants permanent residence to foreign citizens with an investment exceeding 180 million escudos (USD 2 million). In December 2021, the government approved creation of a permanent residence permit for foreigners who own second homes in Cabo Verde. The new law also allows for exemption from excise duties on assets. The legal framework establishes conditions for investment in the country by Cabo Verdean emigrants, including fiscal incentives.

Investment promotion agency Cabo Verde TradeInvest (CVTI) is a one-stop shop for all investors. Through CVTI, the government maintains dialogue with investors using personalized and virtual meetings, round tables, conferences, and workshops. CVTI offers investors a “One-Stop Shop for Investments” electronic platform and help in formalizing expressions of interest and monitoring the investment process. It also provides investors and exporters information about trade agreements and benefits (including those related to the U.S. African Growth and Opportunity Act (AGOA) and Cabo Verde’s membership in the Economic Community of West African States (ECOWAS)), market information, details on trade fairs and events, and contacts with other state institutions and potential partners. In addition, CVTI can assist with securing authorizations and licensing, tax and customs incentives, work permits for foreign workers, visas for company workers, social security registration for workers, and introductions to service providers, such as banks, lawyers, accountants, and real estate agents.

For investments of less than USD 500,000, government entities Pro-Empresa and the Casa do Cidadao (Commercial Registry Department) provide similar services.

The International Business Center (Centro Internacional de Negocios – CIN) provides tax and customs benefits for companies that do international business, with the aim of promoting, supporting, and strengthening the emergence of new industrial, commercial, and service provision activities in Cabo Verde.

The Investment Law applies to both foreign and domestic investors, and it enshrines the principle of freedom of investment regardless of nationality. However, sector-specific legislation requires that foreign operators have at least 51 percent participation from Cabo Verdean partners in the fisheries sector and at least 25 percent in interisland maritime transport. The Investment Law further protects against direct and indirect expropriation. Private property is protected from unilateral requisition and nationalization, except for public interest reasons, in accordance with the law and the principle of non-discrimination, subject to prompt, full, and fair compensation.

An approval process serves as a screening mechanism for inbound foreign investment. The process begins with submission of a formal expression of interest to investment promotion agency Cabo Verde TradeInvest in accordance with the Investment Law. Relevant government entities (depending on the sector and of the nature of the investment) then conduct an integrated review of the investment project and provide an opinion. If the opinion is favorable, Cabo Verde TradeInvest, in coordination with relevant agencies, approves the project and issues an investor certificate no later than 45 days from the submission of interest. Tourism-related projects can obtain tourism utility status in addition to the certificate, and for investments considered of special national interest based on the volume of investment and number of jobs created, the government may offer exceptional fiscal and other incentives.

During 2018, the United Nations Conference on Trade and Development (UNCTAD) conducted an Investment Policy Review (IPR) at the request of the Government of Cabo Verde. The report contains strategic analysis on how Cabo Verde can utilize foreign direct investment (FDI) in the tourism sector to advance sustainable development objectives. https://unctad.org/en/pages/PublicationWebflyer.aspx?publicationid=2248 

In the last five years, civil society organizations have not conducted reviews of investment policy concerns.

Cabo Verde offers benefits to attract private-sector investment. Although equality of treatment and non-discrimination are granted to all investors, certain investment projects, given their nature or size, may receive special treatment and support from the government.

In an effort to reduce approval time for investment projects, the government has established a maximum period of 15 days for analysis and 30 days for approval of investment and export projects. In addition, Cabo Verde has adopted measures to facilitate and stimulate business activity, including lowering the maximum personal income tax (IRPS) one percentage point to 24 percent, eliminating double taxation, and waiving tax installment payments for taxpayers who had negative results or began their business activity in the previous year. Investments of at least 500 million escudos (USD 4.8 million) qualify for contractual benefits such as reduction of or exemption from customs and stamp duties, property taxes, and some other fiscal duties. Those investments that create a minimum number of jobs or expand into new strategic sectors qualify for a 50 percent investment credit, which can be deducted over 15 years.

The law commits the government to paying its bills within 45 days and interest on late payments to ensure predictability in the payment of the state’s obligations to companies. The 2021 budget prioritizes expenditures on assistance for families and support for companies and jobs in the context of the pandemic. It also includes benefits to attract private sector investments and improve the business environment.

Registering a company is straightforward. The Commercial Registry Department (Casa do Cidadao) is a one-stop shop where a company can be created and registered in less than a day. Information on business registration procedures is available at https://portondinosilhas.gov.cv/  and http://caboverde.eregulations.org/show-list.asp?l=pt&mid=1 . Step-by-step information on procedures, time, and cost involved in starting a company can be found at http://www.doingbusiness.org/data/exploreeconomies/cabo-verde/starting-a-business/ . The CVTI website also offers information on investing in Cabo Verde, including Cabo Verde’s Investment Law, the Code of Fiscal Benefits, and the Contractual Tax Benefits-Incentives: https://cvtradeinvest.com/ .

The government does not restrict domestic investors from investing abroad. There is no data available on outward investments.

Cabo Verde is a regional model of transparency and good governance. The government is committed to improving conditions for foreign investment and encouraging a more transparent and competitive economic environment. Laws to promote exports and free-zone enterprises stress the government’s commitment to encouraging investment in export-oriented industries. The tax regime encourages entrepreneurial activity, and government policies support free trade and open markets.

Environmental issues are a priority in Cabo Verde’s sustainable development strategic planning. Legislation requires promotion of an ecologically balanced environment by private companies. Local companies and foreign investment projects must complete environmental-impact studies for assessment of potential impacts by relevant government authorities.

The government promotes the disclosure from companies on the social and corporate governance aspects of their businesses. Many companies, including those operating in sectors such as telecommunications, banking, pharmaceuticals, and laboratories, disclose the information in reports, normally available online.

There is free online access to all laws through the government’s official register website, https://kiosk.incv.cv/ .

Regulations on economic activity can also be viewed on the Cabo Verde TradeInvest website, http://cvtradeinvest.com/ .

Cabo Verde’s regulatory agencies do not solicit comments on proposed regulations from the general public, according to the World Bank .

Public finance and debt obligations are in line with international norms and standards on budget credibility, thoroughness, and fiscal transparency. Cabo Verde continues to improve its processes for the planning, execution, and control of its budgets. The Ministry of Finance uses a digital platform to publish public accounts. With this web portal, any institution or citizen can observe the execution of the budget in real time. A Public Finance Council independently assesses the sustainability of the budget and policies. Cabo Verde has an independent Supreme Audit Institution (SAI), which operates in accordance with International Standards of Supreme Audit Institutions and the Mexico Declaration and is responsible for verifying and publishing the government’s annual financial statements.

In February 2022, Cabo Verde submitted the instrument of ratification of the Agreement Establishing the African Continental Free Trade Area (AfCFTA).

Regionally, Cabo Verde is committed to integration into ECOWAS but has announced postponement of implementation of the ECOWAS Common External Tariffs to later in 2022 and does not foresee adoption of an ECOWAS single currency.

Cabo Verde formally acceded to the World Trade Organization (WTO) in 2008. Cabo Verde has not notified the WTO of any measures that are inconsistent with its Agreement on Trade-Related Investment Measures (TRIM)s obligations.

Cabo Verde’s legal system is based on the civil law system of Portugal. The 1992 constitution provides for a judiciary independent from the executive branch. The judicial system is composed of the Supreme Court, the Constitutional Court, and regional courts. Judges cannot be affiliated with political parties.

The Ministry of Justice appoints local judges. The judiciary generally provides due process rights; however, an overburdened and understaffed judicial system constrains the right to an expeditious trial. Cabo Verde has modern commercial and contractual laws. The judicial system in Cabo Verde is transparent and independent. There is no government interference in the court system, but judicial decisions are often delayed, sometimes for years.

The right to private ownership is guaranteed under the constitution. Property rights are also recognized and guaranteed by several laws. There is a legal entity that records secured interests in property, both chattel and real estate. The legal system also protects and facilitates acquisition and disposition of all property rights.

Cabo Verdean laws concerning FDI include the Investment Law of 2012, which applies to both foreign and domestic investors and preserves the principle of freedom of investment. The Industrial Development Statute regulates incentives and the investment approval process. Law 41/2016 defines the mandate of Cabo Verde TradeInvest ( https://cvtradeinvest.com/ ) as a one-stop shop for external investors.

Cabo Verde does not have an agency charged with regulating competition, though the government has explored the creation of one. The law protects competition in all economic activities.

The Investment Law protects against direct and indirect expropriation. Private property is protected against requisition and nationalization, except for public interest reasons (Investment Law, article 6.1). Under the law, in the event of expropriation, the government is to compensate the owner on the basis of prevailing market prices or the actual market value of the property. To date there have been no cases of unlawful expropriation or claims of discriminatory behavior by the government against foreigners.

In case of noncompliance of investment projects, the law states that land can be recovered by the state and made available to new investment projects.

ICSID Convention and New York Convention

In 2011, Cabo Verde became a contracting state to the ICSID convention. In 2018 Cabo Verde became a state party to the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention).

Investor-State Dispute Settlement

Disputes between the government and investors concerning the interpretation and application of the law that cannot be resolved amicably or via negotiation are submitted for resolution by judicial authorities in accordance with Cabo Verdean law. Disputes between the government and foreign investors on investments authorized and made in the country are settled by arbitration if no other process has been agreed upon.

International Commercial Arbitration and Foreign Courts

The law favors arbitration as a mechanism for settling investment disputes between the Government of Cabo Verde and foreign investors, under national and international dispute resolution rules. Courts recognize and enforce foreign arbitral awards. Generally, arbitration is conducted in Cabo Verde and in Portuguese unless the parties agree on another location and language. The decision of the single referee or the arbitration committee is final and not subject to appeal. In 2018, the Tax Arbitration Center was created to resolve disputes regarding tax matters.

Cabo Verdean law provides for a reorganization procedure and a framework that allows creditors involvement in insolvency proceedings.

Limited capital market and portfolio investment opportunities exist in Cabo Verde. The Cabo Verdean stock market, Bolsa de Valores de Cabo Verde (BVC), is fully operational. It has been most active in the issuance of bonds. Foreign investors must open an account with a bank in Cabo Verde before buying stocks or bonds from BVC.

Foreign interests may access credit under the same market conditions as Cabo Verdeans.

The IMF’s April 2021 country report on Cabo Verde noted that “the government did not impose or intensify restrictions on payments and transfers for current international transactions nor introduce multiple currency practices. Similarly, it did not conclude bilateral payment agreements inconsistent with Article VIII nor impose or intensify import restrictions for balance of payments purposes.”

Cabo Verde has a small financial sector supervised and regulated by the Central Bank of Cabo Verde (BCV). According to 2020 data from BCV, 82.8 percent of Cabo Verde’s adult population has a bank account. Internet-based tools and services in the banking sector continue to grow in Cabo Verde, particularly since the COVID-19 pandemic, changing the model of the client-bank relationship. New information and communications technology products allow customers online alternatives to in-person support.

Banking represents more than 80 percent of the assets of the entire Cabo Verdean financial system. Two banks – Banco Comercial do Atlantico (BCA) and Caixa Economica de Cabo Verde (CECV) – together held 57.7 percent of market share in 2020, according to BCV data.

Legislation approved in January 2020 terminated the issuance of restricted licenses for offshore banking operations, calling for generic licenses and operations with resident clients. BCV subsequently announced that banks with a restricted license (offshore) serving non-residents would have to adjust to the new requirements or face revocation of their license and enforced administrative liquidation. Offshore banks operating in Cabo Verde had until December 2021 to complete the transition. One did, two opted for liquidation, and BCV revoked the license of a fourth. Currently there are no offshore banks operating in Cabo Verde.

To establish a bank account, clients must provide proper identification and obtain a taxpayer number from the Commercial Registry Department (Casa do Cidadao), a process that takes approximately 10 minutes. Bank credit is available to foreign investors under the same conditions as for domestic investors. The private sector has access to credit instruments such as loans, letters of credit, and lines of credit.

Cabo Verde is a model of political stability with a tradition of peaceful transitions of power. There have been no political, social, or religious conflicts resulting in violence in recent years. Civil liberties are generally protected, but access to justice is impaired by an overburdened court system, and crime remains a concern.

Cambodia has a liberal foreign investment regime and actively courts FDI. In 2021, the RGC enacted a new Law on Investment to attract more FDI in emerging sectors including agro-processing, electronics/machinery, health, industrial parts, infrastructure, and green energy. The government permits 100 percent foreign ownership of companies in most sectors. In a handful of sectors, such as cigarette manufacturing, movie production, rice milling, and gemstone mining and processing, foreign investment is subject to local equity participation or prior authorization from authorities.  While there is little or no official legal discrimination against foreign investors, some foreign businesses report disadvantages vis-a-vis Cambodian or other foreign rivals that engage in acts of corruption or tax evasion or take advantage of Cambodia’s weak regulatory environment.

The Council for the Development of Cambodia ( CDC ) is the principal government agency responsible for providing incentives to stimulate investment. Investors are required to submit an investment proposal to either the CDC or the Provincial-Municipal Investment Sub-committee to obtain a Qualified Investment Project (QIP) status depending on capital level and location of the investment in question.  QIPs are then eligible for specific investment incentives.

The CDC also serves as the secretariat to Cambodia’s Government-Private Sector Forum (G-PSF), a public-private consultation mechanism that facilitates dialogue within and among 10 government/private sector working groups.

Cambodia has created special economic zones (SEZs) to further facilitate foreign investment. As of 2021, there are 25 SEZs in Cambodia.  These zones provide companies with access to land, infrastructure, and services to facilitate the set-up and operation of businesses. Services provided include utilities, tax services, customs clearance, and other administrative services designed to support import-export processes. Cambodia offers incentives to projects within the SEZs such as tax holidays, zero rate VAT, and import duty exemptions for raw materials, machinery, and equipment. The primary authority responsible for Cambodia’s SEZs is the Cambodia Special Economic Zone Board (CSEZB). The largest of its SEZs is in Sihanoukville and hosts primarily Chinese companies.

There are few limitations on foreign control and ownership of business enterprises in Cambodia. Foreign investors may own 100 percent of investment projects except in the sectors mentioned above. According to Cambodia’s new Law on Investment and related sub-decrees, there are no limitations based on shareholder nationality nor discrimination against foreign investors except for land ownership as stipulated in the Constitution of the Kingdom of Cambodia.

For property, land title must be held by one or more Cambodian citizens.  For state-owned enterprises, the Law on Public Enterprise provides that the Cambodian government must directly or indirectly hold more than 51 percent of the capital or veto rights in state-owned enterprises.

For agriculture investments, foreign investors may request economic land concessions, if they meet certain criteria including provisions on land use, productivities, job creation, and environmental protection and natural resource management.

There are some limitations on the employment of foreigners in Cambodia. A QIP allows employers to obtain visas and work permits for foreign citizens as skilled workers, but the

employer may be required to prove to the Ministry of Labor and Vocational Training that the skillset is not available among Cambodia workers. The Cambodian Bar has periodically taken actions to restrict or impede the work of foreign lawyers or foreign law firms in the country.

The OECD Investment Policy Review of Cambodia in 2018 is available at the following link .

The World Trade Organization (WTO) last reviewed Cambodia’s trade policies in 2017, which can be found at this link .

All businesses are required to register with the Ministry of Commerce (MOC), the General Department of Taxation (GDT), and the Ministry of Labor and Vocational Training (MOLVT).  Registration with MOC is possible through an online business registration portal at this link , while the GDT’s online portal is also available here .  To further facilitate the process, the Ministry of Economy and Finance (MEF) in 2020 launched the “ Single Portal ” – found at here , where businesses can register at the three ministries through a single online platform.

In addition, new businesses may also be required to register with other relevant ministries governing their sector and business activities. For example, travel agencies must also register with the Ministry of Tourism, and private universities must also register with the Ministry of Education, Youth, and Sport.

There are no restrictions on Cambodian citizens investing abroad. Some Cambodian companies have invested in neighboring countries – notably, Thailand, Laos, and Myanmar.  Cambodia’s foreign direct investment abroad reached approximately $127 million in 2020.

Cambodia’s regulatory system, while improving, still lacks transparency. This is the result of a lack of legislation and the limited capacity of key institutions, which is further exacerbated by a weak court system. Investors often complain that the decisions of Cambodian regulatory agencies are inconsistent, arbitrary, and influenced by corruption. For example, in May 2016, in what was perceived as a populist move, the government set caps on retail fuel prices, with little consultation with petroleum companies.  In April 2017, the National Bank of Cambodia introduced an interest rate cap on loans provided by the microfinance industry with no consultation with relevant stakeholders. More recently, investors have regularly expressed concern overdraft legislation that has not been subject to stakeholder consultations.

Cambodian ministries and regulatory agencies are not legally obligated to publish the text of proposed regulations before their enactment. Draft regulations are only selectively and inconsistently available for public consultation with relevant non-governmental organizations (NGOs), private sector, or other parties before their enactment. Approved or passed laws are available on websites of some ministries but are not always up to date. The Council of Jurists,

the government body that reviews laws and regulations, publishes a list of updated laws and regulations on its website.

Businesses are not required to have audited financial statements or publish their financial reports unless they are financial institutions (banks/microfinance institutions) or publicly listed companies.

The RGC does not mandate companies to make environmental, social, and governance (ESG) disclosures with respect to investments.

As a member of ASEAN since 1999, Cambodia is required to comply with certain rules and regulations regarding free trade agreements with the 10 ASEAN member states. These include tariff-free importation of information and communication technology (ICT) equipment, harmonizing custom coding, harmonizing the medical device market, as well as compliance with tax regulations on multi-activity businesses, among others.

As a member of the WTO since 2004, Cambodia has both drafted and modified laws and regulations to comply with WTO rules. Relevant laws and regulations are notified to the WTO legal committee only after their adoption. A list of Cambodian legal updates in compliance with the WTO is described in the above section regarding Other Investment Policy Reviews.

The Cambodian legal system is primarily based on French civil law. Under the 1993 Constitution, the King is the head of state and the elected Prime Minister is the head of government. Legislative power is vested in a bicameral parliament, while the judiciary makes up the third branch of government. Contractual enforcement is governed by Decree Number 38 D Referring to Contract and Other Liabilities. More information on this decree can be found at this link .

Although the Cambodian Constitution calls for an independent judiciary, both local and foreign businesses report problems with inconsistent judicial rulings, corruption, and difficulty enforcing judgments. For these reasons, many commercial disputes are resolved through negotiations facilitated by the Ministry of Commerce, the Council for the Development of Cambodia, the Cambodian Chamber of Commerce, and other institutions. Foreign investors often build into their contracts clauses that dictate that investment disputes must be resolved in a third country, such as Singapore.

Cambodia’s new Law on Investment, passed in October 2021, regulates the approval process for FDI and provides incentives to potential investors, both domestic and foreign. Sub-decree No. 111 (2005) lays out detailed procedures for registering a QIP with the CDC and provincial/municipal investment subcommittees.

The new Law on Investment introduces an online registration process for QIP applications and shortens the timeline for the CDC’s issuance of a Registration Certificate to 20 working days. The portal for QIP registration with CDC can be found at this link .

Information about investment procedures and incentives in Cambodia may be found on the CDC’s website .

Cambodia’s Competition Law was signed in October 2021, following the enactment of a Law on Consumer Protection in 2019. Cambodia’s Consumer Protection Competition and Fraud Repression Directorate-General ( CCF ), is mandated to enforce these laws and investigate complaints. When disputes arise, individuals or businesses can file complaints with the CCF, with courts acting as the final arbitrator.

Land rights are a contentious issue in Cambodia, complicated by the fact that most property holders do not have legal documentation of their ownership because of the policies and social upheaval during Khmer Rouge era in the 1970s. Numerous cases have been reported of influential individuals or groups acquiring land titles or concessions through political and/or financial connections and then using force to displace communities to make way for commercial enterprises.

In late 2009, the National Assembly approved the Law on Expropriation, which sets broad guidelines on land-taking procedures for public interest purposes. It defines public interest activities to include construction, rehabilitation, preservation, or expansion of infrastructure

projects, and development of buildings for national defense and civil security. These provisions include construction of border crossing posts, facilities for research and exploitation of natural resources, and oil pipeline and gas networks. Property can also be expropriated for natural disasters and emergencies, as determined by the government. Legal procedures regarding compensation and appeals are expected to be established in a forthcoming sub-decree, which is under internal discussion at the Ministry of Economy and Finance.

The government has shown willingness to use tax issues for political purposes. For instance, in 2017, a U.S.-owned independent newspaper had its bank account frozen purportedly for failure to pay taxes. It is believed that, while the company may have had some tax liability, the General Department of Taxation inflated the assessment to pressure the newspaper to halt operations. The action took place in the context of a widespread government crackdown on independent media in the country.

Cambodia’s 2007 Law on Insolvency is intended to provide collective, orderly, and fair satisfaction of creditor claims from debtor properties and, where appropriate, the rehabilitation of the debtor’s business. The law applies to the assets of all businesspeople and legal entities in Cambodia.

In 2012, Credit Bureau Cambodia (CBC) was established to create a more transparent credit market in the country. CBC’s main role is to provide credit scores to banks and financial institutions and to improve access to credit information.

To address the need for capital markets in Cambodia, the Cambodia Securities Exchange (CSX) was founded in 2011 and started trading in 2012. Though the CSX is one of the world’s smallest securities markets, with nine listed companies, it has taken steps to increase the number of listed companies, including attracting SMEs. In 2021, market capitalization stood at $2.4 billion, and the daily trading value averaged $246,000.

In September 2017, the National Bank of Cambodia (NBC) adopted a regulation on the Conditions for Banking and Financial Institutions to be listed on CSX. The regulation sets additional requirements for banks and financial institutions that intend to issue securities to the public. This includes prior approval from the NBC and minimum equity of KHR 60 billion (approximately $15 million).

Cambodia’s bond market is at the beginning stages of development. The regulatory framework for corporate bonds was bolstered in 2017 through the publication of several regulations covering public offering of debt securities, the accreditation of bondholders’ representatives, and the accreditation of credit rating agencies. The country’s first corporate bond was issued in 2018, and there are currently eight corporate bonds listed on the CSX.  There is currently no sovereign bond market, but the government has stated its intention of making government securities available to investors in 2022.

The NBC regulates the operations of Cambodia’s banks. Foreign banks and branches are freely allowed to register and operate in the country. There are 54 commercial banks, 10 specialized banks (set up to finance specific turn-key projects such as real estate development), 79 licensed microfinance institutions (MFIs), and five licensed microfinance deposit taking institutions in Cambodia. The NBC has also granted licenses to 17 financial leasing companies and one credit bureau company to improve transparency and credit risk management and encourage lending to small- and medium-sized enterprise customers.

The banking sector’s assets, including those of MFIs, rose 16 percent year-over-year in 2020 to KHR 241 trillion ($59.4 billion) and customer loans increased 15 percent to KHR 151 trillion ($37.3 billion). In 2020, the number of deposit accounts reached 8.9 million (out of a population of roughly 17 million), while credit accounts reached 3.2 million.

The government does not use the regulation of capital markets to restrict foreign investment. Banks have been free to set their own interest rates since 1995, and increased competition

between local institutions has led to a gradual lowering of interest rates from year to year.  However, in April 2017, at the direction of Prime Minister Hun Sen, the NBC capped interest rates on loans offered by MFIs at 18 percent per annum. The move was designed to protect borrowers, many of whom are poor and uneducated, from excessive interest rates.

In March 2016, the NBC doubled the minimum capital reserve requirement for banks to $75 million for commercial banks and $15 million for specialized banks. Based on the new regulations, deposit-taking microfinance institutions now have a $30 million reserve requirement, while traditional microfinance institutions have a $1.5 million reserve requirement.

In response to the COVID-19 pandemic, the NBC adopted measures to maintain financial stability and ensure liquidity in the banking system. These measures included allowing banks to maintain their capital conservation buffer at 50 percent, reducing the reserve requirement rate, and allowing banks to restructure loans for clients impacted by COVID.

Financial technology (Fintech) in Cambodia is developing rapidly. Available technologies include mobile payments, QR codes, and e-wallet accounts for domestic and cross-border payments and transfers. In 2012, the NBC launched retail payments for checks and credit remittances. A “Fast and Secure Transfer” (FAST) payment system was introduced in 2016 to facilitate instant fund transfers. The Cambodian Shared Switch (CSS) system was launched in October 2017 to facilitate the access to network automated teller machines (ATMs) and point of sale (POS) machines.

In February 2019, the Financial Action Task Force (FATF) cited Cambodia for being “deficient” with regard to its anti-money laundering and countering financing of terrorism (AML/CFT) controls and policies and included Cambodia on its “grey list.”  The RGC committed to working with FATF to address these deficiencies through a joint action plan, although Cambodia remains on the grey list as of 2022. Should Cambodia not take appropriate action, FATF could move it to the “black list,” which could negatively impact the cost of capital as well as the banking sector’s ability to access international capital markets.

In addition to Cambodia’s weak AML/CFT regime, vulnerabilities include a largely cash-based, dollarized economy and porous borders. Both legal and illicit transactions, regardless of size, are frequently conducted outside of regulated financial institutions. Cash proceeds from crime are readily channeled into land, housing, luxury goods and vehicles, and other forms of property, without passing through the banking sector. Moreover, a lack of judicial independence and transparency constrains effective enforcement of laws against financial crimes. The judicial branch lacks efficiency and cannot assure impartiality, and judicial officials, up to and including the chief of the Supreme Court, have simultaneously held positions in the political ruling party. Refer to Section II: “Illicit Finance and Corrupt Activities in Cambodia” of the U.S. government’s Cambodia Business Advisory on High-Risk Investments and Interactions released on November 10, 2021, for more information.

Cambodia does not have a sovereign wealth fund.

Incidents of violence directed at businesses are rare. The Embassy is unaware of any incidents of political violence directed at U.S. or other non-regional interests. In the past, authorities have used force to disperse protestors.

Nevertheless, political tensions remain. After relatively competitive communal elections in June 2017, where Cambodia’s opposition party won 43 percent of available seats, the government banned the opposition party and imprisoned its leader on charges of treason. With no meaningful opposition, the Cambodian People’s Party (CPP) swept the 2018 national elections, winning all 125 parliamentary seats. The government has also taken steps to limit free speech and stifle independent media, including forcing independent news outlets and radio stations to cease operations. While there are few overt signs the country is growing less secure today, the possibility for insecurity exists going forward, particularly if COVID-driven economic problems persist and if a large percentage of the population remains disenfranchised.

Creating a conducive business environment to attract foreign direct investments is a corner stone of Cameroon’s development strategy. Governance and strategic management of the state constitutes one of the four pillars of the 2020-2030 National Development Strategy 2030, which was launched November 2020. The Government of Cameroon acknowledges that the challenging nature of the domestic business climate remains a concern. To fight corruption, rebuild a weak legal system, and modernize an inefficient public service, the National Development Strategy has adopted a holistic approach to governance, which includes political and institutional governance, administrative governance, economic and financial governance, regional governance, and social and cultural governance.

Cameroon has put in place an arsenal of institutions and laws to improve governance. The government created the Special Crime Tribunal on corruption and economic crimes in 2012 to prosecute crimes related to the misappropriation of public funds of $100,000 or more. The Court specifically targets custodians of public funds as well as officials who have the authority to collect or spend money on behalf of the state. The Court reported it had tried 225 cases and recovered $323 million as of July 2020. Another institution, the Audit Bench of the Supreme Court, reports directly to the President and is charged with conducting audits and investigations of public funds. The National Anti-Corruption Commission also reports to the President and investigates corruption allegations. However, corruption and administrative mismanagement continue to hamper the business climate in Cameroon. Cameroon consistently ranks in the bottom half of the Transparency International’s Corruption Perceptions Index (144 of 180 in 2021). In 2020, Cameroon ranked 167 of 190 on the Ease of Doing Business index.

Despite the active presence of state-owned companies in important sectors of the economy, private entities – both domestic and foreign – can create and own businesses that engage in all forms of legal remunerative activities. They can also enter joint ventures and public-private partnerships with the government.

The Cameroon Investment Promotion Agency (CIPA) was created in 2010 and is a state-owned entity with a mission of attracting investment to Cameroon in collaboration with other state institutions. The agency seeks also to foster an enabling environment for investments in Cameroon. As of 2021, CIPA had signed 172 investment agreements and generated the creation of over 60,000 jobs.

CIPA offers investment incentives covering existing and emerging economic sectors. The agency also serves as a one-stop-shop facilitator through the assistance it provides to foreign and domestic investors. It processes application files for approval in compliance with its investment charter and assists in the alignment of projects with the general tax code. It can support potential foreign investors for visa applications. The agency also follows up to monitor the implementation of commitments made by approved companies.

CIPA’s sector coverage

Sources: National Institute of Statistics, IMF, estimates 2019-2020

The government maintains dialogue with business associations such as the Groupement Inter-Patronal du Cameroun (GICAM) and Enterprise Cameroon through the Cameroon Business Forum, which is sponsored by the World Bank. Over the past two years, GICAM has been critical of the government’s handling of the negative impacts of COVID-19 and global inflationary pressures on business.

There are no general economy-wide (statutory, de facto, or otherwise) limits on foreign ownership or control. Apart from the national defense and security areas, there are no sector-specific restrictions, limitations, or requirements applied to foreign ownership and control. Despite an active government presence in most sectors of the economy, private entities – both domestic and foreign – can create and own businesses that engage in all forms of legal remunerative activities. They can also enter joint ventures and public-private partnerships with the government.

Cameroon has no laws or regulations that expressly prohibit investment, equity caps, mandatory domestic joint venture partners, licensing restrictions, or mandatory intellectual property/technology transfer requirements. Cameroon has a screening process, which is applicable to all domestic and foreign investments.  This screening process ensures that investors meet the criteria, such as employment and export quantities, to qualify for private investment incentives.

The IMF approved a three-year, $689.5 million hybrid Extended Credit Facility-Extended Fund Facility arrangement in July 2021. The arrangements are built around five pillars: (i) mitigating the health, economic, and social consequences of the pandemic while ensuring domestic and external sustainability; (ii) reinforcing good governance and strengthening transparency and the anti-corruption framework; (iii) accelerating structural fiscal reforms to modernize tax and customs administrations, mobilize revenue, improve public financial management, increase public investment efficiency, and reduce fiscal risks from state-owned enterprises; (iv) strengthening debt management and reduce debt vulnerabilities; and (v) implementing structural reforms to accelerate economic diversification, boost financial sector resilience and inclusion, and promote gender equality and a greener economy. The IMF completed a First Review of the program on February 23, 2022 and found Cameroon’s overall program performance to be mixed. While macroeconomic performance is broadly satisfactory, and efforts to promote good governance and transparency are gaining momentum, progress on structural reforms is slow. Copies of the review can be found on the IMF website .

Civil society organizations and business associations have provided investment related policy recommendations. Following the introduction of an electronic payment tax, which includes mobile money, in the 2022 finance law, Cameroon’s largest business association GICAM noted “mobile money taxes can have a negative impact on excise tax receipts as consumers are pushed into non-traceable cash transactions, and on the size of remittances from abroad.” GICAM recommended the government enhance consumer purchasing power by reducing some taxes, reviewing remuneration policy, and amending its price regulation policies. Following reform proposals from the road transport syndicate on freight conditions on the Douala-Bangui Corridor, the government approved the construction of rest areas along the corridor as well as the reduction of police checkpoints in 2021.

Entrepreneurs obtain a unique tax identifying number when they open a company in Cameroon. Within 15 days after the registration for a new business, the Directorate General of Taxation issues a permanent taxpayer identification number, known as the Unique Identification Number (UIN).

According to the World Bank, it takes 14 procedures and 82 days to establish a foreign-owned limited liability company in Douala, Cameroon’s largest city and economic capital. This process is longer and more complex than regional and global averages. For foreign investors, a declaration of foreign investment to the Ministry of Finance is mandatory 30 days prior to the beginning of operations. In addition, if the company wants to engage in international trade, registration in the importers’ file is required to obtain an automated customs systems number (Système Douanier Automatisé, or “sydonia”). This number facilitates the entry and exit of goods produced by the company. The authentication of the parent company’s documentation abroad is required only to establish a subsidiary. Foreign-owned resident companies that wish to maintain foreign currency bank accounts must obtain prior approval. The Minister of Finance issues such authorization, which is subject to approval from the Bank of Central African States (BEAC) as per Section 24 of the exchange control regulations. This approval takes on average 38 days to obtain. There is a minimum paid-in capital requirement of CFA 1,000,000 (~$1,800) for establishing LLCs.

In Cameroon, business registration is most often manual, although the Ministry of Small and Medium-Sized Enterprises launched an electronic registration portal designed to automate the process at https://cameroun.eregistrations.org/ . Due to internet access challenges, the website is not always operational. To manually register, entrepreneurs must go to a Ministry of Small and Medium Sized Enterprises regional center for the creation of enterprises, which can complete the registration procedure within one week.

The Cameroonian government does not promote or incentivize outward investment, nor does it restrict domestic investors from investing abroad.

Cameroon’s laws are consistent with international business and legal norms. Cameroon’s legal architecture is made up of national, regional CEMAC, and supra-national regulations, most of which are applicable to domestic and foreign businesses. Weak implementation and investigative capacity, a lack of understanding of international business practices, and corruption in the judiciary limit the effectiveness of the rule of law. In many circumstances, judicial loopholes persist, leading to arbitrary interpretations of the texts.

Some government ministries, though not all, consult with public and private sector organizations through targeted outreach with stakeholders, such as business associations or other groups. There is no formal process for such consultations. Ministries do not report the results of consultations, but there is no evidence that such processes disadvantage U.S. or other foreign investors.

Cameroon’s National Assembly and Senate pass laws. The Executive proposes bills and then executes laws. Though there is technically a separation of powers, the Presidency is the supreme rule-making and regulatory authority. Decentralized institutions in the regions and municipalities have little additional regulatory authority. Draft bills and regulations are not made available for public comment. The website for the Office of the Prime Minister (www.spm.gov.cm) contains PDF versions of most new regulatory actions published in the Cameroon Tribune, the country’s newspaper of record.

Ministries and regulatory agencies do not have a list of anticipated regulatory changes or proposals intended to be adopted/implemented within a specified period. Ministries do not have a legal obligation to publish the text of proposed regulations before their enactment. There is no period set by law for the text of the proposed regulations to be publicly available. There is no specialized government body tasked with reviewing and monitoring regulatory impact assessments conducted by other individual agencies or government bodies.

Cameroon has administrative courts that specialize in the application and enforcement of public laws. From a strictly legal perspective, the Supreme Court has oversight on enforcement mechanisms, but a lack of separation of powers prevents the judiciary from carrying out its responsibilities. There have been no new regulatory or enforcement reforms announced since the 2021 Investment Climate Statement.

Cameroon does not meet the minimum standards of fiscal transparency. This is partly because many of the state-owned enterprises do not have public accounts. Companies that are listed or aspire to be listed on the Central African Stock Exchange (CASE) have more stringent transparency requirements. There are only four publicly listed companies on the CASE. All four use the Organization for the Harmonization of Business Law in Africa (OHADA) accounting system, which does not align completely with International Financial Reporting Standards (IFRS) or Generally Accepted Accounting Principles (GAAP). Cameroon is a member of CEMAC and is thus subject to its regulations, though implementation remains weak. CEMAC’s central bank, the Bank of Central African States (BEAC), controls monetary policy and is the de facto finance sector regulator, in coordination with the Ministry of Finance.

The National Institute of Statistics (INS) conducts surveys and produces statistics, which are meant to inform policy decisions. Some of these statistics are cited in government documents when ministries are drafting legislative proposals or during parliamentary debates. Quantitative analysis conducted by the INS has often been used by multilateral lenders such as the IMF, the World Bank, and the African Development Bank. However, empirical evaluation and data-driven assessments of the impact of new and existing regulations are limited.

Similarly, public comments are not the main drivers of regulations. However, some consultations take place for the national budget, which is produced each year, but there is little oversight to ensure adherence to the document.

The government does not require companies to have environmental, social, or governance disclosures.

Cameroon is a CEMAC member state. CEMAC regulations supersede those of individual members, though areas such as the free movement of people, goods, and services are not respected by some states. Recent reforms by CEMAC’s central bank, BEAC, have met stiff resistance and delays in their application by individual member states, including Cameroon.

The government requires use of OHADA accounting standards, which are used by 14 African nations. No other norms or standards are referenced in the country’s regulatory system.

Cameroon joined the World Trade Organization (WTO) on December 13, 1995 and was previously a member of the General Agreement on Taxes and Tariffs. Cameroon did not notify all draft technical regulations to the WTO Committee on Technical Barriers to Trade (TBT) in 2020 and submitted eight notifications between 1995 and 2020.

The Cameroonian legal system is a legacy of French (Civil Law), German (Codified Laws), English (Common Law), and domestic national customs, which vary for each ethnic group. The government wants to harmonize these different legal traditions to equip Cameroon with laws that are applicable across the country and to reduce the need to navigate different legal opinions. This project, however, is being met with stiff resistance from English-speaking lawyers, who believe that the initiative will undermine the English system to which they are accustomed.

In terms of standards, Cameroon’s commercial legal system follows the OHADA rules, which are supposed to be aligned with International Financial Reporting Standards (IFRS).  Enforcement is weak, partly because of lack of capacity. There are not enough specialized judges in the commercial and economic fields. Consequently, poor enforcement of laws and accounting standards tend to create confusion for foreign investors. Despite efforts to align OHADA standards to international norms, government accounting regulations remain obsolete in the context of rapid developments in international finance and capital markets. To circumvent the problem, U.S. enterprises and investors often maintain two sets of accounting records, one in accordance with U.S. Generally Accepted Accounting Principles (GAAP) or suitable international standards, and another set to address the OHADA standards and government reporting requirements.

Arbitration is becoming the solution of choice to solve business disputes in Cameroon.  Arbitration is in the OHADA corporate law and business associations can choose to use OHADA law to run arbitration councils. Since OHADA is a supra-national law, Cameroon is bound by its decisions. In OHADA, regulations and enforcement actions are appealable, and they can also be adjudicated in the national court system. In Cameroon, businesses mostly use the GICAM and Abidjan Arbitration Councils.

Foreign direct investments are governed by Law No. 2013/004 of April 18, 2013, which defines incentives for private investment in Cameroon, while proposing generic and special incentives and affirming the government’s responsibilities towards private investors.  The law applies to both domestic and foreign investors.  Additional laws and regulations that refer to specific economic sectors are available on the website of the Ministry of Finance ( http://www.minfi.gov.cm/index.php/en/documents ).

The 2022 finance law is the newest legal instrument to have been published in the past year.  The 2021 finance law created new taxes, while maintaining some existing exonerations, notably on value-added taxes and life insurance savings. The 2022 law created new taxes as well, including a tax on electronic payments. CIPA maintains a list of relevant laws, rules, procedures, and reporting requirements for investors ( https://www.investincameroon.net/language/en/ ).

The National Competition Commission handles anti-competition and anti-trust disputes.  In some cases, the regulator of a specific economic sector can play the anti-trust role. State-owned enterprises tend to have quasi-monopoly or monopsony status in their markets.

Decree No.85-9 of July 4, 1985 and the subsequent implementation of Decree N°.87-1872 of December 16, 1987, outline the procedures governing expropriation for public purposes and conditions for compensation. Some of the provisions of these legal texts were repealed by Instruction No. 005/I/Y.25/MINDAF/D220 of December 29, 2005. Essentially, for the public interest, the state may expropriate privately-owned land. The laws also explain the formalities to be observed within the context of the procedure, both at the central and local levels.

In recent years, the government of Cameroon has expropriated large infrastructure road and hydroelectric dam projects. The government has a compensation process in place to meet the losses of those affected by such decisions.

Despite weakness in the actual implementation and execution of laws on the ground, compensation after expropriation generally follows a due process. There are no cases of indirect expropriation, confiscatory tax regimes, or regulatory actions that deprive investors of substantial economic benefits from their investments. However, serious allegations of corruption have plagued compensation procedures over the last decade. These incidents, often carried out by civil servants, have undermined trust in the process.

The Cameroonian government is open to portfolio investment. With the encouragement of the IMF and BEAC, Cameroon and other members of the CEMAC region have designed policies that facilitate the free flow of financial resources into the product and factor markets.

The Financial Markets Commission of Cameroon merged operations with the Libreville-based Central African Financial Market Supervisory Board in February 2019.  The merger has led to the establishment of a unique regional stock exchange called the Central African Stock Exchange (CASE). Cameroon’s financial sector is underdeveloped, and government policies have limited bearing on the free flow of financial resources into the product and factor markets. Foreign investors can get credit on the local market and the private sector has access to a variety of credit instruments. In 2016, Cameroon sought to encourage the development of capital markets through Law No 2016/010 of July 12, 2016, governing undertakings for collective investment in transferable securities in Cameroon.

Cameroon is connected to the international banking payment system. The country is a CEMAC member, which maintains a central bank, BEAC.  CEMAC’s central bank works with the IMF on monetary policies and public finance reform.  BEAC respects IMF Article VIII by refraining from restrictions on payments and transfers for current international transactions.  Despite generally respecting Article VIII, BEAC has instituted several restrictions on payments to boost foreign exchange reserves. Financial institutions and importers complain of a backlog of requests for foreign exchange. BEAC is currently negotiating with several international oil companies on repatriation of revenues before external payments. Investors should be aware that timely repatriation of profits may be a stumbling block.

In 2020, with the support of the IMF, BEAC took steps to address the economic impact of COVID-19 in the region. The central bank eased monetary policy and introduced accommodative measures to ensure adequate liquidity in the banking system to supporting internal and external stability. Concomitantly, the regional banking sector controller (Commission Bancaire de l’Afrique Centrale or COBAC) eased prudential regulations to help banks delay pandemic-related losses.

Less than 20 percent of Cameroonians have access to formal banking services. The Cameroonian government has often spoken of increasing access, but no coherent policy or action has been taken to alleviate the problem. Mobile money, introduced by local and international telecom providers, is the closest tool to banking services that most Cameroonians can access. In its 2022 finance law, the government introduced a tax on electronic payment transfers, including the ubiquitously used “Mobile Money.”

The banking sector is generally healthy.  Large, international commercial banks do most of the lending.  One local bank, Afriland, operates in Cameroon and multiple other countries. Most smaller banks deal in small loans of short duration. Retail banking is not common. According to the World Bank, non-performing loans were 10.31 percent of total bank loans in 2016. The Cameroonian government does not keep statistics on non-performing assets. According to Cameroon’s National Credit Council, Afriland First Bank, Societe General Cameroun (SGC), Banque Internationale du Cameroun pour l’Epargne et le Credit (BICEC), and Societe Commerciale de Banque Cameroun (SCB) are the most important banks in the national banking system, accounting for 52 percent of the banking system’s total consolidated balance sheet, 54 percent of total loans, and 54 percent of customer deposits in 2020.

Foreign banks can establish operations in Cameroon.  Most notably, Citibank and Standard Chartered Bank have operated in Cameroon for more than 20 years. They are subject to the same regulations as local banks. U.S. Embassy Yaoundé officials are unaware of any lost correspondent banking relationships within the past three years. There are no restrictions on foreigners establishing bank accounts, credit instruments, business financing, or other such transactions.

The country has 412 registered microfinance institutions, 19 insurance companies, four electronic money institutions, and one Post Office bank. Two major money transfer operators are also present, essentially offering over-the-counter services. The Cameroon market is at the startup stage for its digital financial system. This emerging market segment is currently provided by banks in partnership with telecom operators. According to a 2021 BEAC report on the state of electronic payments in the CEMAC zone, electronic money payments in the CEMAC region increased 21.8 percent from 2019 to 2020, totaling approximately $51 million in 2020 compared to $42 million in 2019.  Cameroon represented the largest amount of electronic payment transfers, accounting for 73 percent of all CEMAC transactions and totaling over $20 million in 2020.

Financial inclusion is low despite some progress brought about by mobile telephony. The World Bank estimates there were 25 million mobile cellular subscriptions in Cameroon in 2020. Putting aside the multi-SIM effect, the penetration rate in terms of unique subscribers was about 50 percent at the end of 2019, which puts Cameroon in the lower end in the Central African region.

Cameroon does not have a sovereign wealth fund.

Cameroon faces several security challenges. Violence by non-state armed groups against security forces and the local population is in its sixth year in the primarily English-speaking Southwest and Northwest Regions.  Boko Haram and ISIS-West Africa continue to attack civilians and security forces in the Far North Region. In the Adamoua and East Regions, a wave of kidnappings and the presence of refugees from the Central African Republic has led to increased military presence. Terrorists and separatists alike have targeted economic assets and public infrastructure to effect political change.

In the Northwest and Southwest regions, leaders of non-state armed groups have claimed responsibility on social media for the killing of government officials, arsons that destroyed hospitals, schools, bridges, roads, and the seizure of state-run utilities. Non-state armed groups have also posted videos on social media of executions and beheadings of security officers while also claiming responsibility for multiple kidnappings for ransom of persons perceived to be against their cause. Human rights organizations and local citizens have accused soldiers and separatists of grave human rights abuses. In the Far North of Cameroon, Boko Haram and ISIS-West Africa fighters have looted villages and cattle, kidnapped, and abused women. Consequently, several infrastructures projects have ground to a halt.

Canada actively encourages FDI and maintains a sound enabling environment. Investors are attracted to Canada’s proximity to the United States, highly skilled workforce, strong legal protections, and abundant natural resources. Once established, foreign-owned investments are treated equally to domestic investments. As of 2020, the United States had a stock of USD 422 billion of foreign direct investment in Canada. U.S. FDI stock in Canada represents 44 percent of Canada’s total investment. Canada’s FDI stock in the United States totaled USD 570 billion.

The USMCA modernizes the previous NAFTA investment protection rules and investor-state dispute settlement provisions. Parties to the USMCA agree to treat investors and investments of the other Parties in accordance with the highest international standards, and consistent with U.S. law and practice, while safeguarding each Party’s sovereignty and promoting domestic investment.

Invest in Canada is Canada’s investment attraction and promotion agency. It provides information and advice on doing business in Canada, strategic market intelligence on specific industries, site visits, and introductions to provincial, territorial, and municipal investment promotion agencies. Still, non-tariff barriers to trade across provinces and territories contribute to structural issues that have held back the productivity and competitiveness of Canada’s business sector.

Foreign investment in Canada is regulated under the provisions of the Investment Canada Act (ICA). U.S. FDI in Canada is also subject to the provisions of the World Trade Organization (WTO), the USMCA, and the NAFTA. The ICA mandates the review of significant foreign investments to ensure they provide an economic net benefit and do not harm national security.

Canada is not a party to the USMCA’s chapter on investor-state dispute settlement (ISDS). Ongoing NAFTA arbitrations are not affected by the USMCA, and investors can file new NAFTA claims by July 1, 2023, provided the investment(s) were “established or acquired” when NAFTA was still in force and remained “in existence” on the date the USMCA entered into force. An ISDS mechanism between the United States and Canada will cease following a three-year window for NAFTA-protected legacy investments.

The Canadian government announced revised ICA foreign investment screening guidelines on March 24, 2021. The revised guidelines include additional national security considerations such as sensitive technology areas, critical minerals, and sensitive personal data. The new guidelines are aligned with Innovation, Science, and Economic Development Canada’s April 2020 update on greater scrutiny for foreign investments by state-owned investors, as well as investments involving the supply of critical goods and services. The 2020-21 Investment Canada Act Annual Report (released February 2, 2022) indicated a record high 24 investments were subject either to formal national security review or heightened screening despite historically fewer total foreign investments in Canada due to COVID-19-related factors. In contrast, a total of 21 investments were subject to similar screening in the four years from 2016 to 2020. Still, some Canadian elected officials and national security experts assess national security standards should be heightened. The government is exploring proposed amendments to the National Security Review of Investments Regulations which would introduce a voluntary filing mechanism for investments by non-Canadians that do not require an application or a notification.

Foreign ownership limits apply to Canadian telecommunication, airline, banking, and cultural sectors. Telecommunication carriers, including internet service providers, that own and operate transmission facilities are subject to foreign investment restrictions if they hold a 10 percent or greater share of total Canadian communication annual market revenues as mandated by The Telecommunications Act. These investments require Canadian ownership of 80 percent of voting shares, Canadians holding 80 percent of director positions, and no indirect control by non-Canadians. If the company is a subsidiary, the parent corporation must be incorporated in Canada and Canadians must hold a minimum of 66.6 percent of the parent’s voting shares. Foreign ownership of Canadian airlines is limited to 49 percent with no individual non-Canadian able to control more than 25 percent by mandate of the 2018 Transportation Modernization Act. Canadian airlines cannot be directly or indirectly controlled by non-Canadians to meet Canadian Transportation Agency “control in fact” licensure requirements. Foreign banks can establish operations in Canada but are generally prohibited from accepting deposits of less than USD 112,000. Foreign banks must receive Department of Finance and the Office of the Superintendent of Financial Institutions (OSFI) approval to enter the Canadian market. Investment in cultural industries also carries restrictions, including a provision under the ICA that foreign investment in book publishing and distribution must be compatible with Canada’s national cultural policies and be of net benefit to Canada.

The World Trade Organization conducted a trade policy review of Canada in 2019. The report is available at: https://www.wto.org/english/tratop_e/tpr_e/tp489_e.htm . The Organization of Economic Cooperation and Development completed an Economic Forecast Summary and released the results in December 2021. The report is available at: http://www.oecd.org/economy/canada-economic-snapshot/ .

Individuals from Canadian civil society organizations, industry, and academic institutions regularly comment on and assess investment policy-related concerns. In January and February 2022, for example, subject matter experts gave evidence to Canada’s House of Commons Standing Committee on Industry and Technology regarding an investment policy decision concerning a high-profile critical mineral sector investment.

The Canadian government provides information necessary for starting a business at: https://www.canada.ca/en/services/business/start.html . Business registration requires federal or provincial government-based incorporation, the application of a federal business number and corporation income tax account from the Canada Revenue Agency, the registration as an extra-provincial or extra-territorial corporation in all other Canadian jurisdictions of business operations, and the application of relevant permits and licenses. In some cases, registration for these accounts is streamlined (a business can receive its business number, tax accounts, and provincial registrations as part of the incorporation process); however, this is not true for all provinces and territories.

Canada prioritizes export promotion and outward investment as a means to enhance future Canadian competitiveness and productivity. Canada’s Trade Commissioner Service offers a number of funding opportunities and support programs for Canadian businesses to break into and expand in international markets: https://www.tradecommissioner.gc.ca/funding_support_programs-programmes_de_financement_de_soutien.aspx?lang=eng&wbdisable=true . Canada does not restrict domestic investors from investing abroad except when recipient countries or businesses are designated under the government’s sanctions regime.

Canada’s regulatory transparency is similar to the United States. Regulatory and accounting systems, including those related to debt obligations, are transparent and consistent with international norms. Proposed legislation is subject to parliamentary debate and public hearings, and regulations are issued in draft form for public comment prior to implementation in the Canada Gazette, the government’s official journal of record. While federal and/or provincial licenses or permits may be needed to engage in economic activities, regulation of these activities is generally for statistical or tax compliance reasons. Under the USMCA, parties agreed to make publicly available any written comments they receive, except to the extent necessary to protect confidential information or withhold personal identifying information or inappropriate content.

Canada published regulatory roadmaps for clean technology, digitalization and technology neutrality, and international standards in June 2021. These roadmaps, part of the federal government’s multi-year Targeted Regulatory Review program, lay out plans to advance regulatory modernization to support economic growth and innovation. Canadian securities legislation does not currently mandate environmental, social, and governance (ESG) disclosure for public or private companies. The Canadian Securities Administrators, an umbrella organization of all provincial and territorial securities regulators, released two proposed ESG disclosure policies for public comment between October 2021 and February 2022. The policies would require climate-related governance disclosures and climate-related strategy, risk management and metrics and targets disclosures if adopted.

Canada publishes an annual budget and debt management report. According to the Ministry of Finance, the design and implementation of the domestic debt program are guided by the key principles of transparency, regularity, prudence, and liquidity.

Canada addresses international regulatory norms through its FTAs and actively engages in bilateral and multilateral regulatory discussions. U.S.-Canada regulatory cooperation is guided by Chapter 28 of the USMCA “Good Regulatory Practices” and the bilateral Regulatory Cooperation Council (RCC). The USMCA aims to promote regulatory quality through greater transparency, objective analysis, accountability, and predictability. The RCC is a bilateral forum focused on harmonizing health, safety, and environmental regulatory differences. Canada-EU regulatory cooperation is guided by Chapter 21 “Regulatory Cooperation” of the CETA and the Regulatory Cooperation Forum (RCF). CETA encourages regulators to exchange experiences and information and identify areas of mutual cooperation. The RCF seeks to reconstitute regulatory cooperation under the previous Canada-EU Framework on Regulatory Cooperation and Transparency. The RCF is mandated to seek regulatory convergence where feasible to facilitate trade. CPTPP Chapter 25 “Regulatory Coherence” seeks to encourage the use of good regulatory practices to promote international trade and investment, economic growth, and employment. The CPTPP also established a Committee on Regulatory Coherence charged with considering developments to regulatory best practices in order to make recommendations to the CPTPP Commission for improving the chapter provisions and enhancing benefits to the trade agreement.

Canada is a member of the WTO and notifies draft technical regulations to the WTO Committee on Technical Barriers to Trade. Canada is a signatory to the Trade Facilitation Agreement, which it ratified in December 2016.

Canada’s legal system is based on English common law, except for Quebec, which follows civil law. Law-making responsibility is split between the Parliament of Canada (federal law) and provincial/territorial legislatures (provincial/territorial law). Canada has both written commercial law and contractual law, and specialized commercial and civil courts. Canada’s Commercial Law Directorate provides advisory and litigation services to federal departments and agencies whose mandate includes a commercial component and has legal counsel in Montréal and Ottawa.

The judicial branch of government is independent of the executive branch and the current judicial process is considered procedurally competent, fair, and reliable. The provinces administer justice in their jurisdictions, including management of civil and criminal provincial courts.

Foreign investment in Canada is regulated under the provisions of the ICA. U.S. FDI in Canada is also subject to the provisions of the WTO, the USMCA, and the NAFTA. The purpose of the ICA is to review significant foreign investments to ensure they provide an economic net benefit and do not harm national security.

Canada relies on its Invest In Canada promotion agency to provide relevant information to foreign investors: https://www.investcanada.ca/ 

Competition Bureau Canada is an independent law enforcement agency charged with ensuring Canadian businesses and consumers prosper in a competitive and innovative marketplace as stipulated under the Competition Act, the Consumer Packaging and Labelling Act, the Textile Labelling Act, and the Precious Metals Marking Act. The Bureau is housed under the Department of Innovation, Science, and Economic Development (ISED) and is headed by a Commissioner of Competition. Competition cases, excluding criminal cases, are brought before the Competition Tribunal, an adjudicative body independent from the government. The Competition Bureau and Tribunal adhere to transparent norms and procedures. Appeals to Tribunal decisions may be filed with the Federal Court of Appeal as per section 13 of the Competition Tribunal Act. Criminal violations of competition law are investigated by the Competition Bureau and are referred to Canada’s Public Prosecution Service for prosecution in federal court.

The federal government announced in February 2022 an intention to review competition law and policy including specific evaluation of loopholes that allow for harmful conduct, drip pricing, wage fixing agreements, access to justice for those injured by harmful conduct, adaptions to the digital economy, and penalty regime modernization. The announcement cited competition as a key tool to strengthen Canadian post-pandemic economic recovery.

In September 2020, the Bureau signed the Multilateral Mutual Assistance and Cooperation Framework for Competition Authorities (MMAC) with the Australian Competition and Consumer Commission, the New Zealand Commerce Commission, the United Kingdom Competition & Markets Authority, the U.S. Department of Justice, and the U. S. Federal Trade Commission. The MMAC aims to improve international cooperation through information sharing and inter-organizational training.

Canadian federal and provincial laws recognize both the right of the government to expropriate private property for a public purpose and the obligation to pay compensation. The federal government has not nationalized a foreign firm since the nationalization of Axis property during World War II. Both the federal and provincial governments have assumed control of private firms, usually financially distressed companies, after reaching agreement with the former owners.

The USMCA, like the NAFTA, requires expropriation only be used for a public purpose and done in a nondiscriminatory manner, with prompt, adequate, and effective compensation, and in accordance with due process of law.

Bankruptcy in Canada is governed at the federal level in accordance with the provisions of the Bankruptcy and Insolvency Act (BIA) and the Companies’ Creditors Arrangement Act. Each province also has specific laws for dealing with bankruptcy. Canada’s bankruptcy laws stipulate that unsecured creditors may apply for court-imposed bankruptcy orders. Debtors and unsecured creditors normally work through appointed trustees to resolve claims. Trustees will generally make payments to creditors after selling the debtors assets. Equity claimants are subordinate to all other creditor claims and are paid only after other creditors have been paid in full per Canada’s insolvency ladder. In all claims, provisions are made for cross-border insolvencies and the recognition of foreign proceedings. Secured creditors generally have the right to take independent actions and fall outside the scope of the BIA.

Canada’s capital markets are open, accessible, and regulated. Credit is allocated on market terms, the private sector has access to a variety of credit instruments, and foreign investors can get credit on the local market. Canada has several securities markets, the largest of which is the Toronto Stock Exchange, and there is sufficient liquidity in the markets to enter and exit sizeable positions. The Canadian government and Bank of Canada do not place restrictions on payments and transfers for current international transactions.

The Canadian banking system is composed of 35 domestic banks and 16 foreign bank subsidiaries. Six major domestic banks are dominant players in the market and manage close to USD 5.4 trillion in assets. Many large international banks have a presence in Canada through a subsidiary, representative office, or branch. Ninety-nine percent of Canadians have an account with a financial institution. The Canadian banking system is viewed as very stable due to high capitalization rates that are well above the norms set by the Bank for International Settlements. The OSFI, Canada’s primary banking regulator, announced in January 2022 revised capital, leverage, liquidity, and disclosure rules that incorporate the final Basel III banking reforms with additional adjustments to make them suitable for federally regulated deposit-taking institutions. Most of the revised rules will take effect in the second fiscal quarter of 2023, with those related to market risk and credit valuation adjustment risk taking effect in early 2024.

Foreign financial firms interested in investing submit their applications to the OSFI for approval by the Minister of Finance. U.S. and other foreign banks can establish banking subsidiaries in Canada. Several U.S. financial institutions maintain commercially focused operations, principally in the areas of lending, investment banking, and credit card issuance. Foreigners can open bank accounts in Canada with proper identification and residency information.

The Bank of Canada is the nation’s central bank. Its principal role is “to promote the economic and financial welfare of Canada,” as defined in the Bank of Canada Act. The Bank’s four main areas of responsibility are: monetary policy; promoting a safe, sound, and efficient financial system; issuing and distributing currency; and being the fiscal agent for Canada.

Canada does not have a federal sovereign wealth fund. The province of Alberta maintains the Heritage Savings Trust Fund to manage the province’s share of non-renewable resource revenue. The fund’s net financial assets were valued at USD 14 billion as of December 31, 2021. The Fund invests in a globally diversified portfolio of public and private equity, fixed income, and real assets. The Fund follows the voluntary code of good practices known as the “Santiago Principles” and participates in the IMF-hosted International Working Group of SWFs. The Heritage Fund holds approximately 50 percent of its value in equity investments, seventeen percent of which are domestic.

Canada is politically stable with rare instances of civil disturbance. In January and February 2022, however, various groups of protestors occupied large parts of the downtown core of Ottawa and blocked commercial trade at several U.S.-Canada ports of entry. The initial protest movement of several hundred individuals claimed to be focused on the reversal of cross-border vaccine mandates. The movement attracted thousands of additional followers with a spectrum of political philosophies and grievances including far right extremist and anti-government groups. The protestors hindered hundreds of millions of dollars in daily two-way trade causing production slowdowns at several factories on both sides of the border. Many Ottawa residents complained of acts of harassment, desecration, and destruction by the protestors including deafening horn honking. The federal government invoked the never-before-used Emergencies Act to provide additional police powers to end the protests. Some commentators characterized the protests as a demonstration of growing politization within Canada.

The GOC’s policies towards foreign direct investment (FDI) are generally positive. Chad’s laws and regulations encourage FDI, and there are few formal restrictions on foreign trade and investment. Under Chadian law, foreign and domestic entities may establish and own business enterprises.

The National Investment Charter of 2008 permits full foreign ownership of companies in Chad. The only limit on foreign control is on ownership of companies deemed related to national security. The National Investment Charter guarantees both foreign companies and individuals equal standing with Chadian companies and individuals in the privatization process. In principle, tenders for foreign investment in state-owned enterprises (SOEs) and for government contracts are conducted through open international bid procedures. The National Investment Charter also offers incentives to certain foreign companies establishing significant operations in Chad, including up to five years of tax-exempt status.

Chad’s National Agency for Investment and Exports (ANIE, Agence Nationale des Investissements et des Exports), an agency of the Ministry of Industrial and Commercial Development & Private Sector Promotion, facilitates foreign investment. ANIE’s mandate is to contribute to the creation of a business environment that meets international standing, promote investment and exports, support the development of SMEs, and inform GOC decision makers about economic policy. ANIE acts as a one-stop shop for new investors.

Chad has demonstrated few signs of prioritizing investment retention or maintaining an ongoing dialogue with investors, such as through a formal business roundtable or Ombudsman. The Presidential Council for Improving the Investment Climate has met only twice since its 2021 establishment and is still working to clarify its work plan.

There are no limits on foreign ownership or control. There are no sector-specific restrictions that discriminate against market access for U.S. or other foreign investors, and no de facto anti-foreign discriminatory practices. In terms of investment screening mechanisms, the government reviews potential investment projects in a holistic and project-by-project way but has not made public any fixed criteria or standardized methodology.

UNCTAD published a French-language Investment Policy Review (IPR) on Chad in July 2019 ( https://investmentpolicy.unctad.org/publications/1212/investment-policy-review-of-chad ).

The World Trade Organization (WTO) published a joint trade policy review for Chad, Cameroon, Republic of Congo, Gabon, and Central African Republic in 2013 ( https://www.wto.org/english/tratop_e/tpr_e/tp385_e.htm ), and a standalone trade policy review for Chad in 2007 ( https://www.wto.org/english/tratop_e/tpr_e/tp275_e.htm ).

The OECD has not published any investment policy reviews of Chad.

Civil society groups have not shared useful reviews of investment policy-related concerns, though many Chadians at large have voiced concern about the negative effects of Chad’s onerous and lethargic tourist visa process as dissuading potential foreign investment, compared to other countries which boast inexpensive, hassle-free visas on arrival. To date, the government has shown little interest in addressing this common complaint. A Chamber of Commerce does exist, though has published little information regarding policy-related investment concerns.

Foreign businesses interested in investing in or establishing an office in Chad should contact ANIE, which offers a one-stop shop for filing the legal forms needed to start a business. The process officially takes 72 hours and is the most important legal requirement for investment. ANIE’s website ( www.anie-tchad.com ) provides additional information. An easy step to facilitate business (that the government has not taken) would be completing online business registration via the Global Enterprise Registration web site ( www.GER.co ) and the Business Facilitation Program ( www.businessfacilitation.org ). The World Bank estimated in 2019 that it took, on average, 58 days to start a business in Chad.

Contracts are tailored to each investment and often include additional incentives and concessions, such as permissions to import labor or agreements to work with specific local suppliers. Some contracts are confidential. Occasionally, government ministries attempt to change the terms of contracts or apply new laws broadly, even to companies that have pre-existing agreements that exempt them. Chad’s judicial system is weak, and rulings, including those relating to contract disputes, are susceptible to government interference. There is limited capacity within the judiciary to address commercial issues, including contract disputes. Frivolous lawsuits are expensive and difficult to resolve. Parties usually settle disputes directly or through arbitration provided by the Chamber of Commerce, Industry, Agriculture, Mining, and Crafts (CCIAMA) or through an outside entity, such as the International Chamber of Commerce (ICC) in Paris.

The GOC does not offer any programs or incentives encouraging outward investment. The GOC does not restrict domestic investors from investing abroad.

Chad implements laws to foster competition and establish clear rules based on Uniform Acts produced by the Organization for the Harmonization of Business Law in Africa (OHADA, Organisation pour l’Harmonisation en Afrique du Droit des Affaires, www.ohada.com ). However, certain Chadian and foreign companies may encounter difficulties from well-established companies with a corner on the market, discouraging competition.

Regulations and financial policies generally do not impede competition in the financial sector. Legal, regulatory, and accounting systems pertaining to banking are transparent and consistent with international norms. Chad began using OHADA’s accounting system in 2002, bringing its national standards into harmony with accounting systems throughout the region. Several international accounting firms have offices in Chad. However, while accounting, legal, and regulatory procedures are consistent with international norms, some local firms do not use generally accepted standards and procedures in their business practices.

Chad develops forward regulatory plans to encourage foreign investment and budget support. Government ministries draft regulations, subject to approval by the Secretary General of the Government, Council of Ministers, National Assembly, and President. National regulations are most relevant to foreign investors. There are no informal regulatory processes managed by nongovernmental organizations or private sector associations. The GOC occasionally provides opportunities for local associations, such as the National Council of Employers (CNPT, Conseil National du Patronat Tchadien) or the CCIAMA to comment on proposed laws and regulations pertaining to investment. All contracts and practices are subject to legal review, which can be weak.

The government publishes all budget information, including on the Ministry of Finance and Budget website. Other proposed laws and regulations are not published in draft form for public comment. The Observatory on Public Finance is an online framework for the dissemination of public finance data and the operationalization of the Code of Transparency and Good Governance. This code is an implementation of one of the six CEMAC directives on the December 2011 harmonized framework for public financial management that set 2020 as its goal for complete implementation.

The Presidential Council to Improve the Business Climate was announced in 2018, met once in late 2019, and formally launched in January 2021 due to the negative impact of COVID-19 in 2020. This effort to reform Chad’s investment climate and improve Chad’s performance in World Bank assessments is still in its embryonic stage.

The government has not registered Chad on UNCTAD’s website for helping governments simplify, digitize, and automate administrative procedures, www.businessfacilitation.org , despite the website’s ability to be customized for any procedure or level of government without changing any of its laws. To date, the government has not promoted or required companies environmental, social, and governance (ESG) disclosure to facilitate transparency and/or help investors and consumers distinguish between the quality of potential investments.

While the government publishes both its general budget and a simplified “citizen” budget to the website of the Ministry of Finance and Budget and to the Observatory on Public Finance website, it does not allow transparency into its debt obligations, including explicit and contingent liabilities.

Chad has been a member of the WTO since October 19, 1996, and a member of GATT since July 12, 1963. Chad is a member of OHADA and the CEMAC ( www.cemac.int ). Since 2017, Chad is gradually implementing business and economic laws and regulations based on CEMAC standards and OHADA Uniform Acts. Chad’s banking sector is regulated by COBAC (Commission Bancaire de l’Afrique Centrale), a regional agency.

Chad’s legal system and commercial law are based on the French Civil Code which gives rise to the proliferation of frivolous lawsuits and judicial abuse by corrupt authorities. The constitution recognizes customary and traditional law if it does not interfere with public order or constitutional rights. Chad’s judicial system, which often lacks access to printed versions of Chad’s own laws, rules on commercial disputes in a limited technical capacity. Courts normally award monetary judgments in local currency, although it may designate awards in foreign currencies based on the circumstances of the disputed transaction. Historically, the Chadian President appointed judges without National Assembly confirmation, and thus the judiciary may have been subject to executive influence. Following the April 2021 establishment of the Transitional Military Council, its members appointed 93 members to an interim legislative body known as the Transitional National Council (CNT). Many Chadian civil society groups criticized the CNT’s appointment, rather than popular election, as well as its makeup as disproportionately reflecting individuals aligned with former President Deby, and for resulting perceptions of a lack of neutrality.

Chad’s commercial laws are based on standards promulgated by CEMAC, OHADA, and the Economic Community of Central African States (CEEAC, Communaute Economique des Etats de l’Afrique Centrale, http://www.ceeac-eccas.org ). The government is in the process of adopting legislation to comply fully with all these provisions.

Specialized commercial tribunal courts were authorized in 1998 and operationalized in 2004. These tribunals exist in five major cities but lack adequate technical capacity to perform their duties. Firms not satisfied with judgments in these tribunals may appeal to OHADA’s regional court in Abidjan, Cote d’Ivoire, that ensures uniformity and consistent legal interpretations across its member countries. Several Chadian companies have done so. OHADA also allows foreign companies to utilize tribunals outside of Chad, generally in Paris, France, to adjudicate business disputes. Finally, CEMAC established a regional court in N’Djamena in 2001 to hear business disputes, but this body is not widely used.

Contracts and investment agreements can stipulate arbitration procedures and jurisdictions for settlement of disputes. If both parties agree, and settlements do not violate Chadian law, Chadian courts uphold the decision of the court in the nation where an agreement was signed, such as the United States. This principle also applies to disputes between foreign companies and the Chadian Government. The International Chamber of Commerce (ICC) can arbitrate such disputes and foreign companies frequently choose to include clauses in their contract to mandate ICC arbitration.

Bilateral judicial cooperation is in effect between Chad and certain nations. Chad signed the Antananarivo Convention in 1970, covering the discharge of judicial decisions and serving of legal documents, with eleven other former French colonies (Benin, Burkina Faso, Cameroon, CAR, Congo-Brazzaville, Gabon, Cote d’Ivoire, Madagascar, Mauritania, Niger, and Senegal). Chad has similar arrangements in place with France, Nigeria, and Sudan.

The National Investment Charter encourages foreign direct investment. Chad is a member of CEMAC and OHADA. Since 2017, Chad has gradually implemented business and economic laws and regulations based on CEMAC standards and OHADA Uniform Acts.

Foreign investors using the court system are not generally subject to executive interference. In addition, the OHADA Treaty allows foreign companies to utilize tribunals outside of Chad, e.g., the International Chamber of Commerce (ICC) in Paris, France, to adjudicate any disputes. Companies may also access the OHADA’s court located in Abidjan, Ivory Coast.

Foreign businesses interested in investing in or establishing an office in Chad should contact ANIE, which offers a one-stop shop for filing the legal forms needed to start a business. The process officially takes 72 hours and is the most important legal requirement for investment. ANIE’s website ( www.anie-tchad.com ) provides additional information.

Regulation of competition is covered by the OHADA Uniform Acts that form the basis for Chadian business and economic laws and regulations. The Office of Competition in Chad’s Ministry of Industrial and Commercial Development & Private Sector Promotion reviews transactions for competition-related concerns.

Chadian law protects businesses from nationalization and expropriation, except in cases where expropriation is in the public interest. There were no direct government expropriations of foreign-owned property in 2021, though the government maintains indirect expropriation measures, such as a confiscatory tax regime that boasts the third-highest corporate tax rate in the world. There are no indications that the GOC intends to directly expropriate foreign property in the near term, though foreign businesses have reported difficulty repatriating profits from Chadian bank accounts and the open-source reporting indicates that the Chadian government has demanded an extralegal multi-million dollar exit payment from a large multinational.

Historically, a 1967 Land Law has prohibited since its passage the deprivation of ownership without due process, stipulating that the state may not take possession of expropriated properties until 15 days after the payment of compensation. While the government continues to work on reform of the 1967 Land Law, the May 2018 constitution (amended in December 2020), prohibited in its Article 45 the seizure of private property, except in cases of urgent public need — of which there are no known cases. The transitional government’s constitutional charter, which came into place in April 2021 upon the dissolution of Chad’s constitution by the Transitional Military Council, likewise prohibits expropriation outside the framework of the law in its Article 26, though without inclusion of “public utility” or “fair and prior compensation” that were present in the 2018 document.

Chad’s bankruptcy laws are based on OHADA Uniform Acts. According to Section 3, Articles 234 – 239 of OHADA’s Uniform Insolvency Act, creditors and equity shareholders may designate trustees to lodge complaints or claims to the commercial court collectively or individually. The OHADA provisions grant Chad the discretion to apply its own sentences.

Chad’s financial system is underdeveloped. There are no capital markets or money markets in Chad. A limited number of financial instruments are available to the private sector, including letters of credit, short- and medium-term loans, foreign exchange services, and long-term savings instruments. Chad maintains an exchange system that is free from restrictions and multiple currency practices on payments and transfers for current international transactions. This includes due to any actions delegated to BEAC.

Commercial banks offer credit on market terms, often at rates of 12 to 25 percent for short-term loans. Access to credit is available but is prohibitively expensive for most Chadians in the private sector. Medium-term loans are difficult to obtain, as lending criteria are rigid. Most large businesses maintain accounts with foreign banks and borrow money outside of Chad. There are ATMs in some major hotels, most neighborhoods of N’Djamena, the N’Djamena airport, and in major cities.

Chad does not have a stock market and has no effective regulatory system to encourage or facilitate portfolio investments. A small regional stock exchange, known as the Central African Stock Exchange, in Libreville, Gabon, was established by CEMAC countries in 2006. Cameroon, a CEMAC member, launched its own market in 2005. Both exchanges are poorly capitalized.

Chad’s banking sector is small and continues to streamline lending practices and reduce the volume of bad debt accumulated before and during the 2016-2017 economic crisis. While Chad’s banking rate remains low due to low aggregate savings and limited trust in and exposure to banks, according to the World Bank it increased from nine to 22 percent between 2009 and 2017.

Chad’s four largest banks have been privatized. The former Banque Internationale pour l’Afrique au Tchad (BIAT) became a part of Togo-based Ecobank; the former Banque Tchadienne de Credit et de Depôt was re-organized as the Societe Generale Tchad; the former Financial Bank became part of Togo-based Orabank; and the former Banque de Developpement du Tchad (BDT) was reorganized as Commercial Bank Tchad (CBT), in partnership with Cameroon-based Commercial Bank of Cameroon. There are two Libyan banks in Chad, BCC (formerly Banque Libyenne) and BSCIC (Banque Sahelo-Saharienne pour l’Investissement et le Commerce), along with one Nigerian bank — United Bank for Africa (UBA). In 2018, the GOC funded a new bank Banque de l’Habitat du Tchad (BHT) with the GOC as majority shareholder with 50 percent of the shares and two public companies, the National Social Insurance Fund (Caisse Nationale de Prevoyance Sociale, CNPS) and the Chadian Petroleum Company (Societe des Hydrocarbures du Tchad, SHT), each holding 25 percent.

Chad, as a CEMAC member, shares a central bank with Cameroon, Central African Republic, Republic of Congo, Equatorial Guinea, and Gabon — the Central African Economic Bank (BEAC, Banque des Etats de l’Afrique Centrale), headquartered in Yaounde, Cameroon.

Foreigners must establish legal residency in order to establish a bank account.

The GOC does not maintain a Sovereign Wealth Fund.

All Chadian SOEs operate under the umbrella of government ministries. SOE senior management reports to the minister responsible for the relevant sector, as well as a board of directors and an executive board. Historically, the president appointed members of SOE boards of directors, executive boards, and CEOs though no new appointments have happened since the April 2021 establishment of the Transitional Military Council. The boards of directors give general directives over the year, while the executive boards manage general guidelines set by the boards of directors. Some executive directors consult with their respective ministries before making business decisions.

The GOC operates SOEs in several sectors, including Energy and Environmental Industries; Agribusiness; Construction, Building and Heavy Equipment; and Information and Communication. The percentage of their annual budget that SOEs allocate to research and development (R&D) is unpublished.

There were no reports of discriminatory action taken by SOEs against the interests of foreign investors in 2021. Some foreign companies operated in direct competition with SOEs. Chad’s Public Tender Code (PTC) provides preferential treatment for domestic competitors, including SOEs.

SOEs are not subject to the same tax burden and tax rebate policies as their private sector competitors and are often afforded material advantages such as preferential access to land and raw materials. SOEs receive government subsidies under the national budget, which the government does not publish. SOEs often comingle government and SOE funds, which complicates their financial picture.

Chad is not a party to the Agreement on Government Procurement within the framework of the WTO. Chadian practices are not consistent with the OECD Guidelines on Corporate Governance for SOEs.

(Please use DOC key words for industries in this section; list available at https://www.export.gov/industries ).

Foreign investors are permitted and encouraged to participate in the privatization process. There is a public, non-discriminatory bidding process. Having a local contact in Chad to assist with the bidding process is important. To combat corruption, the GOC has recently hired private international companies to oversee the bidding process for government tenders. The Chamber of Commerce submitted a ‘white paper’ (livre blanc) in 2018 with recommendations for the GOC to facilitate and simplify private sector operations, including establishing a Business Observatory and a Presidential Council, which would implement over 70 recommendations to improve the investment climate in Chad. The Presidential Council became operational in January 2021.

The GOC has expressed general willingness to privatize its generally unprofitable SOEs, including to foreign investors. As an example, in 2018, it sold a majority stake in cotton export company CotonTchad Société Nouvelle (CotonTchad SN) to the Singaporean Olam International. Qatari investors recently purchased a slaughterhouse in Moundou as well. Investors from the UAE are under talks to purchase a slaughterhouse in Farcha, though their progress has stalled.

Chad is considering privatization in the following industries:

• Information & Communication (SOTEL Tchad)
• Food Processing & Packaging (the Société Tchadienne de Jus de Fruit (STJF), which produces fruit juice in Doba
• Agricultural Products (Société Moderne de Abbatoires (SMA), a slaughterhouse and meat packaging company in Farcha)

In addition, a 2019 law opened the market for power generation to private companies, though involvement in transmission remains under the control of the state-owned Societe Nationale d’Electricite du Tchad (SNE), which is reportedly unprofitable.

Chad enjoyed relative political stability from 2010 to April 2021, when armed groups entered from Libya and engaged in armed hostilities with Chadian government forces following the government’s announcement of former President Idriss Déby having won a sixth term. During this incursion, Deby, who had ruled the country since 1990, was killed. A group of 15 generals called the Transitional Military Council, with former President Deby’s son Mahamat Deby at the head, dissolved Chad’s constitution and legislative National Assembly in favor of a constitutional charter and interim legislature (Transitional National Council, CNT) based on an 18-month mandate. During these 18 months, set to end in October 2022, the government plans to hold a National Dialogue in May on a range of social, economic, political, and security issues pertinent to the country to inform the drafting of a new constitution to be adopted by referendum a possible pre-election census, and parliamentary and presidential elections to return to civilian-led government. Following the creation of the transitional government, Chad has entered a period of tenuous peace as the government engages in negotiations with armed political groups over their possible terms for participation in the May National Dialogue as well as disarmament, demobilization, and reintegration (DDR) into Chadian society. Cross-border intercommunal violence near neighboring Darfur threatens to hamstring the prospect of a lasting peace, as do widespread frustrations over poor socio-economic conditions and impunity for excessive use of force by government security forces.

Prior to July 2021, the government typically denied permits for demonstrations or suppressed them using tear gas while arresting participants and organizers. Since then, the transitional government has allowed limited protests in N’Djamena while insisting on rigid adherence to pre-approved routes with occasional use of tear gas to disperse protestors. On the other hand, state security forces outside N’Djamena repressed public demonstrations, including live ammunition that resulted in fatalities, to quell political dissent. In December 2021, in northern Chad’s city of Faya, government forces used live ammunition to disperse protestors frustrated with changes in customs procedures, reportedly resulting in one fatality. In January, in the eastern city of Abeche, government security forces violently confronted protestors frustrated with appointment of traditional official, leaving a reported 14 dead and 64 wounded. There were no reports of politically motivated damage to investment projects and/or installations in recent years, including during incursions by armed groups into Chad in 2008 and 2021.

While Chad, which depends on oil for nearly 80 percent of its export revenues, has faced the stresses of an extended period of reduced oil revenues, recent increases in oil prices have begun to alleviate this issue. The COVID-19 pandemic, despite a low estimated incidence rate in Chad, strains Chad’s limited medical infrastructure, disrupts trade routes with neighboring countries, and complicates international air travel.

Regional violent extremist organizations threaten regional stability and foreign investments along the Lake Chad Basin and. Armed non-governmental groups operate along the Libyan border in northern Chad. Violent attacks by Boko Haram have choked off vital trade routes with Nigeria and the road between N’Djamena and Douala, Cameroon, the principal port serving Chad. This has increased costs for imports and decreased exports.

U.S. businesses and organizations in Chad are welcome to inquire at the Embassy about joining the Overseas Security Advisory Committee (OSAC).

For up-to-date information on political and security conditions in Chad, please refer to the Consular Affairs Bureau’s Travel Warning and Country Specific Information at http://www.travel.state.gov. The Embassy encourages all U.S. Citizens in Chad to enroll online with the Smart Traveler Enrollment (STEP) program or with the Embassy upon arrival to receive the latest safety and security updates via email.

Historically and for more than four decades, promoting FDI has been an essential part of the Chilean government’s national development strategy. The country’s market-oriented economic policy creates significant opportunities for foreign investors to participate. Laws and practices are not discriminatory against foreign investors, who receive treatment similar to Chilean nationals. Chile’s business climate is generally straightforward and transparent, and its policy framework has remained consistent despite developments such as civil unrest in 2019 and the COVID-19 pandemic. However, the permitting process for infrastructure, mining, and energy projects is contentious, especially regarding politically sensitive environmental impact assessments, water rights issues, and indigenous consultations. In July 2021, Chile began a constitutional reform process that is expected to produce a new constitution by July that Chileans will vote on whether to enact in September. Key issues under discussion through the Constitutional Assembly process include the political structure of the country, water rights, mining rights, environmental regulation, and the status of indigenous communities.

InvestChile is the government agency in charge of facilitating the entry and retention of FDI into Chile. It provides services related to investment attraction (information about investment opportunities); pre-investment (sector-specific advisory services, including legal); landing (access to certificates, funds and networks); and after-care (including assistance for exporting and re-investment).

Regarding government-investor dialogue, in May 2018, the Ministry of Economy created the Sustainable Projects Management Office (GPS). This agency provides support to investment projects, both domestic and foreign, serving as a first point of contact with the government and coordinating with different agencies in charge of evaluating investment projects, which aims to help resolve issues that emerge during the permitting process.

Foreign investors have access to all productive activities, except for the domestic maritime freight sector, in which foreign ownership of companies is capped at 49 percent. Maritime transportation between Chilean ports is open since 2019 to foreign cruise vessels with more than 400 passengers. Some international reciprocity restrictions exist for fishing.

Most enterprises in Chile may be 100 percent owned by foreigners. Chile only restricts the right to private ownership or establishment in what it defines as certain “strategic” sectors, such as nuclear energy and mining. The current Constitution establishes the “absolute, exclusive, inalienable and permanent domain” of the Chilean state over all mineral, hydrocarbon, and fossil fuel deposits within Chilean territory. However, Chilean law allows the government to grant concession rights and lease agreements to individuals and companies for exploration and exploitation activities, and to assign contracts to private investors, without discrimination against foreign investors. The Constitutional Assembly is reviewing proposals that if enacted could affect mining operations of foreign investors.

Chile has not implemented an investment screening mechanism to protect key national security priorities. FDI is subject to pro forma screening by InvestChile. Businesses in general do not consider these screening mechanisms as barriers to investment because approval procedures are expeditious, and investments are usually approved. Some transactions require an anti-trust review by the office of the national economic prosecutor (Fiscalía Nacional Económica) and possibly by sector-specific regulators.

The World Trade Organization (WTO) has not conducted a Trade Policy Review for Chile since June 2015 (available here: https://www.wto.org/english/tratop_e/tpr_e/tp415_e.htm ). The Organization for Economic Co-operation and Development (OECD) has not conducted an Investment Policy Review for Chile since 1997 (available here: http://www.oecd.org/daf/inv/investment-policy/34384328.pdf ), and the country is not part of the countries covered to date by the United Nations Conference on Trade and Development’s (UNCTAD) Investment Policy Reviews.

The Chilean government took significant steps towards business facilitation during the past decade. Starting in 2018, the government introduced updated electronic and online systems for providing some tax information, complaints related to contract enforcement, and online registration of closed corporations (non-public corporations). In June 2019, the Ministry of Economy launched the Unified System for Permits (SUPER), a new online single-window platform that brings together 182 license and permit procedures, simplifying the process of obtaining permits for investment projects.

According to the World Bank, Chile has one of the shortest and smoothest processes among Latin American and Caribbean countries – 11 procedures and 29 days – to establish a foreign-owned limited liability company (LLC). Drafting statutes of a company and obtaining an authorization number can be done online at the platform HYPERLINK hError! Hyperlink reference not valid.. Electronic signature and invoicing allow foreign investors to register a company, obtain a tax payer ID number and get legal receipts, invoices, credit and debit notes, and accountant registries. A company typically needs to register with Chile’s Internal Revenue Service, obtain a business license from a municipality, and register either with the Institute of Occupational Safety (public) or with one of three private nonprofit entities that provide work-related accident insurance, which is mandatory for employers. In addition to the steps required of a domestic company, a foreign company establishing a subsidiary in Chile must authenticate the parent company’s documents abroad and register the incoming capital with the Central Bank. This procedure, established under Chapter XIV of the Foreign Exchange Regulations, requires a notice of conversion of foreign currency into Chilean pesos when the investment exceeds $10,000. The registration process at the Registry of Commerce of Santiago is available online.

The Government of Chile does not have an active policy of promotion or incentives for outward investment, nor does it impose restrictions on it.

Chile’s legal, regulatory, and accounting systems are transparent and provide clear rules for competition and a level playing field for foreigners. They are consistent with international norms; however, environmental regulations – which include mandatory indigenous consultation required by the International Labor Organization’s Indigenous and Tribal Peoples Convention (ILO 169) – and other permitting processes have become lengthy and unpredictable, especially in politically sensitive cases.

Chile does not have a regulatory oversight body. Four institutions play key roles in the rule-making process: The General-Secretariat of the Presidency (SEGPRES), the Ministry of Finance, the Ministry of Economy, and the General Comptroller of the Republic. Most regulations come from the national government; however, some, in particular those related to land use, are decided at the local level. Both national and local governments are involved in the issuance of environmental permits. Regulatory processes are managed by governmental entities. NGOs and private sector associations may participate in public hearings or comment periods.

In Chile, non-listed companies follow norms issued by the Accountants Professional Association, while publicly listed companies use the International Financial Reporting Standards (IFRS). Since January 2018, IFRS 9 entered into force for companies in all sectors except for banking, in which IFRS 15 will be applied. IFRS 16 entered into force in January 2019. On January 1, 2022, Chile’s Financial Market Commission (CMF) began implementation of the IFRS 17 accounting standards in the Chilean insurance market.

The legislation process in Chile allows for public hearings during discussion of draft bills in both chambers of Congress. Draft bills submitted by the Executive Branch to the Congress are readily available for public comment. Ministries and regulatory agencies are required by law to give notice of proposed regulations, but there is no formal requirement in Chile for consultation with the general public, conducting regulatory impact assessments of proposed regulations, requesting comments, or reporting results of consultations. For lower-level regulations or norms that do not need congressional approval, there are no formal provisions for public hearing or comment. As a result, Chilean regulators and rulemaking bodies normally consult with stakeholders, but in a less formal manner.

All decrees and laws are published in the Diario Oficial (roughly similar to the Federal Register in the United States), but other types of regulations will not necessarily be found there. There are no other centralized online locations where regulations in Chile are published.

According to the OECD, compliance rates in Chile are generally high. The approach to enforcement remains punitive rather than preventive, and regulators still prefer to inspect rather than collaborate with regulated entities on fostering compliance. Each institution with regulation enforcement responsibilities has its own sanction procedures. Law 19.880 from 2003 establishes the principles for reversal and hierarchical recourse against decisions by the administration. An administrative act can be challenged by lodging an action in the ordinary courts of justice, or by administrative means with a petition to the Comptroller General of the Republic. Affected parties may also make a formal appeal to the Constitutional Court against a specific regulation.

Chile still lacks a comprehensive, “whole of government” regulatory reform program. The OECD’s April 2016 “Regulatory Policy in Chile” report asserts that Chile took steps to improve its rule-making process, but still lags behind the OECD average in assessing the impact of regulations, consulting with outside parties on their design and evaluating them over time. The World Bank´s Global Indicators of Regulatory Governance project finds that Chile is not part of the countries that have improved their regulatory governance framework since 2017.

Chile’s level of fiscal transparency is excellent. Information on the budget and debt obligations, including explicit and contingent liabilities, is easily accessible online.

Chile does not share regulatory sovereignty with any regional economic bloc. However, several international norms or standards from multilateral organizations (UN, WIPO, ILO, among others) are referenced or incorporated into the country’s regulatory system. As a member of the WTO, the Chile notifies draft technical regulations to the WTO Committee on Technical Barriers to Trade (TBT).

Chile’s legal system is based on civil law. Chile’s legal and regulatory framework provides for effective means for enforcing property and contractual rights.

Laws governing issues of interest to foreign investors are found in several statutes, including the Commercial Code of 1868, the Civil Code, the Labor Code and the General Banking Act. Chile has specialized courts for dealing with tax and labor issues.

The judicial system in Chile is generally transparent and independent. The likelihood of government intervention in court cases is low. If a state-owned firm is involved in the dispute, the Government of Chile may become directly involved through the State Defense Council, which represents the government interests in litigation cases related to expropriations.

Regulations can be challenged before the court system, the National Comptroller, or the Constitutional Court, depending on the nature of the claim.

Law 20,848 of 2015, established a new framework for foreign investment in Chile and created the Agency for the Promotion of Foreign Investment (APIE), successor to the former Foreign Investment Committee and which also acts under the name of “InvestChile.” The InvestChile website provides relevant laws, rules, procedures, and reporting requirements for investors. For more on FDI regulations and services for foreign investors, see the section on Policies Towards Foreign Direct Investment.

Chile’s anti-trust law prohibits mergers or acquisitions that would prevent free competition in the industry at issue. An investor may voluntarily seek a ruling by an Anti-trust Court that a planned investment would not have competition implications. The national economic prosecutor (FNE) is an active institution in conducting investigations for competition-related cases and filing complaints before the Free Competition Tribunal (TDLC), which rules on those cases.

In January and March 2021, the TDLC approved two extra-judicial settlements between the FNE and Nestle, after the company faced two cases of anti-competitive clauses in the contracts with fresh milk producers. The settlement included a US$ 1.8 million payment from Nestle. On the other hand, in April 2021, the FNE cleared Nestle´s acquisition of Chilean premium chocolate maker La Fete, after finding that the two companies serve different market segments.

In March 2021, the FNE cleared Chinese state-owned enterprise State Grid International Development Limited’s (SGIDL) acquisition of Chilean energy company Compañia General de Electricidad (CGE).

In September 2020, the FNE imposed fines amounting to US$ 4.1 million on the Walt Disney Company and its subsidiary TWDC Enterprises 18 Corp. for failing to provide accurate information to adopt adequate mitigation measures during the approval process for its acquisition of Twenty-First Century Fox, Inc. In June 2021, the TDLC approved the payment of a US$ 220,000 fine for the second charge, while the investigation for the main charge remains ongoing.

In October 2021, the TDLC approved remedies agreed upon by Delta and LATAM airlines with the FNE to mitigate the risks to competition arising from Delta’s acquisition of a 20% minority stake in LATAM’s share capital, along with a joint venture and code share agreements for direct routes between the United States and Canada and between certain South American countries with the United States.

In October 2021, the FNE presented a collusion case against the three main securities transport companies that operate in Chile -Brink’s Chile S.A., Prosegur and Loomis-, for having entered into an agreement to fix the prices of its services between 2017 and 2018. The FNE asked the TDLC to apply fines amounting to US$ 63.4 million against the firms (US$30.5 million for Brink’s Chile S.A., US$25.8 million for Prosegur and US$6.4 million for Loomis), as well as fines between US$ 88,000 and US$ 135,000 against the general managers and the regional heads who were in charge of the Chile offices.

Chilean law grants the government authority to expropriate property, including property of foreign investors, only on public interest or national interest grounds, on a non-discriminatory basis and in accordance with due process. The government has not nationalized a private firm since 1973. Expropriations of private land take place in a transparent manner, and typically only when the purpose is to build roads or other types of infrastructure. The law requires the payment of immediate compensation at fair market value, in addition to any applicable interest.

Chile’s Insolvency Law from 1982 was updated in October 2014. The current law aims to clarify and simplify liquidation and reorganization procedures for businesses to prevent criminalizing bankruptcy. It also established the new Superintendence of Insolvency and created specialized insolvency courts. The new insolvency law requires creditors’ approval to select the insolvency representative and to sell debtors’ substantial assets. The creditor also has the right to object to decisions accepting or rejecting creditors’ claims. However, the creditor cannot request information from the insolvency representative. The creditor may file for insolvency of the debtor, but for liquidation purposes only. The creditors are divided into classes for the purposes of voting on the reorganization plan; each class votes separately, and creditors in the same class are treated equally.

Chile’s authorities are committed to developing capital markets and keeping them open to foreign portfolio investors. Foreign firms offer services in Chile in areas such as financial information, data processing, financial advisory services, portfolio management, voluntary saving plans and pension funds. Under the U.S.-Chile FTA, Chile opened up significantly its insurance sector, with very limited exceptions. The Santiago Stock Exchange is Chile’s dominant stock exchange, and the third largest in Latin America. However, when compared to other OECD countries, it has lower market liquidity.

Existing policies facilitate the free flow of financial resources into Chile’s product and factor markets and adjustment to external shocks in a commodity export-dependent economy. Chile accepted the obligations of Article VIII (sections 2, 3 and 4) and maintains a free-floating exchange rate system, free of restrictions on payments and transfers for current international transactions. Credit is allocated on market terms and its various instruments are available to foreigners. The Central Bank reserves the right to restrict foreign investors’ access to internal credit if a credit shortage exists. To date, this authority has not been exercised.

Nearly one fourth of Chileans have a credit card from a bank and nearly one third have a non-bank credit card, but less than 20 percent have a checking account. However, financial inclusion is higher than banking penetration: a large number of lower-income Chilean residents have a CuentaRut, which is a commission-free card with an electronic account available for all, launched by the state-owned Banco Estado, also the largest provider of microcredit in Chile.

The Chilean banking system is healthy and competitive, and many Chilean banks already meet Basel III standards. The new General Banking Act (LGB), published in January 2019, defined general guidelines for establishing a capital adequacy system in line with Basel standards, and gave the CMF the authority to establish the capital framework. All Basel III regulations were published in December 2020, and the CMF started the implementation process of Basel III requirements to last to December 1, 2025. The system’s liquidity position (Liquidity Coverage Ratio) remains above regulatory limits (70%). Capital adequacy ratio of the system equaled 14.9 percent as of December 2021 and remains robust even when including discounts due to market and/or operational risks. Non-performing loans decreased after August 2020 due to government relief measures for households, including legislation authorizing two rounds of withdrawals from pension accounts. As of January 2022, non-performing loans equaled 1.26 percent compared to 1.54 percent as of January 2021) when measured by the standard 90 days past due criterion.

As of November 2021, the total assets of the Chilean banking system amounted to US$ 428.6 billion, according to the Superintendence of Banks and Financial Institutions. The largest six banks (Banco de Crédito e Inversiones, Banco Santander-Chile, Banco Estado, Banco de Chile, Scotiabank Chile and Itaú-Corpbanca) accounted for 88 percent of the system’s assets. Chile’s Central Bank conducts the country’s monetary policy, is constitutionally autonomous from the government, and is not subject to regulation by the Superintendence of Banks.

Foreign banks have an important presence in Chile, comprising three out of the six largest banks of the system. Out of 17 banks currently in Chile, five are foreign-owned but legally established banks in Chile and four are branches of foreign banks. Both categories are subject to the requirements set out under the Chilean banking law. There are also 21 representative offices of foreign banks in Chile. There are no reports of correspondent banking relationships withdrawal in Chile.

In order to open a bank account in Chile, a foreigner must present his/her Chilean ID Card or passport, Chilean tax ID number, proof of address, proof of income/solvency, photo, and fingerprints.

The Government of Chile maintains two sovereign wealth funds (SWFs) built with savings from years with fiscal surpluses. The Economic and Social Stabilization Fund (FEES) was established in 2007 and was valued at US$ 6.4 billion as of January 2022. The purpose of the FEES is to fund public debt payments and temporary deficit spending, in order to keep a countercyclical fiscal policy. The Pensions Reserve Fund (FRP) was built up in 2006 and amounted to US$ 7.2 billion as of January 2022. The purpose of the FRP is to anticipate future needs of payments to those eligible to receive pensions, but whose contributions to the private pension system fall below a minimum threshold.

Chile is a member of the International Working Group of Sovereign Wealth Funds (IWG) and adheres to the Santiago Principles.

Chile’s government policy is to invest SWFs entirely abroad into instruments denominated in foreign currencies, including sovereign bonds and related instruments, corporate and high-yield bonds, mortgage-backed securities from U.S. agencies, and stocks.

Chile had 28 state-owned enterprises (SOEs) in operation as of 2020. Twenty-seven SOEs are commercial companies and the newest one (FOINSA) is an infrastructure fund that was created to facilitate public-private partnership projects. 25 SOEs are not listed and are fully owned by the government, while the remaining three are majority government owned. Ten Chilean SOEs operate in the port management sector, six in the services sector, three in the defense sector, three in the mining sector (including CODELCO, the world’s largest copper producer, and ENAP, an oil and gas company), two in transportation, one in the water sector, one is a TV station, and one is a state-owned bank (Banco Estado). The state holds a minority stake in four water companies as a result of a privatization process. In 2020, total assets of Chilean SOEs amounted to US$ 89.3 billion, while their total net income was US$ 833.7 million. SOEs employed 47,225 people in 2020.

Twenty SOEs in Chile fall under the supervision of the Public Enterprises System (SEP), a state holding in charge of overseeing SOE governance. The rest – including the largest SOEs such as CODELCO, ENAP and Banco Estado – have their own governance and report to government ministries. Allocation of seats on the boards of Chilean SOEs is determined by the SEP, as described above, or outlined by the laws that regulate them. In CODELCO’s corporate governance, there is a mix between seats appointed by recommendation from an independent high-level civil service committee, and seats allocated by political authorities in the government.

A list of SOEs made by the Budget Directorate, including their financial management information, is available in the following link: http://www.dipres.gob.cl/599/w3-propertyvalue-20890.html.

In general, Chilean SOEs work under hard budget constraints and compete under the same regulatory and tax frameworks as private firms. The exception is ENAP, which is the only company allowed to refine oil in Chile. As an OECD member, Chile adheres to the OECD Guidelines on Corporate Governance for SOEs.

Chile does not have a privatization program.

Pursuant to a political accord in response to the 2019 civil unrest, Chile held a plebiscite in October 2020 in which citizens voted to draft a new constitution. The process to create and ratify the new constitution launched on July 4, 2021 and will continue to mid-2022. Uncertainty over what changes could be made to Chile’s political and regulatory environment could negatively impact investor confidence. Importantly, the legislation enabling the constitutional reform process requires that the new constitution must respect Chile’s character as a democratic republic, its judicial sentences, and its international treaties (including the U.S.-Chile Free Trade Agreement).

Prior to 2019, there were generally few incidents of politically motivated attacks on investment projects or installations with the exception of the southern Araucania region and its neighboring Arauco province in the southwest of Bio-Bio region. This area, home to nearly half a million indigenous inhabitants, has seen an ongoing trend of politically motivated violence and organized criminal activity. Land claims and conflicts with forestry companies are the main grievances underneath the radicalization of a relatively small number of indigenous Mapuche communities, which has led to the rise of organized groups that pursue their demands by violent means. Incidents include arson attacks on churches, farms, forestry plantations, forestry contractors’ machinery and vehicles, and private vehicles, as well as occupation of private lands, resulting in over a half-dozen deaths (including some by police forces), injuries, and damage to property. The indigenous issue has been further politicized due to anger among landowners, forestry transport contractors, and farmers affected by violence, as well as the illegal killing of a young Mapuche activist by special police forces in 2018 and the controversy over accusations of fraud by the police during the investigation of indigenous organized groups. In March 2020, a truck driver died in an arson attack on his vehicle.

Since 2007, Chile has experienced a number of small-scale attacks with explosive and incendiary devices, targeting mostly banks, police stations, and public spaces throughout Santiago, including metro stations, universities, and churches. ATMs have been blown up in the late evenings or early mornings. Anarchist groups often claim responsibility for these acts, as well as violent incidents during student and labor protests. In January 2017, an eco-terrorist group claimed responsibility for a parcel bomb that detonated at the home of the chairman of the board of Chilean state-owned mining giant CODELCO. The same group detonated a bomb of similar characteristics in 2019 at a bus stop in downtown Santiago, causing five injuries, and sent a letter bomb to the office of the president of the Metro system, which was defused by police. One suspect was arrested in 2019 and the investigation of the crimes is ongoing. Another group sent package bombs to a police station in the Santiago metro area, wounding 8 police officers, and to a former Interior Minister, which was defused by police. Two suspects were arrested in 2020, and the investigation remains ongoing at the time of this report. Then-President Piñera announced a 15-day State of Emergency in October 2021 in four southern provinces in the Araucania and Biobio regions.  Piñera emphasized the State of Emergency was intended to combat drug trafficking, terrorism, and organized crime.  The enactment of the State of Emergency placed the respective zones under a military authority designated by the president and empowered the armed forces to support law enforcement functions, prohibit public gatherings, and control the entry and exit of people in the four provinces, which have large populations of indigenous Mapuche among its 1.6 million residents.  Congress authorized multiple extensions to the State of Emergency until March 26. On March 15, the Minister of Interior traveled to the Araucania region to initiate dialogue on the conflict between indigenous Mapuche communities and the Chilean government, however, armed gunmen prevented the minister from entering the community of Temucuicui. The State of Emergency lapsed on March 26 after the Boric government decided not to seek an extension from Congress.

While the security environment is generally safe, street crime, carjackings, telephone scams, and residential break-ins are common, especially in larger cities. Vehicle thefts are a serious problem in Valparaiso and northern Chile (from Iquique to Arica). On occasion, illegal activity by striking workers resulted in damage to corporate property or a disruption of operations. Some firms have publicly expressed concern that during a contentious strike, law enforcement has appeared to be reluctant to protect private property.

After a truck driver died in Antofagasta February 10 following an altercation with irregular immigrants from Venezuela, federations of northern truck drivers created road blockages and supply-chain disruptions to demand the Piñera administration implement increased safety measures.  On February 14, the government initiated a State of Emergency in provinces along Chile’s northern border with Bolivia and Peru, sending soldiers to support law enforcement efforts.  The State of Emergency is set to expire on April 15.

Chilean civil society is active and demonstrations occur frequently. Although the vast majority of demonstrations are peaceful, criminal elements have taken advantage of civil society protests to loot stores along the protest route and clash with the police. Annual demonstrations to mark March 29, the Day of the Young Combatant; September 11, the anniversary of the 1973 coup against the government of President Salvador Allende; and October 18, the anniversary of the outbreak of the 2019 civil unrest, have resulted in damage to property, looting, and scuffles between police and protesters.

* Source for Host Country Data: Central Bank of Chile.

According to the IMF’s Coordinated Direct Investment Survey (CDIS), total stock of FDI in Chile in 2020 amounted to US$ 188.9 billion, compared to US$ 254.3 billion in 2019. Canada, the United States and Spain are the main sources of FDI to Chile with US$ 30.6 billion, US$ 29.0 billion and US$ 21.5 billion, respectively, concentrating 42.9 percent of the total.

Chile’s outward direct investment stock in 2020 amounted to US$ 188.9 billion, compared to US$ 71.7 billion in 2020, a significant decrease compared to US$ 130.2 billion in 2019. It remains concentrated in South America, where Brazil, Peru, Colombia and Argentina together represented 49 percent of total Chilean outward FDI. The United States accounted for 14.1 percent of the total, an increase compared to 2019 when it represented 9.2 percent of the total.

The data below is consistent with host country statistics. Although not included in the table below, tax havens are relevant destinations of outward FDI to Chile, with the British Virgin Islands, Panama, Luxembourg, and Cayman Islands ranking sixth, seventh, ninth and tenth in inbound sources of FDI, respectively, according to the Central Bank of Chile. The Cayman Islands and Bermuda rank sixth and seventh and tenth, respectively, among Chile´s main inward FDI source.

Table 4: Sources of Portfolio Investment

According to the IMF’s Coordinated Portfolio Investment Survey (CPIS), total stock of portfolio investment in Chile as of June 2021 amounted to US$ 200.4 billion, of which US$ 164.6 billion were equity and investment funds shares, and the rest were debt securities. The United States and Luxembourg (a tax haven) were the main sources of portfolio investment to Chile with US $71.3 billion and $54.9 billion, representing 35.6 percent and 27.4 percent of the total, respectively. Both countries also represent 65 percent of the total of equity investment. Ireland, the United Kingdom and Germany are the following top sources of equity portfolio investment to Chile, while the United States, Mexico and Japan are the top sources of debt securities investment.

FDI has played an essential role in China’s economic development. Though the PRC remains a relatively restrictive environment for foreign investors, PRC government officials tout openness to FDI, promising market access expansion and non-discriminatory, “national treatment” for foreign enterprises through improvements to the business environment.  They also have made efforts to strengthen China’s regulatory framework to enhance market-based competition.

MOFCOM reported FDI flows grew by about 15 percent year-on-year, reaching USD 173 billion, however, foreign businesses continue to express concerns over China’s pandemic restrictions.  In 2021, U.S. businesses’ concerns with China’s COVID-19 restrictive travel restrictions were at the top of the agenda, along with concerns over PRC’s excessive cyber security and data-related requirements, preferential treatment for domestic companies – including state-owned enterprises – under various industrial policies, preference for domestic technologies and products in the procurement process, an opaque regulatory system, and inconsistent application of laws protecting intellectual property rights (IPR). U.S.-China geopolitical tensions were also cited as a significant concern. See the following:

• American Chamber of Commerce China 2021 American Business in China White Paper 
• American Chamber of Commerce China 2021 Business Climate Survey
• U.S.-China Business Council’s 2021 China Business Environment Member Survey

China’s International Investment Promotion Agency (CIPA), under MOFCOM, oversees attracting foreign investment and promoting China’s overseas investment. Duties include implementing overseas investment policy; guiding domestic sub-national and international investment promotion agencies; promoting investment in industrial parks at the national, subnational, and cross-border level; organizing trainings in China and abroad for overseas investment projects; and, engaging international and multilateral economic organizations, foreign investment promotion agencies, chambers of commerce, and business associations. The agency has offices worldwide, including CIPA Europe in Hungary, CIPA Germany, and a representative office in the Hague to promote investment in the Benelux area. CIPA maintains an “Invest in China” website which lists laws, regulations, and rules relevant to foreign investors. The China Association of Enterprises with Foreign Investments (CAEFI) is a non-profit organization overseen by MOFCOM. The association and corresponding provincial institutions have hotlines to receive foreign investor complaints.

Entry into China’s market is regulated by the country’s “negative lists,” which identify the sectors in which foreign investment is restricted or prohibited, and a catalogue for encouraged foreign investment, which identifies the sectors and locations (often less developed regions) in which the government encourages investment.

• The Special Administrative Measures for Foreign Investment Access to Pilot Free Trade Zones (the “FTZ Negative List”) applies to China’s 20 FTZs and one free trade port. 
• The Special Administrative Measures for Foreign Investment Access (̈the “Nationwide Negative List”) came into effect on January 1, 2022.
• The Industry Catalogue for Encouraged Foreign Investment (released December 27, 2020) encourages FDI inflows to key sectors, in particular semiconductors and other high-tech industries.
• The Industrial Catalogue for Encouraged Foreign Investment in Western Region.  The “encouraged list” is subdivided into a cross-sector nationwide catalogue and a separate catalogue for western and central regions, China’s least developed regions. 

In restricted industries, foreign investors face equity caps or JV requirements to ensure control by a PRC national and enterprise.  Due to these requirements, foreign investors that wish to participate in China’s market must enter partnerships, which sometimes require transfer of technology. However, even in “open” sectors, a variety of factors, including ability to access local government officials and preferences, enhanced ability to impact local rules and standards, perceptions of better understanding of the PRC market, and access to procurement opportunities, led many foreign companies to rely on the JV structure to operate in the PRC market.

Below are a few examples of industries where investment restrictions apply:

• Preschool to higher education institutes require a PRC partner with a dominant role.
• Establishment of clinical trials for new drugs require a PRC partner who holds the IPR tied to data drawn from the clinical research.

Examples of foreign investment sectors requiring PRC majority stake include:

• Radio/television market survey.
• Basic telecommunication services outside free trade zones.

The 2021 negative lists made minor modifications to some industries, reducing the number of restrictions and prohibitions from 33 to 31 in the nationwide negative list, and from 30 to 27 in China’s pilot FTZs. Notable changes included openings in the automotive and satellite television broadcasting manufacturing sectors. Sectors that remain closed to foreign investment include rare earths, film production and distribution, and tobacco products.  However, the government continues to constrain foreign investors in a myriad of ways beyond caps on ownerships. For instance, in the pharmaceutical sector, while JV requirements were eliminated in the 1990s, foreign companies must partner with local PRC institutions for clinical trials. Other requirements that place undue burden on foreign investors include but are not limited to: applying higher standards for quality-related testing, prohibitions on foreign parties in JVs conducting certain business activities, challenges in obtaining licenses and permits, mandatory intellectual property sharing related to certain biological material, and other implicit and explicit downstream regulatory approval barriers.

The negative list regulating pilot FTZ zones will lift all barriers to foreign investment in all manufacturing sectors, widen foreign investor access to some service sectors, and allow foreign investment into the radio and TV-based market research sector.  For the market research sector, caveats include a 33 percent foreign investor ownership cap and PRC citizenship requirements for legal representatives. While U.S. businesses welcomed market openings, foreign investors remained underwhelmed by the PRC’s lack of ambition and refusal to provide more significant liberalization.  Foreign investors noted the automotive sector openings were inconsequential since the more lucrative electric vehicle (EV) sector was opened to foreign investors in 2018, whereas the conventional auto sector is saturated. Foreign investors cited this was in line with the government announcing liberalization mainly in industries that domestic PRC companies already dominate.

In addition to the PRC’s system for managing foreign investments, MOFCOM and NDRC also maintain a system for managing which segments of the economy are open to non-state-owned investors. The most recent Market Access Negative List  was issued on December 10, 2020.

The Measures for Security Reviews on Foreign Investments  came into effect January 18, 2021, revising the PRC’s framework for vetting foreign investments that could affect national security. The NDRC and the Ministry of Commerce will administer the new measures which establish a mechanism for reviewing investment activities across a range of sectors perceived to implicate PRC national security, including agriculture, energy and resources, cultural products, and more.

China is not a member of the Organization for Economic Co-Operation and Development (OECD), but the OECD Council established a country program of dialogue and co-operation with China in October 1995. The OECD completed its most recent investment policy review for China in 2022.

• OECD 2022 Report 

China’s 2001 accession to the World Trade Organization (WTO) boosted its economic growth and advanced its legal and governmental reforms.  The WTO completed its most recent trade policy review for China in 2021, highlighting FDI grew at a slower pace than in previous periods but remains a major driver of global growth and a key market for multinational companies.

• WTO Trade Policy Review for China
• USTR 2021 Report to Congress on China’s WTO Compliance
• International Monetary Fund (IMF) information on China 

Created in 2018, the State Administration for Market Regulation (SAMR) is responsible for business registration processes.  Under SAMR’s registration system, parties are required to report when they (1) establish a Foreign Invested Enterprise (FIE); (2) establish a representative office in China; (3) acquire stocks, shares, assets or other similar equity of a domestic China-based company; (4) re-invest and establish subsidiaries in China; and (5) invest in new projects.  Foreign companies still report challenges setting up a business relative to their PRC competitors. Many companies offer consulting, legal, and accounting services for establishing operations in China. Investors should review their options carefully with an experienced advisor before investing.

• Invest in China
• The State Council Information on Doing Business in China  
• Filing a Complaint as a Foreign Company
• Nationwide Government Service Platform  

Since 2001, China has pursued a “going-out” investment policy.  At first, the PRC encouraged SOEs to invest overseas, but in recent years, China’s overseas investments have diversified with both state and private enterprises investing in nearly all industries and economic sectors.  China remains a major global investor and in 2021, total outbound direct investment (ODI) increased for the first time in four years to reach $153.7 billion, a 12 percent increase year-on-year, according to the 2020 Statistical Bulletin of China’s Outward Foreign Direct Investment .

China’s government created “encouraged,” “restricted,” and “prohibited” outbound investment categories to suppress significant capital outflow pressure in 2016 and to guide PRC investors to more “strategic sectors.” The Sensitive Industrial-Specified Catalogue of 2018  further restricted outbound investment in sectors like property, cinemas, sports teams, and non-entity investment platforms and encouraged outbound investment in sectors that supported PRC national objectives by acquiring advanced manufacturing and high-tech assets.  PRC firms involved in sectors cited as priorities in the Strategic Emerging Industries, New Infrastructure Initiative, and MIC 2025 often receive preferential government financing and subsidies for outbound investment.

In 2006, the PRC established the Qualified (QDII) program to channel domestic funds into offshore assets through financial institutions. While the quota tied to this program has fluctuated over the years based on capital flight concerns, in 2021 the State Administration of Foreign Exchange (SAFE) approved new quotas for 17 institutions under the program to allow a potential $147.3 billion in outbound investment.

In 2013, the PRC government established a pilot program allowing global asset management companies more opportunities to raise RMB-denominated funds from high net-worth PRC-based individuals and institutional investors to invest overseas. These programs include the Qualified Domestic Limited Partnership (QDLP) pilot program and the Shenzhen-specific Qualified Domestic Investment Entity (QDIE) program. In 2021, the China Securities Regulatory Commission (CSRC) and SAFE expanded the pilot areas to at least seven jurisdictions and quotas for the QDLP to $10 billion, respectively. In April, the Shenzhen Financial Regulatory Bureau amended the Administrative Measures of Shenzhen for Implementation of the Pilot Program for Overseas Investment by Qualified Domestic Investors (“Shenzhen QDIE Measures”) to include investments in the securities market that aligns it with the QLDP program.

One of China’s WTO accession commitments was to establish an official journal dedicated to the publication of laws, regulations, and other measures pertaining to or affecting trade in goods, services, trade related aspects of IPR (TRIPS), and the control of foreign exchange. Despite mandatory 30-day public comment periods, PRC ministries continue to post only some draft administrative regulations and departmental rules online, often with a public comment period of less than 30 days. As part of the Phase One Agreement, China committed to providing at least 45 days for public comment on all proposed laws, regulations, and other measures implementing the Phase One Agreement. While China has made some progress, U.S. businesses operating in China consistently cite arbitrary legal enforcement and the lack of regulatory transparency among the top challenges of doing business in China.

In China’s state-dominated economic system, the relationships between the CCP, the PRC government, PRC business (state- and private-owned), and other PRC stakeholders are blurred. Foreign-invested enterprises (FIEs) perceive that China prioritizes political goals, industrial policies, and a desire to protect social stability at the expense of foreign investors, fairness, and the rule of law. The World Bank Global Indicators of Regulatory Governance gave China a composite score of 1.75 out 5 points, attributing China’s relatively low score to stakeholders not having easily accessible and updated laws and regulations; the lack of impact assessments conducted prior to issuing new laws; and other concerns about transparency.

For accounting standards, PRC companies use the Chinese Accounting Standards for Business Enterprises (ASBE) for all financial reporting within mainland China. Companies listed overseas or in Hong Kong may choose to use ASBE, the International Financial Reporting Standards, or Hong Kong Financial Reporting Standards.

While the government of China made many policy announcements in 2021 that will provide impetus to ESG reporting, stock exchanges on mainland China (not including Hong Kong) have not made ESG reporting mandatory. For instance, currently eighteen  PRC companies are signatories to the UN Principles for Responsible Investment. While the PRC government did announce its green finance taxonomy known as China’s “Catalogue of Green Bond Supported Projects”, experts cited the taxonomy lacks mandatory reporting and verification. On November 4, the People’s Bank of China and the European Commission also jointly launched a sustainable finance taxonomy to create comparable standards on green finance products. Mainland ESG efforts were also primarily focused on environmental and social impact-related, and less so on governance-related reporting. China’s goal to peak carbon emissions before 2030 and reach carbon neutrality by 2060 will drive reporting on decarbonization plans and targets and could increase alignment with international standards such as those outlined in the Task Force on Climate-Related Financial Disclosures (TCFD) recommendations. The PRC government also incorporated non-mandatory ESG-like principles into overseas development initiatives such as its signature Belt and Road Initiative (BRI) via its Guiding Opinions on Promoting Green Belt and Road Construction. For instance, the PRC adopted the Green Investment Principles (GIP) for greening investment for BRI projects; under this initiative members – including major PRC policy banks funding BRI projects – are expected to provide their first TCFD disclosure by 2023. Obstacles contacts cited include a shortage of quality data and ESG professionals, such as third-party auditors which are required to support evidence based ESG reporting.

In December, MEE issued new disclosure rules  requiring five types of domestic entities to disclose environmental information on an annual basis, effective February 8, 2022. The rules will apply only to listed companies and bond issuers that were subject to environmental penalties the previous year and other MEE-identified entities, including those that discharged high levels of pollutants. Entities must disclose information on environmental management, pollution generation, carbon emissions, and contingency planning for environmental emergencies. These same companies and bond issuers must also disclose climate change and environmental protection information related to investment and financing transactions.

On June 28, the CSRC issued final amendments requiring listed companies disclose environmental penalties and encouraging carbon emissions disclosures. It also issued guidelines on the format and content of annual reports and half-year reports of listed companies, requiring them to set up a separate “Section 5 Environmental and Social Responsibility” to encourage carbon emission reduction related disclosure. In May, the Ministry of Ecology and Environment (MEE) issued a plan  for strengthening environmental disclosure requirements by 2025. Most contacts assessed investors are the key drivers of increased ESG disclosures.

As part of its WTO accession agreement, China agreed to notify the WTO Committee on Technical Barriers to Trade (TBT) of all draft technical regulations. However, China continues to issue draft technical regulations without proper notification to the TBT Committee.

The PRC is also a member of the Regional Comprehensive Economic Partnership (RCEP), which entered into force on January 1, 2022. Although RCEP has some elements of a regional economic bloc, many of its regulatory provisions (for example on data flow) are weakened by national security exemptions.

On September 16, China submitted a written application to join the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) to New Zealand (the depositary of the agreement). The PRC would face challenges in addressing obligations related to SOEs, labor rights, digital trade, and increased transparency.

China’s legal system borrows heavily from continental European legal systems, but with “Chinese characteristics.” The rules governing commercial activities are found in various laws, regulations, departmental rules, and Supreme People’s Court (SPC) judicial interpretations, among other sources. While China does not have specialized commercial courts, it has created specialized courts and tribunals for the hearing of intellectual property disputes (IP), including in Beijing, Guangzhou, Shanghai, and Hainan.  The PRC’s constitution and laws are clear that PRC courts cannot exercise power independent of the Party. Further, in practice, influential businesses, local governments, and regulators routinely influence courts. Outside of the IP space, U.S. companies often hesitate in challenging administrative decisions or bringing commercial disputes before local courts due to perceptions of futility or fear of government retaliation.

The PRC’s new foreign investment law, the FIL, came into force on January 1, 2020, replacing the previous foreign investment framework. The FIL provides a five-year transition period for foreign enterprises established under previous foreign investment laws, after which all foreign enterprises will be subject to the same domestic laws as PRC companies, such as the Company Law. The FIL standardized the regulatory regimes for foreign investment by including the negative list management system, a foreign investment information reporting system, and a foreign investment security review system all under one document. The FIL also seeks to address foreign investors complaints by explicitly banning forced technology transfers, promising better IPR, and the establishment of a complaint mechanism for investors to report administrative abuses. However, foreign investors remain concerned that the FIL and its implementing regulations provide PRC ministries and local officials significant regulatory discretion, including the ability to retaliate against foreign companies.

The December 2020 revised investment screening mechanism under the Measures on Security Reviews on Foreign Investments (briefly discussed above) came into effect January 18 without any period for public comment or prior consultation with the business community. Foreign investors complained China’s new rules on investment screening were expansive in scope, lacked an investment threshold to trigger a review, and included green field investments – unlike most other countries. Moreover, new guidance on Neutralizing Extra-Territorial Application of Unjustified Foreign Legislation Measures, a measure often compared to “blocking statutes” from other markets, added to foreign investors’ concerns over the legal challenges they would face in trying to abide by both their host-country’s regulations and China’s. Foreign investors complained that market access in China was increasingly undermined by national security-related legislation. While not comprehensive, a list of official PRC laws and regulations is here .

On June 10, the Standing Committee of the NPC adopted the Law of the People’s Republic of China on Countering Foreign Sanctions (“Anti-Foreign Sanctions Law” or AFSL). The AFSL gives the government explicit authority to impose countermeasures related to visas, deportation, and asset freezing against individuals or organizations that broadly endanger China’s “sovereignty, security, or development interests.” The law also calls for Chinese citizens and organizations harmed by foreign “sanctions” to pursue damages via PRC civil courts.

On October 13, MOF issued a circular prohibiting discrimination against foreign-invested enterprises (FIEs) in government procurement for products “produced in China.” The circular required that suppliers not be restricted based on ownership, organization, equity structure, investor country, or product brand, to ensure fair competition between domestic and foreign companies. The circular also required the abolition of regulations and practices violating the circular by the end of November, including the establishment of alternative databases and qualification databases. This circular may have been intended to address the issuance of Document No. 551 in May by MOF and the Ministry of Industry and Information Technology (MIIT) (without publishing on official websites), titled “Auditing guidelines for government procurement of imported products,” outlining local content requirements for hundreds of items, many of which are medical devices, including X-ray machines and magnetic resonance imaging equipment. It is unclear whether Document 551 will be rescinded or revised based on this circular. Additionally, the circular applies only to FIEs and does not provide fair treatment for imported products from companies overseas. While the circular does state FIEs should be afforded equal treatment, the circular does not address concerns about localization pressures created by Document 551. Further, the circular provides no guidance on what constitutes a “domestic product” and does not address treatment of products manufactured in China that incorporate content from other jurisdictions, key concerns for a wide range of U.S. firms.

In November 2021, the PRC government announced transformation of the Anti-Monopoly Bureau of the SAMR, renaming it the National Anti-Monopoly Bureau, adding three new departments, and doubled staffing. The National Anti-Monopoly Bureau enforces China’s Anti-Monopoly Law (AML) and oversees competition issues at the central and provincial levels.  The bureau reviews mergers and acquisitions, and investigates cartel and other anticompetitive agreements, abuse of a dominant market positions, including those related to IP, and abuse of administrative powers by government agencies. The bureau also oversees the Fair Competition Review System (FCRS), which requires government agencies to conduct a review prior to issuing new and revising administrative regulations, rules, and guidelines to ensure such measures do not inhibit competition. SAMR issues implementation guidelines to fill in gaps in the AML, address new trends in China’s market, and help foster transparency in enforcement. Generally, SAMR has sought public comment on proposed measures, although comment periods are sometimes less than 30 days.

In October 2021, SAMR issued draft amendments to the AML for public comment. Revisions to the AML are expected to be finalized in 2022 and likely will include changes such as stepped-up fines for AML violations and specification of the factors to consider in determining whether an undertaking in the internet sector has abused a dominant market position. In February 2021, SAMR published (after public comment) the “Antitrust Guidelines for the Platform Economy.” The Guidelines address monopolistic behaviors of online platforms operating in China.

Foreign companies have long expressed concern that the government uses AML enforcement in support of China’s industrial policies, such as promoting national champions, particularly for companies operating in strategic sectors. The AML explicitly protects the lawful operations of government authorized monopolies in industries that affect the national economy or national security. U.S. companies expressed concerns that in SAMR’s consultations with other PRC agencies when reviewing M&A transactions, those agencies raise concerns not related to competition concerns to block, delay, or force transacting parties to comply with preconditions – including technology transfer – to receive approval.

China’s law prohibits nationalization of FIEs, except under vaguely specified “special circumstances” where there is a national security or public interest need. PRC law requires fair compensation for an expropriated foreign investment but does not detail the method used to assess the value of the investment.  The Department of State is not aware of any cases since 1979 in which China has expropriated a U.S. investment, although the Department has notified Congress through the annual 527 Investment Dispute Report of several cases of concern.

The PRC introduced bankruptcy laws in 2007, under the Enterprise Bankruptcy Law (EBL), which applies to all companies incorporated under PRC laws and subject to PRC regulations. In May 2020, the PRC released the Civil Code, contract and property rights rules. Despite the NPC listing amendments to the EBL as a top work priority for 2021, the NPC has not released the amendments to the public. Court-appointed administrators – law firms and accounting firms that help verify claims, organize creditors’ meetings, list, and sell assets online – look to handle more cases and process them faster.  As of 2021 official statements cited 5,060 institutional administrators and 703 individual administrators.

On August 18, the Law Enforcement Inspection Team of the Standing Committee of the NPC was submitted its report on the enforcement of enterprise bankruptcy to the 30th meeting of the Standing Committee of the Thirteenth NPC for deliberation. While the report is unavailable publicly, the Supreme People’s Court (SPC) website issued a press release  noting the report found that from 2007 to 2020, courts at all levels nationwide accepted 59,604 bankruptcy cases, and concluded 48,045 bankruptcy cases (in 2020 there were 24,438 liquidation and bankruptcy cases). Of the total liquidation and bankruptcy cases recorded in that same period, 90 percent involved private enterprises. The announcement also cited the allocation of additional resources, including future establishment of at least 14 bankruptcy tribunals and 100 Liquidation & Bankruptcy Divisions and specialized collegial panels to handle bankruptcy cases. As of August 2021, bankruptcy cases are handled by 417 bankruptcy judges, 28 high people’s courts, and 284 intermediate people’s courts.

In 2021 the government added a new court in Haikou. National data is unavailable for 2021, but local courts have released some information that suggest a nearly 10 percent increase in liquidation and bankruptcy cases in Jiangxi province and about a 66 percent increase in Guangzhou, the capital city of Guangdong province. While PRC authorities are taking steps to address corporate debt and are gradually allowing some companies to fail, companies generally avoid pursing bankruptcy because of the potential for local government interference and fear of losing control over the outcome. According to the SPC, 2.899 million enterprises closed business in 2020, of which only 0.1 percent or 3,908 closed because of bankruptcy.

In August 2020, Shenzhen released the Personal Bankruptcy Regulations of Shenzhen Special Economic Zone, to take effect on March 1, 2021. This is the PRC’s first regulation on personal bankruptcy. On July 19, the Shenzhen Intermediate People’s Court of Guangdong Province, China served a ruling on Liang Wenjin approving his personal bankruptcy reorganization plan. This was the first personal bankruptcy case closed by Shenzhen Court since the implementation of the Personal Bankruptcy Regulations of Shenzhen Special Economic Zone and is the first personal bankruptcy reorganization case in China.

The Personal Bankruptcy Regulations is China’s first set of rules on personal bankruptcy, which formally establishes the personal bankruptcy system in China for the first time. At present, the Personal Bankruptcy Regulations is only applicable in Shenzhen. Numerous other localities have also begun experimenting with legal remedies for personal insolvency, in part to deter debtors from taking extreme measures to address debt.

China’s leadership has stated that it seeks to build a modern, highly developed, and multi-tiered capital market. Since their founding over three decades ago, the Shanghai and Shenzhen Exchanges, combined, are ranked the third largest stock market in the world with over USD 12.2 trillion in assets. China’s bond market has similarly expanded significantly to become the second largest worldwide, totaling approximately USD 18.6 trillion. In 2021, China took steps to open certain financial sectors such as mutual funds, securities, and asset management, but multinational companies still report barriers to entering the PRC insurance markets. As an example, in September, Black Rock was the first firm given approval to sell mutual funds to PRC nationals as the first wholly foreign owned mutual fund. Direct investment by private equity and venture capital firms increased but also faced setbacks due to China’s capital controls, which obfuscate the repatriation of returns. Though the PRC is taking steps to liberalize its capital markets, PRC companies that seek overseas investment have historically tended to list in the United States or Hong Kong; PRC and U.S. regulations on exchanges and geopolitics may begin to impact this trend. As of 2021, 24 sovereign entities and private sector firms, including the Asian Development Bank, Hungary, and BMW, have since issued RMB 106.5 billion yuan, roughly USD 16.7 billion, in 72 “Panda Bonds,” Chinese renminbi (RMB)-denominated debt issued by foreign entities in China. China’s private sector can also access credit via bank loans, bond issuance, trust products, and wealth management products. However, most bank credit flows to state-owned firms, largely due to distortions in China’s banking sector that have incentivized lending to state-affiliated entities over their private sector counterparts.  China has been an IMF Article VIII member since 1996 and generally refrains from restrictions on payments and transfers for current international transactions. However, the government has used administrative and preferential policies to encourage credit allocation towards national priorities, such as infrastructure investments and industrial policy.

The PRC’s monetary policy is run by the PBOC, the PRC’s central bank. The PBOC has traditionally deployed various policy tools, such as open market operations, reserve requirement ratios, benchmark rates and medium-term lending facilities, to control credit growth. The PBOC had previously also set quotas on how much banks could lend but ended the practice in 1998. As part of its efforts to shift towards a more market-based system, the PBOC announced in 2019 that it will reform its one-year loan prime rate (LPR), which would serve as an anchor reference for other loans. The one-year LPR is based on the interest rate that 18 banks offer to their best customers and serves as the benchmark for rates provided for other loans. In 2020, the PBOC requested financial institutions to shift towards use of the one-year LPR for their outstanding floating-rate loan contracts from March to August. Despite these measures to move towards more market-based lending, the PRC’s financial regulators still influence the volume and destination of PRC bank loans through “window guidance” – unofficial directives delivered verbally – as well as through mandated lending targets for key economic groups, such as small and medium sized enterprises. In 2020, the China Banking and Insurance Regulatory Commission (CBIRC) also began issuing laws to regulate online lending by banks including internet companies such as Ant Financial and Tencent, which had previously not been subject to banking regulations. In 2021, PBOC and CBIRC issued circulars emphasizing the need to emphasize and encourage financial stability among real estate developers.

The CBIRC oversees the PRC’s 4,607 lending institutions, about USD 54 trillion in total assets. China’s “Big Five” – Agricultural Bank of China, Bank of China, Bank of Communications, China Construction Bank, and Industrial and Commercial Bank of China – dominate the sector and are largely stable, but has experienced regional banking stress, especially among smaller lenders. Reflecting the level of weakness among these banks, in September 2021, the PBOC announced in “China Financial Stability Report 2020” that 422 or 9.6 percent of the 4,400 banking financial institutions received a “fail” rating (high risk) following an industry-wide review in in the second quarter of 2021. The assessment deemed 393 firms, all small and medium sized rural financial institutions, “extremely risky.” The official rate of non-performing loans among China’s banks is relatively low: 1.7 percent as of the end of 2021. However, analysts believed the actual figure may be significantly higher. Bank loans continue to provide most credit options (reportedly around 63.6 percent in 2021) for Chinese companies, although other sources of capital, such as corporate bonds, equity financing, and private equity are quickly expanding in scope, reach, and sophistication in China.

As part of a broad campaign to reduce debt and financial risk, Chinese regulators have implemented measures to rein in the rapid growth of China’s “shadow banking” sector, which includes wealth management and trust products. These measures have achieved positive results. In December 2020, CBIRC published the first “Shadow Banking Report,” and claimed that the size of China’s shadow banking had shrunk sharply since 2017 when China started tightening the sector. By the end of 2019, the size of China’s shadow banking by broad measurement dropped to 84.8 trillion yuan from the peak of 100.4 trillion yuan in early 2017. PBOC estimated in January 2021 that the outstanding balance of China’s shadow banking was around RMB 32 trillion yuan at the end of 2020. Alternatively, Moody’s estimated that China’s shadow banking by broad measurement dropped to RMB 57.8 trillion yuan in the first half of 2021 and shadow banking to GDP ratio dropped to 52.9 percent from 58.3 percent at the end of 2020. Foreign owned banks can now establish wholly owned banks and branches in China, however, onerous licensing requirements and an industry dominated by local players, have limited foreign banks market penetration. Foreigners are eligible to open a bank account in China but are required to present a passport and/or Chinese government issued identification.

China officially has only one sovereign wealth fund (SWF), the China Investment Corporation (CIC), which was launched in 2007 to help diversify China’s foreign exchange reserves. Overall, information and updates on CIC and other funds that function like SWFs was difficult to procure. CIC is ranked the second largest SWF by total assets by Sovereign Wealth Fund Institute (SWFI). With USD 200 billion in initial registered capital, CIC manages over USD 1.2 trillion in assets as of 2021 and invests on a 10-year time horizon. In 2021, CIC reported that during the 2020 period it increased its information technology-related holdings while cutting holdings of overseas equities and bonds. CIC has two overseas branches, CIC International (Hong Kong) Co., Ltd. and CIC Representative Office in New York. CIC has since evolved into three subsidiaries:

• CIC International was established in September 2011 with a mandate to invest in and manage overseas assets.  It conducts public market equity and bond investments, hedge fund, real estate, private equity, and minority investments as a financial investor.
• CIC Capital was incorporated in January 2015 with a mandate to specialize in making direct investments to enhance CIC’s investments in long-term assets.
• Central Huijin makes equity investments in China’s state-owned financial institutions.

China also operates other funds that function in part like sovereign wealth funds, including: China’s National Social Security Fund, with an estimated USD 450 billion in assets in 2021; the China-Africa Development Fund (solely funded by the China Development Bank), with an estimated USD 10 billion in assets (2020); the SAFE Investment Company, with an estimated USD 417.8 billion in assets; and China’s state-owned Silk Road Fund, established in December 2014 with USD 40 billion in assets to foster investment in BRI countries. China’s state-run funds do not report the percentage of assets invested domestically. However, China’s state-run funds follow the voluntary code of good practices known as the Santiago Principles and participate in the IMF-hosted International Working Group on SWFs. While CIC affirms they do not have formal government guidance to invest funds consistent with industrial policies or designated projects, CIC is expected to pursue government objectives.

China has approximately 150,000 wholly-owned SOEs, of which 50,000 are owned by the central government, and the remainder by local or provincial governments.  SOEs account for 30 to 40 percent of total gross domestic product (GDP) and about 20 percent of China’s total employment. Non-financial SOE assets totaled roughly USD 30 trillion. SOEs can be found in all sectors of the economy, from tourism to heavy industries.  State funds are spread throughout the economy and the state may also be the majority or controlling shareholder in an ostensibly private enterprise. China’s leading SOEs benefit from preferential government policies aimed at developing bigger and stronger “national champions.” SOEs enjoy preferential access to essential economic inputs (land, hydrocarbons, finance, telecoms, and electricity) and exercise considerable power in markets like steel and minerals.  SOEs also have long enjoyed preferential access to credit and the ability to issue publicly traded equity and debt.  A comprehensive, published list of all PRC SOEs does not exist.

PRC officials have indicated China intends to utilize OECD guidelines to improve the SOEs independence and professionalism, including relying on Boards of Directors that are free from political influence.  However, analysts believe minor reforms will be ineffective if SOE administration and government policy remain intertwined, and PRC officials make minimal progress in primarily changing the regulation and business conduct of SOEs.  SOEs continue to hold dominant shares in their respective industries, regardless of whether they are strategic, which may further restrain private investment in the economy.  Among central SOEs managed by the State-owned Assets Supervision and Administration Commission (SASAC), senior management positions are mainly filled by senior party members who report directly to the CCP, and double as the company’s party secretary.  SOE executives often outrank regulators in the CCP rank structure, which minimizes the effectiveness of regulators in implementing reforms.  While SOEs typically pursue commercial objectives, the lack of management independence and the controlling ownership interest of the state make SOEs de facto arms of the government, subject to government direction and interference.  SOEs are rarely the defendant in legal disputes, and when they are, they almost always prevail.  U.S. companies often complain about the lack of transparency and objectivity in commercial disputes with SOEs.

Since 2013, the PRC government has periodically announced reforms to SOEs that included selling SOE shares to outside investors or a mixed ownership model, in which private companies invest in SOEs and outside managers are hired.  The government has tried these approaches to improve SOE management structures, emphasize the use of financial benchmarks, and gradually infuse private capital into some sectors traditionally monopolized by SOEs like energy, finance, and telecommunications. For instance, during an August 25 press conference, State-owned Assets Supervision and Administration Commission (SASAC) officials announced that in the second half of the year central SOE reform would focus on the advanced manufacturing and technology innovation sectors. As part of these efforts, they claimed SASAC would ensure mergers and acquisitions removed redundancies, stabilize industrial supply chains, withdraw from non-competitive businesses, and streamline management structures. In practice, however, reforms have been gradual, as the PRC government has struggled to implement its SOE reform vision and often preferred to utilize a SOE consolidation approach.  Recently, Xi and other senior leaders have increasingly focused reform efforts on strengthening the role of the state as an investor or owner of capital, instead of the old SOE model in which the state was more directly involved in managing operations.

SASAC issued a circular on November 20, 2020, directing tighter control over central SOEs overseas properties held by individuals on behalf of SOEs. The circular aims to prevent leakage of SOE assets held by individuals and SOE overseas variable interest entities (VIEs). According to the circular, properties held by individuals should be approved by central SOEs and filed with SASAC.

In Northeast China, privatization efforts at provincial and municipal SEOs remains low, as private capital makes cautious decisions in making investment to local debt-ridden and inefficient SOEs. On the other hand, local SOEs prefer to pursue mergers and acquisitions with central SOEs to avoid being accused of losing state assets. There is no available information on whether foreign investors could participate in privatization programs.

Foreign companies operating in China face a growing risk of political violence, most recently due to U.S.-China political tensions. PRC authorities have broad authority to prohibit travelers from leaving China and have imposed “exit bans” to compel U.S. citizens to resolve business disputes, force settlement of court orders, or facilitate PRC investigations. U.S. citizens, including children, not directly involved in legal proceedings or wrongdoing have also been subject to lengthy exit bans to compel family members or colleagues to cooperate with Chinese courts or investigations. Exit bans are often issued without notification to the foreign citizen or without clear legal recourse to appeal the exit ban decision. A 2020 independent report presented evidence that since 2018, more than 570,000 Uyghurs were implicated in forced labor picking cotton. There was also reporting that Xinjiang’s polysilicon and solar panel industries are connected to forced labor. In 2021, PRC citizens, with the encouragement of the PRC government, boycotted companies that put out statements on social media affirming they do not use Xinjiang cotton in their supply chain. Some landlords forced companies to close retail outlets during this boycott due to fears of being associated with boycotted companies. The ongoing PRC crackdown on virtually all opposition voices in Hong Kong and continued attempts by PRC organs to intimidate Hong Kong’s judges threatens the judicial independence of Hong Kong’s courts – a fundamental pillar for Hong Kong’s status as an international hub for investment into and out of China.  Apart from Hong Kong, the PRC government has also previously encouraged protests or boycotts of products from countries like the United States, the Republic of Korea (ROK), Japan, Norway, Canada, and the Philippines, in retaliation for unrelated policy decisions such as the boycott campaigns against Korean retailer Lotte in 2016 and 2017 in response to the ROK government’s decision to deploy the Terminal High Altitude Area Defense (THAAD); and the PRC’s retaliation against Canadian companies and citizens for Canada’s arrest of Huawei’s Chief Financial Officer Meng Wanzhou.

* Source for Host Country Data: National Bureau of Statistics 

Table 4: Sources of Portfolio Investment
Data not available.