Policies Towards Foreign Direct Investment

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), relative geographic isolation due to closed borders with Turkey and Azerbaijan, per capita gross national income of $4,230, and concerns related to weaknesses in the rule of law.

After a dramatic change of government in April/May 2018, major sectors of Armenia’s economy have ostensibly become more open to competition. Large businesses backed by oligarchic interests are notionally less able to draw on government support to prop up their market positions. An anti-corruption campaign was launched after the 2018 change of government, and a series of high-profile cases have resulted as part of efforts to eliminate systemic corruption. These developments serve to improve Armenia’s investment climate and competitive environment, though 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 are still concerned about the rule of law and equal treatment. U.S companies have also 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. The Armenian National Interests Fund and Investment Support Center are responsible for attracting and facilitating inward foreign direct investment.

Limits on Foreign Control and Right to Private Ownership and Establishment

There are very few restrictions with regard to limitations 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 for foreign direct investment, though government approval is required to take advantage of certain tax and customs privileges.

Other Investment Policy Reviews

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.

Business Facilitation

Armenia has traditionally fared well in the World Bank’s Ease of Doing Business report.  The government has announced its commitment to addressing deficiencies that prevent Armenia from obtaining a higher ranking. Companies can register electronically at http://www.e-register.am/en/ .  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 at https://www.ekeng.am/en/ .  In December 2019, the government launched a new e-regulations platform that provides a step-by-step guide for business and investment procedures. The platform is available at https://armenia.eregulations.org/ .

Outward Investment

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

Source for Host Country Data: Statistical Committee of the Republic of Armenia

Source:  IMF Coordinated Direct Investment Survey (CDIS) (2018)
A significant portion of outward investment is not specified by destination in the CDIS.

Table 4: Sources of Portfolio Investment
Data not available.

Policies Towards Foreign Direct Investment

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

Limits on Foreign Control and Right to Private Ownership and Establishment

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

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

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

Other Investment Policy Reviews

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

Business Facilitation

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

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

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

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

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

Outward Investment

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

According to official statistics, Belarus received USD 1.1 billion in FDI (on a net basis) in January-September 2019, USD 1.6 billion in 2018, USD 1.24 billion in FDI in 2017, and USD 1.3 billion in 2016. Russia (24.1 percent), Cyprus (20.6 percent), UAE (5.1 percent), Germany (4.9 percent), Switzerland (4.9 percent), UK (4.2 percent), China (4.1 percent), Netherlands (3.9 percent), USA (3.3 percent), and Poland (3.0 percent) are considered the top ten foreign investors in Belarus.

* Source for Host Country Data:

For detailed statistics on foreign direct investments in and outside Belarus for 2010-2019 see the website of Belarus’ National Bank (http://www.nbrb.by/engl/statistics/ForeignDirectInvestments/ ) and Economy Ministry (https://www.economy.gov.by/ru/pezultat-ru/ ). 

Policies Towards Foreign Direct Investment

Kazakhstan has attracted significant foreign investment since independence.  According to official statistics, as of January 1, 2020, the total stock of foreign direct investment (by the directional principle) in Kazakhstan totaled USD 161.2 billion, primarily in the oil and gas sector.  International financial institutions consider Kazakhstan to be an attractive destination for their operations, and international firms have established regional headquarters in Kazakhstan.

In June 2017 Kazakhstan joined the OECD Declaration on International Investment and Multinational Enterprises and became an associate member of the OECD Investment Committee.

In its Strategic Plan of Development for the current period (through 2025), the government stated that raising the living standards of Kazakhstan’s citizens to the level of OECD countries is one of the plan’s strategic goals.

In August 2017 the government adopted a new 2018-2022 National Investment Strategy, developed in cooperation with the World Bank, which outlined new coordinating measures on investment climate improvements, privatization plans, and economic diversification policies.  The strategy aims to increase annual FDI inflows as a percentage of GDP from 13.2 percent in 2018 to 19 percent in 2022.

The government of Kazakhstan has incrementally improved the business climate for foreign investors, and national legislation does not discriminate against foreign investors.  Corruption, lack of rule of law and excessive bureaucracy, however, do remain serious obstacles to foreign investment.

Over the last couple of years, the government has undertaken a number of structural changes aimed at improving how the government attracts foreign investment.  In April 2019 the Prime Minister announced the creation of the Coordination Council for Attracting Foreign Investment, which the Prime Minister will chair.  He will also act as Investment Ombudsman.  In December 2018 the Investment Committee was transferred to the Ministry of Foreign Affairs, which is now in charge of attracting and facilitating activities of foreign investors.  The Investment Committee at the Ministry of Foreign Affairs takes responsibility for investment climate policy issues and works with potential and current investors, while the Ministry of National Economy interacts on investment climate matters with international organizations like the OECD, WTO, and the United Nations Conference on Trade and Development (UNCTAD).  Each regional municipality designates a representative to work with investors, and Kazakhstani foreign diplomatic missions are charged with attracting foreign investments.  Specially designated front offices in Kazakhstan’s overseas embassies promote Kazakhstan as a destination for foreign investment.  In addition, the Astana International Financial Center (AIFC, see details in Section 3) operates as a regional investment hub, with tax, legal, and other benefits.  In 2019, the government founded Kazakhstan’s Direct Investment Fund, which is located at the AIFC and expected to attract private investments for diversifying Kazakhstan’s economy.  The state company KazakhInvest is also located in the AIFC and offers investors a single-window for government services.

The government maintains a dialogue with foreign investors through the Foreign Investors’ Council chaired by the President, as well as through the Council for Improving the Investment Climate chaired by the Prime Minister.

The COVID-19 pandemic and unprecedented low oil prices changed the country’s economic development plans.  In March 2020, the government approved a USD 13.7 billion stimulus package, mostly oriented at  income smoothing, supporting local businesses and implementing an import-substitution policy.

Limits on Foreign Control and Right to Private Ownership and Establishment

By law, foreign and domestic private firms may establish and own business enterprises.

While no sectors of the economy are legally closed to investors, restrictions on foreign ownership exist, including a 20 percent ceiling on foreign ownership of media outlets, a 49 percent limit on domestic and international air transportation services, and a 49 percent limit on telecommunication services.  The December 2017 Code on Subsoil and Subsoil Use (the Code) mandates the share of the national company Kazatomprom be no less than 51 percent in new uranium producing joint ventures.

As a result of its WTO accession, Kazakhstan formally removed this limit for telecommunication companies, except for the country’s main telecommunications operator, KazakhTeleCom.  Still, to acquire more than 49 percent of shares in a telecommunication company, foreign investors must obtain a government waiver.  No constraints limit the participation of foreign capital in the banking and insurance sectors.  Starting from January 2020 the restriction on opening branches of foreign banks and insurance companies was lifted in compliance with the country’s WTO commitments.  In addition, foreign citizens and companies are restricted from participating in private security businesses.  The law limits the participation of offshore companies in banks and insurance companies and prohibits foreign ownership of pension funds and agricultural land.

Foreign investors have complained about the irregular application of laws and regulations and interpret such behavior as efforts to extract bribes.  The enforcement process, widely viewed as opaque and arbitrary, is not publicly transparent.  Some investors report harassment by the tax authorities via unannounced audits, inspections, and other methods.  The authorities have used criminal charges in civil disputes as a pressure tactic.

Foreign Investment in the Energy & Mining Industries

Despite substantial investment in Kazakhstan’s energy sector, companies remain concerned about the risk of the government legislating or otherwise advocating for preferences for domestic companies, and creating mechanisms for government intervention in foreign companies’ operations, particularly in procurement decisions.  Recent developments range from a major reduction to a full annulment of work permits for some categories of foreign workforce.  (For more details, please see Part 5,  Performance and Data Localization Requirements.)

In April 2008 Kazakhstan introduced a customs duty on crude oil and gas condensate exports.  In general, oil-related revenue in Kazakhstan goes to the National Fund, a sovereign wealth fund that is financed by direct taxes paid by petroleum industry companies, other fees paid by the oil industry, revenues from privatization of mining and manufacturing assets and from the disposal of agricultural land.  In contrast, the customs duty on crude oil and gas condensate exports is an indirect tax that goes to the government’s budget.  Companies that pay taxes on mineral and crude oil exports are exempt from that export duty.  The government adopted a 2016 resolution that pegged the export customs duty to global oil prices – as the global oil price drops and approaches USD 25 per barrel, the duty rate approaches zero.

The Code defines “strategic deposits and areas” and restricts the government’s preemptive right to acquire exploration and production contracts to these areas, which helps to reduce significantly the approvals required for non-strategic objects.  The government approves and publishes the list of strategic deposits on its website.  The list has not changed since its approval on June 28, 2018: http://www.government.kz/ru/postanovleniya/postanovleniya-pravitelstva-rk-za-iyun-2018-goda/1015356-ob-utverzhdenii-perechnya-strategicheskikh-uchastkov-nedr.html.

The Code entitles the government to terminate a contract unilaterally “if actions of a subsoil user with a strategic deposit result in changes to Kazakhstan’s economic interests in a manner that threatens national security.”  The Article does not define “economic interests.”  The Code, if properly implemented, appears to be a step forward in improving the investment climate, including the streamlining of procedures to obtain exploration licenses and to convert exploration licenses into production licenses.  The Code, however, appears to retain burdensome government oversight over mining companies’ operations.

The Ministry of Energy announced in April 2018 that Kazakhstan is ready to launch a CO2 emissions trading system.  It is unclear, however, when actual quota trading will begin.  In January 2018, the government adopted a National Allocation Plan for 2018-2020, and in February 2018 the Ministry of Energy announced the creation of an online CO2 emissions reporting and monitoring system.  The system is not operational, and it is likely to be launched after the new Environmental Code is passed into law; the draft Code is currently in the lower chamber of parliament.  Some companies have expressed concern that Kazakhstan’s trading system will suffer from insufficient liquidity, particularly as power consumption and oil and commodity production levels increase.  The successor of the Energy Ministry for environmental issues, the Ministry of Ecology, Geology, and Natural Resources, started drafting the 2050 National Low Carbon Development Strategy in October 2019.

Other Investment Policy Reviews

Kazakhstan announced in 2011 its desire to join the Organization for Economic Co-operation and Development.  To meet OECD requirements, the government will need to continue to reform its institutions and amend its investment legislation.  The OECD presented its second Investment Policy Review of Kazakhstan in June 2017, available at:  https://www.oecd.org/countries/kazakhstan/oecd-investment-policy-reviews-kazakhstan-2017-9789264269606-en.htm 

The OECD review recommended Kazakhstan undertake corporate governance reforms at state-owned enterprises (SOEs), implement a more efficient tax system, further liberalize its trade policy, and introduce responsible business conduct principles and standards.  OECD also said it is carefully monitoring the country’s privatization program that aims to decrease the SOE share in the economy to 15 percent of GDP by 2020.

In 2019 the OECD and the government launched a two-year project on improving the legal environment for business in Kazakhstan.

Business Facilitation

The 2020 World Bank’s Doing Business Report ranked Kazakhstan 25 out of 190 countries in the “Ease of Doing Business” category, and 22 out of 190 in the “Starting a Business” category.  The report noted Kazakhstan made starting a business easier by registering companies for value added tax at the time of incorporation.  The report noted Kazakhstan’s progress in the categories of dealing with construction permits, registering property, getting credit, and resolving insolvency.  Online registration of any business is possible through the website https://egov.kz/cms/en 

In addition to a standard package of documents required for local businesses, non-residents should submit electronic copies of their IDs and any certification of their companies from the country of origin.  Both documents should be translated and notarized.  Foreign investors also have access to a “single window” service, which simplifies many business procedures.  Investors may learn more about these services here: https://invest.gov.kz/invest-guide/business-starting/registration/ .

According to the World Bank, it takes four procedures and five days to establish a foreign-owned limited liability company (LLC) in Almaty.  This is faster than the average for Eastern Europe and Central Asia and OECD high income countries.  A foreign-owned company registered in Kazakhstan is considered a domestic company for Kazakhstan currency regulation purposes.  Under the Law on Currency Regulation and Currency Control, residents may open bank accounts in foreign currency in Kazakhstani banks without any restrictions.

In 2019-2020, the government undertook some measures facilitating business operations for investors.  The General Prosecutor’s Office adopted an order in January 2020 that would decriminalize the tax errors of prompt taxpayers.  In July 2019 the government adopted the Road Map for further attraction of foreign investments.  In order to facilitate the work of foreign investors, the government recommended using the law of the Astana International Financial Center (AIFC) as the applicable law for investment contracts with Kazakhstan and planned other measures to showcase the AIFC as an investment hub, including tax preferences, liberalization of visa and migration rules, and the creation of additional international transportation and media links.

Outward Investment

The government neither incentivizes nor restricts outward investment.

*The Statistic Committee and The National Bank of Kazakhstan

Policies Towards Foreign Direct Investment

The Kyrgyz Republic is open to foreign direct investment and the government publicly recognizes that foreign direct investment is an important component to economic development. While the government has implemented laws to entice foreign investment, application of these laws, however, inconsistent application and onerous bureaucracy continue to deter foreign investors. In particular, government activities, including demands for renegotiation of operating contracts, invasive and time-consuming audits, levies of large retroactive fines, and disputes over licenses, pose significant impediments to attracting foreign investment.

Since 1993, the United States has a bilateral investment treaty with the Kyrgyz Republic that encourages and offers reciprocal protection of investment. The Kyrgyz Republic has an Investment and Trade Promotion and Protection Agency of the Kyrgyz Republic under the Ministry of Economy (IPPA). The IPPA serves as a vehicle for maintaining an ongoing dialogue with foreign investors and advocates for investing in the Kyrgyz Republic. The agency participates in the development and implementation of measures to attract and stimulate investment activity. Its mandate is to coordinate with state bodies, local municipalities, business entities, and non-state actors to promote investment and support investors in the Kyrgyz Republic, including private investment and public-private partnerships, as well as assist local exporters to promote Kyrgyz goods to external markets, and develop Free Economic Zones (FEZ). The IPPA has investor support programs to help guide investors through the registration process and conducts outreach aimed at helping create an environment conducive to foreign investment. The IPPA often coordinates with international donor organizations on hosting round- tables discussions, exchanges, and capacity building workshops in the field of economic development.

In August 2019, the Supervisory Board of the Institute of the Business Ombudsman appointed former UK Ambassador to the Kyrgyz Republic, Robin Ord-Smith, as Business Ombudsman. The Institute of Business Ombudsman was created in January 2019 is a non-state body, funded by external donor sources, to protect the rights, freedoms and legitimate interests of business entities, both local and foreign. The selection of a foreigner to head the Institute sends a positive signal to business associations and foreign investors of the country’s commitment to improving transparency mechanisms for regulating business activities.

The government has established several committees and councils to coordinate cooperation between the business associations and government bodies. Since 2017, the Business and Entrepreneurship Development Council regularly convenes MPs, business community representatives from various sectors of the economy to discuss measures to improve the investment, promotion of entrepreneurship, and legislation to facilitate doing business in the Kyrgyz Republic. The Committee on Development of Industry and Entrepreneurship under the President of the Kyrgyz Republic serves as a platform for entrepreneurs to turn to in case if their grievances are not addressed by the government. The respective presidential decree to establish the Committee under the National Council on Sustainable Development of the Kyrgyz Republic was signed on December 24, 2019 with the Provisions and the following amendment to include Vice-Prime-Minister on economic development, Business Ombudsman and heads of business associations. Once this structure fully launches, there will be platforms to raise investment climate and other business concerns at the offices of the President, Parliament and Prime Minister. The Kyrgyz government also interacts with the business community via a number of local associations that serve as a voice for entrepreneurs and corporations, including the American Chamber of Commerce in the Kyrgyz Republic (AmCham), and the International Business Council (IBC), among others. The Ministry of Economy, Parliamentary Business and Entrepreneurship Development Council, and other government bodies often seek the opinion of these associations during the formulation of policy.

Limits on Foreign Control and Right to Private Ownership and Establishment

While there are still no official limits on foreign control, a large investor in a politically sensitive industry may find that the government imposes investor-specific requirements such as a high percentage of local workforce employment or a minimum number of local seats on a board of directors. Foreigners have the right to establish and own businesses, and there have been no allegations on market access restrictions from U.S. investors since 2016.

By law, the Kyrgyz Republic guarantees equal treatment to investors and places no limit on foreign ownership or control. In the last two years, there were no known cases of sector-specific restrictions, limitations or requirements applied to foreign ownership and control. In April 2017, amendments to the “Law on Mass Media” to limit foreign ownership of television (excluding radio and print media) broadcasters to 35 percent, was signed by the President and entered into force in June 2017.

Post is unaware of any formal investment screening processes in the Kyrgyz Republic.

Other Investment Policy Reviews

In 2016, the International Finance Corporation (IFC), a member of the World Bank Group, released a report on the Kyrgyz investment climate in January 2016. The report is available at: https://documents.worldbank.org/en/publication/documents-reports/documentdetail/259411467997285741/investment-climate-in-kyrgyz-republic-views-of-foreign-investors-results-of-the-survey-of-foreign-investors-operating-and-non-operating   here. The Investment Policy Review (IPR) of The Kyrgyz Republic for 2016 by UNCTAD is available at https://unctad.org/en/pages/PublicationWebflyer.aspx?publicationid=1436 .

Business Facilitation

Starting a business in the Kyrgyz Republic has become easier in the elimination of the minimum capital requirement for business registration, abolishment of certain registration fees, and reduced registration time. The Kyrgyz Republic does not have a business registration website. Registration of legal entities, branches, or representative offices in the Kyrgyz Republic is based on “registration by notification” and the “one stop-shop” practice. State registration of a legal entity is completed within three business days from the date of filing the necessary documents for a specified fee. The Kyrgyz Republic ranked in the top quintile of the World Bank’s 2019 Doing Business report (42nd out of 190 countries surveyed) in “Starting a Business.” From May 2, 2018 to May 1, 2019, 115 economies implemented 294 business regulatory reforms across the 10 areas measured by Doing Business.

Outward Investment

Post is not aware of host government efforts to promote outward investment from the Kyrgyz Republic, nor of any instances in which the government sought to restrict domestic investors from investing abroad.

*Source for Host Country Data: National Statistics Committee of the Kyrgyz Republic; http://www.stat.kg 

Table 4: Sources of Portfolio Investment
Data not available. The Kyrgyz Republic has limited stock and bond markets for portfolio investors. The country is not listed on the IMF’s Coordinated Portfolio Investment Survey (CPIS) site. It is unlikely the country has any large portfolio investors.

Policies Towards Foreign Direct Investment

The Ministry of Economic Development (MED) is responsible for overseeing investment policy in Russia.  The Russian Direct Investment Fund (RDIF) was established in 2011 to facilitate FDI in Russia and has already attracted over $40 billion of foreign capital into the Russian economy through long-term strategic partnerships.  In 2013, Russia’s Agency for Strategic Initiatives (ASI) launched an “Invest in Russian Regions” project to promote FDI on a regional basis.  Since 2014, ASI has released an annual ranking of Russia’s regions in terms of the relative competitiveness of their investment climates, and provides potential investors with information about regions most open to foreign investment.  In 2019, 69 Russian regions improved their Regional Investment Climate Index scores (https://asi.ru/investclimate/rating).  The Foreign Investment Advisory Council (FIAC), established in 1994, is chaired by the prime minister and currently includes 53 international company members and four companies as observers.  The FIAC allows select foreign investors to directly present their views on improving the investment climate in Russia and advises the government on regulatory policy.

Russia’s basic legal framework governing investment includes 1) Law 160-FZ, July 9, 1999, “On Foreign Investment in the Russian Federation;” 2) Law No. 39-FZ,  February 25, 1999, “On Investment Activity in the Russian Federation in the Form of Capital Investment;” 3) Law No. 57-FZ, April 29, 2008, “Foreign Investments in Companies Having Strategic Importance for State Security and Defense;” and 4) the Law of the RSFSR No. 1488-1, June 26, 1991, “On Investment Activity in the Russian Soviet Federative Socialist Republic (RSFSR).”  This framework of laws nominally attempts to guarantee equal rights for foreign and local investors in Russia.  However, exemptions are permitted when it is deemed necessary to protect the Russian constitution, morality, health, human rights, national security, or defense, and to promote its socioeconomic development.  Foreign investors may freely use the profits obtained from Russia-based investments for any purpose, provided they do not violate Russian law.

Limits on Foreign Control and Right to Private Ownership and Establishment

Russian law places two primary restrictions on land ownership by foreigners.  The first is on the foreign ownership of land located in border areas or other sensitive territories in terms of national security.  The second restricts foreign ownership of agricultural land, restricting foreign individuals and companies, persons without citizenship, and agricultural companies more than 50-percent foreign-owned from owning land.  These entities may, however, hold agricultural land through leasehold rights.  As an alternative to agricultural land ownership, foreign companies typically lease land for up to 49 years, the maximum term allowed.

A law “On Mass Media,” took effect in 2015 which restricts foreign ownership of any Russian media company to 20 percent (the previous law applied a 50 percent limit to Russia’s broadcast sector).   In December 2018, the State Duma approved in its first reading a draft bill introducing new restrictions on online news aggregation services.  If adopted, foreign companies, including international organizations and individuals, would be limited to a maximum of 20 percent ownership in Russian news aggregator websites.  The second, final hearing was planned for February 2019 but was postponed.  To date, this proposed law has not been passed.

U.S. stakeholders have raised concerns about similar limits on FDI in the mining and mineral extraction sectors, and describe the licensing regime as non-transparent and unpredictable.

Russia’s Commission on Control of Foreign Investment (Commission) was established in 2008 to monitor foreign investment in strategic sectors in accordance with the SSL.  Between 2008 and 2019, the Commission received 621 applications for foreign investment, 282 of which were reviewed, according to the Federal Antimonopoly Service (FAS).  Of those 282, the Commission granted preliminary approval for 259 (92 percent approval rate) and rejected 23 (https://fas.gov.ru/news/29330).  International organizations, foreign states, and the companies they control are treated as distinct entities under the Commission. They are subject to restrictions applicable to a single foreign entity if they participate in a strategic business.

Other Investment Policy Reviews

The WTO conducted Russia’s first Trade Policy Review (TPR) in September 2016.  Dates are still pending for the next Russia TPR.  (Related reports are available at https://www.wto.org/english/tratop_e/tpr_e/tp445_e.htm ).

The United Nations Conference on Trade and Development (UNCTAD) issues an annual World Investment Report covering different investment policy topics.  In 2019, the focus of this report was on special economic zones (https://unctad.org/en/Pages/Publications/WorldInvestmentReports.aspx ).  UNCTAD also issues an investment policy monitor (https://investmentpolicyhub.unctad.org/IPM ).

Business Facilitation

The Federal Tax Service (FTS) operates Russia’s business registration website: www.nalog.ru .  Per law (Article 13 of Law 129-FZ of 2001), a company must register with a local FTS office, and the registration process typically takes no more than three days.  Foreign companies may be required to notarize the originals of incorporation documents included in the application package.  To establish a business in Russia, a company must register with FTS and pay a registration fee of RUB 4,000.  Since January 1, 2019, the registration fee is waived for online submission of incorporation documents.

In 2020, Russia moved up three notches to the 28th position in the World Bank’s Doing Business 2020 Index.  The ranking acknowledged several reforms that helped Russia improve its position.  Russia has improved the process for establishing connection to electricity by setting new deadlines and establishing specialized departments for connection.  Russia has also strengthened minority investor protections by requiring greater corporate transparency, and facilitated the payment of taxes by reducing the tax authority review period of applications for VAT cash refunds, as well as enhancing the software used for tax and payroll preparation.

Outward Investment

The Russian government does not restrict Russian investors from investing abroad.  Since 2015, Russia’s “De-offshorization Law” (376-FZ) requires that Russian tax residents disclose to the government their overseas assets, potentially subjecting these assets to Russian taxes.

While there are no restrictions on the distribution of profits to a nonresident entity, some foreign currency control restrictions apply to Russian residents (both companies and individuals) and to foreign currency transactions.  As of January 1, 2018, all Russian citizens and foreign holders of Russian residence permits are considered Russian “currency control residents.”  These “residents” are required to notify the tax authorities when a foreign bank account is opened, changed, or closed and when funds are moved in a foreign bank account.  Individuals who have spent less than 183 days in Russia during the reporting period are exempt from the reporting requirements and restrictions using foreign bank accounts.  On January 1, 2020, Russia abolished all currency control restrictions on payments of funds by non-residents to bank accounts of Russian residents opened with banks in OECD or FATF member states.  This is provided that such states participate in the automatic exchange of financial account information with Russia.  As a result, from 2020 onward, Russian residents will be able to freely use declared personal foreign accounts for savings and investment in a wide range of financial products.

* Source for Host Country Data: FDI data – Central Bank of Russia (CBR); GDP data – Rosstat (GDP) (Russia’s GDP was RUB 104,630 billion in 2018, according to Rosstat.  The yearly average RUB-USD-exchange rate in 2018, according to the CBR, was RUB 62.7078 to the USD).