Andorra is an independent principality with a population of about 79,000 and area of 181 square miles situated between France and Spain in the Pyrenees mountains. It uses the euro as its national currency. Andorra is a popular tourist destination visited by over 8 million people each year (pre-pandemic) who are drawn by outdoor activities like hiking and cycling in the summer and skiing and snowshoeing in the winter, as well as by its duty-free shopping of luxury products. Andorra’s economy is based on an interdependent network of trade, commerce, and tourism, which represent nearly 60% of the economy, followed by the financial sector. Andorra has also become a wealthy international commercial center because of its integrated banking sector and low taxes. As part of its effort to modernize its economy, Andorra has opened to foreign investment and engaged in other reforms, including advancing tax initiatives. Andorra is actively seeking to attract foreign investment and to become a center for entrepreneurs, talent, innovation, and knowledge.
The Andorran economy is undergoing a process of digitalization and diversification that accelerated due to the impact pandemic-related border closures had on its dominant tourist sector. In 2006, the Government began sweeping economic reforms. The Parliament approved three main regulations to complement the first phase of economic openness: the law of Companies (October 2007), the Law of Business Accounting (December 2007), and the Law of Foreign Investment (April 2008 and June 2012). From 2011 to 2017, the Parliament approved direct taxes in the form of a corporate tax, tax on economic activities, tax on income of non-residents, tax on capital gains, and personal income tax. Andorra joined the IMF in October 2020, providing it access to additional resources for managing its economy. Also, as part of the post-pandemic economic recovery plan, Andorra passed Horizon 23, a comprehensive roadmap backed by 80 million euros of public funds to accelerate economic diversification into sectors like fintech, sports tech, esports, and biotech. These regulations aim to establish a transparent, modern, and internationally comparable regulatory framework.
These reforms aim to attract investment and businesses that have the potential to boost Andorra’s economic development and diversification. Prior to 2008, Andorra limited foreign investment, worried that large foreign firms would have an oversized impact on its small economy. For example, previous regulations allowed non-citizens with less than 20 years residence in Andorra to own no more than 33 percent of a company. While foreigners may now own 100 percent of a trading enterprise or a holding company, the Government must approve the establishment of any private enterprise. The approval can take up to one month, which can be rejected if the proposal is found to negatively impact the environment, the public order, or the general interests of the principality.
Andorra is a microstate that accounts for .001 percent of global emissions and has demonstrated its ambition to the fight against climate change by establishing a national strategy that commits to reducing greenhouse gas emissions (GHG) by a minimum of 37 percent by 2030 and pursuing carbon neutrality by 2050. In addition to implementing an energy transition law, Andorra approved the Green Fund and a hydrocarbon tax to promote climate change mitigation and adaptation initiatives.
Andorra’s per capita income is above the European average and above the level of its neighbors. The country has developed a sophisticated infrastructure including a one-of-a-kind micro-fiber-optic network for the entire country that provides universal access for all households and companies. Andorra’s retail tradition is well known around Europe, thanks to more than 1,400 shops, the quality of their products, and competitive prices. Products taken out of the Principality are tax-free up to certain limits; the purchaser must declare those that exceed the allowance.
Table 1: Key Metrics and Rankings
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1. Openness To, and Restrictions Upon, Foreign Investment
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.
Bosnia and Herzegovina
Bosnia and Herzegovina (BiH) is open to foreign investment, but to succeed, investors must overcome endemic corruption, complex legal/regulatory frameworks and government structures, non-transparent business procedures, insufficient protection of property rights, and a weak judicial system under the indue influence of ethno-nationalist parties and their patronage networks. Economic reforms to complete the transition from a socialist past to a market-oriented future have proceeded slowly and the country has a low level of foreign direct investment (FDI). According to the BiH Central Bank preliminary data, in the first nine months of 2021 FDI in BiH was USD 617 million, a 65% increase from the same period in 2020. In the World Bank’s 2020 Ease of Doing Business Report, BiH was among the least attractive business environments in Southeast Europe, with a ranking of 90 out of 190 global economies. (Note: Beginning in 2021, the World Bank discontinued the worldwide assessment in the Doing Business Report.) The World Bank 2020 report ranked BiH particularly low for its lengthy and arduous processes to start a new business and obtain construction permits. According to the World Bank estimates, real GDP is expected to grow 4 percent in 2021 after contracting 3.2 percent in 2020. The European Bank for Reconstruction and Development (EBRD) expects BiH’s GDP to grow by 4.5% in 2021. EBRD announced that BiH’s economic recovery has been stronger than expected mostly due to the recovery in external markets and strong expansion of domestic private consumption, backed by higher exports of goods and services. BiH is tied closely to global value chains as it primarily exports goods rather than services.
U.S. investment in BiH is low due to its small market size, relatively low income levels, distance from the United States, challenging business climate, and the lack of investment opportunities. Most U.S. companies in BiH are represented by small sales offices that are concentrated on selling U.S. goods and services, with minimal longer-term investments. U.S. companies with offices in BiH include major multinational companies and market leaders in their respective sectors, such as Coca-Cola, Microsoft, Cisco, Oracle, Pfizer, McDonalds, Marriott, Caterpillar, Johnson & Johnson, FedEx, UPS, Philip Morris, KPMG, PwC and others. Nonetheless, BiH offers business opportunities to well-prepared and persistent exporters and investors. Companies that overcome the challenges of establishing a presence in BiH often make a return on their investment over time. A major U.S. investment fund was able to enter the market with a regional investment in the telecom/cable sector in 2014 and exit its majority position in 2019 with a good return. There is an active international community, but lack of political will has stalled the many reform efforts that would improve the business climate as BiH pursues eventual European Union membership. The country is open to foreign investment and offers a liberal trade regime and its simplified tax structure is one of the lowest in the region (17 percent VAT and 10 percent flat income tax).
The complex institutional and territorial structure of BiH complicates the economic landscape of the country and may lead to further disruptions in Foreign Direct Investment. In July 2021, the Republika Srpska (RS) entity began a blockade of state institutions and in October 2021 began to take unconstitutional steps to return competencies to the entity-level government. This near-virtual decision-making blockade and attempts to withdraw the RS from state institutions and agencies have created questionsfor many investors and businesses. The duplicative nature of the proposed RS-based parallel institutions and agencies will complicate the investment landscape and create regulatory and legal confusion. While no new parallel RS agencies are yet operational, the RS has taken concrete legislative and regulatory steps to lay the groundwork for their full implementation in the near to mid-term. Investors should exercise all due diligence and take into account ongoing and potential Constitutional Court challenges and the fact these RS moves violate the Dayton Peace Agreement when deciding whether to conduct business with these nascent agencies or operate under constitutionally questionable legal frameworks established by the RS. The Federation of Bosnia and Herzegovina entity also has functionality issues, with 2018 election results yet unimplemented, and a legislative body that struggles to pass basic economic reforms. Potential investors are urged to read the legal reviews and statements of the High Representative to BiH.
BiH is pursuing World Trade Organization membership and hopes to join in the future. It is also richly endowed with natural resources, providing potential opportunities in energy (hydro, wind, solar, along with traditional thermal), agriculture, timber, and tourism. The best business opportunities for U.S. exporters to BiH include energy generation and transmission equipment, telecommunication and IT equipment and services, transport infrastructure and equipment, engineering and construction services, medical equipment, agricultural products, and raw materials and chemicals for industrial processing. In 2021, U.S. exports to BiH totaled USD 322 million, a 37 percent increase from 2020, and held around 3 percent share of total BiH imports. BiH exports to the United States in 2021 totaled USD 94 million, an increase of 135 percent from 2020. U.S. exports to BiH are primarily in the areas of raw materials for industrial processing, food and agricultural products, machinery and transport equipment, and mineral fuels.
1. Openness To, and Restrictions Upon, Foreign Investment
Bosnia and Herzegovina struggles to attract foreign investment. Complex labor and pension laws, the lack of a single economic space, and inadequate judicial and regulatory protections deter investment. Under the BiH constitution, established through the Dayton Accords that ended the 1990s war, Bosnia and Herzegovina (henceforth “the state”) is 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
The government does not restrict domestic investors from investing abroad. There are no programs to promote or incentivize outward investment.
Brunei is a small, energy-rich sultanate on the northern coast of Borneo in Southeast Asia. Brunei boasts a well-educated, largely English-speaking population, excellent infrastructure, and a government intent on attracting foreign investment and projects. In parallel with Brunei’s efforts to attract foreign investment and create an open and transparent investment regime, the country has taken steps to streamline the process for entrepreneurs and investors to establish businesses and has improved its protections for Intellectual Property Rights (IPR).
Despite ambitions to diversify, Brunei’s economy remains dependent on the income derived from sales of oil and gas, contributing about 50 percent to the country’s GDP. Substantial revenue from overseas investment supplements income from domestic hydrocarbon production. These two revenue streams provide a comfortable quality of life for Bruneians by regional standards. Citizens are not required to pay taxes and have access to free education through the university level, free medical care, and subsidized housing and car fuel.
Brunei has a stable political climate and is generally sheltered from natural disasters. Its central location in Southeast Asia, with good telecommunications and airline connections, business tax credits in specified sectors, and no income, sales, or export taxes, offers a welcoming climate for potential investors. Sectors offering U.S. business opportunities in Brunei include aerospace and defense, agribusiness, construction, petrochemicals, energy and mining, environmental technologies, food processing and packaging, franchising, health technologies, information and communication, digital finance, and services. Brunei has ambitious climate change goals, aspiring to lower greenhouse gas emissions by more than 50 percent and increase its share of renewable energy to 30 percent of total capacity by 2035.
Brunei continues to take a cautious approach against the COVID-19 pandemic despite having fully immunized 95 percent of the population. As of March 2022, although the country is not under lockdown, Brunei has not fully opened its borders to non-essential travel. Travelers entering the country are required to obtain permission from the Prime Minister’s Office.
In 2014, Brunei began implementing sections of its Sharia Penal Code (SPC) that expanded preexisting restrictions on activities such as alcohol consumption, eating in public during the fasting hours in the month of Ramadan, and indecent behavior, with possible punishments including fines and imprisonment. The SPC functions in parallel with Brunei’s common law-based civil penal code. The government commenced full implementation of the SPC in 2019, introducing the possibility of corporal and capital punishments including, under certain evidentiary circumstances, amputation for theft and death by stoning for offenses including sodomy, adultery, and blasphemy. Government officials emphasize that sentencing to the most severe punishments is highly improbable due to the very high standard of proof required for conviction under the SPC. While the SPC does not specifically address business-related matters, potential investors should be aware that the SPC generated global controversy when it was implemented due to its draconian punishments and inherent discrimination toward LGBT communities. The sultan declared a moratorium on the death penalty for sharia crimes in response to the outcry and there have been no recorded incidents of U.S. citizens or U.S. investments directly affected by sharia law.
1. Openness To, and Restrictions Upon, Foreign Investment
Brunei has an open economy favorable to foreign trade and FDI as the government continues its economic diversification efforts to limit its long reliance on oil and gas exports.
FDI is important to Brunei as it plays a key role in the country’s economic and technological development. Brunei encourages FDI in the domestic economy through various investment incentives offered by the Ministry of Finance and Economy.
Improving Brunei’s Ease of Doing Business status by upgrading the domestic business regulatory environment through a whole-of-nation approach has been a priority for the government. The World Bank Ease of Doing Business report indicated that Brunei ranked 66th overall out of 190 world economies in 2019. Brunei ranked first in the report’s “Getting Credit” category, tied with New Zealand, indicative of Brunei’s strong credit reporting mechanisms.
Brunei amended its laws to make it easier and quicker for entrepreneurs and investors to establish businesses. The Business License Act (Amendment) of 2016 exempts several business activities (eateries, boarding and lodging houses or other places of public resort; street vendors and stalls; motor vehicle dealers; petrol stations, including places for storing petrol and inflammable material; timber store and furniture factories; and retail shops and workshops) from needing to obtain a business license. The Miscellaneous License Act (Amendment) of 2015 reduced the wait times for new business registrants to start operations, with low-risk businesses like eateries and shops able to start operations immediately.
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.
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.
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.
On January 24, 2022, the Burkinabé military officers deposed the democratically-elected government of former President Roch Marc Christian Kabore, dissolved the government and national assembly, and suspended the constitution. The coup leader Lieutenant Colonel Paul-Henri Damiba assumed the role of president of Burkina Faso’s Transition Government. In February 2022, a transitional charter was signed by Transition President LTC Damiba laying out a three-year transition period before democratic elections could be held. Since then, a Transitional government and a Transition Legislative Assembly have been installed.
Burkina Faso is a landlocked country and the world’s seventh poorest country according to the 2020 UN Development Program (UNDP) Human Development Index, ranked at 182 out of 189 countries. Burkina Faso has an estimated population of 22 million inhabitants (as of June 2022) according to the United Nations, and the IMF estimates its growth domestic product (GDP) at US$ 19.62 billion. Burkina Faso’s economy rebounded in 2021 and grew at an estimated 8.5 percent, attributable to increases in gold exports and the services sector, according to the World Bank. The economy is forecasted to grow at 5.6 percent in 2022. The fiscal deficit stood at 5.5 percent of GDP in 2022, but could reach 6.6 percent of GDP in 2022 as a result of the multitude of challenges Burkina Faso faces, including security, humanitarian, food, and social, etc. Over 40 percent of the Burkinabe population live below the poverty line, and the country ranks 144th out of 157 countries in the World Bank’s Human Capital Index. Some 80 percent of the country’s population is engaged in agriculture—mostly subsistence—with only a small fraction directly involved in agribusiness. In 2020, as a response to the COVID-19 crisis, the Burkinabe government announced a series of socio-economic measures ranging from tax breaks to subsidies and food support to low-income families. The overall cost of the measures was estimated at US$656 million.
Overall, Burkina Faso welcomes foreign investment and actively seeks to attract foreign partners to aid in its development. It has partially put in place the legal and regulatory framework necessary to ensure that foreign investors are treated fairly, including setting up a venue for commercial disputes and streamlining the issuance of permits and company registration requirements. More progress is needed to diminish the dominance of state-owned firms in certain sectors and to enforce intellectual property protections.
Burkina Faso ranks 100th of 177 countries in the Heritage Foundation’s economic freedom report 2022 Economic Freedom Index. Among the 51 African countries in the report, Burkina Faso ranked 14th, improving its 21st position in the 2021 economic freedom report. Burkina Faso’s corruption perception score improved slightly from 40 in 2020 to 42 in 2021 and improved the country’s ranking from 86th to 78th of 180 countries.
The gold mining industry has boomed in the last decade, and the bulk of foreign investment is in the mining sector, mostly from Canadian firms. Moroccan, French and UAE companies control local subsidiaries in the telecommunications industry, while foreign investors are also active in sectors such as agriculture, transport and logistics, energy, and financial technology. There is a growing foreign investment interest in the security sector. In June 2015, a new mining code was approved to standardize contract terms and better regulate the sector. In 2018, the parliament adopted a new investment code that offers many advantages to foreign investors. This code offers a range of tax breaks and incentives to lure foreign investors, including exemptions from value-added tax (VAT) on certain equipment. Effective tax rates as a result are lower than the regional average, though the tax system is complex, and compliance can be burdensome. Opportunities for U.S. firms exist in many sectors, but including in agriculture and manufacturing
Burkina Faso remains committed to a market-based economy without barriers to trade. Over the last 15 years, the national power utility’s Société Nationale de l’Eléctricité du Burkina (SONABEL) customer base and energy demand ballooned. Between 2015 and 2021, SONABEL customer base grew by 64%. However, supply can only meet the demand in non-peak periods. Burkina Faso imports nearly 70 percent of its electricity from neighboring Ghana and Cote d’Ivoire and faces electricity reliability and affordability challenges. It also imports other energy products such as gasoline and gas through a network of foreign companies to meet local demand. the Millennium Challenge Corporation (MCC) suspended the US$ 500 million compact with the Government of Burkina Faso. The Compact aimed to unlock economic growth by strengthening electricity sector effectiveness, energy reliability cost-effectiveness, and grid development and access, creating a more favorable investment environment for firms in the energy sector and the wider economy and spurring further foreign direct investment in Burkina Faso.
1. Openness To, and Restrictions Upon, Foreign Investment
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.
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.
With the second highest GDP per capita in Latin America (behind Uruguay), Chile has historically enjoyed among the highest levels of stability and prosperity in the region. However, widespread civil unrest broke out throughout the country in 2019 in protest of the government’s handling of the economy and perceived systemic inequality. Pursuant to a political accord, Chile held a plebiscite in October 2020 in which citizens chose to redraft the constitution. Uncertainty about the outcome of the redrafting process may impact investment. Due to Chile’s solid macroeconomic policy framework, the country boasts one of the strongest sovereign bond ratings in Latin America, which has provided fiscal space for the Chilean government to respond to the economic contraction resulting from the COVID-19 pandemic through stimulus packages and other measures. As a result, Chile’s economic growth in 2021 was, according to the Central Bank’s latest estimation, between 11.5 percent and 12 percent. The same institution forecasts Chile’s economic growth in 2022 will be in the range of 1 to 2 percent due largely to the gradual elimination of COVID-19 economic stimulus programs.
Chile has successfully attracted large amounts of Foreign Direct Investment (FDI) despite its relatively small domestic market. The country’s market-oriented policies have created significant opportunities for foreign investors to participate in the country’s economic growth. Chile has a sound legal framework and there is general respect for private property rights. Sectors that attract significant FDI include mining, finance/insurance, energy, telecommunications, chemical manufacturing, and wholesale trade. Mineral, hydrocarbon, and fossil fuel deposits within Chilean territory are restricted from foreign ownership, but companies may enter into contracts with the government to extract these resources. Corruption exists in Chile but on a much smaller scale than in most Latin American countries, ranking 27 – along with the United States – out of 180 countries worldwide and second in Latin America in Transparency International’s 2021 Corruption Perceptions Index.
Although Chile is an attractive destination for foreign investment, challenges remain. Legislative and constitutional reforms proposed in response to the social unrest and the pandemic have generated concerns about the future government policies on property rights, rule of law, tax structure, the role of government in the economy, and many other issues. 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). Despite a general respect for intellectual property (IP) rights, Chile has not fully complied with its IP obligations set forth in the U.S.-Chile FTA and remains on the U.S. Trade Representative (USTR) Special 301 Report for not adequately enforcing IP rights. Environmental permitting processes, indigenous consultation requirements, and cumbersome court proceedings have made large project approvals increasingly time consuming and unpredictable, especially in cases with political sensitivities. The current administration has stated its willingness to continue attracting foreign investment.
1. Openness To, and Restrictions Upon, Foreign Investment
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 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.
With improving security conditions in metropolitan areas, a market of 50 million people, an abundance of natural resources, and an educated and growing middle-class, Colombia continues to be an attractive destination for foreign investment in Latin America. Colombia ranked 67 out of 190 countries in the “Ease of Doing Business” index of the World Bank’s 2020 Doing Business Report (most recent report).
The Colombian economy grew by 10.6 percent in 2021, the largest increase in gross domestic product (GDP) since the statistical authority started keeping records in 1975. This followed a 6.8 percent collapse in 2020 due to the negative effects of the pandemic and lower oil prices, the first economic contraction in more than two decades. In July 2021, rating agencies Fitch and Standard & Poor’s (S&P) downgraded Colombia below investment grade status, citing the increasing fiscal deficit (7.1 percent of GDP for 2021) as the main reason for the downgrade. The Colombian Government passed a tax reform that entered into effect in January 2022, the Social Investment Law, that seeks to reactivate the economy, generate employment, and contribute to the fiscal stability of the country.
Colombia’s legal and regulatory systems are generally transparent and consistent with international norms. The country has a comprehensive legal framework for business and foreign direct investment (FDI). The 2012 U.S.-Colombia Trade Promotion Agreement (CTPA) has strengthened bilateral trade and investment. Colombia’s dispute settlement mechanisms have improved through the CTPA and several international conventions and treaties. Weaknesses include protection of intellectual property rights (IPR), as Colombia has yet to implement certain IPR-related provisions of the CTPA. Colombia became the 37th member of the Organization for Economic Cooperation and Development (OECD) in 2020, bringing the obligation to adhere to OECD norms and standards in economic operations.
The Colombian government has made a concerted effort to develop efficient capital markets, attract investment, and create jobs. Restrictions on foreign ownership in specific sectors still exist. FDI inflows increased 4.8 percent from 2020 to 2021, with 67 percent of the 2021 inflow dedicated to the extractives sector. Roughly half of the Colombian workforce in metropolitan areas is employed in the informal economy, a share that increases to four-fifths in rural areas. In 2021, the unemployment rate was 13.7 percent with 3.4 million people unemployed. The employed population reached 21.6 million, an increase of 0.9 percent compared to 2020.
Since the 2016 peace agreement between the government and the Revolutionary Armed Forces of Colombia (FARC), Colombia has experienced a significant decrease in terrorist activity. Several powerful narco-criminal operations still pose threats to commercial activity and investment, especially in rural zones outside of government control.
Corruption remains a significant challenge. The Colombian government continues to work on improving its business climate, but U.S. and other foreign investors continue to voice complaints about non-tariff, regulatory, and bureaucratic barriers to trade, investment, and market access at the national, regional, and municipal levels. Stakeholders express concern that some regulatory rulings in Colombia target specific companies, resulting in an uneven playing field. Investors generally have access at all levels of the Colombian government, but cite a lack of effective and timely consultation with regulatory agencies in decisions that affect them. Investors also note concern regarding the national competition and regulatory authority’s (Superintendencia de Industria y Comercio, SIC) differing rulings for different companies on similar issues, and slow processing at some regulatory agencies, such as at food and drug regulator INVIMA.
1. Openness To, and Restrictions Upon, Foreign Investment
The Colombian government actively encourages foreign direct investment (FDI). The economic liberalization reforms of the early 1990s provided for national treatment of foreign investors, lifted controls on remittance of profits and capital, and allowed foreign investment in most sectors. Colombia imposes the same investment restrictions on foreign investors that it does on national investors. Generally, foreign investors may participate in the privatization of state-owned enterprises without restrictions. All FDI involving the establishment of a commercial presence in Colombia requires registration with the Superintendence of Corporations and the local chamber of commerce. All conditions being equal during tender processes, national offers are preferred over foreign offers. Assuming equal conditions among foreign bidders, those with major Colombian national workforce resources, significant national capital, and/or better conditions to facilitate technology transfers are preferred.
ProColombia is the Colombian government entity that promotes international tourism, foreign investment, and non-traditional exports. ProColombia assists foreign companies that wish to enter the Colombian market by addressing specific needs, such as identifying contacts in the public and private sectors, organizing visit agendas, and accompanying companies during visits to Colombia. All services are free of charge and confidential. Priority sectors include business process outsourcing, software and IT services, cosmetics, health services, automotive manufacturing, textiles, graphic communications, agribusiness, and electric energy. ProColombia’s “Invest in Colombia” web portal offers detailed information about opportunities in agribusiness, manufacturing, and services in Colombia (www.investincolombia.com.co/sectors). The Duque administration – including senior leaders at the Presidency, ProColombia, and the Ministry of Commerce, Industry, and Trade – continue to stress Colombia’s openness to foreign investors and aggressively market Colombia as an investment destination. The government of Colombia does not have a national security-based investment screening mechanism in place.
Foreign investment in the financial, hydrocarbon, and mining sectors is subject to special regimes, such as investment registration and concession agreements with the Colombian government, but is not restricted in the amount of foreign capital. The following sectors require that foreign investors have a legal local representative and/or commercial presence in Colombia: travel and tourism agency services; money order operators; customs brokerage; postal and courier services; merchandise warehousing; merchandise transportation under customs control; international cargo agents; public service companies, including sewage and water works, waste disposal, electricity, gas and fuel distribution, and public telephone services; insurance firms; legal services; and special air services, including aerial fire-fighting, sightseeing, and surveying.
According to the Colombian constitution and foreign investment regulations, foreign investment in Colombia receives the same treatment as an investment made by Colombian nationals. Foreign investment is permitted in all sectors, except in activities related to defense, national security, and toxic waste handling and disposal. There are no performance requirements explicitly applicable to the entry and establishment of foreign investment in Colombia.
Foreign investors face specific exceptions and restrictions in the following sectors:
Media: Only Colombian nationals or legally constituted entities may provide radio or subscription-based television services. For National Open Television and Nationwide Private Television Operators, only Colombian nationals or legal entities may be granted concessions to provide television services. Foreign investment in national television is limited to a maximum of 40 percent ownership of an operator.
Accounting, Auditing, and Data Processing: To practice in Colombia, providers of accounting services must register with the Central Accountants Board and have uninterrupted domicile in Colombia for at least three years prior to registry. A legal commercial presence is required to provide data processing and information services in Colombia.
Banking: Foreign investors may own 100 percent of financial institutions in Colombia, but are required to obtain approval from the Financial Superintendent before making a direct investment of ten percent or more in any one entity. Foreign banks must establish a local commercial presence and comply with the same capital and other requirements as local financial institutions. Every investment of foreign capital in portfolios must be through a Colombian administrator company, including brokerage firms, trust companies, and investment management companies.
Fishing: A foreign vessel may engage in fishing activities in Colombian territorial waters only through association with a Colombian company holding a valid fishing permit. If a ship’s flag corresponds to a country with which Colombia has a complementary bilateral agreement, this agreement shall determine whether the association requirement applies for the process required to obtain a fishing license. The costs of fishing permits are greater for foreign flag vessels.
Private Security and Surveillance Companies: Companies constituted with foreign capital prior to February 11, 1994 cannot increase the share of foreign capital. Those constituted after that date can only have Colombian nationals as shareholders.
Transportation: Foreign companies can only provide multimodal freight services within or from Colombian territory if they have a domiciled agent or representative legally responsible for its activities in Colombia. International cabotage companies can provide cabotage services (i.e. between two points within Colombia) “only when there is no national capacity to provide the service.” Colombia prohibits foreign ownership of commercial ships licensed in Colombia. The owners of a concession providing port services must be legally constituted in Colombia, and only Colombian ships may provide port services within Colombian maritime jurisdiction, unless there are no capable Colombian-flag vessels.
New businesses must register with the chamber of commerce of the city in which the company will reside. Applicants also register using the Colombian tax authority’s portal at: www.dian.gov.co to obtain a taxpayer ID (RUT). Business founders must visit DIAN ( Dirección de Impuestos y Aduanas Nacionales) offices to obtain an electronic signature for company legal representatives, and obtain – in-person or online – an authorization for company invoices from DIAN. In 2019, Colombia made starting a business a step easier by lifting a requirement of opening a local bank account to obtain invoice authorization. Companies must submit a unified electronic form to self-assess and pay social security and payroll contributions to the Governmental Learning Service (Servicio Nacional de Aprendizaje, or SENA), the Colombian Family Welfare Institute (Instituto Colombiano de Bienestar Familiar, or ICBF), and the Family Compensation Fund (Caja de Compensación Familiar). After that, companies must register employees for public health coverage, affiliate the company to a public or private pension fund, affiliate the company and employees to an administrator of professional risks, and affiliate employees with a severance fund.
Colombia does not incentivize outward investment nor does it restrict domestic investors from investing abroad.
Côte d’Ivoire (CDI) offers a welcoming environment for U.S. investment. The Ivoirian government wants to deepen commercial cooperation with the U.S. The Ivoirian and foreign business community in CDI considers the 2018 investment code generous with welcome incentives and few restrictions on foreign investors. Côte d’Ivoire’s resiliency to the COVID-19 crisis led to quick economic recovery. Gross Domestic Product (GDP) growth stayed positive at two percent in 2020 and rebounded to 6.5 percent in 2021, with government of CDI projecting average growth at 7.65 percent during the period 2021-2025. International credit rating agency Fitch upgraded the country’s political risk rating in July 2021 from B+ to BB-, while the International Monetary Fund’s (IMF) assessment confirms CDI’s economic resilience, despite the Omicron variant of COVID. However, possible repetition of 2021 energy shortages, poor transparency, and delays in reforms could dampen confidence.
U.S. businesses operate successfully in several Ivoirian sectors including oil and gas exploration and production; agriculture and value-added agribusiness processing; power generation and renewable energy; IT services; the digital economy; banking; insurance; and infrastructure. The competitiveness of U.S. companies in IT services is exemplified by one company that altered the local payment system by introducing a digital payment system that rapidly increased its market share, forcing competitors to lower prices.
Côte d’Ivoire is well poised to attract increased Foreign Direct Investments (FDI) based on the government’s strong response to the pandemic, the buoyancy of the economy, high-level support for private sector investment, and clear priorities set forth in the new 2021-2025 National Development Plan (PND – Plan National de Développement). An important factor is Côte d’Ivoire’s resurgence as a regional economic and transportation hub. Government authorities are continuing to implement structural reforms to improve the business environment, modernize public administration, increase human capital, and boost productivity and private sector development. However, this will not come without challenges and uncertainties in the medium term, particularly regarding the evolution of the pandemic and global recovery as well as regulatory and transparency concerns. Government authorities underscore their commitment to strengthening peace and security systems in the northern zone of the country, while striving for inclusive growth in the context of post-pandemic recovery. Finally, recent political instability in northern and western neighboring countries Burkina Faso, Mali, and Guinea, could impede investor confidence in the region, especially when it comes to security.
Doing business with the Ivoirian government remains a significant challenge in some areas such as procurement, taxation, and regulatory processes. Some new public procurement procedures adopted in 2019 were only implemented in 2021, including implementation of an e-procurement module, and improved evaluation, prioritization, selection, and monitoring procedures. This is a work in process, and concerns remain that these procedures are not consistently and transparently applied. Similar concerns circulate about tax procedures, especially retroactive assessments based on changes in tax formulas. An overly complicated tax system and slow, opaque government decision-making processes hinder investment. Government has identified VAT (Value Added Tax), mining, digitalization, and property taxes as key areas for broadening the tax base and improving state revenues. Other challenges include low levels of literacy and income, weak access to credit for small businesses, corruption, and the need to broaden the tax base to relieve some of the tax-paying burden on businesses.
1. Openness To, and Restrictions Upon, Foreign Investment
The government actively encourages FDI and is committed to increasing it. The preparation of the 2021-2025 PND was informed by a comprehensive review of the previous 2016-2020 PND to identify the main achievements, remaining challenges and additional strategic priorities. The 2021-2025 PND process was collaborative, including consultations with civil society, private sector, local government, and development finance institutions (DFIs). The government recognizes it cannot achieve its ambitious PND investment goals without increasing foreign investment and private investment to a target of 72 percent of total investment. Prime Minister Achi’s March 2022 visit to the U.S. profiled CDI as an attractive trade and investment partner that offers a conducive environment to accommodate foreign companies. Achi broadcast the government’s objective to use the private sector as a principal element of development, urging U.S. companies to invest in Côte d’Ivoire. He highlighted CDI’s success in delivering peace and stability through its commitment to political dialogue. Part of CDI’s vision by 2030 is to process domestically at least 50 percent of its raw export commodities.
Foreign companies are free to invest and list on the Regional Stock Exchange (BVRM – Bourse Régionale des Valeurs Mobilières), which is based in Abidjan and covers the eight countries of the West African Economic and Monetary Union (WAEMU). WAEMU members are part of the Regional Council for Savings and Investment (CREPMF – Conseil Régional de l’Épargne Publique et des Marchés Financiers), a West African securities regulatory body. BRVM has only 46 companies, 34 of which are Ivorian. Looking ahead, the market is slowly going digital, with online trading platforms. Licensed stock broking companies already execute most investors’ trades through an automated trading system. Nevertheless, investor and corporate sentiment remain low. Companies are reluctant to list, and investors do not yet see the market as an alternative way to make profit. There is a need to expand and deepen markets to support international trade, including forward and futures markets.
In most sectors, there are no laws that limit foreign investment. There are restrictions, however, on foreign investment in the health sector, law and accounting firms, and travel agencies (see the section below).
The Ivoirian government’s investment promotion agency, the Center for the Promotion of Investment in Côte d’Ivoire (CEPICI), promotes and attracts national and foreign investment. Its services are available to all investors and are provided through a one-stop shop intended to facilitate business creation, operation, and expansion. CEPICI ensures that investors receive incentives outlined in the investment code and facilitates access to industrial land. More information is available at http://www.cepici.gouv.ci/. In 2019, the government added a Ministry of Investment Promotion and Private Sector Development, charged with investment promotion activities and development of industrial zones, including economic and free zones. The Ministry oversees the CEPICI and the Ivoirian Enterprise Institute (INIE – Institut Ivoirien de l’Entreprise), charged with programs targeting Small and Medium Enterprise (SME) development. This overlaps with the mandate of the Ministry of SMEs (Ministère de la Promotion des PME, de l’artisanat et de la Transformation du Secteur informel).
Côte d’Ivoire maintains an ongoing dialogue with investors through various business networks and platforms, such as the CEPICI, the Ivoirian Chamber of Commerce (CCI-CI), the association of large enterprises (CGECI), and the bankers’ association. CGECI regularly proposes reforms to be adopted by the government regarding private sector financing and investment. CGECI workshops and conferences are venues to discuss issues ranging from tax to access to debt issues.
Foreign investors generally have access to all forms of remunerative activity on terms equal to those enjoyed by Ivoirians. The government encourages foreign investment, including investor participation in state-owned firms that the government is privatizing, although in most cases of privatization the state reserves an equity stake in the new company.
There are no general, economy-wide limits on foreign ownership or control, and few sector-specific restrictions. There are no laws specifically directing private firms to adopt articles of incorporation or association that limit or prohibit foreign investment, participation, or control in those firms, and no such practices have been reported. Non-citizens and foreign entities can buy stocks listed on the regional stock exchange located in Abidjan.
Banks and insurance companies are subject to licensing requirements, but there are no restrictions designed to limit foreign ownership or to limit establishment of subsidiaries of foreign companies in this sector. Investments in health, law and accounting, and travel agencies are subject to prior approval and require appropriate licenses and association with an Ivoirian partner. The Ivoirian government has, on a case-by-case basis, mandated using local providers, hiring local employees, or arranging for eventual transfer to local control. The government has implemented local content requirement for companies in the oil and gas sectors. Local content includes an obligation to employ local employees and to work with local SMEs.
The government does not have an official policy to screen investments; its overall economic and industrial strategy does not discriminate against foreign-owned firms. There are indications in some instances of preferential treatment for firms from countries with longstanding commercial ties to CDI. In some sectors, such as cocoa and cashew processing, the government gives preferential treatment to Ivoirian companies. For instance, 20 percent of the national cocoa production is exclusively granted to local cocoa exporting companies.
The Government of CDI provides information about sector policies and business opportunities in publicly available reports. More information can be found at: https://www.cepici.gouv.ci/. The National Development Plan 2021-2025 outlines the key sectors and priorities of the government regarding investment.
The CEPICI manages CDI’s online information portal containing all documents dedicated to business creation and registration (https://cotedivoire.eregulations.org/). All the necessary documentation for registration is available online, however actual registration must be done in person. Further information on business registration is also available on CEPICI’s website (http://www.cepici.gouv.ci/).
Businesses can register at the CEPICI’s One-Stop Shop (Guichet Unique) in Abidjan. The One-Stop Shop allows businesses to register with the commercial registrar (Registre du Commerce et du Crédit Immobilier), the tax authority (Direction Générale d’Impôts) and the social security institute (Caisse Nationale de Prévoyance Sociale). The One-Stop Shop also publishes the legal notice of incorporation on CEPICI’s website. All necessary documents for registration are also available on the website. Registration takes between one and three days, while preparation of necessary documents can take more time. The business licensing process, controlled by sector-specific governing bodies, is separate from the registration process.
Women have equal access to the registration process. There have not been any reports of discrimination in that regard.
International financial institutions are recommending that government authorities better and more transparently address concerns from the private sector in the following general areas:
1) enhancing the regulatory framework, reducing bureaucratic red tape, and improving the provision of public sector services, for example by simplifying and harmonizing the process for issuing business licenses and approvals;
2) promoting digitalization, both in the provision of public services and in public finance management;
3) reducing labor market rigidities by broadening professional training programs;
4) safeguarding property rights, particularly with respect to ownership and transfer of land;
5) deepening financial inclusion and facilitating access to financial markets, also via mobile systems and digital platforms; and
6) reducing uncertainty in the timing of government payments.
Government authorities are stepping up efforts to strengthen macroeconomic statistics. The National Strategy for the development of statistics aims to broaden the competencies of the National Institute of Statistics, reinforce its independence, and create a national fund for the development of statistics.
Côte d’Ivoire does not promote or incentivize outward investment. However, the government does not restrict domestic investors from investing abroad.
The Egyptian government continues to make progress on economic reforms, and while many challenges remain, Egypt’s investment climate is improving. Thanks in part to the macroeconomic reforms it completed as part of a three-year, $12-billion International Monetary Fund (IMF) program from 2016 to 2019, Egypt was one of the fastest-growing emerging markets prior to the COVID-19 outbreak. Egypt was also the only economy in the Middle East and North Africa to record positive economic growth in 2020, despite the COVID-19 pandemic and thanks in part to IMF assistance totaling $8 billion. Increased investor confidence and high real interest rates have attracted foreign portfolio investment and increased foreign reserves. In 2021, the Government of Egypt (GoE) announced plans to launch a second round of economic reforms aimed at increasing the role of the private sector in the economy, addressing long-standing customs and trade policy challenges, modernizing its industrial base, and increasing exports. The GoE increasingly understands that attracting foreign direct investment (FDI) is key to addressing many of its economic challenges and has stated its intention to create a more conducive environment for FDI. FDI inflows grew 11 percent between 2018 and 2019, from $8.1 to $9 billion, before falling 39 percent to $5.5 billion in 2020 amid sharp global declines in FDI due to the pandemic, according to data from the Central Bank of Egypt and the United Nations Commission on Trade and Development (UNCTAD). UNCTAD ranked Egypt as the top FDI destination in Africa between 2016 and 2020.
Egypt has passed several regulatory reform laws, including a new investment law in 2017; a “new company” law and a bankruptcy law in 2018; and a new customs law in 2020. These laws aim to improve Egypt’s investment and business climate and help the economy realize its full potential. The 2017 Investment Law is designed to attract new investment and provides a framework for the government to offer investors more incentives, consolidate investment-related rules, and streamline procedures. The 2020 Customs Law is likewise meant to streamline aspects of import and export procedures, including through a single-window system, electronic payments, and expedited clearances for authorized companies.
Egypt will host the United Nations Climate Change Conference, COP 27, in November 2022. Recognizing the immense challenges the country faces from the impacts of climate change, government officials announced that the Cabinet will appropriate 30 percent of government investments in the 2022/2023 budget to green investments, up from 15 percent in the current fiscal year 2021/2022, and that by 2030 all new public sector investment spending would be green. The GoE accelerated plans to generate 42 percent of its electricity from renewable sources by five years, from 2035 to 2030, and is prioritizing investments in solar and wind power, green hydrogen, water desalination, sustainable transportation, electric vehicles, smart cities and grids, and sustainable construction materials. The government continues to seek investment in several mega projects, including the construction of smart cities, and to promote mineral extraction opportunities. Egypt intends to capitalize on its location bridging the Middle East, Africa, and Europe to become a regional trade and investment gateway and energy hub and hopes to attract information and communications technology (ICT) sector investments for its digital transformation program.
Egypt is a party to more than 100 bilateral investment treaties, including with the United States. It is a member of the World Trade Organization (WTO), the African Continental Free Trade Agreement (AfCFTA), and the Greater Arab Free Trade Area (GAFTA). In many sectors, there is no legal difference between foreign and domestic investors. Special requirements exist for foreign investment in certain sectors, such as upstream oil and gas as well as real estate, where joint ventures are required.
1. Openness To, and Restrictions Upon, Foreign Investment
Egypt’s completion of the three-year, $12-billion IMF Extended Fund Facility between 2016 and 2019, and its associated reform package, helped stabilize Egypt’s macroeconomy, introduced important subsidy and social spending reforms, and helped restore investor confidence in the Egyptian economy. The flotation of the Egyptian Pound (EGP) in November 2016 and the restart of Egypt’s interbank foreign exchange (FX) market as part of this program was the first major step in restoring investor confidence that immediately led to increased portfolio investment and should lead to increased FDI over the long term. Other important reforms have included a new investment law and an industrial licensing law in 2017, a new bankruptcy law in 2018, a new customs law in 2020, and other reforms aimed at reducing regulatory overhang and improving the ease of doing business.
In 2021, Egypt’s government announced plans to launch a second round of economic reforms aimed at increasing the role of the private sector in the economy, addressing long-standing customs and trade policy challenges, and modernizing its industrial base and increasing exports.
As a result of the government’s increased focus on infrastructure development, Egypt’s $259 billion project finance pipeline is the third-largest in the Middle East and the largest in Africa as of March 2022, according to ratings agency Fitch. Recognizing the immense challenges the country faces from the impacts of climate change, government officials announced in 2021 that by 2030 all new public sector investment spending would be green, and accelerated plans to generate 42 percent of its electricity from renewable sources by 2035. Egypt will host the United Nations Conference on Climate Change, COP 27, in November 2022, and the government is developing a package of investment incentives aimed at attracting foreign investment and project finance in areas such as solar and wind power, green hydrogen, water desalination, sustainable transportation, electric vehicles, smart cities and grids, and sustainable construction materials.
With few exceptions, Egypt does not legally discriminate between Egyptian nationals and foreigners in the formation and operation of private companies. The 1997 Investment Incentives Law was designed to encourage domestic and foreign investment in targeted economic sectors and to promote decentralization of industry away from the Nile Valley. The law allows 100 percent foreign ownership of investment projects and guarantees the right to remit income earned in Egypt and to repatriate capital.
The Tenders Law (Law 89 of 1998) requires the government to consider both price and best value in awarding contracts and to issue an explanation for refusal of a bid. However, the law contains preferences for Egyptian domestic contractors, who are accorded priority if their bids do not exceed the lowest foreign bid by more than 15 percent.
The Capital Markets Law (Law 95 of 1992) and its amendments, including the most recent in February 2018, and relevant regulations govern Egypt’s capital markets. Foreign investors are able to buy shares on the Egyptian Stock Exchange on the same basis as local investors.
The General Authority for Investment and Free Zones (GAFI, http://gafi.gov.eg) is the principal government body that regulates and facilitates foreign investment in Egypt and reports directly to the Prime Minister.
The Investor Service Center (ISC) is an administrative unit within GAFI that provides “one-stop-shop” services, easing the way for global investors looking for opportunities presented by Egypt’s domestic economy and the nation’s competitive advantages as an export hub for Europe, the Middle East, and Africa. This is in addition to promoting Egypt’s investment opportunities in various sectors.
The ISC provides a start-to-end service to the investor, including assistance related to company incorporation, establishment of company branches, approval of minutes of Board of Directors and General Assemblies, increases of capital, changes of activity, liquidation procedures, and other corporate-related matters. The Center also aims to issue licenses, approvals, and permits required for investment activities within 60 days from the date of request. Other services GAFI provides include:
Advice and support to help in the evaluation of Egypt as a potential investment location;
Identification of suitable locations and site selection options within Egypt;
Assistance in identifying suitable Egyptian partners; and
Dispute settlement services.
The ISC plans to establish branches in each of Egypt’s Governorates by the end of 2021. Egypt maintains ongoing communication with investors through formal business roundtables, investment promotion events (conferences and seminars), and one-on-one investment meetings.
The Egyptian Companies Law does not set any limitation on the number of foreigners, neither as shareholders nor as managers/board members, except for Limited Liability Companies where the only restriction is that one of the managers must be an Egyptian national. In addition, companies are required to obtain a commercial and tax license, and pass a security clearance process. Companies are able to operate while undergoing the often lengthy security screening process. However, if the firm is rejected, it must cease operations and may undergo a lengthy appeals process. Businesses have cited instances where Egyptian clients were hesitant to conclude long-term business contracts with foreign businesses that have yet to receive a security clearance. They have also expressed concern about seemingly arbitrary refusals, a lack of explanation when a security clearance is not issued, and the lengthy appeals process. Although the Government of Egypt has made progress streamlining the business registration process at GAFI, inconsistent treatment by banks and other government officials has in some cases led to registration delays.
Sector-specific limitations to investment include restrictions on foreign shareholding of companies owning lands in the Sinai Peninsula. Likewise, the Import-Export Law requires companies wishing to register in the Import Registry to be 51 percent owned and managed by Egyptians. Nevertheless, the new Investment Law does allow wholly foreign companies investing in Egypt to import goods and materials. In January 2021 the Egyptian government removed the 20-percent foreign ownership cap for international and private schools in Egypt.
The ownership of land by foreigners is complicated, in that it is governed by three laws: Law 15 of 1963, Law 143 of 1981, and Law 230 of 1996. Land/Real Estate Law 15 of 1963 explicitly prohibits foreign individual or corporation ownership of agricultural land (defined as traditional agricultural land in the Nile Valley, Delta and Oases). Law 15/1963 stipulates that no foreigners, whether natural or juristic persons, may acquire agricultural land. Law 143/1981 governs the acquisition and ownership of desert land. Certain limits are placed on the number of feddans (one feddan is approximately equal to one acre) that may be owned by individuals, families, cooperatives, partnerships, and corporations regardless of nationality. Partnerships are permitted to own 10,000 feddans. Joint stock companies are permitted to own 50,000 feddans.
Under Law 230/1986, non-Egyptians are allowed to own real estate (vacant or built) only under the following conditions:
Ownership is limited to two real estate properties in Egypt that serve as accommodation for the owner and his family (spouses and minors) in addition to the right to own real estate needed for activities licensed by the Egyptian Government;
The area of each real estate property does not exceed 4,000 m²; and
The real estate is not considered a historical site.
Exemption from the first and second conditions is subject to the approval of the Prime Minister. Ownership in tourist areas and new communities is subject to conditions established by the Cabinet of Ministers. Non-Egyptians owning vacant real estate in Egypt must build within a period of five years from the date their ownership is registered by a notary public. Non-Egyptians cannot sell their real estate for five years after registration of ownership, unless the Prime Minister consents to an exemption.
In December 2020, the World Bank published a Country Private Sector Diagnostic report for Egypt which analyzed key structural economic reforms that the Egyptian government should adopt in order to encourage private-sector-led economic growth. The report also included recommendations for the agribusiness, manufacturing, information technology, education, and healthcare sectors.
On July 8, 2020, the Organization for Economic Cooperation and Development (OECD) released an Investment Policy Review for Egypt that highlighted the government’s progress implementing a proactive reform agenda to improve the business climate, attract more foreign and domestic investment, and reap the benefits of openness to FDI and participation in global value chains.
In January 2018 the World Trade Organization (WTO) published a comprehensive review of the Egyptian Government’s trade policies, including details of the Investment Law’s (Law 72 of 2017) main provisions.
The United Nations Conference on Trade Development (UNCTAD) published an Information and Communications Technology (ICT) Policy Review for Egypt in 2017, in which it highlighted the potential for investments in the ICT sector to help drive economic growth and recommended specific reforms aimed at strengthening Egypt’s performance in key ICT policy areas.
GAFI’s ISC (https://gafi.gov.eg/English/Howcanwehelp/OneStopShop/Pages/default.aspx) was launched in February 2018 and provides start-to-end service to the investor, as described above. The Investment Law (Law 72 of 2017) also introduces “Ratification Offices” to facilitate obtaining necessary approvals, permits, and licenses within 10 days of issuing a Ratification Certificate.
Investors may fulfill the technical requirements of obtaining the required licenses through these Ratification Offices, directly through the concerned authority, or through its representatives at the Investment Window at GAFI. The Investor Service Center is required to issue licenses within 60 days from submission. Companies can also register online. GAFI has also launched e-establishment, e-signature, and e-payment services to facilitate establishing companies.
Egypt promotes and incentivizes outward investment. According to the Egyptian government’s FDI Markets database for the period from January 2003 to January 2021, outward investment featured the following:
Egyptian companies implemented 278 Egyptian FDI projects. The estimated total value of the projects, which employed about 49,000 workers, was $24.26 billion;
The following countries respectively received the largest amount of Egyptian outward investment in terms of total project value: The United Arab Emirates (UAE), Saudi Arabia, Algeria, Kenya, Jordan, Ethiopia, Germany, Libya, Morocco, and Nigeria;
The UAE, Saudi Arabia, and Algeria accounted for about 28 percent of the total amount;
Elsewedy Electric was the largest Egyptian company investing abroad, implementing 21 projects with a total investment estimated to be $2.1 billion.
Egypt does not restrict domestic investors from investing abroad.
Gabon is a historically stable country in a volatile region and has significant economic advantages: a small population (roughly 2 million), an abundance of natural resources, and a strategic location in the Gulf of Guinea. After taking office in 2009, President Ali Bongo Ondimba introduced reforms to diversify Gabon’s economy away from oil and traditional investment partners, and to position Gabon as an emerging economy. Gabon promotes foreign investment across a range of sectors, particularly in oil and gas, infrastructure, timber, ecotourism, and mining. Gabon’s government depends on revenues from hydrocarbons.
The Gabonese investment climate is marked by impediments related to establishing a new business, connecting to utilities, such as electricity and water, and transferring company ownership. Many companies also report difficulties in obtaining loans. Banks and other financiers struggle to release funds, especially to small and medium-sized enterprises (SMEs), due to a lack of guarantees and missing documentation. However, several business incubators active in the country are attempting to facilitate business activities. Gabon ranks 38th in Africa for the protection of minority investors and 43rd for the payment of taxes.
Gabon adopted a new hydrocarbon code and a new mining code in July 2019, to provide a modernized basis for the legal, institutional, technical, economic, customs, and tax regimes governing these sectors and to spur investment through a more stable business climate.
Economic conditions in Gabon continued to weaken throughout 2020. The COVID-19 pandemic caused two shocks to the Gabonese economy, prompting it to enter into a recession. First, the decline in global demand and the corresponding collapse in oil prices hit government revenues and the economy hard. Second, domestic demand plummeted as a result of the government’s actions taken to halt the pandemic, such as through border closures and a national curfew.
A renewed wave of illnesses that began in January 2021 compounded this situation. Gabon officially launched its national vaccination campaign against COVID-19 in March 2022; a total of 499,247 doses of COVID vaccines have been administered. Assuming every person requires two doses, the number of doses is seen as enough to have vaccinated about 11.5% of the country’s population (World-coronavirus-tracker)
On July 2021, the IMF Executive Board approved a USD $553.2 million, 36-month arrangement under an Extended Fund Facility (EFF) for Gabon. The Board’s approval allowed for an immediate disbursement of US$115.25 million for budget support. The program aims to support the short-term response to the COVID-19 crisis and lay the foundations for green and inclusive private sector-led growth and a strong and sustainable recovery to benefit all Gabonese. A combined first and second review of the EFF was undertaken in May 2022.
Historically, the mining, oil and petroleum, and wood sectors have attracted the most investment in Gabon. To attract more investors in those key sectors Gabon created a Special Economic Zone (SEZ) at Nkok near Libreville in 2010. This 1,350-hectare project targets local and foreign investors, provides priority access to electricity and water and on-site legal and financial services, and is near the deep-sea port of Owendo. Originally set up through a partnership between Olam International Ltd, the Gabonese government, and the Africa Finance Corporation, it operates with a mandate to develop infrastructure, enhance industrial competitiveness, and build a business-friendly ecosystem. However, corruption, bureaucratic red tape, and the lack of transparency, including through the inconsistent application of customs regulations, remain impediments to investment. Many international companies, including U.S. firms, continued to report difficulties in receiving timely payments from the government, and some oil companies have closed down operations altogether.
1. Openness To, and Restrictions Upon, Foreign Investment
Gabon’s 1998 investment code conforms to the Central African Economic and Monetary Community’s (CEMAC) investment regulations and provides the same rights to foreign companies operating in Gabon as to domestic firms.
Gabon’s domestic and foreign investors are protected from expropriation or nationalization without appropriate compensation, as determined by an independent third party. Certain sectors, such as mining, forestry, petroleum, agriculture, and tourism, have specific investment codes, which encourage investment through customs and tax incentives.
Gabon established the Investment Promotion Agency (ANPI-Gabon) with the assistance of the World Bank in 2014. Its mission is to promote investment and exports, support SMEs, manage public-private partnerships (PPPs), and help companies establish themselves. It is designed to act as the gateway for investment into the country and to reduce administrative procedures, costs, and waiting periods.
Gabonese authorities have made efforts to prioritize investment. In 2017, the High Council for Investment was established to promote investment and boost the economy. This body provides a platform for dialogue between the public and private sectors, and its main objectives are to improve the economy and create jobs.
Foreign investors are largely treated in the same manner as their Gabonese counterparts regarding the purchase of real estate, negotiation of licenses, and entering into commercial agreements. There is no general requirement for local participation in investments (see local labor requirements below). Many businesses find it useful to have a local partner who can help navigate the subjective aspects of the business environment.
There are no limits on foreign ownership or control. However, the Government of Gabon automatically owns a 20 percent stake in all petroleum development in the nation, with Gabon Oil able to purchase up to an additional 15 percent. The standard practice is for the Gabonese President to review foreign investment contracts following the completion of ministerial-level negotiations.
The President has taken an active interest in meeting with investors. The lack of a standardized procedure for new entrants to negotiate deals with the government can lead to confusion and time-consuming negotiations. Moreover, the centralization of decision-making by a few senior officials who are exceedingly busy can delay the process. As a result, new entrants often find the process of finalizing deals time-consuming and difficult to navigate.
Gabon has been a World Trade Organization (WTO) member since 1995. In June 2013, Gabon conducted an investment policy review with the WTO. The government has not conducted any investment policy reviews through the Organization for Economic Co-operation and Development (OECD) or the United Nations Conference on Trade and Development (UNCTAD) since 2017.
The government encourages investments in those economic sectors that contribute the greatest share to Gross National Product (GNP), including oil and gas, mining, and wood harvesting and transformation through customs and tax incentives. For example, oil and mining companies are exempt from customs duties on imported machinery and equipment specific to their industries. The Tourism Investment Code, enacted in 2000, provides tax incentives to foreign tourism investors during the first eight years of operation. The SEZ at Nkok offers tax incentives to industrial investors; the government has mused on the possibility of increasing the number of SEZs in a move to attract further investment.
ANPI-Gabon covers more than 20 public and private agencies, including the Chamber of Commerce, National Social Security Fund (CNSS), and National Health Insurance and Social Security (CNAMGS). It aims to attract domestic and international investors through improved methods of approving and licensing new companies and to support public-private dialogue. It has a single window registration process that allows domestic and foreign investors to register their businesses in 48 hours. There are, however, no special mechanisms for equitable treatment of women and underrepresented minorities in Gabon.
One of ANPI-Gabon’s primary goals is to promote outward investments and exports. The Gabonese government does not restrict domestic investors from investing abroad.
Georgia, located at the crossroads of Western Asia and Eastern Europe, is a small but open market that derives benefits from international trade, tourism, and transportation. While it is susceptible to global and regional shocks, the country has made sweeping economic reforms since 1991 that have produced a relatively well-functioning and stable market economy. Average growth rate was over five percent from 2005 through 2019, and its rankings improved impressively in global business, governance, corruption, and other indexes. Georgia ranked twenty sixth in the Heritage Foundations’ 2022 Economic Freedom Index, and 45th in Transparency International’s Corruption Perception Index. Fiscal and monetary policy are focused on low deficits, low inflation, and a floating real exchange rate, although the latter was affected by regional developments, including sanctions on Russia and other external factors, such as a stronger U.S. Dollar. The COVID-19 pandemic reversed some of the past gains and placed significant pressure on the domestic currency and local economy. Georgia’s economy contracted six percent in 2020 with particularly steep losses in the tourism sector. Although Georgia successfully managed the first wave of COVID-19 pandemic, the infection rate surged in the second part of 2021, compelling the government to adopt a series of restrictions and shut-downs that negatively impacted economic activity. Despite this, Georgia’ economy picked up in 2021, demonstrating strong growth, 10.4 percent higher than 2020. While government and international financial partners forecasted an optimistic outlook for 2022, the economic impacts of the Russia-Ukraine war and sanctions on Russia have damaged growth prospects and led to lower growth expectations.
Overall, business and investment conditions are sound, and Georgia favorably compares to the regional peers. However, there is an increasing lack of confidence in the judicial sector’s ability to adjudicate commercial cases independently or in a timely, competent manner, with some business dispute cases languishing in the court system for years. Other companies complain of inefficient decision-making processes at the municipal level, shortcomings in the enforcement of intellectual property rights, lack of effective anti-trust policies, accusations of political meddling, selective enforcement of laws and regulations, including commercial laws, and difficulties resolving disputes over property rights. The Georgian government continues to work to address these issues, and despite these remaining challenges, Georgia ranks high in the region as a good place to do business.
The United States and Georgia work to increase bilateral trade and investment through a High-Level Dialogue on Trade and Investment and through the U.S.-Georgia Strategic Partnership Commission’s Economic, Energy, and Trade Working Group. Both countries signed a Bilateral Investment Treaty in 1994, and Georgia is eligible to export many products duty-free to the United States under the Generalized System of Preferences program.
Georgia suffered considerable instability in the immediate post-Soviet period. After regaining independence in 1991, civil war and separatist conflicts flared up along the Russian border in the Georgian territories of Abkhazia and South Ossetia. In August 2008, tensions in the region of South Ossetia culminated in a brief war between Russia and Georgia. Russia invaded and occupied the Georgian territories of Abkhazia and South Ossetia. Russia continues to occupy these Georgian regions, and the central government in Tbilisi does not have effective control over these areas. The United States supports Georgia’s sovereignty and territorial integrity within its internationally recognized borders and does not recognize the Abkhazia and South Ossetia regions of Georgia as independent. Tensions still exist both inside the occupied territories and near the administrative boundary lines, but other parts of Georgia, including Tbilisi, are not directly affected.
Transit and logistics are priority sectors as Georgia seeks to benefit from increased East/West trade through the country. The Baku-Tbilisi-Kars railroad has boosted Georgia’s transit prospects and the government has looked for ways to enhance trade. In 2016, the government awarded the contract to build a new port in Anaklia to a group of international investors, including a U.S. company. However, in 2020 the government terminated its contract with the group, resulting in a legal dispute with the investor. While the government has stated its commitment to the construction of the Anaklia Deep Sea Port Project, a tender has not yet been announced.
Separately, logistics and port management companies in Poti and Batumi have started to develop and expand the Batumi and Poti Ports. In 2020, the owner of Georgia’s largest port, Poti Port on the Black Sea, announced its plans to create a deep-water port. In 2021, logistics companies completed two new terminal projects in Batumi and Poti ports.
1. Openness To, and Restrictions Upon, Foreign Investment
Georgia is open to foreign investment. Legislation establishes favorable conditions for foreign investment, but not preferential treatment for foreign investors. The Law on Promotion and Guarantee of Investment Activity protects foreign investors from subsequent legislation that alters the condition of their investments for a period of ten years. Investment promotion authority is vested in the Investment Division of Enterprise Georgia, a legal entity of public law under the Ministry of Economic and Sustainable Development. The Investment Division’s primary role is to attract, promote, and develop foreign direct investment in Georgia. For this purpose, it acts as the moderator between foreign investors and the Georgian government, ensures access to updated information, provides a means of communication with government bodies, and serves as a “one-stop-shop” to support investors throughout the investment process. (http://www.enterprisegeorgia.gov.ge/en/about). Enterprise Georgia also operated the website for foreign investors: www.investingeorgia.org.
Georgia’s Investors Council, an advisory body operating since 2015, aims to promote dialogue among the private business community, international organizations, donors, and the Georgian government for the development of a favorable, non-discriminatory, transparent, and fair business and investment climate in Georgia (http://ics.ge). The Business Ombudsman, who is a member of the Investors Council, is another tool for protecting investors’ rights in Georgia (http://businessombudsman.ge).
Georgia does not have comprehensive mechanisms in place for screening foreign investment and Georgia does not have FDI thresholds. Governmental reviews of investment projects in Georgia are ad hoc. The Ministry of Economy and Sustainable Development’s Investment Policy and Support Department is responsible for analyzing proposed foreign investment projects at the request of state agencies. Georgia’s State Security Service, National Security Council (NSC), Revenue Service, Ministry of Regional Development and Infrastructure, National Bank, Ministry of Finance, Ministry of Justice, Ministry of Internal Affairs, and Ministry of Defense all have potential equities and could play a role in reviewing a foreign transaction or investment proposal for national security concerns in certain circumstances. Georgia’s NSC is currently drafting critical infrastructure protection legislation that is linked to NSC’s investment screening efforts.
Foreign investors have participated in most major privatizations of state-owned property. Transparency of privatization has been an issue at times. No law or regulation authorizes private firms to adopt articles of incorporation or association that limit or prohibit foreign investment, participation, or control. Cross-shareholder or stable-shareholder arrangements are not used by private firms in Georgia. Georgian legislation does not protect private firms from takeovers. There are no regulations authorizing private firms to restrict foreign partners’ investment activity or limit foreign partners’ ability to gain control over domestic enterprises.
There are no specific licensing requirements for foreign investment other than those that apply to all companies. The government requires licenses for activities that affect public health, national security, and the financial sector: weapons and explosives production, narcotics, poisonous and pharmaceutical substances, exploration and exploitation of renewable or non-renewable substances, exploitation of natural resource deposits, establishment of casinos and gambling houses and the organization of games and lotteries, banking, insurance, securities trading, wireless communication services, and the establishment of radio and television channels. The law requires the state to retain a controlling interest in air traffic control, shipping traffic control, railroad control systems, defense and weapons industries, and nuclear energy. For investment projects requiring licenses or permits, the relevant government ministries and agencies have the right to review the project for national security concerns. By law, the government has 30 days to make a decision on licenses, and if the licensing authority does not state a reasonable ground for rejection within that period, the government must approve the license or permit for issuance. In the real estate sector, only Georgian nationals or companies, with some exceptions, may own agricultural land.
Per Georgian law, it is illegal to undertake any type of economic activity in Abkhazia or South Ossetia if such activities require permits, licenses, or registration in accordance with Georgian legislation. Laws also ban mineral exploration, money transfers, and international transit via Abkhazia or South Ossetia. Only the state may issue currency, banknotes, and certificates for goods made from precious metals, import narcotics for medical purposes, and produce control systems for the energy sector.
Registering a business in Georgia is relatively quick and streamlined. Registration takes one day to complete through Georgia’s single window registration process. The National Agency of Public Registry (NAPR) (www.napr.gov.ge – webpage is in Georgian only), located in Public Service Halls (PSH) under the Ministry of Justice of Georgia, carries out company registration. The PSH website (https://www.psh.gov.ge/https://www.psh.gov.ge/main/page/2/85) outlines procedures and requirements for business registration in English. For registration purposes, the law does not require a verification of the amount or existence of charter capital. A company is not required to complete a separate tax registration; the initial registration includes both the revenue service and national business registration. The following information is required to register a business in Georgia: bio data for the founder and principal officers, articles of incorporation, and the company’s area of business activity. Other required documents depend on the type of entity to be established.
To register a business, the potential owner must first pay the registration fee, register the company with the Entrepreneurial Register, and obtain an identification number and certificate of state and tax registration. Registration fees are GEL100 (around $30) for a regular registration and GEL200 (around $60) for an expedited registration, plus a GEL1 bank processing fee. The owner must also open a bank account (free).
Georgia’s business facilitation mechanism provides equitable treatment of women and men. There are a variety of state-run and donor-supported projects that aim to promote women entrepreneurs through specific training or other programs, including access to financing and business training.
The Georgian government does not have any specific policy on promoting or restricting domestic investors from investing abroad and Georgia’s outward investment is insignificant.
According to Georgia’s central bank, the net international investment position of Georgia, which measures the difference between external financial assets and liabilities of a country, totaled negative $26.3 billion as of December 31, 2021.
Hong Kong became a Special Administrative Region (SAR) of the People’s Republic of China (PRC) on July 1, 1997, with its status defined in the Sino-British Joint Declaration and the Basic Law. Under the concept of “one country, two systems,” the People’s Republic of China (PRC) government promised that Hong Kong would be vested with executive, legislative, and independent judicial power, and that its social and economic systems would remain unchanged for 50 years after reversion. The PRC’s imposition of the National Security Law (NSL) on June 30, 2020 undermined Hong Kong’s autonomy and introduced heightened uncertainty for foreign and local firms operating in Hong Kong.
As a result, the U.S. Government has taken measures under Executive Order 13936 on Hong Kong Normalization to eliminate or suspend aspects of Hong Kong’s differential treatment, including issuing a suspension of licenses under the Arms Export Control Act, giving notice of termination of an agreement that provided for reciprocal tax exemption on income from the international operation of ships, establishing new marking rules requiring goods made in Hong Kong to be labeled “Made in China,” and imposing sanctions against several former and current Hong Kong and PRC government officials. On March 31, 2022, the Secretary of State again certified Hong Kong does not warrant treatment under U.S. law in the same manner as U.S. laws were applied to Hong Kong before July 1, 1997.
Since the imposition of the NSL in Hong Kong by Beijing, U.S. citizens traveling or residing in Hong Kong may be subject to increased levels of surveillance, as well as arbitrary enforcement of laws and detention for purposes other than maintaining law and order. The PRC’s 14th Five-Year Plan through 2025, which includes long-range objectives for 2035, lays out a plan for Hong Kong to become more closely integrated into the overall development of the Mainland and encourages deeper co-operation between the Mainland and Hong Kong. On March 5, 2022, PRC Premier Li Keqiang asserted that Beijing intends to exercise “overall jurisdiction over the two SARs,” referring to Hong Kong and Macau.
On July 16, 2021, the Department of State, along with the Department of the Treasury, the Department of Commerce, and the Department of Homeland Security, issued an advisory to U.S. businesses regarding potential risks to their operations and activities in Hong Kong. These include risks for businesses following the imposition of the NSL; data privacy risks; risks regarding transparency and access to critical business information; and risks for businesses with exposure to sanctioned Hong Kong or PRC entities or individuals. The imposition of the NSL by Beijing, significant curtailments in protected freedoms, and the reduction of the high degree of autonomy Hong Kong enjoyed in the past has raised concerns among a number of international firms operating in Hong Kong.
Hong Kong is the United States’ twelfth-largest export market, thirteenth largest for total agricultural products, and sixth largest for high-value consumer food and beverage products. Hong Kong’s economy, with advanced institutions and regulatory systems, is bolstered by competitive sectors including financial and professional, trading, logistics, and tourism, although tourism has suffered devastating drops since 2020 due to COVID-19. The Hong Kong Government’s (HKG) adherence to a “Zero COVID” policy for most of the past two years has also imposed high economic costs on residents and businesses, and drastically reduced the number of visitors to the territory. Since Beijing’s 2020 imposition of the NSL on Hong Kong and the city’s implementation of COVID-19 travel restrictions, some international firms in Hong Kong have relocated entirely, while others have shifted key staff or operations elsewhere.
Hong Kong provides for no distinction in law or practice between investments by foreign-controlled companies and those controlled by local interests. Foreign firms and individuals can incorporate their operations in Hong Kong, register branches of foreign operations, and set up representative offices without encountering discrimination or undue regulation. There are no restrictions on the ownership of such operations. Company directors are not required to be residents of or in Hong Kong. Reporting requirements are straightforward and are not onerous. On economic issues, Hong Kong generally pursues a free market philosophy with minimal government intervention. The HKG generally welcomes foreign investment, neither offering special incentives nor imposing disincentives for foreign investors.
While Hong Kong’s legal system had been traditionally viewed as a bastion of judicial independence, authorities have placed considerable pressure on the judiciary over the previous year. Rule of law risks that were formerly limited to mainland China are now increasingly a concern in Hong Kong. In March 2020, two sitting UK judges resigned from the Hong Kong Court of Final Appeal, with the UK government citing a systematic erosion of liberty and democracy that made it untenable for those judges to sit on Hong Kong’s highest court.
The service sector accounted for more than 90 percent of Hong Kong’s nearly USD 367 billion gross domestic product (GDP) in 2021. Hong Kong hosts a large number of regional headquarters and regional offices, though Hong Kong’s deteriorating political environment and COVID-related travel restrictions have led some firms to depart. The number of U.S. firms with regional bases in Hong Kong fell over the previous decade. Approximately 1,260 U.S. companies are based in Hong Kong, according to Hong Kong’s 2021 census data, with more than half regional in scope. Finance and related services companies, such as banks, law firms, and accountancies, dominate the pack. Seventy of the world’s 100 largest banks have operations in Hong Kong.
1. Openness To, and Restrictions Upon, Foreign Investment
Hong Kong is the world’s third-largest recipient of foreign direct investment (FDI), according to the United Nations Conference on Trade and Development’s (UNCTAD) World Investment Report 2021, with a significant amount bound for mainland China. The HKG’s InvestHK department encourages inward investment, offering free advice and services to support companies from the planning stage through to the launch and expansion of their business. U.S. and other foreign firms can participate in government financed and subsidized research and development programs on a national treatment basis. Hong Kong does not discriminate against foreign investors by prohibiting, limiting, or conditioning foreign investment in a sector of the economy.
Capital gains are not taxed, nor are there withholding taxes on dividends and royalties. Profits can be freely converted and remitted. Foreign-owned and Hong Kong-owned company profits are taxed at the same rate – 16.5 percent. The tax rate on the first USD 255,000 profit for all companies is currently 8.25 percent. No preferential or discriminatory export and import policies affect foreign investors. Domestic industries receive no direct subsidies. Foreign investments face no disincentives, such as quotas, bonds, deposits, or other similar regulations.
According to HKG statistics, 3,940 overseas companies had regional operations registered in Hong Kong as of June 1, 2021. The United States has the largest number with 664. Hong Kong is working to attract more start-ups as it develops its technology sector, and about 28 percent of start-ups in Hong Kong come from overseas. Hong Kong’s Business Facilitation Advisory Committee is a platform for the HKG to consult the private sector on regulatory proposals and implementation of new or proposed regulations. Foreign investors can invest in any business and own up to 100 percent of equity. Like domestic private entities, foreign investors have the right to engage in all forms of remunerative activity.
The HKG owns virtually all land in Hong Kong, which the HKG administers by granting long-term leases without transferring title. Foreign residents claim that a fifteen percent Buyer’s Stamp Duty on all non-permanent-resident and corporate buyers discriminates against them. The main exceptions to the HKG’s open foreign investment policy are:
Broadcasting – Voting control of free-to-air television stations by non-residents is limited to 49 percent. There are also residency requirements for the directors of broadcasting companies.
Legal Services – Foreign-qualified lawyers may only practice the law of their home jurisdiction, provided the firm they are working for is licensed in Hong Kong to work in those jurisdictions. Foreign law firms may become “local” firms after satisfying certain residency and other requirements. Localized firms may thereafter hire local attorneys and must maintain at least a 1:1 ratio of local attorneys to registered-foreign lawyers, without exception. Foreign law firms can also form associations with local law firms.
Hong Kong last conducted the Trade Policy Review in 2018 through the World Trade Organization (WTO). https://www.wto.org/english/tratop_e/tpr_e/g380_e.pdf
The Efficiency Office under the Innovation and Technology Bureau is responsible for business facilitation initiatives aimed at improving the business regulatory environment of Hong Kong. The e-Registry (https://www.eregistry.gov.hk/icris-ext/apps/por01a/index) is a convenient and integrated online platform provided by the Companies Registry and the Inland Revenue Department for applying for company incorporation and business registration. Applicants, for incorporation of local companies or for registration of non-Hong Kong companies, must first register for a free user account, presenting an original identification document or a certified true copy of the identification document. The Companies Registry normally issues the Business Registration Certificate and the Certificate of Incorporation on the same day for applications for company incorporation. For applications for registration of a non-Hong Kong company, it issues the Business Registration Certificate and the Certificate of Registration two weeks after submission.
Hong Kong’s Companies Registry permits public inspection of company information such as the full identification number of company directors and secretaries and their residential addresses. This information is currently available on a paid basis. Starting October 24, 2022, the HKG will restrict public access to this information, citing a need to balance privacy protections and transparency. Those approved by the HKG as “specified persons” will continue to have unrestricted access to the Companies Registries. The ability to apply for status as a “specified person” is largely limited to those working in finance, law, and compliance. Government transparency advocates assert the changes will limit the free flow of information and facilitate fraud, corruption, and other business malfeasance.
As a free market economy, Hong Kong does not promote or incentivize outward investment, nor does it restrict domestic investors from investing abroad. Mainland China and the British Virgin Islands were the top two destinations for Hong Kong’s outward investments in 2020 (based on most recent data available).
Iceland is an island country located between North America and Europe in the Atlantic Ocean, near the Arctic Circle with an advanced economy that centers around three primary sectors: fisheries, tourism, and aluminum production. Until recently, U.S. investment in Iceland has mostly been concentrated in the aluminum sector, with Alcoa and Century Aluminum operating plants in Iceland. However, U.S. portfolio investments in Iceland have been steadily increasing in recent years. Iceland’s convenient location between the United States and Europe, its high levels of education, connectivity, and English proficiency, and a general appreciation for U.S. products make Iceland a promising market for U.S. companies. Furthermore, Americans made up a third of the tourist population that visited Iceland in 2021.
There is broad recognition within the Icelandic government that foreign direct investment (FDI) is a key contributor to the country’s economic revival after the 2008 financial collapse. As part of its investment promotion strategy, the Icelandic government operates a public-private agency called “Invest in Iceland” that facilitates foreign investment by providing information to potential investors and promoting investment incentives. Iceland has identified the following “key sectors” in Iceland; tourism; algae culture; data centers; and life sciences. Iceland offers incentives to foreign investors in certain industries.
Tourism has been a growing force behind Iceland’s economy in the past decade, with opportunities for investors in high-end tourism, including luxury resorts and hotels. The number of tourists in Iceland grew by more than 400 percent between 2010 and 2018, reaching more than 2.3 million in 2018. However, tourism in Iceland contracted in 2019, and the COVID-19 pandemic has had drastic effects on tourism, and the overall economy. The government implemented measures to bolster the tourism economy, thus avoiding mass bankruptcies in the sector, and has committed to building out tourism-related infrastructure.
The startup and innovation communities in Iceland are flourishing, with the IT and biotech sectors growing fast, particularly pharmaceuticals and wellness, gaming, and aquaculture. Iceland’s IT sector spans all areas of the digital economy. The Icelandic energy grid derives 99 percent of its power from renewable resources, making it uniquely attractive for energy-dependent industries. For instance, the data center industry in Iceland is expanding.
Iceland is working by the 2018 Climate Acton Plan, which was updated in 2020, and is designed to achieve Iceland’s national climate goals of making the country carbon neutral by 2040 and to cut greenhouse gas emissions by 40 percent by 2030 under the Paris Agreement.
1. Openness To, and Restrictions Upon, Foreign Investment
The government of Iceland maintains an open investment climate. The Act on Incentives for Initial Investments, which came into force in 2015, is intended to “promote initial investment in commercial operations, the competitiveness of Iceland and regional development by specifying what incentives are permitted in respect of initial investments in Iceland, and how they should be used.” The Act does not apply to investments in airports, energy production, financial institutions, insurance operations, or securities. For more information, see the English translation of the act: (https://www.stjornarradid.is/leit/$LisasticSearch/Search/?SearchQuery=Act+on+incentives+for+initial+investments+in+Iceland).
As part of its investment promotion strategy, the Icelandic government operates a public-private agency called “Invest in Iceland” that facilitates foreign investment by providing information to potential investors and promotes investment incentives. There is a debate, however, within Iceland over balancing energy intensive FDI with the environmental impact associated with certain projects. That said, energy-intensive industries long dominated by aluminum smelting, have expanded to include silicon production plants and data centers. For further resources see: (http://www.invest.is/doing-business/incentives-and-support).
Tourism has been a growing force behind Iceland’s economy in the past decade, with opportunities for investors in high-end tourism, including luxury resorts and hotels. The number of tourists in Iceland grew by more than 400 percent between 2010 and 2018, reaching more than 2.3 million in 2018. However, tourism in Iceland contracted in 2019 with visitors falling just below 2 million, which can be largely attributed to the fall of Icelandic budget airline WOW Air. The COVID-19 pandemic has had drastic effects on tourism, as well as on Iceland’s overall economy, which contracted by 7.1 percent in 2020, according to Statistics Iceland. Less than half a million tourists visited Iceland in 2020, with the number of tourists reaching 700,000 in 2021. Stakeholders in the industry have been generally optimistic for 2022, with hotels reporting good booking positions for the spring and summer seasons.
Isavia, a public company that handles the operation and development of Keflavik International Airport has embarked on $1-2 billion capital works project to expand the airport. Projects include extension of buildings, baggage screening and baggage handling systems, self-check in stations, waiting areas and retail/dining areas, check-in areas, bag-drop off areas, security areas, airbridges/gates for remote stands, re-modelling of existing terminal, de-icing platforms, new runway, new taxiway, and a new ATC tower.
The startup and innovation communities in Iceland are flourishing, with IT and biotech startups seeking investors. Foreign investment in the fisheries sector is restricted, as well as in the energy sector (hydropower and geothermal exploitation rights other than for personal use and energy processing and transportation are limited to Icelandic citizens and legal persons, and individuals and legal persons who reside in the European Economic Area). The wind energy sector is growing in Iceland, and the legal framework is still being developed for that sector.
The 1991 Act on “foreign investments for commercial purposes” limits foreign ownership of fishing rights and fish processing companies (only Icelandic citizens or companies that are controlled by Icelandic citizens and have less than 25 percent foreign shareholders can own or control fishing companies); of hydropower and geothermal exploitation rights other than for personal use and energy processing and transportation (only Icelandic citizens and legal persons, and individuals and legal persons who reside in the European Economic Area (EEA) can hold those rights); and of aviation operators (Icelandic ownership of aviation companies needs to be at least 51 percent, and this does not apply to individuals and legal persons that have EEA citizenship). The law further stipulates that foreign states, sub-national governments, or other foreign authorities are prohibited from investing in Iceland for commercial purposes, although the Minister of Culture and Business Affairs may grant exemptions. The responsibility to inform the relevant ministry of both new investments and investments in companies that the party in question has already invested in lies with the investor, or with the Icelandic company that the foreign individual or entity invested in (this does not apply to EEA citizens or residents).
However, the 1991 Act does not stipulate how foreign investment is screened or monitored by relevant authorities, only that the Minister of Culture and Business Affairs handles permits and monitors the execution of this legislation. The Minister can block foreign investments if s/he considers it a “threat to national security or goes against public policy, public safety or public health or if there are serious economic, societal or environmental complications in specific industries or in specific areas, that is likely to persist…” The law further states that the “Minister has the authority to stop foreign investment in systematically important companies if such investment entails systematic risk.” If an investment has already taken place, the Minister of Tourism, Industries, and Innovation has the authority to compel the foreign person or entity in question to sell.
Iceland has been a World Trade Organization (WTO) member since 1995 and a member of GATT since 1968. The WTO conducted its fifth Trade Policy Review of Iceland in 2017 (https://www.wto.org/english/tratop_e/tpr_e/tp461_e.htm). The review notes that “with a small population and limited natural resources, apart from energy and fish, trade remains important, but the range of exports is limited to tourism, fish and fish products, and aluminum and products thereof. Therefore, the country remains vulnerable to shocks, including the appreciation of the ISK, overheating of the economy, and Brexit. Furthermore, despite uncertainties relating to Brexit, as growth picks up in the EU, Iceland’s main trading partner, opportunities for trade in goods and services should continue to improve.”
The Organization for Economic Cooperation and Development (OECD) and UN Cooperation for Trade and Development (UNCTAD) have not conducted Investment Policy Reviews for Iceland.
Services offered by Invest in Iceland, a public-private agency that promotes and facilitates foreign investment in Iceland, are free of charge to all potentialforeign investors (http://www.invest.is). Invest in Iceland can provide information on investment opportunities in Iceland; collect data on the business environment, arrange site visits and plan contacts with local authorities; arrange meetings with local business partner and professional consultants; influence legislation and lobby on behalf of foreign investors (https://www.invest.is/at-your-service/what-we-do). Invest in Iceland offers detailed information on how to establish a company on its website (http://www.invest.is/doing-business/establishing-a-company). Its sister agencies, Business Iceland (formerly Promote Iceland) (https://www.businessiceland.is/) and Film in Iceland (http://www.filminiceland.com), aim to enhance Iceland’s reputation as a tourist destination and as a destination for filming movies and television productions.
The Icelandic Government along with other stakeholders promote exports of Icelandic goods and services through the public-private agency Islandsstofa, also known as Business Iceland (https://www.businessiceland.is/). Business Iceland assists Icelandic businesses in the main industry sectors to export products and services, including fisheries (seafood and technology), agricultural produce (including organic lamb meat), high-tech products and solutions (software, prosthetics, etc.), and services (tourism). Business Iceland has been very active in the United States and Canada in recent years. A trade commissioner represents the Icelandic Ministry of Foreign Affairs in New York, facilitating exports to the United States and promoting business relations between the two countries. Business Iceland also promotes exports to the U.K., Northern and Southern Europe, and more recently to Asia (China and Japan).
Iceland imposed capital controls following the economic collapse in late 2008, which largely prevented Icelandic investors and pensions funds from investing outside of Iceland. The government lifted capital controls on March 14, 2017.
Israel has an entrepreneurial spirit and a creative, highly educated, skilled, and diverse workforce. It is a leader in innovation in a variety of sectors, and many Israeli start-ups find good partners in U.S. companies. Popularly known as “Start-Up Nation,” Israel invests heavily in education and scientific research. U.S. firms account for nearly two-thirds of the more than 300 research and development (R&D) centers established by multinational companies in Israel. Israel has 117 companies listed on the NASDAQ, the fourth most companies after the United States, Canada, and China. Israeli government agencies, led by the Israel Innovation Authority, fund incubators for early-stage technology start-ups, and Israel provides extensive support for new ideas and technologies while also seeking to develop traditional industries. Private venture capital funds have flourished in Israel in recent years.
The COVID-19 pandemic shook Israel’s economy, but successful pre-pandemic economic policy buffers – strong growth, low debt, a resilient tech sector among them – mean Israel entered the COVID-19 crisis with relatively low vulnerabilities, according to the International Monetary Fund’s Staff Report for the 2020 Article IV Consultation. The fundamentals of the Israeli economy remain strong, and Israel’s economy rebounded strongly post-pandemic with 8.1 percent GDP growth in 2021. With low inflation and fiscal deficits that have usually met targets pre-pandemic, most analysts consider Israeli government economic policies as generally sound and supportive of growth. Israel seeks to provide supportive conditions for companies looking to invest in Israel through laws that encourage capital and industrial R&D investment. Incentives and benefits include grants, reduced tax rates, tax exemptions, and other tax-related benefits.
The U.S.-Israeli bilateral economic and commercial relationship is strong, anchored by two-way trade in goods and services that reached USD 45.1 billion in 2021, according to the U.S. Bureau of Economic Analysis, and extensive commercial ties, particularly in high-tech and R&D. The total stock of Israeli foreign direct investment (FDI) in the United States was USD 40.4 billion in 2020. Since the signing of the U.S.-Israel Free Trade Agreement in 1985, the Israeli economy has undergone a dramatic transformation, moving from a protected, low-end manufacturing and agriculture-led economy to one that is diverse, mostly open, and led by a cutting-edge high-tech sector.
The Israeli government generally continues to take slow, deliberate actions to remove trade barriers and encourage capital investment, including foreign investment. The continued existence of trade barriers and monopolies, however, have contributed significantly to the high cost of living and the lack of competition in key sectors. The Israeli government maintains some protective trade policies.
Israel has taken steps to meet its pledges to reduce greenhouse gas emissions, with planned investments in technologies and projects to slow the pace of climate change.
1. Openness To, and Restrictions Upon, Foreign Investment
Israel is open to foreign investment and the government actively encourages and supports the inflow of foreign capital.
The Israeli Ministry of Economy and Industry’s ‘Invest in Israel’ office serves as the government’s investment promotion agency facilitating foreign investment. ‘Invest in Israel’ offers a wide range of services including guidance on Israeli laws, regulations, taxes, incentives, and costs, and facilitation of business connections with peer companies and industry leaders for new investors. ‘Invest in Israel’ also organizes familiarization tours for potential investors and employs a team of advisors for each region of the world.
The Israeli legal system protects the rights of both foreign and domestic entities to establish and own business enterprises, as well as the right to engage in remunerative activity. Private enterprises are free to establish, acquire, and dispose of interests in business enterprises. As part of ongoing privatization efforts, the Israeli government encourages foreign investment in privatizing government-owned entities.
Israel’s policies aim to equalize competition between private and public enterprises, although the existence of monopolies and oligopolies in several sectors, including communications infrastructure, food manufacturing and marketing, and some manufacturing segments, stifles competition. In the case of designated monopolies, defined as entities that supply more than 50 percent of the market, the government controls prices.
Israel established a centralized investment screening (approval) mechanism for certain inbound foreign investments in October 2019. Investments in regulated industries (e.g., banking and insurance) require approval by the relevant regulator. Investments in certain sectors may require a government license. Other regulations may apply, usually on a national treatment basis.
The World Trade Organization (WTO) conducted its fifth and latest trade policy review of Israel in July 2018. In the past three years, the Israeli government has not conducted any investment policy reviews through the Organization for Economic Cooperation and Development (OECD) or the United Nations Conference on Trade and Development (UNCTAD). The OECD concluded an Economic Survey of Israel in 2020, which can be found here: https://www.oecd.org/economy/israel-economic-snapshot/
The Israeli government is fairly open and receptive to companies wishing to register businesses in Israel. The business registration process in Israel is relatively clear and straightforward. Four procedures are required to register a standard private limited company and take 12 days to complete, on average, according to the Israeli Ministry of Finance. The foreign investor must obtain company registration documents through a recognized attorney with the Israeli Ministry of Justice and obtain a tax identification number for company taxation and for value added taxes from the Israeli Ministry of Finance. The cost to register a company averages around USD 1,000 depending on attorney and legal fees.
The Israel Export and International Cooperation Institute is an Israeli government agency operating independently, under the Ministry of Economy, that helps facilitate trade and business opportunities between Israeli and foreign companies. More information on their activities is available at https://www.export.gov.il/en.
In general, there are no restrictions on Israeli investors seeking to invest abroad. However, investing abroad may be restricted on national security grounds or in certain countries or sectors where the Israeli government deems such investment is not in the national interest.
Since King Abdullah II’s 1999 ascension to the throne, Jordan has taken steps to encourage foreign investment and to develop an outward-oriented, market-based, and globally competitive economy. Jordan is also uniquely poised as a platform to host investments focused on the reconstruction of Iraq and other projects in regional markets.
Jordan is committed to investment promotion as a key driver of economic growth and job creation, though in practice these policies are implemented unevenly. Traditionally, foreign investment has been concentrated in the energy (from both conventional sources and renewables), tourism, real estate, manufacturing, and services sectors. The Government of Jordan offers a range of incentives to potential investors and has undertaken measures to review and enhance the economic, financial, and legal framework governing the investment process. However, despite improvement on doing business indicators, operating in Jordan is more difficult than elsewhere in the region. U.S. investors specifically cite instability in the tax regime and incentive packages as a key challenge, as well as public-private interface issues including the government’s inconsistent interpretation of its policies and regulations.
Jordan’s economic growth has been limited for over a decade by exogenous shocks, including the global financial crisis, energy disruptions during the 2011 Arab Spring, the 2015 closure of Jordans borders with Iraq and Syria, and the Syrian civil war. Although the borders with Iraq fully and Syria partially reopened in 2017 and 2018 respectively, cross-border movements have not recovered to previous levels. After a 1.6 percent GDP contraction in 2020 due to the pandemic, Jordan achieved 2.2 percent real GDP growth in 2021. IMF projections estimate growth will reach 2.7 percent in 2022.
In recent years, the government has run large annual budget deficits and reducing the financing gap with loans, foreign grants, and savings. In March 2020, the IMF board approved a $1.3 billion Extended Fund Facility (EFF) program focused on fiscal consolidation, increased revenue collection, targeted social spending, economic growth, and job creation. The IMF also released additional credit from a Rapid Financing Instrument to help Jordan meet its fiscal obligations during the pandemic. In January 2022, Jordan and the IMF completed its third review of the EFF program.
In October 2021, Jordan established a dedicated Ministry of Investment, which has absorbed the duties of the Jordan Investment Commission and the Public Private Partnerships (PPP) Unit. The Minister of Investment is charged with all issues related to local and foreign investors and setting policies to stimulate investment and enhance competitiveness.
Foreign Direct Investment (FDI) dropped slightly by 1.5 percent to JD 509.8 million ($720 million) in 2020 compared to 2019. FDI inflow reached JD 269.4 million ($380 million) during the first three quarters of 2021.
1. Openness To, and Restrictions Upon, Foreign Investment
Jordan is largely open to foreign investment, and the government is committed to supporting foreign investment. Foreign and local investors are treated equally under the law.
In October 2021, a new, dedicated Ministry of Investment absorbed the responsibilities of the Jordan Investment Commission (JIC) and is now responsible for implementing the 2014 Investment Law and promoting new and existing investment in Jordan. The Ministry is the focal point for investors and can expedite government services and investment incentives. The Ministry supervises and approves investment-related matters within guidelines set by the Investment Council and approved by the government.
The Investment Council, comprised of the Prime Minister, ministers with economic portfolios, and representatives from the private sector, oversees the management and development of national investment policy and propose legislative and economic reforms to facilitate investment.
The Ministry of Investment oversees an “Investment Window” to provide information and technical assistance to investors, with a mandate to simplify registration and licensing procedures for investment projects that benefit from the Investment Law. The Ministry will continue offering the same services that were initiated by The Jordan Investment Commission, including the “Follow-Up and After Care” department established in 2018 and the investor grievance mechanism introduced in 2019 to address investor complaints, with the aim to resolve legal disputes outside of the formal court system.
In 2018, the government issued the “Code of Governance Practices of Policies and Legislative Instruments in Government Departments for the Year 2018.” It aims to increase legislative predictability and stability to ensure the confidence of citizens and the business sector. The government developed and adopted guidelines for a Regulatory Impact Assessment (RIA), to be implemented across all government entities.
Investment and property laws allow U.S. entities to establish businesses in many, but not all, sectors. Foreign companies may open regional and branch offices; branch offices may carry out full business activities; and regional offices may serve as liaisons between head offices and Jordanian or regional clients. The Ministry of Industry, Trade and Supply’s Companies Control Department implements the government’s policy on the establishment of regional and branch offices.
Under the U.S.-Jordan Bilateral Investment Treaty, U.S. investors are granted several exceptions and are accorded the same treatment as Jordanian nationals, allowing U.S. investors to maintain 100 percent ownership in some restricted businesses. In some sectors, including aerospace and defense, travel and tourism, transportation, and media and entertainment, there are limits to U.S. ownership and/or requirements for key positions to be filled by Jordanian nationals, among other restrictions. The most up-to-date listing of limitations on U.S. investments is available in the FTA Annex 3.1 and may be found athttp://www.ustr.gov/trade-agreements/free-trade-agreements/jordan-fta/final-text
Foreign nationals and firms are permitted to own or lease property in Jordan for investment purposes and are allowed one residence for personal use, provided that their home country permits reciprocal property ownership rights for Jordanians. Depending on the size and location of the property, the Land and Survey Department, the Ministry of Finance, and/or the Cabinet may need to approve foreign ownership of land and property, which must then be developed within five years of the date of approval.
In 2020, the government amended its bylaw governing foreign ownership, expanding ownership percentage in some economic activities, while maintaining the following restrictions:
Foreigners are prohibited from wholly or partially owning investigation and security services, stone quarrying operations for construction purposes, customs clearance services, and bakeries of all kinds; and are prohibited from trading in weapons and fireworks. The Cabinet, however, may approve foreign ownership of projects in these sectors upon the recommendation of the Investment Council. To qualify for the exemption, projects must be categorized as being highly valuable to the national economy.
Investors are limited to 50 percent ownership in certain businesses and services, including retail and wholesale trading, engineering consultancy services, exchange houses apart from banks and financial services companies, maritime, air, and land transportation services, and related services.
Foreign firms may not import goods without appointing an agent registered in Jordan; the agent may be a branch office or a wholly owned subsidiary of the foreign firm. The agent’s connection to the foreign company must be direct, without a sub-agent or intermediary.
The bylaw authorizes the Council of Ministers, upon the recommendation of the Prime Minister to grant a higher percentage ownership to non-Jordanian investors in any investment based on a certain criterion.
The Commercial Agents and Intermediaries Law No. 28/2001 governs contractual agreements between foreign firms and commercial agents. Private foreign entities, whether licensed under sole foreign ownership or as a joint venture, compete on an equal basis with local companies.
For national security purposes, foreign investors must undergo security screening through the Ministry of Interior, which can be finalized through the Commission’s “Investment Window” located at the Investment Commission or online https://www.jic.gov.jo/en/home-new/.
Jordan has been a World Trade Organization (WTO) member since 2000. The WTO conducted Jordan’s second Trade Policy Review in November 2015.
In 2012, the United States and Jordan agreed to Statements of Principles for International Investment and for Information and Communication Technology Services, and a Trade and Investment Partnership Bilateral Action Plan, each of which is designed to increase transparency, openness, and governmental and private sector cooperation. All current treaties and agreements in force between the United States and Jordan may be found here: https://www.state.gov/treaties-in-force/
As a follow-up to OECD’s Investment Policy Review of Jordan and Jordan’s adherence to the
OECD Declaration on International Investment and Multinational Enterprises in 2013, the MENA-OECD competitiveness program issued a report in 2018 entitled “Enhancing the legal
framework for sustainable investment: Lessons from Jordan” (http://www.oecd.org/mena/competitiveness/Enhancing-the-Legal-Framework-forSustainable-Investment-Lessons-from-Jorden.pdf).
Businesses in Jordan need to register with the Ministry of Industry, Trade, and Supply, Companies Control Department, or the Chambers of Commerce or Industry depending on the type of business they conduct. Registration is required to open a bank account, obtain a tax identification number and obtain a VAT number. New businesses also need to obtain a vocational license from the municipality, receive a health inspection, and register with the SSC.
In February 2022, the Parliament endorsed a new law for licensing professions within the jurisdiction of the Greater Amman Municipality (GAM) to create a registration fast-track. More than 383 economic activities will be eligible to obtain their licenses within one day, or maximum seven days if the business is considered high-risk. The law also extended the validity of licenses from one to five years.
The Ministry of Investment (which has absorbed the responsibilities of the Jordan Investment Commission) maintains an “Investment Window” which serves as a comprehensive investment center for investors. The Investment Window offers technical advice and complete registration and licensing services for investments inside and outside of development zones. Investors can register their businesses in one day if all documents are provided. Approvals for exemptions granted under the investment law can be approved and obtained in one week.
Jordan has also adopted a single security approval for new investors. The new approval covers registering and licensing the company, obtaining driving licenses for investors, possessing immovable property for the establishment of investment projects in the industrial and developing zones, in addition to granting residence permits to non-Jordanian investors and their family members. The commission has published a number of online guides, including the investor guide (Investor Guide – Moin).
In 2018, the Companies Control Department has developed and launched a portal for online registration: http://www.ccd.gov.jo/. Foreign investors can access it to register new companies.
However, e-signatures have not been implemented, so investors must sign documents using notary services in their countries.
In November 2019, under the Jordan Investment Commission (JIC), the government introduced several new online services including the issuance and renewal investor IDs, issuance and renewal of IDs for investors’ family members, registration of institutions in development zones, first-time registration of individual institutions, changing the method of use, registration and renewal of subscriptions to the Amman Chamber of Commerce (ACC), amendments to subscriptions to the ACC, and issuance of environmental permits. The introduction of these electronic services reduced the time needed to grant or renew the investor identification card (required to facilitate various transactions) to one day. (home new – Moin). In December 2020, the Greater Amman Municipality (GAM) digitized thirteen of its licensing related services, including vocational licensing and renewal.
In 2018, Jordan launched a National Single Window (NSW) for customs clearance. In 2020, all export and import custom declarations became electronic. In January 2022, the government adopted a simplified import tariff structure and reduced tariff rates. The Ministry of Finance reduced tariff brackets from eleven levels of taxation to four, ranging from zero to 25 percent. The maximum tariff rate (previously 40 percent) was reduced to 25 percent and will be reduced to 15 percent by 2023 (https://services.customs.gov.jo/JCcits/sections.aspx).
The Ministry of Digital Economy and Entrepreneurship continues to encourage the use of e-services and expand the number of government transactions that can be completed online. As of March 2021, 413 e-services are available including services provided by the Greater Amman Municipality, Ministry of Investment, Tax Department, Ministry of Trade, and Jordan Customs.
Jordan does not have a mechanism to specifically incentivize outward investment, nor does it restrict it.
Lebanon’s deep economic depression since the end of 2019 is the result of an import-dependent economy out of hard currency and decades of financial mismanagement, including a state-sponsored “Ponzi” scheme that offered high interest rates to attract financial inflows. The August 2020 Port of Beirut explosion and the COVID-19 pandemic further hampered economic growth. A June 2021 World Bank report estimated that Lebanon’s depression is likely to rank among top three most severe economic crises since the 1850s. The World Bank estimated Lebanon’s real GDP fell 10.5 percent in 2021 after a 21.4 percent contraction in 2020. Lebanon’s currency, the Lebanese pound (LBP), has lost more than 90 percent of its value since 2019. As a result, inflation in an import-dependent economy reached 240 percent as of December 2021. Lebanon’s Central Bank is intervening in the foreign exchange market to stem the local currency’s fall at the expense of the country’s limited foreign currency reserves. Lebanon’s banks accumulated around $70 billion in USD losses and are USD insolvent. More than half the country’s population is considered poor, and up to 50 percent are unemployed.
On March 7, 2020, Lebanon announced it would default on and restructure its nearly $31 billion dollar-denominated debt, the first such default in Lebanon’s history. Lebanon has not yet entered into negotiations with bondholders and is unable to borrow on international capital markets, reducing the country’s ability to import key commodities and invest in infrastructure. International correspondent banks likely place increased levels of due diligence on domestic banks because of the incomplete implementation of anti-money laundering/countering the financing of terrorism (AML/CFT) standards. Correspondent banks have also introduced onerous requirements on their Lebanese counterparts because of increasing country risk. PM Najib Mikati formed a government in September 2021, after a 13-month political vacuum, and his Cabinet resumed talks with the IMF on a potential loan in January 2022. While the Mikati government has drafted a plan to address the $69 billion in financial sector losses, the IMF is looking for the government to develop a more comprehensive social, economic, and financial reform program to stabilize the economy and lay the foundation for future growth. The IMF will likely require deep fiscal reforms to make Lebanon’s debt – which reached 194 percent of GDP in 2021 – more sustainable, including restructuring the financial sector, reforming state-owned enterprises, particularly the energy sector, strengthening governance and anti-corruption efforts, and unifying the country’s system of multiple currencies.
Absent holistic economic reforms, preferably as part of an IMF program, analysts assess that Lebanon’s near- and medium-term economic future is bleak, imperiling Lebanon’s potential as a destination for foreign investment. Much depends on how Lebanon implements overdue economic and governance reforms and attracts international assistance and foreign investment. If the country can implement necessary reforms, attract foreign capital, stabilize the exchange rate, and recapitalize its financial sector, then opportunities remain for U.S. companies. Lebanon still has the legal underpinnings of a free-market economy, a highly educated labor force, and limited restrictions on investors. The most alluring sector is the energy sector, particularly for power production, renewable energies, and oil and gas exploration, though challenges remain with corruption and a lack of transparency. Information and communication technology, healthcare, safety and security, waste management, and franchising have historically attracted U.S. investments. However, corruption and a lack of transparency have continued to cause frustration among local and foreign businesses. Other concerns include over-regulation, arbitrary licensing, outdated legislation, ineffectual courts, high taxes and fees, poor economic infrastructure, and a fragmented and opaque tendering and procurement processes. Social unrest driven by a decline in public services and growing food insecurity may further hamper the investment climate.
If Lebanon is able to reform its business environment, it may once again attract foreign investment. Lebanon’s economic crisis is likely to be long and painful, however, and recovery can only be accelerated through quick but careful implementation of reforms.
1. Openness To, and Restrictions Upon, Foreign Investment
Lebanon is open to Foreign Direct Investment (FDI). The Investment Development Authority of Lebanon (IDAL) is the national authority responsible for promoting local and foreign investment in Lebanon covering eight priority sectors: industry, media, technology, telecommunications, tourism, agriculture, and agroindustry. IDAL has the authority to award licenses and permits for new investment in specific sectors. It also grants special incentives and tax exemptions for projects implemented by local and foreign investors based on an investment’s geographic location, sector, and number of jobs created (Investment Law No. 360). IDAL publishes its investment incentives online by sector at http://investinlebanon.gov.lb/en/sectors_in_focus.
IDAL seeks to facilitate international and local partnerships through joint ventures, equity participation, acquisition, and other mechanisms. Moreover, it provides business intelligence, market studies, and legal and administrative advice to potential investors. In February 2018, IDAL established the Business Support Unit (BSU), which provides free legal, accounting, and financial advice to startups across sectors. IDAL is mandated by law to attract, facilitate, and retain investment in Lebanon. IDAL has proposed draft decrees to facilitate investment and boost its “One-Stop-Shop,” but these remain pending in the Prime Minister’s office. In 2020, IDAL set up a business matchmaking platform to connect Lebanese companies seeking capital with a network of local and foreign investors to help them grow and expand. IDAL is involved in providing after-care services to local and foreign investors alike.
Foreign private entities may establish, acquire, and dispose of interests in business enterprises and may engage in all types of remunerative activities. Lebanese law allows the establishment of joint-stock corporations, limited liability, and offshore and holding companies.
According to UNCTAD’s latest investment policy review of Lebanon, the country allows only Lebanese nationals to obtain licenses to manufacture and trade products related to defense and weapons (Legislative Decree 137 of 12 June 1959, Weapons and Ammunition Law). Only Lebanese nationals can own political newspapers and all broadcast media (Press Law of 14 September 1962, Broadcast Law 382 of 4 November 1994). A series of regulatory requirements also effectively restrict FDI in other instances: Two sectors, fixed line telephony and energy transmission, are closed to domestic and foreign investors as they are currently operated by state-owned enterprises, which have a de facto monopoly. Only Lebanese nationals are permitted to practice law.
Legislative Decree No. 35 (August 5, 1967), under the Lebanese Commercial Code, permits foreigners to own and manage 100 percent of limited liability companies (LLC or Société à Responsabilité Limitée – SARL), except if the company engages in certain commercial activities such as exclusive commercial representation. In these cases, Lebanese citizens must hold a majority of capital, and the manager must be Lebanese (Legislative Decree No. 34 dated August 5, 1967). An amendment introduced in 2019 allowed the formation of LLCs by only one person.
Legislative Decree No. 304 of the Commercial Code (December 24, 1942) governs joint-stock corporations (Société Anonyme Libanaise – SAL) and was amended by Law No. 126 on March 29, 2019. Limitations related to foreign participation stipulate that: 1) one-third of the board of directors should be Lebanese (Article 144 amended); 2) board members can be either shareholders or non-shareholders (Article 147 amended); 3) one-third of capital shares should be held by Lebanese for companies that provide public utility services (Article 78); and 4) capital shares and management in cases of exclusive commercial representation are limited (Legislative Decree No. 34 dated August 5, 1967). Banking, insurance, and cargo, which can only operate as joint-stock corporations (JSCs), are required to have a Lebanese majority on the board, which makes them, in practice, restricted for FDI.
Holding and offshore companies are structured as JCSs and governed by Legislative Decree No. 45 (on holdings) and Legislative Decree No. 46 (on offshore companies), both dated June 24, 1983. The law on offshore companies was amended by Law No. 85, dated October 18, 2018, whereby all board members may be non-Lebanese (Article 2, para 4) and the company may be formed by one person (Article 1 in the amendment of the Commercial Code). A foreign non-resident chairman/general manager of a holding or an offshore company is exempt from the obligation of holding work and residency permits. Law No. 772, dated November 2006, exempts holding companies from the obligation to have two Lebanese persons or legal entities on their board of directors. All offshore companies must register with the Beirut Commercial Registry. The law does not permit offshore banking, trust, and insurance companies to operate in Lebanon.
There are size and quota limits that effectively curb foreign ownership of real estate as well. Law No. 296, dated April 3, 2001, amended the 1969 Law No. 11614 that governs acquisition of property by foreigners. The 2001 law eased legal limits on foreign ownership of property to encourage investment in Lebanon, especially in industry and tourism, abolished discrimination for property ownership between Arab and non-Arab nationals and set real estate registration fees at approximately six percent for both Lebanese and foreign investors. The law permits foreigners to acquire up to 3,000 square meters (around 32,000 square feet) of real estate without a permit but requires cabinet approval for acquisitions exceeding this threshold. The cumulative real estate acquisition by foreigners may not exceed three percent of total land in any district. Cumulative real estate acquisition by foreigners in the Beirut region may not exceed ten percent of the total land area. The law prohibits individuals not holding an internationally recognized nationality from acquiring property in Lebanon. In practice, this restriction attempts to prevent Palestinian refugees who are long-term residents in Lebanon from owning property.
The Lebanese Government does not review FDI transactions for national security considerations.
Lebanon is not a member of either the Organization for Economic Cooperation and Development (OECD) or the World Trade Organization (WTO). The United Nations Conference on Trade and Development (UNCTAD), in collaboration with IDAL, published a comprehensive Investment Policy Review for Lebanon in December 2018, which it officially launched in Beirut in March 2019. The report provides a thorough assessment of Lebanon’s business environment, with concrete short-, medium-, and long-term recommendations to revitalize Lebanon’s investment climate. These include creating an FDI promotion strategy and passing or amending legislation, rules, and regulations in the taxation, labor, competition, and governance regimes towards a more conducive business environment. The full report is available at https://unctad.org/en/PublicationsLibrary/diaepcb2017d11_en.pdf
In March 2022, Konrad Adenauer Stiftung and Arabnet publishedBraving the Storm: Safeguarding the Lebanese Innovation Economy. The report notes that the country’s economic crisis has severely affected the Lebanese innovation ecosystem, much like the wider economy. Between 2017 and 2021, yearly total investments in local startups shrunk by more than 70 percent, from $54 million to $16 million. The number of startup investment deals dropped from 56 to 12, which puts Lebanon in 14th place when it comes to the number of investments among 18 MENA countries, from 2nd place in 2017. The resulting toxic environment has also led several startups to relocate outside of Lebanon, with an estimated 55 percent of companies have moved either their entire or part of their business abroad.
According to UNCTAD, company establishment is cumbersome and costly in Lebanon. It takes, on average, more than 15 days to establish an LLC with 15 employees or more in Beirut. Companies must typically register with one of five trade registers (Beirut, Bekaa, Mount Lebanon, North and South), overseen by a magistrate, that operate in the country and are closest to the company’s location. LLCs and JSCs must also retain the services of a lawyer and one auditor on a yearly basis, pay registration fees at the Ministries of Finance and Justice, and register employees at the National Social Security Fund (NSSF). Foreign companies seeking to establish branches in Lebanon must additionally register at the Ministry of Economy. Online establishment is not available for companies wishing to incorporate in Lebanon, and information on establishment is scattered. Foreign branches and representative offices can be partly registered online, but heavy administrative requirements remain. All foreign documents must be certified by the trade register in the company’s country of incorporation and legalized by the Lebanese embassy or consulate there and translated into Arabic.
Lebanon neither promotes nor incentivizes outward investment, nor does it restrict domestic investors from investing abroad. However, informal capital controls imposed by the Lebanese financial sector since October 2019 prevent nearly all external transfers. Banks do allow outward transfers of money from so-called “fresh dollar” accounts, which include foreign currency inflows that occurred after October 2019.
Luxembourg, the only Grand Duchy in the world, is a landlocked country in northwestern Europe surrounded by Belgium, France, and Germany. Despite its small landmass and small population (634,700), Luxembourg is the second-wealthiest country in the world when measured on a Gross Domestic Product (GDP) per capita basis.
Since 2002, the Luxembourg Government has proactively implemented policies and programs to support economic diversification and to attract foreign direct investment. The Government focused on key innovative industries that showed promise for supporting economic growth: logistics, information, and communications technology (ICT), health technologies including biotechnology and biomedical research; clean energy technologies, and most recently, space technology and financial services technologies. With the COVID-19 pandemic, the health-tech sector has become a priority sector to attract to Luxembourg.
Luxembourg’s economy proved resilient during the COVID-19 pandemic, as 2020 GDP only contracted by 1.3 percent. Luxembourg’s economy rebounded strongly in 2021 with a growth rate of 6.9 percent. Luxembourg fared better than the EU growth rate of 5 percent. This rebound is due to a well-performing financial sector which managed to quickly revert to telework and only suffered limited effects of the pandemic. The Government of Luxembourg also provided a major economic stimulus package of 11 billion euros ($13 billion), equivalent to 18.5 percent of Luxembourg GDP, which helped stabilize the economy. This package includes direct subsidies and compensatory payments to companies, state-guaranteed loans, deferral of taxes, and social security contributions. The Government of Luxembourg borrowed a total of 5 billion euros ($6 billion) at negative interest rates due to the Grand Duchy’s Triple A credit rating.
Unemployment decreased 6.3 to 5.2 percent in 2021 and went back to pre-pandemic levels. This rapid job market recovery was supported by the government’s part-time employment reimbursement scheme, which allows workers to go on extended leave while receiving 80 percent of their salary and keeping their job. This measure cost the State of Luxembourg 1.3 billion euros in 2020 and 216 million euros in 2021.
The Russian invasion of Ukraine represents a major downside risk for the Luxembourg economy, with rising energy prices and a general spike in inflation stifling growth in 2022. The forecast 3.5 percent growth rate for 2022 might be out of reach.
Luxembourg remains a financial powerhouse thanks to the exponential growth of the investment fund sector through the launch and development of cross-border funds (UCITS) in the 1990s. Luxembourg is the world’s second largest investment fund asset domicile, after only the United States, with over $6 trillion of assets in custody in financial institutions.
Luxembourg has committed to the EU target of 55 percent Greenhouse Gas (GHG) Emissions reductions by 2030 and net-zero emission by 2050, and has also set itself a national target of 25 percent renewable energy and 35-40 percent energy efficiency improvement by 2030.
Luxembourg is consistently ranked as one of the world’s most open and transparent economies and has no restrictions on foreign ownership. It is also consistently ranked as one of the world’s most competitive and least-corrupt economies.
Over the past decade, Luxembourg has adopted major fiscal reforms to counter money-laundering, terrorist-financing, and tax evasion.
The Government of Luxembourg actively supports the development of new sectors to diversify the country’s economy, given the dominance of the financial sector. Target sectors include space, logistics, and information technology, including financial technology and biomedicine.
Luxembourg launched its SpaceResources.lu initiative in 2016, and, in 2017, announced a fund offering financial support for the space resources industry. More than 50 companies dedicated to space initiatives are now active in Luxembourg. Luxembourg added an additional space fund in early 2020 to further bolster its status as a space startup nation.
Luxembourg has positioned itself as “the gateway to Europe” to establish European company headquarters operations by virtue of its central European location and advanced road, railway, and air connectivity. Due to uncertainties related to Brexit, 50 insurers, asset managers and banking institutions have decided to re-locate their EU headquarters to Luxembourg or transfer a significant part of their activity to the country.
Luxembourg is actively seeking logistics companies to expand the new logistics hub at Luxembourg Airport, home to Cargolux, Europe’s largest all cargo airline. Inaugurated in 2017, the Luxembourg Intermodal Terminal (LIT) is ideally positioned as an international hub for the consolidation of multimodal transport flows across Europe and beyond.
Luxembourg is also seeking ICT companies to use the existing high-security, state-of-the-art datacenters, affording high-speed internet connectivity to major international data hubs. Luxembourg has set up a high-performance computer which will be part of the EU’s high-performance computer network called EURO HPC
1. Openness To, and Restrictions Upon, Foreign Investment
Luxembourg offers a public policy framework and political stability, which remain highly attractive for foreign investors, particularly for U.S. investors, given the focus on growth sectors and the historically strong bilateral relationship between the two countries. The government has increased its outreach toward companies looking to expand in Europe. Luxembourg is in the process of implementing the EU standards for the screening of foreign investment but missed the Fall 2020 implementation deadline.
In 2017, Luxembourg’s Deputy Prime Minister and Minister of the Economy and Foreign Trade, Etienne Schneider, unveiled a strategy to promote economic growth focusing on attracting FDI and supporting companies’ moving into other markets. The Luxembourg “Let’s Make It Happen” campaign, developed by the state Trade and Investment Board, focuses on five key objectives:
Improving Luxembourg-based companies’ access to international markets
Attracting FDI in a “targeted, service-oriented” way
Strengthening the country’s international “economic-promotion network”
Improving Luxembourg’s image as a “smart location” for high-performance business and industry
Ensuring the coherence of economic promotion efforts
There is no overall economic or industrial strategy that has discriminatory effects on foreign investors, either at a market-access or post-establishment phase of investment. Luxembourg strives to attract and retain foreign investors with its unique model of “easy access to decision makers” and its known ability to “act swiftly.”
The Trade and Investment Board has taken the lead in investment promotion and includes representatives from the ministries of Economy, Higher Education and Research, Finance, Foreign and European Affairs, and State. Public-private trade associations such as FEDIL (Business Federation of Luxembourg, the main employers’ trade association), the Luxembourg Chamber of Commerce, and the Chamber of Skilled Trades and Crafts, as well as Luxinnovation, are also represented.
The Board is working in cooperation with Luxembourg embassies and trade and investment offices worldwide, as well as economic and commercial attachés, honorary consuls, and foreign trade advisers, to attract FDI and retain investors. In 2016, the Ministry of the Economy expanded the role of Luxinnovation to incorporate promotion of Luxembourg abroad and to attract FDI into the country. Luxinnovation is a public private partnership agency that carries out business intelligence to target relevant investors and regions and also provides a soft-landing service for investors as they arrive in Luxembourg. The Covid-19 pandemic has led investor outreach efforts to be carried out virtually, and travel restrictions have led investors to prefer virtual meetings before traveling to the country.
There is a right for foreign and domestic private entities to establish and own business enterprises and engage in all forms of remunerative activity. There are no limits on foreign ownership/control or sector-specific restrictions.
General screening of foreign investment exists in line with that of domestic investment. There are no major sectors/matters in Luxembourg in which foreign investors are denied national (domestic) treatment. Luxembourg is in the process of implementing the EU rules for investment screening, to be adopted by Parliament in the Summer of 2022. By implementing these rules, Luxembourg will adopt a formal investment screening process to replace the previous ad-hoc and case by case screening, which lacks transparency.
Luxembourg is included in Trade Policy Reviews (TPRs) of the EU/EC; see the TPR gateway for explanations and background.
In terms of the United Nations Conference on Trade and Development (UNCTAD) Global Action Menu for Investment Facilitation, Luxembourg’s business facilitation efforts are aligned with most of the recommended action points. Over the past decade, Luxembourg has been furthering accessibility and transparency in investment policies and regulations, as well as procedures relevant to investors. Luxembourg ranks 76th in the World Bank’s starting a business ranking, indicating it takes 16.5 days to set up a business in the country.
The Government has improved the efficiency of investment administrative procedures, notably in the context of the overall “Digitization” movement to offer a multitude of government services online or electronically. This has led to the time it takes to start a business being reduced by 2-3 months.
The Government provides a website in multiple languages, including English, that explains the business registration process: http://www.guichet.public.lu/en. A new business must register with the Registry of Commerce (Registre du Commerce: http://www.lbr.lu.) Foreign companies can use the site (after translating from the original French language), but it is best to consult with a local lawyer or fiduciary to complete the overall process. It is necessary to engage a notary to submit the company’s by-laws for registration.
In 2017, the Government reduced the required minimum capitalization of a new company from 12,500 euro to just 1 euro (symbolic), to encourage start-up creation. Between January 2017 and January 2018, over 680 such simplified limited liability companies (Société à responsabilité limitée simplifiée SARL-S) have registered. According to the Luxembourgish Chamber of Commerce, one client out of three has requested information on SARL-S.
After receiving a certificate from the Registry of Commerce, companies are required by law to register with and pay annual dues to the Luxembourg Chamber of Commerce, as well as the Social Security Administration, the Tax Administration (Administration des Contributions Directes) and the Value-Added-Tax Authority (TVA = taxe à la valeur ajoutée). The company will receive an official registration number reflecting the date of inception of the entity, and this number will be used in all business transactions and correspondence with administrative authorities.
The House of Entrepreneurship (HOA), opened in 2016 within the Luxembourg Chamber of Commerce, also provides guidance on the entire registration and creation process of a business. HOA receives over 10,000 enquiries per year by entrepreneurs interested in setting up a business in the country. The organization plays a key role during the COVID-19 pandemic, as it serves as a point of contact and information for businesses looking to apply for Government aid.
The Ministry of Economy continues to support networks and associations acting in favor of female entrepreneurship. The Law of December 15, 2016 incorporated the principle of equal salaries in the Grand Duchy’s legislation, which makes illegal any difference in the salaries paid to men and women carrying out the same task or work of equal value. As a result, Luxembourg had the lowest gender pay gap in the EU in 2021.
In general, the instruments that are most effective are outside the jurisdiction of the Ministry of Economy but are critical. For example, there has been an increase in the number of childcare centers close to business districts which helps dual career families.
The same government services website listed above, http://www.guichet.public.lu/en, includes an “International Trade” tab which provides guidance on outward investment by Luxembourgish companies on various topics, including intra-EU trade and services; import, export, and transit; licensing; and transport. The Luxembourg Government promotes outward investment via the Trade and Investment Board, which functions as a promotion entity for both inward and outward investment.
The “Let’s Make It Happen” initiative, among its many missions, is working to facilitate access to international markets for Luxembourgish companies and to strengthen Luxembourg’s international economic promotion network. Luxembourg does not restrict domestic investors from investing abroad.
Luxembourg also has a public export credit agency, the Office du Ducroire to help companies engage in export and outward investment through funding and export insurance.
In 2020, the Office du Ducroire has insured over 970 million dollars of new transactions and has paid over 1 million dollars of financial support for exports.
Mauritius is an island nation with a population of 1.3 million people. The Government of Mauritius (GoM) claims an Exclusive Economic Zone (EEZ) of approximately 2.3 million square kilometers, but its undisputed EEZ amounts to approximately 1.3 million square kilometers, in addition to jointly managing about 388,000 square kilometers of continental shelf with Seychelles. Mauritius has maintained a stable and competitive economy. Real GDP grew at an average of 4.7 percent from 1968 to 2017, enabling the country to achieve middle-income status in less than 50 years. In 2020, Mauritius’ GDP was $11 billion and its gross national income per capita amounted to $10,230. In July 2020, the World Bank classified Mauritius as a high-income country based on 2019 data, but Mauritius reverted to upper-middle income status in 2021 due to the effects of the COVID-19 pandemic.
The pandemic severely damaged the economy. Tourism, which contributed around 20 percent to the economy pre-COVID, did not return as expected following the reopening of borders in October 2021. There was a moderate rebound in exports of goods, but exports of services declined further due to the difficult situation in the tourism sector. The GoM estimated that GDP growth would increase 4.8 percent in 2021, with contractions in tourism (18.8 percent) and sugar (9.6 percent), according to Statistics Mauritius. The IMF forecasted that the economy would grow 6.7 percent growth in 2022. Unemployment was estimated at 9.2 percent at the end of 2020, while inflation for 2021 was 4.0 percent.
One of the poorest countries in Africa at independence in 1968, Mauritius has become one of the continent’s wealthiest. It successfully diversified its economy away from sugarcane monoculture to a manufacturing and service-based economy driven by export-oriented manufacturing (mainly textiles), tourism, financial and business services, information and communication technology, seafood processing, real estate, and education/training. Before COVID-19, authorities planned to stimulate economic growth in five areas: serving as a gateway for investment into Africa; increasing the use of renewable energy; developing smart cities; growing the blue economy; and modernizing infrastructure, especially public transportation, the port, and the airport.
In November 2021 at the Conference of Parties 26 (COP 26), the GoM pledged to reduce its greenhouse gas emissions to 40 percent of the business-as-usual scenario 2030 figures. To achieve this target, the government plans to undertake major reforms in its energy, transport, waste, refrigeration and air-conditioning, agriculture, and conservation sectors. The government aims to produce 60 percent of the country’s energy from green sources by 2030, to phase out the total use of coal before 2030, and to increase energy efficiency by 10 percent based on 2019 figures. As part of the national strategy to modernize the public transport system, the light rail network that launched in 2019 is expected to be extended. The government was also working to diversify 70 percent of waste from the landfill by 2030 through the implementation of composting plants, sorting units, biogas plants and waste-to-energy plants.
In 2020 and 2021, however, officials focused on supporting sectors whose revenue disappeared due to the pandemic. In May 2020, the Bank of Mauritius (BoM) set up the Mauritius Investment Corporation (MIC) to mitigate the economic downturn due to the pandemic. The BoM invested $2 billion of foreign exchange reserves in the MIC which were largely directed towards the pharmaceutical and blue economy sectors, in addition to assisting companies that suffered during the pandemic. The BoM also intervened regularly on the domestic foreign exchange market to supply foreign currency.
Government policy in Mauritius is pro-trade and investment. The GoM has signed Double Taxation Avoidance Agreements with 46 countries and maintains a well-regarded legal and regulatory framework. Mauritius has been eager to attract foreign direct investment from China and India, as well as courting more traditional markets like the United Kingdom, France, and the United States. The China-Mauritius free-trade agreement went into effect on January 1, 2021. Mauritius also signed a preferential trade agreement with India, which went into effect in April 2021. The GoM promotes Mauritius as a safe, secure place to do business due to its favorable investment climate and tradition as a stable democracy. Corruption in Mauritius is low by regional standards, but recent political and economic corruption scandals illustrated there was room for improvement in terms of transparency and accountability. For instance, a commercial dispute between a U.S. investor and a parastatal partner that turned into a criminal investigation has raised questions of governmental impartiality.
1. Openness To, and Restrictions Upon, Foreign Investment
Mauritius actively seeks foreign investment. According to several surveys and metrics, Mauritius is among the freest and most business-friendly countries in Africa. Mauritius outperforms all other African countries on the Human Development Index where, in 2020, it ranked 66 out of 189 countries. The 2022 Index of Economic Freedom, published by the Heritage Foundation, ranked Mauritius first among 47 countries in the Sub-Saharan Africa region and 30th globally, compared to being 13th in 2021. This decline in the ranking is due to a drop in the country’s fiscal health score. The index also highlighted that while property rights and judicial effectiveness are strong, government integrity is relatively weak.
The Economic Development Board (EDB) is the single gateway government agency responsible for promoting investment in Mauritius and helping guide investors through the country’s legal and regulatory requirements. In terms of investor retention policy, the EDB provides aftercare services that consider future business environment requirements for survival and/or expansion. The EDB has a customer service unit that receives investor suggestions and complaints, and it organizes workshops and roundtable sessions to inform investors about changes in investment policies. In 2021, the EDB also set up a Business Support Facility that provides facilitation and advisory services to all businesses in Mauritius: https://business-support-portal.edbmauritius.org/business-support-facility/.
A non-citizen can hold, purchase, or acquire real property under the Non-Citizens (Property Restriction) Act (NCPRA), subject to government approval. The NCPRA can be accessed on this link: https://dha.govmu.org/Pages/Services/PRA.aspx. A non-citizen is eligible for a residence permit upon purchasing residential property under the government-regulated Property Development Scheme (PDS), Integrated Resort Scheme (IRS), and Real Estate Scheme (RES) as long as the investment exceeds $375,000 or its equivalent in any freely convertible foreign currency.
No government approval is required in certain situations provided under the NCPRA, namely: (i) holding of immoveable property for commercial purposes under a lease agreement not exceeding 20 years; (ii) holding of shares in companies that do not own immoveable property; (iii) holding of immoveable property by inheritance or effect of marriage to a citizen under the “régime legal de communauté”; (iv) holding of shares in companies listed on the Stock Exchange of Mauritius; and (v) through a unit trust scheme or any collective investment vehicle as defined in the Securities Act.
Regarding business activities, the GoM generally does not discriminate between local and foreign investment. There are, however, some business activities where foreign involvement is restricted. These include television broadcasting, sugar production, newspaper and magazine publishing, and certain operations in the tourism sector.
In 2019, the Independent Broadcasting Authority (IBA) Act was amended to increase the allowable equity participation of a foreign company investing in broadcasting to 49.9 percent from 20 percent. Control by foreign nationals in broadcasting was likewise capped at 49.9 percent. The IBA Act can be accessed via http://www.iba.mu/legal.htm.
In the tourism sector, there are conditions on investment by non-citizens in the following activities: (i) guesthouse/tourist accommodation; (ii) pleasure craft; (iii) diving; and (iv) tour operators. Generally, the conditions include a minimum investment amount, number of rooms, or a maximum equity participation, depending on the business activity.
The Investment Office of the EDB screens foreign investment proposals and provides a range of services to potential investors. The EDB is a useful resource for investors exploring business opportunities in Mauritius and assists with occupation permits, licenses, and clearances by coordinating with relevant local authorities. In 2021, the U.S. Embassy in Port Louis did not receive negative comments from U.S. businesses regarding the fairness of the government’s investment screening mechanisms.
The Investment Office of the EDB reviews proposals for economic benefit, environmental impact, and national security concerns. The EDB then advises potential investors on specific permits or licenses required, depending on the nature of the business. Foreign investors may apply through the EDB for necessary permits; alternately, investors may apply directly to the relevant authorities. In the event an investment fails the review process, the prospective investor may appeal the decision within the EDB or with the relevant government ministry.
In response to the COVID-19 crisis, the GoM relaxed investment terms and conditions for foreign investors in 2020. For instance, the minimum investment for obtaining an occupation permit was halved to $50,000. The GoM also removed the minimum turnover and minimum amount invested for the Innovator Occupation Permit. Professionals with an occupation permit and foreign retirees with a residence permit were able to invest in other ventures without any shareholding restrictions. The permanent residence permit validity was doubled to 20 years. Non-citizens who had a residence permit under the various real estate schemes were no longer required to hold an occupation or work permit to invest and work in Mauritius. Additionally, the GoM introduced a 10-year Family Occupation Permit, which allows foreign families to invest and reside in Mauritius for a period of 10 years in exchange for a minimum contribution of $250,000 to the COVID-19 Projects Development Fund. More information is available at https://residency.mu/.
In 2020, the Non-Citizens (Employment Restriction) Act was amended to enable the following categories of individuals to engage in any occupation without a permit: (a) the holder of an occupation permit issued under the Immigration Act; (b) the holder of a residence permit issued under the Immigration Act; (c) a non-citizen who has been granted a permanent resident permit under the Immigration Act; and (d) a member of the Mauritian diaspora under the Mauritian Diaspora Scheme. In 2021, the GoM also introduced the premium investor certificate, which allows companies investing at least $11 million, as well as companies involved in the manufacture of pharmaceuticals and medical devices, to benefit from incentives.
In 2018, the United Nations Conference on Trade and Development (UNCTAD) published its 2017 Report on the Implementation of the Investment Policy Review (IPR) for Mauritius.
In November 2021, Mauritius concluded its fifth trade policy review with the World Trade Organization. The review concluded that Mauritius’ openness to trade and its stable and robust democratic system have contributed to its economic success in recent years. The review also highlighted that, after two decades of liberalizing reforms, Mauritius has transformed into an almost duty-free economy, with the notable exception of sugar, on which Most Favored Nation tariff rates reach 100 percent. The trade policy review is available at https://www.wto.org/english/tratop_e/tpr_e/s417_e.pdf.
After the GoM put in place new measures to improve its anti-money laundering/combating the financing of terrorism (AML/CFT) regime, in October 2021, the Financial Action Task Force (FATF) removed Mauritius from the list of jurisdictions under increased monitoring concerning AML/CFT. In January 2022, the European Union Commission likewise removed Mauritius from its list of high-risk third countries.
The GoM recognizes the importance of a good business environment to attract investment and achieve a higher growth rate. In 2019, the Business Facilitation (Miscellaneous Provisions) Act entered into force. The main reforms brought about by this legislation were expediting trade fee payments, reviewing procedures for construction permits, reviewing fire safety compliance requirements, streamlining of business licenses, and implementing numerous trade facilitation measures.
The incorporation of companies and registration of business activities falls under the provisions of the Companies Act of 2001 and the Business Registration Act of 2002. All businesses must register with the Corporate and Business Registration Department (CBRD); the registration can be completed online at https://companies.govmu.org/Pages/default.aspx. In 2020, the Business Registration Act was amended so that the CBRD became the central repository of business licenses and information. According to the amendment, all government agencies must electronically forward a copy of any permit, license, authorization, or clearance to the registrar for publication in the Companies and Businesses Registration Integrated System (“CBRIS”). As a general rule, a company incorporated in Mauritius can be 100 percent foreign owned with no minimum capital.
Upon completion of the registration process, the CBRD issues a certificate of incorporation. The company can subsequently apply for occupation permits (work and residence permits) and incentives offered to investors. EDB’s investment facilitation services are available to all investors, domestic and foreign. To this end, a Business Support Facility was established at the EDB in 2021. For more information, see https://business-support-portal.edbmauritius.org/.
In partnership with the Corporate and Business Registration Department, the Mauritius Network Services (MNS) has implemented the Companies and Business Registration Integrated System, a web-based portal that allows electronic submission for incorporation of companies and application for the Business Registration Number, file statutory returns, pay yearly fees, register businesses, and search for business information.
In March 2019, the National Electronic Licensing System (NELS), which is co-financed by the European Union, was officially launched. NELS is a single point of entry for the processing of permits and licenses needed to start and operate a business. Through NELS, the submission of business licensing (including the Building and Land Use Permit, Environmental Impact Assessment, Occupation Certificate, Land Conversion Certificate, etc.) can now be done electronically.
In 2020, the Economic Development Board Act was amended to allow companies to log any obstacles relating to obtaining licenses, permits, authorizations, or other clearances; to enquire about any issue and make recommendations to government agencies; and to publish any actions taken to resolve the reported obstacles.
Mauritius also implemented the e-Registry System, where a national register of real estate properties and statistics on land dispute resolutions are now publicly available. An independent mechanism for filing of complaints was also implemented. The e-Registry System features an electronic dashboard for registry searches, submission of documents, online payment of registration fees, and electronic copies of registered documents.
The GoM imposes no restrictions on capital outflows. Due to the small size of the Mauritian economy, the government encourages Mauritian entrepreneurs to invest overseas, particularly in Africa, to expand and grow their businesses. As part of its Africa Strategy, the government established the Mauritius Africa Fund, a public company with a budget of $13.8 million to support Mauritian investment in Africa. Through the Fund, the government participates as an equity partner for up to 10 percent of the seed capital invested by Mauritian investors in projects targeted towards Africa. The government has signed agreements with Senegal, Madagascar, and Ghana to establish and manage Special Economic Zones (SEZ) in these countries. The GoM and has invited local and international firms to set up operations in the SEZs. As per the 2018 Finance Act, Mauritian companies collaborating with the Mauritius Africa Fund for development of infrastructure in the SEZs benefit from a five-year tax holiday. To further facilitate investment, Mauritius has also signed Investment Promotion and Protection Agreements and Double Taxation Avoidance Agreements with African states.
Additionally, since 2012, the Board of Investment (now restructured as the Investment Office of the EDB) has been operating an Africa Center of Excellence, a special office dedicated to facilitating investment from Mauritius into Africa. This office also acts as a repository of business information for Mauritian entrepreneurs about investment opportunities in different sectors in Africa.
According to the most recent figures available from the Bank of Mauritius, in 2020, gross direct investment flows abroad (excluding the offshore sector) amounted to $68 million. The top three sectors for outward investment were accommodation and food service activities (32 percent), manufacturing (12 percent), and real estate activities (9 percent). Investment abroad was focused mainly on developing countries, particularly in Africa, which received $31 million. Seychelles was the top recipient country, receiving $22 million.
Under the new pro-reform government, Moldova is making progress on economic reforms and strengthening democratic institutions. The pro-reform message voters sent when they chose Maia Sandu as Moldova’s first female President in November 2020 was solidified when the pro-Western, anti-corruption Action and Solidarity Party (PAS) won snap parliamentary elections in July 2021. The government enjoys wide support among the business community.
In December 2021, the government secured a 40-month, $560 million governance-focused program with the International Monetary Fund (IMF). The government also unlocked new EU MicroFinancial assistance and secured an Economic Recovery and Resilience plan of up to $660 million for 2021 – 2024 to help Moldova meet its development priorities.
In 2021, Moldova’s economy grew by a record 13.9%, following an almost 8% contraction in 2020. Unemployment decreased, outmigration slowed, and consumer confidence grew.
However, there are major concerns facing Moldova’s investment climate in 2022. Russia’s invasion of Ukraine has had an immediate and significant negative impact on Moldova’s economy. Almost 20% of Moldova’s goods were imported from Ukraine, Russia, and Belarus before the war; with those supply routes now frozen, Moldovans have had to substitute goods from the EU at significantly higher costs. Moldova relied on the port in Odesa and Ukraine’s railway system for much of its trade and now must pay significantly higher transport fees for goods to be trucked in from Romania via the land border. Experts predict GDP will grow by at most 0.3% in 2022.
The government is committed to strengthening Moldova’s investment and business climate to attract foreign investment, which will help mitigate the negative economic impacts of the COVID-19 pandemic, energy crisis, and disruptions to Moldovan economy because of Russia’s invasion of Ukraine. The government continues to deal with the fallout from the massive bank fraud in 2014, when more than a billion dollars was stolen from Moldova’s state coffers. Efforts are being taken to implement reforms, investigate and prosecute those responsible, and tackle the pervasive corruption that continues to undermine public trust and slow economic development. Moldova ranks 105 out of 180 on the Transparency International Corruption Perceptions Index.
Moldova has adopted modern commercial legislation in accordance with WTO rules following negotiations linked to Moldova’s WTO accession. The main challenges to the business climate remain the lack of effective and equitable implementation of laws and regulations, and arbitrary, non-transparent decisions by government officials to give domestic producers an edge over foreign competitors in certain areas. For example, an environmental tax is applied on bottles and other packaging of imported goods, but not levied on bottles and packaging produced in Moldova. Additionally, the government may liberally cite public security or general social welfare as reasons to intervene in the economy in contravention of its declared respect for market principles. There are reports of problems with customs valuation of goods, specifically that the Customs Service has been applying the maximum possible values to imported goods, even if their actual purchase value was far lower.
In June 2014, Moldova signed an Association Agreement (AA) with the European Union (EU), including a Deep and Comprehensive Free Trade Agreement (DCFTA), committing the government to a course of reforms to bring its governmental, regulatory, and business practices in line with EU standards. In March 2022, in response to Russia’s war in Ukraine, the government formally applied for EU membership. The DCFTA has helped integrate Moldova further into the European common market and created more opportunities for investment in Moldova as a bridge between Western and Eastern European markets. Moldova now exports over 80 percent of its goods to European, North American, and other non-Russian markets. U.S. assistance, particularly in the agricultural, wine, information technology, and other key sectors, has been critical in promoting a competitive Moldova that is well-integrated into Western markets.
While some large foreign companies have taken advantage of tax breaks in the country’s free economic zones, foreign direct investment (FDI) remains low. Finance, automotive, light industry, agriculture, food processing, IT, wine, and real estate have historically attracted foreign investment. Largely through USAID programs, Embassy Chisinau has supported the development of a number of these emerging sectors, yet risks remain. The National Strategy for Investment Attraction and Export Promotion 2016-2020 identified seven priority sectors for investment and export promotion: agriculture and food processing, automotive, business services such as business process outsourcing (BPO), clothing and footwear, electronics, information and communication technologies (ICT), and machinery.
Private investors, including several U.S. companies, have shown strong interest in the ICT sector, especially after Moldova established a preferential tax regime for the sector. Improvements in the strength and transparency of the financial sector also helped attract interest. Many U.S. businesses have explored opportunities in the agricultural and energy sectors.
1. Openness To, and Restrictions Upon, Foreign Investment
One of the poorest countries in Europe, Moldova relies heavily on foreign trade and remittances from abroad for its economic growth. Under Moldovan law, foreign companies enjoy national treatment in most respects. The government views FDI as vital for sustainable economic growth and poverty reduction. In 2021, a lack of qualified labor and the continued emigration of qualified, working-age Moldovans undermined official efforts to attract foreign investment.
Moldova ratified its Association Agreement with the EU in 2016, with the intent of bringing closer political association and economic integration with the EU. The DCFTA, a component of the Association Agreement, provides for mutual elimination of customs duties on industrial and most agricultural products and for further liberalization of the services market. It also addresses other barriers to trade and reforms in economic governance, with the goal of strengthening transparency and competition and adopting EU product standards. Given its small economy, Moldova has relied on a liberalized trade and investment strategy to increase the export of its goods and services to the EU.
A member of the WTO since 2001, Moldova has signed bilateral and multilateral free trade agreements, including:
Commonwealth of Independent States (CIS) Free Trade Agreement
Central European Free Trade Agreement
Free Trade Agreement between the Republic of Turkey and the Rebublic of Moldova
After Moldova signed the Association Agreement and DCFTA in 2014, Russia sought to pressure Chisinau through a series of politically motivated trade bans on Moldova’s exports of fruit, canned products, and fresh and processed meat. These embargos drove Moldova to expand and diversify its exports outside Russia and the former Soviet Union. The EU has now become the country’s largest export destination, absorbing more than 60% of all Moldovan exports. Russia’s invasion of Ukraine on February 24, 2022 negatively impacted Moldova’s traditional trading partners and routes. Moldova seeks increased cooperation with the EU to eliminate import quotas on certain Moldovan goods to compensate for lost trade with Russia, Belarus, and Ukraine. Trade with Europe is likely to increase.
In addition to priority sectors, the government has identified in its national development strategy “Moldova 2020” seven priority public sector areas for development and reform: education; access to financing; road infrastructure; business regulation; energy efficiency; justice system; and social insurance. The government has made a formal commitment to accelerate the country’s development by making the economy more capital-intensive, sustainable, and knowledge-based. The government published an overall Action Plan for 2020-2021 and committed to implement outstanding AA/DCFTA requirements. The government has started work on the new National Action Plan.
There are no formal limits on foreign control of property and land, with the significant exception that foreigners are expressly prohibited from owning agricultural or forest land, even via a locally domiciled corporation or business. Foreigners may become owners of such land only through inheritance and may only transfer the land to Moldovan citizens. However, foreigners are permitted to buy all other forms of property in Moldova, including land plots under privatized enterprises and land designated for construction. In 2006, Parliament further restricted the right of sale and purchase of agricultural land to the state, Moldovan citizens, and legal entities without foreign capital. There are reportedly Moldova-registered companies with foreign capital known to own agricultural land through loopholes in the previous law. The only straightforward option available to foreigners who wish to use agricultural land in Moldova is to lease the land.
Under Moldovan law, foreign companies enjoy national treatment in most respects. The Law on Investment in Entrepreneurship prohibits discrimination against investments based on citizenship, domicile, residence, place of registration, place of activity, state of origin, or any other grounds. The law provides for equitable conditions for all investors and rules out discriminatory measures hindering management, operation, maintenance, utilization, acquisition, extension, or disposal of investments. The law mandates equitable treatment for local companies and foreigners regarding licensing, approval, and procurement. Companies registered in questionable tax havens are technically prohibited from holding shares in commercial banks.
In November 2021, Moldova passed a law establishing a formal screening mechanism for strategic investments. The government has not yet drafted implementing regulations, thus the law has not come into effect. The law outlines a range of industries and assets critical to state security, including energy, transport, strategic infrastructure, electronic communications, mass media, elections, information technologies, high-end technologies, cryptography, defense, radioactive materials, cybersecurity, airspace, hydrometeorology, geophysics, and handling of personal data and state secrets. Any (yet to be defined) strategic investment requires prior approval from a governmental council chaired by the Prime Minister. The law restricts investment opportunities for investors from offshore zones, those convicted of certain crimes, involved in money laundering and financing of terrorism, or known to have links to foreign authorities that pose a risk to national security. The law has not yet come into effect because government has not yet drafted implementing regulations or determined the composition and functions of the governmental council or the timeline for investment reviews.
By statute, special forms of legal organizations and certain activities require a minimum of capital to be invested (e.g., MDL 20,000 (USD 1,125) for joint stock companies, MDL 15 million (USD 844,000) for insurance companies, and MDL 100 million (USD 5.6 million) for banks).
The latest Investment Policy Review of Moldova was conducted by the United Nations Conference on Trade and Development (UNCTAD) as part of a broader South-East Europe Review in 2017 and can be accessed at:
All major business associations usually publish position papers and policy recommendations. These documents can be found on the respective websites: American Chamber of Commerce in Moldova www.amcham.md, European Business Association www.eba.md and Foreign Investors Association www.fia.md.
Moldova has an investment promotion agency to assist prospective investors with information about business registration or industrial sectors, facilitate contact with relevant authorities, and organize study visits. The Investment Agency has an investment guide available on its website: invest.gov.md.
The government has established a special council to promote investment projects of national importance and tackle bureaucratic impediments to larger investment. It has also taken steps over the years to simplify and streamline business registration and licensing, lower tax rates, strengthen tax administration, and increase transparency.
The Public Services Agency, created in 2017, oversees business registrations. By law, registration should take three days for a standard procedure or four hours for an expedited procedure and is done in two stages. The first stage involves submission of an application and a set of documents, the range of which may vary depending on the legal form of the business (LLC, joint-stock company, sole proprietorship, etc.). At the second stage, the Agency issues a registration certificate and a unique identification number for the business, conferring full legal capacity to the entity. In 2010, the government introduced the “one-stop-shop” principle, under which businesses are relieved of the requirement to register separately with fiscal, statistical, social security, or health insurance authorities. There are currently no procedures for online business registration. Certain types of activity listed in the law on licensing require businesses to be first licensed by public authorities.
In 2006, the Moldovan Parliament ratified the 1961 Hague Convention on Abolishing the Requirement for Legalization for Foreign Public Documents. Acceptance of U.S. apostilles applied on official documents simplifies the legalization of official documents issued in the United States that are required in the process of business registration.
Moldova does not have an official policy or mechanism for promoting or incentivizing outward investment.
At the confluence of Europe, Sub-Saharan Africa, and the Middle East, Morocco seeks to transform itself into a regional business hub by leveraging its geographically strategic location, political stability, and world-class infrastructure to expand as a regional manufacturing and export base for international companies. Morocco actively encourages and facilitates foreign investment, particularly in export sectors like manufacturing, through positive macro-economic policies, trade liberalization, investment incentives, and structural reforms. The Government of Morocco implements strategies aimed at boosting employment, attracting foreign investment, and raising performance and output in key revenue-earning sectors, with an emphasis placed on value-added industries such as renewables, automotive, aerospace, textile, pharmaceuticals, outsourcing, and agro-food. Most of the government’s strategies are laid out in the New Development Model released in April of 2021. As part of the Government’s development plan, Morocco continues to make major investments in renewable energy, is on track to meet its stated goal of 64 percent total installed capacity by 2030, and announced an even more ambitious goal of 80 percent by 2050.
According to the United Nations Conference on Trade and Development’s (UNCTAD) World Investment Report 2021, Morocco attracted the ninth-most foreign direct investment (FDI) in Africa in 2020. Peaking in 2018 when Morocco attracted $3.6 billion in FDI, inbound FDI dropped by 55 percent to $1.7 billion in 2019 and remained largely unchanged at $1.7 billion in 2020. UAE, France, and Spain hold a majority of FDI stocks. Manufacturing attracted the highest share of FDI stocks, followed by real estate, trade, tourism, and transportation. Morocco continues to orient itself as the “gateway to Africa,” and expanded on this role with its return to the African Union in January 2017 and the launch of the African Continental Free Trade Area (CFTA) which entered into force in 2021. In June 2019, Morocco opened an extension of the Tangier-Med commercial shipping port, making it the largest in Africa and the Mediterranean; the government is developing a third phase for the port which will increase capacity to five million twenty-foot equivalent units (TEUs). Tangier is connected to Morocco’s political capital in Rabat and commercial hub in Casablanca by Africa’s first high-speed train service. But weak intellectual property rights protections, inefficient government bureaucracy, corruption, inadequate money laundering safeguards and the slow pace of regulatory reform remain challenges. In 2021, Morocco was placed on the Financial Action Task Force’s (FATF) “grey list” of countries subjected to increased monitoring due to deficiencies int the fight against money laundering and terrorist financing.
Morocco has ratified 72 investment treaties for the promotion and protection of investments and 62 economic agreements, including with the United States and most EU nations, that aim to eliminate the double taxation of income or gains. Morocco is the only country on the African continent with a Free Trade Agreement (FTA) with the United States, eliminating tariffs on more than 95 percent of qualifying consumer and industrial goods. The Government of Morocco plans to phase out tariffs for some products through 2030. The FTA supports Morocco’s goals to develop as a regional financial and trade hub, providing opportunities for the localization of services and the finishing and re-export of goods to markets in Africa, Europe, and the Middle East. Since the U.S.-Morocco FTA came into effect bilateral trade in goods has grown nearly five-fold. The U.S. and Moroccan governments work closely to increase trade and investment through high-level consultations, bilateral dialogue, and other forums to inform U.S. businesses of investment opportunities and strengthen business-to-business ties.
1. Openness To, and Restrictions Upon, Foreign Investment
Morocco actively encourages foreign investment through macro-economic policies, trade liberalization, structural reforms, infrastructure improvements, and incentives for investors. The Investment Charter, Law 18-95 of October 1995, is the current foundational Moroccan text governing investment and applies to both domestic and foreign investment (direct and portfolio). An updated Investment Charter is under development and is expected to significantly expand incentives for foreign investment. The new charter aims to increase the private investment by two-thirds of total investment by 2035, includes additional incentives to draw investment to promising sectors and less favored regions, and provide additional support for the development of strategic industries such as defense and pharmaceuticals. The Ministry of Industry is executing its second Industrial Acceleration Plan (PAI), running from 2021-2025, which aims to build on the progress made in the previous 2014-2020 PAI and expand industrial development throughout all Moroccan regions. The PAI is based on establishing “ecosystems” that integrate value chains and supplier relationships between large companies and small- and medium-sized enterprises. Moroccan legislation governing FDI applies equally to Moroccan and foreign legal entities, except for certain protected sectors.
Morocco’s Investment and Export Development Agency (AMDIE) is the national agency responsible for the development and promotion of investments and exports. Following the reform to law 47-18 governing the country’s Regional Investment Centers (CRIs) in 2019, each of the 12 regions is empowered to lead their own investment promotion efforts. Each of the CRI’s websites aggregate relevant information for interested investors and include investment maps, priority sectors, procedures for creating a business, production costs, applicable laws and regulations, and general business climate information, among other investment services. The websites vary by region, with some functioning better than others. AMDIE and the 12 CRIs work together throughout the phases of investment at the national and regional level. For example, AMDIE and the CRIs coordinate contact between investors and partners. Regional investment commissions examine investment applications and send recommendations to AMDIE. The inter-ministerial investment committee, for which AMDIE acts as the secretariat, approves any investment agreement or contract which requires financial contribution from the government. The CRIs also provide an “after care” service to support investments and assist in resolving issues that may arise.
Over the last year, AMDIE made a significant push to promote international investment into Morocco under its “Morocco Now” branded campaign. Further information about Morocco’s investment laws and procedures is available on AMDIE’s “Morocco Now” websiteor through the individual websites of each of the CRIs. For information on agricultural investments, visit the Agricultural Development Agency website or the National Agency for the Development of Aquaculture website.
When Morocco acceded to the OECD Declaration on International Investment and Multinational Enterprises in November 2009, it guaranteed national treatment of foreign investors. The only exception to this national treatment of foreign investors is in those sectors closed to foreign investment (noted below), which Morocco delineated upon accession to the Declaration. The National Contact Point for Responsible Business Conduct (NCP), whose presidency and secretariat are held by AMDIE, is the lead agency responsible for the adherence to this declaration.
Foreign and domestic private entities may establish and own business enterprises, barring certain restrictions by sector. While the U.S. Mission is unaware of any economy-wide limits on foreign ownership, Morocco places a 49 percent cap on foreign investment in air and maritime transport companies and maritime fisheries. Foreigners from cannot own agricultural land, though they can lease it for up to 99 years; however, a new law opening agricultural land to foreign ownership has passed into law and its implementing text is forthcoming. The Moroccan government holds a monopoly on phosphate extraction through the 95 percent state-owned Office Cherifien des Phosphates (OCP). The Moroccan state also has a discretionary right to limit all foreign majority stakes in the capital of large national banks but apparently has never exercised that right. The Moroccan Central Bank (Bank Al-Maghrib) may use regulatory discretion in issuing authorizations for the establishment of domestic and foreign-owned banks. In the oil and gas sector, the National Agency for Hydrocarbons and Mines (ONHYM) retains a compulsory share of 25 percent of any exploration license or development permit. As part of law 47-18 governing the country’s Regional Investment Centers, a reform mandated the various approval authorities for investment projects be consolidated into one “Unified Regional Commission” which has since turned an approval process which averaged 180 days into a process which takes 30 days or less, and sometimes as little as one business day. The U.S. Mission is not aware of instances in which the Moroccan government refused foreign investors for national security, economic, or other national policy reasons, nor is it aware of any U.S. investors disadvantaged or singled out by ownership or control mechanisms, sector restrictions, or investment screening mechanisms, relative to other foreign investors.
The last third-party investment policy review of Morocco was the World Trade Organization (WTO) 2016 Trade Policy Review (TPR), which found that the trade reforms implemented since the prior TPR in 2009 contributed to the economy’s continued growth by stimulating competition in domestic markets, encouraging innovation, creating new jobs, and contributing to growth diversification. Although some civil society organizations have been critical of certain development projects/initiatives, particularly those with environmental or social impacts, Post is unaware of a comprehensive review focused on investment policy concerns.
Prior to its discontinuation of the Doing Business Report, in 2020 the World Bank ranked Morocco 53 out of 190 economies, rising seven places since from the previous report in 2019 and climbing 75 places during the last decade from 128 in 2010. Since 2012, Morocco has implemented reforms that facilitate business registration, such as eliminating the need to file a declaration of business incorporation with the Ministry of Labor, reducing company registration fees, and eliminating minimum capital requirements for limited liability companies. Each of the 12 Regional Investment Centers (CRI) maintains a website which guides investors through the registration process.
Foreign companies may use the online business registration mechanism. Foreign companies, except for French companies, are required to provide an apostilled Arabic translated copy of their articles of association and an extract of the registry of commerce in their country of origin. Moreover, foreign companies must report the incorporation of the subsidiary a posteriori to the Foreign Exchange Office (Office de Changes) to facilitate repatriation of funds abroad such as profits and dividends. According to the World Bank, registering a business in Morocco takes an average of nine days, significantly less than the Middle East and North Africa regional average of 20 days. Morocco does not require that the business owner deposit any paid-in minimum capital.
Following the passing of electronic creation of businesses law 18-17 , the new system went live in 2021, allowing for the creation of businesses online via an electronic platform managed by the Moroccan Office of Industrial and Commercial Property (OMPIC). All procedures related to the creation, registration, and publication of company data can be carried out via this platform. A new national commission will monitor the implementation of the procedures. The Simplification of Administrative Procedures Law 55-19, passed in 2020, aims to streamline administrative processes by identifying and standardizing document requirements, eliminating unnecessary steps, and making the process fully digital via the National Administration Portal, the site launched in 2021 but is currently only available in Arabic.
The business facilitation mechanisms provide for equitable treatment of women and underrepresented minorities in the economy. Notably, according to the World Bank, the procedure, length of time, and cost to register a new business is equal for men and women in Morocco. The U.S. Mission is unaware of any official assistance provided to women and underrepresented minorities through the business registration mechanisms. In cooperation with the Moroccan government, civil society, and the private sector, there have been several initiatives aimed at improving gender equality in the workplace and access to the workplace for foreign migrants, particularly those from sub-Saharan Africa.
The Government of Morocco prioritizes investment in Africa as part of its strategy to expand its commercial and trade connections throughout the continent and secure its self-proclaimed title of “Gateway to Africa”. The African Development Bank ranks Morocco as the second biggest African investor in Sub-Saharan Africa, after South Africa, and the largest African investor in West Africa. OCP Africa, a subsidiary of Morocco’s state-owned phosphate giant OCP, has presence in 16 African countries and continues to invest in infrastructure supporting its phosphate exports. According to Morocco’s Office of Exchange, under the supervision of Minister of Economy and Finance, $808 million, or 43 percent of Morocco’s total outward FDI, was invested in the African continent in 2021. The U.S. Mission is not aware of a standalone outward investment promotion agency, although AMDIE’s mission includes supporting Moroccans seeking to invest outside of the country for the purpose of boosting Moroccan exports. Nor is the U.S. Mission aware of any restrictions for domestic investors attempting to invest abroad. However, under the Moroccan investment code, repatriation of funds is limited to “convertible” Moroccan Dirham accounts. Morocco’s Foreign Exchange Office (“Office des Changes,” OC) implemented several changes for 2022 that liberalize the country’s foreign exchange regulations. Moroccans going abroad for tourism can now exchange up to $10,000 in foreign currency per year, with the possibility to attain further allowances indexed at 30 percent of income tax filings with a maximum cap of $30,000. Business travelers can also obtain larger amounts of foreign currency, provided their company has properly filed and paid corporate income taxes. Another new provision permits banks to use foreign currency accounts to finance investments in Morocco’s Industrial Acceleration Zones.
Oman’s location at the crossroads of the Arabian Peninsula, East Africa, and South Asia and in proximity to larger regional markets is an attractive feature for potential foreign investors. Some of Oman’s most promising development projects and investment opportunities involve its ports and free zones, most notably in Duqm, where the government envisions a 2,000 square-kilometer free trade zone and logistics hub. With a “friends of all, enemies of none” foreign policy, Oman does not face the external security challenges of some of its neighbors. Oman’s domestic political situation remains stable, despite increasing economic pressure and the need to create employment for young Omanis.
Oman’s economy and government finances rely heavily on oil and gas revenue. High energy prices in 2022 are improving Oman’s economic prospects but will not immediately overcome the effects of years of relatively low energy prices, weak economic growth, budget deficits, and the impact of the COVID-19 pandemic. The government announced a medium-term fiscal plan in November 2020 to fix its heavily indebted finances by cutting down on spending and raising revenues, primarily through taxes. Some of the measures negatively affected capital flow, and in an economy dependent on state spending the suspension or cancellation of government projects during Oman’s economic contraction further hit the struggling private sector.
Government leadership recognizes these challenges and is working to improve Oman’s investment climate and to achieve its economic development goals under Oman’s Vision 2040 development plan. Omani Sultan Haitham bin Tarik al Said, who assumed the sultancy in January 2020, has prioritized foreign direct investment (FDI) attraction as an imperative to boost local job creation, particularly as COVID-19-related restrictions have loosened. Toward this end, Oman is in the process of developing further advantages for foreign investors, including a program of tax and fee incentives, permissions to invest in several new industries in the economy, expanded land use, increased access to capital, and labor and employment incentives for qualifying companies. In September 2021, Oman allowed expatriate residents with work visas to own residential units and offered long-term residency visas to attract investors. Five- and 10-year renewable residence visas are available to foreign investors in the tourism, real estate, education, health, information technology, and other key sectors. In March 2022, Oman announced that it would reduce the cost of foreign worker permit fees by up to 85 percent, reversing a hike in the fees it had implemented in June 2021 that some businesses had found problematic.
The success of Oman’s reform efforts will depend on its ability to open key sectors to private sector competition and foreign investment, minimize bureaucratic red tape, pay off its overdue bills, balance its desire for “Omanization” with the realities of training and restructuring its work force, and translate its promises of economic reform into increased FDI flows and job creation. The government also needs to undertake more fundamental reforms for investment such as making its tender system transparent, increasing access to credit, and speeding up approvals for new businesses.
Sultan Haitham and his government are actively courting FDI into many of its sectors. In February 2021, the Ministry of Finance signed three memoranda of understanding with the Saudi Fund for Development to finance several projects amounting to about $244 million. In January 2022, Oman also signed a Sovereign Investment Partnership with the United Kingdom, its largest FDI partner, to facilitate joint investments in both countries.
Sultan Haitham and his government are also seeking to make fuller use of the 2009 U.S.-Oman Free Trade Agreement (FTA), under which U.S. businesses and investors have the right to 100-percent ownership of their companies and can import their products to Oman duty-free. U.S. companies operating in Oman sometimes raise concerns over a lack of clarity and consistency on business license and visa renewal criteria, as well as an increase in associated costs.
The top complaints of businesses relate to requirements for hiring and retaining Omani national employees and a heavy-handed application of “Omanization” quotas. Payment delays to companies that completed work on government infrastructure projects are also a problem across various sectors. Smaller companies without in-country experience or a regional presence face considerable bureaucratic obstacles conducting business here. Beginning in 2020, the government also temporarily ceased the issuance of most new project awards and purchases to curb expenditures.
Companies created under Oman’s new Foreign Capital Investment Law (FCIL), promulgated in 2020, have come under the government’s radar and the Ministry of Commerce, Industry and Investment Promotion (MOCIIP) is re-evaluating investor visas that it issued in 2020. The FCIL removed minimum-share capital requirements and limits on the amount of foreign ownership in an Omani company.
1. Openness To, and Restrictions Upon, Foreign Investment
Oman actively seeks foreign direct investment and is in the process of improving the regulatory framework to encourage such investments. The Foreign Capital Investment Law (FCIL) allowed 100-percent foreign ownership in most sectors and removed the minimum capital requirement. The law effectively provided all foreign investors with an open market in Oman, privileges already extended to U.S. nationals due to the provisions in the 2009 U.S.-Oman Free Trade Agreement (FTA), although the FTA goes further in providing American companies with national treatment.
The Omani government’s “In-Country Value” (ICV) policy seeks to incentivize companies, both Omani and foreign, to procure local goods and services and provide training to Omani national employees. The government includes bidders’ demonstration of support for ICV as one factor in government tender awards. While the government initially applied ICV primarily to oil and gas contracts, the principle is now embedded in government tenders in all sectors, including transportation and tourism. New-to-market foreign companies, including U.S. firms, may find the bid requirements related to ICV prohibitive.
With the implementation of the FTA in 2009, U.S. firms may establish and fully own a business in Oman without a local partner. Although U.S. investors are provided national treatment in most sectors, Oman has an exception in the FTA for legal services, limiting U.S. ownership in a legal services firm to no more than 70 percent. Foreign lawyers may not represent cases in Omani courts at any level. The government also has a “negative list” that restricts foreign investment to safeguard national security interests. The list includes some services related to radio and television transmission as well as air and internal waterway transportation. MOCIIP further extended this list to include approximately 70 sectors when the FCIL came into effect.
Since late 2021, the government is employing stringent screening requirements for the issuance and renewals of investor visas, criteria which the government has not made public. U.S. investors raise concerns that these rules are neither consistent nor transparent, and result in a significant increase in renewals costs.
Oman bans non-Omani ownership of real estate and land in various governorates and in some restricted areas. Non-Omanis can buy property only in designated areas called “Integrated Tourism Complexes” and in certain Ministry of Housing-designated multi-story, commercial and residential real estate buildings in Muscat, subject to eligibilities. Oman permits the establishment of real estate investment funds (REIFs) to encourage new inflows of capital into Oman’s property sector. Foreign investors, as well as expatriates in Oman, may own property units in REIFs.
The World Trade Organization (WTO) conducted a Trade Policy Review of Oman in November 2021. The 2021 report is not yet publicly available. The previous WTO Trade Policy Review was in April 2014 (Link to 2014 report: https://www.wto.org/english/tratop_e/tpr_e/tp395_e.htm.)
The Ministry of Commerce, Industry, and Investment Promotion (MOCIIP) works to attract foreign investors and smooth the path for business formation and private-sector development. It works closely with government organizations and businesses in Oman and abroad to provide a range of business support. MOCIIP also offers a range of business investor advice geared to support foreign companies considering investment in Oman, based on company-specific needs and key target sectors that the country’s diversification program identifies. Oman’s “Invest in Oman” website (https://investinoman.om) provides information on Oman as a business location.
MOCIIP has an online business registration site, known as “Invest Easy” (business.gov.om), through which businesses can obtain a Commercial Registration certificate from MOCIIP. MOCIIP can normally complete most registrations in approximately three or four business days; however, some commercial registration and licensing decisions may require the approval of multiple ministries and could take longer. The “Invest Easy” portal integrates several government agencies into a single portal and serves as a single window for businesses in Oman.
The government neither promotes nor provides incentives for outward investment but does not restrict its citizens from investing abroad.
In 2021, the Saudi Arabian government (SAG) continued its ambitious socio-economic reforms, collectively known as Vision 2030. Spearheaded by Crown Prince Mohammed bin Salman, Vision 2030 provides a roadmap for the development of new economic sectors and a transition to a digital, knowledge-based economy. The reforms aim to diversify the Saudi economy away from oil and create more private sector jobs for a young and growing population.
To accomplish these ambitious Vision 2030 reforms, the SAG is seeking foreign investment in burgeoning sectors such as infrastructure, tourism, entertainment, and renewable energy. Saudi Arabia aims to become a major transport and logistics hub linking Asia, Europe, and Africa. Infrastructure projects related to this goal include various “economic cities” and special economic zones, which will serve as hubs for petrochemicals, mining, logistics, manufacturing, and digital industries. The SAG plans to double the size of Riyadh city and welcomes investment in its multi-billion-dollar giga-projects (including NEOM, Qiddiya, the Red Sea Project, and Amaala), which are the jumping-off points for its nascent tourism industry. The Kingdom is also developing tourism infrastructure at natural sites, such as AlUla, and the SAG continues to grow its successful Saudi Seasons initiative, which hosts tourism and cultural events throughout the country.
The Saudi entertainment and sports sector, aided by a relaxation of social restrictions, is also primed for foreign investment. The country hopes to build hundreds of movie theaters and the SAG aims to sign agreements for production studios in Saudi Arabia for end-to-end film production. The SAG seeks to host world class sporting events and has already hosted the European Golf Tour, Diriyah ePrix, Dakar Rally, and Saudi Formula One Grand Prix. In addition, recent film festivals and concerts have demonstrated strong demand for art and cultural events. Lastly, the SAG is eager for foreign investment in green projects related to renewable energy, hydrogen, waste management, and carbon capture to reach net-zero emissions by 2060. It is particularly interested in green capacity-building and technology-sharing initiatives.
Despite these investment opportunities, investor concerns persist regarding business predictability, transparency, and political risk. Although some activists have recently been released, the continued detention and prosecution of activists remains a significant concern, while there has been little progress on fundamental freedoms of speech and religion. The pressure to generate non-oil revenue and provide increased employment opportunities for Saudi citizens has prompted the SAG to implement measures that may weaken the country’s investment climate going forward. Increased fees for expatriate workers and their dependents, as well as “Saudization” policies requiring certain businesses to employ a quota of Saudi workers, have led to disruptions in some private sector activities. Additionally, while specific details have not yet been released, Saudi Arabia announced in 2021 that multinational companies wanting to contract with the SAG must establish their regional headquarters in Saudi Arabia by 2024.
The SAG has taken important steps since 2018 to improve intellectual property rights (IPR) protection, enforcement, and awareness. While some concerns remain regarding IPR protection in the pharmaceutical sector, no new incidents related to regulatory data protection for health and safety information have been reported since October 2020, and in March 2022 Saudi Arabia issued a public statement stipulating that data protection in the Kingdom is for five years. While the sharp downturn in oil prices in 2020 put pressure on Saudi Arabia’s fiscal situation, the subsequent spike in oil prices has increased government revenue and the SAG expects a budget surplus in 2022.
1. Openness To, and Restrictions Upon, Foreign Investment
The SAG seeks to attract $3 trillion in foreign investment to promote economic development, transfer foreign expertise and technology to Saudi Arabia, create jobs for Saudi nationals, and increase Saudi Arabia’s non-oil exports.
In October 2021, Saudi Arabia announced its National Investment Strategy, which will help it deliver on its Vision 2030 goals. The National Investment Strategy outlines investment plans for sectors including manufacturing, renewable energy, transport and logistics, tourism, digital infrastructure, and health care. The strategy aims to grow the Saudi economy by raising private sector contribution to 65 percent of total GDP and increasing foreign direct investment to 5.7 percent of total GDP. The National Investment Strategy aims to raise net foreign direct investment flows to $103 billion annually and increase domestic investment to about $450 billion annually by 2030.
The Ministry of Investment of Saudi Arabia (MISA), formerly the Saudi Arabian General Investment Authority (SAGIA), governs and regulates foreign investment in the Kingdom, issues licenses to prospective investors, and works to foster and promote investment opportunities across the economy. Established originally as a regulatory agency, MISA has increasingly shifted its focus to investment promotion and assistance, offering potential investors detailed guidance and a catalogue of current investment opportunities on its website https://investsaudi.sa/en/sectors-opportunities/.
The SAG has adopted reforms to improve the Kingdom’s attractiveness as an investment destination. It has reduced the license approval period from days to hours, decreased required customs documents, reduced the customs clearance period from weeks to hours, and increased the investor license period to five years. It has launched e-licenses to provide a more efficient and user-friendly process and an online “instant” license issuance or renewal service to foreign investors that are listed on a local or international stock market and meet certain conditions. The SAG allows 100 percent foreign ownership in most sectors.
Saudi Arabia’s burgeoning entertainment sector provides opportunities for foreign investment. In a country where most public entertainment was once forbidden, the SAG now regularly sponsors and promotes entertainment programming, including live concerts, dance exhibitions, sports competitions, and other public performances. The audiences for many of these events are now gender-mixed, representing a larger consumer base. In addition to reopening cinemas in 2018, the SAG has hosted Formula One and Formula E races, professional golf and tennis tournaments, and a world heavyweight boxing title match. Saudi Arabia’s General Entertainment Authority launched the Saudi Seasons initiative in 2019, which hosts tourism and cultural events in each of the country’s 11 regions. The second iteration of Saudi Seasons began in October 2021 after a pause due to COVID. Riyadh Season attracted more than 15 million people and more than 1,200 companies participated, providing 150,000 job opportunities. The program included more than 7,500 entertainment events, including Arab and international concerts, international exhibitions, theatrical shows, and a freestyle wrestling tournament. The initiative also featured 200 restaurants and 70 coffee shops at 14 entertainment zones across Riyadh.
The SAG is also seeking foreign investment for its “economic cities” and “giga-projects” that are at various stages of construction. These projects are large-scale, self-contained developments in different regions focusing on particular industries, such as technology, energy, logistics, tourism, entertainment, and infrastructure. These projects include:
NEOM: a $500 billion long-term development project to build a futuristic “independent economic zone” and city in northwest Saudi Arabia. This initiative aims to create 380,000 jobs and contribute $48 billon to domestic GDP by 2030. This project includes:
The Line: a 100 mile-long, urban smart city that will have no cars, no streets, and no carbon emissions.
Oxagon: NEOM’s economic and industrial hub focusing on innovation, research, and technology. Built on the coast, it will include the world’s largest floating structure.
Trojena: NEOM’s mountain destination blending natural and developed landscapes. This project will include a man-made lake, a wildlife reserve, and a ski resort.
Qiddiya: a large-scale entertainment, amusement, sports, and cultural complex near Riyadh.
King Abdullah Financial District: a commercial center development with nearly 60 skyscrapers in Riyadh.
Red Sea Project: a massive tourism development on the archipelago of islands along the western Saudi coast, which aims to create 70,000 jobs and attract one million tourists per year.
Diriyah Gate: a $50 billion project transforming Diriyah, a suburb of Riyadh, into a premiere destination for culture and heritage, entertainment, hospitality, retail, and education.
Amaala: a wellness, healthy living, and meditation resort on the Kingdom’s northwest coast, projected to include more than 2,500 luxury hotel rooms and 700 villas.
Asir: a $13 billion project to develop the southwestern region of Asir into a global tourism hub, aiming to attract more than 10 million visitors by 2030.
To attract tourists to these new sites, the SAG introduced a new tourism visa in 2019 for non-religious travelers, and the Kingdom no longer requires foreign travelers staying in the same hotel room to provide proof of marriage or family relations. The SAG is facilitating private investments through its Tourism Development Fund, which has initial capital of $4 billion, and the Kafalah program, which provides loan guarantees of up to $400 million. In addition, the Tourism Fund signed MOUs with local banks to finance projects valued up to $40 billion to stimulate tourism investment and increase the sector’s contribution to GDP.
Investment opportunities in Saudi Arabia’s mining sector continue to expand. In June 2020, the SAG approved a new law allowing foreign companies to enter the mining sector and invest in the Kingdom’s vast mining resources. The law will facilitate the establishment of a mining fund to provide sustainable finance, support geological survey and exploration programs, and optimize national mineral resources valued at $1.3 trillion. The law could increase the sector’s contribution to GDP by $64 billion, reduce imports by $9.8 billion, and create 200,000 direct and indirect jobs by 2030. Saudi Arabia’s national mining company, Ma’aden, has a $12 billion joint venture with Alcoa for bauxite mining and aluminum production and a $7 billion joint venture with the leading American fertilizer firm Mosaic and the Saudi chemical giant SABIC to produce phosphate-based fertilizers.
Saudi Arabia’s transportation sector also provides ample opportunity for international investment. In June 2021, Crown Prince Mohammed bin Salman launched the National Transport and Logistics Strategy to upgrade transportation infrastructure throughout Saudi Arabia. The strategy aims to enhance Saudi Arabia’s position as a global logistics center, improve quality of life, and balance the public budget. The strategy calls for the launch of a new national air carrier, with the goal of increasing the number of international destinations served by the country to more than 250. The SAG also aims to raise air freight sector capacity to more than 4.5 million tons. The strategy includes an initiative to connect Saudi Arabia with the other Arab Gulf states via a railway line. The SAG plans to invest $147 billion in transport and logistics over the next eight years.
Lastly, the Kingdom’s infrastructure sector is open to foreign investment. The SAG launched an $800 billion project to double the size of Riyadh city in the next decade and transform it into an economic, social, and cultural hub for the region. The project includes 18 “mega-projects” in the capital city to improve livability, strengthen economic growth, and more than double the population to 15-20 million by 2030. The SAG is seeking private sector financing of $250 billion for these projects, with similar contributions from income generated by its financial, tourism, and entertainment sectors.
Saudi Arabia fully recognizes rights to private ownership and the establishment of private business. However, the SAG excludes foreign investors from some economic sectors and places some limits on foreign control.
Foreign investors must contend with increasingly strict requirements to base a certain percentage of production within Saudi Arabia (localization), labor policy requirements to hire more Saudi nationals (usually at higher wages than expatriate workers), an increasingly restrictive visa policy for foreign workers, and gender segregation in business and social settings (though this is becoming more relaxed as socio-economic reforms progress).
The SAG implemented new taxes and fees in 2017 and early 2018, including significant visa fee increases. In 2020, the SAG increased the value-added tax (VAT) from five to 15 percent.
In February 2021, MISA and the Royal Commission for Riyadh City (RCRC) announced a new directive requiring that companies wanting to contract with the SAG establish their regional headquarters in Saudi Arabia – preferably in Riyadh – by 2024. MISA has yet to publish details regarding this mandate. According to MISA, companies that relocate their regional headquarters to Riyadh will benefit from incentives including relaxed Saudization, spouse work permits, waivers of professional accreditation, visa acceleration, and end-to-end business, personal, and concierge services. Saudi officials have confirmed that offices cannot be headquarters “in name only” but, rather, must be legitimate headquarters offices with C-level executive staff in Riyadh overseeing operations and staff in the rest of the region. Companies choosing to maintain their regional headquarters in another country will not be awarded public sector contracts beginning in 2024. Implementing regulations for this new directive have not been issued and it remains unclear if the rule would affect contracting by parastatal organizations such as Saudi Aramco.
Foreign investment is currently prohibited in ten sectors:
Oil exploration, drilling, and production except services related to the mining sector listed under Central Product Classification (CPC) 5115+883
Catering to military sectors
Security and detective services
Real estate investment in the holy cities, Mecca and Medina (Note: Foreign investment in real estate in Mecca and Medina is allowed in certain locations and limited to 99-year leases.)
Tourist orientation and guidance services for religious tourism related to Hajj and Umrah
Commission agents internationally classified under CPC 621
Services provided by midwives, nurses, physical therapy services, and quasi-doctoral services classified under CPC 93191
Poison centers, blood banks, and quarantine services
Foreign firms are barred from investing in the upstream hydrocarbon sector, but the SAG permits foreign investment in the downstream energy sector, including refining and petrochemicals. ExxonMobil, Shell, China’s Sinopec, and Japan’s Sumitomo Chemical are partners with Saudi Aramco in domestic refineries. ExxonMobil, Chevron, Shell, and other international investors have joint ventures with Saudi Aramco and/or the Saudi Basic Industries Corporation (SABIC, a wholly-owned subsidiary of Saudi Aramco since 2020) in large-scale petrochemical plants. The Dow Chemical Company and Saudi Aramco are partners in the $20 billion Sadara joint venture with the world’s largest integrated petrochemical production complex.
Saudi Aramco also maintains a group of contractors to provide engineering, procurement, construction, hook-up, commissioning and maintenance, and modifications and operations jobs for its offshore oil and gas infrastructure.
Joint ventures almost always take the form of limited liability partnerships in Saudi Arabia, to which there are some disadvantages. Foreign partners in service and contracting ventures organized as limited liability partnerships must pay, in cash or in kind, 100 percent of their contribution to authorized capital. MISA’s authorization is only the first step in setting up such a partnership.
Professionals, including architects, consultants, and consulting engineers, are required to register with, and be certified by, the Ministry of Commerce. In theory, these regulations permit the registration of Saudi-foreign joint venture consulting firms. As part of its WTO commitments, Saudi Arabia generally allows consulting firms to establish a local office without a Saudi partner. Foreign engineering consulting companies, however, must have been incorporated for at least 10 years and have operations in at least four different countries to qualify. Foreign entities practicing accounting and auditing, architecture, and civil planning, or providing healthcare, dental, or veterinary services, must still have a Saudi partner.
In recent years, Saudi Arabia has opened additional service markets to foreign investment, including financial and banking services; aircraft maintenance and repair; computer reservation systems; wholesale, retail, and franchise distribution services; basic and value-added telecom services; and investment in the computer and related services sectors. In 2016, Saudi Arabia formally approved full foreign ownership of retail and wholesale businesses in the Kingdom. While some companies have already received licenses under the new rules, the restrictions attached to obtaining full ownership – including a requirement to invest over $50 million during the first five years and ensure that 30 percent of all products sold are manufactured locally – have proven difficult to meet and have precluded many investors from taking full advantage of the reform.
In addition to applying for a license from MISA, foreign and local investors must register a new business via the Ministry of Commerce (MOC), which has begun offering online registration services for limited liability companies at https://mc.gov.sa/en/. Though users may submit articles of association and apply for a business name within minutes on MOC’s website, final approval from the Ministry often takes a week or longer. Applicants must also complete several other steps to start a business, including obtaining a municipality (baladia) license for their office premises and registering separately with the Ministry of Human Resources and Social Development, Chamber of Commerce, Passport Office, Tax Department, and the General Organization for Social Insurance. From start to finish, registering a business in Saudi Arabia takes about three weeks.
Saudi officials have stated their intention to attract foreign small- and medium-sized enterprises (SMEs) to the Kingdom. Under Vision 2030, Saudi Arabia aims to increase SME contribution to its GDP to 35 percent by 2030. To facilitate and promote the growth of the SME sector, the SAG established the Small and Medium Enterprises General Authority, Monsha’at, in 2015 and released a new Companies Law in 2016, which was amended in 2018 to update the language vis-à-vis Joint Stock Companies (JSC) and Limited Liability Companies (LLC). It also substantially reduced the minimum capital and number of shareholders required to form a JSC from five to two. The SAG continues to roll out initiatives to spur the development of the SME ecosystem in Saudi Arabia. As of 2019, women no longer need a male guardian to apply for a business license. In February 2021, Monsha’at launched the Bank of Small and Medium Enterprises to provide a one-stop shop for SME financing. In March 2022, Monsha’at and the King Abdulaziz City for Science and Technology inaugurated the National Business Innovation Portal, which provides guidance and resources for SMEs.
Private Saudi citizens, Saudi companies, and SAG entities hold extensive overseas investments. The SAG has transformed its Public Investment Fund (PIF), into a major international investor and sovereign wealth fund. The PIF’s outward investment projects are covered in Section 6 (Financial Sector). Saudi Aramco and SABIC are also major investors in the United States. In 2017, Saudi Aramco acquired full ownership of Motiva, the largest refinery in North America, in Port Arthur, Texas. In December 2021, the ExxonMobil-SABIC $10-billion-dollar joint venture, Gulf Coast Growth Ventures, commenced operations at its new petrochemical facility near Corpus Christi, Texas.
Serbia’s investment climate has modestly improved in recent years, driven by macroeconomic reforms, financial stability, and fiscal discipline. Attracting foreign investment is an important priority for the government. In 2020, Serbia improved four places to number 44 on the World Bank’s Doing Business index. Serbia launched a new 30-month Policy Coordination Instrument (PCI) with the International Monetary Fund (IMF) in June 2021. U.S. investors in Serbia are generally positive due to the country’s strategic location, well-educated and English-speaking labor force, competitive labor costs, generous investment incentives, and free-trade arrangements with the EU and other key markets. U.S. investors generally enjoy a level playing field. The U.S. Embassy in Belgrade often assists investors when issues arise, and Serbian leaders are responsive to investment concerns. In 2021, the United States and Serbia signed a new Investment Incentive Agreement that may facilitate opportunities in a variety of sectors. Challenges remain, particularly bureaucratic delays and corruption, as well as loss-making state-owned enterprises (SOEs), a large informal economy, and an inefficient judiciary. Political influence on the economy is also a concern; this issue was highlighted in January 2022 when the government abruptly withdrew licenses related to a major proposed lithium-mining project in response to public protests.
The Serbian government has identified economic growth and job creation as top priorities and has passed significant reforms to labor law, construction permitting, inspections, public procurement, and privatization that have helped improve the business environment. If the government delivers on promised reforms during its EU accession process, business opportunities should continue to grow. Sectors that stand to benefit include agriculture and agro-processing, solid-waste management, sewage, environmental protection, information and communications technology (ICT), renewable energy, health care, mining, and manufacturing. In April 2021, Serbia adopted its first renewable energy law, which should contribute to scaling up renewable energy capacities. Companies and officials have noted that the adoption of reforms has sometimes outpaced implementation. Digitizing certain government functions (e.g., construction permitting, tax administration, and e-signatures) has not yet brought a dramatic improvement in processing times and may not be consistently implemented. The government is slowly making progress on resolving troubled SOEs, through bankruptcy or privatization actions where possible. The government plans to privatize 64 more companies and is also slowly reducing Serbia’s bloated public-sector workforce, mainly through attrition and hiring caps.
Russia’s attack on Ukraine in February 2022 initially had a limited economic impact on Serbia, and the banking system remains well capitalized and liquid; but inflation, as well as energy and agricultural supply disruptions are likely if the war continues, despite Serbia’s refusal to join U.S. and EU sanctions on Russian entities. Public fear of price spikes and shortages initially led to sporadic panic buying at supermarkets and gas pumps, but fuel and other consumer goods have remained available. Russia continues to supply natural gas and crude oil to Serbia, but supplies are vulnerable due to heavy Russian influence in the sector and the potential effect of sanctions. Serbia’s trade with Russia is otherwise limited, but agricultural exports could suffer from contraction or loss of the Russian market due to sanctions and resulting financial and logistical barriers.
1. Openness To, and Restrictions Upon, Foreign Investment
Attracting FDI is a priority for the Serbian government. The Law on Investments extends national treatment to foreign investors and prohibits discriminatory practices against them. The Law also allows the repatriation of profits and dividends, provides guarantees against expropriation, allows waivers of customs duty for equipment imported as capital in-kind, and enables foreign investors to qualify for government incentives.
The government’s investment-promotion authority is the Development Agency of Serbia (RazvojnaagencijaSrbije – RAS: http://ras.gov.rs/). RAS offers a wide range of services, including support of direct investments, export promotion, and coordinating the implementation of investment projects. RAS serves as a one-stop-shop for both domestic and international companies. The government maintains a dialogue with businesses through associations such as the Serbian Chamber of Commerce, American Chamber of Commerce in Serbia, Foreign Investors’ Council (FIC), and Serbian Association of Managers (SAM). Serbia has attracted over $39 billion of foreign direct investment since 2007, according to RAS. Serbia’s strong FDI track-record is substantiated by international awards. The country was ranked at the top of the Financial Times’ FDI 2019 Europe list, based on the criteria of Greenfield investments relative to the size of economy (Financial Times, fDi Report 2020). Serbia was ranked first globally for the fourth consecutive year for creating the most FDI-related jobs per million inhabitants, according to “IBM Global Location Trends 2020”.
The government prompted concerns about its commitment to the protection of foreign investors’ rights in 2022 when it halted a lithium-borate mining project which promised to become the country’s largest-ever foreign direct investment. In July 2021, multinational mining firm Rio Tinto committed $2.4 billion to developing a mine and processing plant at the Jadar deposit in western Serbia, which could potentially supply up to 10% of global lithium demand. However, the project became a lightning rod for criticism by environmental activists, resulting in months of public protests targeting Rio Tinto in period prior to Serbia’s national elections in April 2022. The government reacted by first delaying additional permits and then, in January 2022, withdrawing the spatial plan and revoking existing licenses for the project’s development.
Foreign and domestic private entities have the right to establish and own businesses and to engage in all forms of remunerative activity. Serbia has no investment screening or approval mechanisms for inbound foreign investment. U.S. investors are not disadvantaged or singled out by any rules or regulations.
For some business activities, licenses are required (e.g., financial institutions must be licensed by the National Bank of Serbia prior to registration). Licensing limitations apply to both domestic and foreign companies active in finance, energy, mining, pharmaceuticals, medical devices, tobacco, arms and military equipment, road transportation, customs processing, land development, electronic communications, auditing, waste management, and production and trade of hazardous chemicals.
Serbian citizens and foreign investors enjoy full private-property ownership rights. Private entities can freely establish, acquire, and dispose of interests in business enterprises. By law, private companies compete equally with public enterprises in the market and for access to credit, supplies, licenses, and other aspects of doing business.
Food and Agriculture: Foreign citizens and foreign companies are prohibited from owning agricultural land in Serbia. However, foreign ownership restrictions on farmland do not apply to companies registered in Serbia, even if the company is foreign-owned. Unofficial estimates suggest that Serbian subsidiaries of foreign companies own some 20,000 hectares of farmland in the country. EU citizens are exempt from this ban, although they may buy up to two hectares of agricultural land under certain conditions: they must permanently reside in the municipality where the land is located for at least 10 years, practice farming on the land in question for at least three years, and own adequate agriculture machinery and equipment.
Defense: The Law on Investments adopted in 2015 ended discriminatory practices that prevented foreign companies from establishing companies in the production and trade of arms (for example, the defense industry) or in specific areas of the country. Further liberalization of investment in the defense industry continued via a new Law on the Production and Trade of Arms and Ammunition, adopted in May 2018. The law enables total foreign ownership of up to 49% in seven SOEs, collectively referred to as the “Defense Industry of Serbia,” so long as no single foreign shareholder exceeds 15% ownership. The law also cancels limitations on foreign ownership for arms and ammunition manufacturers.
Serbia has not undergone any third-party investment policy reviews in the past five years.
The following is a sample of articles that have appeared in 2021 and early 2022 providing reviews of concerns related to investment policy.
In addition, the Environmental Justice Atlas (https://ejatlas.org/) listed several investments that resulted or could result in environmental degradation in Serbia, including investments in the city of Pancevo, relocation of Vreoci village in the Kolubara coal basin, the highway that killed a 600-year-old oak tree, pollution of Veliki Backi channel, municipal waste in the city of Kraljevo, the potential impact of the planned Buk Bjela hydropower plant on Tara River canyon, and remediation of Palic lake.
According to the World Bank’s 2020 Doing Business report, seven procedures and seven days are required to establish a foreign-owned limited liability company in Serbia. This is fewer days but more procedures than the average for Europe and Central Asia. In addition to the procedures required of a domestic company, a foreign parent company establishing a subsidiary in Serbia must translate its corporate documents into Serbian.
Under the Business Registration Law, the Serbian Business Registers Agency (SBRA) oversees company registration. SBRA’s website (in Serbian) is www.apr.gov.rs/home.1435.html. All entities applying for incorporation with SBRA can use a single application form and are not required to have signatures notarized.
Companies in Serbia can open and maintain bank accounts in foreign currency, although they must also have an account in Serbian dinars (RSD). The minimum capital requirement is symbolic at RSD 100 (less than $1) for limited liability companies, rising to RSD 3 million (approximately $29,900) for a joint stock company. Some foreign companies have difficulties opening bank accounts due to a provision in the Law on Prevention of Money Laundering and Terrorist Financing that requires companies to disclose their ultimate owner. A single-window registration process enables companies that register with SBRA to obtain a tax-registration number (poreskiidentifikacionibroj – PIB) and health-insurance number with registration. In addition, companies must register employees with the Pension Fund at the Fund’s premises. Since December 2017, the Labor Law requires employers to register new employees before their first day at work; previously, the deadline was registration within 15 days of employment. These amendments represent an attempt by the government to decrease the gray labor market by empowering labor inspectors to penalize employers if they find unregistered workers.
Pursuant to the Law on Accounting, companies in Serbia are classified as micro, small, medium, and large, depending on the number of employees, operating revenues, and value of assets.
The Development Agency of Serbia supports direct investment and promotes exports. It also implements projects aimed at improving competitiveness, supporting economic development, and supporting small-and medium-sized enterprises (SMEs) and entrepreneurs. More information is available at http://ras.gov.rs.
Serbia’s business-facilitation mechanisms provide for equitable treatment of both men and women when a registering company, according to the World Bank’s 2020 Doing Business Index. The government declared 2017-2027 a “Decade of Entrepreneurship” with special programs to support women’s entrepreneurship. Since 2017, the government has provided approximately $1 million annually in grants to support women’s innovative entrepreneurship.
The Serbian government neither promotes nor restricts outward direct investment. Restrictions on short-term capital transactions (i.e., portfolio investments) were lifted in April 2018 through amendments to the Law on Foreign Exchange Operations for short-term securities issued or purchased by EU countries and international financial institutions. Prior to this, residents of Serbia were not allowed to purchase foreign short-term securities, and foreigners were not allowed to purchase short-term securities in Serbia. There are no restrictions on payments related to long-term securities.
Capital markets are not fully liberalized for individuals. Citizens of Serbia are not allowed to keep accounts abroad except in exceptional situations (such as work or study abroad) listed in the Law on Foreign Exchange Operations.
Seychelles is an archipelagic nation of 115 islands located off the eastern coast of Africa in the Indian Ocean. The majority of the country’s 99,202 inhabitants live on three most-populated islands of Mahé, Praslin, and La Digue. Seychelles gained its independence from the United Kingdom in 1976, at which time the population lived at near subsistence level. With a GDP of $1.1 billion as of 2021, Seychelles has the highest GDP per capita in Africa at $10,764. Although the World Bank has designated Seychelles as a high-income country since 2015, the country’s wealth is not evenly distributed. According to the United Nations Development Program’s Human Development Report for 2020, the richest 10 percent of Seychellois earn 40 percent of the total income. Seychelles’ main economic activities are tourism and fishing, and the country aspires to be a financial hub.
Seychelles experienced a coup d’etat in 1977, just a year after independence, which brought to power a one-party socialist government. Multiparty democracy was restored in 1993 after the adoption of a new constitution, but the United Seychelles Party (USP) continued to hold power until October 2020, when the opposition coalition Seychellois Democratic Union(Linyon Demokratik Seselwa, or LDS) won both the presidential and legislative elections. This opposition victory ushered in the first democratic transition of power in the country’s history. LDS holds 25 of the 35 assembly seats and includes four main parties: the Seychelles National Party (SNP); the Lalyans Seselwa (Seychellois Alliance); the Seychelles Party for Social Justice and Democracy (SPSD); and the Seychelles United Party (SUP). The former ruling United Seychelles Party (USP currently holds 10 seats in the National Assembly. The next presidential and legislative elections will be held in 2025.
Heavy reliance on the tourism industry makes the overall economy vulnerable to external shocks, such as the COVID-19 pandemic. In January 2021, the Central Bank of Seychelles (CBS) announced that January to November 2020 tourism revenues decreased by 78 percent. Tourism-related contributions to GDP fell from 22.3 percent in 2019 to 15.5 percent in 2020, per the National Bureau of Statistics. The CBS estimated that the economy contracted 11.3 percent in 2020 compared to 3 percent growth in 2019.
Following the reopening of borders in March 2021, tourism in Seychelles gradually picked up, with the country registering a total of 182,849 tourist arrivals for the January to December 2021 period, compared to 114,858 visitors for the same period in 2020 and 384,224 visitors in 2019. According to the IMF, real GDP grew by 6.9 percent in 2021, compared to a decline of 12.9 percent in 2020. The Seychelles National Bureau of Statistics reported a year-on-year percentage increase of 21.7 percent in real GDP for the third quarter of 2021 as compared to the same quarter in 2020. The main drivers of this increase were the accommodation industry, transport and storage, and the information and communication sector. The IMF forecasted that real GDP would increase by 7.7 percent in 2022.
In 2019, the government was on track to reduce the debt-to-GDP ratio to 50 percent by the end of 2021. According to the Ministry of Finance, however, by the end of 2020 the debt-to-GDP ratio had spiked to 99.4 percent. As was the case during the global economic crisis in 2008, the government turned to the IMF for support. In July 2021, Seychellois authorities and the IMF reached an agreement on economic and structural policies that would be supported by $107 million under the Extended Fund Facility (EFF) for the duration of 28 months. Seychellois authorities and the IMF agreed to reduce fiscal and debt vulnerabilities while promoting economic growth and protecting the environment and the most vulnerable segments of the population. Governance and transparency commitments included the completion of an audit of COVID-19 emergency spending and related procurement, and improvements in the AML/CFT regime. In November 2021, the IMF assessed that the Seychellois government was making impressive progress in implementing the IMF-supported program and restoring macroeconomic balances. Per the Ministry of Finance, by December 2021, the total government and government-guaranteed debt represented about 74 percent of GDP.
Despite the government’s attempts to diversify the economy, activity remained focused on fishing and tourism. However, Seychelles’ Exclusive Economic Zone (EEZ), which spans 1.3 million square kilometers, is a potential source of untapped oil reserves and represents potential business opportunities for U.S. companies. Seychelles also has a small but growing offshore financial sector.
There is also potential for U.S. investment in renewable energy, as Seychelles seeks to reduce its heavy dependence on imported fossil fuels while preserving its natural environment. The Seychellois government planned to reduce overall greenhouse gas emissions by 26.4 percent of the business-as-usual scenario 2030 value by undertaking reforms in its energy, refrigeration and air conditioning, transport, and waste sectors. Authorities planned to use solar and wind energy to increase the share of renewable energy production from 5 to 15 percent by 2030.
While Seychelles welcomes foreign investment though the Seychelles Investment Act, related regulations restrict foreign investment in a number of sectors where local businesses are active, including artisanal fishing, small boat charters, taxi driving, and scuba diving instruction. The country’s investment policies encourage the development of Seychelles’ natural resources, improvements in infrastructure, and increases to productivity levels, but stress that these changes must be implemented in an environmentally sound and sustainable manner. Seychelles puts a premium on maintaining its unique ecosystems and screens all potential investment projects to ensure that any economic, social, or industrial benefits will not compromise the country’s international reputation for environmental stewardship.
1. Openness To, and Restrictions Upon, Foreign Investment
Seychelles has a favorable attitude toward most foreign direct investment, though the government reserves certain types of business activities for domestic investors only. The Reserved Economic Activity Policy, enacted in April 2020, provides a detailed list of the types of business in which only Seychellois may invest and is available here: https://www.investinseychelles.com/component/edocman/reserved-economic-activities-policy,-april-2020/download. The Seychelles Investment (Economic Activities) Regulations also provide details on the limitations on foreign equity for certain types of businesses, as well as a list of economic activities in which need-based investment may be allowed by a foreigner: https://www.wto.org/english/thewto_e/acc_e/syc_e/WTACCSYC61_LEG_4.pdf. In June 2015, Seychelles implemented a moratorium on the construction of large hotels (25 rooms and above) on the country’s inner islands. This includes the three most-populated islands of Mahé, Praslin, and La Digue.
The Seychelles Investment Board (SIB) is the national gateway agency for the promotion and facilitation of investment in Seychelles. The government’s objective is to promote economic and commercial relationships to diversify the economy, as well as to sustain its tourism and fishing industries, which are currently the main drivers of economic growth. The SIB periodically organizes sector-specific meetings with investors and hosts a National Business Forum every two years to engage with the private sector.
The 2010 Seychelles Investment Act and 2014 Seychelles Investment (Economic Activities) Regulations govern foreign direct investment (FDI) in Seychelles. These documents are available at: https://www.investinseychelles.com/investors-guide/investor-resources/policies-guidelines-acts. Since the implementation of IMF reforms after the 2008 financial crisis, Seychelles has successfully attracted FDI. According to the Central Bank of Seychelles, gross FDI inflows amounted to $149 million in 2020, representing a decrease of $105 million compared to 2019. This decrease is principally due to investments that were put on hold because of the pandemic. The SIB advises foreign investors on the laws, regulations, and procedures for their activities in Seychelles.
The 2014 Seychelles Investment (Economic Activities) Regulations and the 2020 Reserved Economic Activity Policy list the economic activities in which only Seychellois can invest. This regulation is currently being converted into a list of foreign activities in which foreigners can invest to allow for increased transparency and better governance. In the 2021 budget speech, the minister of finance highlighted that the current government aims to protect Seychellois businesses and plans to review the categories in which only Seychellois can invest. This review was still ongoing as of March 2022. Seychelles also places financial limits on foreign equity in certain types of resident companies. These limits are detailed in the 2014 Seychelles Investment (Economic Activities) Regulations. The regulations also provide a list of economic activities in which need-based foreign investment may be allowed. While the SIB and the government encourage foreign investors to collaborate with a local partner, there is no formal requirement to do so.
The SIB, in cooperation with other government agencies, also assists in screening potential investment projects. For a business to operate, investors must apply for a license from the Seychelles Licensing Authority. In 2012, the government also established an Investment Appeal Panel to provide a mechanism for investors to challenge the government’s decisions regarding existing or proposed investments in Seychelles. More information is available in the 2010 Seychelles Investment Act: https://www.investinseychelles.com/component/edocman/seychelles-investment-act-2010/download?Itemid=0 .
The Seychellois government is committed to improving the business environment through public-private partnerships (PPP) to upgrade the country’s infrastructure. In March 2021, the cabinet of ministers approved the migration from the 2017 version of the harmonized system of classification to the 2022 version. The government is also currently reviewing the 1972 Companies Act.
On average, it takes eight days to obtain a certificate of incorporation and 14 days to obtain a business license.
SIB also provides post-investment support in the form of consultancy services regarding the laws, regulations, guidelines, minimum operational standards, and land acquisition. This service is provided free of charge and is available to every investor, regardless of the size or nature of the business.
The Enterprise Seychelles Agency (ESA) is responsible for providing business development services to improve the performance of micro, small, and medium enterprises in Seychelles. Services provided by ESA include business planning, training, marketing expertise, and identification of business opportunities for SMEs.
The Seychellois government does not promote or incentivize outward investment. However, it does not restrict local investors from investing abroad.
Switzerland and Liechtenstein
Switzerland is welcoming to international investors, with a positive overall investment climate. The Swiss federal government enacts laws and regulations governing corporate structure, the financial system, and immigration, and concludes international trade and investment treaties. However, Switzerland’s 26 cantons (analogous to U.S. states) and largest municipalities have significant independence to shape investment policies locally, including incentives to attract investment. This federal approach has helped the Swiss maintain long-term economic and political stability, a transparent legal system, extensive and reliable infrastructure, efficient capital markets, and an excellent quality of life for the country’s 8.6 million inhabitants. Many U.S. firms base their European or regional headquarters in Switzerland, drawn to the country’s modest corporate tax rates, productive and multilingual workforce, and well-maintained infrastructure and transportation networks. U.S. companies also choose Switzerland as a gateway to markets in Eastern Europe, the Middle East, and beyond. Furthermore, U.S. companies select Switzerland because of favorable and less restrictive labor laws compared to other European locations as well as availability of a skilled workforce.
In 2019, the World Economic Forum rated Switzerland the world’s fifth most competitive economy. This high ranking reflects the country’s sound institutional environment and high levels of technological and scientific research and development. With very few exceptions, Switzerland welcomes foreign investment, accords national treatment, and does not impose, facilitate, or allow barriers to trade. According to the OECD, Swiss public administration ranks high globally in output efficiency and enjoys the highest public confidence of any national government in the OECD. The country’s competitive economy and openness to investment brought Switzerland’s cumulative inward direct investment to USD 1.4 trillion in 2020 (latest available figures) according to the Swiss National Bank, although nearly half of this amount is invested in regional hubs or headquarters that further invest in other countries.
In order to address international criticism of tax incentives provided by Swiss cantons, the Federal Act on Tax Reform and Swiss Pension System Financing (TRAF) entered into force on January 1, 2020. TRAF obliges cantons to offer the same corporate tax rates to both Swiss and foreign companies, while allowing cantons to continue to set their own cantonal tax rates and offer incentives for corporate investment. These can be deductions or preferential tax treatment for certain types of income (such as for patents), or expenses (such as for research and development). Switzerland joined the Statement of the OECD/G20 Inclusive Framework on Base Erosion and Profit Sharing (BEPS) in July 2021. It intends to implement the BEPS effective minimum corporate tax rate of 15 percent by January 2024, after a referendum to amend the Swiss constitution.
Personal income and corporate tax rates vary widely across Switzerland’s cantons. Effective corporate tax rates ranged between 11.85 and 21.04 percent in 2021, according to KPMG. In Zurich, for example, the combined effective corporate tax rate (including municipal, cantonal, and federal taxes),was 19.7 percent in 2021. The United States and Switzerland have a bilateral tax treaty.
Key sectors that have attracted significant investments in Switzerland include information technology, precision engineering, scientific instruments, pharmaceuticals, medical technology, and machine building. Switzerland hosts a significant number of startups. A new “blockchain act” came fully into force in August 2021, which is expected to benefit Switzerland’s already sizeable ecosystem for companies in blockchain and distributed ledger technologies.
There are no “forced localization” laws designed to require foreign investors to use domestic content in goods or technology (e.g., data storage within Switzerland). Switzerland follows strict privacy laws and certain personal data may not be collected in Switzerland.
Switzerland is a highly innovative economy with strong overall intellectual property protection. Switzerland enforces intellectual property rights linked to patents and trademarks effectively, and new amendments to the country’s Copyright Act to strengthen copyright enforcement on the internet came into force in April 2020.
There are some investment restrictions in areas under state monopolies, including certain types of public transportation, telecommunications, postal services, alcohol and spirits, aerospace and defense, certain types of insurance and banking services, and the trade in salt. The Swiss agricultural sector remains protected and heavily subsidized.
Liechtenstein’s investment conditions are identical in most key aspects to those in Switzerland, due to its integration into the Swiss economy. The two countries form a customs union, and Swiss authorities are responsible for implementing import and export regulations.
Both Liechtenstein and Switzerland are members of the European Free Trade Association (EFTA, which also includes Iceland and Norway). EFTA is an intergovernmental trade organization and free trade area that operates in parallel with the European Union (EU). Liechtenstein participates in the EU single market through the European Economic Area (EEA), unlike Switzerland, which has opted for a set of bilateral agreements with the EU instead.
Liechtenstein has a stable and open economy employing 40,328 people in 2020 (latest figures available), exceeding its domestic population of 39,055 and requiring a substantial number of foreign workers. In 2020, 70.6 percent of the Liechtenstein workforce were foreigners, mainly Swiss, Austrians and Germans, most of whom commute daily to Liechtenstein. Liechtenstein was granted an exception to the EU’s Free Movement of People Agreement, enabling the country not to grant residence permits to its workers.
Liechtenstein is one of the world’s wealthiest countries. Liechtenstein’s gross domestic product per capita amounted to USD 162,558 in 2019 (latest data available). According to the Liechtenstein Statistical Yearbook, the services sector, particularly in finance, accounts for 63 percent of Liechtenstein’s jobs, followed by the manufacturing sector (particularly mechanical engineering, machine tools, precision instruments, and dental products), which employs 36 percent of the workforce. Agriculture accounts for less than one percent of the country’s employment.
Liechtenstein’s corporate tax rate, at 12.5 percent, is one of the lowest in Europe. Capital gains, inheritance, and gift taxes have been abolished. The Embassy has no recorded complaints from U.S. investors stemming from market restrictions in Liechtenstein. The United States and Liechtenstein do not have a bilateral income tax treaty.
1. Openness To, and Restrictions Upon, Foreign Investment
With the exception of its agricultural sector, foreign investment into Switzerland is generally not hampered by significant barriers, with no reported discrimination against foreign investors or foreign-owned investments. Incidents of trade discrimination do exist, for example with regards to agricultural goods such as bovine genetics products.
A Swiss government-affiliated non-profit organization, Switzerland Global Enterprise (S-GE), has a nationwide mandate to attract foreign business to Switzerland on behalf of the Swiss Confederation. S-GE promotes Switzerland as an economic hub and fosters exports, imports, and investments. Some city and cantonal governments offer access to an ombudsman, who may address a wide variety of issues involving individuals and the government, but does not focus exclusively on investment issues.
Foreign and domestic enterprises may freely establish, acquire, and dispose of interests in business enterprises in Switzerland. In August 2021, the Swiss government released a broad framework for a future foreign direct investment (FDI) screening regime. A draft bill is expected to be issued for public consultation in 2022. The bill is expected to focus on any mergers or acquisitions by foreign interests, but with a particular focus on foreign state-owned or state-related investors, regardless of the sector involved. For foreign private-sector investors, no list has been published indicating any specific sectors that would be subject to mandatory reporting and approval.
There are some investment restrictions in areas under state monopolies, including certain types of public transportation, postal services, alcohol and spirits, aerospace and defense, certain types of insurance and banking services, and the trade in salt. Restrictions (in the form of domicile requirements) also exist in air and maritime transport, hydroelectric and nuclear power, operation of oil and gas pipelines, and the transportation of explosive materials. Additionally, the following legal restrictions apply within Switzerland:
Corporate boards: A company registered in Switzerland must be represented by at least one person domiciled in Switzerland. This can be either a member of the board of directors or a member of the executive board (article 718 para. 4 of the Code of Obligations). Foreign-controlled companies often meet this requirement by nominating Swiss directors. However, the manager of a company need not be a Swiss citizen, and company shares may be controlled by foreigners. Further, since January 1, 2021, larger publicly listed companies headquartered in Switzerland must fill at least 30 percent of their board positions with women. Companies have five years to meet this requirement, otherwise they will be required to state the reasons and outline planned remediation measures in their compensation report to shareholders. The establishment of a commercial presence by persons or enterprises without legal status under Swiss law requires a cantonal establishment authorization. These requirements do not generally pose a major hardship or impediment for U.S. investors.
Hostile takeovers: Swiss corporate equity can be issued in the form of either registered shares (in the name of the holder) or bearer shares. Provided the shares are not listed on a stock exchange, Swiss companies may, in their articles of incorporation, impose certain restrictions on the transfer of registered shares to prevent hostile takeovers by foreign or domestic companies (article 685a of the Code of Obligations). Hostile takeovers can also be annulled by public companies under certain circumstances. The company must cite in its statutes significant justification (relevant to the survival, conduct, and purpose of its business) to prevent or hinder a takeover by a foreign entity. Furthermore, public corporations may limit the number of registered shares that can be held by any shareholder to a percentage of the issued registered stock. Under the public takeover provisions of the 2015 Federal Act on Financial Market Infrastructures and Market Conduct in Securities and Derivatives Trading and its 2019 amendments, a formal notification is required when an investor purchases more than three percent of a Swiss company’s shares. An “opt-out” clause is available for firms that do not want to be taken over by a hostile bidder, but such opt-outs must be approved by a super-majority of shareholders and must take place well in advance of any takeover attempt.
Banking: Those wishing to establish banking operations in Switzerland must obtain prior approval from the Swiss Financial Market Supervisory Authority (FINMA), a largely independent agency administered under the Swiss Federal Department of Finance. FINMA promotes confidence in financial markets and works to protect customers, creditors, and investors. FINMA approval of bank operations is generally granted if the following conditions are met: reciprocity on the part of the foreign state; the foreign bank’s name must not give the impression that the bank is Swiss; the bank must adhere to Swiss monetary and credit policy; and a majority of the bank’s management must have their permanent residence in Switzerland. Otherwise, foreign banks are subject to the same regulatory requirements as domestic banks.
Banks organized under Swiss law must inform FINMA before they open a branch, subsidiary, or representation abroad. Foreign or domestic investors must inform FINMA before acquiring or disposing of a qualified majority of shares of a bank organized under Swiss law. If exceptional temporary capital outflows threaten monetary policy, the Swiss National Bank, the country’s independent central bank, may require other institutions to seek approval before selling foreign bonds or other financial instruments.
Insurance: A federal ordinance requires the placement of all risks physically situated in Switzerland with companies located in the country. Therefore, it is necessary for foreign insurers wishing to provide liability coverage in Switzerland to establish a subsidiary or branch in-country.
U.S. investors have not identified any specific restrictions that create market access challenges for foreign investors.Other Investment Policy Reviews
The World Trade Organization’s (WTO) September 2017 Trade Policy Review of Switzerland and Liechtenstein includes investment information. Other reports containing elements referring to the investment climate in Switzerland include the OECD Economic Survey of January 2022.
The Swiss government-affiliated non-profit organization Switzerland Global Enterprise (SGE) has a mandate to attract foreign business to Switzerland on behalf of the Swiss Confederation. SGE promotes Switzerland as an economic hub and fosters exports, imports, and investments. Larger regional offices include the Greater Geneva-Berne Area (which covers large parts of Western Switzerland), the Greater Zurich Area, and the Basel Area. Cantonal and regional Chambers of Commerce provide similar support. Each canton has a business promotion office dedicated to helping facilitate real estate location, beneficial tax arrangements, and employee recruitment plans. These regional and cantonal investment promotion agencies do not require a minimum investment or job-creation threshold in order to provide assistance. However, these offices generally focus resources on attracting medium-sized or larger entities with the potential to create higher numbers of jobs in their region.
The Swiss government’s online portal (“easygov”) is Switzerland’s online registration website and includes links to the main local interlocutors for business related questions: https://www.easygov.swiss/easygov/#/
Switzerland has a dual system for granting work permits and allowing foreigners to create their own companies in Switzerland. Employees who are citizens of the EU/EFTA area can benefit from the EU Free Movement of Persons Agreement. Permits for people from countries outside the EU/EFTA area, such as U.S. citizens, are restricted to highly qualified personnel. U.S. citizens who want to become self-employed in Switzerland must meet Swiss labor market requirements. The criteria for admittance, which usually do not create unusual hindrances for U.S. persons, are contained in:
Setting up a company in Switzerland requires registration at the relevant cantonal Commercial Registry. The cost for registering a company can range considerably, from a few hundred Swiss francs in the case of sole proprietorships or joint partnerships, to higher registration costs for limited liability companies or corporations. A list of Swiss federal fees generally applied for small and medium-sized companies is available at https://www.kmu.admin.ch/kmu/en/home/concrete-know-how/setting-up-sme/starting-business/commercial-register%20/registration-costs.html. However, additional cantonal fees can add significantly to total registration costs, and Public Notary fees may also be necessary, which can also vary considerably by canton.
Other steps/procedures for registration include: 1) placing paid-in capital in an escrow account with a bank; 2) drafting articles of association in the presence of a notary public; 3) filing a deed certifying the articles of association with the local commercial register to obtain a legal entity registration; 4) paying the stamp tax at a post office or bank after receiving an assessment by mail; 5) registering for VAT; and 6) enrolling employees in the social insurance system (federal and cantonal authorities).
While Switzerland does not explicitly promote or incentivize outward investment, Switzerland’s export promotion agency Switzerland Global Enterprise facilitates overseas market entry for Swiss companies through its Swiss Business Hubs in several countries, including the United States. Switzerland does not restrict domestic investors from investing abroad.
Taiwan is an important market for regional and global trade and investment. Taiwan is one of the world’s top 25 economies in terms of gross domestic product (GDP) and serves as the United States’ 8th largest trading partner according to 2021 statistics. An export-dependent economy of 23.5 million people with a highly skilled workforce, Taiwan is at the center of regional high-technology supply chains due to advanced capabilities to develop products for industries such as semiconductors, 5G telecommunications, AI, and the Internet of Things (IoT). Taiwan is also a central shipping hub in East Asia. The Taiwan authorities continue to actively launch initiatives to partner with foreign investors to foster resilient, diverse supply chains in the Indo-Pacific.
Taiwan welcomes and actively courts foreign direct investment (FDI) and partnerships with American and other foreign firms. Taiwan President Tsai Ing-wen’s administration seeks to promote economic growth by increasing domestic investment and FDI. Taiwan authorities offer investment incentives and aim to leverage Taiwan’s strengths in advanced technology, manufacturing, and R&D. Some Taiwan and foreign investors regard Taiwan as a strategic location to insulate themselves against potential supply chain disruptions caused by regional trade frictions and the COVID-19 pandemic.
In January 2019, the Taiwan government launched three investment promotion programs, including a reshoring initiative to lure Taiwanese companies to shift production back to Taiwan from the People’s Republic of China (PRC). The Taiwan government extended these investment incentives to the end of 2024 to support its domestic economy and counter the adverse impact from COVID-19. Over the past few years, Taiwan has witnessed increases in greenfield investments by foreign firms, including from companies trying to reduce their over-reliance on PRC supply chains and from firms in the offshore wind sector.
Taiwan’s finance, wholesale and retail, and electronics sectors remain top targets of inward FDI. Taiwan attracts a wide range of U.S. investors, including in advanced technology, digital, traditional manufacturing, and services sectors. The United States is Taiwan’s second-largest single source of FDI after the Netherlands, through which some U.S. firms also choose to invest. In 2020, according to U.S. Department of Commerce data, the total stock of U.S. FDI in Taiwan reached US $31.5 billion. U.S. services exports to Taiwan totaled US $10.2 billion in 2021. Leading services exports from the United States to Taiwan were intellectual property, transport, and financial services.
Structural impediments in Taiwan’s investment environment include the following: excessive or inconsistent regulation; market influence exerted by domestic and state-owned enterprises (SOEs) in the utilities, energy, postal, transportation, financial, and real estate sectors; foreign ownership limits in sectors deemed sensitive; and regulatory scrutiny over the possible participation of PRC-sourced capital. Taiwan has among the lowest levels of private equity investment in Asia, although private equity firms are increasingly pursuing opportunities in Taiwan’s market. Foreign private equity firms have expressed concern over the lack of transparency and predictability in the investment approvals and exit processes and regulators’ reliance on administrative discretion when rejecting certain transactions. Private equity entry and exit challenges are especially apparent in sectors that are deemed sensitive for national security reasons, but still permit foreign ownership.
Taiwan has strived to enact relevant regulation to fight climate change. Taiwan set a goal for renewable energy sources to provide 27 gigawatts (GW) of capacity by 2025. Taiwan aims to phase out nuclear power by 2025 and derive 20 percent of its power supply from renewable sources (mainly solar and offshore wind installation). Taiwan industry continues to question the feasibility for Taiwan to phase out nuclear power by 2025 and increase the use of liquified natural gas (LNG) and renewables.
Labor relations in Taiwan are generally harmonious. The current Tsai administration made improving labor welfare one of its core priorities.
1. Openness To, and Restrictions Upon, Foreign Investment
Promoting inward FDI has been an important policy goal for the Taiwan authorities because of Taiwan’s self-imposed public debt ceiling that limits public spending, and its low levels of private investment. Despite the global economic recession caused by the COVID-19 pandemic, Taiwan’s domestic private investment registered 19 percent y-o-y growth in 2021 due to continuous reshoring of investment by overseas Taiwan companies since late 2018. Taiwan has pursued various measures to attract FDI from both foreign companies and Taiwan firms operating overseas. A network of science and industrial parks, technology industrial zones, and free trade zones aims to expand trade and investment opportunities by granting tax incentives, tariff exemptions, low-interest loans, and other favorable terms. Incentives tend to be more prevalent for investment in the manufacturing sector. In January 2019, Taiwan launched a reshoring incentive program to attract Taiwan firms operating in the PRC to return to Taiwan.
Thus far, Taiwan has received favorable responses from Information Communication Technology (ICT) manufacturers. The Ministry of Economic Affairs (MOEA) Department of Investment Services (DOIS) Invest in Taiwan Center serves as Taiwan’s investment promotion agency and provides streamlined procedures for foreign investors, including single-window and employee recruitment services. For investments over US $17.6 million (New Taiwan Dollar NTD 500 million), Taiwan authorities will assign a dedicated project manager for the investment process. DOIS services are available to all foreign investors. The Center’s website contains an online investment aid system (https://investtaiwan.nat.gov.tw/smartIndexPage?lang=eng ) to help investors retrieve all the required application forms based on various investment criteria and types.
Taiwan also passed the Foreign Talent Retention Act to attract foreign professionals using relaxed visa and work permit issuance process and tax incentives. As of December 2021, 3,927 foreigners received the Taiwan Employment Gold Card, a government initiative to attract highly skilled foreign talent to Taiwan (https://goldcard.nat.gov.tw/en/ ). The Taiwan Employment Gold Card also includes a residency permit for the applicant and his/her immediate relatives (parents, spouse, children), a work permit for three years, an alien resident certificate, and a re-entry permit. The Employment Gold Card policy helped alleviate recruiting companies’ liability in work permit applications and associated administrative expenditures. The MOEA is also in the process of drafting a proposed amendment to the Statute for Investment by Foreign Nationals, which would replace the existing pre-approval investment review process with an ex-post reporting mechanism and strengthen investment screening in industries of national security concern.
Taiwan maintains a negative list of industries closed to foreign investment in sectors related to national security and environmental protection, including public utilities, power distribution, natural gas, postal service, telecommunications, mass media, and air and sea transportation. These sectors constitute less than one percent of the production value of Taiwan’s manufacturing sector and less than five percent of the services sector. Railway transport, freight transport by small trucks, pesticide manufactures, real estate development, brokerage, leasing, and trading are open to foreign investment. The negative list of investment sectors, last updated in February 2018, is available at http://www.moeaic.gov.tw/download-file.jsp?do=BP&id=ZYi4SMROrBA=.
The Taiwan authorities actively promote a “5+2 Innovative Industries” and six strategic industries development program to accelerate industrial transformation. Target industries under this campaign include smart machinery, biomedicine, IoT, green energy, national defense, advanced agriculture, circular economy, and semiconductors. The Taiwan authorities also offer subsidies for the research and development expenses for partnerships with foreign firms. Taiwan’s central authorities take a cautious approach to approving foreign investment in innovative industries that utilize new and potentially disruptive business models, such as the sharing economy.
Taiwan’s authorities regularly meet with foreign business groups. For example, Taiwan’s National Development Council (NDC) meets with the American Chamber of Commerce in Taiwan (AmCham Taiwan) to discuss AmCham Taiwan’s annual White Paper. Some U.S. investors have expressed concerns about a lack of transparency, consistency, and predictability in the investment review process, particularly regarding private equity investment transactions. U.S. investors claim to experience lengthy review periods for private equity transactions that involve redundant inquiries from the MOEA Investment Commission and its constituent agencies. Some U.S. investors report that public hearings convened by Taiwan regulatory agencies about specific private equity transactions appear to promote opposition to private equity rather than foster transparent dialogue. Private equity transactions and other previously approved investments have, in the past, attracted Legislative Yuan scrutiny, including committee-level resolutions that opposed specific transactions.
Foreign entities are entitled to establish and own business enterprises and engage in all forms of remunerative activity, similar with local firms, unless otherwise specified in relevant regulations. Taiwan sets foreign ownership limits in certain industries, such as a 60 percent limit on foreign ownership of wireless and fixed-line telecommunications firms, including a direct foreign investment limit of 49 percent in that sector. State-controlled Chunghwa Telecom, which controls 92 percent of the fixed-line telecom market, maintains a 49 percent limit on direct foreign investment and a 60 percent limit on overall foreign investment, including indirect ownership. There is a 20 percent limit on foreign direct investment in cable television broadcasting services, but foreign ownership of up to 60 percent is allowed through indirect investment via a Taiwan entity. However, in practice, this kind of investment is subject to heightened regulatory and political scrutiny. In addition, there is a foreign ownership limit of 49.99 percent for satellite television broadcasting services and piped distribution of natural gas and a 49 percent limit for high-speed rail services. These foreign ownership limits also apply to all public switched telecommunications resources (“PSTN”) that use telecommunications resources. The foreign ownership cap on airport ground services firms, air-catering companies, aviation transportation businesses (airlines), and general aviation businesses (commercial helicopters and business jet planes) is less than 50 percent, with a separate limit of 25 percent for any single foreign investor. Foreign investment in Taiwan-flagged merchant shipping services is limited to 50 percent for Taiwan shipping companies operating international routes.
Taiwan has opened more than two-thirds of its aggregate industrial categories to PRC investors, with 97 percent of manufacturing sub-sectors and 51 percent of construction and services sub-sectors open to PRC capital. PRC nationals are prohibited from serving as chief executive officer in a Taiwan company, although a PRC board member may retain management control rights. The Taiwan authorities regard PRC investment in media or advanced technology sectors, such as semiconductors, as a national security concern. The Cross-Strait Agreement on Trade in Services and the Cross-Strait Agreement on Avoidance of Double Taxation and Enhancement of Tax Cooperation were signed in 2013 and 2015, respectively, but have not taken effect. Negotiations on the Agreement on Trade in Goods with the PRC were halted in 2016.
Taiwan’s Investment Commission screens applications for FDI, mergers, and acquisitions. Taiwan authorities claim that 95 percent of investments not subject to the negative list and, with capital less than US $17.6 million (NTD 500 million), obtain approval at the Investment Commission staff level within two to four days. Investments between US $17.6 million (NTD 500 million) and US $53 million (NTD 1.5 billion) in capital take three to five days to screen. The approval authority for these types of transactions rests with the Investment Commission’s executive secretary. For investment in restricted industries, in cases where the investment amount or capital increase exceeds NTD 1.5 billion, or for mergers, acquisitions, and spin-offs, screening takes 10 to 20 days and includes review by relevant supervisory ministries. Final approval rests with the Investment Commission’s executive secretary. Screening for foreign investments involving cross-border mergers and acquisitions or other special situations takes 20-30 days, as these transactions require interagency review and deliberation at the Investment Commission’s monthly meeting.
The investment screening process provides Taiwan’s regulatory agencies opportunities to attach conditions to investments to mitigate concerns about ownership, structure, or other factors. Screening may also include an assessment of the impact of proposed investments on a sector’s competitive landscape and the rights of local shareholders and employees. Screening is also used to detect investments with unclear funding sources, especially PRC-sourced capital. To ensure monitoring of PRC-sourced investment in line with Taiwan law and public sentiment, Taiwan’s National Security Bureau participates in every investment review meeting regardless of the size of the investment. Blocked deals in recent years reflected the authorities’ increased focus on national security concerns beyond the negative-list industries. Taiwan authorities also review proposals to prevent illegal PRC investment via third-areas or through dummy accounts.
Foreign investors must submit an application form containing their funding plan, business operation plan, entity registration, and documents certifying the inward remittance of investment funds. Applicants and their agents must provide a signed declaration certifying that any PRC investors in a proposed transaction do not hold more than a 30 percent ownership stake and do not retain managerial control of the company. When an investment fails review, an investor may re-apply when the reason for the denial no longer exists. Foreign investors may also petition the regulatory agency that denied approval or may appeal to the Administrative Court.
Taiwan has been a member of the World Trade Organization (WTO) since 2002. In September 2018, the WTO conducted the fourth review of Taiwan’s trade policies and practices. Related reports and documents are available at: https://www.wto.org/english/tratop_e/tpr_e/tp477_crc_e.htm
MOEA took steps to improve the business registration process, including finalizing amendments to the Company Act to make business registration more efficient. Since 2014, Taiwan shortened the application review period for company registration to two days. Applications for a taxpayer identification number, labor insurance (for companies with five or more employees), national health insurance, and pension plans can be processed at the same time for approval within five to seven business days. Since January 2017, MOEA’s Central Region Office processes foreign investors’ company registration applications.
In recent years, the Taiwan authorities revised rules to improve the business climate for startups. To develop Taiwan into a startup hub in Asia, Taiwan authorities launched an entrepreneur visa program to permit foreign entrepreneurs to remain in Taiwan if they meet one of the following requirements: raise at least US $70,400 (NTD 2 million) in funding, hold patent rights or a professional skills certificate; operate in an incubator or innovation park in Taiwan; win prominent startup or design competitions, or receive grants from the Taiwan authorities. Since in 2019, startup entrepreneurs – including foreign investors – can use intellectual property (IP) as collateral to obtain bank loans. In July 2021, the Taiwan authorities further introduced additional tax and social security measures to attract foreign professionals to Taiwan.
Further details about Taiwan’s business registration process can be found in Invest Taiwan Center’s business one-stop service request website at https://onestop.nat.gov.tw/oss/web/Show/engWorkFlowEn.do. The Investment Commission website lists the rules, regulations, and required forms for seeking foreign investment approval: https://www.moeaic.gov.tw/businessPub.view?lang=en&op_id_one=1
Approval from the Investment Commission is required for foreign investors before proceeding with business registration. After receiving an approval letter from the Investment Commission, an investor can apply for capital verification and then file an application for a corporate name and proceed with business registration. The new company must register with the Bureau of Labor Insurance and the Bureau of National Health Insurance before recruiting employees.
For the manufacturing, construction, and mining industries, the MOEA defines small and medium-sized enterprises (SMEs) as companies with less than US $2.8 million (NTD 80 million) of paid-in capital and fewer than 200 employees. For all other industries, SMEs are defined as having less than US $3.5 million (NTD 100 million) of paid-in capital and fewer than 100 employees. Taiwan runs a Small and Medium Enterprise Credit Guarantee Fund to help SMEs obtain financing from local banks. Firms established by foreigners in Taiwan may receive a guarantee from the Fund. Taiwan’s National Development Fund has set aside NTD 10 billion (US $350 million) to invest in SMEs.
The PRC used to be the top destination for Taiwan companies’ overseas investment given the low cost of factors of production there, such as wages and land. Since rising trade tensions between the United States and the PRC in 2018, the Taiwan authorities have intensified their efforts to assist Taiwan firms to diversify production by either relocating back to Taiwan or to other markets, including in Southeast Asia. The Tsai administration launched the New Southbound Policy to enhance Taiwan’s economic engagement with 18 countries in Southeast Asia, South Asia, and the Pacific. In 2021, Taiwan companies’ investment in the 18 countries totaled US $5.8 billion. The Taiwan authorities seek investment agreements with these countries to incentivize Taiwan firms’ investment in those markets. Invest Taiwan Center provides consultation and loan guarantee services to Taiwan firms operating overseas. Taiwan’s financial regulators have urged Taiwan banks to expand their presence in Southeast Asian economies either by setting up branches or acquiring subsidiaries.
According to the Act Governing Relations between the People of the Taiwan Area and the Mainland Area, all Taiwan individuals, juridical persons, organizations, or other institutions must obtain approval from the Investment Commission to invest in or have any technology-oriented cooperation with the PRC. The Taiwan authorities maintain a negative list for Taiwan firms’ investment and have special rules governing technology cooperation in the PRC. The Taiwan authorities, Taiwan companies, and foreign investors in Taiwan are increasingly vigilant about the threat of IP theft and illegal talent poaching in key strategic industries, such as the semiconductor industry.
Trinidad and Tobago
Trinidad and Tobago (TT) is a high-income developing country with a gross domestic product (GDP) per capita of $15,425 and an annual GDP of $21.6 billion (2020). It has the largest economy in the English-speaking Caribbean and is the third most populous country in the region with 1.4 million inhabitants. The International Monetary Fund predicts GDP for 2022 will increase by 5.4 percent as the economy rebounds following the economic impact of COVID-19 mitigation. TT’s investment climate is generally open and most investment barriers have been eliminated, but stifling bureaucracy and opaque procedures remain.
Energy exploration and production drive TT’s economy. This sector has historically attracted the most foreign direct investment. The energy sector usually accounts for approximately half of GDP and 80 percent of export earnings. Petrochemicals and steel are other sectors accounting for significant foreign investment. Since the economy is tethered to the energy sector, it is particularly vulnerable to fluctuating prices for hydrocarbons and petrochemicals.
Since the last ICS, TT has rolled back several pandemic-related measures that affected the investment climate including reopening borders to air travel; ending the state of emergency that only permitted essential services to operate; reopening the hospitality and entertainment sector to vaccinated individuals; and reopening schools.
TT is working towards implementing its nationally determined contribution under the Paris Climate Agreement through 15 percent reduction is emissions from power generation (including by the ongoing construction of utility-scale renewable power generation plants), public transportation (through the conversion to compressed natural gas as a fuel, and development of an e-mobility policy) and industry by 2030. The TT government (GoTT) is developing policies on carbon capture and storage, but this technology has been predominantly used to inject carbon into hydrocarbon reservoirs for greater output.
There are no significant risks to responsibly doing business in areas such as labor and human rights.
1. Openness To, and Restrictions Upon, Foreign Investment
The GoTT seeks foreign direct investment and has traditionally welcomed U.S. investors.
The U.S. Mission is not aware of laws or practices that discriminate against foreign investors, but some have seen the decision-making process for tenders and the subsequent awarding of contracts turn opaque without warning, especially when their interests compete with those of well-connected local firms.
InvesTT is the country’s investment promotion agency that assists investors through the process of setting up a non-energy business and provides aftercare services once established. Specifically, it provides market information, offers advice on accessing investment incentives, assists with regulatory and registry issues, and provides property and location services. It also assists with general problem solving and advocacy to the government.
While TT prioritizes investment retention, the U.S. Mission is not aware of a formal, ongoing dialogue with investors, either through an Ombudsman or formal business roundtable.
Foreign and domestic private entities have the right to establish and own business enterprises and engage in all forms of remunerative activity.
There are no limits on foreign ownership. Under the Foreign Investment Act of 1990, a foreign investor is permitted to own 100 percent of the share capital in a private company. A license is required to own more than a 30 percent of a public company.
The U.S. Mission is not aware of any sector-specific restrictions or limitations applied to U.S. investors.
TT maintains an investment screening mechanism for foreign investment related to specific projects that have been submitted for the purpose of accessing sector-specific incentives, such as for those offered in the tourism industry. Information on criteria to access the development incentives are listed in various legislative acts such as the Tourism Development Act of 2001.
The Business & Human Rights Resource Centre noted concerns about the expansion of Chinese investment in TT in 2019.
The GoTT’s business facilitation efforts focus primarily on investor services (helping deal with rules and procedures) through its investment promotion agency and is attempting to make the rules more transparent and predictable overall. However, more work needs to be done to achieve efficient administrative procedures and dispute resolution. TT ranks 158th of 190 countries for registering property, 174th for enforcing contracts, and 160th for payment of taxes in the World Bank’s Doing Business 2020 report, representing a deterioration of indicators that reflect a difficulty of doing business.
The business registration website is: www.ttbizlink.gov.tt. In 2022, the Global Enterprise Registration Network (GER) gives the TT business registration website an above-average score of 8.5 out of 10 for its single electronic window, and a below average score of 4 out of 10 for providing information on how to register a business (http://www.TTconnect.gov.tt). While the process is clear, the inability to make online payments and submit online certificate requests are the two primary reasons for the low score. A feedback mechanism allowing users to communicate with authorities is a strength of the TT business registration website. Foreign companies can use the website and business registration requires completion of seven procedures over a period of 10 days. The agencies with which a company must typically register include:
Companies Registry, Ministry of Legal Affairs
Board of Inland Revenue
National Insurance Board; and
Value Added Tax (VAT Office, Board of Inland Revenue)
The GoTT does not promote or incentivize outward investment. The GoTT does not restrict domestic investors from investing abroad.
In 2021, Tunisia’s economy continued to be heavily impacted by the COVID-19 pandemic. Despite a loosening of containment measures from those in place in 2020, Tunisia’s GDP grew by 3.1 percent in 2021 after a record contraction of 8.8 percent in 2020. The country still faces high unemployment, high inflation, and rising levels of public debt, in addition to a shortage of staple food products and low tourism revenues due to Russia’s further invasion of Ukraine.
On July 25, citing widespread protests and political paralysis, President Saied took “exceptional measures” under Article 80 of the constitution to dismiss Prime Minister Hichem Mechichi, freeze parliament’s activities for 30 days, and lift the immunity of members of parliament. On August 23, Saied announced an indefinite extension of the “exceptional measures” period and on September 22, he issued a decree granting the president certain executive, legislative, and judiciary powers and authority to rule by decree, but allowed continued implementation of the preamble and chapters one and two, which guarantee rights and freedoms. Civil society organizations and multiple political parties raised concern that through these decrees President Saied granted himself unprecedented decision-making powers, without checks and balances and for an unlimited period. On September 29, Saied named Najla Bouden Romdhane as prime minister, and on October 11, she formed a government. On December 13, Saied announced a timeline for constitutional reforms including public consultations and the establishment of a committee to revise the constitution and electoral laws, leading to a national referendum in July 2022. Parliamentary elections would follow in December 2022. On March 30, 2022, the President issued a decree formally dissolving Parliament.
Before the pandemic and President Saied’s decisions on July 25, successive governments had advanced some much-needed structural reforms to improve Tunisia’s business climate, including an improved bankruptcy law, investment code, an initial “negative list,” a law enabling public-private partnerships, and a supplemental law designed to improve the investment climate. The Government of Tunisia (GOT) encouraged entrepreneurship through the passage of the Start-Up Act in June 2018. The GOT passed a new budget law in January 2019 that ensures greater budgetary transparency and makes the public aware of government investment projects over a three-year period. These reforms are intended to help Tunisia attract both foreign and domestic investment.
Nevertheless, substantial bureaucratic barriers to investment remain and additional economic reforms have yet to be achieved. State-owned enterprises play a large role in Tunisia’s economy, and some sectors are not open to foreign investment. The informal sector, estimated at 40 to 60 percent of the overall economy, remains problematic, as legitimate businesses are forced to compete with smuggled goods. Due to a growing budget deficit, the GOT sought international lending support in 2021. In February 2022, high-level discussions on economic reforms and government spending cuts were held between the GOT and the IMF, in the hopes of reaching an agreement on an IMF lending package. Such a program would likely include structural reforms.
Tunisia’s strengths include its proximity to Europe, sub-Saharan Africa, and the Middle East; preferential or free-trade agreements with the EU and much of Africa; an educated workforce; and a strong interest in attracting foreign direct investment (FDI). Sectors such as agribusiness, aerospace, infrastructure, renewable energy (notably green hydrogen), telecommunication technologies, and services remain promising. The decline in the value of the dinar over recent years has strengthened investment and export activity in the electronic component manufacturing and textile sectors.
Since 2011, the United States has provided more than $500 million in economic growth-related assistance, in addition to loan guarantees in 2012, 2014, and 2016 that enabled the GOT to borrow nearly $1.5 billion at low interest.
1. Openness To, and Restrictions Upon, Foreign Investment
The GOT has made efforts to improve the business climate and attract FDI. The GOT prioritizes attracting and retaining investment, particularly in the underdeveloped interior regions, and reducing unemployment by providing tax breaks, subsidizing social security fee contributions for new hires, and offering investment bonuses. However, government policies have not always yielded the anticipated flow of foreign investment in the country, and political developments have had a mitigating effect. More than 3,700 foreign companies currently operate in Tunisia, and the government has historically encouraged export-oriented FDI in key sectors such as call centers, electronics, aerospace and aeronautics, automotive parts, textile and apparel, leather and shoes, agro-food, and other light manufacturing. Through the first half of 2021, the sectors that attracted the most FDI were electrical and electronic (31.3 percent), energy (29 percent), services (10 percent), mechanical (8.2 percent), and agro-food (7.4 percent). Inadequate infrastructure in the interior regions results in the concentration of foreign investment in the capital city of Tunis and its suburbs (54.7 percent), the northern coastal region (20 percent), the eastern coastal region (18.8 percent), and the northwest region (5.7 percent). Internal western and southern regions attracted only 0.8 percent of foreign investment despite special tax incentives for those regions.
The Tunisian Parliament passed an Investment Law (#2016-71) in September 2016 that went into effect April 1, 2017 to encourage the responsible regulation of investments. The law provided for the creation of three major institutions:
The High Investment Council, whose mission is to implement legislative reforms set out in the investment law and decide on incentives for projects of national importance (defined as investment projects of more than 50 million dinars ($17.9 million) and 500 jobs).
The Tunisian Investment Authority, whose mission is to manage investment projects of more than 15 million dinars ($5.4 million) and up to 50 million dinars ($17.9 million). Investment projects of less than 15 million dinars ($5.4 million) are managed by the Agency for Promotion of Industry and Innovation (APII).
The Tunisian Investment Fund, which funds foreign investment incentive packages.
These institutions were all launched in 2017. However, the Foreign Investment Promotion Agency (FIPA) continues to be Tunisia’s principal agency to promote foreign investment. FIPA is a one-stop shop for foreign investors. It provides information on investment opportunities, advice on the appropriate conditions for success, assistance and support during the creation and implementation of the project, and contact facilitation and advocacy with other government authorities.
Under the 2016 Investment Law (article 7), foreign investors have the same rights and obligations as Tunisian investors. Tunisia encourages dialogue with investors through FIPA offices throughout the country.
Foreign investment is classified into two categories:
“Offshore” investment is defined as commercial entities in which foreign capital accounts for at least 66 percent of equity, and at least 70 percent of the production is destined for the export market. However, investments in some sectors can be classified as “offshore” with lower foreign equity shares. Foreign equity in the agricultural sector, for example, cannot exceed 66 percent and foreign investors cannot directly own agricultural land, but agricultural investments can still be classified as “offshore” if they meet the export threshold.
“Onshore” investment caps foreign equity participation at a maximum of 49 percent in most non-industrial projects. “Onshore” industrial investment may have 100 percent foreign equity, subject to government approval.
Pursuant to the 2016 Investment Law (article 4), a list of sectors outlining which investment categories are subject to government authorization (the “negative list”) was set by decree no. 417 of May 11, 2018. The sectors include natural resources; construction materials; land, sea and air transport; banking, finance, and insurance; hazardous and polluting industries; health; education; and telecommunications. The decree specified the deadline to respond to authorization requests for most government agencies and fixed a deadline of 60 days for all other government decision-making bodies not specifically mentioned in the decree. The decree went into effect on July 1, 2018.
In June 2021, the government announced the elimination of government authorization requirements for 27 business activities in various sectors, about 10 percent of the total authorization categories. The change allows foreign and local investors to open businesses under conditions detailed in books of specifications without waiting for a government license. The action is meant to revive an economy heavily impacted by the COVID-19 pandemic and boost investment in sectors such as tourism, transportation, finance, and renewable energy.
For example, government authorizations are no longer required for business ventures such as the opening of shopping malls and supermarkets, operation of certain aircraft for tourism and leisure activities, management of financial portfolios by non-resident companies, organization of sporting events, cement manufacturing, self-production of electricity from renewable energies under 1 megawatt, import and marketing of films, sale and distribution of tobacco and alcohol, and import of used clothes. While the government decree has yet to be published, the elimination of authorization categories will likely improve Tunisia’s investment climate.
In May 2019, the Tunisian Parliament adopted law 2019-47, a cross-cutting law that impacts legislation across all sectors. The law is designed to improve the country’s business climate. The law simplified the process of creating a business, permitted new methods of finance, improved regulations for corporate governance, and provided the private sector the right to operate a project under the framework of a public-private partnership (PPP).
The Agency for Promotion of Industry and Innovation (APII) and the Tunisia Investment Authority (TIA) are the focal point for business registration. Online project declaration for industry or service sector projects for both domestic and foreign investment is available at: www.tunisieindustrie.nat.tn/en/doc.asp?mcat=16&mrub=122.
The 2019 new online TIA platform allows potential investors to electronically declare the creation, extension, and renewal of all types of investment projects. The platform also allows investors to incorporate new businesses, request special permits, and apply for investment and tax incentives. https://www.tia.gov.tn/.
APII has attempted to simplify the business registration process by creating a one-stop shop that offers registration of legal papers with the tax office, court clerk, official Tunisian gazette, and customs. This one-stop shop also houses consultants from the Investment Promotion Agency, Ministry of Employment, National Social Security Authority (CNSS), postal service, Ministry of Interior, and the Ministry of Trade and Export Development. Registration may face delays as some agencies may have longer internal processes. Prior to registration, a business must first initiate an online declaration of intent, to which APII provides a notification of receipt within 24 hours.
For agriculture and fisheries, business registration information can be found on the Agricultural Investment Promotion Agency’s (APIA) website: www.apia.com.tn. In February 2022, APIA announced the establishment of a 100% online investment declaration service for Tunisian and foreign investors in agricultural projects. The online service provides investors with an electronic investment declaration certificate (in PDF format) authenticated by a QR code. The service is accessible through “Espace Promoteur” (apia.com.tn)
The GOT does not incentivize outward investment, and capital transfer abroad is tightly controlled by the Central Bank.
United Arab Emirates
The Government of the United Arab Emirates (UAE) is urgently pursuing economic diversification and regulatory reforms to promote private sector development; reduce dependence on hydrocarbon revenues; and build a knowledge economy buttressed by advanced technology and clean energy.
The UAE serves as a major trade and investment hub for the Middle East and North Africa, as well as increasingly for South Asia, Central Asia, and Sub-Saharan Africa. Multinational companies cite the UAE’s political and economic stability, excellent infrastructure, developed capital markets, and a perceived absence of systemic corruption as factors contributing to the UAE’s attractiveness to foreign investors. The UAE seeks to attract foreign direct investment (FDI) by i) not charging taxes or making restrictions on the repatriation of capital; ii) allowing relatively free movement into the country of labor and low barriers to entry (effective tariffs are five percent for most goods); and iii) offering FDI incentives.
The UAE in 2021 launched broad economic and social reforms to strengthen pandemic recovery, respond to growing regional economic competition, and commemorate its 50-year founding anniversary with a series of reforms.
The UAE and the country’s seven constituent emirates have passed numerous initiatives, laws, and regulations to attract more foreign investment. Recent measures include visa reforms to attract and retain expatriate professionals, a drive to create new international economic partnerships, major investments in critical industries, and policies to encourage Emirati entrepreneurship and labor force participation. These economic development projects offer both challenges and opportunities for foreign investors in the coming years. In 2022, UAE changed its work week for government bodies from Sunday to Thursday to Monday to Thursday with a half day on Friday in order to more closely align with world markets.
Additionally, the UAE approved a comprehensive reform of the national legal system, which, among other aims, developed the legal frameworks around data privacy, investment, regulation and legal protection of industrial property, copyrights, trademarks, and residency. The first-ever federal data protection law regulates how personal data are processed across the UAE, with separate laws on government, financial, and healthcare data to follow. The new Commercial Companies law removes restrictions to facilitate further mergers and acquisition activity. The federal trademark law further expands the scope of legal protection for companies’ trademarks, products, innovations, and trade names by protecting non-traditional patterns of trademarks. These legal reforms are broadly considered to be positive by U.S. companies, but investors will need to carefully consider how these broad changes affect their operations.
The Ministry of Finance announced in January 2022 that the UAE will introduce a federal corporate tax on business profits starting in 2023 as part of its membership in the OECD Inclusive Framework on Base Erosion and Profit Shifting. Companies await further guidance on how the new tax policy will be implemented, but it is expected to have a broad and significant impact on companies operating both inside in the UAE and “offshore” in the country’s many economic free zones.
The UAE announced in October 2021 that it would pursue net zero greenhouse gas emissions by 2050, to include an investment of $163 billion in renewable energy.
1. Openness To, and Restrictions Upon, Foreign Investment
The UAE actively seeks FDI, citing it as a key part of long-term economic development plans. In 2021, as part of the series of reforms to commemorate the UAE’s 50th anniversary, the government announced a series of programs to with the goal of attracting $150 billion worth foreign investment in the coming decade. The COVID-19 pandemic accelerated government efforts to attract foreign investment to promote economic growth.
Under Federal Decree-Law No (26) of 2020, the “Commercial Companies Law,” onshore UAE companies are no longer required to have a UAE national or a Gulf Cooperation Council (GCC) national as a majority shareholder. UAE joint stock companies no longer must be chaired by an Emirati citizen or have Emirati citizens comprise the majority of its board. Local branches of foreign companies no longer must have a UAE national or a UAE-owned company act as an agent. In March 2021, an intra-emirate committee recommended a list of strategically important sectors requiring additional licensing restrictions. The Abu Dhabi Department of Economic Development (ADDED) published in May 2021 a list of 1,105 commercial and industrial business activities that are eligible for 100 percent foreign ownership, effective June 2021. In August 2021, ADDED introduced the “Reduction Program” to facilitate investment and ease of doing business in Abu Dhabi emirate by reducing requirements and cutting fees. As part of the program, Abu Dhabi cut business startup fees by 94 percent in 2021. In June 2021, the Dubai government published guidelines for full ownership procedures for more than 1,000 commercial and industrial activities.
Federal Law No (32) of 2021 introduced two new types of companies: the special purpose acquisition company, or “SPAC,” and the special purpose vehicle, or “SPV.” The law also amended certain provisions related to Limited Liability Companies and public joint stock companies and introduced a regime to allow for the division of Joint Stock Companies.
Non-tariff barriers to investment persist in the form of visa sponsorship and distributorship requirements. Several constituent emirates have introduced new long-term residency visas and land ownership rights to attract and retain expatriates with sought-after skills in the UAE.
The Federal Decree-Law No (26) of 2020, outlined above, reduced limits on foreign control and right to private ownership of companies. Neither Embassy Abu Dhabi nor Consulate General Dubai (collectively referred to as Mission UAE) has received any complaints from U.S. investors that they have been disadvantaged relative to other non-GCC investors.
UAE officials emphasize the importance of facilitating business investment and tout the broad network of free trade zones as attractive to foreign investors. The UAE’s business registration process varies by emirate, but generally happens through an emirate’s Department of Economic Development. The UAE issued Federal Law No (37) of 2021 on commercial registry law to make the Economic Register a comprehensive reference for economic activities in the country and enable use of the unified economic register number as a digital identity for establishments. Links to information portals from each of the emirates are available at https://ger.co/economy/197. Dubai waived and reduced fees for a total of 88 services provided by various Dubai Government entities in July 2021.
In September 2021, the UAE introduced the “Green Visa,” which allows self-employed individuals meeting certain professional requirements to achieve residency for themselves and family members without obtaining a work permit, a shift from previous immigration policies. The UAE also created a “Freelancers Visa” and expanded “Golden Visa” eligibility to include certain managers, CEOs, specialists in science, engineering, health, education, business management, and technology. The Golden Visa, first announced in 2019, allows foreigners who make major investments or focus on in-demand professions to live and work in the UAE without Emirati sponsors and offers extended visa validity compared to the UAE’s traditional work-related visa program.
The UAE introduced in September 2021 a single online platform to present all foreign investment opportunities in the UAE: invest.ae.
Dubai launched the Invest in Dubai platform, a “single-window” service in February 2021 to enable investors to obtain trade licenses and launch their business quickly. In August 2020, the Dubai International Financial Center (DIFC) introduced a new license for startups, entrepreneurs, and technology firms, starting at $1,500 per year. In January 2022, ADDED announced it had removed more than 20,000 requirements to set up businesses in the emirate as part of an ongoing overhaul of procedures. Twenty-six local and federal partner entities participated in the reductions program.
As part of Dubai Multi Commodities Center’s (DMCC) broader environment, social, and governance strategy, the DMCC announced in February 2022 that it will bring 20 social and environmental impact-driven businesses into its community through an Impact Scale-Up Program. Accordingly, the DMCC will provide qualifying companies with substantial discounts on business setup costs for five years.
Five-year residence visas are available for investors who purchase property worth $1.4 million or more, and 10-year residence visas are available for individuals who invest $2.8 million in a business. The government also provides visas for entrepreneurs and specialized talent in science, medicine, and specialized technical fields. The Abu Dhabi Department of Culture and Tourism launched in February 2021, the Creative Visa for individuals working in cultural and creative industries, including heritage, performing arts, visual arts, design and crafts, gaming and e-sports, media, and publishing.
The UAE is an important participant in global capital markets, including through several sizeable sovereign wealth funds, as well as through several emirate-level, government-related investment corporations.