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Andorra

Executive Summary

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

Data not available

1. Openness To, and Restrictions Upon, Foreign Investment

Bosnia and Herzegovina

Executive Summary

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.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website
TI Corruption Perceptions Index 2021 110 of 180 www.transparency.org/research/cpi/overview 
Global Innovation Index 2021 75 of 131 https://www.globalinnovationindex.org/home 
U.S. FDI in partner country 2021  $9 million https://apps.bea.gov/international/factsheet/factsheet.cfm 
World Bank GNI per capita 2020      $6,080 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD 

1. Openness To, and Restrictions Upon, Foreign Investment

Brunei

Executive Summary

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.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2020 35 of 175 http://www.transparency.org/research/cpi/overview
Global Innovation Index 2021 82 of 132 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 USD $11.0 million https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 USD $31,510 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

Burkina Faso

Executive Summary

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.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 78 of 180 2021 Corruption Perceptions Index – Explore the… – Transparency.org
Global Innovation Index 2020 115 of 132 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 NA https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 $770 GNI per capita, Atlas method (current US$) | Data (worldbank.org)

1. Openness To, and Restrictions Upon, Foreign Investment

Chile

Executive Summary

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.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2020 27 of 180 http://www.transparency.org/research/cpi/overview
Global Innovation Index 2021 53 of 132 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country (US$ billion, historical stock positions) 2020 23.0 https://apps.bea.gov/international/factsheet/
World Bank GNI per capita (US$) 2020 13,470 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

Colombia

Executive Summary

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.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 87 of 180 http://www.transparency.org/research/cpi/overview
Global Innovation Index 2021 67 of 132 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 $7,767 https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 $5,790 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

Côte d’Ivoire

Executive Summary

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.

Table 1: Key Metrics and Rankings 
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 105 of 180 http://www.transparency.org/research/cpi/overview
World Bank’s Doing Business Report 2020 110 of 190 http://www.doingbusiness.org/en/rankings
Global Innovation Index 2021 114 of 131 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2019 -$495 https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 $2,280 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD

 

1. Openness To, and Restrictions Upon, Foreign Investment

Egypt

Executive Summary

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.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 117 of 180 http://www.transparency.org/research/cpi/overview 
Global Innovation Index 2021 94 of 131 https://www.globalinnovationindex.org/analysis-indicator 
U.S. FDI in partner country ($M USD, on a
historical-cost basis
2020 USD 11,206 http://www.bea.gov/international/factsheet/ 
World Bank GNI per capita 2020 USD 3,000 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD 

 

1. Openness To, and Restrictions Upon, Foreign Investment

Gabon

Executive Summary

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.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2020 124 of 180 http://www.transparency.org/research/cpi/overview
Global Innovation Index 2020 N/A https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2019 -172.0 https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 7,030 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

Georgia

Executive Summary

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.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 45 of 180 http://www.transparency.org/research/cpi/overview 
Global Innovation Index 2021 63 of 132 https://www.globalinnovationindex.org/analysis-indicator 
U.S. FDI in partner country ($M USD, historical stock positions) 2020 N/A https://apps.bea.gov/international/factsheet/  
World Bank GNI per capita 2020 $4,270 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD   

1. Openness To, and Restrictions Upon, Foreign Investment

Hong Kong

Executive Summary

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.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 12 of 180 http://www.transparency.org/research/cpi/overview
Global Innovation Index 2021 14 of 132 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 USD 92,487 https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 USD 48,630 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

Iceland

Executive Summary

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.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 13 of 175 http://www.transparency.org/research/cpi/overview
Global Innovation Index 2021 17 of 132 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 $796 https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 $62,420 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

Israel

Executive Summary

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.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 36 of 175 http://www.transparency.org/research/cpi/overview
Global Innovation Index 2021 15 of 132 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 $40.4 billion https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 $42,600 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD

 

1. Openness To, and Restrictions Upon, Foreign Investment

Jordan

Executive Summary

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.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 58 of 180 http://www.transparency.org/research/cpi/overview
Global Innovation Index 2021 81 of 132 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 USD $ 156 https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2021 USD 4,310 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

Lebanon

Executive Summary

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.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perception Index 2021 154 of 180 http://www.transparency.org/research/cpi/overview
Global Innovation Index 2021 82 of 132 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 $4347 million https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 $5,370 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

Luxembourg

Executive Summary

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

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 9 of 180 http://www.transparency.org/research/cpi/overview 
Global Innovation Index 2021 23 of 132 https://www.globalinnovationindex.org/analysis-indicator 
U.S. FDI in partner country ($M USD, historical stock positions) 2020 759,400 https://apps.bea.gov/international/factsheet/ 
World Bank GNI per capita 2020 80,860 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD 

1. Openness To, and Restrictions Upon, Foreign Investment

Mauritius

Executive Summary

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.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 49 of 180 http://www.transparency.org/research/cpi/overview
Global Innovation Index 2021 52 of 132 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 $8,300 https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 $10,230 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD

 

1. Openness To, and Restrictions Upon, Foreign Investment

Moldova

Executive Summary

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.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 105 of 180 http://www.transparency.org/research/cpi/overview 
Global Innovation Index 2021 64 of 132 https://www.globalinnovationindex.org/analysis-indicator 
U.S. FDI in partner country ($M USD, historical stock positions) 2020 USD 29 https://apps.bea.gov/international/factsheet/ 
World Bank GNI per capita 2020 USD 4,560 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD 

1. Openness To, and Restrictions Upon, Foreign Investment

Morocco

Executive Summary

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.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perception Index 2021 87 of 180 http://www.transparency.org/research/cpi/overview
Global Innovation Index 2021 77 of 132 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 $457 https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 $3,020 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD

 

1. Openness To, and Restrictions Upon, Foreign Investment

Oman

Executive Summary 

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.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 56 of 179 http://www.transparency.org/research/cpi/overview
Global Innovation Index 2021 76 of 131 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, stock positions) 2020 USD 197 https://apps.bea.gov/international/factsheet/ 
World Bank GNI per capita 2019 USD 14, 170 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment 

Saudi Arabia

Executive Summary

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.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 52 of 180 http://www.transparency.org/research/cpi/overview
Global Innovation Index 2021 66 of 132 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 $11,386 https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 $21,930 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD

 

1. Openness To, and Restrictions Upon, Foreign Investment

Serbia

Executive Summary

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.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021  96 of 180 https://www.transparency.org/en/cpi/2021/index/srb
Global Innovation Index 2021  54 of 132 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M, historical stock positions) 2019 $149 million https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 $7,420 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

Seychelles

Executive Summary

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.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 23 of 180 http://www.transparency.org/research/cpi/overview
Global Innovation Index 2021 N/A https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 $575 https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 $12,200 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD

 

1. Openness To, and Restrictions Upon, Foreign Investment

Switzerland and Liechtenstein

Executive Summary

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

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.

Table 1: Key Metrics and Rankings – Switzerland
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 7 of 180 http://www.transparency.org/
research/cpi/overview
Global Innovation Index 2021 1 of 129 https://www.globalinnovationindex.org/
analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 USD 211,936 https://apps.bea.gov/international/
factsheet
/
World Bank GNI per capita 2020 USD 82,620 http://data.worldbank.org/indicator/
NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

Taiwan

Executive Summary

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.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 25 of 180 http://www.transparency.org/research/cpi/overview 
Global Innovation Index 2020 N/A https://www.globalinnovationindex.org/analysis-indicator 
U.S. FDI in partner country ($M USD, historical stock positions) 2020 USD 31,544 https://apps.bea.gov/international/factsheet/ 
World Bank GNI per capita 2020 N/A https://data.worldbank.org/indicator/NY.GNP.PCAP.CD 

1. Openness To, and Restrictions Upon, Foreign Investment

Trinidad and Tobago

Executive Summary

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.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 82 of 175 http://www.transparency.org/research/cpi/overview
Global Innovation Index 2021 97 of 132 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 $ 4,974 https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 $ 15,420 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD

 

1. Openness To, and Restrictions Upon, Foreign Investment

Tunisia

Executive Summary

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.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 70 of 180 http://www.transparency.org/research/cpi/overview
Global Innovation Index 2021 71 of 132 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 USD 258 https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 USD 3,300 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

United Arab Emirates

Executive Summary

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.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 24 of 180 http://www.transparency.org/research/cpi/overview
Global Innovation Index 2021 33 out of 132 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 $19.5 https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 $39,410 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

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