HomeReportsInvestment Climate Statements...Custom Report - 2d91a1fcb8 hide Investment Climate Statements Custom Report Excerpts: Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Samoa, Sao Tome and Principe, Saudi Arabia, Senegal, Serbia +13 more Bureau of Economic and Business Affairs Sort by Country Sort by Section In this section / Saint Kitts and Nevis Executive Summary 1. Openness To, and Restrictions Upon, Foreign Investment 6. Financial Sector 7. State-Owned Enterprises 9. Corruption 10. Political and Security Environment Saint Lucia Executive Summary 1. Openness To, and Restrictions Upon, Foreign Investment 6. Financial Sector 7. State-Owned Enterprises 9. Corruption 10. Political and Security Environment Saint Vincent and the Grenadines Executive Summary 1. Openness To, and Restrictions Upon, Foreign Investment 6. Financial Sector 7. State-Owned Enterprises 9. Corruption 10. Political and Security Environment Samoa Executive Summary 1. Openness To, and Restrictions Upon, Foreign Investment 6. Financial Sector 7. State-Owned Enterprises 9. Corruption 10. Political and Security Environment São Tomé and Príncipe Executive Summary 1. Openness To, and Restrictions Upon, Foreign Investment 6. Financial Sector 7. State-Owned Enterprises 9. Corruption 10. Political and Security Environment Saudi Arabia Executive Summary 1. Openness To, and Restrictions Upon, Foreign Investment 6. Financial Sector 9. Corruption 10. Political and Security Environment Senegal Executive Summary 1. Openness To, and Restrictions Upon, Foreign Investment 6. Financial Sector 7. State-Owned Enterprises 9. Corruption 10. Political and Security Environment Serbia Executive Summary 1. Openness To, and Restrictions Upon, Foreign Investment 6. Financial Sector 7. State-Owned Enterprises 9. Corruption 10. Political and Security Environment Seychelles Executive Summary 1. Openness To, and Restrictions Upon, Foreign Investment 6. Financial Sector 7. State-Owned Enterprises 9. Corruption 10. Political and Security Environment Sierra Leone Executive Summary 1. Openness To, and Restrictions Upon, Foreign Investment 6. Financial Sector 7. State-Owned Enterprises 9. Corruption 10. Political and Security Environment Singapore Executive Summary 1. Openness To, and Restrictions Upon, Foreign Investment 6. Financial Sector 7. State-Owned Enterprises 9. Corruption 10. Political and Security Environment Slovakia Executive Summary 1. Openness To, and Restrictions Upon, Foreign Investment 6. Financial Sector 7. State-Owned Enterprises 9. Corruption 10. Political and Security Environment Slovenia Executive Summary 1. Openness To, and Restrictions Upon, Foreign Investment 6. Financial Sector 7. State-Owned Enterprises 9. Corruption 10. Political and Security Environment South Africa Executive Summary 1. Openness To, and Restrictions Upon, Foreign Investment 6. Financial Sector 7. State-Owned Enterprises 9. Corruption 10. Political and Security Environment South Korea Executive Summary 1. Openness To, and Restrictions Upon, Foreign Investment 6. Financial Sector 7. State-Owned Enterprises 9. Corruption 10. Political and Security Environment South Sudan Executive Summary 1. Openness To, and Restrictions Upon, Foreign Investment 6. Financial Sector 7. State-Owned Enterprises 9. Corruption 10. Political and Security Environment Spain Executive Summary 1. Openness To, and Restrictions Upon, Foreign Investment 6. Financial Sector 7. State-Owned Enterprises 9. Corruption 10. Political and Security Environment Sri Lanka Executive Summary 1. Openness To, and Restrictions Upon, Foreign Investment 6. Financial Sector 7. State-Owned Enterprises 9. Corruption 10. Political and Security Environment Sudan Executive Summary 1. Openness To, and Restrictions Upon, Foreign Investment 6. Financial Sector 7. State-Owned Enterprises 9. Corruption 10. Political and Security Environment Suriname Executive Summary 1. Openness To, and Restrictions Upon, Foreign Investment 6. Financial Sector 7. State-Owned Enterprises 9. Corruption 10. Political and Security Environment Sweden Executive Summary 1. Openness To, and Restrictions Upon, Foreign Investment 6. Financial Sector 7. State-Owned Enterprises 9. Corruption 10. Political and Security Environment Saint Kitts and Nevis Executive Summary The Federation of St. Christopher and Nevis (St. Kitts and Nevis) is located toward the top end of the Leeward Islands chain of the Lesser Antilles, near the U.S. Virgin Islands. St. Kitts and Nevis is a member of the Organization of Eastern Caribbean States (OECS) and the Eastern Caribbean Currency Union (ECCU). St. Kitts and Nevis had an estimated gross domestic product of USD 952.1 million in 2019. Prior to the COVID-19 crisis, growth was forecast at 3.2 percent for 2020, according to the Eastern Caribbean Central Bank (ECCB). However, the coronavirus pandemic has reduced the gains that were expected to strengthen St. Kitts and Nevis’s economic position in the near term. The impact of the pandemic on tourism, a mainstay of St. Kitts and Nevis’s economy that generates over 60 percent of GDP, has had ripple effects across the economy. Preliminary estimates by the International Monetary Fund (IMF) in April 2020 predicted that GDP would instead contract by 8.1 percent. St. Kitts and Nevis ranked 139th out of 190 countries in the World Bank’s 2020 Doing Business Report. The report noted little change in key areas from the previous year. During the last fiscal year, the economy of St. Kitts and Nevis remained buoyant, fueled by revenue from its citizenship by investment (CBI) program, a robust construction sector, and increased tourist arrivals. Manufacturing exports grew 169 percent and agricultural output grew 37.5 percent over 2018 levels. St. Kitts and Nevis has reduced its debt to GDP ratio to 44.6 percent, surpassing a target set by the Monetary Council of the ECCB in 2017. The government states it is committed to creating an enhanced business climate to attract more foreign investment. In 2019, St. Kitts inaugurated its second cruise pier, increasing ship docking capacity. Multiple resorts and hotels prepared to open in 2020, including the Hilton’s KOI Resort Saint Kitts, Ramada Hotel, T-Loft at Wyndham, and Sea View Hotel. St. Kitts and Nevis anticipated these investments would facilitate and promote increased stay-over and cruise passenger arrivals. However, the global impact of the coronavirus pandemic on the tourism and cruise industries may reduce the expected positive impact of these projects. St. Kitts and Nevis has identified priority sectors for investment. These include financial services, tourism, real estate, agriculture, information technology, education services, renewable energy, and limited light manufacturing. The government provides a number of investment incentives for businesses that are considering establishing operations in St. Kitts or Nevis, encouraging both domestic and foreign private investment. Foreign investors can repatriate all profits, dividends, and import capital. The country’s legal system is based on British common law. It does not have a bilateral investment treaty with the United States. It has a Double Taxation Agreement with the United States, although the agreement only addresses social security benefits. In 2016, St. Kitts and Nevis signed an Intergovernmental Agreement in observance of the U.S. Foreign Account Tax Compliance Act (FATCA), making it mandatory for banks in St. Kitts and Nevis to report banking information of U.S. citizens. Table 1: Key Metrics and Rankings Measure Year Index/Rank Website Address Transparency International Corruption Perceptions Index 2019 N/A http://www.transparency.org/ research/cpi/overview World Bank’s Doing Business Report 2020 139 of 190 http://www.doingbusiness.org/en/rankings Global Innovation Index 2019 N/A https://www.globalinnovationindex.org/ analysis-indicator U.S. FDI in partner country (M USD, historical stock positions) 2018 657 https://apps.bea.gov/ international/factsheet/ World Bank GNI per capita (M USD) 2018 18,340 http://data.worldbank.org/ indicator/NY.GNP.PCAP.CD 1. Openness To, and Restrictions Upon, Foreign Investment Policies Towards Foreign Direct Investment The government of St. Kitts and Nevis strongly encourages foreign direct investment (FDI), particularly in industries that create jobs, earn foreign currency, and have a positive impact on its citizens. The country is home to the ECCB, the Eastern Caribbean Securities Exchange (ECSE), and the Eastern Caribbean Securities Regulatory Commission (ECSRC). Through the St. Kitts Investment Promotion Agency (SKIPA), the government introduced a number of investment incentives for businesses that consider locating in St. Kitts and Nevis. SKIPA provides “one-stop shop” facilitation services to investors, helping to guide them through the various stages of the investment process. Government policies provide liberal tax holidays, duty-free import of equipment and materials, and subsidies for training local personnel. The St. Kitts and Nevis government encourages investment in all sectors, but targeted sectors include financial services, tourism, real estate, agriculture, information and communication technologies, international education services, renewable energy, ship registries, and limited light manufacturing. Limits on Foreign Control and Right to Private Ownership and Establishment There are no limits on foreign control in St. Kitts and Nevis. Foreign investors may hold up to 100 percent of an investment. Local enterprises generally welcome joint ventures with foreign investors in order to access technology, expertise, markets, and capital. Foreign investment in St. Kitts and Nevis is generally not subject to any restrictions, and foreign investors receive national treatment. The only exception to this is the requirement to obtain an Alien Landholders License for foreign investors seeking to purchase property for residential or commercial purposes. Other Investment Policy Reviews The OECS, of which St. Kitts and Nevis is a member, has not conducted a trade policy review in the last three years. Business Facilitation Established in 2007, SKIPA facilitates domestic and foreign direct investment in priority sectors and advises the government on the formation and implementation of policies and programs to attract investment to St. Kitts and Nevis. SKIPA provides business support services and market intelligence to investors. St. Kitts and Nevis ranks 109th of 190 countries in starting a business, which takes seven procedures and about 18.5 days to complete, according to the World Bank’s 2020 Doing Business Report. It is not mandatory that an attorney prepare relevant incorporation documents. A business must register with the Financial Services Regulatory Commission, the Registrar of Companies, the Ministry of Finance, the Inland Revenue Department, and the Social Security Board. The government of St. Kitts and Nevis supports the growth of women–led businesses. The government encourages equitable treatment and support of women in the private sector through non-discriminatory processes for business registration, fiscal incentives, investment opportunities, and quality assessments. In 2019, the Nevis Island Administration (NIA) established a loan program open to women of all ages and men under 35 that gives concessional loans of up to USD 37,000 (100,000 Eastern Caribbean dollars). Outward Investment There is no restriction on domestic investors seeking to do business abroad. Local companies in St. Kitts and Nevis are actively encouraged to take advantage of export opportunities specifically related to the country’s membership in the OECS Economic Union and the Caribbean Community Single Market and Economy (CSME), which enhance the competitiveness of the local and regional private sectors across traditional and emerging high-potential markets. 6. Financial Sector Capital Markets and Portfolio Investment St. Kitts and Nevis is a member of the ECCU. As such, it is also a member of the ECSE and the Regional Government Securities Market. The ECSE is a regional securities market established by the ECCB and licensed under the Securities Act of 2001, a uniform regional body of legislation governing the buying and selling of financial products for the eight member territories. In 2019, the ECSE listed 149 securities, comprising 128 sovereign debt instruments, 13 equities, and eight corporate bonds. Market capitalization stood at USD 1.8 billion, a significant decrease from 2018. This decrease was primarily due to the delisting of CIBC FirstCaribbean International Bank Ltd., which previously accounted for 79.2 percent of total capitalization. St. Kitts and Nevis is open to portfolio investment. St. Kitts and Nevis accepted the obligations of Article VIII of the International Monetary Fund Agreement, Sections 2, 3 and 4 and maintains an exchange system free of restrictions on making payments and transfers for current international transactions. The private sector has access to credit on the local market through loans, purchases of non-equity securities, trade credits and other accounts receivable that establish a claim for repayment. Money and Banking System The eight participating governments of the ECCU have passed the Eastern Caribbean Central Bank Agreement Act. The Act provides for the establishment of the ECCB, its management and administration, its currency, relations with financial institutions, relations with the participating governments, foreign exchange operations, external reserves, and other related matters. St. Kitts and Nevis is a signatory to this agreement, and the ECCB controls St. Kitts and Nevis’s currency and regulates its domestic banks. Domestic and foreign banks can establish operations in St. Kitts and Nevis. The Banking Act requires all commercial banks and other institutions to be licensed in order to conduct any banking business. The ECCB regulates financial institutions. As part of ongoing supervision, licensed financial institutions are required to submit monthly, quarterly, and annual performance reports to the ECCB. In its latest annual report, the ECCB listed the commercial banking sector as stable. Assets of commercial banks totaled USD 2.5 billion at the end of December 2019, a decrease of approximately ten percent from the previous year due primarily to contraction in the net foreign asset position. The reserve requirement for commercial banks was six percent of deposit liabilities. St. Kitts and Nevis is well served by bank and non-bank financial institutions. There are minimal alternative financial services. Some citizens still participate in informal community group lending. The Caribbean region has witnessed a withdrawal of correspondent banking services by U.S. and European banks. CARICOM remains committed to engaging with key stakeholders on the issue and appointed a Committee of Ministers of Finance on Correspondent Banking to monitor the issue. St. Kitts and Nevis enacted the Virtual Assets Bill, 2020, to regulate virtual currencies with the expectation that they will become increasingly prevalent. The bill is intended to facilitate the ease of doing business in a cashless society, and to combat theft, fraud, money laundering, Ponzi schemes, and terrorist financing. Foreign Exchange and Remittances Foreign Exchange St. Kitts and Nevis is a member of the ECCU and the ECCB. The currency of exchange is the Eastern Caribbean Dollar (XCD). As a member of the OECS, St. Kitts and Nevis has a fully liberalized foreign exchange system. The XCD was pegged to the United States dollar at a rate of 2.7 to USD 1.00 in 1976. As a result, the XCD does not fluctuate, creating a stable currency environment for trade and investment in St. Kitts and Nevis. Remittance Policies Companies registered in St. Kitts and Nevis have the right to repatriate all capital, royalties, dividends, and profits. There are no restrictions on the repatriation of dividends for totally foreign-owned firms. However, a mixed foreign-domestic company may repatriate profits to the extent of its foreign participation. As a member of the OECS, there are no exchange controls in St. Kitts and Nevis and the invoicing of foreign trade transactions are allowed in any currency. Importers are not required to make prior deposits in local funds and export proceeds do not have to be surrendered to government authorities or to authorized banks. There are no controls on transfers of funds. St. Kitts and Nevis is a member of the Caribbean Financial Action Task Force (CFATF). The country passed the Anti-Money Laundering Bill, 2019. The stated intent of this bill is to begin to bring the country into alignment with international standards for combating money laundering. St. Kitts and Nevis also passed the Proceeds of Crime and Asset Recovery Bill, 2019, which aims to provide the government with an additional tool to combat money laundering and terrorist financing. In 2016, the government signed an Intergovernmental Agreement in observance of FATCA, making it mandatory for banks in St. Kitts and Nevis to report the banking information of U.S. citizens. Sovereign Wealth Funds Neither the government of St. Kitts and Nevis, nor the ECCB, of which St. Kitts and Nevis is a member, maintains a sovereign wealth fund. 7. State-Owned Enterprises State-owned enterprises (SOEs) in St. Kitts and Nevis work in partnership with ministries, or under their remit to carry out certain specific ministerial responsibilities. There are currently about ten SOEs in St. Kitts and Nevis in areas such as tourism, investment services, broadcasting and media, solid waste management, and agriculture. They are all wholly owned government entities. Each is headed by a board of directors which the senior management reports. A list of SOEs can be found at http://www.gov.kn . Privatization Program St. Kitts and Nevis does not currently have a targeted privatization program. 9. Corruption The law provides criminal penalties for official corruption, and the government generally implements these laws effectively. Media and private citizens reported government corruption was a problem. One media report accused a Dubai-based agent administering the CBI program of fraud by conspiring with a local developer to embezzle funds from CBI applicants. The government dismissed the allegations as unfounded and politically motivated. The government did not publicize the number of passports issued through CBI or the nationalities of the passport holders. Public officials are not subject to financial disclosure laws. The Financial Intelligence Unit and the police white-collar crime unit investigate reports on suspicious financial transactions, but these reports were not available to the public. Government agencies involved in enforcement of anti-corruption laws include the Royal St. Kitts and Nevis Police Force, the Director of Public Prosecutions, and the Financial Intelligence Unit. The Financial Intelligence Unit investigates financial crimes, but no independent body has been established to handle allegations of government corruption. Resources to Report Corruption Simone Bullen-Thompson Solicitor-General Legal Department Church Street, Basseterre, St. Kitts and Nevis Tel: 869-465-2170 Email: firstname.lastname@example.org 10. Political and Security Environment St. Kitts and Nevis does not have a recent history of politically motivated violence or civil disturbance. Over the first 16 weeks of 2020, major crimes decreased by 78 percent compared to the same period in 2019. Notably, this end of this period coincided with the beginning of St. Kitts and Nevis’s COVID-19 containment curfews. St. Kitts and Nevis’s economy has been strongly affected by the COVID-19 crisis. The IMF has projected that the country’s GDP will fall by 8.1 percent in 2020. In April 2020, the government proposed a USD 44.4 million (120 million Eastern Caribbean dollars) stimulus package to support the country’s economy. ECCU member financial institutions agreed to facilitate loan moratoriums or deferments for a period of six months, along with waivers of fees and charges for customers. Saint Lucia Executive Summary St. Lucia is located in the Lesser Antilles in the Eastern Caribbean (EC). St. Lucia is a member of the Organization of Eastern Caribbean States (OECS) and the Eastern Caribbean Currency Union (ECCU). In 2018, the country had an estimated Gross Domestic Product (GDP) of USD 1.33 billion, with a growth of 1.50 percent in 2019. Prior to the COVID-19 crisis, growth was forecasted at 3.78 percent for 2020, according to the Eastern Caribbean Central Bank (ECCB). However, the coronavirus pandemic has significantly reduced the gains that were expected to strengthen St. Lucia’s economic position in the near term. The impact of the pandemic on tourism has had ripple effects across the economy. Preliminary estimates by the International Monetary Fund (IMF) in April 2020 predicted that GDP would instead contract 8.5 percent. There has been a slight decline in the country’s debt to GDP ratio over the past three years, from 65.45 percent in 2016 to 64.28 percent in 2018. Inflation remains relatively stable at 1.55 percent. Public sector outstanding debt in 2018 was estimated at USD 1.2 million (3,342,730 million Eastern Caribbean dollars), and is expected to increase in 2020 due to government borrowing to finance pandemic response and recovery efforts. In the 2020 World Bank’s Doing Business Report, St. Lucia ranked 93rd out of 190 countries. The report noted minimal changes from the previous report, but some improvement in the ease of starting a business. St. Lucia attracts foreign business and investment, especially in its offshore banking and tourism industries. According to the World Travel and Tourism Council, in 2019 tourism was St. Lucia’s main economic sector, accounting for about 40 percent of GDP and formal employment. Real estate and transport are other leading sectors. The government has stated it is committed to creating a welcoming and open business climate to attract more foreign investment. Investment opportunities are focused primarily in tourism and hotel development, information and communication technology, manufacturing, international financial services, agribusiness, and creative industries. The government of St. Lucia provides several investment incentives to encourage domestic and foreign private investment. Recent amendments to the International Business Act sought to encourage businesses to locate their head offices in St. Lucia. Foreign investors in St. Lucia can repatriate all profits, dividends, and import capital. The St. Lucia legal system is based on the British common law system, but its civil code and property law are greatly influenced by French law. St. Lucia does not have a bilateral investment treaty with the United States but has bilateral investment treaties with the United Kingdom and Germany. In 2014, the government of St. Lucia signed an Intergovernmental Agreement in observance of the U.S. Foreign Account Tax Compliance Act (FATCA), making it mandatory for banks in St. Lucia to report the banking information of U.S. citizens. Table 1: Key Metrics and Rankings Measure Year Index/Rank Website Address Transparency International Corruption Perceptions Index 2019 55 of 180 http://www.transparency.org/ research/cpi/overview World Bank’s Doing Business Report 2019 93 of 190 http://www.doingbusiness.org/ en/rankings Global Innovation Index 2019 N/A https://www.globalinnovationindex.org/ analysis-indicator U.S. FDI in partner country (M USD, historical stock positions) 2018 394 http://apps.bea.gov/international/ factsheet/ World Bank GNI per capita (M USD) 2018 9,560 http://data.worldbank.org/indicator/ NY.GNP.PCAP.CD 1. Openness To, and Restrictions Upon, Foreign Investment Policies Towards Foreign Direct Investment The government of St. Lucia strongly encourages foreign direct investment (FDI). Through Invest Saint Lucia, the government introduced several investment incentives for businesses that consider locating in St. Lucia, encouraging both domestic and foreign private investment. Invest Saint Lucia provides “one-stop shop” facilitation services to investors, helping to guide them through the various stages of the investment process. Applicable government agencies, rather than Invest Saint Lucia, grant investment concessions. Invest Saint Lucia is overseen by the Minister in the Office of the Prime Minister with responsibility for Commerce, International Trade, Investment, Enterprise Development and Consumer Affairs. Government policies provide liberal tax holidays, a waiver of import duty on imported plant machinery and equipment and imported raw and packaging materials, and export allowance or tax relief on export earnings. Various laws provide fiscal incentives to encourage establishing and expanding foreign and domestic investment. Invest Saint Lucia also provides investment promotion services. The St. Lucian government encourages investment in all sectors, but targeted sectors include tourism, smart manufacturing and infrastructure, information and communication technologies, alternative energy, education, and business/knowledge processing operations. Limits on Foreign Control and Right to Private Ownership and Establishment There is no limit on the amount of foreign ownership or control in the establishment of a business in St. Lucia. The government allows 100 percent foreign ownership of companies in any sector. Currently, there are no restrictions on foreign investors investing in military or security-related businesses or natural resources. However, Invest Saint Lucia assesses investment proposals for viability and in accordance with the laws of St. Lucia. Trade licenses and other approvals/licenses may be required before establishment. Invest Saint Lucia evaluates all FDI proposals and provides intelligence, business facilitation, and investment promotion to establish and expand profitable business enterprises in St. Lucia. Invest Saint Lucia also advises the government on issues that are important to the private sector and potential investors and advocates for an improved business climate, growth in investment opportunities, and improvements in the international competitiveness of the local economy. They focus on building and promoting St. Lucia as an ideal location for investors, seeking and generating new investment in strategic sectors, facilitating domestic and foreign direct investment as a one stop shop for investors, and identifying major issues and measures geared towards assisting the government in the ongoing development of a National Investment Policy. The government of St. Lucia treats foreign and local investors equally with respect to the establishment, acquisition, expansion, management, conduct, operation, and sale or other disposition of investments in its territory. Other Investment Policy Reviews St. Lucia, as a member state of the OECS, has not conducted a trade policy review in the last three years. Business Facilitation Invest Saint Lucia is the main business facilitation unit for potential investors into St. Lucia. It facilitates FDI in priority sectors and advises the government on the formation and implementation of policies and programs to attract investment. Invest Saint Lucia provides business support services and market intelligence to all investors. All potential investors applying for government incentives must submit their proposals for review by Invest Saint Lucia to ensure the projects are consistent with the national interest and provide economic benefits to the country. Invest Saint Lucia offers an online resource that is useful for navigating the laws, rules, procedures and registration requirements for foreign investors. It is available at http://www.investstlucia.com/ . The Registry of Companies and Intellectual Property office maintains an e-filing portal for most of its services, including company registration. Relevant officials can review applications submitted electronically. However, applicants must pay the registration fee at the Registry office. The Registry of Companies and Intellectual Property office can only accept payment in the form of cash and checks. Personal checks are not accepted. It is advisable to consult a local attorney prior to starting the process. Further information is available at http://www.rocip.gov.lc . According to the World Bank Doing Business Report for 2020, St. Lucia ranked 69 out of 190 countries in the ease of starting a business. The general practice for starting a business is to retain an attorney to prepare all incorporation documents. A business must register with the Registry of Companies and Intellectual Property Office, the Inland Revenue Authority, and the National Insurance Corporation. The government of St. Lucia continues to support the growth of women–led businesses. The government seeks to support equitable treatment of women in the private sector through non-discriminatory processes for business registration, awarding of fiscal incentives, and assessing investments. In 2018, the government of St. Lucia embarked on a disability assessment, funded by the Caribbean Development Bank, to support the full participation of people with disabilities in the society and the economy. Among other objectives, the assessment seeks to provide data about the engagement of people with disabilities in society and to ensure the equal participation of people with disabilities in the formal and informal sectors of the economy. Outward Investment The government of St. Lucia prioritizes investment retention as a key component of its overall economic strategy. While the government of St. Lucia is encouraging more domestic savings, it continues to require significant foreign investment to fill the investment gap. There is no restriction on domestic investors seeking to do business abroad. Local companies in St. Lucia are actively encouraged to take advantage of export opportunities specifically related to the country’s membership in the OECS Economic Union and the Caribbean Community Single Market and Economy (CSME), which enhance the competitiveness of the local and regional private sectors across traditional and emerging high-potential markets. 6. Financial Sector Capital Markets and Portfolio Investment St. Lucia is a member of the ECCU. As such, it is a member of the Eastern Caribbean Securities Exchange (ECSE) and the Regional Government Securities Market. The ECSE is a regional securities market established by the ECCB and licensed under the Securities Act of 2001, a uniform regional body of legislation governing the securities market. St. Lucia is a member of this stock exchange. The government of Saint Lucia remained the market leader in the financial year, raising USD 496.2 million from the auctions of 15 Treasury bills and four bonds, which represents an increase of USD 90.0 million, 22.2 percent from the amount raised in 2018. The Government of Saint Lucia’s activity accounted for 34.5 percent of the number of auctions and 38.4 percent of the overall regional government securities market (RGSM) proceeds. St. Lucia has accepted the obligations of Article VIII of the International Monetary Fund Agreement, Sections 2, 3 and 4 and maintains an exchange system free of restrictions on making payments and transfers for current international transactions. Foreign tax credit is allowed for the lesser of the tax payable in the foreign country or the tax charged under St. Lucia tax law. The private sector has access to credit on the local market through loans, purchases of non-equity securities, and trade credits and other accounts receivable that establish a claim for repayment. Money and Banking System The eight participating governments of the ECCU have passed the Eastern Caribbean Central Bank Agreement Act. The Act provides for the establishment of the ECCB, its management and administration, its currency, relations with financial institutions, relations with the participating governments, foreign exchange operations, external reserves, and other related matters. St. Lucia is a signatory to this agreement and the ECCB controls St. Lucia’s currency and regulates its domestic banks. The Banking Act is a harmonized piece of legislation across the ECCU. The Minister of Finance usually acts in consultation with, and on the recommendation of, the ECCB with respect to those areas of responsibility within the Minister of Finance’s portfolio. Domestic and foreign banks can establish operations in St. Lucia. The Banking Act requires all commercial banks and other institutions to be licensed in order to conduct any banking business. The ECCB regulates financial institutions. As part of ongoing supervision, licensed financial institutions are required to submit monthly, quarterly, and annual performance reports to the ECCB. The ECCB annual economic report stated that the banking system in St. Lucia recorded USD 308.409 million (USD 833.3 million Eastern Caribbean dollars) in net foreign assets at the end of 2018, up from USD 219.954 million (USD 594.3 Eastern Caribbean dollars) one year earlier. Liquidity in the commercial banking system improved during 2018, which was the most recently published report. At the end of December, the ratio of liquid assets to short-term liabilities stood at 42 percent, which was above the recommended minimum, and about 2.9 percentage points higher than the level recorded at the end of 2017. St. Lucia is well-served by bank and non-bank financial institutions. There are minimal alternative financial services. Some citizens still participate in informal community group lending. The Caribbean region has witnessed a withdrawal of correspondent banking services by U.S. and European banks. CARICOM remains committed to engaging with key stakeholders on the issue and appointed a Committee of Ministers of Finance on Correspondent Banking to monitor the issue. Foreign Exchange and Remittances Foreign Exchange St. Lucia is a member of the ECCU and the ECCB. The currency of exchange is the Eastern Caribbean dollar (XCD). St. Lucia has a fully liberalized foreign exchange system. The Eastern Caribbean dollar has been pegged to the United States dollar at a rate of XCD 2.70 to USD 1.00 since 1976. As a result, the Eastern Caribbean dollar does not fluctuate, creating a stable currency environment for trade and investment in St. Lucia. There are no restrictions or limitations placed on foreign investors in converting, transferring, or repatriating funds associated with an investment. Funds can also be freely converted into any of the major world currencies. Remittance Policies Companies registered in St. Lucia have the right to repatriate all capital, royalties, dividends, and profits. There are no restrictions on the repatriation of dividends for totally foreign-owned firms. As a member of the OECS, there are no exchange controls in St. Lucia, and parties can invoice foreign trade transactions in any currency. Importers are not required to make prior deposits in local funds and are not required to surrender export proceeds to government authorities or to authorized banks. There are no controls on transfers of funds. St. Lucia is a member of the Caribbean Financial Action Task Force (CFATF). Sovereign Wealth Funds Neither the government of St. Lucia, nor the ECCB, of which St. Lucia is a member, maintains a sovereign wealth fund. 7. State-Owned Enterprises State-owned enterprises (SOEs) in St. Lucia work in partnership with ministries, or under their remit carrying out specific ministerial responsibilities. There are 39 SOEs in St. Lucia operating in areas such as tourism, investment services, broadcasting and media, solid waste management, and agriculture. SOEs in St. Lucia do not generally pose a threat to investors. The St. Lucian government established most SOEs with the goal of creating economic activity in areas where it perceives the private sector has very little interest. SOEs are wholly owned government entities and are headed by boards of directors to which senior management reports. A list of SOEs in St. Lucia is available at http://www.govt.lc/statutory-bodies . Privatization Program St. Lucia currently does not have a targeted privatization program. 9. Corruption Most locals and foreigners do not view corruption related to foreign business and investment as a major problem in St. Lucia. However, there are isolated reports of allegations of official corruption, particularly among customs officials. Local laws provide for access to information. The law also requires government officials to present their financial assets annually to the Integrity Commission. While authorities do not make public the disclosure reports filed by individuals, the commission submits a report to parliament each year. The commission lacked the ability to compel compliance with the law, and as a result, compliance was low. The Parliamentary Commissioner, Auditor General, and Public Services Commission are responsible for combating corruption. Parliament can also appoint a special committee to investigate specific allegations of corruption. The country is a party to the Inter-American Convention against Corruption and acceded to the United Nations Convention against Corruption in 2011. St. Lucia ranked 55 out of 180 countries in the 2018 and 2019 Transparency International Corruption Index. St. Lucia has laws, regulations, and penalties to combat corruption, notably the Integrity in Public Life Act of 2004. However, while the law provides criminal penalties for official corruption, enforcement is not always effective. Government agencies involved in enforcement of anti-corruption laws include the Royal St. Lucia Police Force, the Director of Public Prosecutions, the Integrity Commission, and the Financial Intelligence Unit. In June 2015, twelve Commonwealth Caribbean countries including St. Lucia established a regional body to enhance transparency and to help fight corruption. The Association of Integrity Commissions and Anti-Corruption Bodies in the Commonwealth Caribbean supports regional efforts to promote integrity and address corruption. Resources to Report Corruption Contact at the government agency or agencies that are responsible for combating corruption: Pastor Sherwin Griffith Chairman Integrity Commission 2nd Floor, Graham Louisy Administrative Building, Waterfront Castries, Saint Lucia (758) 468-2187 email@example.com Paul Thompson Director Financial Intelligence Authority Gablewoods North P.O. Castries LC02 501, Saint Lucia (758) 451-7126 firstname.lastname@example.org 10. Political and Security Environment St. Lucia is considered politically stable and does not have a recent history of political violence. Elections are peaceful and considered generally free and transparent. The next election is constitutionally due in June 2021. Saint Vincent and the Grenadines Executive Summary St. Vincent and the Grenadines is a member of the Organization of Eastern Caribbean States (OECS) and the Eastern Caribbean Currency Union (ECCU). According to Eastern Caribbean Central Bank (ECCB) statistics as of December 2019, St. Vincent and the Grenadines had an estimated gross domestic product (GDP) of USD 825 million in 2019, with forecast growth of 3.4 percent in 2020. However, the coronavirus pandemic is expected to have far-reaching consequences, notably negative near-term economic growth. The government has announced an economic recovery and stimulus package. The country seeks to diversify its economy across several niche markets, particularly tourism, international financial services, agroprocessing, light manufacturing, renewable energy, creative industries, and information and communication technologies. St. Vincent and the Grenadines ranks 130th out of 190 countries in the 2020 World Bank’s Doing Business report. The government of St. Vincent and the Grenadines strongly encourages foreign direct investment (FDI), particularly in industries that create jobs and earn foreign exchange. Through the Invest St. Vincent and the Grenadines Authority (Invest SVG), the government facilitates FDI and maintains an open dialogue with current and potential investors. The government does not impose limits on foreign control, nor are there requirements for local involvement or ownership in locally registered companies. The islands’ legal system is based on the British common law system. St. Vincent and the Grenadines does not have a bilateral investment treaty with the United States. However, it does have double taxation treaties with the United States, Canada, the UK, Denmark, Norway, Sweden, and Switzerland. In 2016, St. Vincent and the Grenadines signed an intergovernmental agreement in observance of the United States’ Foreign Account Tax Compliance Act (FATCA), making it mandatory for banks in St. Vincent and the Grenadines to report the banking information of U.S. citizens. Table 1: Key Metrics and Rankings Measure Year Index/Rank Website Address Transparency International Corruption Perceptions Index 2019 N/A http://www.transparency.org/ research/cpi/overview World Bank’s Doing Business Report 2019 130 of 190 http://www.doingbusiness.org/en/rankings Global Innovation Index 2019 N/A https://www.globalinnovationindex.org/ analysis-indicator U.S. FDI in partner country (M USD, historical stock positions) 2018 7 http://apps.bea.gov/international/factsheet/ World Bank Gross National Income (GNI) per capita (M USD) 2018 7,340 http://data.worldbank.org/ indicator/NY.GNP.PCAP.CD 1. Openness To, and Restrictions Upon, Foreign Investment Policies Towards Foreign Direct Investment The government of St. Vincent and the Grenadines, through Invest SVG, strongly encourages FDI, particularly in industries that create jobs and earn foreign currency. St. Vincent and the Grenadines is an emerging and developing investment destination. The government is open to all investment, but is currently prioritizing investment in niche markets, particularly tourism, international financial services, agroprocessing, light manufacturing, creative industries, and information and communication technologies. St. Vincent and the Grenadines benefits from a low inflation rate and growing opportunities in the trade and export sectors. Invest SVG’s FDI policy is to attract investment into the aforementioned priority sectors. It advises the government on the formation and implementation of policies and programs that attract and facilitate investment. The government offers special incentive packages for foreign investments in the hotel industry and light manufacturing. The government offers other incentive packages on an ad hoc basis. Limits on Foreign Control and Right to Private Ownership and Establishment There are no limits on foreign control in St. Vincent and the Grenadines, nor are there requirements for local involvement or ownership in locally registered companies, although non-nationals must apply for a license from the Prime Minister’s Office to acquire more than 50 percent of a company. An attorney must submit the application and Cabinet must approve it. Companies holding at least five acres of land may restrict or prohibit the issue or transfer of their shares or debentures to non-nationals. The government has not officially closed any industries to private enterprise, although some activities such as telecommunications, utilities, broadcasting, banking, and insurance require a government license. Other Investment Policy Reviews The OECS, of which St. Vincent and the Grenadines is a member, has not conducted a trade policy review in the last three years. Business Facilitation Established in 2003 under the Companies Act, Invest SVG facilitates domestic and foreign direct investment in priority sectors and advises the government on the formation and implementation of policies and programs to attract investment. Invest SVG provides business support services and market intelligence to all investors. It also reviews all investment projects applying for government incentives to ensure they conform to national interests and provide economic benefits to the country. Invest SVG offers an online resource that is useful for navigating the laws, rules, procedures, and registration requirements for foreign investors. It is available at http://www.investsvg.com . According to the World Bank’s 2020 Doing Business Report, St. Vincent and the Grenadines ranks 93rd of 190 countries in the ease of starting a business, which takes seven procedures and 10 days to complete. The general practice is to retain an attorney to prepare all incorporation documents. A business must register with the Commerce and Intellectual Property Office (CIPO), the Ministry of Trade, the Inland Revenue Department, and the National Insurance Service. The CIPO has an online information portal that describes the steps to register a business in St. Vincent and the Grenadines. There is no online registration process, but the required forms are available online. These must be printed and submitted to the CIPO. More information is available at http://www.cipo.gov.vc . Outward Investment There is no restriction on domestic investors seeking to do business abroad. Local companies are actively encouraged to take advantage of export opportunities specifically related to the country’s membership in the OECS Economic Union and the Caribbean Community Single Market and Economy (CSME), which enhance the competitiveness of the local and regional private sectors across traditional and emerging high-potential markets. 6. Financial Sector Capital Markets and Portfolio Investment St. Vincent and the Grenadines is a member of the ECCU. As such, it is also a participant on the Eastern Caribbean Securities Exchange (ECSE) and the Regional Government Securities Market. The ECSE is a regional securities market established by the ECCB and regulated by the Eastern Caribbean Securities Regulatory Commission. The Securities Act of 2001 regulates activities on the ECSM. The Eastern Caribbean Securities Exchange and its subsidiaries, the Eastern Caribbean Central Securities Depository and the Eastern Caribbean Central Securities Registry, facilitate activities on the ECSE. The main activities are the primary issuance and secondary trading of corporate and sovereign securities, the clearance and settlement of issues and trades, maintaining securities holders’ records, and providing custodial, registration, transfer agency, and paying agency services in respect of listed and non-listed securities. As of March 31, 2019, there were 149 securities listed on the ECSE, comprising 128 sovereign debt instruments, 13 equities, and eight corporate bonds. Market capitalization stood at USD 1.8 billion. This represents a significant decrease compared to the previous year and is attributed mainly to the delisting of CIBC First Caribbean International Bank Ltd, whose market capitalization previously accounted for 79.2 percent of total capitalization. St. Vincent and the Grenadines is open to portfolio investment. St. Vincent and the Grenadines accepted the obligations of Article VIII of the International Monetary Fund Agreement, sections 2, 3 and 4, and maintains an exchange system free of restrictions on making international payments and transfers. St. Vincent and the Grenadines does not have a credit bureau. Lending by public and private financial institutions to the private sector remained relatively flat. Money and Banking System Eight participating governments passed the Eastern Caribbean Central Bank Agreement Act. The Act provides for the establishment of the ECCB, its management and administration, its currency, relations with financial institutions, relations with the participating governments, foreign exchange operations, external reserves, and other related matters. St. Vincent and the Grenadines is a signatory to this agreement and as such, the ECCB controls St. Vincent and the Grenadines’ currency and regulates its domestic banks. The Banking Act 2015 is a harmonized piece of legislation across the ECCU member states. The ECCB and the Ministers of Finance of member states jointly carry out banking supervision under the Act. The Ministers of Finance usually act in consultation with the ECCB with respect to those areas of responsibility within the Minister of Finance’s portfolio. Both domestic and foreign banks can establish operations in St. Vincent and the Grenadines. The Banking Act requires all commercial banks and other institutions to be licensed. The ECCB regulates financial institutions. As part of supervision, licensed financial institutions are required to submit monthly, quarterly, and annual performance reports to the ECCB. In its latest annual report, the ECCB listed the commercial banking sector in St. Vincent and the Grenadines as stable. Assets of commercial banks totaled USD 833 million at the end of December 2019 and remained relatively consistent during the previous year. The reserve requirement for commercial banks was 6 percent of deposit liabilities. The Caribbean region has witnessed a withdrawal of correspondent banking services by U.S. and European banks. CARICOM remains committed to engaging with key stakeholders on the issue and appointed a Committee of Ministers of Finance on Correspondent Banking to continue to monitor the issue. Foreign Exchange and Remittances Foreign Exchange St. Vincent and the Grenadines is a member of the ECCU and the ECCB. The currency of exchange is the Eastern Caribbean dollar (XCD). As a member of the OECS, its foreign exchange system is fully liberalized. The Eastern Caribbean dollar has been pegged to the U.S. dollar at a rate of XCD 2.70 to USD 1.00 since 1976. As a result, the Eastern Caribbean dollar does not fluctuate, creating a stable currency environment for trade and investment. Remittance Policies Companies registered in St. Vincent and the Grenadines have the right to repatriate all capital, royalties, dividends, and profits free of all taxes or any other charges on foreign exchange transactions. International business companies are exempt from taxation. Under present regulations, there are no personal income taxes, estate taxes, corporate income taxes, or withholding taxes for international business companies operating in St. Vincent and the Grenadines. International business companies are also exempt from competitive tax for 25 years. Only banks may make currency conversions. St. Vincent and the Grenadines is a member of the CFATF. In 2014, the government of St. Vincent and the Grenadines signed an intergovernmental agreement with the United States to facilitate compliance with FATCA, which makes it mandatory for St. Vincent and the Grenadines’ banks to report the banking information of U.S. citizens. Sovereign Wealth Funds Neither the government of St. Vincent and the Grenadines, nor the ECCB, of which St. Vincent and the Grenadines is a member, maintain a sovereign wealth fund. 7. State-Owned Enterprises There are currently 28 state-owned enterprises (SOEs) operating in the following sectors: water, housing, transportation (ports), electricity, tourism, information and communication, telecommunications, investment and investment services, financial services, fisheries, agriculture, sports and culture, civil engineering, and infrastructure. SOEs in St. Vincent and the Grenadines are all wholly owned government entities. They are headed by boards of directors to which senior managers report. They are governed by their respective legislation and do not generally pose a threat to investors, as they are not designed for competition. Privatization Program There are no targeted privatization programs in St. Vincent and the Grenadines. 9. Corruption The law provides criminal penalties for official corruption, and the government generally implements these laws. St. Vincent and the Grenadines is a signatory to the Inter-American Convention against Corruption, but not to the UN Anti-Corruption Convention. The Director of Public Prosecutions has the authority to prosecute a number of corruption-related offenses. Corruption allegations are investigated by the Royal St. Vincent and the Grenadines Police Force. There is generally no statutory standard obligation for public officers to disclose financial information to a specific authority. However, if there are confiscation proceedings initiated or contemplated against a corrupt official, pursuant to the Proceeds of Crime Act, No. 38 of 2013, the courts can order disclosure of financial information. The Financial Intelligence Unit has the authority to conduct financial investigations with a court order. The law also provides for public access to information. Human rights organizations assisted individuals in obtaining information but considered the mechanism for gaining access deficient. Only a narrow list of exceptions outlining the grounds for nondisclosure exists, yet there is no specific timeline for the relevant authority to make the requested response or disclosure. There are no criminal or administrative sanctions for not providing a response and there is no appeal mechanism for review of a disclosure denial. Public outreach activities via radio call-in shows encouraged citizens to access public information. Resources to Report Corruption Contact at the government agency or agencies that are responsible for combating corruption: Sejilla McDowall Director of the Public Prosecutions Office of Public Prosecutions Frenches Gate, Kingstown Telephone Number: 784-457-1344 Email Address: email@example.com Colin John Commissioner of Police Royal St. Vincent and the Grenadines Police Force Kingstown Telephone Number: 784-457-1211 Email Address: firstname.lastname@example.org 10. Political and Security Environment St. Vincent and the Grenadines does not have a recent history of politically motivated violence or civil disturbance. Elections are peaceful and regarded as being free and fair. The next general elections are constitutionally due in December 2020. Samoa Executive Summary The Independent State of Samoa is a peaceful parliamentary democracy within the Commonwealth of Nations. It has a population of approximately 196,000 and a nominal GDP of USD $824 million. Samoa became the 155th member of the WTO in May 2012 and graduated from least developed country (LDC) status in January 2014. Samoa is recognized throughout Oceania as one of the most politically and economically stable democratic countries in the region – based on strong social and cultural structures and values. The country has been governed by the Human Rights Protectorate Party (HRPP) since 1982, and Prime Minister Tuilaepa Sailele Malielegaoi has been in power since 1998. Samoa is located south of the equator, about halfway between Hawaii and New Zealand in the Polynesian region of the Pacific Ocean. The total land area is 1,097 square miles, consisting of the two large islands of Upolu and Savai’i, which account for 99 percent of the total land area and eight small islets. About 80 percent of all land is customary land, owned by villages, with the remainder either freehold or government owned. Customary land can be leased, but not sold. Several changes and natural disasters have taken place in Samoa in the past seven years that have shaped the country significantly. Samoa previously drove on the right (U.S.) side of the road, but in September 2009 switched to driving on the left (British) side. Accordingly, all cars now imported are right-hand drive. Also, Samoa was previously located east of the international dateline, but in December 2011 moved to the other side (UTC +13), switching from the last sunset of the world each day to becoming one of the first countries to start each day. The September 2009 tsunami and the December 2012 cyclone (Evan) each inflicted damage equivalent to a quarter of Samoa’s GDP. Samoa has recovered from effects of the tsunami and the cyclone, but both were significant setbacks to the economy. In 2019 Samoa suffered a measles epidemic and, in 2020, the shutdown from the COVID-19 pandemic. Both instances severely affected local business with varying degrees of cessation of economic activity. The tourism industry was hit particularly hard. Samoa demonstrated that it will take extreme measures to prevent loss of life, even at the expense of massive economic losses. The Central Bank of Samoa predicts the country’s GDP will fall by 6.6 per cent by the end of 2020 in response to international border closures resulting from the global pandemic COVID-19. The service sector accounts for nearly three-quarters of GDP and employs approximately 50 percent of the formally employed labor force (which is about 20 percent of the population). Tourism is the largest single activity, with visitor numbers and revenue more than doubling over the last decade. Industry accounts for nearly 15 percent of GDP, while employing less than 6 percent of the work force. Table 1: Key Metrics and Rankings Measure Year Index/Rank Website Address TI Corruption Perceptions Index 2019 N/A http://www.transparency.org/ research/cpi/overview World Bank’s Doing Business Report 2019 98 of 190 http://www.doingbusiness.org/en/rankings Global Innovation Index 2019 N/A https://www.globalinnovationindex.org/ analysis-indicator U.S. FDI in partner country (millions of U.S. dollars, historical stock positions) 2018 $20M https://apps.bea.gov/ international/factsheet/ World Bank GNI per capita 2018 $4,020 http://data.worldbank.org/ indicator/NY.GNP.PCAP.CD 1. Openness To, and Restrictions Upon, Foreign Investment Policies Towards Foreign Direct Investment The Government of Samoa welcomes business and investors. Samoa’s fertile soil, English-speaking and educated workforce, and tropical climate offer advantages to focused investors, though the country’s distance from major markets affects the cost of imports and exports. The main productive sectors of the economy are agriculture and tourism, and the economy depends heavily on overseas remittances. For investors, Samoa offers a trained, productive and industrially adaptable work force that communicates well in English; competitive wage rates; free repatriation of capital and profits; well-developed, reasonably priced transport infrastructure, telecommunications, water supply, and electricity; industry incentive packages for Tourism and Manufacturing sectors; a stable financial environment with single-digit inflation, a balanced budget and international reserves; relatively low corporate & income taxes; and a pleasant and safe lifestyle. All businesses in the greater Apia area have access to broadband and Wi-Fi, which is reasonably reliable and fast, but relatively expensive. In rural Upolu and on Savaii Island there is limited availability of high-speed internet, but reliable Wi-Fi through personal mobile routers is universal. In 2018, Samoa completed the installation of a National Broadband Highway which provides fiber optic data services and 4G LTE cellular data speeds to the entire country. 4G LTE data speeds are operative and commercially available nationwide. Foreign Investors are permitted 100% ownership in all different sectors of industry with the exception of restricted activities below. The following businesses are reserved for Samoan Citizens only: 1.Bus transport services for the general public; 1.Bus transport services for the general public; 2.Taxi transport services for the general public; 3.Rental vehicles; 4.Retailing; 5.Saw milling; and 6.Traditional elei garment designing and printing. Please see Samoa’s Foreign Investment Act 2000 for a more detailed restricted list (http://www.paclii.org/ws/legis/consol_act/fia2000219/) and the website of the Investment Promotion division of the Ministry of Commerce Industry and Labor (MCIL) (https://www.mcil.gov.ws/services/investment-promotion-and-industry-development/investment-promotion/). Limits on Foreign Control and Right to Private Ownership and Establishment Foreign Investors are permitted 100% ownership in all different sectors of the industry with the exception of conditions for restricted activities below. Automotive & Ground Transportation Consumer Goods & Home Furnishings Environmental Technologies Textiles, Apparel & Sporting Goods Please see Samoa’s Foreign Investment Act 2000 for a more detailed restricted list: http://www.paclii.org/ws/legis/consol_act/fia2000219/ Other Investment Policy Reviews The IMF completed a financial sector assessment with Samoan authorities in 2015. Readouts from this visit can be found here: http://www.imf.org/external/country/WSM/ The World Trade Organization conducted a Trade Policy review of Samoa in 2019: https://www.wto.org/english/tratop_e/tpr_e/tp486_e.htm Samoa’s national investment policy statement can be found here: https://www.mcil.gov.ws/services/investment-promotion-and-industry-development/investment-promotion/ The Strategy for the Development of Samoa can be found here: http://www.mof.gov.ws/Services/Economy/EconomicPlanning/tabid/5618/Default.aspx http://www.mof.gov.ws/Services/Economy/EconomicPlanning/tabid/5618/Default.aspx Samoa’s Trade, Commerce, and Manufacturing Sector Plan 2012-2016 Volumes 1&2 are available here: http://www.mof.gov.ws/Services/Economy/SectorPlans/tabid/5811/Default.aspx Business Facilitation The Ministry of Commerce, Industry and Labor (MCIL) administers Samoa’s foreign investment policy and regulations (https://www.mcil.gov.ws /). To open a branch of an existing corporation in Samoa, one must register the company for about USD $150. For a company to qualify as a “Samoan company,” the majority of shareholders must be Samoan. The fee to register an overseas company is about USD $150. All businesses with foreign shareholdings must obtain and hold valid foreign investment registration certificates. The application fee is about USD $50 and can be obtained by contacting MCIL. Certificates are valid until the business terminates activity. If a business does not commence activity within 2 years after a certificate is issued, the certificate becomes invalid. Upon approval of the FIC, the foreign investor is then required to apply for a business license before operating in Samoa. Fees range from USD $100-USD $250, depending on the type of business. Land has a special status in Samoa, as it does in most Pacific Island countries. Under the country’s land classification system, about 80 percent of all land is customary land, owned by villages, with the remainder either freehold (private) or government owned. The standard method for obtaining customary land, which cannot be bought or sold, is through long term leases that must be negotiated with the local communities. A typical lease for business use might be for 30 years, with the option of a further 30 years after that, but longer terms can be negotiated. It should be noted that customary land cannot be mortgaged, and thus cannot be used as collateral to raise capital or credit. Freehold land, mostly based in and around Apia can be bought, sold and mortgaged. Only Samoan citizens may buy freehold land unless approval is obtained from Samoa’s Head of State. The Foreign Investment Act 2000 is the preeminent legislation on foreign investment. http://www.paclii.org/ws/legis/consol_act/fia2000219/ Business Registration Step 1: Register your company and get a Foreign Investment Certificate at MCIL. https://www.businessregistries.gov.ws/ Step 2: Obtain a business license and register for VAGST and PAYE from the Ministry of Revenue. Step 3: Register with the National Provident Fund. http://npf.ws/empregistration Step 4: Register with the Accident Compensation Board. This website explains all these steps in more detail. http://www.doingbusiness.org/data/exploreeconomies/samoa/starting-a-business/ Some parts of these registrations can be done online, but most, if not all, require payment in person. MCIL has an Industry Development and Investment Promotion Division (IDIPD) with services available to all investors. http://www.mcil.gov.ws/index.php/en/division/industry-development-investment-promotion-idipd http://www.mcil.gov.ws/index.php/en/division/industry-development-investment-promotion-idipd Samoa’s Ministry of Revenue only distinguishes between small/medium enterprises (less than USD $400K in annual turnover) and large enterprises (over USD $400K in annual turnover). Priority service is given to large enterprises. Outward Investment There is minimal outward investment from Samoa beyond several stationery and apparel stores having branches in New Zealand and American Samoa. The Government and economy are more focused on increasing exports of Samoan products. The Government does not appear to restrict investment abroad. Pacific Islands Trade and Invest (https://pacifictradeinvest.com/about/ ) is a resource for companies looking to establish themselves overseas. 6. Financial Sector Capital Markets and Portfolio Investment The capital market is regulated by the Central Bank of Samoa. Since January 1998, the Central Bank has implemented monetary policy by issuing its own securities using market-based techniques – commonly known as Open Market Operations (OMO). CBS Securities are the predominant monetary policy instrument, which is issued to influence the amount of liquidity in the financial system. Capital Markets in Samoa are in their infancy with the Unit Trust of Samoa (UTOS) domestic market established in 2010, and no international stock exchange. More information on UTOS can be found in section 10. Samoa has accepted the obligations of IMF Article VIII, Sections 2, 3, and 4, and maintains an exchange system that is free of restrictions on payments and transfers for current international transactions. Money and Banking System Samoa is well-served with banking and finance infrastructure. It has four commercial banks, complimented by a dynamic development bank. The sector is ably regulated by the Central Bank of Samoa. The largest banks are regional operators ANZ and BSP, which offer a wide range of services based upon electronic banking platforms. Although they service all markets, they tend to dominate the top-end, encompassing corporate, government and high net worth individuals. Samoa is still a cash-based society, however, and this has enabled two locally owned entrants, the National Bank of Samoa and Samoa Commercial Bank, to each garner double-digit market share, despite entering the market quite recently. The banking sector appears healthy, although recent reports have indicated the state-owned development bank is carrying a significant amount of bad debt of over 20% of its loan portfolio. The government also interfered with the bank’s attempts to foreclose on non-performing assets. With its International Finance Centre (SIFA)—the first Pacific center to be white-listed by the OECD—and a well-structured financial services sector, Samoa is well placed to service the needs of both local and offshore businesses. The Government, through the Central Bank, has been largely resistant to block chain technologies. Their skepticism is somewhat warranted with the discovery of several cryptocurrency schemes operating in the country widely believed internationally to be scams. Foreign Exchange and Remittances Foreign Exchange The Central Bank of Samoa (CBS) controls all foreign exchange transactions as well as matters relating to monetary stability and supply of money within the country. This includes international transactions, overseas transfer of funds and funding of imports, and registration of insurance companies. Repatriation of overseas capital and profits is normally permitted provided the original investment entered Samoa through the banking system or in an otherwise formally approved manner. Investors also have the freedom to repay principle and interest on foreign loans raised for the purpose of the investment and the freedom to pay fees to foreign parties for the use of intellectual property rights. Remittance Policies Repatriation of capital and profit remittances on foreign capital is permitted, although it must be approved by the CBS based on submission of necessary documents, such as the following: a) Application letter explaining the request; a) Application letter explaining the request; b) Audited accounts relating to the profit remittance year(s) requested; c) A copy of the Authorized Directors’ Resolution approving the specified dividend payment; and d) A tax clearance certificate from the Ministry for Revenue. Samoa’s Financial Intelligence Unit (FIU) within the Central Bank and the Ministry of Foreign Affairs and Trade do issue and provide to all financial institutions governed under the Money Laundering Prevention Act 2007. Sovereign Wealth Funds There is no sovereign wealth fund or asset management bureau in Samoa. The country has the Samoa National Provident Fund which manages and invests members’ savings for their retirement. 7. State-Owned Enterprises Private enterprises are allowed to compete with public enterprises under the same terms and conditions. Laws and rules do not offer preferential treatment to state-owned enterprises (SOEs). SOEs are subject to enforced budget constraints.SOEs are active in the energy, water, tourism, aviation, banking, agriculture supplies, and ports/airports sectors. Laws do not provide for a leading role for SOEs or limit private enterprise activity in sectors in which SOEs operate. SOEs have government appointed boards and operate with varying degrees of autonomy with respect to their governing Ministry. SOEs follow a normal corporate structure with a board of directors and executive management. All SOEs have boards of directors who are appointed by a cabinet minister. Some SOEs have board seats allocated specifically to the heads of certain government ministries. By law, SOEs are required to present financials to their board of directors, shareholding Ministry and the National Auditor. Timely compliance, however, varies among SOEs. Privatization Program Major recent privatizations in Samoa in broadcasting (2008) and telecommunications (2011) both resulted in significant gains in efficiency and benefits to both producer and consumer. The 2011 telecommunications privatization was to a foreign company. Procedures for establishing all businesses are provided under existing laws, including the Companies Amendment Act 2006, the Foreign Investment Amendment Act 2011, the Business License Act 1998, the Labour and Employment Relations Act 2013, the Central Bank Act and Guidelines, and the Health Ordinance 1959 (Part 11, 111 clause 13 & 15). 9. Corruption Samoa ratified the UN Anticorruption Convention in 2018. It is not signatory to the OECD Convention on Combatting Bribery. Corruption has not been specifically identified as an obstacle to foreign investment. Both corruption and bribery are criminalized and prosecuted, and the laws appear to be impartially applied. The Office of the Ombudsman is charged with investigating official corruption. There are no international, non-governmental “watchdog” organizations represented locally, and the country was ranked 50 out of 175 on Transparency International’s Corruption Perceptions Index 2014. Resources to Report Corruption Contact at government agency or agencies are responsible for combating corruption: Maiava Iulai Toma Ombudsman Samoa Office of the Ombudsman Central Bank Building, Level 5, P. O. BOX 303 Apia, Samoa (685) 25394 email@example.com Contact at “watchdog” organization UN Office on Drugs and Crime (UNDOC) Bangkok, Thailand +66 2 288 2100 firstname.lastname@example.org 10. Political and Security Environment The parliamentary republic functions without political violence. The risk of civil disorder is low. There is no civil strife or insurrection. There are no significant border disputes at risk of military escalation. Samoa suffered a measles epidemic in 2019, followed by the shutdown from the COVID-19 pandemic. Both instances severely affected local business with varying degrees of cessation of economic activity. The tourism industry was hit particularly hard. Samoa demonstrated that it will take extreme measures to prevent loss of life, even at the expense of massive economic losses. São Tomé and Príncipe Executive Summary The island nation of São Tomé and Príncipe (STP) is located in the equatorial Atlantic in the Gulf of Guinea. STP is gradually taking positive steps toward improving its investment climate and making the country a more attractive destination for foreign direct investment (FDI). STP is a stable, multi-party democracy and the government is working to combat corruption and create an open and transparent business environment. To facilitate the tax receipts and enforcement, STP enacted a Value Added Tax (VAT) Law (13/2019), which will come into force in September 2020. A modern Labor Code (6/2019) enacted in April 2019, is designed to make labor standards easier for investors to understand and implement. In June 2019, STP became the 25th African country ratifying the African Continental Free Trade Agreement (AfCFTA). The first ever Public Private Partnership (PPP) Law, the new Notary Code and the Commercial Register Code entered into force in 2018; the Regulation of Investment Code adopted in 2017; the new Investment Code and the new Code of Fiscal Benefits and Incentives were adopted in 2016. Together, these laws and related regulations adopted in the past year provide a more modern, attractive, and transparent legal framework for foreign investment. A Millennium Challenge Corporation Country Threshold Program, implemented from 2007 to 2011, modernized STP’s customs administration, reformed its tax policies, and made it less burdensome to start a new business. An anti-money laundering and counter-terrorist financing law adopted in 2013 brought STP into compliance with international standards. With limited domestic capital, STP continues to rely heavily on outside investment and as such is committed to taking necessary reforms to improve its investment climate. The consensus among government authorities and economic analysts is that considerable FDI is needed for STP to realize its development goals and potential. However, foreign investors, face challenges identifying viable investment opportunities due to STP’s weak domestic market, inadequate infrastructure, small market, slow justice system, high cost of getting credit, and limited access and as well as the high cost of electricity. STP is a developing country with gross domestic product (GDP) of roughly $422.2 million and a population of 211,028 according to 2018 World Bank estimates. Due to STP’s very limited revenue sources, foreign donors finance roughly 90 percent or more of its budget. For the 2019 state budget, STP’s main sources of foreign assistance were China, Equatorial Guinea, Japan, Portugal, the World Bank, European Union, FAO and the African Development Bank. Creating “robust economic growth” focusing in the provision of services, including tourist, financial, technological, logistics, and health service associated with digital economy, is one of the four axes of the four-year Government program approved December 2018. Special attention will be also given to traditional sectors, mainly agriculture, livestock and marine resources. The STP’s extensive maritime domain (160,000 km2) might present opportunities for hydrocarbon production as technology improves. Seeking to modernize its port infrastructure and capitalize its fishing potential, under Sino-STP cooperation signed in 2016. In early 2019, the Government announced advanced negotiations with China for the construction of a multifunctional commercial port. Additionally, in November 2019, the Ministry of Public Works launched an international public tender for the construction of a deep-water port in Fernão Dias, Lobata District, north of STP, under a public-private partnership model. STP also announced Chinese funding in 2020 for airport recertification and upgrades. With $29 million Word Bank support, STP will rehabilitate 27 km of road linking the capital São Tomé to the north of the island. As a former Portuguese colony, STP has strong economic ties with Portugal and other Lusophone countries including Angola and Brazil. STP is politically stable, and the government and business community appear focused on building consensus to develop the country economically and to improve basic social services for the country’s young and growing population. STP has had peaceful demonstrations with a recent history of smooth political transitions. Free and fair legislative and municipal elections held in October 2018 led to a formation of new government led by the Movement of Liberation of São Tomé and Príncipe/ Social Democratic Party (MLSTP/PSD) in coalition with the PCD-MDFM-UDD coalition. Prime Minister Jorge Bom Jesus, who took office in December 2018 is focused on fighting corruption, improving business environment, attracting FDI and promoting economic growth. In July 2016, STP peacefully elected the president, Evaristo Carvalho; a member of the opposition Independent Democratic Action party (ADI). President Carvalho supports increased foreign investment and welcomes closer U.S. engagement on economic matters. Table 1: Key Metrics and Rankings Measure Year Index/Rank Website Address TI Corruption Perceptions Index 2019 64 of 180 https://www.transparency.org/ cpi2019?/news/feature/cpi-2019 World Bank’s Doing Business Report 2020 170 of 190 https://www.doingbusiness.org/ en/rankings Global Innovation Index 2019 Not Ranked https://www.globalinnovationindex.org/ analysis-indicator U.S. FDI in partner country ($M USD, stock positions) 2018 $21 https://apps.bea.gov/international/ factsheet/factsheet.cfm World Bank GNI per capita 2019 $1,960 https://data.worldbank.org/country/ sao-tome-and-principe?view=chart 1. Openness To, and Restrictions Upon, Foreign Investment Policies Towards Foreign Direct Investment São Tomé and Príncipe is taking steps toward sustainable economic growth. Its economic prospects likely depend on the government’s ability to attract sustained FDI. Therefore, the government is anxious to improve the country’s investment climate to make it a more attractive destination for foreign investors. Under Article 14 of the Investment Code, the State guarantees equal and non-discriminatory treatment to both foreign and domestic investors operating in the country. The Trade and Investment Promotion Agency (APCI), housed under the Ministry of Planning, Finance and Blue Economy, promotes and facilitates investment through single-window service and multi-sectoral coordination. However, due to lack of capacity the agency is struggling to fully comply with its mandate. www.apcistp.com Limits on Foreign Control and Right to Private Ownership and Establishment According to Article 4 of the Investment Code, both domestic and foreign investors are free to establish and own business enterprises, as well as engage in all forms of business activity in STP, except in the sectors defined by law as reserved for the state, specifically military and paramilitary activities and as well as the Central Bank operations. STP is gradually moving toward open competition in all sectors of the economy, and competitive equality is the official standard applied to private enterprises in competition with public enterprises with respect to access to markets, credit, and other business operations. The government has eliminated former public monopolies in farming, banking, insurance, airline services, telecommunications, and trade (export and import). There are no limits on foreign ownership or control except for activities customarily reserved for the state. The form of public participation, namely the percentage of government ownership in joint ventures, varies according to the agreement. Based on Article 8 of the Regulation of the Investment Code, all inbound investment proposals must be screened and approved by the applicable ministry for the economic sector in coordination with APCI. According to Article 14, an investment proposal can be rejected if it threatens national security, public health, or ecological equilibrium and if the proposal has a negative effect or insufficient contribution to country’s economy. However, these mechanisms do not go beyond the law’s mandate and are not considered barriers to investment. Other Investment Policy Reviews The government has not conducted any investment policy reviews through the Organization for Economic Cooperation and Development (OECD). Neither the World Trade Organization (WTO) nor United National Conference on Trade and Development (UNCTAD) has conducted a review. STP is not currently a member of WTO but has observer status, and it is a member of UNCTAD. Business Facilitation STP has taken steps to facilitate investment and improve the business environment in recent years. The Millennium Challenge Corporation (MCC) worked with STP from 2007 to 2011 on a Threshold Country Program to improve investment opportunities, including creating a “one-stop shop” to help encourage new investments by making it easier and cheaper to import and export goods, reducing the time required to start a new business and improving STP’s tax and customs clearance administration. Currently a business can be registered within one to five days. In 2013, with the support of the International Trade Center, APCI was created. These business facilitation services, including the “one-stop-shop” for business registration, offer equal treatment for women and underrepresented minorities in the economy; however, there is no special assistance provided to these groups. The Single Window website (http://gue-stp.net/spip.php?article24 ; Portuguese language only) provides information and application form on creating and registering companies in STP. Outward Investment While STP’s government does not actively promote outward investment, it does not restrict domestic investors from investing abroad. 6. Financial Sector Capital Markets and Portfolio Investment Portfolio investment is undeveloped and unclear. The Central Bank of STP (BCSTP) issued Treasury bills (T-bills) for the first time on June 29, 2015 for 75 million Dobras (around USD 3.7 million) at the fixed interest rate of 6.2 percent, with a maturity of six months. The demand was 20 percent higher than the offer, resulting from the participation of three domestic banks. The most recent issuance occurred on March 15, 2018. STP does not have a stock market. Articles 13 and 14 of the Foreign Exchange Regulations facilitate the free flow of financial resources under the supervision of the Central Bank. Foreign investors are able to get credit on the local market; however, access to credit is difficult due to the limited variety of credit instruments, high interest rates, and the number of guarantees requested by the commercial banks. As a result, on the World Bank Doing Business Report 2020, STP ranked 165 out 190 economies regarding access to credit, representing 4-points dropping comparing to the previous year, 2019. There are currently few significant U.S. investors active in STP. Money and Banking System STP has four private commercial banks. Portuguese, Nigerian, Angolan, Cameroonian, Gabonese and Togolese interests (as well as those of STP) are represented in the ownership and management of the commercial banks. In early 2018, the Central Bank (BCSTP) declared commercial bank “Private Bank” insolvent and opened a public tender to liquidate its assets and liabilities. The Gabonese investment bank BGFI opened its São Toméan operation in March 2012. Banking services are available in the capital with a few smaller branches in cities in the north, south, and center of the country, as well as in Principe. STP lacks credit card and bank card processing; credit card purchases are currently primarily denominated in foreign currency, such as the euro and processed through foreign banks. In addition to retail banking, commercial banks offer most corporate banking services, or can procure them from overseas. Local credit to the private sector is limited and expensive, but available to both foreign and local investors on equal terms. The country’s main economic actors finance themselves outside STP. Foreigners must establish residency to open a bank account. Foreign Exchange and Remittances Foreign Exchange The Central Bank supervises the national financial system and defines monetary and exchange rate policies in the country. Among other responsibilities, the Central Bank sells hard currency and establishes the reference rate. In case of its shortage, the access to foreign currency is limited; however, there is no official norm restricting access. The Article 18 of the Investment Code, foreign investors are allowed to transfer, or repatriate funds associated with an investment. The dobra (STD) is the country’s national currency. In July 2009, STP and Portugal signed an economic cooperation agreement to peg the Dobra to the euro rather than a weighted basket of currencies. Based on the 2017 Monetary Law, the Central Bank introduced a new currency to modernize and strengthen the country’s financial system. With the introduction of the new dobra in January 1, 2018, the exchange rate is currently 1 euro is equal to 24.5 dobra (22.4 dobras per $1). This anchorage offers credible parity, minimizes monetary instability costs, and provides better credibility for exchange rate and monetary policy. Remittance Policies Repatriation of capital is possible with prior authorization. According to both the Foreign Exchange Law and the Investment Code, transfer of profits outside the country is also allowed after the deductions for legal and statutory reserves and the payment of existing taxes owed. The government encourages reinvestments with associated reductions in income taxes. Sovereign Wealth Funds STP does not have a traditional sovereign wealth fund (SWF). It does have a small National Oil Account (NOA). The NOA was previously funded by signing bonuses paid by energy and oil companies to gain rights to conduct exploration and production activities. According to officials from the budget department, the Law of Petroleum allows the government to withdraw up to 20 percent of the balance of the NOA every year as calculated on June 30 of the previous year. Details are available on the state budget and under NOA online. 7. State-Owned Enterprises When STP’s cocoa plantations were shut down in the late 1980s, most SOEs also closed. EMAE (Water and Power Supply Company), ENAPORT (Port Authority Company), ENASA (National Company for Airports and Air Safety), and Empresa dos Correios (Post Office) are 100 percent state-owned enterprises but with some financial autonomy. Under joint venture, the government holds 49 percent of CST (Santomean Telecommunication Company) while the largest Brazilian telecommunication company, OI, owns 51 percent. The government has a 48 percent stake in BISTP (International Bank of STP), while the Portuguese Caixa Geral de Depositos holds 27 percent, and the African Investment Bank holds 25 percent. All four fully owned state enterprises are unprofitable and are annually audited by the Ministry of Planning, Finance and Blue Economy and biennially by the Court of Audit. They have financial autonomy, but largely depend on funds from the state budget. Privatization Program STP does not have an active privatization program. However, thorough its periodical reports, IMF has been recommending the privatization of the SOEs, especially EMAE. 9. Corruption STP has an overall positive trajectory in combatting corruption due to reforms the government has undertaken in recent years; ranking 64 out 180 countries and territories on the 2019 Transparency International’s Corruption Perception Index, keeping same position as a previous year. The government approved a new anti-corruption law in 2012. To reduce corruption by civil servants and to track the flow of money, authorities put in place a new requirement that all payments to government entities over $5 be made directly at the Central Bank and all salary payments to civil servants be paid directly to the employees’ accounts at the commercial banks. A 2004 oil revenue management law received recognition for responsible management of future oil revenues. The government has also taken steps to review and update existing contracts with some foreign companies to support liberalization and free market competition. The government has denounced corruption and pledged to take necessary steps to prevent and combat it. Although corruption in customs was historically an issue for foreign investors, the MCC Threshold Program resulted in a modern customs code and related decrees. The MCC program introduced modern customs tracking software and eliminated manual procedures, removing the link between the customs officials and cash payments. Customs agents now handle payments on behalf of the importer. As a result, customs revenues have increased significantly while incidents of corruption have reportedly declined. This modernization effort represents a fundamental legislative change from colonial-era customs laws and processes to internationally recognized and transparent best practices and principles. In 2013, the parliament adopted a fully amended and restated anti-money laundering/counter-terrorist financing (AML/CFT) law which complies with international standards. Of note, the law includes a clear description of the crimes involving money laundering and terrorism financing activities, specifies the persons and entities that authorities can hold criminally responsible, describes the sanctions that authorities can impose and the assets they can confiscate in connection with the criminal activities, and sets forth STP’s regulatory structure. The law designates the Financial Information Unit (Unidade de Informaçao Financeira) as the central agency in STP with responsibility for investigating suspect transactions. After appearing on previous versions, STP was removed from the Financial Action Task Force’s (FATF) October 18, 2013 list of countries that have strategic deficiencies in their AML/CFT standards and that have not made sufficient progress in addressing the deficiencies. STP is a member of the Inter-Governmental Action Group against Money Laundering in West Africa (GIABA), a FATF-style regional body. According to the 2016 Investment Code, all investment proposals must be submitted to the APCI, which is responsible to carry out all legal inter-institutional coordination with different sectors involved in the analysis and approval of the investment project under the Investment Code. The new law limits contacts between investment proponents and officials involved in the investment approval process. On the other hand, the new law defines precise time for each investment approval procedure; therefore, it is a positive instrument in fighting corruption and briberies. STP signed and ratified the UN Anticorruption Convention; however, it is not party to the Economic Co-operation and Development Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. STP does not have a designated agency responsible for combatting corruption. Resources to Report Corruption “Watchdog” organization: Deodato Capela President Centro de Integridade Pública de São Tomé e Principe (STP Public Integrity Center) – Anticorruption, Transparency and Integrity -NGO P.C: 330, Almeirim-São Tomé; São Tomé e Principe + 239 991 1116 email@example.com http://cipstp.st/ 10. Political and Security Environment STP is relatively stable, has no ethnic tensions, and has a relaxed lifestyle which locals refer to in local dialect as leve-leve (“take it easy”). Since country’s democratic reforms in 1990, the archipelago has been a good example of democracy in the sub-region with a history of the peaceful transfer of power and consensus in decision making; however, protests in early 2018 over the creation of the Constitutional Court highlighted the lack of consensus in that decision, and a Supreme Court decision over a brewery dispute led to unconstitutional dismissal of court’s judges including its president, in the mid-2018. Later, in October, a lower court decision to recount the votes of October 7 legislative, local and regional elections, instigated demonstrations in front of the Agua Grande district electoral commission and consequent unexpected burning of a judge’s car. Despite the post-elections incident highlighted above, the results of October 7 legislative elections led to the formation of a new Government headed by the Movement of Liberation of São Tomé and Principe/ Social Democratic Party (MLSTP/PSD) in coalition with the PCD-MDFM-UDD coalition and a peaceful transition of power. The National Assembly is made up of 55 seats. Currently, Independent Democratic Action has 25 seats, the MLSTP/PSD, 23 seats, the coalition PCD-MDFM-UDD, 5 seats, and the São Tomé and Principe Independent Citizen Movement (MCISTP), 2 seats. STP has a generally good human rights record and demonstrates a respect for citizens’ and workers’ rights. Strikes are not the primary means to settle labor disputes and labor strikes have been sporadic in recent times. Since independence in 1975, there have been no incidents of politically motivated attacks on projects or installations. There is no anti-American sentiment and instances of civil disorder are rare. There is a maritime piracy and terrorism threat in the Gulf of Guinea, but the impact on STP and its territorial waters has been limited. STP has sought to be an active partner in regional maritime security efforts, although its capacity and resources are minimal due to budget constraints. Despite two violent murders in early 2020, violent crime rates are historically low. The murders include a Portuguese resident woman who was violently killed with machete by an employee of the hotel she was managing in the north of São Tomé and as well as money changer shot dead by an Member of Parliament in front of the Judiciary Police, over an alleged unpaid debt. Saudi Arabia Executive Summary During 2019, the Saudi Arabian government (SAG) continued to pursue its ambitious series of socio-economic reforms, collectively known as “Vision 2030.” Aimed at diversifying the Saudi economy away from oil revenues and creating more private sector jobs for a growing and young population, Vision 2030 contemplates the development of new economic sectors and a significant transformation of the economy. Spearheaded by Crown Prince Mohammed bin Salman, the reform program seeks to expand and sharpen the country’s knowledge base, technical expertise, and commercial competitiveness. To help accomplish these goals and develop nascent industries, Saudi Arabia seeks increased foreign investment and international private sector participation in its economy. As in 2018, the SAG took several steps in 2019 to further improve the Kingdom’s investment climate. Regulatory changes were made to allow foreign investors to own controlling stakes in Saudi companies, a new consolidated authority to protect intellectual property rights was launched, significant investments in infrastructure were made, reforms were introduced to remove guardianship laws and travel restrictions for adult women, and a tourism visa was introduced, opening the Kingdom to non-religious tourism for the first time. To further facilitate investment in priority segments of the economy, the SAG elevated two Saudi authorities to full ministries in 2020: the new Ministry of Investment and the new Ministry of Tourism. Saudi Arabia also held several events in 2019 focused on attracting new foreign investments, including the third annual Future Investment Initiative, the National Industrial Development and Logistics Program, and the Saudi Iron and Steel Conference. Saudi Arabia’s Capital Market Authority removed the 49 percent ownership limit for foreign strategic investors in companies trading on the Saudi Stock Exchange “Tadawul,” the largest capital market in the Middle East and North Africa (MENA) region. Foreign strategic investors are now able to own controlling stakes in listed enterprises. The Tadawul currently holds ‘emerging market’ status from leading index providers such as the FTSE Russell Emerging Market Index, the S&P Dow Jones Emerging Market Index, and Morgan Stanley Capital International (MSCI). The incorporation of the Tadawul into these funds in 2019 resulted in sizeable foreign capital infusions into the Kingdom, which increased international interest in Saudi markets and economic sectors. The Saudi Arabian government (SAG) and its new stand-alone intellectual property rights (IPR) agency, the Saudi Authority for Intellectual Property (SAIP), took important steps in 2019 to improve IPR protection. Nearly all IPR institutions and enforcement responsibility have been consolidated into SAIP. Working with other SAG agencies, in 2019 SAIP increased enforcement actions, drafted new IPR regulations, conducted market raids against counterfeit and pirated goods, and launched significant pro-IPR awareness campaigns. In 2019, Saudi Arabia increased in-market seizures of illegal goods and Saudi Customs seized over 3 million counterfeit and illegal goods at its borders and ports. In addition, the illicit satellite and online provider of sports and entertainment content known as “beoutQ” ceased operations in the Kingdom in August 2019. In December 2019, the Kingdom fulfilled its long-standing objective to publicly list shares of its crown jewel – Saudi Aramco, the most profitable company in the world. The initial public offering (IPO) of 1.5 percent of Aramco’s shares on the Saudi Tadawul stock market on December 11, 2019 was a cornerstone of Crown Prince Mohammed bin Salman’s Vision 2030 program. The largest-ever IPO valued Aramco at $1.7 trillion, the highest market capitalization of any company, and generated $25.6 billion in proceeds, exceeding the $25 billion Alibaba raised in 2014 in the largest previous IPO in history. Infrastructure remains at the forefront of Saudi Arabia’s ambitions as it pursues its Vision 2030 goal to become the most important logistics hub in the region, linking Asia, Europe, and Africa. By establishing new business partnerships and facilitating the flow of goods, people, and capital, the Kingdom seeks to increase interconnectivity and economic integration with other Gulf Cooperation Council countries. Improvements to transportation, such as the $23 billion Riyadh metro and completion of a new airport in Jeddah in 2019, are intended to support this plan. In addition, Saudi Arabia continues its work to create and expand “economic cities” throughout the Kingdom as hubs for petrochemicals, mining, logistics, manufacturing, and digital industries. In recognition of the progress made in its investment and business climate, Saudi Arabia’s ranking on several world indexes improved in 2019. The Kingdom jumped 13 places on the IMD World Competitiveness Yearbook 2019, the biggest gain of any country surveyed. Saudi Arabia was ranked the world’s 26th most competitive country, and 7th among G20 countries, supported by improvements to government and business efficiency. Furthermore, the World Bank ranked Saudi Arabia the world’s top reformer and improver in its Doing Business 2020 report. The Kingdom rose 30 places, from 92nd to 62nd, and improved in 9 out of 10 areas measured in the report. Saudi Arabia also climbed three places in the World Economic Forum’s 2019 Global Competitiveness Report rankings, becoming the world’s 36th most competitive economy of 141 surveyed. The Kingdom achieved significant results across each of the 12 index components, ranking first for macroeconomic stability, 17th for market size, and 19th for product market. On the social front, the Kingdom removed guardianship laws and travel restrictions for adult women as part of its effort to increase female participation in the Saudi economy, which currently stands at only 22 percent. To boost domestic tourism, Saudi Arabia launched a new tourism visa in 2019 for non-religious travelers to visit the Kingdom. Citizens of 49 countries are now able to apply for electronic visas. The SAG also removed the requirement that foreign travelers staying in the same hotel room provide proof of marriage or family relations. The SAG launched its Saudi Seasons initiative in 2019, with 11 tourism ‘seasons’ held in each region of the Kingdom. The program includes events and activities specifically designed to complement the cultural, touristic, and historical touchstones of Saudi Arabia. The Kingdom also continued its work on large-scale tourist hubs being constructed around Saudi Arabia, such as Qiddiya, NEOM, the Red Sea Project, and Amaala, which aim to attract both domestic tourists and visitors from around the world when completed. Investor concerns persist, however, over the rule of law, business predictability, and political risk. The continued detention and prosecution of activists, including prominent women’s rights activists, remains a significant concern. The ongoing diplomatic rift with Qatar also contributes to uncertainty. Moreover, pressure on Saudi Arabia’s fiscal situation from the sharp downturn in oil prices and demand, as well as the unexpected spending needed to respond to COVID-19 will have a negative impact on the budgets of ministries and state-owned entities. While it is unclear what the specific impact on Saudi’s major development projects will be, fiscal pressure is likely to dampen the SAG’s ambitious plans. Overall budget cuts of 15 percent have already been announced for 2020 and further spending reductions may be imposed. Despite the launch of SAIP, the protection of intellectual property rights (IPR) also remains a significant concern, particularly for the pharmaceutical industry. Several U.S. and international pharmaceutical companies allege the SAG violated their intellectual property rights and the confidentiality of their trade data by licensing local firms to produce competing generic pharmaceuticals without approval. Industry attempts to engage the SAG on these issues have not led to satisfactory outcomes for the affected companies. Moreover, legal recourse and repercussions for IPR violations remain poorly defined. Primarily for these reasons, the U.S. Trade Representative included Saudi Arabia on its Special 301 Priority Watch List for the second consecutive year. The economic pressures to generate non-oil revenue and provide more jobs for Saudi citizens have prompted the SAG to implement measures that may weaken the country’s investment climate. In particular, increased fees for expatriate workers and their dependents, as well as “Saudization” polices requiring certain businesses to employ a quota of Saudi workers, have led to disruptions in some private sector activities and may lead to a decrease in domestic consumption levels. Furthermore, the lack of a work-visit visa, and the transition to a high-fee, long-term work visa, which requires a work contract, have hindered expatriate workers, including consultants and senior level private sector officials, from entering the country to advise on new and ongoing projects within their own companies. Finally, U.S. companies, including those with significant experience in Saudi Arabia, continue to experience payment delays for SAG contracts. It is unclear whether the financial impact of sharply lower oil prices and additional spending on COVID-19 will exacerbate this challenge. Table 1: Key Metrics and Rankings Measure Year Index/Rank Website Address TI Corruption Perceptions Index 2019 51 of 180 http://www.transparency.org/ research/cpi/overview World Bank’s Doing Business Report 2019 62 of 190 http://www.doingbusiness.org/en/rankings Global Innovation Index 2019 68 of 126 https://www.globalinnovationindex.org/ analysis-indicator U.S. FDI in partner country ($M USD, stock positions) 2018 $11,375 https://apps.bea.gov/ international/factsheet/ World Bank GNI per capita 2018 $21,600 http://data.worldbank.org/ indicator/NY.GNP.PCAP.CD 1. Openness To, and Restrictions Upon, Foreign Investment Policies Toward Foreign Direct Investment Attracting foreign direct investment remains a critical component of the SAG’s broader Vision 2030 program to diversify an economy overly dependent on oil and to create employment opportunities for a growing youth population. As such, the SAG seeks foreign investment that explicitly promotes economic development, transfers foreign expertise and technology to Saudi Arabia, creates jobs for Saudi nationals, and increases Saudi Arabia’s non-oil exports. The government encourages investment in nearly all economic sectors, with priority given to transportation, health/biotechnology, information and communications technology (ICT), media/entertainment, industry (mining and manufacturing), and energy. Saudi Arabia’s economic reforms are opening up new areas for potential investment. For example, in a country where most public entertainment was once forbidden, the SAG now regularly sponsors and promotes entertainment programming, including live concerts, dance exhibitions, sports competitions, and other public performances. Significantly, the audiences for many of those events are now gender-mixed, representing a larger consumer base. In addition to the reopening of cinemas in 2018, the SAG has hosted Formula E races, PGA European Tour professional golf tournaments, a world heavyweight boxing title match, and a professional tennis tournament. Saudi Arabia launched the Saudi Seasons initiative in 2019 with 11 tourism seasons held in each region of the Kingdom. The program includes events and activities specifically designed to complement the cultural, touristic, and historical touchstones of Saudi Arabia. As part of the Riyadh Season, the Kingdom organized a first-ever car exhibition and auction in Riyadh, which attracted 350 U.S. exhibitors. The SAG is proceeding with “economic cities” and new “giga-projects” that are at various stages of development and is seeking foreign investment in them. In 2020, the Kingdom announced the opening of a NEOM Airport, an important milestone for opening the northwest territory for development. These projects are large-scale and self-contained developments in different regions focusing on particular industries, e.g., technology, energy, tourism, and entertainment. Principal among these projects are: Qiddiya, a new, large-scale entertainment, sports, and cultural complex near Riyadh; King Abdullah Financial District, a commercial center development with nearly 60 skyscrapers in Riyadh; Red Sea Project, a massive tourism development on the archipelago of islands along the western Saudi coast, which aims to create 70,000 jobs and attract one million tourists per year. Amaala, a wellness, healthy living, and meditation resort on the Kingdom’s northwest coast, projected to include more than 2,500 luxury hotel rooms and 700 villas. NEOM, a $500 billion long-term development project to build a futuristic “independent economic zone” in northwest Saudi Arabia. Pressure on Saudi Arabia’s fiscal situation from the sharp downturn in oil prices and unexpected spending needed to respond to COVID-19 will have a negative impact on the budgets of ministries and state-owned entities. While it is unclear what the impact on specific development projects will be, fiscal pressure is likely to dampen the SAG’s ambitious plans in the near term. The Ministry of Investment of Saudi Arabia (MISA), formerly the Saudi Arabian General Investment Authority (SAGIA), governs and regulates foreign investment in the Kingdom, issues licenses to prospective investors, and works to foster and promote investment opportunities across the economy. Established originally as a regulatory agency, MISA has increasingly shifted its focus to investment promotion and assistance, offering potential investors detailed guides and a catalogue of current investment opportunities on its website (https://investsaudi.sa/en/sectors-opportunities/). MISA has introduced e-licenses for the first time as part of its ongoing efforts to provide a more efficient and user-friendly process. An online “instant” license issuance or renewal service is now being offered by MISA to foreign investors that are listed on a local or international stock market and meet certain conditions. Saudi Arabia recently opened the following additional sectors to foreign investors: (i) road transport, (ii) real estate brokerage, (iii) audiovisual services and (iv) recruitment and related services. Despite Saudi Arabia’s overall welcoming approach to foreign investment, some structural impediments remain. Foreign investment is currently prohibited in 10 sectors on the Negative List, including: Oil exploration, drilling, and production; Catering to military sectors; Security and detective services; Real estate investment in the holy cities, Mecca and Medina; Tourist orientation and guidance services for religious tourism related to Hajj and umrah; Printing and publishing (subject to a variety of exceptions); Certain internationally classified commission agents; Services provided by midwives, nurses, physical therapy services, and quasi-doctoral services; Fisheries; and Poison centers, blood banks, and quarantine services. In addition to the negative list, older laws that remain in effect prohibit or otherwise restrict foreign investment in some economic subsectors not on the list, including some areas of healthcare. At the same time, MISA has demonstrated some flexibility in approving exceptions to the “negative list” exclusions. Foreign investors must also contend with increasingly strict localization requirements in bidding for certain government contracts, labor policy requirements to hire more Saudi nationals (usually at higher wages than expatriate workers), an increasingly restrictive visa policy for foreign workers, and gender segregation in business and social settings (though gender segregation is becoming more relaxed as the SAG introduces socio-economic reforms). Additionally, in a bid to bolster non-oil income, the government implemented new taxes and fees in 2017 and early 2018, including significant visa fee increases, higher fines for traffic violations, new fees for certain billboard advertisements, and related measures. On July 1, 2020, the SAG will increase the value-added tax (VAT) from five percent to 15 percent. The VAT was originally introduced in January 2018, in addition to excise taxes implemented in June 2017 on cigarettes (at a rate of 100 percent), carbonated drinks (at a rate of 50 percent), and energy drinks (at a rate of 100 percent). Limits on Foreign Control and Right to Private Ownership and Establishment Saudi Arabia fully recognizes rights to private ownership and the establishment of private business. As outlined above, the SAG excludes foreign investors from some economic sectors and places some limits on foreign control. With respect to energy, Saudi Arabia’s largest economic sector, foreign firms are barred from investing in the upstream hydrocarbon sector, but the SAG permits foreign investment in the downstream energy sector, including refining and petrochemicals. There is significant foreign investment in these sectors. ExxonMobil, Shell, China’s Sinopec, and Japan’s Sumitomo Chemical are partners with Saudi Aramco (the SAG’s state-owned oil firm) in domestic refineries. ExxonMobil, Chevron, Shell, and other international investors have joint ventures with Aramco and/or the Saudi Basic Industries Corporation (SABIC) in large-scale petrochemical plants that utilize natural gas feedstock from Aramco’s operations. The Dow Chemical Company and Aramco are partners in a $20 billion joint venture for the world’s largest integrated petrochemical production complex. With respect to other non-oil natural resources, the national mining company, Ma’aden, has a $12 billion joint venture with Alcoa for bauxite mining and aluminum production and a $7 billion joint venture with the leading American fertilizer firm Mosaic and SABIC to produce phosphate-based fertilizers. Joint ventures almost always take the form of limited liability partnerships in Saudi Arabia, to which there are some disadvantages. Foreign partners in service and contracting ventures organized as limited liability partnerships must pay, in cash or in kind, 100 percent of their contribution to authorized capital. MISA’s authorization is only the first step in setting up such a partnership. Professionals, including architects, consultants, and consulting engineers, are required to register with, and be certified by, the Ministry of Commerce. In theory, these regulations permit the registration of Saudi-foreign joint venture consulting firms. As part of its WTO commitments, Saudi Arabia generally allows consulting firms to establish a local office without a Saudi partner. Foreign engineering consulting companies, however, must have been incorporated for at least 10 years and have operations in at least four different countries to qualify. Foreign entities practicing accounting and auditing, architecture, or civil planning, or providing healthcare, dental, or veterinary services, must still have a Saudi partner. In recent years, Saudi Arabia has opened additional service markets to foreign investment, including financial and banking services; aircraft maintenance and repair; computer reservation systems; wholesale, retail, and franchise distribution services; both basic and value-added telecom services; and investment in the computer and related services sectors. In 2016, Saudi Arabia formally approved full foreign ownership of retail and wholesale businesses in the Kingdom. While some companies have already received licenses under the new rules, the restrictions attached to obtaining full ownership – including a requirement to invest over $50 million during the first five years and ensure that 30 percent of all products sold are manufactured locally – have proven difficult to meet and precluded many investors from taking full advantage of the reform. Other Investment Policy Reviews Saudi Arabia completed its second WTO trade policy review in late 2015, which included investment policy (https://www.wto.org/english/tratop_e/tpr_e/tp433_e.htm ). Business Facilitation In addition to applying for a license from MISA, foreign and local investors must register a new business via the Ministry of Commerce (MOC), which has begun offering online registration services for limited liability companies at: https://mc.gov.sa/en/ . Though users may submit articles of association and apply for a business name within minutes on MOC’s website, final approval from the ministry often takes a week or longer. Applicants must also complete a number of other steps to start a business, including obtaining a municipality (baladia) license for their office premises and registering separately with the Ministry of Labor and Social Development, Chamber of Commerce, Passport Office, Tax Department, and the General Organization for Social Insurance. From start to finish, registering a business in Saudi Arabia takes a foreign investor on average three to five months from the time an initial MISA application is completed, placing the country at 141 of 190 countries in terms of ease of starting a business, according to the World Bank (2019 rankings). With respect to foreign direct investment, the investment approval by MISA is a necessary, but not sufficient, step in establishing an investment in the Kingdom; there are a number of other government ministries, agencies, and departments regulating business operations and ventures. In 2019, MISA established offices in the United States, starting in Washington D.C., to further facilitate investment in Saudi Arabia. Saudi officials have stated their intention to attract foreign small- and medium-sized enterprises (SMEs) to the Kingdom. To facilitate and promote the growth of the SME sector, the SAG established the Small and Medium Enterprises General Authority in 2015 and released a new Companies Law in 2016. It also substantially reduced the minimum capital and number of shareholders required to form a joint stock company from five to two. Additionally, as of 2019, women no longer need a male guardian to apply for a business license. Outward Investment Saudi Arabia does not restrict domestic investors from investing abroad. Private Saudi citizens, Saudi companies, and SAG entities hold extensive overseas investments. The SAG has been transforming its Public Investment Fund (PIF), traditionally a holding company for government shares in state-controlled enterprises, into a major international investor and sovereign wealth fund. In 2016, the PIF made its first high-profile international investment by taking a $3.5 billion stake in Uber. The PIF has also announced a $400 million investment in Magic Leap, a Florida-based company that is developing “mixed reality” technology, and a $1 billion investment in Lucid Motors, a California-based electric car company. In the first half of 2020, the PIF made a number of new investments, including in Facebook, Starbucks, Disney, Boeing, Citigroup, LiveNation, Marriott, several European energy firms, and Carnival Cruise Lines. Saudi Aramco and SABIC are also major investors in the United States. In 2017, Aramco acquired full ownership of Motiva, the largest refinery in North America, in Port Arthur, Texas. SABIC has announced a multi-billion dollar joint venture with ExxonMobil in a petrochemical facility in Corpus Christi, Texas. 6. Financial Sector Capital Markets and Portfolio Investment Saudi Arabia’s financial policies generally facilitate the free flow of private capital and currency can be transferred in and out of the Kingdom without restriction. Saudi Arabia maintains an effective regulatory system governing portfolio investment in the Kingdom. The Capital Markets Law, passed in 2003, allows for brokerages, asset managers, and other nonbank financial intermediaries to operate in the Kingdom. The law created a market regulator, the Capital Market Authority (CMA), established in 2004, and opened the Saudi stock exchange (Tadawul) to public investment. Prior to 2015, the CMA only permitted foreign investors to invest in the Saudi stock market through indirect “swap arrangements,” through which foreigners had accumulated ownership of one per cent of the market. In June 2015, the CMA opened the Tadawul to “qualified foreign investors,” but with a stringent set of regulations that only large financial institutions could meet. Since 2015, the CMA has progressively relaxed the rules applicable to qualified foreign investors, easing barriers to entry and expanding the foreign investor base. The CMA adopted regulations in 2017 permitting corporate debt securities to be listed and traded on the exchange; in March 2018, the CMA authorized government debt instruments to be listed and traded on the Tadawul. The Tadawul was incorporated into the FTSE Russell Emerging Markets Index in March 2019, resulting in a foreign capital injection of $6.8 billion. Separately, the $11 billion infusion into the Tadawul from integration into the MSCI Emerging Markets Index took place in May 2019. The Tadawul was also added to the S&P Dow Jones Emerging Market Index. Money and Banking System The banking system in the Kingdom is generally well-capitalized and healthy. The public has easy access to deposit-taking institutions. The legal, regulatory, and accounting systems used in the banking sector are generally transparent and consistent with international norms. The Saudi Arabian Monetary Authority (SAMA), the central bank, which oversees and regulates the banking system, generally gets high marks for its prudential oversight of commercial banks in Saudi Arabia. SAMA is a member and shareholder of the Bank for International Settlements in Basel, Switzerland. In 2017, SAMA enhanced and updated its previous Circular on Guidelines for the Prevention of Money Laundering and Terrorist Financing. The enhanced guidelines have increased alignment with the Financial Action Task Force (FATF) 40 Recommendations, the nine Special Recommendations on Terrorist Financing, and relevant UN Security Council Resolutions. Saudi Arabia is a member of the Middle East and North Africa Financial Action Task Force (MENA-FATF). In 2019, Saudi Arabia became the first Arab country to be granted full membership of the FATF, following the organization’s recognition of the Kingdom’s efforts in combating money laundering, financing of terrorism, and proliferation of arms. Saudi Arabia had been an observer member since 2015. The SAG has authorized increased foreign participation in its banking sector over the last several years. SAMA has granted licenses to a number of new foreign banks to operate in the Kingdom, including Deutsche Bank, J.P. Morgan Chase N.A., and Industrial and Commercial Bank of China (ICBC). A number of additional, CMA-licensed foreign banks participate in the Saudi market as investors or wealth management advisors. Citigroup, for example, returned to the Saudi market in early 2018 under a CMA license. Credit is normally widely available to both Saudi and foreign entities from commercial banks and is allocated on market terms. The Saudi banking sector has one of the world’s lowest non-performing loan (NPL) ratios, in the range of 2.0 percent for 2018. In addition, credit is available from several government institutions, such as the SIDF, which allocate credit based on government-set criteria rather than market conditions. Companies must have a legal presence in Saudi Arabia to qualify for credit. The private sector has access to term loans, and there have been a number of corporate issuances of sharia-compliant bonds, known as sukuk. Foreign Exchange and Remittances Foreign Exchange There is no limitation in Saudi Arabia on the inflow or outflow of funds for remittances of profits, debt service, capital, capital gains, returns on intellectual property, or imported inputs, other than certain withholding taxes (withholding taxes range from five percent for technical services and dividend distributions to 15 percent for transfers to related parties, and 20 percent or more for management fees). Bulk cash shipments greater than $10,000 must be declared at entry or exit points. Since 1986, when the last currency devaluation occurred, the official exchange rate has been fixed by SAMA at 3.75 Saudi riyals per U.S. dollar. Transactions typically take place using rates very close to the official rate. Remittance Policies Saudi Arabia is one of the largest remitting countries in the world, with roughly 75 percent of the Saudi labor force comprised of foreign workers. Remittances totaled approximately $33.4 billion in 2019. There are currently no restrictions on converting and transferring funds associated with an investment (including remittances of investment capital, dividends, earnings, loan repayments, principal on debt, lease payments, and/or management fees) into a freely usable currency at a legal market-clearing rate. There are no waiting periods in effect for remitting investment returns through normal legal channels. The Ministry of Labor and Social Development is progressively implementing a “Wage Protection System” designed to verify that expatriate workers, the predominant source of remittances, are being properly paid according to their contracts. Under this system, employers are required to transfer salary payments from a local Saudi bank account to an employee’s local bank account, from which expatriates can freely remit their earnings to their home countries. Sovereign Wealth Funds The Public Investment Fund (PIF, www.pif.gov.sa ) is the Kingdom’s officially designated sovereign wealth fund. While PIF lacks many of the attributes of a traditional sovereign wealth fund, it has evolved into the SAG’s primary investment vehicle. Established in 1971 to channel oil wealth into economic development, the PIF has historically been a holding company for government shares in partially privatized state-owned enterprises (SOEs), including SABIC, the National Commercial Bank, Saudi Telecom Company, Saudi Electricity Company, and others. Crown Prince Mohammed bin Salman is the chairman of the PIF and announced his intention in April 2016 to build the PIF into a $2 trillion global investment fund, relying in part on proceeds from the initial public offering of up to five percent of Saudi Aramco shares. Since that announcement, the PIF has made a number of high-profile international investments, including a $3.5 billion investment in Uber, a commitment to invest $45 billion into Japanese SoftBank’s VisionFund, a commitment to invest $20 billion into U.S. Blackstone’s Infrastructure Fund, a $1 billion investment in U.S. electric car company Lucid Motors, and a partnership with cinema company AMC to operate movie theaters in the Kingdom. Under the Vision 2030 reform program, the PIF is financing a number of strategic domestic development projects, including: “NEOM,” a planned $500 billion project to build an “independent economic zone” in northwest Saudi Arabia; “Qiddiya,” a new, large-scale entertainment, sports, and cultural complex near Riyadh; “the Red Sea Project”, a massive tourism development on the western Saudi coast; and “Amaala,” a wellness, healthy living, and meditation resort also located on the Red Sea. At the end of 2019, the PIF reported its investment portfolio was valued at $300-$330 billion, mainly in shares of state-controlled domestic companies. In an effort to rebalance its investment portfolio, the PIF has divided its assets into six investment pools comprising local and global investments in various sectors and asset classes: Saudi holdings; Saudi sector development; Saudi real estate and infrastructure development; Saudi giga-projects; international strategic investments; and an international diversified pool of investments. In addition to previous investments in Uber, Magic Leap, and Lucid Motors, the PIF made a number of new investments in the first half of 2020. These include equity investments in Facebook, Starbucks, Disney, Boeing, Citigroup, LiveNation, Marriott, several European energy firms, and Carnival Cruise Lines. The Ministry of Finance announced in 2020 that $40 billion was being transferred from the Kingdom’s foreign reserves, held by the central bank SAMA, to the PIF to fund investments. In practice, SAMA’s foreign reserve holdings also operate as a quasi-sovereign wealth fund, accounting for the majority of the SAG’s foreign assets. SAMA invests the Kingdom’s surplus oil revenues primarily in low-risk liquid assets, such as sovereign debt instruments and fixed-income securities. SAMA’s foreign reserves fell from $502 billion in January 2020 to $449 billion in April 2020. SAMA’s foreign reserve holdings peaked at $746 billion in mid-2014. Though not a formal member, Saudi Arabia serves as a permanent observer to the International Working Group on Sovereign Wealth Funds. 9. Corruption Foreign firms have identified corruption as a barrier to investment in Saudi Arabia. Saudi Arabia has a relatively comprehensive legal framework that addresses corruption, but many firms perceive enforcement as selective. The Combating Bribery Law and the Civil Service Law, the two primary Saudi laws that address corruption, provide for criminal penalties in cases of official corruption. Government employees who are found guilty of accepting bribes face 10 years in prison or fines of up to one million riyals (USD 267,000). Ministers and other senior government officials appointed by royal decree are forbidden from engaging in business activities with their ministry or organization. Saudi corruption laws cover most methods of bribery and abuse of authority for personal interest, but not bribery between private parties. Only senior Control and Anti-Corruption Commission (“Nazaha”) officials are subject to financial disclosure laws. The government is considering disclosure regulations for other officials, but has yet to finalize them. Some officials have engaged in corrupt practices with impunity, and perceptions of corruption persist in some sectors. Nazaha, established in 2011, is responsible for promoting transparency and combating all forms of financial and administrative corruption. Nazaha’s ministerial-level director reports directly to the King. In December 2019, King Salman issued three royal decrees consolidating the Control and Investigation Board and the Mabahith’s Administrative Investigations Directorate under the National Anti-Corruption Commission, and renaming the new entity as the Control and Anti-Corruption Commission (“Nazaha”). The decrees consolidated investigations under the new Commission and mandated that the Public Prosecutor’s Office transition its on-going investigations to the new consolidated commission. The Control and Anti-Corruption Commission report directly to King Salman. The Commission recommends anti-corruption reforms, administers and audits anti-corruption databases and program, and investigates and prosecutes alleged corruption. Furthermore, the Commission has the power to dismiss a government employee even if they are not found guilty by the specialized anti-corruption court. Some evidence suggests Nazaha has not shied away from prosecuting influential players whose indiscretions may previously have been ignored. In 2016, for example, it referred the Minister of Civil Service for investigation over allegations of abuse of power and nepotism. On March 15, Nazaha announced it would charge 298 Saudi and foreign individuals with a range of corruption charges, including a major general and at least two judges. In April, Nazaha indicted eight individuals, including two individuals from Riyadh’s regional health directorate, on corruption charges related to contracts for quarantine accommodations related to the COVID-19 pandemic. The Commission regularly publishes news of its investigations on its website (http://www.nazaha.gov.sa/en/Pages/Default.aspx). SAMA, the central bank, oversees a strict regime to combat money laundering. Saudi Arabia’s Anti-Money Laundering Law provides for sentences up to 10 years in prison and fines up to USD1.3 million. The Basic Law of Governance contains provisions on proper management of state assets and authorizes audits and investigation of administrative and financial malfeasance. The Government Tenders and Procurement Law regulates public procurements, which are often a source of corruption. The law provides for public announcement of tenders and guidelines for the award of public contracts. Saudi Arabia is an observer of the WTO Agreement on Government Procurement (GPA) Saudi Arabia ratified the UN Convention against Corruption in April 2013 and signed the G20 Anti-Corruption Action Plan in November 2010. Globally, Saudi Arabia ranks 51st out of 180 countries in Transparency International’s Corruption Perceptions Index 2019. Resources to Report Corruption The National Anti-Corruption Commission’s address is: National Anti-Corruption Commission P.O. Box (Wasl) 7667, AlOlaya – Ghadir District Riyadh 2525-13311 The Kingdom of Saudi Arabia Fax: 0112645555 E-mail: firstname.lastname@example.org Nazaha accepts complaints about corruption through its website www.nazaha.gov.sa or mobile application. 10. Political and Security Environment Saudi Arabia is a monarchy ruled by King Salman bin Abdulaziz Al Saud. The King’s son, Crown Prince Mohammed bin Salman, has assumed a central role in government decision-making. The Department of State regularly reviews and updates a travel advisory to apprise U.S. citizens of the security situation in Saudi Arabia and frequently reminds U.S. citizens of recommended security precautions. In addition to a Global Travel Advisory due to COVID-19, the Department of State has a current travel advisory for Saudi Arabia that was updated in September 2019. The Travel Advisory urges U.S. citizens to exercise increased caution when traveling to Saudi Arabia due to terrorism and the threat of missile and drone attacks on civilian targets and to not travel within 50 miles of the Saudi Arabia-Yemen border. The Travel Warning notes that terrorist groups continue plotting possible attacks in Saudi Arabia and that terrorists may attack with little or no warning, targeting tourist locations, transportation hubs, markets/shopping malls, and local government facilities. In the past, terrorists have targeted both Saudi and Western government interests, mosques and other religious sites (both Sunni and Shia), and places frequented by U.S. citizens and other Westerners. Missile attacks have targeted major cities such as Riyadh and Jeddah, Riyadh’s international airport, Saudi Aramco facilities, and vessels in Red Sea shipping lanes. Houthi rebel groups operating in Yemen have fired missiles and rockets into Saudi Arabia, targeting populated areas and civilian infrastructure, and have publicly stated their intent to continue to do so. The Houthi rebel groups are also in possession of unmanned aerial systems (drones), which they have used to target civilian infrastructure and military facilities in Saudi Arabia. U.S. citizens living and working on or near such installations, particularly in areas near the border with Yemen, are at heightened risk of missile and drone attack. Please visit www.travel.state.gov for further information, including the latest Travel Advisory. Senegal Executive Summary Senegal’s stable political environment, favorable geographic position, strong and sustained growth, and generally open economy offer attractive opportunities for foreign investment. The Government of Senegal welcomes foreign investment and has prioritized efforts to improve the business climate, although significant challenges remain. Senegal’s macroeconomic environment is stable. The currency – the CFA franc used in eight West African countries – is pegged to the euro. Repatriation of capital and income is relatively straightforward, although the regional central bank has recently tightened restrictions on the use of “offshore accounts” in project finance transactions. Investors cite cumbersome and unpredictable tax administration, bureaucratic hurdles, opaque public procurement, a weak and inefficient judicial system, inadequate access to financing, and a rigid labor market as obstacles. High real estate and energy costs, as well as high factor costs driven by tariffs, undermine Senegal’s competitiveness. The government is working to address these barriers. Since 2012, Senegal has pursued an ambitious development program, the Plan Senegal Emergent (Emerging Senegal Plan, or “PSE”), to improve infrastructure, achieve economic reforms, increase investment in strategic sectors, and strengthen the competitiveness of the private sector. Under the PSE, Senegal has enjoyed sustained economic growth rates, averaging 6.5 percent from 2014 through 2019. With good air transportation links, a modern and functional international airport, planned port expansion projects, and improving ground transportation, Senegal also aims to become a regional center for logistics, services, and industry. Special Economic Zones offer investors tax exemptions and other benefits that have led to increased foreign investment in the manufacturing sector over the past several years. The GOS continues to improve Senegal’s investment climate. Since 2007, Senegal has dramatically reduced the average number of days it takes to start a business. The government continues to expand its “single window” system offering one-stop government services for businesses, opening a new service centers in various locations and projecting to have at least one service center in each of the country’s 45 regional departments by 2021. Property owners can apply for construction permits online. In 2019, the GOS made tax information and some payment options available online. Senegal’s state information agency ADIE has an ambitious SMART Senegal plan to increase access to WiFi and digitize more services onto a national hub. Senegal’s ranking in the World Bank’s Doing Business index improved from 141 in 2018 to 123 in 2019, spurred by improvements in the ease of paying taxes and access to credit information. The government made progress in operationalizing the new Commercial Court, prioritizing the resolution of business disputes. Although companies continue to report problems with corruption and opacity, Senegal compares favorably with many countries in the region in corruption indicators. The Millennium Challenge Corporation (MCC) compact, signed in December 2018 and currently in pre-implementation prior to entry-into-force in 2021, aims to decrease energy costs by modernizing the power sector, increasing access to electricity in rural Senegal, strengthening the electrical transmission network in Dakar, and improving governance of the power sector. Despite these improvements, business climate challenges remain. Because the informal sector dominates Senegal’s economy, legitimate companies bear a heavy tax burden, although Senegal is making progress in broadening the tax base. Some U.S. companies complain about delays and uncertainty in the project development process. A U.S.-Senegal Bilateral Investment Treaty has been in effect since 1990. According to UNCTAD data, Senegal’s stock of foreign direct investment (FDI) increased from $3.4 billion in 2015 to $6.4 billion in 2019. France is historically Senegal’s largest source of foreign direct investment, but the government wants more diversity in its sources of investment. U.S. investment in Senegal has expanded since 2014, including investments in power generation, industry, and the offshore oil and gas sector. Although the IMF reports (see table below) U.S. FDI stock in Senegal was approximately $91 million in 2018 (up from $25 million reported in 2017), anecdotal information suggests the amount is significantly more. China has also become a significant foreign investment partner. Other important investment partners include the United Kingdom, Mauritius, Indonesia, Morocco, Turkey, and the Gulf States. In addition to the developing petroleum industry, other sectors that have attracted substantial investment are agribusiness, mining, tourism, manufacturing, and fisheries. Investors may consult the website of Senegal’s investment promotion agency (APIX) at www.investinsenegal.com for information on opportunities, incentives and procedures for foreign investment, including a copy of Senegal’s investment code. Table 1: Key Metrics and Rankings Measure Year Index/Rank Website Address TI Corruption Perceptions Index 2019 66 of 180 http://www.transparency.org/ research/cpi/overview World Bank’s Doing Business Report 2020 123 of 190 http://www.doingbusiness.org/en/rankings Global Innovation Index 2019 96 of 126 https://www.globalinnovationindex.org/ analysis-indicator U.S. FDI in partner country ($M USD, stock positions) 2018 $91.0 million http://data.imf.org/ ?sk=40313609-F037-48C1-84B1-E1F1CE54D6D5&sId=1390030341854 World Bank GNI per capita 2018 $1,410 http://data.worldbank.org/ indicator/NY.GNP.PCAP.CD Note on Impact of COVID-19 The 2020 COVID-19 epidemic heavily impacted Senegal’s economy. According to June 2020 government estimates, GDP growth for 2020, initially projected to reach 6.8 percent, will fall to 1.1 percent or less. Major oil and gas projects may be delayed at least a year. Although economy-wide employment figures are unreliable, it is clear the slowdown, combined with the GOS’s initial stringent outbreak containment measures, led to significant job losses, primarily in Senegal’s dominant informal sector. A May 2020 survey of 800 Senegalese businesses found that 65 percent had suffered a significant negative impact from COVID-19 and 40 percent had ceased operations. Diaspora remittances, representing 10 percent of GDP, have fallen sharply due to the pandemic’s effects on the world economy. In the wake of the COVID-19 crisis, the GOS enacted one of the region’s most ambitious fiscal stimulus and social assistance packages. Dubbed “Force COVID-19,” the initiative sought to inject $1.7 billion – about 6 percent of GDP – into the economy. The GOS acknowledged the program will result in an increase in Senegal’s fiscal deficit, which is expected to grow from just above 3 percent (nearing the country’s target under ECOWAS convergence criteria) to more than 6 percent. According to the African Development Bank, Senegal’s public debt will rise from 65 percent to 68 percent of GDP, pushing the limits of the 70 percent threshold established by the Economic Community of West African States (ECOWAS). Nevertheless, in June 2020, the IMF assessed Senegal’s risk of debt distress as “moderate,” and the government continued to access regional credit markets at competitive rates. Although the government won praise for its aggressive fiscal response, some have expressed concern over its intervention in labor markets, including a decree prohibiting employers from laying off or reducing salaries of workers during the COVID-19 crisis. The government’s efforts to implement the stimulus plan have drawn mixed reviews. While the government successfully increased funding to shore up its health care system, the rollout of social assistance programs was plagued by allegations of inefficiency, insider dealing, and corruption. Long delays plagued the implementation of programs to assist businesses and preserve employment, with many firms reporting they had still not received promised grants and loans months after the program launch. As of July 2020, the outbreak was still progressing in Senegal, with cases, deaths, and positivity rates still rising. Long-term effects of COVID-19 on Senegal’s economy and investment environment will depend on how long the outbreak lasts and how deeply the regional and world economies are affected. 1. Openness To, and Restrictions Upon, Foreign Investment Policies Toward Foreign Direct Investment The Government of Senegal welcomes foreign investment. The investment code provides for equitable treatment of foreign and local firms. There is no restriction on ownership of businesses by foreign investors in most sectors. Foreign firms generally can invest in Senegal free from systematic discrimination in favor of local firms. Nevertheless, some U.S. and other foreign firms have noted that, in practice, Senegal’s investment environment favors incumbents and insiders – often other foreign firms – at the expense of new market entrants. Common complaints include excessive and inconsistently applied bureaucratic processes, nontransparent judicial processes, and an opaque decision-making process for public tenders and contracts. Financial and capital markets are open, attracting domestic, regional, and international capital. The government conducts ongoing dialogue with the private sector through the Conseil Presidentiel de l’Investissement (Presidential Council on Investment, or “CPI”). Among other activities, the CPI sponsors an annual forum at which investors comment on the government’s policies and actions. Details are available at cpi-senegal.com. Another important venue for dialog is the annual Assises de l’Entreprises sponsored by the Conseil National du Patronat, the national employers’ association. More information can be found at www.cnp.sn. Senegal does not have a business ombudsman or other official charged with coordinating complaints about the business climate. In practice, investors must often engage directly at the minister level to resolve business climate concerns. Limits on Foreign Control and Right to Private Ownership and Establishment There are no barriers to ownership of businesses by foreign investors in most sectors. There are some exceptions for strategic sectors such as water, electricity distribution, and port services where the government and state-owned companies maintain responsibility for most physical infrastructure but allow private companies to provide services. Senegal allows foreign investors equal access to ownership of property and does not impose any general limits on foreign control of investments. Senegal’s Investment Code includes guarantees for equal treatment of foreign investors including the right to acquire and dispose of property. The Government of Senegal does some screening of proposed investments, primarily to verify compatibility with the country’s overall development goals and compliance with environmental regulations. The Ministry of Finance and Budget reviews project financing arrangements for projects implicating public funds to ensure compatibility with budget and debt policies. Senegal’s Investment Promotion Agency (APIX) can facilitate government review of investment proposals and the project approval process. Other Investment Policy Reviews On January 10, 2020, the Executive Board of the International Monetary Fund (IMF) approved a new three-year Policy Coordination Instrument (PCI) for Senegal. For more information, see: https://www.imf.org/en/News/Articles/2020/01/10/pr206-senegal-imf-executive-board-approves-three-year-policy-coordination-instrument Business Facilitation The point of entry for business registration is Senegal’s Investment Promotion Agency (APIX), www.investinsenegal.com , which provides a range of administrative services to foreign investors. Since 2007, APIX has significantly reduced the average number of days it takes to start a business. While the government claims the average for starting a business is two days, the World Bank Doing Business 2020 estimates it takes six days to register a firm. In addition to other bureaucratic and documentary requirements, registering a business requires certification of certain documents by a public notary registered in Senegal. Senegalese law provides special preferences to facilitate investment and business operations by medium and small enterprises including reduced interest rates for Senegalese-owned companies. The government continues to expand its “single window” system offering one-stop government services for businesses, opening a new service centers in various locations and projecting to have at least one service center in each of the country’s 45 regional departments by 2021. Property owners can apply for construction permits online. In 2019, the GOS made tax information and some payment options available online. With the support of UNCTAD and the government of Luxembourg, APIX recently launched an online portal, https://senegal.eregulations.org/ , containing extensive information regarding regulations applicable to businesses and investments in Senegal. Despite these efforts, business climate challenges remain. Because the informal sector dominates Senegal’s economy, legitimate companies bear a relatively heavy tax burden. Some U.S. companies complain about delays in the project development process due to excessive red tape and uncertainty over rules and processes. Senegal’s Agency for the Development and Supervision of Small and Medium-sized Enterprises (ADEPME) has launched initiatives to support small and medium-sized enterprises (defined in Senegal as companies with fewer than 50 employees and annual revenues of less than 5 billion CFA (about $9 million). These include tax incentives, grants for capacity building and for feasibility studies, and technical assistance to help firms operating in the informal sector formalize and register. ADEPME has also launched a program to certify the creditworthiness of SMEs, making them eligible for loans at preferential rates. Outward Investment The government neither promotes nor restricts outward investment. 6. Financial Sector Capital Markets and Portfolio Investment Senegalese authorities take a generally positive view of portfolio investment. Assisted by the debt management office of the BCEAO and thanks to a well-functioning regional debt market, Senegal has historically issued regular debt instruments in local currency to manage its finances. Beginning in 2011, the government began accessing international debt markets, issuing U.S. dollar-denominated Eurobonds in 2011, 2014, 2017, and 2018. Some observers, including the IMF, have expressed concern over the recent rise in Senegal’s external debt, which reached 62 percent of GDP in 2019, compared to 52 percent in 2018. Due to borrowing needed to fund its COVID-19 response, Senegal’s debt-to-GDP ratio is expected to rise further, to 68 percent in 2020. A handful of Senegalese companies are listed on the West African Regional Stock Exchange (BRVM), headquartered in Abidjan, Cote d’Ivoire. The BVRM also has local offices in each of the WAEMU member countries, offering additional opportunities to attract foreign capital and access diversified sources of financing. In 2018, the BCEAO launched the region’s first certification program for dealers in securities and other financial instruments. Modeled on accreditation programs offered by the Chartered Institute for Securities and Investment (CISI), the new program was supported by the U.S. Treasury’s Office of Technical Assistance. Money and Banking System While Senegal’s banking system is generally sound, the financial sector is under-developed. Senegal’s approximately twenty commercial banks, primarily based in France, Nigeria, Morocco, and Togo, follow generally conservative lending guidelines, with collateral requirements that most potential borrowers cannot meet. Few firms are eligible for long-term loans, and small- and medium-sized enterprises have little access to credit. According to a 2014 government survey, less than 5 percent of enterprises receive financing from commercial banks. Senegal’s banking sector is regulated by the BCEAO, the regional central bank, and the WAEMU regional banking commission. Increasingly available mobile money services offer Senegalese consumers alternatives to traditional banking and credit services. Foreign Exchange and Remittances Foreign Exchange As one of the eight WAEMU countries, Senegal uses the CFA franc – issued by the BCEAO – as its currency. The CFA franc is pegged to the Euro. Senegal’s Investment Code includes guarantees of access to foreign exchange and repatriation of capital and earnings, although repatriation transactions are subject to procedural requirements of financial regulators, including limitations imposed by the BCEAO on the use of offshore accounts. Local financial institutions routinely carry out commercial transfers in a timely fashion. The government limits the amount of foreign exchange that individual travelers may take outside Senegal. Departing travelers may carry a maximum of 6 million CFA francs (approximately $10,000) in foreign currency and travelers checks upon presentation of a valid airline ticket. Senegal’s bilateral investment treaty with the United States includes commitments to ensuring free transfer of funds associated with investments. Remittance Policies Remittances from Senegal’s large diaspora represent about 10 percent of GDP and are one of the main resources for the country. According to the last IMF review of Senegal’s economy, remittances remains a significant component of the current account but are expected to decline as a percent of GDP over the medium term. Remittances fell sharply in 2020 as a result of the global COVID-19 crisis. Sovereign Wealth Funds In 2012, Senegal established a sovereign wealth fund (Fonds Souverain d’Investissements Strategiques, or FONSIS) with a mandate to leverage public assets to support equity investments in commercial projects supporting economic development objectives, FONSIS invests primarily in strategic sectors defined in the Plan Senegal Emergent (PSE), including agriculture, fishing, infrastructure, energy, mining, tourism, and services. Senegal maintains several taxes and funds allocated for specific purposes such as expanding access to transportation, energy, and telecommunications, including the autonomous road maintenance fund and the energy support fund. For these funds, some information is included in budget annexes; these funds are subject to the same auditing and oversight mechanisms as ordinary budgetary spending. FONSIS reports that it abides by the Santiago Principles for sovereign wealth funds. 7. State-Owned Enterprises Senegal has generally reduced government involvement in state-owned enterprises (SOEs) during the last three decades. However, the government still owns full or majority interests in approximately 20 such companies, including the national electricity company (Senelec), Dakar’s public bus service, the Port of Dakar, the national postal company (National Post), the national rail company, and the national water utility. The state-owned electricity company, Senelec, retains control over power transmission and distribution, but it relies increasingly on independent power producers to generate power. The government has also retained control of the national oil company, Petrosen, which is involved in hydrocarbon exploration in partnership with foreign oil companies and operates a small refinery dependent on government subsidies. The government has modest and declining ownership of agricultural enterprises, including a state-owned company involved in rice production. In 2018, the government re-launched a wholly state-owned airline, Air Senegal. The government owns a minority share in Sonatel-Orange Senegal, the country’s largest internet and mobile communications provider. The Direction du Secteur Parapublic, an agency within the Ministry of Finance, manages the government’s ownership rights in enterprises. The government’s budget includes financial allocations to these enterprises, including subsidies to Senelec. SOE revenues are not projected in budget documents, but actual revenues are included in quarterly reports published by the Ministry of Finance. Senegal’s supreme audit institution (the Cour des Comptes) conducts audits of the public sector and SOEs. Its reports are made publicly available at www.coursdescomptes.sn and www.ige.sn, but not always in a timely fashion. Privatization Program The government has no program for privatizing the remaining SOEs. 9. Corruption Senegalese law provides criminal penalties for corruption. The National Anti-Corruption Commission (OFNAC) has a mandate to enforce anti-corruption laws. In January 2020, OFNAC released long overdue reports on its activities for 2017 and 2018 and swore in six new executive-level officials, bringing its managing board to a full complement for the first time in several years. A 2014 law requires the president, cabinet ministers, speaker and chief financial officer of the National Assembly, and managers of public funds in excess of one billion CFA francs (approximately $1.8 million) to disclose their assets to OFNAC. The government has made some limited progress in improving its anti-corruption efforts. The current administration has mounted corruption investigations against several public officials (primarily the president’s political rivals) and has secured several convictions. In July 2020, President Sall launched an initiative to enforce a requirement that cabinet members and other high-level officials disclose their assets, and issued a report disclosing his own personal assets. The government of Senegal has also taken steps to increase budget transparency in line with regional standards. Senegal ranked 66 out of 180 countries, in Transparency International’s 2019 Corruption Perception Index (CPI), representing a substantial improvement over Senegal’s ranking of 94 in 2012. Notwithstanding Senegal’s positive reputation for corruption relative to regional peers, the government often did not enforce the law effectively, and officials continued to engage in corrupt practices with impunity. Reports of corruption ranged from rent-seeking by bureaucrats involved in public approvals, to opaque public procurement, to corruption in the police and judiciary. Some high-level officials in President Sall’s administration are rumored to be involved in corrupt dealings. Senegal’s financial intelligence unit, Cellule Nationale de Traitement des Informations Financières (CENTIF) is responsible for investigating money laundering and terrorist financing. CENTIF has broad authority to investigate suspicious financial transactions, including those of government officials. In February 2019, the regional FATF body, GIABA, issued a Mutual Evaluation Report of Senegal’s anti-money laundering and countering terrorist financing (AML/CTF) performance, measured by FATF standards. Although GIABA found the GOS’s understanding of AML/CTF standards and risks adequate, it gave Senegal non-compliant or partially compliant ratings on 26 of FATF’s 40 recommendations concerning the AML/CTF legal framework (“technical compliance”). Senegal also received ten low ratings and one moderate rating on the FATF’s 11 indicators measuring Senegal’s practical efforts to combat money laundering, terrorist financing, and weapons of mass destruction proliferation financing. Key weaknesses included: failure to domesticate relevant BCEAO AML/CTF directives; inadequate monitoring of nonprofits and non-bank professions, such as lawyers and accountants, who engage in financial transactions; inadequate inspections and sanctions of financial institutions; weak interagency cooperation; and low levels of AML/CTF capacity among judicial and customs authorities. It is important for U.S. companies to assess corruption risks and develop an effective compliance program or measures to prevent and detect corruption, including foreign bribery. U.S. firms operating in Senegal can underscore to interlocutors in Senegal that they are subject to the Foreign Corrupt Practices Act (FCPA) in the U.S. and may consider seeking legal counsel to ensure compliance with anti-corruption laws in the U.S. and Senegal. The U.S. Government seeks to level the global playing field for U.S. businesses by encouraging other countries to take steps to criminalize all acts of corruption, including bribery of foreign public officials, and requiring them to uphold their obligations under relevant international conventions. A U.S. firm that believes a competitor is seeking to use bribery of a foreign public official to secure a contract may bring this to the attention of appropriate U.S. agencies. Senegal is a signatory of the United Nations Convention Against Corruption but it is not a signatory of the OECD Convention on Combatting Bribery. Resources to Report Corruption Mrs. Seynabou Ndiaye Diakhaté, President Office National de Lutte Contre La Fraude et la Corruption (OFNAC) Lot 72-73, Cité Keur Gorgui à Mermoz-Pyrotechnie Telephone: 800 000 900 / +221 33 889 98 38 www.ofnac.sn Birahim Seck President Forum Civil 40 Avenue Malick Sy (1er étage) – B.P. 28 554 – Dakar Telephone: +221 33 842 40 44 email@example.com / http://www.forumcivil.sn/ 10. Political and Security Environment Senegal has long been regarded as an anchor of stability in the West Africa region that is vulnerable to political unrest. It is the only mainland West African country that has never had a coup d’état since gaining independence in 1960. Senegal experienced sporadic incidents of political violence during the lead up to national elections in March 2012 due to strong opposition to former President Wade’s decision to seek reelection for a third term. However, the 2012 presidential election reinforced Senegal’s reputation as the strongest democracy in West Africa. International observers assessed the February 2019 presidential election, in which President Sall easily won a second term, as free and fair, despite some isolated systemic issues and a few instances of campaign violence. Public protests occasionally spawn isolated incidents of violence when unions, opposition parties, merchants, or students demand better salaries, working conditions or other benefits. Sporadic incidents of violence as result of petty banditry continue in the Casamance region, which has suffered from a three-decade-old conflict ignited by a local rebel movement seeking independence for the region, but the level of violence has declined in recent years as the government and rebel groups have engaged in negotiations to resolve the conflict. Security is a top priority for the government, which increased its defense and security budget by 92 percent between 2012 and 2017. Serbia Executive Summary Serbia’s investment climate has been modestly improving in recent years, driven by macroeconomic reforms, greater financial stability, improved fiscal discipline, and a European Union (EU) accession process that provides impetus for legal changes that improve the business environment. The government successfully completed a three-year Stand-by Arrangement with the International Monetary Fund (IMF), with the government exceeding all its fiscal targets in 2018. The government signed a new 30-month Policy Coordination Instrument with the IMF in mid-2018. Serbia improved four places in 2020 on the World Bank’s Doing Business Index and is now ranked 44th globally in ease of doing business. Attracting foreign investment remains an important priority for the Serbian government. U.S. investors in Serbia are generally positive, highlighting the country’s strategic location, well-educated and affordable labor force, excellent English language skills, investment incentives, and free-trade arrangements with key markets, particularly the EU. Generally, U.S. investors enjoy a level playing field with their Serbian and foreign competitors. The U.S. Embassy in Belgrade often assists investors when issues arise, and Serbian leaders are responsive to our concerns. Despite notable progress in Serbia, challenges remain, particularly with regard to bureaucratic delays and corruption. Other risks to the investment climate include unresolved loss-making state-owned enterprises (SOEs), a large informal economy, and an inefficient judiciary. Political influence on the decisions of nominally independent regulatory agencies is also a concern. Serbian companies faced temporary export restrictions on certain agricultural products and on all medicines in March and April 2020 due to the COVID-19 pandemic. The Serbian government lifted the export restriction on medicines on April 24 and lifted restrictions on all other affected goods on May 7. The Serbian government has identified economic growth and job creation as its top economic priorities and has committed itself to resolving several long-standing issues related to the country’s slow transition to market-driven capitalism. On the legislative front, the government has passed significant reforms to labor law, construction permitting, inspections, public procurement, and privatization that have helped improve the business environment. Both companies and officials have noted that the adoption of reforms has sometimes outpaced thorough implementation of these reforms. Digitizing certain functions (e.g., construction permitting, tax administration, e-signatures, and removing the previously ubiquitous requirement for ink stamps) has not yet brought a dramatic improvement in processing times and may not be consistently implemented. The government is slowly making progress on resolving the fate of troubled SOEs. Where possible, this has been achieved through bankruptcy or privatization actions. For example, bankruptcy protections were removed for 17 SOEs in May 2016, and the situation of most of these companies has been resolved. The government is also slowly decreasing Serbia’s bloated public-sector workforce, mainly through attrition and hiring freezes, which continued through 2018. If the government delivers on promised reforms during its EU accession process, business opportunities could continue to grow in the coming years. 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. Women in Serbia generally enjoy equal treatment in business, and the government offers various programs to support women’s businesses. One program that started in 2017 provides approximately USD 1 million from the Serbian government budget to support women’s innovative entrepreneurship in the form of small grants. Investors should monitor the government’s implementation of reforms as well as the government’s changing investment incentive programs. Table 1: Key Metrics and Rankings Measure Year Index/Rank Website Address TI Corruption Perceptions Index 2019 91 of 180 http://www.transparency.org/ research/cpi/overview World Bank’s Doing Business Report 2020 44 of 190 http://www.doingbusiness.org/en/rankings Global Innovation Index 2019 57 of 129 https://www.globalinnovationindex.org/ analysis-indicator U.S. FDI in partner country ($M USD, historical stock positions) 2018 USD 145 million http://apps.bea.gov/international/factsheet/ World Bank GNI per capita 2018 USD 7,234 http://data.worldbank.org/ indicator/NY.GNP.PCAP.CD 1. Openness To, and Restrictions Upon, Foreign Investment Policies Towards Foreign Direct Investment Serbia is open to FDI, and attracting FDI is a priority for the government. Even during its socialist past, Serbia prioritized international commerce and attracted a sizeable international business community. This trend continues, and the Law on Investments extends national treatment to and eliminates discriminatory practices against foreign investors. The law also allows the repatriation of profits and dividends, provides guarantees against expropriation, allows customs duty waivers for equipment imported as capital in kind, and enables foreign investors to qualify for government incentives. The Government’s investment promotion authority is the Development Agency of Serbia (Razvojna agencija Srbije – RAS: http://ras.gov.rs/ ). RAS offers a wide range of services, including support of direct investments, export promotion, and coordinating the implementation of investment projects. RAS serves as a one-stop-shop for both domestic and international companies. The government maintains a dialogue with businesses through associations such as the Serbian Chamber of Commerce, American Chamber of Commerce in Serbia, Foreign Investors’ Council (FIC), and Serbian Association of Managers (SAM). Limits on Foreign Control and Right to Private Ownership and Establishment Foreign and domestic private entities have the right to establish and own businesses, and to engage in all forms of remunerative activity. For some business activities, licenses are required, e.g., financial institutions must be licensed by the National Bank of Serbia prior to registration. Licensing limitations apply to both domestic and foreign companies active in finance, energy, mining, pharmaceuticals, medical devices, tobacco, arms and military equipment, road transportation, customs processing, land development, electronic communications, auditing, waste management, and production and trade of hazardous chemicals. Serbian citizens and foreign investors enjoy full private-property ownership rights. Private entities can freely establish, acquire, and dispose of interests in business enterprises. By law, private companies compete equally with public enterprises in the market and for access to credit, supplies, licenses, and other aspects of doing business. Serbia does not maintain investment screening or approval mechanisms for inbound foreign investment. U.S. investors are not disadvantaged or singled out by any rules or regulations. Agribusiness: Foreign citizens and foreign companies are prohibited from owning agricultural land in Serbia. However, foreign ownership restrictions on farmland do not apply to companies registered in Serbia, even if the company is foreign-owned. Unofficial estimates suggest that Serbian subsidiaries of foreign companies own some 20,000 hectares of farmland in the country. EU citizens are exempt from this ban, as of 2017, although they may only buy up to two hectares of agricultural land under certain conditions. They must permanently reside in the municipality where the land is located for at least 10 years, practice farming on the land in question for at least three years, and own adequate agriculture machinery and equipment. Defense: The Law on Investments adopted in 2015 ended discriminatory practices that prevented foreign companies from establishing companies in the production and trade of arms (for example, the defense industry) or in specific areas of the country. Further liberalization of investment in the defense industry continued via a new Law on the Production and Trade of Arms and Ammunition, adopted in May 2018. The law enables total foreign ownership of up to 49 percent in seven SOEs, collectively referred to as the “Defense Industry of Serbia,” so long as no single foreign shareholder exceeds 15 percent ownership. The law also cancels limitations on foreign ownership for arms and ammunition manufacturers. Other Investment Policy Reviews Serbia underwent formal reviews by the Organization for Economic Cooperation and Development (OECD) on Labour Market and Social Policies in 2008 and by the United Nations Conference on Trade and Development (UNCTAD) on competition policy in 2011. Business Facilitation According to the World Bank’s 2020 Doing Business Index, it takes seven procedures and seven days to establish a foreign-owned limited liability company in Serbia. This is fewer days but more procedures than the average for Europe and Central Asia. In addition to the procedures required of a domestic company, a foreign parent company establishing a subsidiary in Serbia must translate its corporate documents into Serbian. Under the Business Registration Law, the Serbian Business Registers Agency (SBRA) oversees company registration. SBRA’s website is available in English at www.apr.gov.rs/home.1435.html . All entities applying for incorporation with SBRA can use a single application form and are not required to have signatures notarized. Companies in Serbia can open and maintain bank accounts in foreign currency, although they must also have an account in Serbian dinars (RSD). The minimum capital requirement is symbolic at RSD 100 (less than USD 1) for limited liability companies, rising to RSD 3 million (approximately USD 27,500) for a joint stock company. A single-window registration process enables companies that register with SBRA to obtain a tax registration number (poreski identifikacioni broj – PIB) and health insurance number concurrently with registration. In addition, companies must register employees with the Pension Fund at the Fund’s premises. Since December 2017, the Labor Law requires employers to register new employees before they start their first day at work; previously, the deadline was registration within 15 days of employment. These amendments represent an attempt by the government to decrease the grey labor market by allowing labor inspectors to penalize employers if they find unregistered workers. Pursuant to the Law on Accounting, companies in Serbia are classified as micro, small, medium, and large, depending on the number of employees, operating revenues, and value of assets. RAS supports direct investment and promotes exports. It also implements projects aimed at improving competitiveness, supporting economic development, and supporting small-and medium-sized enterprises (SMEs) and entrepreneurs. More information is available at http://ras.gov.rs . Serbia’s business-facilitation mechanisms provide for equitable treatment of both men and women when a registering company, according to the World Bank’s 2020 Doing Business Index. The government has declared 2017-2027 a Decade of Entrepreneurship, with special programs to support entrepreneurship by women. Outward Investment The Serbian government neither promotes nor restricts outward direct investment. Restrictions on short-term capital transactions—i.e., portfolio investments—were lifted in April 2018 through amendments to the Law on Foreign Exchange Operations. Prior to this, residents of Serbia were not allowed to purchase foreign short-term securities, and foreigners were not allowed to purchase short-term securities in Serbia. There are no restrictions on payments related to long-term securities. Capital markets are not fully liberalized for individuals. Citizens of Serbia are not allowed to have currency accounts abroad, or to keep accounts abroad, except in exceptional situations listed in the Law on Foreign Exchange Operations (such situations may include work or study abroad). 6. Financial Sector Capital Markets and Portfolio Investment Serbia welcomes both domestic and foreign portfolio investments and regulates them efficiently. The Government removed restrictions on short-term portfolio investments April 2018. Residents of Serbia are now allowed to purchase foreign short-term securities, and foreigners are allowed to purchase short-term securities in Serbia. Payments related to long-term securities have no restriction. In 2019, Serbia recorded net outflows of USD 200 million in portfolio investment, according to the National Bank of Serbia (NBS). The Serbian government regularly issues bonds to finance its budget deficit, including short-term, dinar-denominated T-bills, and dinar-denominated, euro-indexed government bonds. The total value of government debt securities issued on the domestic market reached USD 10.8 billion in February 2020, with 67.3 percent in Serbian dinars, 33 percent in euros, and 0.6 percent in U.S. dollars. Serbia also issued a total value of EUR 3 billion of Eurobonds on international market. Total Serbian government-issued debt instruments on the domestic and international markets stood at USD 14.3 billion in February 2020 (see http://www.javnidug.gov.rs/upload/Bilteni/2020%20Mesecni/Februar/Mesecni%20izvestaj%20Uprave%20za%20javni%20dug%20-%20CIR%20Februar%202020.pdf ). Serbia’s international credit ratings are improving. In March 2017, Moody’s upgraded the Government of Serbia’s long-term issuer ratings to Ba3, from B1. In December 2019, Standard & Poor’s raised its ratings for Serbia from BB to BB+ with a positive outlook; it maintained the rating on May 1, 2020, while modifying the outlook to stable. Also in September 2019, Fitch raised Serbia’s credit rating from BB to BB+. The improved ratings remain below investment grade. Serbia’s equity and bond markets are underdeveloped. Corporate securities and government bonds are traded on the Belgrade Stock Exchange (BSE) www.belex.rs . Of 990 companies listed on the exchange, shares of fewer than 100 companies are traded regularly (more than once a week). Total annual turnover on the BSE in 2019 was USD 860 million, which represents an increase of 47 percent. However, trading volumes have declined since 2007, when the total turnover reached USD 2.7 billion. Established in 1995, the Securities Commission regulates the Serbian securities market. The Commission also supervises investment funds in accordance with the Investment Funds Law. As of April 2020, 18 registered investment funds operate in Serbia-http://www.sec.gov.rs/index.php/en/public-registers-of-information/register-of-investment-funds . Market terms determine credit allocation. In June 2019, the total volume of issued loans in the financial sector stood at USD 23.3 billion. Average interest rates are decreasing but still higher than the EU average. The business community cites tight credit policies and expensive commercial borrowing for all but the largest corporations as impediments to business expansion. Around 67 percent of all lending is denominated in euros, an additional 0.5 percent in Swiss francs, and 0.6 percent in U.S. dollars, all of which provide lower rates, but also shift exchange-rate risk to borrowers. Foreign investors are able to obtain credit on the domestic market. The government and central bank respect IMF Article VIII, and do not place restrictions on payments or transfers for current international transactions. Hostile takeovers are extremely rare in Serbia. The Law on Takeover of Shareholding Companies regulates defense mechanisms. Frequently after privatization, the new strategic owners of formerly state-controlled companies have sought to buy out minority shareholders. Money and Banking System The NBS regulates the banking sector. Foreign banks are allowed to establish operations in Serbia, and foreigners can freely open both local currency and hard currency non-resident accounts. The banking sector comprises 91 percent of the total assets of the financial sector. As of June 2019, consolidation had reduced the sector to 26 banks with total assets of USD 38 billion (about 80 percent of GDP), with 76.5 percent of the market held by foreign-owned banks. The top ten banks, with country of ownership and estimated assets, are Banca Intesa (Italy, USD 5.9 billion); UniCredit (Italy, USD 4.4 billion); Komercijalna Banka (majority Serbian government-owned, now in the process of being sold to Slovenia’s NLB Bank, USD 4.1 billion); Société Générale (France, USD 3.1 billion); Raiffeisen (Austria, USD 3.0 billion); Erste Bank (Austria, USD 2.2 billion) AIK Banka Nis (Serbia, USD 2.1 billion); Eurobank EFG (Greece, USD 1.6 billion); Vojvodjanska Banka (Hungary, USD 2.0 billion) Postanska Stedionica (Serbian government, USD 1.8 billion). See: https://www.nbs.rs/internet/latinica/55/55_4/kvartalni_izvestaj_II_19.pdf Four state-owned banks in Serbia went bankrupt after the global financial crisis in 2008. The state compensated the banks’ depositors with payouts of nearly USD 1 billion. A number of state-controlled banks have had financial difficulties since the crisis because of mismanagement and, in one instance, alleged corruption. The banks honored all withdrawal requests during the financial crisis and appear to have regained consumer trust, as evidenced by the gradual return of withdrawn deposits to the banking system. In June 2019, savings deposits in the banking sector reached USD 14 billion, exceeding pre-crisis levels. The IMF assessed in their July 2019 report on Serbia that since the 2017 Article IV Consultation, the financial sector has shown improved resilience. As of February 2019, banks’ capital adequacy was stable at 22.3 percent, well above the regulatory minimum, while asset quality is improving. Banks’ profitability remains robust with return on assets and return on equity ratios of 1.9 percent and 10.6 percent respectively in February 2019. The IMF assessed in 2018 that authorities had made important progress, with the aggregate stock of non-performing loans (NPLs) falling both in nominal terms and relative to total loans. Since the adoption of an NPL resolution strategy in mid-2015, NPLs have declined from 22.2 to 4.1 percent of the total loan portfolio as of February 2020. NPLs remain fully provisioned. In addition, there are significant foreign-exchange risks, as 74 percent of all outstanding loans are indexed to foreign currencies (primarily the euro). In April 2019, the government adopted a law that protected consumers who had taken mortgage loans denominated in Swiss francs by converting them into euros. Banks and the state shared losses resulting from a reduction of outstanding principal and interest balances. This law enabled borrowers to continue servicing debt at more favorable terms. The NBS, as chief regulator of the financial system, has announced that cryptocurrencies are not money, and thus are not regulated by law in Serbia. Cryptocurrencies are only mentioned in Serbian legislation in the Law on Preventing of Money Laundering and Terrorist Financing. NBS is not currently preparing cryptocurrency regulations. NBS said it does not have the authority to issue licenses for trading in cryptocurrencies or for setting up cryptocurrency ATMs. Nor are cryptocurrency traders or internet platforms subject to NBS oversight. NBS stressed that those engaging in cryptocurrency transactions or activities are the sole carriers of risk. However, the Serbian Administration for Prevention of Money Laundering and Terrorist Financing oversees every transaction in cryptocurrencies performed on ATMs or online in Serbia. Despite the lack of regulation, trading in cryptocurrencies in Serbia does occur. The company ECD Group has installed an online platform for trading in cryptocurrencies (Bitcoin BTC, Litecoin LTC, Ethereum ETH, Dash, and Bitcoin Cash) at https://ecd.rs/ . The company claims to have over 20,000 registered users of the platform. ECD Group has also installed 10 ATMs for cryptocurrencies in Serbia, most of which are in Belgrade but also in Novi Sad, Nis, and Subotica. EDC claims that it has executed over 100,000 transactions since it was established in 2012. As of June 2019, Xcalibra established a new digital platform (Xcalibra.com) to trade cryptocurrencies in Serbian dinars without mediator currencies, which will avoid currency exchange loss. There is also a Bitcoin Association of Serbia.- http://www.bitcoinasocijacija.org . Foreign Exchange and Remittances Foreign Exchange Serbia’s Foreign Investment Law guarantees the right to transfer and repatriate profits from Serbia, and foreign exchange is available. Serbia permits the free flow of capital, including for investment, such as the acquisition of real estate and equipment. Non-residents may maintain both foreign-currency and dinar-denominated bank accounts without restrictions. Investors may use these accounts to make or receive payments in foreign currency. The government amended the Foreign Exchange Law in December 2014 to authorize Serbian citizens to conclude transactions abroad through internet payment systems such as PayPal. Many companies have raised concerns that the NBS uses excessive enforcement of the Foreign Exchange Law to individually examine all cross-currency financial transactions – including intra-company transfers between foreign headquarters and local subsidiaries, as well as loan disbursements to international firms – thus raising the cost and bureaucratic burden of transactions and inhibiting the development of e-commerce within Serbia. For this reason, international financial institutions and the business community have urged revision of the law. The NBS has defended the measure as necessary to prevent money laundering and other financial crimes. The NBS targets inflation in its monetary policy, and regularly intervenes in the foreign-exchange market to that end. In 2019, the NBS made net purchases of EUR 2.7 billion on the interbank currency market in order to prevent sharp fluctuations of the dinar. In 2019, the dinar appreciated 0.5 percent against the euro and depreciated 1.5 percent against the U.S. dollar. No evidence has been reported that Serbia engages in currency manipulation. According to the IMF, Serbia maintains a system free of restrictions on current international payments and transfers, except with respect to blocked pre-1991 foreign currency savings abroad. JP Morgan assessed in December 2019 that the Serbian dinar is one of the two most realistically valued currencies among 25 emerging markets globally. Remittance Policies Personal remittances constitute a significant source of income for Serbian households. In 2019, total remittances from abroad reached USD 2.7 billion, or approximately 7 percent of GDP. The Law on Foreign Exchange Operations regulates investment remittances, which can occur freely and without limits. The Investment Law allows foreign investors to freely and without delay transfer all financial and other assets related to the investment to a foreign country, including profit, assets, dividends, royalties, interest, earnings share sales, proceeds from sale of capital and other receivables. The Foreign Investors’ Council, a business association of foreign investors, confirms that there are no limitations on investment remittances in Serbia. Sovereign Wealth Funds Serbia does not have a sovereign wealth fund. 7. State-Owned Enterprises The Law on Public Enterprises, adopted in February 2016, defines a public enterprise as “an enterprise pursuing an activity of common interest, founded by the State or Autonomous Province or a local government unit.” The law also defines “strategically important companies” as those in which the state has at least a 25 percent ownership share. The law aimed to introduce responsible corporate management in public companies and strengthen supervision over public companies’ management. The law requires that directors of public companies be selected through a public application procedure and that they not hold any political party positions while serving. The law also requires that a portion of public companies’ profits be paid directly to the state, provincial, or local government budget. However, Transparency International Serbia analyzed implementation of the law in September 2017 and concluded that almost none of these requirements have been implemented, including the professionalization and transparency of management. The full report can be seen at: http://transparentnost.org.rs/images/publikacije/Political_influence_on_public_enterprises_and_media.pdf SOEs dominate many sectors of the economy, including energy, transportation, utilities, telecommunications, infrastructure, mining, and natural resource extraction. According to the Agency for Business Registers, Serbia has 549 SOEs, which employ more than 115,000 people, or approximately 4 percent of the formal workforce. A list of all public enterprises is available at the Ministry of Economy’s website: http://privreda.gov.rs/wp-content/uploads/2017/08/Spisak-JP-I-DK-Za-Sajt-Avgust-2017.pdf. In addition to these, at the beginning of 2020, 73 companies with nearly 27,000 employees had not been resolved through privatization or bankruptcy, down from 90 companies in early 2019. The Ministry of Economy is preparing these companies for divestiture (see Privatization Program, below). A quasi-governmental watchdog agency, the Fiscal Council, assessed in September 2017 that unreformed and un-privatized SOEs represent the most significant threat to Serbia’s state budget. In December 2016, the Serbian government committed to the IMF to significantly reduce the fiscal cost of SOEs by curtailing direct and indirect subsidies, strictly limiting the issuance of new guarantees, and enhancing the accountability, transparency, and monitoring of SOEs. The Fiscal Council said in January 2019 that even when they do not require immediate budget support, as a rule, SOEs operate inefficiently and do not invest enough to keep their businesses healthy. For example, by far the largest SOE in Serbia, the power company EPS, has invested less per year than the value of the depreciation of its assets, the Fiscal Council warned. According to the Agency for Business Registration in Serbia’s annual report, public companies in Serbia generated losses of RSD 574 million (USD 5.7 million) in 2019. In June 2017, the Fiscal Council published a separate study on state-owned local utility and service companies, and assessed that they received subsidies up to EUR 200 million (0.7 percent of GDP) annually but still generated losses of EUR 50 million. In addition, they have accumulated payment arrears totaling some EUR 150 million. At the same time, the quality of the services they provide is very low. For example, 98 percent of waste ends up at landfills without any processing, compared to 25 percent in the EU. Only 15 percent of wastewater is treated, compared to 85 percent in neighboring countries. The Council assessed that these local companies fail to collect 10 percent of their receivables, and the bulk of unpaid obligations are from SOEs. In principle, SOEs are treated the same as private sector competitors. SOEs can purchase goods from the private sector and foreign firms under the Public Procurement Law. For example, foreign companies regularly win public tenders for the construction of roads and other infrastructure projects. Under the Public Procurement Law, a buyer must select a domestic supplier if the domestic supplier’s price is no more than five percent higher than a foreign supplier’s price. The Public Procurement Office (PPO) is an independent state body that supervises implementation of the Law on Public Procurement. Private enterprises have the same access to financing, land, and raw materials as SOEs, as well as the same tax burden and rebate policies. However, the IMF estimated that in 2014, SOEs enjoyed benefits amounting to approximately two percent of GDP. Serbia—not yet a member of the WTO—is not a party to the WTO’s Government Procurement Agreement (GPA). Privatization Program From 2001 through 2015, the Serbian government privatized 3,047 SOEs. The government cancelled 646 of these privatizations, alleging that investors did not meet contractual obligations related to employment and investment. According to the Privatization Law, the deadline for the privatization of the 646 companies in the Privatization Agency’s portfolio was December 31, 2015. However, 73 companies were still unresolved as of April 2020. Among others, these companies include ten spas, which all have unresolved property issues; 13 companies in Kosovo, three veterinary stations which were transferred to local municipalities; 15 companies in restructuring that face bankruptcy, and one company that employs disabled persons. Most significantly, the Ministry of Economy must still resolve several large, strategically important SOEs. These include the Resavica coal mine, MSK Kikinda, Petrohemija, and others; however, there was progress in privatization in 2018. Copper mining complex RTB Bor was sold to China’s Zijin Mining, and agricultural corporation PKB to Al Dahra of the United Arab Emirates. In addition, fertilizer producer Azotara was sent to bankruptcy. In many cases, closing these companies would mean leaving whole regions of Serbia destitute, since these companies are drivers of local economies. The Serbian government continues to engage foreign investors in the privatization process, inviting them to submit bids, participate in auctions, and purchase company shares. Invitations for privatization and bidding are published on the Ministry of Economy website at http://www.priv.rs/Naslovna . In December 2018, the French Vinci Airports took over operations of Belgrade’s Nikola Tesla Airport under a 25-year concession agreement. According to official statements, Vinci had offered EUR 501 million to manage the airport and EUR 732 million in investment, as well as an annual fee of up to EUR 16 million. The state telecommunications company Telekom Srbija has garnered investor interest, but the Serbian government has twice canceled its privatization, most recently in December 2015. The government has also concluded the tender for privatization of the second largest bank in the country, Komercijalna Banka, and awarded the contract to Slovenian NLB bank. The sale is expected to be complete by the end of 2020. 9. Corruption Surveys show that corruption is believed to be prevalent in many areas and remains an issue of concern. Serbia was ranked 91st in Transparency International’s 2020 Corruption Perceptions Index, down from 87th in 2018. However, its score – 39 out of 100 possible points – remained unchanged. Serbia is a signatory to the Council of Europe’s Civil Law Convention on Corruption and has ratified the Council’s Criminal Law Convention on Corruption, the UN Convention against Transnational Organized Crime, and the UN Convention against Corruption. Serbia also is a member of the Group of States against Corruption (GRECO), a peer-monitoring organization that provides peer-based assessments of members’ anti-corruption efforts on a continuing basis. The Serbian government has worked to bring its legal framework for preventing and combating corruption more in line with EU norms, and a dedicated state body—the Anti-Corruption Agency (ACA) —oversees efforts in this area. The Criminal Code specifies a large number of potential offenses that can be used to prosecute corruption and economic offenses, including but not limited to giving or accepting a bribe, abuse of office, abuse of a monopoly, misfeasance in public procurement, abuse of economic authority, fraud in service, and embezzlement. As of 2018, Serbia’s National Assembly strengthened anti-corruption laws through three pieces of legislation. The Law on Organization and Competence of State Organs in Suppressing Corruption, Organized Crime for the first time established specialized anti-corruption prosecution units and judicial departments, mandated the use of task forces, and introduced liaison officers and financial forensic experts. The Law on Asset Forfeiture was amended to expand coverage to new criminal offences, and amendments to the Criminal Code made corruption offenses easier to prosecute. Following these legal changes, specialized anti-corruption departments started operations in March 2018 in Novi Sad, Belgrade, Kraljevo, and Niš to prosecute offenders who have committed crimes of corruption valued at less than RSD 200 million (USD 2.1 million). Cases valued above this level are handled by the Organized Crime Prosecutor’s Office. Serbian law also requires income and asset disclosure by appointed or elected officials, and regulates conflict of interest for all public officials. The disclosures cover assets of the officials, spouses, and dependent children. Declarations are publicly available on the ACA website, and failures to file or to fully disclose income and assets are subject to administrative and/or criminal sanctions. Significant changes to assets or income must be reported annually, upon departure from office, and for a period of two years after separation. Serbian authorities do not require private companies to establish internal codes of conduct related to corruption or other matters, but some professional associations – e.g., for attorneys, engineers and doctors – enforce codes of conduct for their members. Private companies often have internal controls, ethics, or compliance programs designed to detect and prevent bribery of government officials. Large companies often have elaborate internal programs, especially in industries such as tobacco, pharmaceuticals, medical devices, and industries regularly involved in public procurement. Serbian law does not provide protection for non-governmental organizations involved in investigating corruption. However, the criminal procedure code provides witness protection measures, and Serbia enacted a Whistleblower Protection Law in June 2015, under which individuals can report corruption in companies and government agencies and receive court protection from retaliation by their employers. In September 2019, whistleblower Aleksandar Obradovic, an IT expert at the state-owned Krusik munitions plant, was arrested and charged with revealing trade secrets after he leaked documents showing dubious deals between Krusik and private companies, including a deal with the GIM Company in which a cabinet minister’s father was involved. A judge lifted Obradovic’s house arrest and ban on internet use in December 2019. However, prosecutors continue to pursue his case, arguing that Obradovic is not covered by the Whistleblower Protection Law. U.S. firms interested in doing business or investing in Serbia are advised to perform due diligence before concluding business deals. Legal audits generally are consistent with international standards, using information gathered from public books, the register of fixed assets, the court register, the statistical register, as well as from the firm itself, chambers, and other sources. The U.S. Commercial Service in Belgrade can provide U.S. companies with background information on companies and individuals via the International Company Profile (ICP) service. An ICP provides information about a local company or entity, its financial standing, and reputation in the business community, and includes a site visit to the local company and a confidential interview with the company management. For more information, contact the local office at firstname.lastname@example.org and visit www.export.gov/serbia . The U.S. Commercial Service also maintains lists of international consulting firms in Belgrade, local consulting firms, experienced professionals, and corporate/commercial law offices, in addition to its export promotion and advocacy services for U.S. business. Some U.S. firms have identified corruption as an obstacle to foreign direct investment in Serbia. Corruption appears most pervasive in cases involving public procurement, natural resource extraction, government-owned property, and political influence/pressure on the judiciary and prosecutors. The Regional Anti-Corruption Initiative maintains a website with updates about anti-corruption efforts in Serbia and the region: http://rai-see.org/ . Resources to Report Corruption Serbian Anti-Corruption Agency Carice Milice 1, 11000 Belgrade, Serbia +381 (0) 11 4149 100 email@example.com Transparency International Serbia Transparentnost Serbia Palmoticeva 27, 11000 Belgrade, Serbia +381 (0) 11 303 38 27 firstname.lastname@example.org 10. Political and Security Environment Since October 2000, Serbia has had democratically elected governments that have committed publicly to supporting regional stability and security. Governments, however, frequently call early elections at the local and national level, which often leave politicians and elected officials focused on the next campaign. During the 2020 COVID-19 crisis, Serbia’s first regularly scheduled parliamentary elections in several cycles were postponed due to the state of emergency declared by President Vucic. Elections in Serbia are generally free and without incidents of violence, although observers have noted irregularities at polling stations and incidents of vote-buying and pressure on voters. The government has made EU membership a primary goal, but progress toward that goal is slow, with only 18 out of 35 chapters open in Serbia’s EU acquis and only two chapters provisionally closed. Corruption is widespread, and despite some anti-corruption reforms by the government, arrests and investigations generally focus on low or mid-level technocrats, and corruption-related trials are typically drawn-out and subject to a lengthy appeal process. Protests are not uncommon, particularly in urban areas. Beginning in December 2018 and continuing through early 2020, weekly anti-government demonstrations were held across the country, attracting large crowds in major cities. The protests were broadly peaceful. There were large protests following the presidential election in April 2017 and in 2016 after the illegal demolition of residential buildings in Belgrade. Immediately following Kosovo’s February 2008 declaration of independence from Serbia, groups attacked embassies of countries that recognized Kosovo, resulting in the torching of the U.S. Embassy in Belgrade. Organized groups of counter protesters assaulted participants at the 2010 LGBTI Pride Parade in Belgrade. The Serbian government cancelled the three subsequent Pride Parades at the last minute, ostensibly because of threats of violence by the same nationalist and extremist groups that attempted to disrupt the 2010 parade. Since 2014, the government has allowed Pride Parades to take place in central Belgrade, under heavy police protection and often sparsely attended, but without incident. Following its sixth successive incident-free parade, Serbia was selected to host EuroPride in 2022, indicating some confidence that a recurrence of wide-scale violence was unlikely. Since 2017, there has been an increase in criminal activity linked to transnational organized crime groups. Sports hooliganism in Serbia is often associated with organized crime, and violent hooliganism remains a concern at matches of rival soccer teams within Serbia. A number of ultra-nationalist organizations, such as Obraz and Nasi, are present in Serbia. These organizations have harassed Serbian political leaders, local NGOs, minority groups, and media outlets considered to be pro-Western, but these incidents are infrequent. Incidents include attacks on Roma settlements and anti-Roma riots in 2010, 2012, and 2013, and attacks on shops and bakeries owned by ethnic Albanians in Vojvodina in 2014. In the 2016 parliamentary elections, three far-right political parties were elected to the National Assembly: the Serbian Radical Party, the Democratic Party of Serbia, and Dveri. Seychelles Executive Summary Seychelles is an island nation located off the eastern coast of Africa in the Indian Ocean with a population of 97,265. Seychelles gained its independence from the United Kingdom in 1976, at which time the population lived at near subsistence level. Today, Seychelles’ main economic activities are tourism and fishing, and the country aspires to be a financial hub. Although the World Bank designated Seychelles as a “high income” country in 2015, its wealth is not evenly distributed. According to the United Nations Development Program’s Human Development Report for 2019, the share of income held by the richest 10 percent in Seychelles amounts to 40 percent. Seychelles experienced a socialist coup in 1977, which resulted in a centrally planned economy and, in the short term, rapid economic development. However, serious imbalances such as large deficits and mounting debt contributed to persistent foreign exchange shortages and slow growth that plagued Seychelles through the first decade of the 21st century. After defaulting on interest payments due on a $230 million bond in 2008, the Government of Seychelles (GOS) turned to the International Monetary Fund (IMF) for support. To meet the IMF’s conditions for a stand-by loan, the GOS implemented a program of reforms, including a liberalization of the exchange rate regime, devaluing and floating the Seychellois Rupee (SCR), and eliminating all foreign exchange controls. As a result, the country has experienced economic growth, lower inflation, a stabilized exchange rate, declining public debt, and increased international reserves. Drivers of economic growth include fisheries, tourism, and construction. However, heavy reliance on the tourism industry, which contributes to 60 percent of GDP, makes the overall economy vulnerable to external shocks, such as a slowdown in the economies of European, Middle Eastern, and Asian countries from which most tourists travel. According to the Central Bank of Seychelles, real GDP grew by 3.9 percent in 2019, down from 3.8 percent in 2018. The IMF forecasts that the GDP will contract by 10.8 percent in 2020 due the Covid-19 crisis. Despite GOS attempts to diversify the economy, it remains focused on fishing and tourism. Seychelles’ vast Exclusive Economic Zone (EEZ), which spans 1.3 million square kilometers of the western Indian Ocean, 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 naturally beautiful environment. Seychelles welcomes foreign investment, though the Seychelles Investment Act and 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 an increase in productivity levels, but stress that this must be done in an environmentally sound and sustainable manner. Indeed, 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. Politically, Seychelles’ first multiparty presidential election was held in 1993, after the adoption of a new constitution. In September 2016, the opposition coalition Linyon Demokratik Seselwa (made up of the four opposition parties: the Seychelles National Party, the Seychelles Party for Social Justice and Democracy, the Lalyans Seselwa, and the Seychelles United Party) won the legislative elections for the first time. Before the elections, the ruling Parti Lepep (now also called United Seychelles) held all 25 directly elected seats in the National Assembly and an additional seven proportionate seats, leaving just one seat for the opposition. Currently, and for the first time since the return of multi-party democracy in 1993, Parti Lepep (United Seychelles) does not have a parliamentary majority, holding only 14 of 33 seats. The next presidential election is scheduled to be held between September and November 2020. Table 1: Key Metrics and Rankings Measure Year Index/Rank Website Address TI Corruption Perceptions Index 2019 66 of 175 http://www.transparency.org/ research/cpi/overview World Bank’s Doing Business Report 2020 100 of 190 http://www.doingbusiness.org/en/rankings Global Innovation Index 2019 N/A https://www.globalinnovationindex.org/ analysis-indicator U.S. FDI in partner country ($M USD, historical stock positions) 2019 N/A https://apps.bea.gov/international/factsheet/ World Bank GNI per capita (USD) 2018 15,600 http://data.worldbank.org/indicator/ NY.GNP.PCAP.CD 1. Openness To, and Restrictions Upon, Foreign Investment Policies Towards Foreign Direct Investment Seychelles has a favorable attitude toward most foreign direct investment, though the GOS reserves certain types of business activities for domestic investors only. The Seychelles Investment (Economic Activities) Regulations provide a detailed list of 65 types of business in which only Seychellois may invest, available here: https://www.investinseychelles.com/component/edocman/si-71-seychelles-investment-economic-activities/download?Itemid=0 . The Regulations also provide details on the limitations on foreign equity for certain types of businesses and a list of economic activities in which need-based investment may be allowed by a foreigner. In June 2015, Seychelles implemented a moratorium on the construction of large hotels of 25 rooms and above in the island. In 2017, the President announced the decision to extend the moratorium until the end of 2020. The Seychelles Investment Board (SIB) is the national single gateway agency for the promotion and facilitation of investment in Seychelles. The government’s objective is to promote economic and commercial relationships to diversify the economy, as well as to sustain its tourism and fishing industries, which are currently the main drivers of economic growth. The SIB organizes sector specific meetings with investors periodically and hosts a National Business Forum every two years to engage with the private sector. Limits on Foreign Control and Right to Private Ownership and Establishment The Seychelles Investment Act of 2010 and Seychelles Investment (Economic Activities) Regulations 2014 govern foreign direct investment (FDI) in Seychelles and are available at: https://www.investinseychelles.com/investors-guide/policies-guidelines-acts . Since the financial crisis of 2008 and the implementation of subsequent IMF reforms, Seychelles has successfully attracted FDI. According to the Central Bank of Seychelles, gross FDI inflows in 2019 amounted to $246 million, representing a decrease of $62 million compared to 2018. This decrease is principally due to delays in the implementation of a number of tourism projects that were not affected by the 2015-2020 moratorium on large tourism developments. The SIB advises foreign investors on the laws, regulations, and procedures for their activities in Seychelles. The Seychelles Investment (Economic Activities) Regulations of 2014 lists the economic activities in which only Seychellois can invest. This regulation is currently being reviewed to convert the list into a list of foreign activities in which foreigners can invest to allow for increased transparency and better governance. Seychelles also places financial limits on foreign equity in certain types of resident companies – these limits are detailed in the Seychelles Investment (Economic Activities) Regulations 2014. The Regulations also provide a list of economic activities in which need-based foreign investment may be allowed. While SIB and the GOS encourage foreign investors to collaborate with a local partner, there is no formal requirement. SIB also assists in screening potential investment projects in cooperation with other government agencies. For a business to operate, investors need to apply for a license from the Seychelles Licensing Authority. The GOS established an Investment Appeal Panel in 2012 to provide an appeal mechanism for investors to challenge GOS decisions regarding investments or proposed investments in Seychelles. More information is available in the Seychelles Investment Act 2010: https://seylii.org/sc/Act%2031%20of%202010%20Seychelles%20Investment%20Act%20%5BNo%20subsidiary%5D.pdf Other Investment Policy Reviews To date, Seychelles has not conducted an investment policy review through the Organization for Economic Cooperation and Development (OECD) or the World Trade Organization (WTO). Seychelles became the 161st WTO member in April 2015. UNCTAD is currently conducting an investment policy review in Seychelles and the report is expected to be finalized by the end of 2020. Business Facilitation The GOS committed to improving the business environment through measures such as using public-private partnerships (PPP) to upgrade the country’s infrastructure. The GOS announced a draft PPP law in 2018; as of March 2020, the National Assembly had not yet voted on the measure. In his 2018 budget speech, the Minister of Finance announced that the Customs Department would be restructured to modernize its activities and facilitate trade. Seychelles reviewed its Customs Management Tariff Classification of Goods Regulations and adopted the 2017 version of the Harmonized System of classification in 2018. The GOS is also currently reviewing the Companies Act of 1972. Seychelles is ranked 100th in the World Bank’s 2020 Ease of Doing Business Report. On average, it takes eight days to obtain a certificate of incorporation and 14 days to obtain a business license. Details on starting a business in Seychelles are available on the World Bank website: https://www.doingbusiness.org/en/data/exploreeconomies/seychelles#. Information on registering a business in Seychelles can be obtained on the SIB website: https://www.investinseychelles.com/investors-guide/start-your-business. Companies, including those foreign-owned, can register business names online through the business registration portal: http://www.sqa.sc/BizRegistration/WebBusinessRegsitration.aspx . However, part of the registration process, such as payment of fees, still must be completed in-person. The Enterprise Seychelles Agency (ESA) is responsible for providing business development services to improve the performance of micro, small, and medium enterprises in Seychelles. Services provided by ESA include business planning, training, marketing expertise, and identification of business opportunities for SMEs. Outward Investment The GOS does not promote or incentivize outward investment. However, it does not restrict local investors from investing abroad. 6. Financial Sector Capital Markets and Portfolio Investment Seychelles welcomes foreign portfolio investment. The Seychelles Securities Act (https://www.fsaseychelles.sc/wp-content/uploads/2019/08/Consolidated-Securities-Act-2007-to-20th-December-2018.pdf ) provides the legal framework for the Seychelles stock market. The Seychelles Securities Exchange, owned by South Africa’s Quote Africa Group, has operated since 2012. The exchange, which was previously known as Trop-X, was rebranded MERJ in 2019. Listing and trading are available in U.S. Dollars, Euros, Pounds Sterling, Seychelles Rupees, and South African Rand. In August 2019, the exchange listed its own security tokens on its main board. This was followed by an initial public offering (IPO) in September, where 16 percent of the company’s tokenized shares were offered to the general public. Portfolio investment in Seychelles is limited by the small size of the economy and banking sector. The buying and selling of sizeable positions may have an outsized impact on the Seychelles Rupee and the economy in general. There are no restrictions on trading by foreigners. By the end of February 2020, there were 38 equity listings with a total market capitalization of $1.244 billion and two debt listings with a market capitalization of EUR 205 million. MERJ is also a partner exchange of the Sustainable Stock Exchanges Initiative. Existing policies facilitate the free flow of financial resources in and out of the economy. The GOS respects IMF Article VIII by refraining from restrictions on payments and transfers for current international transactions. Foreign investors are able to obtain credit on the local market and through the Seychelles banking system, and a variety of credit instruments are available to both local and foreign investors. Money and Banking System Seychelles has a two-tier banking system that separates the central and commercial bank functions and roles. Commercial banks, both domestic and foreign, are regulated and supervised by the Central Bank of Seychelles (CBS). According to the Central Bank of Seychelles Act 2004, the CBS is responsible for the formulation and implementation of Seychelles’ Monetary and Exchange Rate policies. The CBS is the only administrative body responsible for receiving applications for banking licenses, whether domestic or offshore, and issuing the corresponding licenses. As of February 2020, there were eight commercial banks in operation: Absa Bank, Bank of Baroda, Mauritius Commercial Bank (Seychelles), Nouvobanq, Seychelles Commercial Bank, Al Salam Bank Seychelles Ltd, Bank of Ceylon, and the State Bank of Mauritius (SBM) (Seychelles). According to a 2016 report by the CBS, 94 percent of Seychellois use banks. Seychelles also has three non-banking financial institutions: the Seychelles Credit Union, a savings and credit cooperative society; the Development Bank of Seychelles, which provides flexible financing for businesses and projects to promote economic growth and employment; and the Housing Finance Corporation, a government-owned company that provides financing to Seychellois for the purchase of land, the construction of homes, and financing home improvements. Seychelles has a number of laws that govern the financial services sector: Financial Institutions Act 2004, Anti-Money Laundering and Combating the Financing of Terrorism Act 2020, Data Protection Act, Mutual and Hedge Fund Act 2007, and Central Bank Act 2004. The Seychelles banking sector is generally healthy, though it is limited by small size and reliance on correspondent bank relationships. Due to concerns about money-laundering and illicit finance in the Seychellois financial sector, some local banks have lost their correspondent banking relationship with foreign banks, a phenomenon known as de-risking, making it difficult for local banks to perform international transactions. In 2017, the CBS and the Financial Services Authority visited foreign financial centers to address de-risking. The government is actively working with international experts, including the World Bank and International Monetary Fund, to ensure Seychelles is not perceived as high-risk jurisdiction. In February 2020, the European Union added Seychelles to the list of non-cooperative jurisdictions for tax purposes as Seychelles had not implemented the tax reforms by the agreed deadline of December 2019 to which it had committed. Two months earlier, France added Seychelles to its blacklist of tax havens for not providing adequate information on French offshore entities operating in the island nation’s jurisdiction. On March 5, 2020, the President signed the National Assembly passed the Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) Act 2020 and the Beneficial Ownership (BO) Act 2020. These two pieces of legislation address the deficiencies identified in the 2018 Mutual Evaluation Report of the Eastern and Southern Africa Anti Money Laundering Group (ESAAMLG). According to the CBS, in February 2020 non-performing loans to total gross loans in the Seychelles banking sector stood at 2.99 percent, and foreign currency deposits totaled 8,059 million Seychelles Rupees ($573 million). A wide range of financial services such as checking accounts, savings accounts, loans, transactions in foreign currencies, and foreign currency accounts are available in the banking system. Foreigners and foreign/offshore firms must establish residency or proof of business registration to obtain a bank account. Foreign Exchange and Remittances Foreign Exchange Since the IMF reform package of 2008-2013, the GOS places no restrictions or limitations on foreign investors converting, transferring, or repatriating funds associated with investment. Funds are freely converted. Seychelles maintains a floating exchange rate for the Seychelles Rupee (SCR), which has mostly fluctuated between SCR 12 and SCR 14.5 to $1 over the past five years. In 2019, the SCR remained fairly stable against the USD with an average exchange rate of SCR 14.1 to $1. Between March and April 2020, the SCR depreciated by 27 percent with the rate at the end of April being SCR 17.9 to $1. Due to the Covid-19 crisis, there has been a notable decrease in foreign exchange inflows and the CBS has intervened by disbursing $10 million in the domestic market. Remittance Policies Foreign exchange controls were removed in 2008 and foreign investors are free to repatriate their profits and other incomes. The Embassy is unaware of any planned changes to remittance policies, time limits on remittances, or use of any legal parallel market. Sovereign Wealth Funds Seychelles does not maintain any sovereign wealth funds. However, in his State of the Nation address in March 2018, the President said that a law would be presented to the National Assembly later during the year to establish a sovereign wealth fund. As of April 2020, this had not materialized. 7. State-Owned Enterprises Seychelles is one of 14 countries participating in the State-Owned Enterprises (SOE) Network for Southern Africa, which was launched in 2007 to support, in collaboration with the OECD, southern African countries in their efforts to improve the performance of SOEs. According to the Public Enterprise Monitoring Commission Regulations 2019 there are currently 34 state-owned commercial public enterprises, which have either been established using public financial resources or in which the government has a significant shareholding. These government-owned organizations are responsible for the delivery of both commercial and social objectives. They offer a range of essential services, including electricity, water, roads, seaports, fuel supply, import/export, retail, transport, civil aviation, housing, and tourism. In his 2019 State of the Nation Address, President Faure announced that the government would inject $6 million into Air Seychelles each year for the next five years. At the end of 2018, total assets of SOEs amounted to $2 billion, representing 189 percent of total GDP while the total net income was $89 million. SOEs are generally free to purchase and/or supply goods and services from private sector and foreign firms. However, there is a growing concern in the business community that SOEs such as the Seychelles Trading Company (STC) have been allowed to exceed their explicit mandate and compete unfairly. For example, STC has expanded its operations in the retail business with the opening of a hypermarket, a hardware store, and a luxury goods department selling perfumes and designer bags. Most SOEs and parastatal bodies maintain a board of directors and make regular reports to the corresponding ministry. The President and the responsible Minister have authority over the size and composition of the boards of SOEs. The Public Enterprise Monitoring Commission (PEMC), set up in 2013 through the PEMC Act, is an independent institution responsible for monitoring financial, governance, and transparency issues related to public enterprises. Governance and operational assessments of six major SOEs were conducted in 2016 with World Bank assistance. On this basis, an implementation plan for governance and operational review of public enterprises for the period 2017-2019 was prepared and approved by the Cabinet of Ministers. Audited financial statements of SOEs are published annually on the PEMC website (https://www.pemc.sc/reports ). The GOS has published a Code of Governance for Public Entities to provide guidelines to improve the governance, monitoring and control of public entities in Seychelles. The Code, which was developed by the PEMC along with other stakeholders, can be accessed on its website: https://www.pemc.sc/resource-centre. Privatization Program In his 2018 budget speech, the Minister of Finance announced that his Ministry will call on private sector investors to enter into public-private partnership initiatives or partial privatization of the following SOEs: (i) L’Union Estate Company, (ii) Indian Ocean Tuna, (iii) Land Marine Ltd., (iv) European Investment Bank’s shares in Development Bank of Seychelles, and (v) Agence Francaise de Developpement’s shares in Development Bank of Seychelles. In his March 2018 State of the Nation address, the President announced that 20 percent of the Seychelles Petroleum Corporation would be privatized beginning November 2018, but this decision was later withdrawn. Similar privatization plans were announced in previous years, but progress has been slow. The Embassy is not aware of any other formal legal barriers to foreign investors participating in privatization. 9. Corruption Ruling with transparency and accountability are stated priorities of the current government. In 2016, the government established the Anti-Corruption Commission of Seychelles (ACCS) under the Anti-Corruption Act, which gives it authority to investigate, detect, and prevent corrupt practices. The ACCS is now functional and, though small, has carried out a number of investigations. A local chapter of Transparency International, Seychelles Transparency Initiative (TI), was set up in 2017. TI’s focus is currently on increasing transparency in tourism, fisheries, finance and construction. In his March 2018 State of the Nation address, the President stated that the government will review anti-corruption laws and provide more resources to the ACCS so it can fulfill its mandate. The Anti-Corruption (Amendment) Bill (https://seylii.org/sc/legislation/bill/2020/4 ) was voted in by the National Assembly in 2019 giving the ACCS investigative and arresting powers similar to that of the police. Seychelles signed the UN Convention against Corruption in February 2004 and ratified it in March 2006. Seychelles is not party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. In 2003, the GOS published the Public Service Code of Ethics and Conduct, the stated purpose of which is to provide guidance to public sector employees on the standards of behavior required of them. The Public Officer’s Ethics Act of 2008 prohibits personal enrichment through public office, defines and outlaws bribery, provides guidelines for avoiding conflict of interest, and mandates declaration of financial assets for public officials including members of the National Assembly. The government does not require private companies to establish internal codes of conduct. Resources to Report Corruption Anti-Corruption Commission May De Silva Chief Executive Officer Victoria House, State House Avenue Victoria, Mahe Nicole Tirant-Gherardi Ombudsperson Office of the Ombudsperson Room 306, Aarti Chambers, Mont Fleuri, Mahe +248 225147 email@example.com 10. Political and Security Environment The constitution provides citizens the right to change their government peacefully, and citizens exercise this right in practice through periodic elections based on universal suffrage. Seychelles has not experienced large-scale political violence since the late 1970s. The United Seychelles party, formerly known as Parti Lepep, governed Seychelles following the 1977 coup and won every election from the introduction of multi-party democracy in 1993 until 2016, when a coalition of opposition parties won the majority of the National Assembly seats. Shortly afterward, President James Michel resigned in favor of his Vice President, Danny Faure. The current era of divided government, with one party in the Presidency and another in control of the legislature, has so far resulted in political stability. Sierra Leone Executive Summary Sierra Leone, with an estimated population of over 7.9 million people (World Population Review), is located on the coast of West Africa between the Republic of Guinea in the north and northeast, the Republic of Liberia in the south and southeast, and the Atlantic Ocean on the west, and a land area of 71,740 square kilometers. Since the civil war ended in 2002, the country has been largely politically stable with significant religious tolerance among its people. Sierra Leone presents opportunities for investment and engagement. The current President, Brigadier Retired Julius Maada Bio, who ruled briefly as head of a military regime in 1996, took office in April 2018. His “New Direction” administration promised a comprehensive reform agenda to revamp the economy and overturn imbalances on the current account, currency depreciation, high inflationary pressure, untenable debt distress and high unemployment. The 2014-15 Ebola outbreak and global slump in commodity prices severely impacted Sierra Leone’s economy. As the country continued to seek significant budget support from foreign donors, the International Monetary Fund (IMF) in June 2017 approved a three-year Extended Credit Facility (ECF) to help address macroeconomic weaknesses including low revenue, elevated inflation, high public debt and inadequate foreign exchange reserves. However, the ECF was suspended in December 2017, as development partners withheld budgetary support in advance of the 2018 national elections. In November 2018, The IMF approved a 43-month ECF totaling approximately USD 172.1 million. President Bio’s administration launched the medium-term National Development Plan 2019–2023, with four goals aligned with global and regional agendas and investments in education, governance and infrastructure. The plan, focused on human capital development and supported by economic diversification and competitiveness in agriculture, fisheries, and tourism, seeks to facilitate Sierra Leone’s transition to a stable and prosperous democracy. According to the government, this initial five years is part of a 20-year long-term national development commitment aimed at achieving middle-income status by 2039. The investment climate in Sierra Leone presents challenges. In 2020, the World Bank ranked Sierra Leone 163 among 190 countries for the ease of doing business, a drop from 140 in 2015. The World Bank highlighted challenges in access to credit, resolving insolvency, access to electricity, and construction permits but noted improved performance in payment of taxes and cross-border trade, with significantly improved performance in starting a business. The current administration is publicly tackling corruption: for the first time in five years, the country progressed 10 places up in the global Transparency International Corruption ranking, from 129 out of 180 in 2018 to 119 out of 180 in 2019. Sierra Leone passed the Millennium Challenge Corporation’s (MCC) Control of Corruption indicator in 2018 and 2019, after failing in 2017. Sierra Leone, endowed with substantial natural resources, has long relied on its mineral industry, dominated by numerous miners of iron ore, diamonds, rutile and bauxite. Minerals account for more than 80 percent of exports and contribute 2.7 percent of the GDP. President Bio’s government has reviewed mining contracts signed during the previous administration, and is considering changes aimed to derive more public revenue from natural resources, a promise he made during his campaign. The government canceled the mining licenses of two major iron ore companies—one Chinese-owned and oneU.S.-owned —reportedly over payment irregularities; the dispute involving a U.S. company remains before an international tribunal. Meanwhile, in 2020, local police arrested five and detained one expatriate staff of the U.S. company; though police later released most of them on bail, charges have yet to be filed. There are also reports of commercial disputes with other foreign investors within the mining, finance, security, and energy sectors. In some cases the government has failed to abide by international arbitral rulings. Investments outside of the capital city, Freetown, require special attention to local dynamics and community needs, particularly due to the influence and significant authority of traditional leaders, such as village elders and the Paramount Chiefs. Sierra Leone benefits from duty-free access to the Mano River Union market, and the African Continental Free Trade Agreement, the European Union’s Everything But Arms initiative, and the United States’ African Growth and Opportunity Act (AGOA). Achieving sustained economic growth will depend on Sierra Leone’s ability to diversify its economy, promote sectors including agriculture, tourism, and fisheries, and manage the country’s natural resources responsibly. Table 1 Measure Year Index/Rank Website Address TI Corruption Perceptions Index 2019 119 of 180 http://www.transparency.org/ research/cpi/overview World Bank’s Doing Business Report 2020 163 of 190 http://www.doingbusiness.org/en/rankings Global Innovation Index 2019 Not rated of 129 https://www.globalinnovationindex.org/ analysis-indicator U.S. FDI in partner country ($M USD, stock positions) 2018 13 Million USD https://ustr.gov/countries-regions/ africa/sierra-leone World Bank GNI per capita 2018 490 USD http://data.worldbank.org/ indicator/NY.GNP.PCAP.CD 1. Openness To, and Restrictions Upon, Foreign Investment Policies toward Foreign Direct Investment The Government of Sierra Leone has a favorable attitude toward foreign direct investment (FDI), which it sees as critical to revitalizing the country’s economic growth. The Ministry of Trade and Industry oversees trade policies and programs, and supervises the Sierra Leone Investment and Export Promotion Agency (SLIEPA), the government’s lead agency in implementing initiatives to stimulate exports and investments, improve the investment climate, and promote the development of small and medium-sized enterprises (SMEs). The government has a variety of initiatives to remove constraints on trade and improve the investment climate. In recent years, Sierra Leone has constructed major roads leading to district headquarter towns and rehabilitated a network of trunk and feeder roads, linking agricultural suppliers with urban markets in mainly district headquarter towns. The government has also prioritized improvements to the country’s trade facilitation infrastructure, including simplifying the customs clearance procedures at ports and land borders, and extending the major seaport to accommodate more vessels. While the government’s message is that the country is open to foreign investment, investors perceive corruption as a primary obstacle. The Bio administration has taken efforts to address corrupt practices affecting procurements, land rights, customs, law enforcement, judicial proceedings, and other governance and economic sectors. The legal system generally treats foreign investors in a non-discriminatory fashion, although investors have noted that the judicial application of the laws is often subject to financial and political influences. The legal framework is largely in place, but consistent enforcement is a challenge. Moreover, the government has failed to abide by international arbitral rulings related to a U.S.-owned mining company. Limits on Foreign Control and Right to Private Ownership and Establishment Foreign and domestic private entities have the right to establish and own business enterprises and engage in all forms of remunerative activities. Foreigners are free to establish, acquire, and dispose of interests in business enterprises. However, foreign investors cannot invest in arms and ammunition, cement block manufacturing, granite and sandstone excavation, manufacturing of certain consumer durable goods, and military, police, and prison guards’ apparel and accoutrements. Furthermore, there are limits to land ownership by foreign entities and individuals; the limitations vary depending on the location of the land being used and are discussed below in the “Real Property” section. Business Facilitation Sierra Leone has made progress in recent years in simplifying its business registration process. The Corporate Affairs Commission (CAC) now manages the registration of limited liability companies and provides a “one stop shop” including an online business registration system. The entire process involves five steps and takes on average ten days. Additional information is available from the CAC’s website at http://www.cac.gov.sl/ . SLIEPA also provides useful guidance on starting a business, sector-specific business licenses, mining licensing and certification fees, and marine resources and fisheries at http://sliepa.org/starting-a-business/ . Outward Investment Sierra Leone has no program to promote or incentivize outward investment, but also places no restrictions on such activity. 6. Financial Sector Capital Markets and Portfolio Investment Limited capital market and portfolio investment opportunities exist in Sierra Leone. The country established a stock exchange in 2009 to provide a venue for enterprise formation and a market for the trading of stocks and bonds, but the exchange initially listed only one stock, a state-controlled bank. In early 2017, the exchange had three listings that expressed willingness to trade their shares at the exchange. Sierra Leone acceded to the IMF Article VIII in January 1996, which removed all restrictions on payments and transfers for current international transactions. The regulatory system does not interfere with the free flow of financial resources. Nonetheless, foreign and domestic businesses alike have difficulty obtaining commercial credit. Foreign interests may access credit under the same market conditions as Sierra Leoneans, but banks loan small amounts at high interest rates. Foreign investors typically bring capital in from outside the country. Money and Banking System Sierra Leone’s banking sector consists of 13 commercial banks, 56 foreign exchange bureau, 17 community banks, 15 credit-only microfinance, three deposit-taking microfinance, two discount houses, a mortgage finance company, a leasing company, 59 financial service associations, an Apex bank, three mobile financial services providers, and a stock exchange. More than 100 bank branches exist throughout the country, with activity concentrated in Freetown. The banking system currently has seven correspondent banks. The commercial banking sector is characterized by poor performance and has significant financial vulnerability. While the country’s banks are profitable, the government restructured two state-owned banks impacted by non-performing loans. Foreign individuals and companies are permitted to establish bank accounts. The usage of mobile money is taking a central place in money transfers. Other electronic payments and ATM usage are available in urban areas but limited in rural settings, while the Bank of Sierra Leone is set to roll out a “national payment switch” to facilitate connectivity among different banks’ electronic systems. Telecommunications companies are upgrading to specifically enhance mobile money services and ecommerce. As part of structural reforms in the banking sector under the ECF, the Bank of Sierra Leone pledged to establish a special resolution framework for troubled financial institutions, establish a deposit insurance system, strengthen its capacity to supervise and oversee the non-bank financial institution sector, and facilitate the adoption of International Financial Reporting Standards (IFRS) both internally and across the financial sector. Inadequate supervisory oversight of financial institutions, weak regulations, and corruption have made Sierra Leone vulnerable to money laundering. While the country’s anti-money laundering (AML) controls remain underdeveloped and underfunded, the Financial Intelligence Unit (FIU) completed a national risk assessment in 2017 and is currently working with the Economic Crime Team of the Office of Technical Assistance, U.S. Department of the Treasury to enhance its capacity with a series of technical visits in 2018 and 2019, and others scheduled for 2020 with the FIU. The GIABA (a French acronym for Groupe Intergouvernemental d’Action contre la Blanchiment d’Argent en Afriqe de l’Ouest, which in English is, ‘The Inter-Government Action against Money Laundering in West Africa’) and the EU also funded a workshop on designated non-financial business and professions on Anti-Money Laundering and Combating Financing Terrorism (AML/CFT) preventive measures. There is no history of hostile takeovers in Sierra Leone. Foreign Exchange and Remittances Sierra Leone has a floating exchange rate regime and the currency, the Leone, has depreciated slowly over the years mainly due to the increasing demand to finance current consumption and a decreasing inflow of foreign currency resulting from decreased exports and remittances. Foreign Exchange In August 2019, the government mandated the exclusive use of the Leones for all contracts and payments in Sierra Leone. The directive also prohibited individuals, business entities and organizations from holding more than USD 10,000 or its equivalent in any foreign currencies. Traveling individuals or organizations must declare foreign currencies of more than USD 10,000 or its equivalent. Any contravention of these directives is punishable by law as stipulated in the Bank of Sierra Leone Act of 2019. The Investment Promotion Act 2004 guarantees foreign investors and expatriate employees the right to repatriate earnings and the proceeds of the sale of assets. There are no restrictions placed on converting or transferring funds associated with investments, including remittances, earnings, loan repayments, or lease payments for as long as these transactions are done through the banking system. With the approval of the Bank of Sierra Leone, investors can withdraw any amount from commercial banks and transfer the funds into any freely convertible currency at market rates. Availability of foreign currencies is often limited in practice, and foreign-controlled businesses outside of Freetown have reported challenges in dealing with local banks. The exchange rate is market determined, as the national currency fluctuates based on the forces of demand and supply in the market. Nonetheless, the Bank of Sierra Leone sometimes conducts weekly foreign exchange auctions of U.S. dollars. Only commercial banks registered in Sierra Leone may participate. Sierra Leone is a party to the ECOWAS Common Currency, the ECO, and efforts to introduce this common currency is now being given serious consideration, though it has repeatedly been delayed. Remittance Policies The law provides that investors may freely repatriate proceeds and remittances. The Embassy is not aware of any recent complaints from investors regarding the remittance of investment returns, or of any planned policy changes on this issue. Sovereign Wealth Funds Sierra Leone does not maintain a sovereign wealth fund. 7. State-Owned Enterprises Sierra Leone has more than 20 state-owned enterprises (SOEs). These entities are active in the utilities, transport and financial sectors. There is no official or comprehensive government-maintained list of SOEs. However, notable examples include the Guma Valley Water Company, the Sierra Leone Telecommunication Company (Sierratel), the Electricity Distribution and Supply Authority (EDSA), the Electricity Generation and Transmission Company (EGTC), the Sierra Leone Broadcasting Corporation, Rokel Commercial Bank, the Sierra Leone Commercial Bank, the Sierra Leone Housing Corporation, and the Sierra Leone Produce Marketing Company. Sierra Leone is not a party to the Government Procurement Agreement within the WTO Framework. SOEs may engage in commerce with the private sector, but they do not compete on the same terms as private enterprises, and they often have access to government subsidies and other benefits. SOEs in Sierra Leone do not play a significant role in funding or sponsoring research and development. Privatization The National Commission for Privatization was established in 2002 to facilitate the privatization of various SOEs. With support from the World Bank, the commission has focused on privatization of the country’s port operations, and currently seeks investments in public private partnerships (PPPs) for port security, telecommunications, and other infrastructure projects. Privatization processes are open to foreign investors, and could be integrated into plans for better capitalizing the stock exchange in Freetown via new equity listings. 9. Corruption Corruption poses a major challenge in Sierra Leone. The country ranked 119 out of 198 countries with a score of 33/100 on Transparency International’s 2019 Corruption Perceptions Index. Corruption is endemic in government procurement, the award of licenses and concessions, regulatory enforcement, customs clearance, and dispute resolution. Sierra Leone signed the UN Convention against Corruption in 2003 and ratified it in 2004. The country is not a party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. The Anti-Corruption Commission (ACC), established in 2000, has the authority to investigate and prosecute acts of corruption by individuals and companies. The Anti-Corruption Act of 2008 makes it criminal to offer, solicit, or receive a bribe, and this law applies to all appointed and elected officials, close family members, and all companies whether foreign or domestic. The Commission launched a “Pay No Bribe” campaign in 2016, which encouraged citizens to report corruption in the public sector. President Bio established a 12-member Governance Transition Team (GTT) to conduct an immediate stocktaking of government MDAs in April 2018. The report documented a high level of fiscal indiscipline and alleged extensive corruption by the former government of President Ernest Koroma. The report recommended a commission of inquiry of all MDAs to establish how the former government utilized public assets and funds, and for the supreme audit authority to carry out forensic audits of specific sectors. These sectors included agencies relating to energy, telecommunications, the National Social Security and Insurance Trust (NASSIT), and roads. The Anti-Corruption Amendment Act of 2019 increased the powers of the ACC in the fight against graft, increased penalties for offences under the Act and strengthened the witness protection regime. Since then the ACC has steadily pursued arrests, repayments, and convictions in both the private and public sectors. As of April 2020, the ACC had recovered millions of dollars in misappropriated funds, and prosecuted corruption cases leading to convictions of present and former public officials and private citizens. The Chief Justice established a Special Court to adjudicate corruption cases while the ACC has signed several information sharing agreements with key government institutions, including the Audit Service Sierra Leone and the FIU. MCC approved a USD 44 million four-year threshold program for Sierra Leone signed in November 2015. The country passed the “Control of Corruption” indicator on MCC’s annual scorecards in 2019 and 2018, after failing in 2017. Resources to Report Corruption: Francis Ben Kelfala, Commissioner Anti-Corruption Commission Cathedral House 3 Gloucester Street, Freetown +232 76 394 111, +232 77 985 985 firstname.lastname@example.org http://anticorruption.gov.sl/report_corruption.php Lavina Banduah Executive Director Transparency International Sierra Leone 20 Dundas Street, Freetown +232 79 060 985, +232 76 618 348 email@example.com & firstname.lastname@example.org http://www.tisierraleone.org/ 10. Political and Security Environment Sierra Leone is a constitutional republic with a directly elected president and a unicameral legislature. In March 2018, the opposition Sierra Leone People’s Party (SLPP) presidential candidate, Julius Maada Bio, won the presidential elections. The Sierra Leone Police (SLP), which reports to the Ministry of Internal Affairs, is responsible for law enforcement and maintaining security within the country, but it is poorly equipped and lacked sufficient investigative and forensic capabilities. The Republic of Sierra Leone Armed Forces (RSLAF) is responsible for external security but also has some domestic security responsibilities to assist police upon request in extraordinary circumstances. The RSLAF reports to the Ministry of Defense and the Office of National Security. Civilian authorities maintained effective control over the security forces. There is tension between social, political, and cultural institutions over power and resources. Policies and positions are sometimes sought for the purposes of control over public finances. Sierra Leone’s relations with the neighboring countries of Guinea and Liberia are peaceful. There have been isolated incidents of politically motivated violence during and after the 2018 national and local elections. Singapore Executive Summary Singapore maintains an open, heavily trade-dependent economy, characterized by a predominantly open investment regime, with strong government commitment to maintaining a free market and to actively managing Singapore’s economic development. U.S. companies regularly cite transparency and lack of corruption, business-friendly laws and regulations, tax structure, customs facilitation, intellectual property protections, and well-developed infrastructure as attractive features of the investment climate. The World Bank’s Doing Business 2020 report ranked Singapore as the world’s second-easiest country in which to do business. The Global Competitiveness Report 2019 by the World Economic Forum ranked Singapore as the most competitive economy globally. Singapore actively enforces its robust anti-corruption laws and typically ranks as the least corrupt country in Asia and one of the least corrupt in the world. Transparency International’s 2018 Corruption Perception Index placed Singapore as the fourth least corrupt nation. The U.S.-Singapore Free Trade Agreement (USSFTA), which came into force on January 1, 2004, expanded U.S. market access in goods, services, investment, and government procurement, enhanced intellectual property protection, and provided for cooperation in promoting labor rights and environmental protections. Singapore has a diversified economy that attracts substantial foreign investment in manufacturing (petrochemical, electronics, machinery, and equipment) and services (financial services, wholesale and retail trade, and business services). The government actively promotes the country as a research and development (R&D) and innovation center for businesses by offering tax incentives, research grants, and partnership opportunities with domestic research agencies. U.S. direct investment in Singapore in 2018 totaled $219 billion, primarily in non-bank holding companies, manufacturing (particularly computers and electronic products), and finance and insurance. Singapore remains Asia’s largest recipient of U.S. FDI. The investment outlook remains positive due to Singapore’s involvement in Southeast Asia’s developing economies. Singapore remains a regional hub for thousands of multinational companies and continues to maintain its reputation as a world leader in dispute resolution, financing, and project facilitation, particularly for regional infrastructure development. In 2019, U.S. companies pledged $4 billion in future investments in Singapore’s manufacturing and services sectors. Looking ahead, Singapore is poised to attract foreign investments in digital innovation and cybersecurity. The Government of Singapore (hereafter, “the government”) is investing heavily in automation, artificial intelligence, and integrated systems under its Smart Nation banner and seeks to establish itself as a regional hub for these technologies. Singapore is also a well-established hub for medical research and device manufacturing. In recent years, the government has tightened foreign labor policies to encourage firms to improve productivity and employ more workers that are Singaporean. The government introduced measures in the 2019 and 2020 budget to further decrease the ratio of mid- and low-skilled foreign workers to local employees in a firm. These cuts, which target the service sector, were taken despite industry concerns about skills gaps. To address some of these concerns, the government has introduced programs that partially subsidize the cost to firms of recruiting, hiring, and training local workers. Singapore is heavily reliant on foreign workers who make up more than 20 percent of the workforce. The COVID-19 outbreak has been concentrated in dormitories for low-wage workers in Singapore, which may accelerate the government’s efforts to reduce the number of foreign workers. Table 1: Key Metrics and Rankings Measure Year Index/Rank Website Address TI Corruption Perceptions Index 2019 4 of 175 http://www.transparency.org/ research/cpi/overview World Bank’s Doing Business Report 2020 2 of 190 http://www.doingbusiness.org/en/rankings Global Innovation Index 2019 8 of 129 https://www.globalinnovationindex.org/ analysis-indicator U.S. FDI in partner country ($M USD, historical stock positions) 2018 218,835 http://apps.bea.gov/international/factsheet/ World Bank GNI per capita 2018 58,770 http://data.worldbank.org/ indicator/NY.GNP.PCAP.CD 1. Openness To, and Restrictions Upon, Foreign Investment Policies Towards Foreign Direct Investment Singapore maintains a heavily trade-dependent economy characterized by an open investment regime, with some licensing restrictions in the financial services, professional services, and media sectors. The World Bank’s Doing Business 2020 report ranked Singapore as the world’s second-easiest country in which to do business. The 2019 Global Competitiveness Report ranks Singapore as the most competitive economy globally. The 2004 USSFTA expanded U.S. market access in goods, services, investment, and government procurement, enhanced intellectual property protection, and provided for cooperation in promoting labor rights and the environment. The government is committed to maintaining a free market, but it also actively plans Singapore’s economic development, including through a network of state wholly-owned and majority-owned enterprises (SOEs). As of February 2019, the top three Singapore-listed SOEs accounted for 13.1 percent of total capitalization of the Singapore Exchange (SGX). Some observers have criticized the dominant role of SOEs in the domestic economy, arguing that they have displaced or suppressed private sector entrepreneurship and investment. Singapore’s legal framework and public policies are generally favorable toward foreign investors. Foreign investors are not required to enter into joint ventures or cede management control to local interests, and local and foreign investors are subject to the same basic laws. Apart from regulatory requirements in some sectors (reference Limits on National Treatment and Other Restrictions), eligibility for various incentive schemes depends on investment proposals meeting the criteria set by relevant government agencies. Singapore places no restrictions on reinvestment or repatriation of earnings or capital. The judicial system, which includes international arbitration and mediation centers and a commercial court, upholds the sanctity of contracts, and decisions are generally considered to be transparent and effectively enforced. Singapore’s Economic Development Board (EDB) is the lead promotion agency that facilitates foreign investment into Singapore (https:www.edb.gov.sg ). EDB undertakes investment promotion and industry development and works with foreign and local businesses by providing information and facilitating introductions and access to government incentives for local and international investments. The government maintains close engagement with investors through the EDB, which provides feedback to other government agencies, such as the recently launched Infrastructure Asia, to ensure that infrastructure and public services remain efficient and cost-competitive. Exceptions to Singapore’s general openness to foreign investment exist in sectors considered critical to national security, including telecommunications, broadcasting, the domestic news media, financial services, legal and accounting services, ports and airports, and property ownership. Under Singapore law, articles of incorporation may include shareholding limits that restrict ownership in corporations by foreign persons. Telecommunications Since 2000, the Singapore telecommunications market has been fully liberalized. This move has allowed foreign and domestic companies seeking to provide facilities-based (e.g. fixed line or mobile networks) or services-based (e.g. local and international calls and data services over leased networks) telecommunications services to apply for licenses to operate and deploy telecommunication systems and services. Singapore Telecommunications (Singtel) –majority owned by Temasek, a state-owned investment company with the Singapore Minister for Finance as its sole shareholder – faces competition in all market segments. However, its main competitors, M1 and StarHub, are also SOEs. In December 2018, Australian telco TPG Telecom launched a free 12-month service, including unlimited data and free local TPG-to-TPG calls. Approximately thirty mobile virtual network operator services (MVNOs) have also entered the market. The three established Singapore telecommunications competitors are expected to strengthen their partnerships with the MVNOs in a defensive move against TPG’s entry. As of February 2020, Singapore has 70 facilities-based operators and 251 services-based (individual) operators offering telecommunications services. Since 2007, Singtel has been exempted from dominant licensee obligations for the residential and commercial portions of the retail international telephone services. Singtel is also exempted from dominant licensee obligations for wholesale international telephone services, international managed data, international IP transit, leased satellite bandwidth (VSAT, DVB-IP, satellite TV Downlink, and Satellite IPLC), terrestrial international private leased circuit, and backhaul services. The Info-communications Media Development Authority (IMDA) granted Singtel’s exemption after assessing that the market for these services had effective competition. Singapore’s IMDA operates as both the regulatory agency and the investment promotion agency for the country’s telecommunications sector. IMDA conducts public consultations on major policy reviews and provides decisions on policy changes to relevant companies. To facilitate 5G technology and service trials, IMDA has waived frequency fees for companies interested in conducting 5G trials for equipment testing, research, and assessment of commercial potential. In 2019, IMDA issued a subsequent 5G Call for Proposal to provide for two nationwide 5G networks and smaller, specialized 5G networks. IMDA announced April 29 that Singtel, Singapore’s largest mobile network operator (MNO), and a separate joint venture between StarHub and M1, were awarded rights to build two 5G networks that are expected to provide 5G coverage to more than half the country by the end of 2022, with the goal of full coverage by the end of 2025. These three companies, along with Singapore’s only other MNO, TPG Telecom, are also now permitted to launch smaller, specialized 5G networks to support specialized applications, such as manufacturing and port operations. Singapore’s government did not hold a traditional spectrum auction, instead charging a moderate, flat fee to operate the networks, and evaluating proposals from the MNOs based on their ability to provide effective coverage, meet regulatory requirements, invest significant financial resources, and address cybersecurity and network resilience concerns. The announcement emphasized the importance of the winning MNOs using multiple vendors, to ensure security and resilience. Singapore has committed to being one of the first countries to make 5G services broadly available, and its tightly managed 5G-rollout process continues apace, despite COVID-19. The government views this as a necessity for a country that prides itself on innovation and has pushed Singapore’s MNOs to move forward with 5G, even as these private firms worry that the commercial potential does not yet justify the extensive upfront investment necessary to develop new networks. Media The local free-to-air broadcasting, cable, and newspaper sectors are effectively closed to foreign firms. Section 44 of the Broadcasting Act restricts foreign equity ownership of companies broadcasting in Singapore to 49 percent or less, although the Act does allow for exceptions. Individuals cannot hold shares that would make up more than five percent of the total votes in a broadcasting company without the government’s prior approval. The Newspaper and Printing Presses Act (NPPA) restricts equity ownership (local or foreign) of newspaper companies to less than five percent per shareholder and requires that directors be Singapore citizens. Newspaper companies must issue two classes of shares, ordinary and management, with the latter available only to Singapore citizens or corporations approved by the government. Holders of management shares have an effective veto over selected board decisions. Singapore regulates content across all major media outlets. The government controls the distribution, importation, and sale of any newspaper and has curtailed or banned the circulation of some foreign publications. Singapore’s leaders have also brought defamation suits against foreign publishers, which have resulted in the foreign publishers issuing apologies and paying damages. Several dozen publications remain prohibited under the Undesirable Publications Act, which restricts the import, sale, and circulation of publications that the government considers contrary to public interest. Examples include pornographic magazines, publications by banned religious groups, and publications containing extremist religious views. Following a routine review in 2015, the formerly named Media Development Authority lifted a ban on 240 publications, ranging from decades-old anti-colonial and communist material to adult interest content. Singaporeans generally face few restrictions on the internet. However, the IMDA has blocked various websites containing objectionable material, such as pornography and racist and religious hatred sites. Online news websites that report regularly on Singapore and have a significant reach are individually licensed, which requires adherence to requirements to remove prohibited content within 24 hours of notification from IMDA. Some view this regulation as a way to censor online critics of the government. In April 2019, the government introduced legislation in Parliament to counter “deliberate online falsehoods.” The legislation, called the Protection from Online Falsehoods and Manipulation Act (POFMA) entered into force on October 2, 2019, requires online platforms to run carry correction notifications alongside statements that government ministers classify as factually false or misleading, and which they deem likely to threaten national security, diminish public confidence in the government, incite feelings of ill will between people, or influence an election “online falsehoods.” Non-compliance is punishable by fines and/or imprisonment and the government can use stricter measures such as disabling access to end-users in Singapore and forcing online platforms to disallow persons in question from using its services in Singapore. U.S. social media companies have reported being the target of the majority of POFMA cases so far. U.S. media and social media sites continue to operate in Singapore, but a few major players have ceased running political ads after the government announced that it would impose penalties on sites or individuals that spread “misinformation,” as determined by the government. Pay-Television Mediacorp TV is the only free-to-air TV broadcaster and is 100 percent owned by the government via Temasek Holdings (Temasek). Local pay-TV providers are StarHub and Singtel, which are both partially owned by Temasek or its subsidiaries. Local free-to-air radio broadcasters are Mediacorp Radio Singapore, which is also owned by Temasek Holdings, SPH Radio, owned by the publicly-held Singapore Press Holdings, and So Drama! Entertainment, owned by the Singapore Ministry of Defense. BBC World Services is the only foreign free-to-air radio broadcaster in Singapore. To rectify the high degree of content fragmentation in the Singapore pay-TV market, and shift the focus of competition from an exclusivity-centric strategy to other aspects such as service differentiation and competitive packaging, the MDA implemented cross-carriage measures in 2011 requiring pay-TV companies designated by MDA to be Receiving Qualified Licensees (RQL) – currently Singtel and StarHub – to cross-carry content subject to exclusive carriage provisions. Correspondingly, Supplying Qualified Licensees (SQLs) with an exclusive contract for a channel are required to carry that content on other RQL pay-TV companies. In February 2019, the IMDA proposed to continue the current cross-carriage measures. The Motion Picture Association of America (MPAA) has expressed concern that this measure restricts copyright exclusivity. Content providers consider the measures an unnecessary interference in a competitive market that denies content holders the ability to negotiate freely in the marketplace, and an interference with their ability to manage and protect their intellectual property. More common content is now available across the different pay-TV platforms, and the operators are beginning to differentiate themselves by originating their own content, offering subscribed content online via PCs and tablet computers, and delivering content via fiber networks. Streaming services have entered the market, which MPAA has found leads to a significant reduction in intellectual property infringements. StarHub and Singtel have both partnered with multiple content providers, including U.S. companies, to provide streaming content in Singapore and around the region. Banking and Finance The Monetary Authority of Singapore (MAS) regulates all banking activities as provided for under the Banking Act. Singapore maintains legal distinctions between foreign and local banks and the type of license (i.e. full service, wholesale, and offshore banks) held by foreign commercial banks. As of May 2020, 29 foreign full-service licensees and 99 wholesale banks operated in Singapore. An additional 24 merchant banks are licensed to conduct corporate finance, investment banking, and other fee-based activities. Offshore and wholesale banks are not allowed to operate Singapore dollar retail banking activities. Only Full Banks and “Qualifying Full Banks” (QFBs) can operate Singapore dollar retail banking activities but are subject to restrictions on the number of places of business, ATMs, and ATM networks. Additional QFB licenses may be granted to a subset of full banks, which provide greater branching privileges and greater access to the retail market than other full banks. As of May 2020, there are 9 banks operating QFB licenses. Except in retail banking, Singapore laws do not distinguish operationally between foreign and domestic banks. Currently, all banks in Singapore are required to maintain a Domestic Banking Unit (DBU) and an Asian Currency Unit (ACU), separating international and domestic banking operations from each other. Transactions in Singapore dollars can be booked only in the DBU whereas transactions in foreign currency are typically booked in the ACU. The ACU is an accounting unit that the banks use to book all their foreign currency transactions conducted in the Asian Dollar Market (ADM). This enables additional prudential requirements to be imposed on banks’ domestic businesses in Singapore, while also avoiding undue restrictions on the offshore activities of banks. Following public consultations, MAS initiated a 30-month implementation timeline from February 2017 for the removal of the DBU-ACU divide, which align revisions made to MAS 610 (Submission of Statistics and Returns). The government initiated a banking liberalization program in 1999 to ease restrictions on foreign banks and has supplemented this with phased-in provisions under the USSFTA, including removal of a 40 percent ceiling on foreign ownership of local banks and a 20 percent aggregate foreign shareholding limit on finance companies. The Minister in charge of the Monetary Authority of Singapore must approve the merger or takeover of a local bank or financial holding company, as well as the acquisition of voting shares in such institutions above specific thresholds of 5 , 12, or 20 percent of shareholdings. Although Singapore’s government has lifted the formal ceilings on foreign ownership of local banks and finance companies, the approval of controllers of local banks ensures that this control rests with individuals or groups whose interests are aligned with the long-term interests of the Singapore economy and Singapore’s national interests. Of the 29 full-service licenses granted to foreign banks, three have gone to U.S. banks. U.S. financial institutions enjoy phased-in benefits under the USSFTA. Since 2006, U.S.-licensed full-service banks that are also QFBs, which is only one as of May 2020, have been able to operate at an unlimited number of locations (branches or off-premises ATMs).. U.S. and foreign full-service banks with QFB status can freely relocate existing branches and share ATMs among themselves. They can also provide electronic funds transfer and point-of-sale debit services and accept services related to Singapore’s compulsory pension fund. In 2007, Singapore lifted the quota on new licenses for U.S. wholesale banks. Locally and non-locally incorporated subsidiaries of U.S. full-service banks with QFB status can apply for access to local ATM networks. However, no U.S. bank has come to a commercial agreement to gain such access. Despite liberalization, U.S. and other foreign banks in the domestic retail-banking sector still face barriers. Under the enhanced QFB program launched in 2012, MAS requires QFBs it deems systemically significant to incorporate locally. If those locally incorporated entities are deemed “significantly rooted” in Singapore, with a majority of Singaporean or permanent resident members, Singapore may grant approval for an additional 25 places of business, of which up to ten may be branches. Local retail banks do not face similar constraints on customer service locations or access to the local ATM network. As noted above, U.S. banks are not subject to quotas on service locations under the terms of the USSFTA. Holders of credit cards issued locally by U.S. banks incorporated in Singapore cannot access their accounts through the local ATM networks. They are also unable to access their accounts for cash withdrawals, transfers, or bill payments at ATMs operated by banks other than those operated by their own bank or at foreign banks’ shared ATM network. Nevertheless, full-service foreign banks have made significant inroads in other retail banking areas, with substantial market share in products like credit cards and personal and housing loans. In January 2019, MAS announced the passage of the Payment Services Bill after soliciting public feedback for design of the bill. The bill requires more payment services such as digital payment tokens, dealing in virtual currency and merchant acquisition, to be licensed and regulated by MAS. In order to reduce the risk of misuse for illicit purposes, it also limits the amount of funds that can be held in or transferred out of a personal payment account (e.g. mobile wallets) in a year. Regulations are tailored to the type of activity preformed and addresses issues related to terrorism financing, money laundering, and cyber risks. To expand the banking industry, MAS has procured bids for digital online bank licenses, which are set to be announced in June 2020 and begin operation in the middle of 2021. Singapore has no trading restrictions on foreign-owned stockbrokers. There is no cap on the aggregate investment by foreigners regarding the paid-up capital of dealers that are members of the SGX. Direct registration of foreign mutual funds is allowed provided MAS approves the prospectus and the fund. The USSFTA has relaxed conditions foreign asset managers must meet in order to offer products under the government-managed compulsory pension fund (Central Provident Fund Investment Scheme). Legal Services The Legal Services Regulatory Authority (LSRA) under the Ministry of Law oversees the regulation, licensing, and compliance of all law practice entities and the registration of foreign lawyers in Singapore. Foreign law firms with a licensed Foreign Law Practice (FLP) may offer the full range of legal services in foreign law and international law but cannot practice Singapore law except in the context of international commercial arbitration. U.S. and foreign attorneys are allowed to represent parties in arbitration without the need for a Singapore attorney to be present. To offer Singapore law, FLPs require either a Qualifying Foreign Law Practice (QFLP) license, a Joint Law Venture (JLV) with a Singapore Law Practice (SLP), or a Formal Law Alliance (FLA) with a SLP. The vast majority of Singapore’s 130 foreign law firms operate FLPs, while QFLPs and JLVs each number in the single digits. The QFLP licenses allow foreign law firms to practice in permitted areas of Singapore law, which excludes constitutional and administrative law, conveyancing, criminal law, family law, succession law, and trust law. As of May 2020, there are nine QFLPs in Singapore, including five U.S. firms. In January 2019, the Ministry of Law announced the deferral to 2020 of the decision to renew the licenses of five QFLPs, which were set to expire in 2019 so that the government can better assess their contribution to Singapore along with the other four firms whose licenses were also extended to 2020. Decisions on the renewal considers the firms’ quantitative and qualitative performance such as the value of work that the Singapore office will generate, the extent to which the Singapore office will function as the firm’s headquarter for the region, the firm’s contributions to Singapore, and the firm’s proposal for the new license period. A JLV is a collaboration between a Foreign Law Practice and Singapore Law Practice, which may be constituted as a partnership or company. The Director of Legal Services in the LSRA will consider all the relevant circumstances including the proposed structure and its overall suitability to achieve the objectives for which Joint law Ventures are permitted to be established. There is no clear indication on the percentage of shares that each JLV partner may hold in the JLV. Law degrees from designated U.S., British, Australian, and New Zealand universities are recognized for purposes of admission to practice law in Singapore. Under the USSFTA, Singapore recognizes law degrees from Harvard University, Columbia University, New York University, and the University of Michigan. Singapore will admit to the Singapore Bar law school graduates of those designated universities who are Singapore citizens or permanent residents, and ranked among the top 70 percent of their graduating class or have obtained lower-second class honors (under the British system). Engineering and Architectural Services Engineering and architectural firms can be 100 percent foreign-owned. Engineers and architects are required to register with the Professional Engineers Board and the Board of Architects, respectively, to practice in Singapore. All applicants (both local and foreign) must have at least four years of practical experience in engineering, of which two are acquired in Singapore. Alternatively, students can attend two years of practical training in architectural works, and pass written and/or oral examinations set by the respective Board. Accounting and Tax Services The major international accounting firms operate in Singapore. Registration as a public accountant under the Accountants Act is required to provide public accountancy services (i.e. the audit and reporting on financial statements and other acts that are required by any written law to be done by a public accountant) in Singapore, although registration as a public accountant is not required to provide other accountancy services, such as accounting, tax, and corporate advisory work. All accounting entities that provide public accountancy services must be approved under the Accountants Act and their supply of public accountancy services in Singapore must be under the control and management of partners or directors who are public accountants ordinarily resident in Singapore. In addition, if the accounting entity firm has two partners or directors, at least one of them must be a public accountant. If the business entity has more than two accounting partners or directors, two-thirds of the partners or directors must be public accountants. Energy Singapore further liberalized its gas market with the amendment of the Gas Act and implementation of a Gas Network Code in 2008, which were designed to give gas retailers and importers direct access to the onshore gas pipeline infrastructure. However, key parts of the local gas market, such as town gas retailing and gas transportation through pipelines remain controlled by incumbent Singaporean firms. Singapore has sought to grow its supply of Liquefied Natural Gas (LNG), and BG Singapore Gas Marketing Pte Ltd (acquired by Royal Dutch Shell in February 2016) was appointed in 2008 as the first aggregator with an exclusive franchise to import LNG to be sold in its re-gasified form in Singapore. In October 2017, Shell Eastern Trading Pte Ltd and Pavilion Gase Pte Ltd were awarded import licenses to market up to 1 Million Tonnes Per Annum (Mtpa) or for three years, whichever occurs first. This also marked the conclusion of the first exclusive franchise awarded to BG Singapore Gas Marketing Pte Ltd. Beginning in November 2018 and concluding in May 2019, Singapore rolled out the launch of an Open Electricity Market (OEM). Previously, Singapore Power was the only electricity retailer. As of October 2019, 40 percent of resident consumers had switched to a new electricity retailer and are saving between 20 and 30 percent on their monthly bills. To participate in the Open Electricity Market licensed retailers must satisfy additional credit, technical, and financial requirements set by EMA in order to sell electricity to households and small businesses. There are two types of electricity retailers: Market Participant Retailers (MPRs) and Non-Market Participant Retailers (NMPRs). MPRs have to be registered with the Energy Market Company (EMC) to purchase electricity from the National Electricity Market of Singapore (NEMS) to sell to contestable consumers. NMPRs need not register with EMC to participate in the NEMS since they will purchase electricity indirectly from the NEMS through the Market Support Services Licensee (MSSL). As of April 2020, there were 12 retailers in the market, including foreign and local entities. Limits on Foreign Control and Right to Private Ownership and Establishment Foreign and local entities may readily establish, operate, and dispose of their own enterprises in Singapore subject to certain requirements. A foreigner who wants to incorporate a company in Singapore is required to appoint a local resident director; foreigners may continue to reside outside of Singapore. Foreigners who wish to incorporate a company and be present in Singapore to manage its operations are strongly advised to seek approval from the Ministry of Manpower (MOM) before incorporation. Except for representative offices (where foreign firms maintain a local representative but do not conduct commercial transactions in Singapore) there are no restrictions on carrying out remunerative activities. As of October 2017, foreign companies may seek to transfer their place of registration and be registered as companies limited by shares in Singapore under Part XA (Transfer of Registration) of the Companies Act (https://sso.agc.gov.sg/Act/CoA1967). Such transferred foreign companies are subject to the same requirements as locally-incorporated companies. All businesses in Singapore must be registered with the Accounting and Corporate Regulatory Authority (ACRA). Foreign investors can operate their businesses in one of the following forms: sole proprietorship, partnership, limited partnership, limited liability partnership, incorporated company, foreign company branch or representative office. Stricter disclosure requirements were passed in March 2017 requiring foreign company branches registered in Singapore to maintain public registers of their members. All companies incorporated in Singapore, foreign companies, and limited liability partnerships registered in Singapore are also required to maintain beneficial ownership in the form of a register of controllers (generally individuals or legal entities with more than 25 percent interest or control of the companies and foreign companies) aimed at preventing money laundering. While there is currently no cross-sectional screening process for foreign investments, investors are required to seek approval from specific sector regulators for investments into certain firms. These sectors include energy, telecommunications, broadcasting, the domestic news media, financial services, legal services, public accounting services, ports and airports, and property ownership. Under Singapore law, Articles of Incorporation may include shareholding limits that restrict ownership in corporations by foreign persons. Singapore does not maintain a formalized investment screening mechanism for inbound foreign investment. There are no reports of U.S. investors being especially disadvantaged or singled out relative to other foreign investors. Other Investment Policy Reviews Singapore underwent a trade policy review with the World Trade Organization (WTO) in July 2016. No major policy recommendations were raised. This was the country’s only policy review in the past four years, with another WTO review expected later in 2020. (https://www.wto.org/english/tratop_e/tpr_e/tp443_e.htmhttps://www.wto.org/english/tratop_e/tpr_e/tp443_e.htm ) The OECD and United Nations Industrial Development Organization (UNIDO) released a joint report in February 2019 on the ASEAN-OECD Investment Program. The Program aims to foster dialogue and experience sharing between OECD countries and Southeast Asian economies on issues relating to the business and investment climate. It is implemented through regional policy dialogue, country investment policy reviews, and training seminars. (https://www.oecd.org/industry/inv/mne/seasia.htm) The OECD released a Transfer Pricing Country Profile for Singapore in June 2018. The country profiles focus on countries’ domestic legislation regarding key transfer pricing principles, including the arm’s length principle, transfer pricing methods, comparability analysis, intangible property, intra-group services, cost contribution agreements, transfer pricing documentation, administrative approaches to avoiding and resolving disputes, safe harbors and other implementation measures. (https://www.oecd.org/tax/transfer-pricing/transfer-pricing-country-profile-singapore.pdf) The OECD released a peer review report in March 2018 on Singapore’s implementation of internationally agreed tax standards under Action Plan 14 of the base erosion and profit shifting (BEPS) project. Action 14 strengthens the effectiveness and efficiency of the mutual agreement procedure, a cross-border tax dispute resolution mechanism. (http://www.oecd.org/corruption-integrity/reports/singapore-2018-peer-review-report-transparency-exchange-information-aci.html) The UNCTAD has not conducted an IPR of Singapore. Business Facilitation Singapore’s online business registration process is clear and efficient and allows foreign companies to register branches. All businesses must be registered with the Accounting & Corporate Regulatory Authority (ACRA) through Bizfile, its online registration and information retrieval portal (https://www.bizfile.gov.sg/), including any individual, firm or corporation that carries out business for a foreign company. Applications are typically processed immediately after the application fee is paid, but may take between 14 to 60 days, if the application is referred to another agency for approval or review. The process of establishing a foreign-owned limited liability company in Singapore is among the fastest of the countries surveyed by IAB. ACRA (www.acra.gov.sg ) provides a single window for business registration. Additional regulatory approvals (e.g. licensing or visa requirements) are obtained via individual applications to the respective Ministries or Statutory Boards. Further information and business support on registering a branch of a foreign company is available through the EDB (https://www.edb.gov.sg/en/how-we-help/setting-up.html ) and GuideMeSingapore, a corporate services firm Hawskford (https://www.guidemesingapore.com/). Foreign companies may lease or buy privately or publicly held land in Singapore, though there are some restrictions on foreign ownership of property. Foreign companies are free to open and maintain bank accounts in foreign currency. There is no minimum paid-in capital requirement, but at least one subscriber share must be issued for valid consideration at incorporation. At GER (ger.co), Singapore’s online business registration process scores 7/10 in Online Single Windows (https://www.bizfile.gov.sg/). Business facilitation processes provide for fair and equal treatment of women and minorities, and there are no mechanisms that provide special assistance to women and minorities. Outward Investment Singapore places no restrictions on domestic investors investing abroad. The government promotes outward investment through Enterprise Singapore, a statutory board under the Ministry of Trade and Industry (MTI). It provides market information, business contacts, and financial assistance and grants for internationalizing companies. While it has a global reach and runs overseas centers in major cities across the world, a large share of its overseas centers are located in major trading and investment partners and regional markets like China, India, and ASEAN. 6. Financial Sector Capital Markets and Portfolio Investment The government takes a favorable stance towards foreign portfolio investment and fixed asset investments. While it welcomes capital market investments, the government has introduced macro-prudential policies aimed at reducing foreign speculative inflows in the real estate sector since 2009. The government promotes Singapore’s position as an asset and wealth management center, and assets under management grew 5.4 percent in 2018 to US$2.4 trillion (S$3.4 trillion)– the latest year for which the Monetary Authority of Singapore conducted a survey. The Government of Singapore facilitates the free flow of financial resources into product and factor markets, and the Singapore Exchange (SGX) is Singapore’s stock market. An effective regulatory system exists to encourage and facilitate portfolio investment. Credit is allocated on market terms and foreign investors can access credit, U.S. dollars, Singapore dollars (SGD), and other foreign currencies on the local market. The private sector has access to a variety of credit instruments through banks operating in Singapore. The government respects IMF Article VIII by refraining from restrictions on payments and transfers for current international transactions. Money and Banking System Singapore’s banking system is sound and well regulated by the Monetary Authority of Singapore (MAS), and it serves as a financial hub for the region. Banks have a very high domestic penetration rate, and according to World Bank Financial Inclusion indicators, over 97 percent of persons held a financial account in 2017. (latest year available). Local Singapore banks saw net profits rise 27 percent in the last quarter of 2019. Banks are statutorily prohibited from engaging in non-financial business. Banks can hold 10 percent or less in non-financial companies as an “equity portfolio investment.” At the end of 2019, the non-performing loans ratio (NPL ratio) of the three local banks remained at an averaged 1.5 percent since the last quarter of 2018. The World Bank records Singapore’s banking sector overall NPL ratio at 1.3 in 2018. Foreign banks require licenses to operate in the country. The tiered licenses, for Merchant, Offshore, Wholesale, Full Banks and Qualifying Full Banks (QFBs) subject banks to further prudential safeguards in return for offering a greater range of services. U.S. financial institutions enjoy phased-in benefits under the USSFTA. Since 2006, U.S.-licensed full service banks that are also QFBs have been able to operate at an unlimited number of locations (branches or off-premises ATMs) versus 25 for non-U.S. full service foreign banks with QFB status. Under the OECD Common Reporting Standards (CRS), which has been in effect since January 2017, Singapore-based Financial Institutions (SGFIs) – depository institutions such as banks, specified insurance companies, investment entities, and custodial institutions – are required to establish the tax residency status of all their account holders, collect and retain CRS information for all non-Singapore tax residents in the case of new accounts and report to tax authorities the financial account information of account holders who are tax residents of jurisdictions with which Singapore has a Competent Authority Agreement (CAA) to exchange the information. As of December 2019, Singapore has established more than 80 exchange relationships, include one with the United States established in September 2018. U.S. financial regulations do not restrict foreign banks’ ability to hold accounts for U.S. citizens. U.S. Citizens are encouraged to alert the nearest U.S. Embassy of any practices they encounter with regard to the provision of financial services. Fintech investments in Singapore rose from $365 million in 2018 to $861 million in 2019. To strengthen Singapore’s position as a global Fintech hub, MAS has created a dedicated Fintech Office as a one-stop virtual entity for all FinTech-related matters to enable FinTech experimentation and promote an open-API (Application Programming Interfaces) in the financial industry. Investment in payments start-ups accounted for about 40 percent of all funds. Singapore has over 50 innovation labs established by global financial institutions and technology companies. MAS also aims to be a regional leader in the implementation of blockchain technologies to position Singapore as a financial technology center. MAS and the Association of Banks in Singapore are prototyping the use of Distributed Ledger Technology (DLT) for inter-bank clearing and settlement of payments and securities. Two phases have been completed, including a proof-of-concept project for inter-bank payments and software prototypes for decentralized inter-bank payment and settlements. The next two phases will focus on DLT interoperability, including Delivery-versus-Payment (DvP) settlement of payments and securities, and cross-border payments. A fifth phase will then explore the business value of a blockchain-based multi-currency payments network, such as in enabling business opportunities that would benefit or make viable greater cost efficiencies compared to existing systems. (https://www.mas.gov.sg/schemes-and-initiatives/Project-Ubin ). Alternative financial services include retail and corporate non-bank lending via finance companies, co-operative societies, and pawnshops; and burgeoning financial technology-based services across a wide range of sectors: crowdfunding, Initial Coin Offerings, payment services and remittance, which remains a small but growing sector. In January 2020, the Payment Services Bill went into effect, which will require all cryptocurrency service providers to be licensed with the intent to provide more user protection. Smaller payment firms will receive a different classifications from larger institutions and will be less heavily regulated. Key infrastructures supporting Singapore’s financial market include interbank (MEP), Foreign exchange (CLS, CAPS), retail (SGDCCS, USDCCS, CTS, IBG, ATM, FAST, NETS, EFTPOS), securities (MEPS+-SGS, CDP, SGX-DC) and derivatives settlements (SGX-DC, APS)(https://www.mas.gov.sg/regulation/payments/payment-systems ) Foreign Exchange and Remittances Foreign Exchange The USSFTA commits Singapore to the free transfer of capital, unimpeded by regulatory restrictions. Singapore places no restrictions on reinvestment or repatriation of earnings and capital, and maintains no significant restrictions on remittances, foreign exchange transactions and capital movements. Singapore’s monetary policy has been centered on the management of the exchange rate since 1981, with the stated primary objective of promoting medium term price stability as a sound basis for sustainable economic growth. As described by MAS, there are three main features of the exchange rate system in Singapore. MAS operates a managed float regime for the Singapore dollar with the trade-weighted exchange rate allowed to fluctuate within a policy band. The Singapore dollar is managed against a basket of currencies of its major trading partners. The exchange rate policy band is periodically reviewed to ensure that it remains consistent with the underlying fundamentals of the economy. Remittance Policies There are no time or amount limitations on remittances. No significant changes to investment remittance was implemented or announced over the past year. Local and foreign banks may impose their own limitations on daily remittances. Sovereign Wealth Funds The Government of Singapore has three key investment entities. GIC Private Limited (GIC) is the sovereign wealth fund in Singapore that manages the government’s substantial investments, fiscal, and foreign reserves, with the stated objective to achieve long-term returns and preserve the international purchasing power of the reserves. Temasek is a holding company wholly owned by the Singapore Minister for Finance. Under the Singapore Minister for Finance (Incorporation) Act, the Minister for Finance is a corporate body. The MAS, as the central bank of Singapore, manages the Official Foreign Reserves, and a significant proportion of its portfolio is invested in liquid financial market instruments. GIC does not publish the size of the funds under management, but some industry observers estimate its managed assets may exceed $400 billion. GIC does not invest domestically, but manages Singapore’s international investments, which are generally passive (non-controlling) investments in publicly traded entities. The United States is its top investment destination, accounting for 32 percent of GIC’s portfolio as of March 2019, while Asia ex-Japan accounts for 20 percent, the Eurozone 12 percent, Japan 12 percent, and UK 6 percent. Investments in the United States are diversified and include industrial and commercial properties, student housing, power transmission companies, and financial, retail and business services. Although not required by law, GIC has published an annual report since 2008. Temasek began as a holding company for Singapore’s state-owned enterprises, now GLCs, but has since branched out to other asset classes and often holds significant stake in companies. As of March 2019, Temasek’s portfolio value reached $222 billion, and its asset exposure to Singapore is 26 percent; 40 percent in the rest of Asia, and 15 percent in North America. As set out in the Temasek Charter, Temasek delivers sustainable value over the long term for its stakeholders. Temasek has published a Temasek Review annually since 2004. The statements only provides consolidated financial statements, which aggregate all of Temasek and its subsidiaries into a single financial report. A major international audit firm audits Temasek Group’s annual statutory financial statements. GIC and Temasek uphold the Santiago Principles for sovereign investments. GIC is a member of the International Forum of Sovereign Wealth Funds. Other investing entities of government funds include EDB Investments Pte Ltd, Singapore’s Housing Development Board, and other government statutory boards with funding decisions driven by goals emanating from the central government 7. State-Owned Enterprises Singapore has an extensive network of full and partial SOEs that held under the umbrella of Temasek Holdings, a holding company with the Singapore Minister for Finance as its sole shareholder. Singapore SOEs play a substantial role in Singapore’s domestic economy, especially in strategically important sectors including telecommunications, media, healthcare, public transportation, defense, port, gas, electricity grid, and airport operations. In addition, the SOEs are also present in many other sectors of the economy, including banking, subway, airline, consumer/lifestyle, commodities trading, oil and gas engineering, postal services, infrastructure, and real estate. The Government of Singapore emphasizes that government-linked entities operate on an equal basis with both local and foreign businesses without exception. There is no published list of SOEs. Temasek’s annual report notes that its portfolio companies are guided and managed by their respective boards and management, and Temasek does not direct their business decisions or operations. However, as a substantial shareholder, corporate governance within GLCs typically are guided or influenced by policies developed by Temasek. There are differences in corporate governance disclosures and practices across the GLCs, and GLC boards are allowed to determine their own governance practices, with Temasek advisors occasionally meeting with the companies to make recommendations. GLC board seats are not specifically allocated to government officials, although it “leverages on its networks to suggest qualified individuals for consideration by the respective boards”, and leaders formerly from the armed forces or civil service are often represented on boards and fill senior management positions. Temasek exercises its shareholder rights to influence the strategic directions of its companies but does not get involved in the day-to-day business and commercial decisions of its firms and subsidiaries. GLCs operate on a commercial basis and compete on an equal basis with private businesses, both local and foreign. Singapore officials highlight that the government does not interfere with the operations of GLCs or grant them special privileges, preferential treatment or hidden subsidies, asserting that GLCs are subject to the same regulatory regime and discipline of the market as private sector companies. Observers, however, have been critical of cases where GLCs have entered into new lines of business or where government agencies have “corporatized” certain government functions, in both circumstances entering into competition with already-existing private businesses. Some private sector companies have said they encountered unfair business practices and opaque bidding processes that appeared to favor incumbent, government-linked firms. In addition, they note that the GLC’s institutional relationships with the government give them natural advantages in terms of access to cheaper funding and opportunities to shape the economic policy agenda in ways that benefit their companies. The USSFTA contains specific conduct guarantees to ensure that GLCs will operate on a commercial and non-discriminatory basis towards U.S. firms. GLCs with substantial revenues or assets are also subject to enhanced transparency requirements under the USSFTA. In accordance with its USSFTA commitments, Singapore enacted the Competition Act in 2004 and established the Competition Commission of Singapore in January 2005. The Act contains provisions on anti-competitive agreements, decisions, and practices, abuse of dominance, enforcement and appeals process, and mergers and acquisitions. Privatization Program The government has privatized GLCs in multiple sectors and has not publicly announced further privatization plans, but is likely to retain controlling stakes in strategically important sectors, including telecommunications, media, public transportation, defense, port, gas, electricity grid, and airport operations. The Energy Market Authority (EMA) is extending the liberalization of the retail market from commercial and industrial consumers with an average monthly electricity consumption of at least 2,000 kWh to households and smaller businesses. The Electricity Act and the Code of Conduct for Retail Electricity Licensees govern licensing and standards for electricity retail companies. 9. Corruption Singapore actively enforces its strong anti-corruption laws, and corruption is not cited as a concern for foreign investors. Transparency International’s 2019 Corruption Perception Index ranks Singapore 4th 4th of 180175 countries globally, the highest ranking Asian country. The Prevention of Corruption Act (PCA), and the Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act provide the legal basis for government action by the Corrupt Practices Investigation Bureau (CPIB), which is the only agency authorized under the PCA to investigate corruption offences and other related offences. These laws cover acts of corruption within Singapore as well as those committed by Singaporeans abroad. When cases of corruption are uncovered, whether in the public or private sector, the government deals with them firmly, swiftly, and publicly. The anti-corruption laws extend to family members of officials, and to political parties. The CPIB is effective and non-discriminatory. Singapore is generally perceived to be one of the least corrupt countries in Asia and the world, and corruption is not identified as an obstacle to FDI in Singapore. In its 2018 annual review of corruption, Asia, Political, and Economic Risk Consultancy rated Singapore the least corrupt country in the Asian-Pacific Region and praised Singapore authority’s response to a high-level corruption case involving Keppel Offshore & Marine, in which GLC Temasek Holdings holds a 20 percent stake. Singapore is a signatory to the UN Anticorruption Convention, but not the OECD Anti-Bribery Convention. Resources to Report Corruption Contact at government agency or agencies are responsible for combating corruption: Corrupt Practices Investigation Bureau 2 Lengkok Bahru, Singapore 159047 +65 6270 0141 email@example.com Contact at a “watchdog” organization: Transparency International Alt-Moabit 96 10559 Berlin, Germany +49 30 3438 200 10. Political and Security Environment Singapore’s political environment is stable and there is no history of incidents involving politically motivated damage to foreign investments in Singapore. The ruling People’s Action Party (PAP) has dominated Singapore’s parliamentary government since 1959 and currently controls 83 of the 89 regularly contested parliamentary seats. Singapore opposition parties, which currently hold six regularly contested parliamentary seats and three additional seats reserved to the opposition by the constitution, do not usually espouse views that are radically different from the mainstream of Singapore political opinion. Slovakia Executive Summary The Slovak Republic is a small, open, export-oriented economy, with a population of 5.5 million. Slovakia joined the European Union (EU) and NATO in 2004 and the Eurozone in 2009. Slovakia is an attractive destination for foreign direct investment (FDI), with a favorable geographic location in the heart of Europe, and an investment-friendly regulatory environment. A new government was elected in the parliamentary election in February 2020. This new government campaigned heavily on an anti-corruption platform and has pledged to improve the local business climate. In 2019, Slovak GDP grew by 2.3 percent, fueled mainly by growing domestic consumption. While average wages in Slovakia continue to be significantly below the OECD average, high social insurance payments increase the overall cost of labor, particularly for low-skilled, low-wage workers. Employers’ combined social and health contributions are equivalent to 35 percent of wages. The corporate income tax rate is 21 percent except for small companies with revenues below €100,000, whose tax rate was lowered in 2020 to 15 percent. When the COVID-19 outbreak reached Europe, Slovakia organized one of the fastest and strictest response programs in the region in order to avoid overstraining its limited healthcare capacities. Slovakia’s economic recovery will largely depend on the recovery of its main economic partners: Germany, Czechia, Poland and others. Most recent estimates of the Finance Ministry’s Institute of Financial Policy expect a contraction of approximately –7.2 percent of GDP and a drop in exports by 21.4 percent in 2020 followed by a quick rise of GDP of 6.8 percent in 2021. The labor market will likely lose 88,000 jobs and unemployment should rise by 3 percent to 8.8 percent in 2020. In the worst scenario, the government deficit could fall to 7 percent of GDP. However, due to slow absorption of EU funds, the Slovak government expects to be able to cover almost €2.5 billion of its coronavirus related expenses using EU funds. Slovakia continues to face structural challenges of an inefficient judiciary, a lack of investment in innovation, an inadequate education system, and high perception of corruption. There have been few high value-added investments to date, despite Slovak efforts to court R&D. Private and public investment in R&D remains very low compared to the OECD average, and inefficiencies in drawing available EU funds persist. Slovakia remains the largest per capita car producer in the world, with four major car producers and hundreds of suppliers. Manufacturing industries, including automotive, machinery and transport equipment, metallurgy and metal processing, electronics, chemical and pharmaceutical remain attractive and have the potential for further growth. Positive aspects of the Slovak investment climate include: Membership in the EU and the Eurozone Open, export-oriented economy close to western European markets Qualified and relatively inexpensive workforce Investment incentives, including for foreign investors Firm government commitment to EU deficit and debt targets Sound banking sector, deep economic and financial integration within Europe Negative aspects of the Slovak investment climate include: High sensitivity to regional economic developments Shortages in qualified labor, due in part to education system inadequacies Weak public administration, allegations of corruption, weak judiciary Significant regional disparities, suboptimal national transport network Low rate of public and private R&D Heavy reliance on EU structural funds, chronic deficiencies in allocation of funds Table 1: Key Metrics and Rankings Measure Year Index/Rank Website Address TI Corruption Perceptions Index 2019 59 of 180 http://www.transparency.org/ research/cpi/overview World Bank’s Doing Business Report 2019 45 of 190 http://www.doingbusiness.org/en/rankings Global Innovation Index 2019 37 of 129 https://www.globalinnovationindex.org/ analysis-indicator U.S. FDI in partner country ($M USD, historical stock positions) 2018 $847 http://apps.bea.gov/international/factsheet/ World Bank GNI per capita 2018 $18,260 http://data.worldbank.org/ indicator/NY.GNP.PCAP.CD 1. Openness To, and Restrictions Upon, Foreign Investment Policies Towards Foreign Direct Investment Slovakia is one of the most open economies in the EU. The government’s overall attitude toward foreign direct investment (FDI) is positive, and the government does not limit or discriminate against foreign investors. FDI plays an important role in the country’s economy, with major foreign investments in manufacturing and industry, banking, information and communication technologies (ICT), and Business Service Centers, where U.S. companies have a significant presence. Slovakia’s assets, including skilled labor, EU and Eurozone membership, and location at the crossroads of Europe, have attracted a significant U.S. commercial and industrial presence, including Accenture, Adient, Amazon, Amphenol, AT&T, Cisco, Dell, Garrett, GlobalLogic, Hewlett-Packard, IBM, Lear, Oracle, U.S. Steel, Whirlpool, and many others. The Ministry of Economy coordinates efforts to improve the business environment, innovation, and support for least-developed regions. Within the Ministry of Economy, the Slovak Investment and Trade Development Agency (SARIO) is responsible for identifying and advising potential investors. The government supports foreign investors and offers investment incentives based on specific criteria, usually delivered in the form of tax allowances, or grants to support employment, regional development, and training. The Regional Investment Aid Act (57/2018) specifies eligibility criteria. Section four covers investment incentives in detail. According to the National Bank of Slovakia, in 2018, inward FDI flows to Slovakia reached €1 billion, and inward FDI stock was €51 billion. EU Member States are the largest foreign investors in Slovakia, including the Netherlands, Austria, the Czech Republic, Luxembourg, and Germany. South Korea remains an important investor among non-EU countries, given its importance in global automotive supply chains. The Act on Special Levy on Regulated Sectors (235/2012 Coll., and later amendments) imposes a special tax on regulated industries, including the energy and network industries, insurance companies, electronic communications companies, healthcare, air transport, and others. The levy applies to profits generated from regulated activities above €3 million. The Act on Special Levy on Selected Financial Institutions (384/2011 Coll., and later amendments) imposed a special 0.2 percent levy on banks, most of which are foreign-owned. In November 2019, ahead of February 2020 elections, and despite public declarations that the levy would cease to exist in 2020, the government increased the levy to 0.4 percent (valid as of January 2020). Per amendment to the Act on Income Tax (344/2017 Coll.) valid as of January 2019, sharing economy platforms in the area of transport or housing are obliged to register a permanent platform in Slovakia. Income is taxed in accordance with the valid income tax rules of 21 percent for corporate income tax in Slovakia. If the service provider does not register a platform, the firm will be obligated to pay either a 19 or 35 percent withholding tax on the fees it pays to a foreign entity, based on the residence of the recipient of such fee, and based on whether bilateral taxation treaties exist. Limits on Foreign Control and Right to Private Ownership and Establishment Foreign and domestic private entities have the right to establish and own business enterprises and engage in all forms of remunerative activity in Slovakia. Businesses can contract directly with foreign entities. Private enterprises are free to establish, acquire, and dispose of business interests, but must pay all Slovak obligations of liquidated companies before transferring any remaining funds out of Slovakia. Slovakia has no formal performance requirements for establishing, maintaining, or expanding foreign investments. Large-scale privatizations are possible via direct sale or public auction. There are no formal requirements to approve FDI, though the Government ultimately approves investment incentives. If investment incentives apply, the Economy Ministry manages the associated legislative process. The Act on Regional Investment Aid (57/2018) specifies eligibility requirements. The Slovak government treats foreign entities established in Slovakia in the same manner as domestic entities, and foreign entities face no impediments in participating in R&D programs financed and/or subsidized by the Slovak government. Since January 2020, up to 200 percent of R&D spending is tax deductible. The Slovak government holds stakes in a number of energy companies. It has historically been less open to private investment in energy assets that it considers to be in the national security interest. There are no domestic ownership requirements for telecommunications and broadcast licenses. The Act on Civil Air Transport (143/1998 Coll.) sets out rules for foreign operators seeking to operate in Slovakia. Please consult the following websites for more information: R&D Tax-Deductible: https://superodpocet.sk/ Other Investment Policy Reviews The OECD Economic Survey of Slovakia The European Commission’s Country Report Slovakia 2020 The World Trade Organization’s data on Slovakia Business Facilitation According to the World Bank’s Doing Business 2020 report , Slovakia ranks 118th out of 190 countries surveyed on the ease of starting a business (up from 127th in the 2019 edition). It takes around 21.5 days to start a business in Slovakia (versus 26.5 days in 2019), and involves seven procedures. The Central Government Portal “slovensko.sk” provides useful information on e-Government services in the area of starting and running a business, citizenship, justice, registering vehicles, social security, etc. Checklists of procedures necessary for registrations, applications for permits, etc., are currently available on websites of individual institutions, and the Economy Ministry is working on streamlining the information into one common platform. Please consult the following websites for more information: Central Government Portal: https://www.slovensko.sk/en/title/ Commercial Register: http://www.orsr.sk/Default.asp?lan=en Slovak Business Agency: http://www.sbagency.sk/en/national-business-center#.WrzvnNtMS9I Slovak Investment and Trade Development Agency: https://www.sario.sk/en World Bank Doing Business 2020: https://www.doingbusiness.org/content/dam/doingBusiness/country/s/slovakia/SVK.pdf Outward Investment The majority of Slovak exports go to fellow EU countries. Due to their limited size, Slovak companies have not made significant outward foreign direct investments. Several state agencies share responsibilities for supporting investment (inward and outward) and trade. SARIO is officially responsible for export facilitation and attracting investment. The Slovak Export-Import Bank (EXIM BANK) supports exports and outward investments with financial instruments to reduce risks related to insurance, credit, guarantee, and financial activities; it assists both large companies and small and medium sized enterprises (SMEs), and is the only institution in Slovakia authorized to provide export and outward investment-related government assistance. The Ministry for Foreign and European Affairs runs a Business Center that provides services in the area of export and investment opportunities. Slovakia’s diplomatic missions, the Ministry of Finance’s Slovak Guarantee and Development Bank, and the Deputy Prime Minister’s Office for Investments and Regional Development also play a role in facilitating external economic relations. 6. Financial Sector Capital Markets and Portfolio Investment The Bratislava Stock Exchange (BSSE) is a member of the Federation of European Securities Exchanges (FESE). The stock market in Slovakia is among the smallest in Europe, and largely dominated by bonds that represent 95 percent of all volume. In 2019, the total volume of transactions at the BSSE was slightly below $265 million (a 53 percent decline compared to 2018). Market capitalization of shares was roughly $3 billion and market capitalization of bonds $51 billion. The European Single Market and existing European policies facilitate the free flow of financial resources. Slovakia respects International Monetary Fund (IMF) Article VIII by refraining from restricting payments and transfers for current international transactions. Credit is allocated on market terms in Slovakia and is available to foreign investors on the local market. Please consult the following websites for more information: Bratislava Stock Exchange: http://www.bsse.sk/bcpben/MainPage/tabid/104/language/en-US/Default.aspx Central Depository of Securities: https://www.cdcp.sk/en/ Central Bank of Slovakia: https://www.nbs.sk/en/about-the-bank Central Register of Regulated Information: https://ceri.nbs.sk/ Money and Banking System Slovakia became part of the Euro system, which forms the central banking system of the euro area within the European System of Central Banks, upon its integration into the Eurozone on January 1, 2009. The Central Bank of Slovakia (NBS) is the independent central bank of the Slovak Republic. Most banks operating in Slovakia are subsidiaries of foreign-owned institutions. Slovak branches operate conservatively and showed strong resilience during the 2009 financial crisis and subsequent EU-wide stress tests. The combined total assets of the financial institutions active in the Slovak market were over €85 billion at the end of 2019. According to the 2019 Financial Stability Report issued by NBS, profitability of the Slovak banking sector (ROE of 8 percent as of September 2019) remains above-average in the EU’s banking union, but the gap is narrowing. Corporate credit has gradually decreased amid economic slowdown. Non-performing loans reported by domestic banks were approximately 3.4 percent of total loans in September 2019. The banking sector’s aggregate total capital ratio was 18.4 percent in the first half of 2019. Foreign nationals can open bank accounts by presenting their passport and/or residence permit, depending on the bank. Please consult the following websites for more information: Central Bank of Slovakia: https://www.nbs.sk/en/financial-market-supervision-practical-info/publications-data Foreign Exchange and Remittances Foreign Exchange Slovakia joined the Eurozone on January 1, 2009. The exchange rate is free floating. The Foreign Exchange Act (312/2004) governs foreign exchange operations and allows for easy conversion or transfer of funds associated with an investment. The Act liberalized operations with financial derivatives and abolished the limit on the export and import of banknotes and coins (domestic and foreign currency). It also authorizes Slovak residents to open accounts abroad and eliminates the obligation to transfer financial assets acquired abroad to Slovakia. Slovakia meets all international standards for conversion and transfer policy. Non-residents may hold foreign exchange accounts. No permission is needed to issue foreign securities in Slovakia, and Slovak citizens are free to trade, buy, and sell foreign securities. Remittance Policies There are very few controls on capital transactions, except for rules governing commercial banking and credit institutions, which must abide by existing banking and anti-money laundering laws. The basic framework for investment transfers between Slovakia and the United States is set within the 1992 U.S. – Slovakia Bilateral Investment Treaty. Following Slovakia’s approval of the Foreign Account Tax Compliance Act (FATCA) in July 2015, and per the Act on Automatic Exchange of Information on Financial Accounts (359/2015), Slovak financial institutions are obligated to report tax information of American account holders to the Slovak Government, which then forwards that information to the U.S. Internal Revenue Service (IRS). Slovakia is not a Financial Action Task Force (FATF) member; but receives FATF recommendations, and is a member of MONEYVAL, which is an FATF associate member. Slovakia does not impose any limitations on remittances. Dividends are taxed at a 7 percent rate. Transfer pricing for controlled transactions must be based on market prices. An obligation to pay a 21 percent tax applies to companies that are moving their assets or activities abroad. Please consult the following websites for more information: S.-Slovakia Bilateral Investment Treaty: http://2001-2009.state.gov/documents/organization/43587.pdf S.- Slovakia Bilateral Taxation Treaty: https://www.irs.gov/businesses/international-businesses/slovak-republic-tax-treaty-documents MONEYVAL: https://www.coe.int/en/web/moneyval/jurisdictions/slovak_republic Sovereign Wealth Funds Slovakia does not maintain a Sovereign Wealth Fund (SWF). Slovak Investment Holding (SIH) is a fund of funds fully owned by the Slovak Guarantee and Development Bank. Resources are allocated as revolving financial instruments, through financial intermediaries or directly to final beneficiaries, and focus on strategic investment priorities in the following sectors: transport infrastructure, energy efficiency, waste management, SMEs, and social economy. Please consult the following websites for more information: Slovak Investment Holding: https://www.sih.sk/en/ 7. State-Owned Enterprises There are roughly 100 SOEs in Slovakia that employ approximately 86,000 employees. SOEs are mostly active in strategic sectors, including health and social insurance, aerospace, ground transportation, and energy industries. Gas industry SOEs are the most profitable with SPP Infrastructure (gas infrastructure) at the top of the list with a profit of €607 million in 2019. Slovak Rails, a rail infrastructure company with a net loss of €2 million in 2019 and assets worth €3.7 billion, and Slovak Post with a net income of €1.4 million in 2019 and assets worth €500 million, are the two biggest employers in Slovakia, each with almost 14,000 employees. Narodna Dialnicna Spolocnost (National Highway Company) has the most assets, worth €10 billion. The second biggest SOE in terms of assets is SPP Infrastructure with €6 billion. The 30 biggest fully state-owned enterprises have assets of roughly €25 billion. The 2019 Slovak budget received roughly €430 million in revenues from SOEs. Slovenske Elektrarne, a major utility company with 34 percent state ownership has assets worth €10.5 billion. According to the government’s Value for Money unit, 37 percent of SOEs have a good financial health and the same percentage have serious financial problems. In 2019, Transparency International Slovakia (TIS) published a ranking of 100 Slovak SOEs (including state, municipally and regionally owned companies), assessing how open these companies are when it comes to publishing economic results and access to information. Transparency International has deemed the SOEs to be generally non-transparent. The 100 ranked SOEs have a combined budget of more than €10 billion, which represents two thirds of state budget expenses. Wider concerns over transparency of public tenders persist, including those involving the SOEs. Most SOEs are structured as joint-stock companies governed by boards that include government representatives and government appointees and the government plays a key role in SOEs’ decision making. Significant SOEs are required to publish their audited financial statements in accordance with the Accounting Act. They submit their audited financial statements to the Finance Ministry’s dedicated portal. Most ministries publish a list of companies they own on their web portals. The list includes SOE equities and profits broken down by enterprise and is publicly available. Slovak SOE ownership is exercised in accordance with the Act on State-Owned Enterprises (111/1990) and is consistent with the OECD Guidelines on Corporate Governance for SOEs. Please consult the following website for more information: Register of Financial Statements: http://www.registeruz.sk/cruz-public/home 2019 Ranking of SOEs’ openness by Transparency International Slovakia: http://firmy.transparency.sk/rankings/companies/2019 Equity of key Slovak SOEs: https://www.nrsr.sk/web/Dynamic/DocumentPreview.aspx?DocID=472879 Economic data about Slovak companies including SOEs: https://www.finstat.sk/ Privatization Program Foreign investors are free to participate in privatization programs for SOEs however, no privatization efforts are currently under way. Privatization programs were usually executed through direct sale, although Slovakia has a track record of doing major privatization projects through public tenders, especially in the energy sector. According to Act on Transfer of State Assets to Other Entities (92/1991 Coll.), the appropriate ministry plays a central role in the SOE privatization process. Previous privatization programs commonly resulted in foreign investors bidding and winning the tenders. 9. Corruption Slovakia is a party to international treaties on corruption. Among them are the OECD Convention on Combating Bribery of Foreign Public Officials, the UN Anti-Organized Crime Convention, the UN Anti-Corruption Convention, and the Criminal Law Convention on Corruption and Civil Law Convention on Corruption. Slovakia is a member of the Group of States against Corruption (GRECO). The giving or accepting of a bribe constitutes a criminal act according to Slovak law. Slovak criminal law incorporates criminal liability for legal persons, including corporations. Nevertheless, corruption continues to be among the most serious issues for the business community. According to the Special Eurobarometer survey of October 2017, 81 percent of respondents believed that corruption is part of Slovakia’s business culture. In 2019 Transparency International’s global corruption perception ranking showed that Slovakia dropped from 57th place in 2018 to 59th place. There is no data available on whether U.S. firms identify corruption as an obstacle to foreign direct investment. In a March 2018 survey by five foreign chambers of commerce (Slovak-German Chamber of Commerce, Slovak-Austrian Chamber of Commerce, Dutch Chamber of Commerce, Swedish Chamber of Commerce, and Advantage Austria), respondents highlighted the fight against criminality and corruption as the worst among evaluated investment criteria. The investors further noted that concerns about corruption and rule of law could potentially damage the image of Slovakia and raise questions about future stability. NGO analysts and GRECO point out that conflicts of interest and asset declaration regulations lack the necessary level of detail to be implemented and enforced in practice. There is a high threshold for reporting gifts accepted by judges and prosecutors. Government authorities do not require private companies to establish internal codes of conduct that would prohibit bribery of public officials, although some companies have adopted such measures voluntarily. While law enforcement has effectively investigated some cases of petty bribes and mid-level corruption, anti-corruption non-governmental organizations assess that high-level corruption is rarely investigated or prosecuted effectively; only two ministerial-level officials have been convicted of corruption-related crimes since Slovak independence in 1993. According to survey published by the Transparency International Slovakia between October 2016 and 2019 only 10 percent of corruption cases decided by the Specialized Criminal Court exceeded the amount of EUR 5,000. Following the murder of investigative journalist Jan Kuciak and his fiancée Martina Kusnirova in February 2018 and the resulting changes in the government and police leadership, one individual involved in high-level tax fraud was convicted and a number of judges were charged with corruption, interference in the independence of courts and obstruction of justice. In March 2020 Pavol Rusko, a former director of TV Markiza, and Marian Kočner, accused of plotting the murder of Jan Kuciak and his fiancé, and were sentenced to 19 years in jail for obstruction of justice and promissory notes fraud. Based on the promissory notes, Kočner claimed €69 million from TV Markiza. The appeal proceedings are pending. TV Markiza is part of NASDAQ-traded Central European Media Enterprise (CME), and was majority owned by AT&T. CME was sold to Czech firm PPF in 2019, pending approval from relevant EU and national regulatory authorities. The previous government in power from 2016-2020 approved a National Anti-corruption Plan in September 2019. NGOs investigating corruption do not enjoy any special protection. In 2019 the Parliament adopted the law on whistleblower protection including a new office assigned to enhance whistleblower protection. The Head of the Office has not yet been selected. In June 2019 Parliament streamlined application of the anti-shell company law that provides for increased transparency in governmental contracting by requiring private companies reveal their ownership structure before entering into business contracts with state entities. Some members of civil society and many politicians claim political influence over the police and prosecution services have impeded corruption investigations, allowing individuals with strong political connections to avoid prosecution for corrupt practices. Several police investigators have publicly claimed, and other investigators told journalists in private, that the police corps’ politically nominated leadership discouraged investigation of politically sensitive cases, manipulated police statistics on criminality, and forced honest police officers to leave the force. Following February 2020 parliamentary elections, a new government took over with a political program heavily focused on strengthening anti-corruption measures. In January 2020, a conflict of interest in civil service regulation was launched by Cabinet decree, introducing a Code of Conduct for Civil Servants (400/2019 Coll.). Disclosure of contracts in the Central Registry of Contracts by public administrators and state-owned enterprises is compulsory. However, there continues to be frequent media reports alleging corruption in public tenders and EU subsidy programs. Private businesses, especially those with foreign ownership, often have internal codes of ethics, in many cases also extending to contractors. Resources to Report Corruption Contact details of government agencies responsible for combating corruption: Dusan Kovacik Head of the Special Prosecutor’s Office Office of the Special Prosecution under the General Prosecutor’s Office Sturova 2 812 85 Bratislava Telephone: +421 33 690 3171 Dusan.Kovacik@genpro.gov.sk Branislav Zurian Director of the National Criminal Agency Ministry of Interior, National Police Headquarters Račianska 45 812 72 Bratislava Telephone: +421 964052102 Branislav.Zurian@minv.sk Contact details of “watchdog” organizations: Gabriel Sipos Executive Director Transparency International Slovakia Bajkalska 25 82718 Bratislava Telephone: +421 2 5341 7207 firstname.lastname@example.org Zuzana Petkova Executive Director Stop Corruption Foundation Stare Grunty 18 841 04 Bratislava email@example.com Peter Kunder Executive Director Fair Play Alliance Smrecianska 21 811 05 Bratislava Telephone: +421 2 207 39 919 firstname.lastname@example.org 10. Political and Security Environment Politically motivated violence and civil disturbance are rare in Slovakia. There have been no recent reports of politically motivated damage to property, projects, and installations or violence directed toward foreign-owned companies. In May 2018, a foreign-born IBM employee was murdered in an apparent hate crime, but overall criminal violence remains rare. Slovak citizens have responded well to stringent government measures introduced during March and April to contain the spread of the COVID-19 pandemic, with polls showing that nine out of ten Slovaks considered them appropriate. There were no reported cases of mass civil disobedience, looting or clashes with law enforcement, despite the temporary introduction of far-reaching restrictions on movement and the sale of goods and services, as well as a mandatory two-week quarantine in state-operated facilities applied to all individuals returning to Slovakia from abroad. Mass quarantine regimes implemented in a number of marginalized Romani settlements, effectively isolating them from the surrounding world, also progressed with limited civil disturbance or violence. In February 2020, Slovakia elected a new four-party government coalition, which ran on a campaign of anti-corruption, good governance, and accountability. The transfer of power from the previous government was smooth and effective. Slovenia Executive Summary Several factors make Slovenia an attractive location for foreign direct investment (FDI): modern infrastructure with access to important EU transportation corridors, a major port on the Adriatic Sea with access to the Mediterranean, a highly-educated and professional workforce, proximity to Central European and Balkan markets, and membership in the Schengen Area, EU, and Eurozone. With a small domestic market of just over two million people, Slovenia’s economy is heavily dependent on foreign trade and susceptible to international price and currency fluctuations and economic conditions among its major trading partners. In recent years, Slovenia’s economic growth rate has outpaced those of most other EU member states, and the country has enjoyed rising incomes, growing domestic consumption, falling unemployment, low inflation, and burgeoning consumer confidence. GDP grew by an estimated 2.4 percent to EUR 48 billion in 2019, considerably less than 2018’s 4.5 percent growth. Slovenia’s economy has been buffeted by the 2020 COVID-19 pandemic, however, and economic forecasters expect GDP to contract by five to ten percent in 2020. According to Bank of Slovenia figures, inward FDI in Slovenia totaled EUR 15.2 billion in 2018, an 8.6 percent increase over the previous year. Slovenia’s most important sources for direct foreign investment were Austria (24 percent), Luxembourg (13.7 percent), Switzerland (10.5 percent), Germany (nine percent), and Italy (7.9 percent). However, Bank of Slovenia data indicated U.S. companies accounted for almost ten percent of total inward foreign direct investment (FDI) in 2018, EUR 72 million (USD 81.5 million) invested directly and an additional EUR 1.41 billion (USD 1.65 billion) invested indirectly through U.S. subsidiaries in other European countries. This combined investment of EUR 1.48 billion (USD 1.68 billion) placed the United States as Slovenia’s third largest source of direct and indirect foreign investment, behind Austria (EUR 2.041 billion) and Germany (EUR 2.278 billion). The most important sectors for FDI were in manufacturing (35.4 percent), financial and insurance activities (19.3 percent), and wholesale and retail trade and repair of motor vehicles and motorcycles (17.6 percent). Firms with foreign owners generated EUR 1.3 billion in profits in 2018, with average returns on investment of 5.4 percent. Although they represented just 1.6 percent of all Slovenian firms in 2018, firms with FDI accounted for 24 percent of capital, 24.7 percent of assets, and 23.8 of corporate sector employees. Their capital and workforce generated EUR 29.7 billion in net sales revenue and EUR 1.6 billion in operating profit. Foreign companies accounted for more than 40 percent of corporate sector exports and 45 percent of corporate sector imports. Although the government privatized the country’s first and third largest state-owned banks in 2019, roughly 35 percent of Slovenia’s economy remains state-owned or state-controlled, and there is widespread skepticism in some quarters toward privatization and foreign direct investment, despite general awareness of FDI’s importance to economic growth, job creation, and developing new technologies. Potential investors in Slovenia may face significant challenges, including a lack of transparency in economic and commercial decision-making, time-consuming bureaucratic procedures, opaque public tender processes, regulatory red tape, and a heavy tax burden for high earners. Table 1: Key Metrics and Rankings Measure Year Index/Rank Website Address TI Corruption Perceptions Index 2019 35 of 180 http://www.transparency.org/ research/cpi/overview World Bank’s Doing Business Report 2020 37 of 190 http://www.doingbusiness.org/en/rankings Global Innovation Index 2019 31 of 129 https://www.globalinnovationindex.org/ analysis-indicator U.S. FDI in partner country ($M USD, historical stock positions) 2018 USD 369 https://apps.bea.gov/international/factsheet/ World Bank GNI per capita 2018 USD 24,580 http://data.worldbank.org/ indicator/NY.GNP.PCAP.CD 1. Openness To, and Restrictions Upon, Foreign Investment Policies Towards Foreign Direct Investment Although Slovenia has no formal business roundtable or foreign investment ombudsman, the Slovenian Public Agency for the Promotion of Entrepreneurship, Innovation, Development, Investment and Tourism (SPIRIT) promotes FDI and advocates for foreign investors in Slovenia. Its mission is to enhance Slovenia’s economic competitiveness through technical and financial assistance to entrepreneurs, businesses, and investors. Foreign companies conducting business in Slovenia have the same rights, obligations, and responsibilities as domestic companies. The principles of commercial enterprise, which include free operation and national treatment, apply to the operations of foreign companies as well. The Law on Commercial Companies and the Law on Foreign Transactions guarantee their basic rights. According to SPIRIT’s annual survey on foreign investors’ perceptions of Slovenia’s business environment, investors cite the high quality of Slovenia’s labor force as the deciding factor in choosing the country as an investment destination, followed by widespread knowledge of foreign languages, employees’ technical expertise, innovation potential, and strategic geographic position offering easy access to EU and Balkan markets. While generally welcoming greenfield investments, Slovenia presents a number of informal barriers that may prove challenging to foreign investors. According to SPIRIT’s survey, the most significant disincentives to FDI are high taxes, high labor costs, lack of payment discipline, an inefficient judicial system, difficulties in firing employees, and excessive bureaucracy. There are no formal limits on foreign investors’ ability to establish an investment or operate in the market. Foreign companies doing business in Slovenia and the local American Chamber of Commerce have also cited additional factors that adversely affect the local investment climate, including the lack of a high-level FDI promotion strategy, a sizable judicial backlog, difficulties in obtaining building permits, labor market rigidity, and disproportionately high social contributions and personal income taxes coupled with excessive administrative tax burdens. Businesses have also reported a lack of transparency in public procurement, unnecessarily complex and time-consuming bureaucracy, frequent changes in regulation, relatively high real estate prices in some parts of the country, and confusion over lead responsibility or jurisdiction regarding foreign investment among government agencies. Limits on Foreign Control and Right to Private Ownership and Establishment Both foreign and domestic private entities have the right to establish and own business enterprises and engage in different forms of remunerative activity. Slovenia has relatively few formal limits on foreign ownership or control. Sector-specific restrictions: Professional services: There are limits on banking and investment services, private pensions, insurance services, asset management services, and settlement, clearing, custodial, and depository services provided in Slovenia by companies headquartered in non-EU countries. Companies from non-EU countries can operate freely only through an affiliate with a license granted by an appropriate Slovenian or EU institution. Gaming: There is a 20 percent cap on private ownership of individual companies. Air transport: Aircraft registration is only possible for aircraft owned by Slovenian or EU nationals or companies controlled by such entities. Companies controlled by Slovenian nationals or carriers complying with EU regulations on ownership and control are the only entities eligible for Air Operator’s Certificates (AOC) for performing airline services. Maritime transport: The law forbids majority ownership by non-EU residents of a Slovenian-flagged maritime vessel unless the operator is a Slovenian or other EU national. Slovenia has an open economy, and no screening or review process is currently necessary for FDI. Other Investment Policy Reviews Slovenia underwent an OECD Investment Policy Review and a WTO Trade Policy Review in 2002. The Economist Intelligence Unit and World Bank’s “Doing Business 2020” provide current economic profiles of Slovenia. Business Facilitation Individuals or businesses may adopt a variety of different legal and organizational forms to conduct economic activities. Businesses most commonly incorporate legally as limited liability companies (LLC or d.o.o.) and public limited companies (PLC or d.d.). Non-residents of the Republic of Slovenia must obtain a Slovenian tax number before beginning the process of establishing a business. Slovenia’s Companies Act , which is fully harmonized with EU legislation, regulates the establishment, management, and organization of companies. Generally, bureaucratic procedures and practices for foreign investors wishing to start a business in Slovenia are sufficiently streamlined and transparent. Start-up costs for businesses are among the lowest in the EU. In order to establish a business in Slovenia, a foreign investor must produce capital of at least EUR 7,500 (USD 8,141) for a limited liability company and EUR 25,000 (USD 27,136) for a stock company. The investor must also establish a business address and file appropriate documentation with the courts. The entire process usually takes three weeks to one month, but may take longer in Ljubljana due to court backlogs. Individuals or legal entities may establish businesses through a notary, one of several VEM (Vse na Enem Mestu or “all in one place”) point offices designated by the Slovenian government, or online. A list of VEM points is available at http://www.podjetniski-portal.si/ustanavljam-podjetje/vem-tocke/seznam-vstopnih-tock-vem . More information on how to invest and register a business in Slovenia is available at http://www.investslovenia.org/business-environment/establishing-a-company/ and http://www.eugo.gov.si/en/starting/business-registration/ . Outward Investment Slovenia does not restrict domestic investors from investing abroad, nor are there any incentives for outward investments. The majority of Slovenia’s outward investments are in the Western Balkans. Croatia is the most popular destination for Slovenian outward investment, constituting 32.2 percent of Slovenia’s investments abroad, followed by Serbia (15.9 percent), Bosnia and Herzegovina (8.7 percent), and North Macedonia (6.3 percent). 6. Financial Sector Capital Markets and Portfolio Investment Capital markets remain relatively underdeveloped given Slovenia’s level of prosperity. Enterprises rarely raise capital through the stock market and tend to rely on the traditional banking system and private lenders to meet their capital needs. Established in 1990, the Ljubljana Stock Exchange (LSE) is a member of the International Association of Stock Exchanges (FIBV). In 2015, the Zagreb Stock Exchange acquired the LSE. However, the number of companies listed on the exchange is limited and trading volume is very light, with annual turnover similar to a single day’s trading on the NYSE. Low liquidity remains an issue when entering or exiting sizeable positions. In 1995, the Central Securities Clearing Corporation (KDD) was established to provide central securities custody services, clear and settle securities transactions, and maintain the central securities registry on the LSE electronic trading system. In 2017, KDD successfully aligned its procedures to that of the uniform European securities settlement platform TARGET2-Securities (T2S). In 2019, Slovenia’s Securities Market Agency (ATVP) licensed KDD to operate under the EU’s Central Securities Depository Regulation (CSDR) and provide services as a Central Securities Depository (CSD), pursuant to Article 17 of the Regulation (EU) 909/2014 on improving securities settlement in the European Union and on central securities depositories. he Established in 1994, the ATVP has powers similar to those of the U.S. Securities and Exchange Commission and supervises investment firms, the Ljubljana Stock Exchange (LSE), the KDD, investment funds, and management companies. It also shares responsibility with the Bank of Slovenia for supervision of banking and investment services. Slovenia adheres to Article VIII of the International Monetary Fund’s Article of Agreement and is committed to full current account convertibility and full repatriation of dividends. The LSE uses different dissemination systems, including real-time online trading information via Reuters and the Business Data Solutions System. The LSE also publishes information on the Internet at http://www.ljse.si/ . Foreign investors in Slovenia have the same rights as domestic investors, including the ability to obtain credit on the local market. Money and Banking System There is a relatively high degree of concentration in Slovenia’s banking sector, with 12 commercial banks, three savings banks, and two foreign bank branches in Slovenia serving two million people. In 2008, the combined effects of the global financial crisis, the collapse of the construction sector, and diminished demand for exports led to significant capital shortfalls. Bank assets declined steadily after 2009 but rebounded in 2016 and have remained steady since then. Since the crisis, most banks have refocused their business activities towards SMEs and individuals/households, prompting larger companies to search for alternative financing sources. According to European Banking Federation data, Slovenia’s banking sector assets totaled EUR 38.8 billion (USD 43.5 billion) at the end of 2018, equaling approximately 84.4 percent of GDP, still EUR13.2 billion less than the total banking assets volume at the end of 2009, when banking sector assets equaled 146 percent of GDP. Slovenia’s banking sector was devastated by the 2009 economic crisis. Nova Ljubljanska Banka (NLB) and Nova Kreditna Banka Maribor (NKBM) faced successive downgrades by credit rating agencies due to the large numbers of nonperforming loans in their portfolios. In 2013, the government established a Bank Asset Management Company (BAMC) with a management board comprised of financial experts to promote stability and restore trust in the financial system. In exchange for bonds, BAMC agreed to manage the nonperforming assets of three major state banks, conducting three such operations from December 2013 through March 2014. The government also injected EUR 3.5 billion (USD 3.94 billion) into Slovenia’s three largest banks, NLB, NKBM, and Abanka. These measures helped recapitalize and revitalize the country’s largest commercial banks. According to World Bank data, just 7.6 percent of NLB’s total assets and an estimated 1.8 percent of all Slovenian banking assets were still nonperforming as of the end of 2018. According to European Bank Authority statistics, 5.3 percent of all loans in Slovenia were past due in June 2019, a marked turnaround from the post-crisis period. NLB, the country’s largest bank, was privatized in 2019, although the government remains a major shareholder with a 25 percent plus one share stake. Of the remaining shares, more than fifty percent are spread among several international investors on fiduciary account at Bank of New York, while a number of Slovenian institutional and private investors purchased the remainder. The country’s second largest bank, Nova Kreditna Banka Maribor (NKBM), was sold to an American fund and the European Bank of Reconstruction and Development (EBRD) in 2016. In 2020, NKBM acquired the country’s third largest state-owned bank, Abanka. Once fully merged, NKBM/Abanka will have total assets of EUR 8.71 billion, and a 22.5 percent market share, rivaling NLB, which has EUR 8.81 billion in assets and a 23 percent market share. Several foreign banks announced takeovers or merged with Slovenian banks prior to the 2008 financial crisis. In 2001, the French bank Société Générale acquired Slovenia’s largest private bank, SKB Banka. That same year, the Italian banking group San Paolo IMI purchased 82 percent of the Bank of Koper, Slovenia’s fifth largest bank. In 2002, the government sold 34 percent of NLB to Belgium’s KBC Group and another five percent to the EBRD. In the aftermath of the 2008 financial crisis, the government purchased KBC’s NLB shares back in December 2012 and recapitalized the bank. Banking legislation authorizes commercial banks, savings banks, and stock brokerage firms to purchase securities abroad. Investment funds may also purchase securities abroad, provided they meet specified diversification requirements. Despite Slovenia’s vibrant blockchain technology ecosystem and several global blockchain companies headquartered in the country, Slovenian banks have been slow to adopt blockchain technologies to process banking transactions. The Bank of Slovenia, established on June 25, 1991, is the Republic of Slovenia’s central bank. The Bank of Slovenia has been a member of the European System of Central Banks (ESCB) since Slovenia joined the European Union in 2004. The Bank of Slovenia gave up responsibility for monetary policy to the Eurosystem when Slovenia adopted the euro as its currency in 2007. As a member of the Eurosystem, the Bank of Slovenia coordinates with other EU central banks to implement the common monetary policy, manage foreign exchange reserves, ensure the smooth functioning of payment systems, and issue euro banknotes. Slovenian law allows non-residents to open bank accounts in Slovenia on presentation of a passport, a Slovenian tax number, and a foreign tax number. Company owners must be present to open a business bank account. Slovenia’s takeover legislation is fully harmonized with EU regulations. In 2006, Slovenia implemented EU Directive 2004/25/ES by adopting a new takeover law. The law was amended in 2008 to reflect Slovenia’s adoption of the euro as its currency. The law defines a takeover as a party’s acquisition of 25 percent of a company’s voting rights and requires the public announcement of a potential takeover offer for all current shareholders. The acquiring party must publicly issue a takeover offer for each additional acquisition of 10 percent of voting rights until it has acquired 75 percent of voting rights. The law also stipulates that the acquiring party must inform the share issuer whenever its stake in the target company reaches, surpasses, or drops below five, 10, 20, 25, 33, 50, or 75 percent. The law applies to all potential takeovers. It is common for acquisitions to be blocked or delayed, and drawn out negotiations and stalled takeovers have hurt Slovenia’s reputation in global financial markets. In 2015, the privatization of Slovenia’s state-owned telecommunications company, Telekom Slovenije, failed in large part due to political attempts to discourage the sale of a state-owned company. Slovenia’s biggest retailer, Mercator, faced similar challenges in 2014 when a lengthy and arduous process and strong domestic opposition preceded its eventual sale to a Croatian buyer. The U.S.-owned Central European Media Enterprises dropped its politically controversial sale of Slovenian media house Pro Plus to then-U.S. owned United Group in January 2019 after the Competition Protection Agency failed to issue a ruling on the proposed acquisition despite reviewing the case for more than 18 months. The government has also struggled to meet its commitment to open Slovenia’s economy to international capital markets. Thirteen insurance companies, two re-insurance companies, three retirement companies, and five branches of foreign firms operate in Slovenia. The three largest insurance companies in Slovenia account for over 60 percent of the market, with the largest, state-owned Triglav d.d., controlling 36 percent, while foreign insurance companies constitute less than 10 percent. In 2016, two Slovenian and two Croatian insurance companies merged into a new company, SAVA. Insurance companies primarily invest their assets in non-financial companies, state bonds, and bank-issued bonds. Since 2000, there have been significant changes in legislation regulating the insurance sector. The Ownership Transformation of Insurance Companies Act, which seeks to privatize insurance companies, has stalled on several occasions due to ambiguity over the estimated share of state-controlled capital. Although plans for insurance sector privatization have been under discussion since 2005, there has been no implementation. Slovenia currently has three registered health insurance companies and a variety of companies offering other kinds of insurance. Under EU regulations, any insurance company registered in the EU can market its services in Slovenia, provided the insurance supervision agency of the country where the company is headquartered has notified the Slovenian Supervision Agency of the company’s intentions. Foreign Exchange and Remittances Foreign Exchange Slovenia adheres to Article VIII of the IMF Article of Agreement and is committed to full current account convertibility and full repatriation of dividends. To repatriate profits, joint stock companies must provide evidence of the settlement of tax liabilities, notarized evidence of distribution of profits to shareholders, and proof of joint stock company membership (Article of Association). All other companies must provide evidence of the settlement of tax liabilities and the company’s act of establishment. For the repatriation of shares in a domestic company, the party must submit its act of establishment, a contract on share withdrawal, and evidence of the settlement of tax liabilities to the authorized bank. Slovenia replaced its previous currency, the Slovenian tolar, with the euro in January 2007. The Eurozone has a freely floating exchange rate. Remittance Policies Not applicable/information not available. Sovereign Wealth Funds Slovenia does not have a sovereign wealth fund. 7. State-Owned Enterprises Private enterprises compete on the same terms and conditions as public enterprises with respect to access to markets, credit, and other business operations. State-owned and partially state-owned enterprises (SOE) are present across most industries in Slovenia. The state has never undergone a wholesale privatization program and has retained significant ownership shares in many large companies since independence. According to a 2017 OECD report on SOEs, 37 companies with a total value of USD 12.5 billion and employing 47,000 people were majority state owned. Most state-owned companies are in the energy, transportation, public utilities, telecommunications, insurance, and financial sectors, although the government successfully completed the privatization of the three largest state-owned banks in 2020. Other economic sectors, including retail, entertainment, construction, tourism, and manufacturing, include important firms that are either wholly state-owned or in which the state maintains a controlling interest by virtue of holding the largest single block of shares. In general, SOEs do not receive a greater share of contracts or business than private sector competitors in sectors that are open to private and foreign competition. SOEs acquire goods and services from private and foreign firms. SOEs must follow strict government procurement agreements which require transparent procedures available to all firms. Private firms compete under the same terms and conditions with respect to market share, products, and incentives. All firms have the same access to financing. SOEs are subject to the same laws as private companies and must fully comply with all legal obligations. They must submit to independent audits and publish annual reports if required (for example, if the SOE is listed on the stock exchange or the size of the company meets a certain threshold). Reporting standards are comparable to international financial reporting standards. Slovenia is an active participant in the Organization for Economic Cooperation and Development (OECD) Working Party on State Ownership and Privatization Practices and adheres to the OECD Guidelines on Corporate Governance for SOEs. Following OECD recommendations, the government established the Capital Asset Management Agency (AUKN) in 2010 to increase transparency and promote more efficient management of SOEs. In 2013, authorities transformed the AUKN into the Slovenian Sovereign Holding (SSH), which is charged with simplifying and shortening the administrative process of privatizing state assets. SSH took over all AUKN portfolios as well as the portfolios of two other smaller state-owned funds. More than 95 percent of SSH funds are invested domestically. SSH is an independent state authority that reports to the National Assembly. It provides the National Assembly with annual reports regarding the previous year’s implementation of the Annual Plan of the Corporate Governance of Capital Investments. The government then adopts the Annual Plan of the Corporate Governance of Capital Investments based on SSH’s proposal. A list of SSH’s SOEs is available at https://www.sdh.si/en-gb/asset-management/list-of-assets . Privatization Program Foreign investors may participate in the public-bidding processes on an equal basis. However, interested parties often describe the bidding process as opaque, with unclear or unenforced deadlines. In 2015, the government prepared an asset management strategy that classified state-owned assets as strategic, important, or portfolio assets. In companies classified as strategic, the state will maintain or obtain at least a 50 percent plus one share. In companies classified as important, the state will maintain a controlling share (25 percent plus one share). In companies classified as portfolio, it is not mandatory for the state to maintain a controlling share. The government reclassified the list of companies in 2017. SSH publishes online the latest list of state stakes for sale. It is available in Slovenian at https://www.sdh.si/sl-si/prodaje-nalozb/kapitalske-nalozbe-v-postopku-prodaje . 9. Corruption Slovenia has no bribery statute comparable to the U.S. Foreign Corrupt Practices Act. However, Chapter 24 of the Slovenian Criminal Code (SCC) provides statutory provisions for criminal offenses in the economic sector. Corruption in the economy may take many forms, including collusion among private firms or public officials using influence to appoint patrons to the boards of SOEs. The SCC calls for criminal sanctions against officials of private firms for forgery or destruction of business documents, unauthorized use or disclosure of business secrets, insider trading, embezzlement, acceptance of gifts under certain circumstances, money laundering, and tax evasion. Articles 241 and 242 of the SCC make it illegal for a person performing a commercial activity to demand or accept undue rewards, gifts, or other material benefits that will ultimately result in harm or neglect to a business organization. Under Article 261 of the SCC, public officials cannot request or accept a gift to perform or omit an official act within the scope of their official duties. The acceptance of a bribe by a public official may result in a fine or imprisonment of no less than one year, with a maximum sentence of five years. The law also stipulates the seizure of the accepted gift or bribe. Article 262 holds the gift’s donor accountable, making it illegal for natural persons or legal entities to bribe public officials with gifts. Violation of this article carries a sentence of up to three years. In cases in which the gift giver discloses the attempted bribery before it is detected or discovered, punishment may be reduced. The State Prosecutor’s Office is responsible for the enforcement of anti-bribery laws. The number of cases of actual bribery is small and generally limited to instances involving inspection and tax collection. The Prosecutor’s Office has reported that obtaining evidence is difficult in bribery cases, making it equally difficult to prosecute. In 2010, the government established the Commission for the Prevention of Corruption (CPC), an independent state body with a broad mandate to investigate corruption, prevent breaches of ethics, and ensure the integrity of public officials. The CPC is not part of Slovenia’s law enforcement or prosecution system, and its employees do not have traditional police powers. However, the CPC has broad legal powers to access and subpoena financial and other documents, question public servants and officials, conduct administrative investigations, and direct law enforcement bodies to gather additional information and evidence within the limits of their authority. The CPC may also issue fines for violations. In 2011, to combat Slovenia’s ongoing problems with corruption and non-transparent procedures in public procurement, authorities established a new government-wide Public Procurement Agency under the Ministry of Justice to carry out all public procurements over established EU thresholds, including goods and services above EUR 40,000 (USD 43,350) and projects above EUR 80,000 (USD 86,710). In June 2012, the Ministry of Finance took over the agency’s duties and employees. In 2016, the Directorate for Public Procurement was established under the Ministry of Public Administration to oversee public procurements. By law, the National Review Commission provides non-judicial review of all public procurements. Corruption remains an ongoing problem, although its prevalence is relatively limited and there is no evidence that corruption has been an obstacle to FDI. The small size of Slovenia’s political and economic elite contributes to a lack of transparency in government procurement and widespread cronyism in the business sector. Several prominent national and local political figures have been charged or tried for corruption in public procurements. Slovenia convicted its first senior public official for accepting a bribe in 2001 and its first member of parliament in 2010. In 2008, investigators accused several public officials, including the prime minister, of accepting bribes from the Finnish defense contractor Patria related to an armored personnel carrier procurement. Although three defendants, including the current prime minister, were convicted in 2013, the convictions were annulled on appeal. The CPC has instituted a new system for tracking corruption in public procurement at the municipal level and has uncovered numerous violations since implementation. The CPC also operates with a broad mandate to prevent and investigate breaches of ethics and integrity involving holders of public office. The president of Slovenia appoints the leadership of CPC, which reports to the National Assembly. Slovenia ratified the UN Anticorruption Convention in 2008. Slovenia is a party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. Resources to Report Corruption Contact at the government agency or agencies that are responsible for combating corruption: Robert Šumi President Commission for the Prevention of Corruption 56 Dunajska cesta 1000 Ljubljana Slovenia Tel: +386 1 400 5710 Fax: +386 1 400 8472 E-mail: email@example.com Web: www.kpk-rs.si/en Contact at “watchdog” organization: Alma Sedlar, Ph.D. Acting President Transparency International Slovenia Vožarski pot 12, 1000 Ljubljana Tel +386 1 3207325 firstname.lastname@example.org Assistance for U.S. Businesses: The U.S. Department of Commerce offers several services to U.S. businesses seeking to address business-related corruption issues. For example, it may assist U.S. companies in conducting due diligence as part of the company’s overarching compliance program when choosing business partners or agents overseas. The U.S. Foreign Commercial Service may be reached through its offices in major U.S. and foreign cities, or through its website at http://www.trade.gov/cs . The Departments of Commerce and State provide worldwide support for qualified U.S. companies bidding on foreign government contracts through the Commerce Department’s Advocacy Center and State’s Office of Commercial and Business Affairs. U.S. companies may report problems encountered in seeking such foreign business opportunities, including alleged corruption by foreign governments or competitors, to appropriate U.S. officials at the U.S. Embassy and the Department of Commerce Trade Compliance Center’s “Report a Trade Barrier” website at http://tcc.export.gov/Report_a_Barrier/index.asp . Guidance on the U.S. FCPA: The Department of Justice’s (DOJ) FCPA Opinion Procedure enables U.S. firms and individuals to request a statement on the Justice Department’s present enforcement intentions under the FCPA’s anti-bribery provisions regarding any proposed business conduct. The details of the opinion procedure are available on DOJ’s Fraud Section Website at http://www.justice.gov/criminal/fraud/fcpa . Although the Department of Commerce has no enforcement role with respect to the FCPA, it supplies general guidance to U.S. exporters who have questions about the FCPA and international developments concerning the FCPA. For further information, see the website of the Office of the Chief Counsel for International Counsel, U.S. Department of Commerce, at https://ogc.commerce.gov/. Exporters and investors should be aware that virtually all countries prohibit the bribery of public officials and prohibit officials from soliciting bribes under domestic laws. As party to various international conventions, most countries are required to criminalize such bribery and other acts of corruption. 10. Political and Security Environment Except for its brief, 10-day war of independence from Yugoslavia in 1991, there have been no significant incidents of political violence in Slovenia since independence. South Africa Executive Summary South Africa boasts the most advanced, broad-based economy on the African continent. The investment climate is fortified by stable institutions, an independent judiciary and robust legal sector committed to upholding the rule of law, a free press and investigative reporting, a mature financial and services sector, good infrastructure, and a broad selection of experienced local partners. In dealing with the legacy of apartheid, South African laws, policies, and reforms seek to produce economic transformation to increase the participation of and opportunities for historically disadvantaged South Africans. The government views its role as the primary driver of development and aims to promote greater industrialization. Government initiatives to accelerate transformation have included tightening labor laws to achieve proportional racial, gender, and disability representation in workplaces, and prescriptive requirements for government procurement such as equity stakes for historically disadvantaged South Africans and localization requirements. The COVID-19 pandemic has caused widespread disruption to economies and societies across the globe, and South Africa is no exception. Implementing one of the strictest economic and social lockdown regulations in the world, South Africa has limited the health impacts of the COVID-19 pandemic on its people, but at a significant cost to its economy. In a 2020 survey of over 2,000 South African businesses conducted by Statistics South Africa (StatsSA), over 8 percent of respondents have permanently ceased trading, while over 36 percent indicated short-term layoffs. Experts predict South Africa will have a -3 percent to -7 percent rate of GDP growth for the year. Pre-COVID-19 lockdown numbers hovered just below zero growth as South Africa continued to fight its way back from a “lost decade” in which economic growth stagnated, largely as a consequence of corruption and economic mismanagement during the term of its former president. StatsSA released fourth quarter 2019 growth figures that indicated that South Africa entered a recession in the second half of 2019, the second recession in two years as the country had negative growth in the first two quarters of 2018. This lackluster performance led Moody’s rating agency to downgrade South Africa’s sovereign debt to sub-investment grade. S&P and Fitch ratings agencies made their initial sovereign debt downgrades to sub-investment grade a couple of years earlier. Other challenges include: creating policy certainty; reinforcing regulatory oversight; making state-owned enterprises (SOEs) profitable rather than recipients of government money; weeding out widespread corruption; reducing violent crime; tackling labor unrest; improving basic infrastructure and government service delivery; creating more jobs while reducing the size of the state (unemployment is over 29 percent); and increasing the supply of appropriately-skilled labor. Despite structural challenges, South Africa remains a destination conducive to U.S. investment. The dynamic business community is highly market-oriented and the driver of economic growth. South Africa offers ample opportunities and continues to attract investors seeking a comparatively low-risk location in Africa from which to access the continent that has the fastest growing consumer market in the world. Table 1: Key Metrics and Rankings Measure Year Index/Rank Website Address TI Corruption Perceptions Index 2019 70 of 180 http://www.transparency.org/ research/cpi/overview World Bank’s Doing Business Report 2019 84 of 190 http://www.doingbusiness.org/en/rankings Global Innovation Index 2019 63 of 129 https://www.globalinnovationindex.org/ analysis-indicator U.S. FDI in partner country ($M USD, historical stock positions) 2018 $7.6 Billion https://apps.bea.gov/ international/factsheet/ World Bank GNI per capita 2018 $5,750 http://data.worldbank.org/ indicator/NY.GNP.PCAP.CD 1. Openness To, and Restrictions Upon, Foreign Investment Policies Towards Foreign Direct Investment The government of South Africa is generally open to foreign investment as a means to drive economic growth, improve international competitiveness, and access foreign markets. Merger and acquisition activity is more sensitive and requires advance work to answer potential stakeholder concerns. The 2018 Competition Amendment Bill, which was signed into law in February, 2019, introduced a mechanism for South Africa to review foreign direct investments and mergers and acquisitions by a foreign acquiring firm on the basis of protecting national security interests (see section on Laws and Regulations on Foreign Direct Investment below). Virtually all business sectors are open to foreign investment. Certain sectors require government approval for foreign participation, including energy, mining, banking, insurance, and defense. The Department of Trade and Industry and Competition’s (the DTIC) Trade and Investment South Africa (TISA) division provides assistance to foreign investors. TISA has opened provincial One-Stop Shops that provide investment support for foreign direct investment (FDI), with offices in Johannesburg, Cape Town, and Durban, and a national One Stop Shop located on the DTIC campus in Pretoria and online at http://www.investsa.gov.za/one-stop-shop/ . An additional one-stop shop has opened at Dube Trade Port, which is a special economic zone aerotropolis linked to the King Shaka International Airport in Durban. The DTIC actively courts manufacturing enterprises in sectors that its research indicates South Africa has a comparative advantage. It also favors manufacturing that it hopes will be labor intensive and where suppliers can be developed from local industries. The DTIC has traditionally focused on manufacturing industries over services industries, despite a strong service-oriented economy in South Africa. TISA offers information on sectors and industries, consultation on the regulatory environment, facilitation for investment missions, links to joint venture partners, information on incentive packages, assistance with work permits, and logistical support for relocation. The DTIC publishes the “Investor’s Handbook” on its website: www.thedtic.gov.za While the government of South Africa supports investment in principle and takes active steps to attract FDI, investors and market analysts are concerned that its commitment to assist foreign investors is insufficient in practice. Several investors reported trouble accessing senior decision makers. South Africa scrutinizes merger- and acquisition-related foreign direct investment for its impact on jobs, local industry, and retaining South African ownership of key sectors. Private sector representatives and other interested parties were concerned about the politicization of South Africa’s posture towards this type of investment. Despite South Africa’s general openness to investment, actions by some South African Government ministries, populist statements by some politicians, and rhetoric in certain political circles show a lack of appreciation for the importance of FDI to South Africa’s growth and prosperity and a lack of concern about the negative impact domestic policies may have on the investment climate. Ministries often do not consult adequately with stakeholders before implementing laws and regulations or fail to incorporate stakeholder concerns if consultations occur. On the positive side, the President, assisted by his appointment of four investment envoys in 2018, and a few business-oriented reformists in his cabinet, are working to restore a positive investment climate and appear to be making progress as they engage in senior level overseas roadshows to attract investment. Nevertheless, the government has not yet implemented any real economic reforms to address the structural deficiencies hindering South Africa’s economic growth. Limits on Foreign Control and Right to Private Ownership and Establishment Currently there is no limitation on foreign private ownership. South Africa’s transformation efforts – the re-integration of historically disadvantaged South Africans into the economy – has led to policies that could disadvantage foreign and some locally owned companies. The Broad-Based Black Economic Empowerment Act of 2013 (B-BBEE), and associated codes of good practice, requires levels of company ownership and participation by Black South Africans to get bidding preferences on government tenders and contracts. The DTIC created an alternative equity equivalence (EE) program for multinational or foreign owned companies to allow them to score on the ownership requirements under the law, but many view the terms as onerous and restrictive. Currently eight multinationals, most in the technology sector, participate in this program. Other Investment Policy Reviews The last Trade Policy Review carried out by the World Trade Organization for the Southern African Customs Union, in which South Africa is a member, was in 2015. Neither the OECD nor the UN Conference on Trade and Development (UNCTAD) has conducted investment policy reviews for South Africa. Business Facilitation According to the World Bank’s Doing Business report, South Africa’s rank in ease of doing business in 2020 was 84 of 190, down from 82 in 2019. It ranks 139th for starting a business, 5 points lower than in 2019. In South Africa, it takes an average of forty days to complete the process. South Africa ranks 145 of 190 countries on trading across borders. The DTIC has a national InvestSA One Stop Shop (OSS) to simplify administrative procedures and guidelines for foreign companies wishing to invest in South Africa. The DTIC, in conjunction with provincial governments, opened physical OSS locations in Cape Town, Durban, and Johannesburg. These physical locations bring together key government entities dealing with issues including policy and regulation, permits and licensing, infrastructure, finance, and incentives, with a view to reducing lengthy bureaucratic procedures, reducing bottlenecks, and providing post-investment services. Some users of the OSS complain that not all of the inter-governmental offices are staffed, so finding a representative for certain transactions has proven difficult. The virtual OSS web site is: http://www.investsa.gov.za/one-stop-shop/ . The Companies and Intellectual Property Commission (CIPC), a body of the DTIC, is responsible for business registrations and publishes a step-by-step process for registering a company. This process can be done on its website (http://www.cipc.co.za/index.php/register-your-business/companies/ ), through a self-service terminal, or through a collaborating private bank. New business registrants also need to register through the South African Revenue Service (SARS) to get an income tax reference number for turnover tax (small companies), corporate tax, employer contributions for PAYE (income tax), and skills development levy (applicable to most companies). The smallest informal companies may not be required to register with CIPC, but must register with the tax authorities. Companies also need to register with the Department of Labour (DoL) – www.labour.gov.za – to contribute to the Unemployment Insurance Fund (UIF) and a compensation fund for occupational injuries. The DoL registration takes the longest (up to 30 days), but can be done concurrently with other registrations. Outward Investment South Africa does not incentivize outward investments. South Africa’s stock foreign direct investments in the United States in 2018 totaled USD 3.9 billion (latest figures available), a 5.6 percent decrease from 2017. The largest outward direct investment of a South African company is a gas liquefaction plant in the State of Louisiana by Johannesburg Stock Exchange (JSE) and NASDAQ dual-listed petrochemical company SASOL. There are some restrictions on outward investment, such as a R1 billion (USD 83 million) limit per year on outward flows per company. Larger investments must be approved by the South African Reserve Bank and at least 10 percent of the foreign target entities voting rights must be obtained through the investment. https://www.resbank.co.za/RegulationAndSupervision/FinancialSurveillanceAndExchangeControl/FAQs/Pages/Corporates.aspx 6. Financial Sector Capital Markets and Portfolio Investment South Africa recognizes the importance of foreign capital in financing persistent current account and budget deficits and openly courts foreign portfolio investment. Authorities regularly meet with investors and encourage open discussion between investors and a wide range of private and public-sector stakeholders. The government enhanced efforts to attract and retain foreign investors. President Cyril Ramaphosa hosted investment conferences in October 2018 and October 2019 and attended the World Economic Forum in Davos in January 2019 to promote South Africa as an investment destination. South Africa suffered a two-quarter technical recession in 2019 with economic growth registering only 0.2 percent for the entire year. South Africa’s financial market is regarded as one of the most sophisticated among emerging markets. A sound legal and regulatory framework governs financial institutions and transactions. The fully independent South African Reserve Bank (SARB) regulates a wide range of commercial, retail and investment banking services according to international best practices, such as Basel III, and participates in international forums such as the Financial Stability Board and G-20 Finance Ministers and Central Bank Governors. There are calls to “nationalize” the privately-held SARB, which would not change its constitutional mandate to maintain price stability. The Johannesburg Stock Exchange (JSE) serves as the front-line regulator for listed firms, but is supervised in these regulatory duties by the Financial Services Board (FSB). The FSB also oversees other non-banking financial services, including other collective investment schemes, retirement funds and a diversified insurance industry. The South African government has committed to tabling a Twin Peaks regulatory architecture to provide a clear demarcation of supervisory responsibilities and consumer accountability and to consolidate banking and non-banking regulation in 2017. South Africa has access to deep pools of capital from local and foreign investors which provide sufficient scope for entry and exit of large positions. Financial sector assets amount to almost three times GDP, and the JSE is the largest on the continent with capitalization of approximately USD 670 billion and 344 companies listed on the main, alternative and other smaller boards. Non-bank financial institutions (NBFI) hold about two thirds of financial assets. The liquidity and depth provided by NBFIs make these markets attractive to foreign investors, who hold more than a third of equities and government bonds, including sizeable positions in local-currency bonds. A well-developed derivative market and a currency that is widely traded as a proxy for emerging market risk allows investors considerable scope to hedge positions with interest rate and foreign exchange derivatives. The SARB’s exchange control policies permit authorized currency dealers, normally one of the large commercial banks, to buy and borrow foreign currency freely on behalf of domestic and foreign clients. The size of transactions is not limited, but dealers must report all transactions to SARB, regardless of size. Non-residents may purchase securities without restriction and freely transfer capital in and out of South Africa. Local individual and institutional investors are limited to holding 25 percent of their capital outside of South Africa. Given the recent exchange rate fluctuations, this requirement has entailed portfolio rebalancing and repatriation to meet the prescribed prudential limits. Banks, NBFIs, and other financial intermediaries are skilled at assessing risk and allocating credit based on market conditions. Foreign investors may borrow freely on the local market. A large range of debt, equity and other credit instruments are available to foreign investors, and a host of well-known foreign and domestic service providers offer accounting, legal and consulting advice. In recent years, the South African auditing profession has suffered significant reputational damage with the leadership of two large foreign firms being implicated in allegations of aiding and abetting irregular client management practices that were linked to the previous administration, or of delinquent oversight of listed client companies. South Africa’s WEF competitiveness rating for auditing and reporting fell from number one in the world in 2016, to number 60 in 2019. Money and Banking System South African banks are well capitalized and comply with international banking standards. There are 19 registered banks in South Africa and 15 branches of foreign banks. Twenty-nine foreign banks have approved local representative offices. Five banks – Standard, ABSA, First Rand (FNB), Capitec, and Nedbank – dominate the sector, accounting for over 85 percent of the country’s banking assets, which total over USD 390 billion. The SARB regulates the sector according to the Bank Act of 1990. There are three alternatives for foreign banks to establish local operations, all of which require SARB approval: separate company, branch, or representative office. The criteria for the registration of a foreign bank are the same as for domestic banks. Foreign banks must include additional information, such as holding company approval, a letter of “comfort and understanding” from the holding company, and a letter of no objection from the foreign bank’s home regulatory authority. More information on the banking industry may be obtained from the South African Banking Association at the following website: www.banking.org.za . The Financial Services Board (FSB) governs South Africa’s non-bank financial services industry (see website: www.fsb.co.za/ ). The FSB regulates insurance companies, pension funds, unit trusts (i.e., mutual funds), participation bond schemes, portfolio management, and the financial markets. The JSE Securities Exchange SA (JSE) is the sixteenth largest exchange in the world measured by market capitalization and enjoys the global reputation of being one of the best regulated. Market capitalization stood at USD 670 billion as of March 2020, with 344 firms listed. The Bond Exchange of South Africa (BESA) is licensed under the Financial Markets Control Act. Membership includes banks, insurers, investors, stockbrokers, and independent intermediaries. The exchange consists principally of bonds issued by government, state-owned enterprises, and private corporations. The JSE acquired BESA in 2009. More information on financial markets may be obtained from the JSE (website: www.jse.co.za ). Non-residents are allowed to finance 100 percent of their investment through local borrowing. A finance ratio of 1:1 also applies to emigrants, the acquisition of residential properties by non-residents, and financial transactions such as portfolio investments, securities lending and hedging by non-residents. Foreign Exchange and Remittances Foreign Exchange The South African Reserve Bank (SARB) Exchange Control Department administers foreign exchange policy. An authorized foreign exchange dealer, normally one of the large commercial banks, must handle international commercial transactions and report every purchase of foreign exchange, irrespective of the amount. Generally, there are only limited delays in the conversion and transfer of funds. Due to South Africa’s relatively closed exchange system, no private player, however large, can hedge large quantities of Rand for more than five years. While non-residents may freely transfer capital in and out of South Africa, transactions must be reported to authorities. Non-residents may purchase local securities without restriction. To facilitate repatriation of capital and profits, foreign investors should ensure an authorized dealer endorses their share certificates as “non-resident.” Foreign investors should also be sure to maintain an accurate record of investment. Remittance Policies Subsidiaries and branches of foreign companies in South Africa are considered South African entities and are treated legally as South African companies. As such, they are subject to exchange control by the SARB. South African companies may, as a general rule, freely remit the following to non-residents: repayment of capital investments; dividends and branch profits (provided such transfers are made out of trading profits and are financed without resorting to excessive local borrowing); interest payments (provided the rate is reasonable); and payment of royalties or similar fees for the use of know-how, patents, designs, trademarks or similar property (subject to prior approval of SARB authorities). While South African companies may invest in other countries, SARB approval/notification is required for investments over R500 million (USD 43.5 million). South African individuals may freely invest in foreign firms listed on South African stock exchanges. Individual South African taxpayers in good standing may make investments up to a total of R4 million (USD 340,000) in other countries. As of 2010, South African banks are permitted to commit up to 25 percent of their capital in direct and indirect foreign liabilities. In addition, mutual and other investment funds can invest up to 25 percent of their retail assets in other countries. Pension plans and insurance funds may invest 25 percent of their retail assets in other countries. Before accepting or repaying a foreign loan, South African residents must obtain SARB approval. The SARB must also approve the payment of royalties and license fees to non-residents when no local manufacturing is involved. When local manufacturing is involved, the DTIC must approve the payment of royalties related to patents on manufacturing processes and products. Upon proof of invoice, South African companies may pay fees for foreign management and other services provided such fees are not calculated as a percentage of sales, profits, purchases, or income. Sovereign Wealth Funds Although the President announced in February, 2020 the aim to create a Sovereign Wealth Fund and the Finance Minister followed up with a mention of it in his February budget speech, no action has been taken to create such a fund. 7. State-Owned Enterprises State-owned enterprises (SOEs) play a significant role in the South African economy. In key sectors such as electricity, transport (air, rail, freight and pipelines), and telecommunications, SOEs play a lead role, often defined by law, although limited competition is allowed in some sectors (e.g., telecommunications and air). The government’s interest in these sectors often competes with and discourages foreign investment. South Africa’s overall fixed investment was 19 percent of GDP. The SOEs share of the investment was 21 percent while private enterprise contributed 63 percent (government spending made up the remainder of 16 percent). The IMF estimates that the debt of the SOEs would add 13.5 percent to the overall national debt. The Department of Public Enterprises (DPE) has oversight responsibility in full or in part for seven of the approximately 700 SOEs that exist at the national, provincial and local levels: Alexkor (diamonds); Denel (military equipment); Eskom (electricity generation, transmission and distribution); South African Express and Mango (budget airlines); South African Airways (national carrier); South African Forestry Company (SAFCOL – (forestry); and Transnet (transportation). These seven SOEs employ approximately 105,000 people. For other national-level SOEs, the appropriate cabinet minister acts as shareholder on behalf of the state. The Department of Transport, for example, has oversight of the state-owned South African National Roads Agency (SANRAL), Passenger Rail Agency of South Africa (PRASA), and Airports Company South Africa (ACSA), which operates nine of South Africa’s airports. The Department of Communications has oversight of the South African Broadcasting Corporation (SABC). Combined, South Africa’s SOEs that fall under DPE’s authority posted a loss of R15.5 billion (USD 1.3 billion) in the 2017/2018 financial year. In recent years many have been plagued by mismanagement and corruption, and repeated government bailouts have exposed the public sector’s balance sheet to sizable contingent liabilities. The election of President Cyril Ramaphosa and appointment of Minister of Public Enterprises Pravin Gordhan signaled a renewed emphasis on improving SOE governance and performance. The state-owned electricity giant Eskom generates approximately 95 percent of the electricity used in South Africa. Coal-fired power stations generate approximately 93 percent of Eskom’s electricity. Eskom’s core business activities are generation, transmission, trading and distribution. South Africa’s electricity system operates under strain because of low availability factors for base load generation capacity due to maintenance problems. The electricity grid’s capacity reserve margins frequently fall under two percent, well below international norms. Beginning in November 2013, Eskom periodically declared “electricity emergencies,” and asked major industrial users to reduce consumption by ten percent for specified periods (usually one to two days). To meet rising electricity demand, Eskom is building new power stations (including two of the world’s largest coal-fired power stations, but both are years overdue and over budget). Eskom and independent industry analysts anticipate South Africa’s electricity grid will remain constrained for at least the next several years. In December 2019 Eskom implemented State 6 load shedding, when portions of the grid are put offline for planned or unplanned maintenance on a rotating basis, which was a major blow to the economy and raised concerns about the viability of Eskom’s ability to generate sufficient power to meet South Africa’s electricity needs. In February 2019, President Ramaphosa announced that Eskom would be split into multiple entities for power generation, transmission, and distribution, but new structural changes have not occurred within the utility other than a new CEO starting in February 2020. In October 2019 the DMRE finalized its Integrated Resource Plan (IRP), which outlines South Africa’s plan for new power generation up until 2020. The IRP calls for an increase in renewable energy, the decommissioning of coal-fired power plants, and does not provide for new nuclear power. The South African government has implemented a renewable energy independent power producer procurement program (REIPPP) that in the past three years has added 1500Mw of a planned 3900Mw of renewable energy production to the grid and in April 2018 signed 27 Independent Power Producer agreements to provide an additional 2,300 MW to the grid. DMRE published a Request for Information (RFI) with the public comment period ending on January 31, 2020 for new power generation. Companies were asked to provide solutions for energy generation that the government would consider in developing procurement requests for proposals. Given the new IRP, the RFI, and Eskom’s implementation of load shedding, industry is expecting new procurement rounds to be announced for renewable energy and battery storage in 2020. Considering that new energy generation procurements will take place and there is the potential for a new bid round for the REIPPP, recent credit rating agency downgrades could impact investors ability to obtain credit to finance long-term energy deals. All three major credit ratings agencies have downgraded Eskom’s debt. The rating agencies’ decision follows Moody’s downgrade of South Africa’s sovereign debt rating in March 2020, affecting South African government-related entities such as Eskom. Transnet National Ports Authority (TNPA), the monopoly responsible for South Africa’s ports, charges some of the highest shipping fees in the world. In March 2014, Transnet announced an average overall tariff increase of 8.5 percent at its ports to finance a USD 240 million modernization effort. High tariffs on containers subsidize bulk shipments of coal and iron ore, thereby favoring the export of raw materials over finished ones. According to the South African Ports Regulator, raw materials exporters paid as much as one quarter less than exporters of finished products. TNPA is a division of Transnet, a state-owned company that manages the country’s port, rail and pipeline networks. In April 2012, Transnet launched its Market Driven Strategy (MDS), a R336 billion (USD 28 billion) investment program to modernize its port and rail infrastructure. Transnet’s March 2014 selection of four OEMs to manufacture 1064 locomotives is part of the MDS. This CAPEX is being 2/3 funded by operating profits with the remainder from the international capital markets. In 2016, Transnet reported it had invested R124 billion (USD 10.3 billion) in the previous four years in rail, ports, and pipeline infrastructure. In recent years ratings agencies have downgraded Transnet’s rating to below the investment-grade threshold. In November 2019 S&P downgraded Transnet’s local currency rating from BB+ to BB. Direct aviation links between the United States and South Africa are limited to flights between Atlanta, New York (JFK), and Washington (Dulles) to Johannesburg and Newark to Cape Town. The growth of low-cost carriers in South Africa has reduced domestic airfares, but private carriers are likely to struggle against national carriers without further air liberalization in the region and in Africa. The launch of the Single African Air Transport Market, which is composed of 23 African Union member states including South Africa, in January 2018 demonstrates the potential for further cooperation on the continent. In South Africa, the state-owned carrier, South African Airways (SAA), relies on the government for financial assistance to stay afloat and received back-to-back bailouts of R5 billion (USD 357 million) in 2018 alone to repay creditors. That same year, the airline’s management requested a R21.7 billion (USD 1.55 billion) bailout from the government over three years to turn the company around. In 2019, however, creditors initiated business rescue proceedings, the equivalent of Chapter 11 bankruptcy, to restructure and salvage the airline after a crippling strike over wage increases left the airline’s finances in complete disarray. SAA last released its earnings for fiscal year 2017/2018, in which it lost R5.7 billion (USD 407 million) and brought the company’s cumulative losses since 2011 to a total of R23 billion (USD 1.65 billion). The telecommunications sector in South Africa, while advanced for the continent, is hampered by regulatory uncertainty and poor implementation of the digital migration, both of which contribute to the high cost of data. In 2006, South Africa agreed to meet an International Telecommunication Union deadline to achieve analogue-to-digital migration by June 1, 2015. As of May 2020, South Africa has initiated but not completed the migration. Until this process is finalized, South Africa will not be able to effectively allocate the spectrum freed up by the conversion. The biggest development in 2019 was the unveiling of the Department of Communications and Digital Technologies (DCDT), which reintegrated the Department of Communications (DOC) and the Department of Telecommunications and Postal Services (DTPS) that had been split 2014. In October 2016, DTPS released a policy paper addressing the planned course of action to realize the potential of the ICT sector. The paper advocates for open access requirements that could overhaul how telecommunications firms gain access to and use infrastructure. It also proposes assigning high-demand spectrum to a Wireless Open Access Network. Some stakeholders, including state-owned telecommunications firm Telkom, agree with the general approach. Others, including the major private sector mobile carriers, feel the interventions would curb investment while doing little to facilitate digital access and inclusion. In November 2017, DTPS published a draft Electronic Communications Amendment Bill that would implement the ICT White Paper, but the Minister of Communications withdrew the bill in February 2019. Private industry and civil society had criticized the reach of the bill. The Minister stated that the DCDT would consult with relevant stakeholders to re-draft the bill before submitting it to Parliament. Privatization Program Although in 2015 and 2016 senior government leaders discussed allowing private-sector investment into some of the more than 700 SOEs and a recently released report of a presidential review commission on SOE that called for rationalization of SOEs, the government has not taken any concrete action to enable this. The CEO of SAA has stated that a fund-raising plan to sell a stake in SAA to an equity partner will be shelved until the airline can shore up its balance sheet. He announced the restructuring of the national carrier into three segments: international, regional, and domestic, but he has not articulated how that would occur in practice. SAA is currently in business rescue. Other candidates for unbundling of SOEs / privatization are ESKOM and defense contractor Denel. 9. Corruption South Africa has a robust anti-corruption framework, but laws are inadequately enforced and accountability in public sectors tends to be low. The law provides for criminal penalties for conviction of official corruption, and the government continued efforts to curb corruption, but officials sometimes engaged in corrupt practices with impunity. High-level political interference has undermined the ability of the country’s National Prosecuting Authority (NPA) – constitutionally responsible for all prosecutions – to pursue criminal proceedings and enforce accountability. After an unprecedented consultative process, President Ramaphosa appointed Shamila Batohi as the National Director of Public Prosecutions (NDPP) in December 2018, and he created an Investigative Directorate within her office in March 2019 to focus on the significant number of cases emanating from ongoing corruption investigations. The Constitutional Court ruled in August 2018 that Zuma’s appointment of Shaun Abrahams as the former NDPP was invalid and ordered President Ramaphosa to replace Abrahams within 90 days. Widely praised by civil society, the court also ordered former NDPP Mxolisi Nxasana to repay a “golden handshake” (an illegal departure bonus) of 10.2 million rand (USD 788,000) he received when Zuma replaced him with Abrahams in 2015. The Department of Public Service and Administration formally coordinates government initiatives against corruption, and the “Hawks” – South Africa’s Directorate for Priority Crime Investigations – focuses on organized crime, economic crimes, and corruption. In 2018, the Office of the Public Protector, a constitutionally mandated body designed to investigate government abuse and mismanagement, investigated thousands of cases, some of which involved high-level officials. The public and NGOs considered the Office of the Public Protector independent and effective, despite limited funding. According to the NPA’s 2017-2018 Annual Report, it recovered 410,000 rand (USD 31,700) from government officials involved in corruption, a 92-percent decrease from the previous year. Courts convicted 213 government officials of corruption. The Prevention and Combating of Corrupt Activities Act (PCCA) officially criminalizes corruption in public and private sectors and codifies specific offenses (such as extortion and money laundering), making it easier for courts to enforce the legislation. Applying to both domestic and foreign organizations doing business in the country, the PCCA covers receiving or offering bribes, influencing witnesses and tampering with evidence in ongoing investigations, obstruction of justice, contracts, procuring and withdrawal of tenders, and conflict of interests, among other areas. Inconsistently implemented, the PCCA does not include any protectionary measures for whistleblowers. Complementary acts – such as the Promotion of Access to Information Act and the Public Finance Management Act – calls for increased access to public information and review of government expenditures. “State capture” – the popular term used to describe systemic corruption of the state’s decision-making processes by private interests – has become synonymous with the administration of former president Jacob Zuma. In response to widespread calls for accountability, President Cyril Ramaphosa has denounced corruption since assuming office in February 2018. He has vowed to tackle the scourge at all levels of government, including through proposed lifestyle audits of officials to expose bribery, corruption, and public tender irregularities. He has also launched four separate judicial commissions of inquiry to investigate corruption, fraud, and maladministration, including in the Public Investment Corporation, South African Revenue Service, National Prosecuting Authority, and writ large across the government. These commissions have revealed pervasive networks of criminality across all levels of the municipal, provincial, and national government. Numerous former senior officials had already testified before the commission; a number of them directly implicated former president Jacob Zuma in corruption cases. “State capture” – the popular term used to describe systemic corruption of the state’s decision-making processes by private interests – has become synonymous with the administration of former president Jacob Zuma. In response to widespread calls for accountability, President Cyril Ramaphosa has denounced corruption since assuming office in February 2018. He has vowed to tackle the scourge at all levels of government, including through proposed lifestyle audits of officials to expose bribery, corruption, and public tender irregularities. He has also launched four separate judicial commissions of inquiry to investigate corruption, fraud, and maladministration, including in the Public Investment Corporation, South African Revenue Service, National Prosecuting Authority, and writ large across the government. These commissions have revealed pervasive networks of criminality across all levels of the municipal, provincial, and national government. Numerous former senior officials had already testified before the commission; a number of them directly implicated former president Jacob Zuma in corruption cases. Corruption charges were reinstated against Zuma in 2018 related to a USD 2.5-billion arms deal in the late 1990s. The Zuma-linked Gupta family, which owns interests in multiple industries from computer services to mining, has also been placed under investigation and its assets frozen while the state investigates allegations of state capture, bribery, and the siphoning off of public funds meant for small-holder farmers. These and other ongoing efforts are meant to rebuild the public’s trust in government and to foment transparency and predictability in the business environment in order to woo investors. South Africa signed the Anticorruption Convention on 9 Dec 2003 and ratified it on 22 Nov 2004. South Africa also signed the OECD Convention on Combatting Bribery in 2007, with implementing legislation dating from 2004. South Africa is also a party to the SADC Protocol Against Corruption, which promotes the development of mechanisms needed to prevent, detect, punish and eradicate corruption in the public and private sector. The protocol also seeks to facilitate and regulate cooperation in matters of corruption amongst Member States and foster development and harmonization of policies and domestic legislation related to corruption. The Protocol defines ‘acts of corruption,’ preventative measures, jurisdiction of Member States, as well as extradition. http://www.sadc.int/files/7913/5292/8361/Protocol_Against_Corruption2001.pdf Resources to Report Corruption To report corruption to the government: Advocate Busisiwe Mkhwebane Public Protector Office of the Public Protector, South Africa 175 Lunnon Street, Hillcrest Office Park, Pretoria 0083 Anti-Corruption Hotline: +27 80 011 2040 or +27 12 366 7000 http://www.pprotect.org or email@example.com Or for a non-government agency: David Lewis Executive Director Corruption Watch 87 De Korte Street, Braamfontein/Johannesburg 2001 +27 80 002 3456 or +27 11 242 3900 http://www.corruptionwatch.org.za/content/make-your-complaint firstname.lastname@example.org 10. Political and Security Environment South Africa has a history of politically-motivated violence and civil disturbance. Violent protests, often by residents in poor communities against the lack of effective government service delivery, are common. Killings of, and by, mostly low-level political and organized crime rivals take place on a regular basis. Still, South Africa enjoys strong, democratic political institutions and the overall political environment is stable and secure. In May 2018, President Cyril Ramaphosa set up an inter-ministerial committee in the security cluster to serve as a national task force on political killings. The task force includes the Police Minister‚ State Security Minister‚ Justice Minister‚ National Prosecuting Authority, and the National Police Commissioner. The task force ordered multiple arrests, including of high profile officials, in what appears to be a crackdown on political killings. There is suspicion that criminal threats have been used to resolve business disputes. There was one known incident in 2018 when two expat employees of a U.S. company managing an ongoing construction project received threats to leave the country. The threats escalated to mention the expats’ families as targets, and the company evacuated them from South Africa. Subcontractors accused of using substandard construction materials were suspected. There were no reports of physical damage at the project. Labor unrest in one part of South Africa has caused damage to property and halted operations to a U.S. company operating in an industrial zone. In this case, the U.S. company was targeted as a single employer by strikes and labor unrest on what was a national bargaining council issue. South Korea Executive Summary The Republic of Korea (ROK) is an attractive investment destination for foreign investors due to its political stability, public safety, world-class logistics and information and communications technology (ICT) infrastructure, highly-educated and skilled workforce, and dynamic private sector. Following market liberalization measures in the 1990s, foreign portfolio investment has grown steadily, exceeding 37 percent of the Korea Composite Stock Price Index’s (KOSPI) total market capitalization as of March 2020. The services sector offers new and promising opportunities for the next wave of foreign direct investment (FDI). However, studies conducted by the Korean International Trade Association and others have shown that the ROK underperforms in attracting FDI relative to the size and sophistication of its economy due to its burdensome regulatory environment. Korea’s FDI shortfall is due in part to its complicated, opaque, and country-unique regulatory framework. The ROK’s manufacturing model is being overtaken by low-cost producers, most notably China, which threatens the country’s ability to maintain competitiveness. This is especially critical with the advent of disruptive technologies such as fifth generation (5G) mobile communications that enable smart manufacturing, autonomous vehicles, and the Internet of Things – innovative technologies that could be hampered by restrictive regulations which do not comport with global standards. The ROK government (ROKG) has taken some steps to address this over the last decade, notably with the establishment of a Foreign Investment Ombudsman to address concerns of foreign investors. In 2019, the ROKG created a “regulatory sandbox” program to spur creation of new products in the financial services, energy, and tech sectors. Industry observers recommend additional process steps to improve the investment climate, including conducting Regulatory Impact Analyses and soliciting substantive feedback from a broad range of stakeholders, including foreign investors. The revised U.S.-Korea Free Trade Agreement (KORUS) entered into force January 1, 2019, and continues to allow U.S. investors broad access to the ROK market. Types of investment protected under KORUS include equity, debt, concessions, and intellectual property rights. With a few exceptions, U.S. investors are treated the same as ROK investors (and third-country investors) in the establishment, acquisition, and operation of investments in the ROK. Investors may elect to bring claims against the government for alleged investment breaches under a transparent international arbitration mechanism. The U.S. government continues to work closely with the ROKG to ensure full implementation of KORUS investment provisions, especially in regard to the right to mount an adequate defense in competition proceedings. The ROK was the second global hotspot after China for the global COVID-19 pandemic, with the nation’s first case discovered on January 20, 2020 and daily new cases topping 900 by the end of February. The ROKG responded aggressively and immediately, employing its so-called “TRUST” strategy, prioritizing transparency, robust screening and quarantine, unique but universally applicable testing, and strict control and treatment. The success of this approach allowed Korea to cut daily new cases down to single digits by late April without an economic shutdown. The ROKG was also aggressive in pursuing economic stimulus, devoting more than USD 100 billion to such efforts in the first quarter of 2020. As a result, the Korean domestic economy fared better than most of its OECD peers in the early part of the year. The risk of a COVID resurgence still looms, and external shocks also pose a significant threat to Korea’s export-oriented economy looking forward. If the ROKG succeeds in augmenting its stimulus spending with regulatory reform efforts under discussion in spring of 2020, the nation’s investment climate could well benefit in the long run. Table 1: Key Metrics and Rankings Measure Year Index/Rank Website Address TI Corruption Perceptions Index 2019 39 of 180 https://www.transparency.org/cpi2019 World Bank’s Doing Business Report 2019 5 of 190 http://www.doingbusiness.org/en/rankings Global Innovation Index 2019 11 of 126 https://www.globalinnovationindex.org/ analysis-indicator U.S. FDI in partner country ($M USD, stock positions) 2018 $41,532 https://www.selectusa.gov/servlet/ servlet.FileDownload?file=015t0000000LKNs World Bank GNI per capita 2018 $30,600 http://data.worldbank.org/ indicator/NY.GNP.PCAP.CD 1. Openness To, and Restrictions Upon, Foreign Investment Policies Toward Foreign Direct Investment The ROK government’s approach toward FDI is positive, and senior policymakers recognize the value of foreign investment. In a March 2019 meeting, President Moon Jae-in equated the foreign business community’s success “with the Korean economy’s progress.” The current administration has offered incentives to attract foreign companies bringing needed technology and investment in its ongoing efforts to improve the ROK domestic manufacturing supply base. Foreign investors in the ROK still face numerous hurdles, however, including insufficient regulatory transparency, inconsistent interpretation of regulations, unanticipated regulatory revisions, underdeveloped corporate governance structures, an inflexible labor framework, burdensome Korea-unique consumer protection measures, and market domination by large conglomerates, known as chaebol. The 1998 Foreign Investment Promotion Act (FIPA) is the basic law pertaining to foreign investment in the ROK. FIPA and related regulations categorize business activities as open, conditionally or partly restricted, or closed to foreign investment. FIPA features include: Simplified procedures, including those for FDI notification and registration; Expanded tax incentives for high-technology investments; Reduced rental fees and lengthened lease durations for government land (including local government land); Increased central government support for local FDI incentives; Establishment of “Invest KOREA,” a one-stop investment promotion center within the Korea Trade-Investment Promotion Agency (KOTRA) to assist foreign investors; and Establishment of a Foreign Investment Ombudsman to assist foreign investors. The ROK National Assembly website provides a list of laws pertaining to foreigners, including FIPA, in English (http://korea.assembly.go.kr/res/low_03_list.jsp?boardid=1000000037 ). The Korea Trade Investment Promotion Agency (KOTRA) actively facilitates foreign investment through its Invest Korea office (on the web at http://m.investkorea.org/m/index.do). For investments exceeding 100 million won (about USD 88,000), KOTRA assists in establishing a domestically-incorporated foreign-invested company. KOTRA and the Ministry of Trade, Industry and Energy (MOTIE) organize a yearly Foreign Investment Week to attract investment to South Korea. In March 2019, ROK President Moon Jae-in hosted AMCHAM Korea and more than 60 foreign businesses and associations at the Blue House and pledged that Korea would continue to welcome and incentivize foreign investment. During 2019, ROKG leaders like Trade Minister Yoo Myung Hee, Seoul Mayor Park Won-soon, and former Financial Services Commission Chairman Choi Jong-ku also met with AMCHAM Korea to promote FDI. KOTRA also recruits FDI by participating in overseas events such as the March 2019 “South by Southwest Festival” in Austin, Texas, to attract U.S. startups and investors. The ROK’s key official responsible for FDI promotion and retention is the Foreign Investment Ombudsman. The position is commissioned by the President and heads a grievance resolution body that: collects and analyzes information concerning problems foreign firms experience; requests cooperation from and recommends implementation of reforms to relevant administrative agencies; proposes new policies to improve the foreign investment promotion system; and carries out other necessary tasks to assist investor companies. More information on the Ombudsman can be found at http://ombudsman.kotra.or.kr/eng/index.do . Limits on Foreign Control and Right to Private Ownership and Establishment Foreign and domestic private entities can establish and own business enterprises and engage in almost all forms of remunerative activity. The number of industrial sectors open to foreign investors is well above the Organization for Economic Cooperation and Development (OECD) average, according to MOTIE. However, restrictions on foreign ownership remain for 30 industrial sectors, including three that are closed to foreign investment (see below). Under the KORUS FTA, South Korea treats U.S. companies like domestic entities in select sectors, including broadcasting and telecommunications. Relevant ministries must approve investments in conditionally or partially restricted sectors. Most applications are processed within five days; cases that require consultation with more than one ministry can take 25 days or longer. The ROK’s procurement processes comply with the World Trade Organization (WTO) Government Procurement Agreement, but some implementation problems remain. The following is a list of restricted sectors for foreign investment. Figures in parentheses generally denote the Korean Industrial Classification Code, while those for the air transport industries are based on the Civil Aeronautics Laws: Completely Closed Nuclear power generation (35111) Radio broadcasting (60100) Television broadcasting (60210) Restricted Sectors (no more than 25 percent foreign equity) News agency activities (63910) Restricted Sectors (less than 30 percent foreign equity) Newspaper publication, daily (58121) (Note: Other newspapers with the same industry code 58121 are restricted to less than 50 percent foreign equity) Restricted Sectors (no more than 30 percent foreign equity) Hydroelectric power generation (35112) Thermal power generation (35113) Solar power generation (35114) Other power generation (35119) Restricted Sectors (no more than 49 percent foreign equity) Newspaper publication, non-daily (58121) (Note: Daily newspapers with the same industry code 58121 are restricted to less than 30 percent foreign equity) Program distribution (60221) Cable networks (60222) Satellite and other broadcasting (60229) Wired telephone and other telecommunications (61210) Mobile telephone and other telecommunications (61220) Other telecommunications (61299) Restricted Sectors (no more than 50 percent foreign equity) Farming of beef cattle (01212) Transmission/distribution of electricity (35120) Wholesale of meat (46313) Coastal water passenger transport (50121) Coastal water freight transport (50122) International air transport (51) Domestic air transport (51) Small air transport (51) Publishing of magazines and periodicals (58122) Open but Regulated under Relevant Laws Growing of cereal crops and other food crops, except rice and barley (01110) Other inorganic chemistry production, except fuel for nuclear power generation (20129) Other nonferrous metals refining, smelting, and alloying (24219) Domestic commercial banking, except special banking area (64121) Radioactive waste collection, transportation, and disposal, except radioactive waste management (38240) Other Investment Policy Reviews The WTO conducted its seventh Trade Policy Review of the ROK in October 2016. The Review does not contain any explicit policy recommendations. It can be found at https://docs.wto.org/dol2fe/Pages/FE_Search/FE_S_S009-DP.aspx?language=E&CatalogueIdList=233680,233681,230967,230984,94925,104614,89233,66927,82162,84639&CurrentCatalogueIdIndex=1&FullTextHash=&HasEnglishRecord=True&HasFrenchRecord=True&HasSpanishRecord=True . The ROK has not undergone investment policy reviews or received policy recommendations from the OECD or United Nations Conference on Trade and Development (UNCTAD) within the past three years. Business Facilitation Registering a business remains a complex process that varies according to the type of business being established and requires interaction with KOTRA, court registries, and tax offices. Foreign corporations can enter the market by establishing a local corporation, local branch, or liaison office. The establishment of local corporations by a foreign individual or corporation is regulated by FIPA and the Commercial Act; the latter recognizes five types of companies, of which stock companies with multiple shareholders are the most common. Although registration can be filed online, there is no centralized online location to complete the process. For small- and medium-sized enterprises (SMEs) and micro-enterprises, the online business registration process takes approximately three to four days and is completed through Korean language websites. Registrations can be completed via the Smart Biz website, https://www.startbiz.go.kr/. The UN’s Global Enterprise Registration (GER), which evaluates whether a country’s online registration process is clear and complete, awarded Smart Biz 2.5 of 10 possible points and suggested improvements in registering limited liability companies. The Invest Korea information portal received 2 of 10 points. The mandate of the Korea Commission for Corporate Partnership (http://www.winwingrowth.or.kr/ ) and the Ministry of Gender Equality and Family (http://www.mogef.go.kr/ ) includes creating a better business environment for minorities and women, but the agencies do not offer any direct support program for those groups. Some local governments provide guaranteed bank loans for women or the disabled, but a lack of data on those programs makes the impact difficult to measure. Outward Investment The ROK does not have any restrictions on outward investment. While Korea’s globally competitive firms complete their investment procedures in-house, the ROK has several offices to assist small business and middle-market firms. KOTRA has an Outbound Investment Support Office that provides counseling to ROK firms and holds regular investment information sessions. The ASEAN-Korea Centre, which is primarily ROKG-funded, provides counseling and matchmaking support to Korean SMEs interested in investing in the Association of Southeast Asian Nations (ASEAN) region. The Defense Acquisition Program Administration in 2019 opened an office to advise Korean SME defense firms on exporting unrestricted defense articles. 6. Financial Sector Capital Markets and Portfolio Investment The Korea Exchange (KRX) is comprised of a stock exchange, futures market, and stock market following a 2005 merger of the Korea Stock Exchange, Korea Futures Exchange, and Korean Securities Dealers Automated Quotations (KOSDAQ) stock market. It is tracked by the Korea Composite Stock Price Index (KOSPI) and has an effective regulatory system that encourages portfolio investment. There is sufficient liquidity in the market to enter and exit sizeable positions. In 2019, over 2,000 companies were listed with a combined market capitalization of USD 1.4 trillion. The ROK government uses various incentives, such as tax breaks, to facilitate the free flow of financial resources into the product and factor markets. The ROK does not restrict payments and transfers for current international transactions, in accordance with the general obligations of member states under International Monetary Fund (IMF) Article VIII. Credit is allocated on market terms. The private sector has access to a variety of credit instruments, but non-resident foreigners are unable to borrow money in South Korean won, although they can issue bonds in local currency. Foreign portfolio investors enjoy open access to the ROK stock market. Aggregate foreign investment ceilings were abolished in 1998, and foreign investors owned 37.6 percent of benchmark KOSPI stocks and 10.1 percent of the KOSDAQ at the end of 2019. Foreign portfolio investment decreased slightly over the past year, reflecting slowing global growth. Money and Banking System Financial sector reforms enacted to increase transparency and promote investor confidence are often cited as one reason for the ROK’s rapid rebound from the 2008 global financial crisis. These reforms aimed to increase transparency and investor confidence and generally purge the sector of moral hazard. Since 1998, the ROK government has recapitalized its banks and non-bank financial institutions, closed or merged weak financial institutions, resolved many non-performing assets, introduced internationally-accepted risk assessment methods and accounting standards for banks, forced depositors and investors to assume appropriate levels of risk, and taken steps to help end the policy-directed lending of the past. These reforms addressed the weak supervision and poor lending practices in the South Korean banking system that helped cause and exacerbate the 1997-98 Asian financial crisis. The ROK banking sector is healthy overall, with a low non-performing loan ratio of 0.77 percent at the end of 2019, dropping 0.2 percent from the prior year. Korean commercial banks held more than USD 3.3 trillion in total assets at the end of 2019. Foreign commercial banks or branches can establish local operations, which would be subject to oversight by ROK financial regulators. The ROK has not lost any correspondent banking relationships in the past three years, nor are any relationships in jeopardy. There are no restrictions on a foreigner’s ability to establish a bank account in Korea. The Bank of Korea (BOK) is the central bank. Foreign Exchange and Remittances Foreign Exchange In categories open to investment, foreign exchange banks must be notified in advance of applications for foreign investment. All ROK banks, including branches of foreign banks, are permitted to deal in foreign exchange. In effect, these notifications are pro forma, and approval can be processed within three hours. Applications may be denied only on specific grounds, including national security, public order and morals, international security obligations, and health and environmental concerns. Exceptions to the advance notification approval system exist for project categories subject to joint-venture requirements and certain projects in the distribution sector. According to the Foreign Exchange Transaction Act (FETA), transactions that could harm international peace or public order, such as money laundering and gambling, require additional monitoring or screening. Three specific types of transactions are restricted: Non-residents are not permitted to buy won-denominated hedge funds, including forward currency contracts; The Financial Services Commission will not permit foreign currency borrowing by “non-viable” domestic firms; and The ROK government will monitor and ensure that South Korean firms that have extended credit to foreign borrowers collect their debts. The ROK government has retained the authority to re-impose restrictions in the case of severe economic or financial emergency. Funds associated with any form of investment can be freely converted into any world currency. However, there might be some cost or technical problems in case of conversion into lesser used currencies, due to the relatively small foreign exchange market in the country. In 2019, 69.4 percent of spot transactions in the market were between the U.S. dollar and Korean won, while daily transaction (spot and future) was equal to USD 55.8 billion, up 0.5 percent from the previous year. Exchange rates are generally determined by the market. The U.S. Department of the Treasury assessed that ROK authorities historically had intervened on both sides of the currency market, with a net impact that resisted won appreciation as demonstrated by a sustained rise in reserves and net forward position. In its January 2020 semiannual report to Congress, Treasury assessed that in 2018 and the first half of 2019, ROKG authorities on balance intervened to support the won through small net sales of foreign exchange. Treasury welcomed the ROK’s commitment to increased transparency, while recommending that Korean authorities limit currency intervention to exceptional circumstances. The BOK’s most recent intervention report, released in March 2020 and covering 4Q 2019, showed zero net intervention. Remittance Policies The right to remit profits is granted at the time of original investment approval. Banks control the now pro forma approval process for FETA-defined open sectors. For conditionally or partially restricted investments (as defined by the FETA), the relevant ministry must provide approval for both investment and remittance. When foreign investment royalties or other payments are proposed as part of a technology licensing agreement, the agreement and the projected stream of royalties must be approved by either a bank or MOEF. Approval is virtually automatic. An investor wishing to enact a remittance must present an audited financial statement to a bank to substantiate the payment. The ROK routinely permits the repatriation of funds but reserves the right to limit capital outflows in exceptional circumstances, such as situations when uncontrolled outflows might harm the balance of payments, cause excessive fluctuations in interest or exchange rates, or threaten the stability of domestic financial markets. To withdraw capital, a stock valuation report issued by a recognized securities company or the ROK appraisal board also must be presented. Foreign companies seeking to remit funds from investments in restricted sectors must first seek ministerial and bank approval, after demonstrating the legal source of the funds and proving that relevant taxes have been paid. There are no time limitations on remittances. Sovereign Wealth Funds The Korea Investment Corporation (KIC) is a wholly government-owned sovereign wealth fund established in July 2005 under the KIC Act. KIC’s steering committee is comprised of KIC’s Chief Executive Officer, the Minister of Economy and Finance, the Bank of Korea (BOK) Governor, and six private sector members appointed by the ROK President. KIC is on the Public Institutions Management Act (PIMA) list. It is mandated to manage assets entrusted by the ROK government and central bank and generally adopts a passive role as a portfolio investor. Its assets under management stood at USD 131.6 billion at the end of 2018. KIC is required by law to publish an annual report, submit its books to the steering committee for review, and follow all domestic accounting standards and rules. It follows the Santiago Principles and participates in the IMF-hosted International Working Group on Sovereign Wealth Funds. The KIC does not invest in domestic assets, aside from a one-time USD 23 million investment into a domestic real estate fund in January 2015. 7. State-Owned Enterprises Many ROK state-owned enterprises (SOEs) continue to exert significant control over segments of the economy. There are 36 SOEs active in the energy, real estate, and infrastructure (railroad, highway construction) sectors. The legal system has traditionally ensured a role for SOEs as sectoral leaders, but in recent years, the ROK has sought to attract more private participation in the real estate and construction sectors. SOEs are generally subject to the same regulations and tax policies as private sector competitors and do not have preferential access to government contracts, resources, or financing. The ROK is party to the WTO Government Procurement Agreement; a list of SOEs subject to WTO government procurement provisions is available in annex three of the ROK’s agreement. The state-owned Korea Land and Housing Corporation is given preference in developing state-owned real estate projects, notably housing. The court system functions independently from the government and gives equal treatment to SOEs and private enterprises. The ROK government does not provide official market share data for SOEs. It requires each entity to disclose financial statements, the number of employees, and average compensation figures. The PIMA gives authority to MOEF to administer control of many SOEs, mainly focusing on administrative and human resource management. However, there is no singular government entity that exercises ownership rights over SOEs. SOEs subject to PIMA are required to report to a line minister; the President or line ministers appoint CEOs or directors, often from among senior government officials. SOEs are explicitly obligated to consult with government officials on their budget, compensation, and key management decisions (e.g., pricing policy for energy and public utilities). For other issues, the government officials informally require the SOEs to either consult with them before making decisions or report ex post facto. Market analysts generally regard SOEs as a part of the government or entities fully guaranteed by the government, with some exceptions: SOEs listed on local security markets, such as the Industrial Bank of Korea and Korea Electric Power Corporation, are regarded as semi-private firms. The ROK adheres to the OECD Guidelines for Multinational Enterprises and reports significant changes in the regulatory framework for SOEs to the OECD. A list of South Korean SOEs is available on this Korean-language website: http://www.alio.go.kr/home.html . The ROK government officially does not give any non-market based advantage to SOEs competing in the domestic market. Although the state-owned Korea Development Bank does appear to enjoy lower financing costs because of the government’s guarantee, it does not have a major effect on U.S. retail banks operating in Korea. Privatization Program Privatization of government-owned assets historically faced protests by labor unions and professional associations and a lack of interested buyers in some sectors. No state-owned enterprises were privatized between 2002 and November 2016. In December 2016, the ROK sold part of its stake in Woori Bank, recouping USD 2.07 billion, and plans to sell its remaining 21.4 percent stake at an undetermined future date. Given the current administration’s pro-labor stance, most analysts do not expect significant movement with regard to privatization in the near future. Foreign investors may participate in privatization programs if they comply with ownership restrictions stipulated for the 30 industrial sectors indicated in this report, Section 1: Openness To, and Restrictions Upon, Foreign Investment. These programs have a public bidding process that is clear, non-discriminatory, and transparent. The authority in charge or a delegated private lead manager provides the relevant information. 9. Corruption In an effort to combat corruption, the ROK has introduced systematic measures to prevent the illegal accumulation of wealth by civil servants. The 1983 Public Service Ethics Act requires high-ranking officials to disclose personal assets, financial transactions, and gifts received during their term of office. The Act on Anti-Corruption and the Establishment and Operation of the Anti-Corruption and Civil Rights Commission (previously called the Anti-Corruption Act) concerns reporting of corruption allegations, protection of whistleblowers, institutional improvement, and training and public awareness to prevent corruption, as well as establishing national anti-corruption initiatives through the Anti-Corruption and Civil Rights Commission (ACRC). Implementation is behind schedule, according to Transparency International, which ranked the ROK 37 out of 180 countries and territories in its 2019 Corruption Perception Index with a score of 59 out of 100 (with 100 being the best score). The Department of State’s 2019 ROK Human Rights Report highlighted allegations of corruption levied against former Minister of Justice Cho Kuk in October 2019. He resigned 35 days after his appointment amid allegations that he and his family used his previous positions unfairly and, in some cases, fraudulently to gain academic benefits for his daughter and inappropriate returns on financial investments. Public concern about government corruption reached an apex between 2016 and 2017, when local press began exposing the link between then-President Park Geun-hye and her friend and adviser Choi Soon-sil. Choi was arrested and sentenced to 20 years in jail on charges of fraud, coercion, and abuse of power and President Park was impeached by a 234-56 vote in the National Assembly in December 2016. Following her removal from office, a presidential by-election was held on May 9, 2017, bringing President Moon Jae-in into office. Former President Park was found guilty of multiple counts of abuse of power, bribery, and coercion and sentenced to 24 years in prison on April 6, 2018. Separately, on October 5, 2018, Park’s predecessor, former President Lee Myung-bak was sentenced to 11 months’ imprisonment for graft, embezzlement, and abuse of power, including accepting bribes from a major consumer electronics conglomerate in return for a presidential pardon for its chairman. Political corruption at the highest levels of elected office have occurred despite efforts by the ROK legislature to pass and enact anti-corruption laws such as the Act on Prohibition of Illegal Requests and Bribes, also known as the Kim Young-ran Act, in March 2015. The anti-corruption law came into effect on September 28, 2016, and institutes strict limits on the value of gifts that can be given to public officials, lawmakers, reporters, and private school teachers. It also extends to the spouses of officials. The Act on the Protection of Public Interest Whistleblowers is designed to protect whistleblowers in the private sector and equally extends to reports on foreign bribery, with a reporting center operated by the ACRC. In 2014, the Sewol ferry disaster that resulted in the deaths of 304 passengers, most of them school children on a field trip, brought to public attention collusion between government regulators and regulated industries. Investigators determined that companies associated with the vessel had used insider knowledge and government contacts to skirt legal requirements by hiring recently retired government officials. In response, the ROK government tightened regulations around hiring of former government officials. This reform expanded the sectors restricted from employing former government officials, extended the employment ban from two to three years, and increased scrutiny of retired officials employed in fields associated with their former duties. The Public Service Ethics Commission, between May 2017 and February 2019, approved approximately 85 percent, or 1,335, of the requests made by former political appointees and former government officials to accept government-affiliated or private sector positions, according to local press. Most companies maintain an internal audit function to prevent and detect corruption. Government agencies responsible for combating government corruption include the Board of Audit and Inspection, which monitors government expenditures, and the Public Service Ethics Committee, which monitors civil servants’ financial disclosures and their financial activities. The ACRC focuses on preventing corruption by assessing the transparency of public institutions, protecting and rewarding whistleblowers, training public officials, raising public awareness, and improving policies and systems. In reporting cases of corruption to government authorities, nongovernment organizations and civil society groups are protected by the Act on the Prevention of Corruption and the Establishment and Management of the Anti-Corruption and Civil Rights Commission, as well as the Protection of Public Interest Reporters Act. Individuals reporting cases of corruption to the ACRC must provide their full name and other personally identifiable information (PII) to make the submission. However, in April 2018, the law was updated to allow would-be filers to report cases through one’s attorney without disclosing PII to the courts. Violations of these legal protections can result in fines or prison sentences. U.S. firms have not identified corruption as an obstacle to FDI. The ROK ratified the UN Convention against Corruption in 2008. It is also a party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions and a member of the Asia-Pacific Economic Cooperation Anti-Corruption and Transparency Working Group. The Financial Intelligence Unit has cooperated fully with U.S. and UN efforts to shut down sources of terrorist financing. Transparency International has maintained a national chapter in the ROK since 1999. Resources to Report Corruption Government agency responsible for combating corruption: Anti-Corruption and Civil Rights Commission Government Complex-Sejong, 20, Doum 5-ro Sejong-si, 339-012 Tel: +82-44-200-7151 Fax: +82-44-200-7916 Email: email@example.com http://www.acrc.go.kr/en/index.do Contact at “watchdog” organization: Corruption Network in Korea (aka Transparency International Korea) #1006 Pierson Building, 42, Saemunan-ro, Jongno-gu, Seoul 110-761 Tel: +82-2-717-6211 Fax: +82-2-717-6210 Email: firstname.lastname@example.org http://www.transparency-korea.org/ 10. Political and Security Environment The Democratic People’s Republic of Korea (DPRK) and the ROK continue to have a tense relationship despite rapprochement efforts in 2018, and the two Koreas maintain one of the world’s most heavily-fortified borders. The United States has had a security alliance with the ROK since 1953, with nearly 28,000 U.S. troops currently stationed in the ROK. The presence of U.S. forces has allowed the Korean Peninsula to maintain general peace and stability since 1953 and enabled the ROK to grow into a modern, prosperous democracy boasting one of the largest and most dynamic economies in the world. In addition, both the ROK and U.S. governments are attempting to engage with the DPRK in dialogue in an effort to resolve tensions and to realize the complete denuclearization of North Korea. The two Koreas committed in the April 27, 2018, inter-Korean summit to reduce military tensions on the border and to work toward a permanent peace regime on the Korean Peninsula. Likewise, the United States and DPRK agreed in the June 12, 2018, Singapore Summit between President Trump and Chairman Kim to work toward the transformation of U.S.-DPRK relations, joint efforts to build a lasting a stable peace regime on the Korean Peninsula, the complete denuclearization of the Korean Peninsula, and the recovery and repatriation of POW/MIA remains from the Korean War. The ROK’s relations with Japan deteriorated significantly in 2019 due primarily to the government of Japan’s strong reaction against the ROK Supreme Court’s 2018 decisions directing Japanese companies to compensate South Koreans subjected to forced labor during World War II – including the court-directed seizure of defendant company assets – as well as the ROK’s objection to Japan’s subsequent tightening of exports controls against the ROK in 2019. This prompted consumer boycotts in the ROK against Japanese goods, causing a significant drop in local sales for certain products, including beer and automobiles, as well as at certain Japan-origin retail chains. The ROK does not have a history of political violence directed against foreign investors. There have not been reports of politically-motivated threats of damage to foreign-invested projects or foreign-related installations of any sort, nor of any incidents that might be interpreted as having targeted foreign investments. Labor violence unrelated to the issue of foreign ownership, however, has occurred in foreign-owned facilities in the past. There have also been protests in the past directed at U.S. economic, political, and military interests (e.g. beef imports in 2008 or Terminal High Altitude Area Defense deployment in 2017 and 2018). The ROK is a modern democracy with active public political participation, and well-organized political demonstrations are common. For example, large-scale rallies were a regular occurrence throughout former President Park Geun-hye’s impeachment in 2016 and 2017. The protests were largely peaceful and orderly. The presidential by-election and transition that followed Park’s impeachment also proceeded smoothly and without incident. South Sudan Executive Summary Trade and investment conditions in South Sudan have slightly improved in the past year, but many challenges remain. The peace process has moved into the transition phase with the constitution of a new presidency structure and cabinet as components of a new Revitalized Transitional Government of National Unity in February and March. The expanded cabinet included new ministries of investment and East African Community affairs. In accordance with tenets of the peace deal, the new government included representatives from the incumbent government and opposition parties (signatories to the peace agreement). While these steps are positive, implementation of the terms of the peace deal has been significantly behind schedule and remains incomplete. The country continues to be plagued by large-scale displacement, widespread food insecurity, severe human-rights abuses, restricted humanitarian access, and harassment of aid workers and journalists. South Sudan is one of the most oil-dependent economies in the world and the sector is fraught with corruption. In March 2018, the United States Department of Commerce added the Ministry of Petroleum, the Ministry of Mining, and state-owned oil company Nilepet to the Entity List, barring export of certain U.S. goods or technologies to them due to their contribution to the conflict. Removal of these entities will require the implementation of transparency and accountability measures, consistent with aspects of Chapter IV of the peace deal. Humanitarian and development aid is a major source of employment in South Sudan. Difficulties of changing regulations, multiple layers of taxation, and labor harassment faced in this sector may provide insight to difficulties private investors would face. Bureaucratic impediments faced by NGOs include recruitment interference, airport obstructions, and duplicate registration and permit issues by different levels of authority. The government has made efforts to simplify and centralize taxation, with the creation of the National Revenue Authority. The Bank of South Sudan has launched a website where it posts key financial data. However, the legal system is ineffective, underfunded, overburdened, and subject to executive interference and corruption. High-level government and military officials are immune from prosecution and parties in contract disputes are sometimes arrested and imprisoned until the party agrees to pay a sum of money, often without going to court and sometimes without formal charges. The then-South Sudan Investment Authority (SSIA) in 2018 and 2019 conducted investment roadshows, promoting South Sudan as an ideal location for investment. The SSIA compared its laws that govern investment practices in South Sudan with those in the region and determined themselves to be more favorable for investment than their neighbors; however, laws in South Sudan are not routinely enforced. Other factors inhibiting investment in South Sudan include limited physical infrastructure and a lack of both skilled and unskilled labor. The World Bank’s 2020 Doing Business report ranked South Sudan 185 out of 190 economies on overall ease of doing business. The legal framework governing investment and private enterprises remained underdeveloped as of April 2020. The U.S. Department of State maintains a Travel Advisory warning against travel to South Sudan due to critically high risks from crime, kidnapping, and armed conflict. Table 1: Key Metrics and Rankings Measure Year Index/Rank Website Address TI Corruption Perceptions Index 2019 179 of 180 http://www.transparency.org/ research/cpi/overview World Bank’s Doing Business Report 2020 185 of 190 http://www.doingbusiness.org/en/rankings Global Innovation Index 2019 N/A of 126 https://www.globalinnovationindex.org/ analysis-indicator U.S. FDI in partner country ($M USD, stock positions) 2019 N/A https://apps.bea.gov/ international/factsheet/ World Bank GNI per capita 2019 N/A http://data.worldbank.org/ indicator/NY.GNP.PCAP.CD 1. Openness To, and Restrictions Upon, Foreign Investment Policies Towards Foreign Direct Investment As of April 2020, the government was actively seeking foreign direct investment, but had not undertaken meaningful steps to facilitate it. Reported unfair practices have included effective expropriation of assets, inconsistent taxation policies, harassment by security services, extortion attempts, and a general perception that foreigners are not afforded fair results in court proceedings or labor disputes. The country makes few investment facilitation efforts. In March South Sudan upgraded the South Sudan Investment Authority (SSIA) to the Ministry of Investment, as recommended in Chapter I of the peace agreement. In theory the Ministry of Investment has a One Stop Shop Investment Center. However, both organizations are poorly resourced and neither maintains an active website, though the Ministry of Investment plans to launch one this year. There is no business registration website. The ministries that handle company registration include the Ministry of Trade and Industry, Ministry of Investment, Ministry of Finance, and Ministry of Justice. There is no single window registration process, and an investor must visit all the above-mentioned agencies to complete the registration of a company. It is estimated that the registration process could take several months. In January 2018, South Sudan joined the African Trade and Insurance Agency (ATI), which provides export insurance and other assistance to foreign investors and traders. Several local lawyers are willing to advise investors and guide them through the registration process, for a fee. There is a private-sector Chamber of Commerce, but it is a government run organization. There is no ombudsman. Limits on Foreign Control and Right to Private Ownership and Establishment Foreign and domestic private entities have the right to establish and own business enterprises and engage in all forms of remunerative activity, as well as freely establish, acquire and dispose of interests in business enterprises. Under the investment law, the government of South Sudan leases land to foreign investors for limited periods of time, generally not to exceed 30-60 years, with the possibility of renewal. In the case of leases for mining or quarrying, the lease shall not exceed the life of the mine or quarry. Under the 2009 Land Act, non-citizens are not allowed to own land in South Sudan. Years of conflict and internal displacement have left a complex land rights picture with many properties having been usurped by squatters or soldiers. There is no title insurance to speak of and no formal way to determine ownership outside of current possession. Particularly lucrative extractive or land-based ventures should assume claims on ownership, and therefore claims to royalties or rents, will abound. For investors who wish to start a business in South Sudan, there is a local shareholder requirement, but the foreign investor can usually retain majority control. For foreign-based companies who wish to establish a subsidiary in South Sudan, the local shareholder requirement does not apply. South Sudanese businesses are given priority in several areas, including micro-enterprises, postal services, car hire and taxi operations, public relations, retail, security services, and the cooperative services. Exact details, and the extent of enforcement of these requirements, are sometimes unclear. Subject to the Private Security Companies Rules and Regulations of 2013, registering and setting up a protection services security company in South Sudan requires a South Sudanese citizen to hold at least 51 percent of the company. Companies in the extractives sector must also have a South Sudanese national as part owner, but the exact percentage of ownership required is not always clear. According to the Investment Act, foreign investors must apply for an investment certificate from the Ministry of Investment to ensure that the investment will be beneficial to the economy or of general benefit to South Sudan. Other Investment Policy Reviews In the past three years, the government has not undergone any third-party investment policy reviews. Other Investment Policy Reviews The government’s fiscal and economic strategy sees government facilitating investment in economic priority sectors, particularly in agriculture, transport infrastructure, petroleum, mining, and energy, to unlock South Sudan’s economic potential and boost diversified growth. Investment incentives exist, but the exact procedures are somewhat opaque. There is no business registration website. The process to register a business is lengthy and complex, and involves visiting multiple offices at the national, state, and local levels. The Chamber of Commerce recommends hiring a local lawyer to register a business. To register a new company, investors can get a check list with the steps and the name of ministries they need to visit to complete registration process from the Ministry of Trade and Industry. Outward Investment The government does not have a policy for promoting or incentivizing outward investment. The government does not have a policy restricting domestic investors from investing abroad. 6. Financial Sector Capital Markets and Portfolio Investment The Investment Act mentions portfolio investment, but South Sudan does not have a functioning market for financial assets. South Sudan does not have a stock market or related regulatory system. There are no known policies for promotion of investment into product and factor markets. South Sudan’s formal financial system offers few financial products. It is difficult for foreign investors to get credit on the local market due to the shortage of hard currency, the lack of accurate means of obtaining reliable figures or audited accounts, the absence of a credit reference bureau, and South Sudan’s failure to document land ownership properly. According to the World Bank, 50 percent of all South Sudanese firms cite access to finance as a constraint. Banks are often unwilling to lend due to the lack of adequate laws to protect lenders and difficulties related to personal identification. After the Bank of South Sudan confiscated commercial banks’ reserves on deposit at the central bank in 2015, diverting them to the use of the government, companies and individuals had difficulty accessing their funds. This made depositors reluctant to trust their funds to the banking system. The Bank of South Sudan launched treasury bills on August 18, 2016 for purchase by members of the public, companies, and commercial banks. This lasted until April 2017, when people stopped investing in the bills due to high inflation and a lack of a secondary market for them. The bank had previously issued treasury bills in 2012 without success. Money and Banking System The public and private financial sectors are in distress. The banking sector is facing significant challenges because of the civil conflict, high inflation, and strong currency depreciation. The economy of South Sudan is cash-based with limited use of demand deposits. The IMF has categorized South Sudan’s financial sector as small and undeveloped. There are nine foreign-owned banks. There are no known restrictions on a foreigner’s ability to establish a bank account. In September 2019, South Sudan introduced mobile money via two private sector companies to boost digital transactions in the country. Remittances to Uganda and Kenya across one of the platforms began in April 2020. Many international banks operating in South Sudan had to restructure and recapitalize following government defaults in 2015. As a result, most international banks operate as foreign exchange traders or deposit holders. The limited lending banks do conduct are to businesses with well documented contracts with international organizations and government employees. Anecdotal reports indicate, however, that even this limited lending contracted in 2019. This behavior would seem to be confirmed by the IMF’s April 2019 report where it indicated that non-performing loans for foreign and domestic banks were on the rise. Many domestic banks are heavily undercapitalized. The Bank of South Sudan, the central bank, has limited assets and functions more as a commercial bank servicing the governments transactions than as a monetary policy institution. Since mid-2017, when the Bank of South Sudan introduced the “Special Accounts” scheme, commercial banks have been required to immediately sell all the foreign exchange (FX) purchased from the special account holders to the central bank (both transactions should be at the official (indicative) rate), and are subsequently allowed purchase up to 25 percent back from the central bank. These special regulations induce foreign currency flight from local financial markets. Foreign Exchange and Remittances Foreign Exchange Foreign investors cannot remit funds through the parallel market. They are required by law to remit through banks or foreign exchange bureaus at an exchange rate that is far below the market rate. The 2009 Investment Promotion Act guarantees unconditional transferability in and out of South Sudan “in freely convertible currency of capital for investment; payments in respect of loan servicing where foreign loans have been obtained; and the remittance of proceeds, net of all taxes and other statutory obligations, in the event of sale or liquidation of the enterprise.” In reality, the ability to exchange local currency for foreign currency is severely restricted. Some international and U.S. businesses have complained that the inability to repatriate proceeds has hurt their businesses. South Sudan maintained a fixed exchange rate for the South Sudanese Pound until December 2015 when it moved to a managed floating exchange rate regime. Since then, the local currency has depreciated significantly due to deficit spending by the government, printing of money, and a lack of hard currency. The current official exchange rate can be found from the Bank of South Sudan or from commercial banks in Juba. There is a large spread between the official rate and the unofficial parallel market rate. Remittance Policies The World Bank estimated remittances to South Sudan at roughly USD 600 million in 2018, roughly 14 percent of GDP. As markets contract globally and earners are impacted by lockdowns, trade disruptions, layoffs, and illness, the amount of remittance inflows is likely to drop. During the 2008 financial crisis and the 2017 oil slump, remittance inflows dropped by 4 percent and 11 percent, respectively. Given the global scale and economic impact of COVID-19, decreases in remittances are likely to be larger than in the two previous crises. Interconnectivity of mobile money platforms between Kenya, Uganda and South Sudan, might counter this by boosting transactions. There have been no recent changes to investment remittance policies, and no known waiting periods on remittances. Sovereign Wealth Funds The Petroleum Revenue Management Act of 2013 created a sovereign wealth fund (SWF) to set aside surplus profits from oil sales. The law established the Oil Revenue Stabilization Account to act as a buffer against volatility in oil prices and the Future Generations Fund to set aside some funds for future generations. The SWF is supposed to distribute 10 percent of oil profits into the Oil Revenue Stabilization Account and 15 percent to the Future Generations Fund. To date, however, neither has received any financing. The Comprehensive Peace Agreement (CPA) that ended the civil war with Sudan set a 2 percent share of oil revenue that is supposed to be given to the oil producing states along with 3 percent revenue allocation to the local communities. However, in August 2017, the government announced that it would stop giving the 3 percent and 2 percent share to states. The September 2018 peace agreement calls for full implementation of Petroleum Revenue Management Act revenue sharing provisions. In February 2020, local officials from former Northern Liech State confirmed that former Northern Liech State and former Ruweng State received a payment from the Ministry of Finance and Planning as the two percent share from net oil revenues as stipulated in the Petroleum Revenue Management Act 2013. The officials did not specify the amount received, so it is not clear if this was based on earnings of a month or included years’ worth of arrears. The SWF does not follow any good practices and being unfunded, does not invest domestically (although that is the intent). 7. State-Owned Enterprises The national oil company – Nile Petroleum Corporation, or Nilepet – remains the primary fully State-owned enterprise (SOE) in South Sudan. The government owns stakes in construction and trade companies and in several banks. Limited data is available on number, total income, and employment figures of SOEs. There is no published list of SOEs. Nilepet is the technical and operational branch of the Ministry of Petroleum. Nilepet took over Sudan’s national oil company’s shares in six exploration and petroleum sharing agreements in South Sudan at the time of the country’s independence in 2011. Nilepet also distributes petroleum products in South Sudan. The government, through Nilepet, holds minority stakes in other oil companies operating in South Sudan. The Petroleum Revenue Management Bill, which governs how Nilepet’s profits are invested, was enacted into law in 2013; however, the company has yet to release any information on its activities, even though the law states that comprehensive, audited reports on the company’s finances must be made publicly available. The government is not transparent about how it exercises ownership or control of Nilepet. Its director reports to the Minister of Petroleum. Nilepet’s revenues and expenditures are not disclosed in the central government budget. No audited accounts of Nilepet are publicly available. After the January 2012 oil production shutdown, oil production recovered to more than 235,000 barrels per day at end of 2013, only to fall to about 160,000 barrels per day in early 2014 as a result of the conflict that started in December 2013. As of April 2020, production was approximately 178,000 barrels per day. In March 2018, the Bureau of Industry and Security (BIS) of the U.S. Department of Commerce amended the Export Administration Regulations (EAR) to add Nilepet and several related companies to the Entity List, along with the Ministry of Petroleum and the Ministry of Mining, due to their role in worsening the conflict in South Sudan. The Entity List identifies entities, including corporations, private or government organizations, and natural persons, and other persons reasonably believed to be involved, or to pose a significant risk of being or becoming involved, in activities contrary to the national security or foreign policy interests of the United States. The U.S. Government assesses the 15 entities BIS added to the Entity List as contributing to the ongoing crisis in South Sudan because they are a source of substantial revenue that, through public corruption, is used to fund the purchase of weapons and other material that undermine the peace, security, and stability of South Sudan rather than support the welfare of the South Sudanese people. Adding these entities to the Entity List is intended to ensure that items subject to the EAR are not used to generate revenue to finance the continuing violence in South Sudan. The following 15 entities are the first South Sudanese entities added to the Entity List: Ascom Sudd Operating Company; Dar Petroleum Operating Company; DietsmannNile; Greater Pioneer Operating Co. Ltd; Juba Petrotech Technical Services Ltd; Nile Delta Petroleum Company; Nile Drilling and Services Company; Nile Petroleum Corporation; Nyakek and Sons; Oranto Petroleum; Safinat Group; SIPET Engineering and Consultancy Services; South Sudan Ministry of Mining; South Sudan Ministry of Petroleum; and Sudd Petroleum Operating Co. These 15 entities are subject to a license requirement for all exports and reexports destined for any of the entities and transfers (in-country) to them of all items subject to the EAR with a licensing review policy of a presumption of denial. This license requirement also applies to any transaction involving any of these entities in which such entities act as a purchaser, intermediate consignee, ultimate consignee or end-user. Additionally, no license exceptions are available to these entities. If any person participates in a transaction described above involving any of these 15 entities without first obtaining the required license from BIS, that person would be in violation of the EAR and could be subject to civil or criminal enforcement proceedings. Civil enforcement could result in the imposition of monetary penalties or the denial of the person’s export privileges. Additionally, a person’s supplying or procuring items subject to the EAR or engaging in other activity involving an entity on the Entity List could result in a determination to add that person to the Entity List consistent with the procedures set forth in the EAR. The regulation can be viewed on the Federal Register at https://www.gpo.gov/fdsys/pkg/FR-2018-03-22/pdf/2018-05789.pdf . The country does not adhere to the OECD Guidelines on Corporate Governance for SOEs. Privatization Program South Sudan does not have a privatization program. So far, the government has no plans for privatization, and there are few government-owned entities that provide services to individuals. 9. Corruption South Sudan has laws, regulations, and penalties to combat corruption, but there is a near total lack of enforcement and considerable gaps exist in legislation. As a result, corruption is pervasive. Companies are reportedly asked to pay extralegal taxes and fees. Security officials have been reported to impose business conditions including payment of fees, salaries, and logistical support to their operations. In practice, politically connected people are immune to prosecution. There are no laws that prevent conflict of interest in government procurement. The government does not encourage or require private companies to establish internal codes of conduct that, among other things, prohibit bribery of public officials. There is no indication that private companies use internal controls, ethics, and compliance programs to detect and prevent bribery of government officials. The South Sudan Anti-Corruption Commission (SSACC) was established in accordance with the 2005 Constitution and the 2009 SSACC Act. The five commission members and chairperson are appointed by the President with approval by a simple majority in the parliament. The commission is tasked with protecting public property, investigating corruption, and submitting evidence to the Ministry of Justice for necessary action. In addition, the commission is tasked with combatting administrative malpractice in public institutions, such as nepotism, favoritism, tribalism, sectionalism, gender discrimination, bribery, embezzlement, and sexual harassment. In reality, the SSACC lacks the resources or political support to investigate corruption. It has no capacity to address state corruption as it can only relay its findings to the Ministry of Justice for prosecution. There were no significant anti-corruption cases investigated or prosecuted in 2019. South Sudan acceded to the United Nations Convention against Corruption on January 23, 2015 but has not yet ratified it. The country is not a party to the OECD Anti-Bribery Convention and is not reported to be a participant in regional anti-corruption initiatives. The country provides no protection to NGOs or journalists involved in investigating corruption. NGOs and journalists of all types are routinely subject to government harassment. All major sectors including the extractive sector, hotels, airlines, banking, and security sectors are subject to interference from the security sector including recruitment and demand for payments of fees and salaries. Corruption appears to be pervasive at all levels of government and society. The regulatory system is poor or non-existent, and dispute settlement is weak and subject to influence. Resources to Report Corruption National Audit Chamber P.O. Box 210 Juba, South Sudan Tel: +211(0)955481021 email@example.com Honorable Ngor Kulong Ngor Chairperson South Sudan Anti-Corruption Commission P.O Box 312 Juba, South Sudan firstname.lastname@example.org; email@example.com +211(0) 927117414; +211(0)0929201028 Akuei Deng Executive Secretary South Sudan Anti-Corruption Commission P.O Box 312 Juba, South Sudan firstname.lastname@example.org +211912979575 Contact at “watchdog” organizations: UN Panel of Experts on South Sudan Mr. David Biggs (Senior Committee Secretary) Tel: +1(212)9635598 email@example.com Transparency International Alt-Moabit 96 10559 Berlin Germany Telephone: +49 30 3438 200 Fax: +49 30 3470 3912 firstname.lastname@example.org The Sentry c/o The Enough Project c/o The Enough Project 1420 K Street, NW, Suite 200 Washington, DC 20005 email@example.com 10. Political and Security Environment There is a long history of politically motivated violence in South Sudan. The warring parties concluded a peace agreement in September 2018 to stop the civil war that has wrought the country since 2013. Limited fighting continues in some parts of the country as of April 2020, but in general, the ceasefire has held. After much debate, the incumbent government established ten states plus three administrative areas, facilitating the implementation of the September 2018 peace deal and paving the way for the formation of the transitional government. On February 22, President Kiir dissolved the former government and appointed five vice presidents and cabinet ministers as part of the implementation of the peace agreement. In March, President Kiir established the ministries of investment and East African Community affairs and appointed ministers, in accordance with tenants of the peace deal this included representatives from the incumbent government and opposition parties (signatories to the peace agreement). While these steps are positive, implementation of the terms of the peace deal has been significantly behind schedule and remains incomplete; the country continues to be plagued by large-scale displacement, widespread food insecurity, severe human-rights abuses, restricted humanitarian access, and harassment of aid workers and journalists. The effects of the war on the economy and investment will be evident for some time. Previous violence during conflict with Sudan resulted in damage to installations in one of the major oil producing areas in the country, shutting down production in that region. Repairs to these facilities began in 2018, allowing for an increase in oil production. The environment remains insecure but hopes of peace have been rekindled with signing of a new peace agreement in September 2018. The parties, however, remain behind in implementation as of April 2020. As of March 2020, the United Nations Office for the Coordination of Humanitarian Affairs in Juba reported 1.67 million Internally Displaced Persons (IDPs) in South Sudan, and an additional 2.24 million South Sudanese refugees in neighboring countries. The government has not yet developed the conditions that would allow IDPs and refugees to safely return home. Political opposition leaders faced illegal detention and travel restrictions in 2018. The government has temporarily shut down several newspapers and detained journalists it accused of printing articles opposing policies or actions undertaken by the government. The conflict severely disrupted trade, markets, agricultural activities, claimed hundreds of thousands of lives, and spurred one of the world’s most serious humanitarian crises. The conflict was marked by grave human rights abuses, especially pervasive gender-based violence. The Integrated Food Security Phase Classification organization projected that in the February to April 2020 time frame 6.01 million South Sudanese out of a population 11.69 million will likely face Crisis (IPC Phase 3) or worse acute food insecurity. During 2018 and 2019 the bulk of U.S. and the international community’s support efforts were directed at the immediate needs of the ongoing humanitarian crisis brought on by the civil conflict. Other development assistance has been significantly reduced. NGOs complain of harassment, and aid convoys came under attack in 2018 and 2019. South Sudan was named the most dangerous country in the world for aid workers in 2018. Armed cattle raids claimed hundreds of lives in 2018, 2019, 2020, and several ambushes and kidnappings have taken place on the country’s main highway, the Juba-Nimule road. The Department of State currently warns against travel to South Sudan due to the critically high risk of crime, kidnapping, and armed conflict. Spain Executive Summary Spain is open to foreign investment and is actively seeking to attract additional investment. Spain enjoyed economic growth of at least three percent from 2015-2017, leading analysts to declare Spain’s recovery from the housing and financial crises of the past decade. Although growth slowed in 2018 and 2019, Spain continued to notch solid growth rates of at least 2.0 percent, outperforming most other EU member states. In 2019, Spanish GDP grew by 2.0 percent, and public debt fell to 95.5 percent of GDP, and unemployment dropped to 13.8 percent – the lowest level since 2008. In 2020, however, Spain’s economy has contracted dramatically as a result of the COVID-19 pandemic. Although a strong economic rebound is expected in 2021, but Spain’s economy will take several years to recover to pre-crisis GDP levels. Service-based industries, particularly those related to tourism, are most vulnerable to the economic shock. The Spanish government’s fiscal position will also deteriorate as the Spanish government deploys fiscal stimulus, expands unemployment benefits, and garners less tax revenues as a result of the crisis. Spain’s key economic risks are high public debt levels, ballooning pension costs for its aging population, and the duality of the labor market. In spite of COVID-19’s shock to the economy and a corresponding spike in Spain’s already high unemployment rate, Spain’s excellent infrastructure, large domestic market and access to the European Common Market, well-educated workforce, and robust export possibilities remain draws for foreign investors. Spanish law permits foreign ownership in investments up to 100 percent, and capital movements are completely liberalized. According to Spanish data, in 2019, foreign direct investment flow into Spain was EUR 22.4 billion, 54.8 percent less than in 2018. Of this total, EUR 609 million came from the United States, the eighth largest investor in Spain in new foreign direct investment. Foreign investment is concentrated in the energy, real estate, finance and insurance, engineering, and construction sectors. Since its 2008 financial crisis and subsequent fiscal and financial reforms, Spain’s access to affordable financing from international financial markets has increased, which has improved Spain’s credibility and solvency, in turn generating more investor confidence. Spain’s credit ratings were raised in 2018 and 2019, and Spanish issuances of public debt have been oversubscribed, reflecting strong investor appetite for investment in Spain. However, small and medium-sized enterprises (SMEs)—which account for more than 99 percent of Spanish businesses—still have some difficulty accessing credit and are likely to face additional hurdles as a result of the COVID-19 pandemic. Defaults on loans to both small businesses and consumers are likely to rise after steadily falling from their 2014 peaks. Table 1: Key Metrics and Rankings Measure Year Index/Rank Website Address TI Corruption Perceptions 2019 30 of 175 http://www.transparency.org/ research/cpi/overview World Bank’s Doing Business Report “Ease of Doing Business” 2019 30 of 190 https://www.doingbusiness.org/rankings Global Innovation Index 2019 29 of 126 https://www.globalinnovationindex.org/ analysis-indicator U.S. FDI in Partner Country ($M USD, stock positions) 2018 $36,962 http://apps.bea.gov/international/factsheet/ World Bank GNI per capita 2018 $29,340 http://data.worldbank.org/ indicator/NY.GNP.PCAP.CD 1. Openness To, and Restrictions Upon, Foreign Investment Policies Towards Foreign Direct Investment Foreign direct investment (FDI) has played a significant role in modernizing the Spanish economy during the past 40 years. Attracted by Spain’s large domestic market, export possibilities, and growth potential, foreign companies set up operations in large numbers. Spain’s automotive industry is mostly foreign-owned. Multinationals control half of the food production companies, one-third of chemical firms, and two-thirds of the cement sector. Several foreign investment funds acquired networks from Spanish banks, and foreign firms control about one-third of the insurance market. The Government of Spain recognizes the value of foreign investment. Spain offers investment opportunities in sectors and activities with significant added value. Spanish law permits 100 percent foreign ownership in investments (limits apply regarding audio-visual broadcast licenses and strategic sectors of the economy; see next section), and capital movements are completely liberalized. Due to its degree of openness and the favorable legal framework for foreign investment, Spain has received significant foreign investments in knowledge-intensive activities New FDI into Spain declined by 54.8 percent in 2019 from its peak in 2018, according to Spain’s Industry, Trade, and Tourism Ministry data. Compared with the average between 2015 and 2017, 2019 was only slightly lower. In 2019, 30.1 percent of total gross investments were investments in new facilities or the expansion of productive capacity, while 34.0 percent of gross investments were in acquisitions of existing companies. In 2019 the United States had a gross direct investment in Spain of EUR 609 million, accounting for 2.7 percent of total investment and representing a decrease of 38.1 percent compared to 2018. U.S. FDI stock in Spain stayed relatively steady between 2013 (USD 33.9 billion) to 2017 (USD 33.1 billion). Limits on Foreign Control and Right to Private Ownership and Establishment Spain has a favorable legal framework for foreign investors. Spain has adapted its foreign investment rules to a system of general liberalization, without distinguishing between EU residents and non-EU residents. Law 18/1992, which established rules on foreign investments in Spain, provides a specific regime for non-EU persons investing in certain sectors: national defense-related activities, gambling, television, radio, and air transportation. For EU residents, the only sectors with a specific regime are the manufacture and trade of weapons or national defense-related activities. For non-EU companies, the Spanish government restricts individual ownership of audio-visual broadcasting licenses to 25 percent. Specifically, Spanish law permits non-EU companies to own a maximum of 25 percent of a company holding a digital terrestrial television broadcasting license; and for two or more non-EU companies to own a maximum of 50 percent in aggregate. In addition, under Spanish law a reciprocity principle applies (art. 25.4 General Audiovisual Law). The home country of the (non-EU) foreign company must have foreign ownership laws that permit a Spanish company to make the same transaction. The Spanish government issued new regulations on foreign investment in March 2020. In Royal Decree-Law 8/2020, subsequently modified by Royal Decree 11/2020, the government prohibited the acquisition by foreign investors of 10 percent or more of companies active in sectors listed below. Purchases of less than 10 percent are also subject to authorization if they result in participation in the control/management of the company. The sectors covered are: critical infrastructures, both physical and virtual (energy, transport, water, healthcare, communications, media, data storage and processing, aerospace, defense, finance, and sensitive installations) critical technology and dual-use products; essential supplies (energy, hydrocarbons, electricity, raw materials and food); sectors with sensitive information such as personal data or with capacity to control such information and; the media. Under these 2020 Royal Decrees, foreign investment in any industry is also required to receive approval beforehand if the foreign investor is controlled directly or indirectly by the government of another country, if the investor has invested or participated in sectors affecting the security, public order, or public health in another EU Member State, or if administrative or judicial proceedings have been initiated against the investor for exercising illegal or criminal activities. Investments under EUR 1 million are exempted, investments between EUR 1 and 5 million follow a simplified procedure. The Spanish Constitution and Spanish law establish clear rights to private ownership, and foreign firms receive the same legal treatment as Spanish companies. There is no discrimination against public or private firms with respect to local access to markets, credit, licenses, and supplies. Other Investment Policy Reviews Spain is a signatory to the convention on the Organization for Economic Co-operation and Development (OECD). Spain is also a member of the World Trade Organization (WTO) and the United Nations Conference on Trade and Development (UNCTAD). Spain has not conducted Investment Policy Reviews with these three organizations within the past three years. Business Facilitation To set up a company in Spain, the two basic requirements include incorporation before a Public Notary and filing with the Mercantile Register (Registro Mercantil). The public deed of incorporation of the company must be submitted. It can be submitted electronically by the Public Notary. The Central Mercantile Register is an official institution that provides access to companies’ information supplied by the Regional Mercantile Registers after January 1, 1990. Any national or foreign company can use it but must also be registered and pay taxes and fees. According to the World Bank’s Doing Business report, the process to start a business in Spain should take about two weeks. “Invest in Spain” is the Spanish investment promotion agency to facilitate foreign investment. Services are available to all investors. Useful web sites: Companies register: http://www.rmc.es/Home.aspx Companies register for the Madrid region: https://www.rmercantilmadrid.com/RMM/Home/Index.aspx More information on the Mercantile Registry: http://www.rmc.es/ Investment promotion agency: http://www.investinspain.org/invest/es/cabecera/faq-s/establecimiento-de-una-empresa/index.html Outward Investment Among the financial instruments approved by the Spanish Government to provide official support for the internationalization of Spanish enterprise are the Foreign Investment Fund (FIEX), the Fund for Foreign Investment by Small and Medium-sized Enterprises (FONPYME), the Enterprise Internationalization Fund (FIEM), and the Fund for Investment in the tourism sector (FINTUR). The Spanish Government also offers financing lines for investment in the electronics, information technology and communications, energy (renewables), and infrastructure concessions sectors. 6. Financial Sector Capital Markets and Portfolio Investment The Spanish government welcomes all forms of investment, including portfolio investment. Foreign investors do not face discrimination when seeking local financing for projects. Credit is allocated on market terms, and foreign investors are eligible to receive credit in Spain. A large range of credit instruments are available through Spanish and international financial institutions. Many large Spanish companies rely on cross-holding arrangements and ownership stakes by banks rather than pure loans. However, these arrangements do not act to restrict foreign ownership. Several of the largest Spanish companies that engage in this practice are also publicly traded in the United States. There is a significant amount of portfolio investment in Spain, including by American entities. Spain has an actively traded and liquid stock market, the IBEX 35. In 2019, the United States and Spain amended their bilateral tax agreement to prevent double-taxation of each other’s nationals and firms and to improve information sharing between tax authorities. Spain has accepted the obligations of Article VIII, Sections 2, 3, and 4, and maintains an exchange rate system free of restrictions on payments and transfers for current international transactions, other than restrictions notified to the Fund under Decision No. 144 (52/51). Spain’s Council of Ministers on February 28, 2020 voted to approve a new Financial Transactions Tax (FTT) or “Tobin tax,” which would tax transfers of shares in large listed Spanish companies. The measure must be approved by the Spanish Congress before being implemented. The FTT would be an indirect tax of 0.2 percent on the acquisition of Spanish companies with a market capitalization of at least EUR 1 million EUR. The taxed entity would not be the seller or acquirer of the shares but rather the financial intermediary executing the transaction. Money and Banking System There were 24,004 financial institution branches as of December 2019, according to the Bank of Spain. Spain’s domestic housing crisis, which began in 2007, was linked to poor lending practices by Spanish savings banks (cajas de ahorros). The government subsequently created a Fund for Orderly Bank Restructuring (FROB) through Royal Decree-law 9/2009 of June 26, which restructured credit institutions in an effort to bolster capital and provisioning levels. The number of Spanish financial entities has shrunk significantly since 2009 through consolidation as banks have faced increased capital requirements and shrinking profit margins. The number of Spanish banking institutions decreased by decreased by 10.9 percent between 2012 and 2018, and Spain’s correspondent banking relationships fell by 8.9 percent during the same time period, according to SWIFT data. The COVID-19 pandemic has adversely affected the outlook for the Spanish banking sector, as nonperforming loans (NPLs) are expected to rise as profit margins shrink even further. The NPL ratio in Spain—4.8% in December 2019—was a marked improvement from 2014 levels but is likely to rise again due to current economic strains. The sector has substantial capital buffers to absorb the unexpected losses associated with this crisis, but there is also significant disparity between institutions. Slim profit margins for the Spanish financial sector are also likely to persist due to slowing growth and low (or negative) interest rates. Net profit for the Spanish banking system as a whole was about EUR 19 billion in 2019, 13.1% less than in 2018. Spain’s nationwide lockdown in response to COVID-19 has increased risks for banks with respect to NPLs and investment losses, according to the Bank of Spain. As of April 2020, Spain’s banks had the slimmest capital reserves of all eurozone members, including Italy. The dramatic slowdown in Spain’s economy is likely to have a direct impact on banks’ books, as mortgages account for around 40% of loans and consumer loans make up 8% of lending. On a positive note, the Spanish banking sector is in a much more robust position than ten years ago, prior to the financial crisis, and does not have the same solvency problems. The Spanish government also has committed more than EUR 200 billion in loan guarantees to facilitate continued access to credit, particularly for Spain’s self-employed and SMEs. Moreover, Spanish financial institutions have significantly higher capital levels than the minimum regulatory requirements, which can be used to absorb unexpected losses during the pandemic. The Bank of Spain, Spain’s central bank, is a member of the euro system and the European System of Central Banks. Within the framework of the Single Supervisory Mechanism (SSM), the Bank of Spain and European Central Bank (ECB) jointly supervise the Spanish banking system. Foreign banks are able to establish themselves in Spain and are subject to the same conditions as Spanish banks to access the Spanish financial system. Foreign banks with authorization in another EU member state do not need to get authorization from the Bank of Spain to establish a branch or representative office in Spain. The National Securities Market Commission (CNMV), is responsible for the supervision and inspection of Spanish securities markets. Since its creation in 1988, the CNMV’s regime has been updated to adapt to the evolution of financial markets and to introduce new measures to protect investors. Total assets for the five biggest banks in Spain at the end of 2019 were EUR 2.95 trillion: Banco Santander: EUR 1.523 trillion Banco Bilbao Vizcaya Argentaria (BBVA): EUR 699 billion CaixaBank: EUR 391.4 billion Banco Sabadell: EUR 223.7 billion Bankia: 208.5 EUR billion To open a bank account as a non-resident, a foreigner needs a proof of identity, proof of address in Spain, and proof of employment status or where the funds originated. All documents that are not in Spanish or issued by Spanish authorities need to be translated into Spanish. Foreign Exchange and Remittances Foreign Exchange There are no controls on capital flows. In February 1992, Royal Decree 1816/1991 provided complete freedom of action in financial transactions between residents and non-residents of Spain. Previous requirements for prior clearance of technology transfer and technical assistance agreements were eliminated. The liberal provisions of this law apply to payments, receipts and transfers generated by foreign investments in Spain. Remittance Policies Capital controls on the transfer of funds outside the country were abolished in 1991. Remittances of profits, debt service, capital gains, and royalties from intellectual property can all be affected at market rates using commercial banks. Sovereign Wealth Funds Spain does not have a sovereign wealth fund or similar entity. 7. State-Owned Enterprises The size of the public enterprise sector in Spain is relatively small. The role and importance of state-owned enterprises (SOE) in Spain decreased notably due to the privatization process that started in the early 1980s. The reform of SOE oversight in the 1990s led the government to create the State Holding for Industrial Participations, (Sociedad Estatal de Participaciones Industriales, SEPI). SEPI was created as a public-law entity by decree in 1995; its status was then protected by law in 1996. SEPI has direct majority participation in 15 SOEs, which make up the SEPI Group, with a workforce of more than 78,000 employees in 2018, is a direct minority shareholder in nine SOEs (five of them listed on stock exchanges), and participates indirectly in ownership of more than a hundred companies. Either legislative chambers and any parliamentary group may request the presence of SEPI and SOE representatives to discuss issues related to their performance. SEPI and the SOEs are required to submit economic and financial information to the legislature on a regular basis. The European Union, through specialized committees, also controls SOEs’ performance on issues concerning sector-specific policies and anti-competitive practices. Companies with a majority Interest: Agencia Efe, Cetarsa, Ensa, Grupo Cofivacasa, Grupo Correos, Grupo, Enusa, Grupo Hunosa, Grupo Mercasa, Grupo Navantia, Grupo Sepides, GrupoTragsa, Hipodromode la Zarzuela, Mayasa, Saeca Companies with a minority Interest: Airbus Group, Alestis Aerospace, Enagas, Enresa, Hispasat, Indra, International Airlines Group, Red Electrica Corporacion, Ebro Foods Attached companies: RTVE, Corporacion de Radio y Television Espanola Corporate Governance of Spain’s SOEs uses criteria based on principles and guidelines from the Organization for Economic Co-operation and Development (OECD). These include the state ownership function and accountability, as well as issues related to performance monitoring, information disclosure, auditing mechanisms and the role of the board in the companies. Privatization Program As the size of its public enterprise sector is relatively small, Spain does not have a formal privatization program. 9. Corruption Spain has a wide variety of laws, regulations, and penalties to address corruption. The legal regime has both civil and criminal sanctions for corruption, bribery, financial malfeasance, etc. Giving or accepting a bribe is a criminal act. Under Section 1255 of the Spanish civil code, corporations and individuals are prohibited from deducting bribes from domestic tax computations. There are laws against tax evasion and regulations for banks and financial institutions to fight money laundering terrorist financing. In addition, the Spanish Criminal Code provides for jail sentences and hefty fines for corporations’ (legal persons) administrators who receive illegal financing. The Spanish government continues to build on its already strong measures to combat money laundering. After the European Commission threatened to sanction Spain for failing to bring its anti-money laundering regulations in full accordance with the EU’s Fourth Anti-Money Laundering Directive, in 2018, Spain approved measures to modify its money laundering legislation to comply with the EU Directive. These measures establish new obligations for companies to license or register service providers, including identifying ultimate beneficial owners; institute harsher penalties for money laundering offenses; and create public and private whistleblower channels for alleged offenses. The General State Prosecutor is authorized to investigate and prosecute corruption cases involving funds in excess of roughly USD 500,000. The Office of the Anti-Corruption Prosecutor, a subordinate unit of the General State Prosecutor, investigates and prosecutes domestic and international bribery allegations. The Audiencia Nacional, a corps of magistrates has broad discretion to investigate and prosecute alleged instances of Spanish businesspeople bribing foreign officials. Spain enforces anti-corruption laws on a generally uniform basis. Public officials are subjected to more scrutiny than private individuals, but several wealthy and well-connected business executives have been successfully prosecuted for corruption. In 2019, Spanish courts conducted 42 corruption cases involving 170 defendants. The courts issued 102 sentences, with 39 including a full or partial guilty verdict. There is no obvious bias for or against foreign investors. U.S. firms have rarely identified corruption as an obstacle to investment in Spain, although entrenched incumbents have frequently attempted and at times succeeded in blocking the growth of U.S. franchises and technology platforms in both Madrid and Barcelona. As a result, Spain is among the least welcoming countries in Europe for some of the U.S.’s leading technology companies. Although no formal corruption complaints have been lodged, U.S. companies have indicated that they have been disqualified at times from public tenders based on reasons that these companies’ legal counsels did not consider justifiable. Spain’s rank in Transparency International’s annual Corruption Perceptions Index improved slightly in 2019, with the country climbing to position 30 (from 41 in 2018); however, its overall score (62) is one of the lowest among Western European countries. Spain is a signatory of the Organization for Economic Co-operation and Development (OECD) Convention on Combating Bribery and the UN Convention Against Corruption. It has also been a member of the Group of States Against Corruption (GRECO) since 1999. The OECD has noted concerns about the low level of foreign bribery enforcement in Spain and the lack of implementation of the enforcement-related recommendations. In a 2019 report, GRECO highlighted that of the group’s 11 recommendations to combat corruption from 2013, only two had been fully implemented, eight had been partly implemented, and one had not been implemented. Resources to Report Corruption Ministry of Finance Alcala, 9 28071 Madrid, Spain Telephone: +34 91 595 8000 Email: firstname.lastname@example.org Website: https://ssweb.seap.minhap.es/ayuda/consulta/PTransparencia Transparency International National Chapter – Spain Fundacion Jose Ortega y Gasset Calle Fortuny, 53 28010 Madrid, Spain Telephone: +34 91 700 4105 Email: email@example.com Website: http://www.transparencia.org.es/ 10. Political and Security Environment There have been periodic peaceful demonstrations calling for pension increases and other social or economic reforms. Public sector employees and union members have organized frequent small demonstrations in response to service cuts, privatization, and other government measures. Sri Lanka Executive Summary Sri Lanka is a lower middle-income country with a Gross Domestic Product (GDP) per capita of $3,853 and a population of approximately 22 million. The island’s strategic location off the southern coast of India along the main east-west Indian Ocean shipping lanes gives Sri Lanka a regional logistical advantage. After 30 years of civil war, Sri Lanka is transitioning from a predominantly rural-based economy to a more urbanized economy focused on manufacturing and services. Sri Lanka’s export economy is dominated by apparel and cash-crop exports, mainly tea, but technology services exports are a significant growth sector. Prior to the April 21, 2019 Easter Sunday attacks, the tourism industry was rapidly expanding, with Lonely Planet naming Sri Lanka its top travel destination in 2019. However, the attacks led to a significant decline in tourism that continued into 2020 due to COVID-19 and the government’s related decision to close the airport for commercial passenger arrivals in March 2020. The global impact of COVID-19 on tourism and apparel exports is resulting in severe contractions to both sectors in Sri Lanka, with potential follow-on impacts in related sectors including services, construction, and agriculture. Migrant labor remittances, another significant source of foreign exchange, were approximately $6.7 billion in 2019. President Gotabaya Rajapaksa, who came to power in December 2019, has largely promoted pro-business positions, including announcing tax benefits for new investments to attract foreign direct investment (FDI). The new government’s economic goals, outlined in an election manifesto, include positioning Sri Lanka as an export-oriented economic hub at the center of the Indian Ocean (with government control of strategic assets such as Sri Lankan Airlines), improving trade logistics, attracting export-oriented FDI, and boosting firms’ abilities to compete in global markets. FDI in Sri Lanka has largely been concentrated in tourism, real estate, mixed development projects, ports, and telecommunications in recent years. With a growing middle class, investors also see opportunities in franchising, retail, information technology services, and light manufacturing for the domestic market. The Board of Investment (BOI) is the primary government authority responsible for investment, particularly foreign investment, aiming to provide “one-stop” services for foreign investors. The BOI is committed to facilitating FDI and can offer project incentives, arrange utility services, assist in obtaining resident visas for expatriate personnel, and facilitate import and export clearances. However, Sri Lanka’s import regime is one of the most complex and protectionist in the world. Sri Lanka ranks very poorly on the World Bank’s Doing Business Indicators in a number of areas, including contract enforcement (164 out of 190); paying taxes (142/190); registering property (138/190) and obtaining credit (132/190). Sri Lanka ranks well in protecting minority investors, coming in at 28/190. GDP fell to $84 billion in 2019. The Easter Sunday attacks, together with external shocks and political uncertainty, led to a growth of only 2.3 percent in 2019 with inflation hitting 6.2 percent. FDI, including loans, into Sri Lanka fell to approximately $1.2 billion in 2019, significantly less than the $2.3 billion in 2018, and 2020 is expected to see even lower levels of investment due to concern over Sri Lanka’s worsening financial situation and increased reliance on the People’s Republic of China (PRC). Table 1: Key Metrics and Rankings Measure Year Index/Rank Website Address TI Corruption Perceptions Index 2019 93 of 175 http://www.transparency.org/ research/cpi/overview World Bank’s Doing Business Report 2019 99 of 190 http://www.doingbusiness.org/en/rankings Global Innovation Index 2019 89 of 129 https://www.globalinnovationindex.org/ analysis-indicator U.S. FDI in partner country ($M USD, historical stock positions) 2017 $168.0 million http://apps.bea.gov/international/factsheet/ World Bank GNI per capita 2019 $ 4,020 http://data.worldbank.org/ indicator/NY.GNP.PCAP.CD 1. Openness To, and Restrictions Upon, Foreign Investment Policies Towards Foreign Direct Investment Sri Lanka is a constitutional multiparty republic. In 1978, Sri Lanka began moving away from socialist, protectionist policies and opening up to foreign investment, although changes in government are often accompanied by swings in economic policy. President Gotabaya Rajapaksa, who came to power in December 2019, has largely promoted pro-business positions, including announcing tax benefits for new investments to attract FDI. The new government’s economic goals, outlined in an election manifesto, include positioning Sri Lanka as an export-oriented economic hub at the center of the Indian Ocean (with government control of strategic assets such as Sri Lankan Airlines), improving trade logistics, attracting export-oriented FDI, and boosting firms’ abilities to compete in global markets. The BOI (www.investsrilanka.com ), an autonomous statutory agency, is the primary government authority responsible for investment, particularly foreign investment, with BOI aiming to provide “one-stop” services for foreign investors. BOI’s Single Window Investment Facilitation Taskforce (SWIFT) helps facilitate the investment approvals process and works with other agencies in order to expedite the process. BOI can grant project incentives, arrange utility services, assist in obtaining resident visas for expatriate personnel, and facilitate import and export clearances. There are plans to establish new regulatory authorities, including a separate investment authority. Importers to Sri Lanka face high barriers. According to a World Bank study, Sri Lanka’s import regime is one of the most complex and protectionist in the world. U.S. stakeholders have raised concerns that the government does not adequately consult with the private sector prior to implementing new taxes or regulations – citing the severe import restrictions imposed as a reaction to the COVID-19 as an example. These restrictions, quickly imposed without consulting the private sector, further complicated Sri Lanka’s import regime. Similarly, stakeholders have raised concerns that the government does not allow adequate time to implement new regulations. Additionally, importation of a number of “non-essential” items have been temporarily suspended to curtail foreign exchange outflow as the Sri Lankan Rupee (LKR) depreciated around 10 percent during 2020 and is expected to be under further pressure in the medium term. Sri Lanka is a challenging place to do business, with high transaction costs aggravated by an unpredictable economic policy environment, inefficient delivery of government services, and opaque government procurement practices. Investors noted concerns over the potential for contract repudiation, cronyism, and de facto or de jure expropriation. Public sector corruption is a significant challenge for U.S. firms operating in Sri Lanka and a constraint on foreign investment. While the country generally has adequate laws and regulations to combat corruption, enforcement is weak, inconsistent, and selective. U.S. stakeholders and potential investors expressed particular concern about corruption in large infrastructure projects and in government procurement. The government pledged to address these issues, but the COVID-19 response remains its primary concern. Historically, the main political parties do not pursue corruption cases against each other after gaining or losing political positions. While Sri Lanka is a challenging place for businesses to operate, investors report that starting a business in Sri Lanka is relatively simple and quick, especially when compared to other lower middle-income markets. However, scalability is a problem due to the lack of skilled labor, a relatively small talent pool and constraints on land ownership and use. Investors note that employee retention is generally good in Sri Lanka, but numerous public holidays, a reluctance of employees to work at night, a lack of labor mobility, and difficulty recruiting women decrease efficiency and increase start-up times. A leading international consulting firm claims the primary issue affecting investment is lack of policy consistency. Limits on Foreign Control and Private Ownership Foreign ownership is allowed in most sectors, although foreigners are prohibited from owning land with a few limited exceptions. Foreigners can invest in company shares, debt securities, government securities, and unit trusts. Many investors point to land acquisition as the biggest challenge for starting a new business. Generally, Sri Lanka prohibits the sale of public and private land to foreigners and to enterprises with foreign equity exceeding 50 percent. However, on July 30, 2018, Sri Lanka amended the Land (Restriction of Alienation) Act of 2014 to allow foreign companies listed on the Colombo Stock Exchange (CSE) to acquire land. Foreign companies not listed on the CSE—but engaged in banking, financial, insurance, maritime, aviation, advanced technology, or infrastructure development projects identified and approved as strategic development projects—may also be exempted from restrictions imposed by the Land Act of 2014 on a case-by-case basis. The government owns approximately 80 percent of the land in Sri Lanka, including the land housing most tea, rubber, and coconut plantations, which are leased out, typically on 50-year terms. Private land ownership is limited to fifty acres per person. Although state land for industrial use is usually allotted on a 50-year lease, the government may approve 99-year leases on a case-by-case basis depending on the project. Many land title records were lost or destroyed during the civil war, and significant disputes remain over land ownership, particularly in the North and East. The government has started a program to return property taken by the government during the war to residents in the North and East. The government allows up to 100 percent foreign investment in any commercial, trading, or industrial activity except for the following heavily regulated sectors: air transportation; coastal shipping; large scale mechanized mining of gems; lotteries; manufacture of military hardware, military vehicles, and aircraft; alcohol; toxic, hazardous, or carcinogenic materials; currency; and security documents. However, select strategic sectors, such as railway freight transportation and electricity transmission and distribution, are closed to any foreign capital participation. Foreign investment is also not permitted in the following businesses: pawn brokering; retail trade with a capital investment of less than $5 million; and coastal fishing. Foreign investments in the following areas are restricted to 40 percent ownership: a) production for export of goods subject to international quotas; b) growing and primary processing of tea, rubber, and coconut, c) cocoa, rice, sugar, and spices; d) mining and primary processing of non-renewable national resources, e) timber based industries using local timber, f) deep-sea fishing, g) mass communications, h) education, i) freight forwarding, j) travel services, k) businesses providing shipping services. Foreign ownership in excess of 40 percent can be preapproved on a case-by-case basis by the BOI. In areas where foreign investments are permitted, Sri Lanka treats foreign investors the same as domestic investors. However, corruption reportedly may make it difficult for U.S. firms to compete against foreign bidders not subject to the U.S. Foreign Corrupt Practices Act when competing for public tenders. Business Facilitation The Department of Registrar of Companies (www.drc.gov.lk ) is responsible for business registration. Online registration (http://eroc.drc.gov.lk/ ) was recently introduced and registration averages four to five days. In addition to the Registrar of Companies, businesses must register with the Inland Revenue Department to obtain a taxpayer identification number (TIN) for payment of taxes and with the Department of Labor for social security payments. Outward Investment The government supports outward investment, and the Export Development Board offers subsidies for companies seeking to establish overseas operations, including branch offices related to exports. New outward investment regulations came into effect November 20, 2017. Sri Lankan companies, partnerships, and individuals are permitted to invest in shares, units, debt securities, and sovereign bonds overseas subject to limits specified by the new Foreign Exchange Regulations. Sri Lankan companies are also permitted to establish overseas companies. Investments over the specified limit require the Central Bank Monetary Board’s approval. All investments must be made through outward investment accounts (OIA). All income from investments overseas must be routed through the same OIA within three months of payment. Note: OIA transactions were suspended until January 21 in an attempt to ease pressure on the Sri Lankan rupee. 6. Financial Sector Capital Markets and Portfolio Investment The Securities and Exchange Commission (SEC) governs the CSE, unit trusts, stockbrokers, listed public companies, margin traders, underwriters, investment managers, credit rating agencies, and securities depositories. Foreign portfolio investment is encouraged. Foreign investors can purchase up to 100 percent of equity in Sri Lankan companies in permitted sectors. Investors may open an Inward Investment Account (IIA) with any commercial bank in Sri Lanka to bring in investments. As of August 30, 2020, 289 companies representing 20 business sectors are listed on the CSE. As stock market liquidity is limited, investors need to manage exit strategies carefully. In accordance with its IMF Article VIII obligations, the government and the Central Bank of Sri Lanka (CBSL) generally refrain from restrictions on current international transfers. When the government experiences balance of payments difficulties, it tends to impose controls on foreign exchange transactions. Due to pressures on the balance of payments caused by the COVID-19 economic crisis, Sri Lanka took several measures to restrict imports. In March 2020, CBSL suspended importation of a wide list of non-essential goods and motor vehicles. The import control department also imposed further regulations restricting certain imported food items and instituted a 3-month credit term for importation of certain essential imports. The import restrictions are currently in effect until January 1, 2021. The state consumes over 50 percent of the country’s domestic financial resources and has a virtual monopoly on the management and use of long-term savings. This inhibits the free flow of financial resources to product and factor markets. High budget deficits have caused interest rates to rise and resulted in higher inflation. On a year-to-year basis, inflation was approximately 5.2 percent in April of 2020, and the average prime lending rate was 9.49 percent. Retained profits finance a significant portion of private investment in Sri Lanka with commercial banks as the principal source of bank finance and bank loans as the most widely used credit instrument for the private sector. Large companies also raise funds through corporate debentures. Credit ratings are mandatory for all deposit-taking institutions and all varieties of debt instruments. Local companies are allowed to borrow from foreign sources. FDI finances about 6 percent of overall investment. Foreign investors are allowed to access credit on the local market and are free to raise foreign currency loans. Money and Banking System Sri Lanka has a diversified banking system. There are 25 commercial banks: 13 local and 12 foreign. In addition, there are seven specialized local banks. Citibank N.A. is the only U.S. bank operating in Sri Lanka. Several domestic private commercial banks have substantial government equity acquired through investment agencies controlled by the government. Banking has expanded to rural areas, and by 2019 there were over 2,900 commercial banking outlets and over 5,100 Automated Teller Machines throughout the country. Both resident and non-resident foreign nationals can open foreign currency banking accounts. However, non-resident foreign nationals are not eligible to open Sri Lankan Rupee accounts. CBSL is responsible for supervision of all banking institutions and has driven improvements in banking regulations, provisioning, and public disclosure of banking sector performance. Credit ratings are mandatory for all banks. CBSL introduced accounting standards corresponding to International Financial Reporting Standards for banks on January 1, 2018, and the application of the standards substantially increased impairment provisions on loans. The migration to the Basel III capital standards began in July of 2017 on a staggered basis, with full implementation was kicking in on January 1, 2019 and some banks having had to boost capital to meet full implementation of Basel III requirements. In addition, banks must increase capital to meet CBSL’s new minimum capital requirements deadline, which is set for December 31, 2022 although a staggered application of capital provisions for smaller banks unable to meet capital requirements immediately will likely be allowed Total assets of commercial banks stood at LKR 10,944 billion ($59 billion) as of December 31, 2019. The two fully state-owned commercial banks – Bank of Ceylon and People’s Bank – are significant players, accounting for about 33 percent of all banking assets. The Bank of Ceylon currently holds a non-performing loan (NPL) ratio of 5.35 percent (up from 4.79 percent in 2019). The People’s Bank currently holds a NPL ratio of 4.79 percent (up from 3.68 percent in 2019). Both banks have significant exposure to SOEs but, these banks are implicitly guaranteed by the state. In October 2019 Sri Lanka was removed from the Financial Action Task Force (FATF) gray list after making significant changes to its Anti-Money Laundering/Countering the Finance of Terrorism (AML/CFT) laws. CBSL is exploring the adoption of blockchain technologies in its financial transactions and appointed two committees to look into the possible adoption of blockchain and cryptocurrencies. Sri Lanka has as rapidly growing alternative financial services industry which includes finance companies, leasing companies, and microfinance institutes. In response, CBSL has established an enforcement unit to strengthen the regulatory and supervisory framework of non-banking financial institutions. Credit ratings are mandatory for finance companies as of October 1, 2018. The government also directed banks to register with the U.S. Internal Revenue Service (IRS) to comply with the U.S. Foreign Accounts Tax Compliance Act (FATCA). Almost all commercial banks have registered with the IRS. Foreign Exchange and Remittances Foreign Exchange Sri Lanka generally has investor-friendly conversion and transfer policies. Companies say they can repatriate funds relatively easily. In accordance with its Article VIII obligations as a member of the IMF, Sri Lanka liberalized exchange controls on current account transactions in 1994 and, in 2010-2012, the government relaxed exchange controls on several categories of capital account transactions. A new Foreign Exchange Act, No. 12 of 2017, came into operation on November 20, 2017 and further liberalized capital account transactions to simplify current account transactions. Foreign investors are required to open Inward Investment Accounts (IIA) to transfer funds required for capital investments but there are no restrictions or limitations placed on foreign investors in converting, transferring, or repatriating funds associated with an investment through an IIA in any foreign currency designated by CBSL. Remittance Policies No barriers exist, legal or otherwise, to remittance of corporate profits and dividends for foreign enterprises since 2017 when Sri Lanka relaxed investment remittance policies with the new Foreign Exchange Act. Remittances are done through IIAs. There are no waiting periods for remitting investment returns, interest, and principal on private foreign debt, lease payments, royalties, and management fees provided there is sufficient evidence to prove the originally invested funds were remitted into the country through legal channels. Exporters must repatriate export proceeds within 120 days. Sovereign Wealth Funds Sri Lanka does not have a sovereign wealth fund. The government manages and controls large retirement funds from private sector employees and uses these funds for budgetary purposes (through investments in government securities), stock market investments, and corporate debenture investments. 7. State-Owned Enterprises SOEs are active in transport (buses and railways, ports and airport management, airline operations); utilities such as electricity; petroleum imports and refining; water supply; retail; banking; telecommunications; television and radio broadcasting; newspaper publishing; and insurance. Following the end of the civil war in 2009, Sri Lankan armed forces began operating domestic air services, tourist resorts, and farms crowding out some private investment. In total, there are over 400 SOEs of which 55 have been identified by the Sri Lanka Treasury as strategically important, and 345 have been identified as non-commercial. Privatization Program The government is currently selling non-strategic SOEs. Several attempts to sell the government’s stake in the heavily indebted national carrier, Sri Lankan Airlines, were not successful. The government is also seeking to improve the efficiency of SOEs through private sector management practices and is looking to list SOEs on the Colombo Stock Exchange and partially privatize non-strategic SOEs. However, the government does not always follow an open bidding process when selling outside the stock exchange. For instance, in the case of the sale of the Hambantota Port in 2017, the government allowed a PRC company to secure the deal without an open bidding process. SOE labor unions and opposition political parties often oppose privatization and are particularly averse to foreign ownership. Privatization through the sale of shares in the stock market is likely to be less problematic. 9. Corruption While Sri Lanka has adequate laws and regulations to combat corruption, enforcement is reportedly often weak and inconsistent. U.S. firms identify corruption as a major constraint on foreign investment, but generally not a major threat to operating in Sri Lanka once contracts have been established. The business community claims that corruption has the greatest effect on investors in large projects and on those pursuing government procurement contracts. Projects geared toward exports face fewer problems. A Right to Information Act came into effect in February of 2017 which increased government transparency. The Commission to Investigate Allegations of Bribery or Corruption (CIABOC or Bribery Commission) is the main body responsible for investigating bribery allegations, but it is widely considered ineffective and has reportedly made little progress pursuing cases of national significance. The law states that a public official’s offer or acceptance of a bribe constitutes a criminal offense and carries a maximum sentence of seven years imprisonment and fine. Bribery laws extend to family members of public officials, but political parties are not covered. A bribe by a local company to a foreign official is also not covered by the Bribery Act and the government does not require private companies to establish internal codes of conduct that prohibit bribery of public officials. Thus far, the Bribery Commission has focused on minor cases such as bribes taken by traffic police, wildlife officers, and school principals. These cases reportedly follow a pattern of targeting low-level offenses with prosecutions years after the offense followed by the imposition of sentences disproportionate to the conduct (i.e. overly strict or overly lenient). Government procurement regulations contain provisions on conflicts-of-interest in awarding contracts or government procurement. While financial crime investigators have developed a number of cases involving the misappropriation of government funds, these cases have often not moved forward due to lack of political will, political interference, and lack of investigative capacity. Sri Lanka signed and ratified the UN Convention against Corruption in March of 2004. Sri Lanka signed and ratified the UN Convention against Transnational Organized Crime in 2006. Sri Lanka is a signatory to the OECD-ADB Anti-Corruption Regional Plan but has not joined the OECD Anti-Bribery Convention. Resources to Report Corruption Contact at government agency responsible for combating corruption: Commission to Investigate Allegations of Bribery or Corruption No 36, Malalasekara Mawatha, Colombo 7 T+94 112 596360 / 2595039 M+94 767011954 Email: firstname.lastname@example.org or email@example.com Contact at “watchdog” organization: Transparency International, Sri Lanka 5/1 Elibank Road Colombo 5 Phone: 94-11- 4369783 Email: firstname.lastname@example.org 10. Political and Security Environment The government’s military campaign against the Liberation Tigers of Tamil Eelam (LTTE) ended in May 2009 with the defeat of the LTTE. During the civil war, the LTTE had a history of attacks against civilians, although none of the attacks were directed against U.S. citizens. On April 21, 2019, terrorist attacks targeted several churches and hotels throughout Colombo and in the eastern city of Batticaloa, killing more than 250 people, including over 40 foreigners. In the aftermath of the attacks, the government imposed nationwide curfews and a temporary ban on some social media outlets. Following his election in November 2019, President Gotabaya Rajapaksa announced major tax cuts as part of a pro-growth strategy. The outbreak of COVID-19 shortly after the dissolution of Parliament in March delayed Parliamentary elections until August of 2020. During the August elections, President Rajapaksa’s party secured a commanding two thirds majority in parliament. Demonstrations occasionally take place in response to world events or local developments. Demonstrations near Western embassies are not uncommon but have been well-contained with support from the Sri Lankan police and military. Business-related Violence Business related violence is not common and has little impact on the investment environment. Sudan Executive Summary After many months of popular protests, the 30-year regime of Omar Bashir came to an end in April 2019. A civilian-led transitional government (CLTG) took power in September 2019, with a mandate to establish political institutions and hold elections within 39 months. Severe economic problems, namely rising bread and fuel prices, drove the 2018-19 protests. These problems persist, partially due to infrastructure and transport deficiencies but also due to decades of mismanagement, corruption, and economic practices of the former regime. Although the lifting of the comprehensive U.S. economic sanctions regime in late 2017 allowed international banks to offer services that were restricted for years due to the embargo, financial institutions have maintained a guarded approach in engaging with Sudan. Sudan’s designation as a state sponsor of terrorism (SST) is one reason financial institutions do not provide services even though the United States no longer prohibits private companies from doing business in Sudan. This has hampered the ability to conduct international money transfers and payments through banking institutions. Consequently, banking, financial, and transaction services are often expensive and time consuming for the public and private sectors due to a need to find alternative means to make payments. The parallel market is a significant economic factor as the disparity between the parallel exchange rate (130 SDG:1 USD) and the official exchange rate (55:1) remains despite Ministry of Finance and Central Bank of Sudan efforts to unify the two rates. Efforts to remove fuel subsidies, which would free up close to 150 billion Sudanese pounds (USD 2.8 billion), were delayed because of a lack of support from the Forces for Freedom and Change (FFC), a major political coalition. However, the CLTG has already taken measures by opening up gas stations that sell at the commercial rate. Before the novel coronavirus pandemic (COVID-19) considerably slowed economic and commercial activity globally, American companies inquired and visited Sudan with a view to foreign direct investment and promotion of U.S. products. There has been robust demand for U.S. goods, services, technology, and training/capacity programs, particularly in the fields of agriculture, energy, and medicine. Some foreign companies, particularly those involved in port operations and logistics, informed the Embassy that the CLTG has been slow to repay contracts that were cancelled prior to its establishment. One company fronted USD 400 million for a deal that was later cancelled by interim military authorities in 2019. The government still has an outstanding balance of USD 200 million, although it has repeatedly expressed its intention to repay the balance. The former Ministry of Investment has been placed under the authority of the Ministry of Finance and Economic Planning. This move aims to harmonize coordination and consolidate economic policy in response to criticisms of the lack of communication between the two entities, as well as contradictory policies. Sudan has continued to be an attractive market for U.S.-manufactured agricultural machinery such as tractors and pivot irrigation systems, and for seeds. Sudan’s major dairies began purchasing thousands of American-breed dairy cattle in the past few years. Medicine and medical equipment as well as a variety of academic services remain in high demand; however, activities in these areas are minimal due to the difficulty in executing financial transactions with Sudan. Historical challenges in obtaining medicines and medical equipment became clear during the COVID-19 pandemic. Banking and financial services companies have increasingly began taking interest in Sudan. Oracle and Visa recently executed deals allowing local banks to access their banking technologies and payment systems. Lack of transparency and corruption remain reasons American and Sudanese businesses alike should use caution when pursuing permissible commercial activity. Table 1: Key Metrics and Rankings Measure Year Index/Rank Website Address TI Corruption Perceptions Index 2020 173 of 180 https://www.transparency.org/cpi2019 World Bank’s Doing Business Report 2019 171 of 190 http://www.doingbusiness.org/en/rankings Global Innovation Index 2019 N/A https://www.globalinnovationindex.org/ analysis-indicator U.S. FDI in partner country ($M USD, historical stock positions) 2018 USD 0 https://apps.bea.gov/international/factsheet/ World Bank GNI per capita 2018 USD 1,560 https://data.worldbank.org/ indicator/NY.GNP.PCAP.CD?locations=SD 1. Openness To, and Restrictions Upon, Foreign Investment Policies Towards Foreign Direct Investment Pursuant to Executive Order 13761, section 908(a)(1) of the Trade Sanctions Reform Act (TSRA) (22 U.S.C. 7297(a)(1)) has been waived with respect to Sudan. That waiver removed restrictions on export assistance that limited U.S. Embassy Khartoum’s ability to provide the kind of support that the Embassy and the Foreign Commercial Service typically provided, including: business matchmaking services, market research on specific products or services, export advocacy, and provision of information concerning business opportunities. See, e.g., 15 U.S.C. 4721. American investors interested in understanding more about the 2017 lifting of U.S. sanctions on Sudan are encouraged to visit the U.S. Department of the Treasury’s website: https://www.treasury.gov/resource-center/sanctions/Programs/pages/sudan.aspx U.S. businesses should be aware that investors could face difficulties in transferring money to Sudan as international financial entities continue to exercise extreme caution in processing transactions. Their caution could be related to Sudan’s designation as a state sponsor of terrorism or because international financial entities are taking time to complete due diligence or considering the practicality of absorbing the high costs of accessing the Sudan market because of Sudan’s long absence from international banking. Those who decide to pursue permissible commercial activity should be advised that U.S. banking institutions are independent entities and neither the U.S. government nor the Embassy can direct their business decisions. Sudan is becoming a large market for a variety of U.S. agricultural harvesting equipment and inputs. Sudanese farmers represent a significant source of demand for new seeds adaptable to Sudan’s hot and dry climate. Currently, about 20 million hectares are under cultivation in Sudan; however, 84 million hectares are suitable for agriculture. Rain-fed traditional farming practices continue to dominate, but large-scale mechanized farming is growing, especially along the Nile River and its tributaries. There is a robust market for American-manufactured pivot irrigation systems, water pumps, and well-drilling equipment. Sudan’s major dairies began buying thousands of American-breed dairy cattle in the past five years. Sudan has a formal private sector, led by several business associations, one of which (U.S.-Sudan Business Council) is working with the U.S. Chamber of Commerce. These business groups are dominated by a number of large, often family-owned industrial, agricultural, and consumer products conglomerates. Many Sudanese corporate leaders studied in the United States and Europe and are fluent in English. Sudan presents one of the most challenging business environments in the world for potential investors. Sudan received a lower ranking from 162 (2019) to 171 out of 190 countries in the 2020 World Bank-International Financial Corporation’s “Doing Business Report – Ease of Doing Business.” Sudan is ranked 173 of 180 countries on Transparency International’s 2019 Corruptions Perception Index, tied in ranking with Afghanistan and Venezuela. Sudan is ranked 168 out of 188 countries in the 2019 UN Human Development Index (HDI), just ahead of Haiti and Afghanistan. An estimated 47 percent of Sudan’s population live below the national poverty line, according to the HDI. Political risk remains a concern. Sustained popular protests over several months put an end to the 30-year rule of Omar Bashir in April 2019. The CLTG assumed power in September 2019 and will have 39 months to implement the priorities set out in the constitutional declaration (signed August 17), including formation of a Transitional Legislative Council, appointment of civilian state governors, and holding new elections. However, the military remains a strong force in the transitional government, chairing the Sovereign Council and maintaining decision making power over defense and security institutions. The CLTG is currently negotiating with armed groups in Darfur and in the “Two Areas” of South Kordofan and Blue Nile States and with non-armed groups in northern, eastern, and central Sudan to bring an end to those conflicts. Sudan and South Sudan have yet to demarcate their common border and continue to dispute the sovereignty of the territory of Abyei. Armed UN peacekeeping missions (UNAMID and UNISFA) are located in Darfur and Abyei. International air service to Khartoum is limited. Egypt Air, Ethiopian Airlines, Kenyan Airways, Saudi Airlines, Turkish Airways, and several Emirati carriers (Etihad, Emirates, Fly Dubai, and Air Arabia) are among the major carriers that serve Khartoum. No American carrier currently flies to Sudan. Two private domestic airlines, Badr and Tarco, reliably service Khartoum, Port Sudan, and other sizable Sudanese cities. In response to the loss of oil production and revenue following the secession of South Sudan in 2011, the CLTG has attempted to recover revenues by expanding existing oil and gas production, increasing mining operations (particularly gold mining), and expanding the agricultural and livestock sectors that had been the mainstay of the Sudanese economy prior to the advent of crude oil exports in 2000. Current oil production is estimated at less than 60,000 barrels per day (bpd). Challenges the oil industry face include insecurity near oil fields, antiquated drilling equipment and oil wells, and lack of access to the latest technology. According to the Public Authority for Geological Research, Sudan’s confirmed gold reserves amount to 533 tons, and only 20 percent of Sudan’s land is being exploited for gold. The U.S. Geological Survey (USGS) reports that 105 tons of gold, 1.9 million tons of zinc, 500,000 tons of copper, and 4,500 tons of silver are located in the Red Sea Hills in northeastern Sudan. The Gum Arabic Council reported that formal gum Arabic exports in 2018 amounted to 75,000 tons, while informal exports accounted for another 30,000 tons. Sudan, the largest exporter of crude gum Arabic, accounts for over two-thirds of the global market. Production of sorghum and millet in 2019 was reportedly 36 percent below the record 2018 output of 14 million tons, according to the Ministry of Agriculture and Natural Resources. Wheat production in 2019 was roughly 600 million tons and is expected to double in 2020. Sudan has 166 million heads of livestock, according to the UN Food and Agriculture Organization (FAO). Limits on Foreign Control and Right to Private Ownership and Establishment Despite the legal protections guaranteed under the National Investment Encouragement Act of 2013, there are foreign investment restrictions in the transportation sector, specifically in railway, freight transportation, inland waterways barge service, and airport operations. Most telecommunications and media, including television broadcasting and newspaper publishing, are closed to foreign capital participation. Foreign ownership is also restricted in the electrical power generation and financial services sectors. In addition to those overt statutory ownership restrictions, a comparatively large number of sectors are dominated by government monopolies, including those mentioned above. Such monopolies, together with a high perceived difficulty of obtaining required operating licenses, make it more difficult for foreign companies to invest. Other Investment Policy Reviews Sudan has not undergone any third-party investment policy reviews (IPR) through the Organization of Economic Cooperation and Development (OECD), the World Trade Organization (WTO), or the UN Conference on Trade and Development (UNCTAD) in the last five years. UNCTAD’s last IPR of Sudan was in 2015. The last International Monetary Fund (IMF) Article IV Executive Board Consultation was on February 21, 2020. The IMF concluded that regime change “created a window of opportunity for fundamental reforms to address major macro imbalances and lay the groundwork for inclusive growth.” The IMF noted there exists broad agreement between the government and the IMF about Sudan’s reform priorities but found “the authorities have yet to put together a fully coherent and viable plan that enjoys broad public support and can plausibly attract adequate donor financing.” https://www.imf.org/en/Publications/CR/Issues/2020/03/10/Sudan-2019-Article-IV-Consultation-Press-Release-Staff-Report-and-Statement-by-the-Executive-49254 . The World Bank and IMF provide technical assistance to Sudan. World Bank projects in Sudan total USD 181 million. https://www.worldbank.org/en/country/sudan/overview#2 . Facing a severe foreign exchange reserves shortage, the CLTG tightened conversion and transfer policies. Domestic businesses have no assurance of obtaining needed levels of foreign currency for international transactions. The transitional civilian government strictly controls incoming hard currency from exports and business owners wishing to retrieve cash can only make withdrawals denominated in Sudanese pounds at the time of this report. Foreign companies operating in Sudan must have the Central Bank of Sudan’s permission to repatriate profits and foreign currency. The Investment Act of 2013 enshrines the right to repatriate capital and profits, provided the investor has opened an investment account at the Central Bank of Sudan before entering into business. To avoid banking delays, many Sudanese firms complete a significant amount of transactions outside of official channels or complete transactions abroad in U.S. Dollars, Euros, Riyals, or Dirhams. Whether or not the government will revise its practices to ensure a steady stream of foreign exchange once international correspondent banking resumes remains to be seen. The Investment Act also established courts to handle investment issues and disputes. The gap between the black market and official exchange rates has widened since publication of the previous report. The official rate set by the government is 55:1, while the parallel market rate has reached 130:1 (as of May 1, 2020). The government increased the official rate to 55:1 in March 2020 in an effort to unify exchange rates. Nonetheless, this divergence adds to the difficulty and complexity of settling accounts and repatriating profits and foreign exchange. While Sudanese and foreigners are permitted to hold foreign currency accounts in private commercial banks, access to the currency can be delayed and/or limited without prior notification. Individuals and businesses often resort to obtaining hard currency on the black market. Local businesses may avoid holding significant cash in domestic deposit accounts altogether. Sudan’s inflation rate as of March 2020 was 81 percent, up from 71 percent in February and 64 percent in January. The rise in inflation has been attributed to price increases of food commodities, devaluation of the Sudanese currency, and shrinking imports. Business Facilitation According to UNCTAD, Sudan has put in place a relatively open investment legislative framework and many laws are in line with good practices. However, their implementation is often impeded by the absence of secondary legislation, insufficient institutional capacity, and lack of coordination between different levels of government. https://investmentpolicy.unctad.org/investment-policy-review/205/sudan Sudan’s investment authority lists the process by which businesses must register to operate at: http://www.sudaninvest.org/English/Default.htm . The website outlines procedures for companies that wish to invest, including forming and ending relationships and license applications. There is no online business registration process. Outward Investment Sudan tasks its investment authority with facilitating local and foreign investments. Some U.S. companies have sent exploratory teams to Sudan to test the waters and its investment climate. The host government has given warm receptions to U.S. investors, although some existing investors expressed concern about lack of payment for certain contracts signed prior to the CLTG. Sudan does not restrict domestic investors from investing abroad. http://www.sudaninvest.org/English/Invest-Services.htm 6. Financial Sector Capital Markets and Portfolio Investment Sudan has a stock market (KSE) which is located in Khartoum. The KSE has over 60 companies (http://www.kse.com.sd/ ) that include Sudanese Animal Resources Company, Financial Investment Bank, and Blue Nile Insurance. Since 2018, there have been two more companies listed in the Industry sector, 11 more companies listed in the Investment and Development sector, and four more companies listed in the Telecom and Media sectors. The total market value of all sectors is currently listed as 8,684,351,734,000 SDG (USD 157,897,304,255). http://www.kse.com.sd/Pages/default.aspx?c=550&sid=1 Money and Banking System Historically, Sudan has not had access to international banking institutions as it was under comprehensive U.S. economic and financial sanctions until late 2017. Despite lifting of these comprehensive sanctions, international banks remain wary of operating in Sudan due to reputation risk associated with Sudan’s continued designation as a state sponsor of terrorism. Most foreign banks operating in Sudan are based in Gulf states, such as Saudi Arabia, United Arab Emirates, or Qatar. Sudan faces a monetary crisis, with limited foreign exchange and a significant currency black market. The Central Bank of Sudan lists banks operating in Sudan at: https://cbos.gov.sd/en/content/operating-banks-sudan Foreign Exchange and Remittances Foreign Exchange Remittances come into Sudan via the informal market. International banking institutions have not begun transactions with Sudan although U.S. financial sanctions have been lifted. Foreign investors should be aware that they might face problems making or receiving payments. The exchange rate is determined by the Central Bank and the Ministry of Finance. The official exchange rate does not float with the international markets. However, the vast majority of transactions in Sudan are determined by the parallel market rate (130 SDG: 1 USD), currently at more than double the official rate (55 SDG: 1 USD). Sovereign Wealth Funds Sudan has a sovereign wealth fund called the Oil Revenue Stabilization Account, established in 2008. The Natural Resource Governance Institute (NRGI) ranked it 32 out of 34 funds in its 2017 Resource Governance Index. https://resourcegovernanceindex.org/country-profiles/SDN/oil-gas . 7. State-Owned Enterprises The exact number of state-owned enterprises is unknown, although government officials acknowledge that the defense and security agencies may control over 100 companies. The NRGI ranked the state-owned Sudanese Petroleum Corporation (SPC) 69 out of 84 SOEs in its 2017 Resource Governance Index. NRGI assessed that though the SPC discloses sufficient information about joint ventures and subsidiaries, it is opaque in its commodity sales, production, and government transfers. Other areas for improvement included financial reporting and corporate governance. https://resourcegovernanceindex.org/country-profiles/SDN/oil-gas . 9. Corruption The law provides criminal penalties for corruption by officials; nevertheless, government corruption at all levels was widespread. The Bashir regime made a few efforts to enforce legislation aimed at preventing and prosecuting corruption. According to the World Bank’s most recent Worldwide Governance Indicators, corruption was a severe problem. The law provides the legislative framework for addressing official corruption, but implementation under the Bashir regime was weak, and many punishments were lenient. Officials found guilty of corrupt acts could often avoid jail time if they returned ill-gotten funds. Under the Bashir regime, journalists who reported on government corruption were sometimes intimidated, detained, and interrogated by security services. A special anticorruption attorney investigated and prosecuted corruption cases involving officials, their spouses, and their children. Punishments for embezzlement include imprisonment or execution for public service workers, although these were almost never carried out. All bank employees were considered public-service workers. Under the Bashir regime, media reporting on corruption was considered a “red line” set by the National Intelligence and Security Services (NISS) and a topic that authorities, for the most part, prohibited newspapers from covering (see section 2.a. of link below). While reporting on corruption was no longer a red line under the CLTG, media continued to practice self-censorship on issues related to corruption. In August 2019, Omar Bashir was formally indicted on charges of corruption and illegal possession of foreign currency. Bashir’s trial began in August 2019; in December 2019, he was convicted and sentenced to two years’ imprisonment on these charges. Other more serious charges are pending. Financial Disclosure: Under the Bashir regime, the law required high-ranking officials to publicly disclose income and assets. There were no clear sanctions for noncompliance, although the former Anti-Corruption Commission possessed discretionary powers to punish violators. The Financial Disclosure and Inspection Committee and the Unlawful and Suspicious Enrichment Administration at the Ministry of Justice both monitored compliance. Despite three different bodies ostensibly charged with monitoring financial disclosure regulations, there was no effective enforcement or prosecution of offenders. The 2019 constitutional declaration includes financial disclosure and prohibition of commercial activity provisions for members of the Sovereign Council and Council of Ministers, state and regional governors, and members of the Transitional Legislative Council. It also mandates an Anti-Corruption and Restoration of Stolen Wealth Commission. https://www.state.gov/reports/2019-country-reports-on-human-rights-practices/sudan/ Resources to Report Corruption Wajdi Salih Spokesperson High Anti-Corruption and Regime Dismantling Committee +249 (0)91-235-2485 Shaza Elmahdi Consultant on Sudan Center for International Private Enterprise 1211 Connecticut Avenue NW, Suite 700, Washington, D.C. 20036 +1 202-721-9200 email@example.com 10. Political and Security Environment While there have been civil disturbances and political violence associated with the protests against the Bashir regime and the declining economy, damage to property has not been directed specifically at U.S. business interests. The 30-year Bashir regime was ousted in April 2019 after months of massive protests against the deteriorating economic situation. After brief rule by the Transitional Military Council (TMC), the constitutional declaration was signed in August 2019, and the CLTG led by Prime Minister Abdalla Hamdok took office in September 2019. This transitional government has a 39-month mandate to establish basic democratic institutions and hold elections. Despite government efforts to resolve high inflation, exchange rate disparities, and fuel and bread shortages, these issues remain concerns and potential investors should take note. Suriname Executive Summary The Government of Suriname (GOS) officially supports and encourages business development through local and foreign investment. The overall investment climate favors U.S. investors with experience working in developing countries. To attract foreign direct investment (FDI), authorities have planned to update institutional and legal frameworks to protect investors and eliminate restrictions regarding investment income transfers and control related FDI flows. However, the World Trade Organization’s 2019 Trade Policy Review concluded that Suriname’s investment regime has not changed since its last review in 2013. The report states that the overall regime, particularly the approval of FDI, may be discretionary rather than rules-based. The extractives sector has historically attracted significant foreign direct investment, but numerous factors negatively impact the investment climate as a whole. These factors include an unclear process for awarding concessions and public tenders, corruption, institutional capacity constraints, and a lack of overall transparency. Suriname joined the Extractive Industries Transparency Initiative (EITI) in May 2017, but failed to publish its first report and was suspended as of February 2019. The EITI Board reinstated Suriname after it completed its first report in May 2019. Suriname submitted its second report on time, in December 2019. In January 2020, Apache and Total announced a “significant oil discovery” off the coast of Suriname, followed by a similar discovery in April 2020. Experts estimate that it will take 5-10 years to begin offshore oil production, assuming world oil prices support it. The CEO of state-owned oil company Staatsolie estimates that the government of Suriname could earn $10-$15 billion over the course of 20 years if production reaches similar levels as in neighboring Guyana. U.S.-based Newmont Corporation and Canadian-based IAMGOLD – the two major multinational gold companies in Suriname – expect to produce similar amounts of gold in 2020 as in 2019. On several occasions, local media have reported that Surinamese officials have explored selling a variety of Suriname’s gold and petroleum interests to foreign investors, including the China National Offshore Oil Corporation (CNOOC). Although the government has indicated that such talks have taken place, Suriname did not sell any of its interests in offshore oil or gold production. Public debt has increased. The government’s debt burden reached 75 percent of gross domestic product (GDP) in 2019, up from 43 percent in 2015. In November 2019, the National Assembly raised the country’s debt ceiling from 60 percent of GDP to 95 percent of GDP. In December 2019, Suriname completed a $125 million sovereign bond offering that allowed the government to take ownership of the Afobaka Hydroelectric Dam. In February 2020, the government admitted that it had taken $197 million from the Central Bank for imports, debt payments, and other unspecified purposes. The money came from term deposits and commercial banks’ foreign currency cash reserves, and was reportedly used without their permission or knowledge. The value of the Surinamese dollar has decreased, foreign currency reserves have fallen, and prices on consumer goods have risen. These developments led to a series of downgrades from international credit rating agencies. In January, Fitch downgraded Suriname’s Long-Term Foreign Currency Issuer Default Rating from B- to CCC. In April, Standard & Poor lowered Suriname’s long-term sovereign credit rating from B+ to CCC+, while Moody’s changed its outlook on Suriname from stable to negative. Table 1: Key Metrics and Rankings Measure Year Index/Rank Website Address TI Corruption Perceptions Index 2019 70/180 http://www.transparency.org/ research/cpi/overview World Bank’s Doing Business Report 2019 162/190 http://www.doingbusiness.org/en/rankings Global Innovation Index 2019 N/A https://www.globalinnovationindex.org/ analysis-indicator U.S. FDI in partner country ($M USD, historical stock positions) 2018 N/A http://apps.bea.gov/ international/factsheet/ World Bank GNI per capita 2018 $13,820 http://data.worldbank.org/ indicator/NY.GNP.PCAP.CD 1. Openness To, and Restrictions Upon, Foreign Investment Policies Towards Foreign Direct Investment The Government of Suriname (GOS) officially supports and encourages business development through foreign and local investment. The overall investment climate favors U.S. investors with experience working in developing countries. Investment opportunities exist in mining, agriculture, oil and gas sector, timber, fishing, financial technology, and tourism. With the exception of petroleum, Suriname has no sector-specific laws or practices that discriminate against foreign investors, including U.S. investors, by prohibiting, limiting or conditioning foreign investment. In the oil sector, the state oil company, Staatsolie, maintains sole ownership of all oil-related activities. Foreign investment is possible through exploration and product sharing agreements with Staatsolie. Staatsolie executes oil exploration agreements with foreign firms through a fair and competitive bidding process. Six U.S. companies operate in Surinamese waters, as well eight firms from other countries. InvestSur is Suriname’s official investment agency. It officially launched in 2018, and its mission is to be the first and primary contact for potential investors, to promote Surinamese exports, and to increase FDI in Suriname. Its staff and its activities are limited. In February 2020, InvestSur received a $10 million loan as part of a program from the Inter-American Development Bank (IDB). According to the IDB, the objectives of the program are to strengthen the capacity of InvestSur, enhance awareness about the Suriname brand, and support exporters and connect local suppliers with investors. Suriname does not have a formal business roundtable or ombudsman aimed at investment retention or maintaining an ongoing dialogue with investors. Limits on Foreign Control and Right to Private Ownership and Establishment Foreign and domestic private entities can establish and own business enterprises and engage in all forms of remunerative activity. There are no general limits on foreign ownership or control – statutory, de facto, or otherwise. No law requires that domestic nationals own a minimum percentage of domestic companies or that foreign nationals hold seats on the board. No law caps or reduces the percentage of foreign ownership of any private business enterprise. Except for petroleum, there are no sector-specific restrictions applied to foreign ownership and control. Within the petroleum sector, the law limits ownership to Staatsolie, the state-owned oil company, which maintains sole ownership of all petroleum-related activities. Caribbean Single Market and Economy (CSME) countries do enjoy favored status over other sources of foreign investment, but in practice international firms from beyond the CSME are not denied investment opportunities. An Economic Partnership Agreement (EPA) with the European Union aims to provide European companies better access to Suriname. Suriname has not yet ratified the EPA. Government ministries screen inbound foreign investments intended for the sector of the economy that they oversee. Special commissions screen all necessary legal and financial documents. Screening criteria vary, but are intended to determine a proposed investment’s compliance with local law. The screening process is neither public nor transparent, and therefore could be considered a barrier to investment. One stated goal of InvestSur is to make this process more transparent and to standardize screening for investments. There is no indication that U.S. investors are especially disadvantaged or singled out by any of the ownership or control mechanisms, sector restrictions, or investment screening mechanisms, relative to other foreign investors. Other Investment Policy Reviews The World Trade Organization (WTO) conducted an investment policy review of Suriname in 2019: https://www.wto.org/english/tratop_e/tpr_e/tp491_e.htm The Inter-American Development Bank published a report called Framework for Private Development in Suriname in 2013.The World Bank Group published Suriname Sector Competitiveness Analysis, focusing on the agribusiness and extractive sectors in 2017. Business Facilitation Legislation has been drafted on competition policy, limited liability company formation, electronic gazettes to reduce company startup costs, intellectual property, consumer protection, electronic transactions, and establishing a secured transaction framework. However, these laws are still pending. The Ministry of Trade, Industry, and Tourism stated that privacy legislation, tourism law, and intellectual property rights were a top priority to get approved before national elections in May 25. However, the National Assembly did not take up those matters. A draft law regarding government procurement is with parliament for discussion. In 2017, parliament adopted new legislation regarding financial statements and reduction of licensed professions. The authorities also plan to implement procedural reforms to streamline cross-border trade. In November 2018, the government passed legislation to establish a Center for Innovation and Productivity. The center is envisioned to collaborate between trade unions, employers, and the government to promote local production and export. In February 2019, the government created a National Training Authority to implement continuing education programs based on input from the private sector. The World Bank’s Doing Business report indicates starting a business requires 66 days. The local Chamber of Commerce and Industry states it can take as little as 30 days. There is no online registration system. Companies must register with the local Chamber of Commerce and Industry, which provides guidance on registration procedures. At the time of registration, the company needs a local notary’s assent to ratify the company bylaws. For non-residents, the notary also sends a request to the Foreign Exchange Commission for approval. Applicants must obtain a tax number at the registration office of the tax department. Applications then go to the Ministry of Justice and Police and finally to the President for approval. The Ministry of Trade, Industry and Tourism launched the Suriname Electronic Single Window (SESW) in September 2019. Online submission and processing of documents required for import, transit of goods, and export is now possible. Outward Investment The Government does not promote or incentivize outward investment. Suriname’s outward investment is negligible. The GOS does not restrict domestic investors from investing abroad, but there are no specific mechanisms in place to promote the practice. Due to the small size of the local market, some domestic companies have expanded to CARICOM member states, such as Guyana and Trinidad. 6. Financial Sector Capital Markets and Portfolio Investment The government does not promote portfolio investment. There is a small self-regulating stock market with eleven companies registered. It meets twice a month but does not have an electronic exchange. There is no effective regulatory system to encourage and facilitate portfolio investment. At present, Suriname is facing liquidity shortfalls. Sufficient policies do exist to facilitate the free flow of financial resources. As an IMF Article VIII member, Suriname has agreed to refrain from restrictions on payments and transfers for current international transactions. Credit is allocated on market terms and at market rates. Foreign investors that establish businesses in Suriname are able to get credit on the local market, usually with a payment guarantee from the parent company. The private sector has access to a variety of credit instruments. Larger companies can obtain customized credit products. There is, however, a Central Bank regulation that limits a commercial bank’s credit exposure to a single client. Money and Banking System. The private sector has access to a variety of credit instruments. Larger companies can obtain customized credit products. According to the IMF Article IV Consultation in 2019, the banking system faces pressing vulnerabilities. Based on the latest (July 2019) data, the capital adequacy ratio for the banking system stood at 10.5 percent (above the 10 percent minimum requirement), but non-performing loans in the banking system remained high (12.5 percent of gross loans), and profitability was low (0.7 percent return on assets). Deposit and loan dollarization remain high. Total estimated assets of Suriname’s largest banks: DSB Bank (annual report, 2018): USD 1,007 billion Hakrin Bank (annual report 28, 2018): USD 627.6. million Republic Bank Limited (2019 annual report, Suriname-based assets): USD 473 million. (The Republic Bank Limited of Trinidad and Tobago acquired Royal Bank of Canada’s Suriname holdings in 2015.) Finabank (annual report, 2018): $269 million. Suriname has a central bank system Foreign banks or branches are allowed to establish operations in Suriname. They are subject to the same measures and regulations as local banks. According to an IMF assessment in 2016, banks in Suriname are among those in the region that have lost their correspondent relationships. The IMF notes that though the loss of correspondent banking relationships has not reached systemic proportions, a critical risk still exists. The Central Bank admits that compliance regarding legislation and procedures is lacking, and that strengthening of enforcement is needed. According to the IMF’s Article IV Consultation report in 2019, there is a possibility of losing corresponding banking relationships given recent overseas investigations of potential money laundering via Suriname’s financial sector. The reputational risk to both local and foreign banks acting as their correspondents is substantial. Suriname is in the process of completing a National Risk Assessment to identify and assess the money laundering risks. There are no restrictions for foreigners to open a bank account. Banks require U.S. citizens to provide the information necessary to comply with the Foreign Accounts Tax Compliance Act (FATCA). Foreign Exchange and Remittances Foreign Exchange There are no restrictions or limitations placed on foreign investors in converting, transferring, or repatriating funds associated with an investment, such as remittances of investment capital, earnings, loan or lease payments, or royalties. There can be shortages in the availability of U.S. cash dollars at local banks, which can affect businesses. Funds associated with any form of investment can be freely converted into a usable currency at legal market clearing rates with the permission of the Foreign Exchange Commission. However, the criteria for obtaining permissions are opaque. Suriname maintains an official exchange rate of 7.52 Surinamese dollars (SR to $1.) government also registers and supervises money exchanges called cambios, which offer parallel exchange rates. For much of 2019, those parallel rates exchange rate fluctuated between 8.40 to 8.65 SRD to $1. In March 2020, they reached as high as 14 to 16 SRD Remittance Policies There are no recent changes or plans to change investment remittance policies. The waiting period on remittances can be relatively short for dividends; return on investments, interest, and principal on private foreign debt; lease payments; royalties; and management fees. The time needed to process the requests depends on the sector and the amount transferred. Transfers through the banking system can range from same day to one week waiting times, contingent upon approval by the Foreign Exchange Commission.Sovereign Wealth Funds On May 4, 2017, the National Assembly passed legislation establishing a Sovereign Wealth Fund (SWF). Suriname does not participate in the International Forum of Sovereign Wealth Funds. 7. State-Owned Enterprises State owned enterprises (SOEs) operate in the oil, agribusiness, mining, communication, travel, energy, and financial sectors. SOEs provide little information regarding their operations. Only a few produce annual reports accessible to the public. Staatsolie, Suriname’s state-owned oil company, has publicly available audited accounts. As of 2020, all state-owned enterprises will be required to publish annual accounts. Several have been accused of fraud or corrupt practices. There is no public list of SOEs. SOEs receive advantages when competing in the domestic market. These include access to government guarantees and government loans otherwise unavailable to private enterprises. Additionally, SOEs have access to land and raw materials inaccessible to private entities. The government does not yet adhere to the OECD Guidelines on Corporate Governance for SOEs. Privatization Program The GOS did announce a privatization program largely in the agricultural sector, but the only privatization was the state-owned banana company in 2014. Foreign investors can participate in privatization programs. In 2014, the Belgium multinational UNIVEG acquired a 90 percent stake in the state-owned banana company through a public, international bidding process. The European Commission assisted with the bidding process. UNIVEG later pulled out of Suriname. As this is the only example of privatization within Suriname, no standard privatization or public bidding processes have been established by the GOS. 9. Corruption Suriname’s legal code penalizes corruption, but there is virtually no enforcement. Government officials are occasionally removed from assignments, but convictions are rare. On September 1, 2017, parliament passed anti-corruption legislation, nearly 15 years after the initial draft bill was introduced to the National Assembly. As of May 2020, the President had not yet signed the measured into law, and the anti-corruption commission has not yet been installed. Suriname ranks on 70 out of 180 countries on the Corruption Index of Transparency International. Existing laws that deal with corruption do not extend to family members of officials, or to political parties. There are no laws or regulations to counter conflicts of interest in awarding contracts or government procurement. The government does not encourage or require private companies to establish internal codes of conduct prohibiting bribery of public officials. The government does not encourage or require private companies to establish internal codes of conduct prohibiting bribery of public officials. Local private companies do not use internal control, ethics, and compliance programs to detect and prevent bribery of government officials. Suriname has signed and ratified the Inter-American Convention against Corruption. Suriname has not yet signed and ratified the UN Convention against Corruption. Suriname is not a party to the OECD Convention on Combatting Bribery. Suriname has signed and ratified the Inter-American Convention against Corruption. Suriname has not yet signed and ratified the UN Convention against Corruption. Suriname is not a party to the OECD Convention on Combatting Bribery. There are no NGOs that focus exclusively on investigating corruption. U.S. firms have identified corruption as an obstacle to FDI. Corruption is believed to be most pervasive in government procurement, the awarding of licenses and concessions, customs, and taxation. U.S. firms have identified corruption as an obstacle to FDI. Corruption is believed to be most pervasive in government procurement, the awarding of licenses and concessions, customs, and taxation. Resources to Report Corruption Fraud Department Suriname Police Force ( Korps Politie Suriname) Havenlaan, Paramaribo, Suriname (597) 404-943 10. Political and Security Environment Since the restoration of democracy in 1987, Suriname has not seen politically motivated violence or civil disturbance.In July 2019, illegal goldminers damaged property at the Rosebel goldmine after the company’s security personnel fatally shot an illegal goldminer. The mine was subsequently closed for one month, and then reopened. Suriname is increasingly polarized politically, however past elections were considered to be free and fair by international observers. Sweden Executive Summary Sweden is generally considered a highly favorable investment destination. Sweden offers an extremely competitive, open economy with access to new products, technologies, skills, and innovations. Sweden also has a well-educated labor force, outstanding communication infrastructure, and a stable political environment, which makes it a choice destination for U.S. and foreign companies. Low levels of corporate tax, the absence of withholding tax on dividends, and a favorable holding company regime are additional incentives for doing business in Sweden. Sweden’s attractiveness as an investment destination is tempered by a few structural, business challenges. These include high personal and VAT taxes. In addition, the high cost of labor, rigid labor legislation and regulations, a persistent housing shortage, and the general high cost of living in Sweden can present challenges to attracting, hiring, and maintaining talent for new firms entering Sweden. Historically, the telecommunications, information technology, healthcare, energy, and public transport sectors have attracted the most foreign investment. However, manufacturing, wholesale, and retail trade have also recently attracted increased foreign funds. Overall, investment conditions remain largely favorable. Sweden ranked tenth on the World Bank 2020 Doing Business Report. In the World Economic Forum’s 2019 Competitiveness Report Sweden was ranked eight out of 138 countries in overall competitiveness and productivity. The report highlighted Sweden’s strengths: human capital (health, education level, and skills of the population), macroeconomic stability, and technical and physical infrastructure. Bloomberg’s 2020 Innovation Index ranked Sweden fifth among the most innovative nations on earth; a pattern that is reinforced by Sweden being ranked first on the European Commission’s 2019 European Innovation Scorecard and second on the WIPO/INSEAD 2019 Global Innovation Index. Also in 2019, Transparency International ranked Sweden as one of the most corruption-free countries in the world – fourth out of 180. Sweden is perceived as a creative place with interesting research and technology. It is well equipped to embrace the Fourth Industrial Revolution with a superior IT infrastructure and is seen as a frontrunner in adopting new technologies and setting new consumer trends. U.S. and other exporters can take advantage of a test market full of demanding, highly sophisticated customers. Table 1: Key Metrics and Rankings Measure Year Index/Rank Website Address TI Corruption Perceptions Index 2019 4 of 180 http://www.transparency.org/ research/cpi/overview World Bank’s Doing Business Report 2020 10 of 190 http://www.doingbusiness.org/en/rankings Global Innovation Index 2019 2 of 129 https://www.globalinnovationindex.org/ analysis-indicator U.S. FDI in partner country ($M USD, historical stock positions) 2018 $50,902 http://apps.bea.gov/international/factsheet/ World Bank GNI per capita 2018 $54,490 http://data.worldbank.org/ indicator/NY.GNP.PCAP.CD 1. Openness To, and Restrictions Upon, Foreign Investment Policies Towards Foreign Direct Investment There are no laws or practices that discriminate or are alleged to discriminate against foreign investors, including and especially U.S. investors, by prohibiting, limiting or conditioning foreign investment in a sector of the economy (either at the pre-establishment (market access) or post-establishment phase of investment). Until the mid-1980s, Sweden’s approach to direct investment from abroad was quite restrictive and governed by a complex system of laws and regulations. Sweden’s entry into the European Union (EU) in 1995 largely eliminated all restrictions. Restrictions to investment remain in the defense and other sensitive sectors, as addressed in the next section “Limits on Foreign Control and Right to Private Ownership and Establishment.” The Swedish Government recognizes the need to further improve the business climate for entrepreneurs, education, and the flow of research from lab to market. Swedish authorities have implemented a number of reforms to improve the business regulatory environment and to attract more foreign investment. In addition, Sweden is taking steps to create a domestic investment screening mechanism to ensure a secure investment environment, as well as to secure national ICT networks, including 5G. An initial step came on January 1, 2020, when Sweden enacted new regulations giving Swedish armed forces and security services authority to deny or revoke operating licenses to mobile radio providers that threaten national security. Limits on Foreign Control and Right to Private Ownership and Establishment There are very few restrictions on where and how foreign enterprises can invest, and there are no equity caps, mandatory joint-venture requirements, or other measures designed to limit foreign ownership or market access. However, Sweden does maintain some limitations in a select number of situations: Accountancy: Investment in the accountancy sector by non-EU-residents cannot exceed 25 percent. Legal services: Investment in a corporation or partnership carrying out the activities of an “advokat,” a lawyer, cannot be done by non-EU residents. Air transport: Foreign enterprises may be restricted from access to international air routes unless bilateral intergovernmental agreements provide otherwise. Air transport: Cabotage is reserved to national airlines. Maritime transport: Cabotage is reserved to vessels flying the national flag. Defense: Restrictions apply to foreign ownership of companies involved in the defense industry and other sensitive areas. On January 1, 2020, Sweden enacted new regulations giving Swedish armed forces and security services authority to deny or revoke operating licenses to mobile radio providers that threaten national security. Swedish company law provides various ways a business can be organized. The main difference between these forms is whether the founder must own capital and to what extent the founder is personally liable for the company’s debt. The Swedish Act (1992:160) on Foreign Branches applies to foreign companies operating through a branch and also to people residing abroad who run a business in Sweden. A branch must have a president who resides within the European Economic Area (EEA). All business enterprises in Sweden (including branches) are required to register at the Swedish Companies Registration Office, Bolagsverket. An invention or trademark must be registered in Sweden in order to obtain legal protection. A bank from a non-EEA country needs special permission from the Financial Supervision Authority (Finansinspektionen) to establish a branch in Sweden. Sweden does not maintain an investment screening and approval mechanism for inbound foreign investment. However, Sweden is taking steps to create a domestic investment screening mechanism, based on the EU investment screening framework, to ensure a secure investment environment. Suggested regulations would not likely be in place until 2021 at the earliest. Sweden is also working to secure national ICT networks, including 5G. An initial step was taken on January 1, 2020, when Sweden enacted new regulations giving Swedish armed forces and security services authority to deny or revoke operating licenses to mobile radio providers that threaten national security. U.S. investors are treated equally relative to other foreign investors in terms of ownership and scrutiny of investments. Other Investment Policy Reviews Sweden has in the past three years not undergone an investment policy review by the World Trade Organization (WTO), or the United Nations Committee on Trade and Development (UNCTAD), or the Organization for Economic Cooperation and Development (OECD). Business Facilitation Business Sweden’s Swedish Trade and Invest Council is the investment promotion agency tasked with facilitating business. The services of the agency are available to all investors. All forms of business enterprise, except for sole traders, have to be registered with the Swedish Companies Registration Office, Bolagsverket, before starting operations. Sole traders may apply for registration in order to be given exclusive rights to the name in the county where they will be operating. Online applications to register an enterprise can be made at http://www.bolagsverket.se/en and is open to foreign companies. The process of registering an enterprise can take a few days or up to a few weeks, depending on the complexity and form of the business enterprise. All business enterprises, including sole traders, need also to be registered with the Swedish Tax Agency, Skatteverket, before starting operations. Relevant information and guides can be found at http://www.skatteverket.se . Depending on the nature of business, companies may need to register with the Environmental Protection Agency, Naturvårdsverket, or, if real estate is involved, the county authorities. Non EU/EEA citizens need a residence permit, obtained from the Swedish Board of Migration, Migrationsverket, in order to start up and/or run a business. At http://www.verksamt.se , a collaboration of several Swedish government agencies where relevant guides and services pertaining to registering, starting, running, expanding and/or closing a business can be found. Sweden defines a micro enterprise as one with less than 10 employees, a small enterprise with less than 50 employees, and a medium enterprise with less than 250 employees. Outward Investment The Government of Sweden has commissioned the Swedish Exports Credit Guarantee Board (EKN) to promote Swedish exports and the internationalization of Swedish companies. EKN insures exporting companies and banks against non-payment in export transactions, thereby reducing risk and encouraging expanding operations. As part of its export strategy presented in 2015, the Swedish Government has also launched Team Sweden to promote Swedish exports and investment. Team Sweden is tasked with making export market entry clear and simple for Swedish companies and consists of a common network for all public initiatives to support exports and internationalization. The Government does not generally restrict domestic investors from investing abroad. The only exceptions are related to matters of national security and national defense; the Inspectorate of Strategic Products (ISP) is tasked with control and compliance regarding the sale and exports of defense equipment and dual-use products. ISP is also the National Authority for the Chemical Weapons Convention and handles cases concerning targeted sanctions. 6. Financial Sector Capital Markets and Portfolio Investment Credit is allocated on market terms and is made available to foreign investors in a non-discriminatory fashion. The private sector has access to a variety of credit instruments. Legal, regulatory, and accounting systems are transparent and consistent with international norms. NASDAQ-OMX is a modern, open, and active forum for domestic and foreign portfolio investment. It is Sweden’s official stock exchange and operates under specific legislation. Furthermore, the Swedish government is neutral toward portfolio investment and Sweden has a fully capable regulatory system that encourages and facilitates portfolio investments. Money and Banking System Several foreign banks, including Citibank, have established branch offices in Sweden, and several niche banks have started to compete in the retail bank market. The three largest Swedish banks are Skandinaviska Enskilda Banken (SEB), Svenska Handelsbanken, and Swedbank. Nordea is the largest foreign bank and largest bank in Sweden, while Danske Bank is the second largest foreign bank and the fifth largest bank in Sweden. A deposit insurance system was introduced in 1996, whereby individuals received protection of up to SEK 250,000 (USD 38,285) of their deposits in case of bank insolvency. On December 31, 2010, the maximum compensation was raised to the SEK equivalent of 100,000 euro. The banks’ activities are supervised by the Swedish Financial Supervisory Authority, Finansinspektionen, http://www.fi.se , to ensure that standards are met. Swedish banks’ financial statements meet international standards and are audited by internationally recognized auditors only. The Swedish Bankers’ Association, http://www.bankforeningen.se , represents banks and financial institutions in Sweden. The association works closely with regulators and policy makers in Sweden and Europe. Sweden is not part of the Eurozone; however, Swedish commercial banks offer euro-denominated accounts and payment services. On July 1, 2014, Sweden signed the Foreign Account Tax Compliance Act (FATCA) agreement with the U.S. Financial institutions in Sweden are now obligated to submit information in accordance with FATCA to the Swedish Tax Agency. In February 2015, the Swedish Parliament decided on new laws and regulations needed to implement FATCA. The Parliamentary decision means the government’s proposals in Bill 2014/15:41 were adopted, including for example, the introductions of: a new law on the identification of reportable accounts with respect to the agreement; a new law on the identification of reportable accounts with respect to the agreement; changes to tax procedure act; new legislation on the exchange of information with respect to the agreement; and consequential amendments to the Income Tax Act and other laws. The provisions entered into force on April 1, 2015. For full text of Bill 2014/15:41, please see http://www.regeringen.se/contentassets/bd8cf7f897364944b35f5f30c099bc0c/genomforande-av-avtal-mellan-sveriges-regering-och-amerikas-forenta-staters-regering-for-att-forbattra-internationell-efterlevnad-av-skatteregler-och-for-att-genomfora-fatca-prop.-20141541 . Foreign banks or branches offering financial services must have an authorization from the Swedish Financial Supervisory Authority, Finansinpektionen, to conduct operations. As part of the authorization application process, FI reviews the firm’s capital situation, business plan, owners, and management. Parts of the firm’s daily operations may also require authorization from FI. The applicable regulatory code can be found at http://www.fi.se/en/our-registers/search-fffs/2009/20093/ . There are no reported losses of correspondent banking relationships in the past three years and there are no current correspondent banking relationships that are in jeopardy. Foreigners have the right to open an account in a bank in Sweden provided he/she can identify him/herself and the bank conducts an identity check. The bank cannot require the person to have a Swedish personal identity number or an address in Sweden. Foreign Exchange and Remittances Foreign Exchange Sweden adheres to a floating exchange rate regime and the national currency rate fluctuates. Remittance Policies Sweden does not impose any restrictions on remittances of profits, proceeds from the liquidation of an investment, or royalty and license fee payments. A subsidiary or branch may transfer fees to a parent company outside of Sweden for management services, research expenditures, etc. Funds associated with any form of investment can be freely converted into any world currency. In general, yields on invested funds, such as dividends and interest receipts, may be freely transferred. A foreign-owned firm may also raise foreign currency loans both from its parent corporation and credit institutions abroad. There are no recent changes or plans to change investment remittance policies. There are no time limitations on remittances. Sovereign Wealth Funds There is no sovereign wealth fund in Sweden. 7. State-Owned Enterprises The Swedish state is Sweden’s largest corporate owner and employer. Forty-six companies are entirely or partially state-owned, of which two are listed on the Stockholm stock exchange, and have government representatives on their boards. Approximately 135,000 people are employed by these companies, including associated companies. Sectors, which feature State-Owned Enterprises (SOEs), include energy/power generation, forestry, mining, finance, telecom, postal services, gambling, and retail liquor sales. These companies operate under the same laws as private companies, although the government appoints board members, reflecting government ownership. Like private companies, SOEs have appointed boards of directors, and the government is constitutionally prevented from direct involvement in the company’s operations. Like private companies, SOE’s publish their annual reports, which are subject to independent audit. Private enterprises compete with public enterprises under the same terms and conditions with respect to access to markets, credit, and other business operations. Moreover, Sweden is party to the General Procurement Agreement (GPA) within the framework of the World Trade Organization (WTO). Swedish SOEs adhere to the OECD Guidelines on Corporate Governance for SOEs. Further information regarding the Swedish SOEs can be found here: http://www.regeringen.se/regeringens-politik/bolag-med-statligt-agande/ . Privatization Program The Swedish center-left Government, voted into office in September 2014 and remained in power after the 2018 elections, has the mandate to divest or liquidate its holdings in Bilprovningen (Swedish Motor-Vehicle Inspection Company), Bostadsgaranti, Lernia, Orio (formerly Saab Automobile Parts), SAS, and Svensk Exportkredit (SEK). Although there are no indications that the current Government will use its mandate, it nonetheless decided in 2016 to let Vattenfall divest its German lignite operations to the Czech energy group EPH and their funding partners PPF Investments. The sale was made to adapt Vattenfall’s portfolio and to complete the transition to a carbon neutral operation. If the Government of Sweden decides to divest or liquidate holdings, then a public bidding process is implemented. 9. Corruption Investors have an extremely low likelihood of encountering corruption in Sweden. While there have been cases of domestic corruption at the municipal level, most companies have high anti-corruption standards and an investor would not typically be put in the position of having to pay a bribe to conduct business. There are cases of Swedish companies operating overseas that have been charged with bribing foreign officials; however, these cases are relatively rare. Although Sweden has comprehensive laws against corruption, and ratified the 1997 OECD Anti-bribery Convention, in June of 2012, the OECD Anti-Bribery Working Group has given an unfavorable review of Swedish compliance to the dictates of that Convention. The group faulted Sweden for not having a single conviction of a Swedish company for bribery in the last eight years, for having unreasonably low fines, and for not re-framing their legal system so that a corporation could be charged with a crime. Swedish officials object to the review, claiming that lack of convictions is not proof of prosecutorial indifference, but rather indicative of high standards of ethics in Swedish companies. Over the last four years, two high-profile cases have involved Swedish companies. Telia Company’s operations in Uzbekistan received considerable public attention and cost the CEO and other senior officials their jobs. Telia Company was in the process of divesting its operations in Uzbekistan following a probe by the U.S. Department of Justice pertaining to illegal payments. In September 2017, Telia Company reached an agreement to pay $965.8 million to settle U.S. and European criminal and civil charges that the company had paid bribes to win business in Uzbekistan. In December 2019, Ericsson reached an agreement with the U.S. Department of Justice to pay more than $1 billion to resolve a foreign corrupt practices case which involved bribing government officials, falsifying books and records, and failing to implement reasonable internal accounting controls. The resolutions covered criminal conduct in Djibouti, China, Vietnam, Indonesia, and Kuwait. Sweden does not have a specific agency devoted exclusively to anti-corruption, but a number of agencies cooperate together. A list of Sweden’s Public and Private Anti-Corruption Initiatives can be found at http://www.business-anti-corruption.com/country-profiles/europe-central-asia/sweden/initiatives.aspx . UN Anticorruption Convention, OECD Convention on Combatting Bribery Sweden has signed and ratified the UN Anticorruption Convention (see list of signatories at http://www.unodc.org/unodc/en/treaties/CAC/signatories.html ). Sweden is party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (see list of signatories and their implementation reports at http://www.oecd.org/daf/anti-bribery/countryreportsontheimplementationoftheoecdanti-briberyconvention.htm ). Resources to Report Corruption The National Anti-Corruption Group at the Swedish Police, Nationella anti-korruptionsgruppen, handles the investigation of corruption offences and is engaged in preventive efforts. Corruption claims can be reported to the Group by calling +46 114 14. Watchdog organization: Transparency International Sweden Telephone: + 46 (0)72 74 45 558 E-mail address: firstname.lastname@example.org 10. Political and Security Environment Sweden is politically stable and no changes are expected.