HomeReportsInvestment Climate Statements...Custom Report - 4f016a4233 hide Investment Climate Statements Custom Report Excerpts: Albania, Algeria, Andorra, Angola, Antigua and Barbuda, Argentina, Armenia, Australia +3 more Bureau of Economic and Business Affairs Sort by Country Sort by Section In this section / Albania Executive Summary 1. Openness To, and Restrictions Upon, Foreign Investment 6. Financial Sector 7. State-Owned Enterprises 9. Corruption Algeria Executive Summary 1. Openness To, and Restrictions Upon, Foreign Investment 6. Financial Sector 7. State-Owned Enterprises 9. Corruption Andorra Executive Summary 1. Openness To, and Restrictions Upon, Foreign Investment 6. Financial Sector 7. State-Owned Enterprises 9. Corruption Angola Executive Summary 1. Openness To, and Restrictions Upon, Foreign Investment 6. Financial Sector 7. State-Owned Enterprises 9. Corruption Antigua and Barbuda Executive Summary 1. Openness To, and Restrictions Upon, Foreign Investment 6. Financial Sector 7. State-Owned Enterprises 9. Corruption Argentina Executive Summary 1. Openness To, and Restrictions Upon, Foreign Investment 6. Financial Sector 7. State-Owned Enterprises 9. Corruption Armenia Executive Summary 1. Openness To, and Restrictions Upon, Foreign Investment 6. Financial Sector 7. State-Owned Enterprises 9. Corruption Australia Executive Summary 1. Openness To, and Restrictions Upon, Foreign Investment 6. Financial Sector 7. State-Owned Enterprises 9. Corruption Austria Executive Summary 1. Openness To, and Restrictions Upon, Foreign Investment 6. Financial Sector 7. State-Owned Enterprises 9. Corruption Azerbaijan Executive Summary 1. Openness To, and Restrictions Upon, Foreign Investment 6. Financial Sector 7. State-Owned Enterprises 9. Corruption Marshall Islands Executive Summary 1. Openness To, and Restrictions Upon, Foreign Investment 6. Financial Sector 7. State-Owned Enterprises 9. Corruption Albania Executive Summary Albania is an upper middle-income country with a gross domestic product (GDP) per capita of USD 5,373 (2019 IMF estimate) and a population of approximately 2.9 million people. An estimated 45 percent of the population live in rural areas. The IMF estimates Albania’s real GDP increased by 2.2 percent in 2019, and that GDP will contract by 5 percent in 2020 because of the November 2019 earthquake and the COVID-19 crisis. The IMF projects the economy will grow by 8 percent in 2021, provided COVID-19 restrictions ease by summer 2020. The rebound is expected to be fueled mostly by increased consumption and a large post-earthquake reconstruction program. During the post-earthquake International Donors Conference in February, international donors pledged close to USD 330 million in grants and approximately USD 940 million in soft loans. Albania received EU candidate status in June 2014 and, in March 2020, the European Council endorsed the recommendation of the European Commission to open accession talks with Albania. Prior to the first Intergovernmental Conference, which marks the start of accession negotiations, Albania must implement a number of reforms in the justice sector, adopt changes to its electoral code, advance efforts to support minority rights, reduce unfounded asylum claims in EU member states, and show tangible progress in its fight against organized crime and corruption. The Albanian legal system ostensibly does not discriminate against foreign investors. The U.S.-Albanian Bilateral Investment Treaty, which entered into force in 1998, ensures that U.S. investors receive national treatment and most-favored-nation treatment. The Law on Foreign Investment outlines specific protections for foreign investors and allows 100 percent foreign ownership of companies in all but a few sectors. Albania has been able to attract increasing levels of foreign direct investment (FDI) in the last decade. According to the Bank of Albania data, flow of FDI has averaged USD 1.1 billion in the last six years, and stock FDI reached USD 9.5 billion at the end of 2019. Investments are concentrated in the energy sector, extractive industries, banking and insurance, telecommunications, and real estate. Switzerland, The Netherlands, Canada, Turkey, Austria, and Greece are the largest sources of FDI. To attract FDI and promote domestic investment, Albania approved a Law on Strategic Investments in 2015. The law outlines investment incentives and offers fast-track administrative procedures to strategic foreign and domestic investors through December 31, 2020, depending on the size of the investment and number of jobs created. In 2015, to promote FDI, the government also passed legislation creating Technical Economic Development Areas (TEDAs), like free trade zones. (The government is a member of and an advocate for the Western Balkan Initiative, a regional zone intended to increase connectivity and commercial activity.) The development of the first TEDA has yet to begin after several failed tender attempts. The government made significant advancements in its Digital Revolution Agenda during 2019. As of January 2020, 61 percent of all public services to citizens and businesses were available online through the E-Albania Portal, up from 15 percent in 2019. The reform is ongoing, and the government states that by December 2020, 91 percent of all public services will be available online. This should help curb corruption by limiting direct contacts with public administration officials. Despite a sound legal framework and progress on e-reform, foreign investors perceive Albania as a difficult place to do business. They cite corruption, particularly in the judiciary, a lack of transparency in public procurement, and poor enforcement of contracts as continuing problems in Albania. Reports of corruption in government procurement are commonplace. The increasing use of public private partnership (3P) contracts has reduced opportunities for competition, including by foreign investors, in infrastructure and other sectors. Poor cost-benefit analyses and a lack of technical expertise in drafting and monitoring 3P contracts are ongoing concerns. U.S. investors are challenged by corruption and the perpetuation of informal business practices. Several U.S. investors have faced contentious commercial disputes with both public and private entities, including some that went to international arbitration. In 2019 and 2020, a U.S. company’s attempted investment was allegedly thwarted by several judicial decisions and questionable actions of stakeholders involved in a dispute over the investment. Property rights continue to be a challenge in Albania because clear title is difficult to obtain. There have been instances of individuals allegedly manipulating the court system to obtain illegal land titles. Overlapping property titles is a serious and common issue. The compensation process for land confiscated by the former communist regime continues to be cumbersome, inefficient, and inadequate. Nevertheless, parliament passed a law on registering property claims on April 16, which will provide some relief for title holders. Transparency International’s 2019 Corruption Perceptions Index ranked Albania 106th of 180 countries, a drop of seven places from 2018. Consequently, Albania and North Macedonia are now perceived as the most corrupt countries in the Western Balkans. Albania also fell 19 spots in the World Bank’s 2020 Doing Business survey, ranking 82nd from 63rd in 2019. Although this change can be partially attributed to the implementation of a new methodology, the country continues to score poorly in the areas of granting construction permits, paying taxes, enforcing contracts, registering property, obtaining electricity, and protecting minority investors. To address endemic corruption, the Government of Albania (GoA) passed sweeping constitutional amendments to reform the country’s judicial system and improve the rule of law in 2016. The implementation of judicial reform is underway, including the vetting of judges and prosecutors for unexplained wealth. More than half the judges and prosecutors who have undergone vetting have been dismissed for unexplained wealth or organized crime ties. The EU expects Albania to show progress on prosecuting judges and prosecutors whose vetting revealed possible criminal conduct. The implementation of judicial reform is ongoing, and its completion is expected to improve the investment climate in the country. Table 1: Key Metrics and Rankings Measure Year Index/Rank Website Address TI Corruption Perceptions Index 2019 106 of 180 http://www.transparency.org/ research/cpi/overview World Bank’s Doing Business Report 2020 82 of 190 http://www.doingbusiness.org/ en/rankings Global Innovation Index 2019 83 of 129 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 USD 4,860 http://data.worldbank.org/indicator/ NY.GNP.PCAP.CD 1. Openness To, and Restrictions Upon, Foreign Investment Policies Towards Foreign Direct Investment The GoA understands that private sector development and increased levels of foreign investment are critical to support sustainable economic development. Albania maintains a liberal foreign investment regime designed to attract FDI. The Law on Foreign Investment outlines specific protections for foreign investors and allows 100 percent foreign ownership of companies, except in the areas of domestic and international air passenger transport and television broadcasting. Albanian legislation does not distinguish between domestic and foreign investments. The 2010 amendments to the Law on Foreign Investment introduced criteria specifying when the state would grant special protection to foreign investors involved in property disputes, providing additional guarantees to investors for investments of more than 10 million euros. Amendments in 2017 and 2018 extended state protection to December 31, 2019. The Law on Strategic Investments approved in 2015 offers incentives and fast-track administrative procedures, depending on the size of the investment and number of jobs created, to both foreign and domestic investors who apply before December 31, 2020. The Albanian Investment Development Agency (AIDA) is the entity responsible for promoting foreign investments in Albania. Potential U.S. investors in Albania should contact AIDA to learn more about services AIDA offers to foreign investors (http://aida.gov.al/ ). The Law on Strategic Investments stipulates that AIDA, as the Secretariat of the Strategic Investment Council, serve as a one-stop-shop for foreign investors, from filing of the application form to granting the status of strategic investment/investor. Despite hospitable legislation, only a few foreign investors have benefited from the “Strategic Investor” status. Limits on Foreign Control and Right to Private Ownership and Establishment Foreign and domestic investors have equal rights of ownership of local companies, based on the principle of “national treatment.” According to the World Bank’s “Investing Across Borders” indicator, just three of 33 sectors have restrictions against full foreign ownership, or in the case of the agriculture sector, against foreign land ownership. Domestic and international air passenger transport: foreign interest in airline companies is limited to 49 percent ownership by investors outside the Common European Aviation Zone, for both domestic and international air transportation. Television broadcasting: no entity, foreign or domestic, may own more than 40 percent of a television company. Agriculture: No foreign individual or foreign incorporated company may purchase agricultural land, though land may be leased for up to 99 years. Albania currently lacks an investment-review mechanism for inbound FDI. However, in 2017, the government introduced a new provision in the Petroleum Law, which allows the government to reject a petroleum-sharing agreement or the sale of shares in a petroleum-sharing agreement to any prospective investor due to national security concerns. Albanian law permits private ownership and establishment of enterprises and property. Foreign investors do not require additional permission or authorization beyond that required of domestic investors. Commercial property may be purchased, but only if the proposed investment is worth three times the price of the land. There are no restrictions on the purchase of private residential property. Foreigners can acquire concession rights on natural resources and resources of the common interest, as defined by the Law on Concessions and Public Private Partnerships. Foreign and domestic investors have numerous options available for organizing business operations in Albania. The 2008 Law on Entrepreneurs and Commercial Companies and Law Establishing the National Registration Center (NRC) allow for the following legal types of business entities to be established through the NRC: sole proprietorship; unlimited partnership; limited partnership; limited liability company; joint stock company; branches and representative offices; and joint ventures. Other Investment Policy Reviews The World Trade Organization (WTO) completed a Trade Policy Review of Albania in May 2016 (https://www.wto.org/english/tratop_e/tpr_e/tp437_e.htm ). In November 2017, the United Nations Conference on Trade and Development (UNCTAD) completed the first Investment Policy Review of South-East European (SEE) countries, including Albania (http://unctad.org/en/pages/PublicationWebflyer.aspx?publicationid=1884). Business Facilitation The National Business Center (NBC) serves as a one-stop shop for business registration. All required procedures and documents are published online (http://www.qkb.gov.al/information-on-procedure/business-registration/). Registration may be done in person or online via the e-Albania portal. Many companies choose to complete the registration process in person, as the online portal requires an authentication process and electronic signature and is only available in the Albanian language. When a business registers in the NBC it is also automatically registered with the Tax Office, Labor Inspectorate, Customs, and the respective municipality. According to the 2020 World Bank Doing Business Report, it takes 4.5 days and five procedures to register a business in Albania. Outward Investment Albania neither promotes nor incentivizes outward investment, nor does it restrict domestic investors from investing abroad. 6. Financial Sector Capital Markets and Portfolio Investment The government has adopted policies to promote the free flow of financial resources and foreign investment in Albania. The Law on “Foreign Investments” is based on the principles of equal treatment, non-discrimination, and protection of foreign investments. Foreign investors have the right to expatriate all funds and contributions of their investment. In accordance with IMF Article VIII, the government and Central Bank do not impose any restrictions on payments and transfers for international transactions. Despite Albania’s shallow foreign exchange market, banks enjoy enough liquidity to support sizeable positions. Portfolio investments continue to be a challenge because they remain limited mostly to company shares, government bonds, and real estate. In the recent years, the high percentage of non-performing loans and the economic slowdown forced commercial banks to tighten lending standards. However, following a decrease in non-performing loans (NPL) in 2018 the, lending increased by 7 percent year-over-year in 2019. The credit market is competitive, but interest rates in domestic currency can be high, ranging from 6 percent to 7 percent. Most mortgage and commercial loans are denominated in euros because rate differentials between local and foreign currency average 2.5 percent. Commercial banks operating in Albania have improved the quality and quantity of services they provide, including a large variety of credit instruments, traditional lines of credit, and bank drafts etc. Money and Banking System In the absence of an effective stock market, the country’s banking sector is the main channel for business financing. The sector is sound, profitable, and well capitalized. The high rate of non-performing loans (NPL)s had been a concern for several years but has declined recently. The Bank of Albania’s legal measures to address the problem have generated positive results. The banking sector is 100 percent fully privatized. It has undergone consolidation over the last couple of years, as the number of banks decreased from 16 in 2018 to 12 in 2020. As of December 2019, the Turkish -owned National Commercial Bank remained the largest bank in the market, with 27 percent of the market share, followed by Austrian Raiffeisen Bank, with 15 percent, and Albanian Credins Bank, with 14.8 percent. The American Investment Bank is the only bank with U.S. shareholders, and it ranks seventh with 5.2 %percent of the banking sector’s total assets, which in 2019 reached $13.5 billion. Albania’s banking sector weathered the financial crisis better than many of its neighbors, due largely to a limited exposure to international capital markets and lack of a domestic housing bubble. In December 2019, Albania had 446 bank outlets, down from 474 a year ago and the peak of 552 in 2016. Capital adequacy, at 18.3 percent, remains above Basel requirements and indicates sufficient assets. At the end of 2019, the return on assets was 1.5 percent. The number of NPLs continued to fall, reaching 8.4 percent at the end of the 2019, down from 11.1 percent in 2018, and significantly below the 2014 level when NPLs peaked at 25 percent. As part of its strategy to stimulate business activity, the Bank of Albania has adopted a plan to ease monetary policy by continuing to persistently keep low interest rates. The most recent reduction was in March 2020, when the interest rate was reduced to the historic low of 0.5 percent, down from a rate of 1 percent in place since June 2018. Most of the banks operating in Albania are subsidiaries of foreign banks. Only three banks have an ownership structure whose majority shareholders are Albanian. However, the share of total assets of the banks with majority Albanian shareholders has increased because of the sector’s ongoing consolidation. There are no restrictions for foreigners who wish to establish a bank account. They are not required to prove residency status. However, U.S. citizens must complete a form allowing for the disclosure of their banking data to the IRS as required under the U.S. Foreign Account Tax Compliance Act. Foreign Exchange and Remittances Foreign Exchange The Central Bank of Albania (BoA) formulates, adopts, and implements foreign exchange policies and maintains a supervisory role in foreign exchange activities in accordance with the Law on the Bank of Albania No. 8269 and the Banking Law No. 9662. Foreign exchange is regulated by the 2009 Regulation on Foreign Exchange Activities no. 70 (FX Regulation). BoA maintains a free -float exchange rate regime for the domestic currency, the Lek. Albanian authorities do not engage in currency arbitrage, nor do they view it as an efficient instrument to achieve competitive advantage. BoA does not intervene to manipulate the exchange rate unless required to control domestic inflation, in accordance with the Bank’s official mandate of inflation targeting. Foreign exchange is readily available at banks and exchange bureaus. Preliminary notification is necessary if the currency exchange is several million dollars or more – the law does not specify an amount but provides factors for determining the threshold for large exchanges – as the exchange market in Albania is shallow. A 2018 campaign launched by the BoA to reduce the domestic use of the euro to improve the effectiveness of domestic economic policies has produced tangible results. The share of foreign currency loans in total loans fell from 60 percent in 2015 to 50 percent in 2019. Foreign currency deposits, which to some extent reflect relatively high remittances, rose to 54.6 percent of total deposits. Remittance Policies The Banking Law does not impose restrictions on the purchase, sale, holding, or transfer of monetary foreign exchange. However, local law authorizes the BoA to temporarily restrict the purchase, sale, holding, or transfer of foreign exchange to preserve the foreign exchange rate or official reserves. In practice, BoA rarely employs such measures. The last episode was in 2009, when the Bank temporarily tightened supervision rules over liquidity transfers by domestic correspondent banks to foreign banks due to insufficient liquidity in international financial markets. It also asked banks to halt distribution of dividends and use dividends to increase shareholders’ capital, instead. BoA lifted these restrictions in 2010. The Law on Foreign Investment guarantees the right to transfer and repatriate funds associated with an investment in Albania into a freely usable currency at a market-clearing rate. Only licensed entities (banks) may conduct foreign exchange transfers and waiting periods depend on office procedures adopted by the banks. Both Albanian and foreign citizens entering or leaving the country must declare assets in excess of 1,000,000 lek (USD 9,000) in hard currency and/or precious items. Failure to declare such assets is considered a criminal act, punishable by confiscation of the assets and possible imprisonment. Although the Foreign Exchange (FX) Regulation provides that residents and non-residents may transfer capital within and into Albania without restriction, capital transfers out of Albania are subject to certain documentation requirements. Persons must submit a request indicating the reasons for the capital transfer, a certificate of registration from the National Registration Center, and the address to which the capital will be transferred. Such persons must also submit a declaration on the source of the funds to be transferred. In January 2015, The FX Regulation was amended and the requirement to present the documentation showing the preliminary payment of taxes related to the transaction was removed. Albania is a member of the Council of Europe Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL), a Financial Action Task Force-style regional body. In February 2020, Albania was included in the category of jurisdictions under increased monitoring, also referred to as the Grey List. Albania had previously been on this list and was taken off in 2015. The 2020 International Narcotics Control Strategy Report (INCSR) placed Albania in the “Major Money Laundering Jurisdictions” category following its inclusion for the first time in 2017. The category implies that financial institutions of the country engage in currency transactions involving significant amounts of proceeds from international narcotics trafficking. Sovereign Wealth Funds Parliament approved a law in October 2019 to establish the Albanian Investment Corporation (AIC). The law entered in force in January 2020. The AIC would develop, manage, and administer state-owned property and assets, invest across all sectors by mobilizing state owned and private domestic and foreign capital, and promote economic and social development by investing in line with government-approved development policies. The GoA plans to transfer state-owned assets, including state-owned land, to the AIC and provide initial capital to launch the corporation. The IMF Staff Concluding Statement of November 26, 2019, warned that the law would allow the government to direct individual investment decisions, which could make the AIC an off-budget spending tool that risks eroding fiscal discipline and circumventing public investment management processes. 7. State-Owned Enterprises State-owned enterprises (SOEs) are defined as legal entities that are entirely state-owned or state-controlled and operate as commercial companies in compliance with the Law on Entrepreneurs and Commercial Companies. SOEs operate mostly in the generation, distribution, and transmission of electricity, oil and gas, railways, postal services, ports, and water supply. There is no published list of SOEs. The law does not discriminate between public and private companies operating in the same sector. The government requires SOEs to submit annual reports and undergo independent audits. SOEs are subject to the same tax levels and procedures and the same domestic accounting and international financial reporting standards as other commercial companies. The High State Audit audits SOE activities. SOEs are also subject to public procurement law. Albania is yet to become party to the Government Procurement Agreement (GPA) of the WTO but has obtained observer status and is negotiating full accession (see https://www.wto.org/english/tratop_e/gproc_e/memobs_e.htm). Private companies can compete openly and under the same terms and conditions with respect to market share, products and services, and incentives. SOE operation in Albania is regulated by the Law on Entrepreneurs and Commercial Companies, the Law on State Owned Enterprises, and the Law on the Transformation of State-Owned Enterprises into Commercial Companies. The Ministry of Economy and Finance and other relevant ministries, depending on the sector, represent the state as the owner of the SOEs. SOEs are not obligated by law to adhere to Organization for Economic Cooperation and Development (OECD) guidelines explicitly. However, basic principles of corporate governance are stipulated in the relevant laws and generally accord with OECD guidelines. The corporate governance structure of SOEs includes the supervisory board and the general director (administrator) in the case of joint stock companies. The supervisory board comprises three to nine members, who are not employed by the SOE. Two-thirds of board members are appointed by the representative of the Ministry of Economy and Finance, and one-third by the line ministry, local government unit, or institution to which the company reports. The Supervisory Board is the highest decision-making authority and appoints and dismisses the administrator of the SOE through a two-thirds vote. Privatization Program The privatization process in Albania is nearing conclusion, with just a few major privatizations remaining. Entities to be privatized include OSHEE, the state-run electricity distributor; 16 percent of ALBtelecom, the fixed- line telephone company; and state-owned oil company Albpetrol. Other sectors might provide opportunities for privatization in the future. The bidding process for privatizations is public, and relevant information is published by the Public Procurement Agency at www.app.gov.al . Foreign investors may participate in the privatization program. The Agency has not published timelines for future privatizations. 9. Corruption Endemic corruption continues to undermine the rule of law and jeopardize economic development. Foreign investors cite corruption, particularly in the judiciary, a lack of transparency in public procurement, and poor enforcement of contracts as some of the biggest problems in Albania. Corruption perceptions continue to deteriorate, with Albania falling an additional seven positions in Transparency International’s 2019 Corruption Perceptions Index (CPI), now ranking 106th out of 180 countries, tied with North Macedonia as the lowest in the Balkans. Despite some improvement in in Albania’s score from 2013 to 2016, progress in tackling corruption has been slow and unsteady. Albania is still one of the most corrupt countries in Europe, according to the CPI and other observers. The country has a sound legal framework to prevent conflict of interest and to fight corruption of public officials and politicians, including their family members. However, law enforcement is jeopardized by a heavily corrupt judicial system. The passage of constitutional amendments in July 2016 to reform the judicial system was a major step forward, and reform, once fully implemented, is expected to position the country as a more attractive destination for international investors. Judicial reform has been described as the most significant development in Albania since the end of communism, and nearly one-third of the constitution was rewritten as part of the effort. The reform also entails the passage of laws to ensure implementation of the constitutional amendments. Judicial reform’s vetting process will ensure that prosecutors and judges with unexplained wealth or insufficient training, or those who have issued questionable verdicts, are removed from the system. As of publication, more than half of the judges and prosecutors who have faced vetting have either failed or resigned. The establishment of the Special Prosecution Office Against Corruption and Organized Crime and of the National Investigation Bureau, two new judicial bodies, will step up the fight against corruption and organized crime. Once fully implemented, judicial reform will discourage corruption, promote foreign and domestic investment, and allow Albania to compete more successfully in the global economy. UN Anticorruption Convention, OECD Convention on Combatting Bribery The government has ratified several corruption-related international treaties and conventions and is a member of major international organizations and programs dealing with corruption and organized crime. Albania has ratified the Civil Law Convention on Corruption (Council of Europe), the Criminal Law Convention on Corruption (Council of Europe), the Additional Protocol to Criminal Law Convention on Corruption (Council of Europe), and the United Nations Convention against Corruption (UNCAC). Albania has also ratified several key conventions in the broader field of economic crime, including the Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime (2001) and the Convention on Cybercrime (2002). Albania has been a member of the Group of States against Corruption (GRECO) since the ratification of the Criminal Law Convention on Corruption in 2001 and is a member of the Stability Pact Anti-Corruption Initiative (SPAI). Albania is not a member of the OECD Convention on Combating Bribery of Foreign Public Officials in international Business Transactions. Albania has also adopted legislation for the protection of whistleblowers. Resources to Report Corruption To curb corruption, the government announced a new platform in 2017, “Shqiperia qe Duam”(“The Albania We Want”), which invites citizens to submit complaints and allegations of corruption and misuse of office by government officials. The platform has a dedicated link for businesses. The Integrated Services Delivery Agency (ADISA), a government entity, provides a second online portal to report corruption. Algeria Executive Summary Algeria’s state enterprise-dominated economy is challenging for U.S. businesses, but multiple sectors offer opportunities for long-term growth. The government is prioritizing investment in agriculture, information and communications technology, mining, hydrocarbons (both upstream and downstream), renewable energy, and healthcare. The election of President Abdelmadjid Tebboune in December 2019 eliminated some of the uncertainty that marked the eight-month interim government which led the country following the April 2019 resignation of President Abdelaziz Bouteflika. In response to continuing demands for political reform, Tebboune issued a draft of a new constitution in May 2020, and has proposed legislative elections before the end of the year. In 2019, the government eliminated the so-called “51/49” restriction that required majority Algerian ownership of all new businesses. The requirement will be retained for “strategic sectors,” identified as hydrocarbons, mining, defense, and pharmaceuticals manufacturing. The government also passed a new hydrocarbons law, improving fiscal terms and contract flexibility in order to attract new international investors. Following the enactment of this legislation, major international oil companies have signed memorandums of understanding with national hydrocarbons company Sonatrach. Algeria’s economy is driven by hydrocarbons production. Hydrocarbons account for 93 percent of export revenues and are the largest source of government income. With the drop in oil prices in March 2020, the government calculated revenues would drop to roughly half of what the 2020 budget originally anticipated. The government reduced investment by fifty percent in the energy sector, and investment in other sectors is likely to suffer large decreases and may only proceed if the historically debt-resistant government obtains foreign financing. The government’s 2020 budget indicated such debt was possible, but officials have equivocated in public statements. The government hopes to attract foreign direct investment (FDI) to boost employment and replace imports with local production. Traditionally, Algeria has pursued protectionist policies to encourage the development of local industries. The import substitution policies it employs tend to generate regulatory uncertainty, supply shortages, increased prices, and limited selection. The government has taken measures to minimize the economic impact of the COVID-19 outbreak, including delaying tax payments for small businesses, extending credit and restructuring loan payments, and decreasing banks’ reserve requirements. Economic operators deal with a range of challenges, including complicated customs procedures, cumbersome bureaucracy, difficulties in monetary transfers, and price competition from international rivals, particularly from China, Turkey, and France. International firms that operate in Algeria complain that laws and regulations are constantly shifting and applied unevenly, raising commercial risk for foreign investors. An ongoing anti-corruption campaign has increased wariness regarding large-scale investment projects. Business contracts are subject to changing interpretation and revision of regulations, which has proved challenging to U.S. and international firms. Other drawbacks include limited regional integration. Table 1: Key Metrics and Rankings Measure Year Index/Rank Website Address TI Corruption Perceptions Index 2019 106 of 180 http://www.transparency.org/ research/cpi/overview World Bank’s Doing Business Report 2019 157 of 190 http://www.doingbusiness.org/ en/rankings Global Innovation Index 2019 113 of 129 https://www.globalinnovationindex.org/ analysis-indicator U.S. FDI in partner country ($M USD, stock positions) 2019 $2,749 https://apps.bea.gov/international/ factsheet// World Bank GNI per capita 2019 USD 3,970 http://data.worldbank.org/indicator/ NY.GNP.PCAP.CD 1. Openness To, and Restrictions Upon, Foreign Investment Policies Towards Foreign Direct Investment The Algerian economy is both challenging and potentially highly rewarding. While the Algerian government publicly welcomes FDI, a difficult business climate, an inconsistent regulatory environment, and sometimes contradictory government policies complicate foreign investment. There are business opportunities in nearly every sector, including energy, power, water, healthcare, telecommunications, transportation, recycling, agribusiness, and consumer goods. Algeria’s urgency to diversify its economy away from reliance on hydrocarbons has increased amid low and fluctuating oil prices since mid-2014. The government has sought to reduce the country’s trade deficit through import substitution policies and import tariffs. Despite higher oil prices in 2018 that reduced the trade deficit, Algeria’s decreasing hydrocarbons exports have kept government rhetoric focused diversification. On January 29, 2019, the government implemented tariffs between 30-200 percent on over one-thousand goods it assessed were destined for direct sale to consumers. Companies that set up local manufacturing operations can receive permission to import materials the government would not otherwise approve for import if the importer can show materials will be used in local production. Certain regulations explicitly favor local firms at the expense of foreign competitors, most prominently in the pharmaceutical sector, where an import ban the government implemented in 2009 remains in place on more than 360 medicines and medical devices. Frequent, unpredictable changes to business regulations have added to the uncertainty in the market. Algeria eliminated state enterprises’ “right of first refusal” on most transfers of foreign holdings to foreign shareholders, with the exception of identified “strategic” sectors.. There are two main agencies responsible for attracting foreign investment, the National Agency of Investment Development (ANDI) and the National Agency for the Valorization of Hydrocarbons (ALNAFT). ANDI is the primary Algerian government agency tasked with recruiting and retaining foreign investment. ANDI runs branches in each of Algeria’s 48 governorates (“wilayas”) which are tasked with facilitating business registration, tax payments, and other administrative procedures for both domestic and foreign investors. U.S. companies report that the agency is understaffed and ineffective. Its “one-stop shops” only operate out of physical offices and do not maintain dialogue with investors after they have initiated an investment. The agency’s effectiveness is undercut by its lack of decision-making authority, particularly for industrial projects, which is exercised by the Ministry of Industry and Mines, the Minister of Industry and Mines himself, and in many cases the Prime Minister. ALNAFT is charged with attracting foreign investment to Algeria’s upstream oil and gas sector. In addition to organizing events marketing upstream opportunities to potential investors, the agency maintains a paid-access digital database with extensive technical information about Algeria’s hydrocarbons resources. Limits on Foreign Control and Right to Private Ownership and Establishment Establishing a presence in Algeria can take any of three basic forms: 1) a liaison office with no local partner requirement and no authority to perform commercial operations, 2) a branch office to execute a specific contract, with no obligation to have a local partner, allowing the parent company to conduct commercial activity (considered a resident Algerian entity without full legal authority), or 3) a local company with 51 percent of capital held by a local company or shareholders. A business can be incorporated as a joint stock company (JSC), a limited liability company (LLC), a limited partnership (LP), a limited partnership with shares (LPS), or an undeclared partnership. Groups and consortia are also used by foreign companies when partnering with other foreign companies or with local firms. Foreign and domestic private entities have the right to establish and own business enterprises and engage in all forms of remunerative activity. However, the 51/49 rule requires majority Algerian ownership in all projects involving foreign investments. The rule was removed from the 2016 investment law, but remains in force by virtue of its inclusion in the 2016 annual finance law, which requires foreign investment activities be subject to the incorporation of an Algerian company in which at least 51 percent of capital stock is held by resident national shareholders. On December 30, 2019, the Algerian government’s Official Journal published its 2020 finance law, which limited the 51/49 rule to “strategic sectors,” identified as hydrocarbons, mining, defense, and pharmaceuticals. The 51/49 investment rule poses challenges for various types of investors. For example, the requirement hampers market access for foreign small and medium-sized enterprises (SMEs), as they often do not have the human resources or financial capital to navigate complex legal and regulatory requirements. Large companies can find creative ways to work within the law, sometimes with the cooperation of local authorities who are more flexible with large investments that promise of significant job creation and technology and equipment transfers. SMEs usually do not receive this same consideration. There are also allegations that Algerian partners sometimes refuse to invest the required funds in the company’s business, require non-contract funds to win contracts, and send unqualified workers to job sites. Manufacturers are also concerned about intellectual property rights (IPR), as foreign companies do not want to surrender control of their designs and patents. Several U.S. companies have reported they have policies that preclude them from investing overseas without maintaining a majority share, out of concerns for both IPR and financial control of the local venture, which thus prevent them from establishing businesses in Algeria. Algerian government officials defended the 51/49 requirement as necessary to prevent capital flight, protect Algerian businesses, and provide foreign businesses with local expertise. For sectors where the requirement will remain, officials contend a range of tailored measures can mitigate the effect of the 51/49 rule and allow the minority foreign shareholder to exercise other means of control. Some foreign investors use multiple local partners in the same venture, effectively reducing ownership of each individual local partner to enable the foreign partner to own the largest share. The Algerian government does not officially screen FDI, though Algerian state enterprises have a “right of first refusal” on transfers of foreign holdings to foreign shareholders in identified strategic industries. Companies must notify the Council for State Participation (CPE) of these transfers. In addition, initial foreign investments remain subject to approvals from a host of ministries that cover the proposed project, most often the Ministries of Commerce, Health, Energy, Telecommunications and Post, and Industry and Mines. U.S. companies have reported that certain high-profile industrial proposals, such as for automotive assembly, are subject to informal approval by the Prime Minister. In 2017, the government instituted an Investments Review Council chaired by the Prime Minister for the purpose of “following up” on investments; in practice, the establishment of the council means FDI proposals are subject to additional government scrutiny. According to the 2016 Investment Law, projects registered through the ANDI deemed to have special interest for the national economy or high employment generating potential may be eligible for extensive investment advantages. For any project over 5 billion dinars (approximately USD 44 million) to benefit from these advantages, it must be approved by the Prime Minister-chaired National Investments Council (CNI). The CNI meets regularly, though it is not clear how the agenda of projects considered at each meeting is determined. Critics allege the CNI is non-transparent mechanism which could be subject to capture by vested interests. Other Investment Policy Reviews Algeria has not conducted an investment policy review through the Organization for Economic Cooperation and Development (OECD) or the World Trade Organization (WTO). The last investment policy review by a third party was conducted by the United Nations Conference on Trade and Development (UNCTAD) in 2003 and published in 2004. Business Facilitation Algeria’s online information portal dedicated to business creation www.jecreemonentreprise.dz and the business registration website www.cnrc.org.dz are under maintenance and have been so for more than a year. The websites provide information about several business registration steps applicable for registering certain kinds of businesses. Entrepreneurs report that additional information about requirements or regulation updates for business registration are available only in person at the various offices involved in the creation and registration process. In the World Bank’s 2020 Doing Business report, Algeria’s ranking for starting a business was unchanged at 157 out of 190 countries (http://www.doingbusiness.org/en/data/exploreeconomies/algeria). This year’s improvements were modest and concerned only a third of the ten indicator categories. The World Bank report lists 12 procedures that cumulatively take an average of 18 days to complete to register a new business. New business owners seeking to establish their enterprises have sometimes reported the process takes longer, noting that the most updated version of regulations and required forms are only available in person at multiple offices, therefore requiring multiple visits. Outward Investment Algeria does not restrict domestic investors from investing overseas, provided they can access foreign currency for such investments. The exchange of Algerian dinars outside of Algerian territory is illegal, as is the carrying abroad of more than 3,000 dinars in cash at a time (approximately USD 26; see section 7 for more details on currency exchange restrictions). Algeria’s National Agency to Promote External Trade (ALGEX), housed in the Ministry of Commerce, is the agency responsible for supporting Algerian businesses outside the hydrocarbons sector that want to export abroad. ALGEX controls a special promotion fund to promote exports but the funds can only be accessed for limited purposes. For example, funds might be provided to pay for construction of a booth at a trade fair, but travel costs associated with getting to the fair – which can be expensive for overseas shows – would not be covered. The Algerian Company of Insurance and Guarantees to Exporters (CAGEX), also housed under the Ministry of Commerce, provides insurance to exporters. In 2003, Algeria established a National Consultative Council for Promotion of Exports (CCNCPE) that is supposed to meet annually. Algerian exporters claim difficulties working with ALGEX including long delays in obtaining support funds, and the lack of ALGEX offices overseas despite a 2003 law for their creation. The Bank of Algeria’s 2002 Money and Credit law allows Algerians to request the conversion of dinars to foreign currency in order to finance their export activities, but exporters must repatriate an equivalent amount to any funds spent abroad, for example money spent on marketing or other business costs incurred. 6. Financial Sector Capital Markets and Portfolio Investment The Algiers Stock Exchange has five stocks listed – each at no more than 35 percent equity. There is a small and medium enterprise exchange with one listed company. The exchange has a total market capitalization representing less than 0.1 percent of Algeria’s GDP. Daily trading volume on the exchange averages around USD 2,000. Despite its small size, the market functions well and is adequately regulated by an independent oversight commission that enforces compliance requirements on listed companies and traders. Government officials aim to reach a capitalization of USD 7.8 billion in the next five years and enlist up to 50 new companies. Attempts to list additional companies have been stymied by a lack both of public awareness and appetite for portfolio investment, as well as by private and public companies’ unpreparedness to satisfy due diligence requirements that would attract investors. Proposed privatizations of state-owned companies have also been opposed by the public. Algerian society generally prefers material investment vehicles for savings, namely cash. Public banks, which dominate the banking sector (see below), are required to purchase government securities when offered, meaning they have little leftover liquidity to make other investments. Foreign portfolio investment is prohibited – the purchase of any investment product in Algeria, whether a government or corporate bond or equity stock, is limited to Algerian residents only. Money and Banking System The banking sector is roughly 85 percent public and 15 percent private as measured by value of assets held, and is regulated by an independent central bank. Publicly available data from private institutions and U.S. Federal Reserve Economic Data show estimated total assets in the commercial banking sector in 2017 were roughly 13.9 trillion dinars (USD 116.7 billion) against 9.2 trillion dinars (USD 77.2 billion) in liabilities. The central bank had mandated a 12 percent reserve requirement until mid-2016, when in response to a drop in liquidity the bank lowered the threshold to eight percent. In August 2017, the ratio was further reduced to 4% in an effort to inject further liquidity into the banking system. The decrease in liquidity was a result of all public banks buying government bonds in the first public bond issuance in more than 10 years; buying at least five percent of the offered bonds is required for banks to participate as primary dealers in the government securities market. The bond issuance essentially returned funds to the state that it had deposited at local banks during years of high hydrocarbons profits. In January 2018, the bank increased the retention ratio from 4 percent to 8 percent, followed by a further increase in February 2019 to a 12 percent ratio in anticipation of a rise in bank liquidity due to the government’s non-conventional financing policy, which allows the Treasury to borrow directly from the central bank to pay state debts. In response to liquidity concerns caused by the oil price decline in March 2020, the bank decreased the reserve requirement to 8 percent. The IMF and Bank of Algeria have noted moderate growth in non-performing assets, currently estimated between 10-12 percent of total assets. The quality of service in public banks is generally considered low as generations of public banking executives and workers trained to operate in a statist economy lack familiarity with modern banking practices. Most transactions are materialized (non-electronic). Many areas of the country suffer from a dearth of branches, leaving large amounts of the population without access to banking services. ATMs are not widespread, especially outside the major cities, and few accept foreign bankcards. Outside of major hotels with international clientele, hardly any retail establishments accept credit cards. Algerian banks do issue debit cards, but the system is distinct from any international payment system. In addition, approximately 4.6 trillion dinars ( USD 40 billion), or one-third, of the money supply is estimated to circulate in the informal economy. Foreigners can open foreign currency accounts without restriction, but proof of a work permit or residency is required to open an account in Algerian dinars. Foreign banks are permitted to establish operations in the country, but they must be legally distinct entities from their overseas home offices. In 2015, the Financial Action Task Force (FATF) removed Algeria from its Public Statement, and in 2016 it removed Algeria from the “gray list.” The FATF recognized Algeria’s significant progress and the improvement in its anti-money laundering/counter terrorist financing (AML/CFT) regime. The FATF also indicated Algeria has substantially addressed its action plan since strategic deficiencies were identified in 2011. Foreign Exchange and Remittances Foreign Exchange There are few statutory restrictions on foreign investors converting, transferring, or repatriating funds, according to banking executives. Monies cannot be expatriated to pay royalties or to pay for services provided by resident foreign companies. The difficultly with conversions and transfers results mostly from the procedures of the transfers rather than the statutory limitations: the process is bureaucratic and requires almost 30 different steps from start to finish. Missteps at any stage can slow down or completely halt the process. Transfers should take roughly one month to complete, but often take three to six months. Also, the Algerian government has been known to delay the process as leverage in commercial and financial disputes with foreign companies. Expatriated funds can be converted to any world currency. The IMF classifies the exchange rate regime as an “other managed arrangement,” with the central bank pegging the value of the Algerian dinar (DZD) to a “basket” composed of 64 percent of the value of the U.S. dollar and 36 percent of the value of the euro. The currency’s value is not controlled by any market mechanism and is set solely by the central bank. As the Central Bank controls the official exchange rate of the dinar, any change in its value could be considered currency manipulation. When dollar-denominated hydrocarbons profits fell starting in mid-2014, the central bank allowed a slow depreciation of the dinar against the dollar over 24 months, culminating in about a 30 percent fall in its value before stabilizing around 110 dinars to the U.S. dollar in late 2016. However, the dinar lost only about 10 percent of its value against the euro in the same time frame. The 2020 Finance Law forecast a 10 percent depreciation of the dinar against the dollar over three years. Between March 8 and March 30 2020, the government allowed the dinar to depreciate five percent against the dollar. Imbalances in foreign exchange supply and demand caused by the COVID-19 outbreak in March 2020 led to a steep decline in the value of the euro and dollar on the foreign exchange black market. Remittance Policies There have been no recent changes to remittance policies. Algerian exchange control law remains strict and complex. There are no specific time limitations, although the bureaucracy involved in remittances can often slow the process to as long as six months. Personal transfers of foreign currency into the country must be justified and declared as not for business purpose. There is no legal parallel market through which investors can remit; however, there is a substantial black market for foreign currency, where the dollar and euro trade at a significant premium above official rates, although economic disruptions related to the outbreak of COVID-19 in March 2020 led to interruptions in the functioning of the black market. With the more favorable informal rates, local sources report that most remittances occur via foreign currency hand-carried into the country. Under central bank regulations revised in September 2016, travelers to Algeria are permitted to enter the country with up to 1,000 euros or equivalent without declaring the funds to customs. However, any non-resident can only exchange dinars back to a foreign currency with proof of initial conversion from the foreign currency. The same regulations prohibit the transfer of more than 3,000 dinars (USD 26) outside Algeria. Private citizens may convert up to 15,000 dinars (USD 127) per year for travel abroad. To do the conversion, they must demonstrate proof of their intention to travel abroad through plane tickets or other official documents. In April 2019, the Finance Ministry announced the creation of a vigilance committee to monitor and control financial transactions to foreign countries. It divided operations into three categories relating to 1) imports, 2) investments abroad, and 3) transfer abroad of profits. Sovereign Wealth Funds Algeria’s sovereign wealth fund (SWF) is the “Fonds de Regulation des Recettes (FRR).” The Finance Ministry’s website shows the fund decreased from 4408.2 billion dinars (USD 37.36 billion) in 2014 to 784.5 billion dinars (USD 6.65 billion) in 2016. Algerian media reported the FRR was spent down to zero as of February 2017. Algeria is not known to have participated in the IMF-hosted International Working Group on SWF’s. 7. State-Owned Enterprises State-owned enterprises (SOEs) comprise more than half of the formal Algerian economy. SOEs are amalgamated into a single line of the state budget and are listed in the official business registry. To be defined as an SOE, a company must be at least 51 percent owned by the state. Algerian SOEs are bureaucratic and may be subject to political influence. There are competing lines of authority at the mid-levels, and contacts report mid- and upper-level managers are reluctant to make decisions because internal accusations of favoritism or corruption are often used to settle political and personal scores. Senior management teams at SOEs report to their relevant ministry; CEOs of the larger companies such as national hydrocarbons company Sonatrach, national electric utility Sonelgaz, and airline Air Algerie report directly to ministers. Boards of directors are appointed by the state, and the allocation of these seats is considered political. SOEs are not known to adhere to the OECD Guidelines on Corporate Governance. Legally, public and private companies compete under the same terms with respect to market share, products and services, and incentives. In reality, private enterprises assert that public companies sometimes receive more favorable treatment. Private enterprises have the same access to financing as SOEs, but they work with private banks and they are less bureaucratic than their public counterparts. Public companies refrained from doing business with private banks and a 2008 government directive ordered public companies to work only with public banks. The directive was later officially rescinded, but public companies continued the practice. However, the heads of Algeria’s two largest state enterprises, Sonatrach and Sonelgaz, both indicated in 2020 that given current budget pressures they are investigating recourse to foreign financing, including from private banks. SOEs are subject to the same tax burden and tax rebate policies as their private sector competitors, but business contacts report that the government favors SOEs over private sector companies in terms of access to land. SOEs are subject to budget constraints. Audits of public companies can be conducted by the Court of Auditors, a financially autonomous institution. The constitution explicitly charges it with “ex post inspection of the finances of the state, collectivities, public services, and commercial capital of the state,” as well as preparing and submitting an annual report to the President, heads of both chambers of Parliament, and Prime Minister. The Court makes its audits public on its website, for free, but with a time delay, which does not conform to international norms. The Court conducts audits simultaneously but independently from the Ministry of Finance’s year-end reports. The Court makes its reports available online once finalized and delivered to the Parliament, whereas the Ministry withholds publishing year-end reports until after the Parliament and President have approved them. The Court’s audit reports cover the entire implemented national budget by fiscal year and examine each annual planning budget that is passed by Parliament. The General Inspectorate of Finance (IGF), the public auditing body under the supervision of the Ministry of Finance, can conduct “no-notice” audits of public companies. The results of these audits are sent directly to the Minister of Finance, and the offices of the President and Prime Minister. They are not made available publicly. The Court of Auditors and IGF previously had joint responsibility for auditing certain accounts, but they are in the process of eliminating this redundancy. Further legislation clarifying whether the delineation of responsibility for particular accounts which could rest with the Court of Auditors or the Ministry of Finance’s General Inspection of Finance (IGF) unit has yet to be issued. Privatization Program There has been limited privatization of certain projects previously managed by SOEs, and so far restricted to the water sector and possibly a few other sectors. However, the privatization of SOEs remains publicly sensitive and has been largely halted. 9. Corruption The current anti-corruption law dates to 2006. In 2013, the Algerian government created the Central Office for the Suppression of Corruption (OCRC) to investigate and prosecute any form of bribery in Algeria. The number of cases currently being investigated by the OCRC is not available. In 2010, the government created the National Organization for the Prevention and Fight Against Corruption (ONPLC) as stipulated in the 2006 anti-corruption law. The Chairman and members of this commission are appointed by a presidential decree. The commission studies financial holdings of public officials, though not their relatives, and carries out studies. Since 2013, the Financial Intelligence Unit has been strengthened by new regulations that have given the unit more authority to address illegal monetary transactions and terrorism funding. In 2016, the government updated its anti-money laundering and counter-terrorist finance legislation to bolster the authority of the financial intelligence unit to monitor suspicious financial transactions and refer violations of the law to prosecutorial magistrates. Algeria signed the UN Convention Against Corruption in 2003. The Algerian government does not require private companies to establish internal codes of conduct that prohibit bribery of public officials. The use of internal controls against bribery of government officials varies by company, with some upholding those standards and others rumored to offer bribes. Algeria is not a participant in regional or international anti-corruption initiatives. Algeria does not provide protections to NGOs involved in investigating corruption. While whistleblower protections for Algerian citizens who report corruption exist, members of Algeria’s anti-corruption bodies believe they need to be strengthened to be effective. International and Algerian economic operators have identified corruption as a challenge for FDI. They indicate that foreign companies with strict compliance standards cannot effectively compete against companies which can offer special incentives to those making decisions about contract awards. Economic operators have also indicated that complex bureaucratic procedures are sometimes manipulated by political actors to ensure economic benefits accrue to favored individuals in a non-transparent way. Anti-corruption efforts have so far focused more on prosecuting previous acts of corruption rather than on institutional reforms to reduce the incentives and opportunities for corruption. In October 2019, the government adopted legislation which allowed police to launch anti-corruption investigations without first receiving a formal complaint against the entity in question. Proponents argued the measure is necessary given Algeria’s weak whistle blower protections. Currently the government is working with international partners to update legal mechanisms to deal with corruption issues. The government also created a new institution to target and deter the practice of overbilling on invoices, which has been used to unlawfully transfer foreign currency out of the country. The government imprisoned numerous prominent economic and political figures in 2019 and 2020 as part of an anti-corruption campaign. Some operators report that fear of being accused of corruption has made some officials less willing to make decisions, delaying some investment approvals. Corruption cases that have reached trial deal largely with state investment in the automotive and public works sectors, though other cases are reportedly under investigation. Resources to Report Corruption Official government agencies: Central Office for the Suppression of Corruption (OCRC) Mokhtar Lakhdari, General Director Placette el Qods, Hydra, Algiers +213 21 68 63 12 www.facebook.com/263685900503591/ no email address publicly available National Organization for the Prevention and Fight Against Corruption (ONPLC) Tarek Kour, President 14 Rue Souidani Boudjemaa, El Mouradia, Algiers +213 21 23 94 76 www.onplc.org.dz/index.php/ firstname.lastname@example.org Watchdog organization: Djilali Hadjadj President Algerian Association Against Corruption (AACC) www.facebook.com/215181501888412/ +213 07 71 43 97 08 email@example.com Andorra Executive Summary Andorra is an independent principality with a population of about 77,500 and area of 181 square miles situated between France and Spain in the Pyrenees mountains. Although not a member of the European Union, Andorra is part of the EU Customs Union and, due to a monetary agreement with the EU, uses the euro as its national currency. Andorra has become a popular tourist destination, accounting for about 80 percent of GDP, visited by over 8 million people each year who are drawn by its winter sports, summer climate, and duty-free shopping. Andorra has also become a wealthy international commercial center because of its integrated banking sector and low taxes. As part of its effort to modernize its economy, Andorra has opened to foreign investment, and engaged in other reforms, such as advancing tax initiatives aimed at supporting a broader infrastructure. Andorra is actively seeking to attract foreign investment and to become a center for entrepreneurs, talent, innovation, and knowledge. In doing so, Andorra has fostered a large project with the Massachusetts Institute of Technology (MIT) on innovation and big data, employing Andorra’s unique economy as a test market. The Andorran economy is undergoing a process of diversification centered largely on tourism, trade, property, and finance. To provide incentives for growth and diversification in the economy, the Government began sweeping economic reforms in 2006. The Parliament approved three main regulations to complement the first phase of economic openness: the law of Companies (October 2007), the Law of Business Accounting (December 2007), and the Law of Foreign Investment (April 2008 and June 2012). From 2011 to 2017, the Parliament approved direct taxes in the form of a corporate tax, tax on economic activities, tax on income of non-residents, tax on capital gains, savings taxation, and personal income tax. These regulations aim to establish a transparent, modern, and internationally comparable regulatory framework. These reforms aim to attract investment and businesses that have the potential to boost Andorra’s economic development and diversification. Prior to 2008, Andorra limited foreign investment, worried that large foreign firms would have an oversized impact on its small economy. For example, previous regulations allowed non-citizens with less than 20 years residence in Andorra to own no more than 33 percent of a company. While foreigners may now own 100 percent of a trading enterprise or a holding company, the Government must approve the establishment of any private enterprise. The approval can take up to one month, which can be rejected if the proposal is found to threaten the environment, the public order, or the general interests of the principality. Andorra has per capita income above the European average and above the level of its neighbors, Spain and France. The country has developed a sophisticated infrastructure including a one-of-a-kind micro-fiber-optic network for the entire country that provides universal access to all households and companies. Andorra’s retail tradition is well known around Europe, thanks to more than 2,900 shops, the quality of their products, and competitive prices. Products taken out of the Principality are tax-free up to certain limits; the purchaser must declare those that exceed the allowance. Table 1 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 “Ease of Doing Business” 2019 N/A http://www.doingbusiness.org/rankings Global Innovation Index 2019 N/A 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 Andorra has established an open framework for foreign investments, allowing non-residents to create companies in the country, open businesses, and invest in all kinds of assets. The Foreign Investment Law came into force in July 2012, completely opening the economy to foreign investors. Since then, foreigners, whether resident or not, may own up to 100 percent of any Andorra-based company. The law also liberalizes restrictions on foreign professionals seeking to work in Andorra. Previously, a foreigner could only begin to practice in Andorra after twenty years of residency. Under the new regulations, any Andorran legal resident from a country that has a reciprocal standard can work in Andorra. The Government of Andorra created the ACTUA program (www.actua.ad ) as Andorra’s economic development and promotion office in order to provide counseling services, to both Andorran companies looking to grow and foreign investors wanting to start new businesses in Andorra. Actua’s mission is to increase competitiveness, innovation and the sustainability of the economy. Limits on Foreign Control and Right to Private Ownership and Establishment The Andorran legal framework has also adapted to international standards. The most relevant laws passed by Parliament to accompany the economic openness include the law of Companies (October 2007), the Law of Business Accounting (December 2007), and the Law of Foreign Investment (April 2008 and June 2012). The OECD removed Andorra from its “tax haven list” in 2009 after the country signed the Paris Declaration, formally committing to sharing fiscal information outlined by the agreement. With the approval of the Law 19/2016, of November the 30th, on automatic exchange of information on tax matters, Andorra will exchange financial information with signatories of the “Common Reporting Standard” (CRS), developed by the G20 and approved by the OECD Council on July 2014. From 2011 to 2019, the Parliament also approved direct corporate, non-resident, capital gains, savings, and personal income taxes. These regulations aim at establishing a transparent, modern, and internationally comparable regulatory framework. At 10 percent, well below the European average, Andorra’s corporate tax is more competitive than rates in neighboring Spain or France. Other Investment Policy Reviews In the past three years neither the Government nor any international organization has conducted an investment policy review, be it the Organization for Economic Cooperation and Development (OECD); World Trade Organization (WTO); or, the United Nations Conference on Trade and Development (UNCTAD). Business Facilitation Andorra established the ACTUA program as a public/private agency, made up of several ministries, government agencies, associations, and organizations from the private sector. It aims to increase competitiveness, innovation, and sustainability. It provides counseling services, to Andorran companies and potential foreign investors to facilitate investment and economic diversification. Andorran regulations allow for two types of companies: Private Limited Liability Company (Societat de Responsabilitat Limitada – SL), which have a minimum capital requirement of 3,000 euros; and, Public Liability Company (Societat Anonima – SA) which is normally required for multiple shareholders and has a minimum capital requirement of 60,000 euros. The business establishment procedures and for share acquisitions or transfers are quite similar to those of other countries, requiring the filling of a simple application form, with the additional unique condition of the presentation of any prior investment authorization received in the country. This same procedure is applicable for incorporation, establishment, extension, branching, or other form of business expansion. Once the company name is registered, the foreign investment is established, and the investor is required to deposit the share capital with an Andorran banking entity and proceed to public deed of incorporation before a Notary. The company registration before the Company Registry is automatic. Outward Investment The Government’s ACTUA program provides grants for small and medium size companies to foster competitiveness and facilitate internationalization. The Andorran Chamber of Commerce (www.ccis.ad ) helps companies search for business opportunities abroad. 6. Financial Sector Capital Markets and Portfolio Investment The Andorran financial sector is efficient and is currently the main pillar of the Andorran economy, representing 21 percent of the country’s GDP and over 5 percent of the workforce. Created in 1989, and redefined with more responsibilities in 2003, the Andorran Financial Authority (AFA; www.afa.ad ) regulates all aspects of the integrated financial system and safeguards its stability. The AFA is a public entity with its own legal status, functionally independent from the Government. AFA has the power to carry out all necessary actions to ensure the correct development of its supervision and control functions, disciplinary and punitive powers, treasury and public debt management services, financial agency, international relations, advice, and studies. The Andorran Financial Intelligence Unit (UIFAND) was created in 2000 as an independent organ to deal with the tasks of promoting and coordinating the prevention of money laundering and the financing of terrorism (www.uifand.ad ). The State Agency for the Resolution of Banking Institutions (AREB); is a public-legal institution created by Law 8/2015 to take urgent measures to introduce mechanisms for the recovery and resolution of banking institutions (www.areb.ad ). Money and Banking System Andorra adopted the use of the Euro in 2002 and in 2011 signed a new Monetary Agreement with the European Union (EU) making the Euro the official currency. Since July 1, 2013, Andorra has had the right to coin Euros. No exchange or capital controls exist. The Andorra banking system is sound and considered the most important part of the financial sector. The Andorran banks offer a variety of services at market rates. The country also has a sizeable and growing market for portfolio investments. The U.S. Internal Revenue Service certified all the Andorran banks as qualified intermediaries. Founded in 1960, the Association of Andorran Banks (ABA; www.aba.ad ) represents all Andorran banks. Among its tasks are representing and defending interests of its members, watching over the development and competitiveness of Andorran banking at national and international levels, improving sector technical standards, co-operation with public administrations, and promoting professional training, particularly dealing with money laundering prevention. At present, all five Andorran banking groups are ABA members, totaling an estimated 46 billion Euros in combined assets for 2017. Foreign Exchange and Remittances Andorra adopted the Euro in 2002 and in 2011 signed a new Monetary Agreement with the EU making the Euro the official currency. Since 2013, Andorra has the right to coin Euros. There are no limits or restrictions on remittances provided that they correspond to a company’s official earning records. Sovereign Wealth Funds Andorra has no Sovereign Wealth Fund (SWF). 7. State-Owned Enterprises Andorra has thirty-five state-owned enterprises (SOEs) associated with health, social services, and energy and telecommunication, which are generally allowed to compete with private, enterprises without restriction. The only exception is the government-owned Andorra Telecom, which has enjoyed a monopoly on the telecommunications industry since 2015. The Andorran public sector is made up of the central Administration and seven local administrations, one for each of the country’s seven parishes. The public sector employs 11.6 percent of Andorra’s workforce, or approximately 4,377 employees. Privatization Program Andorra has no current plans to privatize any of its SOEs. 9. Corruption Andorra’s laws penalize corruption, money laundering, drug trafficking, hostage taking, sale of illegal arms, prostitution, terrorism, as well as the financing of terrorism. Additional amendments were added in 2008, 2014, 2015, and 2016 to the Criminal Code and the Criminal Procedure Code that modify and introduce money laundering and terrorism financing provisions. In 1994, Andorra joined the Council of Europe, an institution that oversees the defense of democracy, the rule of law, and human rights. That same year, the Justice Ministers of the Member States decided to fight corruption at the European level after considering that the phenomenon posed a serious threat to the stability of democratic institutions. In early 2005, Andorra joined the Council of Europe’s Group of States against Corruption (GRECO) and, consequently, the fight against corruption. The Government has gradually built its internal regulations and relevant legal instruments and has undertaken numerous initiatives to improve the State’s response to reprehensible acts and conduct committed internally and internationally. The Government created the Unit for the Prevention and the Fight against Corruption (UPLC) in 2008 to centralize and coordinate actions that might concern local administrations, national bodies, and entities with an international scope. UPLC is in charge of implementing the recommendations made by GRECO in the framework of periodic evaluation reports. Andorra has not signed the UN Anticorruption Convention or the OECD Convention on Combatting Bribery of Foreign Public Officials in International Business Transactions. There are explicitly defined rules for the ethical behavior of all participating bodies within the Andorran financial system. The Andorran Financial Authority (AFAINAF) has also established rules regarding ethical behavior in the financial system. The Andorran government modified and implemented new laws in order to comply with international corruption standards. The Andorran Financial Intelligence Unit (UIFAND) was created in 2000 as an independent body charged with mitigating money laundering and terrorist funding (www.uifand.ad ). Resources to Report Corruption: Unitat de Prevencio i Lluita contra la Corrupcio Ministeri d’Afers Socials, Justicia i Interior Govern d’Andorra Ctra.de l’Obac s/n AD700 Escaldes-Engordany Phone: +376 875 700 Email: firstname.lastname@example.org Angola Executive Summary Angola is a lower middle-income country located in southern Africa with a USD 100 billion gross domestic product (GDP), a 31.9 million population and a per capita income of USD 3,360 according to 2019 International Monetary Fund (IMF) estimates. The third largest economy in sub-Saharan Africa, Angola is a member of the Organization of the Petroleum Exporting Countries (OPEC) and produces an average of 1.390 million barrels per day, the second highest volume in the sub-Saharan region behind Nigeria. Angola also holds significant proven gas reserves as well as extensive mineral resources. Oil still accounts for 90 percent of exports and 37 percent of GDP. The Government of Angola (GRA)’s commitment to improve oil sector transparency led to the creation of the National Oil and Gas Agency (ANPG), an independent regulator to manage oil and gas concessions, which also ensures that the state-owned oil monopoly Sonangol will relinquish substantial control in the sector and on its core upstream business. In addition to reforms in the oil sector, the administration of President Joao Lourenco has implemented numerous other structural reforms to improve macroeconomic stability and the climate for economic growth. In early 2018, the government scrapped the Angolan currency’s fixed peg to the U.S. dollar over concerns of dwindling foreign exchange reserves, and to institute a more transparent market-based foreign exchange regime. A new private investment law and an antitrust law in 2018 have been key administration initiatives to encourage foreign direct investment (FDI), private-sector competitiveness, and growth. The loosening of the exchange rate has since led to a 178 percent drop in the kwanza. Public debt has shot up to above100 percent of GDP. To curb the depletion of foreign currency reserves, the Central Bank (BNA) has allowed commercial banks to purchase foreign currency directly from oil and gas companies. The BNA has also adopted a restrictive monetary policy, increased the minimum share and start-up requirements for commercial banks, and revoked the licenses of two non-complaint commercial banks. The Lourenco administration has prioritized the fight against corruption and the culture of impunity. His government has indicted prominent Angolan figures accused of corruption-related charges and has improved the legal framework to better control illicit financial flows. The National Strategic Plan to Fight Against Corruption, a five-year strategy launched in 2018, aims to tackle corruption, money laundering, and other economic and financial crimes. The strategy focuses on three main pillars – prevention, prosecution, and institutional capacity building, and includes short and long-term initiatives for a-whole-of society approach to help reduce the impact of corruption. In late 2018, the government approved the law on Compulsory Repatriation and Excess Loss of Assets, providing measures for the repatriation of illicit financial flows. However, a lack of institutional, human, and material capacity risks undercutting the government’s anti-corruption objectives. The business environment remains challenging, spurred by a tedious bureaucracy with limited bottom-up leadership. Angola ranked 177 out of 190 in the 2020 World Bank’s Doing Business ranking. Inadequate supply chain infrastructure, slow and inefficient institutions, limited access to credit, and corruption continue to constrain the private sector’s contribution to growth. Progress in economic diversification and advancement in social and human-capital indicators remain slow and limited. Angola remains heavily dependent on oil, which accounts for 90% of the nation’s total merchandise exports. The recent decline in international oil prices has further aggravated the vulnerability of the country to external shocks. Overdependence on a single export item (oil) has also discouraged the country from incorporating into global value chains and participating more fully in the export of manufactured goods and value-added services. Rolling back dependency on oil will require significant investment in other economic sectors to stimulate growth. Opportunities lie in the precious minerals, tourism, agriculture, fisheries, and hydropower sectors. Continued infrastructure development opportunities are most obvious in the areas of public transportation, tourism, port rehabilitation, energy and power, telecoms, mining, natural gas, and in creating national oil refining capacity. Key sectors that have attracted significant regional and international investment in the country include energy, construction, and oil and gas. Non-oil economic sectors such as agriculture, energy, fisheries, and extractives will open up new areas to foreign and national investment. As the country continues to seek to diversify its economy, an emerging sector is agriculture, in which the country lacks technical knowhow and the necessary startup capital resources to develop. Agriculture represents only 11 percent of GDP. Angola has decided to open up its telecoms market in a bid to attract foreign capital. Key Issues to watch: Angola continues to suffer from a relatively poor investment climate due in large part to the lack of openness to competition in the private sector and the dominance of the state on state-owned enterprises and in the economy. However, the government has prioritized the privatization of 74 state-owned enterprises by 2020. Angola benefits from a relatively stable and predictable political environment, especially when compared to its neighbors in the region. While Angola is scheduled to hold its first municipal elections in 2020, which may lead to some decentralization of decision-making authority, disbursement, and management of public resources, it is unlikely the elections will occur due to the ongoing COVID-19 pandemic. There is an abundant supply of unskilled labor, particularly in the capital, Luanda. Skilled professionals are available, but often require additional training. Portuguese is commonly spoken, while English competency levels are relatively low. The new private investment law of 2018 provides greater tax incentives to companies investing in the domestic economy and does away with the local partnership requirements for foreign investment and ends minimum levels for investment. The Government remains committed to improving the investment environment, strengthening governance, and fighting corruption, and in 2019 passed amended anti-money laundering and countering the financing of terrorism (AML/CFT) legislation to better control illicit financial flows and fight against corruption. Real estate and living expenses remain expensive but have recently moderated due to the ongoing economic crisis, and the local currency weakening against the U.S. dollar. In 2019, Luanda ranked 26th as the most expensive city for expatriates globally, down from sixth in 2018. Infrastructure is limited, roads are often in poor condition, power outages are common, and water availability can be unreliable. Although the government is attempting to ensure more transparency and has improved in its corruption ratings, the investment climate remains hampered by corruption, and a complex, opaque regulatory environment, as outlined in Table 1. Despite price gains in crude oil benchmarks in 2019, weak global oil demand affected the Angolan economy, creating drastic losses in export revenue and a severe limitation in foreign exchange, forcing substantial cuts in government spending. Angola’s high external imbalances and forex shortages continue to hurt private sector growth, and its declining foreign currency reserves. Repatriation of capital, dividends, and transfers of remittances abroad remain challenging. Portfolio investment in Angola is embryonic. Women empowerment: Although only 23 percent of Angola’s entrepreneurs are women, Angola boasts one of the highest growth rates of female entrepreneurs in Africa. However, the government has not instituted any significant reforms to increase the percentage of female entrepreneurs and limited access to credit remains a significant impediment to entrepreneurship in general. Table 1: Key Metrics and Rankings Measure Year Index/Rank Website Address TI Corruption Perceptions Index 2019 146 of 180 https://www.transparency.org/cpi2019 World Bank’s Doing Business Report 2019 177 of 190 http://www.doingbusiness.org/en/rankings Global Innovation Index 2019 Not listed of 129 https://www.globalinnovationindex.org/analysis-indicator U.S. FDI in partner country ($M USD, historical stock positions) 2018 USD 267 Million https://apps.bea.gov/international/factsheet/ World Bank GNI per capita 2018 USD 3360 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD 1. Openness To, and Restrictions Upon, Foreign Investment Policies Towards Foreign Direct Investment Angola’s business environment remains one of the most difficult in the world. Investors must factor in pervasive corruption, an underdeveloped financial system, loss of U.S. corresponding banking relationships, abundant but unskilled labor, and extremely high operating costs. Surface transportation inside the country is slow and expensive, while bureaucracy and port inefficiencies complicate trade and raise costs. The government continued to make concerted efforts to improve and diversify sources of foreign direct investment (FDI) which have been low, volatile and concentrated in the extractive sector. The New Private Investment Law (NPIL) approved by Presidential Decree 10/18, of June 26, 2018 eliminates preferential treatment to local investors and offers equal treatment to foreign investors. There are no laws or practices that discriminate against foreign investors, including U.S. investors. FDI is concentrated in the oil industry with negligible investments in the diamond, power generation, infrastructure, agriculture and health sectors. However, Angola has placed emphasis on investment in the agriculture sector to promote local production and help reduce its import bill. The NPIL also eliminated local content provisions for foreign investors, with local content provisions now only applicable to investments specific to the oil & gas, mining, banking and financial services, aviation, and shipping sectors. Implementation of the New Private Investment Law (NPIL) remains slow and is not standardized. In November 2019, in collaboration with the American Chamber of Commerce in Angola (AmCham-Angola), the government launched the “Angola is Now” investment guide intended as a research tool to grant investors access to information on the business environment and investment opportunities in Angola. The guide contains information on Angola’s natural potential, private investment legislation, as well as the sectors of greatest interest, such as diamonds, other precious stones, iron ore, oil, agriculture, tourism, transportation, real estate and industry. Available in Portuguese and English, the guide also provides a wide range of information on the physical, geographical, environmental, economic and demographic characteristics of Angola’s 18 provinces and can also be accessed at: http://amchamangola.org/guide/ . Limits on Foreign Control and Right to Private Ownership and Establishment With the NPIL, the Angolan government eliminated the 35 percent local content requirement in foreign investments, and offered incentives to companies investing in the domestic economy, while maintaining minimal FDI screening processes, bringing it more in line with those of its sub-Saharan African neighbors. Foreign ownership remains limited to 49 percent in the oil and gas sectors, 50 percent in insurance, and 10 percent in the banking sectors. There are several objectives that the GRA seeks to accomplish through its FDI screening process: 1) create jobs for Angolans or transfer expertise to Angolan companies as part of an “Angolanization” plan; 2) protect sensitive industries such as defense and finance; 3) prevent capital flight or any other behavior that could threaten the stability of the Angolan economy; and, 4) diversify the economy. Other Investment Policy Reviews Angola has been a member of the World Trade Organization (WTO) since 1996. The WTO performed a policy review of Angola in September 2015. At the government’s request, on September 30, 2019, the United Nations Conference on Trade and Development (UNCTAD) completed the Investment Policy Review (IPR) of Angola’s business and economic environments. The IPR was part of an EU funded wider technical assistance project aimed to assist Angola in attracting and benefitting from FDI beyond the extractives industry and support the GRA’s objective of increasing economic diversification and sustainable development. The full report and policy recommendations are accessible at: https://unctad.org/en/PublicationsLibrary/diaepcb2019d4_en.pdf Business Facilitation The World Bank Doing Business 2020 report ranked Angola 177 out of 190 countries and recorded an improvement in Angola’s monitoring and regulation of power outages, and in facilitating trade through the implementation of an automated customs data management system, ASYCUDA (Automated System for Customs Data) World, and by upgrading its port community system to allow for electronic information exchange between different parties involved in the import/export process. Launching a business typically requires 36 days, compared with a regional average of 27 days, with Angola ranked 146 out of the 190 economies evaluated. The government has maintained the approximately twenty “Balcoes Unicos do Empreendedor” (“One Stop Shop” for Entrepreneurs) since 2012. In addition to the Balcoes Unicos process, new business owners must also complete processes at the Ministry of Commerce, the General Tax Administration (AGT) and the provincial court in the location where the business has its headquarters. The Angolan Private Investment and Export Promotion Agency (AIPEX) that replaced the Angolan Investment and Export Promotion Agency (APIEX) now serves as a one-stop shop to promote local and foreign investments, exports and the international competitiveness of Angolan companies. The new state-run private investment agency website is http://www.aipex.gov.ao/PortalAIPEX/#!/ . Contact Information: Departamento de Promoção e Captação do Investimento; Agencia de Investimento Privado e Promoção de Investimentos e Exportações de Angola (AIPEX). Rua Kwamme Nkrumah No.8, Maianga, Luanda, Angola Tel: (+244) 995 28 95 92| 222 33 12 52 Fax: (+244) 222 39 33 81 To encourage the flow of investors and to boost tourism, Presidential Decree 56/18, of February 20, 2018, exempts several neighboring countries from visa entry requirements, and as of March 30, visas upon arrival are available to 61 countries/regions, including the United States and the EU, upon presentation of proof of accommodation and financial support. The 2018 NPIL eliminates the 35 percent local partner stake in the capital structure of foreign investment in the electricity and water, tourism, transport and logistics, construction, media, telecommunications, and information technology (IT) sectors. Angolan law provides equal access for women entrepreneurs and underrepresented minorities in the economy. However, in practice, the investment facilitation mechanisms do not provide added advantages to these groups. Programs to benefit female entrepreneurs and underrepresented groups such as startup projects, business capacity building and development, and financial assistance including micro credit, are mainly implemented by non-governmental organizations and international financial institutions such as the African Development Bank (AfDB), the World Bank (WB), and private sector companies. Outward Investment The Angolan Government does not promote or incentivize outward investment nor does it restrict Angolans from investing abroad. Investors are free to invest in any foreign jurisdiction. According to data from the BNA, in 2018, the government did not invest abroad but received returns on previous investments abroad. Domestic investors invest preferably in Portuguese speaking countries with few investing in neighboring countries in Sub Saharan Africa. The bulk of investment is in fashion, fashion accessories and domestic goods. Due to foreign exchange constraints, there has been very little or no investment abroad by domestic investors. 6. Financial Sector Capital Markets and Portfolio Investment Angola’s capital markets remain nascent. To respond to the need for increased sources of financing for the economy, in 2013, the Angolan government created the Capital Markets Commission (CMC). Angola’s banks are likely the most established businesses that could potentially list on an exchange. However, many Angolan banks have a high rate of non-performing loans, reported to be as high as 37 percent. Angola’s banks have struggled in recent years due to the country’s deteriorating economic environment and increasingly high rate of delinquent loans. The Governor of the BNA has stated that Angola’s banks must go through a consolidation phase and ordered an asset quality review of the banks in early 2019. So far, the BNA has revoked the licenses of three banks based on their failure to meet the mandatory new share-capital minimum requirement, will recapitalize the largest state-owned bank, and has ordered another bank’s shareholders to increase the bank’s operating capital or face potential revocation. The process may limit banks’ ability in the near-term to list on the country’s fledgling stock exchange. The Angolan government raised USD 3 billion in its third Eurobond issue in international markets with investor demand reportedly reaching USD 8.44 billion, exceeding the government’s expectations. For its second Eurobond issue in May 2018, Angola sold a USD 1.75bn, ten year bond at a coupon interest rate of 8.25 percent and a 30 year bond worth USD 1.25bn with a yield of 9.375 percent. According to Angola’s finance ministry, the second Eurobond issuance received more than 500 investor submissions totaling USD 9 billion, three times the final sale value. In November 2015, Angola raised a USD 1.5 billion, 10-year Eurobond with a 9.5 percent yield. Plans to return to the internal bond market in 2020 have been put on hold due to the ongoing coronavirus pandemic and the ensuing downturn in global oil prices. The BNA has developed a market for short-term bonds, called Titulos do Banco Central, and long-term bonds, called Obrigaçoes do Tesouro. Most of these bonds are bought and held by local Angolan banks. The Obrigaçoes have maturities ranging from one to 7.5 years, whereas the Titulos have maturities of 91 to 182 days. For information on current rates, see: http://www.bna.ao/ . Foreign investors do not normally access credit locally. For Angolan investors, credit access is very limited, and if available, comes with a collateral requirement of 125 percent, so they either self-finance, or seek financing from non-Angolan banks and investment funds. The termination of the “Angola Invest” government-subsidized funding program for micro, small and medium private enterprises (SMEs) on September 25, 2018, has further reduced funding opportunities for many SMEs. Since its inception in 2012, Angola Invest financed approximately 515 projects worth USD 377 million. The Angolan National Development Plan provides for the liquidation of unviable state-owned enterprises, the privatization of non-strategic state enterprises and the sale of shareholding by 2022. In January 2018, the president created a commission – the State Asset Management Institute (IGAPE), to prepare and implement the privatization program (PROPRIV), with assistance from the Stock Exchange BODIVA. By April 2020, the Government had reportedly sold an estimated seven entities under its privatization initiative. Money and Banking System The BNA, Angola’s central bank and currency regulator has remained under considerable pressure to stabilize Angola’s economy as a high rate, currently 37 percent, of non-performing loans has crippled the banks’ ability and willingness to foster private sector lending. The BNA implemented a contractionary monetary policy, reducing local currency in circulation over fears of escalating inflation and foreign currency arbitrage. To further address these concerns, in early 2018, the government also scrapped the Angolan currency’s fixed peg to the U.S. dollar in favor of greater rate flexibility, and began regular foreign exchange auctions to banks, preventing the allocation of dollars to preferred clients. From January 2018 to December 2019, the Angolan currency lost 178 percent of its purchasing capacity against the Dollar. The Net International Reserves, despite a loss of purchasing power of more than 100 percent taking into account the price of the currency, suffered a reduction of 40 percent from 2017 to June 2019. The 178 percent devaluation from 2018 has translated into an increase in Angola’s debt, now close to 111 percent of GDP. Angola’s agreement with the IMF for USD 3.7 billion in financial support for which it has requested an additional USD 800 million, suggests the government’s intent to reassure investors, and to diversify Angola’s source of borrowing. As a key condition of the IMF loan, Angola cannot have any new oil collateralized debt. The government also resorted to international capital markets and raised USD 3 billion in its third Eurobond issue with investor demand reportedly reaching nearly USD 8.44 billion. There are currently 27 banks in Angola. Five banks, Banco Angolano de Investimentos (BAI), Banco Economico, Banco de Fomento Angola (BFA), Banco BIC Angola (BIC), and Banco de Poupança e Credito S.A.R.L. (BPC), control over 80 percent of total banking assets, deposits, and loans. Angolan banks focus on profit generating activities including transactional banking, short-term trade financing, foreign exchange, and investments in high-interest government bonds. Banks had until the end of 2018 to comply with the newly BNA-set USD 50 million mandatory capital start-up requirement, up from the previous USD 25 million requirement. In early 2019, the BNA revoked the operating licenses of two banks, Banco Mais and Banco Postal, for failing to increase their capital to meet the new minimum requirements. Another bank, Banco Angolano de Negocios e Comercio, is currently under BNA administration. Angola is scheduled for its next Financial Action Task Force (FATF) mutual evaluation review in 2020/2021 which may also be postponed due to the COVID-19 pandemic. In 2016, the FATF adjudged that Angola had made significant progress in improving its AML/CFT regime and established the requisite legal and regulatory framework to meet its commitments in its action plan regarding strategic deficiencies the identified by the FATF during reviews in 2010 and 2013. Angola has continued to work with the regional FATF body, the Eastern and Southern African Anti-Money Laundering Group (ESAAMLG), to address its remaining strategic deficiencies in anticipation of the 2020/2021 review. Angola has been affected by the broader global de-risking trends wherein banks decide to stop lending to businesses in markets deemed too risky from an anti-money laundering and terrorist financing compliance standpoint. In December 2016, Deutsche Bank, the last international bank providing dollar-clearing services, closed its dollar clearing services in Angola. A limited number of international banks still operate in Angola and provide limited trade finance such as Germany’s Commerzbank and South Africa’s Standard Bank. In 2018, there were no further correspondent bank losses. International banks previously refrained from entering the Angolan market because of the risk of fines and other penalties, but in 2018 there was more interest, with several banks conducting independent assessments of the business climate. Foreign Exchange and Remittances Foreign Exchange Angola continues trading mostly in two currencies, the U.S. dollar and the Euro, with the Renminbi gaining greater prominence given the degree of trade with China. In a bid to deal with the foreign currency shortage and substantial foreign currency arbitrage in the parallel market, the government has opted for a managed float for its currency exchange rate. The Angolan Kwanza was pegged at a rate of 166.00 per U.S. dollar from April 2016 to January 2018 following a steep devaluation due to the slump in oil prices. On January 10, 2018, the BNA began conducting foreign currency auctions allowing the kwanza to fluctuate within an undisclosed but controlled band. Since dropping the peg to the U.S. dollar in January 2018, the Kwanza has depreciated by approximately 178 percent as at the end of December 2019 where a USD was equivalent to 462 Kwanzas. As of November 29, 2019, the BNA’s Monetary Policy Committee (MPC) authorized direct sales of foreign currency between oil companies and commercial banks, and reduced banks’ foreign exchange position limit from 5.0 percent of its own funds to 2.5 percent. The controlling exchange rate is determined by the transaction rate applied on the sale. Occasionally, the BNA may also sell forex through auctions to commercial banks. Banks may charge a margin of up to 2 percent on the reference exchange rate published on the institutional website of the BNA, considered high for investors. Currently, the BNA also publishes daily for public consumption the rates at which each individual commercial bank is selling and purchasing forex. The informal activity in the supply of foreign currency, products, and services is still winning the daily battle against the formal market, even when taking into account availability, quantity, speed, and stability. In 2019, the BNA took steps to eliminate remaining imbalances in the foreign exchange market. Commercial banks may assign foreign currency to their clients based on a schedule submitted and approved by the BNA. On the sale by banks to exchange offices and remittance companies, banks may only make foreign currency available in physical notes on a collateral basis, as they must, and at the time of sale debit the national currency account of those institutions against delivery of physical notes. Payment of remittances in any form and non-strategic imports face a lengthy wait between 90-180 days for foreign exchange. Priority is given to strategic importers of food, raw materials for construction, agriculture, medicine and the oil sector. According to the IMF, the government accumulated USD 51 million in new arrears between end-December 2018 and end-June 2019, due to constraints associated with correspondent banks transacting in U.S. dollars. The government further accumulated about USD 30 million in new arrears between end-June and end-September 2019 and was expected to accumulate an additional USD 30 million by year-end, due to the same correspondent banking constraints. Investors cannot freely convert their earnings in kwanza to any foreign exchange rate due to limited available foreign exchange. Credit cards and other options for payment are extremely limited and money-servicing businesses (Western Union & MoneyGram) have ceased foreign outward transactions in foreign currency. From June 9, 2019, Letters of credit have been designated as the preferential payment instrument for imports. The National Bank of Angola (BNA) Notice no. 15/19, published 30 December 2019, defines new procedures for foreign exchange operations carried out by non-residents. According to the notice, the new procedures apply to foreign exchange transactions related to foreign direct investment – that is, foreign exchange non-resident operations carried out, alone or cumulatively, including divestment operations – in the following ways: Transfer of personal funds from abroad; Application of cash and cash equivalents in national and foreign currency, in bank accounts opened in financial institutions domiciled in Angola, held by foreign exchange residents, susceptible to repatriation; Imports of machinery, equipment, accessories and other tangible fixed assets; Incorporation of technologies and knowledge, provided that they represent an added value to the investment and are susceptible to financial evaluation; Provision of supplementary capital payments or supplies to partners or shareholders; Application, in the national territory, of funds in the scope of reinvestment; Conversion of credits resulting from the execution of contracts for the supply of machinery, equipment and goods, as long as they are proven to be liable to payments abroad; and, Foreign investment in securities or divestment of such assets, covering: i) shares; ii) obligations; iii) units of participation in collective investment undertakings and other documents representing homogeneous legal situations. These procedures also apply to foreign exchange transactions related to foreign investment projects that have been registered with the BNA prior to 30 December 2019. However, they do not apply to investments made by non-foreign exchange residents in the oil sector, which will continue to be governed by proper legislation. The following obligations are applicable to non-resident foreign exchange entities that intend to invest in Angola, within the scope of the new procedures: They must be holders of foreign exchange non-resident accounts, opened with a banking financial institution domiciled in Angola, For the purpose of receiving payments, including for the purchase of shares listed on the stock exchange, foreign currency must be sold to the investment banking intermediary financial institution, except in the case of purchase of securities denominated in foreign currency traded on a regulated market in Angola; Transfer income related to a foreign direct investment is only allowed after the project has been completed and after payment of the taxes due. The non-resident foreign exchange investor is allowed to maintain in national currency values relating to income, reimbursement of supplies or proceeds from the sale of investments to make new investments or convert to foreign currency at a future date. Finally, the following obligations are now imposed on financial institutions that carry out transactions with non-resident foreign exchange entities: Report to BNA the transfer of securities to and from abroad related to the import and export of capital and associated income, at the time of registration in the accounts of its clients who are not foreign exchange residents; Require full identification and knowledge of its customers, as well as confirmation of their status as non-resident foreign exchange; Transfer the financial resources designated for making investments to a specific sub-account created, that should be used only for that purpose; Ensure that movements in bank accounts held by foreign exchange non-residents, in national and foreign currency, are supported by documents that allow a clear identification of the origin or destination of the funds; For the purpose of assessing the legitimacy of transfers abroad of income from foreign direct investments not quoted on a stock exchange, make sure that the investment was made, through the copy of the Private Investment Registration Certificate (CRIP), among other requirements. For the purpose of validating the export proceeds from the sale of securities and related income, validate the source of the credit in the bank accounts of non-resident customers. Breach of the obligations summarized above is punishable by fines of up to AOA 150 million (USD 305,000) for individuals or up to AOA 500 million (USD 1.02 million) for legal persons. Remittance Policies In 2019, the Angolan government amended its anti-money laundering previously established in January 2014. The new law, Law no. 5/20, applies particularly to financial and non-financial entities, accountants, lawyers, law firm partners and auditors acting (including intermediation) in representation of clients in transactions that involve real estate’s acquisition/sale, incorporation of companies and bank accounts’ opening, management or movement, in attempts to better combat illicit remittance flows. Importantly, the new law expressly prohibits the incorporation of shell banks — banks with no physical presence in Angola nor connection to any financial group, requires reporting on capital movement in any commercial bank exceeding USD 1000, and requires enhanced scrutiny of local politically exposed persons. The subsequent drop in foreign exchange availability in Angola, beginning in 2015 due to declining petroleum revenues, has severely impeded personal and legitimate business remittances. International and domestic companies operating in Angola face delays securing foreign exchange approval for remittances to cover key operational expenses, including imported goods and expatriate salaries. The government has improved profit and dividend remittances for most companies, including foreign airlines with withheld remittances for the sector currently valued by the International Air Transport Association (IATA) at USD 4 million, down from 137 million in early 2019. The BNA has facilitated remittances of international supplies by introducing payment by letters of credit. Also, the 2018 NPIL grants foreign investors “the right and guarantee to transfer abroad” dividends or distributed profits, the proceeds of the liquidation of their investments, capital gains, the proceeds of indemnities and royalties, or other income from remuneration of indirect investments related to technology transfer after proof of implementation of the project and payment of all taxes due. The government continues to prioritize foreign exchange for essential goods and services including the food, health, defense, and petroleum industries. Sovereign Wealth Funds In October 2012, former President Eduardo dos Santos established a petroleum-funded USD 5 billion sovereign wealth fund called the Fundo Soberano de Angola (FSDEA). The FSDEA was established in accordance with international governance standards and best practices as outlined in the Santiago Principles. In February 2015, the FSDEA was recognized as transparent by the Sovereign Wealth Fund Institute (SWFI), receiving a score of 8 out of 10. The FSDEA has the express purpose of profit maximization with a special emphasis on investing in domestic projects that have a social component (http://www.fundosoberano.ao/investments/ ). Jose Filomeno dos Santos (Zenu), son of former President Jose Eduardo dos Santos, was appointed chairman of FSDEA in June 2013, but was removed by President Lourenco, based reportedly on poor results at the FSDEA and conspiracy with the Fund’s wealth manager, Quantum Global (QG), to embezzle FSDEA funds. Former Minister Carlos Alberto Lopes was named new head of the FSDEA. Zenu remains under investigation for money laundering, embezzlement, and fraud related to his management of the FSDEA, and is currently on trial for fraud in connection with the transfer of USD 500 million from the Angolan Central Bank to a bank in the UK. On March 22, 2019, the government freed Jean-Claude Bastos de Morais, QG’s CEO, in preventive detention since September 2018, based on the insufficiency of evidence to support the collection of malfeasance charges, while it continues to build its case against him. Half of the initial endowment of FSDEA was invested in agriculture, mining, infrastructure, and real estate in Angola and other African markets, and the other half was supposedly allocated to cash and fixed-income instruments, global and emerging-market equities, and other alternative investments. The FSDEA is in possession of approximately USD 3.35 billion of its private equity assets previously under the control of QG, and announced that the government will use USD 1.5 billion of the fund’s assets to support social programs on condition of future repayment through increased tax on the BNA’s rolling debts. 7. State-Owned Enterprises In Angola, certain state-owned enterprises (SOEs) exercise delegated governmental powers, especially in the mining sector where the government is the sole concessionaire. Foreign investors may sometimes find demands made by SOEs excessive, and under such conditions, SOEs have easier access to credit and government contracts. There is no law mandating preferential treatment to SOEs, but in practice they have access to inside information and credit. Currently, SOEs are not subject to budgetary constraints and quite often exceed their capital limits. SOEs, often benefitting from a government mandate, operate mostly in the extractive, transportation, commerce, banking, and construction sectors. All SOEs in Angola are required to have boards of directors, and most board members are affiliated with the government. SOEs are not explicitly required to consult with government officials before making decisions. By law, SOEs must publish annual financial reports for the previous year in the national daily newspaper Jornal de Angola by April 1. Such reports are not always subject to publicly released external audits (though the audit of state oil firm Sonangol is publicly released). The standards used are often questioned. Not all SOEs fulfill their legal obligations, and few are sanctioned. Angola’s supreme audit institution, Tribunal de Contas, is responsible for auditing SOEs. However, the Tribunal de Contas does not make its reports publicly available. Angola’s fiscal transparency would be improved by ensuring its supreme audit institution audits SOEs, as well as the government’s annual financial accounts, and makes public its findings within a reasonable period. Publicly available audit reports would also improve the transparency of contracts between private companies and SOEs. In November 2016, the Angolan Government revised Law 1/14 “Regime Juridico de Emissão e Gestão da Divida Publica Directa e Indirecta,” which now differentiates between ‘direct’ and ‘indirect’ public debt. The GRA considers SOE debt as indirect public debt, and only accounts in its state budget for direct government debt, thus effectively not reflecting some substantial obligations in fact owed by the government. President Lourenço has launched various reforms to improve financial sector transparency, enhance efficiency in the country’s SOEs as part of the National Development plan 2018-2022 and Macroeconomic Stability Plan. The strategy included the prospective privatization of 74 SOEs that are deemed not profitable to the state. The privatization will possibly include the restructuring of the national air carrier TAAG, as well as Sonangol and its subsidiaries. The latter intends to sell off its non-core businesses as part of its restructuring strategy to make the parastatal more efficient. Angola is not a party to the WTO’s Government Procurement Agreement (GPA). Angola does not adhere to the OECD guidelines on corporate governance for SOEs. Privatization Program The government has a plan to privatize 74 of 90 public companies by 2022 through the Angola Debt and Securities Exchange market (BODIVA) and under the supervision of the Institute of Management of Assets and State Participations (IGAPE). The privatization plan is in line with the provisions of the Government’s Interim Macroeconomic Stabilization Program (PEM), which aims to rid the government of unprofitable public institutions. The terms of reference for the privatization program are not yet public, except for seven factories located in the Special Economic Zone (ZEE). The seven industrial units with full terms of reference are: UNIVITRO – glassworks industry; JUNTEX – plaster industry; CARTON – carton and packaging industry; ABSOR – absorbent products industry; INDUGIDET – sanitation and detergents industry; COBERLEN – blankets and linens industry; and, SACIANGO – cement bags industry. By April 2020, the Government had reportedly sold an estimated seven entities under its privatization initiative, mostly farms, and did not include the seven industrial units with full terms of reference. The government plans to privatize part of state-owned Angola Telecommunications Company, companies in the oil and energy sector, as well as several textile industries. The government has stated that the privatization process will be open to interested foreign investors and has guaranteed a transparent bidding process. Proposals from investors for seven industrial units at the ZEE will be given special attention to those who decide to retain local workers in these units. The government created a privatization commission on February 27, 2018 and a website https://igape.minfin.gov.ao/PortalIGAPE/#!/sala-de-imprensa/noticias/5413/anuncio-de-concurso-tender-announcement for submission of tenders. Full tender documents can be obtained by visiting the below link: http://www.ucm.minfin.gov.ao/cs/groups/public/documents/document/zmlu/mdu4/~edisp/minfin058842.zip Alternatively, contact email@example.com. The tenders are open to local and foreign investors. 9. Corruption Corruption remains a strong impediment to doing business in Angola and has had a corrosive impact on international market investment opportunities and on the broader business climate. Transparency International’s 2019 Corruption Perceptions Index ranks Angola 165 out of 175 countries in its corruption level survey, improving two places from the previous year’s ranking due to ongoing efforts to reduce corruption. Since coming into office on an anti-corruption platform, President Lourenco has led a concerted effort to restore investor confidence by prioritizing anti-corruption and the fight against nepotism. In December, the government froze the assets and accounts of Isabel dos Santos, the former first daughter, and subsequently indicted her on fraud-related charges for mismanaging and embezzling funds during her 18-month stint as chair of the state’s oil firm, Sonangol. Several other government officials were also sacked from office, detained and tried on corruption charges. On September 19, the Supreme Court ordered that Norberto Garcia, the former spokesman of the ruling MPLA party and former director of the defunct Technical Unit for Private Investment, a state institution, charged with fraud, money laundering and document falsification, be placed under house arrest in Luanda. The case dates back to November 2017 when Garcia and six foreigners allegedly tried to set up a state project in a USD 50 billion scam. In another high-profile anti-corruption case, the trial of the former head of Angola’s sovereign wealth fund, José “Zénu” Filomeno dos Santos and his co-conspirator, former Central Bank Governor Valter Felipe, began on December 9. The former stands accused of embezzling USD 1.5billion of public money during his tenure at the Sovereign wealth fund (2013-2017), and both stand accused of fraud and embezzlement related to the illegal transfer of USD 500 million from the BNA coffers to a Credit Suisse account in London. Meanwhile, in August, a court sentenced former Transport Minister Augusto da Silva Tomás to 14 years in prison on fraud charges, but later reduced his sentence to eight years. Angola has a comprehensive anti-corruption legal framework but implementation remains a severe challenge. In January, the government issued a general conduct guide mostly for the National Public Procurement Service, the regulatory and supervisory body of public procurement in Angola, outlining whistleblowing responsibilities for corruption and related offences in public procurement. Following approval in October, a new law on anti-money laundering, combating the Financing of Terrorism, and the proliferation of weapons of mass destruction came into force in January 2020, superseding Law No. 34/11, of 12 December 2011. The new law incorporates several IMF and the Financial Action Task Force (FATF) recommendations. Importantly, it finally recognizes and includes politically exposed persons to be any national or foreign person that holds or has held a public office in Angola, or in any other country or jurisdiction, or in any international organization, and subjects them to greater scrutiny by the financial sector. Other significant improvements in the new law include: The definition of “ultimate beneficial owner” was expanded to encompass, notably, all persons that hold, directly or indirectly, a controlling interest in a company, including the control of the share capital, voting rights or a significant influence in the company. There is no longer a minimum threshold to determine the existence of control; Identification and diligence duties are now applicable to occasional transactions executed via wire transfers in an amount of more than USD 1,000, in national or foreign currency; The scope of the duty to communicate suspicious transactions in cash or wire transfers has been amended and is now applicable to transactions between USD 5,000 and USD 15,000, depending on the underlying operation; Payment-service providers that control the ordering and reception of a wire transfer must consider the information received from the sender and the beneficiary to determine whether there is a communication duty; The Tax Authorities now have a duty to report suspicious cross-border payments. The president approved a set of amendments to the Public Contracts Law on November 16, 2018, which imposed further requirements for the declaration of assets and income, interests, impartiality, confidentiality, and independence in the formation and execution of public contracts. In December 2018, the Government of Angola rolled out of a national anti-corruption strategy (NACS) billed under the motto, “Corruption – A fight for All and By All.” The five-year strategy, developed in concert with the UNDP, is designed to improve government transparency, accountability, and responsiveness to citizen needs. The NACS focuses on three pillars in the fight against corruption – prevention, prosecution, and institutional capacity building. Crimes linked to corruption are enforced through the Public Probity Law of 2010. President Lourenco’s mandate for senior government officials requires all public officials to disclose their assets and income once every two years, and it prohibits public servants from receiving money or gifts from private business deals. The Penal Code makes it a criminal offense for private enterprises to engage in business transactions with public officials. Angola has incorporated regional anti-corruption guidelines and into their domestic legislation, including: the SADC “Protocol Against Corruption,” the African Union’s “Convention on Preventing and Combating Corruption,” and the United Nation’s “Convention against Corruption.” Angola does not have an independent body to investigate and prosecute corruption cases, and generally, enforcement of existing laws is weak or non-existent. However, the Attorney General’s office has a department for Investigation of Corruption crimes and Recovery of Assets. Three institutions – the Audit Court, the Inspector General of Finance, and the Office of the Attorney General – perform many of the anti-corruption duties in Angola. http://www.business-anti-corruption.com/country-profiles/sub-saharan-africa/angola/initiatives/public-anti-corruption-initiatives.aspx The government also passed the Law on the Repatriation of Financial Resources in June 2018, which established the terms and conditions for the repatriation of financial resources held abroad by resident individuals and legal entities with registered offices in Angola. The law exempted individuals and legal entities, who voluntarily repatriated their financial resources within a period of 180 days following the date of entry into force of the Law, by transferring the funds to an Angolan bank account, from any obligation or liability of tax, foreign exchange and criminal nature. Upon expiry of the grace period for repatriation, the Law allowed for the possibility of coercive repatriation by the government. The government estimates that USD 30 billion of Angolan assets are sheltered overseas. In early 2019, the government established the National Asset Recovery Service (SNRA), an institution linked to the Attorney General’s Office (PGR), in charge of ensuring compliance with the repatriation law. Private sector companies have individual internal controls for ethics, compliance and tracking fraudulent activities. However, they do not have a mechanism to detect and report irregularities related to dealings with public officials. It is important for U.S. companies, regardless of their size, to assess the business climate in the sector in which they will be operating or investing, and to have an effective compliance program or measures to prevent and detect corruption, including foreign bribery. U.S. individuals and firms operating or investing in Angola, should take the time to become familiar with the relevant anticorruption laws of both Angola and the United States in order to properly comply with them, and where appropriate, they should seek legal counsel. Angola is not a member state to the UN Anticorruption Convention or the OECD Convention on Combatting Bribery. On March 26, 2018 it ratified and published in the national gazette the African Union Convention on the Prevention and Fight against Corruption and now takes legislative measures against illicit enrichment (Article 8), confiscation and seizure of proceeds and means of corruption (Article 16), and international cooperation in matters of corruption and money laundering (Article 20). Resources to Report Corruption Hélder Pitta Grós Procurador Geral da Republica (Attorney General of the Republic) Procurador Geral da Republica (Attorney General’s Office) Travessa Antonio Marques Monteiro 22, Maianga Telephone: 244-222-333172 Antigua and Barbuda Executive Summary Antigua and Barbuda 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), as of December 31, 2019, Antigua and Barbuda had an estimated Gross Domestic Product (GDP) in market prices of $1.72 billion in 2019, with forecast growth of 6.75 percent in 2020. The economy of Antigua and Barbuda remained buoyant, driven mainly by increased tourist arrivals and ongoing public and commercial construction projects. However, due to the coronavirus pandemic, these projections have been revised downwards significantly, with expected declines in revenues and increased spending on imports such as medicine, medical equipment, and food. The government has stated it remains committed to improving the business climate to attract more foreign investment and stimulate growth. In the World Bank’s 2020 Doing Business Report, Antigua and Barbuda ranks 113th out of 190 countries rated. The scores remained relatively unchanged from the previous year, but highlighted some improvements in starting a business. The government strongly encourages foreign direct investment (FDI), particularly in industries that create jobs and earn foreign exchange. Through the Antigua and Barbuda Investment Authority (ABIA), the government facilitates and supports FDI in the country and maintains an open dialogue with current and potential investors. All potential investors are afforded the same level of business facilitation services. While the government welcomes all FDI, tourism and related services, manufacturing, agriculture and fisheries, information and communication technologies, business process outsourcing, financial services, health and wellness services, creative industries, education, yachting and marine services, real estate, and renewable energy have been identified by the government as priority investment areas. There are no limits on foreign control of investment and ownership in Antigua and Barbuda. Foreign investors may hold up to 100 percent of an investment. Antigua and Barbuda’s legal system is based on British common law. There is currently an unresolved dispute regarding expropriation of an American-owned property. For this reason, the U.S. government recommends continued caution when investing in real estate in Antigua and Barbuda. In 2017, the government signed an intergovernmental agreement in observance of the U.S. Foreign Account Tax Compliance Act (FATCA), making it mandatory for banks in Antigua and Barbuda to report the banking information of U.S. citizens. Table 1: Key Metrics and Rankings Measure Year Index/Rank Website Address TI Corruption Perceptions Index 2019 Not ranked http://www.transparency.org/ research/cpi/overview World Bank’s Doing Business Report 2019 113 of 190 http://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, historical stock positions) 2018 7.0 http://apps.bea.gov/international/ factsheet/ World Bank GNI per capita 2018 15,890 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 Antigua and Barbuda strongly encourages FDI, particularly in industries that create jobs, enhance economic activity, earn foreign currency, and have a positive impact on its citizens. Diversification of the economy remains a priority. Through the ABIA, the government facilitates and supports FDI in the country and maintains an open dialogue with current and potential investors. While the government welcomes all FDI, it has identified tourism and related services, manufacturing, agriculture and fisheries, information and communication technologies, business process outsourcing, financial services, health and wellness services, creative industries, education, yachting and marine services, real estate, and renewable energy as priority investment areas. Limits on Foreign Control and Right to Private Ownership and Establishment There are no limits on foreign control of investment and ownership in Antigua and Barbuda. Foreign investors may hold up to 100 percent of an investment, and a local or foreign entrepreneur needs about 40 days from start to finish to transfer the title on a piece of property. In 1995, the government established a permanent residency program to encourage high-net-worth individuals to establish residency in Antigua and Barbuda for up to three years. As residents, their income is free of local taxation. This program is separate from the Citizenship by Investment (CBI) program. The ABIA evaluates all FDI proposals and provides intelligence, business facilitation, and investment promotion to establish and expand profitable business enterprises. The ABIA also advises the government on issues that are important to the private sector and potential investors to increase the international competitiveness of the local economy. The government of Antigua and Barbuda treats foreign and local investors equally with respect to the establishment, acquisition, expansion, management, conduct, operation, and sale or other disposition of investments in its territory. Other Investment Policy Reviews The OECS, of which Antigua and Barbuda is a member, has not conducted a trade policy review in the last three years. Business Facilitation Established in 2006, the ABIA facilitates foreign direct investment in the aforementioned priority sectors and advises the government on the formation and implementation of policies and programs to attract investment. The ABIA provides business support services and market intelligence to all investors. Its website is: http://investantiguabarbuda.org/ . It also offers an online guide that is useful for navigating the laws, rules, procedures, and registration requirements for foreign investors. The guide is available at http://www.theiguides.org/public-docs/guides/antiguabarbuda . All potential investors applying for government incentives must submit their proposals for review by the ABIA to ensure the project is consistent with national interests and provides economic benefits to the country. In the World Bank’s 2020 Doing Business Report, Antigua and Barbuda ranks 130th out of 190 in the ease of starting a business. The establishment of a new business takes nine procedures and 19 days to complete. This time was reduced by three days because the government made improvements to the exchange of information between public entities involved in company incorporation. The general practice is to retain a local attorney who prepares all the relevant incorporation documents. A business must register with the Intellectual Property and Commerce Office (IPCO), the Inland Revenue Department, the Medical Benefits Scheme, the Social Security Scheme, and the Board of Education. The government continues to explore ways to further expedite the process. The government of Antigua and Barbuda continues to advance the work of the Antigua and Barbuda Business Innovation Center (ABBIC), a two-year project to assist small business and entrepreneurs. The ABBIC includes a business incubator and provides education, training, and investment opportunities to new and existing businesses. The Innovation Center focuses on businesses in the healthcare, tourism, agriculture and environment sectors, as well as projects submitted by women. Through the Prime Minister’s Entrepreneurial Development Program (EDP), people with disabilities can apply for a special incentive grant. The EDP will also provide opportunities for female and young entrepreneurs in keeping with government’s mandate to support the growth of niche markets, innovation, the intellectual capital and ingenuity of its citizens, and the development of micro-, small- and medium-sized enterprises. Outward Investment Although the government of Antigua and Barbuda prioritizes investment retention as a key component of its overall economic strategy, there are no formal mechanisms in place to achieve this. In order to sustain future economic growth, Antigua and Barbuda’s economy depends on significant FDI. There is no restriction on domestic investors seeking to do business abroad. Local companies in Antigua and Barbuda are actively encouraged to take advantage of export opportunities specifically related to the country’s membership in the OECS Economic Union and the Caribbean Community Single Market and Economy (CSME), 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 As a member of the ECCU, Antigua and Barbuda 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 securities market activities. 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 $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. Antigua and Barbuda is open to portfolio investment. Antigua and Barbuda accepted the obligations of Article VIII of the International Monetary Fund Agreement. Sections 2, 3 and 4, and maintains an exchange system free of restrictions on making international payments and transfers. The government normally does not grant foreign tax credits except in cases where taxes are paid in a Commonwealth country that grants similar relief for Antigua and Barbuda taxes, or where an applicable tax treaty provides a credit. The private sector has access to credit on the local market through loans, purchases of non-equity securities, and trade credits, as well as other accounts receivable that establish a claim for repayment. Money and Banking System Antigua and Barbuda is a signatory to the 1983 agreement establishing the ECCB. The ECCB controls Antigua and Barbuda’s currency and regulates its domestic banks. The Banking Act 2015 is a harmonized piece of legislation across the ECCU member states. The ECCB and the Ministers of Finance of member states jointly carry out banking supervision under the Act. The Ministers of Finance usually act in consultation with the ECCB with respect to those areas of responsibility within the Minister of Finance’s portfolio. Domestic and foreign banks can establish operations in Antigua and Barbuda. The Banking Act requires all commercial banks and other institutions to be licensed. The ECCB regulates financial institutions. As part of supervision, licensed financial institutions are required to submit monthly, quarterly, and annual performance reports to the ECCB. In its latest annual report, the ECCB listed the commercial banking sector in Antigua and Barbuda as stable. Assets of commercial banks totaled $2.07 billion at the end of December 2019 and remained relatively consistent during the previous year. The reserve requirement for commercial banks was 6 percent of deposit liabilities. Antigua and Barbuda remains well served by bank and non-bank financial institutions. There are minimal alternative financial services offered. Some people still participate in informal community group lending, but the practice is declining. The Caribbean region has witnessed a withdrawal of correspondent banking services by U.S. 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. The government of Antigua and Barbuda has announced plans to introduce legislation to operate and regulate blockchain technology as an integral part of aspirations to develop Antigua and Barbuda as a regional center for blockchain and cryptocurrency. The government intends to collaborate with global oversight bodies in the implementation of international best practices that will make the jurisdiction attractive to international business. Foreign Exchange and Remittances Foreign Exchange Antigua and Barbuda 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, Antigua and Barbuda has a foreign exchange system that is fully liberalized. 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 Antigua and Barbuda. Remittance Policies Companies registered in Antigua and Barbuda have the right to repatriate all capital, royalties, dividends, and profits free of all taxes or any other charges on foreign exchange transactions. The government levies withholding taxes on non-resident corporations and individuals receiving income in the form of dividends, preferred share dividends, interest and rentals, management fees, and royalties, as well as on interest on bank deposits to non-resident corporations. A person must be present on the island for no less than four years without interruption to be considered a resident. Antigua and Barbuda is a member of the CFATF. In February 2017, the government of Antigua and Barbuda signed an intergovernmental agreement in observance of the FATCA, making it mandatory for banks in Antigua and Barbuda to report the banking information of U.S. citizens. Sovereign Wealth Funds Neither the government of Antigua and Barbuda nor the ECCB, which Antigua and Barbuda is a member, maintains a sovereign wealth fund. 7. State-Owned Enterprises State-owned enterprises (SOEs) in Antigua and Barbuda are governed by their respective legislation and do not generally pose a threat to investors, as they are not designed for competition. The government established many SOEs to create economic activity in areas where the private sector is perceived to have very little interest. A list of SOEs can be found at: http://ab.gov.ag/detail_page.php?page=1 . SOEs are headed by boards of directors to which senior managers report. In 2016, parliament passed the Statutory Corporations (General Provisions) Act, which specifies the ministerial responsibilities in the appointment and termination of board members, decisions of the board, and employment in these SOEs. In order to promote diversity and independence on SOE boards, professional associations, non-governmental organizations (NGOs), and civil society may nominate directors for boards. Privatization Program Antigua and Barbuda does not have a targeted privatization program. 9. Corruption The law provides criminal penalties for corruption by officials, and the government generally implements these laws if corruption is proven. Allegations of corruption against government officials in Antigua and Barbuda are fairly common. Both major political parties frequently accused the other of corruption, but investigations yielded few, if any results. Antigua and Barbuda is party to the Inter-American Convention against Corruption and the United Nations Anti-Corruption Convention. The Integrity in Public Life Act requires all public officials to disclose all income, assets (including those of spouses and children), and personal gifts received while in public office. An Integrity Commission, established by the Act and appointed by the Governor General, receives and investigates complaints regarding noncompliance with or violations of this law or of the Prevention of Corruption Act. As the only agency charged with combating corruption, the Commission was independent but understaffed and under-resourced. Critics stated the legislation was inadequately enforced and the act should be strengthened. The Freedom of Information Act gives citizens the statutory right to access official documents from public authorities and agencies, and it created a commissioner to oversee the process. In practice, citizens found it difficult to obtain documents, possibly due to government funding constraints rather than obstruction. The Act created a special unit mandated to monitor and verify disclosures. By law, the disclosures are not public. There are criminal and administrative sanctions for noncompliance. Resources to Report Corruption Radford Hill Chairman, Integrity Commission R.I.O.A. (Francis Trading) Building, Ground Floor, High Street St. John’s, Antigua (268) 462-5939 (268) 462-5939 firstname.lastname@example.org The Office of National Drug and Money Laundering Control Policy is the independent law enforcement agency with specific authority to investigate reports of suspicious activity concerning specified offences and the proceeds of crime. http://ondcp.gov.ag/laws/regulation/ http://ondcp.gov.ag/about/overview-of-ondcp/ Lt Col Edward Croft Director, Office of National Drug and Money Laundering Control Policy Camp Blizzard, St. George’s, Antigua (268) 562-3255/6 email@example.com Argentina Executive Summary Argentina presents investment and trade opportunities, particularly in infrastructure, health, agriculture, information technology, energy, and mining; however, soaring debt and a failure to implement critical structural reforms have prevented the country from maximizing its economic potential, though the country has taken steps to diminish bureaucratic procedures. Market reactions to the 2019 Argentine presidential elections deepened the country’s economic crisis, stalling reform efforts and leading to a rollback of some market-driven growth policies and the imposition of capital and export controls. In late 2019, the government reprofiled some of the country’s local law debt payments. Argentina’s economy contracted for the second year in a row in 2019, as unemployment and poverty grew and annual inflation rose to 53.8 percent. Following a victory in the October 2019 general election, President Alberto Fernandez took office on December 10, 2019. His economic agenda at the beginning of 2020 focused on restructuring the country’s sovereign debt and providing support to vulnerable sectors. The Fernandez administration increased taxes on foreign trade, further tightened capital controls, and pulled back from former President Mauricio Macri’s fiscal austerity measures, expanding fiscal expenditures. Citing a need to preserve Argentina’s diminishing foreign exchange reserves and raise government revenues for social programs, the Fernandez administration passed a sweeping “economic emergency” law that included a 30 percent tax on purchases of foreign currency and all individual expenses incurred abroad, whether in person or online. The country began a nationwide quarantine on March 20 to combat the COVID-19 pandemic, shortly after the first case was confirmed on March 3. As of early May, the government anticipated a 6.5 percent drop in real Gross Domestic Product (GDP) growth for 2020, though the full economic impact will largely depend on how long quarantine restrictions last and whether the government reaches agreement with its private bondholders to avoid a sovereign default. The Argentine government issued a series of economic relief measures to mitigate the economic impact of the quarantine, primarily focusing on informal workers that account for approximately 40 percent of the labor force. The government’s self-declared insolvency has sharply limited its access to credit, obligating it to finance the pandemic-related stimulus measures by monetary issuance, which may hamper its efforts to restrain inflation and maintain a stable exchange rate. As a result of the crisis, industry and unions are analyzing changes to labor agreements and requesting government tax reforms. U.S. companies frequently point to a high and unpredictable tax burden and rigid labor laws, which make responding to changing macroeconomic conditions more difficult, as obstacles to further investment in Argentina. In April, the government reprofiled foreign currency local law debt. In early May, the Minister of Economy announced the government has sought to restructure its debt to private creditors by May 22 and to reschedule its Paris Club debt. The Minister also stated the government intends to seek a new program with the International Monetary Fund (IMF), to which it owes $44 billion from a Standby arrangement the government signed in 2018. In 2019, Argentina fell two places in the Competitiveness Ranking of the World Economic Forum (WEF), which measures how productively a country uses its available resources, to 83 out of 141 countries, and 12 out of the 20 countries in the Latin American and Caribbean region. As a MERCOSUR member, Argentina signed a free trade and investment agreement with the EU in June 2019. Argentina has not ratified the agreement yet. In May, Argentina proposed slowing the pace and adjusting the negotiating parameters of MERCOSUR’s ongoing trade liberalization talks with South Korea, Canada, and other partners to help protect vulnerable populations and account for the impact of the ongoing COVID-19 pandemic. Argentina ratified the WTO Trade Facilitation Agreement on January 22, 2018. Argentina and the United States continue to expand bilateral commercial and economic cooperation, specifically through the Trade and Investment Framework Agreement (TIFA), the Commercial Dialogue, and under the Growth in the Americas initiative, in order to improve and facilitate public-private ties and communication on trade, investment, energy, and infrastructure issues, including market access and intellectual property rights. More than 300 U.S. companies operate in Argentina, and the United States continues to be the top investor in Argentina with more than USD $15 billion (stock) of foreign direct investment as of 2018. Table 1: Key Metrics and Rankings Measure Year Index/Rank Website Address TI Corruption Perceptions Index 2019 66 of 183 http://www.transparency.org/ research/cpi/overview World Bank’s Doing Business Report 2019 126 of 190 http://www.doingbusiness.org/en/rankings Global Innovation Index 2019 73 of 129 https://www.globalinnovationindex.org/ analysis-indicator U.S. FDI in partner country ($M USD, historical stock positions) 2018 15,196 https://www.bea.gov/data/ economic-accounts/international/ World Bank GNI per capita 2018 12,390 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 Argentina has identified its top economic priorities as resolving its burdensome sovereign debt situation and responding to the COVID-19 pandemic, particularly by protecting vulnerable members of society. When the Fernandez administration took office in late 2019, the Ministry of Foreign Affairs, International Trade, and Worship became the lead governmental entity for investment promotion. The Fernandez administration does not have a formal business roundtable or other dialogue established with international investors, although it does engage with domestic and international companies. Some of the former Macri administration’s efforts to improve the investment climate had included reforms to simplify bureaucratic procedures in an effort to provide more transparency, reduce costs, and diminish economic distortions by adopting good regulatory practices. Many of the planned public-private partnership projects for public infrastructure were delayed or canceled due to Argentina’s macroeconomic difficulties, as well as allegations of corruption in public works projects during the 2003-2015 period. The Macri administration also had expanded economic and commercial cooperation with key partners, including Chile, Brazil, Japan, South Korea, Spain, Canada, and the United States, and deepened its engagement in international fora such as the G-20, the WTO, and the OECD. Foreign and domestic investors generally compete under the same conditions in Argentina. The amount of foreign investment is restricted in specific, sectors such as aviation and media. Foreign ownership of rural productive lands, bodies of water, and areas along borders is also restricted. Argentina has a national Investment and Trade Promotion Agency that provides information and consultation services to investors and traders on economic and financial conditions, investment opportunities, and Argentine laws and regulations. The agency also provides matchmaking services and organizes roadshows and trade delegations. Upon the change of administration, the government placed the Agency under the direction of the Ministry of Foreign Affairs (MFA) to improve coordination between the Agency and Argentina´s foreign policy. The Under Secretary for Trade and Investment Promotion of the MFA works as a liaison between the Agency and provincial governments and regional organizations. The new administration also created the National Directorate for Investment Promotion under the Under Secretary for Trade and Investment Promotion, making the Directorate responsible for promoting Argentina as an investment destination. The Directorate´s mission also includes determining priority sectors and projects and helping Argentine companies expand internationally and/or attract international investment. The agency’s web portal provides information on available services (https://www.inversionycomercio.org.ar/es/home ) Many of the 24 provinces also have their own provincial investment and trade promotion offices. Limits on Foreign Control and Right to Private Ownership and Establishment Foreign and domestic commercial entities in Argentina are regulated by the Commercial Partnerships Law (Law 19,550), the Argentina Civil and Commercial Code, and rules issued by the regulatory agencies. Foreign private entities can establish and own business enterprises and engage in all forms of remunerative activity in nearly all sectors. Full foreign equity ownership of Argentine businesses is not restricted, for the most part, with exception in the air transportation and media industries. The share of foreign capital in companies that provide commercial passenger transportation within the Argentine territory is limited to 49 percent per the Aeronautic Code Law 17,285. The company must be incorporated according to Argentine law and domiciled in Buenos Aires. In the media sector, Law 25,750 establishes a limit on foreign ownership in television, radio, newspapers, journals, magazines, and publishing companies to 30 percent. Law 26,737 (Regime for Protection of National Domain over Ownership, Possession or Tenure of Rural Land) establishes that a foreigner cannot own land that allows for the extension of existing bodies of water or that are located near a Border Security Zone. In February 2012, the government issued Decree 274/2012 further restricting foreign ownership to a maximum of 30 percent of national land and 15 percent of productive land. Foreign individuals or foreign company ownership is limited to 1,000 hectares (2,470 acres) in the most productive farming areas. In June 2016, the Government of Argentina issued Decree 820 easing the requirements for foreign land ownership by changing the percentage that defines foreign ownership of a person or company, raising it from 25 percent to 51 percent of the social capital of a legal entity. Waivers are not available. Argentina does not maintain an investment screening mechanism for inbound foreign investment. U.S. investors are not at a disadvantage to other foreign investors or singled out for discriminatory treatment. Other Investment Policy Reviews Argentina was last subject to an investment policy review by the OECD in 1997 and a trade policy review by the WTO in 2013. The United Nations Conference on Trade and Development (UNCTAD) has not done an investment policy review of Argentina. Business Facilitation In 2019, stemming from the country’s deteriorating financial and economic situation, the Argentine government re-imposed capital controls on business and consumers, limiting their access to foreign exchange. The capital controls and increases in taxes on exports and imports the Argentine government instituted at the end of 2019 have generated uncertainty in the business climate. The Ministry of Production eased bureaucratic hurdles for foreign trade through the creation of a Single Window for Foreign Trade (“VUCE” for its Spanish acronym) in 2016. The VUCE centralizes the administration of all required paperwork for the import, export, and transit of goods (e.g., certificates, permits, licenses, and other authorizations and documents). The Argentine government has not fully implemented the VUCE for use across the country. Argentina subjects imports to automatic or non-automatic licenses that are managed through the Comprehensive Import Monitoring System (SIMI, or Sistema Integral de Monitoreo de Importaciones), established in December 2015 by the National Tax Agency (AFIP by its Spanish acronym) through Resolutions 5/2015 and 3823/2015. The SIMI system requires importers to submit detailed information electronically about goods to be imported into Argentina. Once the information is submitted, the relevant Argentine government agencies can review the application through the VUCE and make any observations or request additional information. The list of products subject to non-automatic licensing has been modified several times since the beginning of the SIMI system. In January 2020, the government moved 300 tariff lines from the automatic import licensing system to the non-automatic import licensing system. The Argentine Congress approved an Entrepreneurs’ Law in March 2017, which allows for the creation of a simplified joint-stock company (SAS, or Sociedad por Acciones Simplifacada) online within 24 hours of registration. Detailed information on how to register a SAS is available at: https://www.argentina.gob.ar/produccion/crear-una-empresaAs of April 2019, the online business registration process is only available for companies located in Buenos Aires. Foreign investors seeking to set up business operations in Argentina follow the same procedures as domestic entities without prior approval and under the same conditions as local investors. To open a local branch of a foreign company in Argentina, the parent company must be legally registered in Argentina. Argentine law requires at least two equity holders, with the minority equity holder maintaining at least a five percent interest. In addition to the procedures required of a domestic company, a foreign company establishing itself in Argentina must legalize the parent company’s documents, register the incoming foreign capital with the Argentine Central Bank, and obtain a trading license. A company must register its name with the Office of Corporations (IGJ, or Inspeccion General de Justicia). The IGJ website describes the registration process and some portions can be completed online (https://www.argentina.gob.ar/justicia/igj/guia-de-tramites ). Once the IGJ registers the company, the company must request that the College of Public Notaries submit the company’s accounting books to be certified with the IGJ. The company’s legal representative must obtain a tax identification number from AFIP, register for social security, and obtain blank receipts from another agency. Companies can register with AFIP online at www.afip.gob.ar or by submitting the sworn affidavit form No. 885 to AFIP. Details on how to register a company can be found at the Ministry of Productive Development’s website: https://www.argentina.gob.ar/produccion/crear-una-empresa . Instructions on how to obtain a tax identification code can be found at: https://www.argentina.gob.ar/obtener-el-cuit-por-internet. The enterprise must also provide workers’ compensation insurance for its employees through the Workers’ Compensation Agency (ART, or Aseguradora de Riesgos del Trabajo). The company must register and certify its accounting of wages and salaries with the Secretariat of Labor, within the Ministry of Labor, Employment, and Social Security. In April 2016, the Small Business Administration of the United States and the Ministry of Production of Argentina signed a Memorandum of Understanding (MOU) to set up small and medium sized business development centers (SBDCs) in Argentina. Under the MOU, in June 2017, Argentina set up a SBDC in the province of Neuqueén to provide small businesses with tools to improve their productivity and increase their growth. The Ministry of Productive Development offers attendance-based courses and online training for businesses. The training menu can be viewed at: https://www.argentina.gob.ar/produccion/capacitacion . Outward Investment The National Directorate for Investment Promotion under the Under Secretary for Trade and Investment Promotion at the MFA assists Argentine companies in expanding their business overseas, in coordination with the National Investment and Trade Promotion Agency. Argentina does not have any restrictions regarding domestic entities investing overseas, nor does it incentivize outward investment. 6. Financial Sector Capital Markets and Portfolio Investment While Argentina’s economic recession began in 2018, a new financial crisis emerged in August 2019 following the unexpected landslide victory of the opposition presidential candidate Alberto Fernandez, foreshadowing his likely victory in the general election. In order to slow the outflow of dollars from its reserves, the Argentine Central Bank introduced tight capital controls prohibiting transfers and payments that are likely in conflict with IMF Article VIII in September 2019 and tightened them thereafter. The Argentine government also implemented price controls and trade restrictions. In December 2019, the new government passed an economic emergency law that created new taxes, increased export duties, and delegated broad powers to the Executive Branch, with the objectives of increasing social spending for the most vulnerable populations and negotiating revised terms for Argentina’s sovereign debt. All these measures have deteriorated the investment climate for local and foreign investors. In April 2020, the government issued a decree postponing debt payments (both interest and principal) of dollar-denominated debt issued under local law until December 31, 2020. Following this measure, rating agencies downgraded Argentina’s country risk to selective, or restrictive, default. The IMF characterized Argentina’s debt situation as “unsustainable” in a February 2020 statement. On April 15, the government presented a formal offer to creditors and continued engaging in negotiations to avoid a default. The Argentine Securities and Exchange Commission (CNV or Comision Nacional de Valores) is the federal agency that regulates securities markets offerings. Securities and accounting standards are transparent and consistent with international norms. Foreign investors have access to a variety of options on the local market to obtain credit. Nevertheless, the domestic credit market is small – credit is 16 percent of GDP, according to the World Bank. To mitigate the recessionary impact of the COVID-19 crisis, the government introduced low-cost lending credit lines (carrying negative real interest rates), and the Central Bank reduced banks’ minimum reserve requirements to encourage banks to expand credit, particularly to SMEs. The Buenos Aires Stock Exchange is the organization responsible for the operation of Argentina’s primary stock exchange, located in Buenos Aires city. The most important index of the Buenos Aires Stock Exchange is the MERVAL (Mercado de Valores). U.S. banks, securities firms, and investment funds are well-represented in Argentina and are dynamic players in local capital markets. In 2003, the government began requiring foreign banks to disclose to the public the nature and extent to which their foreign parent banks guarantee their branches or subsidiaries in Argentina. Money and Banking System Argentina has a relatively sound banking sector based on diversified revenues, well-contained operating costs, and a high liquidity level. The main challenge for banks is to rebuild long-term assets and liabilities. Due to adverse international and domestic conditions, the economy has been in recession since 2018 with high inflation and interest rates. Credit to the private sector in local currency (for both corporations and individuals) decreased 18 percent in real terms in 2019. The anticipated deep recession combined with risks of accelerating inflation have raised concerns regarding the ability of banks to maintain healthy balances. The largest bank is the Banco de la Nacion Argentina. Non-performing private sector loans constitute less than six percent of banks’ portfolios. Private banks have total assets of approximately ARS 4,100 billion (USD $69 billion). Total financial system assets are approximately ARS 6,700 billion (USD $112 billion). The Central Bank of Argentina acts as the country’s financial agent and is the main regulatory body for the banking system. Foreign banks and branches are allowed to establish operations in Argentina. They are subject to the same regulation as local banks. Argentina’s Central Bank has many correspondent banking relationships, none of which are known to have been lost in the past three years. The Central Bank has enacted a resolution recognizing cryptocurrencies and requiring that they comply with local banking and tax laws. No implementing regulations have been adopted. Block chain developers report that several companies in the financial services sector are exploring or considering using block chain-based programs externally and are using some such programs internally. One Argentine NGO, through funding from the Inter-American Development Bank (IDB), is developing block chain-based banking applications to assist low income populations. Foreign Exchange and Remittances Foreign Exchange Beginning in September 2019, the Argentine Central Bank issued a series of decrees and norms regulating access to foreign exchange markets. This series of measures that began with Decree 609/2019 imposes numerous restrictions. Regarding individuals’ ability to purchase dollars, as of October 28, 2019 and pursuant to Communication A6815/2019, Argentine individuals may purchase no more than $200 per month on a rolling monthly basis if the purchase is done through the banking system, or $100 per month if the purchase is made in cash. Purchases above that amount require BCRA approval. In December 2019, the government imposed a 30 percent tax (known as the Impuesto para una Argentina Inclusiva y Solidaria, “PAIS”) on the purchase of foreign currency. The tax also applies to international online purchases from Argentina, paid with credit or debit cards. Non-Argentine residents are required to obtain prior Central Bank approval to purchase in excess of $100 per month, except for certain bilateral or international organizations, institutions and agencies, diplomatic representation, and foreign tribunals. Bank customers—whether individuals or companies—can freely withdraw the balances from their dollar accounts. Companies and individuals will need to obtain prior clearance from the Central Bank before transferring funds abroad (including dividend payments or other distributions abroad, or to pay for services rendered to a company by foreign affiliates). In the case of individuals, if transfers are made from their own foreign currency accounts in Argentina to their own accounts abroad, they do not need to obtain Central Bank approval. Beginning in September 2019, exporters of goods are required to transfer proceeds to Argentina and settle in pesos. Exporters must settle according to the following terms: exporters with affiliates (irrespective of the type of good exported) and exporters of certain goods (including cereals, seeds, minerals, and precious metals, among others) must convert their foreign currency proceeds to pesos within 15 days after the issuance of the permit for shipment; other exporters have 180 days to settle in pesos. Irrespective of these deadlines, the obligation to transfer the funds to Argentina and settle in pesos must be complied with within five business days from the actual collection. Argentine residents are required to transfer to Argentina and settle in pesos the proceeds from services exports rendered to non-Argentine residents that are paid in foreign currency either in Argentina or abroad, within five business days from collection thereof. Payment of imports of goods and services from third parties requires Central Bank approval if the company needs to purchase foreign currency. Payment of imports of goods and services from affiliates for an amount exceeding $2 million per month are subject to prior approval to purchase that foreign currency from the Central Bank. Pre-cancellation of debt coming due abroad in more than three business days requires Central Bank approval to purchase dollars. Per Resolution 36,162 of October 2011, locally registered insurance companies are mandated to maintain all investments and cash equivalents in the country. The BCRA limits banks’ dollar-denominated asset holdings to 5 percent of their net worth. In January 2020, the Central Bank presented its monetary policy framework showing that the monetary and financial policies will be subject to the government’s objective of addressing current social and economic challenges. In particular, the Central Bank acknowledged that it will continue to provide financial support to the government (in foreign and domestic currency) as external credit markets remain closed. The Central Bank determined that a managed exchange rate is a valid instrument to avoid sharp fluctuations in relative prices, international competitiveness, and income distribution. The Central Bank also noted the exchange rate policy should also facilitate the preemptive accumulation of international reserves. In June 2018, the International Monetary Fund (IMF) and Argentina announced a Standby Arrangement agreement (SBA). Three months after agreeing to a $50 billion SBA, Argentina and the IMF announced in September 2018 a set of revisions, including an increase in the line of credit by $7.1 billion. This also front-loads the disbursement of funds and brings the program total to $57 billion. In July 2019, the IMF approved its fourth review allowing the government to withdraw about $5.4 billion, bringing total disbursements since June 2018 to approximately $44.1 billion. The Fernandez administration stated that it does not plan to request further disbursements from its current IMF program and will seek a new IMF program. Remittance Policies In response to the economic crisis in Argentina, the government introduced capital controls in September 2019. Under these restrictions, companies in Argentina (including local affiliates of foreign parent companies) must obtain prior approval from the Central Bank to access the foreign exchange market to purchase foreign currency and to transfer funds abroad for the payment of dividends and profits, services and imports in excess of USD 2 million per month. In January 2020, the Central Bank amended the regime for the payment of dividends abroad to non-residents. The new regime allows companies to access the foreign exchange market to transfer profits and dividends abroad without prior authorization of the BCRA, provided the following conditions are met: (1) Profits and dividends have to be declared in closed and audited financial statements. (1) Profits and dividends have to be declared in closed and audited financial statements. (2)The dividends in foreign currency should not exceed the amount of dividends determined by the shareholders’ meeting in local currency. (2)The dividends in foreign currency should not exceed the amount of dividends determined by the shareholders’ meeting in local currency. (3)The total amount of dividends to be transferred cannot exceed 30 percent of the amount of new capital contributions made by non-residents into local companies since January 2020. (3)The total amount of dividends to be transferred cannot exceed 30 percent of the amount of new capital contributions made by non-residents into local companies since January 2020. (4) The resident entity must be in compliance with the last due filing of the Central Bank Survey of External Assets and Liabilities. (4) The resident entity must be in compliance with the last due filing of the Central Bank Survey of External Assets and Liabilities. Sovereign Wealth Funds The Argentine government does not maintain a Sovereign Wealth Fund. 7. State-Owned Enterprises The Argentine government has state-owned enterprises (SOEs) or significant stakes in mixed-capital companies in the following sectors: civil commercial aviation, water and sanitation, oil and gas, electricity generation, transport, paper production, satellite, banking, railway, shipyard, and aircraft ground handling services. By Argentine law, a company is considered a public enterprise if the state owns 100 percent of the company’s shares. The state has majority control over a company if the state owns 51 percent of the company’s shares. The state has minority participation in a company if the state owns less than 51 percent of the company’s shares. Laws regulating SOEs and enterprises with state participation can be found at http://www.saij.gob.ar/13653-nacional-regimen-empresas-estado-lns0001871-1955-03-23/123456789-0abc-defg-g17-81000scanyel . Through the government’s social security agency (ANSES), the Argentine government owns stakes ranging from one to 31 percent in 46 publicly-listed companies. U.S. investors also own shares in some of these companies. As part of the ANSES takeover of Argentina’s private pension system in 2008, the government agreed to commit itself to being a passive investor in the companies and limit the exercise of its voting rights to 5 percent, regardless of the equity stake the social security agency owned. A list of such enterprises can be found at: http://fgs.anses.gob.ar/participacion . State-owned enterprises purchase and supply goods and services from the private sector and foreign firms. Private enterprises may compete with SOEs under the same terms and conditions with respect to market share, products/services, and incentives. Private enterprises also have access to financing terms and conditions similar to SOEs. SOEs are subject to the same tax burden and tax rebate policies as their private sector competitors. SOEs are not currently subject to firm budget constraints under the law, and have been subsidized by the central government in the past. Between 2016 and 2019, the Government of Argentina reduced subsidies in the energy, water, and transportation sectors. However, in 2019 the Government postponed its subsidy reduction program and redesigned it several times, citing pressing macroeconomic issues. Argentina does not have regulations that differentiate treatment of SOEs and private enterprises. Argentina has observer status under the WTO Agreement on Government Procurement and, as such, SOEs are subject to the conditions of Argentina’s observance. Argentina does not have a specified ownership policy, guideline or governance code for how the government exercises ownership of SOEs. The country generally adheres to the OECD Guidelines on Corporate Governance of SOEs. The practices for SOEs are mainly in compliance with the policies and practices for transparency and accountability in the OECD Guidelines. In 2018, the OECD released a report evaluating the corporate governance framework for the Argentine SOE sector relative to the OECD Guidelines, which can be viewed here: http://www.oecd.org/countries/argentina/oecd-review-corporate-governance-soe-argentina.htm . Argentina does not have a centralized ownership entity that exercises ownership rights for each of the SOEs. The general rule in Argentina is that requirements that apply to all listed companies also apply to publicly-listed SOEs. Privatization Program The current administration has not developed a privatization program. 9. Corruption Argentina’s legal system incorporates several measures to address public sector corruption. The foundational law is the 1999 Public Ethics Law (Law 25,188), the full text of which can be found at: http://servicios.infoleg.gob.ar/infolegInternet/verNorma.do?id=60847 . A March 2019 report by the OECD’s Directorate for Public Governance underscored, however, that the law is heterogeneously implemented across branches of the government and that the legislative branch has not designated an application authority, approved an implementing regulation, or specified sanctions. It also noted that Argentina has a regulation on lobbying, but that it only applies to the executive branch, and only requires officials to disclose meetings with lobbyists. With regards to political parties, the report noted anonymous campaign donations are banned, but 90 percent of all donations in Argentina are made in cash, making it impossible to identify donors. Furthermore, the existing regulations have insufficient controls and sanctions, and leave gaps with provincial regulations that could be exploited. Within the executive branch, the government institutions tasked with combatting corruption include the Anti-Corruption Office (ACO), the National Auditor General, and the General Comptroller’s Office. Public officials are subject to financial disclosure laws, and the Ministry of Justice’s ACO is responsible for analyzing and investigating federal executive branch officials based on their financial disclosure forms—which require the disclosure of assets directly owned by immediate family members. The ACO is also responsible for investigating corruption within the federal executive branch or in matters involving federal funds, except for funds transferred to the provinces. While the ACO does not have authority to independently prosecute cases, it can refer cases to other agencies or serve as the plaintiff and request that a judge to initiate a case. Argentina enacted a new Corporate Criminal Liability Law in November 2017 following the advice of the OECD to comply with its Anti-Bribery Convention. The full text of Law 27,401 can be found at: http://servicios.infoleg.gob.ar/infolegInternet/anexos/295000-299999/296846/norma.htm . The new law entered into force in early 2018. It extends anti-bribery criminal sanctions to corporations, whereas previously they only applied to individuals; expands the definition of prohibited conduct, including illegal enrichment of public officials; and allows Argentina to hold Argentines responsible for foreign bribery. Sanctions include fines and blacklisting from public contracts. Argentina also enacted an express prohibition on the tax deductibility of bribes. Official corruption remains a serious challenge in Argentina. In its March 2017 report, the OECD expressed concern about Argentina’s enforcement of foreign bribery laws, inefficiencies in the judicial system, politicization and perceived lack of independence at the Attorney General’s Office, and lack of training and awareness for judges and prosecutors. According to the World Bank’s worldwide governance indicators, corruption remains an area of concern in Argentina. In the latest Transparency International Corruption Perceptions Index (CPI) that ranks countries and territories by their perceived levels of corruption, Argentina ranked 66 out of 180 countries in 2019, an improvement of 19 places versus 2018. Allegations of corruption in provincial as well as federal courts remained frequent. Few Argentine companies have implemented anti-foreign bribery measures beyond limited codes of ethics. In September 2016, Congress passed a law on public access to information. The law explicitly applies to all three branches of the federal government, the public justice offices, and entities such as businesses, political parties, universities, and trade associations that receive public funding. It requires these institutions to respond to citizen requests for public information within 15 days, with an additional 15-day extension available for “exceptional” circumstances. Sanctions apply for noncompliance. As mandated by the law, the executive branch created the Agency for Access to Public Information in 2017, an autonomous office that oversees access to information. In early 2016, the Argentine government reaffirmed its commitment to the Open Government Partnership (OGP), became a founding member of the Global Anti-Corruption Coalition, and reengaged the OECD Working Group on Bribery. Argentina is a party to the Organization of American States’ Inter-American Convention against Corruption. It ratified in 2001 the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (Anti-Bribery Convention). Argentina also signed and ratified the UN Convention against Corruption (UNCAC) and participates in UNCAC’s Conference of State Parties. Argentina also participates in the Mechanism for Follow-up on the Implementation of the Inter-American Convention against Corruption (MESICIC). Since Argentina became a party to the OECD Anti-Bribery Convention, allegations of Argentine individuals or companies bribing foreign officials have surfaced. A March 2017 report by the OECD Working Group on Bribery indicated there were 13 known foreign bribery allegations involving Argentine companies and individuals as of that date. According to the report, Argentine authorities investigated and closed some of the allegations and declined to investigate others. The authorities determined some allegations did not involve foreign bribery but rather other offenses. Several such allegations remained under investigation. Resources to Report Corruption Felix Pablo Crous Director Government of Argentina Anti-Corruption Office Oficina Anticorrupción, 25 de Mayo 544, C1002ABL, Ciudad Autónoma de Buenos Aires. Phone: +54 11 5300 4100 Email: firstname.lastname@example.org and http://denuncias.anticorrupcion.gob.ar/ Poder Ciudadano (Local Transparency International Affiliate) Piedras 547, C1070AAK, Ciudad Autonoma de Buenos Aires Phone: +54 11 4331 4925 ext 225 Fax: +54 11 4331 4925 Email: email@example.com Website: http://www.poderciudadano.org Armenia Executive Summary Over the past several years, Armenia has received respectable rankings in international indices that review country business environments and investment climates. Significant U.S. investments are present in Armenia, most notably ContourGlobal’s acquisition of the Vorotan Hydroelectric Cascade and Lydian International’s efforts to develop a major gold mine. U.S. investors in the banking, energy, pharmaceutical, information technology, and mining sectors, among others, have entered or acquired assets in Armenia. Armenia presents a variety of opportunities for investors, and the country’s legal framework and government policy aim to attract investment, but the investment climate is not without challenges. Obstacles include Armenia’s small market size, relative geographic isolation due to closed borders with Turkey and Azerbaijan, weaknesses in the rule of law and judiciary, and a legacy of corruption. Net foreign direct investment inflows are low. Armenia is a member of the Eurasian Economic Union, a customs union that brings Armenia, Belarus, Kazakhstan, Kyrgyzstan, and Russia together in an integrated single market. In May 2015, Armenia signed a Trade and Investment Framework Agreement with the United States. The TIFA establishes a United States-Armenia Council on Trade and Investment to discuss bilateral trade and investment and related issues. In November 2017, Armenia signed a Comprehensive and Enhanced Partnership Agreement with the European Union, which aims in part to improve Armenia’s investment climate and business environment. Armenia imposes few restrictions on foreign control and rights to private ownership and establishment. There are no restrictions on the rights of foreign nationals to acquire, establish, or dispose of business interests in Armenia. Business registration procedures are straightforward. According to foreign companies, otherwise sound regulations, policies, and laws are sometimes undermined by problems such as the lack of independence, capacity, or professionalism in key institutions, most critically the judiciary. Armenia does not limit the conversion and transfer of money or the repatriation of capital and earnings. The banking system in Armenia is sound and well-regulated, but investors note that the financial sector is not highly developed. The U.S.-Armenia Bilateral Investment Treaty provides U.S. investors with a variety of protections. Although Armenian legislation offers protection for intellectual property rights, enforcement efforts and recourse through the courts require improvement. Armenia experienced a dramatic change of government in April/May 2018. Parliamentary elections in December 2018 led to the exit from power of numerous parliamentarians known to have significant business holdings in Armenia and exercise outsized sway over large sections of the economy. An anti-corruption campaign is underway as part of efforts to eliminate systemic corruption. Overall, the competitive environment in Armenia is improving, but several businesses have reported that broader reforms across judicial, tax, customs, health, education, military, and law enforcement institutions will be necessary to shore up these gains. Despite progress in the fight against corruption and improvements in some areas that raise Armenia’s attractiveness as an investment destination, investors claim that numerous concerns remain and must be addressed to ensure a transparent, fair, and predictable business climate. An investment dispute in the country’s mining sector has attracted significant international attention and remains outstanding after several years. Table 1: Key Metrics and Rankings Measure Year Index/Rank Website Address TI Corruption Perceptions Index 2019 77 of 180 http://www.transparency.org/ research/cpi/overview World Bank’s Doing Business Report 2020 47 of 190 http://www.doingbusiness.org/ en/rankings Global Innovation Index 2019 64 of 129 https://www.globalinnovationindex.org/ analysis-indicator U.S. FDI in partner country ($M USD, historical stock positions) 2018 USD 7 million http://apps.bea.gov/international/ factsheet/ World Bank GNI per capita 2018 USD 4,230 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 Armenia officially welcomes foreign investment. The Ministry of Economy is the main government body responsible for the development of investment policy in Armenia. Armenia has achieved respectable rankings on some global indices measuring the country’s business climate. Armenia’s investment and trade policy is relatively open; foreign companies are entitled by law to the same treatment as Armenian companies. Armenia has strong human capital and a well-educated population, particularly in the science, technology, engineering, and mathematics fields, leading to significant investment in the high-tech and information technology sectors. Many international companies have established branches or subsidiaries in Armenia to take advantage of the country’s pool of qualified specialists and position within the Eurasian Economic Union (EAEU). However, many businesses have identified challenges with Armenia’s investment climate in terms of the country’s small market (with a population of less than three million), relative geographic isolation due to closed borders with Turkey and Azerbaijan, per capita gross national income of $4,230, and concerns related to weaknesses in the rule of law. After a dramatic change of government in April/May 2018, major sectors of Armenia’s economy have ostensibly become more open to competition. Large businesses backed by oligarchic interests are notionally less able to draw on government support to prop up their market positions. An anti-corruption campaign was launched after the 2018 change of government, and a series of high-profile cases have resulted as part of efforts to eliminate systemic corruption. These developments serve to improve Armenia’s investment climate and competitive environment, though the fight against corruption needs to be institutionalized in the long term, especially in critical areas such as the judiciary, tax and customs operations, and health, education, military, and law enforcement sectors. Foreign investors are still concerned about the rule of law and equal treatment. U.S companies have also reported that the investment climate is tainted by a failure to enforce intellectual property rights. There have been concerns regarding the lack of an independent and strong judiciary, which undermines the government’s assurances of equal treatment and transparency and reduces access to effective recourse in instances of investment or commercial disputes. Representatives of U.S. entities have raised concerns about the quality of stakeholder consultation by the government with the private sector and government responsiveness in addressing concerns among the business community. The Armenian National Interests Fund and Investment Support Center are responsible for attracting and facilitating inward foreign direct investment. Limits on Foreign Control and Right to Private Ownership and Establishment There are very few restrictions with regard to limitations on foreign ownership or control of commercial enterprises. There are some restrictions on foreign ownership within the media and commercial aviation sectors. Local incorporation is required to obtain a license for the provision of auditing services. The Armenian government does not maintain investment screening mechanisms for foreign direct investment, though government approval is required to take advantage of certain tax and customs privileges. Other Investment Policy Reviews In 2019, the U.N. Conference on Trade and Development (UNCTAD) published its first investment policy review for Armenia . The World Trade Organization (WTO) published a Trade Policy Review for Armenia in 2018. Business Facilitation Armenia has traditionally fared well in the World Bank’s Ease of Doing Business report. The government has announced its commitment to addressing deficiencies that prevent Armenia from obtaining a higher ranking. Companies can register electronically at http://www.e-register.am/en/ . This single window service was launched in 2011 and allows individual entrepreneurs and companies to complete name reservation, business registration, and tax identification processes all at once. The application can be completed in one day. An electronic signature is needed in order to be able to register online. Foreign citizens can obtain an e-signature and more detailed information from the e-signature portal at https://www.ekeng.am/en/ . In December 2019, the government launched a new e-regulations platform that provides a step-by-step guide for business and investment procedures. The platform is available at https://armenia.eregulations.org/ . Outward Investment The Armenian government does not restrict domestic investors from investing abroad. 6. Financial Sector Capital Markets and Portfolio Investment The banking system in Armenia is sound and well-regulated, but the financial sector is not highly developed, according to investors. Banking sector assets account for over 80 percent of total financial sector assets. Financial intermediation tends to be poor. Nearly all banks require collateral located in Armenia, and large collateral requirements often prevent potential borrowers from entering the market. U.S. businesses have noted that this creates a significant barrier for small- and medium-sized enterprises and start-up companies. The Armenian government welcomes foreign portfolio investment and there is a supporting system and legal framework in place. Armenia’s securities market is not well developed and has only minimal trading activity through the Armenia Securities Exchange, though efforts to grow capital markets are underway. Liquidity sufficient for the entry and exit of sizeable positions is often difficult to achieve due to the small size of the Armenian market. The Armenian government hopes that as a result of pension reforms in 2014, which brought two international asset managers to Armenia, capital markets will play a more prominent role in the country’s financial sector. Armenia adheres to its IMF Article VIII commitments by refraining from restrictions on payments and transfers for current international transactions. Credit is allocated on market terms and foreign investors are able to access credit locally. Money and Banking System The banking sector is healthy, and indicators of financial soundness, including capital adequacy ratios and non-performing loan rates, have been broadly strong in recent years. The sector is well capitalized and liquid. Dollarization, historically high for deposits and lending, has been falling in recent years. Non-performing loans have fallen to below 10 percent of total loans. There are 17 commercial banks in Armenia and 14 universal credit organizations. There are extensive branch networks throughout Armenia. At the end of 2019, the top three Armenian banks by estimated total assets were Ameriabank (968 billion Armenian drams (AMD), or USD 2.01 billion), Armbusinessbank (782.1 billion AMD, or USD 1.63 billion), and Ardshinbank (721.7 billion AMD, or USD 1.5 billion). The minimum capital requirement for banks is 30 billion AMD (62.5 million USD). There are no restrictions on foreigners to open bank accounts. Residents and foreign nationals can hold foreign currency accounts and import, export, and exchange foreign currency relatively freely in accordance with the Law on Currency Regulation and Currency Control. Foreign banks may establish a subsidiary, branch, or representative office, and subsidiaries of foreign banks are allowed to provide the same types of services as domestically-owned banks. The Central Bank of Armenia (CBA) is responsible for the regulation and supervision of the financial sector. The authority and responsibilities of the CBA are established under the Law on Central Bank of Armenia. Numerous other articles of legislation and supporting regulations provide for financial sector oversight and supervision. Foreign Exchange and Remittances Foreign Exchange Armenia has no limitations on the conversion and transfer of money or the repatriation of capital and earnings, including branch profits, dividends, interest, royalties, or management or technical service fees. Most banks can transfer funds internationally within two to four days. Armenia maintains the Armenian dram as a freely convertible currency under a managed float. The AMD/USD exchange rate has proven generally stable in recent years, though it has not been without occasional sharp movements. According to the Law on Currency Regulation and Currency Control, prices for all goods and services, property, and wages must be set in AMD. There are exceptions in the law, however, for transactions between resident and non-resident businesses and for certain transactions involving goods traded at world market prices. The law requires that interest on foreign currency accounts be calculated in that currency, but paid in AMD. Remittance Policies Armenia imposes no limitations on the conversion and transfer of money or the repatriation of capital and earnings, including branch profits, dividends, interest, royalties, lease payments, private foreign debt, or management or technical service fees. Sovereign Wealth Funds Armenia does not have a sovereign wealth fund. 7. State-Owned Enterprises Most of Armenia’s state-owned enterprises (SOEs) were privatized in the 1990s and early 2000s, but SOEs are still active in a number of sectors. SOEs in Armenia operate as state-owned closed joint stock companies that are managed by the Department of State Property Management and state non-commercial organizations. There are no laws or rules that ensure a primary or leading role for SOEs in any specific industry. Armenia is party to the WTO Government Procurement Agreement, and SOEs are covered under that agreement. SOEs in Armenia are subject to the same tax regime as their private competitors, and private enterprises in Armenia can compete with SOEs under the same terms and conditions. The Department of State Property Management maintains a public list of state-owned closed joint stock companies on its website . Privatization Program Most of Armenia’s state owned enterprises were privatized in the 1990s and early 2000s. Many of the privatization processes for Armenia’s large assets were reported to be neither competitive nor transparent, and political considerations in some instances prevailed over fair tender processes. The current law on privatization, the fifth, is the Law on the 2017–2020 Program for State Property Privatization, which lists 47 entities for privatization. The Department of State Property Management oversees the management of the state’s shares in entities slated for privatization. Details of the privatization program are available on the Department of State Property Management website . 9. Corruption After a peaceful revolution in April/May 2018, the Armenian government has made eradicating corruption on of its highest priorities. The government’s anti-corruption agenda is outlined in a 2019–2022 strategy and implementation plan. These documents establish a new anti-corruption institutional framework with separate entities tasked with preventive and investigative functions, set out specific measures for strengthening these functions, and prioritize strategic communication and public education to give citizens ownership of anti-corruption reforms. The government has increased corruption investigations against mid- and high-level government officials, including those appointed by the current government, since the revolution. Numerous high-ranking officials have stated publicly that corruption within their respective institutions will no longer be tolerated. Though some report that the government has mainly targeted ex-government officials in corruption investigations, there is no indication that Armenia’s anti-corruption laws are being applied by the post-revolutionary government in a discriminatory manner. Armenia’s anti-corruption laws extend to all Armenian citizens. Corruption remains a significant obstacle to U.S. investment in Armenia, particularly as it relates to critical areas such as the justice system and concerns related to the rule of law, enforcement of existing legislation and regulations, and equal treatment. Investors claim that the health, education, military, corrections, and law enforcement sectors lack transparency in procurement and have in the past used selective enforcement to elicit bribes. Judges presiding over civil matters are still widely perceived by the public to be corrupt and under the influence of former authorities. Although bribery is illegal in Armenia, the government does not actively encourage private companies to establish internal codes of conduct. Several multinational companies, select local companies, and foreign and local companies working with international financial institutions have implemented corporate governance mechanisms to tackle corruption internally. However, such corporate governance principles are not widely implemented among local companies. According to Transparency International’s 2019 Corruption Perceptions Index, Armenia received a score of 42 out of 100, ranking it 77th among 180 countries. This reflects an improvement by 28 places over 2018. Armenia’s ability to counter, deter, and prosecute corruption is noted to be hindered by the lack of robust enforcement of official disclosure laws meant to prevent corrupt officials from entering and retaining positions of authority and influence. The objective and systematic scrutiny of declarations by government officials has historically been lacking due to dysfunction within the Commission on Ethics of High-Ranking Officials and the delayed establishment of the Corruption Prevention Commission, which inherited this responsibility. According to international evaluations, Armenian authorities have limited capacities to investigate money laundering and bring such cases to prosecution. Various laws, some updated as recently as 2018, prohibit the participation of civil and municipal servants, as well as local government elected officials such as mayors and councilors, in commercial activities. However, powerful officials at the national, district, and local levels often acquire direct, partial, or indirect control over private firms. Such control is often exercised through a hidden partner or majority ownership of fully private parent companies. This involvement can also be indirect, including through close relatives and friends. According to foreign investors, these practices reinforce protectionism, hinder competition, and undermine the image of the government as a facilitator of private sector growth. Because of the historical strong interconnectedness of the political and economic spheres, Armenia has often struggled to introduce legislation to encourage strict ethical codes of conduct and the prevention of bribery in business transactions. In 2016, Armenia adopted legislation on criminal penalties for illicit enrichment and noncompliance or fraud in filing declarations. Armenia is a member of the UN Convention against Corruption. While not a party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, Armenia is a member of the OECD Anti-Corruption Network for Eastern Europe and Central Asia and has signed the Istanbul Action Plan. A monitoring report released by the OECD in 2018 cited Armenia’s lack of enforcement of anti-corruption laws, together with the continued presence of oligopolistic interests in the economy, as points of serious concern. The report contains a series of recommendations, including to take bold measures to ensure judicial and prosecutorial independence and integrity, introduce corporate liability for corruption offenses, investigate and prosecute high-profile and complex corruption cases, and increase transparency and strengthen monitoring in public procurement. Armenia is also a member of the global Open Government Partnership initiative. No specific law exists to protect NGOs dealing with anti-corruption investigations. Resources to Report Corruption For investigating corruption: Investigation Department of Corruption, Organized and Official Crimes Special Investigation Service of Armenia 13A Vagharsh Vagharshyan Street Yerevan, Armenia +374 11 900 002 firstname.lastname@example.org For prosecuting corruption: Artur Chakhoyan Head of Department for Combating Corruption and Economic Crimes RA Prosecutor General’s Office 5 V. Sargsyan Street Yerevan, Armenia +374 10 511 655 email@example.com For financial and asset declarations of high-level officials: Haykuhi Harutyunyan Chairperson Corruption Prevention Commission 24 Baghramyan Street Yerevan, Armenia firstname.lastname@example.org Watchdog organization: Sona Ayvazyan Executive Director Transparency International Anti-Corruption Center 12 Saryan Street Yerevan, Armenia +374 10 569 589 email@example.com Australia Executive Summary Australia is generally welcoming to foreign investment, which is widely considered to be an essential contributor to Australia’s economic growth and productivity. The United States is by far the largest source of foreign direct investment (FDI) for Australia. According to the U.S. Bureau of Economic Analysis, the stock of U.S. FDI totaled USD 163 billion in January 2019. Mining and resources attract, by far, the largest share of FDI from the United States. Real estate investment is the second largest recipient of FDI from the United States, although it remains much smaller than mining investment in absolute terms. The Australia-United States Free Trade Agreement, which entered into force in 2005, establishes higher thresholds for screening U.S. investment for most classes of direct investment. While welcoming toward FDI, Australia does apply a “national interest” test to qualifying investment through its Foreign Investment Review Board screening process. Various changes to Australia’s foreign investment rules, primarily aimed at strengthening national security, have been made in recent years. The Security of Critical Infrastructure Act 2018 and the related Telecommunications Sector Security Reforms were both introduced in 2018 with the aim of increasing the security of critical infrastructure and protecting against foreign investments deemed to not be in Australia’s interests. In March 2020 the Australian government announced all foreign direct investment would be reviewed for a six-month period, the government’s assumed timing for the COVID-19 crisis. Despite the increased focus on foreign investment screening, the rejection rate for proposed investments has remained low and there have been no cases of investment from the United States having been rejected in recent years. In response to a perceived lack of fairness, the Australian government tightened anti-tax avoidance legislation targeting multi-national corporations with operations in multiple tax jurisdictions. While some laws have been complementary to international efforts to address tax avoidance schemes and the use of low-tax countries or tax havens, Australia has also gone further than the international community in some areas. Australia has a strong legal system grounded in procedural fairness, judicial precedent, and the independence of the judiciary. Property rights are well established and enforceable. The establishment of government regulations typically requires consultation with impacted stakeholders and requires approval by a central regulatory oversight body before progressing to the legislative phase. Anti-bribery and anti-corruption laws exist, and Australia performs well in measures of transparency. Australia’s business environment is generally conducive to foreign companies operating in the country, and the country ranks 14th overall in the World Bank’s Ease of Doing Business Index. The Australian government is strongly focused on boosting economic productivity, particularly through increased use of digital and other emerging technologies. It recently released a Digital Economy Strategy, a Blockchain Roadmap, and a Critical Minerals Strategy, and has launched the new Australian Space Agency, among other initiatives. U.S. involvement and investment in these fields is welcomed. Table 1: Key Metrics and Rankings Measure Year Index/Rank Website Address TI Corruption Perceptions Index 2019 12 of 180 http://www.transparency.org/ research/cpi/overview World Bank’s Doing Business Report 2019 14 of 190 http://www.doingbusiness.org/ en/rankings Global Innovation Index 2019 22 of 129 https://www.globalinnovationindex.org/analysis-indicator U.S. FDI in partner country (historical stock positions) 2018 USD 163 billion https://apps.bea.gov/international/ factsheet World Bank GNI per capita 2018 USD 53,230 http://data.worldbank.org/indicator/ NY.GNP.PCAP.CD 1. Openness To, and Restrictions Upon, Foreign Investment Policies Towards Foreign Direct Investment Australia is generally welcoming to foreign direct investment (FDI), with foreign investment widely considered to be an essential contributor to Australia’s economic growth. Other than certain required review and approval procedures for certain types of foreign investment described below, there are no laws that discriminate against foreign investors. A number of investment promotion agencies operate in Australia. The Australian Trade Commission (often referred to as Austrade) is the Commonwealth Government’s national “gateway” agency to support investment into Australia. Austrade provides coordinated government assistance to promote, attract and facilitate FDI, supports Australian companies to grow their business in international markets, and delivers advice to the Australian Government on its trade, tourism, international education and training, and investment policy agendas. Austrade operates through a number of international offices, with U.S. offices primarily focused on attracting foreign direct investment into Australia and promoting the Australian education sector in the United States. Austrade in the United States operates from offices in Boston, Chicago, Houston, New York, San Francisco, and Washington, DC. In addition, state and territory investment promotion agencies also support international investment at the state level and in key sectors. Limits on Foreign Control and Right to Private Ownership and Establishment Within Australia, foreign and domestic private entities may establish and own business enterprises and may engage in all forms of remunerative activity in accordance with national legislative and regulatory practices. See Section 4: Legal Regime – Laws and Regulations on Foreign Direct Investment below for information on Australia’s investment screening mechanism for inbound foreign investment. Other than the screening process described in Section 4, there are few limits or restrictions on foreign investment in Australia. Foreign purchases of agricultural land greater than AUD15 million (USD 9 million) are subject to screening. This threshold applies to the cumulative value of agricultural land owned by the foreign investor, including the proposed purchase. The agricultural land screening threshold does not, however, affect investments made under the Australia-United States Free Trade Agreement (AUSFTA). The current threshold remains AUD 1.154 billion (USD 690 million) for U.S. non-government investors. Investments made by U.S. non-government investors are subject to inclusion on the foreign ownership register of agricultural land and to Australian Tax Office (ATO) information gathering activities on new foreign investment. The Foreign Investment Review Board (FIRB), which advises Australia’s Treasurer, may impose conditions when approving foreign investments. These conditions can be diverse and may include: retention of a minimum proportion of Australian directors; certain requirements on business activities, such as the requirement not to divest certain assets; and certain taxation requirements. Such conditions are in keeping with Australia’s policy of ensuring foreign investments are in the national interest. Other Investment Policy Reviews Australia has not conducted an investment policy review in the last three years through either the OECD or UNCTAD system. The WTO reviewed Australia’s trade policies and practices in 2019, and the final report can be found at https://www.wto.org/english/tratop_e/tpr_e/tp496_e.htm . The Australian Trade Commission compiles an annual “Why Australia Benchmark Report” that presents comparative data on investing in Australia in the areas of Growth, Innovation, Talent, Location, and Business. The report also compares Australia’s investment credentials with other countries and provides a general snapshot on Australia’s investment climate. See http://www.austrade.gov.au/International/Invest/Resources/Benchmark-Report . Business Facilitation Business registration in Australia is relatively straightforward and is facilitated through a number of government websites. The Commonwealth Department of Industry, Innovation and Science’s business.gov.au web site provides an online resource and is intended as a “whole-of-government” service providing essential information on planning, starting, and growing a business. Foreign entities intending to conduct business in Australia as a foreign company must be registered with the Australian Securities and Investments Commission (ASIC). As Australia’s corporate, markets and financial services regulator, ASIC’s website provides information and guides on starting and managing a business or company in the country. In registering a business, individuals and entities are required to register as a company with ASIC, which then gives the company an Australian Company Number, registers the company, and issues a Certificate of Registration. According to the World Bank “Starting a Business” indicator, registering a business in Australia takes 2 days, and Australia ranks 7th globally on this indicator. Outward Investment Australia generally looks positively towards outward investment as a way to grow its economy. There are no restrictions on investing abroad. Austrade, Export Finance Australia (EFA), and various other government agencies offer assistance to Australian businesses looking to invest abroad, and some sector-specific export and investment programs exist. 6. Financial Sector Capital Markets and Portfolio Investment The Australian Government takes a favorable stance towards foreign portfolio investment with no restrictions on inward flows of debt or equity. Indeed, access to foreign capital markets is crucial to the Australian economy given its relatively small domestic fixed income markets. Australian capital markets are generally efficient and are able to provide financing options to businesses. While the Australian equity market is one of the largest and most liquid in the world, non-financial firms do face a number of barriers in accessing the corporate bond market. Large firms are more likely to use public equity, and smaller firms are more likely to use retained earnings and debt from banks and intermediaries. Australia’s corporate bond market is relatively small, driving many Australian companies to issue debt instruments in the U.S. market. Foreign investors are able to obtain credit from domestic institutions on market terms. Money and Banking System Australia’s banking system is robust, highly evolved, and international in focus. Bank profitability is strong and has been supported by further improvements in asset performance. Total assets of Australian banks is USD 3.0 trillion and the sector has delivered an average annual return on equity of just over 11 percent. According to Australia’s central bank, the Reserve Bank of Australia (RBA), the ratio of non-performing assets to total loans was just under one percent at the end of 2018, having remained at around that level for the last five years after falling from highs of nearly two percent following the Global Financial Crisis. The RBA is responsible for monitoring and reporting on the stability of the financial sector, while the Australian Prudential Regulatory Authority (APRA) monitors individual institutions. The RBA is also responsible for monitoring and regulating payments systems in Australia. Further details on the size and performance of Australia’s banking sector are available on the websites of the Australian Prudential Regulatory Authority (APRA) and the RBA: https://www.apra.gov.au/statistics https://www.rba.gov.au/chart-pack/banking-indicators.html Foreign banks are allowed to operate as a branch or a subsidiary in Australia. Australia has generally taken an open approach to allowing foreign companies to operate in the financial sector, largely to ensure sufficient competition in an otherwise small domestic market. Foreign Exchange and Remittances Foreign Exchange The Commonwealth Government formulates exchange control policies with the advice of the Reserve Bank of Australia (RBA) and the Treasury. The RBA, charged with protecting the national currency, has the authority to implement exchange controls, although there are currently none in place. The Australian dollar is a fully convertible and floating currency. The Commonwealth Government does not maintain currency controls or limit remittances. Such payments are processed through standard commercial channels, without governmental interference or delay. Remittance Policies Australia does not limit investment remittances. Sovereign Wealth Funds Australia’s main sovereign wealth fund, the Future Fund, is a financial asset investment fund owned by the Australian Government. The Fund’s objective is to enhance the ability of future Australian Governments to discharge unfunded superannuation (pension) liabilities expected after 2020, when an ageing population is likely to place significant pressures on Government finances. As a founding member of the International Forum of Sovereign Wealth Fund (IFSWF), the Future Fund’s structure, governance and investment approach is in full alignment with the Generally Accepted Principles and Practices for Sovereign Wealth Funds (the “Santiago principles”). The Future Fund’s investment mandate is to achieve a long-term return of at least inflation plus 4-5 percent per annum. As of December 2019, the Fund’s portfolio consists of: 29 percent global equities, 7 percent Australian equities, 28 percent private equity (including 7 percent in infrastructure), and the remaining 36 percent in debt, cash, and alternative investments. In addition to the Future Fund, the Australian Government manages five other specific-purpose funds: the Disability Care Australia Fund, the Medical Research Future Fund, the Emergency Response Fund, the Future Drought Fund, and the Aboriginal and Torres Strait Islander Land and Sea Future Fund. In total, these five funds have assets of AUD 44 billion (USD 27 billion), while the main Future Fund has assets of AUD 168 billion (USD 104 billion) as of December 31, 2019. Further details of these funds are available at: https://www.futurefund.gov.au/ 7. State-Owned Enterprises In Australia, the term used for a Commonwealth Government State-Owned Enterprise (SOE) is “government business enterprise” (GBE). According to the Department of Finance, there are nine GBEs: two corporate Commonwealth entities and seven Commonwealth companies. (See: https://www.finance.gov.au/resource-management/governance/gbe/ ) Private enterprises are generally allowed to compete with public enterprises under the same terms and conditions with respect to markets, credit, and other business operations, such as licenses and supplies. Public enterprises are not generally accorded material advantages in Australia. Remaining GBEs do not exercise power in a manner that discriminates against or unfairly burdens foreign investors or foreign-owned enterprises. Privatization Program Australia does not have a formal and explicit national privatization program. Individual state and territory governments may have their own privatization programs. Foreign investors are welcome to participate in any privatization programs subject to the rules and approvals governing foreign investment. 9. Corruption Australia maintains a comprehensive system of laws and regulations designed to counter corruption. In addition, the government procurement system is generally transparent and well regulated. Corruption has not been a factor cited by U.S. businesses as a disincentive to investing in Australia, nor to exporting goods and services to Australia. Non-governmental organizations interested in monitoring the global development or anti-corruption measures, including Transparency International, operate freely in Australia, and Australia is perceived internationally as having low corruption levels. Australia is an active participant in international efforts to end the bribery of foreign officials. Legislation exists to give effect to the anti-bribery convention stemming from the OECD 1996 Ministerial Commitment to Criminalize Transnational Bribery. Legislation explicitly disallows tax deductions for bribes of foreign officials. At the Commonwealth level, enforcement of anti-corruption laws and regulations is the responsibility of the Attorney General’s Department. The Attorney-General’s Department plays an active role in combating corruption through developing domestic policy on anti-corruption and engagement in a range of international anti-corruption forums. These include the G20 Anti-Corruption Working Group, APEC Anti-Corruption and Transparency Working Group, and the United Nations Convention against Corruption Working Groups. Australia is a member of the OECD Working Group on Bribery and a party to the key international conventions concerned with combating foreign bribery, including the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (Anti-Bribery Convention). Under Australian law, it is an offense to bribe a foreign public official, even if a bribe may be seen to be customary, necessary, or required. The maximum penalty for an individual is 10 years imprisonment and/or a fine of AUD 2.1 million (approximately USD 1.3 million). For a corporate entity, the maximum penalty is the greatest of: 1) AUD 21 million (approximately USD 13.0 million); 2) three times the value of the benefits obtained; or 3) 10 percent of the previous 12-month turnover of the company concerned. The legislation covering bribery of foreign officials is the Criminal Code Act 1995. In 2019, the Commonwealth Government introduced an amendment to the Act that would expand the list of activities considered foreign bribery, but the amendment has not been legislated at the time of publishing. Information on the amendment can be found at the following link: https://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/Bills_Search_Results/Result?bId=s1246 A number of national and state-level agencies exist to combat corruption of public officials and ensure transparency and probity in government systems. The Australian Commission for Law Enforcement Integrity (ACLEI) has the mandate to prevent, detect and investigate serious and systemic corruption issues in the Australian Crime Commission, the Australian Customs and Border Protection Service, the Australian Federal Police, the Australian Transaction Reports and Analysis Center, the CrimTrac Agency, and prescribed aspects of the Department of Agriculture. Various independent commissions exist at the state level to investigate instances of corruption. Details of these bodies are provided below. UN Anticorruption Convention, OECD Convention on Combatting Bribery Australia has signed and ratified the United Nations Convention against Corruption and is a signatory to the OECD Anti-Bribery Convention. Resources to Report Corruption Western Australia – Corruption and Crime Commission 86 St Georges Terrace Perth, Western Australia Tel. +61 8 9215 4888 https://www.ccc.wa.gov.au/ Queensland – Corruption and Crime Commission Level 2, North Tower Green Square 515 St Pauls Terrace Fortitude Valley, Queensland Tel. +61 7 3360 6060 https://www.ccc.qld.gov.au/ Victoria – Independent Broad-based Anti-corruption Commission Level 1, North Tower, 459 Collins Street Melbourne, Victoria Tel. +61 1300 735 135 https://ibac.vic.gov.au New South Wales – Independent Commission against Corruption Level 7, 255 Elizabeth Street Sydney NSW 2000 Tel. +61 2 8281 5999 https://www.icac.nsw.gov.au/ South Australia – Independent Commission against Corruption Level 1, 55 Currie Street Adelaide, South Australia Tel. +61 8 8463 5173 https://icac.sa.gov.au Austria Executive Summary Austria offers a stable and attractive climate for foreign investors, including a well-developed market economy that welcomes foreign direct investment, particularly in technology and R&D. The most popular investment destinations in recent years have been the automotive, pharmaceuticals, and financial sectors. The country benefits from a skilled labor force, and a high standard of living, with its capital Vienna consistently placing at the top of global quality-of-life rankings. With more than 50 percent of its GDP derived from exports, Austria’s economy is closely tied to other EU economies; Germany is its largest trading partner, followed by the United States. The economy features a large service sector and an advanced industrial sector specialized in high-quality component parts, especially for vehicles. The country’s location between Western European industrialized nations and growth markets in Central, Eastern, and Southeastern Europe (CESEE) has led to a high degree of economic, social, and political integration with fellow European Union (EU) member states and the CESEE. In October 2019 a new digital services tax was signed into law, effective on January 1, 2020. This 5% tax on advertising revenues targets companies with global revenues exceeding €750 million ($848 million) and revenues within Austria of at least 25 million euros, with a carve-out for Austria’s national broadcaster (ORF), which would otherwise be taxed. Austria also maintains a relatively high overall tax burden and a complex regulatory system with extensive bureaucracy. Some 300 U.S. companies have investments in Austria, many of whom have expanded over time. U.S. Foreign Direct Investment into Austria totaled approximately EUR 10.5 billion (USD 11.8 billion) at the end of 2019, according to the Austrian National Bank, and U.S. companies support over 17,000 jobs in Austria. Following solid GDP growth of 1.6% in 2019, leading forecasters anticipate a 7-7.1% decrease in 2020 GDP due to COVID-19. The economy is predicted to make a strong recovery in 2021, ranging from 4.3-5.6% GDP growth. Austria’s government took quick, decisive measures to combat the spread of COVID-19, closing much of the retail sector and mandating a strict stay-at-home policy on March 16, 2020. As a result of their success in reducing infection rates, Austria was one of the first western countries to reopen their economy in stages starting April 14, 2020. Because the country is highly dependent on both foreign trade and tourism, recovery will ultimately depend on the impact of the virus on global travel, international supply chains, and economic recovery in Austria’s largest export markets. Austria offers a wide array of investment incentives to attract industry and jobs in high-tech, R&D, and economically disadvantaged regions. Table 1: Key Metrics and Rankings Measure Year Index/Rank Website Address TI Corruption Perceptions Index 2019 12 of 180 http://www.transparency.org/ research/cpi/overview World Bank’s Doing Business Report 2020 27 of 190 http://www.doingbusiness.org/ en/rankings Global Innovation Index 2019 21 of 129 https://www.globalinnovationindex.org/ analysis-indicator U.S. FDI in partner country ($B USD, historical stock positions) 2019 USD 8.58 http://apps.bea.gov/international/ factsheet/ World Bank GNI per capita 2018 USD 49,310 http://data.worldbank.org/indicator/ NY.GNP.PCAP.CD 1. Openness To, and Restrictions Upon, Foreign Investment Policies Towards Foreign Direct Investment The Austrian government welcomes foreign direct investment, particularly when such investments have the potential to create new jobs, support advanced technology fields, promote capital-intensive industries, and enhance links to research and development. There are no specific legal, practical or market access restrictions on foreign investment. American investors have not complained of discriminatory laws against foreign investors. However, in October 2019 a new digital services tax was signed into law, effective on January 1, 2020. This 5% tax on advertising revenues targets companies with global revenues exceeding €750 million ($848 million) provided at least €25 million ($28 million) of that sum comes from Austria, with a carve-out for Austria’s national broadcaster (ORF) which would otherwise be taxed. Government officials claim the tax is intended to level the playing field. The corporate tax rate, a 25 percent flat tax, is above the EU average, and the government has indicated plans to reduce this rate to 21 percent within the current parliamentary term which runs through 2024. U.S. citizens and investors have occasionally reported that it is difficult to establish and maintain banking services since the U.S.-Austria Foreign Account Tax Compliance Act (FATCA) bilateral agreement went into force in 2014, as some Austrian banks have been reluctant to take on this reporting burden. Potential investors should be aware of Austria’s lengthy environmental impact assessments in their investment decision-making. The mining and transportation sectors are also more heavily regulated than in other economies. The requirement that over 50 percent of energy providers must be publicly owned limits foreign investments in the energy sector. Strict liability and co-existence regulations regarding crop contamination in the agriculture sector virtually outlaw the cultivation, marketing, or distribution of genetically-modified crops. Austria’s national investment promotion organization, the Austrian Business Agency (ABA), is a useful first point of contact for foreign companies interested in establishing operations in Austria. It provides comprehensive information about Austria as a business location, identifies suitable sites for greenfield investments, and consults in setting up a company. ABA provides these services free of charge. The Austrian Economic Chamber (WKO) and the American Chamber of Commerce in Austria (Amcham) are also good resources for foreign investors. Both conduct annual polls of their members to measure their satisfaction with the business climate, thus providing early warning to the government of problems identified by investors. Limits on Foreign Control and Right to Private Ownership and Establishment In principle there is generally no limitation on establishing and owning a business in Austria. However, a local managing director must be appointed to any newly established enterprise. For non-EU citizens to establish and own a business, the Austrian Foreigner’s Law mandates a residence permit that includes the right to run a business. Many Austrian trades are regulated, and the right to run a business in regulated trade sectors is only granted when certain preconditions are met, such as certificates of competence, and recognition of foreign education. The requirement that over 50 percent of energy providers must be publicly owned limits foreign investments in the energy sector. Strict liability and co-existence regulations regarding crop contamination in the agriculture sector virtually outlaw the cultivation, marketing, or distribution of genetically-modified crops. Austria maintains a national security investment screening process to review potential foreign acquisitions of 25 percent or more of a company deemed essential to national security or which is involved in the provision of public services such as energy, water, telecommunications, and educational services. The government plans to reduce the threshold for review to ten percent and expand covered sectors through adoption of a new investment-screening law in 2020. The current screening process has seldom been used since its introduction in 2012. The EU Regulation establishing a framework for the coordination of members’ national security screening of foreign direct investments into the Union entered into force in April 2019. It creates a cooperation mechanism through which EU countries and the European Commission will exchange information and raise concerns related to specific investments which could potentially threaten the national security of EU countries. Non-EU/EEA citizens need authorization from administrative authorities of the respective Austrian province to acquire land. Provincial regulations vary, but in general there must be a public (economic, social, cultural) interest for the acquisition to be authorized. Often, the applicant must guarantee that he does not want to build a vacation home on the land in order to receive the required authorization. Other Investment Policy Reviews Not applicable. Business Facilitation While the World Bank Doing Business Index ranked Austria as the 27th in 2020 (www.doingbusiness.org), starting a business takes time and requires many procedural steps (Austria ranks 127 in this category ). The average time to set up a company in Austria is 21 days, compared to just 9.2 days in other high income countries. In order to register a new company or open a subsidiary in Austria, a company must first be listed on the Austrian Companies Register at a local court. The next step is to seek confirmation of registration from the Austrian Economic Chamber (WKO) establishing that the company is really a new business. The investor must then notarize the “declaration of establishment,” deposit a minimum capital requirement with an Austrian bank, register with the tax office, register with the district trade authority, register employees for social security, and register with the municipality where the business will be located. Membership in the WKO is mandatory for all businesses in Austria. For sole proprietorships, it is possible under certain conditions to use an online registration process via government websites (in German language only) to either found or register a company: https://www.usp.gv.at/Portal.Node/usp/public/content/gruendung/egruendung/269403.html: or www.gisa.gv.at/online-gewerbeanmeldung. It is advisable to seek information from ABA or the WKO before applying to register a firm. Austria’s national investment promotion organization, the Austrian Business Agency (ABA), is a useful first point of contact for foreign companies interested in establishing operations in Austria. It provides comprehensive information about Austria as a business location, identifies suitable sites for greenfield investments, and consults in setting up a company. ABA provides these services free of charge. The website of the ABA contains further details and contact information and is intended to serve as a first point of contact for foreign investors in Austria: https://investinaustria.at/en/starting-business/. Outward Investment With more than 50 percent of its GDP derived from exports, the Austrian government encourages outward investment. Advantage Austria, the “Austrian Foreign Trade Service” is a special section of the WKO that promotes Austrian exports and also supports Austrian companies establishing an overseas presence. Advantage Austria operates six offices in the United States (Washington, DC, New York, Chicago, Atlanta, Los Angeles, and San Francisco.) It also has trade offices in 26 European, 19 Asian, 7 other North- and South American, 6 African countries, and Australia. https://www.wko.at/service/aussenwirtschaft/aussenwirtschaftscenter.html#heading_aussenwirtschaftscenter The Ministry for Digital and Economic Affairs and the WKO run a joint program called “Go International,” providing services to Austrian companies that are considering investing for the first time in foreign countries. The program provides grants for market access costs and provides “soft subsidies,” such as counseling, legal advice, and marketing support. 6. Financial Sector Capital Markets and Portfolio Investment Austria has sophisticated financial markets that allow foreign investors access without restrictions. The government welcomes foreign portfolio investment. The Austrian National Bank (OeNB) regulates portfolio investments effectively. Austria has a national stock exchange that currently includes 62 companies on its regulated market and several others on its multilateral trading facility (MTF). The Austrian Traded Index (ATX) is a price index consisting of the 20 largest stocks on the market and forms the most important index of Austria’s stock market. The size of the companies listed on the ATX is roughly equivalent to those listed on the MDAX in Germany. The market capitalization of Austrian listed companies is relatively small compared to the country’s western European counterparts, accounting for 31% of Austria’s GDP, compared to 54% in Germany or 150% in the United States. Unlike the other market segments in the stock exchange, the Direct Market and Direct Market Plus segments, targeted at SMEs and young, developing companies, are subject only to the Vienna Stock Exchange’s general terms of business, not more stringent EU regulations. These segments also have lower reporting requirements but also greater risk for investors, as prices are more likely to fluctuate, due to the respective companies’ low level of market capitalization. Austria has robust financing for product markets, but the free flow of resources into factor markets (capital, raw materials) could be improved. Overall, financing is primarily available through banks and government-sponsored funding organizations with very little private venture capital in existence. The Austrian government is aware of this issue but has taken few tangible steps to improve the availability of private venture capital. Austria is fully compliant with IMF Article VIII, all financial instruments are available, and there are no restrictions on payments. Credit is available to foreign investors at market-determined rates. Austria’s financial system ranked 30th in the 2019 World Economic Forum’s Global Competitiveness Report, out of 141 countries examined. Money and Banking System Due to U.S. government financial reporting requirements, Austrian banks are very cautious in committing the time and expense required to accept U.S. clients and U.S. investors without established U.S. corporate headquarters. Austria has one of the densest banking networks in Europe with almost 4,000 branch offices registered in 2019. The banking system is highly developed, with worldwide correspondent banks and representative offices and branches in the United States and other major financial centers. Large Austrian banks also have extensive networks in Central and Southeast European (CESEE) countries and the countries of the former Soviet Union. Total assets of the banking sector amounted to EUR 1.02 trillion (USD 1.1 trillion) in 2019 approximately 2.5 times the country’s GDP. Approximately EUR 400 million of these are held by Austria’s two largest banks, Erste Group and Raiffeisen Bank International (RBI). The Austrian banking sector is considered to be one of the most stable in the world. Austria’s banking sector is managed and overseen by the Austrian National Bank (OeNB) and the Financial Market Authority (FMA). Four Austrian banks with assets in excess of EUR 30 billion (USD 34 billion) are subject to the Eurozone’s Single Supervisory Mechanism (SSM), as is Sberbank Europe AG, a Russian bank subsidiary headquartered in Austria, due to its significant cross-border assets, as well as Volksbank Wien AG, due to its importance for the economy. All other Austrian banks continue to be subject to the country’s dual-oversight bank supervision system with roles for the OeNB and the FMA, both of which are also responsible for policing irregularities on the stock exchange and for supervising insurance companies, securities markets, and pension funds. Foreign banks are allowed to establish operations in the country with no legal restrictions that place them at a disadvantage compared to local banks. Foreign Exchange and Remittances Foreign Exchange Austria has no restrictions on cross-border capital transactions, including the repatriation of profits and proceeds from the sale of an investment, for non-residents and residents. The Euro, a freely convertible currency and the only legal tender in Austria and 18 other Euro-zone member states, shields investors from exchange rate risks within the Euro-zone. Remittance Policies Not applicable. Sovereign Wealth Funds Austria has no sovereign wealth funds. 7. State-Owned Enterprises Austria has two major wholly state-owned enterprises (SOEs): The OeBB (Austrian Federal Railways) and Asfinag (highway financing, building, maintenance, and administration). Other government industry holding companies are bundled in the government holding company OeBAG (http://www.oebag.gv.at ) The government has direct representation in the supervisory boards of its companies (commensurate with its ownership stake) and OeBAG has the authority to buy and sell company shares, as well as purchase minority stakes in strategically relevant companies. Such purchases are subject to approval from an audit committee consisting of government-nominated independent economic experts. OeBAG holds a 53 percent stake in the Post Office, 51 percent in energy company Verbund, 33 percent in the gambling group Casinos Austria, 31.5 percent in the energy company OMV, 28 percent in the Telekom Austria Group, and a few other minor ventures. Local governments own the majority of utilities, Vienna International Airport, and more than half of Austria’s 264 hospitals and clinics. Private enterprises in Austria can generally compete with public enterprises under the same terms and conditions with respect to market access, credit, and other such business operations as licenses and supplies. While most SOEs must finance themselves under terms similar to private enterprises, some large SOEs (such as OeBB) benefit from state-subsidized pension systems. As a member of the EU, Austria is also a party to the Government Procurement Agreement (GPA) of the WTO, which indirectly also covers the SOEs (since they are entities monitored by the Austrian Court of Auditors). The five major OeBAG companies (Postal Service, Verbund AG, Casinos Austria, OMV, Telekom Austria), are listed on the Vienna stock exchange. In these cases, senior management does not directly report to a minister, but to an oversight board. However, the government often appoints management and board members, who usually have strong political affiliations. Austrian laws require advance approval by the Austrian Ministry for Digital and Economic Affairs for foreign acquisitions of a relevant stake ) in enterprises in certain strategic industries (with sales over EUR 700,000, USD 784.000 per year), comprising a wide range of sectors (see Chapter 1). Privatization Program The government has not privatized any public enterprises since 2007. Austrian public opinion is skeptical regarding further privatization and there are no indications of any government privatizations on the horizon. In prior privatizations, foreign and domestic investors received equal treatment. Despite a historical government preference for maintaining blocking minority rights for domestic shareholders, foreign investors have successfully gained full control of enterprises in several strategic sectors of the Austrian economy, including in telecommunications, banking, steel, and infrastructure. In March 2020, the government chose not to intervene when the Czech Sazka group increased its stake in the partially state-owned gambling group Casinos Austria to a majority share. 9. Corruption Austria is a member of the Council of Europe’s Group of States against Corruption (GRECO) and also ratified the UN Convention against Corruption (UNCAC) and the OECD Anti-Bribery Convention. As part of the UNCAC ratification process, Austria has implemented a national anti-corruption strategy. Central elements of the strategy are promoting transparency in public sector decisions and raising awareness of corruption. Corruption generally is not a major issue in Austria, which ranked 12th (out of 180 countries) in Transparency International’s latest Corruption Perceptions Index. Bribery of public officials, their family members and political parties, is prohibited under the Austrian Criminal Code, and investors do not report corruption as significantly affecting business in Austria. However, the 2017 Ibiza scandal in which then-Vice Chancellor Heinz Christian Strache and Freedom Party FPOe chairman Johann Gudenus were filmed discussing the provision of government contracts in exchange for favors and party donations shook the public’s belief in the integrity of the political system. This was compounded by further revelations in 2019 that the FPOe had promised gambling licenses to Casinos Austria in exchange for placing a party loyalist on the company’s executive board. When this was made public, it led to a vote of no-confidence for the government, the resignation of the Chancellor and his cabinet, and snap elections. It also led to public questioning of the process of appointment of candidates to high-ranking positions in state-owned enterprises, but so far there has been no change to the law. Bribing members of Parliament is considered a criminal offense, and accepting a bribe is a punishable offense with the sentence varying depending on the amount of the bribe. The 2018 Austrian Federal Contracts Act implements EU guidelines prohibiting participating in public procurement contracts if there is a potential conflict of interest and requires measures to be put in place to detect and prevent such conflicts of interest. This required public authorities to set up compliance management systems or amend their existing structures accordingly. Virtually all Austrian companies have internal codes of conduct governing bribery and potential conflicts of interest. Corruption provisions in Austria’s Criminal Code cover managers of Austrian public enterprises, civil servants, and other officials (with functions in legislation, administration, or justice on behalf of Austria, in a foreign country, or an international organization), representatives of public companies, members of parliament, government members, and mayors. The term “corruption” includes the following in the Austrian interpretation: active and passive bribery; illicit intervention; and abuse of office. Corruption can sometimes include a private manager’s fraud, embezzlement, or breach of trust. Criminal penalties for corruption include imprisonment ranging from six months to ten years , depending on the severity of the offence. Jurisdiction for corruption investigations rests with the Austrian Federal Bureau of Anti-Corruption and covers corruption taking place both within and outside the country. The Lobbying Act of 2013 introduced binding rules of conduct for lobbying. It requires domestic and foreign organizations to register with the Austrian Ministry of Justice. Financing of political parties requires disclosure of donations exceeding EUR 2,500 (USD 2,800). No donor is allowed to give more than EUR 7,500 (USD 8,400) and total donations to one political party may not exceed EUR 750,000 (USD 840,000) in a single year. Foreigners are prohibited from making donations to political parties. Private companies are subject to the Austrian Act on Corporate Criminal Liability, which makes companies liable for active and passive criminal offences. Penalties include fines up to EUR 1.8 million (USD 2.0 million). To date, U.S. companies have not reported any instances of corruption inhibiting FDI. Resources to Report Corruption Contacts at government agencies responsible for combating corruption: Wirtschafts- und Korruptionsstaatsanwaltschaft (Central Public Prosecution for Business Offenses and Corruption) Dampfschiffstraße 4 1030 Vienna, Austria Phone: +43-(0)1-52 1 52 0 E-Mail: firstname.lastname@example.org BAK – Bundesamt zur Korruptionsprävention und Korruptionsbekämpfung (Federal Agency for Preventing and Fighting Corruption) Ministry of the Interior Herrengasse 7 1010 Vienna, Austria Phone: +43-(0)1-531 26 – 6800 E-Mail: BMI-III-BAK-SPOC@bak.gv.at Contact at “watchdog” organization: Transparency International – Austrian Chapter Berggasse 7 1090 Vienna, Austria Phone: +43-(0)1-960 760 E-Mail: email@example.com Azerbaijan Executive Summary The overall investment climate in Azerbaijan continues to improve, although significant challenges remain. Over the past few years, Azerbaijan’s government has sought to attract foreign investment, undertake reforms to diversify its economy, and stimulate private sector-led growth. However, the Azerbaijani economy remains heavily dependent on oil and gas output, which account for roughly 90 percent of export revenue and over half of the state budget. Real GDP grew 2.2 percent in 2019, primarily due to a ramp up in natural gas exports. While the oil and gas sector has historically attracted the largest amount of foreign investment, the Azerbaijani government has targeted four non-oil sectors to diversify the economy: agriculture, tourism, information and communications technology (ICT), and transportation. Measures taken in recent years to improve the business climate and reform the overall economy include eliminating redundant business license categories, empowering the popular “ASAN” government service centers with licensing authority, simplifying customs procedures, suspending certain business inspections, and reforming the tax regime. Azerbaijan fell from 25th to 34th among 190 countries in the “Doing Business 2020” rating published by the World Bank and the International Finance Corporation. According to the report published on October 24, Azerbaijan carried out four successful reforms from May 2018 to May 2019, thereby fulfilling four out of five goals. These reforms were related to registering property, obtaining credit, protecting minority investors, and enforcing contracts. Due to these indicators, Azerbaijan was featured as one of the top 20 “reformer” countries. However, progress remains slow on structural reforms required to create a diversified and competitive private sector, and corruption remains a major challenge for firms operating in Azerbaijan. A small group of government-connected holding companies dominate the economy, enforcement of intellectual property rights is insufficient, and judicial transparency is lacking. Under Azerbaijani law, foreign investments enjoy complete and unreserved legal protection and may not be nationalized or appropriated, except under specific circumstances. Private entities may freely establish, acquire, and dispose of interests in business enterprises. Foreign citizens, organizations, and enterprises may lease, but not own, land. Azerbaijan’s government has not shown any pattern of discriminating against U.S. persons or entities through illegal expropriation. The Bilateral Investment Treaty (BIT) between the United States and Azerbaijan provides U.S. investors with recourse to settle investment disputes using the International Center for the Settlement of Investment Disputes (ICSID). The average time needed to resolve international business disputes through domestic courts or alternative dispute resolution varies widely. Azerbaijan considers travel to the region of Nagorno-Karabakh and the surrounding territories unlawful. Engaging in any commercial activities in Nagorno-Karabakh and the surrounding territories, whether directly or through business subsidiaries, can result in criminal prosecution and/or other legal action against individuals and/or businesses in Azerbaijan; it may also affect the ability to travel to Azerbaijan in the future. Table 1: Key Metrics and Rankings Measure Year Index/Rank Website Address TI Corruption Perceptions Index 2018 152 of 180 http://www.transparency.org/ research/cpi/overview World Bank’s Doing Business Report 2019 25 of 190 http://www.doingbusiness.org/en/rankings Global Innovation Index 2018 82 of 126 https://www.globalinnovationindex.org/ analysis-indicator U.S. FDI in partner country ($M USD, stock positions) 2018 N/A http://apps.bea.gov/international/factsheet/ World Bank GNI per capita 2018 $4,050 http://data.worldbank.org/ indicator/NY.GNP.PCAP.CD 1. Openness To, and Restrictions Upon, Foreign Investment Policies towards Foreign Direct Investment Over the past few years, the Azerbaijani government has actively sought to attract foreign investment. Flows of foreign direct investment to Azerbaijan have risen steadily in recent years, primarily in the energy sector. Foreign investment in the government’s priority sectors for economic diversification (agriculture, transportation, tourism, and ICT) has thus far been limited. Foreign investments enjoy complete and unreserved legal protection under the Law on the Protection of Foreign Investment, the Law on Investment Activity, and guarantees contained within international agreements and treaties. In accordance with these laws, Azerbaijan will treat foreign investors, including foreign partners in joint ventures, in a manner no less favorable than the treatment accorded to national investors. Azerbaijan’s Law on the Protection of Foreign Investments protects foreign investors against nationalization and requisition, except under specific circumstances. The Azerbaijani government has not shown any pattern of discriminating against U.S. persons or entities through illegal expropriation. Azerbaijan’s primary body responsible for investment promotion is the Azerbaijan Export and Investment Promotion Agency (AzPromo). AzPromo is a joint public-private initiative, established by the Ministry of Economy and Industry in 2003 to foster the country’s economic development and diversification by attracting foreign investment into the non-oil sector and stimulating non-oil exports. A January 2018 decree called for new legislation, which has not yet been introduced, to ensure Azerbaijan conforms to international standards to protect foreign investor rights. The Azerbaijani government meets regularly with the American Chamber of Commerce (AmCham) to solicit the input from the business community, particularly as part of AmCham’s biennial white paper process. In 2018, AmCham reported the government accepted around 50 percent of the proposals put forth in their white paper. The next white paper will be presented in 2020. Limits on Foreign Control and Right to Private Ownership and Establishment Foreigners are allowed to register business entities by opening a fully owned subsidiary, acquiring shares of an existing company, or creating a joint venture with a local partner. Foreign companies are also permitted to operate in Azerbaijan without creating a local legal entity by registering a representative or branch office with the tax authorities. Foreigners are not permitted to own land in Azerbaijan but are permitted to lease land and own real estate. Under Azerbaijani laws, the state must retain a controlling stake in companies operating in the mining, oil and gas, satellite communication, and military arms sectors, limiting foreign or domestic private ownership to a 49 percent share of companies in these industries. Foreign ownership in the media sector is also strictly limited. Furthermore, a special license to conduct business is required for foreign or domestic companies operating in telecommunications, sea and air transportation, insurance, and other regulated industries. Azerbaijan does not screen inbound foreign investment and U.S. investors are not specifically disadvantaged by any existing control mechanisms. Other Investment Policy Reviews Azerbaijan has not conducted an Organization for Economic Cooperation and Development (OECD) investment policy review, a United Nations Conference on Trade and Development (UNCTAD) investment policy review, or a WTO Trade Policy Review. Business Facilitation Azerbaijani law requires all companies operating in the country to register. Without formal registration, a company may not maintain a bank account, or clear goods through customs. As part of the ongoing business law reforms, a “Single Window” principle was introduced January 1, 2008, significantly streamlining the registration process. Businesses must now only register with the tax authorities, which takes approximately three days for commercial organizations. Since 2011, companies have also been able to e-register at http://taxes.gov.az . Azerbaijan ranked 34th and joined the top 20 “reformer” countries, according to the World Bank’s “Doing Business 2020” report. Over the period from May 2018 to May 2019, the government implemented four reforms related to obtaining registration of real estate rights, obtaining loans, and protecting minority shareholders. In addition, Azerbaijan made enforcing contracts easier by introducing an e-system allowing plaintiffs to file an initial complaint electronically and by adopting a consolidated law on voluntary mediation, according to the report. The country has also improved its position in terms of “obtaining loans” indicator, climbing 21 spots to take first place. Outward Investment Azerbaijan does not actively promote or incentivize outward investment, though Azerbaijani entities, particularly the State Oil Company of Azerbaijan (SOCAR) and the State Oil Fund of Azerbaijan (SOFAZ), have invested in various countries, including the United States. SOFAZ investment is typically limited to real estate, precious metals, and low-yield government securities. SOCAR has invested heavily in oil and gas infrastructure and petrochemicals processing in Turkey and Georgia, as well as gas pipeline networks in Greece, Albania, and Italy as part of the Southern Gas Corridor that transports Azerbaijani gas to European markets. The government does not restrict domestic investors from investing overseas. 6. Financial Sector Capital Markets and Portfolio Investment Access to capital is a critical impediment to business development in Azerbaijan. An effective regulatory system that encourages and facilitates portfolio investment, foreign or domestic, is not fully in place. Though the Baku Stock Exchange opened in 2000, there is insufficient liquidity in the market to enter or exit sizeable positions.The Central Bank assumed control over all financial regulation in January 2020, following disbandment of a formerly independent regulator. Non-bank financial sector staples such as capital markets, insurance, and private equity are in the early stages of development. The Capital Market Modernization Project is an attempt by the government to build the foundation for a modern financial capital market, including developing market infrastructure and automation systems, and strengthening the legal and market frameworks for capital transactions. One major hindrance to the stock market’s growth is the difficulty in encouraging established Azerbaijani businesses to adapt to standard investor-friendly disclosure practices, which are generally required for publicly listed companies. Azerbaijan’s government and Central Bank do not restrict payments and transfers for international transactions. Foreign investors are permitted to obtain credit on the local market, but smaller companies and firms without an established credit history often struggle to obtain loans on reasonable commercial terms. Limited access to capital remains a barrier to development, particularly for small and medium enterprises. Money and Banking System The country’s financial services sector – of which banking comprises more than 90 percent – is underdeveloped, which constrains economic growth and diversification. The drop in world oil prices in 2014/2015 and the resulting strain on Azerbaijan’s foreign currency earnings and the state budget exacerbated existing problems in the country’s banking sector and led to rising non-performing loans (NPLs) and high dollarization. Subsequent reforms have improved overall sector stability. President Aliyev signed a decree in February 2019 to provide partial relief to retail borrowers on foreign-currency denominated loans that meet certain criteria. As of April 2020, 30 banks were registered in Azerbaijan, including 14 banks with foreign capital and two state-owned banks. These banks employ 19,572 people and have a combined 508 branches and 2,659 ATMs nationwide. Total banking sector assets stood at approximately USD $19.3 billion as of January 2020, with the top five banks holding almost 58 percent of this amount. The banking sector is still recovering from the drop in world oil prices which began in in 2014/2015 and the resulting devaluations. The Financial Markets Supervisory Agency closed 10 insolvent banks in 2016. The government subsequently bailed-out the International Bank of Azerbaijan (IBA) which held approximately 40 percent of the country’s banking assets. In January 2017, the Finance Ministry increased the government’s stake in the IBA from 54.96 percent to 76.73 percent. The government undertook a substantial cleanup of IBA assets, transferring IBA’s non-performing assets at book value to AgrarKredit, a government-owned non-financial enterprise funded by the Central Bank. The amount of transferred assets totaled USD 6 billion in 2015-2016 and a further USD 3 billion was transferred in 2017 (25 percent of 2016 GDP in total). In May 2017, IBA entered formal restructuring, similar to U.S. Chapter 11 bankruptcy, and completed its restructuring process in September 2017. IBA is still updating its commercial strategy. Foreign banks are permitted in Azerbaijan and may take the form of representative offices, branches, joint ventures, and wholly owned subsidiaries. These banks are subject to the same regulations as domestic banks, with certain additional restrictions. Foreign individuals and entities are also permitted to open accounts with domestic or foreign banks in Azerbaijan. Foreign Exchange and Remittances Foreign Exchange Azerbaijan’s Central Bank officially adopted a floating exchange rate in 2016 but continues to operate under an “interim regime” that effectively pegs the exchange rate at AZN 1.7 per USD. Azerbaijan’s foreign currency reserves are based on the reserves of the Central Bank, those of the State Oil Fund of Azerbaijan (SOFAZ), and the assets of the State Treasury Agency under the Finance Ministry. Foreign currency reserves of the Central Bank increased by 14 percent during 2019 and totaled $6.4 billion in January 2020. Between January 2019 and January 2020, SOFAZ assets increased by 12 percent to reach $43.3 billion. Foreign exchange transactions are governed by the Law on Currency Regulation. The Central Bank administers the overall enforcement of currency regulation. Currency conversion is carried out through the Baku Interbank Currency Exchange Market and the Organized Interbank Currency Market. There are no statutory restrictions on converting or transferring funds associated with an investment into freely usable currency at a legal, market-clearing rate. The average time for remitting investment returns is two to three business days. Some requirements on disclosure of the source of currency transfers have been imposed to reduce illicit transactions. Remittance Policies Corporate branches of foreign investors are subject to a remittance tax of 10 percent on all profits derived from its business activities in Azerbaijan. There have not been any recent changes or plans to change investment remittance policies that either tighten or relax access to foreign exchange for investment remittances. There do not appear to be time limitations on remittances, including dividends, return on investment, interest and principal on private foreign debt, lease payments, royalties, and management fees. Nor does there appear to be limits on the inflow or outflow of funds for remittances of profits or revenue. Sovereign Wealth Funds Azerbaijan’s sovereign wealth fund is the State Oil Fund of Azerbaijan (SOFAZ). Its mission is to transform hydrocarbon reserves into financial assets generating perpetual income for current and future generations and to finance strategically important infrastructure and social projects of national scale. While its main statutory focus is investing in assets outside of the country, since it was established in 1999 SOFAZ has financed several socially-beneficial projects in Azerbaijan related to infrastructure, housing, energy, and education. The government’s newly adopted fiscal rule places limits on pro-cyclical spending, with the aim of increasing hydrocarbon revenue savings. SOFAZ publishes an annual report which it submits for independent audit. The fund’s assets totaled USD $43.3 billion as of January 1, 2020. More information is available at oilfund.az. 7. State-Owned Enterprises In Azerbaijan, state-owned enterprises (SOEs) are active in the oil and gas, power generation, communications, water supply, railway, and air passenger and cargo sectors, among others. There is no published list of SOEs. While there are no SOEs that officially have been delegated governmental powers, companies such as the State Oil Company of Azerbaijan (SOCAR), Azerenerji (the national electricity utility), and Azersu (the national water utility) – all of which are closed joint-stock companies with majority state ownership and limited private investment – enjoy quasi-governmental or near-monopoly status in their respective sectors. SOCAR is wholly owned by the government of Azerbaijan and takes part in all oil and gas activities in the country. It publishes regular reports on production volumes, the value of its exports, estimates of investments in exploration and development, production costs, the names of foreign companies operating in the country, production data by company, quasi-fiscal activities, and the government’s portion of production-sharing contracts. SOCAR is also responsible for negotiating Production Sharing Agreements (PSAs) with all foreign partners for hydrocarbon development. SOCAR’s annual financial reports are audited by an independent external auditor and include the consolidated accounts of all SOCAR’s subsidiaries, although revenue data is incomplete. There have been instances where state-owned enterprises have used their regulatory authority to block new entrants into the market. SOEs are, in principle, subject to the same tax burden and tax rebate policies as their private sector competitors. However, in sectors that are open to both the private and foreign competition, SOEs generally receive a larger percentage of government contracts or business than their private sector competitors. While SOEs regularly purchase or supply goods or services from private sector firms, domestic and foreign private enterprises have reported problems competing with SOEs under the same terms and conditions with respect to market share, information, products and services, and incentives. Private enterprises do not have the same access (including terms) to financing as SOEs. SOEs are also afforded material advantages such as preferential access to land and raw materials, advantages that are not available to private enterprises. There is little information available on Azerbaijani SOEs’ budget constraints, due to the limited transparency in their financial accounts. Privatization Program A renewed privatization process started with the May 2016 presidential decree implementing additional measures to improve the process of state property privatization and the July 2016 decree on measures to accelerate privatization and improve the management efficiency of state property. The State Committee on Property Issues launched a portal to provide privatization information, privatization.az, in July 2016. The portal contains information about the properties, their addresses, location, and initial costs with the aim of facilitating privatization. Azerbaijan’s current privatization efforts focus on smaller state-owned properties, and there are no active plans to privatize large SOEs. 9. Corruption Corruption is a major challenge for firms operating in Azerbaijan and is a barrier to foreign investment, despite government efforts to reduce low-level corruption. Azerbaijan does not require that private companies establish internal codes of conduct to prohibit bribery of public officials, nor does it provide protections to NGOs involved in investigating corruption. U.S. firms have identified corruption in government procurement, licensing, dispute settlement, regulation, customs, and taxation as significant obstacles to investment. The Azerbaijani government publicly acknowledges problems with corruption but has neither effectively nor consistently enforced anti-corruption laws nor regulations. Azerbaijan has made modest progress in implementing a 2005 Anticorruption Law, which created a commission with the authority to require full financial disclosure from government officials. The government has achieved a degree of success reducing red tape and opportunities for bribery through a focus on e-government and government service delivery through centralized ASAN service centers, which first opened in February 2013. ASAN centers provide more transparent, efficient, and accountable services through a “one window” model that reduces opportunities for rent-seeking and petty government corruption and have become a model for other initiatives aimed at improving government service delivery. Despite progress in reducing corruption in public services delivery, the civil service, public procurement apparatus, and the judiciary still suffer from corruption. Tax reforms announced in January 2019 are partially aimed at reducing corruption in tax administration. Azerbaijan signed and ratified the UN Anticorruption Convention and is a signatory to the Council of Europe Criminal and Civil Law Conventions. Azerbaijan is not currently a party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. Resources to Report Corruption Kamal Jafarov Acting Executive Secretary Commission on Combating Corruption Baku, Azerbaijan (+994 12) 492-04-65 firstname.lastname@example.org Marshall Islands Executive Summary With a total population of approximately 55,000 people (11,465 in the labor force) spread out over 1,200 small islands and islets across 750,000 square miles of ocean but just 70 square miles of total land mass, the Republic of the Marshall Islands (RMI) has a tiny economy with an annual GDP of around USD 221 million, per capita GDP of USD 4,056 and a 3.5 percent real growth rate. The remoteness of the RMI from major markets (2,300 miles from Honolulu, 1,900 miles from Guam, and 2,800 miles from Tokyo) severely impacts the economy. The Marshallese economy combines a small subsistence sector in the outer islands with a modest urban sector in Majuro and Kwajalein. The RMI government is the country’s largest employer, employing approximately 46 percent of the salaried work force. The U.S. Army Garrison – Kwajalein Atoll (USAG-KA) is the second largest employer. A semi-modern service-oriented economy is located in Majuro and in Ebeye, on Kwajalein Atoll, and is largely sustained by government expenditures and by USAG-KA. Primary commercial industries include wholesale/retail trade, business services, commercial fisheries, construction, and tourism. Fish, coconuts, breadfruit, bananas, taro, and pandanus cultivation constitute the subsistence sector. However, as the land in RMI is not very nutrient rich, the agricultural base is limited. The RMI has a narrow export base and limited production capacity and is therefore vulnerable to external shocks. Primary export products include frozen fish (tuna), tropical aquarium fish, ornamental clams and corals, coconut oil and copra cake, and handicrafts. The RMI continues to rely heavily on imports and continues to run trade deficits (USD 63 million in 2018). The Marshallese economy remains dependent on donor funding. The RMI is part of the former US-administered Trust Territory of the Pacific Islands that gained independence in 1986 and continues to use the U.S. dollar as its currency. Since independence it has operated under a Compact of Free Association with the United States. Since 2004, the U.S. has provided over USD 800 million in direct assistance, subsidies, and financial support to the Marshall Islands, equivalent to approximately 70 percent of the country’s total GDP during the same period. The Marshall Islands has received additional aid from Australia, Japan, Taiwan, the United Arab Emirates (UAE), Thailand, the European Union, and organizations such as the Asian Development Bank. The U.S., China, South Korea, Japan, Germany, and the Philippines are the Marshall Islands’ major trading partners. Top U.S. exports to RMI include food products, prefabricated buildings, recreational boats, excavation machinery, aircraft parts, tobacco, and wood/paper products. With the renegotiation of the Compact’s direct grant assistance approaching in 2023, the Government of the Marshall Islands is increasing its efforts to attract foreign investment and recognizes its important role in growing private sector development. Most local government officials encourage foreign investment, though attitudes may differ from island to island. The government particularly encourages foreign investment in fisheries, aquaculture, deep-sea mining, manufacturing, tourism, renewable energy, and agriculture and provides certain investment incentives for foreign investors. Foreign investment in the Marshall Islands is complicated, however, by laws that prevent non-Marshallese from purchasing land. There is no public land in the country and no land registry; foreign businesses must lease land from private landowners in order to operate in the country. The high cost of doing business due to the country’s remoteness, its dependence on imported materials and services, and its limited infrastructure, especially transportation links, create additional challenges. Finally, due to the RMI’s very low elevation, the potential threats of climate change and sea level rise make attracting FDI to the Marshall Islands even more difficult. The major foreign direct investments are concentrated in the fisheries sector, including a tuna loining plant and a tuna processing plant along with several fishing purse seiners, the majority of which are owned by investors from China and Taiwan. There has been no significant foreign investment over the past year. Table 1: Key Metrics and Rankings Measure Year Index/Rank Website Address TI Corruption Perceptions Index 2020 Not Listed http://www.transparency.org/ research/cpi/overview World Bank’s Doing Business Report 2020 153 of 190 http://www.doingbusiness.org/en/rankings Global Innovation Index 2020 Not Listed https://www.globalinnovationindex.org/ analysis-indicator U.S. FDI in partner country ($M USD, historical stock positions) 2020 $2.2 Billion https://apps.bea.gov/international/factsheet/ World Bank GNI per capita 2020 $3,390 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 the RMI publicly expresses interest in finding ways to increase foreign investment, but there are many structural impediments to foreign investment and economic progress, such as land rights, which are unlikely to be changed in the foreseeable future. Foreign investment is governed through the Foreign Investment Business License (Amendment Act (2000)), which established the Registrar of Foreign Investment and which details restrictions on foreign investments. The Ministry of Resources and Development, Trade and Investment Division administers the law in coordination with the Office of the Attorney General. Land issues and disputes concerning leases are subject to customary law governing land tenure, and proceedings can take a protracted time to resolve. Land cannot be purchased by investors; it can only be leased through customary practices. Limits on Foreign Control and Right to Private Ownership and Establishment Although the Marshall Islands generally encourages foreign investment, the Foreign Investment Business License (Amendment) Act established a National Reserved List, which restricts foreign investment in certain small-scale retail and service businesses. However, this law is not consistently enforced, and foreign investors may enter partnership agreements with local Marshallese businesses. Officially, foreign investment is prohibited in the following business ventures: Small scale agriculture and marine culture for local markets Bakeries and pastry shops Motor garages and fuel filling stations Land taxi operations, not including airport taxis used by hotels Rental of all types of motor vehicles Small retail shops with a quarterly turnover of less than USD 1,000 (including mobile retail shops and/or open-air vendors/take-outs) Laundromat and dry cleaning, other than service provided by hotels/motels Tailor/sewing shops Video rental Handicraft shops Delicatessens, Deli Shops, or Food take-out Other Investment Policy Reviews In the past three years the Government of the Marshall Islands has not conducted an investment policy review through any organization or institution. Business Facilitation The government of the Marshall Islands created the Office of Commerce and Investment and Tourism (OCIT) three years ago to assist foreign investors. OCIT’s website at https://www.rmiocit.org/ has helpful information regarding investment and doing business in the Marshall Islands. The OCIT is currently in the process of developing a one-stop-shop online business registration process which they hope to launch next year. However, currently there is no online website for registering a business in the Marshall Islands. This must be done in person. After a foreign investor receives a FIBL, detailed in the Laws and Regulations on FDI, the business owner must complete the following steps: Check the uniqueness of the proposed company name with the Registrar of Corporations. This costs USD 100 and takes one day. Have the company charters notarized. Notarization can be done at the Office of the Attorney General. It takes two days on average and costs USD 10. Register the company with the Registrar of Corporations. This takes five days and costs USD 250. Limited Liability Companies need to file a Certificate of Formation and need to have LLC agreements detailing how the LLC will be operated, managed, and distributions divided. Obtain an Employer Identification Number from the Marshallese Social Security Administration. This number will also serve as the company’s tax identification number. This process takes two days and costs USD 20. Apply for a business license. The business owner needs to submit a company charter along with the business license. Business licenses are usually issued in seven days. Licensing fees vary depending on the type of business. Fees are as follows: Retail Business: USD 150 Banks: USD 5,000 Professional: USD 3,000 Hotels: USD 500 The Ministry of Finance segments the business sector for tax purposes using annual gross revenue amounts, not number of employees. There are no other segmentations recognized by the Marshall Islands. There is a Small Business Development Center in Majuro. Outward Investment The RMI government does not actively promote, incentivize, or restrict outward investment. 6. Financial Sector Capital Markets and Portfolio Investment There are no stock exchanges or financial regulatory institutions in the country. Money and Banking System There are currently two banks with branches in the Marshall Islands. The Bank of Guam is a publicly owned U.S. company with its headquarters in Guam. It complies with all U.S. regulations and is FDIC-insured. The Bank of the Marshall Islands is a privately-owned Marshallese company with headquarters in Majuro. Foreign Exchange and Remittances Foreign Exchange The government does not impose any restrictions on converting or transferring funds associated with an investment. The Marshall Islands uses the U.S. dollar as its official currency, and there is no central bank. There are no official remittance policies and no restrictions on foreign exchange transactions. There have been no reported difficulties in obtaining foreign exchange as the vast majority of funds are denominated in U.S. dollars. Remittance Policies While the government encourages reinvestment of profits locally, there are no laws restricting repatriation of profits, dividends, or other investment capital acquired in the Marshall Islands. To comply with international money laundering commitments, cash transactions and transfers exceeding USD 10,000 are reported by the banks to the Banking Commission, which monitors this information and has the authority to investigate financial records when necessary. To date, however, the country has not successfully prosecuted any money laundering cases. Sovereign Wealth Funds The Marshall Islands has no sovereign wealth fund (SWF) or asset management bureau (AMB), but the Compact of Free Association established a Trust Fund for the Marshall Islands that is independently overseen by a committee composed of the United States, Taiwan, and Marshall Islands representatives. 7. State-Owned Enterprises Nearly all major industries are controlled by state-owned enterprises (SOEs). The SOE sector, comprising 11 public enterprises, continues to underperform and to impose significant risks and burden on the fiscal system and economy. In the Republic of the Marshall Islands Single Audit for FY2019, the government recognized the need for continued reforms at SOEs. Air Marshall Islands, Marshall Islands Resort, Marshall Islands National Communications Agency, and Tobolar all have negative cash flows and require subsidies each year. The Marshall Islands Marine Resource Authority (MIMRA) is the only SOE to be a net revenue provider for the Marshall Islands, but the audit cautioned that the long-term future support from the fisheries sector cannot be taken for granted. The Marshall Islands is not a member of the WTO. In 2015 the Marshallese parliament passed the State-Owned Enterprises Act which set standards for the formation and operation of SOEs. The Act changed the way the boards of directors of SOEs are structured, and set minimum reporting requirements for the 11 SOEs. Boards must consist of at least three but no more than seven directors, only one of which can be a public official and that public official may not hold a term longer than three years after the Act goes into effect. A public official may not be selected as Chairman of the Board. All SOEs are required to have their books independently audited as part of the government’s overall audit. Privatization Program There is no formal privatization program in the RMI. Currently, foreign investors are allowed to purchase shares only in the National Telecommunications Agency, but foreign investors may not own a majority of shares. Bidding criteria are not readily available, and the process remains largely controlled by the national government. 9. Corruption There are credible allegations and periodic prosecutions for misuse of government funds and abuse of public office for private gain. Government procurement and transfers appear most vulnerable to corruption, and personal relationships sometimes play a role in government decisions. Government officials at all levels are permitted to invest in and own private businesses without regard for conflict-of-interest considerations. Foreign aid has been abused and past audits report a number of financial irregularities connected to donor-funded activities. Bribery is a second-degree felony, whether to a domestic or foreign official. The Marshall Islands acceded to the UN Convention against Corruption in September 2011. Domestic and international firms as well as NGOs have repeatedly identified corruption as a problem in the business environment and a major detractor for international firms exploring investment or business activities in the local market. Resources to Report Corruption Richard Hickson Attorney General RMI Attorney General Office PO Box 890 Majuro, Republic of the Marshall Islands 96960 RichardHicksonLawyer@gmail.com Tel: +692 625 3244 Fax: +692 625 5218 No international, regional, or local watchdog organizations operate in the country.