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Bangladesh

Executive Summary

Bangladesh is the most densely populated non-city state country in the world, with the world’s eighth largest population (over 165 million) in a territory the size of Iowa.  Bangladesh is situated in the northeastern corner of the Indian subcontinent, sharing a 4,100 km border with India and a 247 km border with Burma. With sustained economic growth over the past decade, a large, young, and hard-working workforce, strategic location between the large South and Southeast Asian markets, and vibrant private sector, Bangladesh will likely attract increasing investment.

Buoyed by a growing middle class, Bangladesh has enjoyed consistent annual GDP growth of more than six percent over the past decade.  Much of this growth continues to be driven by the ready-made garments (RMG) industry, which exported USD 36.66 billion of products in FY 2017-18, second only to China, and continued remittance inflows, reaching nearly USD 15 billion in FY 2017-18.  Forecasts based on the first nine months of the 2018-19 fiscal year estimate Bangladesh is on track to reach USD 40 billion in garment exports for the fiscal year.

The Government of Bangladesh (GOB) actively seeks foreign investment, particularly in the agribusiness, garment/textiles, leather/leather goods, light manufacturing, energy, information and communications technology (ICT), and infrastructure sectors.  It offers a range of investment incentives under its industrial policy and export-oriented growth strategy with few formal distinctions between foreign and domestic private investors. Bangladesh received USD 3.0 billion in foreign direct investment (FDI) in FY 2017-18, up from USD 2.45 billion the previous year.  However, the rate of FDI inflows is only around 1 percent of GDP, one of the lowest of rates in Asia.

Bangladesh has made gradual progress in reducing some constraints on investment, including taking steps to better ensure reliable electricity, but inadequate infrastructure, limited financing instruments, bureaucratic delays, and corruption continue to hinder foreign investment.  New government efforts to improve the business environment show promise but implementation has yet to be seen. Slow adoption of alternative dispute resolution mechanisms and sluggish judicial processes impede the enforcement of contracts and the resolution of business disputes.

A series of terrorist attacks in 2015-17, including the July 1, 2016 Holey Bakery attack in Dhaka’s diplomatic enclave, resulted in increased security restrictions for many expatriates, including U.S. Embassy staff.  National elections, which were held on December 30, 2018, are prone to instances of political violence. The influx of more than 700,000 Rohingya refugees since August 2017 has also raised security concerns.

International brands and the international community continue to press the GOB to meaningfully address worker rights and factory safety problems in the country.  With support from the international community and the private sector, Bangladesh has made significant progress on fire and workplace safety. Critical work remains on safeguarding workers’ rights to freely associate and bargain collectively, including in the Export Processing Zones (EPZs).  

The GOB has limited resources for intellectual property rights (IPR) protection and counterfeit goods are readily available in Bangladesh.  Government policies in the ICT sector are still under development. Current policies grant the government broad powers to intervene in that sector.

Capital markets in Bangladesh are still developing and the financial sector is still highly dependent on banks.

Table 1

Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2018 149 of 180 http://www.transparency.org/research/cpi/overview
World Bank’s Doing Business Report “Ease of Doing Business” 2018 176 of 190 http://www.doingbusiness.org/rankings
Global Innovation Index 2018 116 of 126 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in Partner Country ($M USD, stock positions) 2017 $460 http://www.bea.gov/international/factsheet/
World Bank GNI per capita 2017 $1,470 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

Bangladesh actively seeks foreign investment, particularly in the agribusiness, garment and textiles, leather and leather goods, light manufacturing, energy, information and communications technology (ICT), and infrastructure sectors.  It offers a range of investment incentives under its industrial policy and export-oriented growth strategy with few formal distinctions between foreign and domestic private investors.

Foreign and domestic private entities can establish and own, operate, and dispose of interests in most types of business enterprises. Four sectors, however, are reserved for government investment:

  • Arms and ammunition and other defense equipment and machinery;
  • Forest plantation and mechanized extraction within the bounds of reserved forests;
  • Production of nuclear energy;
  • Security printing.

The Bangladesh Investment Development Authority (BIDA) is the principal authority tasked with promoting supervising and promoting private investment.  The BIDA Act of 2016 approved the merger of the now disbanded Board of Investment and the Privatization Committee. BIDA performs the following functions:

  • Provides pre-investment counseling services
  • Registers and approves of private industrial projects
  • Issues approval of branch/liaison/representative offices
  • Issues work permits for foreign nationals
  • Issues approval of royalty remittances, technical know-how and technical assistance fees
  • Facilitates import of capital machinery and raw materials
  • Issues approvals for foreign loans and supplier credits

BIDA’s newly designed website has aggregated information regarding Bangladesh investment policies and ease of doing business indicators: http://bida.gov.bd/  .  

The Bangladesh Export Processing Zone Authority (BEPZA) acts as the investment supervisory authority in export processing zones (EPZs).  BEPZA is the one-stop service provider and regulatory authority for companies operating inside EPZs. In addition, Bangladesh plans to establish over 100 Economic Zones (EZs) throughout the country over the next several years.  The EZs are designed to attract additional foreign investment to locations throughout the country. The Bangladesh Economic Zones Authority (BEZA) is responsible for supervising and promoting investments in the economic zones (EZs).  

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign and domestic private entities can establish and own, operate, and dispose of interests in most types of business enterprises. Bangladesh allows private investment in power generation and natural gas exploration, but efforts to allow full foreign participation in petroleum marketing and gas distribution have stalled.  Regulations in the area of telecommunication infrastructure currently include provisions for 60 percent foreign ownership (70 percent for tower sharing).

Four sectors are reserved for government investment and exclude both foreign and domestic private sector activity:

  • Arms and ammunition and other defense equipment and machinery;
  • Forest plantation and mechanized extraction within the bounds of reserved forests;
  • Production of nuclear energy;
  • Security printing.

In addition, there are 17 controlled sectors that require prior clearance/ permission from the respective line ministries/authorities. These are:

  1. Fishing in the deep sea
  2. Bank/financial institution in the private sector
  3. Insurance company in the private sector
  4. Generation, supply and distribution of power in the private sector
  5. Exploration, extraction and supply of natural gas/oil
  6. Exploration, extraction and supply of coal
  7. Exploration, extraction and supply of other mineral resources
  8. Large-scale infrastructure projects (e.g. flyover, elevated expressway, monorail,     economic zone, inland container depot/container freight station)
  9. Crude oil refinery (recycling/refining of lube oil used as fuel)
  10. Medium and large industry using natural gas/condescend and other minerals as raw material
  11. Telecommunication service (mobile/cellular and land phone)
  12. Satellite channels
  13. Cargo/passenger aviation
  14. Sea-bound ship transport
  15. Sea-port/deep seaport
  16. VOIP/IP telephone
  17. Industries using heavy minerals accumulated from sea beach

While discrimination against foreign investors is not widespread, the government frequently promotes local industries and some discriminatory policies and regulations exist. For example, the government closely controls approvals for imported medicines that compete with domestically-manufactured pharmaceutical products and it has required majority local ownership of new shipping and insurance companies, albeit with exemptions for existing foreign-owned firms, following a prime ministerial directive.  In practical terms, foreign investors frequently find it necessary to have a local partner even though this requirement may not be statutorily defined.

In certain strategic sectors, the GOB has placed unofficial barriers on foreign companies’ ability to divest from the country.

Business Registration

The Bangladesh Investment Development Authority (BIDA), formerly the Board of Investment, is responsible for screening, reviewing, and approving FDI in Bangladesh.  BIDA is directly supervised by the Prime Minister’s office and the Chairman of BIDA has Minister-equivalent rank. There have been instances where receiving approval was delayed.  Once the foreign investor’s application is submitted to BIDA, the authorities review the proposal to ensure the investment does not create conflicts with local business. Investors note it is frequently necessary to separately register with other entities such as the National Board of Revenue.  According to the World Bank, business registration in Bangladesh takes 19.5 days on average with nine distinct steps: http://www.doingbusiness.org/data/exploreeconomies/bangladesh/   .  

BIDA’s resources on Ease of Doing Business, Investment Opportunity, Potential Sectors, and Doing Business in Bangladesh are also available at:  

Requirements vary by sector, but all foreign investors are also required to obtain clearance certificates from relevant ministries and institutions with regulatory oversight.  BIDA establishes time-lines for the submission of all the required documents. For example, if a proposed foreign investment is in the healthcare equipment field, investors need to obtain a No Objection Certificate (NOC) from the Directorate General for Health Services under the Ministry of Health.  The NOC states that the specific investment will not hinder local manufacturers and is in alignment with the guidelines of the ministry. Negative outcomes can be appealed, except for applications pertaining to the four restricted sectors previously mentioned.

A foreign investor also must register its company with the Registrar of Joint Stock Companies and Firms (RJSC&F) and open a local bank account under the registered company’s name.  For BIDA screening, an investor must submit the RJSC&F Company Registration certificate, legal bank account details, a NOC from the relevant ministry, department, or institution, and a project profile (if the investment is more than USD 1.25 million) along with BIDA’s formatted application form.

Other Investment Policy Reviews

In 2013 Bangladesh completed an investment policy review (IPR) with the United Nations Conference on Trade and Development (UNCTAD) and can be found at: http://unctad.org/en/pages/newsdetails.aspx?OriginalVersionID=444&Sitemap_x0020_Taxonomy=Investment percent20Policy percent20Reviews percent20(IPR);#20;#UNCTAD percent20Home  .

Bangladesh has not conducted an IPR through the Organization for Economic Cooperation and Development.

A Trade Policy Review was last done by the World Trade Organization in October 2012 and can be found at:  https://www.wto.org/english/tratop_e/tpr_e/tp370_e.htm  .

With EU assistance, Bangladesh conducted a trade policy review, the “Comprehensive Trade Policy of Bangladesh” which was published by the Ministry of Commerce in September 2014.  Current Bangladesh government export and import policies are available at: http://www.mincom.gov.bd/site/page/30991fcb-8dfc-4154-a58b-09bb86f60601/Policy  .

Business Facilitation

The Government has had limited success reducing the time required to establish a company.  BIDA and BEZA are both attempting to establish one-stop business registration shops and these agencies have proposed draft legislation for this purpose.  In February 2018, the Bangladesh Parliament passed the “One Stop Service Bill 2018,” which aims to streamline business and investment registration processes.  Expected streamlined services from BIDA include: company registration, name clearance issuance, tax certificate and taxpayer’s identification number (TIN), value added tax (VAT) registration, visa recommendation letter issuance, work permit issuance, foreign borrowing request approval, and environment clearance.  BIDA started its online one-stop service (OSS) on a trial basis in January 2018. Businesses are currently getting 15 types of services online. BIDA aims to automate 150 processes from 34 government agencies once the OSS becomes fully operational.

Companies can register their business at the Office of the Registrar of Joint Stock Companies and Firms:  www.roc.gov.bd  .  However, the online business registration process is not clear and cannot be used by a foreign company to attain the business registration as certain steps are required to be performed in-person.  

In addition, BIDA has branch/liaison office registration information on its website at: http://bida.gov.bd/  .  

Other agencies with which a company must typically register are as follows:

  • City Corporation – Trade License
  • National Board of Revenue – Tax & VAT Registration
  • Chief Inspector of Shops and Establishments – Employment of workers notification.

The company registration process now takes around 15 workdays to complete.  The process to open a branch or liaison office is approximately one month. The process for a trade license, tax registration, and VAT registration requires seven days, two days, and three weeks, respectively.  

Outward Investment

Outward foreign direct investment is generally restricted through the Foreign Exchange Regulation Act of 1947.  As a result, the Bangladesh Bank plays a key role in limiting outbound investment. In September 2015, the government amended the 1947 Act by adding a “conditional provision” that permits outbound investment for export-related enterprises.  Private sector contacts note that the few international investments approved by the Bangladesh Bank have been limited to large exporting companies with international experience.

2. Bilateral Investment Agreements and Taxation Treaties

Bangladesh has signed bilateral investment treaties with 28 countries, including Austria, the Belgium-Luxembourg Economic Union, China, Denmark, France, Germany, India, Indonesia, Iran, Italy, Japan, Democratic People’s Republic of Korea, Republic of Korea, Malaysia, Netherlands, Pakistan, Philippines, Poland, Romania, Singapore, Switzerland, Thailand, Turkey, United Arab Emirates, United Kingdom, United States, Uzbekistan, and Vietnam.  

The U.S.-Bangladesh Bilateral Investment Treaty, signed on March 12, 1986, entered into force on July 23, 1989.  The Foreign Investment Act includes a guarantee of national treatment. The United States and Bangladesh also signed a bilateral treaty for the avoidance of double taxation on September 26, 2004.  The United States ratified it on March 31, 2006. The parties exchanged instruments of ratification on August 7, 2006. The treaty became effective for most taxpayers beginning in the 2007 tax year.

Bangladesh has successfully negotiated several regional trade and economic agreements, including the South Asian Free Trade Area (SAFTA), the Asia-Pacific Trade Agreement (APTA), and the Bay of Bengal Initiative for Multi-Sectoral, Technical and Economic Cooperation (BIMSTEC).  Bangladesh has not signed any bilateral free trade agreements (FTA), but started FTA discussions with Sri Lanka in March 2017 with the intention to sign the agreement by the end of 2018. In August 2017, Bangladesh also signed a memorandum of understanding with Turkey to begin discussions towards an FTA.  It has also announced plans to negotiate agreements with Cambodia and Thailand.

Bangladesh has taken steps to strengthen bilateral economic relations with India by reducing trade barriers and improving connectivity.  Bangladesh gained duty-free access to India via regional trade agreements including the South Asian Association for Regional Cooperation (SAARC) Preferential Trading Arrangement (SAPTA) signed in 1993 and the South Asian Free Trade Area (SAFTA) agreement signed in 2004.  Tariff reduction under SAFTA started from July 2006. Under SAFTA, Bangladesh can export goods duty-free to India, with the exception of alcohol and tobacco. India also provides duty-free and preferential tariff treatment to Bangladesh under the Duty Free Tariff Preference (DFTP) Scheme for Least Developed Countries (LDCs) effective from August 13, 2008.  As a founding member of the World Trade Organization (WTO) and as a Less Developed Country (LDC), Bangladesh has been an active advocate for LDC interests in WTO negotiations. In reality, however, many non-tariff barriers between Bangladesh and India continue to inhibit increased regional trade. These include anti-dumping and countervailing duties, conformity in testing/assessment, compliance with sanitary and phytosanitary standards, rules of origin, visa restrictions, and trade facilitation like poor logistic facilities at land ports.  India is the destination for less than 2 percent of Bangladesh’s exports.

Bangladesh met all three criteria required to graduate from LDC status at the triennial review of the UN’s Economic and Social Council Committee for Development Policy held in March 2018.  Bangladesh expects to fully graduate from LDC status in 2024 and then receive a three-year transition period during which it can still enjoy LDC-specific benefits. After 2027, Bangladesh is expected to lose access to several trade preferences program, including the European Union’s Generalized System of Preferences (GSP) Everything but Arms (EBA) program and other preferential financing arrangements.  To gain access to the EU’s GSP+ program, Bangladesh will need to ratify 27 international conventions on human and labor rights, environment, and governance.

3. Legal Regime

Transparency of the Regulatory System

Since 1989, the government has gradually moved to decrease regulatory obstruction of private business.  The Bangladeshi chambers of commerce have called for a greater voice for the private sector in government decisions and for privatization, but at the same time, many support protectionism and subsidies for their own industries.  The result is that policy and regulations in Bangladesh are often not clear, consistent, or publicized. Registration and regulatory processes are alleged to be frequently used as rent-seeking opportunities. The major rule-making and regulatory authority exist at the national level—under each Ministry with many final decisions being made at the top-most levels, including the Prime Minister’s office (PMO).  The PMO is actively engaged in controlling policies, as well as foreign investment in government-controlled projects. 

The Bangladesh Investment Development Authority (BIDA)—a merger of the Board of Investment (BOI) and the Privatization Commission (PC)—was formed in accordance with the Bangladesh Investment Development Authority Bill 2016 passed by Parliament on July 25, 2016.  The bill established BIDA as the lead private investment promotion and facilitation agency in Bangladesh. The move came amid complaints about redundancies in the BOI’s and the PC’s overlapping mandates and concerns that the PC had not made sufficient progress. BIDA hopes to become a “one-stop shop” for investors and a “true” investment promotion authority rather than simply follow the referral service-orientation of BOI.  Currently, BIDA is not yet a one-stop shop and companies must still seek approvals from relevant line ministries

Bangladesh has achieved incremental progress in using information technology to improve the transparency and efficiency of some government services and to develop independent agencies to regulate the energy and telecommunication sectors.  Some investors cited government laws, regulations, and implementation as impediments to investment.  The government has historically limited opportunities for the private sector to comment on proposed regulations.  In 2009, Bangladesh adopted the Right to Information Act that provides for multilevel stakeholders consultation through workshops or media outreach.  Although the consultation process exists, it is still weak and subject to further improvement.

Ministries do not generally publish and release draft proposals to the public.  However, several government organizations, including the Bangladesh Bank (central bank), BIDA, the Ministry of Commerce, and the Bangladesh Telecommunications Regulatory Commission have occasionally posted draft legislation and regulations online and solicited feedback from the business community.  In some instances, parliamentary committees have also reached out to relevant stakeholders for input on draft legislation. The media continues to be the main information source for the public on many draft proposals. There is also no legal obligation to publish proposed regulations, consider alternatives to proposed regulation, or solicit comments from the general public.

Regulatory agencies generally do not solicit comments on proposed regulations from the general public; however, when a consultation occurs, comments may be received through public media consultation, feedback on websites (e.g., in the past, the Bangladesh Bank received comments on monetary policy), focus group discussions, or workshops with relevant stakeholders.  There is no government body tasked with soliciting and receiving comments, but the Bangladesh Government Press of the Ministry of Information is entrusted with the authority of disseminating government information to the public. The law does not require regulatory agencies to report on the results of consultations and, in practice, regulators do not generally report the results.  Widespread use of social media in Bangladesh has created an additional platform for public input into developing regulations and government officials appear to be sensitive to this form of messaging.

The government printing office, The Bangladesh Government Press (http://www.dpp.gov.bd/bgpress/  ), publishes the weekly “Bangladesh Gazette” every Thursday.  The gazette provides official notice of government actions, including the issuance of government rules and regulations and the transfer and promotion of government employees.  Laws can also be accessed at http://bdlaws.minlaw.gov.bd/  .

Bangladesh passed the Financial Reporting Act of 2015 which created the Financial Reporting Council (FRC) in 2016 in an aim to establish transparency and accountability in the accounting and auditing of financial institutions.  However, the FRC is not fully functional as the regulations that will govern the accountings, earning reports, and disclosure of companies have not yet been formulated. Accounting practices and quality varies widely in Bangladesh.  Internationally known and recognized firms have begun establishing local offices in Bangladesh and the presence of these firms is positively influencing the accounting norms in the country. Some firms are capable of providing financial reports audited to international standards while others maintain unreliable (or multiple) sets of accounting reports.  Regulatory agencies also do not conduct impact assessment of proposed regulations; hence, regulations are often not reviewed on the basis of data-driven assessments. National budget documents are not prepared according to internationally accepted standards.

International Regulatory Considerations

The Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) aims to integrate regional regulatory systems between Bangladesh, India, Burma, Sri Lanka, Thailand, Nepal, and Bhutan.  However, efforts to advance regional cooperation measures have stalled in recent years and regulatory systems remain uncoordinated.

Local law is based on the English common law system but most fall short of international standards. The country’s regulatory system remains weak and many of the laws and regulations are not enforced and standards are not maintained.

Bangladesh has been a member of the World Trade Organization (WTO) since January 1995.  The WTO requires all signatories to the Agreement on Technical Barriers to Trade (TBT) to establish a National Inquiry Point and Notification Authority to gather and efficiently distribute trade-related regulatory, standards, and conformity assessment information to the WTO Member community.  Bangladesh Standards and Testing Institute (BSTI) has been working as the National Enquiry Point for the WTO-TBT Agreement since 2002. There is an internal committee on WTO affairs in BSTI and it participates in the notification activities to WTO through the Ministry of Commerce and the Ministry of Industries.

Focal Points and Methods of Contact are:  

General Contact:

Email: ictcell.bsti@gmail.com
Tel: +880-2-8870275

Email address for WTO-TBT National Enquiry Point: bsti_pub@bangla.net

Focal Points for WTO:

  • Md. Muazzem Hossain, Director General, BSTI, Dhaka; Email: dg@bsti.gov.bd, Tel: +880-2-8870275
  • Mr. Shajjatul Bari, Deputy Director, Standards Wing, BSTI, Dhaka; Email: dstd@bsti.gov.bd, Tel: +880-2-8870278, Cell: +8801672790239
  • Mr. Md. Munir Chowdhury, Director General, WTO Cell, Ministry of Commerce; Email: dg.wto@mincom.gov.bd, Tel: +880-2-9545383, Cell: +88 0171 1591060
  • Focal Points for Sanitary and Phytosanitary Measures (SPS), Technical Barriers to Trade (TBT) and Trade-Related Aspects of Intellectual Property Rights (TRIPS):
  • Mr. Md. Hafizur Rahman, Director, WTO Cell, Ministry of Commerce: Email: director1.wto@mincom.gov.bd, Tel: +880-2-9552105, Cell: +88 0171 1861056
  • Mr. Md. Hamidur Rahman Khan, Director, WTO Cell, Ministry of Commerce-
  • Email: director2.wto@mincom.gov.bd, Tel: +880-2-9549195, Cell: +88 01711372093

Link to BSTI: http://www.bsti.gov.bd/  

Legal System and Judicial Independence

Bangladesh is a common law based jurisdiction.  Many of the basic laws of Bangladesh, such as the penal code, civil and criminal procedural codes, contract law, and company law are influenced by English common laws.  However, family laws, such as laws relating to marriage, dissolution of marriage, and inheritance are based on religious scripts and therefore differ between religious communities.  The Bangladeshi legal system is based on a written constitution and the laws often take statutory forms that are enacted by the legislature and interpreted by the higher courts. Ordinarily, executive authorities and statutory corporations cannot make any law, but can make by-laws to the extent authorized by the legislature.  Such subordinate legislation is known as rules or regulations and is also enforceable by the court. As a common law system, statutes are typically short and set out basic rights and responsibilities that are then elaborated on by the courts in their application and interpretation. The Judiciary of Bangladesh acts through (1) The Superior Judiciary having appellate, revision, and original jurisdiction and (2) Sub-Ordinate Judiciary having original jurisdiction.

Since 1971, Bangladesh’s legal system has been updated in the areas of company, banking, bankruptcy, and money loan court laws and other commercial laws.  An important impediment to investment in Bangladesh is a weak and slow legal system in which the enforceability of contracts is uncertain.  The judicial system does not provide for interest to be charged in tort judgments, which means delays in proceedings carry no penalties.  Bangladesh does not have a separate court or division of a court dedicated solely to hearing commercial cases. The Joint District Judge court (a civil court) is responsible for enforcing contracts.

Some notable commercial laws include:

  • The Contract Act, 1872 (Act No. IX of 1930)
  • The Sale of Goods Act, 1930 (Act No. III of 1930)
  • The Partnership Act, 1932 (Act No. IX of 1932)
  • The Negotiable Instruments Act, 1881 (Act No. XXVI of 1881)
  • The Bankruptcy Act, 1997 (Act No. X of 1997)
  • The Arbitration Act, 2001 (Act No. I of 2001).

The judicial system of Bangladesh has never been completely independent from the interference of the executive branch of the government.  In a significant milestone, the government in 2007 separated the country’s judiciary from the executive but the executive retains strong influence over the judiciary through control of judicial appointments.  Other pillars of the justice system, including the police, courts, and legal profession, are also closely aligned with the executive branch.  In lower courts, corruption is widely perceived as a serious problem.  Regulations or enforcement actions are appealable under the Appellate Division of the Supreme Court.

Bangladesh scored a 3.33 in the World Bank’s 2017 Judicial Independence Index on a 1-7 band score with 7 being the best ranking.  That was up from 2016 when it scored a 2.38.

Laws and Regulations on Foreign Direct Investment

Major laws affecting foreign investment include: the Foreign Private Investment (Promotion and Protection) Act of 1980, the Bangladesh Export Processing Zones Authority Act of 1980, the Companies Act of 1994, the Telecommunications Act of 2001, the Industrial Policy Act of 2005, the Industrial Policy Act of 2010, and the Bangladesh Economic Zones Act 2010.  The Industrial Policy Act of 2016 was approved by the Cabinet Committee on Industrial Purchase on February 24, 2016 and replaces the Industrial Policy of 2010.

The Industrial Policy Act of 2016 offers incentives for “green” (environmental), high-tech, or “transformative” industries.  Foreign investors who invest USD 1 million or transfer USD 2 million to a recognized financial institution can apply for Bangladeshi citizenship.  The Government of Bangladesh will provide financial and policy support for high-priority industries (those that create large-scale employment and earn substantial export revenue) and creative industries (architecture, arts and antiques, fashion design, film and video, interactive laser software, software, and computer and media programming).  Specific importance will be given to agriculture and food processing, ready-made garments (RMG), information and communication technology (ICT), software, pharmaceuticals, leather and leather products, and jute and jute goods.

In 2017, BIDA submitted proposed legislation for a One-Stop Service Act (OSS), which was approved by the Parliament in February 2018, to attract further foreign direct investment to Bangladesh.  In addition, Petrobangla, the state-owned oil and gas company, has modified its production sharing agreement contract for offshore gas exploration to include an option to export gas.

BIDA has a “one-stop” website that provides relevant laws, rules, procedure, and reporting requirements for investors at: http://www.bida.gov.bd/  .   Aside from information on relevant business laws and licenses, the website includes information on Bangladesh’s investment climate, opportunities for business, potential sectors, and how to do business in Bangladesh.  The website also has an eService Portal for Investors which provides services like visa recommendations for foreign investors, approval/extension of work permits for expatriates, approval of foreign borrowing, and approval/renewal of branch/liaison and representative offices.  However, the effectiveness of these online services is questionable.

Competition and Anti-Trust Laws

The GOB formed an independent agency in 2011 called the “Bangladesh Competition Commission (BCC)” under the Ministry of Commerce.  The Bangladesh Parliament then passed the Competition Act in June 2012. However, the BCC has experienced operational delays and it has not received sufficient resources to fully operate.  Currently, the WTO Cell of the Ministry of Commerce handles most competition-related issues.

In January 2016, the two parent companies of Malaysia-based Robi and India-based Airtel signed a formal deal to merge their operations in Bangladesh, completing the country’s first telecommunications merger.  The deal, valued at USD 12.5 million, is to date Bangladesh’s largest corporate merger. The merger raised anti-competition concerns but it was completed in November 2016 after the Bangladesh Telecommunication Regulatory Commission (BTRC) and Prime Minister Sheikh Hasina gave final approvals.  

Expropriation and Compensation

Since the Foreign Investment Act of 1980 banned nationalization or expropriation without adequate compensation, the GOB has not nationalized or expropriated property from foreign investors.  In the years immediately following independence in 1971, widespread nationalization resulted in government ownership of more than 90 percent of fixed assets in the modern manufacturing sector, including the textile, jute, and sugar industries and all banking and insurance interests, except those in foreign (but non-Pakistani) hands.  During the last 20 years, the government has since taken steps to privatize many of these industries and the private sector has developed into a main driver of the country’s sustained economic growth.

Dispute Settlement

ICSID Convention and New York Convention

Bangladesh is a signatory to the International Convention for the Settlement of Disputes (ICSID) and it acceded in May 1992 to the United Nations Convention for the Recognition and Enforcement of Foreign Arbitral Awards.  Alternative dispute resolutions are possible under the Bangladesh Arbitration Act of 2001. The current legislation allows for enforcement of arbitral awards.

Investor-State Dispute Settlement

Bangladeshi law allows contracts to refer investor-state dispute settlement to third country fora for resolution.  The U.S.-Bangladesh Bilateral Investment Treaty also stipulates that parties may, upon the initiative of either of them and as a part of their consultation and negotiation, agree to rely upon non-binding, third-party procedures, such as the fact-finding facility available under the Rules of the “Additional Facility (“Facility”) of the International Centre for the Settlement of Investment Disputes (“Centre”).”  If the dispute cannot be resolved through consultation and negotiation, then the dispute shall be submitted for settlement in accordance with the applicable dispute-settlement procedures upon which they have previously agreed. Bangladesh is also a party to the South Asia Association for Regional Cooperation (SAARC) Agreement for the Establishment of an Arbitration Council, signed November 2005, which aims to establish a permanent center for alternative dispute resolution in one of the SAARC member countries.

International Commercial Arbitration and Foreign Courts

Bangladeshi law allows contracts to refer dispute settlement to third country fora for resolution.  The Bangladesh Arbitration Act of 2001 and amendments in 2004 reformed alternative dispute resolution in Bangladesh.  The Act consolidated the law relating to both domestic and international commercial arbitration. It thus creates a single and unified legal regime for arbitration in Bangladesh.  Although the new Act is principally based on the UNCITRAL Model Law, it is a patchwork as some unique provisions are derived from the Indian Arbitration and Conciliation Act 1996 and some from the English Arbitration Act 1996.

In practice, enforcement of arbitration results is applied unevenly and the GOB has challenged ICSID rulings, especially those that involve rulings against the GOB.  The timeframe for dispute resolution is unpredictable and has no set limit. It can be done as quickly as a few months, but often takes years depending on the type of dispute.  Anecdotal information indicates average resolution time can be as high as 16 years. Local courts may be biased against foreign investors in resolving disputes.

Bangladesh is a signatory of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards and recognizes the enforcement of international arbitration awards.  Domestic arbitration is under the authority of the district judge court bench and foreign arbitration is under the authority of the relevant high court bench.

The ability of the Bangladeshi judicial system to enforce its own awards is weak.  Senior members of the government have been effective in using their offices to resolve investment disputes on several occasions, but the GOB’s ability to resolve investment disputes at a lower level is mixed.  The GOB does not publish the numbers of investment disputes involving U.S. or foreign investors. Anecdotal evidence indicates investment disputes occur with limited frequency and the involved parties often resolve the disputes privately rather than seek government intervention.  

The practice of alternative dispute resolution (ADR) in Bangladesh has many challenges, including lack of funds, lack of lawyer cooperation, and lack of good faith.  Slow adoption of ADR mechanisms and sluggish judicial processes impede the enforcement of contracts and the resolution of business disputes in Bangladesh.

As in many countries, Bangladesh has adopted a “conflicts of law” approach to determining whether a judgment from a foreign legal jurisdiction is enforceable in Bangladesh.  This single criterion allows Bangladesh courts broad discretion in choosing whether to enforce foreign judgments with significant effects on matrimonial, adoption, corporate, and property disputes.  Most enterprises in Bangladesh, and especially state-owned enterprises (SOEs), whose leadership is nominated by the ruling government party, maintain strong ties with the government.  Thus domestic courts strongly tend to favor SOEs and local companies in investment disputes.

Investors are also increasingly turning to the Bangladesh International Arbitration Center (BIAC) for dispute resolution.  BIAC is an independent arbitration center established by prominent local business leaders in April 2011 to improve commercial dispute resolution in Bangladesh to stimulate economic growth.  The council committee is headed by the President of International Chamber of Commerce—Bangladesh (ICCB) and includes the presidents of other prominent chambers such as like Dhaka Chamber of Commerce and Industry (DCCI) and Metropolitan Chamber of Commerce and Industry (MCCI).  The center operates under the Bangladesh Arbitration Act of 2001. According to BIAC, fast track cases are resolved in approximately six months while typical cases are resolved in one year. Major Bangladeshi trade and business associations such as the American Chamber of Commerce in Bangladesh (AmCham) can sometimes help to resolve transaction disputes.

Bankruptcy Regulations

Many laws affecting investment in Bangladesh are old and outdated.  Bankruptcy laws, which apply mainly to individual insolvency, are sometimes not used in business cases because of the series of falsified assets and uncollectible cross-indebtedness supporting insolvent banks and companies.  A Bankruptcy Act was enacted in 1997 but has been ineffective in addressing these issues. An amendment to the Bank Companies Act of 1991 was enacted in 2013. Some bankruptcy cases fall under the Money Loan Court Act which has more stringent and timely procedures.

4. Industrial Policies

Investment Incentives

Details regarding fiscal and non-fiscal incentives are available on the BIDA website: http://bida.gov.bd/?page_id=146  . Current regulations permit a tax holiday for designated “thrust” (strategic) sectors and infrastructure projects established between July 01, 2011 and June 30, 2019.  Industries set up in Export Processing Zones (EPZs) are also eligible for tax holidays. Thrust sectors subject to exemption include: certain pharmaceuticals, automobile manufacturing, contraceptives, rubber latex, chemicals or dyes, certain electronics, bicycles, fertilizer, biotechnology, commercial boilers, certain brickmaking technologies, compressors, computer hardware, energy efficient appliances, insecticides, pesticides, petro-chemicals, fruit and vegetable processing, textile machinery, tissue grafting, and tire manufacturing industries. Physical infrastructure projects eligible for exemptions include: deep sea ports, elevated expressways, road overpasses, toll road and bridges, EPZs, gas pipelines, information technology parks, industrial waste and water treatment facilities, liquefied natural gas (LNG) terminals, electricity transmission, rapid transit projects, renewable energy projects, and ports.

In addition to the above tax rebate, manufacturers located in rural areas and commencing commercial operations between July 1, 2014 and June 30, 2019 are eligible for tax exemptions of up to 20 percent for the first 10 years of production.

Independent non-coal fired power plants (IPPs) commencing production (COD) after January 1, 2015 are granted a 100 percent tax exemption for five years, a 50 percent exemption for years 6-8, and a 25 percent exemption for years 9-10.  For coal-fired IPPs contracting with the GOB before June 30, 2020 and COD before June 30, 2023, the tax exemption rate is 100 percent for the first 15 years of operations. For power projects, import duties are waived for imports of capital machinery and spare parts.

The valued-added tax (VAT) rate on exports is zero.  For companies that only export, import duties are waived for imports of capital machinery and spare parts.  For companies that primarily export (80 percent of production and above), an import duty rate of one percent is charged for imports of capital machinery and spare parts identified and listed in notifications to relevant regulators.  Import duties are also waived for EPZ industries and other export oriented industries for imports of raw materials consumed in production.

Special incentives are provided to encourage non-resident Bangladeshis to invest in the country.  Incentives include the ability to buy newly issued shares and debentures in Bangladeshi companies.  A quota of 10 percent of primary shares has been fixed for non-resident Bangladeshis. Furthermore, non-resident Bangladeshis can maintain foreign currency deposits in Non-resident Foreign Currency Deposit (NFCD) accounts.

In the past several years, U.S. companies have experienced difficulties securing the investment incentives initially offered by the GOB.  Several companies have reported instances of infrastructure guarantees (ranging from electricity to gas connections) not being fully delivered or tax exemptions being delayed, either temporarily or indefinitely.

Foreign Trade Zones/Free Ports/Trade Facilitation

Under the Bangladesh Export Processing Zones Authority Act of 1980, the government established an EPZ in Chattogram in 1983.  Additional EPZs now operate in Dhaka (Savar), Mongla, Ishwardi, Cumilla, Uttara, Karnaphuli (Chattogram), and Adamjee (Dhaka).  Korean investors are also operating a separate and private EPZ in Chattogram.

Investments that are wholly foreign-owned, joint ventures, and wholly Bangladeshi-owned companies are all permitted to operate in and enjoy equal treatment in the EPZs.  Approximately one dozen U.S. firms—mostly textile producers—are currently operating in Bangladesh EPZs. Investors have begun to view intermittent infrastructure services, including electricity and gas connections, and increasing costs as making the EPZs less attractive.

In 2010, Bangladesh enacted the Special Economic Zone Act that allows for the creation of privately owned economic zones (EZs) that can produce for export and domestic markets.  The EZs provide special fiscal and non-fiscal incentives to domestic and foreign investors in designated underdeveloped areas throughout Bangladesh. The International Finance Corporation provided assistance to the GOB to establish an EZ authority, the Bangladesh Economic Zones Authority (BEZA), modeled after BEPZA, to implement the new law and oversee the establishment of EZs. The government recently announced plans to create up to 100 new EZs and invited private companies to develop the zones.  Several EZs are moving forward under this initiative: http://www.beza.gov.bd/  .  However, assurances regarding access to necessary infrastructure and other resources, including gas and power, have not been made.  

Performance and Data Localization Requirements

Performance Requirements

The Bangladesh Investment Development Authority (BIDA) has set restrictions for the employment of foreign nationals and the issuance of work permits as follows:

  • Nationals of countries recognized by Bangladesh are eligible for employment consideration;
  • Expatriate personnel will only be considered for employment in enterprises duly registered with the appropriate regulatory authority;
  • Employment of foreign nationals is generally limited to positions for which qualified local workers are unavailable;
  • Persons below 18 years of age are not eligible for employment;
  • The board of directors of the employing company must issue a resolution for each offers or extension of employment;
  • The percentage of foreign employees should not exceed 5 percent in industrial sectors and 20 percent in commercial sectors, including among senior management positions;
  • Initial employment of any foreign national is for a term of two years, which may be extended based on merit;
  • The Ministry of Home Affairs will issue necessary security clearance certificates.

In response to the high number of expatriate workers in the ready-made garment industry, BIDA has issued informal guidance encouraging industrial units to refrain from hiring additional semi-skilled foreign experts and workers.  Overall, the government looks favorably on investments that employ significant numbers of local workers and/or provide training and transfers of technical skills.

The GOB does not formally mandate that investors use domestic content in goods or technology.  However, companies bidding on government procurement tenders are often informally encouraged to have a local partner and to produce or assemble a percentage of their products in country.

Data Storage Requirements

According to a legal overview by the Telenor Group, for reasons of national security or in times of emergency, several regulations and amendments, including the Bangladesh Telecommunication Regulatory Act, 2001 (the “BTRA”), Information and Communication Technology Act 2006 (the “ICT Act”), and the Telegraph Act 1885 (the “1885 Act”), grant law enforcement and intelligence agencies legal authority to lawfully seek disclosure of communications data and request censorship of communications.  A draft Digital Security Act of 2016 (the “Digital Security Act”) was adopted by the Parliament in October 2018.

On the grounds of national security and maintaining public order, the GOB can authorize relevant government authorities (intelligence agencies, national security agencies, investigation agencies, or any officer of any law enforcement agency) to suspend or prohibit the transmission of any data or any voice call and to record or collect user information relating to any subscriber to a telecommunications service.  

Under section 30 of the ICT Act, the GOB, through the ICT Controller, may access any computer system, any apparatus, data, or any other material connected with a computer system, for the purpose of searching for and obtaining any such information or data.  The ICT Controller may, by order, direct any person in charge of, or otherwise concerned with the operation of a computer system, data apparatus, or material, to provide reasonable technical and other assistance as may be considered necessary. Under section 46 of the ICT Act, the ICT Controller can also direct any government agency to intercept any information transmitted through any computer resource, and may order any subscriber or any person in charge of computer resources to provide all necessary assistance to decrypt relevant information.

There is no direct reference in the BTRA to the storage of metadata.  Under the broad powers granted to the BTRA, however, the GOB, on the grounds of national security and public order, may require telecommunications operators to keep records relating to the communications of a specific user.  Telecommunications operators are also required to provide any metadata as evidence if ordered to do so by any civil court.

The ICT Controller enforces the ICT Act and the Bangladesh Telecommunication Regulatory Commission (BTRC) enforces the BTRA.  The Ministry of Home Affairs grants approval for use of powers given under the BTRA. The ICT Act also established a Cyber Tribunal to adjudicate cases.  If approved, the Digital Security Act would create a Digital Security Agency (DSA) empowered to monitor and supervise digital content. Also under the Digital Security Act, for reasons of national security or maintenance of public order, the Director General (DG) of the DSA would be authorized to block communications and to require that service providers facilitate the interception, monitoring, and decryption of a computer or other data source.  

The Bangladesh Road Transport Authority’s (BRTA) Ride-sharing Service Guideline 2017 came into force on March 8, 2018.  The new regulations included requirements that ride sharing companies keep data servers within Bangladesh.

5. Protection of Property Rights

Real Property

Although land, whether for purchase or lease, is often critical for investment and as security against loans, antiquated real property laws and poor record-keeping systems can complicate land and property transactions.  Instruments take effect from the date of execution, not the date of registration, so a bona fide purchaser can never be certain of title. Land registration records have historically been prone to competing claims. Land disputes are common, and both U.S. companies and citizens have filed complaints about fraudulent land sales.  For example, sellers fraudulently claiming ownership have transferred land to good faith purchasers while the actual owners were living outside of Bangladesh. In other instances, U.S.-Bangladeshi dual citizens have purchased land from legitimate owners only to have third parties make fraudulent claims of title to extort settlement compensation.

Property owners can obtain mortgages but parties generally avoid registering mortgages, liens, and encumbrances due to the high cost of stamp duties (i.e., transaction taxes based on property value) and other charges.  There are also concerns that non-registered mortgages are often unenforceable.

Article 42 of the Bangladesh Constitution guarantees a right to property for all citizens but property rights are often not protected due to a weak judiciary system.  The Transfer of Property Act of 1882   and the Registration Act of 1908   are the two main laws that regulate transfer of property in Bangladesh but these laws do not have any specific provisions covering foreign and/or non-resident investors.  Currently, foreigners and non-residents can incorporate a company with the Registrar of Joint Stock Companies and Firms. The company would be considered a local entity and would be able to buy land in its name.

Intellectual Property Rights

Counterfeit goods are readily available in Bangladesh.  The GOB has limited resources for intellectual property rights (IPR) protection.  Industry estimates that 90 percent of business software is pirated. A number of U.S. firms, including film studios, manufacturers of consumer goods, and software firms, have reported violations of their IPR.  Investors note that police are willing to investigate counterfeit goods producers when informed but are unlikely to initiate independent investigations.

The Software Alliance, also known as BSA, is a trade group established by Microsoft Corporation in 1988.  It opened a Bangladesh office in early 2014 as a platform to improve IPR protection in Bangladesh. Public awareness of IPR is growing, thanks in part to the efforts of the Intellectual Property Rights Association of Bangladesh: http://www.ipab.org.bd/ .  Bangladesh is not currently listed in the U.S. Trade Representative’s Special 301 or Notorious Markets reports.  Bangladesh is a member of the World Intellectual Property Organization (WIPO) and acceded to the Paris Convention on Intellectual Property in 1991.

Bangladesh has slowly made progress toward bringing its legislative framework into compliance with the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).  The government enacted a Copyright Law in July 2000 (amended in 2005), a Trademarks Act in 2009, and Geographical Indication of Goods (Registration and Protection) Act in 2013. The Department of Patents, Designs and Trademarks (DPDT) drafted a new Patent Act in 2014 prepared in compliance with the requirements of the TRIPS Agreement.  However the draft act still remains under Ministry of Industries review and this effort has not made measurable progress during the past year.

A number of government agencies are empowered to take action against counterfeiting, including the NBR/Customs, Mobile Courts, the Rapid Action Battalion (RAB), and local Police.  The Department of National Consumer Rights Protection (DNCRP) is charged with tracking and reporting on counterfeit goods and the NBR/Customs tracks counterfeit goods seizures at ports of entry.  Reports are not publicly available.

6. Financial Sector

Capital Markets and Portfolio Investment

Capital markets in Bangladesh are still developing and the financial sector remains highly dependent on bank lending.  Current government policy inhibits the creation of reliable benchmarks for long-term bonds and prevents the development of a tradable bond market.  

Bangladesh is home to the Dhaka Stock Exchange (DSE) and the Chittagong Stock Exchange (CSE).  The Bangladesh Securities and Exchange Commission (BSEC), a statutory body formed in 1993 and attached to the Ministry of Finance, regulates both.  As of March 2019, the DSE market capitalization stood at USD 48.6 billion.

Although the GOB has a positive attitude towards foreign portfolio investors, participation remains low due to limited liquidity and the lack of publicly available and reliable company information.  The DSE has attracted some foreign portfolio investors to the country’s capital market; however, the volume of foreign investment in Bangladesh remains a small fraction of total market capitalization.  As a result, foreign portfolio investment has had limited influence on market trends and Bangladesh’s capital markets have been largely insulated from the volatility of international financial markets. Bangladeshi markets continue to rely primarily on domestic investors and Bangladeshi firms increasingly rely on capital markets to finance investment projects.  In March 2017, the government relaxed investment rules making it possible for foreign investors to use local currency to invest directly in local companies through the purchase of corporate shares.

BSEC has formed separate committees to establish a central clearing and settlement company, allow venture capital and private equity firms, launch derivatives products, and activate the bond market.  In December 2013, BSEC became a full signatory of International Organization of Securities Commissions (IOSCO) Memorandum of Understanding.

BSEC has taken steps to improve regulatory oversight, including installing a modern surveillance system, the “Instant Market Watch,” that provides real time connectivity with exchanges and depository institutions.  As a result, the market abuse detection capabilities of BSEC have improved significantly. A new mandatory Corporate Governance Code for listed companies was introduced in August 2012. Demutualization of both the DSE and CSE was completed in November 2013 to separate ownership of the exchanges from trading rights. A majority of the members of the Demutualization Board, including the Chairman, are independent directors. Apart from this, a separate tribunal has been established to resolve capital market-related criminal cases expeditiously.  All these reforms target a disciplined market with better infrastructure so that entrepreneurs can raise capital and attract foreign investors.

The Demutualization Act 2013 also directed DSE to pursue a strategic investor who would acquire a 25 percent stake in the bourse.  DSE opened bids for a strategic partner in February 2018 and, in September 2018, the Chinese consortium of Shenzhen and Shanghai stock exchanges became DSE’s strategic partner after buying a 25 percent share of DSE for taka 9.47 billion (USD 112.7 million).  

According to the International Monetary Fund (IMF), Bangladesh is an Article VIII member and maintains restrictions on the unapproved exchange, conversion, and/or transfer of proceeds of international transactions into non-resident taka-denominated accounts.  Since 2015, authorities have relaxed restrictions by allowing some debits of balances in such accounts for outward remittances, but there is currently no established timetable for the complete removal of the restrictions.

Money and Banking System

The Bangladesh Bank (BB) acts as the central bank of Bangladesh.  It was established on December 16, 1971 through the enactment of the Bangladesh Bank Order-1972.  General supervision and strategic direction of BB has been entrusted to a nine-member Board of Directors, which is headed by the BB Governor.  BB has 45 departments and 10 branch offices.

According to the BB, four types of banks operate in the formal financial system: State Owned Commercial Banks (SOCBs), Specialized Banks, Private Commercial Banks (PCBs), and Foreign Commercial Banks (FCBs).  Some 59 “scheduled” banks in Bangladesh operate under the full control and supervision of the center as per the Bangladesh Bank Order 1972. The scheduled banks including six SOCBs, three specialized government banks established for specific objectives like agricultural or industrial development, 41 PCBs, and nine FCBs as of March 2019.  The scheduled banks are licensed to operate under Bank Company Act 1991 (Amended 2013). There are also five non-scheduled banks in Bangladesh, established for special and definite objectives and operating under Acts that are enacted for meeting up those objectives.

Currently, 34 non-bank financial institutions (FIs) are operating in Bangladesh.  They are regulated under the Financial Institution Act, 1993 and controlled by the BB.  Out of the total, two are fully government owned, one is a subsidiary of an SOCB, 15 are private domestic initiatives, and 15 are joint venture initiatives.  Major sources of funds of these financial institutions are term deposits (at least three months tenure), credit facilities from banks and other financial institutions, call money, as well as bonds and securitization.

The major difference between banks and FIs are as follows:

FIs cannot issue checks, pay-orders, or demand drafts,

FIs cannot receive demand deposits,

FIs cannot be involved in foreign exchange financing,

FIs can employ diversified financing modes like syndicated financing, bridge financing, lease financing, securitization instruments, private placement of equity etc.

Microfinance institutions (MFIs) remain the dominant players in rural financial markets.  According to the Bangladesh Microcredit Regulatory Authority, as of June 2017, there were 783 licensed micro-finance institutions operating a network of 17,120 branches with 29.2 million members.  A 2014 Institute of Microfinance survey study showed that around 40 percent of the adult population and 75 percent of households had access to financial services in Bangladesh.

The banking sector has had a mixed record of performance over the past several years, but the sector has maintained overall healthy growth.  Total assets in the banking sector stood at 62.5 percent of gross domestic product at end of September 2018. The gross non-performing loan (NPL) ratio was 11.45 percent at end of September 2018.

On December 26, 2017, the BB issued a circular warning citizens and financial institutions about the risks associated with cryptocurrencies.  The circular noted that using cryptocurrencies may violate existing money laundering and terrorist financing regulations and that users may incur financial losses.  According to the BB, the circular did not constitute a ban. Bangladesh foreign exchange regulations, which limit outward payments, largely prevent the use of cryptocurrencies in Bangladesh.  The BB issued similar warnings against cryptocurrencies in 2014.

Foreign Exchange and Remittances

Foreign Exchange Policies

Free repatriation of profits is legally allowed for registered companies and profits are generally fully convertible.  However, companies report that the procedures for repatriation of foreign currency are lengthy and cumbersome. The Foreign Investment Act guarantees the right of repatriation of invested capital, profits, capital gains, post-tax dividends, and approved royalties and fees for businesses.  The central bank’s exchange control regulations and the U.S.-Bangladesh Bilateral Investment Treaty (in force since 1989) provide similar investment transfer guarantees. The Bangladesh Investment Development Authority may need to approve repatriation of royalties and other fees.

Since 2013, Bangladesh has tried to manage its exchange rate vis-à-vis the U.S. dollar within a fairly narrow range.  Until 2017, the Bangladesh taka traded between 76 and 78.8 taka to the dollar. The taka has depreciated relative to the dollar since October 2017 reaching 84.25 taka per dollar as of March 2019, despite ongoing interventions from the Bangladesh Bank.  The Bangladesh currency, the taka, is approaching full convertibility for current account transactions, such as imports and travel, but not for capital account transactions, such as investing, currency speculation, or e-commerce.

Remittance Policies

There are no set time limitations or waiting periods for remitting all types of investment returns.  Remitting dividends, returns on investments, interest, and payments on private foreign debts do not require approval from the central bank and transfers are done within one to two weeks.  For repatriating lease payments, royalties and management fees, some central bank approval is required, and this process can take between two and three-weeks. If a company fails to submit all the proper documents for remitting, it may take up to 60 days.  Foreign investors have reported difficulties transferring funds to overseas affiliates and making payments for certain technical fees without the government’s prior approval to do so. Additionally, some regulatory agencies have reportedly blocked the repatriation of profits due to sector-specific regulations.  The U.S. Embassy also received complaints of American citizens not being able to transfer the proceeds of sales of their properties. There is no mechanism in place for foreign investors to repatriate through government bonds issued in lieu of foreign currency payments. Bangladesh is not involved in currency manipulation tactics.

The Financial Action Task Force (FATF) notes that Bangladesh has established the legal and regulatory framework to meet its Anti-Money Laundering/Counterterrorism Finance (AML/CTF) commitments.  The Asia/Pacific Group on Money Laundering (APG), an independent and collaborative international organization based in Bangkok, conducted its mutual evaluation of Bangladesh’s AML/CTF regime in September 2018 and found that Bangladesh had made significant progress since the last Mutual Evaluation Report (MER) in 2009, but that Bangladesh still faces significant money laundering and terrorism financing risks.  The APG reports are available online: http://www.fatf-gafi.org/countries/#Bangladesh  .

Sovereign Wealth Funds

The Bangladesh Finance Ministry first announced in 2015 that it is exploring the possibility of establishing a sovereign wealth fund for the purposes of investing a portion of Bangladesh’s foreign currency reserves.  In February 2017, the Cabinet initially approved a USD 10 billion “Bangladesh Sovereign Wealth Fund,” (BSWF) that will be created with funds from excess foreign exchange reserves. The government claims the BSWF will be used to invest in “public interest” projects.  Bangladesh does not currently follow the Santiago Principles, a voluntary set of 24 principles and practices designed to promote transparency, good governance, accountability, and prudent investment practices while encouraging a more open dialogue and deeper understanding of sovereign wealth fund activities.

7. State-Owned Enterprises

The government privatized 74 state-owned enterprises (SOEs) during the past 20 years, but many SOEs retain an important role in the economy, particularly in the financial and energy sectors.  Out of the 74 SOEs, 54 were privatized through outright sale and 20 through offloading of shares. The Privatization Commission (PC) has slowed its rate of privatization activities and in 2016, the PC merged with the Board of Investment (BOI) to form a new Bangladesh Investment Development Authority (BIDA).  The 54 non-financial public enterprises in the country have been categorized into 7 sectors following the Bangladesh Standard Industrial Classification (BSIC) and their economic and financial performances are analyzed in the government budget.

Bangladesh’s 45 non-financial SOEs are spread among seven sectors – industrial; power, gas and water; transport and communication; trade; agriculture; construction; and services.  The list of non-financial SOEs and relevant budget details are published in Bangla in the Ministry of Finance’s SOE Budget Summary 2017-18: http://www.mof.gov.bd/site/page/5eed2680-c68c-4782-9070-13e129548aac/SOE-Budget  .

The current government has taken steps to restructure several SOEs to improve their competitiveness.  The GOB converted Biman Bangladesh Airline, the national airline, into a public limited company that initiated a rebranding and fleet renewal program, including the purchase of ten aircraft from Boeing, eight of which were delivered as of March 2019.  Three nationalized commercial banks (NCBs)—Sonali, Janata, and Agrani—have been converted to public limited companies. The GOB also liberalized the telecommunications sector in the last decade, which led to the development of a competitive cellular phone market.

The contribution of SOEs to gross domestic product, value-added production, employment generation, and revenue earning is substantial.  SOEs usually report to the ministries, though the government has allowed some enhanced autonomy for certain SOEs, such as Biman Bangladesh Airline.  SOEs maintain control of rail transportation whereas private companies compete freely in air and road transportation. The corporate governance structure of SOEs in Bangladesh has been restructured as per the guidelines published by the Organization for Economic Cooperation and Development (OECD), but the country’s practices are still not up to OECD standards.  There are no guidelines regarding ownership of SOEs, and while SOEs are required to prepare annual reports and make financial disclosures, disclosure documents are often unavailable to the public.  Each SOE has an independent board of directors composed of both government and private sector nominees. The boards report to the relevant regulatory ministry.  Most SOEs have strong ties with the government, and the ruling government party nominates most SOE leaders.  As the government controls most of the SOEs, domestic courts tend to favor the SOEs in investment disputes.

The Bangladesh Petroleum Act of 1974 grants authority for the government to award natural resources contracts and the Bangladesh Oil, Gas and Mineral Corporation Ordinance of 1984 gives Petrobangla, the state-owned oil and gas company, authority to assess and award natural resource contracts and licenses, to both SOEs and private companies.  Currently, oil and gas firms can pursue exploration and production ventures only through production sharing agreements with Petrobangla.

Privatization Program

Since 2010, the government’s privatization drive has slowed.  Previous privatization drives were plagued with allegations of corruption, undervaluation, political favoritism, and unfair competition.  Nonetheless, the government has publicly stated its goal of continuing the privatization drive. SOEs can be privatized through a variety of methods including: sales through international tender; sales of government shares in the capital market; transfers of some portion of the shares to the employees of the enterprises when shares are sold through the stock exchange; sale of government shares to a private equity company (restructuring); mixed sales methods; management contracts; leasing; and direct asset sales (liquidation).  In 2010, 22 SOEs were included in the Privatization Commission’s (now the Bangladesh Investment Development Authority’s) program for privatization. However, a study on privatized industries in Bangladesh conducted by the Privatization Commission in 2010 found that only 59 percent of the entities were in operation after being privatized and 20 percent of them were permanently closed down—implying a lack of planning or business motivation of their private owners. Later, in 2014, the government declared that SOEs would not be privatized via direct selling but instead by the offloading of shares in the SOE.  The government believed this to be a viable way for ensuring greater accountability for the management of the SOEs while minimizing the government’s exposure. However, unless the offloading of shares involves more than 50 percent of the SOE’s shares, the government would not divest control over the SOE. Additional information is available on the BIDA website at: http://bida.gov.bd/?page_id=4771 .

8. Responsible Business Conduct

The business community is increasingly aware of and engaged in responsible business conduct (RBC) activities with multinational firms leading the way.  While many firms in Bangladesh fall short on RBC activities and instead often focus on philanthropic giving, some of the leading local conglomerates have begun to incorporate increasingly rigorous environmental and safety standards in their workplaces.  U.S. companies present in Bangladesh maintain diverse RBC activities. Consumers in Bangladesh are generally less aware of RBC, and consumers and shareholders exert little pressure on companies to engage in RBC activities.

While many international firms are aware of OECD guidelines and international best practices in RBC, many local firms have limited familiarity with international standards.  There are currently two RBC NGOs active in Bangladesh:

CSR Bangladesh, http://www.csrbangladesh.org/aboutus.php  

CSR Centre Bangladesh, http://www.csrcentre-bd.org  .

Along with the Bangladesh Enterprise Institute (BEI), the CSR Centre is the joint focal point for United Nations Global Compact (UNGC) and its principles in Bangladesh.  The UN Global Compact is the world’s largest corporate citizenship and sustainability initiative. The Centre is a member of a regional RBC platform called the South Asian Network on Sustainability and Responsibility (SANSAR).  Currently, SANSAR has five member countries including Afghanistan, Bangladesh, India, Nepal, and Pakistan.

While several NGOs have proposed National Corporate Social Responsibility Guidelines, the GOB has yet to adopt any national standards for RBC.  As a result, the GOB encourages enterprises to follow generally accepted RBC principles but does not mandate any specific guidelines.

Bangladesh has natural resources, but it has not joined the Extractive Industries Transparency Initiative (EITI).  The country does not adhere to the Voluntary Principles on Security and Human Rights.

9. Corruption

Corruption remains a serious impediment to investment and economic growth in Bangladesh.  While the government has established legislation to combat bribery, embezzlement, and other forms of corruption, enforcement is inconsistent.  The Anti-Corruption Commission (ACC) is the main institutional anti-corruption watchdog. With amendments to the Money Prevention Act, the ACC is no longer the sole authority to probe money-laundering offenses.  Although it still has primary authority for bribery and corruption, other agencies will now investigate related offenses:

  • Bangladesh Police (Criminal Investigation Department) – Most predicate offenses.
  • NBR – VAT, taxation, and customs offenses.
  • Department of Narcotics Control – Drug related offenses.

The current Awami League-led government has publicly underscored its commitment to anticorruption efforts and reaffirmed the need for a strong ACC, but opposition parties claim that the ACC is used by the government to harass political opponents.  Efforts to ease public procurement rules and a recent constitutional amendment that reduced the independence of the ACC may undermine institutional safeguards against corruption. Bangladesh is a party to the UN Anticorruption Convention, but it has still not joined the OECD Convention on Combating Bribery of Public Officials.

Corruption is common in public procurement, tax and customs collection, and regulatory authorities.  Corruption, including bribery, raises the costs and risks of doing business. By some estimates, off-the-record payments by firms may result in an annual reduction of two to three percent of GDP.  Corruption has a corrosive impact on the broader business climate market and opportunities for U.S. companies in Bangladesh. It also deters investment, stifles economic growth and development, distorts prices, and undermines the rule of law.

Resources to Report Corruption

Mr. Iqbal Mahmood
Chairman
Anti-Corruption Commission, Bangladesh
1, Segun Bagicha, Dhaka 1000
+88-02-8333350
Email: chairman@acc.org.bd

Contact at “watchdog” organization:

Advocate Sultana Kamal
Chairperson
Transparency International Bangladesh (TIB)
MIDAS Centre (Level 4 & 5), House-5, Road-16 (New) 27 (Old), Dhanmondi, Dhaka – 1209
+880 2 912 4788 / 4789 / 4792
Email: 
edtib@ti-bangladesh.org, info@ti-bangladesh.org, advocacy@ti-bangladesh.org

10. Political and Security Environment

Prime Minister Hasina’s ruling Awami League party won 289 parliamentary seats out of 300 in a December 30, 2018 election that was marred by wide-spread vote-rigging, ballot-box stuffing, and intimidation.  Harassment, intimidation and violence during the pre-election period made it difficult for many opposition candidates and their supporters to meet, hold rallies, and campaign freely. The clashes between rival political parties and general strikes that previously characterized the political environment in Bangladesh have become far less frequent in the wake of the Awami League’s increasing dominance of the country and crackdown on dissent.  Many civil society groups have expressed concern about the apparent trend toward a one-party state and the marginalization of all political opposition groups.

Americans are advised to exercise increased caution due to crime and terrorism when traveling to Bangladesh.  Some areas have increased risk. For further information, see the State Department’s travel website for the Worldwide Caution, Travel Advisories, and Bangladesh Country Specific Information.

11. Labor Policies and Practices

Bangladesh’s comparative advantage in cheap labor for manufacturing is partially offset by lower productivity due to poor skills development, inefficient management, pervasive corruption, and inadequate infrastructure.  Bangladeshi workers have a strong reputation for hard work, entrepreneurial spirit, and a positive and optimistic attitude. With an average age in Bangladesh of 26 years, the country boasts one of the largest and youngest labor forces in the world.

Bangladesh has labor laws that specify employment conditions, working hours, minimum wage levels, leave policies, health and sanitary conditions, and compensation for injured workers.  Freedom of association and the right to join unions are guaranteed in the constitution. In practice, compliance and enforcement of labor laws are inconsistent, and companies frequently discourage the formation of labor unions.  Export Processing Zones (EPZs) are a notable exception to the national labor law in that they do not allow trade union participation, but the government is considering amendments to change that (see below). Historically, unions have been heavily politicized and labor-management relations contentious.

Bangladesh’s garment sector has undergone several reforms since the April 2013 Rana Plaza building collapse and the November 2012 Tazreen Fashions factory fire that together killed over 1,230 workers.  With support from the international community and the private sector, Bangladesh has made significant progress on fire and workplace safety. Critical work remains on safeguarding workers’ rights to freely associate and bargain collectively, including in the Export Processing Zones (EPZs).  

In June 2013, President Obama suspended Bangladesh’s Generalized System of Preferences (GSP) trade benefits.  Accompanying this decision was a 16-point Action Plan that set forth specific steps to address workers’ rights and safety in Bangladesh.  In July 2013, the EU, the International Labor Organization (ILO), the GOB, and the United States jointly developed a Sustainability Compact.  

Bangladesh has made significant progress in factory fire and structural safety remediation, thanks in part to two industry-led initiatives, the Alliance for Bangladesh Worker Safety (Alliance), which represents U.S. brands, and Accord on Fire and Building Safety in Bangladesh (Accord), which represents European brands.  Inspection and remediation of RMG factories outside the purview of the Alliance and the Accord are handled by the GOB, with assistance from the ILO, under the National Initiative. Only 20 percent of factories under the National Initiative, however, have completed remediation. The GOB has established a Remediation Coordination Center (RCC) to take over responsibility from the Alliance and Accord.

The Alliance successfully concluded its factory inspection and remediation operations at the end of 2018, as scheduled, but has quietly established a local NGO (Nirapon) to monitor remediated factories to ensure there is no backsliding.  Meanwhile, the Accord continues to seek to remain in Bangladesh to complete the remediation of the 1,600 factories under its remit. A Bangladeshi court initially ruled that Accord could not continue operations in Bangladesh past November 2018, but has subsequently instructed the Bangladesh government to try to work out a mutually acceptable, time-bound transition plan with the Accord.  The next court hearing to review where those negotiations stand is scheduled for May 2019.

Significant work remains to address freedom of association restrictions.  In December 2016, a widespread crackdown on union members drew international condemnation.  In response, the international community pressed the GOB to implement several labor reforms.  

The U.S. government suspended Bangladesh’s access to the U.S. General System of Preferences (GSP) over labor rights violations following a six-year formal review conducted by USTR.  The decision, announced in 2013, in the months following the Rana Plaza collapse that resulted in more than 1,100 deaths, was accompanied by a 16-point GSP Action Plan to help guide Bangladesh’s path to reinstatement of the trade benefits.  While some progress has been made in the intervening years, several key issues remain unaddressed. Preliminary analysis of recent revisions to the Bangladesh Labor Act (BLA) and Export Processing Zone (EPZ) law indicate they fail to allow free association and the formation of unions particularly in the ready-made garment (RMG) sector, and fall short of international labor standards.  The U.S. government funds efforts to improve occupational safety and health alongside labor rights in the readymade garments (RMG) sector in partnership with other international partners, civil society, businesses, and the GOB. The United States is also working with the EU, Canada, and the International Labor Organization (ILO) to continuously improve working conditions in the RMG sector via the Sustainability Compact, a coordination platform launched in 2013.  Labor unrest in December 2018 and January-February 2019 followed a disproportionate wage hike announced by the GOB, which increased the pay of entry-level workers by 50 percent, but left the wages of more skilled employees unchanged. In a subsequent crackdown, some 11,000 workers who participated in the mostly peaceful protests were reportedly terminated or forced to resign, and many of them were blacklisted and unable to find new employment.

The Bangladesh parliament in 2018 passed a series of amendments to the Bangladesh Labor Act and the Export Processing Zone (EPZ) law to address some concerns voiced by the International Labor Organization (ILO).  The European Union (EU) noted that 50 sections of the BLA had been amended.  The amendments reduced the membership requirement for the formation of trade unions from 30 to 20 percent and repealed conditional provisions for the employment of child labor in hazardous industries, while shortening time limits for the registration of unions from 60 to 55 days.  The amendments also established a festival allowance for the labor force and provided legal protections for women deprived of maternity leave.

The EU’s preliminary assessment of the EPZ law amendments indicated the BLA changes were made applicable to EPZ.  For example, the 20 percent threshold was now applicable to “Worker Welfare Associations” (WWA), which are allowed in EPZs in lieu of trade unions.  The Government of Bangladesh (GOB)’s Department of Inspection for Factories and Establishments (DIFE) had also been given the authority to inspect factory conditions within EPZs. 

The ILO’s Committee of Experts (COE) is analyzing the BLA amendments.  The term “Committee of Experts” refers to a group of jurists who examine reports from governments on any of the eight fundamental and four governance ILO Conventions they (the governments) may have ratified.  Bangladesh ratified the Labor Inspection Convention, 1947 (No. 81) in 1972.  Meanwhile, the COE continues to wait for an official English translation of the EPZ law amendments before it can begin its analysis of the contents of the amendments.  There is no timeframe for the COE’s completion of the review.

The EU felt the reduction of the membership requirement to 20 percent was an “eyewash” because the GOB had erected other barriers to prevent trade union registration.  The Bangladesh office of the Solidarity Center (SC) shared EU’s concerns and feels the BLA amendments were most “obstructive” in the area of registering new unions, including the 20 percent vote required to recognize a union, which could easily be manipulated by factory management to favor “yellow” or corrupt, undemocratic unions over independent unions.  SC feels the main challenge with the BLA was not its lack of protections, but its lack of implementation.

12. OPIC and Other Investment Insurance Programs

The U.S. Overseas Private Investment Corporation (OPIC) and the Government of Bangladesh signed an updated bilateral agreement in May 1998: https://www.opic.gov/sites/default/files/docs/asia/bangladeshbilateral.pdf .  However, OPIC is not currently authorized for operation in the courty.  Investors should check OPIC’s website for updates: https://www.opic.gov/doing-business-us/OPIC-policies/where-we-operate  .  More information on OPIC services can be found at: www.opic.gov  .  

Bangladesh is also a member of the Multilateral Investment Guarantee Agency (MIGA): http://www.miga.org  .

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy

Economic Data Year Amount Year Amount USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
Host Country Gross Domestic Product (GDP) ($M USD) 2017 $249,700 2016 $221,400 https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?locations=BD  
Foreign Direct Investment 2017 $2,200 2016 $2,300 UNCTAD World Investment Report 2018  
U.S. FDI in Partner Country ($M USD, stock positions) 2017 $460 2016 $458 https://www.bea.gov/international/factsheet/factsheet.cfm?Area=631  
Host Country’s FDI in the United States ($M USD, stock positions) 2017 $2 2016 N/A https://www.bea.gov/international/factsheet/factsheet.cfm?Area=631  
Total Inbound Stock of FDI as % host GDP 2017 0.86% 2016 1.05% https://unctad.org/en/pages/PublicationWebflyer.aspx?publicationid=2130  


Table 3: Sources and Destination of FDI

Direct Investment from/in Counterpart Economy Data
From Top Five Sources/To Top Five Destinations (US Dollars, Millions)
Inward Direct Investment Outward Direct Investment
Total Inward $14,091 100% Total Outward $328 100%
United States $3,316 23.5% United Kingdom $84 25.6%
United Kingdom $1,559 11.1% China, P.R.: Hong Kong $76 23.2%
Singapore $934 6.6% Nepal $44 13.4%
Australia $860 6.1% India $42 12.8%
South Korea $811 5.8% United Arab Emirates $31 9.5%
“0” reflects amounts rounded to +/- USD 500,000.


Table 4: Sources of Portfolio Investment

Portfolio Investment Assets (June, 2018)
Top Five Partners (Millions, US Dollars)
Total Equity Securities Total Debt Securities
All Countries $3,584 100% All Countries $10 100% All Countries $3,574 100%
-United States $587 16.4% Pakistan $10 100% United States $587 16.4%
Germany $581 16.2% N/A N/A N/A Germany $581 16.3%
United Kingdom $383 10.7% N/A N/A N/A United Kingdom $383 10.7%
Spain $235 6.6% N/A N/A N/A Spain $235 6.6%
France $201 5.6% N/A N/A N/A France $201 5.6%

14. Contact for More Information

Economic/Commercial Section
Embassy of the United States of America
Madani Avenue, Baridhara, Dhaka — 1212
Tel: +880 2 5566-2000
Email: USTC-Dhaka@state.gov

Burma

Executive Summary

Burma’s economic reforms since 2011 have created opportunities for investment throughout the country.  With a rich natural resource base, a young labor force, and prime geographic location, Burma’s economy has tremendous potential.  Recent reforms — opening up retail and wholesale trade to FDI, allowing FDI into the insurance sector, and initial steps to streamline business regulation — should begin to attract more foreign investment and sustain higher growth levels.  Many challenges remain, however, with Burma ranking 171 out of 190 — behind Iraq and Sudan — on the World Bank’s index for the ease of doing business.  Electricity shortages, limited infrastructure, and weak institutions continue to hinder foreign investment.  While still facing implementation challenges, Aung San Suu Kyi’s National League for Democracy (NLD)-led government has countered government corruption and called for greater transparency and foreign investment.

Table 1: Key Metrics and Rankings

Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2018 132 of 180 https://www.transparency.org/cpi2018  
World Bank’s Doing Business Report 2019 171 of 190 http://www.doingbusiness.org/en/rankings
Global Innovation Index 2018 N/A https://www.globalinnovationindex.org/analysis-indicator 
U.S. FDI in partner country ($M USD, stock positions) 2018 $55.9** https://www.dica.gov.mm/sites/dica.gov.mm/files/document-files/yearly_country.pdf 
World Bank GNI per capita 2017 1,201 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD 

** In 2018, Burma changed its fiscal reporting period from an April to March reporting period to an October to September period.  This amount only represents U.S. FDI between April and September 2018.

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Toward Foreign Direct Investment

Burma recognizes the value of investment to boost economic growth and development, and it is open to foreign investors.  That said, implementation of liberal investment laws and policies are often slowed and sometimes blocked by local rent-seeking economic actors who benefit from the status quo.  In 2016, Burma passed the Myanmar Investment Law (MIL) to attract more investment from both foreign and domestic businesses. The MIL simplified the rules and regulations for investment to bring Burma more in line with international standards.  The MIL includes a “negative list” of prohibited, restricted, and special sectors. Burma also has three Special Economic Zones (SEZs) in Thilawa, Dawei, and Kyauk Phyu with preferential policies for businesses that locate there, including one-stop-shop service.

The new Companies Law went into effect on August 1, 2018.  Under the new law, foreign investment of up to 35 percent is allowed in domestic companies— which also opens the stock exchange to limited foreign participation.  It also updates and streamlines business regulations.  In tandem with the Companies Law’s entry into force, the government instituted online company registration through “MyCo” (https://www.myco.dica.gov.mm  ).  MyCo also includes a searchable company registry, which should improve transparency on corporate data and ease due diligence research.  The Companies Law makes it easier to start and operate small businesses, and provides the government with tools to enforce corporate governance rules and regulations.

In April 2019, the government awarded licenses to five international insurance firms to offer wholly-foreign-owned life insurance options in the country.

In November 2018, the government created the Ministry for Foreign Investment and Economic Relations (MIFER) to facilitate investment.  The Directorate for Investment and Company Administration (DICA), Burma’s investment promotion agency, was moved from the Ministry of Planning and Finance to MIFER.  One of DICA’s roles is to encourage and facilitate both foreign and local investment by providing information, fostering coordination and networks between investors and continually exploring new opportunities in Burma that would benefit both the nation and the business community.  In addition to DICA, MIFER also oversees the Foreign Economic Relations Department (FERD), which was transferred to MIFER from the Ministry of Planning and Finance.

In May 2018, the Ministry of Commerce issued Notification 25/2018, which opened up the wholesale and retail sector to direct foreign investment.

There is no evidence that the Myanmar Investment Commission (MIC) discriminates against foreign investors.  In June 2017, the MIC announced ten prioritized sectors for foreign and Burmese investors: agriculture and livestock, power, education, health care, logistics, construction for affordable housing, export promotion industries, import substitution industries, aircraft and airports, and establishment of industrial estates and urban areas.

The government engages with chambers of commerce and foreign companies on investment.

Limits on Foreign Control and Right to Private Ownership and Establishment

The Myanmar Investment Law (MIL) went into effect in April 2017 and applies to all investment in Burma, both domestic and foreign.  According to the MIL, some investments require a permit while others do not. The MIL also lists specific sectors where tax incentives are available.  Under the MIL, foreign investors are now able to enter into long-term leases. The MIL revised restrictions on investment to liberalize investment. Section 42 of the MIL lists types of investment activities that only the Union government can undertake; that are not permitted for foreign investors; that are permitted only as a joint-venture with resident citizens or citizen-owned entities; and that are subject to specifically prescribed conditions (e.g. approval from relevant ministries).

When forming or registering a business in Burma, generally two options exist: (i) registration under the new Companies Law or (ii) registration as an MIC-company under the MIL (with registration under the 2014 Special Economic Zone Law for businesses located in a Special Economic Zone as a third option).  Under the MIL, investors involved in the following businesses must still submit a proposal to the MIC and apply for a permit: businesses/investment activities that are strategic for the Union; large, capital-intensive investment projects; projects which have large potential impacts on the environment and local communities; businesses/investment activities that use state-owned land and buildings; and/or businesses/investment activities that the government designates as requiring the submission of a proposal to the MIC.

The State-Owned Economic Enterprises Law, enacted in March 1989, is still in effect today.  It regulates certain investments and economic activities. While the 1989 law stipulated that state-owned enterprises (SOE) have the sole right to carry out a range of economic activities, including teak extraction, oil and gas, banking and insurance, and electricity generation, in practice many of these areas are now open to private sector investment.  For instance, the 2016 Rail Transportation Enterprise Law allows foreign and local businesses to make certain investments in railways, including in the form of public-private partnerships.

More broadly, the MIC, “in the interest of the State,” can make exceptions to the State-Owned Economic Enterprise Law.  The MIC has routinely granted numerous exceptions including through joint ventures or special licenses in the areas of insurance, banking (for domestic investors only), mining, petroleum and natural gas extraction, telecommunications, radio and television broadcasting, and air transport services.

The Burmese military is associated with the Union of Myanmar Economic Holdings, Ltd. (UMEHL) and runs the Myanmar Economic Corporation (MEC), two large conglomerates with many commercial interests. 

Other Investment Policy Reviews

The World Bank’s Doing Business 2019 report includes an analysis of Burma’s investment sectors and business environment, and can be found at:  http://www.doingbusiness.org/data/exploreeconomies/myanmar/  

The World Bank also conducted an enterprise survey of Burma in 2016, the results of which can be found at: http://www.enterprisesurveys.org/data/exploreeconomies/2016/myanmar  

The OECD conducted an investment policy review of Burma in March 2014.  The entire report can be found at: http://www.oecd.org/daf/inv/investment-policy/Myanmar-IPR-2014.pdf .

The World Trade Organization (WTO) conducted a trade policy review of Burma in March 2014.  The entire report can be found at: https://www.wto.org/english/tratop_e/tpr_e/tp393_e.htm  .

Business Facilitation

The Directorate of Investment and Company Administration (DICA) website (http://www.dica.gov.mm/  ) provides information on how to register a business in Burma, which can be done online as of August 2018, or in person at DICA’s offices.  Registration is the first step a businessperson must take before incorporating a company or making an investment in Burma, whether that person is a citizen of Burma or a foreigner.  In accordance with the Companies Law and the Special Companies Act of 1950, a company may register in one of the following forms: as a private or public company by Burmese citizens, as a foreign company or branch of a foreign company, as a joint venture company, or as an association/nonprofit organization.  First steps include checking availability of the company name at DICA or on the online registry, obtaining company registration forms in person or online from DICA, submitting the forms, and paying a company registration fee. The new Companies Law eliminated the need for companies to get a “permit to trade,” removing an obstacle to businesses under the previous version of the law.

The Myanmar Investment Commission (MIC) is responsible for verifying and approving certain investment proposals and regularly issues notifications about sector-specific developments.  The MIC is comprised of representatives and experts from government ministries, departments and governmental and non-governmental bodies. Companies can use the DICA website to retrieve information on requirements for MIC permit applications and submit a proposal to the MIC.  If the proposal meets the criteria, it will be accepted within 15 days. If accepted, the MIC will review the proposal and reach a decision within 90 days. The MIC issued a March 2016 statement granting authority to state and regional investment committees to approve any investment with capital of under USD 5 million.  Such investments no longer require approval from the MIC.

To attract foreign and domestic investors, the MIC has released lists of townships that fall under three different zones: underdeveloped, moderately developed, and adequately developed.  Investors will receive a tax break of seven years, five years, or three years when they make investments in these respective zones. A total of 166 townships fall under the least-developed-zone category.  In 2017, DICA expanded its presence throughout Burma to support companies and promote investment in of all the country’s states and regions.

Outward Investment

Burma does not promote outward investment, but it does not restrict domestic investors from investing abroad.

2. Bilateral Investment Agreements and Taxation Treaties

Burma has signed and ratified bilateral investment agreements with China, India, Japan, South Korea, Laos, Philippines, and Thailand.  It has also signed bilateral investment agreements with Israel and Vietnam although these have not yet entered into force. Burma has engaged in investment treaty negotiations with Bangladesh, China, Hong Kong, Iran, Mongolia, Russia, and Serbia.  Texts of the agreements or treaties that have come into force are available on the UNCTAD website at: http://investmentpolicyhub.unctad.org/IIA/CountryBits/144  .

In 2013, the United States and Burma signed a Trade and Investment Framework Agreement.

Burma does not have a bilateral investment treaty or a free trade agreement with the United States.

Through its membership in ASEAN, Burma is also a party to the ASEAN Comprehensive Investment Agreement, as well as to the ASEAN-Australia-New Zealand Free Trade Agreement, the ASEAN-Korea Free Trade Agreement, and the China-ASEAN Free Trade Agreement, all of which contain an investment chapter that provides protection standards to qualifying foreign investors.

Burma has border trade agreements with Bangladesh, India, China, Laos, and Thailand.

Burma has Avoidance of Double Taxation Agreements with the United Kingdom, Singapore, India, Malaysia, Vietnam and South Korea.

Burma does not have a bilateral taxation treaty with the United States.

3. Legal Regime

Transparency of the Regulatory System

Burma lacks regulatory and legal transparency.  In the past, all regulations were subject to change with no advance or written notice, and without opportunity for public comment.  Some ministries now engage in public consultation before finalizing bills for parliamentary consideration or issuing new regulations and this practice is becoming more widespread.  For instance, the government solicited public comments on the 2016 Investment Law, including the drafting of the rules and regulations, which went through three rounds of public consultations.  While there is no legal requirement to have public consultation, 75 percent of parliamentarians are elected representatives of their constituencies and are expected to respond to public engagement.  An active and vocal civil society also results in more public discourse about proposed legislation and regulations than in the past.

The government of Burma publishes information online on government websites and has established websites through which businesses can access trade information.  The Ministry of Commerce publishes a weekly Commerce Journal and a monthly Trade News booklet, providing trade-related information, and in 2016, launched the National Trade Portal (https://myanmartradeportal.gov.mm/en  ).  The government of Burma publishes new regulations and laws in government-run newspapers and “The State Gazette.”  Burma has issued the annual Citizen Budget in the Burmese language since FY 2015-16. The Ministry of Planning and Finance has published quarterly budget execution reports, six-month-overview-of-budget-execution reports and annual budget execution reports on its website since FY 2015-16.  The Burmese government also publishes its debt obligation report on the Treasury Department’s Facebook page. (See https://www.facebook.com/pages/biz/Treasury-Department-of-Myanmar-777018172438019/  ).  For more information on Burma’s regulatory transparency see http://rulemaking.worldbank.org/data/explorecountries/myanmar  .

As part of the government’s commitment to transparency of its regulatory system, Burma became a candidate country in the Extractive Industries Transparency Initiative in 2014, and in January 2016 Burma’s Extractive Industries Transparency Initiative (EITI) National Coordination Office, a global standard for the promotion of revenue transparency, submitted the country’s first EITI report.  The government announced its new EITI authority, the administrative body for the EITI process, in December 2016. In 2018, the government published its second and third reports for FY 2014/15 and FY 2015/16 FY, and in March 2019 it published its fourth sector report. A forestry sector report is expected in 2019. (See https://eiti.org/myanmar  .)

International Regulatory Considerations

The Ministry of Commerce’s National Trade Portal and Repository contains all of Burma’s laws, processes, forms, and points of contact for trade.  This portal increases transparency in Burma and also meets Burma’s requirements under Articles 12 and 13 of the ASEAN Trade in Goods Agreement.  While Burma is not in compliance with WTO notification requirements, the government developed a WTO notification strategy that should increase the number and quality of notifications. The Trade Portal can be found at: http://www.myanmartradeportal.gov.mm/index.php  .

Legal System and Judicial Independence

Burma’s legal system is a unique combination of customary law, English common law and statutes introduced through the pre-independence India Code, and post-independence Burmese legislation.  Where there is no statute regulating a particular matter, courts are to apply Burma’s general law, which is based on English common law as adopted and modified by Burmese case law.  Every state and region has a High Court, with lower courts in each district and township.   High Court judges are appointed by the President while district and township judges are appointed by the Chief Justice through the Office of the Supreme Court of the Union. The Union Attorney General’s Office law officers (prosecutors) operate sub-national offices in each state, region, district, and township.

The Attorney General enforces standards of due process in the criminal justice system and provides the government’s law officers with a mandate to act as an independent check in the criminal justice system.  The Ministry of Home Affairs, led by a minister appointed by the Commander-in-Chief but reporting to the President, retains oversight of the Myanmar Police Force, which files cases directly with the courts. While foreign companies have the right to bring cases to and defend themselves in local courts, there are concerns about the impartiality and lack of independence of the courts.

In order to address the concerns of foreign investors regarding dispute settlement, the government acceded in 2013 to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”).  In 2016, Burma’s parliament enacted the much-anticipated Arbitration Law, putting the New York Convention into effect and replacing arbitration legislation that was more than 70 years old. Since April 2016, foreign companies can pursue arbitration in a third country.  However, the Arbitration Law does not eliminate all risks. There is still a limited track record of enforcing foreign awards in Burma and inherent jurisdictional risks remain in any recourse to the local legal system. The Arbitration Law however brings Burma’s legislation more in line with internationally accepted standards in arbitration.

Laws and Regulations on Foreign Direct Investment

The MIC plays a leading role in the regulation of foreign investment, and approves all investment projects receiving incentives except those in special economic zones, which are handled by the Central Working Body, set up under the existing Special Economic Zone Law.  Joint ventures between foreign investors and SOEs are the responsibility of the relevant line ministries. There is no evidence that the MIC discriminates against foreign investors.

The MIL outlines the procedures the MIC must take when considering foreign investments.  Investment approvals are made on a case-by-case basis. The MIC evaluates foreign investment proposals and stipulates the terms and conditions of investment permits.  To obtain an investment permit, the investor must submit a proposal in the prescribed form to the MIC, together with supporting documentation, including details of intended activities and the financial credibility of the company/individual; an undertaking not to engage in trading activities; and annual reports for the last two financial years, or copies of the company’s head office’s balance sheet and profit-and-loss account for the last two financial years, notarized by the Burmese Embassy in the country where the company is incorporated.  The MIC accepts or rejects an application within 15 days, and decides whether to approve the proposal within 60 days. The Chairman of the MIC gives the final approval.

The MIC does not record foreign investments that do not require MIC approval.  Joint ventures with military-controlled enterprises require MIC approval and abide by the same rules as other investments.  Many smaller investments may go unrecorded. Once licensed, foreign firms may register their companies locally, use their permits to obtain resident visas, lease cars and real estate, and obtain import and export licenses from the Ministry of Commerce.  Foreign companies may register locally without an MIC license, in which case they are not entitled to receive the benefits and incentives provided for in the MIL. Many import and export licenses requirements have been removed since 2014; for more information see https://www.myanmartradeportal.gov.mm/en/guide-to-import-export  

More information on the MIC can be found at: http://www.dica.gov.mm/en/apply-mic-permit  .

Competition and Anti-Trust Laws

A Competition Law was passed on February 24, 2015, and went into effect on February 24, 2017.  The objective of the law is to protect public interest from monopolistic acts, limit unfair competition, and prevent abuse of dominant position and economic concentration that weakens competition.

The law classifies four types of behavior as sanctionable violations: acts restricting competition (applicable to all persons); acts leading to monopolies (applicable only to entrepreneurs); unfair competitive acts (applicable only to entrepreneurs); and business combinations such as mergers.  The law also restricts the production of goods, market penetration, technological development, and investment, although the government may exempt restrictive agreements “if they are aimed at reducing production costs and benefit consumers,” such as reshaping the organizational structure and business model of a business so as to improve its efficiency; enhancing technology and technological advances for the improvement of the quality of goods and service; and promoting competitiveness of small- and medium-sized enterprises.

Burma is not party to any bilateral or regional agreement on anti-trust cooperation.

Expropriation and Compensation

The 2016 MIL prohibits nationalization and states that foreign investments approved by the MIC will not be nationalized during the term of their investment.  In addition, the law guarantees that the government of Burma will not terminate an enterprise without reasonable cause, and upon expiration of the contract, the government of Burma guarantees an investor the withdrawal of foreign capital in the foreign currency in which the investment was made.  Finally, the law states that “the Union government guarantees that it shall not cease an investment enterprise operating under a Permit of the Commission before the expiry of the permitted term without any sufficient reason.”

Dispute Settlement

ICSID Convention and New York Convention

Burma is not a party to the 1965 Convention on the Settlement of Investment Disputes between States and Nationals of other States (ICSID).  In 2016, the Burmese parliament enacted the Arbitration Law, putting the 1958 New York Convention into effect (see international arbitration below).

Investor-State Dispute Settlement

To date, Burma has not been party to any investment dispute.  In addition, Burma has not been party to any dispute settlement proceeding at the WTO.

Under the 2016 Arbitration Law, local courts should recognize and enforce foreign arbitral awards against the government unless a valid ground for refusal to enforce exists.  Valid grounds for refusal include: one or more parties’ inability to conclude an arbitration agreement; the invalidity of the arbitration agreement, lack of due process, the award falls outside the scope of the arbitration agreement; the arbitration was not in compliance with the applicable laws; or the award is not in force or has been set aside.

International Commercial Arbitration and Foreign Courts

The 2016 Arbitration Law is based on the UNCITRAL Model Law (Model Law), addressing arbitration in Burma as well as the enforcement of a foreign award in Burma.  For example, the provisions relating to the definition of an arbitration agreement, the procedure of appointing arbitrator(s) and the grounds for setting aside an award are mirrored in the Arbitration Law and the Model Law; however there are some differences between these two laws.  For instance, while parties are free to decide on the substantive law in an international commercial arbitration, the Arbitration Law provides that arbitrations seated in Burma must adopt Burmese law as the substantive law.  This may create uncertainty as to what can be defined as an international commercial dispute, since parties are allowed to adopt any foreign law as substantive law.  According to the Arbitration Law, foreign arbitral awards can be enforced if they are the result of a commercial dispute and were made at a place covered by international conventions connected to Burma and as notified in the State Gazette by the President.  If the Burmese court is satisfied with the award, it has to enforce it as if it were a decree of a Burmese court. While observers note that there are still issues to be resolved, the Arbitration Law brings Burma’s legislation much closer to international arbitration standards and legislation.

Bankruptcy Regulations

There is no bankruptcy law in Burma.  Existing, antiquated insolvency laws – such as the Insolvency Act of 1910 and the Insolvency Act of 1920 – are rarely used.

4. Industrial Policies

Investment Incentives

According to the MIL, investors may enjoy corporate tax exemption for seven, five or three years depending on whether investment takes place in underdeveloped, moderately developed or adequately developed regions, although income tax exemptions shall be granted only to investments in promoted sectors such as agriculture, manufacturing, power generation, etc.  The promoted sectors can be found at the DICA website: https://www.dica.gov.mm/en/investment-promotion  .

MIC permit holders are entitled to tax incentives and the right to use land. With a MIC permit, foreign companies can lease regional government approved land for initial periods of up to 50 years, and with the possibility of two consecutive ten-year extensions.

DICA is officially mandated to coordinate investment promotion under the MIC, although different ministries and agencies promote investment in different sectors (e.g. the Ministry of Tourism promotes responsible tourism investment).  DICA is responsible for encouraging and facilitating foreign investment by providing information, fostering coordination and networks between investors, and continually exploring new opportunities in Burma that would benefit both the nation and the business communities.  DICA’s head office is in Yangon and it has 14 branches throughout the country including Naypyitaw, Mandalay, Taunggyi, Mawlamyaing, Pathein, Monyaw, Dawei, Hpa-an, Bago, Magway, Loikaw, Myitkyina, Sittwe and Hakha. DICA uses seminars, workshops, investment fairs and other events to promote investment, as well as its website: http://www.dica.gov.mm/en  .

Foreign Trade Zones/Free Ports/Trade Facilitation

The Myanmar Economic Zones Law also contains specific investment incentives.  Under the law, investors located in an SEZ may apply for income tax exemption for the first five years from the date of commencement of commercial operations, followed by a reduction of the income tax rate by 50 percent for the succeeding five-year period.  Under the law, if profits during the third five-year period are reinvested within one year, investors can apply for a 50 percent reduction of the income tax rate for profits derived from such reinvestment.  In August 2015, the Ministry of National Planning and Economic Development issued new rules governing the SEZs, including the establishment of a One-Stop Service Department to ease the approval and permitting of investments in SEZs, incorporate companies, issue entry visas, issue the relevant certificates of origin, collect taxes and duties, and approve employment permits and/or permissions for factory construction and other investments.

Performance and Data Localization Requirements

Foreign investors must recruit at least 25 percent of their skilled employees from the local labor force in the first two years of their investment.  The local employment ratio increases to 50 percent for the third and fourth years, and 75 percent for the fifth and sixth years. The investors are also required to submit a report to MIC with details of the practices and training methods that have been adopted to improve the skills of Burmese nationals.

Foreign investors are not required to use domestic content in goods or technology.  Burma is currently developing laws, rules and regulations on information technology (IT).  It does not have in place requirements for foreign IT providers to turn over source code and/or provide access to surveillance.

5. Protection of Property Rights

Real Property

The MIL provides that any foreign investor may enter into long-term leases with private landlords or – in the case of state-owned land – the relevant government departments or government organizations, if the investor has obtained a Permit or Endorsement issued by the MIC.  Upon issuance of a Permit or an Endorsement, a foreign investor may enter into leases with an initial term of up to 50 years (with the possibility to extend for two additional terms of ten years each). Longer periods of land utilization or land leases may be allowed by the MIC to promote the development of difficult-to-access regions with lower development.

In September 2018, Burma amended the Vacant, Fallow, and Virgin Lands Management Law and required occupants of land considered vacant, fallow or virgin to go to the nearest land records office and register within a six-month period.  The six-month deadline was intended to offer clear title to lands for investment and infrastructure construction. However, controversy exists over which lands were designated as vacant, fallow or virgin and whether the notification or registration period was sufficient.

In January 2016, the government published the approved National Land Use Policy.  The policy includes provisions on ensuring the use of effective environmental and social safeguard mechanisms; improving public participation in decision-making processes related to land use planning; improving public access to accurate information related to land use management; and developing independent dispute resolution mechanisms.  The policy is to be updated every five years as necessary and stipulates that a new national land law will be drafted and enacted using this policy.  The policy also establishes the National Land Use Council. Chaired by the Vice President, the council constitutes the highest authority within the government presiding over land issues, and is intended to ensure the policy and new national land law are implemented and used as a guide for the harmonization of all existing laws relating to land in the country.

A continuing area of concern for foreigners involves investment in large-scale land projects.  Property rights for large plots of land for investment commonly are disputed because ownership is not well established, particularly following a half-century of military expropriations.  It is not uncommon for foreign firms to face complaints from local communities about inadequate consultation and compensation regarding land.

Burma’s parliament passed the Condominium Law in 2016.  The law states that up to 40 percent of condominium units of “saleable floor area” can be sold to foreign buyers.  Condominium owners shall also have the shared ownership of both the land and apartment.  In 2017 the Ministry of Construction pasted the Condominium Rules, implementing and clarifying provisions of the Condominium law.  One clarification per the rules is that state-owned land may be registered as condominium land (Rules 20 and 21).

In accordance with the Transfer of Immovable Property Restriction Law of 1987, mortgages of immovable property are prohibited if the mortgage holder is a foreigner, foreign company or foreign bank.

Intellectual Property Rights

Burma improved its intellectual property rights protection in 2019 by enacting three laws on intellectual property: the Trademark Law, the Industrial Design Law, and the Patent Law.  A fourth law on copyrights has been passed by Parliament but has not yet been signed by the President. The laws improve protections for intellectual property owners by offering legal protections and implementing fines or legal actions in case of infringement.

The Trademark Law introduces a “first-to-file” system from the previous “first-to-use” system.  Trademark holders who previously registered their trademark will need to re-register their marks.  The new law also includes protections for “well-known” trademarks. Geographical indications will also be protected through registration.  In anticipation of passage of the trademark bill, Burma established a single national Intellectual Property Office that will monitor compliance with intellectual property laws and be responsible for developing IPR policy rules and regulations.  In addition, the WTO has delayed required implementation of the Trade-Related Aspects of Intellectual Property (TRIPs) Agreement for Least Developed Nations – including Burma – until 2021.

For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/  .

Resources for Rights Holders

For Intellectual Property Rights issues in Burma, please contact:

Kitisri Sukhapinda, Regional IP Attache
U.S. Patent and Trademark Office
American Embassy Bangkok, Thailand
Tel: (662) 205-5913
Email: kitisri.sukhapinda@trade.gov

Information on the American Chamber of Commerce (AmCham) Burma Chapter can be found at: http://www.amchammyanmar.com/  

Information on legal service providers available in Burma can be found at: https://mm.usembassy.gov/u-s-citizen-services/attorneys/

6. Financial Sector

Capital Markets and Portfolio Investment

Burma has very small publicly traded equity and debt markets.  Banks have been the primary buyers of government bonds issued by Burma’s Central Bank, which has established a nascent bond market auction system.  The Central Bank issues government treasury bonds with maturities of two, three, and five years.

The Burmese government opened the Yangon Stock Exchange in 2015, and the first company was listed on March 25, 2016.  As of April 2018, five companies are listed on the exchange. Japan Exchange Group and Japan-based Daiwa Securities Group helped launched the stock exchange, owning a combined 49 percent of the stock exchange, with the remaining 51 percent owned by state-owned Myanma Economic Bank.  In 2013, the Securities Exchange Law came into effect, establishing a securities and exchange commission and helping clarify licensing for securities businesses (such as dealing, brokerage, underwriting, investment advisory and company representation). The Companies Law allows foreign investment of up to 35 percent in domestic companies and allows foreign investment in the stock market.

Money and Banking System

In October 2014, the government awarded limited banking licenses to nine foreign banks – all from the Asia-Pacific region – allowing each bank to set up one branch and provide loans to foreign companies.  All nine banks began operations by the end of October 2015. In mid-December 2015, the Burmese government announced a second round of foreign bank licensing, designed to increase the presence of banks headquartered in a wider variety of countries, and in early March 2016 the Central Bank granted new licenses to banks headquartered in India, South Korea, Taiwan, and Vietnam.  In November 2018, the Central Bank published new guidelines that permit locally licensed foreign banks to offer “any financing services and other banking services” to local corporations. Previously, the thirteen foreign banks in Burma were only allowed to offer export financing and related banking services to foreign corporations. No domestic banks currently have a correspondent bank account with a U.S.-based bank.

The Financial Institution Law was enacted in January 2016 and in July 2017 the Central Bank issued four regulations on capital adequacy ratio, asset classification and provisioning, large exposures and liquidity ratio requirements, aiming to align Burma’s banking standards with international Basel II standards.  Since then Burmese banks have pushed back against the timeline of implementation of these regulations, arguing that special circumstances in Burma’s banking industry warrant special treatment.

Insufficient access to formal sources of credit is one of the most frequently identified obstacles to doing business in Burma, according to numerous business surveys.

Foreign Exchange and Remittances

Foreign Exchange

The Burmese kyat has a free-floating exchange rate.  Starting from February 5, 2019, the Central Bank calculates a market-based reference exchange rate from the volume-weighted average exchange rate of interbank and bank-customer deals during the day.

Remittance Policies

According to the MIL, foreign investors have the right of remittance of foreign currency.  Foreign investors are allowed to remit foreign currency overseas through banks authorized to conduct foreign banking business at the prevailing exchange rate.  Banks began introducing remittance services during 2012 and the volume of such formal transfer is low but growing, according to local bank managers.

Nevertheless, in practice, the transfer of money in or out of Burma has been difficult, as many international banks have been slow to update their internal prohibitions on conducting business in Burma, given the long history of U.S. and European sanctions that had isolated the country.  The majority of foreign currency transactions are conducted through banks in Singapore.

The difficulties presented by the formal banking system are reflected in the continued use of informal sources of finance for loans and remittances by both the public and businesses.  Although these informal sources tend to have higher interest charges, they offer an alternative to the limited loan services offered by banks, which generally provide only short-term credit for trade on a limited basis and require collateral.  Remittances are also often made through a well-developed informal financial network (commonly known as the “Hundi system”).

Burma is a “country of primary money laundering concern” according to the 2017 International Narcotics Control Strategy Report.  According to the report, Burma is not a regional or offshore financial center, and its historically isolated banking sector is just beginning to reconnect to the international financial system.  However, the report notes that Burma’s prolific drug production and lack of financial transparency make it attractive for money laundering. Burma enacted anti-money-laundering laws in 2014 and issued relevant rules in 2015.  Burma’s Financial Intelligence Unit (FIU) is the agency responsible for undertaking investigation and legal action. The FIU is now a part of Burma’s police force under the Ministry of Home Affairs.

The FIU is building its capacity to become an independent unit in line with the recommendations of the Financial Action Task Force.  In July 2016, Burma was delisted from the Financial Action Task Force list. While Burma is still designated as a jurisdiction of “primary money laundering concern” under Section 311 of the USA PATRIOT Act, the U.S. Department of the Treasury issued an administrative exception to this finding in October 2016, similar to waivers issued for certain banks since 2012, thereby allowing corresponding banking relationships with the United States.  For more information on the Department of Treasury exception, please see: https://www.fincen.gov/news/news-releases/fincen-issues-exception-prohibition-imposed-section-311-action-against-burma  

Burma does not engage in currency manipulation tactics.

Sovereign Wealth Funds

Burma does not have a sovereign wealth fund.

7. State-Owned Enterprises

Revenue from SOEs contributes about 42 percent of the total revenue of Burma, while SOEs costs amount to 36 percent of expenditures.  In July 2016, the NLD announced 12 economic policies including to reform SOEs and privatize SOEs to enable the private sector to create employment opportunities.  The disaggregate figures of each SOE under the respective ministries are made public in the Burmese language.

Starting in 2012, the government of Burma began taking steps to reduce SOEs’ reliance on government support and to make them more competitive through joint ventures.  This included reducing budget subsidies for financing the raw material requirements of SOEs. The government of Burma has moved in the direction of public private partnerships, corporatization, and privatization.  Burma is not party to the Government Procurement Agreement (GPA) within the framework of the WTO.

SOEs can secure loans at four percent interest rates from state-owned banks, with approval from the cabinet.  Private enterprises, unlike SOEs, are forced to provide land or other real estate as collateral in order to be considered for a loan.  However, SOEs are now subject to stricter financial discipline, as the government has sharply cut direct subsidies to the SOEs while opening markets for competition with the private sector.  Furthermore, the government is removing the easy credit from state banks. SOEs historically had an advantage over private entities in terms of land access since, according to the Constitution, the State owns all the land.

Privatization Program

According to the government of Burma, the private sector accounts for a majority of the country’s GDP, with the State participating in telecommunication services, social and public administration, energy, forestry, construction, and electricity.  The activities of the two military-owned conglomerates of MEHL and MEC are not included in the budget data; while a common sense understanding of “state-owned” would likely include them, these companies are not considered SOEs under Burmese law.

The NLD government has prioritized the privatization of SOEs, largely because many of these entities cost the government money.  In May 2016, the NLD appointed the new members of the Privatization Commission headed by a Vice-President. The Minister of Planning and Finance is the secretary of the commission.  Privatization can take the form of system-sharing, public-private partnership, private-private partnership, franchise, joint-venture, and sales of assets in line with international standards.

8. Responsible Business Conduct

Burma’s awareness of corporate social responsibility (CSR) is growing.  However, many local companies (and some international firms) still equate CSR with in-kind donations or charitable contributions.  In recent years the Union of Myanmar Chambers of Commerce and Industry (UMFCCI), Burma’s largest private sector association, has been promoting the United Nations Global Compact and CSR principles in general.

Burma has implemented the OECD Guidelines for Multinational Enterprises.

9. Corruption

The elected government has continued to prioritize fighting corruption, and resources have been allocated to facilitate the growth of the Anti-Corruption Commission (ACC) into an institution vested with the authority to lead that fight.  In 2018, the government amended its anti-corruption law to give the ACC greater authority to scrutinize government procurements, and the ACC has used that authority to initiate criminal cases against a few high-ranking and some mid-ranking officials for financial impropriety and abuse of office.  The ACC opened a branch office in Yangon in April 2019, and intends to open a branch in Mandalay in May 2019, as it continues to increase its investigative capacity.

The country, however, still lacks a framework that would effectively support a sustained and systematic fight against corruption.  While there have been efforts to reduce some opportunities for higher-level corruption, the lack of transparency regarding military budgets and expenditures remains a substantial impediment to reforms.  In addition, a large swath of the economy is engaged in illegal activities beyond the control of the government. These include the production, transportation and distribution of narcotics, and the smuggling of jade, gemstones, timber, wildlife, and wildlife products.  There are efforts to promote accountability for government officials, but lack of resources for key government functions, including law enforcement, remains a driver for low-level corruption. In its 2018 Corruption Perceptions Index, Transparency International rated Burma 132 out of 180 countries, a slight decline in ranking from the previous year.  Investors might face corruption when seeking investment permits, during the taxation process, when applying for import and export licenses, and when negotiating land and real estate leases.

The Government of Burma, however, recognizes the importance of fighting corruption as a quintessential part of efforts to improve democratic governance.

Resources to Report Corruption

UN Anticorruption Convention, OECD Convention on Combatting Bribery

Burma signed the UN Anticorruption Convention in 2005, and ratified it December 20, 2012.

Burma is not party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

Resources to Report Corruption

Anti Corruption Commission
Cluster (1), Sports’ Village, Wunna Theikdi Ward
Nay Pyi Taw
Phone : + 95 67 810 334 7
Email : myanmaracc2014@gmail.com
http://www.accm.gov.mm/acc/index.php?route=common/home  

10. Political and Security Environment

The government is sensitive to the threat of terrorism and is engaged with international partners on this issue.  There is no evidence to suggest that international terrorist organizations have operational capacity in Burma or are actively targeting Western interests.  Although both Al-Qaeda in the Indian Subcontinent (AQIS) and ISIS in the Philippines (ISIS-P) have called for attacks in Burma as a result of the Rakhine crisis involving the Rohingya people, these calls are so far largely seen as aspirational in nature.  Additionally, crime in Burma is low compared to other countries within the region. While violence or demonstrations rarely target U.S. or other Western interests in Burma, several ethnic armed groups are engaged in ongoing civil conflict with the government of Burma, which occurs almost exclusively in the ethnic states.  On October 15, 2015, the government of Burma and eight ethnic armed groups (EAGs) signed a Nationwide Ceasefire Agreement (NCA).  Two additional armed ethnic groups joined the NCA in February 2018. However, several ethnic armed groups, including the most powerful ones, have not signed the NCA and some signatories continue to fight with the military and other EAGs.

While most of the major cities are quite safe, several areas of the country, particularly the ethnic states, routinely see conflict between the government and EAGs, as well as inter-ethnic violence between EAGs.  One of the ways these conflicts manifest is in the use of landmines and attacks involving improvised explosive devices. These incidents generally target government security forces, but there have been collateral casualties among the civilian population.  The continued use of landmines by the Burmese military and EAGs in the north, northeast, and southeast continue to routinely result in civilian casualties. Civilians have also been killed as a result of clashes between the military and the EAGs, as well as inter-ethnic conflicts.

On August 25, 2017, a Rohingya insurgent group attacked about 30 security outposts in northern Rakhine State.  The government characterized this event as a terrorist attack, and Burmese security forces launched clearance operations throughout northern Rakhine State.  Hundreds of Rohingya villages were burned, and there were widespread, credible allegations of abuses by security forces. An estimated 730,000 Rohingya fled to Bangladesh, and tens of thousands of non-Rohingya are displaced inside Rakhine State.  In November 2017, the U.S. Secretary of State determined that the situation constituted ethnic cleansing. Violence has not spread to other areas of Burma as a result of the crisis in Rakhine State although, as noted above, certain states in Burma continue to experience ethnic or religious violence.  Burma has a minority Muslim population, and violence between Buddhists and Muslims did occur in other parts of the country in 2013 and 2014 following intercommunal violence in Rakhine State in 2012. Since late 2018, there has been a marked increase in violence as a result of the ongoing conflict between the Burmese security forces and fighters from the Arakan Army (AA), an ethnic Rakhine, largely Buddhist, EAG.  A number of townships in northern Rakhine and southern Chin are currently off limits for U.S. government travel due to the violence from this conflict.

11. Labor Policies and Practices

In October 2011, the Government of Burma passed the Labor Organization Law, which legalized the formation of trade unions and allows workers to strike.  As of April 2019 roughly 2,900 enterprise level unions had been formed in a variety of industries ranging from garments and textiles to agriculture to heavy industry.  The passage of the Labor Organization Law has engendered a nascent labor movement in Burma, and there is a low, yet increasing, level of awareness of labor issues among workers, employers, and even government officials.

Burma’s labor costs are low, even when compared to most of its Southeast Asian neighbors.  Skilled labor and managerial staff are in high demand and short supply, leading to high turnover.  The military’s nationalization of schools in 1964, its discouragement of English language classes in favor of Burmese, the lack of investment in education by the previous governments of Burma, and the repeated closing of Burmese universities from 1988 to the mid-2000’s have taken a toll on the country’s work force.  Most people in the 15-39-year-old demographic group lack technical skills and English proficiency. In order to address this gap, the government of Burma’s Employment and Skill Development Law entered into effect in December 2013 and is being revised. The law provides for compulsory contributions on the part of employers to a “skill development fund,” although this provision has not been implemented.  According to the government, 70 percent of Burma’s population is employed in agriculture.

According to the World Bank’s 2014 “Ending Poverty and Boosting Prosperity in a Time of Transition” report on Burma, 73 percent of the total labor force in Burma was employed in the informal sector in 2010, or 57 percent excluding agricultural workers.  Casual laborers represented another 18 percent, mainly from the rural areas. Unpaid family workers represent another 15 percent. According to the government’s labor force survey, the informal sector accounts for 75.6 percent.

A new national minimum wage went into effect in May 2018, raising the minimum daily wage from 3,600 kyat (USD 2.40) to 4,800 kyat (USD 3.20).  The minimum wage covers a standard eight-hour work day across all sectors and industries, and applies to all workers except for those in businesses with less than 15 employees.  While the previous minimum wage has been widely implemented, compensation for overtime work is still unclear.

The Burmese government, in an effort to align Burma’s labor regulations with international standards and increase trade and investment in the country, set out to abolish all antiquated labor laws and to introduce new labor laws and regulations.  The government passed a number of labor reforms and amended a range of labor-related laws, such as the 2016 Shops and Establishment Law and the Payment of Wages Law. Parliament passed a new Occupational Safety and Health Law in March 2019 and a Settlement of Labor Disputes Law in May 2019.

In November 2016, the U.S. government reinstated Burma’s Generalized System of Preferences (GSP) trade benefit in recognition of the progress that the government had made in protecting workers’ rights.  The U.S. government reauthorized the GSP program globally in March 2018 through December 31, 2020.

In September 2016, a National Tripartite Dialogue Forum (NTDF) was created to provide a venue for the Ministry of Labor, Immigration and Population to engage with employers and workers, especially in drafting legislation.  The NTDF meets regularly and is currently reviewing a draft of the Labor Organization Law as well as the Employment and Skill Development Law.

In November 2014, the governments of the United States, Burma, Japan, Denmark, and the ILO formally launched the Initiative to Promote Fundamental Labor Rights and Practices in Myanmar (Initiative) and held the third Stakeholder’s Forum in January 2018.  The overarching goal of the Initiative is to promote a culture of compliance with fundamental labor rights. The Initiative is intended to cultivate relationships between business, labor, and civil society stakeholders and the government of Burma.

12. OPIC and Other Investment Insurance Programs

In May 2013, the Overseas Private Investment Corporation (OPIC) signed an Investment Incentive Agreement with Burma.   OPIC provides political risk insurance, debt financing, and private equity capital to support U.S. investors and their investments. OPIC can provide political risk insurance for currency inconvertibility, expropriation, and political violence for U.S. investments including equity, loans and loan guarantees, technical assistance, leases, and consigned inventory or equipment.  Most recently, in April 2019, OPIC signed an agreement providing USD 8 million in support for a microfinance enterprise in Burma.

In 2014, the Export-Import Bank of the United States (EXIM Bank) announced that it would open for sovereign-backed business in Burma to help finance short-term and medium-term U.S. export sales.  In July 2017 EXIM Bank also authorized long-term transactions in the public sector.

In December 2013, Burma became a member of the World Bank’s Multilateral Investment Guarantee Agency (MIGA), which means that direct foreign investment into the country is eligible for the agency’s investment guarantees.

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy

Host Country Statistical Source* USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) ($M USD) 2018 N/A 2018 $74,002 https://www.imf.org/external/pubs/ft/weo/2017/02/weodata/weorept.aspx?sy=2015&ey=2022&scsm=1&ssd=1&sort=country&ds=.&br=1&pr1.x=66&pr1.y=14&c=518&s=NGDPD&grp=0&a=  
Foreign Direct Investment Host Country Statistical Source USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) 2018 $55.9* N/A N/A N/A
Host country’s FDI in the United States ($M USD, stock positions)** N/A N/A N/A N/A N/A
Total inbound stock of FDI as % host GDP** N/A N/A 2017 38.4% https://unctad.org/en/Pages/DIAE/World%20Investment%20Report/Country-Fact-Sheets.aspx    

* https://www.dica.gov.mm/sites/dica.gov.mm/files/document-files/yearly_country.pdf  . In 2018, Burma changed its fiscal reporting period from an April to March reporting period to an October to September period.  This amount only represents U.S. FDI between April and September 2018
**Accurate statistical data is limited in Burma, although this capacity is also being developed.


Table 3: Sources and Destination of FDI

Direct Investment From/in Counterpart Economy Data
From Top Five Sources/To Top Five Destinations (US Dollars, Millions)
Inward Direct Investment (2017)* Outward Direct Investment
Total Inward Amount 100% N/A
China $8,734 33.1% N/A
Singapore $7,779 29.5% N/A
Thailand  $2,256 8.6% N/A
United Kingdom $1,915 7.3% N/A
Japan $1,167 4.4% N/A
“0” reflects amounts rounded to +/- USD 500,000.

* According to http://data.imf.org/CDIS  


Table 4: Sources of Portfolio Investment

Data not available.

14. Contact for More Information

Amy E. Roth, Economic Officer
U.S. Embassy/110 University Avenue
Kamayut Township 11041, Rangoon, Burma
Telephone:  95 (0)1 536 509
Email Address: BurmaBusiness@state.gov

Pakistan

Executive Summary

Despite a relatively open foreign investment regime, Pakistan remains a challenging environment for foreign investors.  An improving but unpredictable security situation, difficult business climate, lengthy dispute resolution processes, poor intellectual property rights (IPR) enforcement, and inconsistent taxation policies have contributed to lower Foreign Direct Investment (FDI), as compared to regional competitors.  Pakistan ranked 136 out of 190 countries in the World Bank’s Doing Business 2019 rankings, gaining 11 places from 2018.

The Pakistan Tehreek-e-Insaf (PTI) government elected in July 2018 pledged to improve Pakistan’s economy, restructure tax collection, enhance trade and investment, and eliminate corruption.  Since taking power, the PTI government has faced a rapidly expanding current account deficit and declining foreign reserves.  Due to the inherited balance of payments crisis, the PTI government has worked on immediate needs to acquire external financing rather than medium- to long-term structural reforms.  Progress has been slow on key structural reforms including broadening the tax base, reforming the tax authority, and privatizing state owned enterprises.  Current tax policies negatively affect large businesses, as the government relies heavily on them for meeting its tax collection targets.  The PTI government has not announced new policies to attract FDI yet, but is reportedly working on a five-year FDI strategy.  The strategy reportedly aims to gradually increase FDI to USD 7.4 billion by Fiscal Year (FY) 2022-23.

The United States has consistently been one of the largest sources of FDI in Pakistan and one of its most significant trading partners.  Two-way trade in goods between the United States and Pakistan exceeded USD 6.6 billion in 2018, a record for bilateral trade, and included a 4.3-percent increase in U.S. exports to Pakistan.  Agriculture remained the largest growth area for U.S. exports.  The Karachi-based American Business Council, an affiliate of the U.S. Chamber of Commerce, has 65 U.S. member companies, most of which are Fortune 500 companies operating in Pakistan across a range of industries.  The Lahore-based American Business Forum – which has 25 founding members and 18 associate members – also assists U.S. investors.  American companies have profitable investments across a range of sectors, notably, but not limited to, fast-moving consumer goods and financial services.  Other sectors attracting U.S. interest include franchising, information and communications technology (ICT), thermal and renewable energy, and healthcare services.

In 2003, the United States and Pakistan signed a Trade and Investment Framework Agreement (TIFA) to serve as a key forum for bilateral trade and investment discussion.  The TIFA seeks to address impediments to greater trade and investment flows and increase economic linkages between our respective business interests.  Themost recent TIFA meeting was held in October 2016 in Islamabad, led by United States Trade Representative Michael Froman.  The last TIFA intersessional, a working level meeting to review the decisions taken in TIFA, was in June 2017 in Washington.

Table 1: Key Metrics and Rankings

Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2018 117 of 180 http://www.transparency.org/research/cpi/overview
World Bank’s Doing Business Report 2019 136 of 190 http://www.doingbusiness.org/en/rankings
Global Innovation Index 2018 109 of 126 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, stock positions) 2017 $518 http://www.bea.gov/international/factsheet/
World Bank GNI per capita (USD) 2017 $1,580 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

In the past decade, Pakistan was unable to attract sufficient foreign investments to support desired growth objectives and remains a low priority country for foreign investors.  The previous government recognized Pakistan’s need for foreign investment and introduced an Investment Policy, in 2013, to attract foreign investment and also signed an economic co-operation agreement with China, the China Pakistan Economic Corridor (CPEC), in April 2015.  CPEC is focused mainly on infrastructure and energy production.  Given that several large CPEC energy projects went online in 2018, Pakistan’s government has been able to develop sufficient power generation capacity in the country, though deficiencies in the transmission and distribution network remain.

The previous government also introduced incentives, which remain in place under the current PTI government, through the Strategic Trade Policy Framework (STPF) and Export Enhancement Packages (EEP).  These incentives are largely industry-specific and include tax breaks, tax refunds, tariff reductions, the provision of dedicated infrastructure, and investor facilitation services.  The current government is reportedly working on its own STPF, but has not announced a new policy.  Pakistan also designated special economic zones (SEZs), which the PTI government continues to develop, which offer a separate basket of incentives to potential investors.  None of the SEZs are fully operational, but they have attracted some investment and are available to any company, domestic or foreign.

Net inflows of FDI peaked at USD 5.4 billion in fiscal year FY2008.  [Note:  Pakistan’s fiscal year in runs from July 1 to June 30.  End Note.]  In FY2018, net FDI was USD 3.1 billion, approximately 14.8 percent higher than FY2017.  According to the State Bank of Pakistan (SBP), the largest share of FDI (USD 997 million) was in the power sector (largely due to Chinese FDI in CPEC projects), followed by USD 708 million in the construction sector, and USD 400 million in financial business.  Most analysts believe that the improved security environment, large energy projects under CPEC, and improvements in macroeconomic stability have played a key role in the improvement of FDI in FY2018.  China remained the single largest FDI contributor in Pakistan, contributing more than 58 percent of Pakistan’s total FDI in FY2018.  During the last five years, cumulative FDI inflows remained USD 10 billion, over 81 percent in non-manufacturing sectors.  Since the PTI government started in 2018, Pakistan has signed Memorandum of Understandings (MoUs) with Saudi Arabia, the United Arab Emirates, and Malaysia.  These MoUs agreed to bring investments of over USD 21 billion, largely in the areas of energy, agriculture and oil and gas exploration.

Notwithstanding the substantial increase in Chinese FDI, non-Chinese sources are limited.  Compared to the region, low FDI is attributed to Pakistan offering competitive returns in only a few sectors.  For example, multinational companies in the consumer goods sector have witnessed steady profits, while pharmaceuticals have been obstructed by opaque and restrictive government regulations.  Power companies have also experienced an uptick in business since CPEC, but mostly by conventional energy providers; renewable energy providers have encountered obstacles in the form of inconsistent and discouraging policies from regulators.  The current government is working on introducing new energy policy for the next 25 years.  It aims to have 20-30 percent share of all energy come from renewable energy by 2030, compared to the current share of 2-3 percent.  The ICT sector has risen steadily, albeit from a relatively low base.  Growth has come from companies engaged in outsourcing services and software development.

Pakistan has a low tax-to-gross domestic product (GDP) ratio of approximately 13 percent in FY2018, which slightly increased from FY2017.  [Note:  For comparison, OECD countries averaged 32-34 percent over the past decade.  End Note]  Pakistan relies heavily on multinational corporations for a significant portion of the tax collections.  Foreign investors in Pakistan regularly report that both federal and provincial tax regulations are difficult to navigate.  The World Bank’s Doing Business 2019 report notes that companies pay 47 different taxes, compared to an average of 24.8 in other South Asian countries.  On average, calculating these payments requires that business spend on average over 293 hours per year.  In addition, companies frequently lament the lack of transparency in the assessment of taxes.  Since 2013, the government has requested advance tax payments from companies, complicating businesses’ operations as the government intentionally delays tax refunds.

The Foreign Private Investment Promotion and Protection Act, 1976, and the Furtherance and Protection of Economic Reforms Act, 1992, provide legal protection of foreign investors and investment in Pakistan.  All sectors and activities are open for foreign investment unless specifically prohibited or restricted for reasons of national security and public safety.  Specified restricted industries include arms and ammunitions; high explosives; radioactive substances; securities, currency and mint; and consumable alcohol.

The specialized investment promotion agency of Pakistan is the Board of Investment (BOI).  The BOI is responsible for the promotion of investment, facilitating local and foreign investors for implementation of their projects, and to enhance Pakistan’s international competitiveness.  They assist companies and investors who intend to invest in Pakistan and facilitate the implementation and operation of their projects.

Limits on Foreign Control and Right to Private Ownership and Establishment

The 2013 Investment Policy eliminated minimum initial capital investment requirements across sectors so that no minimum investment requirement or upper limit on the share of foreign equity is allowed, with the exception of the airline, banking, agriculture, and media sectors.  Foreign investors in the services sector may retain 100 percent equity – subject to obtaining permission, a no objection certificate, or license from the concerned agency, as well as fulfilling the requirements of respective sectoral policy.  In the education, health, and infrastructure sectors, 100 percent foreign ownership is allowed, while in the agricultural sector, the threshold is 60 percent – with an exception for corporate agriculture farming, where 100 percent ownership is allowed.  There are no restrictions on payments of royalties and technical fees for the manufacturing sector, but there are restrictions on other sectors, including a USD 100,000 limit on initial franchise investments and a cap on subsequent royalty payments of 5 percent of net sales for five years.  Royalties and technical payments are subject to a 15 percent income tax, and subject to remittance restrictions listed in Chapter 14, section 12 of the SBP Foreign Exchange Manual (http://www.sbp.org.pk/fe_manual/index.htm ).  The tourism, housing, construction, and information and communications technology sectors have been granted “industry status,” eligible for lower tax and utility rates compared to “commercial sector” enterprises, including banks and insurance companies.  Small-scale mining valued at less than PKR 300 million (roughly USD 2.6 million) is restricted to Pakistani investors.

With the exception of arms, ammunition, high explosives, radioactive substances, private security companies, currency, and consumable alcohol, foreign investors are allowed in all sectors.  There are no restrictions or mechanisms that specifically exclude U.S. investors.

Since signing the World Trade Organization (WTO) Financial Services Agreement in December 1997, Pakistan’s financial services commitments have improved.  Foreign banks can establish locally incorporated subsidiaries and branches, provided they have USD 5 billion or belong to one of the regional organizations or associations to which Pakistan is a member (e.g., Economic Cooperation Organization (ECO) or the South Asian Association for Regional Cooperation (SAARC)).  Absent these requirements, foreign banks are limited to a 49-percent maximum equity stake in locally incorporated subsidiaries.  Foreign and local banks must submit an annual branch expansion plan to the SBP for approval.  The SBP approves branch openings based on the bank’s net worth, adequacy of capital structure, future earnings prospects, credit discipline, and the needs of the local population.  All banks are required to open 20 percent of their new branches in small cities, towns, and villages.

The Foreign Private Investment Promotion and Protection Act stipulates that foreign investments will not be subject to higher income taxes than similar investments made by Pakistani citizens.  While Pakistan’s legal code and economic policy do not discriminate against foreign investments, enforcement of contracts remains problematic due to a weak and inefficient judiciary.  Pakistani courts have not upheld some international arbitration awards.

Pakistan maintains investment screening mechanisms for inbound foreign investment.  The BOI is the lead organization for such screening.  Pakistan blocks foreign investments if the screening process determines the investment could negatively affect Pakistan’s national security.

Other Investment Policy Reviews

Pakistan has not undergone any third-party investment policy reviews in last three years.  The International Monetary Fund assessed the nation’s overall macro economy under Article-IV consultation in 2018; however, that review was not specific to investment policy.

Business Facilitation

Pakistan works with the World Bank to improve its overall ease of doing business standing.  The government has simplified pre-registration and registration facilities and automated land records to simplify property registrations.  To improve cross border trade, it has also improved electronic submissions and processing of trade documents.  Even so, Pakistan ranked 130 out of 190 countries in the World Bank Doing Business 2019 report’s “Starting a Business” category.  Pakistan is ranked 26 out of 190 for protecting minority investors.  Starting a business in Pakistan normally involves 10 procedures and takes at least 16.5 days.

The Securities and Exchange Commission of Pakistan (SECP) manages company registrations.  Both foreign and domestic companies begin the registration by providing a company name and paying the requisite registration fees to the SECP.  Companies then supply documentation on the proposed business, including information on corporate offices, location of company headquarters, and a copy of the company charter.  Companies must apply for national tax numbers with the Federal Board of Revenue (FBR) to facilitate payment of income and sales taxes.  Industrial or commercial establishments with five or more employees must register with Pakistan’s Federal Employees Old-Age Benefits Institution (EOBI) for social security purposes.  Depending on the location, registration with provincial governments may be required.

The SECP website (www.secp.gov.pk ) offers the Virtual One Stop Shop (OSS) where companies can register with the SECP, FBR, and EOBI simultaneously.  OSS is also available for foreign investors.

The government’s investment policy provides both domestic and foreign investors the same incentives, concessions, and facilities for industrial development.  Though some incentives are included in the federal budget, the government relies on Statutory Regulatory Orders (SROs) for industry specific taxes or incentives.  For example, an SRO issued in February 2019 imposed additional labeling requirements for imported goods, creating non-tariff barriers.

Outward Investment

Pakistan does not promote or incentivize outward investment.  Although the government does not explicitly prohibit Pakistanis from investing abroad, the process of approvals is so cumbersome it normally takes years, discouraging potential investors.

2. Bilateral Investment Agreements and Taxation Treaties

Though U.S.-Pakistan Bilateral Investment Treaty (BIT) negotiations began in 2004 and closed the text in 2012, the agreement has not been signed due to reservations from Pakistani stakeholders.  According to the BOI, Pakistan has signed BITs with 49 countries with only 27 entered into force.

Pakistan does not have a Free Trade Agreement (FTA) with United States.  However, both countries have Trade and Investment Framework Agreement (TIFA) in place.  Pakistan has trade agreements with China, Malaysia, Sri Lanka, Iran, Mauritius, and Indonesia.  It is also a signatory of the South Asian Free Trade Agreement (SAFTA) and the Afghanistan Pakistan Transit Trade Agreement (APTTA).  Pakistan is negotiating FTAs with Turkey and Thailand and re-negotiating its existing FTA with China.

A U.S.-Pakistan bilateral tax treaty was signed in 1959.  Pakistan has double taxation agreements with 63 other countries and a multilateral tax treaty between the SAARC countries (Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka) came into force in 2011.  The treaty provides additional provisions for the administration of taxes.  In 2018, Pakistan updated its tax treaty with Switzerland and has approached the United States government to request the same.

In 2016, Pakistan signed the OECD’s Multilateral Convention on Mutual Administrative Assistance in Tax Matters.  The Convention will help Pakistan exchange banking details with the other 80 signatory countries to locate untaxed money in foreign banks.  Pakistan is a member of the Base Erosion and Profit Shifting (BEPS) framework and will automatically exchange country-by-country reporting as required by the BEPS package.

3. Legal Regime

Transparency of the Regulatory System

Since the 2010 introduction of the 18th amendment to Pakistan’s constitution, foreign companies must address provincial, and sometimes local, government laws in addition to national law.  Respective regulatory authorities conduct in-house post-implementation reviews for regulations in consultation with relevant stakeholders.  However, these assessments are not made publicly available.  Prior to implementation, non-government sectors and private sector associations can provide feedback to the government on different laws and policies, but authorities are not bound to collect nor implement their suggestions.  Many foreign businesses in Pakistan complain about the inconsistencies in laws and policies from different regulatory authorities.  Since the implementation of the 18th amendment, which devolved certain powers from the federal to provincial governments, inconsistencies have affected sales of U.S. companies, particularly in food and beverages; the two largest provinces, Punjab and Sindh, have different regulations for beverages.  However, there are no rules or regulations in place that discriminate specifically against U.S. investors.

The SECP is the main regulatory body for foreign companies in Pakistan.  However, the SECP is not the sole regulator.  Company financial transactions are regulated by SBP, labor by the Social Welfare or EOBI, and specialized functions are overseen by bodies such as the National Electric Power Regulatory Authority or Alternate Energy Development Board.  Each body is overseen by autonomous management but all are required to go through the Ministry of Law and Justice before submitting their policies and laws to parliament or, in some cases, the executive branch; parliament or the Prime Minister is the final authority for any operational or policy related legal changes.

The SECP is technically empowered to notify accounting standards to companies in Pakistan.  Pakistan has adopted most, though not all, International Financial Reporting Standards.  Though most of Pakistan’s legal, regulatory, and accounting systems are transparent and consistent with international norms, execution and implementation is inefficient and opaque.

Most draft legislations are made available for public comment but there is no centralized body to collect public responses.  The relevant authority gathers public comments, if deemed necessary; otherwise legislation is directly submitted to the legislative branch.  For business and investment laws and regulations, the Ministry of Commerce collects feedback from local chambers and associations – such as the American Business Council and Overseas Investors Chamber of Commerce and Industry (OICCI).  Rather than publishing regulations online for public review, the Ministry relies on stakeholder discussion forums for comment.

The government publishes limited debt obligations in the budget document in two broad categories: capital receipts and public debt, which are published in the “Explanatory Memorandum on Federal Receipts.”  These documents are available at http://www.finance.gov.pk , http://www.fbr.gov.pk , and http://www.sbp.org.pk/edocata .  The government does not adequately disclose the terms of bilateral debt obligations, including financing on China-Pakistan Economic Corridor projects.

International Regulatory Considerations

Pakistan has bilateral trade agreements with China, Indonesia, Iran, Malaysia, Mauritius, and Sri Lanka, although most are limited to a few hundred tariff lines and do not cover all trade.  It is negotiating additional trade agreements with Turkey and Thailand.  Pakistan is a member of the South Asia Free Trade Area, SAARC, the Central Asia Regional Economic Cooperation (CAREC), and Economic Cooperation Organization (ECO).

Pakistan has been a World Trade Organization (WTO) member since January 1, 1995, and provides most favored nation (MFN) treatment to all member states, except India and Israel.  Since 2012, the government has maintained a “negative” list of products that cannot be imported from India.  The list contains approximately 1,200 products.  Pakistan does not recognize the State of Israel and thus does not trade with Israel.

In October 2015, Pakistan ratified the WTO’s Trade Facilitation Agreement (TFA).  Pakistan is one of 23 WTO countries negotiating the Trade in Services Agreement.  Pakistan notifies all draft technical regulations to the WTO Committee on Technical Barriers to Trade.

Legal System and Judicial Independence

Most international norms and standards incorporated in Pakistan’s regulatory system are influenced by British laws.  Laws governing domestic or personal matters are strongly influenced by Islamic Sharia Law.  Of the two courts – superior (high) courts and the subordinate (lower) courts – the superior judiciary is composed of the Supreme Court, the Federal Sharia Court, and five High Courts (Lahore High Court, Sindh High Court, Balochistan High Court, Islamabad High Court, and Peshawar High Court), and decisions have national standing.  The Supreme Court is Pakistan’s highest court and has jurisdiction over the provincial courts, referrals from the federal government, and cases involving disputes among provinces or between a province and the federal government.  A 2015 constitutional amendment allows military courts to try civilians for terrorism, sectarian violence, and other charges; parliament renewed this authority in January 2017 for an additional two years, which lapsed in March 2019.  The sitting PTI government favors an extension of these courts for another two years but opposition benches are not supportive.  For extension, parliament needs a two-thirds majority to pass the bill, which the PTI government lacks.  Additionally, the government also use special civilian terrorism courts to try a wide range of cases, not necessarily limited to terrorism, including any crimes involving violence and acts or speech deemed by the government to foment religious hatred, including blasphemy.  The lower courts are composed of civil and criminal district courts, as well as various specialized courts, including courts devoted to banking, intellectual property, customs and excise, smuggling, drug trafficking, terrorism, tax law, environmental law, consumer protection, insurance, and cases of corruption.  Pakistan’s judiciary is influenced by the government and other stakeholders.  The lower judiciary is influenced by the executive branch and seen as lacking competence and fairness.  It currently faces a significant backlog of unresolved cases.

Pakistan has a written contractual/commercial law with the Contract Act of 1872 as the main source for regulating Pakistani contracts.  English decisions, where relevant, are also cited in courts.

Laws and Regulations on Foreign Direct Investment

Pakistan’s investment and corporate laws permit wholly-owned subsidiaries with 100 percent foreign equity in all sectors of the economy, subject to obtaining relevant permissions.  In the education, health, and infrastructure sectors, 100 percent foreign ownership is allowed.  In the agricultural sector, the threshold is 60 percent, with an exception for corporate agriculture farming, where 100 percent ownership is allowed.  A majority of foreign companies operating in Pakistan are “private limited companies,” which are incorporated with a minimum of two shareholders and two directors registered with the SECP.

While there are no regulatory requirements on the residency status of company directors, the chief executive must reside in Pakistan to conduct day-to-day operations.  If the chief executive is not a Pakistani national, she or he is required to obtain a multiple entry work visa.  Companies operating in Pakistan are statutorily required to retain full-time audit services and legal representation.  Companies must also register any changes to the name, address, directors, shareholders, CEO, auditors/lawyers, and other pertinent details to the SECP within 15 days of the change.

To address long process delays, in 2013, the SECP introduced the issuance of a provisional “Certificate of Incorporation” prior to the final issuance of a “No Objection Certificate” (NOC).  The Certificate includes a provision noting that company shares will be transferred to another shareholder if the foreign shareholder(s) and/or director(s) fails to obtain a NOC.

Pakistan’s judicial system allows specialized tribunals as a means of alternative dispute resolution.  Special tribunals are able to address taxation, banking, labor, and IPR enforcement disputes.  However, due to an active but weak and inefficient judiciary, most foreign investors include contract provisions that provide for international arbitration to avoid protracted disputes.

Competition and Anti-Trust Laws

Established in 2007, the Competition Commission of Pakistan (CCP) ensures private and public sector organizations are not involved in any anti-competitive or monopolistic practices.  Complaints regarding anti-competition practices can be lodged with CCP, which conducts the investigation and is legally empowered to award penalties; complaints are reviewable by the CCP appellate tribunal in Islamabad and the Supreme Court of Pakistan.  The CCP appellate tribunal is required to issue decisions on any anti-competition practice within six months from the date in which it becomes aware of the practice.

Expropriation and Compensation

Two Acts, the Protection of Economic Reforms Act 1992 and the Foreign Private Investment Promotion and Protection Act 1976, protect foreign investment in Pakistan from expropriation, while the 2013 Investment Policy reinforced the government’s commitment to protect foreign investor interests.  Pakistan does not have a strong history of expropriation.

Dispute Settlement

ICSID Convention and New York Convention

Pakistan is a member of the International Center for the Settlement of Investment Disputes (ICSID).  Pakistan ratified the convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention) in 2005.

Investor-State Dispute Settlement

In 2008, the Pakistani government instituted a Rental Power Plant (RPP) plan to help alleviate the chronic power shortages throughout the country.  Walters Power International Limited was a participant in three RPP plants and brought the power generation equipment into Pakistan to service these plants.  Subsequently, in 2010, the Supreme Court of Pakistan nullified all RPP contracts due to widespread corruption in cash advances made to RPP operators.  Walters Power International Limited settled with the Pakistan National Accountability Bureau (NAB) and the Central Power Generation Company Limited by returning advance payments plus interest.  In mid-2012, NAB formally acknowledged that settlement with the Walters Power International Limited had been made, which under Pakistani law released Walters Power International Limited from any further liability, criminal or civil, and should have permitted re-export of equipment.

However, the Government of Pakistan has (a) refused to allow the plant be exported so that some salvage value could be obtained, and (b) prevented the plant to operate despite critical need for power in the country.  This plant was internationally advertised in a competitive bidding process and went through seven levels of regulatory approvals.  Despite repeated efforts by Walters Power International Limited, NAB has declined to instruct the appropriate parties to issue a Notice of Clearance to Pakistan Customs to allow the re-export of the equipment.  Walters Power International Limited alleges that the unreasonable delay in permitting re-export of equipment following settlement constitutes expropriation.  The case is still pending with NAB.

International Commercial Arbitration and Foreign Courts

Foreign investors lament the lack of clear, transparent, and timely investment dispute mechanisms.  Protracted arbitration cases are a major concern.  Pakistan’s Arbitration Act of 1940 provides guidance for arbitration in commercial disputes, but cases typically take years to resolve.  To mitigate such risks, most foreign investors include contract provisions that provide for international arbitration.

Pakistan is not a signatory of any treaty or investment agreement in which binding international arbitration of investment disputes is required.  With the exception of arbitration, there is no alternative dispute resolution (ADR) mechanism available as a means for settling disputes between two private parties.

Bankruptcy Regulations

Pakistan was ranked 53 of 190 for ease of “resolving insolvency” rankings in the World Bank’s Doing Business 2019 report.  On average, Pakistan requires 2.6 years to resolve insolvency issues and has a recovery rate of 44.5 percent.

Pakistan does not have a single, comprehensive bankruptcy law.  Foreclosures are governed under the Companies Act 2017 and administered by the SECP, while the Banking Companies Ordinance of 1962 governs liquidations of banks and financial institutions.  Court-appointed liquidators auction bankrupt companies’ property and organize the actual bankruptcy process, which can take years to complete.

The Companies Act 2017 regulates mergers and acquisitions.  Mergers are allowed between international companies, as well as between international and local companies.  In 2012, the government enacted legislation for friendly and hostile takeovers.  The law requires companies to disclose any concentration of share ownership over 25 percent.  There are no laws or regulations authorizing private firms to adopt articles of incorporation discriminating against foreign investment.

Pakistan has no dedicated credit monitoring authority.  However, SBP has authority to monitor and investigate the quality of the credit commercial banks extend.

4. Industrial Policies

Investment Incentives

Pakistan currently does not provide any formal investment incentives such as grants, tax credits or deferrals, access to subsidized loans, or reduced cost of land to individual foreign investors.  The 2013 investment policy revolves around business facilitation and not direct incentives.  However, in 2016, the government reduced or eliminated custom duties on the imports of equipment and machinery and introduced temporary tariff concessions for the automobile manufacturing sector.  The government does not offer research and development incentives.  Nonetheless, certain technology-focused industries, including information technology and solar energy, benefit from a wide range of fiscal incentives.

In general, the government does not issue guarantees or jointly finance foreign direct investment projects.  However, the government made an exception for CPEC related projects; the Government of Pakistan provided sovereign guarantees for the investment and returns, and provided joint financing for specific projects.

Foreign Trade Zones/Free Ports/Trade Facilitation

Providing unique fiscal and institutional incentives exclusively for export-oriented industries, the government established the first Export Processing Zone (EPZ) in Karachi in 1989.  Subsequently, EPZs were established in Risalpur, Gujranwala, Sialkot, Saindak, Gwadar, RekoDek, and Duddar; today, only Karachi, Risalpur, Sialkot, and Saindak remain operational.  EPZs offer investors tax and duty exemptions on equipment, machinery, and materials (including components, spare parts, and packing material); indefinite loss carry-forward; and access to the EPZ Authority (EPZA) “Single Window,” which facilitates import and export authorizations.  The 2012 Special Economic Zones Act allows both domestically focused and export-oriented enterprises to establish companies and public-private partnerships within SEZs.  Despite offering substantial financial, investor service, and infrastructure benefits to reduce the cost of doing business, Pakistan’s SEZs have struggled to attract investment due to lack of basic infrastructure.

Pakistan intends to establish nine SEZs under China Pakistan Economic Corridor (CPEC).  The government plans to inaugurate the first one in Rashakai, Khyber Pakhtunkhwa, in June 2019.  Most CPEC SEZs remain in nascent stages of development.

Apart from SEZ-related incentives, the government offers special incentives for Export-Oriented Units (EOU) – a stand-alone industrial entity exporting 100 percent of its production.  Export-Oriented Units incentives include duty and tax exemptions for imported machinery and raw materials, as well as the duty-free import of vehicles.  Export-Oriented Units are allowed to operate anywhere in the country.  Pakistan provides the same investment opportunities to foreign investors and local investors.

Performance and Data Localization Requirements

Foreign business officials have struggled to get business visas to Pakistan.  When permitted, business people typically received single-entry visas with a short duration validity.  Once in country, Pakistan required NOCs to visit locations outside of Islamabad, Karachi, or Lahore, making it difficult to inspect factories, supply chains, or goods outside of these three cities.  Pakistan announced updates to its visa and NOC policies to attract foreign tourists and businesspeople, but the more open polices have not been fully implemented.  New visa policies will not apply to U.S. passport holders.  Technical and managerial personnel working in sectors that are open to foreign investments are typically not required to obtain special work permits.  The new NOC policy permits travel throughout Pakistan, with exceptions for travel near Pakistan’s borders that still requires an NOC.

Foreign investors are not required to use domestic content in goods or technology or hire Pakistani nationals, either as laborers or as representatives on the company’s board of directors.  Likewise, there are no specific performance requirements for foreign entities operating in the country, and the same investment incentives are available to both local and foreign investors.  Similarly, there are no special performance requirements on the basis of origin of the investment.

Foreign investors are allowed to sign technical agreements with local investors without disclosing proprietary information.  According to the country’s 2013 Investment Policy, manufacturers introducing new technologies that are unavailable in Pakistan receive the same incentives available to companies operating in Pakistan’s SEZs.

The embassy has not received complaints regarding encryption issues from IT companies operating in Pakistan.  Officially, accreditation from the Electronic Certification Accreditation Council (under the Ministry of Information Technology) is required for entities using encryption and cryptography services, though it is not consistently enforced.  Despite the company’s April 2016 announcement that it would employ end-to-end encryption, WhatsApp is widely used.  The Pakistan Telecommunication Authority (PTA) initially demanded unfettered access to Research in Motion’s BlackBerry customer information, but the issue was resolved when the company agreed to assist law enforcement agencies in the investigation of criminal activities.  PTA and SBP prohibit telecom and financial companies from transferring customer data overseas.  Other data, including emails, can be legally transmitted and stored outside the country.

5. Protection of Property Rights

Real Property

Though Pakistan’s legal system supports the enforcement of property rights and both local and foreign owner interests, it offers incomplete protection for the acquisition and disposition of property rights.  With the exception of the agricultural sector, where foreign ownership is limited to 60 percent, no specific regulations regarding land lease or acquisition by foreign or non-resident investors exists.  Corporate farming by foreign-controlled companies is permitted if the subsidiaries are incorporated in Pakistan.  There are no limits on the size of corporate farmland holdings, and foreign companies can lease farmland for up to 50 years, with renewal options.

The 1979 Industrial Property Order safeguards industrial property in Pakistan against government use of eminent domain with insufficient compensation for both foreign and domestic investors.  The 1976 Foreign Private Investment Promotion and Protection Act guarantees the remittance of profits earned through the sale or appreciation in value of property.

Though protection for legal purchasers of land are provided, even if unoccupied, clarity of land titles remains a challenge.  Improvements to land titling have been made by the Punjab, Sindh, and Khyber Pakhtunkhwa provincial governments dedicating significant resources to digitizing land records.

Intellectual Property Rights

The Government of Pakistan has identified intellectual property rights (IPR) protection as a key economic reform and has taken concrete steps over the past 15 years to strengthen its IPR regime.  In 2005, Pakistan created the Intellectual Property Organization (IPO) to consolidate government control over trademarks, patents, and copyrights.  Three ministries handled these areas previously: the Ministry of Education for copyright, Ministry of Commerce for trademarks, and the Ministry of Industries for patents.  The IPO’s mission also includes coordinating and monitoring the enforcement and protection of IPR through law enforcement agencies.  Enforcement agencies include local police, the Federal Investigation Agency, customs officials at the Federal Board of Revenue (FBR), the Securities & Exchange Commission (SECP), the Competition Commission of Pakistan (CCP), the Drug Regulatory Authority of Pakistan (DRAP), and the Print and Electronic Media Regulatory Authority.

Although the creation of the IPO consolidated policy-making institutions, confusion surrounding enforcement agencies’ roles still constrains IPO performance on IPR enforcement, leaving IPR holders struggling to identify the right forum in which to address IPR infringement.  The IPO constituted seven new enforcement coordination committees for better IPR enforcement and signed an MOU with the FBR to share information.  The IPO is in initial stages to sign MOUs with the CCP and SECP.  However, the IPO labors to coordinate disparate bodies under current laws.  Weak penalties and agencies’ redundancies allow counterfeiters to evade punishment, while companies struggle to identify the correct forum to file complaints.  Pakistan is the fourth largest source of counterfeit and pirated goods seized by U.S. customs and border protection.

In 2016, Pakistan established three specialized IP tribunals – in Karachi covering Sindh and Balochistan, in Lahore covering Punjab, and in Islamabad covering Islamabad and Khyber Pakhtunkhwa.  There are plans to create tribunals for Peshawar and Quetta as well.  The Lahore and Islamabad IP tribunals became fully operational in 2016, and the Karachi tribunal came online in April 2017.  The IP tribunals have already ruled on 800 cases, many of which have resulted in injunction orders.  Numerous U.S. companies have successfully defended their IPR in the new tribunals, but a lack of capacity and consistency of the presiding officers remains a concern.  In under three years, the Islamabad and Lahore tribunals have each seated three different presiding officers while Karachi had two, and high court justices without expertise in IP law often overrule tribunals’ decisions.  While these three tribunals are fully operational and have improved IPR enforcement, they have not made any major rulings, and it remains too early to assess their long-term influence on Pakistan’s IPR environment.

In 2018, the CCP investigated and imposed a fine of USD 47,000 on a local coffee house on charges of unauthorized use of the Starbucks trademark.

Pakistan has sought to encourage investment in the seed industry through enhanced regulatory structure.  Over the past three years officials have revised the 1976 Seed Act, cautiously resumed  the biotechnology approval process, and received parliamentary approval of the Plant Breeders’ Rights Act (approved December 2016), which, once implementing rules are written, is expected to provide Pakistan’s first-ever intellectual property protection for seeds.  While current and potential investors have expressed concern over enforcement capacity and would like to accelerate the approval process for new technologies, the Government of Pakistan is taking steps to solidify federal (rather than provincial) oversight of the sector and respond to industry input.  Access to modern seed technology is vital to the development of Pakistan’s agricultural sector.

Pakistan is a party to the Berne Convention for the Protection of Literary and Artistic Works and is a member of the World Intellectual Property Organization (WIPO).  In July 2004, Pakistan acceded to the Paris Convention for the Protection of Industrial Property.  Pakistan has not yet ratified the WIPO Copyright Treaty or the WIPO Performance and Phonograms Treaty.

In 2016, Pakistan was upgraded from Priority Watch List to Watch List with an Out-of-Cycle Review on the U.S. Trade Representative’s Special 301 Report.  Pakistan currently remains on the Watch List for the 2019 Special 301 Report, which acknowledged certain achievements by the government but highlighted the lack of enforcement on violations, particularly with respect to copyrights, pharmaceutical data, and media piracy.  Pakistan is not included on the Notorious Markets List.

Pakistan does not track and report on seizure of counterfeit goods.

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ 

6. Financial Sector

Capital Markets and Portfolio Investment

The Government of Pakistan does not provide any investment incentives except the incentives offered to attract new capital inflows in specialized sectors and SEZs.  These incentives for specific sector and SEZs include tax exemptions, tariffs reductions, infrastructure, and investor facilitation services in designated special economic zones.  Since 1997, Pakistan has established and maintained a largely open investment regime.  The PML-N government introduced the Investment Policy 2013 that further liberalized investment policies in most sectors.  However, in addition to expressing concern about the deteriorating law and order situation, foreign investors continue to advocate for Pakistan to improve legal protections for foreign investments, protect intellectual property rights, and an established a clear and consistent policy of upholding contractual obligations and settlement of tax disputes.

Pakistan’s three stock exchanges (Lahore, Islamabad, and Karachi) merged to form the Pakistan Stock Exchange (PSE) in January 2016.  As a member of the Federation of Euro-Asian Stock Exchanges and the South Asian Federation of Exchanges, PSE is also an affiliated member of the World Federation of Exchanges and the International Organization of Securities Commissions.  In 2016, the government imposed a capital gains tax of 10 percent on stocks held for less than six months, and eight percent on stocks held for more than six months but less than a year and no capital gains tax for holdings that exceed 12 months.  However, in 2017, the government modified the capital gain tax and imposed 15 percent on stocks held for less than 12 months, 12.5 percent on stocks held for more than 12 but less than 24 months, and 7.5 percent on stocks held for more than 24 months.  The 2012 Capital Gains Tax Ordinance appointed the National Clearing Company of Pakistan Limited to compute, determine, collect, and deposit the capital gains tax.  Per the Foreign Exchange Regulations, foreign investors can invest in shares and securities listed on the PSE and can repatriate profits, dividends, or disinvestment proceeds.  The investor must open a Special Convertible Rupee Account with any bank in Pakistan in order to make portfolio investments.

The free flow of financial resources for domestic and foreign investors is supported by financial sector policies, with the SBP and SECP providing regulatory oversight of financial and capital markets.  Interest rates depend on the reverse repo rate (also called the policy rate).  The SBP steadily lowered the policy rate from a high of 10 percent at the fourth quarter 2014 to 6 percent in November 2017, but has increased the rate to 10.75 percent in March 2019.

Pakistan has adopted and adheres to international accounting and reporting standards – including IMF Article VIII, with comprehensive disclosure requirements for companies and financial sector entities.

Foreign-controlled manufacturing, semi-manufacturing (i.e. goods that require additional processing before marketing), and non-manufacturing concerns are allowed to borrow from the domestic banking system without regulated limits.

The banks are required to ensure that total exposure to any domestic or foreign entity should not exceed 25 percent of banks’ equity with effect from December 2013.  Foreign-controlled (minimum 51 percent equity stake) semi-manufacturing concerns (i.e., those producing goods that require additional processing for consumer marketing) are permitted to borrow up to 75 percent of paid-up capital, including reserves.

For non-manufacturing concerns, local borrowing caps are set at 50 percent of paid-up capital.  While there are no restrictions on private sector access to credit instruments, few alternative instruments are available beyond commercial bank lending.  Pakistan’s domestic corporate bond, commercial paper and derivative markets remain in early stages of development.  There are a limited number of venture capitalists operating in Pakistan.

Money and Banking System

The State Bank of Pakistan (SBP) is the central bank of Pakistan.

According to the most recent statistics published by the SBP, only 23 percent of the adult population uses formal banking channels to conduct financial transactions while 24 percent are informally served by the banking sector.  The remaining 53 percent of the adult population do not use any formal financial services.

The overall financial sector has done well in Pakistan over the last few years.  The SBP’s December 2018 banking sector review noted improving asset quality, stable liquidity, robust solvency, and increased investment in the banking sector.  The asset base of the banking sector expanded by 7.3 percent during 2018.  The risk profile of the banking sector remained satisfactory because profitability and asset quality improved as the non-performing loans to gross loans (infection) rate declined to its lowest level in a decade, 8 percent, at the end of 2018.

The five largest banks, one of which is state owned, control 52.3 percent of all banking sector assets.  In 2018, total assets of the banking industry were USD 140.6 billion[1].  As of December 2018, net non-performing bank loans totaled approximately USD 785.7 million – 1.4 percent of net total loans.

The penetration of foreign banks in Pakistan is relatively low and do not account for a significant portion of the local banking industry and overall economy.  According to a study conducted by the World Bank Group in 2018, the share of foreign banks to GDP stands at 3.5 percent.  In the wake of the global financial crisis, foreign banks have scaled down their operations and businesses in Pakistan mainly due to policies to shrink operations in small and struggling markets.  Banks closing down or limiting their operations included the Royal Bank of Scotland and Citibank, which sold its consumer banking portfolio to Habib Bank Limited and restricted its operations to corporate banking.  Other foreign banks operating in Pakistan are Standard Chartered Bank, Deutsche Bank, Samba Bank, Industrial and Commercial Bank of China, Bank of Tokyo, and the newly established Bank of China.

International banks are involved in two major types of international activities: cross-border flows, and foreign participation in domestic banking systems through brick-and-mortar operations.

SBP requires that foreign banks hold at minimum USD 300 million in capital reserves at their Pakistan flagship location, and maintain at least an eight percent capital adequacy ratio.  In addition, foreign banks are required to maintain the following minimum capital requirements, which vary based on the number of branches they are operating:

  • 1 to 5 branches: USD 28 million in assigned capital;
  • 6 to 50 branches: USD 56 million in assigned capital;
  • Over 50 branches: USD 94 million in assigned capital.

Foreigners require proof of residency – a work visa, company sponsorship letter, and valid passport – to establish a bank account in Pakistan.  There are no further other restrictions to prevent foreigners from opening and operating a bank account.  However, most foreigners prefer to use a foreign bank to conduct their banking transactions.

Foreign Exchange and Remittances

Foreign Exchange

SBP maintains strict controls over the exchange rate and monitors foreign exchange transactions in the open market.  Banks are required to report and justify outflows of foreign currency.  Travelers leaving or entering Pakistan are allowed to physically carry a maximum of USD 10,000 in cash.  While cross-border payments of interest, profits, dividends, and royalties are allowed without submitting prior notification, banks are required to report loan information so SBP can verify remittances against repayment schedules.  Exchange companies are permitted to buy and sell foreign currency for individuals, banks, and other exchange companies, and can also sell foreign currency to incorporated companies to facilitate the remittance of royalty, franchise, and technical fees.  Exchange companies are playing an increasingly important role in facilitating remittances from Pakistanis working overseas.

There is no clear policy on convertibility of funds associated with investment to other global currencies.  SBP deals with such cases and opts for an ad-hoc approach on a case to case and situational basis.

The embassy has provided advocacy for U.S. companies that have struggled to repatriate their profits.  Although no formal policy bars profit repatriation, U.S. companies have faced delays in repatriation from the SBP.

The Ministry of Finance and the SBP jointly manage Pakistan’s exchange rate.  Even though the exchange rate is determined by the market, over the past few years the SBP has intervened to stabilize the exchange rate or manage its decline.  Falling foreign exchange reserves have constrained the SBP’s ability to directly intervene in the market by injecting dollars into it.

Remittance Policies

The 2001 Income Tax Ordinance of Pakistan exempts taxes on any amount of foreign currency remitted from outside Pakistan through normal banking channels.  Remittance of full capital, profits, and dividends over USD 5 million are permitted while dividends are tax-exempt.  No limits exist for dividends, remittance of profits, debt service, capital, capital gains, returns on intellectual property, or payment for imported equipment in Pakistani law.  However, large transactions that have the potential to influence Pakistan’s foreign exchange reserves require approval from the government’s Economic Coordination Committee.  Similarly, banks are required to account for outflows of foreign currency.  Investor remittances must be registered with the SBP within 30 days of execution and can only be made against a valid contract or agreement.

Sovereign Wealth Funds

Pakistan does not have its own sovereign wealth fund (SWF) and no specific exemptions for foreign SWFs exist in Pakistan’s tax law.  Foreign SWFs are taxed like any other non-resident person unless specific concessions have been granted under an applicable tax treaty to which Pakistan is a signatory.

[1] Even though the value of total assets has increased in PKR, due to devaluation of the rupee, the converted number in USD has decreased from 2017.

7. State-Owned Enterprises

The second round of the Government of Pakistan’s extensive 15-year privatization campaign came to an abrupt halt after 2006 when the Supreme Court reversed a proposed deal for the privatization of Pakistan Steel Mills, setting a precedent for future offerings.  As a result, large and inefficient state-owned enterprises (SOEs) retain monopolistic powers in a few key sectors, requiring the government to provide annual subsidies to cover SOE losses.  Three of the country’s largest SOEs include Pakistan Railways (PR), Pakistan International Airlines (PIA), and Pakistan Steel Mills (PSM).  According to the IMF, the total debt of SOEs now amounts to 3.6 percent of GDP (almost USD 10 billion) in 2018.

There are 197 SOEs in the power, oil and gas, banking and finance, insurance, and transportation sectors.  Some are profitable; others suffer losses.  They provide stable employment and other benefits for more than 420,000 workers.  According to the IMF, in 2018, Pakistan’s total debts and liabilities for SOEs exceeded PKR 1.2 trillion (USD 10 billion), or 3.6 percent of GDP – a 22 percent increase since 2016, but roughly the same since 2017.  Some SOEs have governing boards, but they are not effective.

The following links provides details of the Government of Pakistan’s privatized transactions over the past 18 years since 1991.  http://privatisation.gov.pk/?page_id=125 

SOEs competing in the domestic market receive non-market based advantages from the host government.  Two examples include PIA and PSM, which are operating at loss, but the Government of Pakistan continues to provide them with financial bailout packages.  The embassy is not aware of any negative impact to the U.S firms in this regard.

PR is the only provider of rail services in Pakistan and the largest public sector employer, with approximately 90,000 employees.  PR’s freight traffic has declined by over 75 percent since 1970 and only about 250 of PR’s 458 locomotives are serviceable.  PR has attempted to recapture the market share previously ceded to the trucking industry, and in 2016, the company purchased 55 new locomotives from GE for its freight operations.  PR has received commitments for USD 8.2 billion in CPEC loans and grants to modernize its mail rail lines.  PR relies on monthly government subsidies of approximately USD 2.8 million to cover its ongoing obligations.  In FY2018, government payments to PR totaled approximately USD 321 million.  Pakistan no longer intends to privatize PR, and the Privatization Commission has removed it from the list of SOEs identified for privatization.

Even though the government is still publicly committed to privatizing its national airline, the process has been stalled since early 2016 when three labor union members were killed during a violent protest of the government’s decision to convert PIA into a limited company.  The move would have allowed shares to be transferred to a non-government entity and pave the way for privatization.  The legislature eventually passed a bill, but it requires that the Pakistan government retain 51 percent equity in the airline in the event it is privatized, reducing the attractiveness of the company to potential investors.  In 2018, the Government of Pakistan extended bailout packages worth USD 300 million to PIA.

Established to avoid importing foreign steel, PSM has accumulated losses of approximately USD 3.77 billion per annum.  The company loses USD 5 million a week, and has not produced steel since June 2015, when the national gas company cut power supplies due to over USD 340 million in outstanding bills.  Like PIA, the government attempted to privatize PSM under the IMF program but was stymied by domestic and political opposition.  The government is reportedly considering leasing or selling a portion of PSM’s 19,000 acres, coupled with a basket of incentives that would provide for a 10-year tax holiday and duty-free import of any machinery and equipment upgrades to potential leases.

The Securities and Exchange Commission of Pakistan (SECP) introduced corporate social responsibility (CSR) voluntary guidelines in 2013, though adherence to the OECD guidelines is not known.

Privatization Program

Terms to purchase public shares of SOEs and financial institutions for both foreign and local investors are the same.  Under the 2013 IMF EFF program, the government identified 31 SOEs for either partial or total privatization.  In 2015, the government successfully offloaded stakes in several banks and publicly traded firms, and in 2016 sold its 40 percent stakes in PSE.  However, due to significant political resistance, the government postponed plans to privatize its largest and most inefficient SOEs, namely PIA, PSM, and several power generation and distribution companies.

Eight SOEs from the banking, energy, mining, and hospitality sectors are scheduled to be privatized by the end of 2019.  Foreign investors can participate after following guidelines established by the Privatization Commission.

The Privatization Commission (PC) claims the privatization process to be a transparent, easy to understand, and non-discriminatory 17 step process, available on its website: http://privatisation.gov.pk/?page_id=88 

8. Responsible Business Conduct

There is no unified set of standards defining responsible business conduct in Pakistan.  Though large companies, especially multi-national corporations, have an awareness of responsible business conduct standards, there is a lack of wider awareness.  The Pakistani government has not established standards or strategic documents specifically defining responsible business conduct standards and goals.  The Ministry of Human Rights published its most recent “Action Plan for Human Rights” in May 2017.  Although it does not specifically address responsible business conduct or business and human rights, one of its six thematic areas of focus is implementation of international and UN treaties.  Pakistan is signatory to nearly all International Labor Organization (ILO) conventions.

In late 2016 and early 2017, a series of explosions and a fire, occurred at the Gadani shipbreaking yards in Balochistan.  The incidents underscored the lack of safety and environmental standards in the industry.  The Prime Minister’s office launched a probe into the 2016 explosion and concluded that negligence by ship owners and government officials caused the incident.  The government suspended officials found guilty of negligence, and announced that families of the incident’s victims would receive compensation.  A subsequent January 2017 fire prompted officials to halt the scrapping of oil and liquid petroleum gas tankers at the shipyard.

International organization, civil society, NGO, and labor union contacts all note that there is a lack of adequate implementation and enforcement of labor laws.  Some NGOs, worker organizations, and business associations are working to promote responsible business conduct, but not on a wide scale.

Pakistan does not have domestic measures requiring supply chain due diligence for companies sourcing minerals originating from conflict-affected areas and does not participate in the Extractive Industries Transparency Initiative and/or the Voluntary Principles on Security and Human Rights.

9. Corruption

Pakistan was ranked 117 out of 180 countries on Transparency International’s 2018 Corruption Perceptions Index.  Following the institution of the 18th Amendment, corruption at the provincial level has increased, according to Transparency International.  The organization noted that corruption problems persist due to the lack of accountability and enforcement of penalties, followed by the lack of merit-based promotion, and relatively low salaries.

Bribes are criminal acts punishable by law but exist at all levels of government.  Although high courts are widely viewed as more credible, lower courts are often considered corrupt, inefficient, and subject to pressure from prominent wealthy, religious, and political figures.  Political involvement in judicial appointments increases the government’s influence over the court system.

NAB, Pakistan’s anti-corruption organization, suffers from insufficient funding and staffing.  Like NAB, the CCP’s mandate also includes anti-corruption authorities, but its effectiveness is also hindered by resource constraints.

Resources to Report Corruption

Justice (R) Javed Iqbal
Chairman
National Accountability Bureau
Ataturk Avenue, G-5/2, Islamabad
+92-51-111-622-622
chairman@nab.gov.pk

Sohail Muzaffar
Chairman
Transparency International
5-C, 2nd Floor, Khayaban-e-Ittehad, Phase VII, D.H.A., Karachi
+92-21-35390408-9
pakistan@gmail.com

10. Political and Security Environment

Despite improvements to the security situation in recent years, the presence of foreign and domestic terrorist groups within Pakistan continues to pose a significant danger to U.S. interests and citizens.  Terrorists may attack with little or no warning, targeting transportation hubs, markets, shopping malls, military installations, airports, universities, tourist locations, schools, hospitals, places of worship, and government facilities.  The embassies of many countries, including the United States, United Kingdom, Canada, Australia, and New Zealand, have issued travel advisories regarding travel to Pakistan, and many multinational companies operating in Pakistan employ private security and risk management firms to mitigate the significant threats to their business operations.  Even with improvements in the security situation, terrorist attacks remain frequent in Pakistan.  Despite high levels of violence in Karachi, carried out by criminal gangs with alleged political affiliations, targeted killings have largely declined since Pakistan’s paramilitary Rangers began an intensive campaign of operations in 2013 to counter violent crime.

The BOI, in collaboration with Provincial Investment Promotion Agencies, has coordinated airport-to-airport security and secure lodging for foreign investors.  To inquire about this service, investors can contact the BOI for additional information.

The embassy is not aware of any damage to projects and/or installations.  Abductions/kidnappings of foreigners for ransom remains a concern.

While security challenges exist in Pakistan, the country has not grown increasingly politicized or insecure in the past year.

11. Labor Policies and Practices

Pakistan has a complex system of labor laws.  Due to the 18th Amendment to the Constitution, the provinces manage jurisdiction over labor matters.  Each province is in the process of developing its own labor law regime, and the provinces are at different stages of labor law development.

In the Islamabad Capital Territory and provinces of Khyber Pakhtunkhwa and Sindh, the minimum wage for unskilled workers is PKR 15,000 per month (USD 106).  In Punjab, it is PKR 16,500 per month (USD 118), while in Baluchistan PKR 14,000 per month (USD 100).  Legal protections for laborers are also uneven across provinces, and implementation of labor laws is weak nationwide.  Lahore inspectorates have inadequate resources, which lead to inadequate frequency and quality of labor inspections.  On January 23, 2019, the Punjab Provincial Assembly passed the Punjab Domestic Workers Act 2019.  The law prohibits the employment of children under age 15 as domestic workers, and stipulates that children between 15 and 18 may only perform part-time, non-hazardous household work.  The law also mandates a series of protections and benefits, including limits to the number of hours worked weekly, and paid sick and holiday leave.  On January 25, 2017, the Sindh Provincial Assembly passed the Sindh Prohibition of Employment of Children Act, 2017.  The Senate passed the Domestic Workers (Employment Rights) Act in March 2016 (http://www.senate.gov.pk/uploads/documents/1390294147_766.pdf ), but the bill has not progressed in the National Assembly.  An amendment to the federal Employment of Children Act, 1991, which would raise the minimum age of employment to sixteen, has been pending in the National Assembly since January 2016.

According to Pakistan’s most recent labor force survey (conducted 2017-2018), the civilian workforce consists of approximately 65.5 million workers.  Women are extremely under-represented in the labor force.  The survey estimated overall labor participation at approximately 45 percent, with male participation at 68 percent and female participation at 20 percent.  The largest percentage of the labor force works in the agricultural sector (38.5 percent), followed by the services (38 percent), and industry/manufacturing (16 percent) sectors.  The official unemployment rate continued to hover at around 6 percent, but the figure is likely significantly higher for youth.  In 2018, the UN Population Fund estimated that 29 percent of Pakistan’s population was between the ages of 10 and 24 and according to 2017-18 labor force survey estimates unemployment for 15 to 24 year old was 10.5 percent.

Pakistan is a labor exporter, particularly to Gulf Cooperation Council (GCC) countries.  According to Pakistan’s Bureau of Emigration and Overseas Employment’s 2018 “Export of Manpower Analysis,” the bureau had registered more than 10.5 million Pakistanis going abroad for employment since 1971, with more than 96 percent traveling to GCC countries.  Pakistanis working overseas sent more than USD 19 billion in remittances each year between 2015 and 2018.

Pakistani government contacts say their workforce is insufficiently skilled.  Federal and provincial government initiatives such as the National Vocational and Technical Training Commission and the Punjab government’s Technical Education and Vocational Training Authority aim to increase the employability of the Pakistani workforce.  However, the ILO’s 2016-2020 Pakistan Decent Work Country Programme notes that “Neither a comprehensive national policy nor coherent provincial policies for skills and entrepreneurship development are being applied.”

The ILO’s 2016-2020 Pakistan Decent Work Country Program notes that “a small fraction of vulnerable workers are covered by social security in one form or another, while access to comprehensive social protection systems is also limited.”  The ILO’s 2014 Decent Work Country Profile states that in 2013, only 9.4 percent of the economically active population – excluding public sector employees – were contributing to formal social security systems such as old age, survivors’, and disability pensions.

Freedom of association is guaranteed under article 17 of Pakistan’s constitution.  However, the ILO indicates that the Pakistani state and employers have used “disabling legislation and repressive tactics” to make union formation and collective bargaining “extremely difficult.”  The Pakistan Institute of Labour Education and Research in its 2015 “Status of Labour Rights in Pakistan” noted that according to non-official data, there were 949 registered trade unions with a total membership of 1,865,141 – approximately four percent of the total estimated labor force.  Provincial labor departments are responsible for managing trade union and industrial labor disputes.  Each province has its own industrial relations legislation, and each has labor courts to adjudicate disputes.  Public sector workers, such as teachers and public health workers, have spearheaded recent strikes.

The ILO’s 2016-2020 Pakistan Decent Work Country Programme states that “exploitative labour practices in the form of child and bonded labour remain pervasive…” and notes “the absence of reliable and comprehensive data to accurately assess the situation of hazardous child labour, worst forms of child labour, or forced labour.”  The report also identifies weak compliance with, and enforcement of, labor laws and regulations as contributing to poor working conditions – including unhealthy and unsafe workplaces –and the erosion of worker rights.

The Balochistan government, in collaboration with ILO, supported tripartite consultations regarding the Balochistan Prohibition of Employment of Children Bill.  The draft legislation prohibits employment of children in 39 worst forms of labor or hazardous labor, including domestic labor.  Negotiations were ongoing as of March 2018, and NGO and international organization contacts said they expected the Provincial Assembly to enact the law in 2018.

Pakistan is a Generalized System of Preferences beneficiary, which requires labor standards to be upheld.

12. OPIC and Other Investment Insurance Programs

The Overseas Private Investment Corporation (OPIC) maintains an active portfolio of projects worth USD 352.7 million in Pakistan, including new investments in microfinance and hospital care in rural Pakistan.

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy

Host Country Statistical Source* USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount  
Host Country Gross Domestic Product (GDP) ($M USD) 2018 $299,099 2017 $304,952 https://data.worldbank.org/country/pakistan 
Foreign Direct Investment Host Country Statistical source* USG or international statistical source USG or international Source of data:  BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) 2018 $136 2017 $518 BEA data available at https://www.bea.gov/international/direct-investment-and-multinational-enterprises-comprehensive-data 
Host country’s FDI in the United States ($M USD, stock positions) 2018 $27 2017 $224 BEA data available at https://www.bea.gov/international/direct-investment-and-multinational-enterprises-comprehensive-data 
Total inbound stock of FDI as % host GDP 2018 1.3% 2017 14.1% UNCTAD data available at https://unctad.org/en/Pages/DIAE/World%20Investment%20Report/Country-Fact-Sheets.aspx 

* Source for Host Country Data: All host country statistical data used from State Bank of Pakistan which publishes data on a monthly basis.


Table 3: Sources and Destination of FDI

Direct Investment From/in Counterpart Economy Data
From Top Five Sources/To Top Five Destinations (US Dollars, Millions)
Inward Direct Investment Outward Direct Investment
Total Inward $42,447 100% Total Outward $1,928 100%
United Kingdom $12,378 29.2% United Arab Emirates $487 25.3%
Switzerland $6,221 14.7% Bangladesh $211 10.9%
Netherlands $3,891 9.2% United Kingdom $184 9.5%
China,P.R. Mainland $2,972 7% Bahrain $145 7.5%
Japan $2,065 4.9% Kenya $80 4.1%
“0” reflects amounts rounded to +/- USD 500,000.


Table 4: Sources of Portfolio Investment

Portfolio Investment Assets
Top Five Partners (Millions, US Dollars)
Total Equity Securities Total Debt Securities
All Countries $462.5 100% All Countries $151.8 100% All Countries $310.7 100%
Saudi Arabia $126.6 27.4% Saudi Arabia $121.2 79.8% UAE $107.9 34.7%
UAE $108.5 23.5% United Kingdom $10.1 6.6% USA $71.2 22.9%
USA $78.1 16.9% British Virgin Islands $9.6 6.3% Indonesia $39.4 12.7%
Indonesia $39.4 8.5% USA $6.9 4.5% Oman $26.6 8.6%
Oman $26.6 5.8% Luxemburg $1.03 0.68% Qatar $14.8 4.8%

14. Contact for More Information

Christopher Elms
Economic Officer
U.S. Embassy Islamabad
Diplomatic Enclave, Ramna 5
Islamabad, Pakistan
Phone: (+92) 051-201-4000
Email: ElmsC@state.gov