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Australia

Executive Summary

Australia is generally welcoming to foreign investment, which is widely considered to be an essential contributor to Australia’s economic growth and productivity. The United States is by far the largest source of foreign direct investment (FDI) for Australia. According to the U.S. Bureau of Economic Analysis, the stock of U.S. FDI totaled USD 170 billion in January 2020. The Australia-United States Free Trade Agreement, which entered into force in 2005, establishes higher thresholds for screening U.S. investment for most classes of direct investment. While welcoming toward FDI, Australia does apply a “national interest” test to qualifying investment through its Foreign Investment Review Board screening process.

Various changes to Australia’s foreign investment rules, primarily aimed at strengthening national security, have been made in recent years. This continued in 2020 with the passage of the Foreign Investment Reform (Protecting Australia’s National Security) Act 2020, which broadens the classes of foreign investments that require screening, with a particular focus on defense and national security supply chains. All foreign investments in these industries now require screening, regardless of their value or national origin. The Foreign Investment Reform legislation commenced in January 2021. Despite the increased focus on foreign investment screening, the rejection rate for proposed investments has remained low and there have been no cases of investment from the United States having been rejected in recent years, although some U.S. companies have reported greater scrutiny of their investments in Australia.

In response to a perceived lack of fairness, the Australian government has tightened anti-tax avoidance legislation targeting multi-national corporations with operations in multiple tax jurisdictions. While some laws have been complementary to international efforts to address tax avoidance schemes and the use of low-tax countries or tax havens, Australia has also gone further than the international community in some areas.

Australia has increased funding for clean technology projects and both local and international companies can apply for grants to implement emission-saving equipment to their operations. Australia adopted a net-zero emissions target at the national level in November 2021 although made no change to its short-term goal of a 26-28 percent emission reduction by 2030 on 2005 levels. Australia’s eight states and territories have adopted both net-zero targets and a range of interim emission reduction targets set above the federal target. Various state incentive schemes may also be available to U.S. investors.

The Australian government is strongly focused on economic recovery from the COVID-driven recession Australia experienced in 2020, the country’s first in three decades. In addition to direct stimulus and business investment incentives, it has announced investment attraction incentives across a range of priority industries, including food and beverage manufacturing, medical products, clean energy, defense, space, and critical minerals processing. U.S. involvement and investment in these fields is welcomed.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 18 of 179 http://www.transparency.org/
research/cpi/overview
Global Innovation Index 2021 25 of 132 https://www.globalinnovationindex.org/
analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 USD 170 billion https://www.bea.gov/data/
intl-trade-investment/direct-investment-
country-and-industry
 
World Bank GNI per capita 2020 USD 53,690 http://data.worldbank.org/indicator/
NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

7. State-Owned Enterprises

In Australia, the term used for a Commonwealth Government State-Owned Enterprise (SOE) is “government business enterprise” (GBE). According to the Department of Finance, there are nine GBEs: two corporate Commonwealth entities and seven Commonwealth companies. (See: https://www.finance.gov.au/resource-management/governance/gbe/ ) Private enterprises are generally allowed to compete with public enterprises under the same terms and conditions with respect to markets, credit, and other business operations, such as licenses and supplies. Public enterprises are not generally accorded material advantages in Australia. Remaining GBEs do not exercise power in a manner that discriminates against or unfairly burdens foreign investors or foreign-owned enterprises.

8. Responsible Business Conduct

There is general business awareness and promotion of responsible business conduct (RBC) in Australia. The Commonwealth Government states that companies operating in Australia and Australian companies operating overseas are expected to act in accordance with the principles set out in the OECD Guidelines for Multinational Enterprises and to perform to the standards they suggest. In seeking to promote the OECD Guidelines, the Commonwealth Government maintains a National Contact Point (NCP), the current NCP being currently the General Manager of the Foreign Investment and Trade Policy Division at the Commonwealth Treasury, who is able to draw on expertise from other government agencies through an informal inter-governmental network. An NCP Web site links to the “OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas” noting that the objective is to help companies respect human rights and avoid contributing to conflict through their mineral sourcing practices. The Commonwealth Government’s export credit agency, EFA, also promotes the OECD Guidelines as the key set of recommendations on responsible business conduct addressed by governments to multinational enterprises operating in or from adhering countries.

Australian companies have very few instances of human rights or labor rights abuses and domestic law prohibits such actions. In 2018 the Australian parliament passed the Modern Slavery Act, new legislation requiring large companies to assess risks of modern slavery in their supply chains and take action to limit these risks.

Australia began implementing the principles of the Extractive Industries Transparency Initiative (EITI) in 2016.

Australia has ratified the Montreux Document on Private Military and Security Companies, and was a founding member of the International Code of Conduct for Private Security Service Providers Association.

9. Corruption

Australia maintains a comprehensive system of laws and regulations designed to counter corruption. In addition, the government procurement system is generally transparent and well regulated. Corruption has not been a factor cited by U.S. businesses as a disincentive to investing in Australia, nor to exporting goods and services to Australia. Non-governmental organizations interested in monitoring the global development or anti-corruption measures, including Transparency International, operate freely in Australia, and Australia is perceived internationally as having low corruption levels.

Australia is an active participant in international efforts to end the bribery of foreign officials. Legislation exists to give effect to the anti-bribery convention stemming from the OECD 1996 Ministerial Commitment to Criminalize Transnational Bribery. Legislation explicitly disallows tax deductions for bribes of foreign officials. At the Commonwealth level, enforcement of anti-corruption laws and regulations is the responsibility of the Attorney General’s Department.

The Attorney-General’s Department plays an active role in combating corruption through developing domestic policy on anti-corruption and engagement in a range of international anti-corruption forums. These include the G20 Anti-Corruption Working Group, APEC Anti-Corruption and Transparency Working Group, and the United Nations Convention against Corruption Working Groups. Australia is a member of the OECD Working Group on Bribery and a party to the key international conventions concerned with combating foreign bribery, including the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (Anti-Bribery Convention).

The legislation covering bribery of foreign officials is the Criminal Code Act 1995. Under Australian law, it is an offense to bribe a foreign public official, even if a bribe may be seen to be customary, necessary, or required. The maximum penalty for an individual is 10 years imprisonment and/or a fine of AUD 2. million (approximately USD 1.6 million). For a corporate entity, the maximum penalty is the greatest of: 1) AUD 22.2 million (approximately USD 16.4 million); 2) three times the value of the benefits obtained; or 3) 10 percent of the previous 12-month turnover of the company concerned.

A number of national and state-level agencies exist to combat corruption of public officials and ensure transparency and probity in government systems. The Australian Commission for Law Enforcement Integrity (ACLEI) has the mandate to prevent, detect, and investigate serious and systemic corruption issues in the Australian Crime Commission, the Australian Customs and Border Protection Service, the Australian Federal Police, the Australian Transaction Reports and Analysis Center, the CrimTrac Agency, and prescribed aspects of the Department of Agriculture.

Various independent commissions exist at the state level to investigate instances of corruption. Details of these bodies are provided below.

UN Anticorruption Convention, OECD Convention on Combatting Bribery

Australia has signed and ratified the United Nations Convention against Corruption and is a signatory to the OECD Anti-Bribery Convention.

Resources to Report Corruption

Western Australia – Corruption and Crime Commission
86 St Georges Terrace
Perth, Western Australia
Tel. +61 8 9215 4888
https://www.ccc.wa.gov.au/ 

Queensland – Corruption and Crime Commission
Level 2, North Tower Green Square
515 St Pauls Terrace
Fortitude Valley, Queensland
Tel. +61 7 3360 6060
https://www.ccc.qld.gov.au/ 

Victoria – Independent Broad-based Anti-corruption Commission
Level 1, North Tower, 459 Collins Street
Melbourne, Victoria
Tel. +61 1300 735 135
https://ibac.vic.gov.au 

New South Wales – Independent Commission against Corruption
Level 7, 255 Elizabeth Street
Sydney NSW 2000
Tel. +61 2 8281 5999
https://www.icac.nsw.gov.au/ 

South Australia – Independent Commission against Corruption
Level 1, 55 Currie Street
Adelaide, South Australia
Tel. +61 8 8463 5173
https://icac.sa.gov.au 

10. Political and Security Environment

Political protests (including rallies, demonstrations, marches, public conflicts between competing interests) form an integral, though generally minor, part of Australian cultural life. Such protests rarely degenerate into violence.

11. Labor Policies and Practices

Australia’s unemployment rate peaked at 7.5 percent during the COVID-19 pandemic but had fallen to 4 percent by early 2022. Average weekly earnings for full-time workers in Australia were AUD 1,748 (approximately USD 1,290) as of November 2021. The minimum wage is set annually and is significantly higher than that of the United States, currently sitting at AUD 2033 (USD 15.00). Overall wage growth has been low in recent years, growing at approximately the rate of inflation.

The Australian Government and its state and territory counterparts are active in assessing and forecasting labor skills gaps across industries. Tertiary education is subsidized by both levels of governments, and these subsidies are based in part on an assessment of the skills needed by industry. These assessments also inform immigration policy through the various working visas and associated skilled occupation lists. Occupations on these lists are updated annually based on assessment of the skills most needed by industry.

Immigration has always been an important source for skilled labor in Australia. The Department of Home Affairs publishes an annual list of occupations with skill shortages to be used by potential applicants seeking to work in Australia. The visas available to applicants, and length of stay allowed for, differ by occupation. The main working visa is the Temporary Skills Shortage visa (subclass 482). Applicants must have a nominated occupation when they apply which is applicable to their circumstances, and applications are subject to local labor market testing rules. These rules preference the hiring of Australian labor over foreign workers so long as local workers can be found to fill the advertised job.

Most Australian workplaces are governed by a system created by the Fair Work Act 2009. Enterprise bargaining takes place through collective agreements made at an enterprise level covering terms and conditions of employment. Such agreements are widely used in Australia. A Fair Work Ombudsman assists employees, employers, contractors, and the community to understand and comply with the system. The Fair Work Act 2009 establishes a set of clear rules and obligations about how this process is to occur, including rules about bargaining, the content of enterprise agreements, and how an agreement is made and approved. Unfair dismissal laws also exist to protect workers who have been unfairly fired from a job. Australia is a founding member of the International Labour Organization (ILO) and has ratified 58 of the ILO’s conventions.

Chapter 18 of the AUSFTA agreement deals with labor market issues. The chapter sets out the responsibilities of each party, including the commitment of each country to uphold its obligations as a member of the ILO and the associated ILO Declaration on Fundamental Principles and Rights at Work and its Follow-up (1998).

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) 2021 $1.33 trillion 2020 $1.50 trillion www.worldbank.org/en/country
Foreign Direct Investment Host Country Statistical source* USG or international statistical source USG or international Source of data:
BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) 2020 $170 billion 2019 $158 billion BEA data available at
https://apps.bea.gov/international/factsheet/
Host country’s FDI in the United States ($M USD, stock positions) 2020 $98 billion 2019 $112 billion BEA data available at
https://www.bea.gov/international/
direct-investment-and-multinational-enterprises
-comprehensive-data
Total inbound stock of FDI as % host GDP 2020 59% 2019 53% UNCTAD data available at
https://stats.unctad.org/handbook/
EconomicTrends/Fdi.html   

* Source for Host Country Data: Australian Bureau of Statistics

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 790,655 100% Total Outward 627,680 100%
USA 151,171 19% USA 127,563 20%
Japan 101,508 13% UK 103,597 17%
UK 95,093 12% New Zealand 55,338 9%
Netherlands 40,660 5% Canada 26,500 4%
Canada 35,554 4% Singapore 13,934 2%
“0” reflects amounts rounded to +/- USD 500,000.

14. Contact for More Information

Economic Counselor Doug Sonnek
U.S. Embassy Canberra
21 Moonah Place, Yarralumla, ACT+61 2 6214 5759
SonnekDE@state.gov 

Austria

Executive Summary

Austria has a well-developed market economy that welcomes foreign direct investment, particularly in technology and R&D. The country benefits from a skilled labor force, and a high standard of living, with its capital, Vienna, consistently placing at the top of global quality-of-life rankings.

With more than 50 percent of its GDP derived from exports, Austria’s economy is closely tied to other EU economies, especially that of Germany, its largest trading partner. The United States is one of Austria’s top two-way trading partners, ranking fifth in overall trade according to provisional data from 2021. The economy features a large service sector and an advanced industrial sector specialized in high-quality component parts, especially for vehicles. The agricultural sector is small but highly developed.

The COVID-19 crisis deeply affected Austria’s economy, contributing to a GDP decrease of 6.7% in 2020 with the unemployment rate increasing to a peak of 5.4% at the end of 2020. Austria’s economy rebounded with 4.5% GDP growth in 2021 and unemployment lower than before the onset of the pandemic, but forecasters recently lowered expectations to 3.8% growth for 2022 due to instability stemming from Russia’s invasion of Ukraine. At the same time, Austria is experiencing a record number of vacancies, largely stemming from a shortage of skilled labor.

The country’s location between Western European industrialized nations and growth markets in Central, Eastern, and Southeastern Europe (CESEE) has led to a high degree of economic, social, and political integration with fellow European Union (EU) member states and the CESEE.

Some 220 U.S. companies have investments in Austria, represented by around 300 subsidiaries, and many have expanded their original investment over time. U.S. Foreign Direct Investment into Austria totaled approximately EUR 11.6 billion (USD 13.7 billion) in 2020, according to the Austrian National Bank, and U.S. companies support over 16,500 jobs in Austria. Austria offers a stable and attractive climate for foreign investors.

The most positive aspects of Austria’s investment climate include:

  • Relatively high political stability;
  • Harmonious labor-management relations and low incidence of labor unrest;
  • Highly skilled workforce;
  • High levels of productivity and international competitiveness;
  • Excellent quality of life for employees and high-quality health, telecommunications, and energy infrastructure.

Negative aspects of Austria’s investment climate include:

  • A high overall tax burden;
  • A large public sector and a complex regulatory system with extensive bureaucracy;
  • Low-to-moderate innovation dynamics;
  • Low levels of digitalization;
  • Low levels of private venture capital.

Key sectors that have historically attracted significant investment in Austria:

  • Automotive;
  • Pharmaceuticals;
  • ICT and Electronics;
  • Financial.

Key issues to watch:

  • Due to a strong reliance on Russian natural gas and the third-highest banking exposure to Russia among EU Member States, Austria could be one of the hardest countries hit by sanctions against Russia. Russia’s invasion of Ukraine and sanctions are expected to cause a 0.4-0.5% decrease in Austria’s GDP. However, the impact is likely to be greater if natural gas supplies are disrupted. Austria relies on Russian imports for approximately 80% of its natural gas demand.
  • At the same time, Austria’s export-oriented economy makes it particularly sensitive to events affecting trade, which could include potential setbacks in the pandemic, particularly during the winter months. The tourism sector, which, together with hotels and restaurants, accounts for 15 percent of the country’s GDP is still struggling, currently operating at two-thirds of its pre-crisis output levels. Many companies are also struggling to find skilled labor, which is hindering the economy from reaching its full output potential.
Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 13 of 175 http://www.transparency.org/research/cpi/overview
Global Innovation Index 2021 18 of 132 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 USD 4.95 https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 USD 48,350 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

7. State-Owned Enterprises

Austria has two major wholly state-owned enterprises (SOEs): The OeBB (Austrian Federal Railways) and Asfinag (highway financing, building, maintenance, and administration). Other government industry holding companies are bundled in the government holding company OeBAG (http://www.oebag.gv.at)

The government has direct representation in the supervisory boards of its companies (commensurate with its ownership stake), and OeBAG has the authority to buy and sell company shares, as well as purchase minority stakes in strategically relevant companies. Such purchases are subject to approval from an audit committee consisting of government-nominated independent economic experts.

OeBAG holds a 53 percent stake in the Post Office, 51 percent in energy company Verbund, 33 percent in the gambling group Casinos Austria, 31.5 percent in the energy company OMV, 28 percent in the Telekom Austria Group, as well as a handful of smaller ventures. Local governments own most utilities, the Vienna International Airport, and more than half of Austria’s 270 hospitals and clinics.

Private enterprises in Austria can generally compete with public enterprises under the same terms and conditions with respect to market access, credit, and other such business operations as licenses and supplies. While most SOEs must finance themselves under terms similar to private enterprises, some large SOEs (such as OeBB) benefit from state-subsidized pension systems. As a member of the EU, Austria is also a party to the Government Procurement Agreement (GPA) of the WTO, which indirectly also covers the SOEs (since they are entities monitored by the Austrian Court of Auditors).

The five major OeBAG-controlled companies (Postal Service, Verbund AG, Casinos Austria, OMV, Telekom Austria), are listed on the Vienna Stock Exchange. Senior managers in these companies do not directly report to a minister, but to an oversight board. However, the government often appoints management and board members, who usually have strong political affiliations.

8. Responsible Business Conduct

Austrian Responsible Business Conduct (RBC)/Corporate Social Responsibility (CSR) standards are laid out in the Austrian Corporate Governance Codex, which is based on the EU Commission’s 2011 “Strategy for Corporate Social Responsibility.” The Austrian Standards Institute’s ONR 192500 acts as the main guidance for CSR and is based on the EU Commission’s published Strategy, which is also compliant with UN guidelines. Major Austrian companies follow generally accepted CSR principles and publish a CSR chapter in their annual reports; many also provide information on their health, safety, security, and environmental activities.

Austria adheres to the OECD’s Guidelines for Multinational Enterprises. The Ministry for Labor, Social Affairs, Health, and Consumer Protection is represented in national and international CSR-relevant associations and supports CSR initiatives while working closely together with the Austrian Standards Institute.

The Austrian export credit agency promotes information on CSR issues, principles and standards, including the OECD Guidelines, on its website.

https://www.oekb.at/en/oekb-group/our-claim/corporate-governance.html 

Austria is a signatory to the Montreaux Document on Private Military and Security Companies, which it ratified in 2008.

9. Corruption

Austria is a member of the Council of Europe’s Group of States against Corruption (GRECO) and also ratified the UN Convention against Corruption (UNCAC) and the OECD Anti-Bribery Convention. As part of the UNCAC ratification process, Austria has implemented a national anti-corruption strategy. Central elements of the strategy are promoting transparency in public sector decisions and raising awareness of corruption. Austria ranked 13th (out of 180 countries) in Transparency International’s latest Corruption Perceptions Index. Despite this ranking, the Group of States Against Corruption (GRECO) February 2021 report criticized Austria for only fully implementing two of 19 recommendations since the last report was issued in 2017. The criticism largely focused on a lack of transparency on lobbying, receipt of donations, and the income of Members of Parliament.

Bribery of public officials, their family members and political parties, is covered under the Austrian Criminal Code, and corruption does not significantly affect business in Austria. However, the public’s belief in the integrity of the political system was shaken by the 2019 Ibiza scandal, when a 2017 video surfaced in which Vice Chancellor and chair of the right populist Freedom Party (FPOe) Heinz Christian Strache and the FPOe floor leader in Parliament Johann Gudenus were filmed discussing providing government contracts in exchange for favors and political party donations with a woman posing as the niece of a Russian oligarch. This was compounded by further revelations in 2019 that the FPOe had allegedly promised gambling licenses to Casinos Austria in exchange for placing a party loyalist on the company’s executive board. Strache was convicted of corruption and bribery by the Vienna District Court in August 2021 following a separate health care fraud investigation. In October 2021, then-Chancellor Sebastian Kurz of the center-right People’s Party (OeVP) announced his resignation amid allegations that, while he was Foreign Minister in 2016, his inner circle paid newspapers to publish falsified opinion polls in his favor; that investigation by anti-corruption prosecutors is still ongoing. Finance Minister Bluemel (OeVP) also resigned, and prosecutors continue to investigate allegations that he may have facilitated political party donations by Casinos Austria subsidiary Novomatic, in exchange for government assistance with the company’s tax problems.

Anti-corruption cases are often characterized by slow-moving investigations and trials that drag on for years. The trial of former Finance Minister Grasser, which started in 2017, concluded in late 2020, with Grasser receiving a sentence of eight years in prison from the trial court judge. The official verdict was published in January 2022, and Grasser is expected to appeal the sentence.

Bribing members of Parliament is considered a criminal offense, and accepting a bribe is a punishable offense with the sentence varying depending on the amount of the bribe. The 2018 Austrian Federal Contracts Act implements EU guidelines prohibiting participating in public procurement contracts if there is a potential conflict of interest and requires measures to be put in place to detect and prevent such conflicts of interest. This required public authorities to set up compliance management systems or amend their existing structures accordingly. Virtually all Austrian companies have internal codes of conduct governing bribery and potential conflicts of interest.

Corruption provisions in Austria’s Criminal Code cover managers of Austrian public enterprises, civil servants, and other officials (with functions in legislation, administration, or justice on behalf of Austria, in a foreign country, or an international organization), representatives of public companies, members of parliament, government members, and mayors. The term “corruption” includes the following in the Austrian interpretation: active and passive bribery; illicit intervention; and abuse of office. Corruption can sometimes include a private manager’s fraud, embezzlement, or breach of trust.

Criminal penalties for corruption include imprisonment ranging from six months to ten years, depending on the severity of the offence. Jurisdiction for corruption investigations rests with the Austrian Federal Bureau of Anti-Corruption and covers corruption taking place both within and outside the country. The Lobbying Act of 2013 introduced binding rules of conduct for lobbying. It requires domestic and foreign organizations to register with the Austrian Ministry of Justice. Financing of political parties requires disclosure of donations exceeding EUR 2,500 (USD 2,950). No donor is allowed to give more than EUR 7,500 (USD 8,850) and total donations to one political party may not exceed EUR 750,000 (USD 885,000) in a single year. Foreigners are prohibited from making donations to political parties. Private companies are subject to the Austrian Act on Corporate Criminal Liability, which makes companies liable for active and passive criminal offences. Penalties include fines up to EUR 1.8 million (USD 2.1 million).

To date, U.S. companies have not reported any instances of corruption inhibiting FDI.

10. Political and Security Environment

Generally, civil disturbances are rare and the overall security environment in the country is considered to be safe. There have been no incidents of politically motivated damage to foreign businesses. Austria suffered a terrorist attack on November 2, 2020, when a gunman shot and killed four civilians and injured 23 in the center of Vienna.

11. Labor Policies and Practices

Austria has a well-educated and productive labor force of 4.3 million, of whom 3.8 million are employees and 500,000 are self-employed or farmers. In line with EU regulations, the free movement of labor from all member states is allowed.

The COVID-19 crisis has led to an increase in unemployment, which reached 5.4 percent in 2020, but has since returned to near-pre-crisis levels. As of February 2022, the unemployment rate was 4.9 percent, compared to 4.5 percent in 2019. At the same time, the number of people unemployed for longer than 12 months has increased by 23 percent since the start of the pandemic. The Labor Ministry is developing initiatives to reintegrate long-term unemployed in the job market and combat the current shortage of skilled labor. To combat the effects of lockdown-related business closures, the government implemented a subsidized reduced hours work program, enabling employers to reduce employees’ hours by up to 90 percent, with assistance to cover up to 80-90 percent of regular pay, which was in place until March 2022 and helped keep the unemployment rate under control.

Foreigners account for almost one-quarter of Austria’s labor force; around 840,000 foreign workers are employed in Austria. Migrant workers come largely from the CEE region, but there are also many workers who arrived during the Syrian refugee crisis who have entered the labor market. Migrant workers often occupy lower-paying jobs and make up a large percentage of workers in the tourism and healthcare sectors.

Youth unemployment is relatively low, compared to European reference countries. Austria’s successful dual-education apprenticeship system, combining on-the-job training with classroom instruction in vocational schools, has helped bring youth into the labor market. The program includes guaranteed placement by the Public Employment Service for those 15–24-year-olds who cannot find an apprenticeship. Austria and the United States signed a Memorandum of Understanding to foster cooperation on apprenticeships and workforce development in April 2022. Austria has a well-balanced labor market but, like many of its neighbors, suffers from a shortage of skilled IT personnel, particularly in the banking and financial sector. Social insurance is compulsory in Austria and is comprised of health insurance, old-age pension insurance, unemployment insurance, and accident insurance. Employers and employees contribute a percentage of total monthly earnings to a compulsory social insurance fund. Austrian laws closely regulate terms of employment, including working hours, minimum vacation time, holidays, maternity leave, statutory separation notice, severance pay, dismissal, and an option for part-time work for parents with children under the age of seven. Problematic areas include increased deficits in the pension and health insurance systems, the shortage of healthcare personnel to care for the increasing number of elderly, and escalating costs for retirement and long-term care. Due to its generous social welfare system, Austria has a high rate of employer non-wage labor costs, amounting to approximately 30 percent of gross wages. Labor laws are commonly adhered to and strictly enforced.

Labor-management relations are relatively harmonious in Austria, which traditionally enjoys a low incidence of industrial unrest. Strikes are uncommon with only two notable incidents over the past decades (2011, 2018). Additionally, all employees are automatically members of the Austrian Labor Chamber.

Collective bargaining revolves mainly around wages and fringe benefits. Approximately 90 percent of the labor force works under a collective bargaining agreement. In 2017, Austria implemented a national minimum wage of EUR 1,500 (approx. USD 1,770) per month, with monthly wages paid 14 times per year. This equates to an hourly wage of EUR 10.09 (approx. USD 11.91), placing Austria in the upper tier among European countries with a minimum wage, ahead of France, Germany and the UK.

Austrian law stipulates a 40-hour maximum workweek limit, but collective bargaining agreements also allow for a workweek of 38 or 38.5 hours per week. Firms may increase the maximum regular hours from 40 to 60 per week in special cases, with no more than 12 hours in a single day. Responsibility for agreements on flextime or reduced workweeks is at the company level. Overtime is paid at an additional 50 percent of the employee’s salary, and, in some cases, such as work on public holidays, 100 percent. Austrian employees are generally entitled to five weeks of paid vacation (and an additional week after 25 years in the workforce); the rate of absence due to illness/injury averages 13 workdays annually.

14. Contact for More Information

Andreas Lerch
Economic Specialist
U.S. Embassy Vienna, Vienna 1090, Boltzmanngasse 16
+43 1 31339-2387
lercha@state.gov

Belgium

Executive Summary

According to its most recent report, the Belgian central bank expects gross domestic product (GDP) to grow 2.6% in 2022 despite economic headwinds linked to global supply chain bottlenecks, spiking energy costs, and uncertainty related to COVID-19 and the Russian invasion of Ukraine. Experts project that Belgium’s growth rate will slow but remain above potential, dipping slightly to 2.4% in 2023 and further to 1.6% in 2024. The labor market remains strong as overall job numbers continue to increase, and analysts anticipate that the unemployment rate will decline steadily to 5.7% by 2024. The inflation rate will likely continue to increase, largely driven by rising energy prices. The Belgian central bank expects the rate to peak in 2022 at 4.9% and then decline as energy markets stabilize. Belgium’s budget deficit is projected to reach 6.3% of GDP for 2021 – down from a high of 9.1% in 2020 – and will likely remain above 4% of GDP through 2024. The level of government debt will hold steady, with most experts projecting 108.9% of GDP in 2021, 106.3% in 2022 and 107.5% in 2023.

Belgium is a major logistical hub and gateway to Europe, a position that helps drives its economic growth.  Since June 2015, the Belgian government has undertaken a series of measures to reduce the tax burden on labor and to increase Belgium’s economic competitiveness and attractiveness to foreign investment.  A July 2017 decision to lower the corporate tax rate from 35% to 25% further improved the investment climate. The current coalition government has not signaled any intention to revise this tax rate.

Belgium boasts an open market well connected to the major economies of the world. As a logistical gateway to Europe, host to major EU institutions, and a central location closely tied to the major European economies, Belgium is an attractive market and location for U.S. investors. Belgium is a highly developed, long-time economic partner of the United States that benefits from an extremely well-educated workforce, world-renowned research centers, and the infrastructure to support a broad range of economic activities

Belgium has a dynamic economy and attracts significant levels of investment in chemicals, petrochemicals, plastics and composites; environmental technologies; food processing and packaging; health technologies; information and communication; and textiles, apparel and sporting goods, among other sectors.  In 2021, Belgian exports to the U.S. market totaled $27.7 billion, registering the United States as Belgium’s fourth largest export destination.  Key exports included chemicals (37.6%), machinery and equipment (10.9%), and precious metals and stones (5.9%).  In terms of imports, the United States ranked as Belgium’s fourth largest supplier of imports, with the value of imported goods totaling $27.6 billion in 2021.  Key imports from the United States included chemicals (38.8%), machinery and equipment (11%), and plastics (10.7%).

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 18 of 180 http://www.transparency.org/
research/cpi/overview
Global Innovation Index 2021 22 of 132 https://www.globalinnovationindex.org/
analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) N/A USD Amount https://apps.bea.gov/
international/factsheet/
World Bank GNI per capita 2020 45,750USD https://data.worldbank.org/
indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

7. State-Owned Enterprises

Belgium has around 80,000 employees working in SOEs, mainly in the railways, telecoms and general utility sectors. There are also several regional-owned enterprises where the regions often have a controlling majority.  Private enterprises are allowed to compete with SOEs under the same terms and conditions, but since the EU started to liberalize network industries such as electricity, gas, water, telecoms and railways, there have been regular complaints in Belgium about unfair competition from the former state monopolists. Complaints have ranged from lower salaries (railways) to lower VAT rates (gas and electricity) to regulators with a conflict of interest (telecom). Although these complaints have now largely subsided, many of these former monopolies are now market leaders in their sector, due mainly to their ability to charge high access costs to legacy networks that were fully amortized years ago.

8. Responsible Business Conduct

The Belgian government encourages both foreign and local enterprises to follow generally accepted Corporate Social Responsibility principles such as the OECD Guidelines for Multinational Enterprises and the United Nations Guiding Principles on Business and Human Rights. The Belgian government also encourages adherence to the OECD Due Diligence guidance for responsible supply chains of minerals from conflict-affected areas.

When it comes to human rights, labor rights, consumer and environmental protection, or laws/regulations which would protect individuals from adverse business impacts, the Belgian government is generally considered to enforce domestic laws in a fair and effective manner.

There is a general awareness of corporate social responsibility among producers and consumers. Boards of directors are encouraged to pay attention to corporate social responsibility in the 2009 Belgian Code on corporate governance. This Code, also known as the ‘Code Buysse II’ stresses the importance of sound entrepreneurship, good corporate governance, an active board of directors and an advisory council. It deals with unlisted companies and is complementary to existing Belgian legislation. However, adherence to the Code Buysse II is not factored into public procurement decisions. For listed companies, far stricter guidelines apply, which are monitored by the Financial Services and Markets Authority.

Belgium is part of the Extractive Industries Transparency Initiative.  There are currently no alleged or reported human or labor rights concerns relating to responsible business conduct (RBC) that foreign businesses should be aware of. In cases of violations, the Belgian government generally enforces domestic laws effectively and fairly. NGOs and unions that promote or monitor RBC can do so freely.

Department of State

Department of the Treasury

Department of Labor

9. Corruption

Belgian has extensive anti-bribery laws in place. Bribing foreign officials is a criminal offense in Belgium. Belgium has been a signatory to the OECD Anti-Bribery Convention and is a participating member of the OECD Working Group on Bribery.

Anti-bribery legislation provides for jurisdiction in certain cases over persons (foreign as well as Belgian nationals) who commit bribery offenses outside the territory of Belgium. Various limitations apply, however. For example, if the bribe recipient exercises a public function in an EU member state, Belgian prosecution may not proceed without the formal consent of the other state.

Under Belgian law bribery is considered passive if a government official or employer requests or accepts a benefit for him or herself or for somebody else in exchange for behaving in a certain way. Active bribery is defined as the proposal of a promise or benefit in exchange for undertaking a specific action.

Corruption by public officials carries heavy fines and/or imprisonment between 5 (five) and 10 years. Private individuals face similar fines and slightly shorter prison terms (between six months and two years). The current law not only holds individuals accountable, but also the company for which they work. Recent court cases in Belgium suggest that corruption is most prevalent in government procurement and public works contracting.  American companies have not, however, identified corruption as a barrier to investment.

The responsibility for enforcing corruption laws is shared by the Ministry of Justice through investigating magistrates of the courts, and the Ministry of the Interior through the Belgian federal police, which has jurisdiction over all criminal cases. A special unit, the Central Service for Combating Corruption, has been created for enforcement purposes but continues to lack the necessary staff. Belgium is also an active participant in the Global Forum on Asset Recovery.

The Belgian Employers Federation encourages its members to establish internal codes of conduct aimed at prohibiting bribery. To date, U.S. firms have not identified corruption as an obstacle to FDI.

UN Anticorruption Convention, OECD Convention on Combatting Bribery

10. Political and Security Environment

Belgium is a peaceful, democratic nation comprised of federal, regional, and municipal political units: the Belgian federal government, the regional governments of Flanders, Wallonia, the Brussels-Capital region, and communes (municipalities). Political divisions do exist between the Flemish and the Walloons, but they are addressed in democratic institutions and generally resolved through compromise. The Federal Council of Ministers, headed by the prime minister, remains in office as long as it retains the confidence of the lower house (Chamber of Representatives) of the bicameral parliament.

In 2021, a seven-year-long investigation into an attempted sabotage of the Doel nuclear power plant – perpetrated in 2014 – ended inconclusively in 2021. Investigators concluded that the incident was likely carried out by a plant employee or subcontractor who had a legitimate reason to be in the area where the sabotage occurred.

11. Labor Policies and Practices

The Belgian labor force is generally well trained, highly motivated and very productive. Workers have an excellent command of foreign languages, particularly in Flanders. There is a low unemployment rate among skilled workers. EU Enlargement facilitated the entry of skilled workers into Belgium from newer member states. Non-EU nationals must apply for work permits before they can be employed. Minimum wages vary according to the age and responsibility level of the employee and are adjusted for the cost of living.

Belgian workers are highly unionized and usually enjoy good salaries and benefits. Belgian wage and social security contributions, along with those in Germany, are among the highest in Western Europe. For 2019, Belgium’s harmonized unemployment figure was 5.4 percent, below the EU28 average of 6.4 percent (OECD). High wage levels and pockets of high unemployment coexist, reflecting both strong productivity in new technology sector investments and weak skills of Belgium’s long-term unemployed, whose overall education level is significantly lower than that of the general population. There are also significant differences in regional unemployment levels (2019 figures): 3.3 percent in Flanders, against 7.2 percent in Wallonia and 12.7 percent in Brussels.  At the same time, shortages exist, mainly of workers with a degree in the sciences, mathematics, ICT, and engineering.

Given the nature of the informal economy, relatively few reliable figures are available. However, according to the IMF, the importance of the Belgian informal sector stood at around 17% of GDP at the end of 2015. This relatively high percentage can be attributed mainly to the high Belgian personal income tax rates that often make it financially worthwhile to avoid the payment of such taxes through formalized employers. The Belgian Central Bank states the informal economy is mainly based in the construction, catering, and household services sectors.

Belgian’s comprehensive social security package is composed of five major elements: family allowance, unemployment insurance, retirement, medical benefits and a sick leave program that guarantees salary in event of illness. Currently, average employer payments to the social security system stand at 25 percent of salary while employee contributions comprise 13 percent. In addition, many private companies offer supplemental programs for medical benefits and retirement.

Belgian labor unions, while maintaining a national superstructure, are, in effect, divided along linguistic lines. The two main confederations, the Confederation of Christian Unions and the General Labor Federation of Belgium exert a strong influence in the country, politically and socially. A national bargaining process covers inter-professional agreements that the trade union confederations negotiate biennially with the government and the employers’ associations. In addition to these negotiations, bargaining on wages and working conditions takes place in the various industrial sectors and at the plant level. About 51 percent of employees from the public service and private sector are labor union members. Wage negotiations in Belgium often lead to large manifestations and strikes, which sometimes force public transport and major roads to close temporarily.

Firing a Belgian employee can be very expensive. An employee may be dismissed immediately for cause, such an illegal activity, but when a reduction in force occurs, the procedure is far more complicated. In those instances where the employer and employee cannot agree on the amount of severance pay or indemnity, the case is referred to the labor courts for a decision. To avoid these complications, some firms include a “trial period” (of up to one year) in any employer-employee contract. Belgium is a strict adherent to ILO labor conventions.

Belgium was one of the first countries in the EU to harmonize its legislation with the EU Works Council Directive of December 1994. Its flexible approach to the consultation and information requirements specified in the Directive compares favorably with that of other EU member states.

In 2015, the Belgian government increased the retirement age from the current age of 65 to 66 as of 2027 and 67 as of 2030.  Under the 2015 retirement plan, various schemes for early retirement before the age of 65 will be gradually phased out, and unemployment benefits will decrease over time as an incentive for the unemployed to regain employment.

Wage increases are negotiated by sector within the parameters set by automatic wage indexation and the 1996 Law on Competitiveness. The purpose of automatic wage indexation is to establish a bottom margin that protects employees against inflation: for every increase in consumer price index above 2 percent, wages must be increased by (at least) 2 percent as well. The top margin is determined by the competitiveness law, which requires the Central Economic Council (CCE) to study wage projections in neighboring countries and make a recommendation on the maximum margin that will ensure Belgian competitiveness. The CCE is made up of civil society organizations, primarily representatives from employer and employee organizations, and its mission is to promote a socio-economic compromise in Belgium by providing informed recommendations to the government. The CCE’s projected increases in neighboring countries have historically been higher than their real increases, however, and have caused Belgium’s wages to increase more rapidly than its neighbors. Since 2016 however, that wage gap has decreased substantially.

Belgian labor law provides for dispute settlement procedures, with the labor minister appointing an official as mediator between the employers and employee representatives.

In February 2022, the federal government reached an agreement on a plan to reform aspects of the labor market, including the introduction of a voluntary four-day work week, relaxed rules allowing employees to work longer into the night (8:00 p.m. – 12:00 a.m.) and the right to “disconnect,” a privilege already afforded to civil servants who are no longer obliged to respond to work-related messages during off-hours.

14. Contact for More Information

Pieter-Jan VAN STEENKISTE
Economic Specialist
Regentlaan, 27 – BE1000 Brussels
0032 475 706 529
vansteenkistepj@state.gov

Canada

Executive Summary

Canada and the United States have one of the largest and most comprehensive investment relationships in the world. U.S. investors are attracted to Canada’s strong economic fundamentals, proximity to the U.S. market, highly skilled work force, and abundant resources.  Canada encourages foreign direct investment (FDI) by promoting stability, global market access, and infrastructure. The United States is Canada’s largest investor, accounting for 44 percent of total FDI. As of 2020, the amount of U.S. FDI totaled USD 422 billion, a 5 percent increase from the previous year. Canada’s FDI stock in the United States totaled USD 570 billion, a 15 percent increase from the previous year.

Canada attracted USD 61 billion inward FDI flows in 2021 (the highest since 2007), a rebound from COVID-19-related decreases in 2020 according to Canada’s national statistical office.

The United States-Mexico-Canada Agreement (USMCA) came into force on July 1, 2020, replacing the North American Free Trade Agreement (NAFTA). The USMCA supports a strong investment framework beneficial to U.S. investors. Foreign investment in Canada is regulated by the Investment Canada Act (ICA). The purpose of the ICA is to review significant foreign investments to ensure they provide an economic net benefit and do not harm national security. In March 2021, the Canadian government announced revised ICA foreign investment screening guidelines that include additional national security considerations such as sensitive technology areas, critical minerals, and sensitive personal data. The guidelines followed an April 2020 ICA update, which provides for greater scrutiny of foreign investments by state-owned investors, as well as investments involving the supply of critical goods and services.

Despite a generally welcoming foreign investment environment, Canada maintains investment stifling prohibitions in the telecommunication, airline, banking, and cultural sectors. The 2022 budget proposal included language that could limit foreign ownership of real estate for a two-year period (to cool an overheated market and lack of housing for Canadians). Ownership and corporate board restrictions prevent significant foreign telecommunication and aviation investment, and there are deposit acceptance limitations for foreign banks. Investments in cultural industries such as book publishing are required to be compatible with national cultural policies and be of net benefit to Canada. In addition, non-tariff barriers to trade across provinces and territories contribute to structural issues that have held back the productivity and competitiveness of Canada’s business sector.

Canada has taken steps to address the climate crisis by establishing the Canadian Net-Zero Emissions Accountability Act that enshrines in law the Government of Canada’s commitment to achieve net-zero greenhouse gas emissions by 2050 and issuing the 2030 Emissions Reduction Plan that describes the measures Canada is undertaking to reduce emissions to 40 to 45 percent below 2005 levels by 2030 and achieve net-zero emissions by 2050.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 13 of 180 http://www.transparency.org/research/cpi/overview
Global Innovation Index 2020 16 of 132 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2019 USD 402,255 https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 USD 43,580 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

8. Responsible Business Conduct

Canada defines responsible business conduct (RBC) as “Canadian companies doing business abroad responsibly in an economic, social, and environmentally sustainable manner.” The Government of Canada has publicly committed to promoting RBC and expects and encourages Canadian companies working internationally to respect human rights and all applicable laws, to meet or exceed international RBC guidelines and standards, to operate transparently and in consultation with host governments and local communities, and to conduct their activities in a socially and environmentally sustainable manner.

Canada encourages RBC by providing RBC-related guidance to the Canadian business community, including through Canadian embassies and missions abroad. Through its Fund for RBC, Global Affairs Canada provides funding to roughly 50 projects and initiatives annually. Canada also promotes RBC multilaterally through the OECD, the G7 Asia Pacific Economic Co-operation, and the Organization of American States. Canada promotes RBC through its trade and investment agreements via voluntary provisions for corporate social responsibility. Global Affairs Canada and the Canadian Trade Commissioner Service issued an Advisory to Canadian companies active abroad or with ties to Xinjiang, China in January 2021. The Advisory set clear compliance expectations for Canadian businesses with respect to forced labor and human rights involving Xinjiang.

The Canadian Ombudsperson for Responsible Enterprise is charged with receiving and reviewing claims of alleged human rights abuses involving Canadian companies foreign operations in the mining, oil and gas, and garment sectors. Contact information for making a complaint is available at: https://core-ombuds.canada.ca/core_ombuds-ocre_ombuds/index.aspx?lang=eng .

Canada is active in improving transparency and accountability in the extractive sector. The Extractive Sector Transparency Measures Act was brought into force on June 1, 2015. The Act requires extractive entities active in Canada to publicly disclose, on an annual basis, specific payments made to all governments in Canada and abroad. Canada joined the Extractive Industries Transparency Initiative (EITI) in February 2007, as a supporting country and donor. Canada’s Corporate Social Responsibility strategy, “Doing Business the Canadian Way: A Strategy to Advance Corporate Social Responsibility in Canada’s Extractive Sector Abroad” is available on the Global Affairs Canada website: http://www.international.gc.ca/trade-agreements-accords-commerciaux/topics-domaines/other-autre/csr-strat-rse.aspx?lang=eng .

A comprehensive overview of Canadian RBC information is available at: https://www.international.gc.ca/trade-agreements-accords-commerciaux/topics-domaines/other-autre/csr-rse.aspx?lang=eng#:~:text=RBC%20is%20about%20Canadian%20companies,laws%20and%20internationally%20recognized%20standards .

Canada is working toward reconciliation between Indigenous and non-Indigenous peoples including through the settlement of historical claims. The claims, made by First Nations against the Government of Canada, relate to the administration of land and other First Nation assets. As of March 2018 (the latest data provided by Canada), the Government of Canada has negotiated settlements on more than 460 specific claims. Hundreds of specific claims remain outstanding including 250 accepted for negotiation, 71 before the Specific Claims Tribunal, and 160 under review or assessment.

Additional Resources

Department of State

Department of the Treasury

Department of Labor

9. Corruption

Corruption in Canada is low and similar to that found in the United States. Corruption is not an obstacle to foreign investment. Canada is a party to the UN Convention Against Corruption, the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, and the Inter-American Convention Against Corruption.

Canada’s Criminal Code prohibits corruption, bribery, influence peddling, extortion, and abuse of office. The Corruption of Foreign Public Officials Act prohibits individuals and businesses from bribing foreign government officials to obtain influence and prohibits destruction or falsification of books and records to conceal corrupt payments. The law has extended jurisdiction that permits Canadian courts to prosecute corruption committed by Canadian companies and individuals abroad. Canada’s anti-corruption legislation is vigorously enforced, and companies and officials guilty of violating Canadian law are effectively investigated, prosecuted, and convicted of corruption-related crimes. In March 2014, Public Works and Government Services Canada (now Public Services and Procurement Canada, or PSPC) revised its Integrity Framework for government procurement to ban companies or their foreign affiliates for 10 years from winning government contracts if they have been convicted of corruption. In August 2015, the Canadian government revised the framework to allow suppliers to apply to have their ineligibility reduced to five years where the causes of conduct are addressed and no longer penalizes a supplier for the actions of an affiliate in which it was not involved. PSPC has a Code of Conduct for Procurement, which counters conflict-of-interest in awarding contracts. Canadian firms operating abroad must declare whether they or an affiliate are under charge or have been convicted under Canada’s anti-corruption laws during the past five years to receive assistance from the Trade Commissioner Service.

10. Political and Security Environment

Canada is politically stable with rare instances of civil disturbance. In January and February 2022, however, various groups of protestors occupied large parts of the downtown core of Ottawa and blocked commercial trade at several U.S.-Canada ports of entry. The initial protest movement of several hundred individuals claimed to be focused on the reversal of cross-border vaccine mandates. The movement attracted thousands of additional followers with a spectrum of political philosophies and grievances including far right extremist and anti-government groups. The protestors hindered hundreds of millions of dollars in daily two-way trade causing production slowdowns at several factories on both sides of the border. Many Ottawa residents complained of acts of harassment, desecration, and destruction by the protestors including deafening horn honking. The federal government invoked the never-before-used Emergencies Act to provide additional police powers to end the protests. Some commentators characterized the protests as a demonstration of growing politization within Canada.

11. Labor Policies and Practices

The federal government and provincial/territorial governments share jurisdiction for labor regulation and standards. Federal employees and those employed in federally regulated industries, including the railroad, airline, and banking sectors, are covered under the federally administered Canada Labor Code. Employees in other sectors are regulated by provincial labor codes. As the laws vary somewhat from one jurisdiction to another, it is advisable to contact a federal or provincial labor office for specifics, such as minimum wage and benefit requirements.

Although labor needs vary by province, Canada faces a national labor shortage in skilled trades professions such as carpenters, engineers, and electricians. Canada launched several initiatives such as the Global Skills Visa to address its skilled labor shortage, including through immigration reform, the inclusion of labor mobility provisions in free trade agreements, including the Canada-EU CETA agreement, the Temporary Foreign Worker Program (TFWP), and the International Mobility Program. The TFWP is jointly managed by Employment and Social Development Canada (ESDC) and Immigration, Refugees, and Citizenship Canada (IRCC). The International Mobility Program (IMP) primarily includes high skill/high wage professions and is not subject to a labor market impact assessment. The number of temporary foreign workers a business can employ is limited. For more information, see the TFWP website: https://www.canada.ca/en/employment-social-development/services/foreign-workers.html 

The impact of COVID-19 on the labor force has yet to be fully realized. As of February 2022, the unemployment rate was 5.5 percent, below the pre-COVID 5.7 percent reported in February 2020. Statistics indicate women and marginalized communities were disproportionately affected by job and other economic losses during the height of the pandemic. The Canadian government administered an emergency wage benefit in response to a significant increase in unemployment caused by the pandemic. Many minority groups including women and Indigenous populations have experienced notable employment gains since the depths of the pandemic.

Canadian labor unions are independent from the government. Canada has labor dispute mechanisms in place and unions practice collective bargaining. As of 2015 (the most recent year of available data), there were 776 unions in Canada. Eight of those unions – five of which were national and three international – represented 100,000 or more workers each and comprised 45 percent of all unionized workers in Canada (https://www.canada.ca/en/employment-social-development/services/collective-bargaining-data/labour-organizations.html). Less than one third of Canadian employees belonged to a union or were covered by a collective agreement as of 2015. In June 2017, Parliament repealed legislation public service unions had claimed contravened International Labor Organization conventions by limiting the number of persons who could strike.

In March 2022, 3,000 Canadian Pacific Railway workers participated in a 2-day strike and concurrent lockout over wage, benefit, and pension concerns. The parties agreed to binding arbitration following federal government mediation.

In August 2021, 9,000 Canadian border agents went on strike over pay and work conditions. The Canadian government and border agents reached a tentative agreement on a new contract following the one-day strike.

14. Contact for More Information

Economic Section
490 Sussex Drive, Ottawa, Ontario
613-688-5335

Cyprus

Executive Summary

Cyprus is the eastern-most member of the European Union (EU), situated at the crossroads of three continents – Europe, Africa, and Asia – and thus occupies a strategic place in the Eastern Mediterranean region.

The Republic of Cyprus (ROC) eagerly welcomes foreign direct investment (FDI). The ROC is a member of the eurozone. English is widely spoken. The legal system is based on UK common law. Legal and accounting services for foreign investors are highly developed. Invest Cyprus, an independent, government-funded entity, aggressively promotes investment in the traditional sectors of shipping, tourism, banking, and financial and professional services. Newer sectors for FDI include energy, film production, investment funds, education, research & development, information technology, and regional headquartering. The discovery of significant hydrocarbon deposits in Cyprus’s Exclusive Economic Zone (and in the surrounding Eastern Mediterranean region) has driven major new FDI by multinational companies in recent years.

The ROC has generally handled the pandemic effectively, mitigating its impact on investment to the greatest extent possible. As of March 2022, around 85 percent of the adult population was double-vaccinated, with many people having received a third dose. COVID case loads generally follow trends in continental Europe. COVID cases are again rising, consistent with what we are seeing elsewhere in Europe, the government has a highly effective testing regime in place and has demonstrated competence in managing the local epidemic.

The ROC has also demonstrated commitment to promoting green investments, with significant funding allocated to securing a green transition (see Section 8).

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 52 of 175 http://www.transparency.org/
research/cpi/overview
 
Global Innovation Index 2021 28 of 132 https://www.globalinnovationindex.org/
analysis-indicator
 
U.S. FDI in partner country ($M USD, historical stock positions) 2020 USD 4,900 https://apps.bea.gov/
international/factsheet/
  
World Bank GNI per capita 2020 USD 26,440 https://data.worldbank.org/
indicator/NY.GNP.PCAP.CD
   

The Government of the Republic of Cyprus is the only internationally recognized government on the island, but since 1974 the northern third of Cyprus has been administered by Turkish Cypriots. This area proclaimed itself the “Turkish Republic of Northern Cyprus” (“TRNC”) in 1983. The United States does not recognize the “TRNC” as a government, nor does any country other than Turkey. A substantial number of Turkish troops remain in the northern part of the island. A buffer zone, or “green line,” patrolled by the UN Peacekeeping Force in Cyprus (UNFICYP), separates the two parts. The Republic of Cyprus and the area administered by Turkish Cypriots are addressed separately below.

U.S. citizens can travel to the north / Turkish Cypriot area, however, additional COVID-19 measures may apply when crossing. U.S. companies can invest in the north but should be aware of legal complications and risks due to the lack of international recognition, tensions between the two communities, and isolation of the north from the eurozone. Turkish Cypriot businesses are interested in working with American companies in the fields of agriculture, hospitality, renewable energy, and retail franchising. Significant Turkish aid and investment flows to the “TRNC.” A political settlement between the communities would be a powerful catalyst for island-wide Cypriot economic growth and prosperity.

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

7. State-Owned Enterprises

REPUBLIC OF CYPRUS

The ROC maintains exclusive or majority-owned stakes in more than 40 SOEs and is making slow progress towards privatizing some of them (see sections on Privatization and OECD Guidelines on Corporate Governance of SOEs). There is no comprehensive list of all SOEs available but the most significant are the following:

  • Electricity Authority of Cyprus (EAC);
  • Cyprus Telecommunications Authority (CyTA);
  • Cyprus Sports Organization;
  • Cyprus Ports Authority;
  • Cyprus Broadcasting Corporation (CyBC);
  • Cyprus Theatrical Organization; and
  • Cyprus Agricultural Payments Organization.

These SOEs operate in a competitive environment (domestically and internationally) and are increasingly responsive to market conditions. The state-owned EAC monopoly on electricity generation and distribution ended in 2014, although competition remains difficult given the small market size and delays in implementing new market rules. As an EU Member State, Cyprus is a party to the WTO Government Procurement Agreement (GPA).

OECD Guidelines on Corporate Governance are not mandatory for ROC SOEs, although some of the larger SOEs have started adopting elements of corporate governance best practices in their operating procedures. Each of the SOEs is subject to dedicated legislation. Most are governed by a board of directors, typically appointed by the government at the start of its term, and for the duration of its term in office. SOE board chairs are typically technocrats, affiliated with the ruling party. Representatives of labor unions and minority shareholders contribute to decision making. Although they enjoy a fair amount of independence, they report to the relevant minister. SOEs are required by law to publish annual reports and submit their books to the Auditor General.

AREA ADMINISTERED BY TURKISH CYPRIOTS

In the area administrated by Turkish Cypriots, there are several “state-owned enterprises” and “semi-state-owned enterprises,” usually common utilities and essential services.

In the Turkish Cypriot administered area, the below-listed institutions are known as “public economic enterprises” (POEs), “semi-public enterprises” and “public institutions,” which aim to provide common utilities and essential services.

Some of these organizations include:

  • Turkish Cypriot Electricity Board (KIBTEK);
  • BRTK – State Television and Radio Broadcasting Corporation;
  • Cyprus Turkish News Agency;
  • Turkish Cypriot Milk Industry;
  • Cypruvex Ltd. – Citrus Facility;
  • EMU – Eastern Mediterranean Foundation Board;
  • Agricultural Products Corporation;
  • Turkish Cypriot Tobacco Products Corporation;
  • Turkish Cypriot Alcoholic Products LTD;
  • Coastal Safety and Salvage Services LTD; and
  • Turkish Cypriot Development Bank.

8. Responsible Business Conduct

REPUBLIC OF CYPRUS

In recent years, responsible business conduct (RBC) awareness among both producers and consumers is growing in Cyprus. Leading foreign and domestic enterprises tend to follow generally accepted RBC principles, and firms pursuing these practices tend to be viewed more favorably by the public. The Cyprus Stock Exchange is among the entities imposing a responsible code of conduct. Most professional associations also promote ethical business conduct among their members, including the Cyprus Bar Association, and the Institute of Certified Public Accountants of Cyprus. For example, the Cyprus Integrity Forum promotes transparency and accountability in business through its Business Integrity Forum certification program – see: https://cyprusintegrityforum.org/business-integrity-forum/ .

The ROC does not specifically adhere to OECD Guidelines for Multinational Enterprises; however, multinationals are expected to follow generally accepted RBC principles. ROC authorities have made some initial soundings considering the possibility of eventually joining the Extractive Industries Transparency Initiative (EITI – https://www.eiti.org/ ).

AREA ADMINISTERED BY TURKISH CYPRIOTS

RBC awareness has grown among both producers, consumers and business in the area administrated by Turkish Cypriots. Firms pursuing these practices tend to be viewed favorably by the public.

9. Corruption

REPUBLIC OF CYPRUS

Corruption continues to undermine growth and investment in the ROC, despite the existence of a strong-anti corruption framework. Ninety-five percent of Cypriots think the problem of corruption is widespread, compared to an average of 71 percent in the EU, according to a Eurobarometer survey on corruption conducted by the European Commission in December 2019. In the same survey, 60 percent of Cypriots said they were personally affected by corruption in their daily life, compared to an average of just 26 across the EU. Perhaps even more alarmingly, 69 percent of Cypriots said they thought the level corruption had increased in the past three years, against 42 percent in the EU, who thought the same for their countries. Cypriots put political parties at the top of their list of groups they thought perpetrated corruption (at 63 percent), followed by the healthcare system (59 percent), the police/customs (53 percent), and officials awarding public tenders (52 percent). Corruption, both in the public and private sectors, constitutes a criminal offense. Under the Constitution, the Auditor General controls all government disbursements and receipts and has the right to inspect all accounts on behalf of the Republic, and fear of the Auditor General’s scrutiny is widespread. Government officials sometimes manage procurement efforts with greater concern for the Auditor General than for getting the best outcome for the taxpayer. Private sector concerns focus on the inertia in the system, as reflected in the Auditor General’s annual reports, listing hundreds of alleged incidents of corruption and mismanagement in public administration that usually remain unpunished or unrectified.

Transparency International, the global anti-corruption watchdog, ranked Cyprus 52nd out of 180 countries in its 2021 Corruption Perception Index – from 42nd the year before. Disagreements between the Berlin-based headquarters of Transparency International and its Cypriot division in 2017 led to the dis-accreditation of the latter in 2017 and the launch of a successor organization on the island called the Cyprus Integrity Forum (contact details follow).

GAN Integrity, a business anti-corruption portal with offices in the United States and Denmark, released a report on corruption in Cyprus April 2018 noting the following: “Although Cyprus is generally free from corruption, high-profile corruption cases in recent years have highlighted the presence of corruption risks in the Cypriot banking sector, public procurement, and land administration sector. Businesses may encounter demands for irregular payments, but the government has established a strong legal framework to combat corruption and generally implements it effectively. Bribery, facilitation payments and giving or receiving gifts are criminal offenses under Cypriot law. The government has a strong anti-corruption framework and has developed effective e-governance systems (the Point of Single Contact and the e-Government Gateway project) to assist businesses.” The report can be accessed at: https://www.ganintegrity.com/portal/country-profiles/cyprus/ .

Cyprus cooperates closely with EU and other international authorities to fight corruption and provide mutual assistance in criminal investigations. Cyprus ratified the European Convention on Mutual Assistance in Criminal Matters. Cyprus also uses the foreign Tribunal Evidence Law, Chapter 12, to execute requests from other countries for obtaining evidence in Cyprus in criminal matters. Additionally, Cyprus is an active participant in the Council of Europe’s Multidisciplinary Group on Corruption. Cyprus signed and ratified the Criminal Law Convention on Corruption and has joined the Group of States against Corruption in the Council of Europe (GRECO). GRECO’s second compliance report on Cyprus, released November 17, 2020, is available at: https://www.coe.int/en/web/greco/evaluations/cyprus .

Cyprus is also a member of the UN Anticorruption Convention but it is not a member of the OECD Convention on Combating Bribery.

10. Political and Security Environment

REPUBLIC OF CYPRUS

There have been no incidents of politically-motivated damage to foreign projects and or installations since 1974. U.S. companies have not been the target of violence. There were numerous relatively peaceful protests against the ROC government following the financial crisis of March 2013 and in response to the forced conversion of deposits into equity. Since then, protests against additional austerity measures have been fairly calm.

AREA ADMINISTERED BY TURKISH CYPRIOTS

There have been no incidents of politically-motivated damage to foreign projects and or installations since 1974. U.S. companies have not been the target of violence. Protests and demonstrations, usually targeting the “government,” are commonplace. They are generally peaceful and well-regulated; however, some demonstrations result in scuffles with police or minor damage to buildings.

11. Labor Policies and Practices

REPUBLIC OF CYPRUS

As an EU country, Cyprus has robust labor standards, safeguarding the freedom of association and the right to organize and bargain collectively. The Department of Labor Inspection and other bodies effectively guard against forced labor, child labor, employment discrimination, and secure acceptable working conditions with respect to minimum wage, occupational safety and health, and hours of work. There are several social safety net programs, including unemployment insurance. There is likely some undeclared income in the ROC, as in most developed countries, but there are no indications the informal economy plays a decisive role here. Illegal migrants are sometimes used as cheap labor but this does not appear to be a systemic problem, and authorities do not hesitate to fine employers of illegal laborers.

Prior to the COVID-19 pandemic, the rate of unemployment in the ROC had been declining steadily, dropping from 16.1 percent in 2014 to 8.1 percent in Q3 2020 – at par with the Eurozone area. According to Eurostat, Cyprus has a tertiary education attainment level of 36.3 percent of the total population – well above the EU average of 26.7 percent, and one of the highest in the EU. Many of these graduates are from UK and U.S. colleges and universities, resulting in an abundant supply of English-speaking staff. Cyprus’s total labor force was estimated at 402,000 persons in 2020, broken down as follows: services, 77.8 percent; industry and construction, 19.5 percent; and agriculture, 2.7 percent. More women are joining the labor force and their percentage participation has risen from 33.4 percent in 1980 to 47.6 percent today. Applications for work permits for non-EU workers must be submitted to the Civil Registry and Migration Department by the intended employer and should be accompanied by a work contract stamped by the Ministry of Labor and Social Insurance. This ministry must certify that there are no available or adequately qualified Cypriots to carry out the work in question.

Cypriot labor law differentiates between layoffs and firing on redundancy grounds. In order to be eligible for redundancy pay, an employee must have worked in the same position for more than two years and must be laid off either due to: (a) budget constraints leading the employer to abolish the position, or (b) inability on the part of the employee to keep up with technological advances. Employees laid off by their employer are entitled to a redundancy payment depending on their length of service. Redundancy payments are equivalent to between two and four weeks of pay per year of service depending on length of service for up to 25 years, with a maximum of 75 weeks of pay or USD 64,350 (EUR 55,000) per employee, whichever is greater. Redundancy payments come out of a government fund, supported with employer and employee contributions. In addition to redundancy pay, a handful of employers, including banks and SOEs, offer severance pay to their employees, although this is not common in the private sector.

Some employers hire temporary workers or employ staff on personal contract to avoid hiring unionized labor, often offering less than the going rate under collective agreements. Similarly, some employers hire employees for a year in order to benefit from a wage subsidy of up to USD 1,290 (EUR 1,100) per month by the Human Resources Development Authority and then dismiss them as soon as the subsidy expires.

International companies are not required by law to hire union labor, but investors should be aware Cyprus tends to have strong unions in several sectors. As of March 2021, the percentage of the labor force belonging to unions was unofficially estimated at approximately 50 percent, compared to the EU average of approximately 33 percent. The unions remain vocal opponents to privatizations and general austerity measures.

ROC public sector working hours are 07:30 – 15:00, Monday to Friday.

Cyprus imposes a minimum wage for certain professions as follows (unchanged since March 2016):

  • Clerks/secretaries, sales assistants, paramedical, live-in maids/domestic helpers, school assistants/child-caregivers: USD 1,044 (EUR 870) per month, rising to USD 1,108 (EUR 924) after six months’ employment.
  • Security guards: USD 5.88 (EUR 4.90) per hour, rising to USD 6.24 (EUR 5.20) after six months’ employment.
  • Cleaning personnel: USD 5.46 (EUR 4.55) per hour, rising to USD 5.81 (EUR 4.84) after six months’ employment. Non-EU, live-in domestic servants have a separate minimum wage, set at USD 552 (EUR 460) per month, plus their room and board.

For all other professions, there is no minimum wage and wages are set by the employer and employee. Collective bargaining agreements between trade unions and employers cover most sectors of the economy. Wages set in these agreements are typically significantly higher than the legislated minimum wage. In June 2021, the Ministry of Labour initiated consultations with unions and employers to introduce a national minimum wage, but these discussions have so far been inconclusive.

Under the EU single market, EU citizens benefit from the right to free movement of workers. Employers are required to seek work visas for third-country nationals from the Civil Registry and Migration Department. The ROC caps the number of third-country nationals a company may employ. Some companies have noted seeking visas for their third-country national staff can be lengthy and cumbersome.

AREA ADMINISTERED BY TURKISH CYPRIOTS

According to the 2019-2020 Turkish Cypriot Competitiveness Report published by the Turkish Cypriot Chamber of Commerce, the greatest obstacle to doing business was an insufficiently trained workforce.

Reliable labor statistics are often difficult to obtain. The “State Planning Office” (“SPO”) estimated the total number of people employed in 2021 was 125,739. The labor force in the area administered by Turkish Cypriots has a high per capita level of university graduates, including many from U.S. and European universities, and offers an abundant supply of white-collar workers. The unemployment rate was 7.8 percent as of December 2021. Women accounted for approximately 34.9 percent of the labor force. Around 10 percent of private sector workers and more than 65 percent of “semi-public” and “public sector” workers belong to labor unions. Workers are allowed to form and become members of unions. As of February 2021, the minimum wage was USD 410 (6,090 Turkish Lira) per month.

Foreign persons are required to obtain work permits through their employer. Foreign entities may import their key personnel from abroad and are also permitted to hire trainees and part-time workers. A full-time work week is 40 hours for “public sector” employees.

Private sector employees can work up to 8 hours a day. After 8 hours, employees can continue to work up to 4 hours of overtime a day. Overtime during weekdays is paid at 110 percent of the base rate. On weekends and holidays, overtime is paid at 150 percent of the base rate. Employees cannot work on Sundays unless there is an emergency, or an approval by “labor authorities.”

Workers are able to exercise their right to bargain collectively, mainly in the public sector. “Public sector” and “semi-public sector” employees benefit from collective bargaining agreements. The “law” provides for collective bargaining.

According to “authorities,” the majority of foreign workers are from Turkey and work in the service (hotel, restaurant, catering) and construction sectors.

14. Contact for More Information

George F. Demetriou
Economic Specialist
U.S. Embassy
Metochiou & Ploutarchou Streets
2407 Engomi
Nicosia, Cyprus
Tel: +357 22 393361
Email: DemetriouGF@state.gov 

Denmark

Executive Summary

Denmark is regarded by many independent observers as one of the world’s most attractive business environments and ranks highly in indices measuring political, economic, and regulatory stability. It is a member of the European Union (EU), and Danish legislation and regulations conform to EU standards on virtually all issues. It maintains a fixed exchange rate policy, with the Danish Krone linked closely to the Euro. Denmark is a social welfare state with a thoroughly modern market economy heavily driven by trade in goods and services. Given that exports account for about 60 percent of GDP, the economic conditions of its major trading partners – the United States, Germany, Sweden, and the United Kingdom – have a substantial impact on Danish national accounts.

Denmark is a world leader in “green technology” industries, such as offshore wind and energy efficiency, and in sectors such as shipping and life sciences. Denmark is a net exporter of food. Its manufacturing sector depends on raw material imports. Within the EU, Denmark is among the strongest supporters of liberal trade policy. Transparency International regularly ranks Denmark as being perceived as the least corrupt nation in the world. Denmark is strategically situated to link continental Europe with the Nordic and Baltic countries. Transport and communications infrastructures are efficient.

The Danish economy experienced a contraction of 2.1 percent of GDP in 2020 due to COVID-19 followed by a 4.7 percent rebound in 2021, thereby weathering the pandemic with among the lowest declines in GDP in the EU. Denmark’s economic activity and employment have surpassed their pre-pandemic levels and trends, but companies across sectors cite labor shortages as a key challenge. In May 2022, the Ministry of Finance revised its GDP growth projections, forecasting 3.5 percent GDP growth in 2022, decelerating to 2 percent annual GDP growth in 2023. The Ministry projects the Danish economy will weather headwinds from the Russian invasion of Ukraine and surging energy prices, as well as elevated levels of inflation, due to its robust foundation, although economic activity will be at a slightly lower level. The Ministry anticipates the impact will mainly be through increased inflation and disruption of trade. Denmark’s underlying macroeconomic conditions, however, are healthy, and the investment climate is sound. The entrepreneurial climate, including female-led entrepreneurship, is robust.

New legislation establishing a foreign investment screening mechanism to prevent threats to national security and public order came into effect on July 1, 2021. The mechanism requires mandatory notification for investments in the following five sectors: defense, IT security and processing of classified information, companies producing dual-use items, critical technology, and critical infrastructure. It allows for voluntary notification for all sectors. The legislation does not apply to Greenland or to the Faroe Islands, though both are looking into potential legislation.

In 2020, the Danish parliament passed the Danish Climate Act, which established a statutory target for reducing greenhouse gas emissions by 70 percent from 1990 levels in 2030 and achieving net zero by 2050. In April 2022, the government presented a reform proposal on Danish energy policy to move towards the above goals and simultaneously achieve independence from Russian natural gas. The proposal includes plans for increased domestic production of biogas as well as natural gas from the North Sea, a quadrupling of combined onshore wind and solar power production capacity by 2030, and an expansion of district heating. The government also proposed green taxation to finance the transition with a differentiated carbon emission tax in addition to the EU carbon trading system.

Note: Additional information on the investment climates in the constituent parts of the Kingdom of Denmark, the Faroe Islands and Greenland, can be found at the end of this report.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 1 of 180 http://www.transparency.org/research/cpi/overview
Global Innovation Index 2021 9 of 132 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 USD 9.9 https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 USD 63,010 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

7. State-Owned Enterprises

Denmark is party to the Government Procurement Agreement (GPA) within the framework of the WTO. State-owned enterprises (SOEs) hold dominant positions in rail, energy, utilities, and broadcast media in Denmark. Large-scale public procurement must go through public tender in accordance with EU legislation. Competition from SOEs is not considered a barrier to foreign investment in Denmark. As an OECD member, Denmark promotes and upholds the OECD Corporate Governance Principles and subsidiary SOE Guidelines.

8. Responsible Business Conduct

As an OECD member, Denmark promotes, through the Danish Business Authority (DBA), the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights. Denmark’s National Contact Point can be reached at: mneguidelines.oecd.org/National-Contact-Points-Website-Contact-Details.pdf 

From January 1, 2016, the largest companies must account for their responsible business conduct, including with respect to human rights and to reducing the climate impact of the company’s activities. Additionally, target figures for the gender composition of the board of directors, as well as policies for increasing the proportion of the underrepresented gender at the company’s management levels, must be reported (Danish Financial Statements Act, sections 99a and 99b). The mandate has also applied to medium-sized businesses (exempting small and micro companies) since January 2018.

The DBA published a National Action Plan to advance Corporate Social Responsibility (CSR) and Responsible Business Conduct (RBC) in Denmark in 2012, covering the 2012 – 2015 period. It contained 42 initiatives focusing on business-driven CSR. In October 2019, the government launched a public hearing process to “investigate how reporting can be made more comparable and create more transparency for the benefit of society and the companies themselves. The purpose is to increase transparency about whether companies are living up to their corporate social responsibility, that sustainable companies have better access to investment and that companies experience a positive value from their CSR reporting.” The government received recommendations in October 2020 and is working on new initiatives. The government hosts www.csrkompasset.dk/  (English language version www.csrcompass.com/ ), a free online tool that can help companies implement responsible supply chain management. The tool is targeted at small and medium-sized production, trade, and service companies. The structure of the CSR Compass and its advice and guidelines are in line with national and international trends and best practice standards, including the UN Global Compact, OECD’s guidelines for multinational companies, Business for Social Responsibility (BSR), the Business Social Compliance Initiative (BSCI), the Danish Ethical Trading Initiative (DIEH), and the Danish Council on Corporate Social Responsibility’s guidelines for responsible supply chain management.

Denmark is a signatory of the Montreux Document on Private Military and Security Companies.

9. Corruption

Denmark is perceived as the least corrupt country in the world according to the 2021 Corruption Perceptions Index by Transparency International, which has local representation in Denmark. The Ministry of Justice is responsible for combating corruption, which is covered under the Danish Penal Code. Penalties for violations range from fines to imprisonment of up to four years for a private individual’s involvement and up to six years for a public employee’s involvement. Since 1998, Danish businesses cannot claim a tax deduction for the cost of bribes paid to officials abroad.

Denmark is a signatory to the OECD Convention on Combating Bribery, the UN Anticorruption Convention, and a participating member of the OECD Working Group on Bribery. In the Working Group’s 2015 Phase 3 follow-up report on Denmark, the Working Group concluded “that Denmark has partially implemented most of its Phase 3 recommendations. However, concerns remain over Denmark’s enforcement of the foreign bribery offence.”

10. Political and Security Environment

Denmark is a politically stable country. Incidents involving politically motivated damage to projects or installations are very rare. The EIU rates Denmark “AAA” for political risk.

11. Labor Policies and Practices

The Danish labor force is generally well-educated and efficient. English-language skills are good, and English is considered a natural second language among a very high proportion of Danes. The labor market is stable and flexible. U.S. companies operating in Denmark have indicated that Danish rules on hiring and firing employees generally enable employers to adjust the workforce quickly to changing market conditions.

The Danish labor force amounted to approximately 3.08 million people at the end of 2021. Of these, 946,000 were employed in the public sector, which accounts for about 31 percent of the labor force. Denmark’s OECD-harmonized unemployment rate was 4.5 percent in March 2022, lower than the EU-27’s average rate of 6.2 percent and OECD average of 5.12 percent. Denmark faces labor shortages in certain sectors, which may be abated by the projected slowdown in growth but may otherwise present a challenge for foreign investors.

The labor force participation rate for women is among the highest in the world. In 2020, 75.9 percent of working-age women participated in the labor force, and the employment rate was 72.8 percent. The working-age male labor force participation rate and employment rate were 79.4 percent and 76.3 percent, respectively.

The Danish labor force is highly organized, with 66.5 percent belonging to a union in 2018, the second highest in the OECD. Labor disputes and strikes occur only sporadically. In general, private sector labor/management relations are excellent, based on dialogue and consensus rather than confrontation. Working conditions are established through a complex system of legislation and organizational agreements, where most aspects of wage and working conditions are determined through collective bargaining rather than legislation.

The contractual work week for most wage earners is 37.5 hours. By law, employees are entitled to five weeks of paid annual leave. In practice, most of the labor force has the right to six weeks of paid annual leave, gained through other labor market agreements.

Denmark has well-functioning unemployment insurance and sick-pay schemes, self-financed or financed by the state. Employees have a right to take maternity or paternity leave which in Denmark is a total of 52 weeks, 18 of which are reserved for the mother (four weeks prior to birth, 14 after) and two for the father to be taken within the first 14 weeks after birth. In addition, most employees have maternity/paternity leave for at least 14 weeks fully paid by the employer, while the government supports the remainder of the leave. In August 2022, the system will change due to EU legislation being implemented.

Danish wages are high by international standards and have prompted the use of capital-intensive technologies in many sectors. Some investors report that the high average wage level is detrimental to Danish competitiveness. Although high wages and generous benefits, including time off, reduce competitiveness, high productivity and low direct costs to employers can result in per employee costs that are lower than in other industrialized countries. Real wages increased on average by 4.2 percent from 2020 to 2021. The government forecast that nominal wages will increase significantly in 2022, though increasing inflation will affect real wage increases.

Generally, personal income tax rates in Denmark are among the highest in the world. However, foreign employees making more than an amount specified annually by the Danish Immigration Service and certain researchers may choose to be subject to a 27 percent income tax rate, plus a labor market contribution tax amounting to 32.84 percent income tax in the first seven years of working in Denmark. Certain conditions must be fulfilled for key employees to be eligible for the 27 percent tax rate: for example, since January 1, 2022, wages must total at least $11,200 (DKK 70,400) per month before the deduction of labor market contributions and after Danish labor market supplementary pension contributions. There are also limits based on an individual’s previous work history in the Danish labor market. Compared with the general Danish progressive income tax system, this is an attractive incentive. Further information can be obtained from Danish embassies or from the Danish Immigration Service ( www.nyidanmark.dk ).

Danish work permits are not required for citizens of EU countries. U.S. companies have reported that in general, work permits for foreign managerial staff may be readily obtained. However, permits for non-managerial workers from countries outside the EU and the Nordic countries are granted only if substantial professional or labor-related conditions warrant. Special rules detailed by the Danish Immigration Service in its “Positive List Scheme” apply to certain professional fields experiencing a shortage of qualified manpower. The list is updated twice annually. Foreigners who have been hired in the designated fields will be immediately eligible for residence and work permits. The minimum educational level required for a position on the Positive List is an occupational Bachelor’s degree, a series of education usually 3.5 years in length combining theoretical and practical experience. In some cases, a Danish authorization must be obtained, which the Positive List will explicitly state if applicable (e.g., non-Danish trained doctors must be authorized by the Danish Patient Safety Authority). Professions covered by the Positive List Scheme include engineers, scientists, doctors, nurses, IT specialists, marine biologists, lawyers, accountants and a wide range of other master’s or bachelor’s degree positions.

Persons who have been offered a highly paid job have particularly easy access to the Danish labor market through the Pay Limit Scheme. As of 2022, the Pay Limit Scheme extends to positions with an annual pay of no less than $71,200 (DKK 448,000), regardless of the field or specific nature of the job. The length of work and residence permits granted under the Pay Limit Scheme depend on the length of the employment contract in Denmark. For permanent employment contracts, work permits are granted for an initial period of four years. After this period, the permit can be extended if the same job is held. There are several other schemes meant to make it easier for certified companies to bring employees with special skills or qualifications to Denmark. These schemes vary in duration and requirements.

Danish immigration law also allows issuance of residency permits of up to 18 months’ duration based on an individual evaluation, using a point system based on education, language skills, and adaptability.

Denmark has ratified all eight ILO Core Conventions and been an ILO member since 1919.

14. Contact for More Information

Kristen Stolt
Economic Officer
U.S. Embassy Denmark
Dag Hammarskjölds Alle 24
2100 Copenhagen, Denmark
Email: CopenhagenICS@state.gov

Finland

Executive Summary

Finland is a Nordic country situated north of the Baltic States bordering Russia, Sweden, and Norway, possessing a stable and modern economy, including a world-class investment climate. It is a member of the European Union and part of the euro area. The country has a highly skilled, educated, and multilingual labor force, with strong expertise in Information Communications Technology (ICT), emerging technologies, shipbuilding, forestry, and renewable energy. Finland offers stability, functionality, high standard of living, and a well-developed digital infrastructure.

Key challenges for foreign investors include high tax rates, a rigid labor market, cumbersome bureaucracy, and lengthy and unwieldly process in opening bank accounts. An aging population and the shrinking work force are the most pressing demographic concerns for economic growth.

Finland is top-ranked in COVID Recovery Index Table (CERI), reflecting its good governance and resilient health care sector. Finland’s vulnerabilities are its dependence on exports and an aging population.

Finland is committed to the EU’s greenhouse emissions reduction target under the UNFCCC and the Paris Agreement and is aiming to become the world’s first carbon-neutral society by 2035.

Foreign direct investment (FDI) in Finland by country is as follows: Sweden, 27 percent; the Netherlands 17 percent; Luxembourg 15 percent; Norway 7 percent; and China 5 percent.

Despite its openness to trade and investment, Finland lags behind the other Nordic and Baltic countries as a destination for foreign investment. In 2019, FDI accounted for 31 percent of Finland’s GDP – less than in 2010 and well below the 49 percent regional average.

To attract investment, the Government of Finland (GOF) cut the corporate tax rate in 2014 from 24.5 percent to 20 percent (the lowest rate in the Nordics), simplified its residency permit procedures, and established Business Finland as a one-stop-shop for foreign investors.

The Foreign Commercial Service and Political/Economic Section at U.S. Embassy in Finland are a valuable resource for American businesses wishing to engage the Finnish market. Finland has vibrant telecommunication, energy, emerging markets, and biotech sectors, as well as Arctic expertise. With excellent transportation links to the Nordic-Baltic region, Finland is emerging as a regional transportation hub.

On January 1, 2018, Finpro, the Finnish trade promotion organization, and Tekes, the Finnish Funding Agency for Innovation, merged to become Business Finland, which facilitates foreign direct investment in Finland and trade promotion. Business Finland employs 600 experts in 40 offices abroad and 16 offices in Finland.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perception Index 2021 1 of 180 http://www.transparency.org/research/cpi/overview
Global Innovation Index 2021 7 of 132 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 $5,269 billion https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 $ 49,780 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD

 

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

8. Responsible Business Conduct

The Government promotes Corporate Social Responsibility (CSR) through the Ministry of Employment and the Economy CSR Guidelines ( https://tem.fi/en/key-guidelines-on-csr ). The Committee on Corporate Social Responsibility acts as the Finnish National Contact Point (NCP) for the effective implementation of the OECD Guidelines for Multinational Enterprises (MNEs), together with the Ministry of Economic Affairs and Employment: https://tem.fi/en/handling-specific-instances-of-the-oecd-guidelines-for-multinational-enterprises .

The government’s SOE policy establishes CSR as a core value of SOEs. Finnish companies perceive that the central component of responsible business conduct or corporate responsibility is to conduct due diligence to ensure compliance with law and regulations. There are no national codes for CSR in Finland; rather, Finnish companies and public authorities have promoted global CSR codes, such as the OECD Guidelines for Multinational Enterprises; the UN Global Compact for Business and Human Rights; ILO principles; EMAS; ISO standards; and the Global Reporting Initiative (GRI). As the EU-level CSR legislation is being drafted, a proposal for an EU Directive on corporate sustainability due diligence was released in March 2022, Finland is preparing to draft national CSR legislation based on the Government Program.

The Directive of the European Parliament and the Council on the disclosure of non-financial information has been implemented via amendments to the Finnish Accounting Act, requiring affected organizations to report on their CSR. The obligation to report non-financial information and corporate responsibility reports apply to large public interest entities i.e. listed companies, credit institutions and insurance companies with more than 500 employees. In addition, turnover must be greater than USD 45.4 million or balance sheet exceed more than USD 22.7 million.

Importing tin, tantalum, tungsten, and gold from conflict zones into the EU requires new procedures from businesses as of January 2021. The Act on the placing on the market of conflict minerals and their ores, which entered into force on January 1, 2021, improves the transparency of supply chains, and brings Finland’s conflict minerals regime into line with EU regulations.

Tukes, the Finnish Safety and Chemicals Agency, is the competent authority in Finland and Customs is given tasks related to the implementation of the Act. For more information: https://tukes.fi/en/industry/conflict-minerals .

Finland is committed to the implementation of the OECD Guidelines for Multinational Enterprises, the ILO Declaration on Fundamental Principles and Rights at Work, and the tripartite declaration of principles concerning multinational enterprises and social policy by the ILO.

Finland has joined the Extractive Industries Transparency Initiative (EITI), which supports improved governance in resource-rich countries. Finland is not a member of the Voluntary Principles on Security and Human Rights Initiative.

Finland is a supporter of the Montreux Document on pertinent international legal obligations and good practices for states related to operations of private military and security companies during armed conflict, but the Finnish government is not a member of ICoCA, the international Code of Conduct for Private Security Service providers’ Association.

The Finnish Ministry of Economic Affairs and Employment (TEM) has appointed a working group to support preparations on due diligence, in addition to review a judicial analysis on a CSR Act. The Committee’s term is January 2021 to December 2023.

Labor and environmental laws and regulations are not waived to attract or retain investments and the Government published a guide to socially responsible public procurement in November 2017: http://julkaisut.valtioneuvosto.fi/handle/10024/160318 .

The Corporate Responsibility Network (FiBS) is the largest corporate responsibility network in the Nordic countries and has more than 300 members: https://www.fibsry.fi/briefly-in-english/ . The Human Rights Center (HRC), administratively linked to the Office of the Parliamentary Ombudsman, encourages foreign and local enterprises to follow the most important international norms: https://www.humanrightscentre.fi/monitoring/.

The MVO Nederland CSR Risk Checker identified two country risks for Finland: Labor rights (labor conditions/contracts and working hours) and Environment (soil and ground water contamination). More info here: https://www.mvorisicochecker.nl/en/worldmap

The Securities Market Association, https://cgfinland.fi/en/, developed and updated (2020) the Finnish Corporate Governance Code for companies listed on the Helsinki Stock Exchange: https://cgfinland.fi/en/corporate-governance-code/ and https://business.nasdaq.com/list/Rules-and-Regulations/European-rules/nasdaq-helsinki/index.html .

Department of State

Department of the Treasury

Department of Labor

Climate Issues

Finland is strongly committed to the EU’s joint reduction target under the UNFCCC and the Paris Agreement and is aiming to become the world’s first carbon-neutral welfare society by 2035. Finland is updating the Climate Change Act to develop more stringent targets for emissions by 2030. Finland’s Annual Climate Report 2021 suggests that while emissions declined in 2020, achieving carbon neutrality by 2035 will require additional action.

The national targets set in the Finnish Government Plan (2019) are more stringent than EU-imposed obligations. Under current legislation, Finland’s national target is to achieve a minimum reduction of 80 percent in emissions by 2050 compared to 1990 levels. PM Marin’s government has set a goal to achieve carbon neutral status by 2035 and carbon negative status shortly thereafter.

Finland was the first country in the world to set a carbon tax in 1990, and Finnish power plants and industries have participated in the EU Emissions Trading System since 2005. Finland supports the development of carbon markets also around the world and promote the gradual phase-out of fossil fuel subsidies.

In 2020, the Finnish Government announced plans to form a Climate Fund focusing on combating climate change, boosting low-carbon industry and promoting digitalization. Approximately 65 percent of the Climate Fund’s investments relate to climate change and about 35 percent to climate-related digitalization. Depending on the funding category and target, the funding by the Climate Fund can vary between 1 and 20 million euros.

Finland ranks first on the 2021 Information Technology and Innovation Foundation’s (ITIF’s) Global Energy Innovation Index (GEII). The GEII reveals varied contributions nations make to the global innovation system. Finland, a top contributor overall to the global energy innovation system, ranks first for entrepreneurial experimentation and market formation, a ranking it also held in 2016. Finland’s top score is in market readiness and technology adoption, which assesses a nation’s demand-pull on clean energy innovation through its energy efficiency and clean energy consumption.

On MIT’s Green Future Index, Finland ranked sixth among 76 leading countries and territories. The index measures progress and commitment towards building low carbon future. According to the index, Finland fosters an extensive green tech R&D ecosystem, with leading-edge renewables (such as green hydrogen) and food tech.

Finland ranked sixth on the 2020 Green Growth Index, measuring performance in meeting Sustainable Development Goal (SDG) targets.

Ecological sustainability is one of Finland’s main goals and Finland also aims to be a forerunner of ecological public procurement. Finland’s first National Public Procurement Strategy, launched September 2020, focuses on developing strategic management and promoting procurement expertise. To support the achievement of ecological, social and economic goals in society through public procurement it is important to develop a strong culture of knowledge-based management. For more see: https://vm.fi/en/-/national-public-procurement-strategy-identifies-concrete-ways-in-which-public-procurement-can-help-achieve-wider-goals-in-society

9. Corruption

In April 2021, the Finnish Government adopted a government resolution on Finland’s national risk assessment and action plan on money laundering and terrorist financing. The assessment found that all sectors experience challenges in identifying signs of terrorist financing and sectors with the highest risk of money laundering are money remitters (hawala operators) and virtual currency providers.

Finland’s money laundering and terrorist financing national action plan (2021-2023) sets out measures to reduce the risks of money laundering and terrorist financing. More information here: https://valtioneuvosto.fi/en/-/10623/highest-risk-sectors-are-money-remittances-and-provision-of-virtual-currencies

The National Risk Assessment of 2018 does not list corruption as a risk in Finland, nor does the 2017 Security Strategy for Society.

Over the past decade, Finland has ranked in the top three on Transparency International’s (TI) Corruption Perceptions Index (CPI). In 2021, Finland was ranked first on the CPI, and ranked third in the world on the Democracy Index civil liberties score with an overall score of 9.27. Finland scored 10 in electoral process and pluralism, 9.29 in the functioning of the government, 8.89 in political participation, 8.75 in political culture and 8.41 in civil liberties. Corruption in Finland is covered by the Criminal Code and penalties range from fines to imprisonment of up to four years. The Criminal Code divides bribery offences into two categories, giving of bribes to public officials or acceptance of bribes and giving or acceptance of bribes in business. Finland has statutory tax rules concerning non-deductibility of bribes. Finland does not have an authority specifically charged to prevent corruption, instead several authorities and agencies contribute to anti-corruption work. The Ministry of Justice coordinates anti-corruption matters, but Finland’s EU anti-corruption contact is the Ministry of the Interior. The National Bureau of Investigation also monitors corruption, while the tax administration has guidelines obliging tax officials to report suspected offences, including foreign bribery, and the Ministry of Finance has guidelines on hospitality, benefits, and gifts. The Ministry of Justice describes its anti-corruption efforts at https://oikeusministerio.fi/en/anti-corruption-activities .

In 2020, Ministry of Employment and Economy released an Anti-Corruption guide intended for companies, especially SMEs, to provide them with guidance and support for promoting good business practices and corruption-free business relations both in Finland and abroad. For more see: https://tem.fi/en/-/guide-offers-smes-practical-anti-corruption-tips The Ministry of Justice is maintaining an Anti-Corruption.fi website, https://korruptiontorjunta.fi/en/combating-corruption-in-finland, providing both ordinary citizens and professional operators with impartial and fact-based information on corruption and its prevention in Finland. The goal is a transparent, impartial, and corruption-free culture and society.

The Act on a Candidate’s Election Funding (273/2009) delineates election funding and disclosure rules. The Act requires presidential candidates, Members of Parliament, and Deputy Members to declare total campaign financing, the financial value of each contribution, and donor names for donations exceeding EUR 1,500: https://www.finlex.fi/en/laki/kaannokset/2009/en20090273.pdf . The Act on Political Parties (10/1969) concerning the funding of political parties is at: https://www.finlex.fi/fi/laki/kaannokset/1969/en19690010.pdf . The National Audit Office of Finland keeps a register containing election-funding disclosures at: http://www.vaalirahoitusvalvonta.fi/en/index.html . Election funding disclosures must be filed with the National Audit Office of Finland within two months of election results being confirmed.

Finland does not regulate lobbying; there is no requirement for lobbyists to register or report contact with public officials. However, in March 2020, a parliamentary working group was set up to establish a transparency lobbying register. In December 2021, the working group report on the Transparency Register was sent out for comments, with the aim of having the government proposal before Parliament in spring 2022. The Finnish Association of Communications Professionals (ProCom) keeps a voluntary lobbyist registry (in Finnish).

The ethical Guidelines of the Finnish Prosecution Service can be found from a new website that was opened on October 1, 2019. https://syyttajalaitos.fi/en/the-ethical-guidelines .

The following are ratified or in force in Finland: the Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime; the Council of Europe Civil Law Convention on Corruption; the Criminal Law Convention on Corruption; the UN Convention against Transnational Organized Crime; and, the UN Anticorruption Convention. Finland is a member of the European Partners against Corruption (EPAC).

Finland is a signatory to the OECD Convention on Anti-Bribery. In October 2020, the OECD working group on bribery said it recognizes Finland’s commitment to combat corruption, but is concerned about lack of foreign bribery enforcement. For more see Finland’s 4th evaluation report: http://www.oecd.org/corruption/Finland-phase-4-follow-up-report-ENG.pdf .

In October 2020, the Council of Europe’s anticorruption body GRECO (Group of States against Corruption) addressed 14 recommendations to Finland on preventing corruption and promoting integrity in central governments (top executive functions) and compliance with these recommendations. For more see GRECO’s 5th evaluation round, Finland compliance report: https://rm.coe.int/fifth-evaluation-round-preventing-corruption-and-promoting-integrity-i/1680a0b0ca . The National Bureau of Investigation is responsible for the investigation of organized and international crimes, including economic crime and corruption, and operates an anti-corruption unit to detect economic offences. Finland adopted the first national anti-corruption strategy in May 2021. The Strategy is in line with the UN Sustainable Development Goals (2030 Agenda) and the recommendations issued by the UN, the OECD, the Council of Europe and the European Union to Finland to reinforce its anti-corruption work.

At the beginning of 2017, the Public Procurement Act based on the new EU directives on public procurement entered into force. Under the law, a foreign bribery conviction remains mandatory grounds for exclusion from public contracts (section 80: mandatory exclusion criteria).

Resources to Report Corruption

Contact at the government agency or agencies that are responsible for combating corruption:

Markku Ranta-Aho
Head of Financial Crime Division
National Board of Investigation
P.O. Box 285, 01310 Vantaa, Finland
markku.ranta-aho@poliisi.fi

Contact at a “watchdog” organization:

Mari Laakso
Chairperson
Transparency Finland
Mari.Laakso@transparency.fi

10. Political and Security Environment

While instances of political violence in Finland are rare, extremism exists, and anti-immigration and anti-Semitic incidents do occur. Stickers and posters with anti-Semitic images and messages were on the synagogue of Helsinki’s Jewish congregation in neighborhoods with significant Jewish populations and on public property throughout 2021. The vandalism ranged from targeted to apparently random, and similar incidents had occurred numerous times over the previous three years. Some of the anti-Semitic graffiti and stickers claimed to be from the banned neo-Nazi Nordic Resistance Movement (NRM). Stickers specifically targeted Jewish community members at lesbian, gay, bisexual, transgender, queer, and intersex (LGBTQI+) pride events.

In 2019, 15 anti-Semitic acts of vandalism against the Israeli Embassy over an 18-month period prompted an official demarche. The NRM is banned in Finland, as is its Facebook page. However, in January 2021 the daily newspaper Helsingin Sanomat reported that the NRM continued to operate out of public sight and without a clear name. In June 2021 prosecutors charged nine members of the NRM with engaging in illegal association for continuing NRM activities under the organization of the group Toward Freedom! (Kohti Vapautta! in Finnish) and leading a demonstration at Tampere Central Market in October 2020. There were a few anti-Semitic incidents on International Holocaust Remembrance Day at the beginning of 2020, but the banning of NRM and COVID-19 have led to a marked decline in anti-Semitic incidents over the past two years.

It is illegal in Finland to share violent content such as footage of Christchurch massacre, but it is still being disseminated and no one has been prosecuted. In August 2017, a stabbing attack took place in central Turku, in southwest Finland in which two pedestrians were killed and eight injured. Finnish authorities considered the attack a terrorist act and its perpetrator was convicted on terrorism charges, making it the first incident of its kind in Finland since the end of World War II.

In December 2021, the Finnish Intelligence Service (SUPO) announced that the first terrorism investigation on the extreme right in Finland has started. Although the investigation is exceptional, it does not affect SUPO’s terrorist threat assessment, according to which the most significant threat is posed by lone operators or small groups inspired by far-right or radical Islamist ideology. According to SUPO’s most recent 2020 yearbook, released in March 2021, the danger of extreme right-wing terrorism has grown in Finland, and SUPO has identified far-right operators with the capacity and motivation to mount a terrorist attack. Some indications of concrete preparation have also emerged. The threat of radical Islamist terrorism has remained at the previous level.

The Fund for Peace (FFP) ranked Finland as the most stable country in the world again in 2021 in the Fragile States Index based on political, social, and economic indicators including public services, income distribution, human rights, and the rule of law. Marsh’s Political Risk Map 2021, based on Marsh Specialty’s World Risk Review platform, provides risk ratings for 197 countries on a 0.1 to 10 scale, with 10 representing the highest risk and 0.1 the lowest. Finland was rated low risk, with ratings ranging from 1.2 to 3.9.

11. Labor Policies and Practices

Finland has a long tradition of trade unions. The country has a unionization rate of 59 percent, and approximately 90 percent of employees in Finland participate in the collective bargaining system. Extensive tripartite cooperation between the government, employer’s groups, and trade unions characterize the country’s labor market system. Any trade union and employers’ association may make collective agreements, and the Ministry decides on the validity of the agreement. The Act on Employment Contracts regulates employment relationships regarding working hours, annual leave, and safety conditions, although minimum wages, actual working hours, and working conditions are determined to a large extent through collective agreements instead of parliamentary legislation. Collective bargaining and collective labor agreements are generally binding. In recent years, local labor market partners have been given more flexibility to enforce the collective agreements. In Fall 2020, the government decided to commission a report on measures to strengthen the trust and negotiating competence required for local collective bargaining within both generally binding collective agreements and normally binding collective agreements. The aim is to develop and advance local collective bargaining through the system of collective agreements. The report, launched March 2021, concluded that local bargaining continues to have a great potential in the field of so-called normally binding collective agreements.

Finland adheres to most ILO conventions; enforcement of worker rights is effective. Freedom of association and collective bargaining are guaranteed by law, which provides for the right to form and join independent unions, conduct legal strikes, and bargain collectively. The law prohibits anti-union discrimination and any obstruction of these rights. The National Conciliator under the Ministry of Employment and the Economy assists negotiating partners with labor disputes. The arbitration system is based on the Act on Mediation in Labor Disputes and the Labor Court is the highest body for settlement. The ILO’s Finland Country profile can be found here: http://www.ilo.org/dyn/normlex/en/f?p=1000:11110:0::NO:11110:P11110_COUNTRY_ID:102625 .

The Ministry of Employment and the Economy is responsible for drafting labor legislation and the Ministry of Social Affairs and Health is responsible for enforcing labor laws and regulations via the Occupational Safety and Health (OSH) authorities of the OSH Divisions at the Regional State Administrative Agencies, which operate under the Ministry of Social Affairs and Health. Finnish authorities adequately enforce contract, wage, and overtime laws. New legislation concerning the hiring of foreign workers in Finland entered into force on June 18, 2016. Its objective is to intensify monitoring and to ensure improved compliance with the terms of employment in Finland. Finland allows the free movement of EU citizen workers.

During 2020, there were 108 strikes in Finland, compared to 107 in 2019. Though most labor disputes are resolved relatively quickly, some recent labor disputes have been protracted and have led to supply chain disruptions affecting business operations in the United States and other markets.

In September 2021, Statistics Finland reported that between 2010 and 2020, the number of working-age people has fallen by 136,000 persons, and during the next two decades the working age population is expected to decrease more slowly or by 76,000 persons by 2040. While the number of people belonging to the younger age groups declined over the period 2015 – 2020 period in Finland, the age group of 60 years and older continued to increase. By the end of 2020, the number of people aged 60 or older was over 1.6 million of Finland’s total population of roughly 5.53 million people.

The government reformed social protection and unemployment security to encourage people to accept job offers, shorten unemployment periods, reduce structural unemployment, and save public resources. The unemployed are granted a labor market subsidy, which, if linked to earnings as is the case for about 60 percent of the unemployed, guarantees moderate income for a period up to 400 working days. Those without jobs after the 400-day period need to demonstrate that they are actively pursuing employment to continue receiving benefits. The period of eligibility was shortened from 500 days to 400 days starting on January 1, 2017, except for those with a work history shorter than three years (reduced to 300 days), and for those aged over 58 with an employment history of at least five years (remains 500 days).

On January 1, 2017, Finnish authorities introduced a two-year, nationwide, statutory and randomized universal basic income trial. The goal was to determine whether a basic income, received without conditions, incentivizes recipients to seek paid work. The government concluded that the basic income experiment did not increase the employment of participants, but it did improve mental wellbeing, confidence, and life satisfaction. The study found a mild positive effect on employment, particularly in certain categories, such as families with children.

In 2017, the center-right government of Juha Sipila introduced the “Activation Model” (AM), which mimicked the Danish unemployment insurance system. The AM became effective on January 1, 2018 and was applied to basic (flat-rate) unemployment benefits (paid by the Social Insurance Institution, Kela) and income-related schemes (paid by unemployment funds). The aim of the AM was to tighten the conditions for benefit eligibility, in order to encourage activation of the unemployed, reduce the duration of periods in unemployment and increase the employment rate. AM experiences were mixed, and union opposed the action vigorously. In a December 2019 press release, the Minister of Social Affairs and Health called the activation model unfair and announced that the model is abolished starting January 1, 2020.

Transparency International estimate the size of Finland’s informal economy to be 13 percent, representing approximately USD 39 billion at GDP PPP levels. According to Finland’s Ministry of Interior, the share of the grey economy of GDP range from USD 1.2 to 16.6 billion. In June 2020, a Strategy and Action Plan for tackling the Grey Economy and Economic Crime (2020-2023) was adopted. For more see Grey Economy and Economic Crime website: https://www.vero.fi/en/grey-economy-crime/ 

14. Contact for More Information

HelsinkiPolEconAll@state.gov 

France and Monaco

Executive Summary

France welcomes foreign investment and has a stable business climate that attracts investors from around the world. The French government devotes significant resources to attracting foreign investment through policy incentives, marketing, overseas trade promotion offices, and investor support mechanisms. France has an educated population, first-rate universities, and a talented workforce. It has a modern business culture, sophisticated financial markets, a strong intellectual property rights regime, and innovative business leaders. The country is known for its world-class infrastructure, including high-speed passenger rail, maritime ports, extensive roadway networks, a dense network of public transportation, and efficient intermodal connections. High-speed (3G/4G) telephony is nearly ubiquitous, and France has begun its 5G roll-out in key metropolitan cities.

In 2021, the United States was the leading foreign investor in France in terms of new jobs created (10,118) and second in terms of new projects invested (247). The total stock of U.S. foreign direct investment in France reached $91 billion. More than 4,500 U.S. firms operate in France, supporting over 500,000 jobs, making the United States the top foreign investor overall in terms of job creation.

Following the election of French President Emmanuel Macron in May 2017, the French government implemented significant labor market and tax reforms. By relaxing the rules on companies to hire and fire employees, the government cut production taxes by 15 percent in 2021, and corporate tax will fall to 25 percent in 2022. Surveys of U.S. investors in 2021 showed the greatest optimism about the business operating environment in France since 2008. Macron’s reform agenda for pensions was derailed in 2018, however, when France’s Yellow Vest protests—a populist, grassroots movement for economic justice—rekindled class warfare and highlighted wealth and, to a lesser extent, income inequality.

The onset of the pandemic in 2020 shifted Macron’s focus to mitigating France’s most severe economic crisis in the post-war era. The economy shrank 8.3 percent in 2020 compared to the year prior, but with the help of unprecedented government support for businesses and households, economic growth reached seven percent in 2021. The government’s centerpiece fiscal package was the €100 billion ($110 billion) France Relance plan, of which over half was dedicated to supporting businesses. Most of the support was accessible to U.S. firms operating in France as well. The government launched a follow-on investment package in late 2021 called “France 2030” to bolster competitiveness, increase productivity, and accelerate the ecological transition.

Also in 2020, France increased its protection against foreign direct investment that poses a threat to national security. In the wake of the health crisis, France’s investment screening body expanded the scope of sensitive sectors to include biotechnology companies and lowered the threshold to review an acquisition from a 25 percent ownership stake by the acquiring firm to 10 percent, a temporary provision set to expire at the end of 2022. In 2020, the government blocked at least one transaction, which included the attempted acquisition of a French firm by a U.S. company in the defense sector. In early 2021, the French government threated to block the acquisition of French supermarket chain Carrefour by Canada’s Alimentation Couche-Tard, which eventually scuttled the deal.

Key issues to watch in 2022 are: 1) the impact of the war in Ukraine and measures by the EU and French government to mitigate the fallout; 2) the degree to which COVID-19 and resulting supply chain disruptions continue to agitate the macroeconomic environment in France and across Europe, and the extent of the government’s continued support for the economic recovery; and 3) the creation of winners and losers resulting from the green transition, the degree to which will be largely determined by firms’ operating models and exposure to fossil fuels.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 22 of 180 http://www.transparency.org/research/cpi/overview 
Global Innovation Index 2021 11 of 132 https://www.globalinnovationindex.org/analysis-indicator 
U.S. FDI in partner country ($M USD, historical stock positions) 2020 USD 91.153 https://apps.bea.gov/international/factsheet/ 
World Bank GNI per capita 2020 USD 39.480 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD 

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

7. State-Owned Enterprises

The 11 listed entities in which the French State maintains stakes at the federal level are Aeroports de Paris (50.63 percent); Airbus Group (10.92 percent); Air France-KLM (28.6 percent); EDF (83.88 percent), ENGIE (23.64 percent), Eramet (27.13 percent), La Française des Jeux (FDJ) (20.46 percent), Orange (a direct 13.39 percent stake and a 9.60 percent stake through Bpifrance), Renault (15.01 percent), Safran (11.23 percent), and Thales (25.67 percent). Unlisted companies owned by the State include SNCF (rail), RATP (public transport), CDC (Caisse des depots et consignations) and La Banque Postale (bank). In all, the government maintains majority and minority stakes in 88 firms in a variety of sectors.

Private enterprises have the same access to financing as SOEs, including from state-owned banks or other state-owned investment vehicles. SOEs are subject to the same tax burden and tax rebate policies as their private sector competitors. SOEs may get subsidies and other financial resources from the government.

France, as a member of the European Union, is party to the Agreement on Government Procurement (GPA) within the framework of the World Trade Organization. Companies owned or controlled by the state behave largely like other companies in France and are subject to the same laws and tax code. The Boards of SOEs operate according to accepted French corporate governance principles as set out in the (private sector) AFEP-MEDEF Code of Corporate Governance. SOEs are required by law to publish an annual report, and the French Court of Audit conducts financial audits on all entities in which the state holds a majority interest. The French government appoints representatives to the Boards of Directors of all companies in which it holds significant numbers of shares, and manages its portfolio through a special unit attached to the Ministry for the Economy and Finance Ministry, the shareholding agency APE (Agence de Participations de l’Etat). The State as a shareholder must set an example in terms of respect for the environment, gender equality and social responsibility. The report also highlighted that the State must protect its strategic assets and remain a shareholder in areas where the general interest is at stake.

8. Responsible Business Conduct

The business community has general awareness of standards for responsible business conduct (RBC) in France. The country has established a National Contact Point (NCP) for the OECD Guidelines for Multinational Enterprises, coordinated and chaired by the Directorate General of the Treasury in the Ministry for the Economy and Finance. Its members represent State Administrations (Ministries in charge of Economy and Finance, Labor and Employment, Foreign Affairs, Ecology, Sustainable Development and Energy), six French Trade Unions (CFDT, CGT, FO, CFE-CGC, CFTC, UNSA) and one employers’ organization, MEDEF.

The NCP promotes the OECD Guidelines in a manner that is relevant to specific sectors. When specific instances are raised, the NCP offers its good offices to the parties (discussion, exchange of information) and may act as a mediator in disputes, if appropriate.  This can involve conducting fact-finding to assist parties in resolving disputes, and posting final statements on any recommendations for future action with regard to the Guidelines. The NCP may also monitor how its recommendations are implemented by the business in question. In April 2017, the French NCP signed a two-year partnership with Global Compact France to increase sharing of information and activity between the two organizations.

In France, corporate governance standards for publicly traded companies are the product of a combination of legislative provisions and the recommendations of the AFEP-MEDEF code (two employers’ organizations). The code, which defines principles of corporate governance by outlining rules for corporate officers, controls and transparency, meets the expectations of shareholders and various stakeholders, as well as of the European Commission. First introduced in September 2002, it is regularly updated, adding new principles for the determination of remuneration and independence of directors, and now includes corporate social and environmental responsibility standards. The latest amendments in February 2019 tackle the remuneration and post-employment benefits of Chief Executive Officers and Executive Officers: 60 percent variable remuneration based on quantitative objectives and 40 percent on quality objectives, including efforts in the corporate social responsibility.

Also relating to transparency, the EU passed a new regulation in May 2017 to stem the trade in conflict minerals and, in particular, to stop conflict minerals and metals from being exported to the EU; to prevent global and EU smelters and refiners from using conflict minerals; and to protect mine workers from being abused. The regulation goes into effect January 1, 2021, and will then apply directly to French law.

France has played an active role in negotiating the ISO 26000 standards, the International Finance Corporation Performance Standards, the OECD Guidelines for Multinational Enterprises, and the UN Guiding Principles on Business and Human Rights. France has signed on to the Extractive Industries Transparency Initiative (EITI), although, it has not yet been fully implemented. Since 2017, large companies based in France and having at least 5,000 employees are now required to establish and implement a corporate plan to identify and assess any risks to human rights, fundamental freedoms, workers’ health, safety, and risk to the environment from activities of their company and its affiliates.

The February 2017 “Corporate Duty of Vigilance Law” requires large companies to set up, implement, and publish a “vigilance plan” to identify risks and prevent “serious violations” of human rights, fundamental freedoms, and serious environmental damage.

In 2021, France enacted a Climate and Resilience Law covering consumption and food, economy and industry, transportation, housing, and strengthening sanctions against environmental violations. The production and work chapter aligns France’s national research strategy with its national low carbon and national biodiversity strategies. All public procurement must consider environmental criteria. To protect ecosystems, the law amends several mining code provisions, including the requirement to develop a responsible extractive model. The law translates France’s multi-year energy program into regional renewable energy development objectives, creates the development of citizen renewable energy communities, and requires installation of solar panels or green roofs on commercial surfaces, offices, and parking lots. The consumption chapter requires an environmental sticker and inscription to better inform consumers of a product or service’s impact on climate. The law bans advertising of fossil fuels by 2022 and advertising of the most carbon-emitting cars (i.e., those that emit more than 123 grams of carbon dioxide per kilometer) by 2028. The law also empowered local authorities with mechanisms to reduce paper advertisements and regulate electronic advertising screens in shop windows. Large- and medium-sized stores (i.e., those with over 400 square meters of sales area) must devote 20 percent of their sales area to bulk sales by 2030. In the agriculture sector, the law sets annual emissions reduction levels concerning nitrogen fertilizers; failure to meet these objectives will trigger a tax beginning in 2024. The law’s transportation chapter extends France’s 2019 Mobility law by creating 33 low-emission zones in urban areas that have more than 150,000 inhabitants by the end of 2024, and bans cars manufactured before 1996 in these large cities. In the top 10 cities that regularly exceed air quality limits on particulates, the law will ban vehicles that have air quality certification stickers of above a certain level. The law requires regions to offer attractive fares on regional trains, bans domestic flights when there is train transportation of less than 2.5 hours, requires airlines to conduct carbon offsetting for domestic flights beginning in 2022, and creates carpool lanes. The law creates a road ecotax starting in 2024, prohibits the sale of new cars that emit more than 95 gram of carbon dioxide per kilometer by 2030 and of new trucks, buses, and coaches with 95 gCO2/km emissions by 2040, and provides incentives to develop bicycle paths, parking areas, and rail and waterway transport.

The Climate and Resilience Law’s housing chapter seeks to accelerate the environmental renovation of buildings. Starting in 2023, owners of poorly insulated housing must undertake energy renovation work if they want to increase rent rates. The law forbids leasing non-insulated housing beginning in 2025 and bans leasing any type of poorly insulated housing beginning in 2028. It also provides information, incentives, and control mechanisms empowering tenants to demand landlords conduct energy renovation work. Beginning in 2022, the law requires an energy audit, including proposals, when selling poorly insulated housing. All households will have access to a financing mechanism to pay the remaining costs of their renovation work via government-guaranteed loans. The law regulates the laying of concrete, mandates a 50 percent reduction in the rate of land use by 2030, requires net zero land reclamation by 2050, and prohibits the construction of new shopping centers that lead to modifying natural environment. The law aims to protect 30 percent of France’s sensitive natural areas and supports local authorities in adapting their coastal territories against receding coastlines. The law’s final chapter focuses on environmental violations and reinforces sanctions for environmental damage, such as long-term degradation to fauna and flora (up to three years in prison and a €250,000 ($273,000) fine), as well as for the general offense of environmental pollution and “ecocide” (up to 10 years in prison and a €4.5 million ($4.9 million) fine or up to 10 times the profit obtained by the individual committing the environmental damage). The chapter uses the term “ecocide” to refer to the most serious cases of environmental damage, although the term is not defined in the law. Even if pollution has not occurred, these penalties apply as long as the individual’s behavior is considered to have put the environment in “danger.”

9. Corruption

In line with President Macron’s campaign promise to clean up French politics, the French parliament adopted in September 2017 the law on “Restoring Confidence in Public Life.” The new law bans elected officials from employing family members, or working as a lobbyist or consultant while in office. It also bans lobbyists from paying parliamentary, ministerial, or presidential staff and requires parliamentarians to submit receipts for expenses.

France’s “Transparency, Anti-corruption, and Economic Modernization Law,” also known as the “Loi Sapin II,” came into effect on June 1, 2017. It brought France’s legislation in line with European and international standards. Key aspects of the law include: creating a new anti-corruption agency; establishing “deferred prosecution” for defendants in corruption cases and prosecuting companies (French or foreign) suspected of bribing foreign public officials abroad; requiring lobbyists to register with national institutions; and expanding legal protections for whistleblowers. The Sapin II law also established a High Authority for Transparency in Public Life (HATVP). The HATVP promotes transparency in public life by publishing the declarations of assets and interests it is legally authorized to share publicly. After review, declarations of assets and statements of interests of members of the government are published on the High Authority’s website under open license. The declarations of interests of members of Parliament and mayors of big cities and towns, but also of regions are also available on the website. In addition, the declarations of assets of parliamentarians can be accessed in certain governmental buildings, though not published on the internet.

France is a signatory to the OECD Anti-Bribery Convention. The U.S. Embassy in Paris has received no specific complaints from U.S. firms of unfair competition in France in recent years. France ranked 22rd of 180 countries on Transparency International’s (TI) 2021 corruption perceptions index. See  https://www.transparency.org/country/FRA .

10. Political and Security Environment

France is a politically stable country. Large demonstrations and protests occur regularly (sometimes organized to occur simultaneously in multiple French cities); these can result in violence. When faced with imminent business closures, on rare occasions French trade unions have resorted to confrontational techniques such as setting plants on fire, planting bombs, or kidnapping executives or managers.

From mid-November 2018 through 2019, Paris and other cities in France faced regular protests and disruptions, including “Gilets Jaunes” (Yellow Vest) demonstrations that turned violent, initiated by discontent over high cost of living, gas, taxes, and social exclusion. In the second half of 2019, most demonstrations were in response to President Macron’s proposed unemployment and pension reform. Authorities permitted peaceful protests. During some demonstrations, damage to property, including looting and arson, in popular tourist areas occurred with reckless disregard for public safety.  Police response included water cannons, rubber bullets and tear gas.

Between 2012 and 2021, 271 people have been killed in terrorist attacks in France, including the January 2015 assault on the satirical magazine Charlie Hebdo, the November 2015 coordinated attacks at the Bataclan concert hall, national stadium, and streets of Paris, and the 2016 Bastille Day truck attack in Nice. While the terrorist threat remains high, the threat is lower than its peak in 2015. Terrorist attacks have since been smaller in scale. Security services remained concerned with lone-wolf attacks, carried out by individuals already in France, inspired by or affiliated with ISIS.  French security agencies continue to disrupt plots and cells effectively. Despite the spate of recent small-scale attacks, France remains a strong, stable, democratic country with a vibrant economy and culture. Americans and investors from all over the world continue to invest heavily in France.

11. Labor Policies and Practices

France’s has one of the lowest unionized work forces in the developed world (between 8-11 percent of the total work force). However, unions have strong statutory protections under French law that give them the power to engage in sector- and industry-wide negotiations on behalf of all workers. As a result, an estimated 98 percent of French workers are covered by union-negotiated collective bargaining agreements. Any organizational change in the workplace must usually be presented to the unions for a formal consultation as part of the collective bargaining process.

The number of apprenticeships in France peaked in 2021, at 718,000 (+37 percent compared with 2020), including 698,000 in the private sector, according to February 2, 2022 Labor Ministry figures. Apprenticeships, like vocational training, have been placed under the direct management of the government via a newly created agency called France Compétences. The government claims growth of apprenticeship and reform of vocational training help to explain the drop to from eight percent in 2020 to 7.4 percent in 2021.

During the COVID-19 crisis, France’s partial unemployment scheme, which allows firms to retain their employees while the government continues to pay a portion of their wages, expanded dramatically in scope and size and kept unemployment at pre-crisis levels (between eight and nine percent). The reform of unemployment insurance was launched in stages in November 2017 and twice postponed because of the COVID-19 pandemic. Labor Minister Elizabeth Borne presented on March 2, 2021, the last measures of the government’s final decree on unemployment insurance. These final measures include a new method for calculating the daily reference wage and the introduction of a tax on short-term contracts. In spite of strong labor union opposition, the government was able to enforce its reform in November 2021. Earlier measures of the reform, in place since January 1, 2021, cover a 30 percent cut in benefits of higher wage earners and an increase from one to four months of the threshold for recharging rights to unemployment benefits once they have ended. This reform is designed to tackle two issues: 1) ensuring that the jobless do not make more money from unemployment benefits than by working; and 2) reducing the deficit of France’s unemployment insurance system UNEDIC. The deficit is expected to turn to surplus by the end of 2022, according to an October 22, 2021 report by UNEDIC, due to the end of the government COVID-19 partial unemployment scheme and as a consequence of the unemployment insurance reform. Pension reform has been delayed until after the April 2022 presidential elections.

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
French Statistical source* USG or international statistical source USG or International Source of Data:  BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount  
France’s Gross Domestic Product (GDP) ($M USD) 2020 $2,542,370 2020 $ 2,630,317 www.worldbank.org/en/country 
Foreign Direct Investment French Statistical source* USG or international statistical source USG or international Source of data:  BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in France ($M USD, stock positions) 2020 $67,195 2020 $91,153 BEA data available at https://apps.bea.gov/international/factsheet/ 
France’s FDI in the United States ($M USD, stock positions) 2020 $213,390 2020 $314,979 BEA data available at https://www.bea.gov/international/direct-investment-and-multinational-enterprises-comprehensive-data 
Total inbound stock of FDI as % host GDP 2020 34.1% 2019 37.2% UNCTAD data available at

https://stats.unctad.org/handbook/
EconomicTrends/Fdi.html
 

* French Source : INSEE database for GDP figures and French Central Bank (Banque de France) for FDI figures. Accessed on March 21, 2022.

Table 3: Sources and Destination of FDI
Direct Investment from/in France Economy Data 2020
From Top Five Sources/To Top Five Destinations (U/S. Dollars, Millions)
Inward Direct Investment Outward Direct Investment
Total Inward 897,115 100% Total Outward 1,440,715 100%
Luxembourg 164,501 18% The Netherlands 221,098 15%
Switzerland 119,020 13%  United States 213,390 15%
United Kingdom 115,093 12% Belgium 166,713 11%
 The Netherlands 107,709 12% United Kingdom 137,138 9%
Germany 98,303 10% Italy 76,091 5%
“0” reflects amounts rounded to +/- USD 500,000.

Source: Bank of France.

Note: These figures represent the stock of foreign direct investment (FDI), not the annual flow of FDI. The United States was the second top investor by number of projects recorded in 2021 but remained in first place for jobs generated (10,118).

14. Contact for More Information

Dustin Salveson (from July 2022, Craig Pike)
Economic Officer
U.S. Embassy
2 Avenue Gabriel
75008 Paris, France
Tel: +33.1.43.12.2000
FranceICSeditor@state.gov

Germany

Executive Summary

As Europe’s largest economy, Germany is a major destination for foreign direct investment (FDI) and has accumulated a vast stock of FDI over time.  Germany is consistently ranked as one of the most attractive investment destinations based on its stable legal environment, reliable infrastructure, highly skilled workforce, and world-class research and development.

An EU member state with a well-developed financial sector, Germany welcomes foreign portfolio investment and has an effective regulatory system. Capital markets and portfolio investments operate freely with no discrimination between German and foreign firms. Germany has a very open economy, routinely ranking among the top countries in the world for exports and inward and outward foreign direct investment.

Foreign investment in Germany mainly originates from other European countries, the United States, and Japan, although FDI from emerging economies (and China) has grown in recent years. The United States is the leading source of non-European FDI in Germany. In 2020, total U.S. FDI in Germany was $162 billion. The key U.S. FDI sectors include chemicals ($8.7 billion), machinery ($6.5 billion), finance ($13.2 billion), and professional, scientific, and technical services ($10.1 billion). From 2019 to 2020, the industry sector “chemicals” grew significantly from $4.8 billion to $8.7 billion. Historically, machinery, information technology, finance, holding companies (nonbank), and professional, scientific, and technical services have dominated U.S. FDI in Germany.

German legal, regulatory, and accounting systems can be complex but are generally transparent and consistent with developed-market norms.  Businesses operate within a well-regulated, albeit relatively high-cost, environment. Foreign and domestic investors are treated equally when it comes to investment incentives or the establishment and protection of real and intellectual property.  Germany’s well-established enforcement laws and official enforcement services ensure investors can assert their rights.  German courts are fully available to foreign investors in an investment dispute. New investors should ensure they have the necessary legal expertise, either in-house or outside counsel, to meet all national and EU regulations.

The German government continues to strengthen provisions for national security screening of inward investment in reaction to an increasing number of high-risk acquisitions of German companies by foreign investors, particularly from China, in recent years.  German authorities screen acquisitions by foreign entities acquiring more than 10 percent of voting rights of German companies in critical sectors, including health care, artificial intelligence, autonomous vehicles, specialized robots, semiconductors, additive manufacturing, and quantum technology, among others. Foreign investors who seek to acquire at least 10 percent of voting rights of a German company in one of those fields are required to notify the government and potentially become subject to an investment review. Furthermore, acquisitions by foreign government-owned or -funded entities will now trigger a review.

German authorities are committed to fighting money laundering and corruption.  The government promotes responsible business conduct and German SMEs are aware of the need for due diligence.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2020 9 of 180 http://www.transparency.org/research/cpi/overview 
Global Innovation Index 2020 9 of 131 https://www.globalinnovationindex.org/analysis-indicator 
U.S. FDI in partner country ($M USD, historical stock positions) 2020 USD 162,387 https://apps.bea.gov/international/factsheet/ 
World Bank GNI per capita 2020 USD 47,470 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD 

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

7. State-Owned Enterprises

The formal term for state-owned enterprises (SOEs) in Germany translates as “public funds, institutions, or companies,” and refers to entities whose budget and administration are separate from those of the government, but in which the government has more than 50 percent of the capital shares or voting rights. Appropriations for SOEs are included in public budgets, and SOEs can take two forms, either public or private law entities. Public law entities are recognized as legal personalities whose goal, tasks, and organization are established and defined via specific acts of legislation, with the best-known example being the publicly-owned promotional bank KfW (Kreditanstalt für Wiederaufbau). KfW’s mandate is to promote global development. The government can also resort to ownership or participation in an entity governed by private law if the following conditions are met: doing so fulfills an important state interest, there is no better or more economical alternative, the financial responsibility of the federal government is limited, the government has appropriate supervisory influence, and yearly reports are published.

Government oversight of SOEs is decentralized and handled by the ministry with the appropriate technical area of expertise. The primary goal of such involvement is promoting public interests rather than generating profits. The government is required to close its ownership stake in a private entity if tasks change or technological progress provides more effective alternatives, though certain areas, particularly science and culture, remain permanent core government obligations. German SOEs are subject to the same taxes and the same value added tax rebate policies as their private- sector competitors. There are no laws or rules that seek to ensure a primary or leading role for SOEs in certain sectors or industries. Private enterprises have the same access to financing as SOEs, including access to state-owned banks such as KfW.

The Federal Statistics Office maintains a database of SOEs from all three levels of government (federal, state, and municipal) listing a total of 19,009 entities for 2019, or 0.58 percent of the total 3.35 million companies in Germany. SOEs in 2019 had €646 billion in revenue and €632 billion in expenditures. Forty-one percent of SOEs’ revenue was generated by water and energy suppliers, 12 percent by health and social services, and 11 percent by transportation-related entities. Measured by number of companies rather than size, 88 percent of SOEs are owned by municipalities, 10 percent are owned by Germany’s 16 states, and two percent are owned by the federal government.

The Federal Ministry of Finance is required to publish a detailed annual report on public funds, institutions, and companies in which the federal government has direct participation (including a minority share) or an indirect participation greater than 25 percent and with a nominal capital share worth more than €50,000. The federal government held a direct participation in 106 companies and an indirect participation in 401 companies at the end of 2019 (per the Ministry’s April 2021 publication of full-year 2019 figures), most prominently Deutsche Bahn (100 percent share), Deutsche Telekom (32 percent share), and Deutsche Post (21 percent share). Federal government ownership is concentrated in the areas of infrastructure, economic development, science, administration/increasing efficiency, defense, development policy, and culture. As the result of federal financial assistance packages from the federally-controlled Financial Market Stability Fund during the global financial crisis of 2008/9, the federal government still has a partial stake in several commercial banks, including a 15.6 percent share in Commerzbank, Germany’s second largest commercial bank. In 2020, in the wake of the COVID-19 pandemic, the German government acquired shares of several large German companies, including CureVac, TUI, and Lufthansa in an attempt to prevent companies from filing for insolvency or, in the case of CureVac, to support vaccine research in Germany.

The 2021 annual report (with 2019 data) can be found here:

https://www.bundesregierung.de/breg-de/service/publikationen/beteiligungsbericht-des-bundes-2021-2016812 

Publicly-owned banks constitute one of the three pillars of Germany’s banking system (cooperative and commercial banks are the other two). Germany’s savings banks are mainly owned by the municipalities, while the so-called Landesbanken are typically owned by regional savings bank associations and the state governments. Given their joint market share, about 40 percent of the German banking sector is thus publicly owned. There are also many state-owned promotional/development banks which have taken on larger governmental roles in financing infrastructure. This increased role removes expenditures from public budgets, particularly helpful considering Germany’s balanced budget rules, which took effect for the states in 2020.

8. Responsible Business Conduct

In December 2016, the Federal Government passed the National Action Plan for Business and Human Rights (NAP), applying the UN Guiding Principles for Business and Human Rights to the activities of German companies though largely voluntary measures. A 2020 review found most companies did not sufficiently fulfill due diligence measures and in 2021 Germany passed the legally binding Human Rights Due Diligence in Supply Chains Act. From 2023, the act will apply to companies with at least 3,000 employees with their central administration, principal place of business, administrative headquarters, a statutory seat, or a branch office in Germany. From 2024 it will apply to companies with at least 1000 employees. The 2021 coalition agreement between the SPD, the Greens party, and the Free Democrats Party (FDP) committed to revising the NAP in line with the Supply Chains Act. Germany promoted EU-level legislation during its 2020 Council of the European Union presidency and the EU Commission published a legislative proposal in 2022.

Germany adheres to the OECD Guidelines for Multinational Enterprises; the National Contact Point (NCP) is housed in the Federal Ministry of Economic Affairs and Climate Action. The NCP is supported by an advisory board composed of several ministries, business organizations, trade unions, and NGOs. This working group usually meets once a year to discuss all Guidelines-related issues. The German NCP can be contacted through the Ministry’s website: https://www.bmwi.de/Redaktion/EN/Textsammlungen/Foreign-Trade/national-contact-point-ncp.html .

There is general awareness of environmental, social, and governance issues among both producers and consumers in Germany, and surveys suggest that consumers increasingly care about the ecological and social impacts of the products they purchase. In order to encourage businesses to factor environmental, social, and governance impacts into their decision-making, the government provides information online and in hard copy. The federal government encourages corporate social responsibility (CSR) through awards and prizes, business fairs, and reports and newsletters. The government also organizes so-called “sector dialogues” to connect companies and facilitate the exchange of best practices and offers practice days to help nationally as well as internationally operating small- and medium-sized companies discern and implement their entrepreneurial due diligence under the NAP. To this end it has created a website on CSR in Germany ( http://www.csr-in-deutschland.de/EN/Home/home.html  in English). The German government maintains and enforces domestic laws with respect to labor and employment rights, consumer protections, and environmental protections. The German government does not waive labor and environmental laws to attract investment.

Social reporting is currently voluntary, but publicly listed companies frequently include information on their CSR policies in annual shareholder reports and on their websites.

Civil society groups that work on CSR include Amnesty International Germany, Bund für Umwelt und Naturschutz Deutschland e. V. (BUND), CorA Corporate Accountability – Netzwerk Unternehmensverantwortung, Forest Stewardship Council (FSC), Germanwatch, Greenpeace Germany, Naturschutzbund Deutschland (NABU), Sneep (Studentisches Netzwerk zu Wirtschafts- und Unternehmensethik), Stiftung Warentest, Südwind – Institut für Ökonomie und Ökumene, TransFair – Verein zur Förderung des Fairen Handels mit der „Dritten Welt“ e. V., Transparency International, Verbraucherzentrale Bundesverband e.V., Bundesverband Die Verbraucher Initiative e.V., and the World Wide Fund for Nature (WWF, known as the “World Wildlife Fund” in the United States).

9. Corruption

Among industrialized countries, Germany ranks 10th out of 180, according to Transparency International’s 2021 Corruption Perceptions Index. Some sectors including the automotive industry, construction sector, and public contracting, exert political influence and political party finance remains only partially transparent. Nevertheless, U.S. firms have not identified corruption as an impediment to investment in Germany. Germany is a signatory of the OECD Anti-Bribery Convention and a participating member of the OECD Working Group on Bribery.

Over the last two decades, Germany has increased penalties for the bribery of German officials, corrupt practices between companies, and price-fixing by companies competing for public contracts. It has also strengthened anti-corruption provisions on financial support extended by the official export credit agency and has tightened the rules for public tenders. Government officials are forbidden from accepting gifts linked to their jobs. Most state governments and local authorities have contact points for whistleblowing and provisions for rotating personnel in areas prone to corruption. There are serious penalties for bribing officials and price fixing by companies competing for public contracts.

To prevent corruption, Germany relies on the existing legal and regulatory framework consisting of various provisions under criminal law, public service law, and other rules for the administration at both federal and state levels. The framework covers internal corruption prevention, accounting standards, capital market disclosure requirements, and transparency rules, among other measures.

According to the Federal Criminal Office, in 2020, 50.6 percent of all corruption cases were directed towards the public administration (down from 73 percent in 2018), 33.2 percent towards the business sector (down from 39 percent in 2019), 13.4 percent towards law enforcement and judicial authorities (up from 9 percent in 2019), and 2 percent to political officials (unchanged compared to 2018).

Parliamentarians are subject to financial disclosure laws that require them to publish earnings from outside employment. Disclosures are available to the public via the Bundestag website (next to the parliamentarians’ biographies) and in the Official Handbook of the Bundestag. Penalties for noncompliance can range from an administrative fine to as much as half of a parliamentarian’s annual salary. In early 2021, several parliamentarians stepped down due to inappropriate financial gains made through personal relationships to businesses involved in the procurement of face masks during the initial stages of the pandemic.

Donations by private persons or entities to political parties are legally permitted. However, if they exceed €50,000, they must be reported to the President of the Bundestag, who is required to immediately publish the name of the party, the amount of the donation, the name of the donor, the date of the donation, and the date the recipient reported the donation. Donations of €10,000 or more must be included in the party’s annual accountability report to the President of the Bundestag.

State prosecutors are generally responsible for investigating corruption cases, but not all state governments have prosecutors specializing in corruption. Germany has successfully prosecuted hundreds of domestic corruption cases over the years, including large– scale cases against major companies.

Media reports in past years about bribery investigations against Siemens, Daimler, Deutsche Telekom, Deutsche Bank, and Ferrostaal have increased awareness of the problem of corruption. As a result, listed companies and multinationals have expanded compliance departments, tightened internal codes of conduct, and offered more training to employees.

10. Political and Security Environment

Overall, political acts of violence against either foreign or domestic business enterprises are extremely rare. Most protests and demonstrations, whether political acts of violence against either foreign or domestic business enterprises or any other cause or focus, remain peaceful. However, minor attacks by left-wing extremists on commercial enterprises occur. These extremists justify their attacks as a means to combat the “capitalist system” as the “source of all evil.” In the foreground, however, concrete connections such as “anti-militarism” (in the case of armament companies), “anti-repression” (in the case of companies for prison logistics or surveillance technology), or the supposed commitment to climate protection (companies from the raw materials and energy sector) are usually cited. In several key instances in larger cities with a strained housing market (low availability of affordable housing options), left-wing extremists target real estate companies in connection with the defense of autonomous “free spaces” and the fight against “anti-social urban structures.” Isolated cases of violence directed at certain minorities and asylum seekers have not targeted U.S. investments or investors.

11. Labor Policies and Practices

The German labor force is generally highly skilled, well-educated, and productive. Before the economic downturn caused by COVID-19, employment in Germany had risen for 13 consecutive years and reached an all-time high of 45.3 million workers in 2019. As a result of the COVID-19 pandemic, employment fell to 44.8 million in 2020 and remained stagnant in 2021 at 44.79 million workers. The pandemic had a disproportionate impact on female workers, who comprise most employees in the tourism, restaurant, retail, and beauty industries.

Unemployment has fallen by more than half since 2005, and, in 2019, reached the lowest average annual value since German reunification. In 2019, around 2.34 million people were registered as unemployed, corresponding to an unemployment rate of 5.2 percent, according to German Federal Employment Agency calculations. Using internationally comparable data from the European Union’s statistical office Eurostat, Germany had an average annual unemployment rate of 3.2 percent in 2019, the second lowest rate in the European Union. For the pandemic year 2020, the Federal Employment Agency reported an average unemployment rate of 5.9 percent and an average 2.7 million unemployed. In 2021, employment recovered despite the persistent pandemic, with the unemployment rate falling to 5.7 percent and the total number of unemployed dropping by 82,000. However, long-term effects on the labor market and the overall economy due to COVID-19 are not yet fully observable. All employees are by law covered by federal unemployment insurance that compensates for lack of income for up to 24 months. A government-funded temporary furlough program (“Kurzarbeit”) allows companies to decrease their workforce and labor costs with layoffs and has helped mitigate a negative labor market impact in the short term. At its peak in April 2020, the program covered more than six million employees. By December 2021 the number had decreased considerably to 790,000 but remained a key government tool to cope with the impact of COVID-19 on the labor market. The government, through the national employment agency, has spent more than €22 billion on this program, which it considers the main tool to keep unemployment low during the COVID-19 economic crisis. The government extended the program for all companies already meeting its conditions in March 2022 until the end of June 2022.

Germany’s average national youth unemployment rate was 6.9 percent in 2020, the lowest in the EU. The German vocational training system has garnered international interest as a key contributor to Germany’s highly skilled workforce and its sustainably low youth unemployment rate. Germany’s so-called “dual vocational training,” a combination of theoretical courses taught at schools and practical application in the workplace, teaches and develops many of the skills employers need. Each year there are more than 500,000 apprenticeship positions available in more than 340 recognized training professions, in all sectors of the economy and public administration. Approximately 50 percent of students choose to start an apprenticeship. The government promotes apprenticeship opportunities, in partnership with industry, through the “National Pact to Promote Training and Young Skilled Workers.”

An element of growing concern for German business is the country’s decreasing population, which (absent large-scale immigration) will likely shrink considerably over the next few decades. Official forecasts at the behest of the Federal Ministry of Labor and Social Affairs predict the current working-age population will shrink by almost three million between 2010 and 2030, resulting in an overall shortage of workforce and skilled labor. Labor bottlenecks already constrain activity in many industries, occupations, and regions. The government has begun to enhance its efforts to ensure an adequate labor supply by improving programs to integrate women, elderly, young people, and foreign nationals into the labor market. The government has also facilitated the immigration of qualified workers.

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) 2020 €3.332,230 2020 $3.846,414 Federal Statistical Office,
www.worldbank.org/en/country 
Foreign Direct Investment Host Country Statistical source* USG or international statistical source USG or international Source of data:  BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) 2019 €88,748 2020 $162,387 Bundesbank, BEA data available at https://apps.bea.gov/international/factsheet/ 
Host country’s FDI in the United States ($M USD, stock positions) 2019 €324,992 2020 $564,294 Bundesbank, BEA data available at https://www.bea.gov/international/direct-investment-and-multinational-enterprises-comprehensive-data 
Total inbound stock of FDI as % host GDP 2019 29.7% 2020 27.9% Federal Statistical Office, Bundesbank, UNCTAD data available at
https://hbs.unctad.org/foreign-direct-investment/     

* Source for Host Country Data: Federal Statistical Office, www.destatis.de ; Bundesbank, www.bundesbank.de 

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 $1,129,900 100% Total Outward $1,955,383 100%
Luxembourg $220,284 19% United States $336,475 17%
The Netherlands $206,592 18% Luxembourg $291,412 15%
United States $115,320 10% The Netherlands $228,609 12%
Switzerland $91,434 8% United Kingdom $132,019 7%
United Kingdom $748,964 7% France $99,582 5%
“0” reflects amounts rounded to +/- USD 500,000.

14. Contact for More Information

U.S. Commercial Service
Pariser Platz 2, 14191 Berlin, Germany
Email: office.berlin@trade.gov

Greece

Executive Summary

The Greek economy has proven resilient in recent years as it continues to rebound from the 2007 economic crisis – including the rigid fiscal constraints demanded by creditors — and the global COVID-19 pandemic.  In early 2020, COVID-19 held the potential to permanently scar an economy that still suffered from legacy issues, including high debt and non-performing loans, limited credit growth, near zero capacity for fiscal expansion, and a hollowed-out healthcare system.  While continuing its aggressive reform agenda, the Mitsotakis government rose to meet the pandemic challenge, as European institutions effectively welcomed Greek debt back into the eurosystem, the IMF and EU evaluated the country’s public debt as sustainable, Moody’s upgraded Greek sovereign debt, the country began borrowing at historically low cost, and strategic investors returned, favorably considering Greece’s current and long-term value proposition.  Meanwhile, over the past several years, our bilateral relationship has deepened significantly via our defense and strategic partnerships, and Greece ambitiously seeks now to bring our economic ties to similar, historic heights.  Far from being the problem child of Europe or the international financial system, Greece is increasingly a source of solutions – not just in the fields of energy diplomacy and defense, but in high-tech innovation, healthcare, and green energy, improving prospects for solid economic growth and stability here and in the wider region.

The Mitsotakis government was elected in July 2019 on an aggressive investment and economic reform agenda which has plowed forward despite the pandemic.  During its first nine months in power, Mitostakis’s team pushed market-friendly reforms and Parliament voted through dozens of economic-related bills, including a key investment law in October 2019, designed to cut red tape, help achieve full employment, and adopt best international practices – including by digitizing government services.  GDP growth reached 8.3 percent in 2021, a major leap forward following the detrimental effects of the COVID-19 pandemic.

Greece maintains a liquidity buffer, estimated at €30 billion, but is intent on boosting its coffers as the economic fallout from the COVID-19 pandemic is larger than expected.  So far untouched, the buffer should be sufficient to cover the country’s financing needs until at least the end of 2022, and the country’s leadership maintains its intention to reserve the European Stability Mechanism (ESM) tranche solely for sovereign debt interest payments.  While capital controls were completely lifted in September 2019, Greece remains subject to enhanced supervision by Eurozone creditors.  However, the European Commission’s (EC) latest positive assessment on the Greek economy, will – most likely – pave the way for the end of the country’s enhanced surveillance status in Q3 2022.

Greece’s banking system, despite three recapitalizations as part of the August 2015 European Stability Mechanism (ESM) agreement, remains saddled with the largest ratio of non-performing loans in the EU, which constrains the domestic financial sector’s ability to finance the national economy.  As a result, businesses, particularly small and medium enterprises, still struggle to obtain domestic financing to support operations due to inflated risk premiums in the sector.  To tackle the issue, and as a requirement of the agreement with the ESM, Greece has established a secondary market for its non-performing loans (NPLs).  According to the Bank of Greece, non-performing loans (NPLs) came, on a solo basis, to €58.7 billion at end-September 2020, down by €9.8 billion from December 2019 and by €48.5 billion from their March 2016 peak.  The NPL-to-total loan ratio remained high in September 2020 at 35.8 percent. The high percentage of performing loans benefited from moratoria until December 31, 2020, and contained the inflow of new NPLs. Non-performing private debt remains high, irrespective of the reduction in NPLs on bank balance sheets via transfer to non-bank entities. 2020 saw substantial reforms aimed at resolving the issue of NPLs.  These involved the securitization of NPLs through the activation of the “Hercules” scheme and the enactment of Law No. 4738/2020 which improves several aspects of insolvency law.  Nevertheless, NPLs will remain high, and considering that there will be a new inflow of NPLs due to the pandemic, other solutions complementary to the “Hercules” scheme should be implemented.  In addition to sales of securitized loan packages, banks have exploited other ways to manage bad loans.  For example, nearly all of Greece’s systemic banks employ loan servicing firms to manage non-performing exposure.  Greece’s secondary market for NPL servicers now includes 24 companies including: Sepal (an Alpha Bank-Aktua joint venture), FPS (a Eurobank subsidiary), Pillarstone, Independent Portfolio Management, B2Kapital, UCI Hellas, Resolute Asset Management, Thea Artemis, PQH, Qquant Master Servicer, and DV01 Asset Management.

Greece’s return to economic growth has generated new investor interest in the country.  Pfizer, Cisco, Deloitte, and Microsoft, to name a few, have all announced major investments in the past few years, due in part to improved protection of intellectual property rights and Greece’s delisting from the U.S. Trade Representatives Special 301 Watch List in 2020.  In March 2021, Greece successfully raised €2.5 billion from its first 30-year bond sale in more than a decade, with the issue more than 10 times oversubscribed.  The bond, which has so far received investor demand of more than €26.1 billion, will price at 150 basis points over the mid-swap level, resulting in a yield of 1.93 percent.

In January 2022, Fitch Ratings Agency maintained Greece’s credit rating at BB and noted the country’s outlook as ‘stable’ due to the financial impact of COVID-19.  On April 1, 2021, Moody’s improved its outlook of the Greek banking system from “stable” to “positive.”Standard & Poor’s affirmed its credit rating for Greece at BB-in October 2020 and also kept its outlook to “stable.”  The European Central Bank (ECB) included Greek government bonds in its quantitative easing program, with €12 billion worth of Greek government debt earmarked for purchase under the ECB’s €750 billion Pandemic Emergency Purchase Program in 2020.  In February 2022, Greece has received the Eurogroup’s approval to repay the final tranches of bailout loans from the International Monetary Fund (IMF) early, along with a small part of bilateral loans from its eurozone partners.  Greece plans to repay loans worth €1.9 billion to the IMF by March, two years ahead of schedule.

The Greek government was given strong marks for its initial response in limiting the spread of the pandemic and has implemented several innovative digital reforms to its economy during COVID-19.  The Greek economy contracted by 10 percent in 2020 with a gross domestic product (GDP) of €189 billion but its GDP rose to €211 billion in 2021.  This was largely attributed to the successful 2021tourism season, which brought in €10 billion to the Greek economy.  The unemployment rate was 15.8 percent in 2021, a slight increase from 15.5 percent in 2020.

In response to the pandemic, Greece’s recovery and resilience plan was among the first plans that were formally approved by the European Council, in July 2021.  Greece received €4 billion of the disbursement in August.  The plan will disburse €17.8 billion in grants and €12.7 billion in loans over the course of five years.  Greece has earmarked funding for many climate-relevant investments and digitalization efforts.  Greece was also the first Member State to finalize its Partnership Agreement for the 2021-2027 programming period.  The Partnership Agreement outlines the plan for deploying of more than €21 billion worth of investments to support Greece’s economic, social and territorial cohesion.

The Greek government also took measures to support businesses throughout the pandemic in 2021.  In February 2021, the government approved a €500 million scheme to support small and medium-sized businesses affected by the pandemic.  The state aid Temporary Framework was open to small and medium-sized enterprises active in all sectors except financial, primary agriculture, tobacco, and fisheries sectors.  This public support, in the form of direct grants, sought to provide sufficient working capital for businesses affected by the pandemic.  In May 2021, the European Commission approved a €793 million support measure for micro, small and medium-sized enterprises affected by the coronavirus outbreak in the form of direct grants, which is open to companies active in all sectors except the financial one.  The aid aims to provide liquidity support to qualifying beneficiaries, to safeguard businesses against the risk of default, allowing them to preserve their economic activity and helping them recover after the pandemic.

Rounding out 2021, the Greek government enacted a €665 million scheme in November 2021 to support households affected by the pandemic.  The scheme was adopted to assist households at risk of losing their primary residence by defaulting on their mortgage loans.  On 3 November 2021, the European Commission approved modifications to ensure the extension of the loan period and a reduction of the maximum aid amount per beneficiary.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 58 of 180 https://www.transparency.org/country/GRC
Global Innovation Index 2021 47 of 131 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 $74 million https://apps.bea.gov/international/factsheet/factsheet.cfm?Area=310
World Bank GNI per capita 2020 $17,930 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

7. State-Owned Enterprises

Greek state-owned enterprises (SOEs) are active in utilities, transportation, energy, media, health, and the defense industry.  There is no official website with a list of SOEs.

Bank of Greece: partially owned (Greek state shares cannot exceed 35 percent); over 1,800 employees; governed by a Governor appointed by the government.

Public Gas Corporation of Greece (DEPA): majority-owned by Greek state (65 percent); Net income €131 million in 2016; Total assets €3.1 billion in 2016; governed by Ministry of Development; Government is in the process of splitting the company and privatizing its infrastructure and commercial operations.

Hellenic Aerospace Industry: wholly owned; Total assets €932.5 million in 2014; Net income €13.7 million in 2014; over 1,300 employees.

Hellenic Financial Stability Fund: governed by General Council and Executive Board

Hellenic Post: majority-owned (90 percent by Greek state); Net income €15.5 million in 2017.

Hellenic Vehicle Organization: majority-owned (51 percent owned by Greek state); around 400 employees; Total assets around €69 million; governed by Board of Directors.

Water Supply and Sewerage Company (EYDAP): majority-owned (34 percent by Greek state); governed by Board of Directors.

Public Power Corporation: majority-owned (51 percent by Greek state); Total assets €14.1 billion in 2018; over 16,700 employees.

Most Greek SOEs are structured under the auspices of the Hellenic Corporation for Assets and Participations (HCAP), an independent holding company for state assets mandated by Greece’s 2015 bailout and formally launched in 2016.  HCAP’s supervisory board is independent from the Greek state and is appointed in part by Greece’s creditor institutions.  Some SOEs are still supervised by the Finance Ministry’s Special Secretariat for Public Enterprises and Organizations, established by Law 3429/2005.  Private companies previously were not allowed to enter the market in sectors where the SOE functioned as a monopoly, such as water, sewage, or urban transportation.  However, several of these SOEs are planned for privatization as a requirement of the country’s bailout programs, intended to liberalize markets and raise revenues for the state.

Official government statements on privatization since 2015 have sometimes led to confusion among investors.  Some senior officials have declared their opposition to previously approved privatization projects, while other officials have maintained the stance that the government remains committed to the sale of SOEs.  The current government has expressed its commitment and is moving forward with privatizations, including DEPA and some of the port assets.  Under the bailout agreement, Greece has moved forward with the deregulation of the electricity market, adopting the Target Model in November 2020.  In sectors opened to private investment, such as the telecommunications market, private enterprises compete with public enterprises under the same nominal terms and conditions with respect to access to markets, credit, and other business operations, such as licenses and supplies.  Some private sector competitors to SOEs report the government has provided preferential treatment to SOEs in obtaining licenses and leases.  The government actively seeks to end many of these state monopolies and introduce private competition as part of its overall reform of the Greek economy.  Greece – as a member of the EU – participates in the Government Procurement Agreement within the framework of the WTO.  SOEs purchase goods and services from private sector and foreign firms through public tenders.  SOEs are subject to budget constraints, with salary cuts imposed in the past few years on public sector jobs.

8. Responsible Business Conduct

Awareness of corporate social responsibility (CSR) including environmental, social, and governance issues, has been growing over the last decade among both producers and consumers in Greece.  Several enterprises, particularly large ones, in many fields of production and services, have accepted and now promote CSR principles.  Several non-profit business associations have emerged in the last few years (Hellenic Network for Corporate Social Responsibility, Global Sustain, etc.) to disseminate CSR values and to promote them in the business world and society more broadly.  These groups’ members have incorporated programs that contribute to the sustainable economic development of the communities in which they operate; minimize the impacts of their activities on the environment and natural resources; create healthy and safe working conditions for their employees; provide equal opportunities for employment and professional development; and provide shareholders with satisfactory returns through responsible social and environmental management.  Firms that pursue CSR in Greece enhance the public acceptance and respect that they enjoy.  In 2014, the government drafted a National Action Plan for Corporate Social Responsibility for the 2014-2021 period.  The main goal of the plan is to increase the number of companies that recognize and use CSR to formulate their strategies.  Greece has encouraged adherence to the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Afflicted and High-Risk Areas.  There are no alleged/reported human or labor rights concerns relating to CSR that foreign businesses should be aware of.  Greece is not a member of the Extractive Industries Transparency Initiative.  Greece signed the Montreux Document on Private Military and Security Companies in 2009.  It has also been a supporter of the International Code of Conduct for Private Security Service Providers and is a participant in the International Code of Conduct for Private Security Service Providers’ Association (ICoCA).

9. Corruption

Greece saw a slight increase in perceptions of corruption, as it went up one place to 59 on Transparency International’s 2019 Corruption Perception Index, from 60 in 2019 and 67 in 2018.  By contrast, the country had improved since 2012, partly due to mandatory structural reforms.  Despite these structural improvements, bureaucracy is reportedly slowing the progress.  Transparency International issued a report in 2018 criticizing the government for improper public procurement actions involving Greek government ministers and the recent appointment of the close advisor to the country’s prime minister to be the head of the Hellenic Competition Commission, which oversees the enforcement of anti-trust legislation.  Transparency International released another report in October 2018, warning of the corruption risks posed by golden visa programs, mentioning Greece as a top issuer of golden visas.  In Transparency International’s 2020 report, the organization outlined the costs directly stemming from the COVID-19 pandemic, including cases of foreign bribery occurring in the health care sector.

On March 19, 2015, the government passed Law 4320, which provides for the establishment of a General Secretariat for Combatting Corruption under the authority of a new Minister of State.  Under Article 12 of the Law, this entity drafts a national anti-corruption strategy, with an emphasis on coordination between anti-corruption bodies within various ministries and agencies, including the Economic Police, the Financial and Economic Crime Unit (SDOE), the Ministries’ Internal Control Units, and the Health and Welfare Services Inspection Body.  Based on Law 4320, two major anti-corruption bodies, the Inspectors-Controllers Body for Public Administration (SEEDD) and the Inspectors-Controllers Body for Public Works (SEDE), were moved under the jurisdiction of the General Secretariat for Combatting Corruption.  A Minister of State for combatting corruption was appointed to the cabinet following the January 2015 elections and given oversight of government efforts to combat corruption and economic crimes.  The minister drafted coordinated plans of action, monitored their implementation, and was given operational control of the Economic Crime division of the Hellenic Police, the SDOE, ministries’ internal control units, and the Health and Welfare Services’ inspection body.  Following the September 2015 national elections, the government abolished the cabinet post of Minister of State for combatting corruption and assigned those duties to a new alternate minister for combatting corruption in the Ministry of Justice, Transparency, and Human Rights.

Legislation passed on May 11, 2015, provides a wider range of disciplinary sanctions against state employees accused of misconduct or breach of duty, while eliminating the immediate suspension of an accused employee prior to the completion of legal proceedings.  If found guilty, offenders could be deprived of wages for up to 12 months and forced to relinquish their right to regain a senior post for a period of one to five years.  Certain offenders could also be fined from €3,000 to €100,000.  The law requires income and asset disclosure by appointed and elected officials, including nonpublic sector employees, such as journalists and heads of state-funded NGOs.  Several different agencies are mandated to monitor and verify disclosures, including the General Inspectorate for Public Administration, the police internal affairs bureau, the Piraeus appeals prosecutor, and an independent permanent parliamentary committee.  Declarations are made publicly available.  The law provides for administrative and criminal sanctions for noncompliance. Penalties range from two to ten years’ imprisonment and fines from €10,000 to €1 million.  On August 7, 2019, Parliament passed legislation establishing a unified transparency authority by transferring the powers and responsibilities of public administration inspection services to an independent authority.  In November 2019, laws addressing the bribery of officials were amended to include a specific definition of “public official” and to make active bribery of a public official a felony instead of a misdemeanor, punishable by a prison sentence of five to eight years (as opposed to three years).  On November 17, 2020, the government established the Financial Prosecutor’s Office to deal with financial crime in the wake of public complaints about an investigation by the Corruption Prosecutor’s Office into a case involving the pharmaceutical company Novartis.  The new office, headed by a senior prosecutor selected by the Supreme Judicial Council of the Supreme Court, included 16 prosecutors, and became operational in November 2020.

Bribery is a criminal act, and the law provides severe penalties for infractions, although diligent implementation and haphazard or uneven enforcement of the law remains an issue.  Historically, the problem has been most acute in government procurement, as political influence and other considerations are widely believed to play a significant role in the evaluation of bids.  Corruption related to the health care system and political party funding are areas of concern, as is the “fragmented” anti-corruption apparatus.  NGOs and other observers have expressed concern over perceived high levels of official corruption.  Permanent and ad hoc government entities charged with combating corruption are understaffed and underfinanced. There is a widespread perception that there are high levels of corruption in the public sector and tax evasion in the private sector, and many Greeks view corruption as the main obstacle to economic recovery.

The Ministry of Justice prosecutes cases of bribery and corruption.  In cases where politicians are involved, the Greek parliament can conduct investigations and/or lift parliamentary immunity to allow a special court action to proceed against the politician.  A December 2014 law does not allow high ranking officials, including the prime minister, ministers, alternate, and deputy ministers, parliament deputies, European Parliament deputies, general and special secretaries, regional governors and vice governors, and mayors and deputy mayors to benefit from more lenient sentences in cases involving official bribes.  In 2019, Parliament passed an amendment to Article 62 of the constitution, which limits parliamentary immunity to acts carried out in the course of parliamentary duties.  In addition, Parliament amended Article 86 of the constitution, abolishing the statute of limitations for crimes committed by ministers and to disallow postponements for trials of ministers.

Greece is a signatory to the UN Anticorruption Convention, which it signed on December 10, 2003, and ratified September 17, 2008.  As a signatory of the OECD Convention on Combating Bribery of Foreign Government Officials and all relevant EU-mandated anti-corruption agreements, the Greek government is committed in principle to penalizing those who commit bribery in Greece or abroad.  The OECD Convention has been in effect since 1999.  Greek accession to other relevant conventions or treaties:

Council of Europe Civil Law Convention on Corruption: Signed June 8, 2000.  Ratified February 21, 2002.  Entry into force: November 1, 2003.

Council of Europe Criminal Law Convention on Corruption: Signed January 27, 1999.  Ratified July 10, 2007.  Entry into force: November 1, 2007.

United Nations Convention against Transnational Organized Crime: Signed on December 13, 2000.  Ratified January 11, 2011.

10. Political and Security Environment

There have been no major terrorist incidents in Greece in recent years; however, domestic groups conduct intermittent small-scale attacks such as targeted package bombs, improvised explosive devices, and unsophisticated incendiary devices (Molotov cocktails) typically targeting properties of political figures, party offices, privately owned vehicles, ministries, police stations, and businesses. In addition, domestic anarchist groups often carry out small-scale attacks targeting government buildings and foreign missions.  Bilateral counterterrorism cooperation with the Greek government remains strong, and support from the Greek security services with respect to the protection of American interests is excellent.  Demonstrations and protests are commonplace in large cities in Greece. While most of these demonstrations and strikes are peaceful and small-scale, they often cause temporary disruption to essential services and traffic, and anarchist groups are known in some cases to attach themselves to other demonstrations to create mayhem.

The masterminds of Greece’s most notorious terrorist groups are currently behind bars, including leaders of November 17 and Revolutionary Popular Struggle, active between the 1970s and 1990s and responsible for hundreds of attacks and murders.  Greek authorities largely eliminated these groups in advance of the 2004 Olympic Games.  Following the Olympics, a new wave of organizations emerged, including Revolutionary Struggle, Conspiracy of Fire Nuclei, and Sect of Revolutionaries, though authorities rounded up these groups in a wave of arrests between 2009 and 2011, and again in 2014.

Domestic terrorist groups include “OLA,” also known as the Group of Popular Fighters or Popular Fighters Group, which claimed responsibility for the December 2018 bomb outside a private television station and the December 2017 bomb outside an Athens courthouse.  OLA also claimed responsibility for the November 2015 bomb attack at the offices of the Hellenic Federation of Enterprises, which caused extensive damage to the offices and surrounding buildings, the December 2014 attack on the Israeli embassy in Athens, which resulted in no injuries and minor damage to the building, and the attack on the German Ambassador’s residence in Athens in December 2013.  OLA also claimed responsibility for an indirect fire attack on a Mercedes-Benz building on January 12, 2014, and an attack in January 2013 against the headquarters of the then-governing New Democracy party in Athens.

11. Labor Policies and Practices

There is an adequate supply of skilled, semi-skilled, and unskilled labor in Greece, although some highly technical skills may be lacking.  Illegal immigrants predominate in the unskilled labor sector in many urban areas, and in rural areas predominately in agriculture.  Greece provides residency permits to migrants for a variety of reasons, including work.  In July 2015, Parliament adopted a law regulating the status of non-EU foreign nationals recruited to work in the country as seasonal workers.  The law also reduces the minimum consecutive residency period in the country required for undocumented migrants to be eligible to apply for a residency permit from ten to seven years, such applications being judged on the applicant’s strong ties to the country.  The same law outlines the requirements for setting work contracts, requires proof of adequate shelter for workers and imposes a €1,500 ($1,620) fine for employers who do not do so, requires prepayment of at least one month’s worth of social security for each employee, provides basic labor rights to each worker, and prohibits employers from recruiting workers if found to have previously recruited workers through fraudulent means.  The law also stipulates that daily wages for non-EU foreign seasonal workers cannot be less than that of an unqualified worker.  The law grants seasonal non-EU foreign workers the same rights as citizens with respect to minimum age of employment, labor conditions, the right to association, unionism, collective bargaining, education and vocational training, employment consultation services, and the right to certain goods, services and benefits under conditions.  The same law also provides that non-EU nationals who are victims of abusive conditions or labor accidents could be eligible to apply for a residency permit on humanitarian grounds.

The labor force today is overwhelmingly comprised of employees who have secondary or higher-level education. Relatedly, beginning in 2012, women in the labor force now possess more higher education degrees than men.

In December 2021, the unemployment rate in Greece was 12.8 percent, a decrease from the 15.5 percent unemployment rate in December 2020 and from the 13.4 percent rate in November 2021.  In 2021, the unemployment rate among men was 10 percent, while among women it was 16.2 percent.  The unemployment rate among Greek citizens age 15-24 years remains high at 27 percent.  The unemployment rate for those citizens age 25 – 74 is currently 12.1 percent.

According to a report conducted by the International Monetary Fund in 2019, Greece’s informal economy is among the highest in the EU.  An informal economy, or shadow economy, is the part of any economy that is neither taxed nor monitored by any form of government.  The informal economy in Greece followed an upward trend until 2009, when it accounted for €56.9 billion at the current inflation rate.

An OECD report published in 2021 highlights a significant increase in the shadow economy during the COVID-19 pandemic and in all of OECD’s 36 member states.  In 2020, rising unemployment and a slump in GDP drove more citizens into the shadow economy to make up for lost income.

In Greece, OECD estimates the shadow economy rose to 20.9 percent of GDP from 19.2 percent in 2019.From preliminary estimates, the shadow economy fell in 2021 to 20.3 percent.  However, the shadow economy in Greece in 2021 increased by €1.6 billion from 2020.

Asylum-seekers are eligible to apply for a work permit once they complete their first asylum interview; however, the procedures for obtaining this permit were not widely understood by asylum-seekers, non-governmental organizations (NGOs), or government officials.  As of February 2021, the Greek Asylum Service had 74,934 cases pending, with the backlog expected to be cleared before the end of 2021.  Asylum services and receipt of applications were suspended from March 13-April 10, 2020, due to the COVID-19 pandemic.  Recognized refugees are entitled to the same labor rights as Greek nationals.  NGOs and government officials working in migrant sites reported that some asylum-seekers perform undeclared seasonal agricultural labor in rural areas.

In April 2019, Greece announced a wage subsidy scheme called “Rebrain Greece,” which provides 500 talented Greeks that moved abroad during the financial crisis with a €3,000 monthly salary if they return to Greece.  The program hopes to reinvigorate high-skilled sectors of the economy.  In December 2020, the Greek Parliament passed Law 4758 that involved a tax break for those foreign nationals who would transfer their tax residence to Greece.  Digital nomads who choose to work in Greece can take advantage of a 50 percent tax break for their first seven years of residency.

Greece has ratified International Labor Organization (ILO) Core Conventions.  Specific legislation provides for the right of association and the rights to strike, organize, and bargain collectively.  Greek labor laws set a minimum age (15) and wage for employment, determine acceptable work conditions and minimum occupational health and safety standards, define working hours, limit overtime, and apply certain rules for the dismissal of personnel.  There is a difference between national minimum wage in the private sector for unspecialized workers aged 25 or older and workers below 25 years of age.  The latter receive 84 percent of the salary of those over 25.  A May 2015 law amended the laws prohibiting strikes during national emergencies.  The 2015 law explicitly prohibits the issuance of civil mobilization orders as a means of countering strike actions before or after their proclamation.

In 2017 parliament passed legislation providing for the temporary closure of businesses in cases where employers repeatedly violate the law concerning undeclared work or safety.  Under the same law, employers are obliged to declare in advance their employees’ overtime or changes in their work schedules.  The legislation also provided for social and welfare benefits to be granted to surrogate mothers, including protection from dismissal during pregnancy and after childbirth.  Courts are required to examine complaints filed by employees against their employers for delayed payment within two months after their filing, and issue decisions within 30 days after the hearing.

The government sets restrictions on mass dismissals in private and public companies employing more than 20 workers.  Dismissals exceeding in number the limits set by law require consultations through the Supreme Labor Council (with worker, employer, and government representatives participating), and government authorization.  Based on a ministerial decision in February 2014, the government shifted competency for approving dismissals from the Minister of Labor to the Ministry’s Secretary General.

Greek law provides for the right of workers to form and join independent unions, conduct their activities without interference, and strike.  The establishment of trade unions in enterprises with fewer than 20 workers is prohibited.  In July 2016, Parliament passed a law allowing armed forces personnel to form unions, while explicitly prohibiting strikes and work stoppages by those unions.  Police also have the right to organize and demonstrate but not to strike.  On July 10, 2020, the parliament separately passed legislation requiring prior and timely announcements – in writing or via email – of demonstrations to the appropriate police or Coast Guard authorities.  The laws also make protest organizers accountable for bodily harm or property damage if they do not follow the requirements.

Around 950 inspectors are authorized to conduct labor inspections, including labor inspectorate personnel and staff of the Ministry of Labor, Social Security, and Social Solidarity, the Social Insurance Fund, the Economic Crimes Division of the police, and the Independent Authority for Public Revenue.  Despite government efforts to increase inspections for undeclared, under-declared, and unpaid work, trade unions and the media alleged that, due to insufficient inspectorate staffing, enforcement of labor standards was inadequate in the housekeeping services, tourism, and agricultural sectors.  Enforcement was also lacking among small enterprises (employing 10 or fewer persons).  According to the Union of Labor Health Inspectors, authorities conducted approximately 45,000 inspections related to issues of health and safety at work and ordered fines amounting to 7 million euros ($8.4 million) between 2015 and 2016.

Wage laws are not always enforced.  Unions and media allege that some private businesses forced their employees to return part of their wages and mandatory seasonal bonuses, in cash, after being deposited in the bank.  Several employees were reportedly registered as part-time workers but in essence worked additional hours without being paid.  In other cases, employees were paid after months of delays and oftentimes with coupons and not in cash.  Cases of employment for up to 30 consecutive days of work without weekends off were also reported.  Such violations were mostly noted in the tourism, agriculture, and housekeeping services sectors.

On July 1, 2019, Greece introduced Law 4611/2019, requiring Greek employers to provide a lawful reason when terminating employees on indefinite-term contracts, to pay social security contributions on behalf of interns and apprentices, and introduced new health and safety requirements including use of motorcycles for employment purposes.

14. Contact for More Information

Carl Watson, Deputy Economic Counselor
U.S. Embassy Athens, Leof. Vasilissis Sofias 91, Athina 115 21, Greece
+30 210-720-2306
ATHENS-econ@state.gov

Iceland

Executive Summary

Iceland is an island country located between North America and Europe in the Atlantic Ocean, near the Arctic Circle with an advanced economy that centers around three primary sectors: fisheries, tourism, and aluminum production. Until recently, U.S. investment in Iceland has mostly been concentrated in the aluminum sector, with Alcoa and Century Aluminum operating plants in Iceland. However, U.S. portfolio investments in Iceland have been steadily increasing in recent years. Iceland’s convenient location between the United States and Europe, its high levels of education, connectivity, and English proficiency, and a general appreciation for U.S. products make Iceland a promising market for U.S. companies. Furthermore, Americans made up a third of the tourist population that visited Iceland in 2021.

There is broad recognition within the Icelandic government that foreign direct investment (FDI) is a key contributor to the country’s economic revival after the 2008 financial collapse. As part of its investment promotion strategy, the Icelandic government operates a public-private agency called “Invest in Iceland” that facilitates foreign investment by providing information to potential investors and promoting investment incentives. Iceland has identified the following “key sectors” in Iceland; tourism; algae culture; data centers; and life sciences. Iceland offers incentives to foreign investors in certain industries.

Tourism has been a growing force behind Iceland’s economy in the past decade, with opportunities for investors in high-end tourism, including luxury resorts and hotels. The number of tourists in Iceland grew by more than 400 percent between 2010 and 2018, reaching more than 2.3 million in 2018. However, tourism in Iceland contracted in 2019, and the COVID-19 pandemic has had drastic effects on tourism, and the overall economy. The government implemented measures to bolster the tourism economy, thus avoiding mass bankruptcies in the sector, and has committed to building out tourism-related infrastructure.

The startup and innovation communities in Iceland are flourishing, with the IT and biotech sectors growing fast, particularly pharmaceuticals and wellness, gaming, and aquaculture. Iceland’s IT sector spans all areas of the digital economy. The Icelandic energy grid derives 99 percent of its power from renewable resources, making it uniquely attractive for energy-dependent industries. For instance, the data center industry in Iceland is expanding.

Iceland is working by the 2018 Climate Acton Plan, which was updated in 2020, and is designed to achieve Iceland’s national climate goals of making the country carbon neutral by 2040 and to cut greenhouse gas emissions by 40 percent by 2030 under the Paris Agreement.

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

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

7. State-Owned Enterprises

The Icelandic Government owns wholly or majority shares in 40 companies, including systematically important companies such as energy companies, the Icelandic National Broadcasting Service (RUV) and Iceland Post. Other notable SOEs are Landsbankinn (one of three commercial banks in Iceland), Isavia (public company that operates Keflavik International Airport), and ATVR (the only company allowed to sell alcohol to the general public). Here you can find a list of SOEs ( https://www.stjornarradid.is/verkefni/rekstur-og-eignir-rikisins/felog-i-eigu-rikisins/ ). Total assets of SOEs in 2020 amounted to 5,735 billion ISK (approx. $44.3 billion) and SOEs employed around 5,100 people that same year. In terms of assets and equity, Landsbankinn (one of three commercial banks in Iceland) is the largest SOE in Iceland, and Isavia employs the most people.

State-owned enterprises (SOEs) generally compete under the same terms and conditions as private enterprises, except in the energy production and distribution sector. Private enterprises have similar access to financing as SOEs through the banking system.

As an OECD member, Iceland adheres to the OECD Guidelines on Corporate Governance. The Iceland Chamber of Commerce in Iceland, NASDAQ OMX Iceland and the Confederation of Icelandic Employers have issued guidelines that mirror the OECD Guidelines on Corporate Governance. Iceland is party to the Government Procurement Agreement (GPA) within the framework of the World Trade Organization (WTO).

For SOEs operating within the private sector in a competitive environment, the general guideline from the Icelandic government is that all decisions of the board of the SOE should ensure a level playing field and spur competition in the market.

In the midst of the banking crisis, the state, through the Financial Supervisory Authority (FME), took over Iceland’s three largest commercial banks, which collapsed in October 2008, and subsequently took over several savings banks to allow for uninterrupted banking services in the country. The government has started the privatization process of Islandsbanki, and currently owns 42.5 percent shares in the bank. The Bank Shares Management Company, established by the state in 2009, manages state-owned shares in financial companies.

The government of Iceland has acquired stakes in many companies through its ownership of shares in the banks; however, it is the policy of the government not to interfere with internal or day-to-day management decisions of these companies. Instead, in 2009, the state established the Bank Shares Management Company to manage the state-owned shares in financial companies. The board of this entity, consisting of individuals appointed by the Minister of Finance, appoints a selection committee, which in turn chooses the State representative to sit on the boards of the various companies.

While most energy producers are either owned by the state or municipalities, there is free competition in the energy market. That said, potential foreign investment in critical sectors like energy is likely to be met by demands for Icelandic ownership, either formally or from the public. For example, a Canadian company, Magma Energy, acquired a 95 percent stake in the energy production company HS Orka in 2010, but later sold a 33.4 percent stake to the Icelandic pension funds in the face of intense public pressure.

Iceland’s universal healthcare system is mainly state-operated. However, few legal restrictions to private medical practice exist; private clinics are required to maintain an agreement regarding payment for services with the Icelandic state, a foreign state, or an insurance company.

8. Responsible Business Conduct

As an OECD member, Iceland adheres to the OECD Guidelines for Multinational Enterprises. The Ministry for Culture and Business Affairs houses Iceland’s National Contact Point for the Guidelines, charged with promoting the due diligence approach of the Guidelines to the business community and to facilitate the resolution of any disputes arising in the context of the Guidelines ( https://www.stjornarradid.is/verkefni/atvinnuvegir/vidskipti/almenn-vidskiptamal/ ).

Business Iceland (formerly Promote Iceland), which is a public-private agency responsible for promoting Iceland’s export sectors abroad, has signed the United Nations’ Global Compact (GC) and raises awareness of corporate social responsibility in Iceland. Festa, a non-profit organization which promotes sustainable development and corporate social responsibility, has over 120 associated members, including some of Iceland’s largest companies, public organizations, universities, and municipalities ( www.samfelagsabyrgd.is/festa ). Gagnsaei, an NGO affiliated with Transparency International, is active in Iceland and is a voice against corruption ( www.transparency.is ). There is a general awareness of corporate social responsibility among producers, companies, and consumers.

There was a high-profile case in 2018 and 2019 surrounding a private employment agency which has now been declared bankrupt, that allegedly mistreated migrant Romanian workers by failing to pay salaries and provide housing as per agreement. This case caused outrage in Iceland and many union and workers’ association leaders voiced their concerns in the media and stated that mistreatment of workers would not be tolerated. The Directorate of Labor fined the company in 2019 for failing to register workers adequately.

As an OECD member state, Iceland adheres to the OECD Due Diligence Guidance recommendations to help companies respect human rights and avoid contributing to conflict through their mineral purchasing decisions and practices. The Icelandic economy does not have a mining industry, other than extracting rocks and gravel for construction purposes. In 2013, former Icelandic Prime Minister Sigmundur David Gunnlaugsson issued a joint statement with the other Nordic Prime Ministers to reaffirm their support to the Extractive Industry Transparency Initiative (EITI).

Department of State

Department of the Treasury

Department of Labor

9. Corruption

Isolated cases of corruption have been known to occur but are not an obstacle to foreign investment in Iceland or a recognized issue of concern in the government. In 2021 Iceland ranked 13 out of 180 economies on the Transparency International’s Corruption Perceptions Index. Iceland has signed the UN Convention against Corruption. Iceland is a member of the OECD Convention on Combatting Bribery.

The Council of Europe body Group of States Against Corruption (GRECO) published its fifth evaluation report on Iceland on April 12, 2018. GRECO found that Iceland had no dedicated government-wide policy plan on anti-corruption and that its agency and institution-specific codes of conduct were not sufficiently detailed and were often implemented in an ad hoc manner. For more information, see the GRECO report ( https://rm.coe.int/fifth-evaluation-round-preventing-corruption-and-promoting-integrity-i/16807b8218 ). The Icelandic Parliament introduced a new law in 2020 on measures against conflict of interests for ministers, assistance to ministers, director generals at ministries, and ambassadors, concerning receiving gifts, additional job positions, and supervision of the aforementioned law.

In the wake of the financial collapse in Iceland in 2008, a Code of Conduct for Staff in the Government Offices of Iceland was established in 2012, “with the purpose of promoting professional methods and of confidence in public administration.” The code of conduct addresses workplace relations and procedures; behavior and conduct; conflicts of interest and shared interests; communication with the media, public and surveillance bodies; and responsibility and monitoring for Government Offices staff. For more information see the Government of Iceland’s website ( https://www.government.is/ministries/prime-ministers-office/code-of-conduct-for-staff/ ). The code does not extend to family members of officials or political parties.

10. Political and Security Environment

Politically motivated violence in Iceland is rare, and Iceland consistently ranks among the world’s safest countries. The World Bank’s Worldwide Governance Indicator on Political Stability and Absence of Violence placed Iceland in the top 97th percentile rank of all countries worldwide in 2020 ( http://info.worldbank.org/governance/wgi/Home/Reports ). In early 2014, frustration among voters regarding the then-governing Progressive Party-Independence Party coalition government’s withdrawal of Iceland’s accession bid to the European Union led to the largest protests since the financial collapse; these protests did not include violence. Non-violent protests led to a governmental reorganization and early elections following the 2016 “Panama Papers” scandal. A subsequent government, composed of the Independence Party, Bright Future, and the Reform Party, took office in early 2017 and collapsed within a year. The current coalition government, composed of the Independence Party, Progressive Party, and the Left-Green Movement, assumed power in November 2017 and began its second term November 28, 2021.

There have been individual cases of politically motivated vandalism of foreign holdings in recent years, directed primarily at the aluminum industry.

11. Labor Policies and Practices

The labor force in Iceland is highly skilled and educated. The labor force consisted of 208,900 people aged between 16 and 74 years old at the end of 2021 according to Statistics Iceland. Of them, 199,700 people were employed and 9,200 unemployed at the end of 2021. According to Statistics Iceland, the unemployment rate was 4.4 percent in December 2021, while the Directorate of Labor reported 4.9 percent unemployment for the same month. Foreign labor plays a large role in unskilled and semi-skilled sectors such as tourism and construction. In December 2021, 38,000 immigrants were employed in Iceland, according to Statistics Iceland. Women in Iceland are almost on par with men when it comes to labor participation, with 77.2 percent of women being active on the job market, compared to 79 percent of men, according to Statistics Iceland. The Icelandic population is highly educated, with 33.3 percent of 16-to-74-year old’s having tertiary/university education.

Icelandic Labor Laws are taken seriously in Iceland, and there are no waivers to attract or retain investment. The labor unions and Directorate of Labor conduct spot inspections on worksites to monitor legal compliance. The labor market is highly unionized, with 91.9 percent of the workforce members of trade unions in 2020, according to Statistics Iceland.

Icelandic labor unions are decentralized and not politically affiliated. Collective bargaining power, in both the public and the private sectors, rests with individual labor unions. The law does not establish a minimum wage, but the minimum wages negotiated in collective bargaining agreements apply automatically to all employees in those occupations, including foreign workers, regardless of union membership. While the agreements can be either industry-wide, sector-wide, or in some cases firm-specific, the type of position defines the negotiated wage levels. The government has sometimes imposed mandatory mediation to avert or end strikes in key economic sectors such as healthcare or fisheries.

According to collective bargaining agreements, the standard work week is 37.5 hours, or 7.5 hours a day. Employees have the right to take a 15-minute paid break within the standard workday. Lunch, either 30 or 60 minutes, is then added to the standard workday. The law requires that employers compensate work exceeding eight hours per day as overtime. Collective bargaining agreements determine the terms of overtime pay, but they do not vary significantly across unions. The law limits the total hours a worker may work, including overtime, to 48 hours a week on average during each four-month period. Typical holiday and shift-work rates are 40 percent above the standard shift rate and may be up to 45 percent more if total work hours exceed full-time employment. The law entitles workers to 11 hours of rest in each 24-hour period and one full day off each week. Under specially defined circumstances, employers may reduce the 11-hour rest period to no fewer than eight hours, but they must then compensate workers with corresponding rest time later. They may also postpone a worker’s day off, but the worker must receive the corresponding rest time within 14 days.

Outside terminating an employee, employers are by law prohibited from making unilateral amendments to hiring contracts. Companies are mandated to report mass layoffs to the Directorate of Labor. Terminated employees retain the same rights to severance benefits regardless of whether they were part of a mass layoff or fired. For further information, see the Directorate of Labor website ( https://vinnumalastofnun.is/en ).

14. Contact for More Information

Ester Halldorsdottir
Economic and Commercial Specialist
U.S. Embassy
Engjateigur 7
105 Reykjavik
Iceland
+354 595-2200
Reykjavikeconomic@state.gov 

Ireland

Executive Summary

The COVID-19 crisis had a massive impact on Ireland’s economy and its effects will continue in 2022. The Irish government implemented varying degrees of lockdown measures in response to the COVID-19 pandemic from the onset in March 2020, including restrictions to close non-essential businesses and services for extended periods of time. Unemployment (including COVID-19 related temporary unemployment) peaked at 28.1 percent in April 2020. Ireland’s official unemployment rate remained around 5 percent (currently at 5.2 percent as of February 2022) due to the unprecedented pandemic related government assistance programs to businesses and workers furloughed due to COVID-19. Over the past two years, the government sustained a level of unprecedented deficit spending to combat the pandemic. Despite the prolonged difficulties caused by COVID-19, Ireland’s economy performed extremely well with GDP growth of 13.5 percent recorded in 2021 following growth of 5.9 percent in 2020. Most of this growth can be attributed to export focused industries (technology, pharmaceutical, and other large multinational companies headquartered in Ireland) while the domestic economy struggled with temporary business closures due to the restrictions. Russia’s invasion of Ukraine exasperated Ireland’s growing inflation concerns with fuel and gas price rises leading to price increases across all sectors, which could dampen consumer spending and confidence and could result in lower-than-expected growth for 2022.

The Irish government actively promotes foreign direct investment (FDI) and has had considerable success in attracting investment, particularly from the United States. There are over 950 U.S. subsidiaries in Ireland operating primarily in the following sectors: chemicals, biosciences, pharmaceutical and medical devices; computer hardware and software; internet and digital media; electronics, and financial services.

One of Ireland’s many attractive features as an FDI destination is its favorable 12.5 percent corporate tax (in place since 2003), the second lowest in the European Union (EU). Ireland signed the OECD Inclusive Framework Agreement, which institutes minimum corporate tax rate of 15 percent when implemented. Firms routinely note that they come to Ireland primarily for the high quality and flexibility of the English-speaking workforce; the availability of a multilingual labor force; cooperative labor relations; political stability; and pro-business government policies and regulators. Additional positive features include a transparent judicial system; transportation links; proximity to the United States and Europe; and Ireland’s geographic location making it well placed in time zones to support investment in Asia and the Americas. Ireland benefits from its membership of the EU and a barrier-free access to a market of almost 500 million consumers. In addition, the clustering of existing successful industries has created an ecosystem attractive to new firms. The United Kingdom’s (UK) departure from the EU, or Brexit, on January 1, 2021, leaves Ireland as the only remaining English-speaking country in the EU and may make Ireland even more attractive as a destination for FDI.

The Irish government treats all firms incorporated in Ireland on an equal basis. Ireland’s judicial system is transparent and upholds the sanctity of contracts, as well as laws affecting foreign investment. Conversely, Ireland’s ability to attract investment are often marred by relatively high labor and operating costs (such as for energy); skilled-labor shortages; licensing and permitting challenges (e.g., for zoning, rezoning, project permissions, etc.) Eurozone-risk; infrastructure in need of investment (such as in transportation, affordable housing, energy and broadband internet); high income tax rates; uncertainty in EU policies on some regulatory matters; and absolute price levels among the highest in Europe.

New data centers must meet new requirements regarding location, energy consumption and energy storage as Ireland’s electricity system struggles to meet demand for energy.

A formal national security screening process for foreign investment in line with the EU framework is expected to be in place by late 2022, though the original date was 2020 but delayed due to the pandemic. At present, investors looking to receive government grants or assistance through one of the four state agencies responsible for promoting foreign investment in Ireland are often required to meet certain employment and investment criteria.

Ireland uses the euro as its national currency and enjoys full current and capital account liberalization.

The government recognizes and enforces secured interests in property, both chattel and real estate. Ireland is a member of the World Intellectual Property Organization (WIPO) and a party to the International Convention for the Protection of Intellectual Property.

Several state-owned enterprises (SOEs) operate in Ireland in the energy, broadcasting, and transportation sectors. All of Ireland’s SOEs are open to competition for market share.

While Ireland has no bilateral investment treaties, the United States and Ireland have shared a Friendship, Commerce, and Navigation Treaty since 1950 that provides for national treatment of U.S. investors. The two countries have also shared a Tax Treaty since 1998, supplemented in December 2012 with an agreement to improve international tax compliance and to implement the U.S. Foreign Account Tax Compliance Act (FATCA).

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perception Index 2021 13 of 180 http://www.transparency.org/research/cpi/overview
Global Innovation Index 2021 19 of 132 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 $390,274 https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 $65,620 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD

 

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

8. Responsible Business Conduct

A growing awareness of corporate social responsibility (CSR) in Ireland is mainly driven by independent organizations and multinational corporations. According to “Business in the Community–Ireland,” an organization at the forefront of promoting CSR in Ireland, many of the participant firms believe CSR-oriented policies can play a major role in rebuilding Ireland’s corporate reputation. Companies advertise their participation in such programs as the Fairtrade Certification Mark. The American Chamber of Commerce in Ireland has also released its own report documenting the widespread CSR efforts of American affiliate firms in the country.

The government promotes responsible business conduct in Ireland. Its national action plan “Towards Responsible Business – Ireland’s National Plan on Corporate Social Responsibility 2017- 2020″ aims to support businesses in Ireland to create sustainable jobs; embed responsible practices in the marketplace; embrace diversity and promote responsible workplaces; and encourage enterprises to consider their businesses’ impacts on the environment. It gives effect to the UN Guiding Principles on Business and Human Rights and sets out the Irish government’s commitments to promoting responsible business practice at home and overseas. DETE maintains a web page www.csrhub.ie  for information on all aspects of CSR in Ireland.

Ireland, as an adherent to the OECD Guidelines for Multinational Enterprises, established a National Contact Point (NCP) responsible for promoting CSR/RBC and facilitating mediation when complaints arise regarding a company not observing the Guidelines. Contact information for the NCP is: https://enterprise.gov.ie/en/What-We-Do/Trade-Investment/OECD-Guidelines-NCP/ 

Additional Resources

Department of State

Department of the Treasury

Department of Labor

Climate Issues

In November 2021, the government released its Climate Action Plan which detailed the actions required to achieve a 51 percent emissions reduction target by 2030 and a goal of net-zero emissions by 2050, as set out in the Climate Act 2021. The plan will be updated annually to ensure alignment with Ireland’s legally binding economy-wide carbon budgets and sectoral ceilings.  The Climate Action Plan lays out sector specific targets to achieve these goals, with the largest reduction slated to come from the energy sector (62-81 percent reduction).  Some of the actions outlined in the action plan to meet the energy decarbonization targets include a review of policy for large energy users, such as data centers, incentivizing demand side flexibility, and developing supportive policies for wind, solar, and micro generation.

Security of energy supply continues to be an issue in Ireland which has been further complicated by Russia’s invasion of Ukraine. Ireland is highly dependent on imports of oil and natural gas. While renewable energy, mainly from onshore wind turbines, is growing, Ireland must still import gas, through interconnectors from the UK. Eirgrid, the national grid operator, said Ireland could face electricity shortages over the next five winters unless base load production (from gas or coal) is increased to ensure that intermittent supply from renewables is supplemented.

The Taoiseach (Prime Minister) and the IDA have highlighted the importance of Ireland’s green credentials and climate improvement plans in attracting future investment from international financial services firms.  The IDA said Ireland aims to be a global leader in the area of green or sustainable finance.  Taoiseach Micheál Martin said sustainable finance remains “a top priority” within the government’s financial services agenda, and Ireland was “uniquely positioned” to benefit from significant global investment in fintech due to the country’s track record for foreign direct investment, entrepreneurial culture and existing number of international financial services firms.

9. Corruption

Corruption is not a serious problem for foreign investors in Ireland. The principal Irish legislation relating to anti-bribery and corruption is the Criminal Justice (Corruption Offences) Act of 2018. The Act consolidates all previous legislation for the prevention of corruption. The legislation makes it illegal for Irish public servants to accept bribes. The Ethics in Public Office Act, 1995, provides for the written annual disclosure of interests of people holding public office or employment.

The law on corruption in Ireland gives effect in domestic law to the OECD Anti-Bribery Convention and other conventions concerning criminal corruption and corruption involving officials of the European Union and officials of EU member states. Irish legislation ensures there are strong penalties in place with prison terms of up to ten years and an ‘unlimited’ fine, for those found guilty of offenses under the Act, including convictions of bribery of foreign public officials by Irish nationals and companies that takes place outside of Ireland.

Irish police (An Garda Siochana, or Garda) investigate all allegations of corruption. The Director of Public Prosecutions is responsible for preparing files for prosecution, on detection of sufficient evidence of criminal activity. The government has, in the past, convicted a small number of public officials for corruption and/or bribery. In 1996, Ireland established the Criminal Asset Bureau (CAB), an independent body responsible for seizing illegally acquired assets. CAB has the powers to focus on the illegally acquired assets of criminals involved in organized crime by identifying criminally acquired assets of persons and taking the appropriate action to deny such people of these assets. Any CAB action is primarily taken through the application of the Proceeds of Crime Act, 1996 legislation. Ireland is a member of the Camden Asset Recovery Inter-Agency Network (CARIN).

UN Anticorruption Convention, OECD Convention on Combatting Bribery

Ireland signed the UN Convention on Corruption in December 2003 and ratified it in 2011. Ireland is also a participating member of the OECD Working Group on Bribery.

Resources to Report Corruption
Government agency responsible for combating corruption:

Department of Justice and Equality, Crime and Security Directorate
94 St. Stephen’s Green
Dublin 2
Telephone: + 353 1 602-8202
E-mail: info@justice.ie 
Website: www.justice.ie 

Contact at Transparency International:

John Devitt
Chief Executive

Transparency International
Floor 2
69 Middle Abbey St
Dublin 2
Telephone: +353 1 554 3938
E-mail: Admin@transparency.ie 

 

10. Political and Security Environment

There has been no significant spillover of violence from Northern Ireland since the ceasefires of 1994 and the signing and implementation of the Good Friday Agreement (GFA) in 1998. The cessation of violence in Northern Ireland led to increased business investment and confidence in Northern Ireland which also benefited Ireland. The GFA designated funding to develop cross-border cooperation on R&D collaboration, create energy and transportation infrastructure linkages, and for participation in joint trade missions. No violence related to the situation in Northern Ireland has been specifically directed at U.S. citizens or firms located in Ireland.

11. Labor Policies and Practices

Ireland’s population reached 5.01 million in April 2021 an increase of 34,000 on 2020 levels. Net migration in the year to April 2021 was 11,200 persons. The total number of persons employed at the end of 2020 was 2.28 million, but this increased to 2.51 million by the end of 2021 as COVID-19 restrictions relaxed and employers began hiring. Employment opportunities continue to attract inward migrations particularly for employees with language skills.

The onset of the COVID-19 pandemic brought with it three lockdowns of the economy (in April, October and December 2020) with maximum restrictions on movements and a sharp rise in the numbers receiving temporary government employment supports. Temporary government unemployment supports (pandemic unemployment payments) were put in place to keep employees linked to their employers to assist in a rapid return to operations following the lockdowns. The COVID-19 adjusted unemployment rate for Ireland stood at 27.0 percent (with an underlying unemployment rate of 7.2 percent) in February 2021. In the year since, most of those claiming temporary unemployment payments have returned to work and by February 2022 the traditional unemployment rate stood at 5.2 percent with the COVID-adjusted rate at 7.0 percent. The Central Bank of Ireland forecasts Ireland’s unemployment rate will average of 5.8 percent in 2022 before declining to 5.3 percent in 2023.

Average hourly labor costs in Ireland increased by 2.0 percent in 2020. During

2021, average industrial earnings increased by 2.1 percent to 989 euro (USD 1,170) per week. The government mandated minimum wage rate was increased by 0.30 euro to 10.50 euro ($12.40) per hour from January 2022, with lower rates set for younger and less experienced workers.

The government regulates the Irish labor force less than governments in most continental EU countries. The 2.633 million workforce has a high degree of flexibility, mobility, and education. There is relative gender balance in the workforce, with 1,328,100 males and 1,177,900 females employed in 2021. The gender balance reflects a societal change and government support that facilitated a surge in female employment from the mid-1980s. There are no restrictions on the hiring of non-national labor, and many firms, especially in the technology sector, hire young professionals with a diverse range of language and technology skills.

Ireland, since the mid-1990’s, is an attractive destination for foreign investment due to the availability of a young, highly educated workforce. The removal of tuition fees for third level (university) education in 1995 resulted in a rapid increase of third-level qualified graduates. While tuition fees are paid by the government, students must still pay registration fees, currently capped at 3,000 euro ($ 3,600) per academic year. The availability of highly educated and qualified potential employees in Ireland is an attractive feature for employers looking to locate in the EU and has been a significant factor in attracting the already large number of multinational companies located in Ireland. Over 60 percent of new third-level students in Ireland undertake business, engineering, computer science, or science courses. The focus of government strategy has shifted to upgrading skills and increasing the number of workers in technology-intensive, high-value sectors to ensure the availability of an educated workforce.

The onset of the COVID-19 pandemic introduced mass teleworking to Ireland. The huge change in work practice came almost overnight and despite the immense change, workers and their employers seem to have adapted well. Key to Ireland’s teleworking success was the access to good broadband services. Adequate broadband is already available in most urban areas while the government’s national broadband plan to bring high speed broadband to all areas is still rolling out. It is likely that these plans may be accelerated to get earlier delivery of broadband services in more rural parts of the island. The government is expected to enact legislation giving rights to employees to seek remote working opportunities from their employers.

The Irish system of industrial relations is voluntary. Employers and employees generally agree on pay levels and conditions of employment through collective bargaining. There are generally good industrial relationships and very few industrial disputes. There were just three labor disputes in 2021 down from seven in 2020. (Note: Pandemic measures are likely to have affected the number of disputes in 2020 and 2021. End note). A series of agreements between the government and public service labor unions in place since 2010 have in general reduced public service labor disputes.

Employers typically resist trade union demands for mandatory trade/labor union recognition in the workplace. While the Irish Constitution guarantees the right of citizens to form associations and unions, Irish law also affirms the right of employers to withhold union recognition and to deal with employees on an individual basis. One quarter of all workers are unionized but there is much higher participation by public sector workers in unions. The government estimates up to 80 percent of workers in foreign-owned firms do not belong to unions. This may reflect more attractive pay, benefits, and conditions by these employers compared with domestic firms. DETE explicitly addressed the country’s collective bargaining rights through an amendment of existing legislation in the Industrial Relations (Amendment) Act 2015.

14. Contact for More Information

Until August 2022:

Peter Lee
Economic Affairs Chief
American Embassy, Dublin, Ireland
Telephone: +353-1-630 6274
Email: dublinpeo@state.gov .

From September 2022:

Anood Taqui
Economic Affairs Chief
American Embassy, Dublin, Ireland
Telephone: +353-1-630 6274
Email: dublinpeo@state.gov .

Italy

Executive Summary

Italy’s successful vaccination campaign, an ambitious reform and investment plan funded and approved by the European Union, and Prime Minister Mario Draghi’s leadership which has boosted Italy’s role on the international stage, helped the Italian economy to grow a healthy 6.6 percent in 2021 – one of the fastest rates in Europe. Growth was underpinned by a robust 17 percent increase in investment. However, energy price spikes, supply chain disruptions, and Russia’s full-scale invasion of Ukraine create uncertainty affecting consumer and business confidence. Italy now forecasts its economy, the euro area’s third largest, will grow by 3.1 percent (down from a 4.7 percent projected in September 2021). For 2023, the government projects GDP will grow 2.4 percent (down from the previous target of 2.8 percent). The public debt, proportionally the highest in the eurozone after Greece’s, is targeted at 147 percent of GDP in 2022, down from 2020’s 156 percent, and projected to decline to 145 percent in 2023.

Italy’s National Resilience and Recovery Plan (NRRP) combines over €200 billion in investment to accelerate the digital and green transition coupled with wide-ranging reforms addressing the Italian economy’s longstanding drags on growth — namely its slow legal system, tax administration and bloated bureaucracy — while rebalancing policies to address gender, youth, and regional disparities. This combination of investment and reform, with some easing of fiscal constraints from Brussels, may reposition Italy, the eurozone’s second largest industrial base, as an engine for growth. In April 2022, the European Commission disbursed €21 billion in the first tranche of Next Generation EU funds pandemic aid to Italy after determining the Italian government successfully met the 51 objectives of its NRRP set out for 2021. Italy will have to achieve a further 45 milestones and targets by June 30, 2022, to receive the second tranche of funds worth €24.1 billion. Crucial for improving Italy’s investment climate and spurring growth is reform of Italy’s justice system, one of the slowest in Europe. According to the European Commission, the average Italian civil law case takes more than 500 days to resolve, versus an average of about 200 days in Germany, 300 in Spain and 450 in Greece. For U.S. investors, judicial reform and bureaucratic streamlining would minimize uncertainty and create a more favorable investment climate.

Italy is and will remain an attractive destination for foreign investment, with one of the largest markets in the EU, a diversified economy, and a skilled workforce. Italy’s economy, the eighth largest in the world, is dominated by small and medium-sized firms (SMEs), which comprise 99.9 percent of Italian businesses. Italy’s relatively affluent domestic market, access to the European Common Market, proximity to emerging economies in North Africa and the Middle East, and assorted centers of excellence in scientific and information technology research, remain attractive to many investors. Italy is the eighth largest consumer market in the world, the seventh largest manufacturing producer, and boasts a diversified economy and skilled workforce. The clustering of industry, the infrastructure, and the quality of life are also among the top reasons international investors decide to start or expand a business in Italy. According to Italy’s Institute of Statistics, over 15,000 foreign multinationals employ one out of seven Italian residents.  Foreign companies account for 18 percent of Italian GDP and 14 percent of investments. Exports of pharmaceutical products, furniture, industrial machinery and machine tools, electrical appliances, automobiles and auto parts, food and wine, as well as textiles/fashion are an important source of external revenue. The sectors that have attracted significant foreign investment include telecommunications, transportation, energy, and pharmaceuticals. The government remains open to foreign investment in shares of Italian companies and continues to make information available online to prospective investors.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 42 of 180 http://www.transparency.org/research/
cpi/overview
Global Innovation Index 2021 29 of 132 https://www.globalinnovationindex.org/
analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2021 $31,093 https://www.bea.gov/international/
direct-investment-and-multinational-
enterprises-comprehensive-data
World Bank GNI per capita 2020 $32,290 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

8. Responsible Business Conduct

There is a general awareness of expectations and standards for responsible business conduct (RBC) in Italy. Enforcement of civil society disputes with businesses is generally fair, though the slow pace of civil justice may delay individuals’ ability to seek effective redress for adverse business impacts. In addition, EU laws and standards on RBC apply in Italy. In the event Italian courts fail to protect an individual’s rights under EU law, it is possible to seek redress at the European Court of Justice (ECJ).

CONSOB has enacted corporate governance, accounting, and executive compensation standards to protect shareholders. Information on corporate governance standards is available at: https://www.consob.it/c/portal/layout?p_l_id=892052&p_v_l_s_g_id=0

As an OECD member, Italy supports and promotes the OECD Guidelines for Multinational Enterprises (“Guidelines”), which are recommendations by governments to multinational enterprises for conducting a risk-based due diligence approach to achieve responsible business conduct (RBC). The Guidelines provide voluntary principles and standards in a variety of areas including employment and industrial relations, human rights, environment, information disclosure, competition, consumer protection, taxation, and science and technology. (See OECD Guidelines: http://www.oecd.org/dataoecd/12/21/1903291.pdf ). The Italian National Contact Point (NCP) for the Guidelines is in the Ministry of Economic Development. The NCP promotes the Guidelines; disseminates related information; and encourages collaboration among national and international institutions, the business community, and civil society. The NCP also promotes Italy’s National Action Plan on Corporate Social Responsibility which is available online. See Italian NCP: http://pcnitalia.sviluppoeconomico.gov.it/en /.

Independent NGOs and unions operate freely in Italy. Additionally, Italy’s three largest trade union confederations actively promote and monitor RBC. They serve on the advisory body to Italy’s NCP for the OECD Guidelines for Multinational Enterprises.

Italy encourages adherence to OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Afflicted and High-Risk Areas and has provided operational guidelines for Italian businesses to assist them in supply chain due diligence. Italy is a member of the Extractive Industries Transparency Initiative (EITI). The Italian Ministry of Foreign Affairs works internationally to promote the adoption of best practices.

Department of State

Department of the Treasury

Department of Labor

9. Corruption

10. Political and Security Environment

Politically motivated violence is not a threat to foreign investments in Italy. On rare occasion, extremist groups have made threats and deployed letter bombs, firebombs, and Molotov cocktails against Italian public buildings, private enterprises and individuals, and foreign diplomatic facilities. Though many of these groups have hostile views of the United States, they have not targeted U.S. property or citizens in recent years.

Italy-specific travel information and advisories can be found at: www.travel.state.gov.

11. Labor Policies and Practices

Unemployment continues to be a pressing issue in Italy, particularly among youth (ages 15-24). Italy has one of the EU’s highest youth unemployment rates at 25.3 percent (January 2022), while the overall unemployment rate was 8.9 percent in December 2021. The effect of the COVID-19 pandemic on the labor force has been uneven and substantial. Job losses were concentrated among self-employed workers and those on fixed-term contracts, especially in the services sector, penalizing younger workers and women. The unemployment rate did not increase due to the government’s ban on layoffs and a program that provided paid furloughs, which allowed companies to temporarily reduce staff during the COVID-19 emergency – without adding them to the ranks of the unemployed. Despite these measures, Italy lost 456,000 jobs in 2020 but recuperated 540,000 jobs in 2021, while Italy’s inactive population (neither working nor seeking work actively) dropped 4.8 percent (corresponding to 653,000 people).

Moreover, compared to February 2020, there are still 207,000 fewer jobs. Most new jobs in 2021 were in the services sector under temporary contracts (without unemployment insurance and social security benefits) and predominantly taken by young people and women. As of January 2022, only 50.3 percent of Italian women had jobs – the second lowest rate in the EU- compared to 68.1 percent for men. The data shows that the COVID pandemic impaired the already low levels of female participation in the labor force. The ratio of long-term unemployment (unemployment lasting over 12 months) as a share of overall unemployment continues to be among the highest of major European economies. Underemployment (employment that is not full-time or not commensurate with an employee’s skills and abilities) is also severe. Those underemployed usually find work in the service industry or other low-skilled professions in the large informal economy, which Italy’s statistics agency estimates comprises at least 12 percent of Italian GDP. According to the latest available data (released in October 2021), the informal economy accounted for 11.3 percent of GDP in 2019, with undeclared work estimated at approximately 3.6 million full-time equivalent units. The agricultural, services, and construction sectors stood out for high rates of undeclared work. However, there is anecdotal evidence of unpaid internships and trainee programs masking as de facto undeclared work in every industry as a precursor to securing a regular labor contract.

Labor force productivity – a central weakness of the Italian economy – is below the EU average. Many Italian employers report an inability to find qualified candidates for highly skilled positions, demonstrating considerable skills disparities in the Italian labor market. The government has also reported difficulty finding qualified candidates to manage NRRP programs in the South. Well-educated Italians find more attractive career opportunities outside of Italy, with large numbers of Italians taking advantage of EU freedom of movement to work in other EU countries. There is no reliable measure of Italians working overseas, as many expatriate workers do not report their whereabouts to the Italian government. Skilled labor shortages are a particular problem in Italy’s industrialized north.

Companies may bring in a non-EU employee after the government-run employment office has certified that no qualified, unemployed Italian is available to fill the position. However, the cumbersome and lengthy process is a deterrent to foreign firms seeking to comply with the law. Language barriers also prevent outsiders from competing for Italian positions. Work visas are subject to annual quotas, although intra-company transfers are exempt.

Indefinite employment contracts signed before March 2015 are governed by the 2012 labor regulations, which allows firms to conduct layoffs and firings with lump-sum payments. Under the 2012 system, according to Article 18 of the workers’ statute of 1970, judges can order reinstatement of dismissed employees (with back pay) if they find the dismissal was a pretext for discriminatory or disciplinary dismissal. In practice, dismissed employees reserved the right to challenge their release indefinitely, often using the threat of protracted legal proceedings or an adverse court ruling to negotiate additional severance packages with employers.

Indefinite employment contracts signed after March 2015 fall under rules established by the 2015 Jobs Act, a labor market reform package that contractually advanced employee protections that increased with tenure. During the first 36 months of employment, firms may dismiss employees for bona fide economic reasons. Under the 2015 Jobs Act regime, dismissed employees must appeal their dismissal within 60 days, and reinstatements are limited.  Regardless of the reason for termination, a former employee is entitled to receive severance payments (TFR – trattamento di fine rapporto) equal to 7.4 percent of the employee’s annual gross compensation for each year worked. Other 2015 Jobs Act measures include universal unemployment and maternity benefits and a reduced number of official labor contract templates (from 42 to six). For example, Italy’s unemployment insurance (NASPI) provides up to six months of coverage for laid-off workers. The government also provides worker retraining and job placement assistance, but services vary by region. Implementation of robust national active labor market policies remains in progress. The NRRP includes provisions for unemployment benefit reform and new active labor policies that the government approved as part of the 2022 budget. In 2018 the government introduced the “Dignity Decree,” which rolled back some structural reforms to Italy’s labor market adopted as part of the 2015 Jobs Act. For example, the Dignity Decree extended incentives to hire people under 35 years of age, set limits on the renewal of short-term contracts (the government suspended the limit during the pandemic), and made it costlier for companies to fire workers.

Italy offers residents other social safety net protections. In 2017 the government implemented an anti-poverty plan (Reddito di Inclusion, or “Inclusion Income”) to provide some financial relief and training to the indigent and those below a certain income threshold. In the 2019 budget, the government introduced the Citizenship Income (Reddito di Cittadinanza), which replaced and broadened the 2017 Inclusion Income program. The Citizenship Income program provides a basic income of €780 per month to eligible citizens and acts as an employment agency to some participants. The estimated annual cost of the program was approximately €6.5 billion, but the pandemic increased the number of potential beneficiaries. The program benefits around 1.3 million households (or 3.1 million individuals).

In 2019 the government implemented an early retirement plan (Quota 100), which changed the pension law and permitted earlier retirement for eligible workers aged 62 or older with at least 38 years of employment. The benefit expired at the end of 2021, although the government proposed a less generous early retirement pilot program in the 2022 budget and is actively negotiating pension reform with unions.

While the 2015 Jobs Act included a statutory minimum wage, the government has yet to implement the policy. With no national minimum wage, sector-wide collective bargaining determines prevailing wages. The government in 2016 established an agency for Job Training and Placement (ANPAL) to coordinate (with Italian regional governments) the implementation of many labor policies. ANPAL oversees the relocation allowance (Assegno di Ricollocazione), an initiative to provide unemployment benefits to workers willing to move to different regions, and a related special wage guarantee fund (Cassa Integrazione Straordinaria) that provides stipends for retraining.

The Citizenship Income program and ANPAL appear to have failed in their goal of helping eligible workers find jobs. However, the Citizenship Income program seems to have played a role in reducing poverty before the pandemic and limiting its rise in 2020 during the economic crisis. In March 2021, the Ministry of Labor set up a committee to reform the Citizenship Income program. The 2022 budget provided extra funds to the program (€8.8 billion for 2022-2029) and implemented more stringent qualification criteria. Historical regional labor market disparities remain unchanged, with the southern third of the country posting a significantly higher unemployment rate than northern and central Italy. Despite these differences, internal migration within Italy remains modest and limited to highly educated workers that cannot find jobs in the South. At the same time, industry-wide national collective bargaining agreements set equal wages across the entire country.

Italy is a member of the International Labor Organization (ILO), and Italy does not waive existing labor laws to attract or retain investments. Collective labor agreements in different professions periodically fix the terms and conditions of employment. Italian unions fall into four major national confederations; the General Italian Confederation of Labor (CGIL), the Italian Confederation of Workers’ Unions (CISL), the Italian Union of Labor (UIL), and the General Union of Labor (UGL). The first three organizations are affiliated with the International Confederation of Free Trade Unions (ICFTU), while UGL is usually affiliated with the World Confederation of Labor (WCL). The confederations negotiate national-level collective bargaining agreements with employer associations that are binding on all employers in a sector or industry.

Collective bargaining is widespread, occurring at the national level and used primarily by labor to secure compensation for inflation, cost-of-living adjustments and bonuses for increased productivity and profitability. Firm-level collective bargaining is limited, and the Italian Constitution provides that unions may reach collective agreements binding on all workers. There are no official estimates of the percentage of the economy covered by collective bargaining agreements. However, a 2019 estimate from the European Trade Union Institute estimated collective bargaining coverage was approximately 80 percent (for national-level bargaining), with less coverage for industry-level agreements and minimal coverage for company-level agreements.

Collective agreements may last up to three years, although the current practice renews collective contracts annually. Collective bargaining establishes the minimum standards for employment, but employers retain the discretion to apply more favorable treatment to some employees covered by the agreement.

Labor disputes are handled through the civil court system, though subject to specific procedures. Before entering the civil court system, parties must first attempt to resolve their disputes through conciliation (administered by the local office of the Ministry of Labor) and through specific union-agreed dispute resolution procedures.

In cases of proposed mass layoffs or facility closures, the Ministry of Economic Development may convene a tripartite negotiation (Ministry, company, and union representatives) to reach a mutually acceptable agreement to avoid layoffs or closure. In recent years, U.S. companies have faced significant resistance from labor unions and politicians when attempting to right-size operations. Due to the COVID-19 pandemic, the government banned most layoffs through 2021. The end of the ban did not generate any relevant impact on layoffs and employment, and the 2022 budget extended the prohibition to end-April 2022.

There have been no recent strikes that posed investment risks. The Italian Constitution recognizes an employee’s right to strike. Strikes are permitted in practice but are typically short-term (e.g., one working day) to draw attention to specific areas of concern. In addition, workers (or former employees) commonly participate in demonstrations to show opposition to proposed job cuts or facility closings, but these demonstrations have not threatened investments. In addition, occasional strikes by employees of local transportation providers may limit citizens’ mobility.

14. Contact for More Information

U.S. Embassy Rome
Economic Section
Via Vittorio Veneto, 119
Tel. 39-06-4674-2867
RomeECON@state.gov

Mailing Address:
Unit 9500
Attn: Economic Section
DPO, AE 09624
Email: RomeECON@state.gov 
Tel: +39 06 4674 2107

New Zealand

Executive Summary

After weathering the pandemic better than most countries, the New Zealand economy has begun to overheat. Net debt to GDP has increased from 19.5 percent prior to the onset of Covid restrictions to 34.5 percent at the end of 2021. The increase in debt has been due in part to spending measures the government has undertaken for Covid response and recovery. These measures were able to support economic activity during extensive Covid-related domestic lockdowns and travel restrictions, but along with supply chain disruptions, they have begun to contribute to higher inflation. Nationwide labor shortages across a variety of sectors have also had a sizeable impact on the economy. In response to war in Ukraine, the New Zealand government rapidly passed historic sanctions legislation targeting individuals, companies, and assets associated with Russia’s invasion. Sanctions are expected to have a limited direct impact on the investment climate in New Zealand.

While a swift border closure and the imposition of lockdowns originally helped stamp out community transmission of Covid, the appearance of the Omicron variant in January 2022 resulted in an outbreak that put pressure on the health system. At time of writing, border restrictions were being phased out in favor of a management approach to the pandemic. The government announced its plans to open the New Zealand border to travelers from visa-waiver countries on May 1. By October, it is expected that the border will fully reopen. Since 2020, the tourism sector has suffered the most, while primary exports and the housing market have helped to sustain the economy. Unemployment is currently 3.2 percent, a record low.

New Zealand has an international reputation for an open and transparent economy where businesses and investors can make commercial transactions with ease. Major political parties are committed to an open trading regime and sound rule of law practices. This has been regularly reflected in high global rankings in the World Bank’s Ease of Doing Business report and Transparency International’s Perceptions of Corruption index. New Zealand is party to a multitude of free trade agreements (FTA). In February 2022, the country signed its latest, an FTA with the United Kingdom.

Successive governments accept that foreign investment is an important source of financing for New Zealand and a means to gain access to foreign technology, expertise, and global markets. Some restrictions do apply in a few areas of critical interest including certain types of land, significant business assets, and fishing quotas. These restrictions are facilitated by a screening process conducted by a government agency.

The current Labour-led government welcomes productive, sustainable, and inclusive foreign investment, but since being elected in October 2017 and reelected in October 2020, there has been a modest shift in economic priorities to social initiatives while continuing to acknowledge New Zealand’s dependence on trade and foreign investment. Cabinet has agreed a whole-of-government framework that will drive climate change policy. This national initiative is currently underway to reduce the country’s emissions and is developing a pathway for farmers to reduce agricultural emissions. The rapidly developing digital and e-commerce landscape is supported by government initiatives that expand the knowledge base, while making a priority of digital inclusion. Along with its focus on post-pandemic recovery, the New Zealand government has invested in a digital, innovative future that aims to secure multilateral agreements with e-commerce rules that address the complexities of the evolving digital economy.

The 2022 Investment Climate Statement for New Zealand uses the exchange rate of NZD 1 = USD 0.70

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 1 of 180 https://www.transparency.org/en/cpi/2021 
Global Innovation Index 2021 26 of 131 https://www.globalinnovationindex.org/analysis-indicator 
U.S. FDI in partner country ($M USD, historical stock positions) 2020 $12,900 https://ustr.gov/countries-regions/southeast-asia-pacific/new-zealand 
World Bank GNI per capita 2020 $41,550 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD 

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

7. State-Owned Enterprises

The Treasury monitors 12 State-Owned Enterprises (SOEs), three mixed-ownership-model entities, and 29 Crown entities. Together, these entities make up the broader SOE sector in New Zealand, which is concentrated in the energy and transportation sectors. In the year to June 2021, the asset base of the 12 SOEs was NZD 50.7 billion (USD 35.5 billion). While figures for net income are not available, the operating balance for the sector was NZD 184 million (USD 129 million). In the same period, mixed ownership companies reported an asset base of NZD 28.8 billion (USD 20.2 billion) and an operating balance of NZD 410 million (USD 287 million). For more information on the financial performance of the SOEs and Crown entities, please visit https://www.treasury.govt.nz/publications/year-end/financial-statements-2021-html  where a partial list of SOEs is available.

The Treasury’s Governance & Appointments team provides advice to Ministers on board appointments, which typically involve local personnel. Legislation of SOEs falls under the State-Owned Enterprises Act 1986, which sets up processes to improve efficiency in the sector. All SOEs are registered as public companies and are bound by the Companies Act and the Fair Trade Act, which clearly define the relationships between companies and their directors/shareholders, and the market. In the late 1990s, competition law under the Commerce Act was strengthened to provide for penalties for misuse of a dominant position. The Commerce Commission “ComCom” sets out guidelines and policies for anti-competitive behavior. A suspected breach of the Commerce Act, inclusive of those involving an SOE, is reported to ComCom’s website at https://comcom.govt.nz/contact-us  and is immediately investigated.

8. Responsible Business Conduct

The New Zealand government actively promotes corporate social responsibility (CSR), which is widely practiced throughout the country. There are New Zealand NGOs dedicated to facilitating and strengthening CSR, including the New Zealand Business Council for Sustainable Development, the Sustainable Business Network, and the American Chamber of Commerce in New Zealand.

New Zealand is committed to both the OECD due diligence guidance for responsible supply chains of minerals from conflict-affected and high-risk areas, and the OECD Guidelines for Multinational Enterprises. Multi-national businesses are the main focus, such as a New Zealand company that operates overseas, or a foreign-owned company operating in New Zealand. The guidance can also be applied to businesses with only domestic operations that form part of an international supply chain. Individuals wishing to complain about the activity of a multi-national business that happened in another country, will need to contact the National Contact Points of that country. In New Zealand, MBIE is the NCP to carry out the government’s responsibilities under the guidelines.

To help businesses meet their responsibilities, MBIE has developed a short version of the guidelines to assess the social responsibility ‘health’ of enterprises, and for assessing the actions of governments adhering to the guidelines. If further action is needed, MBIE provide resolution assistance, such as mediation, but do not adjudicate or duplicate other tribunals that assess compliance with New Zealand law. MBIE is assisted by a liaison group that meets once a year, with representatives from other government agencies, industry associations, and NGOs.

As reported over the past five years in the Trafficking in Persons report, human traffickers exploit domestic and foreign victims in New Zealand.  Foreigners from South and East Asia, the Pacific, and some countries in Latin America are vulnerable to working as forced laborers in several of New Zealand’s tourist, construction, and agribusinesses. Temporary migrant workers in sectors most negatively affected by pandemic, such as hospitality and tourism, are increasingly vulnerable to exploitation.

9. Corruption

New Zealand is renowned for its efforts to ensure a transparent, competitive, and corruption-free government procurement system. The country consistently achieves top ratings in Transparency International’s Perceptions of Corruption Perception Index. Stiff penalties against bribery of government officials as well as those accepting bribes are strictly enforced. The Ministry of Justice provides guidance on its website for businesses to create their own anti-corruption policies, particularly improving understanding of the New Zealand laws on facilitation payments. U.S. firms have not identified corruption as an obstacle to investing in New Zealand.

New Zealand supports multilateral efforts to increase transparency of government procurement regimes. The country joined the WTO Government Procurement Agreement (GPA) in 2012, citing benefits for exporters, while noting that there would be little change for foreign companies bidding within New Zealand’s totally deregulated government procurement system. New Zealand’s accession to the GPA came into effect in August 2015.

New Zealand also engages with Pacific Island countries in capacity building projects to bolster transparency and anti-corruption efforts. The country has signed and ratified the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, and the UN Convention against Transnational Organized Crime. In 2003, New Zealand signed the UN Convention against Corruption and ratified it in 2015.

The legal framework for combating corruption in New Zealand consists of domestic and international legal and administrative methods. Domestically, New Zealand’s criminal offences related to bribery are contained in the Crimes Act 1961 and the Secret Commissions Act 1910. If the acts occur outside New Zealand, proceedings may be brought against them under the Crimes Act if they are a New Zealand citizen, resident, or incorporated in the country. Penalties include imprisonment up to 14 years and foreign bribery offences can incur fines up to the greater of NZD 5 million (USD 3.4 million) or three times the value of the commercial gain obtained.

The New Zealand government has a strong code of conduct, the Standards of Integrity and Conduct, which applies to all State Services employees and is rigorously enforced. The Independent Police Conduct Authority considers complaints against New Zealand Police and the Office of the Judicial Conduct Commissioner was established in August 2005 to deal with complaints about the conduct of judges. New Zealand’s Office of the Controller and Auditor-General and the Office of the Ombudsman take an active role in uncovering and exposing corrupt practices. The Protected Disclosures Act 2000 was enacted to protect public and private sector employees who engage in “whistleblowing.”

The Ministry of Justice is responsible for drafting and administering the Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) legislation and regulations. The AML/CFT Amendment Act 2017 extends the 2009 Act to cover a wider group of professionals, such as lawyers and accountants, along with businesses that deal in high-value goods. The New Zealand Police Financial Intelligence Unit estimate that NZD 1.3 billion (USD 910 million) of criminal proceeds is laundered in New Zealand annually, driven in part by the ease of forming a business in the country. The Department of Internal Affairs is working on a solution for businesses that are facing difficulty meeting their AML/CFT obligations during COVID-19.

After a standard review of the 2017 general election and 2016 local body elections, the Justice Select Committee conducted an inquiry in 2019 on the issue of foreign interference through politicized social media campaigns and from foreign donations to political candidates standing in New Zealand elections. New Zealand intelligence agencies acknowledged political donations as a legally sanctioned form of participation in New Zealand politics but raised concerns when aspects of a donation are obscured or are channeled in a way that prevents scrutiny of the origin of the donation, when the goal is to covertly build and project influence. In December 2019 the government passed the Electoral Amendment Act under urgency to ban donations from overseas persons to political parties and candidates over NZD 50 (USD 35) down from the previous NZD 1,500 (USD 1050) maximum, to reduce the risk of foreign money influencing the election process.

10. Political and Security Environment

New Zealand is a stable liberal democracy with almost no record of significant political violence.

The New Zealand government raised its national security threat level for the first time from “low” to “high” after the terrorist attack on two mosques in Christchurch on March 15, 2019.  One month later it lowered the risk to “medium” where a “terrorist attack, or violent criminal behavior, or violent protest activity is assessed as feasible and could well occur.”  The incident led to wide-ranging gun law reform that restricts semi-automatic firearms and magazines with a capacity of more than ten rounds.  An amnesty buy-back scheme of prohibited firearms administered by the NZ Police ran until December 20, 2019.

A series of anti-vaccine mandate protests in Wellington commenced February 8, 2022, and lasted for 23 days. Although not overtly violent, they included groups that blocked roads, trespassed, and caused general disruption.  The issue has not been politicized, however, with complete cross-aisle agreement from all parties in Parliament not to respond to the demands of the protestors – who remain a tiny minority in a country that is among the most completely vaccinated in the world.

11. Labor Policies and Practices

Following restrictive Covid-related immigration policies, the New Zealand labor market tightened further from already-tight levels pre-Covid. Unemployment is currently 3.2 percent. Labor shortages are reported across a multitude of sectors but are most pronounced in construction and agriculture, where specialty skills and migrant workers are impacted by immigration regulations.

New Zealand’s informal economy is considered to be relatively modest, contributing approximately one-tenth of GDP. The relatively small size of the informal economy can be explained by low levels of corruption, along with respect for the rule of law and regulations.

New Zealand operates a Recognized Seasonal Employer (RSE) scheme that allows the horticulture and viticulture industry to recruit workers from the Pacific Islands for seasonal work to supplement the New Zealand workforce. There have been prosecutions and convictions for the exploitation of migrant workers, with reports that the hospitality, agriculture, viticulture, and construction industries are most effected. New Zealand recruitment agencies that recruit workers from abroad must use a licensed immigration adviser. Impacted by Covid, the RSE scheme underwent changes during the pandemic. While immigration was heavily restricted between 2020 and 2022, the RSE was eventually expanded in early 2022 with an announcement by the Government that the cap would be increased for Pasifika workers in the horticulture sector.

New Zealand has consistently maintained an active and visible presence in the International Labour Organization (ILO), being a founding member in 1919, and its representatives have attended the annual International Labour Conferences since 1935. The ILO and the government of New Zealand have collaborated on several initiatives, including the elimination of child labor in Fiji, employment creation in Indonesia, and the improvement of labor laws in Cambodia.

The government has taken a more proactive approach to enforcing employment law in New Zealand, because the migrant worker population has increased rapidly in recent years and the resources to protect those workers have not kept up with the increase. The government has been steadily increasing the number of labor inspectorates – situated within MBIE – to double the number in 2017.

There is no stated government policy on the hiring of New Zealand nationals, however certain jobs within government agencies that handle sensitive information may have a citizenship requirement, minimum duration of residency, and require background checks.

Labor laws are generally well enforced, and disputes are usually handled by the New Zealand Employment Relations Authority.

MBIE provides guidance for employers on minimum standards of employment mandated by law, guidelines to help promote the employment relationship, and optional guidelines that are useful in some roles or industries. Agreements on severance and redundancy packages are usually negotiated in individual agreements. For more see: https://www.employment.govt.nz/ 

After a three-year review and consultation, the government introduced the Screen Industry Workers Bill in February 2020. The previous government passed the Employment Relations (Film Production Work) Amendment Act 2010 – commonly referred to as the “Hobbit law” -which put limits on the ability of workers on film productions to collective bargaining.

New Zealand law provides for the right of workers to form and join independent unions of their choice without previous authorization or excessive requirements, to bargain collectively, and to conduct legal strikes, with some restrictions. Contractors cannot join unions, bargain collectively, or conduct strike action. Police have the right to organize and bargain collectively but sworn police officers do not have the right to strike or take any form of industrial action. In November 2019 MBIE sought feedback on a discussion document entitled “Better protections for contractors” to strengthen legal protections for contractors. They aim to ensure that contractors receive their minimum rights and entitlements, reduce the imbalance of bargaining power between firms and contractors who are vulnerable to poor outcomes, and ensure that system settings encourage inclusive economic growth and competition. Submissions closed in February 2020.

The ERA requires registered unions to file annual membership returns with the Companies Office. MBIE estimate total union membership at 380,659 for the March 2020 quarter, representing 16.4 percent of all employees in the New Zealand labor force.

Industrial action by employees who work for providers of key services are subject to certain procedural requirements, such as mandatory notice of a period determined by the service. New Zealand considers a broader range of key “essential services” than international standards, including: the production and supply of petroleum products; utilities, emergency workers; the manufacture of certain pharmaceuticals, workers in corrections and penal institutions; airports; dairy production; and animal slaughtering, processing, and related inspection services.

The number of work stoppages has been on a downward trend until the Labour-led government took office in 2017. The number of work stoppages increased from 3 in 2016 (involving 430 employees causing 195 lost workdays), to 143 in 2018 (involving 11,109 employees causing 192 lost workdays and NZD 1.2 million (USD 780,000) in lost wages), to 159 in 2019 (involving 53,771 employees causing 142,670 lost workdays and NZD 9.2 million (USD 6 million) in lost wages). In 2020 there were 112 work stoppages involving 595 employees causing 613 lost workdays and NZD 120,000 (USD 84,000) in lost wages. (While figures have not been released for 2021, health care and rail workers voted on strike action during 2021 and 2022.)

Work stoppages include strikes initiated by unions and lockouts initiated by employers, compiled from the record of strike or lockout forms submitted to MBIE under the Employment Relations Act 2000. The data does not cover other forms of industrial action such as authorized stop-work meetings, strike notices, protest marches, and public rallies which have also increased in recent years. Several strikes during the year involved employees of United States businesses or franchises particularly within the fast-food industry. The New Zealand government does not get involved in individual work disputes unless the striking employees violate their legislated responsibilities.

The Labour-led government campaigned on a promise to lift the minimum wage to NZD20 (USD 13) by April 2021. From April 1, 2022, the minimum wage for adult employees who are 16 and over and are not new entrants or trainees is NZD 21.20 (USD 14.84) per hour. The new entrants and training minimum wage is NZD 16.96 (USD 11.87) per hour. In recent years some local government agencies have raised minimum wages for their staff up from the government mandated rate to a “living wage” of nearly NZD 22.75 (USD 15.93) as of 2021. All businesses in New Zealand affected by COVID-19 have been eligible to receive from the government a wage subsidy from March, to pay their employees 80 percent of their salary to stem job losses.

The Health and Safety at Work Act 2015 sets out the health and safety duties for work carried out by a New Zealand business. The Act contains provisions that affect how duties apply where the work involves foreign vessels. These provisions take account of the international law principle that foreign vessels are subject to the law that applies in the flag state they are registered under. Generally New Zealand law does not apply to the management of a foreign-flagged vessel but does apply to a New Zealand business that does work on that vessel. The Fisheries (Foreign Charter Vessels and Other Matters) Bill 2014 has required all foreign charter fishing vessels to reflag to New Zealand and operate under New Zealand’s full legal jurisdiction since May 2016.

In March 2017, the New Zealand government’s ratification of the ILO’s Maritime Labor Convention (MLC) came into effect. While New Zealand law is already largely consistent with the MLC, ratification gives the Government jurisdiction to inspect and verify working conditions of crews on foreign ships in New Zealand waters. More than 99 percent of New Zealand’s export goods by volume are transported on foreign ships. About 890 foreign commercial cargo and cruise ships visit New Zealand each year.

The Maritime Transport Amendment Act 2017 implements New Zealand’s accession to the intergovernmental International Oil Pollution Compensation’s Supplementary Fund Protocol, 2003. The fund gives New Zealand access to compensation in the event of a major marine oil spill from an oil tanker and exercises New Zealand’s right to exclude the costs of wreck removal, cargo removal and remediating damage due to hazardous substances from liability limits. Accession to the Protocol was prompted in part by New Zealand’s worst maritime environmental disaster in October 2011 when a Greek flagged cargo ship ran aground creating a 331 ton oil spill resulting in NZD 500 million (USD 350 million) in clean-up costs.

On April 4, 2022, the Public Health Response Order 2021 requiring mandatory Covid vaccinations was removed for some workers. Mandatory vaccines remain in place for those employed in health and disability sectors, prison staff, and those working at the border. Border restrictions to enter New Zealand are also currently being eased. From May 1, travelers from visa waiver countries will be permitted to enter the country. From October, the border is expected to fully reopen. For more information, please visit:

https://www.immigration.govt.nz/about-us/covid-19/border-closures-and-exceptions/border-entry-requirements 

14. Contact for More Information

Economic Officer
U.S. Embassy Wellington
PO Box 1190
Wellington 6140
New Zealand
+64-4-462-6000

Norway

Executive Summary

Norway is a modern, highly developed country with a small but very strong economy. Per capita GDP is among the highest in the world, boosted by decades of success in the oil and gas sector and other world-class industries like shipping, shipbuilding, and aquaculture. The major industries are supported by a strong and growing professional services industry (finance, ICT, legal), and there are emerging opportunities in fintech, cleantech, medtech, and biotechnology. Strong collaboration between industry and research institutions attracts international R&D activity and funding. Norway is a safe and straightforward place to do business, ranked 9 out of 190 countries in the World Bank’s 2020 Doing Business Report, and fourth out of 180 on Transparency International’s 2021 Corruption Perceptions Index. Norway is politically stable, with strong property rights protection and an effective legal system. Productivity is significantly higher than the EU average.

Norway has managed the coronavirus pandemic with relative success two years in, maintaining a low death rate, protecting health facilities’ capacity, and cushioning economic shocks. Swift implementation of social mobility restrictions, strong political unity, and broad public support were among the country’s key success factors. Norway’s solid financial footing, including fiscal reserves in its trillion-dollar sovereign wealth fund and monetary policy maneuverability, enabled the government to finance generous support packages to mitigate the pandemic’s economic impact on workers and businesses.

Norwegian lawmakers and businesses welcome foreign investment as a matter of policy and the government generally grants national treatment to foreign investors. Some restrictions exist on foreign ownership and use of natural resources and infrastructure. The government remains a major owner in the Norwegian economy and retains monopolies on a few activities, such as the retail sale of alcohol.

While not a member of the European Union (EU), Norway is a member of the European Economic Area (EEA, which also includes Iceland and Liechtenstein) with access to the EU single market’s movement of persons, goods, services, and capital. The Norwegian government continues to liberalize its foreign investment legislation with the aim of conforming more closely to EU standards and has cut bureaucratic regulations over the last decade to make investment easier. Foreign direct investment in Norway stood at USD 160 billion at the end of 2021 and has more than doubled over the last decade. There are approximately 8,100 foreign-owned companies in Norway, and over 700 U.S. companies have a presence in the country, employing more than 58,000 people.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 4 of 180 http://www.transparency.org/research/cpi/overview 
Global Innovation Index 2021 20 of 132 https://www.globalinnovationindex.org/analysis-indicator 
U.S. FDI in partner country ($M USD, historical stock positions) 2020 USD 21.5 billion https://apps.bea.gov/international/factsheet/ 
World Bank GNI per capita 2020 USD 78,290 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD 

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

7. State-Owned Enterprises

The government continues to play a strong role in the Norwegian economy through its ownership or control of many of the country’s leading commercial firms. The public sector accounts for nearly 66 percent of GDP. The Norwegian government is the largest owner in Norway, with ownership stakes in a range of key sectors (e.g., energy, transportation, finance, and communications). 74 State-Owned Enterprises (SOEs) are managed directly by the relevant government ministries, and approximately 33 percent of the stock exchange’s capitalization is in government hands. State ownership in companies can be used as a means of ensuring Norwegian ownership and domicile for these firms.

Norway is party to the Government Procurement Agreement (GPA) within the framework of the World Trade Organization (WTO) and a signatory to all relevant annexes. SOEs are thus covered under the agreement.

Successive Norwegian governments have sustained stable levels of strong, transparent, and predictable government ownership. The former center-right government took limited steps to reduce ownership stakes.

The GON publishes the annual state ownership report, available in English here: https://www.regjeringen.no/en/topics/business-and-industry/state-ownership/statlig-eierskap-publikasjoner/id737457/  and a white paper on state ownership in companies available here: https://www.regjeringen.no/no/dokumenter/meld.-st.-8-20192020/id2678758 .

8. Responsible Business Conduct

Corporate Social Responsibility (CSR) is very much part of Norwegian corporate and political consciousness. Significant attention has been given to ethical and sustainable business practices over the last several years; the GON has issued a series of white papers, most recently in 2015, on promoting human rights through foreign policy and foreign development assistance. In 2009, a white paper laid out responsibility of Norwegian businesses in the global economy and in 2006-2007, the GON set down guidelines for ethical and responsible conduct in state-owned enterprises, and incorporated climate policy, procurement policy, and development policy as parts of the GON’s broader CSR vision.

As an OECD member, Norway adheres to the OECD Guidelines for Multinational Enterprises. Norway’s National Contact Point (NCP) for the OECD Guidelines raises awareness of the due diligence approach of the Guidelines and handles complaints against Norwegian businesses with international operations, in the event they are not behaving in accordance with the Guidelines. The NCP facilitates resolution of these complaints through dialogue and mediation. Kompakt is the Government’s consultative body on matters relating to CSR: https://www.regjeringen.no/en/topics/foreign-affairs/business-cooperation-abroad/innsikt/kompakt_en/id633619/ 

The Norwegian Accounting Act requires companies listed on the Oslo Stock Exchange to provide a report on their policies and practices for corporate governance. The Norwegian Corporate Governance Board, composed of nine independent organizations, issues and updates the Norwegian Code of Practice for the above-mentioned companies. Transparency and disclosure are key to the development of corporate social responsibility. Large enterprises are required under Section 3-3c of the Accounting Act to report on their CSR activities. Public disclosure requirements are increasingly regulated. The work of the EU in this area may lead to the development of regulations of relevance to Norway.

In the mining sector, Norway encourages adherence to the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Afflicted and High-Risk Areas and participates in the Extractive Industries Transparency Initiative (EITI).

In order to prevent tax evasion and the use of tax havens to conceal financial information, large enterprises and public-interest entities that are active in the extractive industry or in the logging of primary forests are required to report on a country-by-country basis. In addition, Norway has entered into a number of new bilateral tax information exchange agreements in recent years.

Norway is a signatory of The Montreux Document on Private Military and Security Companies, a supporter of the International Code of Conduct or Private Security Service Providers, and a participant in the International Code of Conduct for Private Security Service Providers’ Association (ICoCA).

9. Corruption

Business is generally conducted “above the table” in Norway, and Norway ranks fourth out of 180 countries on Transparency International’s 2021 Corruption Perceptions Index.  Corrupt activity by Norwegian or foreign officials is a criminal offense under Norway’s Penal Code. Norway’s anti-corruption laws cover illicit activities overseas, subjecting Norwegian nationals/companies who bribe officials in foreign countries to criminal penalties in Norwegian courts. In 2008, the Ministry of Foreign Affairs launched an anti-corruption initiative, focused on limiting corruption in international development efforts.

Norway is a member of the Council of Europe’s anti-corruption watchdog Group of States against Corruption (GRECO) and ratified the Criminal Law Convention on Corruption in 2004, without any reservations. Norway has ratified the UN Anticorruption Convention (2006) and is a signatory of the OECD Convention on Combating Bribery.

10. Political and Security Environment

Norway is a vibrant, stable democracy. Violent political protests or incidents are extremely rare, as are politically motivated attacks on foreign commercial projects or property. However, on July 22, 2011, a Norwegian individual motivated by extreme anti-Islam ideology carried out twin attacks on Oslo’s government district and on the Labor Party’s youth summer camp in Utøya, killing 77 people. The individual, now in prison, operated alone and this incident is not generally considered an indicator of increased political violence in the future.

11. Labor Policies and Practices

Obtaining work permits for foreign labor, particularly for semi-skilled workers, can be cumbersome.

Skilled and semi-skilled labor is usually available in Norway. The labor force as of year-end 2021 totaled about 2.917 million persons, representing 72.3 percent of the working-age population. 2.817 million persons were employed at year end 2021 (72.3% of male labor force and 67.3% of female labor force), with unemployment at 3.4 percent.

Union membership is in excess of 1.94 million persons, 68 percent of the labor force. The unions are independent of the government but some, such as the largest (LO), have close and historic ties with the Labor Party. Norway has a highly centralized and constructive system of collective bargaining. The government may impose mandatory wage mediation should strikes threaten key sectors of the economy, particularly the oil and gas and transportation sectors. Mandatory wage mediation has been used 120 times since 1953, most recently in 2021 to end a strike among municipality workers ranging from nurses and teachers to janitors.

Employee benefits are generous, e.g., one year paid parental leave (shared between parents, and financed chiefly by the government), and unemployment benefits for up to 104 weeks. There are special provisions for layoffs linked to lower activity for the employer.

The average number of hours worked per week in one’s primary job, 33.6 in 2020, is the third lowest in the OECD, after the Netherlands and Denmark. Productivity, however, is high – significantly higher than the EU average. Sickness and absenteeism rates have been between 6-8 percent over the last decade and stood at 6.1 percent at the end of 2020. Relatively high disability rates, especially among young people, are a concern.

Norwegian blue-collar hourly earnings are comparatively high. High wages encourage the use of relatively capital-intensive technologies in Norwegian industry. Top-level executives and highly skilled engineers, on the other hand, are generally paid considerably less than their U.S. counterparts, which, when combined with relatively high wages at the bottom of the wage scale, contributes to Norway’s very high level of income equality relative to other OECD countries.

14. Contact for More Information

Stephen SCHLIEMAN
Economic Officer
Embassy of the United States of America
Morgedalsvegen 36
0378 Oslo
Norway
+47 2130 8665
oslopolecon@state.gov

Portugal

Executive Summary

The Portuguese economy bounced back from the pandemic, expanding by 4.9 percent in 2021 after an 8.4 percent contraction the prior year, benefitting from EU fiscal and monetary stimulus and a very high vaccination rate. The labor market has shown remarkable resiliency, with unemployment at 6 percent in January 2022, down from 7 percent a year before. GDP is expected to grow again by an estimated 5 percent in 2022, despite the economic shocks from the Russian war against Ukraine

The country will have a chance to boost its economic recovery, deploying more than €16 billion in EU grants and credit expected to fund state coffers between 2021 and 2026. It is expected these funds will be allocated in support of energy and digital transitions.

Increased flows of fossil fuels contributed to a 40 percent jump in trade in goods and services between Portugal and the United States to a record $10 billion in 2021. However, bilateral trade remains lop-sided with a large U.S. trade deficit of around $2.2 billion. Many U.S. companies nvest in business/service delivery centers in Portugal, taking advantage of Portugal’s relatively low-cost, talented, and multilingual labor force.

The country continues to push to improve market attractiveness. Portugal’s export and FDI promotion agency (AICEP) celebrated a record €2.7 billion of contracted FDI in 2021, double that locked-in during the last (2019) high mark. Portugal’s metalworking, auto component, and machinery industries predominate the recent FDI trends, accounting for about 30 percent of the contracted flows, according to the Government .

Portugal’s tech startup scene is thriving, featuring at least six fast-growing firms with ‘Portuguese-U.S. DNA’ that achieved ‘unicorn’ status with valuations above $1 billion– Outsystems, Talkdesk, Feedzai, Remote, SwordHealth and Anchorage. These high-tempo firms are flourishing after tapping into opportunities in the U.S. startup ecosystem that provides not only funding but also knowhow, networks, and customers, ultimately producing jobs on both sides of the Atlantic.

Established in 2012, Portugal’s “Golden Visa” program gives fast-track residence permits to foreign investors who meet certain conditions, such as making substantial capital transfers or certain real estate acquisitions. Between 2012 and February 2022, Portugal issued 10,442 ‘Golden Visas’, representing €6.2 billion of investment, of which more than €5.6 billion went to real estate. Chinese nationals have been the main beneficiaries of the special program for residence permits, accounting for almost 50 percent (5,066) of the 10,442 total, followed by Brazilians with 1,072. Russian citizens were assigned 431 Golden visas since 2012. As of January 2022, Portugal modified the “Golden Visa” program to restrict the purchase of real estate to regions outside urban hotspots such as Lisbon, Porto, and overbuilt areas of the popular Algarve with the aim of boosting rural investment. Loopholes in the program appear to be enabling urban purchases in any event. On March 28, the European Commission urged member states to immediately repeal existing investor citizenship schemes, which the Commission claimed pose inherent risks.

In terms of risks, the independent Portuguese data protection agency (CNPD) has targeted U.S. companies by issuing a succession of judicial opinions warning against the use of U.S. technology firms – including Cloudflare, Respondus, and Amazon Web Services (AWS), arguing that as they are headquartered in the United States and therefore subject to U.S. law, by definition, they have inadequate data privacy standards. CNPD has not found any specific wrongdoing by any U.S. technology firm but bases its rulings on the grounds that a target company is headquartered in the United States. On March 25, President Biden and EU Commission President von der Leyen announced a deal in principle on the Trans-Atlantic Data Privacy Framework, which will supplement the U.S.-EU Privacy Shield Framework (Privacy Shield). However, it remains to be seen how this new Trans-Atlantic Data Privacy Framework will affect EU-U.S. data flows in Portugal.

Portugal ranks second highest in terms of PRC investments in Europe (in relation to GDP). These investments are predominantly in the premier Portuguese companies, which the PRC leverages to reach other markets in Europe, Latin America, and Africa. Portugal’s investment screening regime was established in 2014, but the Government of Portugal has never strictly enforced it.

Despite the security risks, the Government continues to allow investments by and collaboration with untrusted vendors in 5G and Artificial Intelligence (AI). Huawei is using its educational and gender-equity programs to increase influence with high achieving students and access to key technology policymakers in the Government and private sector. The PRC is also attempting to gain a foothold in Portuguese 5G, AI, solar, and related infrastructure industries.

Portugal’s public debt, estimated at 127percent of GDP at the end of 2021, remains an issue, particularly if there is a shift in the benign monetary and sovereign risk sentiment that enabled Lisbon to enjoy issuing debt at record low prices in the last few years. The pace of corporate and household indebtedness has also increased.

Portugal’s primary trading partners are Spain, France, Germany, the United Kingdom, and the United States. Portugal suffers an acute brain drain, with high emigration rates among professionals leaving for higher paying careers in Switzerland, France, the UK, and elsewhere.

Beyond Europe, Portugal maintains significant links with Portuguese-speaking countries including Brazil, Angola, Mozambique, Cape Verde, and Guinea-Bissau. Portugal has one of the lowest fertility rates in Europe and net immigration (from Ukraine, Brazil, and other Portuguese-speaking countries) has prevented a fall in population.

Russia’s invasion of Ukraine will impact the Portuguese growth curve. Except for grain imports from Ukraine, energy intermediate goods, and liquified natural gas (LNG) imports from Russia, the country’s trade and investment relationship with both countries is limited. In LNG specifically, Russia accounted for 15 percent of imports, well below the 45 percent EU average. However, Portugal is a net importer of energy products, fully dependent on outside supply of crude and refined fossil fuels. It also imports natural gas for energy and generation, which acts as a key complement to the fast-growing renewable energy footprint of its solar, wind and hydro power assets. The country’s commercial balance will be negatively impacted by a long period of high global energy prices.

Portugal’s low installed solar capacity of about 7 percent of the energy mix is expected to reach 8 GW of solar capacity, or 27 percent of the mix by 2030. The Government is promoting significant investments in wind and solar energy development to meet its target of 47 percent energy from renewables by 2030. By 2021 the country reduced its external energy dependence by 9 percentage points (from 2005), seeking greater supply security by increasing domestic energy generation and reducing the consumption of primary energy by 17 percent. The Government has also talked about plans to launch a 2-5 GW offshore wind auction this summer (without providing details), in hopes of speeding up the deployment of large-scale offshore wind capacity to reduce energy dependence on Russia.

Portugal’s path to a carbon neutral economy includes incentives for energy efficiency; promoting diversification of energy sources; increasing electrification; reinforcing and modernizing infrastructure; developing more interconnections; market stability for investors; reconfiguring and digitalizing the market; incentives for research and innovation, promoting low-carbon processes, products and services; and improving energy services and information for consumers.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 32 of 180 http://www.transparency.org/research/cpi/overview
Global Innovation Index 2021 31 of 132 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 USD 2.54 billion https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 USD 21,790 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

7. State-Owned Enterprises

There are currently over 40 major state-owned enterprises (SOEs) operating in Portugal in the banking, health care, transportation, water, and agriculture sectors. Caixa Geral de Depositos (CGD) has revenues greater than one percent of GDP. The bank has the largest market share in customer deposits, commercial loans, mortgages, and many other banking services in the Portuguese market.

Parpublica is a government holding company for several smaller SOEs, providing audits and reports on these. More information can be found at: http://www.parpublica.pt/ . The activities and accounts of Parpublica are fully disclosed in budget documents and audited annual reports. In addition, the Ministry of Finance publishes an annual report on SOEs through a specialized monitoring unit (UTAM) that presents annual performance data by company and sector: In 2020, Parpublica  managed assets totaling €11 billion, employs 4,400 workers and the net income of the holding was €80 million.

When SOEs are wholly owned, the government appoints the board, although when SOEs are majority-owned the board of executives and non-executives’ nomination depends on the negotiations between government and the remaining shareholders, and in some cases on negotiations with EU authorities as well.

According to Law No. 133/2013, SOEs must compete under the same terms and conditions as private enterprises, subject to Portuguese and EU competition laws. Still, SOEs often receive preferential financing terms from private banks.

In 2008 Portugal’s Council of Ministers approved resolution no. 49/2007, which defined the Principles of Good Governance for SOEs according to OECD guidelines. The resolution requires SOEs to have a governance model that ensures the segregation of executive management and supervisory roles, to have their accounts audited by independent entities, to observe the same standards as those for companies publicly listed on stock markets, and to establish an ethics code for employees, customers, suppliers, and the public. The resolution also requires the Ministry of Finance’s Directorate General of the Treasury and Finances to publish annual reports on SOEs’ compliance with the Principles of Good Governance. Credit and equity analysts generally tend to criticize SOEs’ over-indebtedness and inefficiency, rather than any poor governance or ties to government.

8. Responsible Business Conduct

There is strong awareness of responsible business conduct in Portugal and broad acceptance of the need to consider the community among the key stakeholders of any company. The Group of Reflection and Support for Business Citizenship (GRACE) was founded in 2000 by a group of companies, primarily multinational enterprises, to expand the role of the Portuguese business community in social development.

The Ministry of Economy and AICEP encourage foreign and local enterprises to observe the due diligence approach of the OECD Guidelines for Multinational Enterprises, and both agencies jointly comprise the National Contact Point (NCP) to provide support for mediating disputes that may arise regarding the Guidelines. The Portuguese Business Ethics Association (APEE) is dedicated to promoting corporate social responsibility and works in collaboration with the Ministry of Economy’s Directorate-General of Economic Activities. It promotes events like Social Responsibility Week and celebrates protocols and agreements with companies to ensure they follow responsible business conduct principles incorporated into the labor code.

Portugal’s Competition Authority both encourages and enforces competition rules, including ethical business practices. The Competition Authority operates a leniency program for companies that self-identify lapses. There have not been any high profile, controversial instances of private sector impact on human rights. The Portuguese government enforces domestic laws effectively and fairly through the domestic courts system, and through the supra-national European Court of Human Rights. Within its constitution, Portugal states that constitutional precepts concerning fundamental rights must be interpreted and observed in harmony with the Universal Declaration of Human Rights.

The Portuguese legal and regulatory framework on corporate governance includes not only regulations and recommendations from the Portuguese Securities Market Commission (CMVM), but also specific legal provisions from the Portuguese Companies Code and the Portuguese Securities Code. CMVM promotes sound corporate governance for listed companies by setting out a group of recommendations and regulations on the standards of corporate governance. CMVM regulations are binding for listed companies.

Non-governmental organizations also promote awareness of environmental and good governance issues in business. These include Quercus Portugal, which publishes guidelines and organizes events to promote environmental responsibility in business practices, and Transparencia e Integridade Associacao Civica (TIAC), which produces reports on corruption on everything from soccer match-fixing to conflicts of interest in public and private enterprise. TIAC also allows whistle-blowers to anonymously submit reports of corruption through their website.

Portugal represents a success story in fighting child labor from its supply chain, as the public and private sector came together decisively to eradicate child labor issues from the 1990’s. However, Portugal remains a source, transit, and destination country for men, women, and children subjected to forced labor trafficking. In 2019, a series of large COVID-19 outbreaks unveiled how groups of migrant workers at berry farms were subject to poor housing and sanitary conditions.

Portugal does not participate in the Extractive Industries Transparency Initiative (EITI) or the Voluntary Principles on Security and Human Rights. The country’s two main umbrella unions, CGTP-Confederação Geral dos Trabalhadores Portugueses and UGT-União Geral dos Trabalhadores, also regularly denounce and combat non-compliant business practices, particularly related to labor rights violations.

Portugal potentially holds some of the largest lithium reserves in Europe and is preparing to advance with battery-grade ore mining. While some recognize the role of lithium for energy transition, several NGOs issued negative opinions of planned mine projects, warning about open-pit methods that will provoke dust, noise, and detonations around the clock, damaging the lifestyle and health of local population. Environmentalists also warn about the risks to local species such as water moles, the Iberian wolf and river mussels. In January 2020, 14 civil society and environmental associations signed a national manifest against Portugal’s mining plans

Department of State

Department of the Treasury

Department of Labor

Portugal’s national climate strategy aims to reach net zero emissions by 2050. In its 2021-2030 National Energy and Climate plan, Portugal sets out goals for decarbonization, energy efficiency, energy security, internal energy markets and research, innovation, and competitiveness. Portugal’s installed solar capacity is now about 7 percent of the energy mix and is expected to reach 8 GW of solar capacity, or 27 percent of the energy mix by 2030.  The Government is promoting significant investments in wind and solar energy development to meet its target of 47 percent energy from renewables by 2030. Portugal reduced its external energy dependence by 9.1 percentage points in 2021 versus 2005, increasing domestic energy generation and reducing the consumption of primary energy by 17 percent, ensuring greater supply security. Portugal’s path to a carbon neutral economy includes: incentives for energy efficiency; promoting diversification of energy sources; increasing electrification; reinforcement and modernization of infrastructure; development of interconnections; market stability for investors; reconfiguration and digitalization of the market; incentives for research and innovation, promotion of low-carbon processes, products and services; and improved energy services and information for consumers.

When it comes to public procurement and instruments for the State to accelerate the climate transition, Portugal has a ‘once-in-a-generation chance’ to boost its efforts. The country can use around €16.6 billion in European Union (EU) pandemic response funds expected to flow to state coffers between 2021 and 2026 to support its Recovery and Resilience Plan (RRP), of which the government will allocate 47 percent to efforts that help climate objectives. Public procurement and investment policies dictate that large infrastructure, industrial, mining, and other environmentally sensitive initiatives require the approval of impact assessment studies, supervised and assessed by the Portuguese Agency for the Environment (APA), before moving forward.

9. Corruption

U.S. firms do not identify corruption as an obstacle to foreign direct investment. Portugal has made legislative strides toward further criminalizing corruption. The government’s Council for the Prevention of Corruption, formed in 2008, is an independent administrative body that works closely with the Court of Auditors to prevent corruption in public and private organizations that use public funds. Transparencia e Integridade Associacao Civica, the local affiliate of Transparency International, also actively publishes reports on corruption and supports would-be whistleblowers in Portugal.

In 2010, the country adopted a law criminalizing violation of urban planning rules and increasing transparency in political party funding. In 2015, Parliament unanimously approved a revision to existing anti-corruption laws that extended the statute of limitations for the crime of trading in influence to 15 years, and criminalized embezzlement by employees of state-owned enterprises with a prison term of up to eight years. The laws extend to family members of officials and to political parties.

Despite being seen as generally aligned with the best international practices in terms of preventing and combating corruption, a June 2019 interim report by the Council of Europe’s Group of States against Corruption (GRECO) concluded that only one of the fifteen recommendations contained in GRECO´s Fourth Round Evaluation Report had been implemented satisfactorily or dealt in a satisfactory manner by Portugal at end-2019 in terms of compliance with GRECO anti-corruption recommendations addressed to lawmakers, judges and prosecutors.

Portugal ranked 32nd out of 180 countries in Transparency International (TI)’s 2021 Corruption Perception Index (CPI), an improvement of one position from the previous year.

Portugal approved a national anti-corruption strategy in December 2021. This legislative package includes a working group that prepares a national report, revises the whistle-blower protection framework, fraud-proofs legislation, improves public procurement processes, reinforces the transparency of political party financing, and ensures that companies have corruption prevention plans in place.

Portugal has laws and regulations to counter conflict-of-interest in awarding contracts or government procurement. Parliamentarians are required to declare their income, assets, and interests to the Authority for Transparency attached the Constitutional Court.

The Portuguese government encourages (and in some cases requires) private companies to establish internal codes of conduct that, among other things, prohibit bribery of public officials. Most private companies use internal controls, ethics, and compliance programs to detect and prevent bribery of government officials. As described above, the Competition Authority operates a leniency program for companies that self-identify infringements of competition rules, including ethical lapses.

Portugal has ratified and complies with both the UN Convention against Corruption and the OECD Anti-Bribery Convention.

10. Political and Security Environment

Since the 1974 Carnation Revolution, Portugal has had a long history of peaceful social protest. Portugal experienced its largest political rally since its revolution in response to proposed budgetary measures in 2012. Public workers, including nurses, doctors, teachers, aviation professionals, and public transportation workers organized peaceful demonstrations periodically in protest of insufficient economic support, low salary levels, and other measures.

11. Labor Policies and Practices

Numerous labor reform packages aimed at improving productivity were implemented after the 2011 bailout, but overall labor productivity remains a challenge. The annualized monthly minimum wage increased stands at €823.

After the difficulties of the eurozone debt crisis, when many Portuguese migrated out of the country along with some resident migrants, net-migration became positive again in 2017 and has strengthened since. The largest communities of workers come from Brazil, Cape Verde, Romania, Ukraine, UK, China, France, Italy, Angola, Guinea-Bissau, Nepal and India. In the Southern Algarve region, the tourism sector employs most of the migrant workers. Alentejo and the coastal regions of central Portugal, with their intensive agriculture sectors, host substantial Asian workers’ communities, especially from Bangladesh.

Employers are allowed to conduct collective dismissals linked to adverse market or economic conditions, or due to technological advancement, but must provide advance notice and severance pay. Depending on the seniority of each employee, an employer must provide between 15 to 75 days of advance notice, and pay severance ranging from 12 days’ to one month’s salary per year worked. Employees may challenge termination decisions before a Labor Court. Labor laws are uniformly applicable and enforced, including in Portugal’s foreign trade zone/free port in the Autonomous Region of Madeira.

Collective bargaining is common in Portugal’s banking, insurance, and public administration sectors. More information is available at the Directorate General for Labor Relations site.

Portugal has labor dispute resolution mechanisms in place through Labor Courts and Arbitration Centers. Labor strikes are not violent and of short duration. Labor laws are not waived in order to attract or retain investment.

Portugal is a member of the International Labor Organization (ILO), and has ratified all eight Fundamental Conventions as well as all four Governance (Priority) Conventions.

The Labor Code caps the work schedule at eight hours per day, and 40 hours per week. The public sector employee workweek, with certain exclusions, was capped at 35 hours in July 2016. Employees are entitled to at least 22 days of annual leave per year. Employers must pay employees a Christmas and vacation bonus, both equivalent to one month’s salary.

Gender pay gap inequality in Portugal worsened from 10.9 percent in 2019 to 11.4 percent in 2020, which is still better than the average EU difference (13 percent), according to Eurostat data . Portugal has shown progress in developing gender equality and gender mainstreaming policies, according to European Institute for Gender Equality (EIGE). The 2030 National Strategy on Gender Equality, aligned with the UN Sustainable Development Goals, established a plan to: promote gender equality; tackle violence against women and domestic violence; and, combat discrimination on the grounds of sexual orientation, gender identity and sexual characteristics.

Portugal’s Fraud Management and Economics Observatory estimates that the informal economy is worth about 27 percent of GDP, according to its last available analysis in 2015. The President of the Observatory said  in 2020 that the weight of the informal economy has likely “increased significantly” with the onset of the pandemic.

14. Contact for More Information

Embassy of the United States
Avenida das Forças Armadas
1600-081+351 21-770-2000
Email: icsportugalqueries@state.gov 

Spain

Executive Summary

Spain is open to foreign investment and actively seeks additional investment as a key component of its COVID-19 recovery. After six years of growth (2014-2019), Spain’s GDP fell 11 percent in 2020 – the worst performance in the Eurozone – due in large part to high COVID-19 infection rates, a strict three-month lockdown, border closures, and pandemic-related restrictions that decimated its tourism and hospitality sectors. By building on healthy fundamentals and fueled by up to 140 billion euros in Next Generation EU recovery funds, Spain rebounded with 5.1 percent GDP growth in 2021, and unemployment improved to 13.3 percent. Economic activity is expected to return to its pre-crisis level in 2023, though Russia’s unprovoked war in Ukraine could threaten the recovery by pushing up energy prices, compounding supply chain disruptions, and stoking inflation. Service-based industries, particularly those related to tourism, and energy-intensive industries remain most vulnerable to the economic shock. Spain’s key economic risks are high public debt levels and ballooning pension costs for its aging population, though these areas are targets for government reforms.

Despite COVID-19’s economic shock, Spain’s excellent infrastructure, well-educated workforce, large domestic market, access to the European Common Market, and leadership on renewable energy make it an appealing foreign investment destination. Spanish law permits up to 100 percent foreign ownership in companies, and capital movements are completely liberalized. According to Spanish data, in 2021, foreign direct investment flow into Spain was EUR 28.8 billion, 17.7 percent more than in 2020. Of this total, EUR 1.6 billion came from the United States, the fifth largest investor in Spain in new foreign direct investment. Foreign investment is concentrated in the energy, real estate, financial services, engineering, and construction sectors.

Spain aims to use its Next Generation EU recovery funds to transform the Spanish economy, especially through digitalization and greening of the economy, to achieve long-term increases in productivity and growth. Full financing is contingent on additional economic reforms beyond labor reform. Spain’s credit ratings remain stable, and issuances of public debt – especially for green bonds – have been oversubscribed, reflecting strong investor appetite for investment in Spain. However, small- and medium-sized enterprises (SMEs), which account for more than 99 percent of Spanish businesses and have been acutely impacted by the COVID-19 pandemic, still have some difficulty accessing credit and rely heavily on bank financing. Small firms also experience more challenges accessing EU recovery funds.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 34 of 180 http://www.transparency.org/
research/cpi/overview
Global Innovation Index 2021 30 of 132 https://www.globalinnovationindex.org/
analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 $38,500 https://apps.bea.gov/international/
factsheet/
World Bank GNI per capita 2020 USD 27,360 https://data.worldbank.org/indicator/
NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

7. State-Owned Enterprises

Spain’s public enterprise sector is relatively small, and the role and importance of state-owned enterprises (SOE) decreased since the privatization process started in the early 1980s. The reform of SOE oversight in the 1990s led the government to create the State Holding for Industrial Participations (SEPI) in 1995. SEPI has direct majority participation in 15 SOEs, which make up the SEPI Group, with a workforce of more than 78,000 employees. It is a direct minority shareholder in nine SOEs (five of them listed on stock exchanges) and participates indirectly in ownership of more than one hundred companies. Either legislative chamber and any parliamentary group may request the presence of SEPI and SOE representatives to discuss issues related to their performance. SEPI and the SOEs are required to submit economic and financial information to the legislature on a regular basis. The European Union, through specialized committees, also controls SOEs’ performance on issues concerning sector-specific policies and anti-competitive practices.

Companies with a majority interest: Agencia Efe, Cetarsa, Ensa, Grupo Cofivacasa, Grupo Correos, Grupo Enusa, Grupo Hunosa, Grupo Mercasa, Grupo Navantia, Grupo Sepides, GrupoTragsa, Hipodromodo la Zarzuela, Mayasa, Saeca, Defex (in liquidation)

Companies with a minority interest: Airbus Group, Alestis Aerospace, Enagas, Enresa, Hispasat, Indra, International Airlines Group, Red Electrica Corporacion, Ebro Foods

Attached companies: RTVE, Corporacion de Radio y Television Espanola

SEPI also has indirect participation in more than 100 subsidiaries and other investees of the majority companies, which make up the SEPI Group.

Corporate Governance of Spain’s SOEs uses criteria based on OECD principles and guidelines. These include the state ownership function and accountability, as well as issues related to performance monitoring, information disclosure, auditing mechanisms, and the role of the board in the companies.

8. Responsible Business Conduct

Although the visibility of responsible business conduct (RBC) efforts is still moderate by international standards, it has garnered growing interest over the last two decades. Today, almost all of Spain’s largest energy, telecommunications, infrastructure, transportation, financial services, and insurance companies, among many others, undertake RBC projects, and such practices are spreading throughout the economy.

Spain enforces domestic and EU laws and regulations to protect human rights, labor rights, consumer protection, and environmental protections. Spain endorsed the OECD Guidelines for Multinational Enterprises and supports the Montreux Document on Private Military and Security Companies. The national point of contact is the Ministry of Industry, Trade, and Tourism.

9. Corruption

Spain has a variety of laws, regulations, and penalties to address corruption. The legal regime has both civil and criminal sanctions for corruption, bribery, financial malfeasance, etc. Giving or accepting a bribe is a criminal act. Under Section 1255 of the Spanish civil code, corporations and individuals are prohibited from deducting bribes from domestic tax computations. There are laws against tax evasion and regulations for banks and financial institutions to fight money laundering terrorist financing. In addition, the Spanish Criminal Code provides for jail sentences and hefty fines for corporations’ (legal persons) administrators who receive illegal financing.

The Spanish government continues to build on its already strong measures to combat money laundering. After the European Commission threatened to sanction Spain for failing to bring its anti-money laundering regulations into full accordance with the EU’s Fourth Anti-Money Laundering Directive, in 2018, Spain approved measures to modify its money laundering legislation to comply with the EU Directive. These measures establish new obligations for companies to license or register service providers, including identifying ultimate beneficial owners; institute harsher penalties for money laundering offenses; and create public and private whistleblower channels for alleged offenses.

The General State Prosecutor is authorized to investigate and prosecute corruption cases involving funds in excess of roughly USD 500,000. The Office of the Anti-Corruption Prosecutor, a subordinate unit of the General State Prosecutor, investigates and prosecutes domestic and international bribery allegations. The Audiencia Nacional, a corps of magistrates has broad discretion to investigate and prosecute alleged instances of Spanish businesspeople bribing foreign officials.

Spain enforces anti-corruption laws on a generally uniform basis. Public officials are subjected to more scrutiny than private individuals, but several wealthy and well-connected business executives have been successfully prosecuted for corruption. In 2021, Spanish courts arraigned 344 defendants involved in 53 corruption cases. The courts issued 65 sentences, with 44 including a full or partial guilty verdict.

There is no obvious bias for or against foreign investors. U.S. firms rarely identify corruption as an obstacle to investment in Spain, although entrenched incumbents have frequently attempted and at times succeeded in blocking the growth of U.S. franchises and technology platforms in both Madrid and Barcelona.

Spain’s rank in Transparency International’s annual Corruption Perceptions Index fell slightly in 2021 to position 34; its overall score (61) is lower than that of many other Western European countries.

Spain is a signatory to the OECD Convention on Combating Bribery and the UN Convention Against Corruption. It has also been a member of the Group of States Against Corruption (GRECO) since 1999. Spain has made progress addressing OECD concerns about the low level of foreign bribery enforcement in Spain and the lack of implementation of the enforcement-related recommendations. In a 2021 report, GRECO highlighted that of the group’s 11 recommendations to combat corruption from 2013, six had been fully implemented, four had been partly implemented, and one had not been implemented.

10. Political and Security Environment

There are periodic peaceful demonstrations calling for salary and pension increases and other social or economic reforms. Public sector employees and union members organize frequent small demonstrations in response to service cuts, privatization, and other government measures. Demonstrations and civil unrest in Catalonia have resulted in vandalism and damage to store fronts and buildings in Barcelona and other cities. Some regional business leaders have expressed concern that disturbances could negatively affect business operations and investments in the region.

11. Labor Policies and Practices

The COVID-19 pandemic and public health crisis derailed progress on reducing Spain’s stubbornly high unemployment rate, which peaked at 26.9 percent in 2013 after the European financial crisis. At the end of 2021, unemployment stood at 13.3 percent, among the highest unemployment rates in the EU. The figure, however, excludes about 100,000 workers who were enrolled in temporary government furlough schemes established to provide income support for workers who lost their jobs during the pandemic. The youth unemployment rate decreased to 30.7 percent in 2021, from the 40.1 percent in 2020, representing 452,000 unemployed people under the age of 25. Spain’s economically active population totaled 23.3 million people, of whom 20.2 million were employed and 3.1 million unemployed. Foreign nationals comprised 15.3 percent of Spain’s workforce (3,094,900 people) in 2021.

Spain approved a landmark labor reform law in 2022 that satisfies EU requirements to unlock subsequent tranches of European recovery funds. Key components include:

  • Elimination of temporary contracts except for periods of high demand and temporary substitution of workers: The reform allows for two types of temporary contracts: structural, to respond to temporary increases in demand for up to one year, and substitution, to cover workers’ absences due to medical and parental leave.
  • Permanent-intermittent contracts: The reform’s limitations on temporary contracts will push employers to use a permanent-intermittent contract, which provides firms flexibility to use seasonal workers and allows seasonal workers to earn seniority for the entire duration of the employment relationship – not just the time of services provided.
  • Limits on training contracts: The goal of this measure is to reduce the share of Spanish young people employed on temporary contracts. It defines two broad types of educational contracts, including for students under 30 who work part-time while studying for a period of up to two years, and for professional trainees who are seeking work experience toward specific certifications.
  • Workers sector-wide will receive the same benefits: Firms must now apply the appropriate sector-wide labor agreement to the service a subcontractor performs, such as cleaning, maintenance, or information support, rather than the firm-level labor agreement.
  • Restoration of indefinite agreements between firms and unions: Expired labor agreements will now stay in effect until they are replaced.
  • Establishment of permanent state-backed furloughs (ERTEs) and stronger fraud-fighting measures: The reform establishes a permanent furlough scheme to protect workers in firms or sectors facing significant structural economic changes that require workers to retrain and find new employment. The measures strengthen fines for firms “overusing” temporary contracts.

The labor market is mainly divided into permanent workers with full benefits and temporary workers with many fewer benefits. In the event of dismissal for an objective reason (e.g., economic reasons), severance pay is available to the worker and amounts to 20 days’ wages per year of service with a maximum of 12 months’ wages. A worker dismissed for disciplinary reasons is not entitled to severance pay. For termination of a fixed term contract (either its term expiration or completion of the work), the worker is entitled to a severance payment of 12 days per year of service. Under Spanish Labor law, an employee may bring a claim against the employer for unfair dismissal within 20 days of receiving a termination letter.

Mechanisms for preventing and resolving individual labor disputes in Spain are developed by labor laws and alternative dispute resolution (ADR) systems through collective bargaining agreements. Each of Spain’s 17 autonomous communities has a different ADR system at different levels generally dealing with collective disputes. Spanish law stipulates that, before taking individual labor disputes to court in search of a solution, parties must first attempt to reach agreement through conciliation or mediation.

The Spanish Public Employment Service (SEPE) under the Ministry of Labor and Social Economy administers unemployment benefits called the Contributory Unemployment Protection. This benefit protects those who can and wish to work but become unemployed temporarily or permanently, or those whose normal working day is reduced by a minimum of 10 percent and a maximum of 70 percent.

Collective bargaining is widespread in both the private and public sectors. A high percentage of the working population is covered by collective bargaining agreements, although only a minority (generally estimated to be about 10 percent) of those covered are union members. Large employers generally have individual collective bargaining agreements, while smaller companies use industry-wide or regional agreements. As a result of the recent labor reform, sectoral-level agreements currently hold primacy over business-level agreements.

The Constitution guarantees the right to strike, and this right has been interpreted to include the right to call general strikes to protest government policy.

The informal or underground economy costs Spain an estimated EUR 270 billion, or about 25 percent of GDP as of 2020. The informal economy is most common in sectors such as construction or retail that tend to use more cash in commercial transactions. In July 2021, the Spanish Parliament approved an anti-fraud law (Law 11/2021) to prevent and combat tax fraud, lower the limit for cash payments to EUR 1,000 between professionals and EUR 2,500 between individuals, and prohibit tax amnesties.

14. Contact for More Information

Ana Maria Waflar, Economic Specialist, tel.: (34) 91 587 2290

Sweden

Executive Summary

Sweden is generally considered a highly favorable investment destination. Sweden offers an extremely competitive, open economy with access to new products, technologies, skills, and innovations. Sweden also has a well-educated labor force, outstanding communication infrastructure, and a stable political environment, which makes it a choice destination for U.S. and foreign companies. Low levels of corporate tax, the absence of withholding tax on dividends, and a favorable holding company regime are additional incentives for doing business in Sweden.

Sweden’s attractiveness as an investment destination is tempered by a few structural business challenges. These include high personal and VAT taxes. In addition, the high cost of labor, rigid labor legislation and regulations, a persistent housing shortage, and the general high cost of living in Sweden can present challenges to attracting, hiring, and maintaining talent for new firms entering Sweden. Historically, the telecommunications, information technology, healthcare, energy, and public transport sectors have attracted the most foreign investment. However, manufacturing, wholesale, and retail trade have also recently attracted increased foreign funds.

Overall, investment conditions remain largely favorable. In the World Economic Forum’s 2019 Competitiveness Report, Sweden was ranked eight out of 138 countries in overall competitiveness and productivity. The report highlighted Sweden’s strengths: human capital (health, education level, and skills of the population), macroeconomic stability, and technical and physical infrastructure. Bloomberg’s 2021 Innovation Index ranked Sweden fifth among the most innovative nations on earth; a pattern reinforced by Sweden ranked second on the European Commission’s 2021 European Innovation Scoreboard and second on the World Intellectual Property Organization/INSEAD 2021 Global Innovation Index. Also in 2021, Transparency International ranked Sweden as one of the most corruption-free countries in the world – fourth out of 180. Sweden is perceived as a creative place with interesting research and technology. It is well equipped to embrace the Fourth Industrial Revolution with a superior IT infrastructure and is seen as a frontrunner in adopting new technologies and setting new consumer trends. U.S. and other exporters can take advantage of a test market full of demanding, highly sophisticated customers.

The COVID-19 pandemic considerably impacted the Swedish economy, but following several fiscal stimulus packages, a successful vaccination rollout, and a relaxation of pandemic-related restrictions, Sweden’ economy has recovered fully to pre-pandemic levels with no notable impact on the investment climate. Climate and the environment are a central concern for the Swedish government, political parties across the political spectrum, businesses, and the public at large. Successive Swedish governments have actively lobbied for ambitious action to protect the environment and to curb greenhouse gases within a multilateral, internationally binding framework and by welcoming research, innovation, and investment within the fields of climate and the environment.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 4 of 175 http://www.transparency.org/research/cpi/overview
Global Innovation Index 2021 2 of 131 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 $63,847 https://www.bea.gov/international/di1usdbal
World Bank GNI per capita 2020 $54,050 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

8. Responsible Business Conduct

There is widespread awareness of responsible business conduct (RBC) among both producers and consumers in Sweden. All businesses are expected to comply with local laws and regulations, and to observe the international norms and principles for human rights, labor protection, sustainable development, and anti-corruption. Firms that pursue RBC are viewed favorably, often publicizing their adherence to generally accepted RBC principles such as those contained in OECD Guidelines for Multinational Enterprises. Volvo Trucks, for example, has collaborated with USAID in pursuing RBC efforts outside of Sweden. The Swedish National Contact Point for the OECD Guidelines can be found at: https://www.regeringen.se/regeringens-politik/handel-och-investeringsframjande/nationella-kontaktpunkten/ . The Government of Sweden has adopted a platform for sustainable business, the term it uses for efforts related to RBC/CSR (link to pdf): https://www.government.se/49b750/contentassets/539615aa3b334f3cbedb80a2b56a22cb/sustainable-business—a-platform-for-swedish-action .

Sweden effectively and fairly enforces domestic laws in relation to human rights, labor rights, consumer protection, environmental protections, and other laws/regulations intended to protect individuals from adverse business impacts. There are no alleged/reported human or labor rights concerns relating to RBC that foreign businesses should be aware of, as for example, alleged instances of forced and/or child labor in domestic supply chains, forced evictions of indigenous peoples, or arrests of and violence against environmental defenders.Sweden has put in place corporate governance, accounting, and executive compensation standards to protect shareholders. Sweden is a member of the Extractive Industries Transparency Initiative (EITI).Sweden is one of seventeen states that have finalized The Montreux Document on Private Military and Security Companies. It is a supporter of and participant in International Code of Conduct for Private Security Service Providers’ Association (ICoCA).

Representatives of the Sámi people have repeatedly requested meaningful consultation on issues that relate to mining, wind, and other projects proposed for their areas.  One area of focus is the proposed Gállok (Kallak) iron ore mine in a traditional reindeer herding area.  UN Human Rights Council special rapporteurs urged against a license for the open pit mine, which they noted would create significant and irreversible risks to Sámi lands, resources, culture, and livelihoods.  The Sámi also express concern about the lack of good-faith consultations and the failure to obtain the free, prior, and informed consent of the Sámi.  Sweden adopted a new law in January 2022, which requires consultations with the Sámi on issues that affect their interests.  The law takes effect March 2022 at the national level, but local and regional consultations will not be required for another two years.  In 2020, Sweden’s supreme court ruled that Sámi hunting rights lost in 1993 should be restored to the Sámi village Girjas Sameby. The ruling has been interpreted as a move to restore lost land resource rights to the Sámi.

9. Corruption

Investors have an extremely low likelihood of encountering corruption in Sweden. While there have been cases of domestic corruption at the municipal level, most companies have high anti-corruption standards, and an investor would not typically be put in the position of having to pay a bribe to conduct business.

There are cases of Swedish companies operating overseas that have been charged with bribing foreign officials; however, these cases are relatively rare. Although Sweden has comprehensive laws against corruption, and ratified the 1997 OECD Anti-bribery Convention, in June of 2012, the OECD Anti-Bribery Working Group has given an unfavorable review of Swedish compliance to the dictates of that Convention. The group faulted Sweden for not having a single conviction of a Swedish company for bribery in the last eight years, for having unreasonably low fines, and for not re-framing their legal system so that a corporation could be charged with a crime. Swedish officials object to the review, claiming that lack of convictions is not proof of prosecutorial indifference, but rather indicative of high standards of ethics in Swedish companies. In 2019, the OECD Anti-Bribery Working Group repeated its recommendations and urged Sweden to follow them. Over the last five years, two high-profile cases have involved Swedish companies. Telia Company’s operations in Uzbekistan received considerable public attention and cost the CEO and other senior officials their jobs. Telia Company was in the process of divesting its operations in Uzbekistan following a probe by the U.S. Department of Justice (DOJ) pertaining to illegal payments. In September 2017, Telia Company reached an agreement to pay $965.8 million to settle U.S. and European criminal and civil charges that the company had paid bribes to win business in Uzbekistan. In December 2019, Ericsson reached an agreement with the Department of Justice to pay more than $1 billion to resolve a foreign corrupt practices case which involved bribing government officials, falsifying books and records, and failing to implement reasonable internal accounting controls.  The resolutions covered criminal conduct in Djibouti, China, Vietnam, Indonesia, and Kuwait. Ericsson also entered into a three-year Deferred Prosecution Agreement (DPA) with the DOJ. As part of this resolution, Ericsson agreed to engage an independent compliance monitor for three years. The monitor’s main responsibilities include reviewing Ericsson’s compliance with the terms of the settlement and evaluating Ericsson’s progress in implementing and operating its enhanced compliance program and accompanying controls as well as providing recommendations for improvements.Sweden does not have a specific agency devoted exclusively to anti-corruption, but a number of agencies cooperate together. A list of Sweden’s Public and Private Anti-Corruption Initiatives can be found at https://www.ganintegrity.com/portal/country-profiles/sweden .

UN Anticorruption Convention, OECD Convention on Combatting Bribery

Sweden has signed and ratified the UN Anticorruption Convention (see list of signatories at http://www.unodc.org/unodc/en/treaties/CAC/signatories.html ).

Sweden is party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (see list of signatories and their implementation reports at http://www.oecd.org/daf/anti-bribery/countryreportsontheimplementationoftheoecdanti-briberyconvention.htm ).

10. Political and Security Environment

Sweden is politically stable, and no changes are expected.

11. Labor Policies and Practices

In 2021, there were 5,602,000 people aged 15–74 years in the labor force, not seasonally adjusted. There were 2,952,000 men and 2,650,000 women in the labor force. The relative labor force participation rate was 74.5 percent. This rate was 77.3 percent for men and 71.7 percent for women. Sweden’s labor force of 5.6 million is disciplined, well educated, and highly skilled. Approximately 68 percent of the Swedish labor force is unionized, although membership is declining. Swedish unions have helped to implement business restructuring to remain competitive, and strongly favor employee education and technical advancements. Management- labor cooperation is generally excellent and non-confrontational. The National Mediation Office, which mediates labor disputes in Sweden, reported in its summary findings for 2020 that no working day was lost due to a strike in Sweden in 2020.

Foreign/migrant workers are covered by Swedish and EU labor laws. Labor laws are not waived in order to attract or retain investment. In general, there is no government policy that requires the hiring of nationals.

Sweden has a Co-determination at Work Act, which provides for labor representation on the boards of corporate directors once a company has reached more than 25 employees. This law also requires management to negotiate with the appropriate union, or unions prior to implementing certain major changes in company activities. It calls for a company to furnish information on many aspects of its economic status to labor representatives. Labor and management usually find this system works to their mutual benefit. The Co-determination at Work Act and the Employment Protection Act together set the rules for the adjustment employment to respond to fluctuating market conditions. Severances and layoffs are based on seniority and are conducted in consultation with unions. Unemployment insurance and other social safety net programs are available for workers laid off for economic reasons. Government-sponsored training programs to facilitate the transition for unemployed persons into areas reporting labor shortages are available, but their scope is targeted.

The cost of doing business in Sweden is generally comparable to most OECD countries, though some country-specific cost advantages are present. Overall salary costs have become increasingly competitive due to relatively modest wage increases over the last decade and a favorable exchange rate. This development is even more pronounced for highly qualified personnel and researchers.

There is no fixed minimum wage by legislation. Instead, wages are set by collective bargaining by sector. The traditionally low-wage differential has increased in recent years as a result of increased wage setting flexibility at the company level. Still, Swedish unskilled employees are relatively well paid, while well-educated Swedish employees are relatively less well paid compared to those in competitor countries. The average increases in real wages in recent years have been high by historical standards, in large part due to price stability. Even so, nominal wages in recent years have been slightly above those in competitor countries, about 2 percent annually. Employers must pay social security fees of about 31.5 percent. The fee consists of statutory contributions for pensions, health insurance, and other social benefits.

Sweden has ratified most International Labor Organization (ILO) conventions dealing with worker’s rights, freedom of association, collective bargaining, and the major working conditions and occupational safety and health conventions. More information on Sweden’s labor agreements and legislation in English can be found on the Swedish Trade Union Confederation’s website at http://www.lo.se/english/startpage .

An amended Labor law was agreed upon in June 2021. The amendments to the law are proposed to enter into force on June 30, 2022. The amendments to the Labor law will give employers greater flexibility to manage their workforce based on the skills needed for their business and improve predictability at various stages in a dismissal process. Employees will in return get more predictability regarding different employment conditions and forms of employment. Employers may, among other things, have an increased opportunity to make exceptions from the order of ending employment contracts, as Swedish labor laws are based on seniority. The rules for dismissal for personal reasons are made clearer in the amended law and the employer does not bear the wage cost in the event of dismissal disputes. At the same time, there will be a better balance between employees with different employment conditions.

Sweden is a member of the European Union (EU). The EU impacts Sweden’s trade relationship with the United States in that the EU has a common trade policy for all member countries.

A study conducted by the Swedish Tax Authority in 2020 assessed the size of the informal economy in Sweden to be 2.3 percent as share of GDP (2006 figure) and the share had remained largely constant in the last thirteen years.

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  
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) 2020 $46,503 2020 $63,847 BEA data available at
https://www.bea.gov/international/
direct-investment-and-multinational-
enterprises-comprehensive-data
Host country’s FDI in the United States ($M USD, stock positions) 2019 $81,935 2020 $55,404 BEA data available at
https://www.bea.gov/international/
direct-investment-and-multinational-
enterprises-comprehensive-data
Total inbound stock of FDI as % host GDP 2020 $73.5% 2020 76.1% UNCTAD data available at
https://stats.unctad.org/handbook/
EconomicTrends/Fdi.html
    

* Source for Host Country Data: Statistics Sweden (SCB).

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 413,512 100% Total Outward 464,891 100%
Luxembourg 59,401 14.4% United States 85,939 18.5%
The Netherlands 58,890 14.2% The Netherlands 46,019 9.9%
United Kingdom 50,825 12.3% United Kingdom 33,311 7.2%
United States 48,767 11.8% Norway 32,700 7.0%
Germany 41,219 10.0% Finland 28,730 6.2%
“0” reflects amounts rounded to +/- USD 500,000.

14. Contact for More Information

Economic Unit
U.S. Embassy Stockholm
Dag Hammarskjölds Väg 31
115 89 Stockholm, Sweden
+46 (0)8 783 5309
StockholmICS@state.gov

U.S. Commercial Service
U.S. Embassy Stockholm
Dag Hammarskjölds Väg 31
115 89 Stockholm, Sweden
www.export.gov/sweden
office.stockholm@trade.gov

Switzerland and Liechtenstein

Executive Summary

Switzerland is welcoming to international investors, with a positive overall investment climate. The Swiss federal government enacts laws and regulations governing corporate structure, the financial system, and immigration, and concludes international trade and investment treaties. However, Switzerland’s 26 cantons (analogous to U.S. states) and largest municipalities have significant independence to shape investment policies locally, including incentives to attract investment. This federal approach has helped the Swiss maintain long-term economic and political stability, a transparent legal system, extensive and reliable infrastructure, efficient capital markets, and an excellent quality of life for the country’s 8.6 million inhabitants. Many U.S. firms base their European or regional headquarters in Switzerland, drawn to the country’s modest corporate tax rates, productive and multilingual workforce, and well-maintained infrastructure and transportation networks. U.S. companies also choose Switzerland as a gateway to markets in Eastern Europe, the Middle East, and beyond. Furthermore, U.S. companies select Switzerland because of favorable and less restrictive labor laws compared to other European locations as well as availability of a skilled workforce.

In 2019, the World Economic Forum rated Switzerland the world’s fifth most competitive economy. This high ranking reflects the country’s sound institutional environment and high levels of technological and scientific research and development. With very few exceptions, Switzerland welcomes foreign investment, accords national treatment, and does not impose, facilitate, or allow barriers to trade. According to the OECD, Swiss public administration ranks high globally in output efficiency and enjoys the highest public confidence of any national government in the OECD. The country’s competitive economy and openness to investment brought Switzerland’s cumulative inward direct investment to USD 1.4 trillion in 2020 (latest available figures) according to the Swiss National Bank, although nearly half of this amount is invested in regional hubs or headquarters that further invest in other countries.

In order to address international criticism of tax incentives provided by Swiss cantons, the Federal Act on Tax Reform and Swiss Pension System Financing (TRAF) entered into force on January 1, 2020. TRAF obliges cantons to offer the same corporate tax rates to both Swiss and foreign companies, while allowing cantons to continue to set their own cantonal tax rates and offer incentives for corporate investment. These can be deductions or preferential tax treatment for certain types of income (such as for patents), or expenses (such as for research and development). Switzerland joined the Statement of the OECD/G20 Inclusive Framework on Base Erosion and Profit Sharing (BEPS) in July 2021. It intends to implement the BEPS effective minimum corporate tax rate of 15 percent by January 2024, after a referendum to amend the Swiss constitution.

Personal income and corporate tax rates vary widely across Switzerland’s cantons. Effective corporate tax rates ranged between 11.85 and 21.04 percent in 2021, according to KPMG. In Zurich, for example, the combined effective corporate tax rate (including municipal, cantonal, and federal taxes),was 19.7 percent in 2021. The United States and Switzerland have a bilateral tax treaty.

Key sectors that have attracted significant investments in Switzerland include information technology, precision engineering, scientific instruments, pharmaceuticals, medical technology, and machine building. Switzerland hosts a significant number of startups. A new “blockchain act” came fully into force in August 2021, which is expected to benefit Switzerland’s already sizeable ecosystem for companies in blockchain and distributed ledger technologies.

There are no “forced localization” laws designed to require foreign investors to use domestic content in goods or technology (e.g., data storage within Switzerland). Switzerland follows strict privacy laws and certain personal data may not be collected in Switzerland.

Switzerland is a highly innovative economy with strong overall intellectual property protection. Switzerland enforces intellectual property rights linked to patents and trademarks effectively, and new amendments to the country’s Copyright Act to strengthen copyright enforcement on the internet came into force in April 2020.

There are some investment restrictions in areas under state monopolies, including certain types of public transportation, telecommunications, postal services, alcohol and spirits, aerospace and defense, certain types of insurance and banking services, and the trade in salt. The Swiss agricultural sector remains protected and heavily subsidized.

Liechtenstein

Liechtenstein’s investment conditions are identical in most key aspects to those in Switzerland, due to its integration into the Swiss economy. The two countries form a customs union, and Swiss authorities are responsible for implementing import and export regulations.

Both Liechtenstein and Switzerland are members of the European Free Trade Association (EFTA, which also includes Iceland and Norway). EFTA is an intergovernmental trade organization and  free trade area  that operates in parallel with the  European Union  (EU). Liechtenstein participates in the EU single market through the European Economic Area (EEA), unlike Switzerland, which has opted for a set of bilateral agreements with the EU instead.

Liechtenstein has a stable and open economy employing 40,328 people in 2020 (latest figures available), exceeding its domestic population of 39,055 and requiring a substantial number of foreign workers. In 2020, 70.6 percent of the Liechtenstein workforce were foreigners, mainly Swiss, Austrians and Germans, most of whom commute daily to Liechtenstein. Liechtenstein was granted an exception to the EU’s Free Movement of People Agreement, enabling the country not to grant residence permits to its workers.

Liechtenstein is one of the world’s wealthiest countries. Liechtenstein’s gross domestic product per capita amounted to USD 162,558 in 2019 (latest data available). According to the  Liechtenstein Statistical Yearbook , the services sector, particularly in finance, accounts for 63 percent of Liechtenstein’s jobs, followed by the manufacturing sector (particularly mechanical engineering, machine tools, precision instruments, and dental products), which employs 36 percent of the workforce. Agriculture accounts for less than one percent of the country’s employment.

Liechtenstein’s corporate tax rate, at 12.5 percent, is one of the lowest in Europe. Capital gains, inheritance, and gift taxes have been abolished. The Embassy has no recorded complaints from U.S. investors stemming from market restrictions in Liechtenstein. The United States and Liechtenstein do not have a bilateral income tax treaty.

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

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

7. State-Owned Enterprises

The Swiss Confederation is the largest or sole shareholder in Switzerland’s five state-owned enterprises (SOEs), active in the areas of ground transportation (SBB), information and communication (Swiss Post, Swisscom), defense (RUAG, which was divided into two companies in January 2020 – see below), and aviation / air traffic control (Skyguide). These companies are typically responsible for “public function mandates,” but may also cover commercial activities (e.g., Swisscom in the area of telecommunications).

These SOEs typically have commercial relationships with private industry. Private sector competitors can compete with the SOEs under the same terms and conditions with respect to access to markets, credit, and other business operations. Additional publicly owned enterprises are controlled by the cantons in the areas of energy, water supply, and a number of subsectors. SOEs and canton-owned companies may benefit from exclusive rights and privileges (some of which are listed in Table A 3.2 of the most recent WTO Trade Policy Review – https://www.wto.org/english/tratop_e/tpr_e/tp455_e.htm ).

Switzerland is a party to the WTO Government Procurement Agreement (GPA). Some areas are partly or fully exempted from the GPA, such as the management of drinking water, energy, transportation, telecommunications, and defense. Private companies may encounter difficulties gaining business in these exempted sectors.

8. Responsible Business Conduct

The Swiss Confederation and Swiss companies are generally aware of the importance of pursuing due diligence to responsible business conduct (RBC) and demonstrating corporate social responsibility (CSR). In response to criticism from civil society about the business practices of Swiss companies abroad, the Swiss government commissioned a series of reports on the government’s role in ensuring CSR, particularly in the commodities sector, and in December 2016 published a national action plan in conjunction with its commitments under the UN Guiding Principles on Business and Human Rights ( https://www.admin.ch/gov/en/start/documentation/media-releases.msg-id-64884.html ). In June 2017, the Swiss government concluded that Switzerland promotes voluntary principles, such as the upholding of human rights standards, and also supports including mandatory CSR market incentives, such as minimum conditions for the protection of workers abroad, in forthcoming legislation. In January 2020, the Swiss government approved the CSR Action Plan 2020-2023 , which covers sixteen measures – particularly promoting sustainability reporting and due diligence by companies, stakeholder dialogue, and the alignment of private section CSR instruments with the OECD Guidelines for Multinational Enterprises.

The latest updates on corporate social responsibility are available on https://www.seco.admin.ch/seco/en/home/Aussenwirtschaftspolitik_Wirtschaftliche_Zusammenarbeit/Wirtschaftsbeziehungen/Gesellschaftliche_Verantwortung_der_Unternehmen.html 

In November 2020, a referendum known as the “Responsible Business Initiative,” which would have placed new obligations on Swiss companies to protect human rights and the environment internationally, was narrowly rejected by Swiss voters. Instead, a proposal of Parliament came into force in January 2022, obliging covered companies to report on environmental and labor issues, human rights and the fight against corruption and to exercise due diligence with regard to conflict minerals and child labor. After a one-year transition period, the new reporting obligations will apply as of 2023, and companies will submit their first reports in2024. Also, Swiss companies involved in minerals extraction abroad are required to source all minerals in compliance with international labor standards and applicable environmental laws, and must report on measures to ensure their international activities do not involve or support child labor.

In March 2021, Swiss voters approved a free trade agreement between Indonesia and the European Free Trade Association (EFTA), of which Switzerland is a member. The agreement requires that any palm oil imported under preferential tariffs be produced sustainably. This is said to be the first-ever agreement of its type that links trade preferences to sustainable methods of production.

Switzerland ranked 3rd out of 180 countries in the 2020 Yale University-based Environmental Performance Index (EPI).

The Swiss government implements the OECD Due Diligence Guide for Responsible Supply Chains of Minerals from Conflict and High-Risk Areas. Switzerland is a member of the Extractive Industries Transparency Initiative and supports the Better Gold Initiative, which promotes responsible gold mining in Peru, Bolivia and Colombia. Switzerland’s Point of Contact for the OECD Guidelines at the State Secretariat for Economic Affairs (SECO) may be contacted at: https://mneguidelines.oecd.org/ncps/switzerland.htm . Information about the Swiss Better Gold Association is available at:  https://www.swissbettergold.ch .

Switzerland has signed a number of nonbinding agreements outlining best practices for corporations, including the Voluntary Principles on Security and Human Rights and the International Code of Conduct for Private Security Service Providers. The latter was the result of a multi-stakeholder initiative launched by Switzerland.

Switzerland is also a signatory state of the Montreux Document, a non-binding instrument on the obligations of states under international law with regard to the activities of private military and security companies.

9. Corruption

Switzerland is ranked 7th of 180 countries in Transparency International’s Corruption Perceptions Index 2021, reflecting low perceptions of corruption in society. Under Swiss law, officials are not to accept anything that would “challenge their independence and capacity to act.” In case of non-compliance the law foresees criminal penalties, including imprisonment for up to five years, for official corruption, and the government generally implements these laws effectively. The bribery of public officials is governed by the Swiss Criminal Code (Art. 322), while the bribery of private individuals is governed by the Federal Law Against Unfair Competition. The law defines as granting an “undue advantage” either in exchange for a specific act, or in some cases for future behavior not related to a specific act. Some officials may receive small gifts valued at no more than CHF 200 or CHF 300 for an entire year, which are not seen as “undue.” However, officials in some fields, such as financial regulators, may receive no advantages at all. Transparency International has recommended that a maximum sum should be set at the federal level.

Investigating and prosecuting government corruption is a federal responsibility. A majority of cantons require members of cantonal parliaments to disclose their interests. A joint working group comprising representatives of various federal government agencies works under the leadership of the Federal Department of Foreign Affairs to combat corruption. Some multinational companies have set up internal hotlines to enable staff to report problems anonymously.

Switzerland ratified the United Nations Convention against Corruption in 2009. Swiss government experts believe this ratification did not result in significant domestic changes, since passive and active corruption of public servants was already considered a crime under the Swiss Criminal Code.

A review by the Council of Europe’s Group of States against Corruption (GRECO) in 2017 recommended the adoption of a code of ethics/conduct, together with awareness-raising measures, for members of the federal parliament, judges, and the Office of the Attorney General (OAG) to avoid conflict of interests. These measures needed to be accompanied by a reinforced monitoring of members of parliament’s compliance with their obligations. In March 2018, the OECD Working Group on Bribery in International Business Transactions recommended that Switzerland adopt an appropriate legal framework to protect private sector whistleblowers from discrimination and disciplinary action, to ensure that sanctions imposed for foreign bribery against natural and legal persons are effective, proportionate, and dissuasive, and to ensure broader and more systematic publication of concluded foreign bribery cases. The OECD Working Group positively highlighted Switzerland’s proactive policy on seizure and confiscation, its active involvement in mutual legal assistance, and its role as a promoter of cooperation in field of foreign bribery. Regarding detection, the OECD Working Group commended the key role played by the Swiss Financial Intelligence Unit (MROS) in detecting foreign bribery.

A number of Swiss federal administrative authorities are involved in combating bribery. The Swiss State Secretariat for Economic Affairs (SECO) deals with issues relating to the OECD Convention. The Federal Office of Justice deals with those relating to the Council of Europe Convention, while the Federal Department of Foreign Affairs (MFA) deals with the UN Convention. The power to prosecute and judge corruption offenses is shared between the relevant Swiss canton and the federal government. For the federal government, the competent authorities are the Office of the Attorney General, the Federal Criminal Court, and the Federal Police. In the cantons, the relevant actors are the cantonal judicial authorities and the cantonal police forces.

In 2001, Switzerland signed the Council of Europe’s Criminal Law Convention on Corruption. In 1997, Switzerland signed the OECD Anti-Bribery Convention, which entered into force in 2000. Switzerland signed the UN Convention against Corruption in 2003. Switzerland ratified the UN Anticorruption Convention in 2009.

In order to implement the Council of Europe convention, the Swiss parliament amended the Penal Code to make bribery of foreign public officials a federal offense (Title Nineteen “Bribery”); these amendments entered into force in 2000. In accordance with the revised 1997 OECD Anti-Bribery Convention, the Swiss parliament amended legislation as of 2001 on direct taxes of the Confederation, cantons, and townships to prohibit the tax deductibility of bribes.

Switzerland maintains an effective legal and policy framework to combat domestic corruption. U.S. firms investing in Switzerland have not raised with the Embassy any corruption concerns in recent years.

10. Political and Security Environment

There is minimal risk from civil unrest in Switzerland. Protests do occur in Switzerland, but authorities carefully monitor protest activities. Urban areas regularly experience demonstrations, mostly on global trade and political issues, and some occasionally sparked by U.S. foreign policy. Protests held during the annual World Economic Forum (WEF) occasionally draw participants from several countries in Europe. Historically, demonstrations have been peaceful, with protestors registering for police permits. Protestors have blocked traffic; spray-painted areas with graffiti, and on rare occasions, clashed with police. Political extremist or anarchist groups sometimes instigate civil unrest. Right-wing activists have targeted refugees/asylum seekers/foreigners, and more recently have organized protests against COVID-19 restrictions. Meanwhile, left-wing activists (who historically have demonstrated a greater propensity toward violence) usually target organizations involved with globalization, alleged fascism, and alleged police repression. Swiss police have at their disposal tear gas and water cannons, which are rarely used.

11. Labor Policies and Practices

The Swiss labor force is highly educated and highly skilled. The Swiss economy is capital intensive and geared toward high value-added products and services. In 2021, 77.2 percent of the workforce was employed in services, 20.4 percent in manufacturing, and 2.4 percent in agriculture. Full-time work compared to part-time work is more prevalent among foreign workers than among Swiss workers: 40.4 percent of the Swiss population works part-time, compared to 27.8 percent of the foreign working population. Part-time work is three times more common among women than men. Wages in Switzerland are among the highest in the world. Switzerland continues to observe International Labor Organization (ILO) core conventions. Government regulations cover maximum work hours, minimum length of holidays, sick leave, compulsory military service, contract termination, and other requirements. There is no federal minimum wage law.

Foreigners fill not only low-skilled, low-wage jobs, but also highly technical positions in the manufacturing and service industries. In 2021, foreigners account for 26.4 percent of Switzerland’s labor force estimated at about 4.7 million people. Many foreign nationals are long-time Swiss residents who have not applied for or been granted Swiss citizenship. Foreign seasonal workers take many lower-wage jobs in agriculture. Switzerland has one of the smallest informal economies in Europe, accounting for approximately 6% of GDP since 2016.

In the wake of a 2014 referendum to impose limits on immigration, the government introduced a series of measures aimed at bringing traditionally underemployed groups into the labor market – women, older job seekers, refugees, and temporarily accepted asylum seekers. In 2018 the Federal Council implemented a parliamentary decision that companies in sectors with more than 5 percent unemployment provide information on job openings to government-run employment centers, which make the openings available to cross-border commuters and EU nationals as well.

Trade union density – the percentage of the workforce represented by trade unions – is on the decline in Switzerland, according to OECD data. From over 20 percent in 2000, trade union density had fallen to 14.4 percent by 2018, according to the OECD (latest data available). Labor-management relations are generally constructive, with a general willingness on both sides to settle disputes by negotiation rather than labor action. According to the Federal Office of Statistics, some 581 collective agreements were in force in Switzerland in March 2018 (latest data available). Of these, approximately 64 percent concern the services sector, 34 percent the manufacturing sector, and one percent the agricultural sector; these are usually renewed without major difficulties. Trade unions continue to promote a wider coverage of collective agreements for the Swiss labor force. Although the number of workdays lost to strikes in Switzerland is among the lowest in the OECD, Swiss trade unions have encouraged workers to strike on several occasions in recent years. A general prohibition on strikes by Swiss public servants was repealed in 2000, although restrictions remain in place in a few cantons. The Federal Council may now only restrict or prohibit the right to strike where it affects the security of the state, external relations, or the supply of vital goods to the country.

In difficult economic times, employers may temporarily shift full-time employees to part-time by registering with cantonal authorities and justifying reductions as necessary to business activities. This practice, known as Kurzarbeit (“short-time work”), allows for the government to make partial salary payments through the unemployment insurance fund. Employees can reject the shift to part-time work, but risk dismissal in that case. Kurzarbeit became widespread with the onset of the COVD-19 crisis and the temporary shutdown of wide segments of the Swiss economy in 2020. By October 2021 this was drastically reduced to 48,264 affected employees from 7,917 companies, compared to 1.91 million employees in May and 219,388 in October 2020. . The Swiss government has continued expanded financial support for the Kurzarbeit program throughout the pandemic.

Switzerland’s average unemployment rate was 4.8 percent in 2020 under ILO Labor Force Survey methodology, while according to Swiss authorities registered unemployment in 2021 was 3.0 percent. Cantons bordering EU countries experience higher unemployment rates than Switzerland as a whole.

14. Contact for More Information

Theodore Fisher
Economic/Commercial Officer
U.S. Embassy in Bern, Sulgeneckstrasse 19, 3003 Bern
+41 31 357 7011
Business-bern@state.gov

The Netherlands

Executive Summary

The Netherlands consistently ranks among the world’s most competitive industrialized economies. It offers an attractive business and investment climate and remains a welcoming location for business investment from the United States and elsewhere.

Strengths of the Dutch economy include the Netherlands’ stable political and macroeconomic climate, a highly developed financial sector, strategic location, well-educated and productive labor force, and high-quality physical and communications infrastructure. Investors in the Netherlands take advantage of its highly competitive logistics, anchored by the largest seaport and fourth-largest airport in Europe. In telecommunications, the Netherlands has one of the highest levels of internet penetration in the European Union (EU) at 96 percent and hosts one of the largest data transport hubs in the world, the Amsterdam Internet Exchange.

The Netherlands is among the largest recipients and sources of foreign direct investment (FDI) in the world and one of the largest historical recipients of direct investment from the United States. This can be attributed to the Netherlands’ competitive economy, historically business-friendly tax climate, and many investment treaties containing investor protections. The Dutch economy has significant foreign direct investment in a wide range of sectors including logistics, information technology, and manufacturing. Dutch tax policy continues to evolve in response to EU attempts to harmonize tax policy across member states.

Until the COVID-19 crisis, economic growth had placed the Dutch economy in a very healthy position, with successive years of a budget surplus, public debt that was well under 50 percent of GDP, and record-low unemployment of 3.5 percent. This allowed the Dutch government significant fiscal space to implement coronavirus relief measures. In response to COVID, the Dutch government implemented wide-ranging support for businesses affected by the COVID crisis, including support to cover employee wages, benefits to self-employed professions to bridge a loss of income, and compensation for fixed costs other than wages. The financial support measures added up to about $70.5 billion (€60 billion) in the first year of the crisis. These programs prevented a wave of bankruptcies – bankruptcy filings in 2020 and 2021 were the lowest in two decades.

The new coalition government announced in early 2022 plans to be climate neutral by 2050. The government said it would adjust domestic climate goals to at least 55 percent CO2 reduction by 2030 compared to 1990, with ambitions to aim higher for a 60 percent reduction.  The government has named a Minister for Climate and Energy Policy to work on domestic issues in addition to a Climate Envoy focused on international efforts.  The Netherlands joined the U.S.-EU Global Methane Pledge and promised to end all investment in new coal power generation domestically and internationally.  In April 2022, the government joined the AIM for Climate initiative.

The 2019 National Climate Agreement contains policy and measures to achieve climate goals through agreements with various economic sectors on specific actions.  The participating sectors include electricity, industry, “built environment,” traffic and transport, and agriculture.

The Netherlands business community suffered a two-pronged loss in the planned departure of two of its major national corporate champions. Energy leader Shell and food and household products conglomerate Unilever announced in 2021 a relocation of their corporate headquarters from The Hague and Rotterdam, respectively, to London. The companies cited concerns with Dutch tax law relative to dividend taxation and need for consolidated management structure. (Note: Both companies previously split their corporate governance between the Netherlands and the UK. End Note.)

In March 2022, the Dutch Central Planning Bureau (CPB) published its 2022 economic projections. Due to the Russian invasion of Ukraine, the outlook was marked by uncertainty and flagged “even higher” energy prices as the most important economic consequence. Because of increased energy prices and high inflation from the COVID pandemic, CPB estimates a 5.2% inflation rate for 2022 with a range of 6.0% and 3.0% depending on how long energy prices remain high. CPB estimated economic growth of 3.6% in 2022 and 1.7% in 2023. CPB predicted unemployment at 4 percent in 2022, down from 4.2% in 2021. The low unemployment rate reflects a similar challenge also faced by the United States – businesses are finding it difficult to recruit qualified staff. Government debt is expected to rise to 61 percent of GDP by 2025 due to increased spending under the new coalition government, including on defense, outlays to support an aging population, and support to low-income families to offset inflation in energy and food prices.

According to the U.S. Bureau of Economic Analysis (BEA), when measured by country of foreign parent, the Netherlands is the second largest destination for U.S. FDI abroad in 2020 after the UK, holding $844 billion out of a total of $6.1 trillion total outbound U.S. investment – about 14 percent. Investment from the Netherlands contributed $484 billion FDI to the United States, making it the fourth largest investor at the end of 2020 of about $4.6 trillion total inbound FDI to the United States– about 10.5 percent. Measured by ultimate beneficial owner (UBO), the Netherlands was the seventh largest investor at $236 billion. For the Netherlands, outbound FDI to the United States represented 14 percent of all direct investment abroad.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 8 of 180 https://www.transparency.org/en/cpi/2021 
Global Innovation Index 2021 6 of 132 https://www.globalinnovationindex.org/analysisindicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 $844 million Bea: Netherlands – International Trade and Investment Country Facts
World Bank GNI per capita 2020 $ 51,060 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

7. State-Owned Enterprises

The Dutch government maintains an equity stake in a small number of enterprises and some ownership in companies that play an important role in strategic sectors.  In particular, government-controlled entities retain dominant positions in gas and electricity distribution, rail transport, and the water management sector.  The Netherlands has an extensive public broadcasting network, which generates its own income through advertising revenues but also receives government subsidies. For a complete list of government-owned entities, please see:  https://www.rijksoverheid.nl/onderwerpen/staatsdeelnemingen/vraag-en-antwoord/in-welke-ondernemingen-heeft-de-overheid-aandelen 

Private enterprises are allowed to compete with public enterprises with respect to market access, credits, and other business operations such as licenses and supplies.  Government-appointed supervisory boards oversee state-owned enterprises (SOEs).  In some instances involving large investment decisions, SOEs must consult with the cabinet ministry that oversees them.  As with any other firm in the Netherlands, SOEs must publish annual reports, and their financial accounts must be audited. The Netherlands fully adheres to the OECD Guidelines on Corporate Governance of SOEs.

8. Responsible Business Conduct

The Netherlands is a global leader in corporate social responsibility (CSR).  Principles of CSR are promoted and prescribed through a range of corporate, governmental, and international guidelines.  In general, companies carefully guard their CSR reputation and consumers are increasingly opting for products and services that are produced in an ethical and sustainable manner. The Netherlands adheres to OECD Guidelines for Multinational Enterprises, and the Dutch Ministry of Economic Affairs and Climate Policy houses the National Contact Point (NCP) that promotes OECD guidelines and helps mediate concerns that persons, non-governmental organizations (NGOs), and enterprises may have regarding implementation by a specific company.  For more information, visit  http://www.oecdguidelines.nl.

The Dutch government strongly encourages foreign and local enterprises to follow UN Guiding Principles on Business and Human Rights, which states that businesses have a social responsibility to respect the same human rights norms in other countries as they do in the Netherlands.

Under the law, there is no differentiation for men and women regarding equal access to investment.  Furthermore, no groups are excluded from participating in financial markets and the financial system.

The Netherlands has strong standards for corporate governance.  Publicly listed companies are required to publish audited financial reports.  As of 2017, the EU requires these companies to include a chapter on Responsible Business Conduct.

The Ministry of Economic Affairs and Climate Policy established an independent networking organization on CSR called MVONederland in 2004.  MVONederland currently has over 2050 members, including SMEs, multinational corporations, and NGOs, as well as local and national administrative bodies.  See  https://www.mvonederland.nl/en/about-mvo-nederland/about-csr-corporate-sustainability-and-responsibility/  

The Dutch government also encourages companies to engage in CSR through incentive programs and by setting high standards.  Examples include:

  • The government reviews CSR activities of more than 500 corporations annually and presents an award to the company with the highest transparency score.
  • The government boosts the development of sustainable products through its own sustainable procurement policy.
  • Dutch companies can only join government trade missions if they have endorsed OECD Guidelines for Multinational Enterprises.
  • Companies that observe the OECD Guidelines for Multinational Enterprises are eligible for financial support for their international trade and investment activities.
  • The government supports the Sustainable Trade Initiative (IDH), which helps companies make their international production chains more sustainable.
  • The government conducts sector-risk analyses to identify where problems are most likely to occur and target improvements.
  • The government has completed nine of 13 sector-wide Responsible Business Conduct Agreements it intends to make with the private sector in the area of international CSR.  The nine agreements cover garments and textiles, banking, pensions, insurance, food products, sustainable forestry, natural stone, metals, and gold. See https://www.government.nl/topics/responsible-business-conduct-rbc/responsible-business-conduct-rbc-agreements

9. Corruption

The Netherlands fully complies with international standards on combating corruption.  Transparency International ranked the Netherlands eighth in its 2020 Corruption Perception Index. Anti-bribery legislation to implement the 1997 OECD Anti-Bribery Convention (ABC) entered into effect in 2001.  The anti-bribery law reconciles the language of the ABC with the EU Fraud Directive and the Council of Europe Convention on Fraud.  Under the law, it is a criminal offense if one obtains foreign contracts through corruption.

At the national level, the Ministry of the Interior and Kingdom Relations and Ministry of Justice and Security have both taken steps to enhance regulations to combat bribery in the processes of public procurement and issuance of permits and subsidies.  Most companies have internal controls and/or codes of conduct that prohibit bribery.

Several agencies combat corruption.  The Dutch Whistleblowers Authority serves as a knowledge center, develops new instruments for tracking problems, and identifies trends on matters of integrity.  The Independent Commission for Integrity in Government is an appeals board for whistleblowers in government and law enforcement agencies.

The Netherlands signed and ratified the UN Anticorruption Convention and is party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

10. Political and Security Environment

Although political violence rarely occurs in the highly stable and consensus-oriented Dutch society, public debate on issues such as immigration and integration policy has been contentious.  While rare, there have been some politically and religiously inspired acts of violence.

The Dutch economy derives much of its strength from a stable business climate that fosters partnerships among unions, business organizations, and the government.  Strikes are rarely used as a way to resolve labor disputes.

11. Labor Policies and Practices

The Netherlands has a strongly regulated labor market (over 75 percent of labor contracts fall under some form of collective labor agreement) that comprises a well-educated and multilingual workforce.  Labor/management relations in both the public and private sectors are generally good in a system that emphasizes the concept of social partnership between industry and labor.  Although wage bargaining in the Netherlands is increasingly decentralized, there still exists a central bargaining apparatus where labor contract guidelines are established.

The terms of collective labor agreements apply to all employees in a sector, not only union members.  To avoid surprises, potential investors are advised to consult with local trade unions prior to making an investment decision to determine which, if any, labor contracts apply to workers in their business sector.  Collective bargaining agreements negotiated in recent years have, by and large, been accepted without protest.

Every company in the Netherlands with at least 50 workers is required by law to institute a Works Council (“Ondernemingsraad”), through which management must consult on a range of issues, including investment decisions, pension packages, and wage structures.  The Social Economic Council has helpful programs on establishing employee participation that allow firms to comply with the law on Works Councils.  See https://www.ser.nl/en/SER/About-the-SER/What-does-the-SER-do.

The working population consists of 9 million persons.  Workers are sought through government-operated labor exchanges, private employment firms, or direct hiring.  At 50 percent, the Netherlands has the highest share of part-time workers in its workforce of all EU member states (in 2017, the EU average of part-time workers was 19 percent).  A rise in female participation in the workforce led to a 37 percent increase in the share of part-time workers in the total working population.  Three-quarters of women and one quarter of men work less than a 36-hour week.  Labor market participation, especially by older workers, is growing, and the number of independent contractors is rapidly increasing.

To ensure continued economic growth and address the impact of an aging population, increased labor market participation is critical.  The age to qualify for a state pension (AOW) will increase from age 66 to 67 by 2024.  Governmental labor market policies are targeted at increasing productivity of the labor force, including the expansion of working hours.  For example, access to daycare is improving in order to raise the average number of hours per week worked by women (28 hours), which is 11 hours below the average of hours worked by men.

Effective January 1, 2022, the minimum wage for employees older than 21 years is €1,725 ($1,850) per month.

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) 2021 $859,001 2020 $914,000 GDP (current US$) – Netherlands | Data (worldbank.org)
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) 2019 $976,750 2020 $844,000 BEA data available at https://apps.bea.gov/international/factsheet/
Host country’s FDI in the United States ($M USD, stock positions) 2020 $744,720 2020 $484,000 BEA data available at https://www.bea.gov/international/direct-investment-and-multinational-enterprises-comprehensive-data
Total inbound stock of FDI as % host GDP 2019 170% (excluding SFI) 2020 318% UNCTAD data available at

https://stats.unctad.org/handbook/EconomicTrends/Fdi.html     

* Source for Host Country Data: Netherlands Bureau for Economic Policy Analysis (CPB): GDP, Dutch Central Bank (DNB): FDI.

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 4,512,447 100% Total Outward 5,876,798 100%
United States 1,190,180 26% United Kingdom 801,255 14%
Luxemburg 435,166 10% United States 792,311 13%
United Kingdom 433,383 10% Switzerland 521,553 9%
Germany 332,293 7% Germany 418,576 7%
Switzerland 226,734 5% Luxembourg 330,020 6%
“0” reflects amounts rounded to +/- USD 500,000.

14. Contact for More Information

Tracy Taylor
Economic Unit Chief
John Adams Part 1
2244 BZ Wassenaar
Telephone: +31 (0)70 3102276
Email: TaylorTL1@state.gov

United Kingdom

Executive Summary    

The United Kingdom (UK) is a popular destination for foreign direct investment (FDI) and imposes few impediments to foreign ownership.  In the past decade, the UK has been Europe’s top recipient of FDI.  The UK government provides comprehensive statistics on FDI in its annual inward investment report:  https://www.gov.uk/government/statistics/department-for-international-trade-inward-investment-results-2020-to-2021.  

The COVID pandemic triggered a massive expansion of government support for households and businesses.  The government focused on supporting business cashflow and underwriting over £200 billion ($261 billion) in loans from banks to firms.  Although aggregate investment grew by 5.3 percent in 2021, levels remain below their pre-pandemic peak.  Most analysts expect a rebound in investment growth in 2022, however, driven in part by the government’s investment tax super-deduction, which allows business to claim back 130 percent of the cost of an eligible capital investment on their taxable profits up until March 2023, a more stable post-Brexit regulatory framework, and the reduction of economic and mobility restrictions imposed to cope with the pandemic.  Most of these measures were phased out by October 2021.  Their fiscal impact has been large, however, and the budget deficit reached 8.5 percent of GDP.  The government has committed to fiscal consolidation, and in September 2021 announced that it planned to increase the corporation tax rate from 19 percent to 25 percent by 2023 and national insurance contributions by 2.5 percent to fund additional health and social care spending.

In response to declining inward foreign investment each year since 2016, and amidst the sharp but temporary recession related to the pandemic, the UK government established the Office for Investment in November 2020.  The Office is focused on attracting high-value investment opportunities into the UK which “align with key government priorities, such as reaching net zero, investing in infrastructure, and advancing research and development.”  It also aims to drive inward investment into “all corners of the UK through a ‘single front door.’”

The UK formally withdrew from the EU’s political institutions on January 31, 2020, and from the bloc’s economic and trading institutions on December 31, 2020.  The UK and the EU concluded a Trade and Cooperation Agreement (TCA) on December 24, 2020, setting out the terms of their future economic relationship.  The TCA generally maintains tariff-free trade between the UK and the EU but introduced several new non-tariff, administrative barriers. Market entry for U.S. firms is facilitated by a common language, legal heritage, and similar business institutions and practices.  The UK is well supported by sophisticated financial and professional services industries and has a transparent tax system in which local and foreign-owned companies are taxed alike.  The pound sterling is a free-floating currency with no restrictions on its transfer or conversion.  There are no exchange controls restricting the transfer of funds associated with an investment into or out of the UK.

UK legal, regulatory, and accounting systems are transparent and consistent with international standards.  The UK legal system provides a high level of protection.  Private ownership is protected by law and monitored for competition-restricting behavior.  U.S. exporters and investors generally will find little difference between the United States and the UK in the conduct of business, and common law prevails as the basis for commercial transactions in the UK.

The United States and UK have enjoyed a “Commerce and Navigation” Treaty since 1815 which guarantees national treatment of U.S. investors.  A Bilateral Tax Treaty specifically protects U.S. and UK investors from double taxation.  The UK has, however, taken some steps that particularly affect U.S. companies in the technology sector.  A unilateral digital services tax came into force in April 2020, taxing digital firms—such as social media platforms, search engines, and marketplaces—two percent on revenue generated in the UK.  The Competition and Markets Authority (CMA), the UK’s competition regulator, has indicated that it intends to scrutinize and police the sector more thoroughly.  From 2020-2021, the CMA investigated the acquisition of Giphy by Meta Platforms (formerly Facebook).  The CMA found that the acquisition may impede competition in both the supply of display advertising in the UK, and in the supply of social media services worldwide (including in the UK) and ordered Meta to sell Giphy.

The United States is the largest source of direct investment into the UK on an ultimate parent basis.  Thousands of U.S. companies have operations in the UK.  The UK also hosts more than half of the European, Middle Eastern, and African corporate headquarters of American-owned multinational firms.

In October 2021, the UK government introduced its Net Zero Strategy, which comprehensively sets out UK government plans to cut emissions, seize green economic opportunities, and use private investment to achieve a net zero economy by 2050.  The Net Zero Strategy allocates £7.8 billion ($10.5 billion) in new spending and aims to leverage up to £90 billion ($118 billion) of private investment by 2030.  In its latest spending review, Her Majesty’s Treasury’s (HMT) estimated that net-zero spending between 2021-22 and 2024-25 would total £25.5 billion ($34.5 billion).

The UK government is endeavoring to position the UK as the first net-zero financial center and a global hub for sustainable financial activity.  The UK Infrastructure Bank, established in 2021, is providing £22 billion ($29 billion) of infrastructure finance to tackle climate change.  In 2021 HMT sold £16 billion ($20.8 billion) worth of the UK’s Green Gilt to help fund green projects across the UK.  Through the Greening Finance Roadmap, HMT outlines the UK government’s intent to implement a detailed sovereign green taxonomy, which is expected to be published by the end of 2022, along with sustainable disclosure requirements that would serve as an integrated framework for sustainability throughout the UK economy.

Currency conversions have been done using XE and Bank of England data.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perception Index 2021 11 of 180  http://www.transparency.org/research/cpi/overview
Global Innovation Index 2021 4 of 131 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 $890,086  https://www.bea.gov/data/intl-trade-investment/direct-investment-country-and-industry 

 

World Bank GNI per capita 2020 $45,870 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD

 

1. Openness To, and Restrictions Upon, Foreign Investment   

2. Bilateral Investment Agreements and Taxation Treaties    

The UK has concluded 105 bilateral investment treaties, which are known in the UK as Investment Promotion and Protection Agreements.  For a complete current list, including actual treaties, see:  http://investmentpolicyhub.unctad.org/IIA/CountryBits/221#iiaInnerMenu  

The United Kingdom is a member of the OECD Inclusive Framework on Base Erosion and Profit Shifting (BEPS) and the Inclusive Framework’s October 2021 agreement on the global minimum corporate tax.

3. Legal Regime   

4. Industrial Policies