Policies Toward Foreign Direct Investment

The Algerian economy is both challenging and potentially highly rewarding.  While the Algerian government publicly welcomes FDI, a difficult business climate, an inconsistent regulatory environment, and contradictory government policies complicate foreign investment.  There are business opportunities in nearly every sector, including energy, power, water, healthcare, telecommunications, transportation, recycling, agribusiness, and consumer goods. 

Algerians’ urgency to diversify their economy away from reliance on hydrocarbons has increased amid low and fluctuating oil prices since mid-2014.  The government has sought to reduce the country’s trade deficit through import substitution policies and import tariffs. Despite higher oil prices in 2018 that helped shrink the trade deficit, Algeria’s decreasing hydrocarbons exports has kept government rhetoric focused on the need to diversify Algeria’s economy.  On January 29, 2019 the government implemented tariffs between 30-200 percent on over 1,000 goods it believes are destined for direct sale to consumers. Companies that set up local manufacturing operations can receive permission to import materials the government would not otherwise approve for import if the importer can show those materials will be used in local production.  Certain regulations explicitly favor local firms at the expense of foreign competitors, most prominently in the pharmaceutical sector, where an outright import ban the government implemented in 2009 remains in place on more than 360 medicines and medical devices. The arbitrary nature of the government’s frequent changes to business regulations has added to the uncertainty in the market.

Algerian state enterprises have a “right of first refusal” on transfers of foreign holdings to foreign shareholders.  Companies must notify the Council for State Participation (CPE) of these transfers. 

There are two main agencies responsible for attracting foreign investment, the National Agency of Investment Development (ANDI) and the National Agency for the Valorization of Hydrocarbons (ALNAFT).

ANDI is the primary Algerian government agency tasked with recruiting and retaining foreign investment.  ANDI runs branches in each of Algeria’s 48 governorates (“wilayas”) which are tasked with facilitating business registration, tax payments, and other administrative procedures for both domestic and foreign investors.  In practice, U.S. companies report that the agency is under-staffed and ineffective. Its “one-stop shops” only operate out of physical offices, and there are no efforts to maintain dialogue with investors after they have initiated an investment.  The agency’s effectiveness is undercut by its lack of decision-making authority, particularly for industrial projects, which is exercised by the Ministry of Industry and Mines, the Minister of Industry himself, and in many cases the Prime Minister.

ALNAFT is charged with attracting foreign investment to Algeria’s upstream oil and gas sector.  In addition to organizing events marketing upstream opportunities in Algeria to potential investors, the agency maintains a paid-access digital database with extensive technical information about Algeria’s hydrocarbons resources. 

Limits on Foreign Control and Right to Private Ownership and Establishment

Establishing a presence in Algeria can take any of three basic forms: 1) a liaison office with no local partner requirement and no authority to perform commercial operations, 2) a branch office to execute a specific contract, with no obligation to have a local partner, allowing the parent company to conduct commercial activity (considered a resident Algerian entity without full legal authority), or 3) a local company with 51 percent of share-capital held by a local company or shareholders.  A business entity can be incorporated as a joint stock company (JSC), a limited liability company (LLC), a limited partnership (LP), a limited partnership with shares (LPS), or an undeclared partnership. Groups and consortia are also used by foreign companies when partnering with other foreign companies or with local firms.

Foreign and domestic private entities have the right to establish and own business enterprises and engage in all forms of remunerative activity.  However, the 51/49 rule requires majority Algerian ownership (at least 51 percent) in all projects involving foreign investments. This requirement was first adopted in 2006 for the hydrocarbons sector and was expanded across all sectors in the 2009 investments law.  The rule was removed from the 2016 Investment Law, but remains in force by virtue of its inclusion in the 2016 annual finance law, which requires foreign investment activities be subject to the incorporation of an Algerian company in which at least 51 percent of capital stock is held by resident national shareholder(s). 

Algerian government officials have defended the 51/49 requirement as necessary to prevent capital flight, protect Algerian businesses, and provide foreign businesses with local expertise.  The government has argued the rule is not an impediment to attracting foreign investment and is needed to diversify investment in Algeria’s economy, foster private sector growth, create employment for nationals, transfer technology and expertise, and develop local training initiatives.  Additionally, officials contend, and some foreign investors agree, a range of tailored measures can mitigate the effect of the 51/49 rule and allow the minority foreign shareholder to exercise other means of control. Some foreign investors use multiple local partners in the same venture, effectively reducing ownership of each individual local partner to enable the foreign partner to own the largest share.

The 51/49 investment rule poses challenges for various types of investors.  For example, the requirement hampers market access for foreign small and medium-sized enterprises (SMEs), as they often do not have the human resources or financial capital to navigate complex legal and regulatory requirements.  Large companies can find creative ways to work within the law, sometimes with the cooperation of local authorities who are more flexible with large investments that promise of significant job creation and technology and equipment transfers.  SMEs usually do not receive this same consideration. There are also allegations that Algerian partners sometimes refuse to invest the required funds in the company’s business, require non-contract funds to win contracts, and send unqualified workers to job sites.  Manufacturers are also concerned about intellectual property rights (IPR), as foreign companies do not want to surrender control of their designs and patents. Several U.S. companies have reported they have internal policies that preclude them from investing overseas without maintaining a majority share, out of concerns for both IPR and financial control of the local venture, which correspondingly prevent them from establishing businesses in Algeria.

The Algerian government does not officially screen FDI, though Algerian state enterprises have a “right of first refusal” on transfers of foreign holdings to foreign shareholders.  Companies must notify the Council for State Participation (CPE) of these transfers. In addition, initial foreign investments are still subject to approvals from a host of ministries that cover the proposed project, most often the Ministries of Commerce, Health, Energy, and Industry and Mines.  U.S. companies have reported that certain high-profile industrial proposals, such as for automotive assembly, are subject to informal approval by the Prime Minister. In 2017, the government instituted an Investments Review Council chaired by Prime Minister for the purpose of “following up” on investments; in practice, the establishment of the council means FDI proposals are subject to additional government scrutiny.  According to the 2016 Investment Law, projects registered through the ANDI deemed to have special interest for the national economy or high employment generating potential may be eligible for extensive investment advantages. For any project over 5 billion dinars (approximately USD 44 million) to benefit from these advantages, it must be approved by the Prime Minister-chaired National Investments Council (CNI). The CNI meets regularly, though it is not clear how the agenda of projects considered at each meeting is determined. 

Other Investment Policy Reviews

Algeria has not conducted an investment policy review through the Organization for Economic Cooperation and Development (OECD) or the World Trade Organization (WTO).  The last investment policy review by a third party was conducted by the United Nations Conference on Trade and Development (UNCTAD) in 2003 and published in 2004.

Business Facilitation

Algeria’s online information portal dedicated to business creation www.jecreemonentreprise.dz   and the business registration website www.cnrc.org.dz   are currently under maintenance.  The websites provide information about several business registration steps applicable for registering certain kinds of businesses.  Entrepreneurs report that additional information about requirements or regulation updates for business registration are available only in person at the various offices involved in the creation and registration process.

In the World Bank’s 2019 Doing Business report, Algeria’s ranking for starting a business dropped from 145 to 157 (http://www.doingbusiness.org/en/data/exploreeconomies/algeria  ) despite seeing improvement in rankings for half of the ten indicator categories, including reforms which made getting electricity and trading across borders simpler.  The World Bank report lists 12 procedures that cumulatively take an average of 17.5 days to complete to register a new business. New business owners seeking to establish their enterprises have sometimes reported the process takes longer, noting that the most updated version of regulations and required forms are only available in person at multiple offices, therefore requiring multiple visits.

Outward Investment

Algeria does not currently have any restrictions on domestic investors from investing overseas, provided they can access foreign currency for such investments.  The exchange of Algerian dinars outside of Algerian territory is illegal, as is the carrying abroad of more than 3,000 dinars in cash at a time (approximately USD 26; see section 7 for more details on currency exchange restrictions).

Algeria’s National Agency to Promote External Trade (ALGEX), housed in the Ministry of Commerce, is the lead agency responsible for supporting Algerian businesses outside the hydrocarbons sector that want to export abroad.  ALGEX controls a special promotion fund to promote exports but the funds can only be accessed for very limited purposes. For example, funds might be provided to pay for construction of a booth at a trade fair, but travel costs associated with getting to the fair – which can be expensive for overseas shows – would not be covered.  The Algerian Company of Insurance and Guarantees to Exporters (CAGEX), also housed under the Ministry of Commerce, provides insurance to exporters. In 2003, Algeria established a National Consultative Council for Promotion of Exports (CCNCPE) that is supposed to meet annually. Algerian exporters claim difficulties working with ALGEX including long delays in obtaining support funds, and the lack of ALGEX offices overseas despite a 2003 law for their creation.  The Bank of Algeria’s 2002 Money and Credit law allows Algerians to request the conversion of dinars to foreign currency in order to finance their export activities, but exporters must repatriate an equivalent amount to any funds spent abroad, for example money spent on marketing or other business costs incurred.

Transparency of the Regulatory System

The national government manages all regulatory processes.  Legal and regulatory procedures, as written, are considered consistent with international norms, although the decision-making process is at times opaque.

Algeria implemented a new accounting system called Financial Accounting System (FAS) in 2010.  Though legislation does not make explicit references, FAS appears to be based on International Accounting Standards Board and International Financial Reporting Standards (IFRS).  Operators generally find accounting standards to follow international norms, though they note that some particularly complex processes in IFRS have detailed explanations and instructions but by comparison are explained relatively briefly in FAS.

There is no specific mechanism for public comment on draft laws, regulations or regulatory procedures.  Typically, government officials give testimony to Parliament on draft legislation, and that testimony receive press coverage.  Occasionally copies of bills are leaked to the media.  However, full-text copies of draft laws are not made publicly accessible before enactment.  All laws and some regulations are published in the Official Gazette (www.joradp.dz  ) in Arabic and French, but the database has only limited online search features, and no summaries are published.  Often secondary legislation and/or administrative acts (known as ‘circulaires’ or ‘directives’) provide important details on how to implement laws and procedures.  Administrative acts are generally written at the ministry-level and not made public, though may be available if requested in person at a particular agency or ministry.  Public tenders are often accompanied by a book of specifications which is not made public, but only provided upon payment.

In some cases, authority over a matter may rest among multiple ministries, which imposes additional bureaucratic steps and the likelihood of either inaction or the issuance of conflicting regulations due to errors or unusual circumstances.  The development of regulations occurs largely away from public view; internal discussions at or between ministries are not usually made public.  In some instances, the only public interaction on regulations development is a press release from the official state press service at the conclusion of the process; in other cases, a press release is issued earlier.  Regulatory enforcement mechanisms and agencies exist at some ministries, but they are usually understaffed and enforcement remains weak.

The National Economic and Social Council (CNES) looks broadly at the effects of Algerian government policies and regulations in economic and social spheres.  The CNES has also been known to provide feedback on proposed legislation, though this is not required and neither the feedback nor legislation are necessarily made public.

Information on external debt obligations up to fiscal year 2018 was publicly available via the Central Bank’s quarterly statistical bulletin online  .  The statistical bulletin only describes external debt and not public debt, but the Ministry of Finance’s budget execution summaries reflect amalgamated debt totals.  The Ministry of Finance is working on a project to create an electronic, consolidated database of internal and external debt information. An amendment of the law on currency and credit authorizes the Central Bank to purchase bonds directly from the Treasury for a period of up to five years.  The Ministry of Finance indicated this would include purchasing debt from state enterprises, a process they described as the Central Bank transferring money to the treasury, which then provides the cash to, for example, state owned enterprises, in exchange for their debt. 

International Regulatory Considerations

Algeria is not a member of any regional economic bloc or of the WTO.  The structure of Algerian regulations largely follows European—specifically French—standards.

Legal System and Judicial Independence

Algeria’s legal system is based on the French civil law tradition.  The commercial law was established in 1975 and most recently updated in 2007 (www.joradp.dz/TRV/FCom.pdf ).  The judiciary is nominally independent from the executive branch, but U.S. companies have reported allegations of political pressure exerted on the courts by the executive.  Regulation enforcement actions are adjudicated in the national courts system and are appealable. Algeria has a system of administrative tribunals for adjudicating disputes with the government, distinct from the courts that handle civil disputes and criminal cases.  Decisions made under treaties or conventions to which Algeria is a signatory are binding and enforceable under Algerian law.

Laws and Regulations on Foreign Direct Investment

The 51/49 rule in the 2016 annual finance law requires a majority Algerian partner for any foreign investment (see section 2), but otherwise there are few laws restricting foreign investment.  In practice, the many regulatory and bureaucratic requirements for business operations provide officials avenues to advance informally political or protectionist policies. The investments law enacted in 2016 charged ANDI with creating four new branches to assist with business establishment and the management of investment incentives.  ANDI’s website (www.andi.dz/index.php/en/investir-en-algerie  ) lists the relevant laws, rules, procedures, and reporting requirements for investors.  However, much of the information lacks detail—particularly for the new incentives elaborated in the 2016 investments law—and refers prospective investors to ANDI’s physical “one-stop shops” located throughout the country. 

There is an ongoing effort by customs, under the Ministry of Finance, to establish a new digital platform featuring one-stop shops for importers and exports to streamline bureaucratic processes.

Competition and Anti-Trust Laws

The National Competition Council (www.conseil-concurrence.dz/  ) is responsible for reviewing both domestic and foreign competition related concerns.  Established in late 2013, it is housed under the Ministry of Commerce. Once the economic concentration of enterprises exceeds 40 percent of a market’s sales or purchases, the Competition Council is authorized to investigate, though a 2008 directive from the Ministry of Commerce exempted economic operators working for national economic progress from this review/approval.

Expropriation and Compensation

The Algerian state can expropriate property under limited circumstances proscribed by law, with the state mandated to pay “just and equitable” compensation to the defendants for the property.  Expropriation of property is extremely rare, with no cases within the last 10 years. However, in late 2018 a government measure required farmers to comply with a new regulation altering the concession contracts of their land in a way that would cede more control to the government.  Those who refused to switch contract type by December 31, 2018 lost their right to their land. 

Dispute Settlement

ICSID Convention and New York Convention

Algeria is a signatory to the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (The New York Convention) and the Convention on the International Center for the Settlement of Investment Disputes (ICSID Convention).  The Algerian code of civil procedure allows both private and public companies full recourse to international arbitration. Algeria permits the inclusion of international arbitration clauses in contracts. 

Investor-State Dispute Settlement

Investment disputes sometimes occur, especially on major projects.  These disputes can be settled informally through negotiations between the parties or via the domestic court system.  For disputes with foreign investors, cases can be decided during international arbitration. The most common disputes in the last several years have involved state-owned oil and gas company Sonatrach and its foreign partners concerning the retroactive application since 2006 of a windfall profits tax on hydrocarbons production.  Sonatrach won a case in October 2016 against Spanish oil company Repsol and two Korean firms. In 2018 Sonatrach announced it had settled all outstanding international disputes.

The most recent investment dispute involving a U.S. company dates to 2012.  The company, which had encountered bureaucratic blocks on the expatriation of dividends from a 2005 investment, did not resort to arbitration.  The dispute was resolved in 2017, with the government permitting the company to expatriate the dividends.

There is no U.S.-Algeria Bilateral Investment Treaty or Free Trade Agreement.

International Commercial Arbitration and Foreign Courts

The Algerian Chamber of Commerce and Industry (CACI), the nationwide, state-supported chamber of commerce, has the authority to arbitrate investment disputes as an agent of the court.  The bureaucratic nature of Algeria’s economic and legal system, as well as its opaque decision-making process, means that disputes can drag on for years before a resolution is reached. Businesses have reported cases in the court system are subject to political influence and generally tend to favor the government’s position.

Local courts recognize and have the authority to enforce foreign arbitral awards.  Disputes between state-owned enterprises (SOEs) and foreign investors are rarely decided in domestic courts, since nearly all contracts between foreign and Algerian partners include clauses for international arbitration.  The Ministry of Justice is in charge of enforcing arbitral awards against SOEs.

Bankruptcy Regulations

Algeria’s bankruptcy law generally follows international norms.  While bankruptcy per se is not criminalized, management decisions (such as company spending, investment decisions, and even procedural mistakes) are subject to criminal penalties, ranging from fines to jail time, so decisions that lead to bankruptcy can be punishable under Algerian criminal law.  However, bankruptcy cases rarely proceed to a full dissolution of assets. The Algerian government generally props up public companies on the verge of bankruptcy via cash infusions from the public banking system. According to the World Bank’s Doing Business report, both debtors and creditors may file for both liquidation and reorganization.

Investment Incentives

Any incentive offered by the Algerian government is generally available to any company, though there are multiple tiers of “common, additional, and exceptional” incentives under the 2016 investments law (www.joradp.dz/FTP/jo-francais/2016/F2016046.pdf ).  “Common” incentives available to all investors include exemption from customs duties for all imported production inputs, exemption from value-added sales tax (VAT) for all imported goods and services that enter directly into the implementation of the investment project, a 90 percent reduction on tenancy fees during construction, and a 10-year exemption on real estate taxes.  Investors also benefit from a three-year exemption on corporate and professional activity taxes and a 50 percent reduction for three years on tenancy fees after construction is completed. Additional incentives are available for investments made outside the coastal regions, namely the reduction of tenancy fees to a symbolic dinar (USD .01) per square meter of land for 10 years in the High Plateau region and 15 years in the south of Algeria, plus a 50 percent reduction thereafter.  The law also charges the state to cover, in part or in full, the necessary infrastructure works for the realization of the investment. “Exceptional” incentives apply for investments “of special interest to the national economy,” including the extension of the common tax incentives to 10 years. The sectors of “special interest” have not yet been publicly specified. An investment must receive the approval of the National Investments Council in order to qualify for the exceptional incentives. 

Regulations passed in a March 2017 executive decree exclude approximately 150 economic activities from eligibility for the incentives (www.joradp.dz/FTP/jo-francais/2017/F2017016.pdf ).  The list of excluded investments is concentrated on the services sector but also includes manufacturing for some products.  All investments in sales, whether retail or wholesale, and imports business are ineligible.

The 2016 investments law also provided state guarantees for the transfer of incoming investment capital and outgoing profits.  Pre-existing incentives established by other laws and regulations also include favorable loan rates well below inflation from public banks for qualified investments.

Foreign Trade Zones/Free Ports/Trade Facilitation

Algeria does not have any foreign trade zones or free ports.

Performance and Data Localization Requirements

The Algerian government does not officially mandate local employment, but companies usually must provide extensive justification to various levels of the government as to why an expatriate worker is needed.  Some businesses have reported instances of the government pressuring foreign companies operating in Algeria, particularly in the hydrocarbons sector, to limit the number of expatriate middle and senior managers so that Algerians can be hired for these positions.  Any person or legal entity employing a foreign citizen is required to notify the Ministry of Labor. Contacts at multinational companies have alleged this pressure is applied via visa applications for expatriate workers. U.S. companies in the hydrocarbons industry have reported that, when granted, expatriate work permits are usually valid for no longer than six months and are delivered up to three months late, requiring firms to apply perpetually for renewals.

In 2017, the Algerian government began instituting forced localization in the auto sector.  Industry regulations issued in December 2017 require companies producing or assembling cars in the country to achieve a local integration rate of at least 15 percent within three years of operation.  The threshold rises to between 40 and 60 percent after a company’s fifth year of operation. Since 2014, the government has required car dealers to invest in industrial or “semi-industrial” activities as a condition for doing business in Algeria.  Dealers seeking to import new vehicles must obtain an import license from the Ministry of Commerce. Since January 2017, the Ministry has not issued any licenses. As the Algerian government further restricts imports, localization requirements are expected to broaden to other manufacturing industries over the next several years.  For example, a tender launched in 2018 for 150 megawatts of photovoltaic solar energy power plants mandated that bidders be Algerian legal entities.

Information technology providers are not required to turn over source codes or encryption keys, but all hardware and software imported to Algeria must be approved by the Agency for Regulation of Post and Electronic Communications (ARPCE), under the Ministry of Post, Information Technology and Communication.  The ARPCE was created in May 2018, dissolving and taking over the function of the previous Agency for Regulation of Post and Telecommunications (APRT). In practice, the Algerian government requires public sector entities to store data on servers within the country.

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

* Algeria Office of National Statistics: http://www.ons.dz/Au-deuxieme-trimestre-2018-les.html  

* National Agency for Investment Development.

Table 3: Sources and Destination of FDI

No information for Algeria is available on the IMF’s Coordinated Direct Investment Survey (CDIS) website.  Neither World Bank nor Algerian sources break down FDI to and from Algeria by individual countries.

Table 4: Sources of Portfolio Investment

No information for Algeria is available on the IMF’s Coordinated Direct Investment Survey (CDIS) website.  Neither World Bank nor Algerian sources break down FDI to and from Algeria by individual countries.

Policies Towards Foreign Direct Investment

The GOC’s policies towards foreign direct investment (FDI) are generally positive.  There are few formal restrictions on foreign trade and investment. 

Chad’s laws and regulations encourage FDI.  The National Investment Charter of 2008, a set of guidelines promulgated by the National Agency for Investment and Exports (ANIE, Agence Nationale des Investissements et des Exports), an agency of the Ministry of Industrial and Commercial Development & Private Sector Promotion, offers incentives to foreign companies establishing operations in Chad, including up to five years of tax-exempt status.  Under Chadian law, foreign and domestic entities may establish and own business enterprises. The National Investment Charter permits full foreign ownership of companies in Chad. The only limit on foreign control is on ownership of companies deemed related to national security.  The National Investment Charter guarantees both foreign companies and individuals equal standing with Chadian companies and individuals in the privatization process. In principle, tenders for foreign investment in state-owned enterprises (SOEs) and for government contracts are conducted through open international bid procedures.

Limits on Foreign Control and Right to Private Ownership and Establishment

There are no limits on foreign ownership or control.  There are no sector-specific restrictions that discriminate against market access for U.S. or other foreign investors, and no de facto anti-foreign discriminatory practices.

Other Investment Policy Reviews

The World Trade Organization (WTO) last published a trade policy review for Chad, Cameroon, Republic of Congo, Gabon, and Central African Republic in July 2013. 

Neither the Organization for Economic Cooperation and Development (OECD) nor the United Nations Committee on Trade and Development (UNCTAD) has published any investment policy reviews (IPR) of Chad.

Business Facilitation

Foreign businesses interested in investing in or establishing an office in Chad should contact ANIE, which offers a one-stop shop for filing the legal forms needed to start a business.  The process officially takes 72 hours and is the only legal requirement for investment. ANIE’s website (www.anie-tchad.com  ) provides additional information.  Online business registration is not yet available via the Global Enterprise Registration web site (www.GER.co  ) or the Business Facilitation Program (www.businessfacilitation.org  ). 

In 2018, the World Bank ranked Chad 180 out of 190 countries for ease of starting a business, which included factors beyond the registration, to include permitting, access to resources like space and energy, and access to capital.

Contracts are tailored to each investment and often include additional incentives and concessions, such as permissions to import labor or agreements to work with specific local suppliers.  Some contracts are confidential. Occasionally, government ministries attempt to change the terms of contracts or apply new laws broadly, even to companies that have pre-existing agreements that exempt them.  Chad’s judicial system is weak, and rulings, including those relating to contract disputes, are susceptible to government interference. There is limited capacity within the judiciary to address commercial issues, including contract disputes.  Parties usually settle disputes directly or through arbitration provided by the Chamber of Commerce, Industry, Agriculture, Mining, and Crafts (CCIAMA) or through an outside entity, such as the International Chamber of Commerce (ICC) in Paris. 

Outward Investment

The GOC does not offer any programs or incentives encouraging outward investment, although there are no restrictions on domestic investors who might have the means and the interest in investing abroad.

The GOC does not restrict domestic investors from investing abroad.

Transparency of the Regulatory System

Chad is currently implementing laws to foster competition and establish clear rules based on Uniform Acts produced by the Organization for the Harmonization of Business Law in Africa (OHADA, Organisation pour l’Harmonisation en Afrique du Droit des Affaires, www.ohada.com  ).  However, until full implementation of new laws is complete, certain Chadian and foreign companies may encounter difficulties from well-established companies with a corner on the market that discourages competition. 

Regulations and financial policies generally do not impede competition in the financial sector.  Legal, regulatory, and accounting systems pertaining to banking are transparent and consistent with international norms.  Chad began using OHADA’s accounting system in 2002, bringing its national standards into harmony with accounting systems throughout the region.  Several international accounting firms have offices in Chad. However, while accounting, legal, and regulatory procedures are consistent with international norms, some local firms do not use generally accepted standards and procedures in their business practices.

There are no informal regulatory processes managed by nongovernmental organizations or private sector associations.  The Government has posted its draft Finance Law on the Ministry of Finance and Budget’s website the past two years; other proposed laws and regulations are not published in draft form for public comment. (Note: the Ministry of Finance and Budget’s website was funded by a USG grant in 2014. End Note.)  The GOC occasionally provides opportunities for local associations, such as the National Council of Employers (CNPT, Conseil National du Patronat Tchadien) or the CCIAMA to comment on proposed laws and regulations pertaining to investment.  All contracts and practices are subject to legal review, which can be weak. In 2018, the Ministry of Public Health closed some pharmacies operating without licenses and initiated a law regulating pharmacies.

The GOC publishes all budget information including on its website. The GOC also established an Observatory on Public Finance (OFiP) in 2018 to implement projects and publish information contributing to transparency in the management of public finances. OTFiP is a dedicated online framework for the dissemination of public finance data and the operationalization of the Code of Transparency and Good Governance. This code is an implementation of one of the six CEMAC Directives on the new harmonized framework for public financial management. 

Chad is still not listed on www.businessfacilitation.org  . 

International Regulatory Considerations

Chad has been a member of the WTO since 19 October 1996 and a member of GATT since 12 July 1963. Chad is a member of OHADA, and also a member of the Central African Economic and Monetary Community (CEMAC, Communaute Economique et Financiere de l’Afrique Centrale, www.cemac.int  ) and OHADA.  Since 2017, Chad is gradually implementing business and economic laws and regulations based on CEMAC standards and OHADA Uniform Acts.  Chad’s banking sector is regulated by COBAC (Commission Bancaire de l’Afrique Centrale), a regional agency. 

Legal System and Judicial Independence

Chad’s legal system and commercial law are based on the French Civil Code.  The constitution recognizes customary and traditional law if it does not interfere with public order or constitutional rights.  Chad’s judicial system rules on commercial disputes in a limited technical capacity. The Chadian President appoints judges without National Assembly confirmation, and thus the judiciary may be subject to executive influence.  Courts normally award monetary judgments in local currency, although it may designate awards in foreign currencies based on the circumstances of the disputed transaction. 

Chad’s commercial laws are based on standards promulgated by CEMAC, OHADA, and the Economic Community of Central African States (CEEAC, Communaute Economique des Etats de l’Afrique Centrale, http://www.ceeac-eccas.org  ).  The Government and National Assembly are currently in the process of adopting legislation to comply fully with all these provisions. 

Specialized commercial tribunal courts were authorized in 1998 and became operational in 2004.  These tribunals exist in five major cities but lack adequate technical capacity to perform their duties.  Firms not satisfied with judgments in these tribunals may appeal to OHADA’s regional court in Abidjan, Ivory Coast that ensures uniformity and consistent legal interpretations across its member countries and several Chadian companies have done so.  OHADA also allows foreign companies to utilize tribunals outside of Chad, generally in Paris, France, to adjudicate business disputes. Finally, CEMAC established a regional court in N’Djamena in 2001 to hear business disputes, but this body is not widely used.

Contracts and investment agreements can stipulate arbitration procedures and jurisdictions for settlement of disputes.  If both parties agree and settlements do not violate Chadian law, Chadian courts will respect the decisions of courts in the nations where particular agreements were signed, including the United States.  This principle also applies to disputes between foreign companies and the Chadian Government. Such disputes can be arbitrated by the International Chamber of Commerce (ICC). Foreign companies frequently choose to include clauses in their contract to mandate ICC arbitration. 

Bilateral judicial cooperation is in effect between Chad and certain nations.  Chad signed the Antananarivo Convention in 1970, covering the discharge of judicial decisions and serving of legal documents, with eleven other former French colonies (Benin, Burkina Faso, Cameroon, CAR, Congo-Brazzaville, Gabon, Cote d’Ivoire, Madagascar, Mauritania, Niger, and Senegal).  Chad has similar arrangements in place with France, Nigeria, and Sudan. 

Laws and Regulations on Foreign Direct Investment

The National Investment Charter encourages foreign direct investment.  Chad is a member of the Central African Economic and Monetary Community (CEMAC, Communaute Economique et Financiere de l’Afrique Centrale, www.cemac.int  ) and the Organization for the Harmonization of Business Law in Africa (OHADA, Organisation pour l’Harmonisation en Afrique du Droit des Affaires, www.ohada.com  ). Since 2017, Chad is gradually implementing business and economic laws and regulations based on CEMAC standards and OHADA Uniform Acts. 

Foreign investors using the court system are not generally subject to executive interference.  In addition, the OHADA Treaty allows foreign companies to utilize tribunals outside of Chad, e.g., the ICC in Paris, France, to adjudicate any disputes.  Companies may also access the OHADA’s court located in Abidjan, Côte d’Ivoire.

Foreign businesses interested in investing in or establishing an office in Chad should contact ANIE, which offers a one-stop shop for filing the legal forms needed to start a business.  The process officially takes 72 hours and is the only legal requirement for investment. ANIE’s website (www.anie-tchad.com  ) provides additional information.

Competition and Anti-Trust Laws

Regulation of competition is covered by the OHADA Uniform Acts that form the basis for Chadian business and economic laws and regulations.  The Office of Competition in Chad’s Ministry of Industrial and Commercial Development & Private Sector Promotion reviews transactions for competition-related concerns. 

Expropriation and Compensation

Chadian law protects businesses from nationalization and expropriation, except in cases where expropriation is in the public interest.  There were no government expropriations of foreign-owned property in 2018. There are no indications that the GOC intends to expropriate foreign property in the near future.

Chad’s Fourth Republic Constitution adopted in May 2018 prohibits seizure of private property except in cases of urgent public need, of which there are no known cases.  A 1967 Land Law prohibits deprivation of ownership without due process, stipulating that the state may not take possession of expropriated properties until 15 days after the payment of compensation.  The government continues to work on reform of the 1967 law. A draft law encourages foreign companies to own property instead of leasing.

Dispute Settlement

ICSID Convention and New York Convention

Chad has been a signatory and contracting state of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (“ICSID Convention”) since 1966. 

Chad is not a contracting state of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Arbitration Convention”).

Investor-State Dispute Settlement

Chad is signatory to an investment agreement among the member states of CEMAC, CEEAC, and OHADA.  The OHADA Investment Arrangement, with provisions for securities, arbitration, dispute settlement, bankruptcy, recovery, and other aspects of commercial regulation, has defined the commercial rights of several economic stakeholders, e.g., the Chadian Treasury,   and provides for the enforcement of foreign arbitral awards. Chad has no Bilateral Investment Treaty (BIT) or Free Trade Agreement (FTA) with an investment chapter with the United States.

There is no formal record of the government’s handling of investment disputes.  Some U.S. and other foreign investors have been involved in disputes with the GOC, particularly over issues regarding taxes and duties, though there are no official statistics. Investment disputes involving foreign investors are frequently arbitrated by an independent body.

International Commercial Arbitration and Foreign Courts

In addition to independent courts, such as the ICC, Chad’s constitution recognizes customary and traditional law as long as it does not interfere with public order or constitutional rights.  As most businesses operate in the informal sector, customary and traditional law function as alternative dispute resolution (ADR) mechanisms when parties are from the same tribe or clan and express their desire to settle outside of the formal court.

Specialized commercial tribunal courts were authorized in 1998 and became operational in 2004.  These tribunals exist in five major cities, but lack adequate capacity to perform their duties. The N’Djamena Commercial Tribunal  has heard disputes involving foreign companies.

Foreign investors using the court system are not generally subject to executive interference.  In addition, the OHADA Treaty allows foreign companies to utilize tribunals outside of Chad, e.g., the ICC in Paris, France, to adjudicate any disputes.  Companies may also access the OHADA’s court located in Abidjan, Côte d’Ivoire.

Bankruptcy Regulations

Chad’s bankruptcy laws are based on OHADA Uniform Acts.  According to Section 3, Articles 234 – 239 of OHADA’s Uniform Insolvency Act, creditors and equity shareholders may designate trustees to lodge complaints or claims to the commercial court collectively or individually.  These laws criminalize bankruptcy and the OHADA provisions grant Chad the discretion to apply its own sentences.

The World Bank’s 2018 Doing Business Report ranks Chad’s ease of resolving insolvency at 150 of 190.  This is a decrease of four positions from 2017. The report is available at http://www.doingbusiness.org/data/exploreeconomies/chad/#resolving-insolvency  

Investment Incentives

The Chadian tax code (CGI, Code General des Impôts) offers incentives to new business start-ups, new activities, or substantial extensions of existing activities.  Eligible economic activities are limited to the industrial, mining, agricultural, forestry, and real estate sectors, and may not compete with existing enterprises already operating in a satisfactory manner (Articles 16 and 118 of the National Investment Charter). 

Foreign investors may ask the GOC for other incentives through investment-specific negotiations.  Large companies usually sign separate agreements with the government, which contain negotiated incentives and obligations.  The possibility of special tax exemptions exists for some public procurement contracts, and a preferential tax regime applies to contractors and sub-contractors for major oil projects.  The government occasionally offers lower license fees in addition to ad hoc tax exemptions. Incentives tend to increase with the size of a given investment, its potential for job creation, and the location of the investment, with rural development being a GOC priority.  Investors may address inquiries about possible incentives directly to the Ministry of Industrial and Commercial Development & Private Sector Promotion, or the Ministry of Petroleum and Energy.

The GOC does not issue guarantees but jointly finances some foreign direct investments.

Foreign Trade Zones/Free Ports/Trade Facilitation

There are currently no foreign trade zones in Chad.  The Chadian Agency for Investment and Exportation (ANIE) is examining the possibility of creating a duty-free zone.

Performance and Data Localization Requirements

Chad does not follow forced localization, the policy in which foreign investors must use domestic content in goods or technology. 

Foreign companies are legally required to employ Chadian nationals for 98 percent of their staff.  Firms can formally apply for permission from the Labor Promotion Office (ONAPE) to employ more than two percent expatriates if they can demonstrate that skilled local workers are not available.  Most foreign firms operating in Chad have obtained these permissions. Foreign workers require work permits in Chad, renewable annually. Companies must present personnel files of local candidates not hired to the GOC for comparison against the profiles of foreign workers.  Multinational companies and international non-governmental organizations routinely protest these measures. 

There are no requirements for foreign IT providers to turn over source code and/or provide access to surveillance (backdoors into hardware and software or turn over keys for encryption).  There are no rules on maintaining a certain amount of data storage within Chad. The GOC has enacted four laws covering cybersecurity and cyber-criminality.

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

Table 3: Sources and Destination of FDI

Data not available.

Table 4: Sources of Portfolio Investment

Data not available.

Policies Toward Foreign Direct Investment

The DRC remains a challenging environment in which to conduct business.  At the same time, the GDRC sporadically takes steps to improve economic governance and its business climate, while the DRC’s rich endowment of natural resources, large population and generally open trading system provide significant potential opportunities for U.S. investors.  The GDRC’s investment agency, the National Agency for Investment Promotion (ANAPI), provides investment facilitation services for initial investments over USD 200,000 and is mandated to simplify the investment process, make procedures more transparent, assist new foreign investors and improve the image of the DRC as an investment destination.  Current investment regulations prohibit foreign investors from engaging in informal small retail commerce, referred to locally as petit commerce, and ban foreign majority-ownership of agricultural concerns. Visas for foreign workers are limited to six consecutive months and cost between USD 300 (single entry) and USD 400 (multiple-entry).

Following approval of an initial “temporary” work visa, which, normally, is not difficult to procure, a foreign worker may qualify for a more expensive “establishment visa” with at least a one year validity.  Salaries paid to expatriates are taxed at a higher rate than those of locals to encourage local employment.

Limits on Foreign Control and Right to Private Ownership and Establishment

The DRC Constitution stipulates entitlement to own and establish a business enterprise, and to engage in all forms of remunerative activity, noting minimal restrictions related to small commerce and a prohibition of foreign shareholder ownership of more than 49 percent of an agribusiness.  The government has drafted foreign ownership legislation, but parliamentary debate is still pending. Although it may not be based in law, many investors note that in practice the GDRC requires foreign investors to both hire local agents and participate in a joint venture with the government or local partners.

A new law on subcontracting in the private sector, which was enacted in January 2017, restricts foreign investors’ participation in subcontracting in almost all sectors and is considered discriminatory to the interests of some U.S. companies operating in DRC.  The law restricts subcontracting activity to majority Congolese-owned and capitalized-companies whose head offices are located in the national territory.  The only exception is in the case of unavailability of expertise in a specific subcontracting area. In that case, proof of lack of expertise must be provided to the competent authority to enable a non-Congolese company to be used as a subcontractor, but the activity may not exceed six months.

The law also forbids the subcontracting of more than 40 percent of the overall value of a contract; voids clauses, stipulations and contractual arrangements that violate the provisions of this law; and carries penalties of up to USD 150,000 and the risk of closure of operations for six months if certain provisions are violated.  As of April 2017, the Federations of Enterprises of the Congo (FEC), the American Chamber of Commerce DRC, and other business organizations were lobbying to review and revise the law.  Foreign businesses had a 12-month grace period, which ended in January 2018, to comply with the new law, but as noted below, the law is not yet being enforced.

On April 16^th, 2018, the Congolese government adopted the draft decree on the “creation, organization and functioning of the Authority to Regulate Subcontracting in the Private Sector” (ARSP).  On December 27th, 2018 former President Kabila and Prime Minister Tshibala signed an order to appoint the Authority’s general management and the board of directors, which would implement the law.  The Director General of the ARSP announced in May 2019 that the Authority would begin operations shortly.

On March 9, 2018, the government promulgated a new mining code which increased royalty rates by two to ten percent, raised tax rates on “strategic” metals, and imposed a surcharge on “super profits” of mining companies.  Of particular concern to mining companies, the government unilaterally removed a stability clause contained in the mining code of 2002.  The stability clause protects investors from any new fees or taxes for ten years.  With no coherent and transparent legal and fiscal framework to alleviate investors’ concerns, the stability clause offered a significant inducement to major mining companies.  Removal of the stability clause may deter future investment in the mining sector.  Since August 27^th, 2018, the day of the last meeting between the government and investors, the situation has not progressed.  Also in August, the DRC’s major industrial mining companies, responsible for 80 percent of copper and cobalt production and 90 percent of gold production, formed a new industry body, the Initiative for the Promotion of the Mining Industry (IPM), to engage the GDRC more effectively on the new mining code.  IPM is awaiting appointment of the new government to resume discussions.  The Tshisekedi government has indicated that it is willing to reopen discussions on the new mining code, but given its minority status in the National Assembly, it may not be able to implement changes that require legislative approval.

Other Investment Policy Reviews

The DRC has not undergone an Organization for Economic Cooperation and Development (OECD) or United Nations Conference on Trade and Development (UNCTAD) Investment Policy Review in the last 10 years, but the GDRC has made significant progress to improve its customs clearance procedures. Cities with high custom clearance traffic use Sydonia, which is an advanced software system for custom administrations in compliance with ASYCUDA.  (ASYCUDA is a large technical assistance software program recommended by UNCTAD for custom clearance management.)

Business Facilitation

Since 2013, the GDRC has operated a “one-stop shop” (https://www.guichetunique.cd/) that brings together all the government entities involved in the registration of a company in the DRC.  The registration process now officially takes three days, but in practice it can take much longer.  Yet, some businesses have reported that the Guichet Unique has considerably shortened and simplified the overall process of business registration.

Outward Investment

The GDRC does not prohibit outward investment, nor does it particularly promote it.  There are no current government restrictions preventing domestic investors from investing abroad, and there are no current blacklisted countries with which domestic investors are precluded from doing business.

Transparency of the Regulatory System

The DRC still does not have a legal system to address the issue of competition.  By joining OHADA and COMESA, the DRC plans to implement the standards and regulations of these structures in order to create a more transparent and effective policy to promote competition on a non-discriminatory basis.

There are no informal regulations that would discriminate against foreign or American investors in particular.  Nevertheless, the new regulations in the mining code and the law on subcontracting are perceived as discriminatory and punitive by foreign investors.

The GDRC authority on business standards, the Congolese Office of Control (OCC), oversees foreign businesses engaged in the DRC.

There are no formal or informal provisions systematically employed by the GDRC to impede foreign investment, but neither are there provisions that are universally employed to attract such investment.  Problems encountered within the GDRC tend largely to be administrative and/or bureaucratic in nature, as reforms and improved laws and regulations are often poorly or unevenly applied.

Proposed laws and regulations are rarely published in draft format for public discussion and comments; discussion is typically limited to the governmental entity that proposes the draft law and Parliament prior to enactment.

By implementing the OHADA, the GDRC strengthened its legal framework in the areas of contract, company, and bankruptcy law and set up an accounting system better aligned to international standards.  For this purpose, a Coordination Committee was established internally in the GDRC to monitor OHADA implementation.

The Extractive Industries Transparency Initiative (EITI), a multi-stakeholder initiative to increase transparency in transactions between governments and companies in the extractive industries, declared in 2014 that DRC’s payment and receipt procedures conform to EITI requirements.  In 2016, EITI awarded the DRC the first Initiative Award for Transparency in Extractive Industries for a pilot study DRC EITI conducted on establishing beneficial ownership, i.e. identifying the persons who actually control or benefit from a company.

The DRC adopted a Beneficial Ownership Roadmap in December 2016 outlining the steps to be taken to ensure the country complies with the more rigorous EITI Standard of 2016.  The roadmap sought to achieve stakeholder consensus on a definition of beneficial ownership in the DRC context, and to draft legislation requiring certain categories of businesses to disclose their beneficial owners.  No progress was made on the issue during 2016 however.  As a result, stakeholders amended the roadmap and a revised version was published in December 2017.

The DRC’s validation process for compliance with the 2016 EITI Standard commenced in November 2018, with assessment due in 2020.  The initial report published by the International EITI Secretariat in April 2019 stated that DRC EITI failed to adequately address 13 of the  requirements of the EITI Standard, with two of these assessed as unmet with inadequate progress.  The report also stressed the need to clarify the financial flows of state-owned enterprises (SOEs) in the DRC’s extractive sector.

International Regulatory Considerations

The DRC is a member of several regional economic blocks, including the Southern African Development Community (SADC), the Common Market for Eastern and Southern Africa (COMESA), the Economic Community of Central African States (ECCAS), and the Economic Community of the Great Lakes Countries (ECGLC).

According to the Congolese National Standardization Committee, the DRC has adopted 470 harmonized COMESA standards, almost achieving the objective set by the country in 2008.

In order to formalize the DRC’s integration into the COMESA Free Trade Area and to comply with its commitments, in December 2015, the DRC President promulgated, after its adoption by both chambers of Parliament, an act establishing a new scale of import duties and taxes pursuant.  The act establishes a zero rate for goods originating in COMESA member countries following a three-year graduated scale of 40 percent, 30 percent and 30 percent reductions respectively.  Still, the DRC is not on track to meet this goal, and significant tariff reductions have yet to take place.  The DRC has signed several customs agreements in the region and sub-region to reduce import tariffs, but it has not yet implemented these agreements.

The DRC is a World Trade Organization (WTO) member and, as such, seeks to comply with Trade Related Investment Measures (TRIM) requirements.  In October 2016, the WTO noted that there had been positive developments on various fronts in the DRC, including streamlining of the country’s tax system, introduction of a value added tax (VAT), and enactment of a new customs act, a new excise act, and a new procurement code.  The WTO also noted that the business environment has improved as a result of the progressive establishment of single sites for conducting international trade (https://segucerdc.cd/ ) and setting up enterprises (www.guichetunique.cd ).  The WTO further commended the adoption of new sectoral policies that have opened several economic sectors, including insurance services and hydrocarbon trade, to competition.  The GRDC has proposed a new Strategic National Development Plan which sets the goal of modernizing and industrializing the country by 2035.

Legal System and Judicial Independence

The DRC is a civil law country, and the main provisions of its private law can be traced to the Napoleonic Civil Code.  As a result of colonialism, the general characteristics of the Congolese legal system are similar to those of the Belgian legal system.  Customary or tribal law is another aspect of the legal system. Various local customary laws regulate both personal status laws and property rights, especially the inheritance and land tenure systems in traditional communities throughout the country.  The Congolese legal system is divided into three branches: public law, private law and economic law.  Public law regulates legal relationships involving the state or state authority; private law regulates relationships between private persons; and economic law regulates interactions in areas such as labor, trade, mining and investment.

As of early 2018, the DRC had established thirteen commercial courts located in DRC’s main business cities, including Kinshasa, Lubumbashi, Matadi, Boma, Kisangani, and Mbuji-Mayi, though only the Kikwit and Boma courts appear to be functioning reasonably well.  These courts are designed to be led by professional judges specializing in commercial matters and exist in parallel to an otherwise inadequate judicial system.  A lack of qualified personnel and a reluctance by some DRC jurisdictions to fully recognize OHADA law and institutions have hindered commercial courts.  In 2013, the European Union began funding the construction or rehabilitation of commercial courts in Boma, Butembo, Kolwezi and Kananga, and the World Bank later supported the rehabilitation of the courts in Kinshasa, Kisangani, and Mbuji-Mayi.  Infrastructure, quality issues, and delays in execution have hampered these projects.

The current judicial process is not procedurally reliable, as its rulings are not always respected.  The national court system provides an appeals mechanism, and the OHADA provides regulations and a legal framework to appeal verdicts.  Legal documents in the DRC can be found at: http://www.leganet.cd/index.htm .

Laws and Regulations on Foreign Direct Investment

Most Foreign Direct Investment (FDI) is governed by the 2002 Investment Code.  Mining, hydrocarbons, finance, and other sectors are also governed by sector-specific investment laws.  The GDRC deregulated the electricity and insurance sectors in 2015, and in 2016 Parliament passed a bill to reform the hydrocarbons sector and revised the labor law.  Lawmakers have also authored legislation to address consumer protection, e-commerce, liberalization of prices, competition regulation, account auditing, agriculture regulation, entrepreneurship, and free trade areas.  With the exception of the bill on e-commerce, all of these bills were adopted and promulgated in 2018.

ANAPI is the DRC agency with the mandate to simplify the investment process, make procedures more transparent, assist new foreign investors, and improve the image of the country as an investment destination (investindrc.cd). There is also a Steering Committee for the Improvement of the Business and Investment Climate (CPCAI), which has the overall goal of improving the DRC’s ranking in the World Bank’s “Doing Business” indicators by reducing administrative delays, red tape, and the overall cost of establishing a business.  Since its inception, CPCAI has eliminated 46 of 117 taxes applied to cross-border trade.  The GDRC also instituted a “Guichet Unique,” in 2013, which is a one-stop shop to simplify business creation, cutting processing time from five months to three days, and reducing incorporation fees from USD 3,000 to USD 120. (www.guichetunique.cd ). A “one-stop-shop” also exists for import-export business, covering, among other things, the collection of taxes and transshipment operations. (https://segucerdc.cd/ ).

Competition and Anti-Trust Laws

There is no existing national agency that reviews transactions for competition or antitrust-related concerns, however, as a member of COMESA, the DRC falls under the organization’s competition regime, which is made up of the COMESA Competition Regulations and rules. Under the COMESA Treaty, the regulations are binding on all member states.  Since the DRC does not have a dedicated domestic competition law regime, the regional competition law regime is effectively the only competition law available.

Expropriation and Compensation

Technically, the GDRC may only proceed with an expropriation when it benefits the public interest, and the person or entity subject to an expropriation should receive fair compensation.  The U.S. Embassy is unaware of any new expropriation activities by the GDRC against U.S. citizens in 2017 and 2018, but there are a number of existing and some long standing claims made against the GDRC.  Some claims have been taken to arbitration, though many arbitral judgments against the GDRC are not paid in a timely manner, if at all.  The U.S. – DRC BIT also contains provisions on expropriation.

Dispute Settlement

ICSID Convention and New York Convention

The DRC is a member of the International Center for Settlement of Investment Disputes (ICSID) Convention and has been a Contracting State to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) since February 2015.  Although the DRC has not made any notifications or reservations in accordance with the New York Convention, the internal legislation facilitating the DRC’s accession to the New York Convention contains reservations regarding reciprocity (the DRC will only enforce awards made in the territory of other Contracting States); commerciality (only awards on matters which are considered commercial under DRC law will be recognized and enforced under the New York Convention); non-retroactivity (the New York Convention will only apply to awards made after February 3, 2015); and finally, that the New York Convention will not apply to disputes related to immovable property (i.e. real estate, industrial plants, etc.) or to rights related to immovable property.

In the case of an investment dispute, the U.S.-DRC BIT provides for reconciliation of national or international arbitration.  In the case of a dispute between a U.S. investor and the GDRC, the U.S. investor is subject to the Congolese civil code and legal system.  If the parties cannot reach agreement under the terms of the U.S.-DRC BIT the dispute is taken to ICSID or the Paris-based International Chamber of Commerce (ICC).  Commercial parties may also seek redress under the Organization for the Harmonization of African Business Law (OHADA).

The DRC’s accession to the New York Convention is important to international investors seeking to develop activities in the DRC because it facilitates the enforcement of international arbitral awards.  Nevertheless, the reservation related to immovable property effectively excludes disputes relating to mining rights, which, under Congolese law, are considered immovable property.

Although there are instances of ongoing corruption at every level of the DRC judicial system, several disputes between foreign investors and State Owned Enterprises (SOE) have been resolved in favor of the foreign investor.

International Commercial Arbitration and Foreign Courts

As a signatory to the OHADA, the DRC also adopted the OHADA Uniform Act on Arbitration (the UAA).  The UAA sets out the basic rules applicable to any arbitration where the seat of arbitration is located in an OHADA member state.  Because DRC is a member of the New York Convention, the requirements set out under Article 5 of the New York Convention for the recognition and enforcement of foreign awards will apply where the seat of any arbitration is outside an OHADA member state, or where the parties chose arbitral rules outside the UAA.

OHADA‘s UAA offers an alternative dispute resolution mechanism for settling disputes between two parties.  The two main consequences of the DRC’s September 2012 accession to OHADA with respect to dispute resolution are:

• The mandatory application of the UAA, which sets out arbitration procedures applicable to any arbitration arising in a Member State of OHADA where the place of arbitration is situated in a Member State.
• Disputes must be submitted to the Common Court of the Justice and Arbitration (CCJA) (based in Abidjan, Cote d’Ivoire) in accordance with the provisions of the OHADA Treaty and the OHADA Arbitration Rules.

The UAA, while not directly based on the United Nations Commission on International Trade Law (UNCITRAL) Model Law, is similar in that it provides for the recognition and enforcement of arbitration agreements and arbitral awards and supersedes the national laws on arbitration to the extent that any conflict arises.  Arbitral awards with a connection to an OHADA member state are given final and binding status in all OHADA member states, on a par with a judgment of a national court.  Support is provided by the CCJA which can rule on the application and interpretation of the UAA.

Arbitral awards rendered in any OHADA Member State are enforceable in any other OHADA member state, subject to obtaining an exequatur (a legal document issued by a sovereign authority allowing a right to be enforced in the authority’s domain of competence) of the competent court of the State in which the award is to be made.  Exequaturs shall, in principle, be granted unless the award clearly affects public order in that State.  Decisions granting or refusing the granting of an exequatur may be appealed to the CCJA.

Bankruptcy Regulations

The OHADA Uniform Act on Insolvency Proceedings provides a comprehensive framework not only for companies encountering financial difficulties and seeking relief from the pressing demands of creditors, but also for creditors to file their claims.  The GDRC judiciary system has agreed to enforce the OHADA Insolvency Act.

Investment Incentives

Investment incentives for companies entering the DRC are generally negotiated during a streamlined period of approximately 30 days.  Negotiated incentives can range from tax breaks to duty exemptions, and are dependent upon the location and type of enterprise, the number of jobs created, the degree of training and promotion of local staff, and the export-producing potential of the operation.  Investors who wish to take advantage of customs and tax incentives in the extant 2002 Investment Code must apply to the National Agency for Investment Promotion (ANAPI), which, in turn, submits applications to the Ministries of Finance and Planning for final approval.

Foreign Trade Zones/Free Ports/Trade Facilitation

The DRC does not have designated free trade areas or free port zones; however legislation is pending to create such zones.  DRC is still progressively implementing legislation to integrate into the COMESA and SADC Free Trade Areas.  In 2015, the GDRC confirmed its commitment to work to enter the tripartite COMESA-SADC-EAC (Eastern African Community) Free Trade Area and the Continental Free Trade Area.  The implementation process has been on hold since that time, however, newly elected President Tshisekedi has signaled that he will revive stalled efforts to join the EAC.  Notwithstanding, the GDRC signed the agreement for the Continental Free Trade Area (Zone de libre-échange continentale or ZLEC) on March 21, 2018 in Kigali, under the aegis of the African Union.  The GDRC has yet to take any steps to implement the agreement.

Performance and Data Localization Requirements

Although there are no specific performance requirements for foreign investors, they invariably must negotiate many of the conditions of their investments with ANAPI.  Performance requirements agreed upon with ANAPI typically include a timeframe for the investment, use of OHADA accounting procedures and periodic authorized GDRC audits, protection of the environment, periodic progress reports to ANAPI, and the maintenance of international and local norms for the provision of goods and services.  The investor must also agree that all imported equipment and capital will remain in country for at least five years.

The Ministry of Labor controls expatriate residence and work permits.  For U.S. companies, the BIT assures the right to hire staff of their choice to fill some management positions, but companies agree to pay a special tax on expatriate salaries.  Visa, residence or work permit requirements are not discriminatory or excessively onerous, and are not designed to prevent or discourage foreigners from investing in the DRC, though corruption and bureaucratic hurdles can create serious delays in obtaining the necessary permits and visas.

The GDRC enacted a new law on subcontracting in January 2017, which requires foreign companies to use local subcontractors for subsidiary services.  The DRC does not have specific legislation on data storage, however, it recognizes the need for appropriate regulation.  As there is no obligatory legislation, in practice, few companies report having issues regarding data storage.

Table 2: Key Macroeconomic Data

Table 3: Sources and Destination of FDI
Data not available.

Table 4: Sources of Portfolio Investment
Data not available.

Policies Towards Foreign Direct Investment

The government actively encourages Foreign Direct Investment (FDI) and is committed to doubling foreign investment over the next several years.  Foreign companies are free to invest and list on the regional stock exchange Bourse Regionale des Valeurs Mobilieres (BRVM), which is based in Abidjan and covers the eight countries of the West African Economic and Monetary Union (WAEMU).  WAEMU members are part of the Regional Council for Savings and Investment, a regional securities regulatory body.

In most sectors, there are no laws that limit foreign investment.  There are restrictions on foreign investment in the health sector, law and accounting firms, and travel agencies.  Although there are regulations designed to control land speculation in urban areas, foreigners own significant amounts of land.  Freehold land tenure in rural areas is difficult to negotiate and inhibits outside investment. Land tenure disputes exist all over the country owing to the lack of formal private land ownership in most areas.  Most businesses, including agribusinesses and forestry companies, circumvent this by acquiring long-term leases. Companies that wish to purchase

land must have the property surveyed before obtaining title.  Surveying is tightly controlled by a small oligopoly of companies, and can often cost more than the value of the parcel of land.

Cote d’Ivoire’s investment promotion agency, the Centre for the Promotion of Investment in Cote d’Ivoire (CEPICI), facilitates foreign investment, and its services are available to all investors.  CEPICI provides its services through a one-stop shop to facilitate business creation, operation, and expansion; requests incentives in the investment code and for access to industrial land; and promotes and attracts national and foreign investments.  More information is available at http://www.cepici.gouv.ci/  .

Cote d’Ivoire maintains an ongoing dialogue with investors through various business networks and platforms, such as CEPICI, the Ivoirian Chamber of Commerce (CCI-CI), the association of large enterprises (CGECI), and the bankers’ association.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign investors generally have access to all forms of remunerative activity on terms equal to those enjoyed by Ivoirians.  The government encourages foreign investment, including in the privatization of state-owned and public firms, although in most cases the state reserves an equity stake in the new company.

There are no significant limits on foreign investment, nor are there legal differences in the treatment of foreign and national investors, either in terms of the level of foreign ownership or sector of investment.  There are no laws specifically authorizing private firms to adopt articles of incorporation or association that limit or prohibit foreign investment, participation, or control, and no such practices have been reported.

Banks and insurance companies are subject to licensing requirements, but there are no restrictions designed to limit foreign ownership or to establish subsidiaries of foreign companies in this sector.  Investments in health, law and accounting, and travel agencies are subject to prior approval and require appropriate licenses and association with an Ivoirian partner. The Ivoirian government has, on a case-by-case basis, mandated using local providers, hiring local employees, or arranging for eventual transfer to local control.

The government does not have an official policy to screen investments and its overall economic and industrial strategy does not discriminate against foreign-owned firms.  There are indications in some instances of preferential treatment for firms from countries with longstanding commercial ties to Cote d’Ivoire.

Other Investment Policy Reviews

Cote d’Ivoire has not conducted an investment policy review (IPR) through the OECD.

A Trade Policy Review was last done by the WTO in July 2012 and can be found at https://www.wto.org/english/tratop_e/tpr_e/tp366_e.htm  

UNCTAD does not provide an IPR report for Cote d’Ivoire, though there are statistics on FDI in the country profile at http://unctadstat.unctad.org/Country Profile/GeneralProfile/en-GB/384/index.html  .

The government of Cote d’Ivoire provides information about sector policies and business opportunities in various reports.  More information can be found at: http://www.cepici.gouv.ci/en/   or at: www.gcpnd.gouv.ci/  .

Business Facilitation

The government has engaged in business facilitation efforts through a series of reforms using the World Bank’s Ease of Doing Business Index as a reference to improve the business environment.  These reform efforts include the acceleration of business creation to 24 hours, the issuing of a construction permit in 26 days, the establishment of a one-stop shop for external trade, and the establishment of a single tax declaration form.  In 2018, Cote d’Ivoire improved its Doing Business ranking from 139th to 122nd place.

Cote d’Ivoire’s online information portal containing all documents dedicated to business creation and registration (https://cotedivoire.eregulations.org/  ) is managed by CEPICI.  All the necessary documentation for registration is available online.  The one-stop shop for business registration takes between 24-48 hours and has all the agencies under a single roof, allowing for a more simplified approach to business creation.  Businesses have noted the one-stop shop has been very successful in speeding up registration.

The registration process is generally equitable toward women and underrepresented nationalities, and there have not been any reports of discrimination.

Outward Investment

Cote d’Ivoire does not promote or incentivize outward overseas investment.  The government does not restrict domestic investors from investing abroad.

Transparency of the Regulatory System

The government has taken steps to encourage a more transparent and competitive economic environment, and the IMF, World Bank, EU, and other large donors continue to urge the government to make further reforms.  The government aims for transparency in law and policy to foster competition and provide clear rules of the game and a level playing field for domestic and foreign investors. Transparency of the regulatory system, however, is a concern in Cote d’Ivoire, as companies complain that regulations are issued with little warning and without a period for public comment.

There are no informal regulatory processes managed by non-governmental organizations or private sector associations.

In general, regulatory authority exists at the national level and is the most relevant for foreign businesses.  For most industries or sectors, regulations are developed through the relevant ministry. In the telecommunications, electricity, cocoa, coffee, cotton, and cashew sectors, the government has established control boards or independent regulatory agencies to regulate the sector and pricing.

Cote d’Ivoire’s accounting, legal, and regulatory procedures are consistent with international norms, though businesses often complain about the system’s lack of clarity and the government’s poor communication.  Cote d’Ivoire is a member of the Organization for the Harmonization of African Business Law (OHADA), which is common to 16 countries and adheres to the West African Economic and Monetary Union’s (WAEMU) accounting system.  In accounting, companies use the WAEMU system, which complies with international norms in force and is a source of economic and financial data.

Draft bills and regulations are not published or made available for public comment.  The government often holds public seminars and workshops to discuss proposed plans with trade and industry associations.

Key regulatory actions are published in the Journal Officiel de la Republique de Cote d’Ivoire, and each regulatory body provides regulatory actions (laws, decisions, and sanctions) on its website http://www.sgg.gouv.ci/jo.php  .

The regulatory body, Autorite Nationale de Regulation des Marches Publics (ANRMP), ensures transparency and compliance with administrative processes.  Consumers, trade associations, private companies, and individuals have the right to file complaints with ANRMP to ensure that the government follows administrative processes.

There is no centralized online location where regulatory actions or their summaries are published, similar to the Federal Register.  The website https://abidjan.net/   makes the Journal Officiel available for purchase online.

The U.S. government does not have any knowledge of recent regulatory system, including enforcement reforms, that have been announced since the last ICS report.  Regulatory reforms announced in prior years have been fully implemented, with the goal to create an enabling business environment, foster competition, and build investors’ confidence in the economy.

The regulatory enforcement mechanisms are made available to the public through the private and public institutions tasked with controlling and regulating these sectors.

Regulations are reviewed on data-driven assessments, as regulatory bodies regularly publish and promote access for the business community and development partners to their data.  Quantitative analysis and public comments are made available.

Cote d’Ivoire’s government ensures transparency of public finances and debt obligations (including explicit and contingent liabilities) with the publication of this information through the following websites:

http://budget.gouv.ci/budget/budget-etat  
https://www.tresor.gouv.ci/tres/fr_FR/rapport-de-la-dette/  

International Regulatory Considerations

The Ivoirian government accounts for regional bodies in public procurement by incorporating WAEMU directives into the bidding processes and auditing, as well as into the regulation of public procurement within the WAEMU.  The public procurement code harmonizes public procurement policy and is in compliance with WAEMU directives. Changes include the separation of auditing and regulating functions, the transformation from a national to a regional system of procurement for intellectual services, and an increase from 25 to 30 percent of advance payment for the initial procurement of goods and services.  The ANRMP regulates public procurement with a view to improve governance and transparency. It may sanction entities which do not comply with public procurement regulations.

Cote d’Ivoire’s laws, codes, professional association standards, and regional directives are incorporated in the country’s regulatory system.  European norms are often followed due to Cote d’Ivoire’s free trade agreement with the EU.

Cote d’Ivoire has been a WTO member since 1995 but has not notified all draft technical regulations to the WTO Committee on Technical Barriers to Trade.  Cote d’Ivoire signed the Trade Facilitation Agreement (TFA) in December 2013 and ratified it in December 2015. There have been notable efforts to implement the TFA requisites with the establishment of the TFA National Committee to coordinate its implementation.  Other efforts include the USAID trade facilitation support program, which has helped in the national implementation of the TFA.

Legal System and Judicial Independence

Cote d’Ivoire’s legal system is based on the French civil law model.  The law guarantees the right to own and transfer private property. While this right is respected in most instances, the law regarding rural land tenure makes it prohibitively difficult to do so.  The court system enforces contracts.

Cote d’Ivoire is a signatory to the Organization for the Harmonization of Corporate Law in Africa (OHADA) that provides common corporate law and arbitration procedures for the 16 member states.  The Commercial Court of Abidjan handles business cases. Mediation is also available through the Ivoirian legal framework in addition to the Commercial Court and the Arbitration Tribunal. Following the recommendations of business associations and commercial law experts, in August 2017, the government established the Court of Appeals of the Commercial Court of Abidjan.  The IMF has recommended the creation of other commercial jurisdictions in the interior of the country.

Cote d’Ivoire’s judicial system is ostensibly independent, but magistrates are sometimes subject to political or financial influence.  Judges sometimes fail to base their decisions on the legal or contractual merits of a case and are often seen to rule against foreign investors in favor of entrenched interests.  The greatest complaint from investors is the slow process. Cases are often postponed and appealed without a reasonable explanation, moving from court to court for years or even decades.  With international assistance, the government is making an effort to reform the judiciary system to make it more efficient and transparent.

Regulations or enforcement actions are appealable and adjudicated in the national court system.

Laws and Regulations on Foreign Direct Investment

The major law affecting foreign investment is the 2018 Investment Code.  The code is considered generous as it has no restrictions on foreign investment or the repatriation of funds.  The code offers mixed fiscal incentives, combining tax exoneration and tax credits to encourage investment. There are also incentives to promote small businesses and entrepreneurship, low-cost housing construction, factories, and infrastructure development, which the government considers key to the country’s economic development.  In mining, the 2014 Mining Code allows a period for holding permits for ten years with a possibility to extend for two more years on a limited permit area of 400 square kilometers. The code has spurred investment in the sector.

CEPICI provides a one-stop shop website for investment.  More information on Cote d’Ivoire’s laws, rules, procedures, and reporting requirements can be found at:

www.apex-ci.org/  
www.cepici.gouv.ci/  

Competition and Anti-Trust Laws

The Ministry of Commerce, Handicraft and Small Business Promotion, through the Commission on Anti-Competition Practices, is responsible for reviewing competition–related concerns under the 1991 competition law, which was updated in 2013.  The National Authority for the Regulation of Public Tenders is responsible for reviewing the awards of contracts.    

No significant competition cases were reported over the past year.

Expropriation and Compensation

Private expropriation to force settlement of contractual or investment disputes continues to be a problem.  Local individuals or local companies, using what appear to be spurious court decisions, have challenged the ownership of some foreign companies in recent years.  On occasion, the government has blocked the bank accounts of U.S. and other foreign companies because of ownership and tax disputes.

There is no history of public expropriations.

In cases of illegal expropriations, Ivoirian law affords claimants due process.  Even so, perceived corruption and lack of capacity in the judicial and security services have resulted in poor enforcement of private property rights, particularly when the entity in question is foreign and the plaintiff is Ivoirian or a long-established foreign resident.

Dispute Settlement

ICSID Convention and New York Convention

Cote d’Ivoire is a signatory to the International Center for Settlement of Investment Disputes (ICSID) and a signatory to the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards.

In cases where the firm does not meet the nationality conditions stipulated by Article 25 of the Convention, the code stipulates that the dispute be resolved within the provisions of the supplementary mechanisms approved by the ICSID.

Investor-State Dispute Settlement

Cote d’Ivoire is a signatory to investment agreements subject to binding international arbitration of investment disputes.  Cote d’Ivoire recognizes and has been known to enforce foreign arbitral awards, but enforcement is inconsistent.

Cote d’Ivoire does not have a Bilateral Investment Treaty (BIT) or a Free Trade Agreement (FTA) with the United States.

In the past 10 years, foreign investors have had investment disputes, which are often resolved through arbitration or an amicable settlement.  One U.S. firm was involved in tax and customs disputes over its investment in the cocoa sector. As a result, the U.S. firm chose to divest its holdings.  One U.S. dispute still ongoing involves the decision of the government to nullify a memorandum of understanding with a U.S. company to fulfill sanitation work.

As a signatory to the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards, local courts are obliged to enforce foreign arbitral awards.

The U.S. government is not aware of any history of extrajudicial action against foreign investors, including U.S. firms.

International Commercial Arbitration and Foreign Courts

The Abidjan-based regional Joint Court of Justice and Arbitration (CCJA) provides a means of solving contractual disputes.  The arbitration tribunal has the ability to enforce awards more quickly, but the use of the tribunal in lieu of the court system has been limited.

Cote d’Ivoire is a member of the Organization for the Harmonization of African Business Law (OHADA), whose provisions of 1999 have replaced domestic law on arbitration.  The unified law is based on the UNICITRAL model law.

Judgments of foreign courts are recognized but difficult to enforce in local courts.  To avoid working through the Ivoirian legal system, some investors stipulate in contracts that disputes must be settled through international commercial arbitration.  Yet, even if stipulated in the contract, decisions reached through international arbitration or through OHADA are sometimes not honored by local courts.

Cote d’Ivoire’s domestic courts have no preferential treatment for state-owned enterprises involved in investment disputes.

Bankruptcy Regulations

As a member of OHADA, Cote d’Ivoire has both commercial and bankruptcy laws that address the liquidation of business liabilities.  OHADA is a regional system of uniform laws on bankruptcy, debt collection, and rules governing business transactions. OHADA permits three different types of bankruptcy liquidation:  an ordered suspension of payment to permit a negotiated settlement; an ordered suspension of payment to permit restructuring of the company, similar to Chapter 11; and the complete liquidation of assets, similar to Chapter 7.  Creditors’ rights, irrespective of nationality, are protected equally by the Act. Bankruptcy is not criminalized. Monetary judgments resulting from a bankruptcy are usually paid out in local currency. Cote d’Ivoire is ranked 77 out of 190 countries for ease of resolving insolvency, according to the World Bank’s Doing Business Report.

The joint venture Credit Info – Volo West Africa manages regional credit bureaus in the WAEMU.

Investment Incentives

The 2018 Investment Code offers mixed fiscal incentives combining tax exoneration and tax credits focusing on agriculture, agro-business, tourism, health, and education.  These include a full exoneration of customs duties or suspended VAT, and tax exemptions to business operations in some remote areas, with incentives based on the type of investment, phase of operation, local content, and participation.   There are also incentives to promote small businesses and entrepreneurship, low-cost housing construction, factories, and infrastructure development, which the government considers key to the country’s economic development. The Investment Code, the Petroleum Code, and the Mining Code delineate incentives available to new investors in Cote d’Ivoire.

The government occasionally guarantees loans or jointly finances foreign direct investment projects.  This is not a common practice.

Foreign Trade Zones/Free Ports/Trade Facilitation

Created in 2008, the free trade zone for information technology and biotechnology (VITIB) is located in the city of Grand Bassam.  In 2014, VITIB inaugurated the Mahatma Gandhi Technology Park at Grand Bassam with a loan of USD 20 million from India’s EXIM bank.  Current plans are to develop a technology corridor on VITIB land in Grand Bassam. Bonded warehouses do exist, and bonded zones within factories are allowed.  High port costs and maritime freight rates have inhibited the development of in-bond manufacturing or processing, and there are consequently no general foreign trade zones.

Performance and Data Localization Requirements

The government strongly encourages investors and firms to hire Ivoirian employees, but this is not a requirement.

The 2012 Investment Code (Article 14) guarantees the freedom to designate senior management and board members.

Citizens of Economic Community of West African States (ECOWAS) countries can legally work in Cote d’Ivoire.  For other nationalities, visa, work, and residence permits are required and the investment agency CEPICI facilitates their acquisition.  The process is not onerous and does not inhibit the mobility of foreign investors and their employees.

There are no government-imposed conditions on permission to invest, including tariff and non-tariff barriers.

The government does occasionally place conditions on location, local content, equity ownership, import substitution, export requirements, host country employment, and technology.  The Ivoirian government required that Kentucky Fried Chicken franchises, that began operating in April 2018, use locally-sourced chicken. The government also makes use of a number of tax exemptions and customs exonerations to incentivize companies to do more value-added processing in Cote d’Ivoire.

There are no performance requirements for investments.

Cellular telephone companies must meet technology and performance requirements to maintain their licenses.  Cote d’Ivoire does not have any known requirements for foreign IT firms to turn over source code or provide access to encryption.

There are no requirements that prevent or unduly impede companies from freely transmitting customer or other business related data.  Data transmission or transfer is subject to prior authorization of the telecom regulatory board Autorite de Regulation des Telecommunications (ART-CI).

Cote d’Ivoire’s law on data protection requests prior declaration or authorization by ART-CI for any data processing.  ART-CI is responsible for the oversight of local data storage.

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

Table 3: Sources and Destination of FDI

Table 4: Sources of Portfolio Investment

Data not available.

Policies Towards Foreign Direct Investment

The Government of Ghana has no overall economic or industrial strategy that discriminates against foreign-owned businesses.  The government has made increasing FDI a priority and acknowledged the importance of having an enabling environment for the private sector to thrive.  Officials are implementing some regulatory and other reforms to improve the ease of doing business and make investing in Ghana more attractive.

The 2013 GIPC Act requires the Ghana Investment Promotion Center (GIPC) to register, monitor and keep records of all business enterprises in Ghana.  Sector-specific laws further regulate investments in minerals and mining, oil and gas, industries within Free Zones, banking, non-banking financial institutions, insurance, fishing, securities, telecommunications, energy, and real estate.  Some sector-specific laws, such as in the oil and gas sector and the power sector, include specific local content requirements that could discourage international investment. Foreign investors are required to satisfy the provisions of the GIPC Act as well as the provisions of sector-specific laws.  GIPC leadership has pledged to work in closer collaboration with the private sector to address investor concerns but there have been no significant changes to the laws. More information on investing in Ghana can be obtained from GIPC’s website, www.gipcghana.com  .

Limits on Foreign Control and Right to Private Ownership and Establishment

Ghana is one of the more open economies to foreign equity ownership in Sub-Saharan Africa.  Most of its major sectors are fully open to foreign capital participation.

U.S. investors in Ghana are treated the same as any other foreign investor.  All foreign investment projects must register with the GIPC. Foreign investments are subject to the following minimum capital requirements: USD 200,000 for joint ventures with a Ghanaian partner that should have at least 10 percent of the equity; USD 500,000 for enterprises wholly-owned by a non-Ghanaian; and USD 1 million for trading companies (firms that buy or sell imported goods or services) wholly owned by non-Ghanaian entities.  The minimum capital requirement may be in cash or capital goods relevant to the investment. Trading companies are also required to employ at least 20 skilled Ghanaian nationals.

Ghana’s investment code excludes foreign investors from participating in eight economic sectors: petty trading, the operation of taxi and car rental services with fleets of fewer than 25 vehicles, lotteries (excluding soccer pools), the operation of beauty salons and barber shops, printing of recharge scratch cards for subscribers to telecommunications services, production of exercise books and stationery, retail of finished pharmaceutical products, and the production, supply, and retail of drinking water in sealed pouches.  Sectors where foreign investors are allowed limited market access include: telecommunications, banking, fishing, mining, petroleum, and real estate.

Real Estate

The 1992 Constitution recognized existing private and traditional titles to land.  Freehold acquisition of land is no longer permitted. There is an exception, however, for transfer of freehold title between family members for land held under the traditional system.  Foreigners are allowed to enter into long-term leases of up to 50 years and the lease may be bought, sold, or renewed for consecutive terms. Nationals are allowed to enter into 99-year leases.

Oil and Gas

The oil and gas sector is subject to a variety of state ownership and local content requirements.  The Petroleum (Exploration and Production) Act (2016, Act 919) mandates local participation. All entities seeking petroleum exploration licenses in Ghana must create a consortium in which the state-owned Ghana National Petroleum Corporation (GNPC) holds a minimum 15 percent carried interest.  The Petroleum Commission issues all licenses, but exploration licenses must be approved by Parliament. Further, local content regulations specify in-country sourcing requirements with respect to the full range of goods, services, hiring, and training associated with petroleum operations. The regulations also require mandatory local equity participation for all suppliers and contractors.  The Minister of Energy must approve all contracts, sub-contracts, and purchase orders above USD 100,000. Non-compliance with these regulations may result in a criminal penalty, including imprisonment for up to five years.

The Petroleum Commission applies registration fees and annual renewal fees on foreign oil and gas service providers, which, depending on a company’s annual revenues, range from USD 70,000 to USD 150,000, compared to fees of between USD 5,000 and USD 30,000 for local companies.

Mining

Per the Minerals and Mining Act, 2006 (Act 703), foreign investors are restricted from obtaining a small-scale mining license for mining operations less than or equal to an area of 25 acres (10 hectares).  Non-Ghanaians may only apply for industrial mineral rights if the proposed investment is USD 10 million or above. The Act mandates compulsory local participation, whereby the government acquires 10 percent equity in ventures at no cost.  In order to qualify for a license, a non-Ghanaian company must be registered in Ghana, either as a branch office or a subsidiary that is incorporated under the Ghana Companies Act or Incorporated Private Partnership Act.

The Minerals and Mining Act provides for a stability agreement, which protects the holder of a mining lease for a period of 15 years from future changes in law that may impose a financial burden on the license holder.  When an investment exceeds USD 500 million, lease holders can negotiate a development agreement that contains elements of a stability agreement and more favorable fiscal terms. Parliament passed a new Minerals and Mining (Amendment) Act (Act 900) in December 2015.  One significant provision of the new act requires the mining lease-holder to, “…pay royalty to the Republic at the rate and in the manner that may be prescribed.” The previous Act 703 capped the royalty rate at six percent. The Minerals Commission implements the law.  

Power Sector

In December 2017, Ghana introduced regulations requiring local content and local participation in the power sector. The Energy Commission (Local Content and Local Participation) (Electricity Supply Industry) Regulations, 2017 (L.I. 2354) specify minimum initial levels of local participation/ownership and ten year targets:

The regulations also specify minimum and target levels of local content in engineering and procurement, construction works, post construction works, services, management, operations and staff.  All persons engaged in or planning to engage in the supply of electricity are required to register with the ‘Electricity Supply Local Content and Local Participation Committee’ and satisfy the minimum local content and participation requirements within five years. Failure to comply with the requirements could result in a fine or imprisonment.

Insurance

The National Insurance Commission (NIC) imposes nationality requirements with respect to the board and senior management of locally-incorporated insurance and reinsurance companies.  At least two board members must be Ghanaians, and either the Chairman of the board or Chief Executive Officer (CEO) must be Ghanaian. In situations where the CEO is not Ghanaian, the NIC requires that the Chief Financial Officer be Ghanaian. Minimum initial capital investment in the insurance sector is 15 million Ghana cedis (approximately USD 3 million).

Telecommunications

Per the Electronic Communications Act of 2008, the National Communications Authority (NCA) regulates and manages the nation’s telecommunications and broadcast sectors.  For 800 MHz spectrum licenses for mobile telecommunications services, Ghana restricts foreign participation to a joint venture or consortium that includes a minimum of 25 percent Ghanaian ownership.  Applicants have two years to meet the requirement, and can list the 25 percent on the Ghana Stock Exchange. The first option to purchase stock is given to Ghanaians, but there are no restrictions on secondary trading.

There are no significant limits on foreign investment or differences in the treatment of foreign and national investors in other sectors of the economy.

Other Investment Policy Reviews

Ghana has not conducted an investment policy review (IPR) through the OECD recently. UNCTAD last conducted an IPR in 2003.

The WTO last conducted a Trade Policy Review (TPR) in May 2014.  The TPR concluded that the 2013 amendment to the investment law raised the minimum capital that foreigners must invest to levels above those specified in Ghana’s 1994 GATS horizontal commitments, and excluded new activities from foreign competition.  However, it was determined that overall this would have minimum impact on dissuading future foreign investment due to the size of the companies traditionally seeking to do business within the country. An executive summary of the findings can be found at: https://www.wto.org/english/tratop_e/tpr_e/tp398_e.htm  

Business Facilitation

Although registering a business is a relatively easy procedure and can be done online through the Registrar General’s Department (RGD) at https://egovonline.gegov.gov.gh/RGDPortalWeb/portal/RGDHome/eghana.portal   , businesses have noted that the process involved in establishing a business is lengthy and complex, and requires compliance with regulations and procedures of at least four other government agencies, including GIPC, Ghana Revenue Authority (GRA), Ghana Immigration Service, and the Social Security and National Insurance Trust (SSNIT).

According to the World Bank’s Doing Business Report, it takes eight procedures and 14 days to establish a foreign-owned limited liability company (LLC) that wants to engage in international trade in Ghana.  This is longer than the regional average for Sub-Saharan Africa. Foreign investors must obtain a certificate of capital importation, which can take 14 days. The local authorized bank must confirm the import of capital with the Bank of Ghana, which will then confirm the transaction to GIPC for investment registration purposes.

Per the GIPC Act, all foreign companies are required to register with GIPC after incorporation with the RGD.  Registration can be completed online at http://www.gipcghana.com . While the registration process is designed to be completed within five business days, bureaucracy often delays this process.

The Ghanaian business environment is unique and guidance can be extremely helpful.  In some cases, a foreign investment may enjoy certain tax benefits under the law or additional incentives if the project is deemed critical to the country’s development.  Most companies or individuals considering investing in Ghana or trading with Ghanaian counterparts find it useful to consult with a local attorney or business facilitation company.  The Embassy maintains a list of local attorneys which is available through the U.S. Commercial Service in Ghana (www.export.gov/ghana). Specific information about setting up a business is available at the GIPC website: http://www.gipcghana.com/invest-in-ghana/doing-business-in-ghana.html .

Ghana Investment Promotion Centre
Post: P. O. Box M193, Accra-Ghana
Telephone: +233 (0) 302 665125, +233 (0)302 665126, +233 (0) 302 665127, +233 (0) 302 665128/ +233 (0) 302 665129
Telephone: +233 (0) 302 244318254/ 244318252
Email: info@gipcghana.com
Website: www.gipcghana.com  

Note that mining or oil/gas sector companies are required to obtain licensing/approval from the following relevant bodies:

Petroleum Commission Head Office
Plot No. 4A, George Bush Highway, Accra, Ghana
P.O. Box CT 228 Cantonments, Accra, Ghana
Telephone: +233 [0] 302 953392 | +233 [0] 302 953393
Website: http://www.petrocom.gov.gh/  

Minerals Commission
Minerals House, No. 12 Switchback Road, Cantonments, Accra
P.O. Box M 248
Telephone: +233 (0) 302 772 783 /+233 (0) 302 772 786 /+233 (0) 302 773 053
Website: http://www.mincom.gov.gh/  

Outward Investment

Ghana has no specific outward investment policy.  It has entered into bilateral treaties, however, with a number of countries to promote and protect foreign investment on a reciprocal basis.  A few Ghanaian companies have established operations in other West African countries.

Transparency of the Regulatory System

The Government of Ghana’s policies on trade liberalization and investment promotion are guiding its efforts to create a clear and transparent regulatory system.

Ghana does not have a standardized consultation process but ministries and Parliament generally share the text or summary of proposed regulations and solicit comments directly from stakeholders or via public meetings and hearings.  All laws that are currently in effect are printed in the Ghana Gazette (equivalent of the U.S. Federal Register).

The Government of Ghana has established regulatory bodies such as the National Communications Authority, the National Petroleum Authority, the Petroleum Commission, the Energy Commission, and the Public Utilities Regulatory Commission to oversee activities in the telecommunications, downstream and upstream petroleum, electricity and natural gas, and water sectors.  The creation of these bodies was a positive step but the lack of resources and their subjectiveness to political influence challenge their ability to deliver the intended level of oversight.

The government launched a Business Regulatory Reform program in 2017, but implementation has been slow.  The program aims to improve the ease of doing business, review all rules and regulations to identify and reduce unnecessary costs and requirements, establish an e-registry of all laws, establish a centralized public consultation web portal, provide regulatory relief for entrepreneurs, and eventually implement a regulatory impact analysis system.

Ghana continues to improve on making information on debt obligations, including contingent and state-owned enterprise debt, publicly available.  Information on the overall debt stock (including domestic and external) is presented in the Annual Debt Management Report which is available on the Ministry of Finance website at https://www.mofep.gov.gh/sites/default/files/reports/economic/2018-Annual-Public-Debt-Report.pdf .  However, information on contingent liabilities from state-owned enterprises is not explicit and is scattered in various reports.

International Regulatory Considerations

Ghana has been a World Trade Organization (WTO) member since January 1995.  Ghana issues its own standards for many products under the auspices of the Ghana Standards Authority (GSA).  The GSA has promulgated more than 500 Ghanaian standards and adopted more than 2,000 international standards for certification purposes.  The Ghanaian Food and Drugs Authority is responsible for enforcing standards for food, drugs, cosmetics, and health items. Ghana notifies all draft technical regulations to the WTO Committee on Technical Barriers to Trade (TBT).

Legal System and Judicial Independence

Ghana’s legal system is based on British common law and local customary law. Investors should note that the acquisition of real property is governed by both statutory and customary law.  The judiciary comprises both the lower courts and the superior courts. The superior courts are the Supreme Court, the Court of Appeal, and the High Court and Regional Tribunals. Lawsuits are permitted and usually begin in the High Court. The High Court has jurisdiction in all matters, civil and criminal, other than those involving treason.  There is a history of government intervention in the court system, although somewhat less so in commercial matters. The courts have, when the circumstances require, entered judgments against the government. However, the courts have been slow in disposing of cases and at times face challenges in enforcing decisions, largely due to resource constraints and institutional inefficiencies.

Laws and Regulations on Foreign Direct Investment

The GIPC Act codified the government’s desire to present foreign investors with a transparent foreign investment regulatory regime.  GIPC regulates foreign investment in acquisitions, mergers, takeovers and new investments, as well as portfolio investment in stocks, bonds, and other securities traded on the Ghana Stock Exchange.  The GIPC Act also specifies areas of investment reserved for locals, and further delineates incentives and guarantees that relate to taxation, transfer of capital, profits and dividends, and guarantees against expropriation.

While Ghana does not currently have a “one-stop shop” for business registration, GIPC helps to facilitate the process and provides economic, commercial and investment information for companies and business people interested in starting a business or investing in Ghana.  GIPC provides assistance to enable investors to take advantage of relevant incentives. Registration can be completed online at www.gipcghana.com  .  

As detailed in the previous section on “Limits on Foreign Control and Right to Private Ownership and Establishment,” sector-specific laws regulate foreign participation/investment in telecommunications, banking, fishing, mining, petroleum, and real estate.  

Ghana regulates the transfer of technologies not freely available in Ghana.  According to the 1992 Technology Transfer Regulations, total management and technical fee levels higher than eight percent of net sales must be approved by GIPC.  The regulations do not allow agreements that impose obligations to procure personnel, inputs, and equipment from the transferor or specific source. The duration of related contracts cannot exceed ten years and cannot be renewed for more than five years.  Any provisions in the agreement inconsistent with Ghanaian regulations are unenforceable in Ghana.

Competition and Anti-Trust Laws

Ghana’s competition law, Protection Against Unfair Competition Act, 2,000 (Act 589), is still under review.

Expropriation and Compensation

The Constitution sets out some exceptions and a clear procedure for the payment of compensation in allowable cases of expropriation or nationalization.  Additionally, Ghana’s investment laws generally protect investors against expropriation and nationalization. The Government of Ghana may, however, expropriate property if it is required to protect national defense, public safety, public order, public morality, public health, town and country planning, or to ensure the development or utilization of property in a manner to promote public benefit.  In such cases, the GOG must provide prompt payment of fair and adequate compensation to the property owner. The Government of Ghana guarantees due process by allowing access to the high court by any person who has an interest or right over the property.

U.S. investors are generally not subject to differential or discriminatory treatment in Ghana, and there have been no government expropriations involving U.S. investments in recent times.  There have been no reported instances of indirect expropriation or any government action equivalent to expropriation during the past year.

Dispute Settlement

ICSID Convention and New York Convention

Ghana is a member state to the International Centre for the Settlement of Investment Disputes (ICSID Convention).  Ghana is a signatory to the convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention).

There is a caveat for investment disputes arising from within the energy sector: the Government of Ghana has expressed a preference for handling disputes under the ad hoc arbitration rules of the UN Commission on International Trade Law (UNCITRAL Model Law).

Investor-State Dispute Settlement

Ghana’s track record for sound governance and a relatively reliable legal system result in a dispute resolution process that benefits foreign investors, in comparison to other countries in the region.

Over the past ten years, there have been four disputes involving U.S. investors.  One of the cases was resolved through international arbitration. The other three are still pending resolution.

International Commercial Arbitration and Foreign Courts

The United States has signed three bilateral agreements on trade and investment with Ghana: a Trade and Investment Framework Agreement (TIFA), OPIC Investment Incentive Agreement, and the Open Skies Agreement.  These agreements contain provisions for investment as well as trade dispute mechanisms.

The Commercial Conciliation Center of the American Chamber of Commerce (Ghana) provides arbitration services on trade and investment issues for disputes regarding contracts with arbitration clauses.

There is interest in alternative dispute resolution, especially as it applies to commercial cases. Several lawyers provide arbitration and/or conciliation services.  Arbitration decisions are enforceable provided they are registered in the courts.

The Government of Ghana established fast track courts to expedite action in certain cases.  These fast track courts, which are automated divisions of the High Court, were intended to oversee cases which can be concluded within six months.  However, they have not succeeded in consistently disposing of cases within six months. In March 2005, the government established a commercial court with exclusive jurisdiction over all commercial matters.  This Court also handles disputes involving commercial arbitration and the enforcement of awards; intellectual property rights, including patents, copyrights and trademarks; commercial fraud; applications under the Companies Act; tax matters; and insurance and re-insurance cases.  A distinctive feature of the commercial court is the use of mediation or other alternative dispute resolution mechanisms, which are mandatory in the pre-trial settlement conference stage. Ghana also has a Financial and Economic Crimes Court. It is a specialized division of the High Court that handles high profile corruption and economic crime cases.

Enforcement of foreign judgments in Ghana is based on the doctrine of reciprocity.  On this basis, judgments from Brazil, France, Israel, Italy, Japan, Lebanon, Senegal, Spain, the United Arab Emirates, and the United Kingdom are enforceable. Judgments from American courts are not currently enforceable in Ghana.

The GIPC, Free Zones, Labor, and Minerals and Mining Laws outline dispute settlement procedures and provide for arbitration when disputes cannot be settled by other means.  They also provide for referral of disputes to arbitration in accordance with the rules of procedure of the United Nations Commission on International Trade Law (UNCITRAL), or within the framework of a bilateral agreement between Ghana and the investor’s country.  The 2010 Alternative Dispute Resolution Act (Act 798 of 2010) provides for the settlement of disputes by mediation and customary arbitration, in addition to regular arbitration processes.

Bankruptcy Regulations

Ghana does not have a bankruptcy statute.  The Companies Act of 1963, however, provides for official closure of a company when it is unable to pay its debts.  A new insolvency law is under debate in Parliament.

Investment Incentives

Investment incentives differ slightly depending upon the law under which an investor operates.  For example, while all investors operating under the Free Zone Act are entitled to a ten-year corporate tax holiday, investors operating under the GIPC law are not automatically entitled to a tax holiday.  Tax incentives vary depending upon the sector in which the investor is operating.

All investment-specific laws contain some incentives.  The GIPC law allows for import and tax exemptions for plant inputs, machinery and parts that are imported for the purpose of the investment. Chapters 82, 84, 85, and 89 of the Customs Harmonized Commodity and Tariff Code zero-rate these production items.  The Government of Ghana imposed a five percent import duty on some items that were previously zero-rated, to conform to the ECOWAS common external tariff.

The Ghanaian tax system is replete with tax concessions that considerably reduce the effective tax rate. The minimum incentives are specified in the GIPC law and are not applied in an ad hoc or arbitrary manner.  Once an investor has been registered under the GIPC law, the investor is entitled to the incentives provided by law. The government has discretion to grant an investor additional customs duty exemptions and tax incentives beyond the minimum stated in the law.  The GIPC website (http://www.gipcghana.com) provides a thorough description of available incentive programs. The law also guarantees an investor all the tax incentives provided for under Ghanaian law. For example, rental income from commercial and residential property is exempt from tax for the first five years after construction. Similarly, income from a company selling or leasing out premises is income tax exempt for the first five years of operation.  Rural banks and cattle ranching are exempt from income tax for ten years and pay 8 percent thereafter.

The corporate tax rate is 25 percent and this applies to all sectors except income from non-traditional exports (8 percent tax rate) and oil and gas exploration companies (35 percent tax rate). For some sectors there are temporary tax holidays.  These sectors include Free Zone enterprises and developers (0 percent for the first ten years and 15 percent thereafter); real estate development and rental (0 percent for the first five years and 25 percent thereafter); agro-processing companies (0 percent for the first five years, after which the tax rate ranges from 0 percent to 25 percent depending on the location of the company in Ghana), and waste processing companies (0 percent for seven years and 25 percent thereafter).  Tax rebates are also offered in the form of incentives based on location. A capital allowance in the form of accelerated depreciation is applicable in all sectors except banking, finance, commerce, insurance, mining, and petroleum. Under the new Income Tax law of 2015, all businesses can carry forward tax losses for at least three years.

Ghana has no discriminatory or excessively burdensome visa requirements.  A foreign investor who invests under the GIPC law is automatically entitled to a specific number of visas/work permits based on the size of the investment.  When an investment of USD 50,000, but not more than USD 250,000 or its equivalent is made in convertible currency or machinery and equipment, the enterprise can obtain a visa/work permit for one expatriate employee.  An investment of USD 250,000, but not more than USD 500,000, entitles the enterprise to two automatic visas/work permits. An investment of USD 500,000, but not more than USD 700,000, allows the enterprise to bring in three expatriate employees.  An investment of more than USD 700,000 allows an enterprise to bring in four expatriate employees. An enterprise may apply for extra visas or work permits, but the investor must justify why a foreigner must be employed rather than a Ghanaian. There are no restrictions on the issuance of work and residence permits to Free Zone investors and employees.  Overall, the process of issuing work permits is not very transparent.

Ghana has no import price controls.  It is pursuing a liberalized import regime policy within the framework of the World Trade Organization to accelerate industrial growth.  The Government of Ghana joined other ECOWAS countries by fully implementing the ECOWAS Common External Tariff (CET) in February 2016.

In some instances, Ghana has issued guarantees for foreign direct investment projects that it deems critical to the country’s development.  To make the operation of public-private partnerships (PPPs) effective, the government may support such projects with viability gap funding and guarantees.  A new PPP law is under debate in Parliament.

Foreign Trade Zones/Free Ports/Trade Facilitation

Free Trade Zones (called Free Zones in Ghana) were established in May 1996, with one near Tema Steelworks, Ltd., in the Greater Accra Region, and two other sites located at Mpintsin and Ashiem near Takoradi in the Western Region.  The seaports of Tema and Takoradi, as well as the Kotoka International Airport and all the lands related to these areas, are part of the Free Zone. The law also permits the establishment of single factory zones outside or within the areas mentioned above.  Under the law, a company qualifies to be a Free Zone company if it exports more than 70 percent of its products. Among the incentives for Free Zone companies are a ten-year corporate tax holiday and zero import duty.

To make it easier for Free Zone developers to acquire the various licenses and permits to operate, the Ghana Free Zones Authority (www.gfzb.com.gh) provides a “one-stop approval service” to assist in the completion of all formalities.  A lack of resources has limited the effectiveness of the Authority. Foreign employees of Free Zone businesses require work and residence permits.

Performance and Data Localization Requirements

In most sectors, Ghana does not have performance requirements for establishing, maintaining, and expanding a business.  Investors are not currently required to purchase from local sources or employ prescribed levels of local content, except in the upstream petroleum sector and the power sector, which are subject to substantial local content requirements.  Similar legislation is being drafted for the downstream petroleum sector and a National Local Content Policy is being debated by Cabinet that may extend to a broad array of sectors of the economy, but there is no clear timeline for its approval.

Generally, investors are not required to export a specified percentage of their output, except for Free Zone enterprises which, in accordance with the Free Zone Act, must export 70 percent of their products.  Government officials have intimated that local content requirements should be applied to sectors other than petroleum, but currently no local content regulations have been promulgated for other sectors.

As detailed earlier in this report, there are a few areas where the GOG does impose performance requirements including the mining, oil and gas, insurance, and telecommunications sectors.

Data Storage

The Government of Ghana does not follow a forced localization policy in which foreign investors must use domestic content in goods or technology.  In addition, there are no requirements for foreign IT providers to turn over source code and/or provide access to surveillance (backdoors into hardware and software or turn over keys for encryption).

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

Table 3: Sources and Destination of FDI

Table 4: Sources of Portfolio Investment

Data not available.

Policies Towards Foreign Direct Investment

Mali generally encourages foreign investment.  Foreign and domestic investments receive equal treatment.  The structural adjustment facility agreements signed between the International Monetary Fund (IMF)/World Bank and Mali since 1992 support foreign investment.  The government’s national strategy to fight poverty as presented to the IMF, World Bank, and other donors emphasizes the role of the private sector in developing the economy.  Mali adopted a new Strategic Framework for Economic Recovery and Sustainable Development for 2019-2023, “le Cadre Stratégique pour la Relance Economique et le Développement Durable” (CREDD).  Emphasizing peace, security, and macroeconomic stability, the new CREDD hopes to strengthen economic growth, institutional development, governance, and the provision of basic social services. Mali maintains an office in charge of Business Climate Reforms, the Cellule Technique de la Réforme du Climat des Affaires (CTRCA), tasked with developing an action plan for improving the business environment.  In 2015, Mali also created a committee comprising both government and private business for Monitoring Business Environment Reforms. Mali is a member of the Economic Community of West African States (ECOWAS) and the West African Economic and Monetary Union (WAEMU), which aim to reduce trade barriers, harmonize monetary policy, and create a common market.

The Malian government has instituted policies promoting direct investment and export-oriented businesses.  Foreign investors go through the same screening process as domestic investors. Criteria for granting authorization under the 2012 investment code include the size of the proposed capital investment, the use of locally produced raw materials, and the level of job creation.

Mali maintains a one-stop shop for prospective investors, the Agency for Investment Promotion (Agence pour la Promotion de l’Investissement or API).  A law on public-private partnerships approved by the National Assembly in 2016 aims to reinforce the framework to attract foreign and domestic investment in a multitude of sectors.

In 2011, the government created an export promotion agency (APEX-Mali) to promote and encourage export-oriented activities.  APEX-Mali is fully functional. The Government of Mali has also revitalized an African Growth and Opportunity Act (AGOA) committee to encourage exports to the United States.  The AGOA committee developed a National AGOA Strategy to help Malian exporters better utilize the market preferences provided under AGOA.

U.S. investors report to face the same challenges as other foreign investors do, including allegedly unfair application of tax collection laws, difficulties clearing goods through customs, and requests for bribes.  Third parties report that corruption in the judiciary is common and foreign companies often find themselves at a disadvantage vis-à-vis Malian investors in enforcing contracts and competing for public procurement tenders.

Additional information can be found in the 2019 Doing Business Report on Mali: http://www.doingbusiness.org/en/data/exploreeconomies/mali#  .

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign and domestic private entities have the right to establish and own business enterprises with no restriction to forms of remunerative activities.  There are some specific limits on ownership in the mining and media sector. For example, foreign investors in the mining sector can own up to 90 percent of a mining company.  Foreign investors in media companies must have a 50 percent or lower ownership stake. WAEMU requires Malian and foreign companies to report if they will hold foreign currency reserves in their Malian business accounts and receive approval from the Ministry of Economy and Finances and the Central Bank for West African States (BCEAO). 

Other Investment Policy Reviews

No information is available on other investment policy reviews.

Business Facilitation

The Agency for Investment Promotion (API) is Mali’s one-stop shop to facilitate business and to promote foreign and local investments.  Serving both Malian and foreign enterprises of all sizes, API has become a strong source of potential support for U.S. investors.

API’s website (http://www.apimali.gov.ml/  ) provides copious information ranging from business registration, tax payment, access to social security, trade regulations, land ownership procedures, visa and residence permit regulations, and information on tax exemptions, special economic zones, recruitment of personnel, and connecting to water and electricity utilities.

Foreign companies, regardless of size, wishing to register in Mali can receive tax and customs benefits depending on the size of investment.  Small and medium sized enterprises, for which the size definition varies across ministries, are also eligible for fiscal advantages. The Government of Mali is in the process of harmonizing its registration advantages.  There is no discrimination based on gender, age, or ethnicity in the process of business registration.

The World Bank’s 2019 Doing Business Report notes that it takes an average of five procedures and 11 days to establish a business in Mali.  The Government of Mali publishes the incorporation notices of new companies on the official API website. The mining code encourages investments in small and medium mining enterprises, awards two-year exploration permits free of charge, and does not require a commitment from the exploring firm to lease the area explored thereafter.

Additional information on Mali’s online business registration processes is available at https://ger.co/  .

Outward Investment

The Government of Mali has no policy to promote outgoing investment.  A few Malian companies invest in neighboring countries and in France.

Transparency of the Regulatory System

As reflected in agreements with the IMF and World Bank, the Government of Mali has adopted a generally transparent regulatory policy and laws to foster competition.  The commerce, labor, and competition laws are designed to meet the requirements of fair competition, to ease bureaucratic procedures, and to facilitate the hiring and firing of employees.  In practice, however, many international firms complain of lack of transparency in the regulatory system and challenges in enforcing regulatory requirements to the detriment of business prospects.  The investment code simplifies the application process to establish a business, and favors investments that promote handicrafts, exports, and labor-intensive businesses. There is, however, no public comment period or opportunity for citizens or businesses to comment upon proposed laws.  Mali is a member of the African Organization for the Harmonization of Business Law (OHADA) and implements the Accounting System of West African States (SYSCOA), which harmonizes business practices among several African countries consistent with international norms. There are no informal regulatory processes managed by nongovernmental organization or associations.

Mali is a member of the United Nations Conference on Trade and Development’s (UNCTAD) international network of transparent investment procedures.  Foreign and national investors can find detailed information on administrative procedures applicable to investment and income generating operations including the number of steps to establish a business, types of companies to be created, required documents and conditions, costs, processing time, legal references, payment of taxes, access to lands and properties, getting a visa or a residence permit, subscribing to insurance, social protection, borrowing from microfinance institutions, and intellectual property-related issues.

The Regulatory Authority for Public Transactions (Autorité de Regulation des Marchés Publics et des Delegations des Services Publics or ARMDS) is tasked with ensuring transparency in public procurement projects and can hear complaints from businesses on public procurement related issues.  It makes its decisions available on its website as well as the key laws relating to public procurement.

The Government of Mali regularly reviews regulations.  The process of reviewing the mining code and the investment code is ongoing.  The Government of Mali does not review regulations based on scientific studies or quantitative analysis.  The regulations are reviewed in order to adapt them to the national context or to international standards or commitments.

International Regulatory Considerations

The investment code allows a foreign company that has a signed agreement with the government to refer to international arbitration any case that the local courts are unable to resolve.

Mali is a member of the African Organization for the Harmonization of Business Law (OHADA) and has ratified the 1993 treaty creating the Joint Arbitration Court.  OHADA has a provision allowing litigation between foreign companies and domestic companies or with the government to be tried in an appellate court outside of Mali.  Mali has been a member of the World Bank Multilateral Investment Guarantee Agency (MIGA) since 1990.

Mali has been a member of the World Trade Organization (WTO) since 1995.  Mali has not notified the WTO of any measures concerning investments related to trade in goods that are inconsistent with the requirements of Trade Related Investment Measures (TRIMs).

Legal System and Judicial Independence

Mali’s legal system is based on French civil law.  Mali uses its investment code, commerce code, labor code, and code on competition and price to govern disputes.  Disputes occasionally arise between the government or state-owned enterprises and foreign companies. Some report that certain cases involve wrongdoing on the part of companies and/or corrupt government officials.

Although Mali’s judicial system is s independent, many companies have noted that it has been subject to political influence.  Numerous business complaints are awaiting an outcome in the courts. Judges and prosecutors’ career paths depend on the Minister of Justice, and hence their independence is allegedly compromised.  According to some reports, corruption in the judicial system is common, leading to what foreign investors have defined as flawed decisions.

An independent commercial court was established in 1991 with the encouragement of the U.S. government to expedite the handling of business litigation.  Commercial courts, located in Bamako, Kayes, and Mopti, can hear intellectual property rights cases. In areas where there is no commercial court, the Local Courts of First Instance have the jurisdiction to hear business disputes.  The Courts of First Instance decisions are appealable in the Court of Appeal and/or in the Supreme Court. Since its inception, the commercial court has handled cases involving foreign companies. The court is staffed by magistrates and is assisted by elected Malian Chamber of Commerce and Industry representatives.  Teams composed of one magistrate and two Chamber of Commerce and Industry representatives conduct hearings. The magistrate’s role is to ensure that the court renders decisions in accordance with applicable commercial laws, including internationally recognized bankruptcy laws, and that court decisions are enforced under Malian law.

Laws and Regulations on Foreign Direct Investment

The investment code gives the same incentives to both domestic and foreign companies for licensing, procurement, tax, and customs duty deferrals, export and import policies, and export zone status if the firm exports at least 80 percent of production.  Incentives include exemptions from duties on imported equipment and machinery. Investors may also receive tax exemptions on the use of local raw materials. In addition, foreign companies can negotiate specific incentives on a case-by-case basis. The government has reduced or eliminated many export taxes and import duties as part of ongoing economic reforms; however, export taxes remain for gold and cotton.  The government applies price controls to petroleum products and cotton, and occasionally to other commodities, such as rice, on a case-by-case basis.

In most cases, foreign investors can own 100 percent of any business they create, except in the mining and media sectors.  They can also purchase shares in parastatal companies. The state has privatized many local companies. Foreign companies may also start joint-venture operations with Malian enterprises.  The repatriation of capital and profit is guaranteed.

Despite having a generally favorable investment regime on paper, foreign investors have complaint of facing a myriad of challenges in practice.  The most important of these being reported include low access to financing, high level of corruption, poor infrastructure (including inconsistent electricity), a non-transparent judicial system, and the lack of an educated workforce.

The following websites provide additional information relating to investments in Mali:

• Agency for Investment Promotion: http://mali.eregulations.org/  
• Mali Trade Portal: https://tradeportal.ml/  
• National Council of Employers: http://www.cnpmali.org/index.php/lois-et-reglements/codes   
• Chamber of Agriculture: https://www.apcam.org/  
• Chamber of Commerce: http://www.cci.ml  
• Ministry of Economy and Finances: http://www.finances.gouv.ml  
• Ministry of Mines: http://www.mines.gouv.ml  
• Public Procurement Regulation Authority:  http://www.armds.ml/  

Competition and Anti-Trust Laws

The Ministry of Commerce and Competition is in charge of reviewing free competition in the Malian market place.  Order 2007, Decree 2008, and the WAEMU 2002 anti-trust rules are the primary judicial documents that govern competition.  The Tribunal of Commerce and ARMDS are the primary judicial bodies that oversee competition-related concerns. Some report that Mali struggles to limit illegal imports of products such as sodas, juices, tobacco, medicines, and textiles (including fabrics).  The General Directorate of Customs, the National Directorate for Commerce and Competition, and the Agency for Sanitary Security of Foods occasionally intervene to limit the import and commercialization of smuggled goods. The Organization of Industrial Entrepreneurs (Organisation Patronal des Industriels or OPI) has criticized corruption and smuggling as significant hurdles to fair competition.    

Expropriation and Compensation

Expropriation of private property other than land for public purposes is rare.  The Malian government has not unfairly targeted U.S. firms for expropriation. By Malian law, the expropriation process should be public and transparent and follow the principles of international law.  Compensation based on market value is awarded by court decision.

The government may exercise eminent domain in various situations including:  undertaking large-scale public projects; in cases of bankrupt companies that have had a government guarantee for their financing; or when a company has not complied with the requirements of an investment agreement with the government.  In 2000 and 2012, the government expropriated land near the Bamako city airport for air safety reasons. Notifications of the expropriation were sent via direct mail and published in public and private media, and prior owners were compensated according to Malian law.  In 2010 and 2011, the government expropriated private land on the outskirts of Bamako for the construction of low -and medium-income housing. The prior owners have initiated a legal case against the government, arguing that housing projects should not be considered large-scale public works projects.  The government settled the case by compensating previous owners. In cases of illegal expropriations, Malian law affords claimants due process in principle. However, given the reported vast corruption in the land administration sector, investors claim that fair court cases are rare.

Dispute Settlement

ICSID Convention and New York Convention

Mali is a member state to the International Centre for the Settlement of Investment Disputes (ICSID Convention).  Mali also signed and ratified the Convention of the Recognition and Enforcement of Foreign Arbitrage Awards (1958 New York Convention).

Investor-State Dispute Settlement

Mali has ratified the 1993 treaty creating OHADA’s Joint Arbitration Court.  OHADA has a provision allowing litigation between foreign companies and domestic companies or with the government to be tried in an appellate court outside of Mali.  Mali has been a member of the World Bank Multilateral Investment Guarantee Agency (MIGA) since 1990. It has concluded numerous bilateral investments treaties and investment protection guarantee agreements.  The U.S. government concluded an agreement with the Government of Mali on Private Investments Guaranty in 1964. Despite the official agreements, U.S. investors have complained about unfair practices. The dispute resolution process can take multiple years and is often fraught with corruption, political influence, and demands for payments to facilitate the legal process.

For example, the Tax Office and a mining company transferred several cases relating to six fiscal years (2008-2013) to the ICSID.  The ICSID ruled in the mining company’s favor. However, it has been reported that the Government of Mali then started reassessing the company’s tax bill for other years; investors claim that it is not clear whether this was done in retaliation or as part of a government-wide tightening of tax collection.  In October 2016, the Government of Mali closed the mining company’s office in Bamako after the company protested the new tax bills. Under pressure from the Tax Office, the mining company eventually agreed to pay a part of the assessments claimed by the Tax Office in order to reopen its office, but continues to contest the legality of the decision.

In 2013, an American company that was contracted to complete the Millennium Challenge Corporation (MCC)-funded airport renovation filed a case against the Government of Mali at the Paris Arbitration Court regarding an alleged breach of contract.  The case is pending.

After five months of negotiations regarding a contract for a 30-megawatt (MW) power project initially awarded to a U.S. company, the Malian state-owned utility company cancelled the contract in January 2017 without justification and without the authorization of the Malian Public Procurement Regulatory Office.

In 2015, a U.S. company’s bid for an engineering oversight project related to the renovation of the Bamako airport was unjustly disqualified.  ARMDS rejected the U.S. company’s complaint, stating the company did not wait the requisite 72 hours before contacting the authority. The company elevated the complaint to the Administrative Chamber of the Malian Supreme Court, where the case now rests indefinitely.

Another U.S. energy company spent three years trying to negotiate a power purchasing agreement with the Government of Mali regarding a 15 MW hydroelectric plant in Markala.   When the government changed, the new Minister involved with the project requested a new impact study which was deemed to be redundant, costly, and unnecessary by foreign investors.  The Government of Mali has since reissued the tender which the U.S. company had believed it had won and the U.S. company gave up on the project. Reports of such delays are common. Many companies have spent considerable time developing relationships with high-level government officials, time that felt wasted once the government reshuffled itself, as it does frequently.

International Commercial Arbitration and Foreign Courts

Companies are supposed to undertake amicable negotiations before engaging ARMDS or the courts.  Failure to reach an out-of-court agreement will lead to the case being transferred to the court of first instance, the commerce court, or international arbitration.  The decisions of foreign courts are enforced as long as specified and recognized by Malian law. In 2016, the Government of Mali paid USD 26 million to a foreign mining company pursuant to ICSID’s decision.

Bankruptcy Regulations

Mali’s bankruptcy law is found in its commerce code, which does not criminalize bankruptcy.   According to data collected by the World Bank’s 2019 Doing Business Report, resolving insolvency takes 3.6 years on average and costs 18 percent of the debtor’s estate. Generally, the company will be sold piecemeal.  The average recovery rate is 28.5 cents on the dollar. Mali adopted a credit bureau law in order to comply with a WAEMU requirement aimed at improving the business environment by reducing information asymmetry between banks and borrowers, based on voluntary adherence of individuals and companies.

Investment Incentives

The investment, mining, commerce, and labor codes have the stated intention of encouraging investment and attracting foreign investors.  Mali has privatized a number of state-owned enterprises, and foreign companies have responded successfully to calls for bids in several cases.  The investment code offers incentives to companies that reinvest profits to expand existing businesses or diversify into another relevant sector.  The code also encourages the use of locally sourced inputs, which can offer tax exemptions. Companies that use at least 60 percent locally produced raw materials in their products are eligible for certain tax exemptions.  Companies that invest at least five percent of their turnover in supporting local research and development are eligible for a reduction of payroll taxes for Malian employees.

Most businesses are located in the capital city of Bamako.  The investment code encourages the establishment of new businesses in other areas.  Incentives include income tax exemptions for five- to eight-year periods, reduced energy prices, and the installation of water, electric power, and telecommunication lines in areas lacking public utilities.

The National Assembly approved a revised petroleum code in June 2004.  The law allows an initial period of four years for prospecting, renewable for two successive periods of three years each.   A 2008 amendment allows the government to expand the prospecting period for two additional years during the initial or successive phases.  Prospecting and exploitation permits, as well as their renewal, are subject to the payment of fixed taxes ranging from one million to ten million FCFA (USD 1,650 to USD 16,500).  In addition, prospecting permit holders remain liable for the payment of taxes ranging from FCFA 500-2,500 (USD 0.85-5.00) per square kilometer, and taxes of FCFA 1,000,000 (USD 1,650) per square kilometer during exploitation.  Permit holders and the companies associated with those permit holders are subject to a 35 percent tax on net profits. In 2004, the Government of Mali created a marketing office for petroleum exploration, l’Autorité pour la Promotion de la Recherche Pétrolière, or AUREP.  This agency drafts, plans, and implements oil research programs, and collects data on oil reserves. Private sector petroleum investors should meet with AUREP when beginning work.

The government has identified priority sectors for furthering economic development.  Special incentives are offered for investment in the following areas:

• Agribusiness
• Fishing and fish processing
• Livestock and forestry
• Mining and metallurgical industries
• Water and energy production industries
• Tourism and hotel industries
• Communication
• Housing development
• Transportation
• Human and animal health promotion enterprises
• Vocational and technical training enterprises
• Cultural promotion enterprises

In general, the government does not have a practice of issuing guarantees or jointly financing FDI projects.  Foreign investors in the mining sector can own up to 90 percent of a mining project. Foreign investors in media companies must have a 50 percent or lower ownership stake.

Foreign Trade Zones/Free Ports/Trade Facilitation

By law, there is no discrimination between foreign-owned firms and Malian entities with regard to investment opportunities.  Companies (domestic or foreign) that export at least 80 percent of their production are entitled to tax-free status. As such, they benefit from duty free-status on all equipment and other inputs they need for their operations.  The Government of Mali encourages the cultural sector by reducing taxes on cultural goods imports. Imports of solar energy materials also benefit from special tax treatment. Short-term tax exemptions are provided by the Government of Mali during periods of high prices of essential products.  Customs agents have accepted letters from Ministers exempting favored parties from exemptions; the IMF is working with the Government of Mali to stop this arbitrary exemption practice, including by explicitly making it illegal and instructing Customs to disregard any future letters. To date, there are no dedicated free trade zones in Mali.  Mali, Cote d’Ivoire, and Burkina Faso have planned to establish a special economic zone involving the Sikasso region of Mali, Korogho in Cote d’Ivoire, and Bobo-Dioulasso in Burkina Faso, but the zone is not yet operational. The government is currently drafting a law to create special economic zones in the regions of Sikasso, Segou, and Mopti, as well as a dry port in Kayes.

Performance and Data Localization Requirements

There is no requirement that Malian nationals own shares in a foreign investment or that foreign equity be reduced over time.  OHADA regulations specify that a company with less than 35 percent government equity is legally considered a private company.

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

* Source for Host Country Data: BCEAO (rate 1$ = 570CFA)

Table 3: Sources and Destination of FDI

Table 4: Sources of Portfolio Investment

Data not available.

Policies towards Foreign Direct Investment

Morocco actively encourages foreign investment through macro-economic policies, trade liberalization, structural reforms, infrastructure improvements, and incentives for investors.  Law 18-95 of October 1995, constituting the Investment Charter, which can be found online at http://www.usa-morocco.org/Charte.htm  , is the principal Moroccan text governing investment and applies to both domestic and foreign investment (direct and portfolio).  Morocco’s 2014 Industrial Acceleration Plan, a new approach to industrial development based on establishing “ecosystems” that integrate value chains and supplier relationships between large companies and small and medium-sized enterprises (SMEs;), has guided Ministry of Industry policy for the last five years.  The plan runs through 2020. Morocco’s Investment and Export Development Agency (AMDIE) is the primary agency responsible for the development and promotion of investments and exports. The Agency’s website aggregates relevant information for interested investors and includes investment maps, procedures for creating a business, production costs, applicable laws and regulations, and general business climate information, among other investment services.  Further information about Morocco’s investment laws and procedures is available on AMDIE’s website at http://www.amdie.gov.ma/en/  .  For further information on agricultural investments, visit the Agricultural Development Agency (ADA) website (http://www.ada.gov.ma/)   or the National Agency for the Development of Aquaculture (ANDA) website (https://www.anda.gov.ma/  ).

Moroccan legislation governing FDI applies equally to Moroccan and foreign legal entities, with the exception of certain protected sectors.

When Morocco acceded to the OECD Declaration on International Investment and Multinational Enterprises in November 2009, Morocco guaranteed national treatment of foreign investors (i.e., according equal treatment for both foreign and national investors in like circumstances).  The only exception to this national treatment of foreign investors is in those sectors closed to foreign investment (noted below), which Morocco delineated upon accession to the Declaration. Per a Moroccan notice published in 2014, the lead agency on adherence to the Declaration is AMDIE.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign and domestic private entities may establish and own business enterprises, barring some sector restrictions.  While the U.S. Mission is not aware of any economy-wide limits on foreign ownership, Morocco places a 49 percent cap on foreign investment in air and maritime transport companies and maritime fisheries.  Morocco prohibits foreigners from owning agricultural land, though they can lease it for up to 99 years. The Moroccan government holds a monopoly on phosphate extraction through the 95 percent state-owned Office Cherifien des Phosphates (OCP).  The Moroccan state also has a discretionary right to limit all foreign majority stakes in the capital of large national banks, but does not appear to have ever exercised that right. In the oil and gas sector, the National Agency for Hydrocarbons and Mines (ONHYM) retains a compulsory share of 25 percent of any exploration license or development permit.  The Moroccan Central Bank (Bank Al-Maghrib) may use regulatory discretion in issuing authorizations for the establishment of domestic and foreign-owned banks. As set forth in the 1995 Investment Charter, there is no requirement for prior approval of FDI, and formalities related to investing in Morocco do not pose a meaningful barrier to investment. The U.S. Mission is not aware of instances in which the Moroccan government turned away foreign investors for national security, economic, or other national policy reasons.  The U.S. Mission is not aware of any U.S. investors disadvantaged or singled out by ownership or control mechanisms, sector restrictions, or investment screening mechanisms, relative to other foreign investors.

Other Investment Policy Reviews

The World Trade Organization (WTO) 2016 Trade Policy Review (TPR) of Morocco found that the trade reforms implemented since the last TPR in 2009 have contributed to the economy’s continued growth by stimulating competition in domestic markets, encouraging innovation, creating new jobs, and contributing to growth diversification. The WTO 2016 TPR can be found at https://www.wto.org/english/tratop_e/tpr_e/tp429_e.htm   .  The U.S. Mission is not aware of any other investment policy reviews in the past three years.

Business Facilitation

In the World Bank’s 2019 Doing Business Report (http://www.doingbusiness.org/en/data/exploreeconomies/morocco   ), Morocco ranks 60 out of 190 economies worldwide in terms of ease of doing business, rising nine places since the 2018 report.  Since 2012, Morocco has implemented a number of reforms facilitating business registration, such as eliminating the need to file a declaration of business incorporation with the Ministry of Labor, reducing company registration fees, and eliminating minimum capital requirements for limited liability companies.  Morocco maintains a business registration website that is accessible through the various Regional Investment Centers (CRI – Centre Regional d’Investissement at https://rabat.eregulations.org/procedure/4/7?l=fr).  The business registration process is generally streamlined and clear.

Foreign companies may utilize the online business registration mechanism.  Foreign companies, with the exception of French companies, are required to provide an apostilled Arabic translated copy of its articles of association and an extract of the registry of commerce in its country of origin.  Moreover, foreign companies must report the incorporation of the subsidiary a posteriori to the Foreign Exchange Board (Office National de Change) to facilitate repatriation of funds abroad such as profits and dividends. According to the World Bank, the process of registering a business in Morocco takes an average of nine days (significantly less time than the Middle East and North Africa regional average of 21 days).  Including all official fees and fees for legal and professional services, registration costs 3.7 percent of Morocco’s annual per capita income (significantly less than the region’s average of 22.6 percent). Moreover, Morocco does not require that the business owner deposit any paid-in minimum capital.

On December 11, 2018, the lower house of parliament adopted draft law 88-17 on the electronic creation of businesses.  The final implementation decrees are expected to be ready by mid-2019.  The new system will allow the creation of businesses online via an electronic platform managed by the Moroccan Office of Industrial and Commercial Property (OMPIC). Once launched, all procedures related to the creation, registration, and publication of company data will be required to be carried out via this platform.  The creator of the company will be exempt from filing physical documents. A separate decree will determine the list of documents required during the electronic business creation process. A new national commission will monitor the implementation of the new procedures.

The business facilitation mechanisms provide for equitable treatment of women and underrepresented minorities in the economy.  Notably, according to the World Bank, the length of time and cost to register a new business is equal for men and women in Morocco.  The U.S. Mission is not aware of any special assistance provided to women and underrepresented minorities through the business registration mechanisms.  In cooperation with the Moroccan government, civil society, and the private sector, there have been a number of initiatives aimed at improving gender quality in the workplace and access to the workplace for foreign migrants, particularly from sub-Saharan Africa.

Outward Investment

In 2017, Morocco’s FDI in Africa was USD 2.57 billion, representing a 12 percent increase over 2016.  The African Development Bank ranks Morocco as the second biggest African investor in Sub-Saharan Africa, after South Africa, with up to 85 percent of Moroccan FDI going to the region.  The U.S. Mission is not aware of a standalone outward investment promotion agency, though AMDIE’s mission includes supporting Moroccan exporters and investors seeking to invest outside of Morocco. Nor is the U.S. Mission aware of any restrictions for domestic investors attempting to invest abroad.   However, under the Moroccan investment code, repatriation of funds is limited to convertible Moroccan Dirham accounts. Capital controls limit the ability of residents to convert dirham balances into foreign currency or to move funds offshore.

Transparency of the Regulatory System

Morocco is a constitutional monarchy with an elected parliament and a mixed legal system of civil law based primarily on French law, with some influences from Islamic law.  Legislative acts are subject to judicial review by the Constitutional Court. The Constitutional Court has the power to determine the constitutionality of legislation, excluding royal decrees (Dahirs).  Legislative power in Morocco is vested in both the government and the two chambers of Parliament, the Chamber of Representatives (Majlis Al-Nuwab) and the Chamber of Councillors (Majlis Al Mustashareen).  The King can issue royal decrees, which have the force of law. The principal sources of commercial legislation in Morocco are the Code of Obligations and Contracts of 1913 and Law No. 15-95 establishing the Commercial Code.  The Competition Council and the National Authority for Detecting, Preventing, and Fighting Corruption (INPPLC) have responsibility for improving public governance and advocating for further market liberalization. All levels of regulations exist (local, state, national, and supra-national).  The most relevant regulations for foreign businesses depend on the sector in question. Ministries develop their own regulations and draft laws, including those related to investment, through their administrative departments, with approval by the respective minister. Each regulation and draft law is made available for public comment.  Key regulatory actions are published in their entirety in Arabic and usually French in the official bulletin on the website (at http://www.sgg.gov.ma/Accueil.aspx  ) of the General Secretariat of the Government.  Once published, the law is final. Public enterprises and establishments can adopt their own specific regulations provided they comply with regulations regarding competition and transparency.

Morocco’s regulatory enforcement mechanisms depend on the sector in question, and enforcement is legally reviewable.  The National Telecommunications Regulatory Agency (ANRT), for example, created in February 1998 under Law No. 24-96, is the public body responsible for the control and regulation of the telecommunications sector.  The agency regulates telecommunications by participating in the development of the legislative and regulatory framework. Morocco does not have specific regulatory impact assessment guidelines, nor are impact assessments required by law.  Morocco does not have a specialized government body tasked with reviewing and monitoring regulatory impact assessments conducted by other individual agencies or government bodies.

The World Bank’s 2019 Doing Business Report indicates that Morocco implemented reforms in 2018 aimed at reducing regulatory complexity and strengthening legal institutions.  The U.S. Mission is not aware of any informal regulatory processes managed by nongovernmental organizations or private sector associations. The Moroccan Ministry of Finance posts quarterly statistics (compiled in accordance with IMF recommendations) on public finance and debt on their website (https://www.finances.gov.ma/en/Pages/Finances-publiques.aspx?m=ACTIVITIES&p=402  )

International Regulatory Considerations

Morocco joined the WTO since January 1995 and reports technical regulations that could affect trade with other member countries to the WTO.  Morocco is a signatory to the Trade Facilitation Agreement (https://www.tfadatabase.org/members/morocco  ) and has a 92 percent implementation rate of TFA requirements.  European standards are widely referenced in Morocco’s regulatory system.  In some cases, U.S. or international standards, guidelines, and recommendations are also accepted.

Legal System and Judicial Independence

The Moroccan legal system is a hybrid of civil law (French system) and Islamic law, regulated by the Decree of Obligations and Contracts of 1913 as amended, the 1996 Code of Commerce, and Law No. 53-95 on Commercial Courts.  These courts also have sole competence to entertain industrial property disputes, as provided for in Law No. 17-97 on the Protection of Industrial Property, irrespective of the legal status of the parties. According to the European Bank for Reconstruction and Development’s 2015 Morocco Commercial Law Assessment Report, Royal Decree No. 1-97-65 (1997) established commercial court jurisdiction over commercial cases including insolvency.  Although this led to some improvement in the handling of commercial disputes, companies have complained of the lack of training for judges on general commercial matters to remain a key challenge to effective commercial dispute resolution in the country. In general, some report litigation procedures to be time consuming and resource-intensive, and lacking legal requirement with respect to case publishing. Disputes may be brought before one of eight Commercial Courts (located in Rabat, Casablanca, Fes, Tangier, Marrakech, Agadir, Oujda, and Meknes), and one of three Commercial Courts of Appeal (located in Casablanca, Fes, and Marrakech).  There are other special courts such as the Military and Administrative Courts. Title VII of the Constitution provides that the judiciary shall be independent from the legislative and executive branches of government. The 2011 Constitution also authorized the creation of the Supreme Judicial Council, headed by the King, which has the authority to hire, dismiss, and promote judges. Enforcement actions are appealable at the Courts of Appeal, which hear appeals against decisions from the court of first instance.

Laws and Regulations on Foreign Direct Investment

The principal sources of commercial legislation in Morocco are the 1913 Royal Decree of Obligations and Contracts, as amended; Law No. 18-95 that established the 1995 Investment Charter; the 1996 Code of Commerce; and Law No. 53-95 on Commercial Courts.  These courts have sole competence to hear industrial property disputes, as provided for in Law No. 17-97 on the Protection of Industrial Property, irrespective of the legal status of the parties. Morocco’s CRI and AMDIE provide users with various investment related information on key sectors, procedural information, calls for tenders, and resources for business creation.

Competition and Anti-Trust Laws

Morocco’s Competition Law No. 06-99 on Free Pricing and Competition (June 2000) outlines the authority of the Competition Council   as an independent executive body with investigatory powers.  Together with the INPPLC, the Competition Council is one of the main actors charged with improving public governance and advocating for further market liberalization.  Law No. 20-13, adopted on August 7, 2014, amended the powers of the Competition Council to bring them in line with the 2011 constitution.  The Competition Council’s responsibilities include:  (1) making decisions on anti-competition practices and controlling concentrations, with powers of investigation and sanction; (2) providing opinions in official consultations by government authorities; and (3) publishing reviews and studies on the state of competition.  After four years of delays, the Moroccan Government nominated and approved all members of the Competition Council in December of 2018.

Expropriation and Compensation

Expropriation may only occur in the context of public interest for public use by a state entity, although in the past, private entities that are public service “concessionaires,” mixed economy companies, or general interest companies have also been granted expropriation rights.  Article 3 of Law No. 7-81 (May 1982) on expropriation, the associated Royal Decree of May 6, 1982, and Decree No. 2-82-328 of April 16, 1983 regulate government authority to expropriate property. The process of expropriation has two phases. In the administrative phase, the State declares public interest in expropriating specific land, and verifies ownership, titles, and value of the land, as determined by an appraisal.  If the State and owner are able to come to agreement on the value, the expropriation is complete. If the owner appeals, the judicial phase begins, whereby the property is taken, a judge oversees the transfer of the property, and payment compensation is made to the owner based on the judgment. The U.S. Mission is not aware of any recent, confirmed instances of private property being expropriated for other than public purposes (eminent domain), or being expropriated in a manner that is discriminatory or not in accordance with established principles of international law.

Dispute Settlement

ICSID Convention and New York Convention

Morocco is a member of the International Center for Settlement of Investment Disputes (ICSID) and signed its convention in June 1967.  Morocco is also a party to the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards. Law No. 08-05 provides for enforcement of awards made under these conventions.

Investor-State Dispute Settlement

Morocco is signatory to over 60 bilateral treaties recognizing binding international arbitration of trade disputes, including one with the United States.  Law No. 08-05 established a system of conventional arbitration and mediation, while allowing parties to apply the Code of Civil Procedure in their dispute resolution.  Foreign investors commonly rely on international arbitration to resolve contractual disputes. Commercial courts recognize and enforce foreign arbitrations awards. Generally, investor rights are backed by a transparent, impartial procedure for dispute settlement.  There have been no claims brought by foreign investors under the investment chapter of the U.S.-Morocco Free Trade Agreement since it came into effect in 2006. The U.S. Mission is aware of approximately five cases of business disputes over the past ten years involving U.S. investors, three of which were resolved.

Morocco officially recognizes foreign arbitration awards issued against the government.  Domestic arbitration awards are also enforceable subject to an enforcement order issued by the President of the Commercial Court, who verifies that no elements of the award violate public order or the defense rights of the parties.  As Morocco is a member of the New York Convention, international awards are also enforceable in accordance with the provisions of the convention. Morocco is also a member of the Washington Convention for the International Centre for Settlement of Investment Disputes (ICSID), and as such agrees to enforce and uphold ICSID arbitral awards.  The U.S. Mission is not aware of extrajudicial action against foreign investors.

International Commercial Arbitration and Foreign Courts

Morocco has a national commission on Alternative Dispute Resolution (ADR) with a mandate to regulate mediation training centers and develop mediator certification systems.  Morocco seeks to position itself as a regional center for arbitration in Africa, but the capacity of local courts remains a limiting factor. The Moroccan government established the Center of Arbitration and Mediation in Rabat and the Casablanca International Mediation and Arbitration Center (CIMAC).  The U.S. Mission is not aware of any investment disputes involving state owned enterprises (SOEs).

Bankruptcy Regulations

Morocco’s bankruptcy law is based on French law.  Commercial courts have jurisdiction over all cases related to insolvency, as set forth in Royal Decree No. 1-97-65 (1997).  The Commercial Court in the debtor’s place of business holds jurisdiction in insolvency cases. The law gives secured debtors priority claim on assets and proceeds over unsecured debtors, who in turn have priority over equity shareholders.  Bankruptcy is not criminalized. The World Bank’s 2019 Doing Business report ranked Morocco 71 out of 190 economies in “Resolving Insolvency,” a significant improvement from Morocco’s 134th place ranking in 2018.  One contributing factor to this improvement is the Moroccan Government’s revision of the national insolvency code in March of 2018.

Investment Incentives

As set out in the Investment Code (Section 2.4), Morocco offers incentives designed to encourage foreign and local investment.  Morocco’s Investment Charter gives the same benefits to all investors regardless of the industry in which they operate (except agriculture and phosphates, which remain outside the scope of the Charter).  With respect to agricultural incentives, Morocco launched the Plan Maroc Vert (Green Morocco Plan) in 2008 to improve the competitiveness of the agribusiness industry, which has grown to 10 percent of GDP.  This plan offers technical and financial support to federations in the citrus and olive sectors to boost agribusiness value chains.  More information about agricultural subsidies for incentivizing investments and the Plan Maroc Vert can be found at http://www.agriculture.gov.ma/fda  .

Morocco has several free zones offering companies incentives such as tax breaks, subsidies, and reduced customs duties. Free zones aim to attract investment by companies seeking to export products from Morocco. The Ministry of Industry, Investment, Trade, and Digital Economy inaugurated the newest free zone in the Souss-Massa region in November 2018.  Additionally, businesses associated with Casablanca Finance City (CFC) receive a variety of incentives, including exemption from corporate taxes for the first five years after receiving CFC status. For details on CFC eligibility, see CFC’s website (https://casablancafinancecity.com/le-statut-cfc/avantages/?lang=fr).

The Moroccan government launched its “investment reform plan” in 2016 to create a favorable environment for the private sector to drive growth.  The plan included the adoption of investment incentives to support the industrial ecosystem, tax and customs advantages to support investors and new investment projects, import duty exemptions, and a value added tax (VAT) exemption.  AMDIE’s website (http://www.amdie.gov.ma/en/#missions) has more details on investment incentives, but generally these incentives are based on sectoral priorities (i.e. aerospace).  Morocco does not issue guarantees or jointly finance FDI projects, except for some public-private partnerships in fields such as utilities.

Foreign Trade Zones/Free Ports/Trade Facilitation

The government maintains several “free zones” in which companies enjoy lower tax rates in exchange for an obligation to export at least 85 percent of their production.  In some cases, the government provides generous incentives for companies to locate production facilities in the country. The Moroccan government also offers a VAT exemption for investors using and importing equipment goods, materials, and tools needed to achieve investment projects whose value is at least USD 20 million.  This incentive lasts for a period of 36 months from the start of the business.

Performance and Data Localization Requirements

The Moroccan government views foreign investment as an important vehicle for creating local employment.  Visa issuance for foreign employees is contingent upon a company’s inability to find a qualified local employee for a specific position, and can only be issued after the company has verified the unavailability of such an employee with the National Agency for the Promotion of Employment and Competency (ANAPEC).  If these conditions are met, the Moroccan government allows the hiring of foreign employees, including for senior management. According to some reports, the process for obtaining and renewing visas and work permits can be onerous and may take up to six months, except for CFC members, where the processing time is reportedly one week.

The government does not require the use of domestic content in goods or technologies.  The WTO Trade Related Investment Measures’ (TRIMs) database does not indicate any reported Moroccan measures that are inconsistent with TRIMs requirements.  Though not required, tenders in some industries, including solar energy, are written with targets for local content percentages. Both performance requirements and investment incentives are uniformly applied to both domestic and foreign investors depending on the size of the investment.

The Moroccan Data Protection Act (Act 09-08) stipulates that data controllers may only transfer data if a foreign nation ensures an adequate level of protection of privacy and fundamental rights and freedoms of individuals with regard to the treatment of their personal data.  Morocco’s National Data Protection Commission (CNDP) defines the exceptions according to Moroccan law. Local regulation requires the release of source code for certain telecommunications hardware products. However, the U.S. Mission is not aware of any Moroccan government requirement that foreign IT companies should provide surveillance or backdoor access to their source-code or systems.

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

* Source for Host Country Data: Moroccan GDP data from Bank Al-Maghrib, all other statistics from the Moroccan Exchange Office.  Conflicts in host country and international statistics are likely due to methodological differences

Table 3: Sources and Destination of FDI

Table 4: Sources of Portfolio Investment

Data not available.

Policies Towards Foreign Direct Investment

The GRM is open to foreign investment, seeing it as a driver of economic growth and job creation.  All business sectors are open to foreign investors, with the exception of a few sectors related to national security.  The GRM reviews and approves each foreign and domestic investment; there are almost no restrictions on the form or extent of foreign investment.

APIEX (Agencia para a Promocao de Investimentos e Exportacoes –Agency for Promotion of Investments and Exports) is the primary investor contact within the GRM, operating under the Ministry of Industry and Commerce.  Its objective is to promote and facilitate private and public investment. It also oversees the promotion of national exports.  It can assist with administrative, financial, and property issues.  Through APIEX, investors can receive exemptions from some customs and value-added tax (VAT) duties when importing “class K” equipment, which includes capital investments.

Contact information for APIEX is:

Agency for Promotion of Investments and Exports

Rua da Imprensa, 332 (ground floor)

Tel: (+258) 21313310

Ahmed Sekou Toure Ave., 2539

Tel: (+258) 21 321291/2/3

Mobile: (+258 ) 823056432

Mozambique’s Law on Investment, No. 3/93, passed in 1993, and its related regulations, govern national and foreign investment.  In August 2009, Decree No. 43/2009 replaced earlier amendments from 1993 and 1995, providing new regulations to the Investment Law.  In general, large investors receive more support from the government in the business registration process than small and medium-sized investors do.  Government authorities must approve all foreign and domestic investment requiring guarantees and incentives.  Regulations for the Code of Fiscal Benefits were established by Decree No. 56/2009 and approved in October 2009. The Code of Fiscal Benefits, Law No. 4/2009, passed in January 2009, can be found at: http://investmentpolicyhub.unctad.org/InvestmentLaws/laws/110 .

The GRM, through the Confederation of Business Associations (Portuguese acronym – CTA), Mozambique’s primary business and industry association, maintains an ongoing dialogue with the private sector, holding quarterly meetings with the Prime Minister and an annual meeting with the President.  CTA provides feedback to the GRM on laws and regulations that impact the business environment.

Limits on Foreign Control and Right to Private Ownership and Establishment

Mozambique investment law and its regulations generally do not distinguish between investor origin or limit foreign ownership or control of companies.  With the exception of security, safety, media, entertainment, and certain game hunting concessions, there were no legal requirements that Mozambican citizens own shares of foreign investments until 2011.

Law No. 15/2011, passed in August 2011 and often referred to as the “Mega-Projects Law,” governs public-private partnerships, large-scale ventures, and business concessions.  It states that Mozambican persons should participate in the share capital of all such undertakings in a percentage ranging from 5 percent to 20 percent of the equity capital of the project company.  Implementing regulations were approved by the Council of Ministers in June 2012.

Article 4.1 in Law 14/2014, often referred to as The Petroleum Law, states that the GRM regulates the exploration, research, production, transportation, trade, refinery, and transformation of liquid hydrocarbons and their by-products, including petrochemical activities.  Article 4.6 established state-owned oil company ENH as the government’s exclusive representative for investment and participation in oil and gas projects.  ENH typically owns up to 15 percent of shares in oil and gas projects in the country.

Other Investment Policy Reviews

Mozambique has undergone investment policy reviews by the following international organizations:

OECD Investment Policy Review (2013)

http://www.oecd.org/daf/inv/investment-policy/mozambique-investment-policy.htm 

WTO Trade Policy review – Report by the Secretariat – Mozambique – Revision (2017)

https://www.wto.org/english/tratop_e/tpr_e/tp454_e.htm 

UNCTAD Investment Policy Review (2012)

http://unctad.org/en/pages/PublicationWebflyer.aspx?publicationid=222 

Business Facilitation

APIEX is the government entity that promotes and facilitates investment in Mozambique.  It provides support to investors for the following services: incorporation, business licensing, entrance visas, work permits, residence permits, identification and licensing of land, identification of business partners, troubleshooting, project monitoring, and implementation follow-up.

Lengthy registration procedures can be problematic for any investor – national or foreign – but those unfamiliar with Mozambique and the Portuguese language face greater challenges.  Some foreign investors find it beneficial to work with a local equity partner familiar with the bureaucracy at the national, provincial, and district levels.

In 2019, Mozambique ranked 135 among 190 countries in the World Bank Doing Business report.  The report states that Mozambique performs slightly better than the sub-Saharan average for the ease of doing business but below peers such as Botswana and South Africa in the region.  Mozambique ranks 174 out of 190 countries in how easy it is to start a business, taking 17 days to complete the process, requiring 10 procedures, and costing 120 percent of the per capita income.  The report also indicates that getting credit and enforcing contracts are comparatively more challenging in Mozambique than most countries.  The GRM has made improvements in areas such as getting construction permits and electricity.

Outward Investment

The GRM does not promote or incentivize outward investment.  It also does not restrict domestic investors from investing abroad.  The law does request that domestic investors remit investment income from overseas, except for amounts required to pay debts, taxes, or other expenses abroad.

Transparency of the Regulatory System

Investors face myriad requirements for permits, approvals, and clearances that take substantial time and effort to obtain.  The difficulty of navigating the system provides opportunities for corruption and bribery when officials facilitate routine transactions.  Regulations in the areas of labor, health and safety, and the environment often go unenforced, or are selectively enforced.  In addition, civil servants have threatened to enforce antiquated regulations that remain on the books to obtain favors or bribes.

Draft bills are usually made available for public comments through the business associations or relevant sectors or in public meetings.  Changes to laws and regulations are published in the National Gazette.  Public comments are usually limited to input from a few private sector organizations, such as CTA.  There have been complaints of short comment periods and that comments are not properly reflected in the National Gazette.  The GRM is considering a law that would make public consultation on future legislation mandatory.

International Regulatory Considerations

Mozambique is a member of SADC (Southern African Development Community).  In June 2016, the SADC EPA Group, which includes Mozambique, Botswana, Lesotho, Namibia, South Africa, and Swaziland, signed an Economic Partnership Agreement with the European Union. Mozambique exports aluminum under the EPA agreement.

The GRM ratified the Trade Facilitation Agreement (TFA) in July 2016 and notified the WTO in January 2017.  A National Trade Facilitation Committee was established to coordinate the implementation of the TFA.

Legal System and Judicial Independence

Mozambique’s legal system is based on Portuguese civil law and customary law.  In December 2005, the Parliament approved major revisions to the Commercial Code – the result of a collaborative effort starting in 1998 between the Mozambican government, the private sector, and donors.  The previous Commercial Code was from the colonial period, with clauses dating back to the 19th century, and it did not provide an effective basis for modern commerce or resolution of commercial disputes.  The revised code went into effect July 1, 2006.  In April 2018, the Council of Ministers passed new provisions for the Commercial Code, which were debated and approved in Parliament.

Laws and Regulations on Foreign Direct Investment

The Code of Fiscal Benefits, Law No. 4/2009, passed in January 2009, and Decree No. 56/2009, approved in October 2009, form the legal basis for foreign direct investment in Mozambique. Operating within these regulations, APIEX analyzes the fiscal and customs incentives available for a particular investment.  Investors must establish foreign business representation and acquire a commercial representation license.  During project development, investors must document their community consultation efforts related to the project.  If the investment requires the use of land, the investor will also have to present, among other documents, a topographic plan or an outline of the site where the project will be developed.

If the investment involves an area under 1,000 hectares and the investment is up to approximately USD 25 million, the governor of the province where it will be located can approve the investment.  APIEX has the authority to approve any project between USD 25 million and approximately USD 40 million.  The Minister of Economy and Finance must approve national or foreign investment between approximately USD 40 million and USD 225 million.  If the investment (national or foreign) occupies an area of 10,000 hectares or an area superior to 100,000 hectares for a forestry concession, or it amounts to more than USD 225 million, the project must be approved by the Council of Ministers.

On February 21, 2017, the GRM approved a new regulation to facilitate visas for foreign nationals intending to invest in projects in Mozambique.  The measure reduced the minimum investment amount required from USD 50 million to USD 500,000 for an investment visa.  Under the new visa regulations, citizens of nations that have Mozambican embassies or consulates may now also request visas upon entry for the purposes of short-term tourism and/or business.  The new border visa is valid for stays of up to 30 days and allows two entries.  It cannot be renewed or extended in Mozambique.

Competition and Anti-Trust Laws

Law 10/2013, passed on April 11, 2013, and known as the Competition Law, established a modern legal framework for competition in Mozambique and created the Competition Regulatory Authority.  A budget has still not been allocated to this body, and the GRM needs to appoint a board of directors.  The framework is inspired by the Portuguese competition enforcement system.  Violating the prohibitions contained in the Competition Law (either by entering into an illegal agreement or practice or by implementing a concentration subject to mandatory filing) could result in a fine of up to 5 percent of the turnover of the company in the previous year.  Competition Regulatory Authority decisions may be appealed in the Judicial Court in Maputo, for cases leading to fines or other sanctions, or to the Administrative Court for merger control procedures.

Expropriation and Compensation

While there have been no significant cases of nationalization since the adoption of the 1990 Constitution, Mozambican law holds that “when deemed absolutely necessary for weighty reasons of national interest or public health and order, the nationalization or expropriation of goods and rights shall (result in the owner being) entitled to just and equitable compensation.” No American companies have been subject to expropriation issues in Mozambique since the adoption of the 1990 Constitution.

Dispute Settlement

ICSID Convention and New York Convention

Mozambique acceded in 1998 to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

Investor-State Dispute Settlement

For disputes between U.S. and Mozambican companies where a Bilateral Investment Treaty (BIT) violation is alleged, recourse via the international Alternative Dispute Resolution may also be available.  No investment disputes in the past ten years have involved U.S. investors. Investors who feel they have a dispute covered under the BIT should contact the U.S. Embassy.

International Commercial Arbitration and Foreign Courts

In 1999, the Parliament passed Law no. 11/99 (Law on Arbitration), which allows access to modern commercial arbitration for foreign investors.  The Judicial Council approved Resolutions No. 1/CJ/2017 and No. 2/CJ/2017 in 2017, creating the Regulations of Mediation Services in Judicial Courts and the Judicial Mediators’ Code of Conduct.  These new resolutions are designed to promote the mediation process as an alternative to litigation.

The Center of Arbitration, Conciliation, and Mediation (CACM) offers commercial arbitration. During 2018, CACM handled 20 cases of commercial arbitration, and another five cases are in process.  CACM has 298 arbitrators, 11 of which are international.  One of the main constraints to the use of arbitration is that many contracts do not incorporate a clause that allows conflicts to be resolved via arbitration instead of in the courts.

Bankruptcy Regulations

In June 2014, the GRM passed a comprehensive legal regime for bankruptcy, streamlining the bankruptcy process and setting the rules for business recovery.  Globally, Mozambique stands at 84 of 190 economies on the ease of resolving insolvency issues, according to the 2018 Doing Business Report.

Investment Incentives

The Code of Fiscal Benefits contains specific incentives for entities that intend to invest in certain geographical areas within Mozambique that have natural resource potential but which lack infrastructure and have low levels of economic activity.  Rapid Development Zones (RDZ) were also created to facilitate investment.  Investments in these zones are exempt from import duties on certain goods and are granted an investment tax credit equal to 20 percent of the total investment (with a right to carry the credit forward for five years).  Additional modest incentives are available for professional training and the construction and rehabilitation of public infrastructure, including, but not limited to roads, railways, water supply, schools, and hospitals.

The Code of Fiscal Benefits, Law No. 4/2009, passed in 2009, is available at: https://investmentpolicyhubold.unctad.org/InvestmentLaws/laws/108 .  The Regulations for the Code of Fiscal Benefits are set forth in Decree No. 56/2009, which was approved in October 2009.  APIEX can assist companies with the investment incentives stipulated in the Code of Fiscal Benefits

Foreign Trade Zones/Free Ports/Trade Facilitation

Mozambique has seven free trade zones in the country, which provide a variety of fiscal exemptions depending on the sector of investment as well as the project location.  Investors should pay close attention to documents and procedures requested in order to establish a business locally or to request fiscal and customs incentives if investing in an industrial free zone. Information regarding business registration and administrative practices are available at: http://www.portaldogoverno.gov.mz/por/Empresas/Registos .

Performance and Data Localization Requirements

The government generally does not require investors to purchase from local sources, nor does it require technology or proprietary business information to be transferred to a local company; however, a proposed “Local Content” law could create additional requirements in this realm.

Regulations for new mining and petroleum laws may require investors to give preference to local sources available in Mozambique if the goods or services are of an internationally comparable quality and competitively priced.

Companies may hire foreign workers only when there are not sufficient Mozambican workers available that meet specific job qualifications.  The Ministry of Labor enforces quotas for foreign workers as a percentage of the workforce within individual private companies.  All investments must specify the number and category of Mozambican and foreign workers.

There are currently no data localization policies in effect in Mozambique.  The government agency responsible for enforcing IT policies and rules is:

UTICT – Unidade Tecnica de Implementacao da Politica de Informatica
Technical Implementation Unit for IT Policy
Tel: (258) 21 309 398; 21 302 241
Mobile (258) 305 3450
Email: cpinfo@infopol.gov.mz

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

Table 3: Sources and Destination of FDI

Table 4: Sources of Portfolio Investment

Data not available.

Policies Towards Foreign Direct Investment

Over the past decade, the GOR has undertaken a series of policy reforms intended to improve the investment climate, wean Rwanda’s economy off foreign assistance, and increase FDI levels.  Rwanda enjoys strong economic growth, averaging over 7 percent annually over the last decade, high rankings in the World Bank’s Doing Business report (29 out of 190 economies in 2019 (and second best in Africa) compared to 41 in 2018), and a reputation for low corruption.  The Rwandan economy grew more than 8 percent in 2018 as higher global prices for traditional exports, improved agricultural output, growth in transport and tourism, and a rebound in construction activities helped the country to recover from drought and a cyclical downturn in 2016.  The Rwandan economy will continue to be susceptible to the whims of climatic conditions and fluctuation in global commodity prices for coffee, tea, and minerals.  

Potential and current investors cite a number of hurdles and constraints to doing business in Rwanda, including its landlocked geography and resulting high freight transport costs; a small domestic market; limited access to affordable financing; payment delays with government contracts; and frequently inconsistent application of tax, investment, and immigration rules.  In order to support export growth, the GOR subsidizes transportation costs for agricultural products. Given Rwanda’s landlocked geopolitical situation, the country must rely on strong levels of economic diplomacy with countries that offer access to ports. Any serious breakdown in political relationships with Kenya, Tanzania, or Uganda, could impinge investors’ ability to obtain the necessary inputs required for sustained levels of commerce in Rwanda. 

RDB was established in 2006 to fast track investment projects by integrating all government agencies responsible for the entire investor experience under one roof.  This includes key agencies responsible for business registration, investment promotion, environmental compliance clearances, export promotion and other necessary approvals.  New investors can register online at the RDB’s website and receive a certificate in as fast as six hours, and the agency’s “one-stop shop” helps investors secure required approvals, certificates, and work permits.  RDB took steps to enhance investor after-care in 2017, launching a weekly Investor Open House and quarterly investor dialogues, events where RDB senior management officials meet and engage with business leaders. RDB states its investment priorities are innovation and technology, particularly ICT and green innovation; tourism and real estate; agriculture and food security; energy and infrastructure; and mining.  

In 2018, the GOR implemented improvements designed to stimulate investments.  Examples of these reforms include reducing the time required to obtain construction permits and to clear exports through customs by exporters and enabling a more timely provision of electricity.  The GOR also introduced several online certification processes, including for certificate of origin and phytosanitary approvals. RRA started issuing electronic certificates of origin free of charge.  The National Agricultural Export Board issues certificates of origin for tea and coffee free of charge. Rwanda Energy Group (REG) reports that reforms, including a new online application process, have reduced the time for new connections to the electricity grid from an average of 34 days to 20.  REG claims that newly introduced automation systems will enable it to better monitor frequency and duration of outages, improving grid stability and uptime. According to RDB, certain construction projects will no longer require geotechnical studies. RDB also says that construction permit applications will no longer require a commencement date.  

Investors broadly express satisfaction with RDB’s investment facilitation efforts.  However, some foreign investors complain that implementation can be less smooth due to delays in government payments for services or goods delivered.  Other investors complain that they perceived there were GOR efforts to change contracts or memoranda of understanding after such items were negotiated.  Others have faced surprising tax assessments with little notice. Some investors have faced difficulty in obtaining or renewing work visas, perhaps a result of the GOR’s demonstrated preference for hiring local or East African Community (EAC) residents over other expatriates.  Rwanda’s Directorate General of Immigration and Emigration does not always honor the employment and immigration commitments of investment certificates and deals, according to some investors.  

A number of investors have said a top concern affecting their operations in Rwanda is that tax incentives included in deals signed by the RDB are not fully honored by the RRA.  Investors further cite the inconsistent application of tax incentives and import duties as a significant challenge to doing business in Rwanda. For example, a few investors have said that local customs officials have attempted to charge them duties based on their perception of the value of an import, regardless of the actual purchase price.  Under Rwandan law, foreign firms should receive equal treatment with regard to taxes, as well as access to licenses, approvals, and procurement. Foreign firms should receive VAT tax rebates within 15 days of receipt by the RRA, but firms complain that the process for reimbursement can take months, and occasionally years. RRA introduced new software in 2018 that should allow these refunds to be processed and delivered in a more timely manner.  VAT refunds may also be held up pending the results of RRA audits. RRA aggressively enforces tax requirements and imposes punitive fines for errors – deliberate or not – in tax payments, according to some investors.

Based on Article 15 of Law nº 76/2013 of 11/09/2013, the Office of the Ombudsman has the authority to request that the Supreme Court reconsider and review judgments rendered at the last instance by ordinary, commercial, and military courts, if there is any persistence of injustice.  More information on the review process can be found at https://ombudsman.gov.rw/en/?Court-Judgement-Review-Unit-1375  .  

Limits on Foreign Control and Right to Private Ownership and Establishment

Rwanda has neither statutory limits on foreign ownership or control nor any official economic or industrial strategy that discriminates against foreign investors.  Local and foreign investors have the right to own and establish business enterprises in all forms of remunerative activity.  The Rwandan constitution stipulates that every person has the right to private property, whether personal or in association with others.  The government cannot violate the right to private ownership except in the public interest, and only then after following procedures that are determined by law and subject to fair compensation. 

The law also allows private entities to acquire and dispose of interests in business enterprises.  Foreign nationals may hold shares in locally incorporated companies. The GOR has continued to privatize state holdings, although the government, ruling party, and military continue to play a dominant role in Rwanda’s private sector.  Foreign investors can acquire real estate but with a general limit on land ownership.  While local investors can acquire land through leasehold agreements that extend to a maximum of 99 years, foreign investors are usually restricted to leases up to 49 years with the possibility of renewal.  The government published a new Investment Code in 2015 aimed at providing tax breaks and other incentives to boost FDI.  The Investment Code includes equal treatment for foreigners and nationals with regard to certain operations, free transfer of funds, and compensation against expropriation. 

Other Investment Policy Reviews

In February 2019, The World Trade Organization (WTO) published a Trade Policy Review for the EAC covering Burundi, Kenya, Rwanda, Tanzania and Uganda.  The report is available at: https://docs.wto.org/dol2fe/Pages/FE_Search/FE_S_S006.aspx?Query=(@Symbol= percent20wt/tpr/s/*) percent20and percent20(( percent20@Title= percent20rwanda percent20) percent20or percent20(@CountryConcerned= percent20rwanda))&Language=ENGLISH&Context=FomerScriptedSearch&languageUIChanged=true#   

The Rwanda annex to the report is available at:  https://docs.wto.org/dol2fe/Pages/FE_Search/ExportFile.aspx?Id=251521&filename=q/WT/TPR/S384-04.pdf  

Business Facilitation

The RDB offers one of the fastest business registration processes in Africa.  New investors can register online at the RDB’s website (http://org.rdb.rw/busregonline  ) or register in person at the RDB in Kigali.  Once a certificate of registration is generated, company tax identification and employer social security contribution numbers are also generated automatically.  The RDB “One Stop Center” assists firms in acquiring visas and work permits, connections to electricity and water, and support in conducting required environmental impact assessments.  

In 2018, RRA distributed a new electronic billing software and electronic billing machines that should improve efficiency and introduce additional flexibilities for customer-facing businesses.  This should also support all customers by allowing vendors to issue official VAT invoices from any computer with the new software. The system submits VAT refund claims directly through the RRA E-Tax Portal, which should reduce the time required to process VAT refunds. To reduce the number of cases subjected to audit, RRA is implementing an automated audit case selection process using a risk-based approach to select taxpayers subjected to audit based on compliance history.  The official announcement of these changes is available at: https://www.rra.gov.rw/index.php?id=286&tx_news_pi1 percent5Bnews percent5D=166&tx_news_pi1 percent5Bcontroller percent5D=News&tx_news_pi1 percent5Baction percent5D=detail&cHash=dfd263b497338982e0a9ebff74d52fdb  

The RDB is prioritizing additional reforms to improve the investment climate.  By 2020, it hopes to amend the land policy to merge issuance of free hold titles and occupancy permits; introduce online notarization of property transfers; implement small claims procedure to allow self-representation in court and reduce attorney costs; launch electronic auctioning to reduce time to enforce judgments, reducing court fees and allowing payments electronically; and establish a commercial division at the Court of Appeal to fast-track commercial dispute resolution. 

Rwanda promotes women and gender equality and has pioneered a number of projects to promote women entrepreneurs, including the creation of the Chamber of Women Entrepreneurs within the Rwanda Private Sector Federation (PSF).  Both men and women have equal access to investment facilitation and protections.     

Outward Investment

The government does not have a formal program to provide incentives for domestic firms seeking to invest abroad, but there are no restrictions in place limiting such investment.

Transparency of the Regulatory System

The GOR generally employs transparent policies and effective laws largely consistent with international norms.  Rwanda is a member of the U.N. Conference on Trade and Development’s international network of transparent investment procedures.  The Rwanda eRegulations system is an online database designed to bring transparency to investment procedures in Rwanda.  Investors can find further information on administrative procedures at:  https://businessprocedures.rdb.rw/.  Rwandan laws and regulations are published in the Government Gazette and/or online at http://primature.gov.rw/index.php?id=97  .  Government institutions generally have clear rules and procedures, but implementation can sometimes be uneven.  Investors have cited examples of receiving conflicting information from different officials in one or more government departments.  Investors have also cited breach of contracts and incentive promises, and the short time given to comply with changes in government policies, as hurdles to comply with regulations. 

For example, the GOR submitted a 2019 draft law to Parliament banning single use plastic containers.  Investors in the beverage and agro-processing sectors expressed concern that the law would have a serious impact on their operations, that alternative packaging was not available in some cases, and that the GOR did not consult effectively with stakeholders before submitting it.  The law would build on a ban on the manufacture and use of polyethylene bags introduced in 2008.

There is no formal mechanism to publish draft laws for public comment, although civil society sometimes has the opportunity to review them.  There is no informal regulatory process managed by nongovernmental organizations. Regulations are usually developed rapidly in an effort to achieve policy goals and sometimes lack a basis in scientific or data-driven assessments.  Scientific studies, or quantitative analysis (if any) conducted on the impact of regulations, are not generally made publicly available for comment. Regulators do not publicize comments they receive. Public finances and debt obligations are generally made available to the public in reasonable time but only after budget enactment.  Finances for SOEs are not publicly available but may be requested by civil society organizations with a legitimate reason.  

There is no government effort to restrict foreign participation in industry standards-setting consortia or organizations.  Legal, regulatory, and accounting systems are generally transparent and consistent with international norms, but are not always enforced.  The Rwanda Utility Regulation Agency (RURA), the Office of the Auditor General (OAG), the Anticorruption Division of the RRA, the Rwanda Standards Board (RSB), the National Tender Board, and the Rwanda Environment Management Authority also enforce regulations.  In recent years, the OAG’s annual reports to parliament have prompted criminal investigations of alleged misconduct and corruption. Consumer protection associations exist but are largely ineffective. The business community has been able to lobby the government and provide feedback on some draft government policies through the PSF, a business association with strong ties to the government.  In some cases, the PSF has welcomed foreign investors which organized other investors to positively affect government policies. However, some investors have criticized the PSF for advocating to businesses about government policies rather than advocating business concerns to the government.  

International Regulatory Considerations

Rwanda is a member of the EAC Standards Technical Management Committee.  Approved EAC measures are generally incorporated into the Rwandan regulatory system within six months and are published in the National Gazette like other domestic laws and regulations.  Rwanda is also a member of the standards technical committees for the International Standardization Organization, the African Organization for Standardization, and the International Electrotechnical Commission.  Rwanda is a member of the International Organization for Legal Metrology and the International Metrology Confederation.  RSB represents Rwanda at the African Electrotechnical Commission. Rwanda notifies draft technical regulations to the WTO Committee on Technical Barriers to Trade. 

Legal System and Judicial Independence

The Rwandan legal system was originally based on the Belgian civil law system.  However, since the renovation of the legal framework in 2002, the introduction of a new constitution in 2003, and the country’s entrance to the Commonwealth in 2009, there is now a mixture of civil law and common law (hybrid system).  Rwanda’s courts address commercial disputes and facilitate enforcement of property and contract rights.  Rwanda’s judicial system suffers from a lack of resources and capacity, including well-functioning courts, with some cases allegedly backlogged up to five years.  Investors occasionally cite what they perceive as the government’s casual approach to contract sanctity and say the GOR sometimes fails to enforce court judgments in a timely fashion.  In August 2018, the GOR created a Court of Appeal in an attempt to expedite the appeal process without going to the Supreme Court and to reduce backlogs. The new Court of Appeal arbitrates cases handled by the High Court, Commercial High Court, and Military High Court.  The Supreme Court continues to decide on cases of injustice filed from the Ombudsman Office and on constitutional interpretation. 

A Tax Court is yet to be established in Rwanda.  The RDB announced the government’s intent to create a commercial division at the Court of Appeal to fast-track resolution on commercial disputes. 

Laws and Regulations on Foreign Direct Investment

National laws governing commercial establishments, investments, privatization and public investments, land, and environmental protection are the primary directives governing investments in Rwanda.  Since 2011, the government reformed tax payment processes and enacted additional laws on insolvency and arbitration. The 2015 Investment Code establishes policies on FDI, including dispute resolution (Article 9).  The RDB keeps investment-related regulations and procedures at: http://businessprocedures.rdb.rw  .

According to a WTO policy review report dated January 2019, Rwanda is not a party to any countertrade and offsetting arrangements, or agreements limiting exports to Rwanda. 

A new property tax law was passed in August 2018.  The new law removes the provision that taxpayers must have freehold land titles to pay property taxes.  Small and medium enterprises (SMEs) will receive a two-year tax trading license exemption upon establishment.  Under the new law, the income threshold reserved for maintenance and upkeep of rented property has increased from 30 percent to 50 percent, and interest rates on loans are subtracted in the calculation of the taxable value.  For residential houses (in excess of the first family home), owners pay 0.25 percent in the first year, 0.5 percent in the second year, 0.75 percent in third year, and graduate to 1 percent from the fourth year onwards.  Commercial buildings are taxed 0.2 percent of the property market value in the first year, 0.3 percent in the second year, 0.4 percent in the third year, and 0.5 percent from the fourth year onwards.  For industry, the rate is maintained at a flat rate of 0.1 percent of their market value to support the “Made in Rwanda” campaign to promote local manufacturing. 

In April 2018, the GOR passed a new law to streamline income tax administration and to clarify the law.  A number of items were added to the list of activities giving rise to taxable income. For example, the sale, lease, and free transfer of immovable assets allocated to the business now constitute taxable income.  All payments made by a resident of Rwanda on services performed abroad, other than those consumed abroad, constitute taxable income. New articles were added to address transfer pricing rules, preconditions to participate in public tenders, and taxation rules for liberal professionals and consultants.  The new law can be accessed here: http://www.primature.gov.rw/media-publication/publication/latest-offical-gazettes.html?no_cache=1&tx_drblob_pi1 percent5BdownloadUid percent5D=464  . 

Competition and Anti-Trust Laws

Since 2010, a Competition and Consumer Protection Unit was created at the Ministry of Trade and Industry (MINICOM) to address competition and consumer protection issues.  Rwanda has legislation in place to regulate competition. The government is setting up the Rwanda Inspectorate and Competition Authority (RICA), a new independent body with the mandate to promote fair competition among producers.  The body will reportedly aim to ensure consumer protection and enforcement of standards. RICA will serve as a regulatory body to enforce technical regulations and laws related to trade, while the RSB will continue to set quality standards for goods.  To read more on competition laws in Rwanda, please visit: http://www.minicom.gov.rw/index.php?id=136 . 

Market forces determine most prices in Rwanda, but in some cases, the GOR intervenes to fix prices for items considered sensitive in Rwanda.  RURA, in consultation with relevant ministries, sets prices for petroleum products, water, electricity, and public transport. MINICOM and the Ministry of Agriculture have fixed farm gate prices, or the market value of a cultivated product minus the selling costs, for agricultural products like coffee, maize, and Irish potatoes  from time to time. On international tenders, a 10 percent price preference is available for local bidders, including those from regional economic integration bodies in which Rwanda is a member.

Some U.S. companies have expressed frustration that while authorities require them to operate as a formal enterprise that meets all Rwandan regulatory requirements, some local competitors are informal businesses that do not operate in full compliance with all regulatory requirements.  Other investors have claimed unfair treatment compared to ruling party-aligned or politically connected business competitors in securing public incentives and contracts.

More information on specific types of agreements, decisions and practices considered to be anti-competitive, or abuse of dominant position, in Rwanda can be found here: https://rura.rw/fileadmin/Documents/docs/ml08.pdf 

Expropriation and Compensation

The 2015 Investment Code forbids the expropriation of investors’ property in the public interest unless the investor is fairly compensated.  A new expropriation law came into force in 2015, which included more explicit protections for property owners.  Though Rwandan law is clear that private property will be expropriated only in the public interest and after appropriate compensation following market rates, property owners have complained about the definition of “public interest,” valuation procedures, payment levels, and timing of payments.  A number of property owners have protested expropriation of their property by the City of Kigali and claimed that the compensation offered was below market value and not in accordance with the expropriation law. 

A 2017 study by Rwanda Civil Society Platform argues that the government conducts expropriations on short notice and does not provide sufficient time or support to help landowners fairly negotiate compensation.  The report includes a survey that found only 27 percent of respondents received information about planned expropriation well in advance of action.  While mechanisms exist to challenge the government’s offer, the report notes that landowners are required to pay all expenses for the second valuation, a prohibitive cost for rural farmers or the urban poor.  Media have reported that wealthier landowners have the ability to challenge valuations and have received higher amounts. 

Political exiles and other embattled opposition figures have been involved in taxation lawsuits and “abandoned properties” that led to the auctioning of properties, allegedly at below market values. 

Dispute Settlement

ICSID Convention and New York Convention

Rwanda is signatory to the International Center for Settlement of Investment Disputes (ICSID) and the African Trade Insurance Agency (ATI).  ICSID seeks to remove impediments to private investment posed by non-commercial risks, while ATI covers risk against restrictions on import and export activities, inconvertibility, expropriation, war, and civil disturbances. 

Rwanda ratified the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards in 2008. 

Investor-State Dispute Settlement

Rwanda is a member of the East African Court of Justice for the settlement of disputes arising from or pertaining to the EAC.  Rwanda has also acceded to the 1958 New York Arbitration Convention and the Multilateral Investment Guarantee Agency convention.  Under the U.S.-Rwanda BIT, U.S. investors have the right to bring investment disputes before neutral, international arbitration panels.  Disputes between U.S. investors and the GOR in recent years have been resolved through international arbitration, court judgments, or out of court settlements.  Judgments by foreign courts and contract clauses that abide by foreign law are accepted and enforced by local courts, though they lack capacity and experience to adjudicate cases governed by non-Rwandan law.  There have been a number of private investment disputes in Rwanda, though the government has yet to stand as complainant, respondent, or third party in a WTO dispute settlement. Rwanda has been a party to two cases at ICSID since Rwanda became a member in 1963; one of these cases is an ongoing case brought by an American investor against Rwanda.  SOEs are also subject to domestic and international disputes. In 2018, SOEs party to a suit both won and lost several judgments by the Supreme Court, while other cases were settled under arbitration. 

International Commercial Arbitration and Foreign Courts

In 2012, the GOR launched the Kigali International Arbitration Center (KIAC).  According to press reports, the KIAC has reviewed 100 cases worth USD 50 million in claims involving petitions of 18 different nationalities since 2012.  Some businesses report being pressured to use the Rwanda-based KIAC for the seat of arbitration in contracts signed with the GOR. Because KIAC has a short track record and the location of its domicile, these companies would prefer arbitration take place in a third country, and some have reported difficulty in securing international financing due a KIAC provision in their contracts. 

Bankruptcy Regulations

Rwanda ranks 58 out of 190 economies for resolving insolvency in the World Bank’s 2019 Doing Business Report.  It takes an average of two and a half years to conclude bankruptcy proceedings in Rwanda. The recovery rate for creditors on insolvent firms was reported at 19 cents on the dollar, with judgments typically made in local currency. 

The 2009 Insolvency Law clarified standards for beginning insolvency proceedings, preventing the separation of the debtor’s assets during reorganization proceedings, setting clear time limits for the submission of a reorganization plan, implementing an automatic stay of creditors’ enforcement actions, introducing provisions on voidable transactions and the approval of reorganization plans, and establishing additional safeguards for creditors in reorganization proceedings.

In April 2018, the GOR instituted a new Insolvency and Bankruptcy Law.  One major changes is the introduction of an article on “pooling of assets” allowing creditors to pursue parent companies and other members of the group, in case a subsidiary is in liquidation.  Article 121 states that “On application of the liquidator, creditor or shareholder, the court may order that: 

1) any company that is or has been a related company of the company in liquidation must pay to the liquidator the whole or part of any or all of the claims made in the liquidation; 2) where two or more related companies are in liquidation, the liquidations in respect of each company must proceed together, as if they were one company, to the extent the court so orders and subject to such terms and conditions as the court may impose.”  

The new law can be accessed here:  http://org.rdb.rw/wp-content/uploads/2018/06/Insolvency-Law-OGNoSpecialbisdu29April2018.pdf  

Investment Incentives

The 2015 Investment Code offers a package of benefits and incentives to both domestic and foreign investors under certain conditions, including:

For an international company with its headquarters or regional office in Rwanda, a preferential corporate income tax rate of 0 percent; 

• For any investor, a preferential corporate income tax rate of 15 percent;
• Corporate income tax holiday of up to seven years;
• Exemption of customs tax for products used in Export Processing Zones (EPZ);
• Exemption of capital gains tax;
• VAT refund;
• Accelerated depreciation; and
• Immigration incentives.

Further details on benefits under the Investment Code can be accessed here:  http://businessprocedures.rdb.rw/media/Investiment_promotion_law.pdf .  

Poorly coordinated efforts between the RDB, RRA, MINICOM, and the Directorate of Immigration and Emigration can lead to inconsistent application of incentives, according to investors.  Investors reported that tax incentives included in deals signed by the RDB are not honored by the RRA in all cases or sometimes not in a timely manner. Additionally, investors continue to face challenges receiving payment for services rendered for GOR projects, VAT refund delays, and/or expatriation of profits.  In 2016, the GOR instituted a law governing public-private partnership (PPPs) as a step toward courting investments in key development projects.  The law provides a legal framework concerning establishment, implementation, and management of PPPs. Detailed guidelines for the law can be accessed here:  http://rdb.rw/wp-content/uploads/2018/08/PPP-Guidelines.pdf   

Foreign Trade Zones/Free Ports/Trade Facilitation

Rwanda has established the KSEZ, which was set up through the merger of former Kigali Free Trade Zone and the Kigali Industrial Park projects.  SEZs in Rwanda are regulated by the SEZ Authority of Rwanda (SEZAR), based at the RDB.  Land in KSEZ is acquired through Prime Economic Zone Secretariat, a private developer, under the regulations of SEZAR.  The price per square meter is USD 62, and the minimum size that can be acquired is one hectare.  Bonded warehouse facilities are now available both in and outside of Kigali for use by businesses importing duty-free materials.  The GOR has established a number of benefits for investors operating in the SEZs, including tax and land ownership advantages. A company basing itself in the SEZ can also opt to be a part of the Economic Processing Zone.  A number of criteria must be satisfied in order to qualify, such as extensive records on equipment, materials and goods, suitable offices, security provisions, and a number of property constraints. Holding an EPZ license will exempt a company from VAT, import duties, and corporate tax.  The company is then obliged to export a minimum of 80 percent of production. Even after considering savings due to these government incentives, a few investors reported that land in the SEZs was significantly more expensive than land outside the zones. The GOR has stated that there are no fiscal, immigration, or customs incentives beyond those provided in the 2015 Investment Code, though media has occasionally speculated that certain investors received additional incentives.  The negative list of goods prohibited under the EAC Customs Management Act applies in SEZs. In November 2018, the GOR approved the Bugesera Special Economic Zone (BSEZ), located 45 minutes from Kigali. 

Procedural information and cost involved in operating in SEZs can be accessed here: https://businessprocedures.rdb.rw/procedure/238/189?l=en   

The SEZ policy was revised in 2018.  The new policy introduces performance incentives to include indicators such as exports, full time jobs, local supply contracts, and domestic market recapture.  Under the new policy, foreigners and locals may only lease land (formerly, foreign investors were able to purchase land outright in SEZ). To read more on the new policy, please see:  http://www.minicom.gov.rw/fileadmin/minicom_publications/documents/SEZ_Policy_-_January_2018_v2.pdf  

Rwanda created the Export Growth Facility (EGF) in 2015, with an initial capital of RWF 500 million, administered by the Development Bank of Rwanda (BRD).  German KfW Development Bank injected €8.5 million in support of the fund.  The pilot program targets SMEs with export sales below USD 1 million.  Priority sectors include horticulture, agro-processing, and manufacturing.  The facility has three windows: an investment catalyst fund, a matching grant fund for market entry costs, and an export guarantee facility.  Investment catalyst funds support private sector investments in export-orientated production through a 6.5 percent subsidy on market interest rates (normally between 16-20 percent).  The matching grant fund provides grants (50 percent of the need) for expenditure on specific market entry costs (export strategy elaboration, export promotion, compliance with standards, etc.).  The export guarantee fund provides short-term guarantees to commercial banks financing exporters’ pre- and post-shipment operations. The export guarantee component is not yet operational. The facility supports both locally and foreign-owned companies in Rwanda; at least one American company has already received a loan. 

Rwanda created the Business Development Fund (BDF) in 2011 to provide support to SMEs in credit guarantees, matching grants, asset leasing, and advisory services.  BDF works with banks to provide guarantees between 50-75 percent of required collaterals. The maximum guarantee is RWF 500 million for agriculture projects and RWF 300 million for other sectors, for a maturity period of up to 10 years. 

The GOR also manages the Rwanda Green Fund (FONERWA) to spur investment in green innovation.  The UK Aid Department for International Development, KFW, and other donors have invested in the fund.  FONERWA claims projects it supports have created more than 137,000 green jobs to date.

Performance and Data Localization Requirements

There is no legal obligation for nationals to own shares in foreign investments or requirement that shares of foreign equity be reduced over time.  However, the government strongly encourages local participation in foreign investments. 

There is no requirement for private companies to store their data in Rwanda.  Under the National Information and Telecommunication Infrastructure plan, Rwanda is pushing to become a regional ICT hub and has constructed a National Data Center.  The facility acts as the country’s central data storage facility and houses applications used by government institutions. There is no requirement for foreign IT providers to turn over source code and/or provide access to encryption technology.  IT companies dealing with government data cannot store it outside Rwanda or transfer it without GOR approval. 

Some investors have cited the GOR’s reluctance to support visas for expatriate staff as a significant limitation on doing business in Rwanda.  There is no formal requirement that a certain number of senior officials or board members be citizens of Rwanda. Under the 2015 Investment Code, the government allows registered those who invest a minimum of USD 250,000 to hire up to three expatriate employees, without the need to conduct a labor market test in Rwanda.  Investors who wish to hire more than three expatriate employees must conduct a labor market test, unless the available position is listed on Rwanda’s “Occupations in Demand” list. The Directorate General of Immigration and Emigration does not always honor the employment and immigration commitments of investment certificates and deals, according to a number of investors.  Investors should be aware that applicants from other EAC countries are given hiring preference over other expatriates.

While the government does not impose conditions on the transfer of technology, it does encourage foreign investors, without legal obligation, to transfer technology and expertise to local staff to help develop Rwanda’s human capital.  There is no legal requirement that investors must purchase from local sources or export a certain percentage of their output, though the government offers tax incentives for the latter. Unless stipulated in a contract or memorandum of understanding characterizing the purchase of privatized enterprises, performance requirements are not imposed as a condition for establishing, maintaining, or expanding other investments.  Such requirements are imposed chiefly as a condition to tax and investment incentives. The GOR is not involved in assessing the type and source of raw materials for performance, but the RSB determines quality standards for some product categories. 

Rwanda requires that all U.S. citizens possess a visa to enter Rwanda.  A 30-day tourist visa can be purchased for USD 30 upon arrival at Kigali International Airport or at a land border.  Accepted forms of payment include cash (Rwandan francs or U.S. dollars printed in 2006 or later) and credit cards (Visa or MasterCard).  Rwanda requires proof of yellow fever vaccination for travelers coming from a country where yellow fever is endemic or where there is an outbreak of yellow fever.  U.S. citizens planning to remain in Rwanda for more than 30 days must apply for a permit within 15 days of arrival. Departures after the visa ending date are fined on a daily basis.  The government generally processes visa applications for U.S. citizen investors in a timely manner. However, some investors have complained that the application process for work permits and extended stay visas (over 60 days) has become onerous.  Immigration authorities frequently request extra documentation detailing applicants’ qualifications and, at times, have taken several months to adjudicate work permit cases. Applicants for work permits may facilitate the process by ensuring that they travel with a) original police background checks, preferably notarized, b) educational documents on original letterhead, and c) a certified copy of diplomas if the original is not carried.

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

Table 3: Sources and Destination of FDI

Inward Direct Investment according to IMF’s Coordinated Direct Investment Survey (http://data.imf.org/CDIS  ).  Data on Rwandan outward FDI is not available.

Table 4: Sources of Portfolio Investment

Data not available; data on Rwanda equity security holdings by nationality is not available.  According to a 2017 BNR report, portfolio investment remains the lowest component of foreign investment in Rwanda mainly due to the low level of financial market development.  Portfolio investment stock increased to USD 100.5 million in 2016, a 3 percent increase from 2015 levels. In 2016, Rwanda recorded foreign portfolio inflows of USD 3 million compared to USD 2.5 million in 2015.  There is no more recent data available for portfolio investment.

Policies Towards Foreign Direct Investment

Ugandan authorities vocally welcome FDI, and Uganda’s legal regime generally facilitates FDI.  A new Investment Code Act (new ICA) came into force in February 2019. The new ICA defines investment more broadly, to include both FDI and portfolio investment.  It also includes international development agencies and companies incorporated in Uganda but with foreign ownership or control in the “foreign investor” category. The new ICA abolishes restrictions on technology transfer and on repatriation of funds by foreign investors.  It establishes new incentives for investment, and grandfathers in old incentives.

Uganda’s laws do not discriminate against foreign investors per se.  Some provisions of the new ICA may discourage FDI, however. Investors must obtain a license from the Uganda Investment Authority (UIA) before investing.  The new ICA establishes a minimum threshold value of USD 250,000 for FDI and a yet-to-be-specified minimum threshold value for portfolio investment. The Ugandan authorities can alter these minimums at any time, thereby creating potential uncertainty for investors.  Additionally, investment licenses may carry specific performance conditions, such as requiring investors to permit the UIA to monitor operations, or to employ or train Ugandan citizens or use Ugandan goods and services to the greatest extent possible. Further, the Ugandan government may revoke investment licenses of entities that “tarnish the good repute of Uganda as an attractive base for investment.”  The government has yet to revoke any investor license on this ground.

Sending a possibly chilling signal to would-be foreign investors, in early 2019, the government accused South African telecoms giant MTN of conspiring with foreigners to commit treason, deported several of its top foreign executives, and reportedly pressured it to list on the Ugandan stock exchange and sell at least 20 percent of its equity to Ugandans.  In a seemingly arbitrary manner, the government also raised the fee for renewal of MTN’s license from USD 100 million to USD 118 million.

The UIA facilitates investment by granting licenses to foreign investors, as well as promoting, facilitating, and supervising investments in Uganda.  It provides a “one stop” shop online where investors can apply for a license, pay fees, register businesses, apply for land titles, and apply for tax identification numbers.  In practice, investors may also need to liaise with other authorities to complete legal requirements. The UIA also triages complaints from foreign investors. The UIA’s website (www.ugandainvest.go.ug  ) and the Business in Development Network Guide to Uganda (www.bidnetwork.org  ) provide information on the laws and reporting requirements for foreign investors.

In practice, investors often bypass the UIA after facing delays, poorly enforced regulations, and corruption.  For larger investments, companies have reported that political support from a high-ranking Ugandan official is a prerequisite.

President Museveni hosts an annual investors’ round table to consult a select group of both foreign and local investors on increasing investment in Uganda, occasionally including U.S. investors.  Every Ugandan embassy has a trade and investment desk charged with advertising investment opportunities in the country. In January 2019, the government conducted a workshop to train its diplomats on investment promotion.

Limits on Foreign Control and Right to Private Ownership and Establishment

With the exception of land, foreigners have the right to own property, establish businesses, and make investments.  The new ICA eliminates all obligations and restrictions regarding technology transfer, intellectual property, and repatriation of funds.  Ugandan law permits foreign investors to acquire domestic enterprises and to establish green field investments. The Companies Act of 2010 permits the registration of companies incorporated outside of Uganda.

As detailed above, all investors must secure a license from the UIA.  The Ugandan authorities evaluate investment proposals based on a number of criteria, including potential for generation of new earnings; savings of foreign exchange; the utilization of local materials, supplies and services; the creation of employment opportunities in Uganda; the introduction of advanced technology or upgrading of indigenous technology; and the contribution to locally or regionally balanced socioeconomic development.

Foreigners wishing to invest in the oil and gas sector must apply for registration in through the Petroleum Authority of Uganda (PAU) National Supplier Database.  More information is available at the Embassy’s website on this process (select – Registering a U.S. Firm on the National Supplier Database): https://ug.usembassy.gov/business/commercial-opportunities/

Uganda’s petroleum laws already impel foreign oil companies to preference local goods and labor where available, with the Minister of Energy authorized to determine the extent of required local content.

Other Investment Policy Reviews

• The United Nations Commission on Trade and Development (UNCTAD) issued its World Investment Report, 2018, available at: https://unctad.org/en/pages/PublicationWebflyer.aspx?publicationid=2130  
• The International Monetary Fund issued an Article IV Consultation and Review in 2019, and its concluding statement is available at: www.imf.org/en/News/Articles/2019/02/14/mcs021419-uganda-staff-concluding-statement-of-the-2019-article-iv-mission  

Business Facilitation

The UIA one-stop shop website assists in registering businesses and investments.  In practice, investors and business may need to liaise with multiple authorities to set up shop, and the UIA lacks the capacity to play a robust and proactive business facilitation role.  According to the 2018 World Bank Doing Business report, business registration takes an average of 24 days.

Prospective investors can also register online and apply for an investment license at https://www.ebiz.go.ug/  .  The UIA also assists with the establishment of local subsidiaries of foreign firms by assisting in registration with the Uganda Registration Services Bureau (URSB) (http://ursb.go.ug/  ).  New businesses are required to obtain a Tax Identification Number from the Uganda Revenue Authority (URA), which they can do online (https://www.ura.go.ug/myTin.do  ) or through the UIA.  Businesses must also secure a trade license from the municipality or local government in the area in which they intend to operate.  Investors in specialized sectors such as finance, telecoms, and petroleum often need an extra permit from the relevant ministry in coordination with the UIA.

Under the Uganda Free Zones Act of 2014, the government continues to establish free trade zones for foreign investors with an export orientation.  Such investors receive a range of benefits including tax rebates on imported inputs and exported products. An investor seeking a free zone license may lodge an application with the Uganda Free Zones Authority (https://freezones.go.ug/  ).

Outward Investment

The GOU does not promote or incentivize outward investment, nor restrict domestic investors from investing abroad.

Transparency of the Regulatory System

On paper, Uganda’s legal and regulatory systems are generally transparent and non-discriminatory, and in accordance with international norms.  In practice, bureaucratic hurdles and corruption significantly affect all investors, but with disproportionate effect on foreigners learning to navigate a parallel informal system.  While Ugandan law requires open and transparent competition on government project tenders, U.S. investors have alleged that endemic corruption means that competitors not subject to the Foreign Corrupt Practices Act can pay bribes to win awards.

Ugandan law allows the banking, insurance, and media sectors to establish self-regulatory processes through private associations.  The government continues to regulate these sectors, however, and the self-regulatory practices generally do not discriminate against foreign investors.

Potential investors must be aware of local, national, and supra-national regulatory requirements in Uganda.  For example, international EAC rules on free movement of goods and services would affect an investor planning to export to the regional market.  Similarly, regulations issued by local governments regarding operational hours or the location of factories would affect an investor’s decision at a local level only.  Foreign investors should liaise with relevant ministries to understand regulations in the proposed sector for investment.

Uganda’s accounting procedures are broadly transparent and consistent with international norms, though full implementation remains a challenge.  Publicly listed companies must comply with accounting procedures consistent with the International Auditing and Assurance Standards Board.

Governmental agencies making regulations typically engage in only limited public consultation.  Draft bills similarly are subject to limited public consultation and review. Local media typically cover public comment only on more controversial bills.  Although the government publishes laws and regulations in full in the Uganda Gazette, the gazette is not available online and can only be accessed through purchase of hard copies at the Uganda Printing and Publishing Corporation offices.   The Uganda Legal Information Institute also publishes all enacted laws on its website (https://ulii.org/  ).

Uganda’s court system and Inspector General of Government ensure governmental adherence to the administrative process, although anecdotal reports suggest that corruption significantly undermines the judiciary’s oversight role.

Public finances are generally transparent and budget documents are available online.  However, the government’s significant use of supplementary and classified budget accounts undermines parliamentary and public oversight of public finances.  Some analysts believe that Uganda’s growing public debt burden is higher than official government reports indicate.

International Regulatory Considerations

Per treaty, Uganda’s regulatory systems must conform to the below supranational regulatory systems.  In practice, domestication of supranational legislation remains imperfect:

• African, Caribbean, and Pacific Group of States (ACP)
• African Union (AU)
• Common Market for Eastern and Southern Africa (COMESA)
• Commonwealth of Nations
• East African Community (EAC)

Uganda is a member of the WTO and notifies the WTO Committee on Technical Barriers to Trade (TBT) of all draft technical regulations through the Ugandan Ministry of Trade’s National TBT Coordination Committee.

Legal System and Judicial Independence

Uganda’s legal system is based on English Common Law.  The courts are responsible for enforcing contracts. Litigants must first submit commercial disputes for mediation either within the court system or to the government-run Center of Arbitration for Dispute Resolution (CADER).  Uganda does not have a singular commercial law; multiple statutes touch on commercial and contractual law. A specialized commercial court adjudicates commercial disputes. Approximately 80 percent of commercial disputes are resolved through mediation.  Litigants may appeal commercial court decisions and regulatory and enforcement actions through the regular national court system.

While in theory independent, in practice there are credible reports that the executive may attempt to influence the courts in high-profile cases.  More importantly for most investors, endemic corruption and significant backlogs hamper the judiciary’s impartiality and efficacy.

Laws and Regulations on Foreign Direct Investment

The Constitution and new ICA regulate FDI.  The UIA provides an online “one stop shop” for investors (www.ugandainvest.go.ug  ).

Competition and Anti-Trust Laws

Uganda does not have any specialized laws or institutions dedicated to competition-related concerns, although the regular courts occasionally handle disputes with competition elements.

Expropriation and Compensation

The constitution guarantees the right to property for all persons, domestic and foreign.  It also prohibits the expropriation of property, except when in the “national interest” as eminent domain, and preceded by compensation to the owner at fair market value.  In March 2019, the government announced plans to table a new land amendment bill to facilitate large infrastructure projects while respecting the constitutionally protected rights of landowners.  Details and the timeline for passage of the controversial bill remain unclear. Some observers considered the government’s pressure in early 2019 on telecoms giant MTN to sell at least 20 per cent of its equity to Ugandans to be a form of expropriation.

Dispute Settlement

ICSID Convention and New York Convention

Uganda is a party to both the ICSID Convention and the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards.  The domestic Arbitration and Conciliation Act incorporates the 1958 New York Convention.

Investor-State Dispute Settlement

Pursuant to the Arbitration and Conciliation Act, the courts and government in theory accept binding arbitration with foreign investors and between private parties.  In practice, the overall challenges of the judiciary are likely to impede full enforcement. There is no recent history of prominent extrajudicial action against foreign investors.  Uganda has not been involved in any investment disputes with a U.S person in the last ten years; however, U.S. firms do complain about serious corruption in the award of government tenders.

International Commercial Arbitration and Foreign Courts

Ugandan law provides for arbitration and mediation of civil disputes.  The legal framework on arbitration includes the Arbitration and Conciliation Act and Commercial Court Division Mediation Rules.  Litigants must first submit all civil disputes to mediation before a court-appointed mediator. CADER is a statutory institution that facilitates the mediation and operates based on the UNCITRAL Arbitration rules.

Most investment disputes in Uganda are resolved through unrecorded private arbitration.  The Foreign Judgments Reciprocal Enforcement Act enables the recognition and enforcement of judgments and awards made by foreign courts.

There is no evidence that Ugandan courts favor state owned enterprises when arbitrating or adjudicating disputes.

Bankruptcy Regulations

The Bankruptcy Act of 1931, the Insolvency Act of 2011, as well as the Insolvency Regulations of 2013 generally align Uganda’s legal framework on insolvency with international standards.   Uganda ranked 112 out of 190 countries for resolving insolvency in the 2019 World Bank Doing Business Report. Uganda averages 39.3 cents on the dollar for recoveries, well above the sub-Saharan average of 20 cents per dollar.  Bankruptcy is not criminalized.

Investment Incentives

The government is still formulating new investment incentives after the enactment of the new ICA.  The Public Private Partnership Act of 2015 creates a legal framework for the government to partner with private investors, both local and foreign, in financing investment in key sectors.  The government has undertaken joint ventures with foreign investors in key sectors such as oil and gas and infrastructure.

Foreign Trade Zones/Free Ports/Trade Facilitation

The Uganda Free Zones Authority (UFZA) (https://freezones.go.ug/  ) regulates free trade zones, which offer a range of tax advantages.  The government’s process in awarding free zone status is not transparent, however.  There have been reports that corrupt individuals in government are allocating free trade zones in return for bribes.  UFZA has issued 20 Free Zone Licenses to 17 developers and three operators. In the first half of 2018-2019, the government estimates the value of exports through Free Zones at USD 93.6 million.

Performance and Data Localization Requirements

The new ICA does not impose any direct requirements regarding local employment and does not specify mandatory numbers for local employment in management positions.  The broadness of its provisions, however, arguably leaves the door open for enforcement of local employment requirements. The Petroleum Exploration, Development, and Production Act and the Petroleum Refining, Conversion, Transmission, and Midstream Storage Act may require investors in the oil sector to contribute to the creation of a local skilled Ugandan workforce.  Bureaucratic hurdles and inconsistent enforcement can make obtaining visas and work permits for foreign workers an onerous and expensive process. Foreign investors must have a license to invest in Uganda.

The government regularly moots local content laws.  Uganda’s petroleum laws already impel foreign oil companies to preference local goods and labor where available, with the Minister of Energy authorized to determine the extent of required local content.  The new ICA provides for broad performance requirements, but is vague on enforcement action.

While there are no general requirements for foreign information technology (IT) providers to give the government any source code or information related to encryption, the National Information Technology Authority Act allows the Minister for Information, Communication and Technology to order an IT provider to submit any information to the National Information Technology Authority (NITA).  Similarly, the Computer Misuse Act allows the government to “compel a service provider…to co-operate and assist the competent authorities in the collection or recording of traffic data in real time, associated with specified communication transmitted by means of a computer system.” These regulatory powers apply to all IT providers, both foreign and local. There are no measures to prevent or unduly impede companies from freely transmitting customer or other business-related data outside of Uganda.  In 2017, however, the Bank of Uganda interpreted Uganda’s cyber security legislation as providing it with the mandate to require financial institutions to relocate their data centers to Uganda to provide the government with access to customers’ digital financial information. Citing customer privacy concerns, financial firms remain in negotiations with the Bank of Uganda over this policy.

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

* Source for Host Country Data: Uganda Bureau of Statistics Statistical Abstract 2018

Table 3: Sources and Destination of FDI

Source: IMF’s Coordinated Portfolio Investment Survey (CPIS) site (cpis.imf.org)

Table 4: Sources of Portfolio Investment

Data not available.

Policies Toward Foreign Direct Investment

In general, Zambian law does not restrict foreign investors in any sector of the economy, although there are a few regulations and practices limiting foreign control laid out below.  The country has affirmed its commitment to fostering private sector development and attracting FDI. FDI, which is monitored by the government, continues to play an increasing role in Zambia’s economy, contributing to increased capital inflows and overall investment.  FDI is facilitated through the Zambia Development Agency (ZDA), which is responsible for fostering economic growth and development in Zambia through promoting trade and investment and an efficient, effective, and coordinated private sector-led economic development strategy.

Zambia has undertaken institutional reforms aimed at improving its attractiveness to investors; these reforms include the Private Sector Development Reform Program (PSDRP), which addresses issues related to cost of doing business through legislation and institutional reforms, and the Millennium Challenge Account (MCA), which addresses some issues relating to transparency and good governance.  However, frequent government policy changes create uncertainty for foreign investors. Recent examples include: a planned, rapid transition from a value-added tax regime to a sales tax currently projected to take effect on July 1, 2019; taxes and royalty increases in the mining sector that took effect on January 1, 2019 and mark the 10th significant change to mining taxes and regulations in 16 years; and constant and unpredictable limits on various crop exports.

Limits on Foreign Control and Right to Private Ownership and Establishment

The ZDA does not discriminate against foreign investors, and all sectors are open to both local and foreign investors.  Foreign and domestic private entities have a right to establish and own business enterprises and engage in all forms of remunerative activities, and no business ventures are reserved solely for the government.  Although private entities may freely establish and dispose of interests in business enterprises, investment board approval is required to transfer an investment license for a given enterprise to a new owner.

Currently, all land in Zambia is considered state land and ownership is vested in the president; there is no private land in the country.  Land titles held by foreigners are for 99-year state leases; ownership is not conferred. According to the government, the current land administration system leaves little room for the empowerment of citizens, especially the poor and vulnerable rural communities.  The government began reviewing the current land policy in earnest in March 2017. The resulting draft land policy would assert more central government control over traditional lands and seeks to reduce the lease tenure on foreign-owned properties from 99 years to renewable terms of 25 years.  Both traditional chiefs and foreign investors have objected to terms in the draft bill, which has not been presented to Parliament and is currently with the Ministry of Lands for further stakeholder consultation.

Foreign investors in the telecom sector are required to disclose certain proprietary information to the ZDA as part of the regulatory approval process.  Further information regarding information and communication regulation can be found at the website of the Zambia Information and Communication Technology Authority at  http://www.zicta.zm  .

The ZDA board screens all investment proposals and usually makes its decision within 30 days. The reviews appear routine and non-discriminatory and applicants have the right to appeal the investment board decisions.  An investment application is screened to determine: the extent to which the proposed investment will help create employment; the development of human resources; the degree to which the project is export-oriented; the likely impact on the environment; the possible technology transfer; and any other considerations the Board considers appropriate.

The following are the requirements for registering a foreign company in Zambia:

1. At least one and not more than nine local directors must be appointed as directors of a majority foreign-owned company.  At least one local director of the company must be resident in Zambia, and if the company has more than two local directors, more than half of them shall be residents of Zambia.
2. There must be at least one documentary agent (a firm, corporate body registered in Zambia or an individual who is a resident in Zambia).
3. A certified copy of the Certificate of Incorporation from the country of origin must be attached to Form 46.
4. The charter, statutes, regulations, memorandum and articles, or other instrument relating to a foreign company must be submitted.
5. The Registration Fee of K4,166 (~ USD 348.00) must be paid.
6. The issuance and sealing of the Certificate of Registration marks the end of the process for registration.

This information can also be found at the web address of the Patents and Companies Registration Agency (PACRA), http://www.pacra.org.zm  .

Other Investment Policy Reviews

The Organization for Economic Co-operation and Development (OECD) conducted its first review in sub-Saharan Africa on the basis of the OECD Policy Framework for Investment in Zambia in 2012.  The OECD review made the following recommendations regarding Zambia’s investment environment: 1) develop a harmonized national investment policy; 2) take better advantage of the investment promotion and facilitation options available; 3) undertake a cost-benefit analysis with regard to fiscal incentives; 4) improve the consultative mechanisms for policy development; 5) strengthen the framework for Public-Private Partnerships (PPPs); 6) strengthen the oversight and enforcement mechanisms of the regulatory framework; and 7) develop mechanisms to channel industry demands for human resource development.

Following the review, the government began an ongoing process to consider new investment reforms, including development of a harmonized investment policy and a review of its tax incentive system and framework for PPPs.  In 2016, the government, under the leadership of the Ministry of Commerce, Trade, and Industry, adopted an industrial policy to support and accelerate industrialization in Zambia. The policy addressed issues of productive capacity for enterprises to promote the production and consumption of local content.  Zambia has also committed to develop a Green Growth Strategy that makes sustainable and equitable use of Zambia’s natural resources within ecological limits.

Report found here: http://www.oecd.org/daf/inv/investment-policy/zambia-investmentpolicyreview-oecd.htm  

The GRZ conducted a trade policy review through the World Trade Organization (WTO) in June 2016.  The report found that Zambia recorded relatively strong economic growth at an average rate of 6.6 percent per year up to 2015.  The improvement was attributed to growing demand for copper (the main export product) and its spillover effects on some other sectors such as transport, communications, and wholesale and retail trade.  Buoyant construction activity and higher agricultural production also helped.

The trade policy review report of 2016 reached the following conclusions: the government will continue to implement programs and initiatives directed at attaining inclusive growth and job creation and pay particular attention to macroeconomic stability, diversification of the economy, support to small and medium enterprises (SMEs), engagement with cooperating partners, and promotion of investment.  Zambia is committed to continue to use bilateral, regional, and multilateral frameworks to support the growth and development of the economy.

Report found here: https://www.wto.org/english/tratop_e/tpr_e/tp440_e.htm  

Business Facilitation

The Zambian government, often with support from cooperating partners, has undertaken economic reforms to improve its business facilitation process and attract foreign investors, including steps to support transparent policymaking and to encourage competition.  The impact of these progressive policies, however, has been undermined by persistent fiscal deficits and widespread corruption. Business surveys generally indicate that corruption in Zambia is a major obstacle for conducting business in the country. Given these reasons, companies prefer using a specialized public procurement due diligence tool in order to help mitigate the costs and risks of corruption involving public procurement processes in Zambia.

The Zambian Business Regulatory Review Agency (BRRA) has responsibility for Regulatory Services Centers (RSCs) that serve as a one-stop shop for investors.  RSCs provide for an efficient regulatory clearance system by streamlining business registration processes; providing single licensing system; reducing the procedures and time it takes to complete the registration process; and increasing accessibility of business registration institutions by placing them under one roof.

With an RSC, an investor need contact only one entity to obtain all the necessary paperwork in one streamlined and coordinated process.  This means investors, both local and foreign, are provided with centralized organizations that tend to their needs comprehensively, without having to move from one stakeholder agency to another.  The government established RSCs in Lusaka, Livingstone, Kitwe, and Chipata, and has plans to establish additional RSCs so that there is at least one in each of the country’s 10 provinces. Information about the RSCs can be found at the following links:

• http://www.brra.org.zm/index.php/656-2/  
• http://www.brra.org.zm/index.php/single-licensing-system-2/  

The Companies Act No. 10 of 2017 was operationalized through a statutory instrument (June 2018) and implementing regulations (February 2019) aimed at fostering accountability and transparency in the management of companies.  Companies are now required to maintain a register of beneficial owners, and persons holding shares on behalf of other persons or entities must now disclose those beneficial owners.

In order to facilitate improved access to credit, the Patents and Company Registration Office (PACRA) established the collateral registry system, a central database that records all registrations of charges or collaterals created by borrowers to secure credits provided by lenders.  This service allows lenders to search for collateral offered by loan applicants to see if that collateral already has an existing claim registered against it.  Creditors can also register security interests against the proposed collateral to protect their priority status in accordance with the Movable Property (Security Interest) Act No. 3 of 2016.  Generally, the first registered security interest in the collateral has first priority over any subsequent registrations.

Parliament passed the Border Management and Trade Facilitation Act in December 2018.  The Act, among other things, calls for coordinated border management and control to facilitate the efficient movement and clearance of goods; puts into effect provisions for one-stop border posts; and simplifies clearance of goods with neighboring countries.  While one-stop border posts have existed for several years and agencies are co-located at some border crossings, agencies still had conflicting regulations and processes. The new law seeks to harmonize outstanding issues.

Outward Investment

Through the ZDA, the government continues to undertake a number of activities to promote investment through provision of fiscal and non-fiscal incentives, establishment of Multi-Facility Economic Zones (MFEZs), the development of SMEs, as well as the promotion of skills development, productive investment, and increased trade.  However, there is no incentive for outward investment nor is there any known government restriction on domestic investors from investing abroad.

Transparency of the Regulatory System

The GRZ has made strides, in principle, toward introducing transparent policies to foster competition, although complaints arise from time to time.  The unpredictability and intermittence of import and export bans on commodities, especially on maize (corn) and other grains, is a deterrent to private sector participation in commodity markets.  There are no informal regulatory processes managed by non-governmental organizations (NGOs) or private sector associations that discriminate against foreign investors. The government continues to use the Regulatory Impact Assessment (RIA) as part of its policy and legislative making process.  The introduction of the RIA in 2015 was a welcome move with the expectation of improving the decision making process, creating a platform for public-private dialogue and healthy debate on economic development laws and policies, and ultimately improving the quality of regulation. Under the Business Regulatory Act No. 3 of 2014, the law requires that regulators consider alternatives to proposed regulations; the RIA informs those discussions.

Proposed laws and other statutory instruments are, however, often insufficiently vetted with interest groups, or are not released in draft form for public comment.  Proposed bills are published on the National Assembly of Zambia website (http://www.parliament.gov.zm/  ) for public viewing.  Hard copies of the documents are delivered by courier to the stakeholders’ premises/mailboxes.

Opportunities for comment on proposed laws and regulations sometimes exist through trade associations, such as the Zambia Chamber of Commerce and Industry, Zambia Association of Manufacturers, Zambia Chamber of Mines, and American Chamber of Commerce in Zambia.  Stakeholder consultation in developing legislation and regulation has, however, generally been poor under the current administration. The government established the BRRA in 2014 with the mandate to administer the Business Regulatory Act. The Act requires public entities to submit for Cabinet approval a policy or proposed law that regulates business activity, after the policy or proposed law has BRRA approval.  A public entity that intends to introduce any policy or law for regulating business activities should give notice, in writing, to the BRRA at least two months prior to submitting it to Cabinet; hold public consultations for at least 30 days with relevant stakeholders, and perform a Regulatory Impact Assessment (RIA). The BRRA works in close collaboration with the Ministry of Justice, which does not approve any proposed law to regulate business activity without the approval of BRRA.  While this framework is solid on paper, the BRRA and the consultative process is still relatively new and unknown even by other government officials.

Although the underpinnings of an efficient system to handle court disputes exist, Zambian courts are relatively inexperienced in the area of commercial litigation.  This, coupled with the large number of pending commercial cases, affects the promptness and transparency of the regulatory system. Some measures to promote resolution of disputes by mediation have been implemented in an attempt to clear the case backlog.  For example, the courts support Alternative Dispute Resolution (ADR) and there has been an increase in the use of arbitration, mediation, and tribunals by litigants in Zambia. Arbitration is common in commercial matters and the proceedings are governed by the Arbitration Act No. 19 of 2000.  The Act incorporates the United Nations Commission on International Trade Law (UNCITRAL) model and the New York Convention on the recognition and enforcement of foreign arbitral awards. Zambian courts have no jurisdiction if parties have agreed to an arbitration clause in their contract. The establishment of the fee-based judicial commercial division in 2014 to adjudicate high-value claims has helped accelerate resolution of such cases.

In 2015, the government introduced the Output Based Budget (OBB) as a tangible outcome of implementing the planning and budgeting policy that requires a more results-oriented budget in line with national development priorities.  The OBB also provides more relevant information for assessing government’s estimates of revenue, expenditure, and performance. In 2017, the government announced the long-pending migration to the modern Treasury Single Account (TSA) system by all ministries and spending agencies; the system however has not yet achieved full utilization by all budget entities.  The TSA is a unified structure of bank accounts that gives a consolidated position of the government’s cash resources. It aims to improve the government’s ability to efficiently and effectively manage public financial resources by refining current payments processes and eliminating redundant procedures between itself and its clients.

While there are clear public procurement guidelines, concerns persist regarding transparency and a level playing field for U.S. firms.  To enhance the transparency, integrity, and efficiency of Zambia’s procurement system the GRZ launched the electronic government procurement (e-GP) in July 2016.  The e-GP is being piloted by a few ministries, but not available countrywide. In 2018, Cabinet approved legislation to repeal the Public Procurement Act in order to introduce price benchmarking and expert estimates in tendering for capital projects and other high value goods and services; Parliament had not passed the measure as of the end of 1st quarter 2019.

International Regulatory Considerations

Zambia is signatory to a range of international treaties that govern international investment and has signed several BITs, but still lacks harmonized legislation for investment built on a national investment policy.  While the government has made gains in improving the business and operating environment for companies, especially for foreign investors, weaknesses in the regulatory framework remain apparent. On October 2, 2000, Zambia became a beneficiary of the African Growth and Opportunity Act (AGOA) market access treaty with the United States and was again found eligible for continuous benefits under AGOA in March 2019.

Zambia is engaged in regional and international integration programs aimed at expanding its trading links and volume to spur further diversification.  Zambia is a member of a number of regional and international groupings aimed at expanding markets for domestically produced goods and services. These include membership in both COMESA and SADC Free Trade Areas (FTAs).  Zambia is also an active participant in the establishment of the Tripartite Free Trade Area between COMESA, SADC, and the East African Community (EAC). In February 2019, Zambia signed the African Continental Free Trade Agreement (AfCFTA); it still awaits ratification by Zambia’s Parliament.  The trade agreement among 49 African Union member states creates a continent-wide single market, followed by the free movement of people and a single-currency union; much work remains to develop implementation protocols and mechanisms across Africa.

At the multilateral level, Zambia has been a WTO member since January 1, 1995.  Zambia’s investment incentives program is transparent and has been included in the WTO’s trade policy reviews.  The incentive packages are also subject to reviews by the Board of the ZDA and to periodic reviews by the Parliamentary Accounts Committee.  Zambia is a signatory to the WTO Trade Facilitation Agreement (TFA) but still faces major challenges in expediting the movement, release, and clearance of goods, including goods in transit, which is a major requisite of the TFA.  Zambia has benefited from duty-free and quota-free market access to the EU through its Everything but Arms FTA, and to the United States from the Generalized System of Preferences (GSP) and AGOA agreements.

Membership in all the aforementioned organizations has led to improved market access under preferential trade terms for Zambia’s private sector, which can invest in and take advantage of larger foreign markets.  The major challenge has been the low productive capacity of the country’s private sector and the difficulty it has in meeting the competitive demands and standards of regional and international markets so as to take advantage of increased market access.

Legal System and Judicial Independence

Zambia has a dual legal system that consists of statutory and customary law administered through a single formal court system.  Statutory law is derived from the English legal system with some English Acts of Parliament still deemed to be in full force and effect within Zambia.  Traditional and customary laws, which remain in a state of flux, are generally not written or codified, although some of them have been unified under Acts of Parliament.  No clear definition of customary law has been developed by the courts, and there has not been systematic development of this subject.

Zambia has a written commercial law.  The Commercial Court, a division of the High Court, deals with disputes arising out of commercial transactions.  All commercial matters are registered in the commercial registry and judges of the Commercial Court are experienced in commercial law.  Appeals from the Commercial Court, based on the amended January 2016 constitution, now fall under the recently established Court of Appeals, comprised of eight judges.  Constitutional appeals default to the Constitutional Court, another new judicial body formed following 2016 constitutional reforms. The Foreign Judgments (Reciprocal Enforcement) Act, Chapter 76, makes provision for the enforcement in Zambia of judgments given in foreign countries that accord reciprocal treatment.  The registration of a foreign judgment is not automatic. Although Zambia is a state party to international human rights and regional instruments, it has a dualist system of jurisprudence that considers international treaty law as a separate system of law from domestic law. Domestication of international instruments by Acts of Parliament is necessary for these to be applicable in the country.  Systematic efforts to domesticate international instruments are quite slow, but progressing.

The courts in Zambia are generally independent, but contractual and property rights enforcement is weak and final court decisions can take a prohibitively long time.  At times, politicians have exerted pressure on the judiciary in politically controversial cases. Regulations or enforcement actions are appealable and adjudication depends on the matter at hand and the principal law or act governing the regulations.  Some actions can be handled through commercial arbitration, tribunals, or ADR. Also, courts have powers to determine whether a matter can be handled under any of these mechanisms.

Laws and Regulations on Foreign Direct Investment

The major laws affecting foreign investment in Zambia include:

1. The Zambia Development Agency Act of 2006, which offers a wide range of incentives in the form of allowances, exemptions, and concessions to companies.
2. The Companies Act of 1994, which governs the registration of companies in Zambia.
3. The Zambia Revenue Authority’s Customs and Excise Act, Income Tax Act of 1966, and the Value Added Tax of 1995 provide for general incentives to investors in various sectors.
4. The Employment Act, Chapter 268, Zambia’s basic employment law that provides for required minimum employment contractual terms.
5. The Immigration and Deportation Act, Chapter123, regulates the entry into and residency in Zambia of visitors, expatriates, and immigrants.

Competition and Anti-Trust Laws

Market competition operates under a relatively weak regulatory framework, although there is freedom of pricing, currency convertibility, freedom of trade, and free use of profits.  A fairly strong institutional framework is provided for strategic sectors, such as mining and mining supply industries, and large-scale commercial farming. The Competition and Consumer Protection Commission (CCPC) is a statutory body established with a unique dual mandate to protect the competition process in the economy and to protect consumers.  The mandate of the Commission cuts across all economic sectors. The CCPC regulates the economy to avoid restrictive business practices, abuse of dominant position of market power, anti-competitive mergers and acquisitions, and cartels that erode consumer welfare. The Commission is also mandated to enhance consumer welfare. In general terms, therefore, the principal aim of the Commission is to safeguard competition and ensure consumer protection, but it has been described as ineffectual and lacks legislative influence.

In 2016, the CCPC published a series of guidelines and policies that included adopting a formal Leniency Policy, a policy that encourages persons to report to the CCPC information that may help to uncover prohibited agreements.  In certain circumstances, the person receives immunity from prosecution, imposition of fines, or the guarantee of a reduction in fines. The policy also calculates administrative penalties. In addition, the CCPC in 2016 published the draft Settlement Guidelines, which provide a formal framework for parties seeking to engage the CCPC for purposes of reaching a settlement.

The Competition and Fair Trading Act, Chapter 417, prevents firms from distorting the competitive process through conduct or agreements designed to exclude actual or potential competitors, and applies to all entities, regardless of whether private, public, or foreign.  Although the Commission largely opens investigations when a complaint is filed, it can also open investigations on its own initiative. Zambian competition law can also be enforced by civil lawsuits in court brought by private parties and criminal prosecution by the Commission is possible in cartel cases without the involvement of the Director of Public Prosecution under the Competition and Consumer Protection Act (CCPA) No. 24 of 2010.  However, the general perception is the Commission may sometimes be restricted in applying the competition law against government agencies and State Owned Enterprises (SOEs), especially those protected by other laws. There were 29 civil competition cases in 2017.

Expropriation and Compensation

Zambia is a signatory to the Multilateral Investment Guarantee Agency (MIGA) of the World Bank and other international agreements.  This guarantees foreign investment protection in cases of war, strife, disasters, and other disturbances, or in cases of expropriation.  Zambia has signed bilateral reciprocal promotional and protection of investment protocols with a number of countries. Furthermore, the ZDA also offers further security for investments in the country through the signing of the Investment Promotion and Protection Agreements (IPPAs).

Investments may only be legally expropriated by an act of Parliament relating to the specific property expropriated.  Although the ZDA Act states that compensation must be at a fair market value, the method for determining fair market value is ill-defined.  Compensation is convertible at the current exchange rate. The ZDA Act also protects investors from being adversely affected by any subsequent changes to the Investment Act of 1993 for seven years from their initial investment.

Leasehold land, which is granted under 99-year leases, may revert to the government if it is determined to be undeveloped after a certain amount of time, generally five years.  Land title is sometimes questioned in court, and land is re-titled to other owners. In 2012, the GRZ took several actions similar to expropriation, reversing the privatization of one SOE and terminating two government concessions.  In two of three instances, full compensation for GRZ actions has yet to be finalized, though GRZ figures for 2012 foreign direct investment reflect a significant offset for the return of foreign acquisition capital.

In January 2012, the GRZ reversed the June 2010 sale of the SOE Zambia Telecommunications Company (Zamtel) to Libya’s LAP GreenN, which had acquired a 75 percent shareholding in Zamtel for USD 257 million.  The GRZ unilaterally reversed the sale and re-appropriated the telecom company, citing corruption and flaws in the privatization process. LAP GreenN, through the Libyan Investment Authority, challenged the Zambian government’s decision in court and asked for USD 480 million in compensation.  In October 2017, the London High Court ordered the Zambian government to compensate LAP GreenN USD 380 million for re-nationalizing Zamtel. The Zambian government insists it will compensate LAP GreenN for its investment in Zamtel, but will not transfer ownership of the company back to the operator.

In November 2012, the GRZ also terminated its concession agreement with the privately owned Zambia Border Crossing Company to manage the Kasumbalesa border post with the Democratic Republic of the Congo, along with five other border concessions at Jimbe (with Angola), Nakonde (with Tanzania), Chanida (with Mozambique), Kipushi (with Congo DR), and Mwami (with Malawi).  The GRZ cited smuggling, loss of revenue, and threats to national security in terminating the concession, which had been awarded as a PPP on a design, build, and operate basis.

There is no pattern of discrimination against U.S. persons by way of an illegal expropriation by the government or authority in the country.  There are no high-risk sectors prone to expropriation actions.

Dispute Settlement

ICSID Convention and New York Convention

Zambia is party to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958, which entered into force on June 7, 1959, and party to the Convention of the Settlement of Investment Disputes between States and Nationals of Other States of 1965, which entered into force on October 14, 1966.  These are enforced through the Investment Disputes Convention Act Chapter 42.

Zambia is a member state of the International Center for the Settlement of Investment Disputes (ICSID) Convention and a signatory to the United Nations Commission of International Trade Law (UNCITRAL Model Law).  In 2002, Zambia ratified the convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention).

Investor-State Dispute Settlement

Over the past 10 years, previous disputes involved delayed payments from SOEs to U.S. companies for goods and services and the delayed deregistration of a U.S.-owned aircraft that was leased to a Zambian airline company that went bankrupt.  Currently, a U.S. company is in dispute over the refusal of payment by its local joint venture partner that resulted from goods delivered to the government of Zambia. The case, however, has not officially reached the courts of Zambia.

Relatively few investment disputes involving U.S. companies have occurred since Zambia’s economy was liberalized following the introduction of multi-party democracy in 1991.  The Zambian Investment Code stipulates that claimants must first file internal dispute claims with the Zambian High Court. Failing that, the parties may go to international arbitration, which the state recognizes as binding.  However, U.S. companies can encounter difficulties in receiving payments from the government for work performed or products and services rendered. This can be due to inefficient government bureaucracy or, more often, to a lack of funds available to the government to meet its obligations.

In practice, there are also few recorded cases where Zambia has used sovereignty provisions to countermand its international obligations related to investment and settlement of disputes arising out of asset expropriation.  Recently, in November 2016, under the provisions of section 84B of the Banking and Financial Services Act (BSFA), Chapter 387, the Bank of Zambia took possession of Intermarket Banking Corporation Zambia Limited (IBC), stating the bank had become insolvent.  In October 2017, the Minister of Finance announced that the government had successfully restructured the IBC and that its capital requirement had been met. The bank was re-opened under the name Zambia Industrial Commercial Bank Limited and took over the assets and deposits of Intermarket Banking Corporation Zambia Limited.

International Commercial Arbitration and Foreign Courts

The Zambian Arbitration Act Number 19 of 2000 incorporates the UNCITRAL and the New York Convention on the recognition and enforcement of foreign arbitral awards.  The Act applies to both domestic and international arbitration and is based on the UNCITRAL model law. Arbitration agreements must be in writing and parties may appoint an arbitrator of any nationality, gender, or professional qualifications.  Foreign lawyers cannot be used to represent parties in domestic or international arbitrations taking place in Zambia. There are no facilities that provide online arbitration, although the Zambia Institute of Arbitrators promotes and facilitates arbitration and other forms of ADR.  The New York Convention on the recognition and enforcement of foreign arbitral awards has been domesticated into Zambian legislation by virtue of Section 31 of the Arbitration Act. Arbitration awards are enforced in the High Court of Zambia, and judgments enforcing or denying enforcement of an award can be appealed to the Supreme Court.

Foreign arbitral awards are recognized and enforced in Zambia under the Arbitration Act, Section 27, which provides for the recognition and enforcement of foreign arbitral awards.  It takes about 18 weeks to enforce a foreign award. The United States has a BIT with Zambia through AGOA and through COMESA, of which Zambia is a member. There have been no claims under these agreements.  Proceedings against the state are subject to the State Proceedings Act, Chapter 71, and Volume 6, which grants the state immunity against execution.

Bankruptcy Regulations

The Bankruptcy Act, Chapter 82 provides for the administration of bankruptcy of the estates of debtors and makes provision for punishment of offenses committed by debtors.  It also provides for reciprocity in bankruptcy proceedings between Zambia and other countries and for matters incidental to and consequential upon the foregoing. This applies to individuals, local, and foreign investors.  Bankruptcy judgments are made in local currency, but can be paid out in any internationally convertible currency. Under the Bankruptcy Act, a person can be charged as a criminal. A person guilty of an offense declared to be a felony or misdemeanor under the Bankruptcy Act in respect of which no special penalty is imposed by this Act shall be liable on conviction to imprisonment for a term not exceeding two years.

Zambia has made strides in improving its credit information system.  Since 2008, the credit bureau, TransUnion, requires banks and some non-banks to provide loans requirement information and consult it when making loans.  The credit bureau eventually captures data from other institutions such as utilities. The bureau’s coverage is still less than 10 percent of the population; the quality of information is suspect; and there is lack of clarity on data sources and the inclusion of positive information.

Investment Incentives

The ZDA Act provides for a number of incentives available to both local and foreign investors.

Under the Income Tax Act, Chapter 323 or the Customs and Excise Act, Chapter 322, investors who invest not less than USD 500,000 in an MFEZ, an industrial park, a priority sector, or invest in a Rural Enterprise under the ZDA Act, are entitled to the following fiscal incentives:

1. A corporate tax rate of 0 percent for 5 years from commencement of operations.
2. Taxation on only 50 percent of profits in year 6 through year 8 from commencement of operations and only 75 percent for years 9 and 10.
3. 5-year exemption on dividend taxes following the first year of declaration.
4. 5-year customs duties exemption on imported machinery and equipment.
5. Improvement allowance of 100 percent of capital expenditure on improvements or upgrading of infrastructure.

In addition to fiscal incentives, the above category of investors, along with those who invest an amount not less than USD 250,000 in any sector or product not provided for as a priority sector or product under the Act, are entitled to investment guarantees and protection against state nationalization along with free facilitation for application of immigration permits, secondary licenses, land acquisition, and utilities.  For major investments, the Minister of Finance may specify additional incentives for investment in an identified sector or product of not less than USD 10 million or equivalent in convertible currency in new assets that qualify for those incentives.

During the presentation of the 2018 national budget, the Minister of Finance proposed discontinuing the five-year income tax holidays provided under the ZDA Act.  Instead, the Minister proposed accelerated depreciation for capital expenditure in an effort to safeguard government revenues eroded through tax holidays. The proposal was criticized by foreign investors, and has led to some investors putting the brakes on additional investment in the country.  The proposal to discontinue the five-year income tax holiday is not yet enacted.

Foreign Trade Zones/Free Ports/Trade Facilitation

An investor may apply to be appointed and licensed by the Commissioner General to establish and operate a bonded factory under Section 65 of the Customs and Excise Act.  In early 2007, the GRZ announced the creation of MFEZs in which investors enjoy waivers on customs duty on imported equipment, excise duty, and value added tax, among other concessions.  It is currently unclear if the government will maintain these incentives (see Investment Incentives section).

There are three MFEZs currently operating: the Chambishi MFEZ in Copperbelt Province and the Lusaka East MFEZ located near Lusaka’s international airport, both of which are heavily (if not exclusively) dominated by Chinese-owned enterprises; and the Lusaka South MFEZ, which has a mix of multi-national firms.  Foreign-owned firms enjoy the same investment opportunities as domestic firms in MFEZs. The ZDA Act is the primary legislation for investment in Zambia. An investor, foreign or local, is free to identify and suggest any other location in the country deemed economical for MFEZ development, although the government has prioritized designated areas in Lusaka, Ndola, Mpulungu, Chembe, Nakonde, Kasumbalesa, and Mwinilunga.  Investors are encouraged to provide local employment and skills transfer to local entrepreneurs and communities. Investors are also encouraged to utilize local raw materials and intermediate goods and engage in technology transfer to qualify to operate in an MFEZ.

Zambia is active in several key regional organizations that promote regional trade and regulatory harmonization.  COMESA launched its FTA in October 2000 and established a customs union in June 2009. The top five intra-COMESA exports from Zambia include tobacco, raw sugarcane, wire, refined copper, and cement.  The SADC Protocol on Trade came into force in 2008. The Trade Protocol promotes regional integration through trade development and develops natural and human resources for the mutual benefit of their people.  Trade among SADC member states is conducted on reciprocal preferential terms. Rules of Origin define the conditions for products to qualify for preferential trade in the SADC region. Products have to be “wholly produced” or “sufficiently processed” in the SADC region to be considered compliant with the SADC Rules of Origin.  The SADC Rules of Origin are product-specific and not generic, like the Rules of Origin for COMESA.

COMESA, the EAC, and SADC member states agreed in October 2008 to negotiate a Tripartite Free Trade Area (TFTA) covering half of Africa.  The Tripartite Free Trade Area (TFTA) was launched in June 2015 in Egypt; to date, Zambia is one of the 22 out of the 27 member states which have signed the agreement.  The Agreement will enter into force once it has been ratified by 14 Member States. Only Egypt and Uganda have ratified the Agreement thus far. In February 2019, Zambia signed the African Continental Free Trade Agreement (AfCFTA); it must still be ratified by Parliament.  The trade agreement between 49 African Union member states plans to create a single market, followed by the free movement of people and a single-currency union; much work remains to develop implementation protocols and mechanisms continent-wide. The TFTA and AfCFTA declaration have yet to enter into effect.

Zambia performs better than the average sub-Saharan African and lower middle income countries in the areas of information availability, involvement of the trade community, appeal procedures, and automation, according to OECD trade facilitation indicators.   Zambia’s performance for internal border agency co-operation and governance and impartiality is below average for sub-Saharan African and lower middle income countries.

Performance and Data Localization Requirements

Although performance requirements are not imposed, authorities expect commitments made in applications for investment licenses to be fulfilled.  Foreign contractors bidding on infrastructure projects are required by law to give 20 percent of works to Zambian small contractors. Outside of infrastructure projects, no requirements currently exist for data localization, local content, equity, financing, employment, or technology transfers.  However, in January 2018 the government issued a Statutory Instrument (SI) instructing all industries to transport 30 percent of their cargo by rail. The government does not impose offset requirements or impose conditions on permission to invest in a specific geographic area or local content, but investors are encouraged to employ local nationals.  There is no legal definition of local content, and the most comprehensive local content legislation is contained in the Mines and Minerals Development Act of 2008. The Citizens Economic Empowerment Act of 2006 and Statutory Instrument of 2008 also contain local content provisions.

The GRZ favors the use of local workers for unskilled labor as well as for skilled middle or senior management workers.  Under the ZDA Act, any foreign investor who invests a minimum of USD 250,000 or its equivalent and employs a minimum of 200 employees at certain technical or managerial levels is entitled to a self-employment permit or resident permit.  The ZDA assists the qualifying investor to obtain work permits for up to five expatriate employees. In practice, however, some foreign companies, especially smaller-scale investors, have had difficulty securing these permits. Any entry permit holder can apply for a dependent’s pass for each of his dependents.  The government is considering limiting foreigners to obtain work permits only for rare skills not found in Zambia. While not yet implemented, the GRZ has at times denied work permits or work permit renewals. The ZDA is also in the process of developing standards regarding investment performance benchmarks that it seeks to establish within an MFEZ to assist the government in monitoring company performance against the commitments made when investment incentives are granted.

The GRZ encourages investors where possible to use domestic content in goods or technology if available.  In 2017 the government started the formulation of a local content strategy to promote inclusive and sustainable growth through increased use of locally available goods and services in development sectors.  According to the Ministry of Commerce, Trade, and Industry, once the strategy is developed, a law will be passed to compel businesses to use a certain percentage of local inputs and products in the production and provision of goods and services.  In a speech to Parliament in March 2018, the president criticized a perceived influx of foreign workers into Zambia’s mining industry; the government has announced it will conduct a month-long review of foreign labor quotas in the sector. The move follows sustained opposition to working practices by domestic unions and civil society organizations.

While this was not the first time that scrutiny of foreign labor has surfaced as a strategic issue for the government, the latest review is a reminder of the burgeoning pressures that continue to underpin sector management and policymaking.  To date, the current administration has adopted a relatively pragmatic approach to managing the mining sector’s fiscal and regulatory framework, acknowledging the challenging commercial conditions for some mining companies, and the need for stability in the operating environment.

Currently, there is no requirement for foreign information technology providers to turn over source code or provide access to surveillance.  The telecommunications sector is governed by the Information and Communications Technology Act No. 15 of 2009 (ICT Act) and falls under the Ministry of Communications and Transport.

The government strives to be consistent with Trade Related Investment Measures (TRIMs) requirements and generally abides by the WTO’s TRIMS obligation.  Although performance requirements are not imposed, authorities expect commitments made in applications for investment licenses to be fulfilled.

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

Host country statistical data used are almost non-existent. If they exist there is not a central source for retrieving the data and at most times do not match international source.

Table 3: Sources and Destination of FDI

Table 4: Sources of Portfolio Investment

Data not available.

Policies Towards Foreign Direct Investment

The government has a clear desire to attract greater FDI in order to improve the country’s competitiveness.  The government encourages public-private partnerships in order to enhance technological development, while also emphasizing the need to improve the investment climate by restoring the rule of law and sanctity of contracts.  Implementation has been limited.

Zimbabwe’s Indigenization and Economic Empowerment law limits the amount of shares owned by foreigners in the diamonds and platinum sectors to 49 percent with specific indigenous organizations owning the remaining 51 percent.  The government has signaled it intends to remove these restrictions. There are also smaller sectors “reserved” for Zimbabweans.

The Zimbabwe Investment Authority (ZIA) promotes and facilitates both foreign direct investment and local investment.  ZIA facilitates and processes investment applications for approval.  ZIA’s website is http://www.investzim.com/  .  The country encourages companies to register with ZIA and the process currently takes approximately 90 days.  The government has announced plans for a more powerful, streamlined entity (a “one-stop shop”) – the Zimbabwe Investment Development Authority (ZIDA).

While the new government of President Emerson Mnangagwa commits to prioritizing investment retention, there are as of yet no mechanisms and formal structures through which this is done.

Limits on Foreign Control and Right to Private Ownership and Establishment

While there is a right for foreign and domestic private entities to establish and own business enterprises and engage in all forms of remunerative activity, foreign ownership of businesses in the diamonds and platinum sectors is limited to 49 percent (or less in certain reserved sectors), as outlined above.

In 2007, the government passed the Indigenization and Economic Empowerment Act, which required that “indigenous Zimbabweans” (i.e. black Zimbabweans) own at least 51 percent of all enterprises valued over USD 500,000.  A March 2018 amendment to the law limits these restrictions to the diamond and platinum sectors.

Foreign investors are free to invest in the non-resource sectors without any restrictions as the government aims to achieve technology transfer, create employment, and achieve value addition.  The government further reserves certain sectors such as passenger busses, taxis and car hire services, employment agencies, grain milling, bakeries, advertising, dairy processing and estate agencies for Zimbabweans.

The country screens FDI through the Zimbabwe Investment Authority (ZIA) in liaison with relevant line ministries to confirm compliance with the country’s investment regulations.  Once an investor meets the criteria, ZIA issues the company or entity with an investment certificate.

According to the country’s laws, U.S. investors are not especially disadvantaged or singled out by any of the ownership or control mechanisms relative to other foreign investors.  In its investment guidelines, the government states its commitment to non-discrimination between foreign and domestic investors and among foreign investors.

Other Investment Policy Reviews

In the past three years, the government has not conducted an investment policy review through the Organization for Economic Cooperation and Development (OECD), the World Trade Organization (WTO) or the United Nations Conference on Trade and Development (UNCTAD).

Business Facilitation

The government expressed its desire to reduce the time it takes to start up a business.  It has also committed itself to improving the transparency and predictability of its policies and to dealing decisively with corruption.

Zimbabwe does not have a fully online registration process.  One is able to begin the process and conduct a name search online via the ZimConnect web portal.  The Zimbabwe Investment Authority (ZIA) is the country’s investment promotion body set up to facilitate both foreign direct investment and local investment.  ZIA’s website is http://www.investzim.com/  .  According to the World Bank, it takes on average 32 days to start a business and requires nine distinct processes, with costs greater than an individual’s average annual income.

Outward Investment

Zimbabwe does not promote or incentivize outward investment because of the tight foreign exchange constraint.  Any outward investment requires approval by exchange control authorities.

Transparency of the Regulatory System

The government’s official policy is to encourage competition within the private sector, but the bureaucracy within regulatory agencies lacks transparency, and corruption is prevalent.  Investors have also complained of policy inconsistency and unpredictability.

The government has introduced import taxes arbitrarily to support certain inefficient producers who lobby for protection against more competitive imports.  In late 2012, the Ministry of Finance announced a 25 percent surtax on selected imported products including soaps, meat products, beverages, dairy products, and cooking oil starting January 1, 2013 as well as other import taxes on beer, cigarettes, and chickens brought in from outside the Southern African Development Community (SADC) and the Common Market for Eastern and Southern African regions (COMESA).  In 2016, the government, through the Ministry of Industry and Commerce, introduced statutory instrument (SI) 64 which banned importation of a number of products manufactured locally. In 2017, the government replaced SI 64 with SI 122, which removed some products from requiring import licenses on importation. In October 2018, the government repealed SI 122 altogether to allow local companies and individuals with free funds to import commodities and stock up and stave off shortages of basic commodities.

In the last year, the government has stated its commitment to ensuring that laws, regulations and policies pertaining to investment are enacted after proper notice and consultation and are available publicly in a prompt and transparent manner.

According to the Department of State’s 2018 Fiscal Transparency Report, public budget documents do not provide a full picture of government expenditures, and there is a notable lack of transparency regarding state-owned enterprises and the extraction of natural resources.

International Regulatory Considerations

Zimbabwe is a member of the Southern African Development Community (SADC) and the Common Market for Eastern and Southern Africa (COMESA), and it is signatory to the SADC and COMESA trade protocols establishing free trade areas (FTA) with the aim of growing into a customs union.  Although the country is also a member of the World Trade Organization (WTO), it normally notifies only SADC and COMESA of measures that it intends to implement.

Legal System and Judicial Independence

According to Zimbabwe’s law and constitution, Zimbabwe has an independent judicial system whose decisions are binding on the other branches of government.  The country has written commercial law and it has expressed its intention to set up specialized commercial courts in 2019. Administration of justice in commercial cases that lack political overtones is still generally impartial.  Regulations or enforcement actions are appealable and are adjudicated in the national court system.

Laws and Regulations on Foreign Direct Investment

As noted above, in 2007, the government introduced the Indigenization and Economic Empowerment Act requires that “indigenous Zimbabweans” (black Zimbabweans) own at least 51 percent of all enterprises valued over USD 500,000, but now amended to apply only to the diamonds and platinum sectors.  In certain sectors, such as primary agriculture, transport services, and retail and wholesale trade including distribution, foreign investors may not own more than 35 percent equity.

The Zimbabwe Investment Authority (ZIA) promotes and facilitates both foreign direct investment and local investment.  ZIA facilitates and processes investment applications for approval.  ZIA’s website is http://www.investzim.com/  .  The government has announced plans for a more powerful, streamlined entity (a “one-stop shop”) – the Zimbabwe Investment Development Authority (ZIDA).

Competition and Anti-Trust Laws

The government’s official policy is to encourage competition within the private sector with the enactment of the Zimbabwe Competition Act.  The Act provided for the formation of the Tariff and Competition Commission charged with investigating restrictive practices, mergers, and monopolies in the country.  The Competition and Tariff Commission (CTC) is an autonomous statutory body established in 2001 with the dual mandate of implementing and enforcing Zimbabwe’s competition policy and law and executing the country’s trade tariffs policy.

Expropriation and Compensation

Despite provisions in Zimbabwe’s previous constitution that prohibited the acquisition of private property without compensation, in 2000 the government began to allow the uncompensated seizures of privately owned agricultural land, serially amending the constitution to grant the government increasingly broad authorities to do so after the fact.  The authorities subsequently transferred many of the farms seized to government officials and other regime supporters. In April 2000, the government amended the constitution to authorize the compulsory acquisition of privately owned commercial farms with compensation limited to the improvements made on the land. In September 2005, the government amended the constitution again to transfer ownership of all expropriated land to the government.  Since the passage of this amendment, top government officials, supporters of the ruling Zimbabwe African National Union – Patriotic Front (ZANU-PF) party, and members of the security forces have continued to disrupt production on commercial farms, including those owned by foreign investors and those covered by bilateral investment agreements. Similarly, government officials have sought to impose politically-connected individuals as indigenous partners on privately and foreign-owned wildlife conservancies.

In 2006, the government began to issue 99-year leases for land seized from commercial farms. These leases, however, are not readily transferable or acceptable as collateral that would allow for borrowing and investment.  The government retains the right to withdraw the lease at any time for any reason. The government’s program to seize commercial farms without compensating the titleholders, who have no recourse to the courts, has raised serious questions about respect for property rights and the rule of law in Zimbabwe.  As a result, Zimbabwe ranked 95 out of 190 countries considered with respect to the country’s ability to protect minority investors in the World Bank’s 2018 Doing Business report.

Zimbabwe’s new government has announced its intention to compensate farmers who lost their land.  Negotiations between the government and farmers’ groups are ongoing.

Dispute Settlement

ICSID Convention and New York Convention

Zimbabwe acceded to the 1965 Convention on the Settlement of Investment Disputes between States and Nationals of Other States and to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards in 1994.  However, the government does not always accept binding international arbitration of investment disputes between foreign investors and the state.

Investor-State Dispute Settlement

The government is signatory to a number of bilateral investment agreements with a number of countries (see above) in which international arbitration of investment disputes is recognized.  As noted above, Zimbabwe does not have a Bilateral Investment Treaty or Free Trade Agreement with an investment chapter with the United States.

Local courts recognize and enforce foreign arbitral awards issued against the government, but there is a history of extrajudicial action against foreign investors.  For example, senior politicians declined to support enforcement of a 2008 SADC Tribunal decision ordering Zimbabwe to return expropriated commercial farms to the original owners.  Once an investor has exhausted the administrative and judicial remedies available locally, the government of Zimbabwe agrees, in theory, to submit matters for settlement by arbitration according to the rules and procedures promulgated by the United Nations Commission on International Trade Law.  However, this has not occurred in practice.

International Commercial Arbitration and Foreign Courts

As noted above, local courts recognize and enforce foreign arbitral awards issued against the government, but there is a history of extrajudicial action against foreign investors.  For example, senior politicians declined to support enforcement of a 2008 SADC Tribunal decision ordering Zimbabwe to return expropriated commercial farms to the original owners. Once an investor has exhausted the administrative and judicial remedies available locally, the government of Zimbabwe agrees, in theory, to submit matters for settlement by arbitration according to the rules and procedures promulgated by the United Nations Commission on International Trade Law.  However, this has not occurred in practice.

Bankruptcy Regulations

In the event of insolvency or bankruptcy, Zimbabwe applies the Insolvency Act.  All creditors have equal rights against an insolvent estate. In terms of resolving insolvency, Zimbabwe ranks 102 out of 190 economies in the World Bank’s 2017 Doing Business Report.

There are a number of incentives depending on the form of investment and the sectors.  For investment designed to develop industrial parks and investment in tourism development zones and joint ventures in the form of the build, own, operate, and transfer (BOOT) and build, operate, and transfer (BOT), the investors will not pay tax in the first five years after which they will pay tax at the rate of 25 percent compared to the normal tax rate of 35 percent.  For BOOT and BOT joint ventures, investors will not pay tax for the first five years after which they will pay tax at the rate of 15 percent per annum. Investors within the mining sector exporting 50 percent of output will have reduced corporation tax of 20 percent and receive import duty exemption on imported capital goods while losses are carried forward indefinitely for mining operations.  Moreover, the government generally allows for duty exemptions in the importation of raw materials used in the manufacture of goods for export.

Foreign Trade Zones/Free Ports/Trade Facilitation

The government promulgated legislation creating Export Processing Zones (EPZs) in 1996.  Zimbabwe now has approximately 183 EPZ-designated companies. Benefits include a five-year tax holiday, duty-free importation of raw materials and capital equipment for use in the EPZ, and no tax liability from capital gains arising from the sale of property forming part of the investment in EPZs.  Since January 2004, the government has generally required that foreign capital comprise a majority of the investment. The requirement on EPZ-designated companies to export at least 80 percent of output has constrained foreign investment in the zones. The merger between the Zimbabwe Investment Centre and the Zimbabwe Export Processing Zones Authority, which began in 2006, has completed and the Zimbabwe Investment Authority now performs both roles.  Zimbabwe has recently passed amendments to the Zimbabwe Investment Authority Act to include Special Economic Zones. However, to date, activities in special economic zones have not been meaningful in spite of the generous incentives offered to investors in these areas.

Although there are no discriminatory import or export policies affecting foreign firms, the government’s approval criteria heavily favor export-oriented projects.  Import duties and related taxes range as high as 110 percent. Export Processing Zone-designated companies must export at least 80 percent of output.

Performance and Data Localization Requirements

The government mandates local employment except for specialized skills that are in short supply locally.  There are no general performance requirements for businesses located outside Export Processing and Special Economic Zones.  Government policy, however, encourages investment in enterprises that contribute to rural development, job creation, exports, the addition of domestic value to primary products, use of local materials, and the transfer of appropriate technologies.

Government participation is required for new investments in strategic industries such as energy, public water provision, and railways.  The terms of government participation are determined on a case-by-case basis during license approval. The few foreign investors (for example, from China, Russia, and Iran) in reserved strategic industries have either purchased existing companies or have supplied equipment and spares on credit.

The government encourages foreign investors to make maximum use of Zimbabwean management and technical personnel, and any investment proposal that involves the employment of foreigners must present a strong case in order to obtain work and residence permits.  Normally, the maximum contract period for a foreigner is three years but with possible extension to five years for individuals with highly specialized skills.

While currently there is no forced localization in which foreign investors must use domestic content in goods, the government is in the process of developing a local content policy designed to encourage the use of local inputs in production.

The government does not require foreign IT providers to turn over source code and/or provide access to surveillance.  Only banks are required to maintain all their data in the country through the escrow agreement.

The new government investment guidelines do not permit mandatory and/or arbitrary performance requirements that distort or limit the expansion of trade and investment.

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

*Zimbabwe National Statistical Agency

Table 3: Sources and Destination of FDI

Data not available.

Table 4: Sources of Portfolio Investment

Data not available.