Transparency of the Regulatory System

In 2018, the Government of Bahrain issued competition, a personal data protection, bankruptcy, and health insurance laws to enhance the country’s investment ecosystem.  The so-called Law of Commerce (Legislative Decree No. 7, passed in 1987) addresses the concept of unfair competition and prohibits acts that would have a damaging effect on commercial competition.  Companies also are forbidden from undertaking practices detrimental to their competitors or from attracting the customers of their competitors. There is no official competition authority in Bahrain and the country has yet to institute comprehensive anti-monopoly laws or an independent anti-corruption agency.

Bahrain’s industrial sector exhibits dominance by state-controlled companies such as Aluminum Bahrain (ALBA) and Gulf Petrochemical Industries Company (GPIC).  De facto monopolies also exist in some industries led by individuals or family-run businesses.

The GOB uses International Financial Reporting Standards (IFRS) as part of its implementation of Generally Accepted Accounting Principles (GAAP).  IFRS are used by domestic listed and unlisted companies in their consolidated financial statements for external financial reporting.

Bahrain adopted International Accounting Standard 1 (IAS 1) in 1994 in the absence of other local standards.  Non-listed banks and other business enterprises use IASs in the preparation of financial statements.

The 2001 Bahrain Commercial Companies Law requires each registered entity to produce a balance sheet, a profit-and-loss account and the director’s report for each financial year.  All branches of foreign companies, limited liability companies and corporations must submit annual audited financial statements to the Directorate of Commerce and Company Affairs at the MoICT, along with the company’s articles and /or articles of association.

Depending on the company’s business, financial statements may be subject to review by other regulatory agencies such as the Bahrain Monetary Agency (BMA) and the Bahrain Stock Exchange (banks and listed companies).

Bahrain encourages firms to adhere to both the IFRS and Bahrain’s Code of Corporate Governance.  Bahrain-based companies by and large remain in compliance with IAS 1 disclosure requirements.

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

According to the World Bank, the GOB does not have the legal obligation to publish the text of proposed regulations before they are implemented and there is no period of time set by law for the text of the proposed regulations to be publicly available.  Bahrain, therefore, ranks among the countries the World Bank identifies with low rule-making transparency.

• http://rulemaking.worldbank.org/en/data/explorecountries/bahrain  

Laws and regulatory actions can be proposed by legislators, the government, or the King and are normally drafted under the Cabinet’s guidance prior to being transferred back to the Council of Representatives (COR).  If the bill or legislation is approved by a majority of the COR, the legislation advances to the Shura Council. If approved by a majority in the Shura Council, legislation is referred back to the Cabinet for the King’s ratification.  If the COR advances a version that the Shura Council disagrees with, a revised draft goes back to the COR. If the two houses cannot agree, they meet in what is known as the National Assembly, where both chambers meet to reconcile differences on a specific bill.  The publication of the regulatory action in the Official Gazette is the final legislative step. The implementation of any laws takes place the day following its publication. The media sometimes publishes the draft laws and offers commentary on various legal interpretations.

Commercial regulations can be proposed by the EDB, MoICT, the Cabinet, or the COR.  Draft regulations are debated within the COR’s Finance and Economic Committee. The Bahrain Chamber of Commerce board of directors may raise concerns over draft legislation at committee meetings or send written comments for review by Members of Parliament, but the bills are otherwise not available for public comment.  The Cabinet issues final approval of regulations.

The e-Government portal and the Legislation and Legal Opinion Commission website list laws by category and date of issuance.  Some laws are translated into English. The National Audit Office publishes results of its annual audits of government ministries and parastatals.

International Regulatory Considerations

Bahrain is a member of the GCC.  The GOB has agreed to enforce GCC standards and regulations where they exist, and not to create any domestic rules that contradict established GCC-wide standards and regulations.  In certain cases, the GOB applies international standards where domestic or GCC standards have not been developed.  For example, the GOB mandates that imported vehicles meet either the U.S. Federal Motor Vehicle Safety Standards or the so-called “1958 Agreement” standards developed by the United Nations Economic Commission for Europe.  Bahrain is a member of the WTO and notifies all draft technical regulations to the WTO Committee on Technical Barriers to Trade.  Bahrain ratified the Trade Facilitation Agreement (TFA) in September 2016 through Law No. 17 of 2016.  Bahrain Customs and MoICT have begun working toward implementing the TFA’s requirements.

Legal System and Judicial Independence

Bahrain’s Constitution defines the Kingdom as a sovereign, independent, Arab Muslim State.  Although Article 2 of the Constitution states that Islamic Sharia (Islamic) law is the main source of legislation, general matters and private transactions are governed mainly by laws derived from modern legislation.  Three types of courts are present in Bahrain – civil, criminal, and family (Sharia) courts. The civil court system consists of lower courts, courts of appeal, and the Court of Cassation — the highest appellate court in the Kingdom, hearing a variety of civil, criminal and family cases.  Civil courts deal with all administrative, commercial, and civil cases, as well as disputes related to the personal status of non-Muslims.  Family courts deal primarily with personal status matters, such as marriage, divorce, custody, and inheritance.

Many of the high-ranking judges in Bahrain come from the ruling family, prominent families, or are non-Bahrainis (mainly Egyptians).  Bahraini law borrows a great deal from other Arab states, particularly Egyptian legal codes.

Bahrain has a long-established framework of commercial law.  English is widely used, and a number of well-known international (including U.S.) law firms, working in association with local partners, are authorized to practice law in Bahrain and provide expert legal services, both nationally and regionally.  Fees are charged according to internationally accepted practices. Non-Bahraini lawyers can represent clients in Bahraini courts. In April 2007, the government permitted international law firms to be established in Bahrain. These firms provide services such as commercial and financial consultancy in legal matters.

Entrenched local business interests with government influence can sometimes cause problems for foreign companies.  Interpretation and application of the law sometimes varies by ministry and may be dependent on the stature and connections of an investor’s local partner.  These departures from the consistent, transparent application of regulations and the law are not common, and investors report general satisfaction with government cooperation and support.

The GOB is eager to develop its legal framework further.  The U.S. Department of Commerce’s Commercial Law Development Program (CLDP) has conducted training and capacity-building programs in Bahrain for several years, in cooperation with the Ministry of Justice and Islamic Affairs, the Higher Supreme Council for Judges, and the Judicial and Legal Studies Institute.

Judgments of foreign courts are recognized and enforceable under local courts.  Article nine of the U.S.-Bahrain Bilateral Investment Treaty outlines how problems with U.S. investments should be handled within the Bahraini legal system.  The most common source of investment-related problems in Bahrain is slow or incomplete application of the law. In general, the judicial process is fair and cases are appealable.

Laws and Regulations on Foreign Direct Investment

The U.S.-Bahrain BIT provides benefits and protection to U.S. investors in Bahrain, such as most-favored nation and national treatment, the right to make financial transfers freely and immediately, the application of international legal standards for expropriation and compensation cases, and access to international arbitration.  The BIT guarantees national treatment for U.S. investments across most sectors, with exceptions only for ownership of television, radio or other media, fisheries, and dredging or oil exploration. Bahrain also provides most-favored nation or national treatment status to U.S. investments in air transportation, the purchase or ownership of land, and the purchase or ownership of shares traded on the Bahrain Bourse.

The national treatment clause in the BIT ensures American firms interested in selling products exclusively in Bahrain are no longer required to appoint a commercial agent, though they may opt to do so.  A commercial agent is any Bahraini party appointed by a foreign party to represent the foreign party’s product or service in Bahrain.

With few exceptions, Bahrain permits 100 percent foreign-ownership of new industrial entities and the establishment of representative offices or branches of foreign companies without local sponsors.  Wholly foreign-owned companies may be set up for regional distribution services and may operate within the domestic market as long as they do not exclusively pursue domestic commercial sales. Private investment (foreign or Bahraini) in petroleum extraction is permitted only under a production-sharing agreement with the Bahrain Petroleum Company (BAPCO), the state-owned petroleum company.

Expatriates may own land in designated areas in Bahrain.  Non-GCC nationals, including Americans, may own high-rise commercial and residential properties, as well as properties used for tourism, banking, financial and health projects, and training centers.

Bahrain issued Bankruptcy Law No. 22 in May 2018 governing corporate reorganization and insolvency.  The law is based on U.S. Chapter 11 insolvency legislation and provides companies in financial difficulty with an opportunity to restructure under court supervision.

Below is a link to a site designed to assist foreign investors navigate the laws, rules, and procedures related to investing in Bahrain: http://cbb.complinet.com/cbb/microsite/laws.html  

Competition and Anti-Trust Laws

The GOB issued Competition Law No. 31 in July 2018 to prevent the formation of monopolies or the practice of anti-competitive behavior.  This law makes it easier for new businesses to enter existing markets and compete with significant players.

MoICT’s Consumer Protection Directorate is responsible for ensuring that the law determining price controls is implemented and that violators are punished.  There are general restrictions on FDI in some sectors, including the oil and gas and petrochemicals sectors, in which all companies are government-owned.

Expropriation and Compensation

There have been no expropriations in recent years, and there are no cases in contention.  The U.S.-Bahrain BIT protects U.S. investments by banning all expropriations (including “creeping” and “measures tantamount to”) except those for a public purpose.  Such transactions must be carried out in a non-discriminatory manner, with due process, and prompt, adequate, effective compensation.

Dispute Settlement

ICSID Convention and New York Convention

Bahrain uses multiple international and regional conventions to enhance its commercial arbitration legal framework.  Bahrain is a party to the United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration, the New York Convention, the International Centre for the Settlement of Investment Disputes (ICSID), and the GCC Convention for Execution of Judgments, among others.  These conventions and international agreements established the foundation for the GCC Arbitration Centre, and the Bahrain Chamber for Disputes & Resolution (BCDR). Bahrain’s Constitution stipulates international conventions and treaties have the power of law.

Investor-State Dispute Settlement

The U.S.-Bahrain BIT provides for three dispute settlement options:

1. Submitting the dispute to a local court;
2. Invoking dispute-resolution procedures previously agreed upon by the national or company   and the host country government; or,
3. Submitting the dispute for binding arbitration to the International Center for Settlement of Investment Disputes (ICSID) or any other arbitral institution agreed upon by both parties.

In 2010, the Ministry of Justice established the Bahrain Chamber for Dispute Resolution (BCDR).  In partnership with the American Arbitration Association (AAA), the BCDR specializes in alternative dispute resolution services.  The jurisdiction of the BCDR-AAA is twofold: Jurisdiction by Law (Section 1 cases), and Jurisdiction by Party Agreement (arbitration, also referred to as Section 2 cases).

Jurisdiction by Law (Section 1 Cases)

Disputes exceeding BD 500,000 (approximately USD 1.3 million) which involve either an international commercial dispute or a party licensed by the Central Bank of Bahrain (CBB) are referred to the BCDR-AAA.  Prior to the creation of the BCDR, these cases fell within the jurisdiction of the courts of Bahrain.

From the establishment of the BCDR-AAA through December 2018, 231 cases were filed under Section 1, with claims totaling over USD 3.9 billion.  Of these cases, 29.4 percent were decided or settled within 6 months; 41.1 percent were decided/settled within 6–12 months; 11.3 percent were decided or settled within 12–18 months; 6.1 percent were decided or settled within 18–24 months; 3.0 percent were decided or settled after 24 months; and 9.1 percent were ongoing.

Arbitration (Section 2 Cases)

As of April 2018, ten cases have been filed: one in 2013, one in 2015, three in 2016, and five in 2017.  Of these cases only three of the cases filed in 2017 as of April 2018 were ongoing and the rest were awarded or settled.

Bahrain Chamber for Dispute Resolution
Suite 301, Park Plaza
Bldg. 247, Road 1704
P.O. Box 20006
Manama, Kingdom of Bahrain
Telephone: + (973) 17-511-311
Website: www.bcdr-aaa.org  

The United Nations Conference on Trade and Development (UNCTAD) reported that Bahrain faced its first known Investor-State Dispute Settlement (ISDS) claim in 2017.  The case involves investor claims over the Central Bank of Bahrain’s 2016 move to close the Manama branch of Future Bank, a commercial bank whose shareholders include Iranian banks.  Bahrain and Iran are party to a BIT.

International Commercial Arbitration and Foreign Courts

Arbitration procedures are largely a contractual matter in Bahrain.  Disputes historically have been referred to an arbitration body as specified in the contract, or to the local courts.  In dealings with both local and foreign firms, Bahraini companies have increasingly included arbitration procedures in their contracts.  Most commercial disputes are resolved privately without recourse to the courts or formal arbitration. Resolution under Bahraini law is generally specified in all contracts for the settlement of disputes that reach the stage of formal resolution but is optional in those designating the BCDR.  Bahrain’s court system has adequately handled occasional lawsuits against individuals or companies for nonpayment of debts.

Bahrain Law No. 9 of 2015 promulgating the Arbitration Law (the “New Arbitration Law”) came into effect on August 9, 2015.  The law provides that the UNCITRAL 1985 Model Law, with its 2006 amendments on international commercial arbitration (the “UNCITRAL Law”), will apply to any arbitration, taking place in Bahrain or abroad, if the parties to the dispute agreed to be subject to the UNCITRAL Law.

The GCC Commercial Arbitration Center, established in 1995, serves as a regional specialized body providing arbitration services.  It assists in resolving disputes among GCC countries or between other parties and GCC countries. The Center implements rules and regulations in line with accepted international practice.  Thus far, few cases have been brought to arbitration. The Center conducts seminars, symposia, and workshops to help educate and update its members on any new arbitration-related matters.

GCC Commercial Arbitration Center
P.O. Box 2338
Manama, Kingdom of Bahrain
Arbitration Boards’ Secretariat
Telephone: + (973) 17278000
Email: case@gcccac.org
Website: http://www.gcccac.org/en/  

Bankruptcy Regulations

The GOB enacted its original bankruptcy and insolvency law as a Decree by Law No. 11 in 1987.  On May 30, 2018, the GOB issued and ratified Law No. 22 /2018, updating the original legislation.  Modeled on U.S. Chapter 11 legislation, the law introduces reorganization whereby a company’s management may continue business operations during the administration of a case. The Bankruptcy Law also includes provisions for cross-border insolvency, and special insolvency provisions for small and medium-sized enterprises.

The Bahrain credit reference bureau, known as “BENEFIT,” is licensed by the Central Bank of Bahrain (CBB) and operates as the credit monitoring authority in Bahrain.

Investment Incentives

The GOB offers a variety of incentives to attract FDI.  The Bahrain Logistics Zone, Bahrain Economic Development Board (EDB), Bahrain Development Bank (BDB), Bahrain International Investment Park (BIIP), and Tamkeen all offer incentives to encourage FDI.  Some examples of incentives include assistance in registering and opening business operations, financial grants, exemption from import duties on raw materials and equipment, and duty-free access to other GCC markets for products manufactured in Bahrain.

Foreign Trade Zones/Free Ports/Trade Facilitation

Khalifa bin Salman Port, Bahrain’s primary commercial seaport provides a free transit zone to facilitate the duty-free import of equipment and machinery.  The Government of Bahrain has developed two main industrial zones, one to the north of Sitra and the other in Hidd. The Hidd location, known as the Bahrain International Investment Park (BIIP), is adjacent to a logistics zone, known as the Bahrain Logistics Zone.  Foreign-owned firms have the same investment opportunities in these zones as Bahraini companies.

Bahrain’s Ministry of Industry, Commerce and Tourism (MoICT) operates the BIIP, a 2.5 million square-meter, tax-free zone located minutes from Bahrain’s main Khalifa bin Salman port.  Many U.S. companies operate out of this park. BIIP is most suited to manufacturing and services companies interested in exporting from Bahrain. The park offers manufacturing companies the ability to ship their products duty free to countries in the Greater Arab Free Trade Area.  BIIP has space available for potential investors, including some plots of vacant land designated for new construction, and some warehouse facilities for rental.

A 1999 law requires that investors in industrial or industry-related zones launch a project within one year from the date of receiving the land, and development must conform to the specifications, terms, and drawings submitted with the application.  Changes are not permitted without approval from the MoICT.

Performance and Data Localization Requirements

Companies in Bahrain are obliged to comply with so-called “Bahrainization” employment targets  , under which the Labour Market Regulatory Authority (LMRA) mandates that a certain percentage of each company’s employees are Bahraini.  Companies may contact LMRA to determine their Bahrainization rate, which differs based on the sector of the economy in which they work, or use a calculator available at http://lmra.bh/portal/en/page/show/193  .  The applicable Bahrainization rate  s are mandatory across the board in the company structure, applying equally to senior management and line workers.  Per Cabinet Resolution Number 27 of 2016, LMRA announced that companies that are unable to comply with the Bahrainization rates would only be eligible to apply for new work permits and sponsorship transfers by paying an additional annual fee of BD  500 (roughly USD 1,329) per non-Bahraini worker. LMRA may apply fines to companies that do not comply with Bahrainization requirements.

The GOB issued Law 1/2019 in March 2019 amending Article 14 of the Private Health Establishments Law, which gives priority to recruiting qualified Bahraini physicians, technicians, and nursing staff in private health establishments.

There are no excessively onerous visa, residence, work permit, or similar requirements inhibiting the mobility of foreign investors or their employees in Bahrain.  Americans and citizens of many other countries can obtain a two-week visa with relative ease upon arrival in Bahrain or online. Bahrain also offers a multiple-entry visa that lasts for five years, if required.

Bahrain has a liberal approach to foreign investment and actively seeks to attract foreign investors and businesses; no product localization is forced and foreign investors are not obliged to use domestic content in goods or technology.  There are no government-imposed conditions on permission to invest, including tariff and non-tariff barriers, on American investments.

There are no special performance requirements imposed on foreign investors.  The U.S.-Bahrain Bilateral Investment Treaty forbids mandated performance requirements as a condition for the establishment, acquisition, expansion, management, conduct, or operation of a covered investment.  Foreign and Bahraini-owned companies must meet the same requirements and comply with the same environmental, safety, health, and labor requirements. Officials at the Ministry of Labour and Social Development, LMRA and the MoICT supervise companies operating in Bahrain on a non-discriminatory basis.

The Central Bank of Bahrain regulates financial institutions and foreign exchange offices.  Foreign and locally owned companies must comply with the same rules, policies, and regulations.

There are no requirements for foreign IT providers to turn over source code and/or to provide access to surveillance.

Bahrain enacted Law No. 30 of 2018 with respect to Personal Data Protection on July 12, 2018. The nationwide Data Protection Law, which goes into force on August 1, 2019, promotes the efficient and secure processing of big data for commercial use and provides guidelines for the effective transfer of data across borders.

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

Transparency of the Regulatory System

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

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

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

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

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

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

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

International Regulatory Considerations

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

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

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

Focal Points and Methods of Contact are:  

General Contact:

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

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

Focal Points for WTO:

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

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

Legal System and Judicial Independence

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

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

Some notable commercial laws include:

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

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

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

Laws and Regulations on Foreign Direct Investment

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

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

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

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

Competition and Anti-Trust Laws

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

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

Expropriation and Compensation

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

Dispute Settlement

ICSID Convention and New York Convention

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

Investor-State Dispute Settlement

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

International Commercial Arbitration and Foreign Courts

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

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

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

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

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

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

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

Bankruptcy Regulations

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

Investment Incentives

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

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

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

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

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

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

Foreign Trade Zones/Free Ports/Trade Facilitation

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

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

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

Performance and Data Localization Requirements

Performance Requirements

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

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

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

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

Data Storage Requirements

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

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

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

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

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

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

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

Transparency of the Regulatory System

Barbados’ legal framework fosters competition and establishes clear rules for foreign and domestic investors with regard to tax, labor, environmental, health, and safety concerns.  These regulations are in keeping with international standards. The Ministry of Finance and Economic Affairs and Invest Barbados provide oversight aimed at ensuring the attraction and channeling of investment occurs transparently.

Rulemaking and regulatory authority rest with the bicameral parliament of the government of Barbados.  The House of Assembly consists of 30 members who are elected in single seat constituencies. The Senate consists of 21 members who are appointed by the Governor General.

Foreign investment into Barbados is governed by a series of laws and their implementing regulations.  These laws and regulations are developed with the participation of relevant ministries, drafted by the Office of the Attorney General, and enforced by the relevant ministry or ministries.  Additional compliance supervision is delegated to specific agencies, by sector, as follows:

• Banking and financial services – CBB
• Insurance and non-banking financial services – Financial Services Commission (FSC)
• International business – International Business Unit, Ministry of International Business
• Business incorporation and intellectual property – CAIPO

The Ministry of Finance and Economic Affairs monitors investments to collect information for national statistics and reporting purposes.

All foreign businesses must be registered or incorporated through CAIPO and will be regulated by one of the other aforementioned agencies depending on the nature of the business.

Although Barbados does not have legislation that guarantees access to information or freedom of expression, access to information is generally available in practice.  The government maintains a website and an information service to facilitate the dissemination of information such as government office directories and press releases. The Government Information Service (BGIS) website is available at: http://gisbarbados.gov.bb/  .  The government also maintains a parliamentary website where it posts legislation prior to parliamentary debate and live streams House sittings.  The government budget is also available on this website, http://www.barbadosparliament.com/  .

Although some bills are not subject to public consultation, input from various stakeholder groups and agencies is enlisted during the initial drafting of legislation.  Public awareness campaigns, through print and electronic media, are used to inform the general public. Copies of regulations are circulated to stakeholders, and government ministries and departments, and are published in the Official Gazette after passage in parliament.

Accounting, legal, and regulatory procedures are transparent.  Publicly listed companies publish annual financial statements and changes in portfolio shareholdings, including share values.  Service providers are required to adhere to international best practice standards including International Financial Reporting Standards (IFRS), International Standards on Auditing (ISA), and International Public Sector Accounting Standards (IPSAs) for government and public sector bodies.  They must also comply with the provisions of the Money Laundering and Financing of Terrorism Prevention and Control Act. Accounting professionals in particular must engage in continuous professional development. The Corporate and Trust Service Providers Act regulates Barbadian financial service providers.  Failure to adhere to these laws and regulations may result in revocation of the business license and/or cancellation of work permit(s). The most recent Caribbean Financial Action Task Force (CFATF) Mutual Evaluation assessment found Barbados to be largely compliant.

The Office of the Ombudsman is established by the constitution to guard against abuses of power by government officers in the performance of their duties.  The Office of the Ombudsman aims to provide quality service in an impartial and expeditious manner when investigating complaints by Barbadian nationals or residents who consider the conduct of a government body or official unreasonable, improper, inadequate, or unjust.

The Office of the Auditor General is also established by the constitution and is regulated by the Financial Administration and Audit Act.  The Auditor General is responsible for the audit and inspection of all public accounts of the Supreme Court, the Senate, the House of Assembly, all government ministries, government departments, government-controlled entities, and statutory bodies.  The Office of the Auditor General’s annual reports can be found on the parliament of Barbados website.

International Regulatory Considerations

The OECD recognized Barbados as largely compliant with international regulatory standards.   Barbados is a signatory to the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, the Multilateral Competent Authority Agreement, and the Multilateral Convention to Implement Tax Treaty Related Matters to Prevent Base Erosion and Profit Shifting.

The Barbados National Standards Institution (BNSI) was established in 1973 as a joint venture between the government of Barbados and the private sector.  It oversees a laboratory complex housing metrology, textile, engineering, and chemistry/microbiology laboratories. The primary functions of the BNSI include the preparation, promotion, and implementation of standards in all sectors of the economy, including the promotion of quality systems, quality control, and certification.  The Standards Act (2006) and the Weights and Measures Act (1977) and Regulations (1985) govern the work of the BNSI. As a signatory to the World Trade Organization (WTO) Agreement on the Technical Barriers to Trade, Barbados, through the BNSI, is obligated to harmonize all national standards to international norms to avoid creating technical barriers to trade.

Barbados ratified the WTO Trade Facilitation Agreement (TFA) in 2018.  With full implementation, the Agreement improves the speed and efficiency of border procedures, facilitates trade costs reduction, and enhances participation in the global value chain.  Barbados has implemented the Automated System for Customs Data (ASYCUDA).

Legal System and Judicial Independence

Barbados’ legal system is based on the British common law.  Modern corporate law is modeled on the Canada Business Corporations Act.  The Attorney General, the Chief Justice, junior judges, and magistrates administer justice in Barbados.  The Supreme Court consists of the Court of Appeal and the High Court. Parties may appeal to the Court of Appeal.  The High Court hears criminal and civil (commercial) matters and makes determinations on the interpretation of the constitution.

The Caribbean Court of Justice (CCJ) is the regional judicial tribunal.  The CCJ has original jurisdiction to interpret and apply the RTC. In 2005, Barbados became a full member of the CCJ, making the body its final court of appeal and original jurisdiction of the RTC.

The United States and Barbados are both parties to the WTO.  The WTO Dispute Settlement Panel and Appellate Body resolve disputes over WTO agreements, while courts of appropriate jurisdiction in both countries resolve private disputes.

Laws and Regulations on Foreign Direct Investment

Invest Barbados’ foreign direct investment policy is to promote Barbados as a desirable investment location, to provide advice, and to assist prospective investors.  The main laws concerning investment in Barbados are the Barbados International Business Promotion Act (2005), the Tourism Development Act (2005), and the Companies Act.  There is also a framework of legislation that supports the jurisdiction as a global hub for business including insurance, ships’ registration, and wealth management.

All proposals for investment concessions are reviewed by Invest Barbados to ensure proposed projects are consistent with the national interest and provide economic benefits to the country.

Invest Barbados provides complimentary “one-stop shop” facilitation services to investors to guide them through the investment process.  It offers a website useful for navigating the laws, rules, procedures, and registration requirements for foreign investors. This is available at http://www.investbarbados.org   .

Competition and Anti-Trust Laws

Chapter 8 of the RTC outlines the competition policy applicable to CARICOM states.  Member states are required to establish and maintain a national competition authority for facilitating the implementation of the rules of competition.  At the CARICOM level, a regional Caribbean Competition Commission (CCC) applies the rules of competition. The CARICOM competition policy addresses anticompetitive business conduct such as agreements between enterprises, decisions by associations of enterprises, and concerted practices by enterprises that have as their object or effect the prevention, restriction, or distortion of competition within the Community and actions by which an enterprise abuses its dominant position within the Community.  The Fair Competition Act codified the establishment of the Barbados Fair Trading Commission (FTC) in 2001. The FTC is responsible for the promotion and maintenance of fair competition and participates in the CCC. The FTC regulates the principles, rates, and standards of service for public utilities and other regulated service providers. The Telecommunications Act regulates competition in the telecommunications field.

Expropriation and Compensation

The Barbados constitution and the Companies Act (Chap. 308) contain provisions permitting the government to acquire property for public use upon prompt payment of compensation at fair market value.  U.S. Embassy Bridgetown is not aware of any outstanding expropriation claims or nationalization of foreign enterprises in Barbados.

Dispute Settlement

ICSID Convention and New York Convention

The government of Barbados wrote the New York Convention’s provisions into domestic law, but did not ratify the convention.  The Arbitration Act (1976) and the Foreign Arbitral Awards Act (1980), which recognizes the 1958 New York Convention on the Negotiation and Enforcement of Foreign Arbitral Awards, are the main laws governing dispute settlement in Barbados.

Barbados is also a member of the International Center for the Settlement of Investment Disputes (ICSID), also known as the Washington Convention.  Individual agreements between Barbados and multilateral lending agencies also have provisions calling on Barbados officials to accept recourse to binding international arbitration to resolve investment disputes between foreign investors and the state.

Investor-State Dispute Settlement

The Barbados Arbitration Act (1976) and the Foreign Arbitral Awards Act (1980) provide for arbitration of investment disputes.  Barbados does not have a Bilateral Trade Treaty or a Free Trade Agreement with an investment chapter with the United States. U.S. Embassy Bridgetown is not aware of any current investment disputes in Barbados.

Barbados ranks 170 out of 190 countries in enforcing contracts according to the 2019 World Bank Doing Business Report.  Dispute resolution in Barbados generally takes an average of 1,340 days. The slow court system and bureaucracy are widely seen as the main hindrances to timely resolution of commercial disputes.  Through the Arbitration Act of 1976, local courts recognize and enforce foreign arbitral awards issued against the government. Barbados does not have recent cases of investment disputes involving either U.S. or foreign investors.

International Commercial Arbitration and Foreign Courts

The Supreme Court of Barbados is the domestic arbitration body.  Local courts enforce foreign arbitral awards.

Bankruptcy Regulations

Under the Bankruptcy and Insolvency Act (2002), Barbados has a bankruptcy framework that recognizes certain debtor and creditor rights.  The Act gives a potentially bankrupt company three options: bankruptcy (voluntary or involuntary), receivership, or reorganization of the company.  The Companies Act provides for the insolvency and/or liquidation of a company incorporated under this Act. Barbados was ranked 34 out of 190 countries in resolving insolvency in the 2019 World Bank Doing Business Report.

Investment Incentives

In January 2019, Barbados repealed its Fiscal Incentives Act, bringing the country into conformity with its obligations under the WTO and in particular the Agreement on Subsidies and Countervailing Measures (SCM Agreement).  Manufacturers may still benefit from some concessions. For further information, please contact Invest Barbados.

The Small Business Development Act (1999) defines a small business as having no more than 25 employees.  Small businesses must be registered under the Companies Act, which applies to domestic and foreign-owned micro- and small enterprises. Small businesses are not eligible for incentives under the Tourism Development Act, the Special Development Areas Act, or the Shipping Incentives Act.

Enterprises generating export profits (other than from exports within CARICOM) may receive an export allowance expressed as a rebate of corporate tax on those profits.  The maximum rebate of 93 percent applies if more than 81 percent of an enterprise’s profits result from extra-regional exports. The export development allowance permits a company to deduct from taxable income an additional 50 percent of what the company spends in developing export markets outside CARICOM.

Initial allowances or investment allowances of up to 40 percent on capital expenditure are available for businesses making capital expenditures on machinery and plants or on an industrial building or structure.  The government also allows annual depreciation allowances on such expenditures.

In the tourism sector, the government’s market development allowance permits a company to deduct an additional 50 percent of what it spends to encourage tourists to visit Barbados.  Under the Tourism Development Act of 2002, businesses and individuals that invest in the tourism sector can write off capital expenditure and 150 percent of interest. These entities are also exempt from import duties and environmental levies on furniture, fixtures and equipment, building materials, supplies, and equity financing.  The Act expands the definition of tourist sector beyond accommodation to include restaurants, tourist recreational facilities, and tourism-related services. The Act encourages the development of attractions that emphasize the island’s natural, historic, and cultural heritage, and encourages construction of properties in non-coastal areas.

In response to concerns by the OECD and the European Union’s Tax Code of Conduct Group, the government of Barbados has reformed its international business sector regime by harmonizing the legislative and tax frameworks for domestic and international companies.   Companies conducting international business may operate with a tax rate from 1 to 5.50 percent. Companies exporting 100 percent of their services or products are able to apply for a foreign currency permit, affording them similar benefits previously enjoyed by international business companies and international societies with restricted responsibility.  For fiscal years commencing on or after January 1, 2019, all corporate entities will be taxed on the sliding scale shown:

There are no withholding taxes on dividends, interest, royalties, or management fees paid to non-residents.

Foreign Trade Zones/Free Ports/Trade Facilitation

There are currently no foreign trade zones or free ports in Barbados.

Performance and Data Localization Requirements

Foreign investors must finance their investments from external sources or from income that the investment generates.  When a foreign investment generates significant employment or other tangible benefits for the country, the authorities may allow the company to borrow locally for working capital.  Invest Barbados may provide a training grant to qualifying manufacturing and information and communication technology enterprises during the initial operating period.

Barbados does not require that locals own shares of a foreign investor’s enterprise, but some restrictions may apply to share transfers.  The Companies Act does not permit bearer shares. Foreign investors do not need to establish facilities in any specific location, although there are some zoning restrictions on residential and commercial construction for environmental reasons.  There is no requirement that enterprises must purchase a fixed percentage of goods from local sources. However, investors, particularly within the hospitality industry, are encouraged to use local products and produce wherever possible.

Non-nationals, including all managerial and technical staff, (but not nationals of CARICOM member states) seeking to work in Barbados must apply for work permits.  The work permit is specific to the job and employer and the permit may be granted for a period of up to five years. Short-term permits of up to six months are also available.  To grant a work permit, the government requires that the expatriate must bring to the job special skills or knowledge not readily available in Barbados. While work permits are readily granted to senior management, the government may restrict the number of permits approved depending on the number of people employed by the local company.  There are no restrictions regarding foreign directors of boards. More information is available at: www.immigration.gov.bb/pages/WorkPermit.aspx   .

There are no requirements for foreign information technology providers to turn over source code and/or provide access to surveillance (for example, backdoors into hardware and software turn over keys for encryption).

As a member of the WTO, Barbados is party to the Agreement to the Trade Related Investment Measures.  The government strongly encourages investments that will create jobs and increase exports and foreign exchange earnings.  Barbados does not require participation by nationals or by the government in foreign investment projects. Barbados encourages local sourcing, but does not require enterprises to purchase a fixed percentage of goods from local sources.  Foreign investors receive the same treatment as Barbadians.

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

* Source for Host Country Data: Central Bank of Barbados (CBB) hhttp://data.centralbank.org.bb/GeneralStatistics.aspx   . All CBB GDP figures for 2018 are estimates.

Table 3: Sources and Destination of FDI

Data not available; Barbados does not appear in the IMF’s Coordinated Direct Investment Survey.

Table 4: Sources of Portfolio Investment

Data not available; Barbados does not appear in the IMF’s Coordinated Portfolio Investment Survey for Sources of Portfolio Investment.

Transparency of the Regulatory System

The government states that its policies are transparent and the implementation of laws is consistent with international norms to foster competition and establish clear rules of the game.  However, independent economic experts note that private sector businesses are often discriminated against in relation to public sector businesses. In particular, SOEs often receive government subsidies, benefits and exemptions, including cheaper loans and debt forgiveness.  Such beneficial treatment is generally unavailable to private sector companies.

According to Belarusian legislation, drafts of laws and regulations pertaining to investment and doing business are subject to public discussion.  Draft legislation is published on government agencies’ websites.

International Financial Reporting Standards (IFRS) have been a part of Belarus’ legislative framework since 2016.  Public-interest entities, which include banks, insurance companies, and public corporations with subsidiary companies are required to publish their financial statements, which comply with IFRS.  Such statements are subject to statutory audit.

IFRS in Belarus can be accessed through the Ministry of Finance at the following links:

• http://www.minfin.gov.by/accounting/inter_standards/docs/71f9f73c3eb44bb2.html  ;
• http://www.minfin.gov.by/accounting/inter_standards/docs/fa70d11e0cb14c56.html  ;
• http://www.minfin.gov.by/accounting/inter_standards/docs/f8f75f4fd1e848df.html  ;
• http://www.minfin.gov.by/accounting/inter_standards/docs/eb7753f40f6f49f0.html  ;
• http://www.minfin.gov.by/accounting/inter_standards/docs/9d4e40da559e40d4.html  .

Belarus has no informal regulatory processes managed by nongovernmental organizations or private sector associations.

International Regulatory Considerations

Belarus is not a WTO member but announced in April 2016 it will step up efforts to join the organization by June 2020.  The Working Party on Belarus’ Accession to the WTO group meets regularly in Geneva and as of January 2019, still needs to hold talks on trade in services with the European Union, the United States, Canada, and Ukraine.  After the completion of bilateral market access talks with WTO member states, Belarus will still have to integrate these agreements into national regulations.

Belarus is a member of the Eurasia Economic Union (EAEU), a political and economic union driven by Russian leadership and modeled after the European Union.  The EAEU’s goal is to ensure the free movement of goods, capital, services, and people across the territories of its five members – Armenia, Belarus, Kazakhstan, Kyrgyzstan, and Russia.  The EAEU envisages common economic policies on customs, foreign trade and investment, technical regulation, competition and antitrust regulation. The Eurasian Economic Commission is the EAEU executive body.  The EAEU has completed free trade agreements with Vietnam, China, and Iran and is in negotiations with Serbia, Singapore, India, Israel, and Egypt.

Legal System and Judicial Independence

The Belarusian legal system is a civil law system with a legal separation of branches and institutions and with the main source of law being legal act, not precedent.  For example, Article 44 of Belarus’ Constitution guarantees the inviolability of property. Article 11 of the Civil Code safeguards property rights. Presidential edicts and decrees, however, typically carry more force than legal acts adopted by the legislature, which risks weakening investor protections and incentives previously passed into law.  There is sometimes a public comment process during drafting of legislation or presidential decrees, but the process is often not transparent or sufficiently inclusive of investors’ concerns. Belarus has a written and consistently applied commercial law, which is broadly codified but contains inconsistencies and is not always considered to be business friendly.

Each of Belarus’ six regions and the capital city of Minsk have economic courts to address commercial and economic issues.  In addition, the Supreme Court has a judicial panel on economic issues. In 2000, Belarus established a judicial panel on intellectual property rights (IPR) protection.  Under the Labor Code, any claims of unfair labor practices are heard by regular civil courts or commissions on labor issues. However, the judiciary’s lack of independence from the executive branch impedes its role as a reliable and impartial mechanism for resolving disputes, whether labor, economic, commercial, or otherwise. According to Freedom House’s 2018 Nations in Transit report, executive authorities can directly influence a judge’s decision-making if their political or economic interests are involved, and such influence usually takes the form of direct instructions from officials.

Laws and Regulations on Foreign Direct Investment

Foreign investment in Belarus is governed by the 2013 laws “On Investments” and “On Concessions,” the 2009 Presidential Decree No. 10 “On the Creation of Additional Conditions for Investment Activity in Belarus,” and other legislation as well as international and investment agreements signed and ratified by Belarus.

The GOB regularly updates the following websites with the latest in laws, rules, procedures and reporting requirements for foreign investors:

http://www.investinbelarus.by/en/  

http://www.economy.gov.by/  

http://president.gov.by/en/official_documents_en/  

Competition and Anti-Trust Laws

The June 3, 2016, presidential edict number 188 authorized the Ministry of Antimonopoly Regulation and Trade to counteract monopolistic activities and promote competition in Belarus’ markets.

Expropriation and Compensation

According to Article 12 of the Investment Code, neither party may expropriate or nationalize investments both directly and indirectly by means of measures similar to expropriation or nationalization, for other purposes than for the public benefit and on a nondiscriminatory basis; according to the appropriate legal procedure; and on conditions of compensation payment.  Belarus has signed 66 bilateral agreements on the mutual protection and encouragement of investments.

In 2018, there was one nationally-reported case of nationalization, however the Belarusian government compensated the Ukrainian owner market value for shares of the Motor Sich aircraft repair factory in Orsha.  In the past five years, there have been no instances of confiscation of business property as a penalty for violations of law.

Post has not received any expropriation claims from U.S. companies, and is not aware of any particularly high-risk sectors prone to expropriation actions.

Dispute Settlement

There were no known investment disputes with American investors in 2018.

ICSID Convention and New York Convention

Belarus is a party to both the International Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID) and the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards.  The GOB states that local courts recognize and enforce foreign arbitral awards in compliance with the above conventions, national laws, and regulations. The enforcement of arbitral awards in Belarus is governed by Chapter 28 of the Code of Commercial Procedure.

Most of the BITs concluded by Belarus include a provision on international investment arbitration as a mechanism for settling investor-state disputes and recognize the binding force of the awards issued in investment arbitrations.  Under Belarusian law, if an international treaty signed by Belarus establishes rules other than those established by local law, the rules of the international treaty shall prevail.

Investor-State Dispute Settlement

Local economic court proceedings normally do not exceed two months.  The term of such proceedings with the participation of foreign persons is normally no longer than seven months, unless established otherwise by an international agreement signed by Belarus.

International Commercial Arbitration and Foreign Courts

Judgments of foreign courts are accepted and enforced if there is a relevant international agreement signed by Belarus.  Courts recognize and enforce foreign arbitral awards. International arbitration is accepted as a means for settling investment disputes between private parties.  In principle, the GOB accepts binding international arbitration of investment disputes between foreign investors and the state, although the Embassy is not aware of any cases where this has been put to the test.  As of 2018, there were three known cases against Belarus pending at the ICSID: two from Russian investors in joint ventures in transport and infrastructure sectors, and one from a Dutch holding company in the banking sector.  The Belarusian Chamber of Commerce and Industry has an International Arbitration Court. The 2013 “Law on Mediation,” as well as codes of civil and economic procedures, established various alternative ways of addressing investment disputes.

Bankruptcy Regulations

Belarus’ 2012 bankruptcy law, related presidential edicts, and government resolutions are not always consistently applied.  Additional legal acts, such as the Civil Code and Code of Economic Procedures, also include certain regulations on bankruptcy-related issues.  Under the bankruptcy law, foreign creditors have the same rights as Belarusian creditors. Belarusian law criminalizes false and intentional insolvency as well as concealing insolvency.  According to the World Bank’s 2019 Doing Business Report, Belarus was ranked 72 in Resolving Insolvency, down from 68 in 2018 and 69 in 2017 (rankings available at http://www.doingbusiness.org/data/exploreeconomies/belarus  )

Investment Incentives

According to the GOB’s Strategy for Attracting FDI, the priority sectors that need FDI include pharmaceuticals; biotechnology; nanotechnologies and nanomaterials; metallurgy; mechanical engineering industry; production of machines, electrical equipment, home appliances and electronics; transport and related infrastructure; agriculture and food industry; information and communication technologies; creation and development of logistics systems; and tourism.  NAIP maintains a database of investment proposals at http://www.investinbelarus.by/en/invest/base/  .  The GOB offers various incentives and programs for FDI depending on the sector and industry.  The below incentives outline the specific incentives that are usually accompanied by preferential tax rates.

Investment Agreement with the Republic of Belarus

The list of major incentives and benefits under an investment agreement includes but is not limited to:

• Allocation of a land plot without auctioning the right to lease it
• Removal of vegetation without compensation during construction
• Full VAT deduction for the purchase of goods, services (works) or property rights
• Exemption from import tariffs and VAT on the imports of production equipment
• Exemption from fees for the right to conclude a land lease
• Exemption from duties for employing foreign nationals
• Exemption from compensation for losses sustained by the agriculture and/or forestry industries due to the use of a land plot under the investment agreement
• Exemption from land tax on land plots in government or private ownership, and from rent on land plots in government ownership, for a period starting from the first day of the month in which the investment agreement came into effect until December 31 of the year following the year in which the last of the facilities scheduled under the investment agreement started operations.

Investment agreements concluded under the decision of the Belarusian Council of Ministers and with the permission of the President of Belarus may offer additional incentives and benefits not expressly provided for in legislation.  Such incentives are provided on a case-by-case basis.

Free Economic Zones

Each of Belarus’ six regions has its own free economic zone (FEZ):  Minsk, Brest, Gomel-Raton, Mogilev, Grodno Invest, and Vitebsk. The tax and regulatory pattern applicable to businesses in these zones is simpler and lower than elsewhere in Belarus.  To become a FEZ resident, an investor needs to make a minimal investment of EUR 1 million, or at least EUR 500,000 provided the entire sum is invested during a three-year period, as well as engage in the production of import-substituting products or goods for export.

In October 2005, the President of Belarus signed the edict that established uniform rules for all FEZs.  The list of main tax benefits for FEZ residents was revised in December 2016 to include certain exemptions from the corporate profit tax (CPT), real estate tax, land tax, and rent on government-owned land plots located within the boundaries of the FEZ, among others.

As of 2017, FEZ residents benefit from a simplified procedure of export-import operations. Resident enterprises are exempt from customs duties and taxes on facilities, construction materials, other equipment used in implementation of their investment projects.  They are also exempt from customs duties and taxes on raw materials and materials used in the process of manufacture of the products sold outside the territory of the Eurasian Economic Union.

Otherwise, FEZ residents pay VAT, excise duties, ecological tax, natural resource extraction tax, state duty, patent duties, offshore duty, stamp duty, customs duties and fees, local taxes and duties, and contributions to the Social Security Fund according to the general guidelines.

For more details please visit:

• FEZ Minsk: http://www.fezminsk.by/en/  
• FEZ Gomel-Raton: http://www.gomelraton.com/en/  
• FEZ Vitebsk: http://www.fez-vitebsk.com/en/  
• FEZ GrondoInvest: https://grodnoinvest.by/en/  
• FEZ Brest: http://fezbrest.com/en/  
• FEZ Mogilev: http://www.fezmogilev.by/  

Great Stone Industrial Park

The Great Stone Industrial Park is a special economic zone of approximately 112.5 square kilometers located adjacent to the Minsk National Airport and Belarusian highway M1, which connects Moscow to Berlin.  Great Stone resident companies also have access to Lithuania’s Klaipeda seaport on the Baltic Sea.  According to a master plan approved in 2013, Great Stone will eventually include production facilities, dormitories and residential areas for workers, offices and shopping malls, and financial and research centers.

Great Stone is primarily a Belarus-China joint venture but any company – regardless of its country of origin – can apply to join the industrial park.  Interested companies must submit either a business project worth at least USD 500,000, to be invested within three years from the moment of the business’ registration; or submit a business project worth at least USD 5 million without any time limit for investment; or submit a business project worth at least USD 500,000 tied to research and development.

As of 2017, Great Stone residents receive, among other preferences, certain exemptions on income tax, real estate and land taxes, and dividend income; the right to import goods, including raw materials, under a preferential customs regime; full VAT repayment on goods used for the design, building, and equipment of facilities in Great Stone; exemptions from environmental compensatory payments; and a preferential entry/exit program allowing Great Stone residents and their employees to stay in Belarus without a visa for up to 180 days.  Great Stone residents are also exempt from any new taxes or fees should the government make future changes to the tax code.

For more information on Great Stone, please visit: https://industrialpark.by/en/home.html  

High Technology Park (HTP)

Created in 2005 to foster development of the IT and software development industry, the High Technology Park (Hi-Tech Park) is a “virtual” legal regime that extends over the entire territory of Belarus.  A physical campus of the HTP is found in the eastern part of Minsk and a satellite campus is located in Hrodna. The legislation behind the HTP was updated in 2017 with the signing of Presidential Decree No. 8 “On the Development of the Digital Economy.”  The decree extended the HTP preferences from 2022 until 2049 and expanded the list of business activities in which HTP residents may engage, including but not limited to: software development; data processing; cryptocurrency and token-related activity; data center services; development and deployment of Internet-of-Things technologies; ICT education; and cybersports.

HTP provides residents beneficial tax preferences, including but not limited to:  exemptions from VAT and CPT on sale of goods or services; exemptions from customs duty and VAT on certain kinds of equipment imported into Belarus for use in investment projects; immovable property tax and land tax benefits with regard to buildings and land within the boundaries of the HTP campuses; and caps on personal income tax at nine percent for employees and five percent for foreign entities.

Foreign nationals who are hired on contract by an HTP resident company, or who are founders of a HTP resident company, or who are employed by such founders, are eligible for visa-free entry into Belarus for a stay of up to 180 days a year.  Foreigners employed by HTP residents are not required to have working permit in Belarus and are entitled to apply for a temporary residence permit for the duration of their contract.

Government agencies are not allowed to inspect the operations of HTP residents without prior consent of the HTP Administration.

For more information on HTP, please visit: http://www.park.by/  

Investment activities in small and medium-sized towns

Small and medium-sized cities/town and rural areas in Belarus are defined by a 2012 presidential decree as settlements with populations under 60,000.  Individual entrepreneurs and legal entitites who work in rural areas, defined as settlements of less than 2,000, receive additional tax benefits and exemptions.

Since July 1, 2012, companies and individual entrepreneurs operating in all rural areas and towns enjoy the following benefits in the first seven years after registration:  exemption from profit tax on the sale of goods, work, and services of a company’s own production; exemption from other taxes and duties, except for VAT, excise tax, offshore duty, land tax, ecological tax, natural resources tax, customs duties and fees, state duties, patent duties, and stamp duty; exemption from mandatory sale of foreign currency received from sale of goods, work, and services of a company’s own production, and from leasing property; no restrictions on insuring risks with foreign insurers; exemption from import tariffs on certain goods brought into Belarus that contribute to the charter fund of a newly established business.  The special legal regime does not apply to banks, insurance companies, investment funds, professional participants in the securities market, businesses operating under other preferential legal regimes (e.g. FEZ or HTP), and certain other businesses.

Performance and Data Localization Requirements

The host government does not mandate local employment.  Foreign investors have the right to invite foreign citizens and stateless persons, including those without permanent residence permits, to work in Belarus provided their labor contracts comply with Belarusian law.  The GOB often imposes various conditions on permission to invest, and pursues localization policies when it deems it appropriate. Other performance requirements are often applied uniformly to both domestic and foreign investors.

According to official Belarusian sources, licenses are not required for data storage.  Law enforcement regulations governing electronic communications do not include any requirements specifically for foreign internet service providers.  Beginning in 2016, internet service providers are required, by law, to maintain all electronic communications for a one-year period.

According to official statistics, Belarus received USD 1.6 billion in FDI (on a net basis) in 2018, up from USD 1.24 billion in FDI in 2017 and USD 1.3 billion in 2016.  Russia (41.7 percent), Cyprus (13.5 percent), China (9.3 percent), Germany (5.5 percent), UAE (3.6 percent), Poland (3.4 percent), Ireland (2.8 percent), Latvia (2.5 percent), the United Kingdom (2.4 percent) and the United States (2.1 percent) are considered the top ten foreign investors in Belarus.   

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

For detailed statistics on foreign direct investments in and outside Belarus for 2010-2018 see the website of Belarus’ National Bank (http://www.nbrb.by/engl/statistics/ForeignDirectInvestments/  ) and Economy Ministry (https://www.economy.gov.by/ru/pezultat-ru/  ).

Table 3: Sources and Destination of FDI

Table 4: Sources of Portfolio Investment

For the latest available statistics on foreign portfolio investments in Belarus see the website of Belrus’ National Bank:  http://www.nbrb.by/engl/statistics/PortfolioInvestment  

Transparency of the Regulatory System

The Belgian government has adopted a generally transparent competition policy.  The government has implemented tax, labor, health, safety, and other laws and policies to avoid distortions or impediments to the efficient mobilization and allocation of investment, comparable to those in other EU member states.  Draft bills are never made available for public comment, but have to go through an independent court for vetting and consistency. Nevertheless, foreign and domestic investors in some sectors face stringent regulations designed to protect small- and medium-sized enterprises.  Many companies in Belgium also try to limit their number of employees to 49, the threshold above which certain employee committees must be set up, such as for safety and trade union interests.

Recognizing the need to streamline administrative procedures in many areas, in 2015 the federal government set up a special task force to simplify official procedures.  It also agreed to streamline laws regarding the telecommunications sector into one comprehensive volume after new entrants in this sector had complained about a lack of transparency.  Additionally the government beefed up its Competition Policy Authority with a number of academic experts and additional resources. Traditionally, scientific studies or quantitative analysis conducted on the impact of regulations are made publicly available for comment. However, not all public comments received by regulators are made public.

Accounting standards are regulated by the Belgian law of January 30, 2001, and balance sheet and profit and loss statements are identical with international accounting norms. Cash flow positions and reporting changes in non-borrowed capital formation are not required.  However, contrary to IAS/IFRS standards, Belgian accounting rules do require an extensive annual policy report.

Belgium publishes all its relevant legislation and administrative guidelines in an official Gazette, called Le Moniteur Belge (www.moniteur.be  ). The American Chamber of Commerce has called attention to the adverse impact of cumbersome procedures and unnecessary red tape on foreign investors, although foreign companies do not appear to be impacted more than Belgian firms.

International Regulatory Considerations

Belgium is a founding member of the EU, whose directives are enforced.  On May 25, 2018 Belgium implemented the General Data Protection Regulation (GDPR) (EU) 2016/679, an EU regulation on data protection and privacy for all individuals within the European Union.

Through the European Union, Belgium is a member of the WTO, and notifies all draft technical regulations to the WTO Committee on Technical Barriers to Trade (TBT).

Legal System and Judicial Independence

Belgium’s (civil) legal system is independent of the government and is a means for resolving commercial disputes or protecting property rights.  Belgium has a wide-ranging codified law system since 1830. There are specialized commercial courts which apply the existing commercial and contractual laws. As in many countries, the Belgian courts labor under a growing caseload, and backlogs cause delays. There are several levels of appeal.

Laws and Regulations on Foreign Direct Investment

Payments and transfers within Belgium and with foreign countries require no prior authorization. Transactions may be executed in euros as well as in other currencies.

Belgium has no debt-to-equity requirements.  Dividends may be remitted freely except in cases in which distribution would reduce net assets to less than paid-up capital.  No further withholding tax or other tax is due on repatriation of the original investment or on the profits of a branch, either during active operations or upon the closing of the branch.

Since there are three different regional Investment Authorities, the links to their respective websites are given below.

• Flanders: www.flandersinvestmentandtrade.com
• Wallonia; www.awex.be
• Brussels: www.investinbrussels.com  

Competition and Anti-Trust Laws

The contact address for competition-related concerns:

Federal Competition Authority
City Atrium, 6th floor
Vooruitgangsstraat 50
1210 Brussels
tel: +32 2 277 5272
fax: +32 2 277 5323
email: info@bma-abc.be
Website: www.bma-abc.be

Expropriation and Compensation

There are no outstanding expropriation or nationalization cases in Belgium with U.S. investors. There is no pattern of discrimination against foreign investment in Belgium.

When the Belgian government uses its eminent domain powers to acquire property compulsorily for a public purpose, adequate compensation is paid to the property owners. Recourse to the courts is available if necessary.  The only expropriations that occurred during the last decade were related to infrastructure projects such as port expansion, roads, and railroads.

Dispute Settlement

ICSID Convention and New York Convention

Belgium is a member of the International Center for the Settlement of Investment Disputes (ICSID) and regularly includes provision for ICSID arbitration in investment agreements.

Investor-State Dispute Settlement

The government accepts binding international arbitration of disputes between foreign investors and the state. There have been no investment disputes involving a U.S. person within the past 10 years.  Local courts are expected to enforce foreign arbitral awards issued against the government. To date, there has been no evidence of extrajudicial action against foreign investors.

International Commercial Arbitration and Foreign Courts

1. Alternative Dispute Resolution is not mandatory by law and is therefore not commonly used in disputes, except for matters where the determination by an expert is sought, whether appointed by the parties in agreement or in accordance with a contractual clause or appointed by the court in the context of dispute resolution.
2. Belgium has no domestic arbitration bodies.
3. Local courts recognize and enforce foreign arbitral awards. Judgments of foreign courts are recognized and enforceable under the local courts.
4. There are no reports or complaints targeting Court proceedings involving SOEs or alleged favoritism for them.

Bankruptcy Regulations

Belgian bankruptcy law is governed by the Bankruptcy Act of 1997 and is under the jurisdiction of the commercial courts.  The commercial court appoints a judge-auditor to preside over the bankruptcy proceeding and whose primary task is to supervise the management and liquidation of the bankrupt estate, in particular with respect to the claims of the employees.  Belgian bankruptcy law recognizes several classes of preferred or secured creditors. A person who has been declared bankrupt may subsequently start a new business unless the person is found guilty of certain criminal offences that are directly related to the bankruptcy.  The Business Continuity Act of 2009 provides the possibility for companies in financial difficulty to enter into a judicial reorganization. These proceedings are to some extent similar to Chapter 11 as the aim is to facilitate business recovery. In the World Bank’s Doing Business Report, Belgium ranks number 8 (out of 198) for the ease of resolving insolvency.

Investment Incentives

Since the law of August 1980 on regional devolution in Belgium, investment incentives and subsidies have been the responsibility of Belgian’s three regions: Brussels, Flanders, and Wallonia.  Nonetheless, most tax measures remain under the control of the federal government as do the parameters (social security, wage agreements) that govern general salary and benefit levels. In general, all regional and national incentives are available to foreign and domestic investors alike.

Belgian investment incentive programs at all levels of government are limited by EU regulations and are normally kept in line with those of the other EU member states.  The European Commission has tended to discourage certain investment incentives in the belief that they distort the single market, impair structural change, and threaten EU convergence, as well as social and economic cohesion.   In January 2016, the European Commission ordered Belgium to reclaim up to USD 900 million in tax breaks from 36 companies (12 of whom are U.S. companies) going as far back as 2004. The Belgian Government had given these breaks to companies through a series of one-off fiscal rulings. Belgium legally challenged the EC decision and won, but the EC can still appeal the ruling (see above).

In their investment policies, the regions emphasize innovation promotion, research and development, energy savings, environmental cleanliness, exports, and most of all, employment.  The three regional agencies have staff specializing on specific regions of the world, including the United States, and have representation offices in different countries. In addition, the Finance Ministry established a foreign investment tax unit in 2000 to provide assistance and to make the tax administration more “user friendly” to foreign investors.

In 2005, the Belgian Federal Finance Ministry proposed a new investment incentive program in the form of a notional interest rate deduction.  This was adopted by Parliament, and since January 1, 2006, the new tax law permits a corporation established in Belgium, foreign or domestic, to deduct from its taxable profits a percentage of its adjusted net assets linked to the rate of the Belgian long-term state bond.  The law permits all companies operating in Belgium to deduct the “notional” interest rate that would have been paid on their locally invested capital had it been borrowed at a rate of interest equal to the current rate the Belgian government pays on its 10-year bonds. This amount is deducted from profits, thus lowering nominal Belgian corporate taxes.  The applicable interest rate is adjusted annually, but will never be allowed to vary more than one percent (100 basis points) in one year nor exceed 6.5 percent.

Foreign Trade Zones/Free Ports/Trade Facilitation

There are no foreign trade zones or free ports as such in Belgium.  However, the country utilizes the concept of customs warehouses. A customs warehouse is a warehouse approved by the customs authorities where imported goods may be stored without payment of customs duties and VAT.  Only non-EU goods can be placed under a customs warehouse regime. In principle, non-EU goods of any kind may be admitted, regardless of their nature, quantity, and country of origin or destination. Individuals and companies wishing to operate a customs warehouse must be established in the EU and obtain authorization from the customs authorities.  Authorization may be obtained by filing a written request and by demonstrating an economic need for the warehouse.

Performance and Data Localization Requirements

Performance requirements in Belgium usually relate to the number of jobs created. There are no national requirement rules for senior management or board of directors. There are no known cases where export targets or local purchase requirements were imposed, with the exception of military offset programs, which were reintroduced under Prime Minister Verhofstadt in 2006.  While the government reserves the right to reclaim incentives if the investor fails to meet his employment commitments, enforcement is rare. However, in 2012, with the announced closure of an automotive plant in Flanders, the Flanders regional government successfully reclaimed training subsidies that had been provided to the company.

There is currently no requirement for foreign IT providers to share source code and/or provide access to surveillance agencies.  There is for the moment no forced localization, but the European Parliament is currently considering legislative steps in that direction.

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

* Source for Host Country Data:
GDP: https://stat.nbb.be/Index.aspx?ThemeTreeId=41&lang=fr#  
National Bank of Belgium offers different statistics, but it does not match the BEA stats. https://stat.nbb.be/Index.aspx?DataSetCode=INVDIR  

Table 3: Sources and Destination of FDI

Table 4: Sources of Portfolio Investment

New link: http://data.imf.org/CPIS   

Transparency of the Regulatory System

Regulatory authority exists both at the local and national levels with national laws and regulations being most relevant to foreign businesses.  Despite these measures, some investors complain that the regime for incentives did not always meet their needs, that land titles are not always reliable and secure, and that bureaucratic delays or corruption can be hindrances to doing business in Belize.

There are quasi-governmental organizations mandated by law to manage specified regulatory processes on behalf of the Government of Belize, e.g. the Belize Tourism Board, BELTRAIDE, and the Belize Agricultural Health Authority.  There are no reports that these processes significantly distort or discriminate against foreign investors.

The cabinet dictates government policies that are enacted by the legislature and implemented by the various government ministries.  Regulations exist at the local level, primarily relating to property taxes and registering for trade licenses to operate businesses in the municipality.

Accounting, legal, and regulatory systems are consistent with international norms. Publicly owned companies are generally audited annually and the reports are prepared in accordance with International Financial Reporting Standards and International Standards on Auditing.

The mechanism for drafting bills, regulations and enacting legislation generally apply across the board and apply to investment laws and regulations.  The government publishes in the Gazette, proposed as well as enacted laws and regulations that are publicly available for a minimal fee.

Draft bills are generally open to public comment.  Once introduced in the House of Representatives, they are sent to Standing Committees of the House of Representatives, which then meet and invite the public and interested persons to review, recommend changes, or object to draft laws prior to further debate.  Public comments on draft legislation are not generally posted online nor made publicly available. It would be the prerogative of an interested party to attend public consultations, committee meetings, or to request the public comments from the National Assembly or relevant Ministry.  Additionally, laws are sometimes passed quickly without meaningful publication, public review or public debate; as was the case with the Central Bank of Belize (International Immunities Act) and the Crown Proceedings (Amendment Act) of 2017.

Government ministries also make available policies, laws, and regulations pertinent to their portfolio available on their respective ministry websites.  Since 2016, enacted laws have been published on the website of the National Assembly. There is however, a delay in updating the website.

Regulations and enforcement actions are appealable with regulatory decisions subject to judicial review.  There have been no regulatory systems including enforcement reforms announced in the last year.

Information on the public finance, the government’s budget and debt obligations (including explicit and contingent liabilities) are widely accessible to the general public, with most documents available online.

International Regulatory Considerations

As a full member of the Caribbean Community (CARICOM), Belize’s foreign, economic and trade policies vis-a-vis non-members are coordinated regionally.  The country’s import tariffs are largely defined by CARICOM’s Common External Tariff.

Belize is also a member of several other treaties because of its CARICOM membership.  A primary example is the Economic Partnership Agreement (EPA) between CARIFORUM and the European Union (EU).  In the wake of Brexit, these countries also signed a CARIFORUM – United Kingdom Economic Partnership Agreement in March 2019.  The latter agreement is expected to come into effect by January 2021or soon after the UK leaves the EU.

Outside of CARICOM, Belize is a member of the Central American Integration System (SICA) at a political level, but is not a part of the Secretariat of Central American Economic Integration (SIECA) that supports economic integration of Central America.

Belize is also a member of the WTO and adheres to the organization’s agreements and reporting system.  The Belize Bureau of Standards (BBS) is the national standards body responsible for preparing, promoting and implementing standards for goods, services, and processes.  The BBS operates in in accordance with the WTO Agreement on Technical Barriers to Trade and the CARICOM Regional Organization for Standards and Quality. The BBS is also a member of the International Electrotechnical Commission (IEC), the International Organization for Standardization (ISO), and Codex Alimentarius.

Legal System and Judicial Independence

The Belize Constitution, is the supreme law and is founded on the principle of separation of powers with independence of the judiciary from the executive and legislative branches of government.  As a former British colony, Belize follows the English Common Law legal system, which is based on established case law. Belize has a written Contract Act, supported by precedents from the national courts as well as from the wider English speaking and Commonwealth case law.  Contracts are enforced through the courts.

General information relating to Belize’s judicial and legal system, including links to Belize’s Constitution, Laws and judicial decisions are available at the Judiciary of Belize website www.belizejudiciary.org  .  There are specialized courts that deal with family related matters including divorce and child custody, but no specialized courts to deal with commercial disputes or cases.

The current judicial process continues to face challenges including frequent adjournments, delays, and a backlog of cases.  Several measures are being implemented to improve the country’s judiciary. The training of mediators and the introduction of court-connected mediation support alternative methods to dispute settlement.  This effort along with better case management procedures is expected to decrease the court’s caseload, time delays, and cost particularly for smaller claim civil cases.

Regulations and enforcement actions are appealable.  Regulatory decisions are also subject to judicial review.  Judgments by the Belize Supreme Court and the Court of Appeal are available at http://www.belizejudiciary.org  .  In 2010, Belize adopted the Caribbean Court of Justice (CCJ) as its final appellate court on civil and criminal matters, replacing the Judicial Committee of the Privy Council of the United Kingdom.  Judgments by the Caribbean Court of Justice, are available at http://www.caribbeancourtofjustice.org  .

Laws and Regulations on Foreign Direct Investment

The country has an English Common Law legal system supplemented by local legislation and regulations.  Enacted laws are generally available in the National Assembly’s website at www.nationalassembly.gov.bz  .  Examples of key legislation passed in 2018 include:

• Designated Processing Areas Act, 2018
• Income and Business Tax (Amendment) Act, 2018
• Stamp Duties (Amendment) Act, 2018
• International Business Companies (Amendment) Act, 2018
• Bill of Sales (Amendment) Act, 2018
• General Sales Tax (Amendment) Act, 2018
• Customs Excise Duties (Amendment), 2018
• International Financial Services Commission, 2018

The laws, rules, procedures, and reporting requirements related to investors differ depending on the nature of the investment.  BELTRAIDE provides advisory services for foreign investors relating to procedures for doing business in Belize and incentives available to qualifying investors.  Further information is available at the BELTRAIDE website: http://www.belizeinvest.org.bz  

Competition and Anti-Trust Laws

Belize does not have any laws governing competition, but there are attempts to limit outside competition in certain industries (such as food and agriculture) by levying high import duties.

Expropriation and Compensation

The Government has used the right of eminent domain in several cases to appropriate private property, including land belonging to foreign investors.  There were no new expropriation cases in 2018. However, there are allegations that several previous expropriations were done for personal or political gain.  Belizean law requires that the government assess and compensate according to fair market value. Such expropriation cases can take several years to settle and there are a few cases where compensation is still pending.  In the cases of expropriations, the claimants assert that the Government failed to adhere to agreements entered into by a previous administration.

The process to acquire land titles is open to abuse with numerous cases of land title manipulation involving foreigners and Belizeans.  The government continues efforts at improving the land title system and in addressing delays in processing land transactions.

Dispute Settlement

ICSID Convention and New York Convention

The Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) was extended to Belize by an act of the United Kingdom when Belize was a colony.  After independence, Belize did not ratify the Convention nor is it listed as a contracting state. Nevertheless, the Arbitration Act governs arbitration and expressly incorporates three international conventions into domestic law.  These conventions include the 1923 Geneva Protocol on Arbitration Clauses; the Convention on the Execution of Foreign Arbitral Awards; and the New York Convention. A 2013 Caribbean Court of Justice judgment also upheld the Arbitration Act giving effect to the New York Convention in domestic law.

Belize signed but has not ratified the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID convention).  For more information visit http://sice.oas.org/dispute/comarb/icsid/w_conv1.asp  

Investor-State Dispute Settlement

Belize is signatory to various investment agreements which make provisions for the settlement of investor-state disputes.  Belize is also a member of the CARICOM Single Market and Economy, as well as a party to two regional Economic Partnership Agreements (EPA): 1) between CARIFORUM and the EU; and 2) CARIFORUM and the United Kingdom.  These regional arrangements make provisions for the settlement of investor-state disputes.

Since Belize is not a party to any Bilateral Investment Treaty (BIT) or Free Trade Agreement (FTA) with the United States, investment disputes involving U.S. persons are taken either before the courts or before international arbitration panels.

Local courts are empowered to recognize and enforce foreign arbitral awards against the government but these are generally challenged up to the CCJ.  In January 2017, the Crown Proceedings (Amendment) Act and the Central Bank of Belize (International Immunities) Act were passed, which also affect the enforcement of foreign arbitral awards against the government.  Essentially, the Crown Proceedings Amendment Act provides that if a foreign judgment is entered against the government and later declared as “unlawful, void or otherwise invalid” by a court in Belize, the foreign judgement would not be enforced in or outside Belize.  The Act also provides for hefty penalties of fines and/or imprisonment on a person, individual or legal, seeking to enforce the foreign judgment. The Central Bank (International Immunities) Act restates the immunity of the Central Bank of Belize assets “from legal proceedings in other states.”  This Act similarly provides for penalties of fines and/or imprisonment on a person, individual or legal, which initiates any such proceedings. Despite these legislative acts, there has not been a history of extrajudicial actions against foreign investors.

Over the past decade, the Government of Belize has been involved in numerous investment disputes with one involving a U.S. company.  Most cases were initially entered in arbitration panels, but were eventually appealed either before the U.S. District Court of Colombia or the CCJ.  The majority of the judgements went against the Government, which has settled some and continues to settle other cases.

International Commercial Arbitration and Foreign Courts

Belize’s Arbitration Act allows the Supreme Court of Belize to support and supervise dispute settlement between private parties by arbitration.  In 2013, the Supreme Court also introduced the process of court-connected mediation as an alternative method to dispute settlement between private parties and as a means of reducing costs and duration of litigation.

Local courts are empowered to recognize and enforce foreign arbitral but these are generally challenged up to the CCJ, Belize’s highest appellate court.

There are numerous instances of cases involving State Owned Enterprises (SOEs) which went before domestic courts with rulings both in favor and against the SOE.

Bankruptcy Regulations

Chapter 244 of the Laws of Belize (Bankruptcy Act) provides and allows for bankruptcy filings. The Act provides for the establishment of receivership, trustees, adjudication and seizures of the property of the bankrupt.  The court may order the arrest of the debtor as well as the seizure of assets and documents in the event the debtor may flee or avoid payment to creditors. The Act also provides for imprisonment on conviction of certain specified offenses.  The Director of Public Prosecutions may also institute proceedings for offenses related to the bankruptcy proceedings.

Investment Incentives

The legal framework authorizing and providing for investment incentives include the Fiscal Incentives Act, the Designated Processing Areas Act, the Commercial Free Zone Act, the International Business Companies Act, the Retired Persons Incentives Act, the Trusts Act, the Offshore Banking Act, and the Gaming Control Act.

The Government of Belize enacted the Designated Processing Areas Act, 2018, which replaces the Export Processing Zone incentive program.  Additionally, legislative review of the Fiscal Incentives and the Commercial Free Zone programs continue. Investors seeking to take advantage of these programs should be aware of these developments when discussing investment concessions.

In exceptional circumstances, the current administration issues government guarantees from development institutions.  While government policies support public private partnership, there are not recent examples of joint financing of foreign direct investment projects.

Foreign Trade Zones/Free Ports/Trade Facilitation

The Designated Processing Areas Act (DPA) was passed in 2018 to replace the former Export Processing Zone Act.  While the program is being fully implemented, it remains a tool to attract local and foreign investments to boost production for export markets.  Approved companies under this program receive a DPA status for a period of up to ten years and may quality for various tax exemptions. These may include exemptions from Custom and Excise duties as well as from taxes on imported goods, namely the General Sales Tax, the Environmental Tax, and the Revenue Replacement Duties.  Similarly, property and land tax may be waived on the designated area. In addition, approved companies are given certain exemptions, including from the Trade Licensing Act requirements for operating in a municipality and the Supplies Control Act, in relation to the importation of raw materials for production that are not for sale in Belize.  Companies may maintain a foreign currency account in a domestic or international bank located in Belize as well as sell, lease, or transfer goods and services between DPA companies. While subject to the Income and Business Tax, businesses may qualify for a preferential tax rate on chargeable income. They may also be eligible for an annual quota for fuel solely for specified uses.

A Commercial Free Zone (CFZ) is a specifically designated area for the conduct of business operations, including for example, manufacturing, commercial offices, insurance services, banking and financial services, offshore financial services, professional or related services, processing, packaging, warehousing, and the distribution of goods and services.  Belize currently has two CFZs, one on the northern border with Mexico and a small zone on the western border with Guatemala. Goods originating from these free zones can only be sold into Belize’s national customs territory after the necessary duties and taxes have been assessed and paid. The Commercial Free Zone Management Agency (CFZMA) monitors and administers the free zones.  Incentives include exemptions from import duties, income tax, taxes on dividends, capital gains tax, or any new corporate tax levied by the Government during the first 10 years of operation. In addition, imports and exports of a CFZ are exempt from customs duties, consumption taxes, excise taxes, or in-transit taxes, except those destined for or directly entering areas subject to the national customs territory. Additionally, CFZ businesses incurring a net loss over the five-year tax holiday may deduct losses from profits in the three years following the tax holiday period.

Performance and Data Localization Requirements

The Fiscal Incentives Act awards a qualified entity a development concession during the start-up or expansion stages to foster growth by offsetting custom duties. According to BELTRAIDE (www.belizeinvest.org.bz   ), two programs are offered under this Act, the Regular Program for investments exceeding USD150,000 and the Small and Medium Enterprise (SME) program for investments of less than USD150,000.  In general, the legal framework allows for full Customs Duties exemptions and Tax Holidays for up to 15 years for approved enterprises. The length and extent of a development concession are determined by several factors, including: (a) the extent of local value added; (b) the projected profitability of the enterprise; (c) foreign exchange earnings or savings; (d) transfer of skills and technology; and (e) new employment opportunities.

The Fiscal Incentives SME Program is aimed at smaller enterprises with a minimum of 51 percent Belizean ownership. The SME Program offers the same benefits of the Regular Program, with the exception of the allowable timeframe for duty exemptions.  Under this program, companies are allowed a maximum of five years of development concessions, with the expectation that after this period, companies can mature into the Regular Program.

The International Business Companies (Amendment) Act was passed in December 2018 largely to satisfy OECD base erosion and profit sharing requirements (BEPS).  The main change is that IBCs are no longer ring-fenced, with both residents and non-residents allowed to take part in the regime and IBCs no longer restricted from carrying on business with residents.  Additionally, IBCs are now liable for both income tax and stamp duty and required to file annual returns. Another important change is that IBC companies must be conducted and controlled from Belize with least two resident directors.  Certain activities are now also excluded, including those related to banking, fund management, or insurance business. See http://www.ibcbelize.com   and www.ifsc.gov.bz   for more information.

The Qualified Retirement Program (QRP) was created to facilitate eligible persons who have met the income requirements to permanently live and retire in Belize.  The Belize Tourism Board overseas this program designed to benefit retired persons over 45 years of age. To qualify, applicants need proof of income not less than USD2,000 per month through a pension or annuity generated outside of Belize.  An approved QRP is allowed to import personal effects as well as approved means of transportation, free of customs duties and taxes. All income generated outside of Belize is also free of taxes. An approved QRP is given one year to import all personal and household effects into Belize, using multiple shipments as necessary.  Duty and tax-free importation of an automobile, light aircraft or boat is allowed, with vehicles allowed to be replaced every three years. Effects and items imported under this program can only be sold, given away, or leased after the appropriate payment of applicable duties and taxes. For more information, visit http://www.belizetourismboard.org  

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

* Source for Host Country Data: Statistical Institute of Belize, Central Bank of Belize

Table 3: Sources and Destination of FDI

Statistics on foreign direct investments in Belize by country of origin is limited, including the total invested by U.S. investors.  The Central Bank of Belize recorded total inflows of FDI at USD152.48 million in 2018 and outflows at USD32.933 million in the same period.  Major sources of FDI include the United States, Canada and the United Kingdom. FDI inflows are traditionally concentrated primarily in real estate, construction, reinvested earnings and the agriculture sectors.

Table 4: Sources of Portfolio Investment

Data not available.

Transparency of the Regulatory System

Benin is a member of UNCTAD’s international network of transparent investment procedures.  Foreign and domestic investors can find detailed information on administrative procedures applicable to investment and income generating operations at http://benin.eregulations.org/  , including the number of steps, name and contact details of the entities and persons in charge of procedures, required documents and conditions, costs, processing time, and legal bases justifying the procedures.  There is no rule to prevent a monopoly over a particular business sector. The Benin Private Investment Council (CIPB) is the only business-related think-tank or body that advocates for investors, http://www.cipb.bj/  .  Generally, draft bills are not available for public comment.  However, individuals (including non-citizens) have the option to file appeals about or challenge passed or enacted bills with the country’s Constitutional Court.

International Regulatory Considerations

Benin is a member of the Organization for the Harmonization of African Business Law, known by its French acronym OHADA, and has adopted OHADA’s Universal Commercial Code (codified law) to manage commercial disputes and bankruptcies within French-speaking African member countries.  Benin is also a member of OHADA’s Common Court of Justice and Arbitration and the International Center for the Settlement of Investment Disputes (ICSID). OHADA provisions govern bankruptcy. Debtors may file for reorganization only, and the creditor may file for liquidation only.

Legal System and Judicial Independence

The preamble of the Beninese Constitution, adopted on December 11, 1990, highlights the attachment of the Beninese people “to principles of democracy and human rights as they have been defined by the Charter of the United Nations of 1945 and the Universal Declaration of Human Rights of 1948, the African Charter on Human and Peoples’ Rights adopted in 1981 by the Organization of African Unity and ratified by Benin on 20 January 1986 and whose provisions form an integral part of this present Constitution and of Beninese law and have a value superior to the internal law.”

Benin’s domestic law includes various legislative and regulatory texts covering family law, land law, labor law, criminal law, criminal procedure, and civil, commercial, social, and administrative proceedings.  The commercial court, created in 2017, enforces commercial related issues. Benin created an anti-terrorism, drugs, and economic crimes court (CRIET) in 2018. The CRIET has made several controversial decisions, including in cases of corruption charges against individuals who are among President Talon’s detractors.  In general, court cases tend to proceed slowly and there may be challenges in the enforcement of court decisions. Magistrates and judges, though appointed by the Executive, are by law independent. Benin’s courts enforce rulings of foreign courts and international arbitration.

Laws and Regulations on Foreign Direct Investment

The APIEX one-stop-shop website, http://benin.eregulations.org/  , provides information on regulations and procedures for investment in Benin.  Benin is a member of OHADA’s Common Court of Justice and Arbitration (CCJA) and the International Center for the Settlement of Investment Disputes (ICSID).  Investors may include arbitration provisions in their contracts in order to avoid prolonged entanglements in the Beninese courts. The United Nations’ investment guide for Benin (https://www.theiguides.org/public-docs/guides/benin/  ) details investment procedures in Benin.

Competition and Anti-Trust Laws

There is no existing agency that reviews transactions for competition-related concerns.  Only the local court or international arbitration courts may address these concerns filed with them.  There are no recent or existing competition cases to highlight.

Expropriation and Compensation

Based on a 1992 privatization law, the Government is forbidden from nationalizing private enterprises operating in Benin.

In conformity with World Bank structural reform commitments, the government opened the cotton sector and its related components (namely ginning and inputs) to the private sector in the 1990s, and in 2008 divested the ginning industry part of its agricultural parastatal SONAPRA (Société Nationale pour la Promotion Agricole) moving the ginning assets and regulatory control functions to SODECO (Societe de Developpement du Coton).  SODECO is a public-private joint venture: 35 percent government, 45 percent private (controlled by Societe Commune de Participation-SCP of now-President Patrice Talon), and the remainder split between stock market, local communities, cotton growers, and staff members but run by SCP. According to the founding convention, the GOB was to cede by 2013 its share to SCP.  With no publicly available on current SODECO ownership nobody would argue that SCP fully controls it.  In October 2012, prompted by concerns over performance and mismanagement, the government reassumed control of cotton production and ginning holdings under SONAPRA.  In 2014, OHADA’s CCJA judged that the Beninese government had illegally seized SODECO’s ginning assets, and similarly had illegally revoked the Port of Cotonou cargo inspection contract with the private company Benin Control.  The CCJA ordered payment of USD 267 million in compensation to the two companies owned or largely controlled by then-cotton tycoon, and current Head of State, Patrice Talon (see http://www.ohada.org/index.php/fr/ohada-au-quotidien/role-des-audiences-publiques-de-la-cour-ccja  ).  Under President Talon’s administration, in 2016 SODECO took back control of its ginning facilities and SONAPRA was dissolved.

In 2006, the government took over the management of previously privatized oil company SONACOP on the grounds that the company was in financial disarray, lacked funds for its operations, and was unable to supply gas stations throughout the country.  SONACOP is still a state-owned enterprise charged with import and distribution of petroleum products.

In February 2017, the Council of Ministers announced that the government was terminating concessions for the management of four state-owned hotels (two in Cotonou and two in northern Benin), and instructed the Minister of Justice to file reparations claims against the concessionaires on the grounds that they had not fulfilled their concession agreements.

In 2012, the government took control of the private bank Banque Internationale du Benin (BIBE) stating that poor management risked leading the bank to bankruptcy and possible systemic risk to the banking sector.  BIBE is still in government hands.

Dispute Settlement

ICSID Convention and New York Convention

Benin is a member of the International Center for the Settlement of Investment Disputes (ICSID) and New York Convention.

Investor-State Dispute Settlement

Post has no reports of government interference in judicial handling of investment disputes.

All three known past investment disputes between U.S. investors and the Beninese government were resolved in favor of the U.S. investors.  However, in 2016, the government revoked the contract of U.S.-based company SECURIPORT for the provision of civil aviation and immigration security services in the favor of Morpho-Dys, a company based in Cote d’Ivoire; this dispute remains unresolved.  The local courts recognize and enforce foreign arbitral awards issued against the government. In 2010, Benin’s civil society challenged a contract awarded by the government in the communications sector and the award decision was reversed.

There is an investment incentive agreement between the Government of the United States of America and the Government of Benin.

International Commercial Arbitration and Foreign Courts

Benin is a member of the Organization for the Harmonization of African Business Law, known by its French acronym OHADA, and has adopted OHADA’s Universal Commercial Code (codified law) to manage commercial disputes and bankruptcies.  Benin is also a member of OHADA’s Common Court of Justice and Arbitration and the International Center for the Settlement of Investment Disputes (ICSID) and as such enforces foreign arbitral awards as well as foreign court rulings. Post is unaware of any investment dispute resolution made in favor of a state-owned enterprise by domestic courts.

Bankruptcy Regulations

OHADA provisions govern bankruptcy.  Debtors may file for reorganization only, and creditors may file for liquidation only.

Benin ranked 110 in the “Resolving Insolvency” category of the World Bank Group’s 2019 Doing Business report.  While this may seem a downgrade from 2018’s score of 105, it actually reflects a very modest improvement even as its relative score to other countries places it lower on the list.

Investment Incentives

Depending on the size of the investment, investors may benefit from reduced tax liability on profits or imported industrial equipment for up to one year from the date of business registration.  Investors must meet several criteria including employing a minimum number of Beninese nationals, safeguarding the environment, and meeting nationally accepted accounting standards. The Investment Control Commission monitors companies that receive these incentives to ensure compliance.

Foreign Trade Zones/Free Ports/Trade Facilitation

The 2008 Investment Code allows for the creation of Free Trade Zones and establishes incentives such as tax reductions for investors.  There are currently three Free Trade Zones in Benin, but the only active one is located in southeastern Benin near the Nigerian border.  Depending on the size of the investment, free trade zone investors may benefit from reduced tax liability on profits, and duty free on imported inputs including raw material and equipment, exported finished products, or imported industrial equipment for up to one year from the date of business registration.  Investors must meet several criteria including employing a minimum number of Beninese nationals, safeguarding the environment, and meeting nationally accepted accounting standards. A local entity and a foreign investor enjoy the same opportunities. The Investment Control Commission monitors companies that receive these incentives to ensure compliance.

Performance and Data Localization Requirements

According to Benin’s 2008 Investment Code, investors must meet certain criteria, including employment of a minimum number of Beninese nationals, in order to qualify for tax reductions and other incentives.  These criteria are not rigorously applied to senior management. Union leader participation is required in Board of Directors’ meetings.

There are no government-imposed conditions on permission to invest and there is no “forced localization” policy pertaining to the use of domestic content in goods or technology.  There are no requirements in place for foreign IT providers to turn over source code and/or provide access to encryption.

The Benin Post and Communications Regulatory Authority, ARCEP, ensures the confidentiality of the content of all communications by the service provider or operator, whether this is information or other data the service provider obtains in the course of providing the services offered.  No information may be disclosed without the written consent of ARCEP or a signed order of the competent judicial authority.  Additional information may be found at www.arcep.bj  .

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

* Source for Host Country Data: Institut National de la Statistique et de l’Analyse Économique

Table 3: Sources and Destination of FDI

Table 4: Sources of Portfolio Investment

Data not available.

Transparency of the Regulatory System

Bolivia has no laws or policies that directly foster competition on a non-discriminatory basis.  However, Article 66 of the Commercial Code (Law 14379, 1977) states that unfair competition, such as maintaining an import, production, or distribution monopoly, should be penalized according to criminal law.  There are no informal regulatory processes managed by nongovernmental organizations or private sector associations.

Regulatory authority regarding investment exists at the national level in Bolivia.  There are no informal regulatory procedures.

The Commercial Code requires that all companies keep adequate accounting records and legal records for transparency.  However, there is a large informal sector that does not follow these practices.  Most accounting regulations follow international principles, but the regulations do not always conform to international standards.  Large private companies and some government institutions, such as the Central Bank and the Banking Supervision Authority, have transparent and consistent accounting systems.

Formal bureaucratic procedures have been reported to be lengthy, difficult to manage and navigate, and sometimes debilitating.  Many firms complain that a lack of administrative infrastructure, corruption, and political motives impede their ability to perform. The one exception is when registering a new company in Bolivia.  Once a company submits all documents required to the FUNDEMPRESA, the process usually takes less than one week.

There is no established public comment process allowing social, political, and economic interests to provide advice and comment on new laws and decrees.  However, the government generally — but not always — discusses proposed laws with the relevant sector.  The lack of laws to implement the 2009 Constitution creates legal discrepancies between constitutional guarantees and the dated policies currently enforced, and thus an uncertain investment climate.  Draft text or summaries are usually published on the National Assembly’s website.

Online regulatory disclosures by the Bolivian Government can be found in the “Gaceta Judicial” at:  http://www.gacetaoficialdebolivia.gob.bo/ 

Supreme Decree 71 in 2009 created a Business Auditing Authority (AEMP), which is tasked with regulating the business activities of public, private, mixed, or cooperative entities across all business sectors.  AEMP’s decisions are legally reviewable through appeal.  However, should an entity wish to file a second appeal, the ultimate decision-making responsibility rests with the Bolivian Government ministry with jurisdiction over the economic sector in question.  This has led to a perception that enforcement mechanisms are neither transparent nor independent.

Environmental regulations can slow projects due to the constitutional requirement of “prior consultation” for any projects that could affect local and indigenous communities.  This has affected projects related to the exploitation of natural resources, both renewable and nonrenewable, as well as public works projects.  Issuance of environmental licenses has been slow and subject to political influence and corruption.

In 2010, the new pension fund was enacted; it increased the contributions that companies have to pay from 1.71 percent of payroll to 4.71 percent.

International Regulatory Considerations

Bolivia is a full member of the Andean Community of Nations (CAN), comprised of Bolivia, Colombia, Ecuador, and Peru.  Bolivia is also in the process of joining the Southern Common Market (MERCOSUR) as a full member.  The CAN’s norms are considered supranational in character and have automatic application in the regional economic block’s member countries.  The government does notify the WTO Committee on Technical Barriers to Trade regarding draft technical regulations.

Legal System and Judicial Independence

Property and contractual rights are enforced in Bolivian courts under a civil law system, but some have complained that the legal process is time consuming and has been subject to political influence and corruption.  Although many of its provisions have been modified and supplanted by more specific legislation, Bolivia’s Commercial Code continues to provide general guidance for commercial activities.  The constitution has precedence over international law and treaties (Article 410), and stipulates that the state will be directly involved in resolving conflicts between employers and employees (Article 50).  There have been allegations of corruption within the judiciary in high profile cases.  Regulatory and enforcement actions are appealable.

Laws and Regulations on Foreign Direct Investment

No major laws, regulations, or judicial decisions impacting foreign investment came out in the past year.  There is no primary central point-of-contact for investment that provides all the relevant information to investors.

Competition and Anti-Trust Laws

Bolivia does not have a competition law, but cases related to unfair competition can be presented to AEMP.  Article 314 of the 2009 Constitution prohibits private monopolies.  Based on this article, in 2009 the Bolivian Government created an office to supervise and control private companies (http://www.autoridadempresas.gob.bo/ ). Among its most important goals are: regulating, promoting, and protecting free competition; trade relations between traders; implementing control mechanisms and social projects, and voluntary corporate responsibility; corporate restructuring, supervising, verifying and monitoring companies with economic activities in the country in the field of commercial registration and seeking compliance with legal and financial development of its activities; and qualifying institutional management efficiency, timeliness, transparency and social commitment to contribute to the achievement of corporate goals.

Expropriation and Compensation

The Bolivian Constitution allows the central government or local governments to expropriate property for the public good or when the property does not fulfill a “social purpose” (Article 57).  In the case of land, this social purpose (FES) is understood as “sustainable land use to develop productive activities, according to its best use capacity, for the benefit of society, the collective interest and its owner.”  In all other cases where this article has been applied, the Bolivian Government has no official definition of “collective interest” and makes decisions on a case-by-case basis.  Noncompliance with the social function of land, tax evasion, or the holding of large acreage is cause for reversion, at which point the land passes to “the Bolivian people” (Article 401).  In cases where the expropriation of land is deemed a necessity of the state or for the public good, such as when building roads or laying electricity lines, payment of just indemnification is required, and the Bolivian Government has paid for the land taken in such cases.  However, in cases where there is non-compliance, or accusations of such, the Bolivian Government is not required to pay for the land and the land title reverts to the state.

The constitution also gives workers the right to reactivate and reorganize companies that are in the process of bankruptcy, insolvency, or liquidation, or those closed in an unjust manner, into employee-owned cooperatives (Article 54).  The mining code of 1997 (last updated in 2007) and hydrocarbons law of 2005 both outline procedures for expropriating land to develop underlying concessions.

Between 2006 and 2014, the Bolivian Government nationalized companies that were previously privatized in the 1990s.  The government nationalized the hydrocarbons sector, the majority of the electricity sector, some mining companies (including mines and a tin smelting plant), and a cement plant.  To take control of these companies, the government forced private entities to sell shares to the government, often at below market prices.  Some of the affected companies have cases pending with international arbitration bodies.  All outsourcing private contracts were canceled and assigned to public companies (such as airport administration and water provision).

There are still some former state companies that are under private control, including the railroad, and some electricity transport and distribution companies.  The first non-former state company was nationalized in December of 2012.  Government nationalizations have not discriminated by country; some of the countries affected were the United States, France, the United Kingdom, Spain, Argentina, and Chile.  In numerous cases the Bolivian Government has nationalized private interests in order to appease social groups protesting within Bolivia.

Dispute Settlement

ICSID Convention and New York Convention

In November 2007, Bolivia became the first country ever to withdraw from ICSID.  In August 2010, the Bolivian Minister of Legal Defense of the State said that the Bolivian Government would not accept ICSID rulings in the cases brought against them by the Chilean company Quiborax and Italian company Euro Telcom.  However, the Bolivian Government agreed to pay USD 100 million to Euro Telecom for its nationalization; this agreement was ratified by a Supreme Decree 692 on November 3, 2010.  Additionally, in 2014, a British company that owned the biggest electric generation plant in Bolivia (Guaracachi) won an arbitration case against Bolivia for USD 41 million.  In 2014, an Indian company won a USD 22.5 million international arbitration award in a dispute over the development of an iron ore project.  The Bolivian Government has appealed that award.

In another case, a Canadian mining company with significant U.S. interests failed to complete an investment required by its contract with the state-owned mining company.  The foreign company asserts it could not complete the project because the state mining company did not deliver the required property rights.  The foreign company entered into national arbitration (their contract does not allow for international arbitration) and in January 2011, the parties announced a settlement of USD 750,000, which the company says will be used to pay taxes, employee benefits, and pending debts — essentially leaving them without compensation for the USD 5 million investment they had made.  They also retained responsibility for future liabilities.

Investor-State Dispute Settlement

Conflicting Bolivian law has made international arbitration in some cases effectively impossible.  Previous investment contracts between the Bolivian Government and the international companies granted the right to pursue international arbitration in all sectors and stated that international agreements, such as the ICSID and the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards, must be honored.  However, the government claims these rights conflict with the 2009 Constitution, which states (Articles 320 and 366) that international arbitration is not recognized in any case and cannot proceed under any diplomatic claim, and specifically limits foreign companies’ access to international arbitration in the case of conflicts with the government.  The 2009 Constitution also states that all bilateral investment treaties must be renegotiated to incorporate relevant provisions of the new constitution.  The Investment Law of 2014 was enacted in late 2015.  Under the 2015 Arbitration Law (Law 708), international arbitration is not permitted when the dispute is against the government or a state-owned company.

A variety of companies of varying nationality were affected by the government’s nationalization policy between 2006 and 2014.  In 2014, President Morales announced there would be no more nationalizations.  The same year, one Brazilian company was nationalized, but that had been previously agreed to with the owner under the previous nationalization policy.

International Commercial Arbitration and Foreign Courts

In Bolivia, two institutions have arbitration bodies, including the National Chamber of Commerce and the Chamber of Industry and Commerce of Santa Cruz (CAINCO).  In order to utilize these domestic arbitration bodies, the private parties must include arbitration within their contracts.  Depending on the contract between the parties, UNCITRAL or Bolivia’s Arbitration Law (No. 708) may be used.  Local courts recognize and enforce foreign arbitral awards and judgments.   There are no statistics available regarding SOE involvement in investment disputes.

Bankruptcy Regulations

Bolivia ranks above regional averages for resolving insolvency according to the World Bank’s Doing Business Report.  The average time to complete bankruptcy procedures to close a business in Bolivia is 20 months.  The Bolivian Commercial Code includes (Article 1654) three different categories of bankruptcy:

1. No Fault Bankruptcy – when the owner of the company is not directly responsible for its inability to pay its obligations.
2. At- Fault Bankruptcy – when the owner is guilty or liable due to the lack of due diligence to avoid harm to the company.
3. Bankruptcy due to Fraud – when the owner intentionally tries to cause harm to the company.

In general, the application of laws related to commercial disputes and bankruptcy has been perceived as inconsistent, and charges of corruption are common.  Foreign creditors often have little redress beyond Bolivian courts, and judgments are generally more favorable to local claimants than international ones.  If a company declares bankruptcy, the company must pay employee benefits before other obligations.  Workers have broad-ranging rights to recover pay and benefits from foreign firms in bankruptcy, and criminal actions can be taken against individuals the Bolivian Government deems responsible for failure to pay in these matters.

No credit bureaus or credit monitoring authorities serve the Bolivian market.

In 2018, the Bolivian Government enacted a new law (No. 1055) called the Creation of Social Enterprises.  The law allows for employees of a company to assert ownership rights over companies under financial distress heading into bankruptcy.  Passage of the law was controversial, with numerous business chambers asserting that the law could incentivize employees and labor unions to undermine the performance of companies in order to force bankruptcy and gain control of company assets.

Investment Incentives

In an effort to attract more investment, the government enacted an investment law in 2014, which says that each Ministry will provide incentives for sector-specific investment.

Article 14 of the 2014 investment law requires technology transfer from foreign companies operating in Bolivia to Bolivian workers and institutions.  The law also specifies that Bolivians should work in operational, administrative, and executive offices of foreign companies.  Also, companies investing in Bolivia should donate equipment and machinery to universities and technical schools in the same area as the investment, and conduct research activities that will find solutions that contribute to public welfare.

Article 21 of the investment law stipulates that the government can incentivize investment in certain sectors that contribute to the economic and social development of the country.

Law 767 from 2015 aims to promote investments in the exploration and exploitation of hydrocarbons.  However, many companies considered this regulation as skewed to production and insufficient to incentivize new exploration.  In 2016, Supreme Decree 2830 was issued, providing a 12 percent reduction in the payment of the direct tax on hydrocarbons and other incentives in order to better incentive exploration.

Foreign Trade Zones/Free Ports/Trade Facilitation

In 2016, Supreme Decree 2779 was enacted, approving regulations for a new system of free trade zones in Bolivia.  The decree establishes a period of one year for existing free trade zones to transform into free industrial zones, which allow for industrial operations and assembly.  Free industrial zones exist in El Alto, Patacamaya, Oruro, Puerto Suarez, and Warnes.  Cobija is the only remaining free trade zone under this new system, with operations approved until 2038.  Concessions within free industrial zones are 15 years in duration and renewable.  The decree also eased customs procedures for goods entering the zones and established stronger government support for the promotion of productive investments in the zones.

Performance and Data Localization Requirements

Bolivian labor law requires businesses to limit foreign employees to 15 percent of their total work force and requires that such foreign hires be part of the technical staff.  These workers require a work visa that can be obtained in any Bolivian consulate, and in the case that they work for a Bolivian company, both the company and the workers should also contribute to the Bolivian Pension System (Pension Law Article 104.1)

Supreme Decree 27328 regulates national and local level government procurement, which give priority to national sourcing.  If an item required is not produced in Bolivia, buying decisions are made based on price.  Supreme Decree 28271 (Article 10), establishes the following preference margins for sourcing with Bolivian products:

Except for national tenders, 10 percent preference margin for Bolivian products regardless of the origin of materials.

For national public tenders, if the cost of Bolivian materials represents more than 50 percent of the total cost of the product, the producers receive a 10 percent preference margin over other sellers.

In national and international public tenders, if Bolivian inputs and labor represent more than the 50 percent of the total cost of the product, the seller receives a 25 percent preference margin over other sellers.  If the Bolivian inputs and labor represent between 30 percent and 50 percent of the total cost of the product, the seller receives a 15 percent preference margin over other sellers.

Under the Bolivian Criminal Code (Article 226), it is a crime to raise or lower the price of a product based on false information, interests, or actions.  For those caught doing so, punishment is six months to three years in prison.  It is also a crime to hoard or conceal products in order to raise prices.  The Bolivian Government has aggressively applied these provisions in a number of cases, applying regulations that allow them to request accounting records and audit companies’ financial actions looking for evidence of speculation.

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

* Source for Host Country Data: BEA, UNCTAD, World Bank

Table 3: Sources and Destination of FDI

Table 4: Sources of Portfolio Investment

The government has adequate laws to foster competition; however, due to corruption, laws are often not implemented transparently or efficiently.  The multitude of state, entity, cantonal (in the Federation only), and municipal administrations – each with the power to establish laws and regulations affecting business – creates a heavily bureaucratic, non-transparent system.  Ministries and/or regulatory agencies are not typically obligated to publish the text of proposed regulations before they are enacted. Some local and international companies have expressed frustration with generally limited opportunities to provide input and influence/improve draft legislation that impacts the business community.

Foreign investors have criticized government and public procurement tenders for a lack of openness and transparency.  Dispute resolution is also challenging as the judicial system moves slowly, often does not adhere to existing deadlines, and provides no recourse if the company in question re-registers under a different name.

In an effort to promote the growth of business in its entity, the Republika Srpska government passed a series of amendments in 2013 to create an RS one-stop-shop for business registration.  This institution centralizes the process of registering a business, ostensibly making it easier, faster, and cheaper for new business owners to register their companies in the RS. The Federation’s announced plans to establish a one-stop-shop have long been delayed.

Businesses are subject to inspections from a number of entity and cantonal/municipal agencies, including the financial police, labor inspectorate, market inspectorate, sanitary inspectorate, health inspectorate, fire-fighting inspectorate, environmental inspectorate, institution for the protection of cultural monuments, tourism and food inspectorate, construction inspectorate, communal inspectorate, and veterinary inspectorate.  Some investors have complained about non-transparent fees levied during inspections, changing rules and regulations, and an ineffective appeals process to protest these fines.

International Regulatory Considerations

BiH is not a part of the EU, the WTO, or a signatory to the TFA.

Legal System and Judicial Independence

BiH has a clogged court system and it often takes several years for a case to be brought to trial.  Moreover, commercial cases with subject matter that judges do not have experience adjudicating, such as intellectual property cases, are often left unresolved for lengthy periods of time.  Most judges have little to no in-depth knowledge of adjudicating international commercial disputes and require training on applicable international treaties and laws. Regulations or enforcement actions can be appealed, and appeals are adjudicated in the national court system.

The U.S. Government has provided training to judges, trustees, attorneys, and other stakeholders at the state and entity levels to assist in the development of bankruptcy and intellectual property rights laws.  Those laws are now in effect at both the entity and state levels, but have not been fully implemented.

Laws and Regulations on Foreign Direct Investment

The state-level Law on the Policy of Foreign Direct Investment accords foreign investors the same rights as domestic investors and guarantees foreign investors national treatment, protection against nationalization/expropriation, and the right to dispose of profits and transfer funds.  In practice, most business sectors in Bosnia and Herzegovina are fully open to foreign equity ownership. Notable exceptions to this general rule are select strategic sectors, such as defense; electric power transmission, which is closed to foreign investment; and some areas of publishing and media, where foreign ownership is restricted to 49 percent (see below).  However, an Entity Government may decide that companies normally subject to this limitation are not subject to restrictions.

According to legal amendments adopted in March 2015, foreign investors can now own more than 49 percent of capital business entities dealing with media activities, such as publishing newspapers, magazines and other journals, publishing of periodical publications, production and distribution of television programs, privately owned broadcasting of radio and TV programs, and other forms of daily or periodic publications.  The new law maintains the restriction that foreign investors cannot own more than 49 percent of public television and radio services. The March 2015 amendments also set conditions to enhance legal security and clarity for foreign direct investment flows. The Foreign Investment Promotion Agency maintains a list of laws relevant to investors on its website: http://www.fipa.gov.ba/publikacije_materijali/zakoni/default.aspx?id=317&langTag=en-US  

The complex legal environment in BiH underlines the utility of local legal representation for foreign investors.  Bosnian attorneys’ experience base is still limited with respect to legal questions and the issues that arise in a market-oriented economy.  However, local lawyers are quickly gaining experience in working with international organizations and companies operating in BiH. Companies’ in-house legal counsel should be prepared to oversee their in-country counsel, with explicit explanations and directions regarding objectives.  The U.S. Embassy maintains a list of local lawyers willing to represent U.S. citizens and companies in BiH. The list can be accessed at https://ba.usembassy.gov/u-s-citizen-services/attorneys/

Competition and Anti-Trust Laws

BiH has a Competition Council, designed to be an independent public institution to enforce anti-trust laws, prevent monopolies, and enhance private sector competition.  The Council reviews and approves foreign investments in cases of mergers and acquisitions of local companies by foreign companies. The Competition Council consists of six members appointed for six-year terms of office with the possibility of one reappointment.  The BiH Council of Ministers appoints three Competition Council members, the Federation Government appoints two members, and the RS Government appoints one member. From the six-member Competition Council, the BiH Council of Ministers affirms a president of the Council for a one-year term without the possibility of reappointment.

Expropriation and Compensation

BiH investment law forbids expropriation of investments, except in the public interest.  According to Article 16, “Foreign investment shall not be subject to any act of nationalization, expropriation, requisition, or measures that have similar effects, except where the public interest may require otherwise.”  In such cases of public interest, expropriation of investments would be executed in accordance with applicable laws and regulations, be free from discrimination, and include payment of appropriate compensation. Neither the entity governments nor the state government have expropriated any foreign investments to date.

Dispute Settlement

ICSID Convention and New York Convention

BiH is a signatory of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”).  Bosnia and Herzegovina is a signatory to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID), also known as the Washington Convention.

Investor-State Dispute Settlement

Over the last decade, there have been two cases of legal disputes involving U.S. investors and the local government.  While efforts are being made to improve BiH’s commercial court system, its current capacity and practical inefficiencies limit timely resolution of commercial disputes.

International Commercial Arbitration and Foreign Courts

BiH has been a member of the International Center for the Settlement of Investment Disputes since 1997.  BiH does not have a Bilateral Investment Treaty (BIT) or Free Trade Agreement (FTA) with the United States.  It accepts international arbitration to settle private investment disputes if the parties outline this option in a contract.

The only domestic arbitration body in BiH, the Arbitration Court of the BiH Foreign Trade Chamber, is an inexperienced institution.  It needs updated and modernized laws and regulations to comply with international norms and standards. The Arbitration Court would benefit from licensed and trained arbitrators.  Domestic arbitration legislation is encompassed within the Civil Procedure Code and is not currently modeled on internationally-accepted regulations. As for the legislation, arbitration is generally poorly addressed.  Namely, there are few provisions in the entities’ laws that regulate litigation procedures, which are the legal basis for parties in dispute to entrust the dispute to arbitration. There is no legislation that is modelled on internationally accepted regulations, such as the model law of the United Nations Commission on International Trade Law (UNICITRAL).

Bankruptcy Regulations

Both the Federation and Republika Srpska entities have Laws on Bankruptcy.  However, bankruptcy proceedings are not resolved in a timely manner, and there is insufficient emphasis placed on companies’ rehabilitation and/or reorganization.  The entities’ laws define the rights of creditors, equity shareholders, and holders of other financial contracts. Foreign contract holders enjoy the same rights as local contract holders.  Bankruptcy is not criminalized. The U.S. Government provided recent training to judges on international bankruptcy principles.

Investment Incentives

There are some incentives for foreign direct investment, including exemptions from payment of customs duties and customs fees.  Bosnia and Herzegovina is divided into three jurisdictions for direct tax purposes: the Federation, the RS, and the Brčko District.

In the Federation, RS, and Brčko District, the corporate income tax allows offsetting of losses against profits over a five-year period. The corporate tax rate is 10 percent across the state.  Foreign investors can open bank accounts in all jurisdictions and transfer their profits abroad without any restrictions. The rights and benefits of foreign investors granted and obligations imposed by the Law on the Policy of Foreign Direct Investment cannot be terminated or overruled by subsequent laws and regulations.  Should a subsequent law or regulation be more favorable to foreign investors, the investor has the right to choose the most beneficial regulations.

In addition to the BiH-wide incentives listed above, the two entities and the Brčko District have specific incentives.  In the Brčko District, investments in fixed assets are subject to tax relief.

In the Federation:

A taxpayer who invests KM 20 million (approx. USD 12 million) over a period of five years is exempted from paying corporate income tax for the period of five years beginning from the first investment year, in which a minimum KM 4 million (approx. USD 2.5 million) must be invested, shall have reduced the obligations of the calculated income tax for 50 percent of the amount in the year of investment.  A taxpayer that does not make the prescribed investment in the period of five years loses the right of tax exemption. In that case, unpaid corporate income tax is determined in accordance with the provisions of the Law on Corporate Income Tax augmented with a penalty interest payable for untimely paid public revenues.

Qualifying investments include fixed assets such as real estate, plants, and equipment for carrying out production activity.  A taxpayer loses the right to tax exemption if the corporation makes a dividend payment during first three years of investment.  A taxpayer whose workforce is more than 50 percent disabled persons and persons with special needs in any given year are exempted from paying corporate income tax.  The exemption applies to the applicable year in which disabled persons and persons with special needs met the required threshold. Employees must have been with the company for longer than one year to be considered.

In the Republika Srpska:

In its Amendments to the Law on Profit Tax, the RS reduced taxes on investments in equipment intended for company production and investment in plants and immovable property used for manufacturing and processing.

For employers with at least 30 workers during a calendar year, there is a tax base reduction in personal income tax and mandatory employer contribution of the employer.  Employees must be officially listed with the RS Employment Office.

The 2012 RS Decree on Conditions and Implementation of the Investment and Employment Support Program (Official Gazette of RS No. 70/12) also established incentives meant to encourage and support direct investments, employment growth, and transfer of new knowledge and technologies.  To qualify for the incentives, participants must have existing investment projects in the RS manufacturing sector, a minimum investment value of KM 2 million (USD 1.2 million), and new employment for at least 20 workers. The total funding awarded is proportional to the investment value, the number of newly employed, and the development level of the investment location.

In early 2015, the RS government passed the Law on Property Tax, which imposes a flat rate for property taxes in all municipalities; the Law on Income Tax, which exempts dividends and profit shares from taxation; the Law on Corporate Income Tax, which broadens the scope of deductible expenses and harmonizes taxes for foreign investors; and the Law on Contributions, which decreases tax contributions employers pay on salaries by 1.4 percent.

Foreign Trade Zones/Free Ports/Trade Facilitation

The BiH Law on Free Trade Zones allows the establishment of free trade zones (FTZs) as part of the customs territory of BiH.  Currently there are four free trade zones in BiH: Vogošća, Visoko, Herzegovina-Mostar, and Holc Lukavac.  One or more domestic or foreign legal entities registered in BiH may create a FTZ.

FTZ users do not pay taxes and contributions, with the exception of those related to salaries and wages.  Investors are free to invest capital in the FTZ, transfer their profits, and retransfer capital. Customs and tariffs are not paid on imports into FTZs. FTZ is considered economically justified if the submitted feasibility study and other evidence can prove that the value of goods exported from a free zone will exceed at least 50 percent of the total value of manufactured goods leaving the free zone within the period of 12 months.

Performance and Data Localization Requirements

BiH government does not have a “forced localization” policy in which foreign investors must use domestic content or sourcing in goods, human capital, or technology.  Also, there are no requirements for foreign IT providers to turn over source code and/or provide access to surveillance. There are no mechanisms in place used to enforce rules on maintaining a certain amount of data storage within the country.

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

Table 3: Sources of FDI

According to the BiH Central Bank, FDI in BiH in 2018 amounted to USD 458 million.  In 2017 total FDI in BiH was USD 445 million. The all-time high for FDI was USD 2.1 billion in 2007.  Most investments in 2013-2018 came from Croatia, Austria, Russia, Serbia, UAE, and the United Kingdom.

Table 4: Sources of Portfolio Investment

There is no data available from the IMF’s Coordinated Portfolio Investment Survey regarding sources of Portfolio Investment in BiH.

Transparency of the Regulatory System

Bureaucratic procedures necessary to start and maintain a business tend to be open, though slow, and regulatory procedures can be cumbersome to navigate.  However, in 2018, Botswana launched a Regulatory Impact Assessment Strategy that will work at improving the regulatory environment and ensuring that legislation is necessary and cost effective, reduce administrative burdens imposed by the regulatory environment to businesses, improve transparency, consultation, and government accountability.  Foreign investor complaints generally focus on the inefficiency and/or unresponsiveness of mid- and low-level government bureaucrats. The GoB has introduced a Performance Management System to improve the service and accountability of its employees. Unfair business practices or conduct can be reported to the Competition Authority, which seeks to level the playing field for all business operators and foster a conducive environment for business.  Bills in Botswana, including investment laws, go through a public consultation process and are available for public comment. Bills are also debated in Parliament whose sessions are open to the public.

The Companies Act of 2004 requires all companies registered in Botswana to prepare annual financial statements on the basis of generally accepted accounting principles.  It further requires every public company, including non-exempt private companies, to prepare their Financial Statement in accordance with the International Financial Reporting Standards.

The Public Procurement and Asset Disposal Board (PPADB) oversees all government tenders. Prospective government contractors are required to register with the PPADB.  The PPADB maintains a process by which tender decisions can be challenged; bidders can also challenge a tender procedure in the courts. The PPADB publishes its decisions concerning awarded tenders, prequalification lists, and newly registered contractors.

The PPADB Act calls for preferential procurement of citizen-owned contractors for works, service and supplies, as well as specific, disadvantaged women’s communities, though it states that such preferences must be time-bound, phased in and out as necessary, and consistent with the country’s external obligations and its “market-oriented, macroeconomic framework.”  When a procuring entity wishes to reserve a tender for citizen-only participation, it is required to publish a notice to that effect either in the bid document or the pre-qualification notice.

Health and safety laws, embodied in the Factories Act of 1973, provide basic protection for workers from unsafe working conditions.  Minimum working conditions required on work premises include cleanliness of the premises, adequate ventilation and sanitation, sufficient lighting and the provision of safety precautions.  Health inspectors and the Botswana Bureau of Standards carry out periodic checks at both new and operating factories.

International Regulatory Considerations

Botswana is a member of SACU and SADC.  Neither has authority over member state national regulatory systems.  Botswana is a member of the World Trade Organization (WTO) and notifies all draft technical regulations to the WTO’s Technical Barriers to Trade (TBT) Committee on Technical Barriers to Trade.

Legal System and Judicial Independence

The Constitution provides for an independent judiciary system.  Botswana’s legal system is based on Roman-Dutch law as influenced by English common law. This type of system cohabits with legislation, judicial decisions, and local customary law.  The courts enforce commercial contracts, and the judicial system is widely regarded as being fair. Both foreign and domestic investors have equal access to the judicial system. Botswana does not have a dedicated commercial court.  The Industrial Court, set up by the Trade Dispute Act of 2004, primarily addresses labor matters.

The GoB is planning to create a corps of commercially specialized judges within the civil court system.  Under the new system, commercial cases will be overseen by these commercial judges in order to expedite handling and ensure relevant expertise.  The country already has a specialized anti-corruption court that handles all corruption cases.

Some U.S. litigants have reported that the time to obtain and enforce a judgment in a commercial dispute is unreasonably long.  The turnaround time for civil cases is approximately two years. In an effort to create more efficient adjudications, the GoB has established land tribunal, industrial, small claims, and corruption courts.  During the past several years, some dockets have improved, but progress has been uneven.

Local laws are accessible through the Botswana Attorney General’s Office website (www.laws.gov.bw  ).  It can take up to 24 months for a law, once passed, to appear on the website.

Laws and Regulations on Foreign Direct Investment

Under Botswana’s Company Act, foreigners who wish to operate a business are required to register as well as obtain the relevant licenses and permits as prescribed by the Trade Act of 2008.

Licenses are required for a wide spectrum of businesses, including banking, non-bank financial services, transportation, medical services, mining, energy provision, and alcohol sales.  Although amendments to the Trade Act have eliminated the catchall miscellaneous business license category, investors have reported on local authorities insisting a business apply for a license even when it does not fall within the established categories.  In addition, some businesses have observed the enforcement of licenses, as well as the time taken for inspections to comply with licensing requirements, varies widely across local government authorities.

Competition and Anti-Trust Laws

Botswana has developed anti-trust legislation and policies to ensure appropriate competition in the business environment.  Under the Competition Act, the Competition Authority is now monitoring mergers and acquisitions. During the year 2016/2017 the Authority dealt with a number of cases to address the non-competitive business conduct and these included bid rigging cases.  The Competition Authority is empowered to reject mergers deemed not to be in the public best interest. It has interpreted this ability to mean that it can prohibit mergers that result in the concentration of a majority of shares in the hands of foreign investors.

Expropriation and Compensation

Section 8 of the country’s Constitution prohibits the nationalization of private property.  The GoB has never pursued a policy of forced nationalization and is highly unlikely to adopt one.  The Acquisition of Property Act provides a process for any expropriation, including parameters to determine market value and receive compensation.  The 2007 Amendment to the Electricity Supply Act allows the GoB to revoke an Independent Power Producer’s license and confiscate the operations, with compensation, for public interest purposes.

Dispute Settlement

ICSID Convention and New York Convention

It has ratified the convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention).  It is also a member state to the International Centre for the Settlement of Investment Disputes (ICSID convention), and the Multilateral Investment Guarantee Agency (MIGA).

Investor-State Dispute Settlement

There are no known investment disputes involving U.S. persons.  Botswana accepts international arbitration to settle investment disputes.  Judgments by foreign courts recognized by the GoB are enforceable under the local courts where the appropriate bilateral agreements between the countries exist.

International Commercial Arbitration and Foreign Courts

There are no known complaints about transparency or discrimination by local courts in Botswana.

Bankruptcy Regulations

Botswana’s commercial and bankruptcy laws are comprehensive.  Secured and unsecured creditors enjoy similar rights under bankruptcy proceedings to those they would enjoy in the United States.

Investment Incentives

Botswana has several mechanisms in place to attract foreign direct investment (FDI).  The BITC assists local and foreign investors. BITC is responsible for promoting FDI, investor aftercare, and the promotion of locally manufactured goods in export markets.  It assists investors with company registration, land acquisition, factory shells, utility connections, and work and residence permits for essential staff. Investors’ requests for support from BITC and other agencies are evaluated based on the extent to which the proposed project assists in the GoB’s diversification efforts, contributes to the growth of priority sectors, and provides employment and training to Botswana citizens.  The GoB also makes grants available to investors who partner with citizens and will extend credit to investors presenting proposals that have undergone appropriate due diligence and that have completed a feasibility study. Foreign investors are encouraged to transfer technology to Botswana and skills to Botswana citizens with a view to preparing them for promotion into management positions.

Botswana offers a relatively low tax rate of 22 percent on corporate taxable income and 7.5 percent withholding tax on all dividends distributed.  MITI can grant manufacturing companies the reduced level of 15 percent taxable income. Companies can pay the reduced rate of 15 percent of profit with accreditation from the Innovation Hub or the International Financial Services Centre on approved operations.

The Minister of Finance and Economic Development has the authority to issue development approval orders which are used for specific projects, which include providing tax holiday and education and training grants.  The Minister must be satisfied that the proposed project will be beneficial to Botswana’s economy. Any firm, local or foreign, may apply for a Development Approval Order through the Permanent Secretary at the finance ministry.  Applications are evaluated against the following criteria: job creation for Botswana citizens; the company’s training plans for Botswana citizens; the company’s plans to localize non-citizen positions; Botswana citizen participation in company management; amount of equity held by Botswana citizens in the company; the location of the proposed investment; the project’s effect on the stimulation of other economic activities; and the project’s effect on reducing local consumer prices.  MITI also offers rebates on imported materials for manufactures that produce products for export.

In 2017, Parliament approved and implemented a special incentive package for Selebi-Phikwe geared to promote economic growth and diversification.  Some of the incentives include reduced corporate tax of 5 percent for the first five years and 10 percent thereafter (versus the 22 percent national tax rate), zero customs duty on imported raw materials, rebates for customs duty and value-added tax for any exports outside the SACU, and a minimum of 50 years on land leases (instead of the standard lease of 25 years).

Foreign Trade Zones/Free Ports/Trade Facilitation

Parliament established a new parastatal organization, the Special Economic Zones Authority (SEZA), with the mandate to develop and operate special economic zones around the country.  It has earmarked five geographic areas with a total of eight zones though they are not yet fully operational. In 2015, Parliament approved a Special Economic Zones (SEZ) law to streamline investment in sector-targeted geographic areas in the country including two Gaborone area SEZs (multi-use, diamond processing, and financial services); two Selebi-Phikwe SEZs (mineral processing and horticulture); and additional SEZs in Lobatse (beef, leather, biogas); Palapye (energy); Pandamatenga (agriculture); and Francistown (mining and logistics).  The Special Economic Zones Act is available for sale in hard copy at the GoB bookshop. SEZA has prioritized four SEZs—Lobatse (leather park), Gaborone Fairgrounds (Financial Services), Gaborone Sir Seretse Khama Airport (Diamond and Logistics) and Pandamatenga (Agriculture)—and is actively recruiting investors, private developers, and manufacturers. The Botswana Unified Revenue Services has also introduced an electronic Customs Management System to replace the Automated System for Customs Data. This will pave the way for the National Single Window, an electronic trade platform that makes trading more secure and efficient.

Performance and Data Localization Requirements

Performance requirements are not imposed as a condition for establishing, maintaining, or expanding an investment in Botswana.  Foreign investors are encouraged, but not compelled, to establish joint ventures with citizens or citizen-owned companies.

Foreign investors wishing to invest in Botswana are required to register the company in accordance with the Companies Act and comply with other applicable legislation.  Investors are encouraged, but not required, to purchase from local sources. The GoB does not require investors to locate in specific geographical areas, use a specific percentage of local content, permit local equity in projects, manufacture substitutes for imports, meet export requirements or targets, or use national sources of financing for private-sector investments.  However, GoB entities, including BITC, use the criteria of diversifying the economy, creating employment, and transferring skills to Botswana citizens in determining whether to assist foreign investors.

As a matter of policy, the GoB encourages foreign firms to hire qualified Botswana nationals rather than expatriates.  The granting of work permits for foreign workers may be made contingent upon establishment of demonstrable localization efforts.  The government may additionally require evidence that a local is being trained to assume duties currently being fulfilled by foreign worker, specially focused at the middle-management level.  The GOB offers incentives to companies that train local employees, including the deduction of 200 percent of training expenses when an accredited institution conducts the training.

Foreign and local business managers noted increasing difficulty obtaining work permits for foreign skilled workers and managers over the last decade.  Permits for foreign workers decreased from 20,000 to about 5,000 during that time. Business leaders cite difficulty securing work permits combined with local skills deficits and constrained labor productivity as one of the foremost business constraints in Botswana.  In March 2019, GoB reports suggest permits for foreign workers has increased to over 8,000 with approval rates in excess of 90 percent. Select grants are available to foreign investors who partner with Botswana citizens. The Citizen Entrepreneurial Development Agency has established a venture capital fund to provide equity to citizens and ventures between citizens and foreign investors.  The majority of GoB loans and grants are designed specifically for citizen-owned contracting firms or for small enterprises and are therefore not available to foreign investors.

The GoB, the largest procuring entity in the country, has directed central government, local authorities and state-owned enterprises to purchase all products and services from locally based manufacturers and service providers if the goods and services are locally available, competitively priced, and meet tender specifications in terms of quality standards as certified or recognized by the Botswana Bureau of Standards.  Local preferences arise from numerous sources. In 2015, MITI instituted a program to give locally based small companies a 15 percent preferential price margin in GoB procurement, with mid-sized companies receiving a 10 percent margin, and large companies a 5 percent margin. The directive applies to 27 categories of goods and services ranging from textiles, chemicals, and food, in addition to a broad range consultancy services.  In 2014, the GoB and the Chamber of Mines created a committee to oversee the purchasing of mining supplies with a 10 percent preference towards those produced locally. The 2012 Citizen Economic Empowerment Policy also emphasized the preference for local companies and the GoB’s Public Procurement and Asset Disposal Board (PPADB) registers citizen-owned companies for preference purposes.

For a foreign firm to qualify with the Department of Industrial Affairs as a locally based manufacturer or service provider to sell goods or services to the government of Botswana, the firm first must be registered with the Registrar of Companies and possess a relevant license or waiver letter.  Few of these procedures can be completed online and in practice companies see the need to hire an agent on the ground to handle registrations. Tenders are generally designed based on the products available in the local market and with locally-based companies in mind. In addition, many tenders require local registration as a prerequisite for bids and the GoB frequently breaks up large-scale projects into a series of tenders.  All of these factors make it difficult to compete for tenders from outside Botswana.

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

Table 3: Sources and Destination of FDI

According to the Bank of Botswana, investment in Botswana totaled 84.75 billion pula in 2016, of which 31 billion pula were non-FDI investments.  Africa (33.3 percent) and Europe (64.4 percent) accounted for most of the 54 billion pula influx of FDI. Within these regions, South Africa and United Kingdom were the predominant players, accounting for 9.7 and 32.5 billion pula respectively.  Little data on FDI sources is available for countries and regions with limited investments in Botswana. Retail and Wholesale Trade surpassed the mining sector in 2016 to account for 38.9 percent of Foreign Investment inflows.

Table 4: Sources of Portfolio Investment

IMF Coordinated Direct Investment Survey data are not available for Botswana.  Equity securities represent 82 percent of Botswana’s portfolio investment assets abroad.  Information about country destination of these portfolio investments is not available.

Transparency of the Regulatory System

In the 2019 World Bank Doing Business report, Brazil ranked 109th out of 190 countries in terms of overall ease of doing business in 2018, an improvement of 16 positions compared to the 2018 report.  According to the World Bank, it takes approximately 20.5 days to start a business in Brazil. Brazil is seeking to streamline the process and decrease the amount to time it takes to open a small or medium enterprise (SME) to five days through its RedeSimples Program.  Similarly, the government has reduced regulatory compliance burdens for SMEs through the continued use of the SIMPLES program, which simplifies the collection of up to eight federal, state, and municipal-level taxes into one single payment.  

The 2019 World Bank study noted that the annual administrative burden for a medium-size business to comply with Brazilian tax codes is an average of 1,958 hours versus 160.7 hours in OECD high-income economies.  The total tax rate for a medium-sized business in Rio de Janeiro is 69 percent of profits, compared to the average of 40.1 percent in the OECD high-income economies. Business managers often complain of not being able to understand complex, and sometimes contradictory, tax regulations, despite their housing large local tax and accounting departments in their companies.  

Tax regulations, while burdensome and numerous, do not generally differentiate between foreign and domestic firms.  However, some investors complain that in certain instances the value-added tax collected by individual states (ICMS) favors locally-based companies that export their goods.  Exporters in many states report difficulty receiving their ICMS rebates when their goods are exported. Taxes on commercial and financial transactions are particularly burdensome, and businesses complain that these taxes hinder the international competitiveness of Brazilian-made products.  

Of Brazil’s ten federal regulatory agencies, the most prominent include:

• ANVISA, the Brazilian counterpart to the U.S. Food and Drug Administration, which has regulatory authority over the production and marketing of food, drugs, and medical devices;
• ANATEL, the country’s telecommunications agency, which handles telecommunications, and licensing and assigning of radio spectrum bandwidth;
• ANP, the National Petroleum Agency, which regulates oil and gas contracts and oversees auctions for oil and natural gas exploration and production, including for offshore pre-salt oil and natural gas;
• ANAC, Brazil’s civil aviation agency;
• IBAMA, Brazil’s environmental licensing and enforcement agency; and
• ANEEL, Brazil’s electric energy regulator that regulates Brazil’s power electricity sector and oversees auctions for electricity transmission, generation, and distribution contracts.

In addition to these federal regulatory agencies, Brazil has at least 27 state-level regulatory agencies and 17 municipal-level regulatory agencies.  

The Office of the Presidency’s Program for the Strengthening of Institutional Capacity for Management in Regulation (PRO-REG) has introduced a broad program for improving Brazil’s regulatory framework.  PRO-REG and the U.S. White House Office of Information and Regulatory Affairs (OIRA) are collaborating to exchange best practices in developing high quality regulations that mandate the least burdensome approach to address policy implementation.  

Regulatory agencies complete Regulatory Impact Analyses (RIAs) on a voluntary basis.  The Senate has approved a bill on Governance and Accountability for Federal Regulatory Agencies (PLS 52/2013 in the Senate, and PL 6621/2016 in the Chamber) that is pending Senate Transparency and Governance Committee approval after the Lower House proposed changes to the text in December 2018.  Among other provisions, the bill would make RIAs mandatory for regulations that affect “the general interest.” PRO-REG is drafting enabling legislation to implement this provision. While the legislation is pending, PRO-REG has been working with regulators to voluntarily make RIAs part of their internal procedures, with some success.  

The Chamber of Deputies, Federal Senate, and the Office of the Presidency maintain websites providing public access to both approved and proposed federal legislation.  Brazil is seeking to improve its public comment and stakeholder input process. In 2004, the GoB instituted a Transparency Portal, a website with data on funds transferred to and from the federal, state and city governments, as well as to and from foreign countries.  It also includes information on civil servant salaries.

In 2018, the Department of State found Brazil to have met its minimum fiscal transparency requirements in its annual Fiscal Transparency Report.  The Open Budget Index ranked Brazil on par with the United States in terms of budget transparency in its most recent (2017) index. The Brazilian government demonstrates adequate fiscal transparency in managing its federal accounts, although there is room for improvement in terms of completeness of federal budget documentation.  Brazil’s budget documents are publically available, widely accessible, and sufficiently detailed. They provide a relatively full picture of the GoB’s planned expenditures and revenue streams. The information in publicly available budget documents is considered credible and reasonably accurate.

International Regulatory Considerations

Brazil is a member of Mercosul – a South American trade bloc whose full members include Argentina, Paraguay, and Uruguay – and routinely implements Mercosul common regulations, but still adheres to Brazilian regulations.

Brazil is a member of the WTO, and the government regularly notifies draft technical regulations, such as agricultural potential barriers, to the WTO Committee on Technical Barriers to Trade (TBT).  

Legal System and Judicial Independence

Brazil has a civil legal system structured around courts at the state and federal level.  Investors can seek to enforce contracts through the court system or via mediation, although both processes can be lengthy.  The Brazilian Superior Court of Justice (STJ) must accept foreign contract enforcement judgments for the judgments to be considered valid in Brazil.  Among other considerations, the foreign judgement must not contradict any prior decisions by a Brazilian court in the same dispute. The Brazilian Civil Code, enacted in 2002, regulates commercial disputes, although commercial cases involving maritime law follow an older, largely superseded Commercial Code.  Federal judges hear most disputes in which one of the parties is the Brazilian State, and also rule on lawsuits between a foreign state or international organization and a municipality or a person residing in Brazil.

The judicial system is generally independent.  The Supreme Federal Court (STF), charged with constitutional cases, frequently rules on politically sensitive issues.  State court judges and federal level judges below the STF are career officials selected through a meritocratic examination process.  The judicial system is backlogged, however, and disputes or trials of any sort frequently require years to arrive at a final resolution, including all available appeals.  Regulations and enforcement actions can be litigated in the court system, which contains mechanisms for appeal depending upon the level at which the case is filed. The STF is the ultimate court of appeal on constitutional grounds; the STJ is the ultimate court of appeal for cases not involving constitutional issues.  

Laws and Regulations on Foreign Direct Investment

Foreigners investing in Brazil must electronically register their investment with the BCB within 30 days of the inflow of resources to Brazil.  Investors must register investments involving royalties and technology transfer with Brazil’s patent office, the National Institute of Industrial Property (INPI).  Investors must also have a local representative in Brazil. Portfolio investors must have a Brazilian financial administrator and register with the Brazilian Securities Exchange Commission (CVM).  

Brazil does not offer a “one-stop-shop” for international investors.  There have been plans to do so for several years, but nothing has been officially created to facilitate foreign investment in Brazil.  The BCB website offers some useful information, but is not a catchall for those seeking guidance on necessary procedures and requirements.  The BCB’s website in English is: https://www.bcb.gov.br/en#!/home .

Competition and Anti-Trust Laws

The Administrative Council for Economic Defense (CADE), which falls under the purview of the Ministry of Justice, is responsible for enforcing competition laws, consumer protection, and carrying out regulatory reviews of mergers and acquisitions.  Law 12529 from 2011 established CADE in an effort to modernize Brazil’s antitrust review process and to combine the antitrust functions of the Ministry of Justice and the Ministry of Finance into CADE. The law brought Brazil in line with U.S. and European merger review practices and allows CADE to perform pre-merger reviews, in contrast to the prior legal regime that had the government review mergers after the fact.  In October 2012, CADE performed Brazil’s first pre-merger review.

In 2018, CADE conducted 74 formal investigations of cases that allegedly challenged the promotion of the free market.  It also approved 390 merger and/or acquisition requests and rejected an additional 14 requests.

Expropriation and Compensation

Article 5 of the Brazilian Constitution assures property rights of both Brazilians and foreigners that live in Brazil.  The Constitution does not address nationalization or expropriation. Decree-Law 3365 allows the government to exercise eminent domain under certain criteria that include, but are not limited to, national security, public transportation, safety, health, and urbanization projects.  In cases of eminent domain, the government compensates owners in cash.

There are no signs that the current federal government is contemplating expropriation actions in Brazil against foreign interests.  Brazilian courts have decided some claims regarding state-level land expropriations in U.S. citizens’ favor. However, as states have filed appeals to these decisions, the compensation process can be lengthy and have uncertain outcomes.  

Dispute Settlement

ICSID Convention and New York Convention

In 2002, Brazil ratified the 1958 Convention on the Recognition and Enforcement of Foreign Arbitration Awards.  Brazil is not a member of the World Bank’s International Center for the Settlement of Investment Disputes (ICSID).  Brazil joined the United Nations Commission on International Trade Law (UNCITRAL) in 2010, and its membership will expire in 2022.

Investor-State Dispute Settlement

Article 34 of the 1996 Brazilian Arbitration Act (Law 9307) defines a foreign arbitration judgment as any judgment rendered outside the national territory.  The law established that the Superior Court of Justice (STJ) must ratify foreign arbitration awards. Law 9307, updated by Law 13129/2015, also stipulates that a foreign arbitration award will be recognized or executed in Brazil in conformity with the international agreements ratified by the country and, in their absence, with domestic law.  A 2001 Brazilian Federal Supreme Court (STF) ruling established that the 1996 Brazilian Arbitration Act, permitting international arbitration subject to STJ Court ratification of arbitration decisions, does not violate the Federal Constitution’s provision that “the law shall not exclude any injury or threat to a right from the consideration of the Judicial Power.”

Contract disputes in Brazil can be lengthy and complex.  Brazil has both a federal and a state court system, and jurisprudence is based on civil code and contract law.  Federal judges hear most disputes in which one of the parties is the State, and rule on lawsuits between a foreign State or international organization and a municipality or a person residing in Brazil.  Five regional federal courts hear appeals of federal judges’ decisions. The 2019 World Bank Doing Business report found that on average it takes 12.5 procedures and 731 days to litigate a breach of contract.

International Commercial Arbitration and Foreign Courts

Brazil ratified the 1975 Inter-American Convention on International Commercial Arbitration (Panama Convention) and the 1979 Inter-American Convention on Extraterritorial Validity of Foreign Judgments and Arbitration Awards (Montevideo Convention).  Law 9307/1996 provides advanced legislation on arbitration, and provides guidance on governing principles and rights of participating parties. Brazil developed a new Cooperation and Facilitation Investment Agreement (CFIA) model in 2015 (https://concordia.itamaraty.gov.br/ ), but it does not include ISDS mechanisms.  (See sections on bilateral investment agreements and responsible business conduct.)

Bankruptcy Regulations

Brazil’s commercial code governs most aspects of commercial association, while the civil code governs professional services corporations.  In 2005, bankruptcy legislation (Law 11101) went into effect creating a system modeled on Chapter 11 of the U.S. bankruptcy code. Critics of Law 11101 argue it grants equity holders too much power in the restructuring process to detriment of debtholders.  Brazil is drafting an update to the bankruptcy law aimed at increasing creditor rights, but it has not yet been presented in Congress. The World Bank’s 2019 Doing Business Report ranks Brazil 77th out of 190 countries for ease of “resolving insolvency.”

Investment Incentives

The GoB extends tax benefits for investments in less developed parts of the country, including the Northeast and the Amazon regions, with equal application to foreign and domestic investors.  These incentives were successful in attracting major foreign plants to areas like the Manaus Free Trade Zone in Amazonas State, but most foreign investment remains concentrated in the more industrialized southern states in Brazil.  

Individual states seek to attract private investment by offering tax benefits and infrastructure support to companies, negotiated on a case-by-case basis.  Competition among states to attract employment-generating investment leads some states to challenge such tax benefits as beggar-thy-neighbor fiscal competition.  

While local private sector banks are beginning to offer longer credit terms, the state-owned Brazilian National Development Bank (BNDES) is the traditional Brazilian source of long-term credit as well as export credits.  BNDES provides foreign- and domestically-owned companies operating in Brazil financing for the manufacturing and marketing of capital goods and primary infrastructure projects. BNDES provides much of its financing at subsidized interest rates.  As part of its package of fiscal tightening, in December 2014, the GoB announced its intention to scale back the expansionary activities of BNDES and ended direct Treasury support to the bank. Law 13483, from September 2017, created a new Long-Term Lending Rate (TLP) for BNDES, which will be phased-in to replace the prior subsidized loans starting on January 1, 2018.  After a five-year phase in period, the TLP will float with the market and reflect a premium over Brazil’s five-year bond yield (a rate that incorporates inflation). The GoB plans to reduce BNDES’s role further as it continues to promote the development of long-term private capital markets.

In January 2015, the GoB eliminated the industrial products tax (IPI) exemptions on vehicles, while keeping all other tax incentives provided by the October 2012 Inovar-Auto program.  Through Inovar-Auto, auto manufacturers were able to apply for tax credits based on their ability to meet certain criteria promoting research and development and local content. Following successful WTO challenges against the trade-restrictive impacts of some of its tax benefits, the government allowed Inovar-Auto program to expire on December 31, 2017.  Although the government has announced a new package of investment incentives for the auto sector, Rota 2030, it remains at the proposal stage, with no scheduled date for a vote or implementation.

On February 27, 2015, Decree 8415 reduced tax incentives for exports, known as the Special Regime for the Reinstatement of Taxes for Exporters, or Reintegra Program.  Decree 8415 reduced the previous three percent subsidy on the value of the exports to one percent for 2015, to 0.1 percent for 2016, and two percent for 2017 and 2018.

Brazil provides tax reductions and exemptions on many domestically-produced information and communication technology (ICT) and digital goods that qualify for status under the Basic Production Process (PPB).  The PPB is product-specific and stipulates which stages of the manufacturing process must be carried out in Brazil in order for an ICT product to be considered produced in Brazil. The major fiscal benefits of the National Broadband Plan (PNBL) and supporting implementation plan (REPNBL-Redes) have either expired or been revoked.  In 2017, Brazil held a public consultation on a National Connectivity Plan to replace the PNBL, but has not yet published a final version.

Under Law 12598/2013, Brazil offers tax incentives ranging from 13 percent to 18 percent to officially classified “Strategic Defense Firms” (must have Brazilian control of voting shares) as well as to “Defense Firms” (can be foreign-owned) that produce identified strategic defense goods.  The tax incentives for strategic firms can apply to their entire supply chain, including foreign suppliers. The law is currently undergoing a revision, expected to be complete in 2018.

Industrial Promotion

The InovAtiva Brasil and Startup Brasil programs support start-ups in the country.  The GoB also uses free trade zones to incentivize industrial production. A complete description of the scope and scale of Brazil’s investment promotion programs and regimes can be found at: http://www.apexbrasil.com.br/en/home  .  

Foreign Trade Zones/Free Ports/Trade Facilitation

The federal government grants tax benefits to certain free trade zones.  Most of these free trade zones aim to attract investment to the country’s relatively underdeveloped North and Northeast regions.  The most prominent of these is the Manaus Free Trade Zone, in Amazonas State, which has attracted significant foreign investment, including from U.S. companies.  Constitutional amendment 83/2014 came into force in August 2014 and extended the status of Manaus Free Trade Zone until the year 2073.

Performance and Data Localization Requirements

Government Procurement Preferences:  The GoB maintains a variety of localization barriers to trade in response to the weak competitiveness of its domestic tech industry.

1. Tax incentives for locally sourced information and communication technology (ICT) goods and equipment (Basic Production Process (PPB), Law 8248/91, and Portaria 87/2013);
2. Government procurement preferences for local ICT hardware and software (2014 Decrees 8184, 8185, 8186, 8194, and 2013 Decree 7903); and the CERTICS Decree (8186), which aims to certify that software programs are the result of development and technological innovation in Brazil.

Presidential Decree 8135/2013 (Decree 8135) regulated the use of IT services provided to the Federal government by privately and state-owned companies, including the provision that Federal IT communications be hosted by Federal IT agencies. In 2015, the Ministry of Planning developed regulations to implement Decree 8135, which included the requirement to disclose source code if requested.  On December 26, 2018, President Michel Temer approved and signed the Decree 9.637/2018, which revoked Decree 8.135/2013 and eliminated the source code disclosure requirements.

The Institutional Security Cabinet (GSI) mandated the localization of all government data stored on the cloud during a review of cloud computing services contracted by the Brazilian government in Ordinance No. 9 (previously NC 14), this was made official in March 2018.  While it does provide for the use of cloud computing for non-classified information, it imposes a data localization requirement on all use of cloud computing by the Brazil government.

Investors in certain sectors in Brazil must adhere to the country’s regulated prices, which fall into one of two groups: those regulated at the federal level by a federal company or agency, and those set by sub-national governments (states or municipalities).  Regulated prices managed at the federal level include telephone services, certain refined oil and gas products (such as bottled cooking gas), electricity, and healthcare plans. Regulated prices controlled by sub-national governments include water and sewage fees, vehicle registration fees, and most fees for public transportation, such as local bus and rail services.  As part of its fiscal adjustment strategy, Brazil sharply increased regulated prices in January 2015.

For firms employing three or more persons, Brazilian nationals must constitute at least two-thirds of all employees and receive at least two-thirds of total payroll, according to Brazilian Labor Law Articles 352 to 354.  This calculation excludes foreign specialists in fields where Brazilians are unavailable.

Decree 7174 from 2010, which regulates the procurement of information technology goods and services, requires federal agencies and parastatal entities to give preferential treatment to domestically produced computer products and goods or services with technology developed in Brazil based on a complicated price/technology matrix.  

Brazil’s Marco Civil, an Internet law that determines user rights and company responsibilities, states that data collected or processed in Brazil must respect Brazilian law, even if the data is subsequently stored outside the country.  Penalties for non-compliance could include fines of up to 10 percent of gross Brazilian revenues and/or suspension or prohibition of related operations. Under the law, Internet connection and application providers must retain access logs for specified periods or face sanctions.  While the Marco Civil does not require data to be stored in Brazil, any company investing in Brazil should closely track its provisions – as well provisions of other legislation and regulations, including a data privacy bill passed in August 2018 and cloud computing regulations.

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

* IBGE and BCB data, year-end.

Table 3: Sources and Destination of FDI

Table 4: Sources of Portfolio Investment

Transparency of the Regulatory System

Brunei’s regulatory system is generally seen as lacking in transparency.  There is little to no transparency in lawmaking processes, nor is there any available information on whether impact assessments are made prior to proposing regulations.  Each ministry is responsible for coordinating with the Attorney General’s Chambers to draft proposed legislation. Legislation does not receive broad reviews and few outside of the originating ministry are able to provide their input.  The Sultan has final authority to approve proposed legislation. Laws and regulations that are in effect are readily accessible on the Attorney General’s Chambers: http://www.agc.gov.bn  .

International Regulatory Considerations

Brunei is an active member of ASEAN, through which it has concluded FTAs with Australia and New Zealand, China, India, Japan and South Korea.  Brunei became a WTO member in 1995 and a signatory to the General Agreement on Tariffs and Trade (GATT) in 1993.

Legal System and Judicial Independence

Brunei’s constitution does not specifically provide for judicial independence, but in practice the court system operates without government interference.  Brunei’s legal system includes two parallel systems: one based on common law and the other based on Islamic law. In 2016, recognizing the importance of protecting investors’ rights and contract enforcement, Brunei established a Commercial Court.

In 2014, Brunei implemented the first phase of its Sharia Penal Code (SPC), which expanded existing restrictions on minor offenses—such as eating during Ramadan—that are punishable by fines or imprisonment.  On April 3, 2019, Brunei commenced full implementation of its Sharia Penal Code, introducing the possibility of barbaric punishments in certain situations such as stoning to death for rape, adultery, or sodomy, and execution for apostasy, contempt of the Prophet Muhammad, or insult of the Quran.  The punishments require different standards of proof from the common law-based penal code. For example, four pious men must personally witness an act of fornication to support a sentence of stoning.

Laws and Regulations on Foreign Direct Investment

The basic legislation on investment includes the Investment Incentive Order 2001 and the Income Tax (As Amended) Order 2001.  Investment Order 2001 supports economic development in strategically important industrial and economic enterprises and, through the Ministry of Finance and Economy, offers investment incentives through a favorable tax regime.  Although Brunei does not have a stock exchange, government plans to establish a securities market are reportedly under way.

Foreign ownership of companies is not restricted, although under the Companies Act, at least one of two directors of a locally incorporated company must be a resident of Brunei, unless granted an exemption from the appropriate authorities.

Business Registration

All businesses in Brunei must be registered with the Registry of Companies and Business Names at the Ministry of Finance and Economy.  Except for sole proprietorships and partnerships, foreign investors can fully own incorporated companies, foreign company branches, or representative offices.  Foreign direct investments by multinational corporations may not require local partnership in setting up a subsidiary of their parent company in Brunei. However, at least one company director must be a Brunei citizen or permanent resident of Brunei.  Brunei’s “one-stop-shop” website for investments and business start-ups can be found here: http://business.gov.bn  .

The Business License Act (Amendment) of 2016 exempts several business activities (eateries, boarding and lodging houses or other places of public resort; street vendors and stalls; motor vehicle dealers; petrol stations including places for storing petrol and inflammable materials; timber stores and furniture factories; and retail shops and workshops) from needing to obtain a business license.

Competition and Anti-Trust Laws

Brunei does not have any legislation pertaining to the regulation of competition issues.  In 2015, Brunei enacted the Competition Order, to promote and maintain fair and healthy competition to enhance market efficiency and consumer welfare.  The Sultan also announced the establishment of the Competition Commission in 2017 to oversee and act on competition issues that include adjudicating anti-competitive cases and imposing penalties on companies that violate the 2015 Competition Order.  The Order is scheduled to be enforced in phases, starting with the prohibition of anti-competitive agreements and practices.

Expropriation and Compensation

There is no history of expropriation of foreign-owned property in Brunei.  There have been cases of domestically owned private property being expropriated for infrastructure development. Compensation was provided in such cases, and claimants were provided with due process regarding their disputes.

Dispute Settlement

ICSID Convention and New York Convention

Brunei is a member state to the convention on the International Center for Settlement of Investment Disputes (ICSID Convention) and a signatory to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention).  Legislation related to dispute settlement is covered under Brunei’s Arbitration Order 2009.

Investor-State Dispute Settlement

In 2016, Brunei’s Supreme Court announced the establishment of a commercial court to deal with business-related cases.  More information about Brunei’s judiciary system is available through the judiciary: http://www.judiciary.gov.bn  .

International Commercial Arbitration and Foreign Courts

In May 2016, Brunei’s Attorney General’s Chambers announced the establishment of the Brunei Darussalam Arbitration Center (BDAC).  BDAC delivers services and administration for arbitration and mediation to fulfill the needs of domestic and international users in relation to commercial disputes, as a resolution alternative to court proceedings.

The International Arbitration Order (IAO) which regulates international and domestic arbitrations came into effect in February 2010.  More information about Brunei’s Attorney General’s Chambers is available here: http://www.agc.gov.bn   .

Bankruptcy Regulations

In 2012, amendments to Brunei’s Bankruptcy Act increased the minimum threshold for declaring bankruptcy from BND 500 to BND 10,000 (USD $368 to USD $7,379) and enabled the trustee to direct the Controller of Immigration to impound and retain the debtor’s passport, certificate of identity, or travel document to prevent the debtor from leaving the country.  The amendment also requires the debtor to deliver all property under the debtor’s possession to the trustee. Information about Brunei’s bankruptcy laws is available on the judiciary’s website: http://www.judiciary.gov.bn  .

Investment Incentives

Companies involved in the exportation of agriculture, forestry, and fishery products can apply for tax relief on export profits.  Tax exemption may be available for pioneer industry companies. For non-pioneer enterprises, the tax relief period is eight years and up to 11 years for pioneer enterprises.

Since 2015, the corporate income tax rate in Brunei has been 18.5 percent.

Sole proprietorships and partnerships are not subject to tax.  Individuals do not pay any capital gains tax, and profits arising from the sale of capital assets are not taxable.  Brunei has double-taxation agreements with the United Kingdom, Indonesia, China, Singapore, Vietnam, Bahrain, Oman, Japan, Pakistan, Malaysia, Hong Kong, Laos, Kuwait, Tajikistan, Qatar, and United Arab Emirates.  Under the Income Tax (Petroleum) Act, a company is subject to taxes of up to 55 percent for any petroleum operation pursuant to production sharing agreements.

Darussalam Assets is a private limited company established in December 2012, under the purview of the Ministry of Finance and Economy to spur the growth of government-linked companies (GLC) through active ownership and management of its GLC portfolio based on commercial principles, in line with Brunei’s 2035 development vision.

Foreign Trade Zones/Free Ports/Trade Facilitation

Muara Port is Brunei’s main seaport with an established free trade zone called the Muara Export Zone (MEZ), which was established to promote and develop Brunei as a trade hub of the region. The establishment of the MEZ was an initial step towards developing other free trade zones in the country.  In Brunei’s 2017 Legislative Council session, the government announced that a 96 hectare area near Muara Port will be designated a free trade zone.

Performance and Data Localization Requirements

The Brunei government seeks to increase the number of Bruneians working in the private sector. Brunei’s Local Business Development Framework seeks to increase the use of local goods and services, train a domestic workforce, and develop Bruneian businesses by placing requirements on all companies operating in the oil and gas industry in Brunei to meet local hiring and contracting targets.  These requirements also apply to information and communication technology firms that work on government projects. The Framework sets local content targets based on the difficulty of the project and the value of the contract, with more flexible local content requirements for projects requiring highly specialized technologies or with a high contract value. In 2019, senior officials stated an intent to extend local hiring targets to additional sectors of the economy.

Expatriate employment is controlled by a labor quota system administered by the Labor Department and the issuance of employment passes by the Immigration Department.  Brunei allows new companies to apply for special approval to expedite the recruitment of expatriate workers in select positions. According to the Ministry of Home Affairs, the special approval is only available to new companies for up to six months, and covers businesses such as restaurants and shops.  The special approval cuts the waiting time for a quota to seven days instead of 21.

Brunei has not announced any specific legislation pertaining to data storage and data localization requirements.

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

* Host country data available at depd.gov.bn  

Table 3: Sources and Destination of FDI

Brunei’s Department of Economic Planning and Development and IMF Coordinated Direct Investment Survey data are not available.

Table 4: Sources of Portfolio Investment

Brunei’s Department of Economic Planning and Development and IMF Coordinated Portfolio Investment Survey data are not available.

Transparency of the Regulatory System

In general, the regulatory environment in Bulgaria is characterized by complexity, lack of transparency, and arbitrary or weak enforcement.  These factors create incentives for public corruption. Bulgarian law lists 38 operations subject to licensing. The law requires all regulations to be justified by defined need (in terms of national security, environmental protection, or personal and material rights of citizens), and prohibits restrictions merely incidental to the stated purposes of the regulation.  The law also requires the regulating authority to perform a cost-benefit analysis of any proposed regulation. This requirement, however, is often ignored when Parliament reviews draft bills. With few exceptions, all draft bills are made available for public comment, both on the central government website and the relevant agency’s website, and interested parties are given 30 days to submit their opinions.  The government maintains a web platform, www.strategy.bg  , on which it posts draft legislation. 

In addition, the law eliminates bureaucratic discretion in granting requests for routine economic activities, and provides for silent consent when the government does not respond to a request in the allotted time.  Local companies in which foreign partners have controlling interests may be requested to provide additional information or to meet additional mandatory requirements in order to engage in certain licensed activities, including production and export of arms and ammunition, banking and insurance, and the exploration, development, and exploitation of natural resources.  Bulgarian government licenses exports of dual-use goods and bans the export all goods under international trade sanctions lists. The Bulgarian government’s budget is assessed as transparent and in accordance with international standards and principles. Data on government debt is publicly available but data on the debt accrued by state-owned companies is not. 

International Regulatory Considerations

Bulgaria became a member of the World Trade Organization in December 1996.  Under the provisions of Article 207 of the Treaty on the Functioning of the European Union (Lisbon Treaty), common EU trade policies are exclusively the competence of the EU and the European Commission, which coordinates them with the 27 member states. 

Legal System and Judicial Independence

The 1991 Constitution serves as the foundation of the legal system and creates an independent judicial branch comprised of judges, prosecutors, and investigators.  The judiciary continues to be the least trusted institution in the country, with widespread allegations of corruption and undue political and business influence. The busiest courts in Sofia suffer from serious backlogs, limited resources, and inefficient procedures that hamper the swift and fair administration of justice.

There are three levels of courts.  Bulgaria’s 113 regional courts exercise jurisdiction over civil and criminal cases.  Above them, 29 district courts (including the Sofia City Court and the Specialized Court for Organized Crime and High Level Corruption) serve as courts of appellate review for regional court decisions and have trial-level (first-instance) jurisdiction in serious criminal cases and in civil cases where claims exceed BGN 25,000 (USD 14,500), excluding alimony, labor disputes, and financial audit discrepancies, or in property cases where the property’s value exceeds BGN 50,000 (USD 29,000).  Six appellate courts review the first-instance decisions of the district courts. The Supreme Court of Cassation is the court of last resort for criminal and civil appeals. 

There is a separate system of 28 specialized administrative courts that rule on the legality of local and national government decisions, with the Supreme Administrative Court serving as the court of final instance.

The Constitutional Court, which is separate from the rest of the judiciary, issues final rulings on the compliance of laws with the Constitution.

Bulgaria has adequate means of enforcing property and contractual rights under local legislation. In practice, however, the government’s handling of investment disputes has been slow, and intervention at the highest level is often required.  Investors sometimes perceive that jurisprudence is inconsistent, and that national legislation is used to deter competition by foreign investors.

Laws and Regulations on Foreign Direct Investment

The 2004 Investment Promotion Act stipulates equal treatment of foreign and domestic investors.  The law encourages investment in manufacturing and high technology, as well as in education and human resource development.  It creates incentives by helping investors purchase land, providing state financing for basic infrastructure and training new staff, and facilitating tax incentives and opportunities for public-private partnerships (PPPs) with the central and local government.  The most common PPPs are in the form of concessions, which include the lease of government property for private use for up to 35 years.

Foreign investors must comply with the 1991 Commercial Code, which regulates commercial and company law, and the 1951 Law on Obligations and Contracts, which regulates civil transactions.

InvestBulgaria’s official web site http://www.investbg.government.bg/en   is a useful source of information on Bulgaria’s economy, investment law, and statistics for prospective foreign investors.

Competition and Anti-Trust Laws

The Commission for Protection of Competition (the “Commission”) oversees market competition and enforces the Law on the Protection of Competition (the “Competition Law”). The Competition Law, enacted in 2008, is intended to implement EU rules that promote competition.  Monopolies can only be established in enumerated categories of strategic industries.  The law forbids restrictive trade practices, abuse of market power, and certain forms of unfair competition.   In practice, the Competition Law has been applied inconsistently, and the Competition Commission has been seen as lacking impartiality.

Expropriation and Compensation

Private real property rights are legally protected by the Bulgarian Constitution. Only in the case where a public need cannot be met by other means, the Council of Ministers or a regional governor may expropriate land, provided that the owner is compensated at fair market value. Expropriation actions by the Council of Ministers or by regional authorities can be appealed at a local administrative court. The U.S.-Bulgaria Bilateral Investment Treaty (BIT) commits both parties to prompt, adequate, and effective compensation in the event of expropriation.

Dispute Settlement

ICSID Convention and New York Convention

Bulgaria is a signatory to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention) and the 1961 European Convention on International Commercial Arbitration.  Bulgaria is a member of the World Bank-based International Centre for the Settlement of Investment Disputes (ICSID).

Investor-State Dispute Settlement

Bulgaria accepts binding international arbitration in disputes with foreign investors.  Arbitral awards, both foreign and domestic, are enforced through the judicial system. The party must petition the Sofia City Court for a writ of execution and then execute the award according to the general framework for execution of judgments.  Foreclosure proceedings may also be initiated.

International Commercial Arbitration and Foreign Courts

There are more than 20 arbitration institutions in Bulgaria, with the Arbitration Court of the Bulgarian Chamber of Commerce and Industry (BCCI) being the oldest.  Bulgarian law instructs courts to act on civil litigation cases within three months after a claim is filed. In practice, however, dispute settlement can take several months and up to a few years.

Bankruptcy Regulations

The 1994 Commercial Code Chapter on Bankruptcy provides for reorganization or rehabilitation of a legal entity, maximizes asset recovery, and provides for fair and equal distribution among all creditors.  The law applies to all commercial entities, except public monopolies or state-owned enterprises (SOEs). The 2015 Insurance Code regulates insurance company failures, while bank failures are regulated under the 2002 Bank Insolvency Act and the 2006 Credit Institutions Act. The 2014 bankruptcy of the country’s fourth-largest bank, Corporate Commercial bank, was a test case that showed serious deficiencies in the process of recovery and preservation of bank assets during bankruptcy proceedings.

Non-performance of a financial obligation must be adjudicated before the bankruptcy court can determine whether the debtor is insolvent.  There is a presumption of insolvency when the debtor is unable to perform an executable obligation under a commercial transaction or public debt or related commercial activities, has suspended all payments, or is able to pay only the claims of certain creditors.  The debtor is deemed over-indebted if its assets are insufficient to cover its short-term monetary obligations.

Bankruptcy proceedings may be initiated on two grounds:  the debtor’s insolvency, or the debtor’s excessive indebtedness.  Under Part IV of the Commercial Code, debtors or creditors, including state authorities such as the National Revenue Agency, can initiate bankruptcy proceedings.  The debtor must declare bankruptcy within 30 days of becoming insolvent or over-indebted. Bankruptcy proceedings supersede other court proceedings initiated against the debtor except for labor cases, enforcement proceedings, and cases related to receivables securitized by third parties’ property.  Such cases may be initiated even after bankruptcy proceedings begin.

Creditors must declare to the trustee all debts owed to them within one month of the start of bankruptcy proceedings.  The trustee then has seven days to compile a list of debts. A rehabilitation plan must be proposed within one month after publication of the list of debts in the Commercial Register.  After creditors’ approval, the court endorses the rehabilitation plan, terminates the bankruptcy proceeding, and appoints a supervisory body for overseeing the implementation of the rehabilitation plan.  The court must endorse the plan within seven days and put it forward to the creditors for approval. The creditors must convene to discuss the plan within a period of 45 days. The court may renew the bankruptcy proceedings if the debtor does not fulfill its obligations under the rehabilitation plan.

The Bulgarian National Bank may revoke the operating license of an insolvent bank when the bank’s own capital is negative and the bank has not been restructured according to the procedure defined in Article 51 in the Law on the Recovery and Resolution of Credit Institutions and Investment Firms.  In the World Bank’s 2019 Doing Business Report, Bulgaria ranked 59th for ease of “resolving insolvency,” ahead of three EU peers (Luxembourg, Greece, and Malta).

Investment Incentives

The 2004 Investment Promotion Act (revised in 2018) stipulates equal treatment of foreign and domestic investors. The law encourages investment in manufacturing, services, and high technology, education, and human resource development via a range of incentives, which include: helping investors purchase municipal or state-owned land without tender, providing state financing for basic infrastructure and for training new staff, and reimbursing the employer’s portion of social security payments. The law also provides tax incentives and fast-track administrative procedures for public-private partnerships.  The government policy for investment promotion excludes a number of sectors classified as ‘strategic’ for national security purposes.

Investment projects deemed particularly important for the economy and meet the legal requirement for a minimum investment commitment in the amount of EUR 10 to 50 million and for creating 50 to 150 new jobs are classified as priority projects.  The exact amount of the required investment depends on the level of economic activity expected to be generated. Priority investors may receive incentives such as below-market prices when acquiring property rights (full or limited) on central or municipal government property, government grants for research and development (R&D) and education projects, and institutional support for establishing PPPs.

Additional incentives include a two-year valued-added tax (VAT) exemption on equipment imports for investment projects over EUR 2.5 million, provided the project will be implemented within a two-year period and create at least 20 new jobs.  Corporate income tax exemption can also be granted for manufacturing projects, with no minimum investment requirement, that are implemented in high unemployment areas and create at least 10 jobs.

The government does not have a practice of issuing guarantees or jointly financing foreign direct investment projects.

Foreign Trade Zones/Free Ports/Trade Facilitation

The role of Free Trade Zones vastly diminished following Bulgaria’s full integration into the EU single market in 2007.  At the same time, EU integration encouraged local authorities to seek partnerships with the private sector and provide resources (i.e., land, infrastructure, etc.) for the development of industrial zones and technological parks.  Located favorably on one of the main highways, the Trakia Economic Zone just outside of Plovdiv, the largest in Bulgaria, consists of two industrial parks, two industrial zones, one high tech park and one agribusiness park.  In addition, the state-owned National Industrial Zones Company currently operates fully functioning industrial zones in Sofia, Burgas, Vidin, Ruse, Svilengrad and Varna.  The NIZC assists investors in these economic zones with established infrastructure, location, and transport logistics.   The common thread among all these economic zones is that they are either located in regions with plenty of available labor, in economically disadvantaged regions where the government provides special investment incentives, or are at important cross border points.  The high-technology Sofia Tech Park has joined efforts with the Bulgarian Academy of Sciences and several local universities to create innovation clusters expected to become the largest R&D center and high-tech incubator in Bulgaria.

Performance and Data Localization Requirements

Bulgaria generally does not impose export performance or local content requirements as a condition for establishing, maintaining, or expanding an investment.  However, non-EU workers cannot exceed 35 percent of the total workforce to be considered Bulgarian small- and medium-sized enterprises, or 20 percent in firms classified as large.  Employment visas and work permits are required for most expatriate personnel from non-EU countries. Many U.S. companies have experienced difficulties in the past obtaining work permits for their non-Bulgarian, non-EU employees.  In 2017 the government simplified procedures and shortened issuance time for work visas for non-EU workers. 

There are no requirements for foreign IT providers to turn over source code or provide access to surveillance, nor are there mechanisms used to enforce any rules on maintaining a certain amount of data storage within Bulgaria. 

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

* Source for Host Country Data: Bulgarian National Bank (BNB). For comparative purposes, data inside the table draws from the U.S./international source provided in the last column.

Table 3: Sources and Destination of FDI

The official FDI data in 2018 is broadly consistent with the IMF dollar-adjusted data.  The data for the Netherlands are heavily influenced by investment by non-Dutch companies (particularly Russian) incorporated in the country.  Distortions such as this substantially overstate the actual role of some countries as sources of FDI and understate that of the United States.  A recent study, based on beneficial owner analysis, placed the United States as historically the sixth-largest source country for FDI in Bulgaria, significantly above its nominal ranking at #13.  According to the same analysis, the United States is historically the largest non-EU source of FDI in Bulgaria.

Table 4: Sources of Portfolio Investment

Bulgarian companies’ tendency to seek tax advantages by using offshore entities impacts the data below, particularly in the case of Luxembourg

Transparency of the Regulatory System

The government of Burkina Faso aims for transparency in law and policy to foster competition.  By law, prices of goods and services must be established according to fair and sound competition.  The government believes that cartels, the abuse of dominant position, restrictive practices, refusal to sell to consumers, discriminatory practices, unauthorized sales, and selling at a loss are practices that distort free competition.

At the same time, the price of some staple goods and services are still regulated by the government, including fuel, essential generic drugs, tobacco, cotton, school supplies, water, electricity, and telecommunications.

There are regulatory authorities for government procurement, for electronic communication and posts, for electricity, and for quality standards.

Provinces and municipalities have the power to regulate in their jurisdiction, but that regulation has a minimal effect on business entities.  There are several regulatory bodies at the national level and they usually internalize regulations enacted by international organizations. Regulations exist at the supra-national level mostly through WAEMU and ECOWAS.

Burkina Faso’s legal, regulatory, and accounting systems are transparent and consistent with international norms.  Since January 2018, Burkina Faso as an Organization for the Harmonization of Corporate Law in Africa (OHCLA) member state adopted the revised version of the OHCLA accounting system  It is composed of the Uniform Act on Accounting and Financial Law (AUDCIF); the OHADA General Accounting Plan (PCGO); the SYSCOHADA application guide, and the International Financial Reporting Standards (IFRS) application guide. The OHCLA accounting system complies with the IFRS norms.

There is no online Regulatory Disclosure. However, the regulations of the parliament allow the various commissions to hear civil society organizations wishing to share information to inform MPs when they are examining bills.

International Regulatory Considerations

Burkina Faso is a member of the West African Economic Monetary Union (WAEMU) and the Economic Community of West African States (ECOWAS).  There is a supranational relationship between these organizations and their state members. Burkina Faso is also a member of the Organization for the Harmonization of Corporate Law in Africa (OHCLA).  As such, Uniform Laws adopted by the OHCLA are automatically part of the national legal system.

The Government of Burkina Faso regularly notifies all the draft technical barriers to the relevant WTO Committee.  In the October 2017 Trade Policy Review, the WTO congratulated WAEMU countries for their continued efforts to improve their international trading environment, especially through the implementation of the Trade Facilitation Agreement (TFA).  Burkina Faso has begun the ratification process of the TFA but it has not yet completed it. However, WAEMU and ECOWAS members already implement many of the TFA provisions.

Legal System and Judicial Independence

The legal system of Burkina Faso is the civil law. Contracts must always be performed in good faith. Burkina Faso has commercial courts that judge commercial cases. Commercial law is constituted by the uniform acts of the OHADA. The Commercial Code governs all matters that are not covered by the OHADA law.

The Burkinabe judiciary is independent despite cases of corruption of judges that have been reported in the press.  In addition, even the Disciplinary Commission of the Judiciary has sanctioned corrupt judges. There are three degrees of jurisdiction in Burkina Faso allowing the loser to appeal a decision rendered in first instance.  In the event of a dispute over the execution of a contract, the plaintiff must first abstain a judgment from a court first and if the loser does not execute, the winner can retain a bailiff.

Laws and Regulations on Foreign Direct Investment

The investment code adopted by law 038-2018 demonstrates the government’s interest in attracting FDI to create industries that produce export goods and provide training and jobs for its domestic workforce.  The code provides standardized guarantees to all legally established firms operating in Burkina Faso, whether foreign or domestic. It contains four investment and operations preference schemes, which are equally applicable to all investments, mergers, and acquisitions.

Burkina Faso’s regulations governing the establishment of businesses include most forms of companies admissible under French business law, including: public corporations, limited liability companies, limited share partnerships, sole proprietorships, subsidiaries, and affiliates of foreign enterprises.  With each scheme, there is a corresponding set of related preferences, duty exceptions, corporate tax exemptions, and operation-related taxes.

Under the investment code, all personal and legal entities lawfully established in Burkina Faso, both local and foreign, are entitled to the following rights: fixed property, forest and industrial rights, concessions, administrative authorizations, access to permits, and participation in state contracts.

Competition and Anti-Trust Laws

The National Commission for Competition and Consumption (Commission Nationale pour la Concurrence et la Consommation) reviews competition matters.  Some competition matters are under the aegis of the West African Economic and Monetary Union (WAEMU). Law No. 016-2017/AN of 27 April 2017 on organizing competition in Burkina Faso governs the competition sector.  This law is intended to create a free and transparent market, a guarantee of the development of a market economy driven by competitive and wealth-creating businesses.

Expropriation and Compensation

The Burkinabe constitution guarantees basic property rights.  These rights cannot be infringed upon except in the case of public necessity, as defined by the government.  This has rarely occurred. Until 2007, all land belonged to the government but could be leased to interested parties.  The government reserves the right to expropriate land at any time for public use. In instances where property is expropriated, the government must compensate the property holder in advance, except in the event of an emergency.

In 2007, Burkina Faso drafted a national land reform policy that recognizes and protects the rights of all rural and urban stakeholders to land and natural resources.  It also clarifies the institutional framework for conflict resolution at a local level, establishes a viable institutional framework for land management, and strengthens the general capacities of the government, local communities and civil society on land issues.

A 2009 rural land management law provides for equitable access to rural lands in order to promote agricultural productivity, manage natural resources, encourage investment, and reduce poverty.  It enables legal recognition of rights legitimated by traditional rules and practices. In rural areas, traditional land tenure rules have long governed land transactions and allocations. The 2009 law reinforces the decentralization and devolution of authority over land matters, and provides for formalization of individual and collective use rights and the possibility of transforming these rights into private titles.

In 2012, the government revised the 2009 law, marking the end of exclusive authority of the state over all land.  It includes provisions to recognize local land use practices. The new law provides conciliation committees to resolve conflicts between parties prior to any legal action.  There are several property rights recognition and protection acts, such as land charters, individual or collective land ownership certificates, and loan agreements that govern the nature, duration and counterparties for transfer rights between a landowner and a third party.

The first (2010-2014) Millennium Challenge Corporation (MCC) compact supported the establishment of local authorities and the issuance of titles as part of the land tenure reform process.  USAID continues to support the decentralization of land policy, through the establishment of the National Land Observatory, which produces, collects, and distributes information on national/local land tenure issues to aid in government decision-making.

Dispute Settlement

ICSID Convention and New York Convention

The 1965 Convention of the International Center for Settlement of Investment Disputes (ICSID) entered into force for Burkina Faso on October 14, 1966.  In the event that an amicable settlement of a dispute between the government and an investor cannot be reached, the investment code requires that arbitration procedures be submitted to international arbitration under the rules outlined by ICSID .

When the ownership of a company does not meet the nationality requirements laid out by Article 25 of ICSID, the code specifies that the dispute be resolved in accordance with the dispositions of the supplementary mechanisms approved by ICSID in September 1978.

Burkina Faso is a member of the New York Convention since March 23, 1987.

Investor-State Dispute Settlement

Burkina Faso is a party to the Washington Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards and outlines arbitration procedures in its investment code as a means of solving investment disputes.  BITs signed by Burkina Faso provide for international arbitration. Burkinabe courts accept international arbitration as a means for settling investment disputes between private parties. Longstanding disputes that remain unresolved after administrative jurisdictional hearings may be submitted to arbitration.  Burkinabe courts recognize and enforce foreign arbitral awards. The United States did not sign a BIT with Burkina Faso.

International Commercial Arbitration and Foreign Courts

Mediation and conciliation are available and encouraged in Burkina Faso.  In 2006, Burkina Faso introduced specialized commercial chambers in the general courts and in 2007 opened the Arbitration, Mediation and Resolution Center (Centre d’Arbitrage, de Mediation et de Conciliation de Ouagadougou (CAMCO)) under the auspices of the Chamber of Commerce and Industry.  (http://www.camco.bf/  ).  If a dispute is not settled by the CAMCO, the case can be referred to international bodies such as the International Chamber of Commerce of Paris.

The parliament adopted the Law n ° 047-2017 laying down modalities for intervention by the state jurisdictions on arbitration in Burkina Faso.  Burkina Faso is not a member of the Apostille Convention. Consequently, any arbitral award rendered abroad should receive an exequatur before enforcement.

Bankruptcy Regulations

Burkina Faso, as a member of the OHADA, the Uniform Act on Bankruptcy is applicable.

There is no credit bureau in Burkina Faso.  The World Bank’s 2019 “Doing Business” report ranked Burkina Faso 107 out of 190 countries for Resolving Insolvency.

Investment Incentives

The 2018 investment code demonstrates the government’s interest in attracting FDI to create industries that produce export goods and provide training and jobs for its domestic workforce.  The code provides standardized guarantees to all legally established firms operating in Burkina Faso, whether foreign or domestic. It contains five investment and operations preference schemes, which are equally applicable to all investments, mergers, and acquisitions.

Burkina Faso’s regulations governing the establishment of businesses include most forms of companies admissible under French business law, including: public corporations, limited liability companies, limited share partnerships, sole proprietorships, subsidiaries, and affiliates of foreign enterprises.  With each scheme, there is a corresponding set of related preferences, duty exceptions, corporate tax exemptions, and operation-related taxes.

Under the investment code, all personal and legal entities lawfully established in Burkina Faso, both local and foreign, are entitled to the following rights: fixed property, forest and industrial rights, concessions, administrative authorizations, access to permits, and participation in state contracts.

Foreign Trade Zones/Free Ports/Trade Facilitation

There are no foreign trade zones or free ports in Burkina Faso.  The Burkinabe investment code prohibits discrimination against foreigners.  American firms not registered in Burkina Faso can compete for contracts on projects financed by international sources such as the World Bank, U.N. organizations, or the African Development Bank.

Performance and Data Localization Requirements

The GoBF does not mandate local employment, but in recent years has encouraged investors to promote local employment and support local economies.  The GoBF does not require investors to purchase materials from local sources or to export a certain percentage of output. However, regarding the mining sector, according to the article 101 of the mining code, “Holders of mining title or authorization and their subcontractors give preference to Burkinabe enterprises for any contract of provision of services or supplies of goods in equivalence of price, quality and time.” The GoBF does not impose “offset” requirements, which dictate that major procurements be approved only if the foreign supplier invests in Burkinabe manufacturing, research and development, or service facilities in areas related to the items being procured.  Burkina Faso does not have “forced localization” policies.

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.

Transparency of the Regulatory System

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

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

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

International Regulatory Considerations

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

Legal System and Judicial Independence

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

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

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

Laws and Regulations on Foreign Direct Investment

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

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

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

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

Competition and Anti-Trust Laws

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

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

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

Expropriation and Compensation

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

Dispute Settlement

ICSID Convention and New York Convention

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

Investor-State Dispute Settlement

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

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

International Commercial Arbitration and Foreign Courts

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

Bankruptcy Regulations

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

Investment Incentives

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

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

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

Foreign Trade Zones/Free Ports/Trade Facilitation

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

Performance and Data Localization Requirements

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

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

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

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

Table 3: Sources and Destination of FDI

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

Table 4: Sources of Portfolio Investment

Data not available.

Transparency of the Regulatory System

Although parts of the government are working to create more transparent policies for fostering competition, Burundi lacks clear rules of the game.  Many policies for foreign investment are not transparent, and laws or regulations on the books are often ineffective or unenforced. Burundi’s regulatory and accounting systems are generally transparent and consistent with international norms on paper, but a lack of capacity or training for the staff and political constraints sometimes limit the regularity and transparency of their implementation.

Rule-making and regulatory authority is exercised exclusively at the national level.  Relevant ministries and the Council of Ministers exercise regulatory and rule-making authority, based on laws passed by the Senate and National Assembly.  In practice, government officials sometimes exercise influence over the application and interpretation of rules and regulations outside of formal structures.  The government sometimes discusses proposed legislation and rule-making with private sector interlocutors and civil society, but does not have a formal public comment process.  There are no informal regulatory processes managed by non-governmental organizations (NGOs) or private sector associations.

Accounting, legal, and regulatory procedures are generally transparent or consistent with international norms on paper but are unevenly implemented in practice.

Draft bills or regulations are not subject to public consultation process.  There are no conferences that involves citizens in consultation process to give them an opportunity to make their comments or contributions, especially at the time of project development, and, even if this was the case, the public does not have access to the detailed information needed to participate in this process.

Burundi does not have a centralized online location where key regulatory actions are published; however, regulatory actions are sometimes posted on the websites of the GoB institutions (typically that of the Office of the President or ministries).

Burundi has sectoral regulatory agencies covering taxes and revenues, mining and energy, water, and agriculture.  Regulatory actions are reviewable by courts. There have been no recent reforms to the regulatory enforcement system.

The government generally issues terms of reference and recruits private consultants who prepare a study on the draft legislation for review and comment by the private sector.  The government analyzes these comments and takes them into consideration while drafting new regulations. New regulations can be issued by a presidential decree or submitted to the parliament when they have become a law.  This mechanism applies to laws and regulations on investment.

Information on public finances and debt obligations (including explicit and contingent liabilities) are published in the Burundi Central Bank’s Reports and on its website: https://www.brb.bi/  ;  however, publications are usually not up-to-date.

International Regulatory Considerations

Burundi is a part of the East African Community (EAC), a regional economic bloc composed by six member states, the republics of Burundi, Kenya, Rwanda, South Sudan, Tanzania, and Uganda.  The EAC Integration process is anchored on four pillars: Customs Union, Common Market, Monetary Union, and Political Federation. Each member state must harmonize its national regulatory system with that of the EAC.  At the moment, several milestones have been realized under the EAC Pillars; some countries are ahead of others, but the process of harmonization of regulatory systems (national and regional) continues to progress as does the regional integration (progress of the East African Customs Union, the creation of the Common Market and the implementation of the Monetary Union Protocol, etc.).

Burundian law and regulations reference a number of standards, including the East African Standards, Codex Alimentarius Standards, the International Organization for Standardization (ISO), and its own standards.  ISO remains the main reference.

The country joined the WTO member on July 23, 1995.  According to the Ministry of Commerce, Industry, and Tourism, Burundi has not notified the WTO Committee on TBT of all draft technical regulations.

Legal System and Judicial Independence

The country’s legal system is civil (Roman), based on German and French civil codes.  For local civil matters, customary law also applies. Burundi’s legal system contains standard provisions guaranteeing the right to private property and the enforcement of contracts.  The country has a written commercial law and a commercial court. The investment code offers plaintiffs recourse in the national court system and to international arbitration.

The judicial system is not effectively independent of the executive branch.  A lack of capacity hinders judicial effectiveness, and judicial procedures are not rigorously observed.

The investment code offers plaintiffs recourse in the national court system and to international arbitration when necessary.

Laws and Regulations on Foreign Direct Investment

There were no major laws, regulations, or judicial decisions pertaining to foreign investment in the past year.  In 2009, the GoB created an Investment Promotion Authority (API) in charge of promoting investment and facilitating market entry for investors in Burundi.  API offers a range of services to potential investors, including assistance in acquiring the licenses, certificates, approvals, authorizations, and permits required by law to set up and operate a business enterprise in Burundi.  In 2014, API created a follow-up mechanism to make sure that investors are implementing projects for which they received tax exemptions and other advantages provided in the investment code.

In 2018, the Council of Ministers reviewed draft legislation updating the investment code and then referred to a technical committee for review and improvement; it remains a work in progress.  Among other changes, the draft contains new measures to ensure the protection of the property of foreign investors and penalties for malfeasance by foreign investors.

Competition and Anti-Trust Laws

There is no Burundian agency in charge of reviewing transactions for competition-related concerns.

Expropriation and Compensation

Burundian law allows the GoB to expropriate property for exceptional and state-approved reasons, but the GoB is then committed to provide a legal prior fair compensation allowance based on the fair market value.

There are no recent cases involving expropriation of foreign investments nor do any foreign firms have active pending complaints regarding compensation in Burundian courts.

Dispute Settlement

ICSID Convention and New York Convention

Burundi is a full member of ICSID Convention since 1969 and became the 150th country to sign the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention).  Burundi’s commercial law allows enforcement of judgments in foreign courts by local courts.

Investor-State Dispute Settlement

Burundi is a signatory of International Centre for Settlement of Investment Disputes (ICSID) and Multilateral Investment Guarantee Agency (MIGA) in which international arbitration of investment disputes is recognized.  Burundi has no bilateral investment treaty with the United States.

There have been limited instances of foreign investors seeking restitution from the GoB over allegations of breach of contract and corruption.

In cases involving international elements, the GoB accepts international arbitration and recognizes and enforces foreign arbitral awards.  There is no history of extrajudicial action against foreign investors.

International Commercial Arbitration and Foreign Courts

In rare cases involving international elements, the GoB accepts international arbitration and recognizes and enforces foreign arbitral awards.  In investment disputes between private parties, international arbitration is accepted as a means of settlement provided one of the parties is an extra-national.  In 2007, the GoB created a Center for Arbitration and Mediation (CEBAC) to handle such disputes, but it is not very active.

There is no operational commercial arbitration body in the country besides CEBAC.  Foreign arbitral awards are recognized, but local courts are not legally equipped to enforce them.  No Burundian private entity has been involved in a foreign arbitration. In the past, one registered case involved the GoB and a private gold refining company (Affimet).  The ICSID ruling was enforced by GoB, which lost the case.

Although there are complaints about the discriminatory and opaque nature of Burundian court processes in general, there are no known cases involving State-Owned Enterprises (SOEs) in investment disputes.

Bankruptcy Regulations

Burundi has two laws governing or pertaining to bankruptcy:  Law N°1/07 of March 15, 2006, on bankruptcy and Law N°1/08 of March 15, 2006, on legal settlement of insolvent companies.  Under Burundian law, creditors have the right to file for liquidation and the right to request information from the legal bankruptcy agent.  The bankruptcy framework does not require that creditors approve the selection of the bankruptcy agent and does not provide creditors the right to object to decisions accepting or rejecting creditors’ claims.

Investment Incentives

The current Investment Code grants various potential fiscal and customs benefits to investors including:  three or more years of tax-free operation; exemption of charges on property transfer; exemptions from duties on raw materials, capital goods, and specialized vehicles; tax exemptions for goods used to establish new businesses; exemptions from customs duties if investment goods are made within the EAC or COMESA; a corporate tax rate of 30 percent with a reduction to 28 percent if 50-200 Burundians are employed and to 25 percent if more than 200 are employed; and free transfer of foreign assets and income after payment of taxes due.

The GoB does not issue guarantees, but does co-finance foreign direct investment projects, albeit typically on an in-kind basis, such as by granting land for facilities.

Foreign Trade Zones/Free Ports/Trade Facilitation

The government has passed a free trade zone law; however the enabling regulation has not been developed and Burundi does not yet have trade zones, free ports, or special tax treatment areas. While the government has discussed the possibility of free trade zones in the future, no sufficient legal framework for them currently exists.

Performance and Data Localization Requirements

The current government policy for both domestic and foreign companies is mandatory employment of local workers unless it is not possible to find a local candidate with the required skills or expertise.  The number of expatriate employees is limited to 20 percent of the total workforce. There is no policy mandating foreign companies to appoint local personnel to senior management or boards of directors.

Burundian visa requirements are not excessively onerous and do not generally inhibit the mobility of foreign investors and their employees.  Since 2015, Burundi has removed the possibility for visitors to apply for a visa upon arrival at the airport unless authorized by the PAFE (immigration authority).  Travelers to Burundi must apply for visas in one of the Burundian missions abroad. A foreigner holding a residency visa is permitted to work in Burundi. A two-year residency visa costs USD 500.  There are no government/authority-imposed conditions on permission to invest except for a minimum investment requirement of USD 50,000 applicable to foreign investors.

There are no requirements that investors purchase from local sources.  However, the mining law requires a commitment from the investor to recruit staff or subcontractors of Burundian nationality as a precondition for granting a mining license.  The GoB imposes no performance requirements on investors as a condition for establishing, maintaining, or expanding their investments or for access to tax and investment incentives.

There are no laws requiring foreign IT providers to turn over source code and/or provide access to encryption except for a law requiring that companies share user information with law enforcement authorities during terrorism investigations; this law applies equally to Burundian and foreign companies.  There are no laws that prevent companies from transmitting data outside the country.

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

* BRB (Bank of the Republic of Burundi), 2017 Annual Report (at official exchange rate).

Table 3: Sources and Destination of FDI

No detailed information is available on the IMF’s Coordinated Portfolio Investment Survey (CPIS) website and no information is available on outward direct investment from Burundi.

Table 4: Sources of Portfolio Investment

No detailed information is available on the IMF’s Coordinated Portfolio Investment Survey (CPIS) website and no information is available on outward direct investment from Burundi.