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Albania

Executive Summary

Albania is an upper middle-income country with a gross domestic product (GDP) of USD 16.77 billion (2021 IMF estimate) and a population of approximately 2.9 million people.

In 2020, the economy contracted by 4 percent in the height of COVID-19 and in 2021 re-bounded with a growth rate of 8.7 percent. The increase was fueled by construction, easing of pandemic related restrictions, recovery of tourism sector, increase in the real estate sector, record domestic electricity production, and continued budgetary, monetary, and fiscal policy support, including IMF and EU pandemic and earthquake related support. The initial growth projection for 2022 was 4.1 percent, despite uncertainties related to the pandemic, elevated fiscal deficits and public debt, and external and internal inflationary pressures. However, uncertainties due to Russia’s 2022 invasion of Ukraine, surging energy prices, and inflationary pressures, coupled with limited room for fiscal maneuvering due to high public debt that exceeded 80 percent at the end of 2021, present challenges to the Albanian economy.

Albania joined NATO in 2009 and has been a member of WTO since 2000. The country signed the Stabilization and Association Agreement with the European Union in 2006, received the status of the EU candidate country in 2014, and began accession negotiations with the EU in July 2022.

Albania’s legal framework is in line with international standards in protecting and encouraging foreign investments and does not discriminate against foreign investors. The Law on Foreign Investments of 1993 outlines specific protections for foreign investors and allows 100 percent foreign ownership of companies in all but a few sectors. The U.S.-Albanian Bilateral Investment Treaty, which entered into force in 1998, ensures that U.S. investors receive national treatment and most-favored-nation treatment. Albania and the United States signed a Memorandum of Economic Cooperation in October 2020 with an aim of increasing trade and investment between the two countries. Since the signing multiple U.S. companies have signed agreements for major projects in the country.

As a developing country, Albania offers large untapped potential for foreign investments across many sectors including energy, tourism, healthcare, agriculture, oil and mining, and information and communications technology (ICT). In the last decade, Albania has been able to attract greater levels of foreign direct investment (FDI). According to the UNCTAD data, during 2010-2020, the flow of FDI has averaged USD 1.1 billion and stock FDI at the end of 2020 reached USD 10 billion or triple the amount of 2010. According to preliminary data of the Bank of Albania the FDI flow in 2021 is expected to reach USD 1 billion. Investments are concentrated in extractive industries and processing, real estate, the energy sector, banking and insurance, and information and communication technology. Switzerland, the Netherlands, Canada, Italy, Turkey, Austria, Bulgaria, and France are the largest sources of FDI. The stock FDI from United States accounts for a small, but rapidly growing share. At the end of Q3 2021, the United States stock FDI in Albania reached USD168 million, up from USD 99 million at the end of 2020, nearly a 70 percent increase.

Despite a sound legal framework, foreign investors perceive Albania as a difficult place to do business. They cite endemic corruption, including in the judiciary and public procurements, unfair competition, informal economy, frequent changes of the fiscal legislation, and poor enforcement of contracts as continuing challenges for investment and business in Albania. Reports of corruption in government procurement are commonplace. The continued use of public private partnership (PPP) contracts has reduced opportunities for competition, including by foreign investors, in infrastructure and other sectors. Poor cost-benefit analyses and a lack of technical expertise in drafting and monitoring PPP contracts are ongoing concerns. U.S. investors are challenged by corruption and the perpetuation of informal business practices. Several U.S. investors have faced contentious commercial disputes with both public and private entities, including some that went to international arbitration. In 2019 and 2020, a U.S. company’s attempted investment was allegedly thwarted by several judicial decisions and questionable actions of stakeholders involved in a dispute over the investment. The case is now in international arbitration.

Property rights continue to be a challenge in Albania because clear title is difficult to obtain. There have been instances of individuals allegedly manipulating the court system to obtain illegal land titles. Overlapping property titles is a serious and common issue. The compensation process for land confiscated by the former communist regime continues to be cumbersome, inefficient, and inadequate. Nevertheless, parliament passed a law on registering property claims on April 16, 2020, which will provide some relief for title holders.

In an attempt to limit opportunities for corruption, the GoA embarked on a comprehensive reform to digitalize all public services. As of March 2021, 1,200 services or 95 percent of all public services to citizens and businesses were available online through the E-Albania Portal . However, Albania continues to score poorly on the Transparency International’s Corruption Perceptions Index. In 2021, Albania declined to 110th out of 180 countries, a fall of six places from 2020. Albania continues to rank low in the Global Innovation Index, ranking 84 out of 132 countries.

To address endemic corruption, the GOA passed sweeping constitutional amendments to reform the country’s judicial system and improve the rule of law in 2016. The implementation of judicial reform is underway, heavily supported by the United States and the EU, including the vetting of judges and prosecutors for unexplained wealth. More than half the judges and prosecutors who have undergone vetting have been dismissed for unexplained wealth or ties to organized crime. The EU expects Albania to show progress on prosecuting judges and prosecutors whose vetting revealed possible criminal conduct. The implementation of judicial reform is ongoing, and its completion is expected to improve the investment climate in the country. The Albanian parliament voted overwhelmingly and unopposed to extend this vetting mandate in February 2022.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 110 of 180 http://www.transparency.org/research/cpi/overview 
Global Innovation Index 2021 84 of 132 https://www.globalinnovationindex.org/analysis-indicator 
U.S. FDI in partner country ($M USD, historical stock positions) 2018 $35 https://apps.bea.gov/international/factsheet/ 
World Bank GNI per capita 2020 $ 5,210 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD 

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

Algeria

Executive Summary

Algeria’s state enterprise-dominated economy is challenging for U.S. businesses, but multiple sectors offer opportunities for long-term growth. The government is prioritizing investment in agriculture, information and communications technology, mining, hydrocarbons (both upstream and downstream), renewable energy, and healthcare.

Following his December 2019 election, President Abdelmadjid Tebboune launched a series of political reforms, which led to the adoption of a new constitution in December 2020 and the election of a new parliament in June 2021. Tebboune has declared his intention to focus on economic issues in 2022 and beyond.

In 2020, the government eliminated the so-called “51/49” restriction that required majority Algerian ownership of all new businesses, though it retained the requirement for “strategic sectors,” identified as energy, mining, defense, transportation infrastructure, and pharmaceuticals manufacturing (with the exception of innovative products). In the 2021 Finance Law, the government reinstated the 51/49 ownership requirement for any company importing items into Algeria with an intent to resell. The government passed a new hydrocarbons law in 2019, improving fiscal terms and contract flexibility in order to attract new international investors. The new law encourages major international oil companies to sign memorandums of understanding with the national hydrocarbons company, Sonatrach.  Though the 43 regulatory texts enacting the legislation have not been formally finalized, the government is using the new law as the basis for negotiating new contracts with international oil companies. In recent years, the Algerian government took several steps, including establishing a standalone ministry dedicated to the pharmaceutical industry and issuing regulations to resolve several long-standing issues, to improve market access for U.S. pharmaceutical companies. The government is in the process of drafting and finalizing a new investment law. Algeria has established ambitious renewable energy adoption targets to reduce carbon emissions and reduce domestic consumption of natural gas.

Algeria’s economy is driven by hydrocarbons production, which historically accounts for 95 percent of export revenues and approximately 40 percent of government income. Following the significant drop in oil prices at the onset of the COVID-19 pandemic in March 2020, the government cut budgeted expenditures by 50 percent and significantly reduced investment in the energy sector. The implementation of broad-based import reductions coupled with a recovery in hydrocarbon prices in 2021 led to Algeria’s first trade surplus since 2014. Though successive government budgets have boosted state spending, Algeria continues to run a persistent budget deficit, which is projected to reach 20 percent of GDP in 2022. Despite a significant reduction in revenues, the historically debt-averse government continues to resist seeking foreign financing, preferring to attract foreign direct investment (FDI) to boost employment and replace imports with local production. Traditionally, Algeria has pursued protectionist policies to encourage the development of local industries. The import substitution policies it employs tend to generate regulatory uncertainty, supply shortages, increased prices, and a limited selection for consumer goods. The government depreciated the Algerian dinar approximately 5% in 2021 after a 10% depreciation in 2020 to conserve its foreign exchange reserves, contributing to significant food inflation.

The government has taken measures to minimize the economic impact of the COVID-19 pandemic, including delaying tax payments for small businesses, extending credit and restructuring loan payments, and decreasing banks’ reserve requirements.  Though the government has lifted domestic COVID_19 related confinement measures, continued restrictions on international flight volumes complicate travel to Algeria for international investors.

Economic operators deal with a range of challenges, including complicated customs procedures, cumbersome bureaucracy, difficulties in monetary transfers, and price competition from international rivals particularly the People’s Republic of China, France, and Turkey. International firms operating in Algeria complain that laws and regulations are constantly shifting and applied unevenly, raising commercial risk for foreign investors. An ongoing anti-corruption campaign has increased weariness regarding large-scale investment projects and put a chill on bureaucratic decision making. Business contracts are subject to changing interpretation and revision of regulations, which has proved challenging to U.S. and international firms. Other drawbacks include limited regional integration, which hampers opportunities to rely on international supply chains.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 117 of 175 http://www.transparency.org/research/cpi/overview
Global Innovation Index 2021 120 of 132 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 20xx USD Amount https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 $3,570 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD

 

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

Andorra

Executive Summary

Andorra is an independent principality with a population of about 79,000 and area of 181 square miles situated between France and Spain in the Pyrenees mountains. It uses the euro as its national currency. Andorra is a popular tourist destination visited by over 8 million people each year (pre-pandemic) who are drawn by outdoor activities like hiking and cycling in the summer and skiing and snowshoeing in the winter, as well as by its duty-free shopping of luxury products. Andorra’s economy is based on an interdependent network of trade, commerce, and tourism, which represent nearly 60% of the economy, followed by the financial sector. Andorra has also become a wealthy international commercial center because of its integrated banking sector and low taxes. As part of its effort to modernize its economy, Andorra has opened to foreign investment and engaged in other reforms, including advancing tax initiatives. Andorra is actively seeking to attract foreign investment and to become a center for entrepreneurs, talent, innovation, and knowledge.

The Andorran economy is undergoing a process of digitalization and diversification that accelerated due to the impact pandemic-related border closures had on its dominant tourist sector.  In 2006, the Government began sweeping economic reforms. The Parliament approved three main regulations to complement the first phase of economic openness:  the law of Companies (October 2007), the Law of Business Accounting (December 2007), and the Law of Foreign Investment (April 2008 and June 2012). From 2011 to 2017, the Parliament approved direct taxes in the form of a corporate tax, tax on economic activities, tax on income of non-residents, tax on capital gains, and personal income tax. Andorra joined the IMF in October 2020, providing it access to additional resources for managing its economy. Also, as part of the post-pandemic economic recovery plan, Andorra passed Horizon 23, a comprehensive roadmap backed by 80 million euros of public funds to accelerate economic diversification into sectors like fintech, sports tech, esports, and biotech. These regulations aim to establish a transparent, modern, and internationally comparable regulatory framework.

These reforms aim to attract investment and businesses that have the potential to boost Andorra’s economic development and diversification. Prior to 2008, Andorra limited foreign investment, worried that large foreign firms would have an oversized impact on its small economy.  For example, previous regulations allowed non-citizens with less than 20 years residence in Andorra to own no more than 33 percent of a company. While foreigners may now own 100 percent of a trading enterprise or a holding company, the Government must approve the establishment of any private enterprise. The approval can take up to one month, which can be rejected if the proposal is found to negatively impact the environment, the public order, or the general interests of the principality.

Andorra is a microstate that accounts for .001 percent of global emissions and has demonstrated its ambition to the fight against climate change by establishing a national strategy that commits to reducing greenhouse gas emissions (GHG) by a minimum of 37 percent by 2030 and pursuing carbon neutrality by 2050. In addition to implementing an energy transition law, Andorra approved the Green Fund and a hydrocarbon tax to promote climate change mitigation and adaptation initiatives.

Andorra’s per capita income is above the European average and above the level of its neighbors. The country has developed a sophisticated infrastructure including a one-of-a-kind micro-fiber-optic network for the entire country that provides universal access for all households and companies. Andorra’s retail tradition is well known around Europe, thanks to more than 1,400 shops, the quality of their products, and competitive prices. Products taken out of the Principality are tax-free up to certain limits; the purchaser must declare those that exceed the allowance.

Table 1: Key Metrics and Rankings

Data not available

1. Openness To, and Restrictions Upon, Foreign Investment

2. Bilateral Investment Agreements and Taxation Treaties

Andorra has bilateral agreements with France (2003), Spain (2003), and Portugal (2007). No bilateral investment treaty exists between Andorra and the United States.

Andorra has signed Tax Information Exchange agreements for the exchange of fiscal information with 24 countries. All those agreements have been ratified and are in force.

In 2014, Andorra became the 48th signatory to the OECD Declaration on Automatic Exchange of Information in Tax Matters, which commits countries to end bank secrecy for tax evasion purposes. Andorra is a member of the OECD’s Inclusive Framework base erosion profit shifting (BEPS). Additionally, Andorra ratified the Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting, which came into effect January 1, 2022. Andorra signed a Non-Double Taxation agreement with France, Spain, Portugal, Luxembourg, Liechtenstein, Malta, Cyprus, United Arab Emirates, San Marino, and Hungary and is currently negotiating other such agreements.

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

The constitution guarantees the right to private ownership for citizens and residents. Both domestic and foreign private entities now have the right to establish and own business enterprises.

6. Financial Sector

Angola

Executive Summary

The Angolan economy emerged from five straight years of recession with slight GDP growth of 0.7 percent in 2021, thanks primarily to growth in the non-oil sector. The government forecasts more substantial growth of 2.4 percent in 2022. The oil and gas sector remains the key source of government revenue despite declining oil production and the government should benefit from higher than budgeted oil prices in 2022. The growth in non-oil sectors such as manufacturing, agriculture, transportation will be bolstered by increased demand from the lifting of COVID restrictions in late 2021 and early 2022.

The Angolan government has maintained a reform agenda since the 2017 election of President Joao Lourenço. His administration has adopted measures to improve the business environment and make Angola more attractive for investment. Angola completed the IMF’s Extended Fund Facility in December 2021, demonstrating an ability to commit to and carry out difficult fiscal and macroeconomic reforms, despite the COVID-19 pandemic. The government received three credit rating upgrades between September 2021 and early 2022.

In addition to the Privatization Program (PROPRIV), revision of the Private Investment Law, and updated Public Procurement law, the government has taken steps to recover misappropriated state assets – the Attorney General’s Office claims just under $13 billion since 2018 – and to uproot corruption. Through the Private Investment and Export Promotion Agency (AIPEX), Angola seeks to connect foreign investors with opportunities across the private sector, with PROPRIV, and a wide range of available state-owned enterprises and other assets. The public procurement process has also become more transparent. Angola plans to present its candidacy to join the Extractive Industries Transparency Initiative in 2022 to increase transparency in the oil, gas, and mineral resource sectors.

Despite the government’s efforts to address corruption, its prevalence remains a key issue of concern for investors. Angola’s infrastructure requires substantial improvement; which the government is seeking to address by attracting investment public-private partnerships to improve and manage of ports, railroads, and key energy infrastructure. The justice system and other administrative processes remains bureaucratic and time-consuming. Unemployment (32.9 percent in the fourth quarter of 2021) and inflation (which reached 27 percent in 2021) remain high. There is limited technical training, English-speaking skills are generally low. Skilled labor levels are also low, though the government has attempted to address the issue through training and apprenticeship programs.

Overall FDI increased by $2.59 billion in 2020, the last full year of reporting, from 2019.

The government has committed to reaching 70 percent installed renewable energy by 2025 and has recognized the risks of climate change for Angola. To reach its renewable energy goal, the government has signed deals with U.S. companies on the installation of solar and hydro capacity worth hundreds of millions of dollars.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 136 of 180 http://www.transparency.org/research/cpi/overview 
Global Innovation Index 2021 132 of 132 https://www.globalinnovationindex.org/analysis-indicator 
U.S. FDI in partner country ($M USD, historical stock positions) 2020 $-578 million https://apps.bea.gov/international/factsheet/ 
World Bank GNI per capita 2020 $2140 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD 

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

Antigua and Barbuda

Executive Summary

Antigua and Barbuda is a member of the Organization of Eastern Caribbean States (OECS) and the Eastern Caribbean Currency Union (ECCU). According to Eastern Caribbean Central Bank (ECCB) statistics, Antigua and Barbuda’s 2021 estimated gross domestic product (GDP) was $1.47 billion (3.97 billion Eastern Caribbean dollars). This represents an approximate 5.3 percent growth from 2020. The ECCB forecasts 2022 growth at 4.7 percent.

Unanticipated spending on pandemic response measures, coupled with sharp declines in government revenues, forced the government to increase borrowing in 2020. As of December 2021, Antigua and Barbuda reported total public sector debt of $1.3 billion representing 89 percent of GDP. Unlike other Eastern Caribbean (EC) countries, Antigua and Barbuda did not have the resources to significantly increase spending on social support payments to vulnerable populations. Following several years of operating losses, the government became the sole source of financing for regional airline Leeward Islands Air Transport (LIAT) in mid-2020. Based in Antigua and Barbuda, LIAT was heavily overstaffed and therefore a major employer, but is now under the supervision of a bankruptcy trustee.

Antigua and Barbuda ranks 113th out of 190 countries rated in the 2020 World Bank Doing Business Report. The scores remain relatively unchanged from the 2019 report, though some improvements in the ease of starting a business were highlighted.

Through the Antigua and Barbuda Investment Authority (ABIA), the government encourages foreign direct investment, particularly in industries that create jobs and earn foreign exchange. The ABIA facilitates and supports foreign direct investment in the country and maintains an open dialogue with current and potential investors. All potential investors are afforded the same level of business facilitation services.

While the government welcomes all foreign direct investment, tourism and related services, manufacturing, agriculture and fisheries, information and communication technologies, business process outsourcing, financial services, health and wellness services, creative industries, education, yachting and marine services, real estate, and renewable energy have been identified by the government as priority investment areas.

There are no limits on foreign control of investment and ownership in Antigua and Barbuda. Foreign investors may hold up to 100 percent of an investment.

Antigua and Barbuda’s legal system is based on British common law. There is currently an unresolved dispute regarding the alleged expropriation of an American-owned property. For this reason, the U.S. government recommends continued caution when investing in real estate in Antigua and Barbuda.

In 2017, the government signed an intergovernmental agreement in observance of the U.S. Foreign Account Tax Compliance Act (FATCA), making it mandatory for banks in Antigua and Barbuda to report the banking information of U.S. citizens.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index N/A N/A http://www.transparency.org/research/cpi/overview  
Global Innovation Index N/A N/A https://www.globalinnovationindex.org/analysis-indicator  
U.S. FDI in partner country ($M USD, historical stock positions) 2020 7.0 https://apps.bea.gov/international/factsheet/  
World Bank GNI per capita 2019 16,420 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD  

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

Argentina

Executive Summary

Argentina presents investment and trade opportunities, particularly in agriculture, energy, health, infrastructure, information technology, and mining. However, economic uncertainty, interventionist policies, high inflation, and persistent economic stagnation have prevented the country from maximizing its potential. The economy fell into recession in 2018, the same year then-President Mauricio Macri signed a three-year $57 billion Stand-By Arrangement (SBA) with the International Monetary Fund (IMF). President Alberto Fernandez and Vice President Cristina Fernandez de Kirchner’s (CFK) took office on December 10, 2019, and reversed fiscal austerity measures, suspended the IMF program, and declared public debt levels unsustainable.

In September 2020, Argentina restructured $100 billion in foreign and locally issued sovereign debt owed to international and local private creditors. Together, these transactions provide short-term financial relief by clearing principal payments until 2024. Unable to access international capital markets, the government relied on Central Bank money printing to finance the deficit, further fueling inflation. Although Argentina’s economy rebounded 10.3 percent in 2021, offsetting a 10 percent decline in 2020, the economy remains below pre-recession levels. In 2021, the Argentine peso (official rate) depreciated 17 percent, inflation reached 50.9 percent, and the poverty rate reached 37.3 percent.

Even as the pandemic receded and economic activity rebounded, the government cited increased poverty and high inflation as reasons to continue, and even expand, price controls, capital controls, and foreign trade controls. Agricultural and food exports such as beef, soy, and flour were frequent targets for government intervention. Beginning in May 2021, the government introduced bans and other limits on beef exports to address increasing domestic prices. However, the government also implemented incentives for exporters and investors in other industries. It eliminated export taxes for specific businesses and industries, including small and medium sized enterprises; auto and automotive parts exports over 2020 volumes; and information technology service exports from companies enrolled in the knowledge-based economy promotion regime. There were also investment promotion incentives in key export sectors such as agriculture, forestry, hydrocarbons, manufacturing, and mining.

The high cost of capital affected the level of investments in developing renewable energy projects, despite the potential for both wind and solar power. In an effort to expand production of oil and natural gas, the current administration provides benefits to the fossil fuel industry that impact the cost-competitiveness of renewable energy technologies. The government has encouraged the use of biofuels and electric vehicles. A proposed Law for the Promotion of Sustainable Mobility includes incentives and 20-year timelines to promote the use of technologies with less environmental impact in transportation.

After the first COVID-19 case was confirmed in Argentina in March 2020, the country imposed a strict nationwide quarantine that became one of the longest in the world. Argentina reopened its borders to tourists and non-residents on November 21, 2021. Hotel and lodging, travel and tourism, and entertainment activities have reopened, although many businesses went bankrupt during the shutdown. Most of the pandemic-related economic relief measures were phased out during 2021.

Both domestic and foreign companies frequently point to a high and unpredictable tax burden and rigid labor laws as obstacles to further investment in Argentina. In 2021, Argentina ranked 73 out of 132 countries evaluated in the Global Innovation Index, which is an indicator of a country’s ability to innovate, based on the premise that innovation is a driver of a nation’s economic growth and prosperity. In the latest Transparency International Corruption Perceptions Index (CPI), Argentina ranked 96 out of 180 countries in 2021, dropping 18 places compared to 2020.

As a Southern Common Market (MERCOSUR) member, Argentina signed a free trade and investment agreement with the European Union (EU) in June 2019. Argentina has not yet ratified the agreement. During 2021 there was little progress on trade negotiations with South Korea, Singapore, and Canada. Argentina ratified the WTO Trade Facilitation Agreement on January 22, 2018. Argentina and the United States continue to expand bilateral commercial and economic cooperation to improve and facilitate public-private ties and communication on trade, investment, energy, and infrastructure issues, including market access and intellectual property rights. More than 265 U.S. companies operate in Argentina, and the United States continues to be the top investor in Argentina with more than USD $8.7 billion (stock) of foreign direct investment as of 2020.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perception Index 2021 96 of 180 http://www.transparency.org/research/cpi/overview
Global Innovation Index 2021 73 of 132 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 $8.7 billion https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 $9,070 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD

 

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

Armenia

Executive Summary

Over the past several years, Armenia has received consistently respectable rankings in international indices that review country business environments and investment climates. Projects representing significant U.S. investment are present in Armenia, most notably ContourGlobal’s Vorotan Hydroelectric Cascade and Lydian’s efforts to develop a major gold mine. U.S. investors in the banking, energy, pharmaceutical, information technology, and mining sectors, among others, have entered or acquired assets in Armenia. Armenia presents a variety of opportunities for investors, and the country’s legal framework and government policy aim to attract investment, but the investment climate is not without challenges. Obstacles include Armenia’s small market size, relative geographic isolation due to closed borders with Turkey and Azerbaijan, weaknesses in the rule of law and judiciary, and a legacy of corruption. Net foreign direct investment inflows are low.  Armenia had commenced a robust recovery from a deep 2020 recession prior to the introduction of new sanctions against Russia.  GDP growth reached five percent in 2021 and had been expected to continue to grow in 2022 by at least five percent.  As a result of the war and sanctions imposed on Russia, Armenia’s 2022 GDP growth forecast is now just above one percent.

In May 2015, Armenia signed a Trade and Investment Framework Agreement with the United States. This agreement established a United States-Armenia Council on Trade and Investment to discuss bilateral trade and investment and related issues. Since 2015, Armenia has been a member of the Eurasian Economic Union, a customs union that brings Armenia, Belarus, Kazakhstan, Kyrgyzstan, and Russia into a single integrated market. In November 2017, Armenia signed a Comprehensive and Enhanced Partnership Agreement with the European Union, which aimed in part to improve Armenia’s investment climate and business environment.

Armenia imposes few restrictions on foreign control and rights to private ownership and establishment. There are no restrictions on the rights of foreign nationals to acquire, establish, or dispose of business interests in Armenia. Business registration procedures are generally straightforward. According to foreign companies, otherwise sound regulations, policies, and laws are sometimes undermined by problems such as the lack of independence, capacity, or professionalism in key institutions, most critically the judiciary. Armenia does not limit the conversion and transfer of money or the repatriation of capital and earnings. The banking system in Armenia is sound and well-regulated, but investors note that the financial sector is not highly developed. The U.S.-Armenia Bilateral Investment Treaty provides U.S. investors with a variety of protections. Although Armenian legislation offers protection for intellectual property rights, enforcement efforts and recourse through the courts are in need of improvement.

Armenia experienced a dramatic change of government in 2018, when a democratically elected leader came to power on an anti-corruption platform after street protests toppled the old regime. Following the 2020 NK hostilities, in June 2021, the incumbent retained power in snap parliamentary election that met most international democracy standards.  The government continues to push forth with economic and anti-corruption reforms that have improved the business climate.  Overall, the competitive environment in Armenia is improving, but several businesses have reported that broader reforms across judicial, tax, customs, health, education, military, and law enforcement institutions will be necessary to shore up these gains.

Despite improvements in some areas that raise Armenia’s attractiveness as an investment destination, investors claim that numerous issues remain and must be addressed to ensure a transparent, fair, and predictable business climate. A number of investors have raised concerns about the quality of dialogue between the private sector and government. Investors have also flagged issues regarding government officials’ ability to resolve problems they face in an expeditious manner. An investment dispute in the country’s mining sector has attracted significant international attention and remains outstanding after several years.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 58 of 180 http://www.transparency.org/research/cpi/overview 
Global Innovation Index 2021 69 of 132 https://www.globalinnovationindex.org/analysis-indicator 
U.S. FDI in partner country ($M USD, historical stock positions) 2019 USD 6 million https://apps.bea.gov/international/factsheet/ 
World Bank GNI per capita 2020 USD 4,220 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD 

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

Australia

Executive Summary

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

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

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

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

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

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

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

Austria

Executive Summary

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

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

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

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

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

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

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

Negative aspects of Austria’s investment climate include:

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

Key sectors that have historically attracted significant investment in Austria:

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

Key issues to watch:

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

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

Azerbaijan

Executive Summary

The overall investment climate in Azerbaijan continues to improve, although significant challenges remain.  Azerbaijan’s government has sought to attract foreign investment, undertake reforms to diversify its economy, and stimulate private sector-led growth.  The Azerbaijani economy, however, remains heavily dependent on oil and gas output, which account for roughly 88 percent of export revenue and over half of the state budget.  The economy of Azerbaijan grew 5.6% year-on-year in 2021, compared to a 4.3% contraction in the previous year.  Both oil and gas (1.7%) and the non-oil and gas (7.2%) sectors of the economy expanded as the economy continued to recover from the pandemic.  While the oil and gas sector has historically attracted the largest share of foreign investment, the Azerbaijani government has targeted four non-oil sectors to diversify the economy: agriculture, tourism, information and communications technology (ICT), and transportation/logistics.  Measures taken in recent years to improve the business climate and reform the overall economy include eliminating redundant business license categories, empowering the popular “Azerbaijan Service and Assessment Network (ASAN)” government service centers with licensing authority, simplifying customs procedures, suspending certain business inspections, and reforming the tax regime.

Community spread of COVID-19 is occurring in Azerbaijan, and COVID-19 infections are present in all regions the country.  The special quarantine regime was extended until May 1, 2022, according to a February 2022 decision by Azerbaijan’s Cabinet of Ministers.  Masks are no longer required in outdoor spaces but remain obligatory indoors.  In 2021, Azerbaijan allocated AZN 800.8 million (USD 471 million) from the state budget to support COVID-19 mitigation measures, including vaccine purchases, bonus payments to healthcare workers, and the operation of modular hospitals.

Despite substantial efforts to open the business environment, progress remains slow on structural reforms required to create a diversified and competitive private sector, and corruption remains a major challenge for firms operating in Azerbaijan.  A small group of government-connected holding companies dominates the economy, intellectual property rights enforcement is improving but remains insufficient, and judicial transparency is lacking.

Under Azerbaijani law, foreign investments enjoy complete and unreserved legal protection and may not be nationalized or appropriated, except under specific circumstances.  Private entities may freely establish, acquire, and dispose of interests in business enterprises.  Foreign citizens, organizations, and enterprises may lease, but not own, land.  Azerbaijan’s government has not shown any pattern of discriminating against U.S. persons or entities through illegal expropriation.  The Bilateral Investment Treaty (BIT) between the United States and Azerbaijan provides U.S. investors with recourse to settle investment disputes using the International Center for the Settlement of Investment Disputes (ICSID).  The average time needed to resolve international business disputes through domestic courts or alternative dispute resolution varies widely.

Following the release in November of a tripartite ceasefire declaration by Armenia, Azerbaijan, and Russia, which brought an end to the fall 2020 intensive fighting in the Nagorno-Karabakh conflict, the Azerbaijani government is seeking new investments in the territories around Nagorno-Karabakh that were previously under the control of Armenian-backed separatists.  Azerbaijan’s 2022 budget includes an allocation of AZN 2.2 billion (USD 1.3 billion) for the restoration and reconstruction of these territories.  These funds will be reportedly used to restore road infrastructure, electricity, gas, water, communications infrastructure, and the education and healthcare sectors, along with the restoration of cultural and historical monuments.  The government is also pursuing green energy projects in this region. Reconstruction is expected to continue over the coming years, along with continued special budget allocations provided for rebuilding and resettling these territories.  Demining these territories as part of reconstruction efforts remains a priority of the Azerbaijani government.

Table 1: Key Metrics and Rankings 
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 130 of 180 http://www.transparency.org/research/cpi/overview
Global Innovation Index 2021 80 of 131 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, stock positions) 2021 N/A http://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 $4,480 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

Bahrain

Executive Summary

The investment climate in the Kingdom of Bahrain is positive and relatively stable. Bahrain maintains a business-friendly attitude and liberal approach to attracting foreign investment and business.

In an economy dominated by state-owned enterprises (SOE), Bahrain aims to foster a greater role for the private sector to promote economic growth. Government of Bahrain (GOB) efforts focus on encouraging foreign direct investment (FDI) in the manufacturing, logistics, information and communications technology (ICT), financial services, tourism, health, and education sectors.

Bahrain’s total FDI stock reached BD 11.537 billion ($30.683 billion) in 2020. Annual FDI inflows dropped from BD 603 million ($1.6 billion) in 2018 to BD 355 million ($942 million) in 2019 and BD 333 million ($885 million) in 2020. The financial services, manufacturing, logistics, education, healthcare, real estate, tourism, and ICT sectors have attracted the majority of Bahrain’s FDI.

Bahrain’s economy saw a major recovery in 2021, following the slowdown of the COVID-19 pandemic, and the rise in global oil prices. In addition, the continuity of some key provisions from the BD 4.3 billion ($11.4 billion) financial relief package, that was launched in 2020 to help support businesses and individuals, helped boost Bahrain’s revenues and economic growth.

In November 2021, the government announced a new economic recovery plan focused on five pillars: (1) creating quality jobs for citizens; (2) streamlining commercial procedures to attract $2.5 billion in yearly FDI by 2025; (3) launching $30 billion in major strategic projects; (4) developing strategic priority sectors; and (5) achieving fiscal sustainability and economic stability, including by extending Bahrain’s Fiscal Balance Program to 2024. Since then, the government has released detailed development strategies for the industrial, tourism, financial services, oil and gas, telecommunications and logistics sectors and identified 22 signature infrastructure projects, including the creation of five new island cities, that will stimulate post-pandemic growth and drive the economic recovery plan. The government has not identified funding sources to finance these projects or its sector modernization strategies.

Bahrain’s Vision 2030 outlines measures to protect the natural environment, reduce carbon emissions, minimize pollution, and promote sustainable energy. Bahrain’s Sustainable Energy Authority (SEA), within the Ministry of Electricity and Water Affairs, designs energy efficiency policies and promotes renewable energy technologies that support Bahrain’s long-term climate action and environmental protection ambitions. Endorsed by Bahrain’s Cabinet and monitored by SEA, the National Energy Efficiency Action Plan (NEEAP) and the National Renewable Energy Action Plan (NREAP) set national energy efficiency and national renewable energy 2025 targets of 6 and 5 percent, respectively, with the NREAP target increasing to 10 percent by 2035.

To strengthen Bahrain’s position as a regional startup hub and to enhance its investment ecosystem, the GOB launched Bahrain FinTech Bay in 2018; issued new pro-business laws; and established several funds to encourage start-up investments including the $100 million Al Waha Fund of Funds and the Hope Fund to support startup growth. Since 2017, the Central Bank of Bahrain (CBB) has operated a financial technology regulatory sandbox to enable startups in Bahrain, including cryptocurrency and blockchain technologies, and regulate conventional and Sharia-compliant businesses.

The U.S.-Bahrain Bilateral Investment Treaty (BIT) entered into force in 2001 and protects U.S. investors in Bahrain by providing most-favored nation treatment and national treatment, the right to make financial transfers freely and without delay, international law standards for expropriation and compensation cases, and access to international arbitration.

Bahrain permits 100 percent foreign ownership of new industrial entities and the establishment of representative offices or branches of foreign companies without Bahraini sponsors or local partners. In 2017, the GOB expanded the number of sectors in which foreigners are permitted to maintain 100 percent ownership in companies to include tourism services, sporting events production, mining and quarrying, real estate, water distribution, water transport operations, and crop cultivation and propagation.  In May 2019, the GOB loosened foreign ownership restrictions in the oil and gas sector, allowing 100 percent foreign ownership in oil and gas extraction projects under certain conditions.

The U.S.-Bahrain Free Trade Agreement (FTA) entered into force in 2006. Under the FTA, Bahrain committed to world-class Intellectual Property Rights (IPR) protection.

Despite the GOB’s transparent, rules-based government procurement system, U.S. companies sometimes report operating at a disadvantage compared with other firms. Many ministries require firms to maintain a local commercial registration or pre-qualify prior to bidding on a local tender, often rendering firms with little or no prior experience in Bahrain ineligible to bid on major tenders.

In February 2022, Bahrain’s Ministry of Industry, Commerce, and Tourism broke ground on the United States Trade Zone (USTZ) to incentivize U.S. companies to build out full turnkey industrial manufacturing, logistics, and distribution facilities in Bahrain to access the wider GCC market.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perception Index 2021 78 of 175 http://www.transparency.org/research/cpi/overview
Global Innovation Index 2021 78 of 129 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 $571 https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 $19,900 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD

 

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

Bangladesh

Executive Summary

Bangladesh is the most densely populated non-city-state country in the world, with the eighth largest population (over 165 million) within a territory the size of Iowa. Bangladesh is situated in the northeastern corner of the Indian subcontinent, sharing a 4,100 km border with India and a 247-kilometer border with Burma. With sustained economic growth over the past decade, a large, young, and hard-working workforce, strategic location between the large South and Southeast Asian markets, and vibrant private sector, Bangladesh will likely continue to attract increasing investment, despite severe economic headwinds created by the global outbreak of COVID-19.

Buoyed by a young workforce and a growing consumer base, Bangladesh has enjoyed consistent annual GDP growth of more than six percent over the past decade, with the exception of the COVID-induced economic slowdown in 2020. Much of this growth continues to be driven by the ready-made garment (RMG) industry, which exported $35.81 billion of apparel products in fiscal year (FY) 2021, second only to China, and continued remittance inflows, reaching a record $24.77 billion in FY 2021. (Note: The Bangladeshi fiscal year is from July 1 to June 30; fiscal year 2021 ended on June 30, 2021.) The country’s RMG exports increased more than 30 percent year-over-year in FY 2021 as the global demand for apparel products accelerated after the COVID shock.

The Government of Bangladesh (GOB) actively seeks foreign investment. Sectors with active investments from overseas include agribusiness, garment/textiles, leather/leather goods, light manufacturing, power and energy, electronics, light engineering, information and communications technology (ICT), plastic, healthcare, medical equipment, pharmaceutical, ship building, and infrastructure. The GOB offers a range of investment incentives under its industrial policy and export-oriented growth strategy with few formal distinctions between foreign and domestic private investors.

Bangladesh’s Foreign Direct Investment (FDI) stock was $20.87 billion through the end of September 2021, with the United States being the top investing country with $4.1 billion in accumulated investments. Bangladesh received $2.56 billion FDI in 2020, according to data from the United Nations Conference on Trade and Development (UNCTAD). The rate of FDI inflows was only 0.77 percent of GDP, one of the lowest of rates in Asia.

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

As a traditionally moderate, secular, peaceful, and stable country, Bangladesh experienced a decrease in terrorist activity in recent years, accompanied by an increase in terrorism-related investigations and arrests following the Holey Artisan Bakery terrorist attack in 2016. A December 2018 national election marred by irregularities, violence, and intimidation consolidated the power of Prime Minister Sheikh Hasina and her ruling party, the Awami League. This allowed the government to adopt legislation and policies diminishing space for the political opposition, undermining judicial independence, and threatening freedom of the media and NGOs. Bangladesh continues to host one of the world’s largest refugee populations. According to UN High Commission for Refugees, more than 923,000 Rohingya from Burma were in Bangladesh as of February 2022. This humanitarian crisis will likely require notable financial and political support until a return to Burma in a voluntary and sustainable manner is possible. International retail brands selling Bangladesh-made products and the international community continue to press the Government of Bangladesh to meaningfully address worker rights and factory safety problems in Bangladesh. With unprecedented support from the international community and the private sector, the Bangladesh garment sector has made significant progress on fire and structural safety. Critical work remains on safeguarding workers’ rights to freely associate and bargain collectively, including in Export Processing Zones (EPZs).

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

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

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 147 of 180 http://www.transparency.org/research/cpi/overview
Global Innovation Index 2021 116 of 129 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 USD 723 https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 USD 2,030 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

Barbados

Executive Summary

With a $4.4 billion economy, Barbados is the largest economy in the Eastern Caribbean. The shutdown of the tourism sector in 2020 due to the pandemic led to an 18 percent GDP contraction. The economy began to recover in 2021 with 1.4 percent growth, and the International Monetary Fund (IMF) forecasts 2022 growth at 8.5 percent. Unemployment was estimated at approximately 40 percent in the first quarter of 2021, representing a 30 percent increase from the same period last year.

The Government of Barbados entered a standby arrangement with the IMF in late 2018.  The $290 million ($580 million Barbados dollars) Barbados Economic Recovery and Transformation (BERT) program aims to decrease the debt-to-GDP ratio, strengthen the balance of payments, and stimulate growth.  While the government was on track to meet its IMF targets pre-pandemic, the program dampened income and spending power due to public sector layoffs, the introduction of new indirect taxes, and a decline in the construction sector.  The impact of the pandemic required the IMF to adjust the program targets downwards several times. The IMF also approved additional lending into the program twice in 2020.

The country’s services sector continues to hold the largest growth potential, especially in the areas of international financial services, information technology, global education services, health, and cultural services.  The gradual decline of the sugar industry has opened land for other agricultural uses.  Investment opportunities exist in the areas of agricultural processing and alternative and renewable energy.  Uncertainty about the trajectory of economic recovery of the tourism, commercial aviation, and cruise industries impacts the potential for projects in those sectors. The government has identified renewable energy and climate resilience projects as top priorities. In 2021, Barbados joined the Organization of Economic Cooperation and Development (OECD) framework seeking to harmonize global corporate minimum tax rates at 15 percent.

Barbados bases its legal system on the British common law system. It does not have a bilateral investment agreement with the United States, but it does have a double-taxation treaty and a tax information exchange agreement.

In 2015, Barbados signed an intergovernmental agreement in observance of the United States’ Foreign Account Tax Compliance Act (FATCA), making it mandatory for banks in Barbados to report the banking information of U.S. citizens.

Table 1
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 29 of 180 http://www.transparency.org/research/cpi/overview 
Global Innovation Index N/A N/A https://www.globalinnovationindex.org/analysis-indicator 
U.S. FDI in partner country ($M USD, historical stock positions) N/A N/A https://apps.bea.gov/international/factsheet/  
World Bank GNI per capita 2020 14,350 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD   

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

Belarus

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

Belgium

Executive Summary

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

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

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

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

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

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

Belize

Executive Summary

Belize has the smallest economy in Central America, with a gross domestic product (GDP) of US $1.3 billion in 2021, a 12.5 percent expansion over the previous year. Due to mounting fiscal pressures and a need to diversify and expand its economy, the Government of Belize (GoB) is open to, and actively seeks, foreign direct investment (FDI).  However, the small population of the country (2021 estimate – 432,516 persons), high cost of doing business, high public debt, bureaucratic delays, often insufficient infrastructure, and corruption constitute investment challenges. The Central Bank of Belize projects the country’s GDP will likely expand 6.0 percent in 2022 while the IMF’s projects 6.5 percent growth, led by a rebound of activity in the construction, retail and wholesale trade, transport and communication, and tourism sectors.

Public debt declined from 133 percent of GDP in 2020 to 108 percent in 2021. This was in large part due to the Blue Bond Agreement, a successful marine protection and conservation-driven financial transaction. International reserves increased from US $348 million (3.8 months of imports) in 2020 to US $420 million (3.9 months of imports) in 2021, partly due to the IMF’s Special Drawing Rights (SDR) 25.6 million allocation, which the authorities are keeping as reserve. Belize’s government encourages FDI to relieve fiscal pressure and transform the economy. The Central Bank of Belize recorded increased inflows of FDI at US $152.25 million in 2021 and outflows at US $24.4 million in the same period.  FDI inflows were concentrated primarily in real estate, construction, financial intermediation, and the hotel and restaurant industries.

Generally, Belize has no restrictions on foreign ownership and control of companies; however, foreign investments must be registered with the Central Bank of Belize and adhere to the Exchange Control Act and related regulations. The Government of Belize (GoB) made progress on the ease of doing business through trade license, stamp duty, exchange control, and land reforms to streamline business applications and related processes.

The banking system remains stable but fragile. Since January 2020, a domestic bank and an international bank each lost a correspondent banking relationship, a significant portion of the sector. In March 2022, the GoB lowered the business tax on the net interest income charged to banks and financial institutions to encourage lending in strategic foreign exchange earning sectors such as tourism, agriculture, and the Business Process Outsourcing (BPO) sectors.

There were incidents of property destruction at two American companies involved in sugar cane industry in the last year. In response, a prominent agro-productive organization wrote to the Government in January 2022 expressing concerns that the Belizean government’s failure to protect and support private sector investors in these instances led to damaging the investment climate and the Belizean economy.

Belize is categorized as a small island developing state (SIDS) that is highly vulnerable to the effects of climate change and is a relatively minor contributor to global greenhouse gas emissions. Belize’s updated National Determined Contributions (NDC) is nonetheless committed to developing a long-term strategy aligned with achieving net zero global emissions by 2050.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2020 N/A http://www.transparency.org/research/cpi/overview
Global Innovation Index 2021 N/A https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 USD 64 million https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 USD 4,110 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

Benin

Executive Summary

Benin transitioned to a democracy in 1990, enjoying a reputation for regular, peaceful, and, until recently, inclusive elections. In 2019 and 2021, the government held legislative and presidential elections, respectively, which were not fully inclusive nor competitive. Elections-related unrest in 2019 and 2021 resulted in several deaths. In April 2021, President Patrice Talon was re-elected for a second, and pursuant to Benin’s constitution, final five-year term.

Benin’s overall macroeconomic conditions were positive in 2020, though growth declined compared to previous years. According to the World Bank, GDP growth slowed from 6.9 percent in 2019 to 3.8 percent in 2020. Most of the slowdown in 2019 and 2020 was driven by the COVID-19 pandemic and Nigeria’s partial closure of its borders that lasted from August 2019 to December 2020. In December 2021, Benin’s National Assembly unanimously passed the Government of Benin (GOB) 2022 budget, which projects economic growth to accelerate to seven percent in 2022, higher than estimates from multilateral institutions. The IMF projection for growth in 2022 is 6.5 percent, and the African Development Bank projects a growth rate recovery from 4.8 in 2021 to 6.5 percent in 2022 if Covid-19 is brought under control. Port activity and the cotton sector are the largest drivers of economic growth. Telecommunications, agriculture, energy, cement production, and construction are other significant components of the economy. Benin also has a large informal sector. The country’s GDP is roughly 51 percent services, 26 percent agriculture, and 23 percent manufacturing.

In January 2022, the Talon administration released its second government action plan (French acronym-PAG) estimated at $20.6 billion. The PAG lists 342 projects (half of which are carried forward from the Talon administration’s first PAG covering 2016-2021) across 23 sectors. With the goals of strengthening the administration of justice, fostering a structural transformation of the economy, and improving living conditions, the projects are concentrated in infrastructure, agriculture and agribusiness, tourism, health, energy, telecomuncation, and education.  The government estimates that full implementation of the PAG will result in the creation of 500,000 new jobs and a leap in national economic and social conditions. The government intended that 48 percent of the PAG be funded through public funds and the remainder through public-private partnerships (PPPs). Through the end of 2021 a limited number of public-private partnerships had been secured. Government critics allege that the Talon administration is using the PAG in part to channel resources and contracts to administration insiders.

Benin continues efforts to attract private investment in support of economic growth amidst reports of high-level corruption among government insiders and occasional failure to respect foreign investment contracts. The Investment and Exports Promotion Agency (APIEX) is a one-stop-shop for promoting new investments, business startups, and foreign trade. In 2020, APIEX worked with foreign companies to facilitate new investments, though some companies reported that the agency was under-resourced and hamstrung by bureaucratic red tape in other agencies and ministries. APIEX reported that business creation increased to 40,000 in 2020 from 13,000 in 2015. The construction of a Special Economic Zone, located at Glo-Djigbé, is also a major component of the second PAG. Located 30 miles north of Benin’s capital Cotonou, the Glo-Djigbé Industrial Zone (GDIZ) is currently in the works under the direction of Benin’s Industry Promotion and Investment Company (SIPI), a public private partnership. The GDIZ is structured such that the GOB owns a 35 percent stake in it with the the Mauritanian-Singaporean firm Arise Integrated International Platfoms (Arise-IIP) owning 65 percent. Glo-Djigbé seeks to transform numerous locally produced agricultural products and high-tech goods for export. Though no businesses have started operating in GDIZ yet, approximately 25 have signed contracts to begin operations there, including Oryx and JNP (both petroleum services); NKS (cashew processing), Groupe Aigle (cotton processing), and SIDDIH (pharmaceuticals). The GDIZ is expected to increase Benin’s GDP by $7 billion over the next decade and boost export revenues.  The primary target markets will be the United States, the European Union, and other African countries. The GDIZ covers 1,640 hectares with 400 hectares being developed currently.

Benin’s second MCC power compact, valued at $391million entered into force in June 2017. This compact aims to strengthen the national power utility, attract private sector investment into solar power generation, and fund infrastructure investments in electricity distribution as well as off-grid electrification for poor and unserved households. It is also advancing policy reforms to bolster financing for the electricity sector and strengthen regulation and utility management. Through the compact MCC is expanding the capacity and increasing the reliability of Benin’s power grid in southern and northern Benin. As two thirds of Benin’s population does not have access to electricity, the compact also includes a significant off-grid electrification project via a clean energy grant facility that supports private sector investment in off-grid power systems. Benin’s second MCC compact follows its first compact (2006-2011) which modernized the Port of Cotonou and improved land administration, the justice sector, and access to credit.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 78 of 180 http://www.transparency.org/research/cpi/overview 
Global Innovation Index 2021 96 of 132 https://www.globalinnovationindex.org/analysis-indicator 
U.S. FDI in partner country ($M USD, historical stock positions) 2019 USD 2 million https://apps.bea.gov/international/factsheet/ 
World Bank GNI per capita 2020 USD 1,280 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD 

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

Bolivia

Executive Summary

In general, Bolivia is open to foreign direct investment (FDI).  In 2021, gross FDI flows received reached USD 440 million, higher than in 2020 when Bolivia registered a significant divestment of USD 1,018 million. FDI flows were greatest in the sectors of hydrocarbons, manufacturing, industry, and commerce, together representing over 80 percent of the total. Additional sectors receiving some FDI included the transport sector, storage and communications, insurance companies, and real estate services.

The year 2021 was economically characterized as a rebound after the effects of the COVID-19 pandemic in 2020, in which Gross Domestic Product (GDP) fell by 8.9 percent, the largest contraction in over 50 years. The leading sectors were mining, construction, and transport, registering double digit growth rates. International financial institutions estimated GDP growth between 5-5.5 percent for 2021. Bolivia was the fastest growing economy in the continent from 2014-2016 and in the top three until the start of the pandemic.

Bolivia abrogated the Bilateral Investment Treaties (BIT) it had with the United States and several other countries in 2012.  The Bolivian government claimed the abrogation was necessary for Bolivia to comply with the 2009 Constitution.  Companies that invested under the U.S. – Bolivia BIT will be covered by its terms until June 10, 2022, but investments made after June 10, 2012, are not covered.

Notwithstanding the uncertain political situation, Bolivia’s investment climate has remained relatively steady over the past several years.  Lack of legal security, corruption allegations, and unclear investment incentives are all impediments to investment in Bolivia.  There is no significant FDI from the United States in Bolivia, and there are no initiatives designed to encourage U.S. investment specifically.  Bolivia’s current macroeconomic stability, abundant natural resources, and strategic location in the heart of South America make it a prospective country for investment.

During the COVID-19 pandemic, the Bolivian government took several economic measures to support families, such as authorizing postponement in the payment of basic services (water, electricity, natural gas, telecommunications) and credit payment deferral for the private sector. These measures ended in 2021.

Bolivia’s Mother Earth Law stipulates climate change mitigation and adaptation. Bolivia last updated its Nationally Determined Contributions (NDC) for implementing the Paris Agreement in 2015. Bolivia does not have any regulatory “green” incentives for investment.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 128/ 180 http://www.transparency.org/research/cpi/overview
Global Innovation Index 2020 104/ 132 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, stock positions) 2020 USD 432 https://www.bea.gov/data/economic-accounts/international
World Bank GNI per capita 2020 USD 3,180 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD

In 2021, the investment rate as a percentage of GDP (18 percent) was in line with regional averages.  There has also been a shift from private to public investment.  In recent years, private investment was particularly low because of the deterioration of the business environment.  From 2006 to 2021, private investment, including local and foreign investment, averaged 7 percent of GDP.  During the same period, public investment grew significantly, reaching an annual average of 12 percent of GDP.

FDI is highly concentrated in natural resources, especially hydrocarbons and mining, which account for nearly two-thirds of FDI in Bolivia.  Since 2006, the net flow of FDI averaged 1.6 percent of GDP.  Before 2006, it averaged around 6.7 percent of GDP.

1. Openness To, and Restrictions Upon, Foreign Investment

2.   Bilateral Investment Agreements and Taxation Treaties 

Bolivia abrogated the BIT it signed with the United States and 22 other countries. The BIT with Bolivia was the first to be terminated by a U.S. treaty partner.  In October 2007, Bolivia became the first country to withdraw from the World Bank’s International Centre for Settlement of Investment Disputes (ICSID).  Bolivia does not have a bilateral taxation treaty with the U.S.  Bolivia has various agreements with other countries aimed at avoiding double taxation, including: Argentina, France, Germany, Spain, Sweden, the United Kingdom, and Andean Community countries.

Bolivia is not a member of the OECD Inclusive Framework on Base Erosion and Profit Shifting.

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

The government’s general attitude toward foreign portfolio investment is neutral.  Established Bolivian firms may issue short or medium-term debt in local capital markets, which act primarily as secondary markets for fixed-return securities.  Bolivian capital markets have sought to expand their handling of local corporate bond issues and equity instruments.  Over the last few years, several Bolivian companies and some foreign firms have been able to raise funds through local capital markets.  However, the stock exchange is small and is highly concentrated in bonds and debt instruments (more than 95 percent of transactions).  The number of total transactions in 2021 was around 28 percent of GDP.

From 2008-2019, the financial markets experienced high liquidity, which led to historically low interest rates.  However, liquidity has been more limited in recent years, and there are some pressures to increase interest rates.  The Bolivian financial system is not well integrated with the international system and there is only one foreign bank among the top ten banks of Bolivia.

In October 2012, Bolivia returned to global credit markets for the first time in nearly a century.  In 2017, Bolivia sold USD 1 billion at 4.5 percent for ten years, with U.S. financial institutions managing the deal.  The resources gained from the sales were largely used to finance infrastructure projects. A sovereign bond issuance of up to $2 billion was approved by the National Assembly for 2022 but had not yet occurred as of April 2022. The Bolivian government’s attempt to refinance $2 billion in sovereign debt in February 2022 fell short, with only $850 million sold. The government had also hoped the new issuance would be for a 10-year term but had to settle for eight years (a 2030 maturity) for all the resold bonds. The interest rate for the new bonds is 7.5%, compared to interest rates of approximately 5% for the original bonds.

The government and central bank respect their obligations under IMF Article VIII, as the exchange system is free of restrictions on payments and transfers for international transactions.

Foreign investors legally established in Bolivia can get credits on the local market.  However, due to the size of the market, large credits are rare and may require operations involving several banks.  Credit access through other financial instruments is limited to bond issuances in the capital market.  The 2013 Financial Services Law directs credit towards the productive sectors and caps interest rates.

Bosnia and Herzegovina

Executive Summary

Bosnia and Herzegovina (BiH) is open to foreign investment, but to succeed, investors must overcome endemic corruption, complex legal/regulatory frameworks and government structures, non-transparent business procedures, insufficient protection of property rights, and a weak judicial system under the indue influence of ethno-nationalist parties and their patronage networks. Economic reforms to complete the transition from a socialist past to a market-oriented future have proceeded slowly and the country has a low level of foreign direct investment (FDI). According to the BiH Central Bank preliminary data, in the first nine months of 2021 FDI in BiH was USD 617 million, a 65% increase from the same period in 2020. In the World Bank’s 2020 Ease of Doing Business Report, BiH was among the least attractive business environments in Southeast Europe, with a ranking of 90 out of 190 global economies. (Note: Beginning in 2021, the World Bank discontinued the worldwide assessment in the Doing Business Report.) The World Bank 2020 report ranked BiH particularly low for its lengthy and arduous processes to start a new business and obtain construction permits. According to the World Bank estimates, real GDP is expected to grow 4 percent in 2021 after contracting 3.2 percent in 2020. The European Bank for Reconstruction and Development (EBRD) expects BiH’s GDP to grow by 4.5% in 2021. EBRD announced that BiH’s economic recovery has been stronger than expected mostly due to the recovery in external markets and strong expansion of domestic private consumption, backed by higher exports of goods and services. BiH is tied closely to global value chains as it primarily exports goods rather than services.

U.S. investment in BiH is low due to its small market size, relatively low income levels, distance from the United States, challenging business climate, and the lack of investment opportunities. Most U.S. companies in BiH are represented by small sales offices that are concentrated on selling U.S. goods and services, with minimal longer-term investments. U.S. companies with offices in BiH include major multinational companies and market leaders in their respective sectors, such as Coca-Cola, Microsoft, Cisco, Oracle, Pfizer, McDonalds, Marriott, Caterpillar, Johnson & Johnson, FedEx, UPS, Philip Morris, KPMG, PwC and others. Nonetheless, BiH offers business opportunities to well-prepared and persistent exporters and investors. Companies that overcome the challenges of establishing a presence in BiH often make a return on their investment over time. A major U.S. investment fund was able to enter the market with a regional investment in the telecom/cable sector in 2014 and exit its majority position in 2019 with a good return. There is an active international community, but lack of political will has stalled the many reform efforts that would improve the business climate as BiH pursues eventual European Union membership. The country is open to foreign investment and offers a liberal trade regime and its simplified tax structure is one of the lowest in the region (17 percent VAT and 10 percent flat income tax).

The complex institutional and territorial structure of BiH complicates the economic landscape of the country and may lead to further disruptions in Foreign Direct Investment. In July 2021, the Republika Srpska (RS) entity began a blockade of state institutions and in October 2021 began to take unconstitutional steps to return competencies to the entity-level government. This near-virtual decision-making blockade and attempts to withdraw the RS from state institutions and agencies have created questionsfor many investors and businesses. The duplicative nature of the proposed RS-based parallel institutions and agencies will complicate the investment landscape and create regulatory and legal confusion. While no new parallel RS agencies are yet operational, the RS has taken concrete legislative and regulatory steps to lay the groundwork for their full implementation in the near to mid-term. Investors should exercise all due diligence and take into account ongoing and potential Constitutional Court challenges and the fact these RS moves violate the Dayton Peace Agreement when deciding whether to conduct business with these nascent agencies or operate under constitutionally questionable legal frameworks established by the RS. The Federation of Bosnia and Herzegovina entity also has functionality issues, with 2018 election results yet unimplemented, and a legislative body that struggles to pass basic economic reforms. Potential investors are urged to read the legal reviews and statements of the High Representative to BiH.

BiH is pursuing World Trade Organization membership and hopes to join in the future. It is also richly endowed with natural resources, providing potential opportunities in energy (hydro, wind, solar, along with traditional thermal), agriculture, timber, and tourism. The best business opportunities for U.S. exporters to BiH include energy generation and transmission equipment, telecommunication and IT equipment and services, transport infrastructure and equipment, engineering and construction services, medical equipment, agricultural products, and raw materials and chemicals for industrial processing. In 2021, U.S. exports to BiH totaled USD 322 million, a 37 percent increase from 2020, and held around 3 percent share of total BiH imports. BiH exports to the United States in 2021 totaled USD 94 million, an increase of 135 percent from 2020. U.S. exports to BiH are primarily in the areas of raw materials for industrial processing, food and agricultural products, machinery and transport equipment, and mineral fuels.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website
TI Corruption Perceptions Index 2021 110 of 180 www.transparency.org/research/cpi/overview 
Global Innovation Index 2021 75 of 131 https://www.globalinnovationindex.org/home 
U.S. FDI in partner country 2021  $9 million https://apps.bea.gov/international/factsheet/factsheet.cfm 
World Bank GNI per capita 2020      $6,080 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD 

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

Botswana

Executive Summary 

Botswana is a small country with a population of about 2.35 million (World Bank, 2020) and nestled between South Africa, Namibia, Zimbabwe and Zambia.  Its central location in southern Africa enables it to serve as a gateway to the region.  Botswana has historically enjoyed high economic growth rates and its export-driven economy is highly correlated with global economic trends.  Development has been driven mainly by revenue from diamond mining, which has enabled Botswana to develop infrastructure and provide social welfare programs for vulnerable members of the population, and these programs will be maintained despite financial challenges in the current financial year, which runs from April 2022 to March 2023.  The economic impact of the COVID-19 pandemic was significant as evidenced by an economic growth of negative 8.5 percent in 2020; economic growth was estimated to reach 9.7 percent in 2021.  Unemployment also rose from 22.2 percent in the fourth quarter of 2019 (prior to the pandemic) to 26 percent in the fourth quarter of 2021.  The fiscal impact of the pandemic has also been significant, resulting in large budget deficits of $1.4 billion in 2020 and $0.87 billion in 2021 compared to the $0.68 billion surplus that the government had forecasted for 2021 in its National Development Plan (NDP).  In the first quarter of 2021, diamond revenues recovered, but international tourism revenues did not.  In recent years, inflation has remained at the bottom end of the central bank’s three to six percent acceptable range; however, since the COVID-19 pandemic, inflation rose to a 13-year high of 10.6 percent in January 2022 and stayed at that level in February 2022.  The World Bank classifies Botswana as an upper middle-income country based on its per capita income of $6,405 in 2020, although it declined from $7,203 in 2019.

Botswana is a stable, democratic country with an independent judiciary system.  It maintains a sound macroeconomic environment, fiscal discipline, a well-capitalized banking system, and a crawling peg exchange rate system.  In March 2021, Standard & Poor’s (S&P) maintained Botswana’s sovereign credit rating for long and short-term foreign and domestic currency bonds at “BBB+/A-2” with a negative outlook, which reflects the risks COVID-19 will continue to pose on Botswana’s economic and fiscal performance over the next 12 months.  In November 2021, Moody’s revised its credit rating for Botswana from A2 to A3 with a stable outlook.  These agencies’ ratings are highly influenced by Botswana’s continued dependence on diamonds, which contribute to at least a quarter of Botswana’s GDP and are susceptible to external shocks which places the country at a much higher risk.  The diamond industry has however been experiencing a recovery, setting Botswana on a positive trajectory.

Botswana has minimal labor strife.  The country has been cited in the 2020 Global Competitiveness Report as one of 30 countries out of 141 in which hiring of foreign labor has become significantly harder than it was in 2008.  Botswana is a member state to both the International Centre for Settlement of Investment Disputes (ICSID) Convention and the 1958 New York Convention.  Corruption in Botswana remains less pervasive than in other parts of Africa; nevertheless, foreign and national companies have noted increasing tender-related corruption.  The Government of Botswana (GoB) created the Botswana Investment and Trade Centre (BITC) to assist foreign investors.  Botswana offers low tax rates and has no foreign exchange controls.  The BITC’s topline economic goals are to promote export-led growth, ensure efficient government spending and financing, build human capital, and to ensure the provision of appropriate infrastructure.  GoB entities, including BITC, use these criteria to determine the level of support to give foreign investors.  The GoB has committed to streamline business-related procedures, and remove bureaucratic impediments based on World Bank recommendations in a business reform roadmap.  Under this framework, the GoB introduced electronic tax and customs processes in 2016 and 2017.  The Companies and Intellectual Property Authority (CIPA) built and successfully integrated the Online Business Registration System (OBRS) with Botswana Unified Revenue Services (BURS) and the Immigration Office.  OBRS is designed to reduce the business registration process by more than 10 days.  On March 2022, Parliament passed the Intellectual Property Policy to leverage Botswana’s IP potential for inclusive and sustainable economic growth and development.  The Public Procurement and Asset Disposal Board (PPADB) will from April 1, 2022, be transitioned to Public Procurement and Regulatory Authority (PPRA) and no longer adjudicate on government tenders.  The GoB also established the Special Economic Zones Authority (SEZA) to streamline sector-targeted investment in Botswana’s different geographic areas.  The Ministry of Investment, Trade & Industry (MITI) is developing a Trading Service Strategy to facilitate economic diversification and is also working on the African Continental Free Trade Area (AfCFTA) Implementation Strategy.

Due to COVID-19-related economic shortfalls, Botswana drew down heavily on its foreign exchange reserves and government savings.  Sectors such as mining, tourism, trade, hotels and restaurants, construction, and manufacturing suffered significantly; however, rough diamond sales recovered somewhat in the second half of 2020.  In April 2021, the government put in place several interventions to raise revenues including a Value Added Tax (VAT) increase from 12 percent to 14 percent, an increase on Withholding Tax on dividend income from 7.5 percent to 10 percent and increases in several fees and levies charged for government services (source: 2021, Budget Speech).  The government moved swiftly to implement relevant statutory instruments to curb the likelihood of companies exploiting COVID-19 to collude to set exorbitant prices.  The 2020 statutory instrument 61 regulated the prices of essential supplies and basic food commodities for the duration of the 18-month COVID-19 related state of emergency.  Interventions like the Economic Recovery and Transformation Plan (ERTP) and the Reset Agenda augmented the short-term economic relief package that included wage subsidies, tax amnesties, waivers of certain levies due to government, loan guarantee schemes to support firms’ access to bank credit, and provision of food relief.  The president’s Reset Agenda seeks to adjust some priorities in light of new and unexpected challenges and to find smarter ways to implement projects in a timely manner and within stipulated budgets.  The ERTP aims to reinforce support already given to affected businesses and also to take advantage of opportunities that have emerged because of the pandemic such as digital services and e-commerce.

Botswana is committed to reducing greenhouse emissions to 15 percent by 2030 through renewable energy projects already underway and listed in the Integrated Resource Plan (IRP).  Botswana also adopted a Climate Change Policy in 2021 which seeks to promote access to carbon markets, climate finance, and clean technologies.

Table 1: Key Metrics and Rankings 
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 45 of 180 http://www.transparency.org/research/cpi/overview
Global Innovation Index 2021 57 of 173 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 21.0 https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 6,640 USD https://data.worldbank.org/indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment 

3. Legal Regime 

4. Industrial Policies 

5. Protection of Property Rights 

6. Financial Sector 

Brazil

Executive Summary

Brazil is the second largest economy in the Western Hemisphere behind the United States, and the twelfth largest economy in the world (in nominal terms) according to the World Bank. The United Nations Conference on Trade and Development (UNCTAD) named Brazil the seventh largest destination for global foreign direct investment (FDI) flows in 2021 with inflows of $58 billion, an increase of 133percent in comparison to 2020 but still below pre-pandemic levels (in 2019, inflows totaled $65.8 billion). In recent years, Brazil has received more than half of South America’s total amount of incoming FDI, and the United States is a major foreign investor in Brazil. According to Brazilian Central Bank (BCB) measurements, U.S. stock was 24 percent ($123.9 billion) of all FDI in Brazil as of the end of 2020, the largest single-country stock by ultimate beneficial owner (UBO), while International Monetary Fund (IMF) measurements assessed the United States had the second largest single-country stock of FDI by UBO, representing 18.7 percent of all FDI in Brazil ($105 billion) and second only to the Netherlands’ 19.9 percent ($112.5 billion). The Government of Brazil (GoB) prioritized attracting private investment in its infrastructure and energy sectors during 2018 and 2019. The COVID-19 pandemic in 2020 delayed planned privatization efforts and despite government efforts to resume in 2021, economic and political conditions hampered the process.

The Brazilian economy resumed growth in 2017, ending the deepest and longest recession in Brazil’s modern history. However, after three years of modest recovery, Brazil entered a recession following the onset of the global coronavirus pandemic in 2020. The country’s Gross Domestic Product (GDP) increased 4.6 percent in 2021, in comparison to a 4.1 percent contraction in 2020. As of February 2022, analysts had forecasted 0.3 percent 2022 GDP growth. The unemployment rate was 11.1 percent at the end of 2021, with over one-quarter of the labor force unemployed or underutilized. The nominal budget deficit stood at 4.4 percent of GDP ($72.4 billion) in 2021, and is projected to rise to 6.8 percent by the end of 2022 according to Brazilian government estimates. Brazil’s debt-to-GDP ratio reached 89.4 percent in 2020 and fell to around 82 percent by the end of 2021. The National Treasury projections show the debt-to-GDP ratio rising to 86.7 percent by the end of 2022, while the Independent Financial Institution (IFI) of Brazil’s Senate projects an 84.8 percent debt-to-GDP ratio. The BCB increased its target for the benchmark Selic interest rate from 2 percent at the end of 2020 to 9.25 percent at the end of 2021, and 11.75 percent in March 2022. The BCB’s Monetary Committee (COPOM) anticipates raising the Selic rate to 12.25 percent before the end of 2022.

President Bolsonaro took office on January 1, 2019, and in that same year signed a much-needed pension system reform into law and made additional economic reforms a top priority. Bolsonaro and his economic team outlined an agenda of further reforms to simplify Brazil’s complex tax system and complicated code of labor laws in the country, but the legislative agenda in 2020 was largely consumed by the government’s response to the COVID-19 pandemic. In 2021, the Brazilian government passed a major forex regulatory framework and strengthened the Central Bank’s autonomy in executing its mandate. The government also passed a variety of new regulatory frameworks in transportation and energy sectors, including a major reform of the natural gas market. In addition, the government passed a law seeking to improve the ease of doing business as well as advance the privatization of its major state-owned enterprise Electrobras.

Brazil’s official investment promotion strategy prioritizes the automobile manufacturing, renewable energy, life sciences, oil and gas, and infrastructure sectors. Foreign investors in Brazil receive the same legal treatment as local investors in most economic sectors; however, there are foreign investment restrictions in the health, mass media, telecommunications, aerospace, rural property, and maritime sectors. The Brazilian congress is considering legislation to liberalize restrictions on foreign ownership of rural property.

Analysts contend that high transportation and labor costs, low domestic productivity, and ongoing political uncertainties hamper investment in Brazil. Foreign investors also cite concerns over poor existing infrastructure, rigid labor laws, and complex tax, local content, and regulatory requirements; all part of the extra costs of doing business in Brazil.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perception Index 2021 96 of 180 http://www.transparency.org/research/cpi/overview
Global Innovation Index 2021 57 of 129 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 $70,742 https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 $7,850 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD

 

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

Brunei

Executive Summary

Brunei is a small, energy-rich sultanate on the northern coast of Borneo in Southeast Asia. Brunei boasts a well-educated, largely English-speaking population, excellent infrastructure, and a government intent on attracting foreign investment and projects. In parallel with Brunei’s efforts to attract foreign investment and create an open and transparent investment regime, the country has taken steps to streamline the process for entrepreneurs and investors to establish businesses and has improved its protections for Intellectual Property Rights (IPR).

Despite ambitions to diversify, Brunei’s economy remains dependent on the income derived from sales of oil and gas, contributing about 50 percent to the country’s GDP. Substantial revenue from overseas investment supplements income from domestic hydrocarbon production. These two revenue streams provide a comfortable quality of life for Bruneians by regional standards. Citizens are not required to pay taxes and have access to free education through the university level, free medical care, and subsidized housing and car fuel.

Brunei has a stable political climate and is generally sheltered from natural disasters. Its central location in Southeast Asia, with good telecommunications and airline connections, business tax credits in specified sectors, and no income, sales, or export taxes, offers a welcoming climate for potential investors. Sectors offering U.S. business opportunities in Brunei include aerospace and defense, agribusiness, construction, petrochemicals, energy and mining, environmental technologies, food processing and packaging, franchising, health technologies, information and communication, digital finance, and services. Brunei has ambitious climate change goals, aspiring to lower greenhouse gas emissions by more than 50 percent and increase its share of renewable energy to 30 percent of total capacity by 2035.

Brunei continues to take a cautious approach against the COVID-19 pandemic despite having fully immunized 95 percent of the population. As of March 2022, although the country is not under lockdown, Brunei has not fully opened its borders to non-essential travel. Travelers entering the country are required to obtain permission from the Prime Minister’s Office.

In 2014, Brunei began implementing sections of its Sharia Penal Code (SPC) that expanded preexisting restrictions on activities such as alcohol consumption, eating in public during the fasting hours in the month of Ramadan, and indecent behavior, with possible punishments including fines and imprisonment. The SPC functions in parallel with Brunei’s common law-based civil penal code. The government commenced full implementation of the SPC in 2019, introducing the possibility of corporal and capital punishments including, under certain evidentiary circumstances, amputation for theft and death by stoning for offenses including sodomy, adultery, and blasphemy. Government officials emphasize that sentencing to the most severe punishments is highly improbable due to the very high standard of proof required for conviction under the SPC. While the SPC does not specifically address business-related matters, potential investors should be aware that the SPC generated global controversy when it was implemented due to its draconian punishments and inherent discrimination toward LGBT communities. The sultan declared a moratorium on the death penalty for sharia crimes in response to the outcry and there have been no recorded incidents of U.S. citizens or U.S. investments directly affected by sharia law.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2020 35 of 175 http://www.transparency.org/research/cpi/overview
Global Innovation Index 2021 82 of 132 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 USD $11.0 million https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 USD $31,510 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

Bulgaria

Executive Summary

Bulgaria is seen by many investors as an attractive low-cost investment destination, with government incentives for new investment. The country offers some of the least expensive labor in the European Union (EU) and low and flat corporate and income taxes. However, Bulgaria has the lowest labor productivity rate in the EU, and a rapidly shrinking population could exacerbate the trend.

In 2021 Bulgaria continued to suffer from the COVID-19 pandemic and related shutdowns, although the impact on the economy was less severe than in many other European countries. In 2021 the government updated the budget to include more public funding of COVID-related measures, such as increased pensions. Tourism, logistics, the service industries, and the automotive sector were particularly hard hit by the pandemic. The Bulgarian economy declined 4.4 percent in 2020, rebounded to 4.2 percent growth in 2021, and is projected to grow by 4.8 percent in 2022. This recovery is being driven by higher consumption and public investment funds. The war in Ukraine and rising energy and food prices, however, threaten these growth expectations.

Bulgaria is expected to receive EUR 6.2 billion over a six-year period (2021-2026) from the EU’s post-COVID recovery grant funds to improve its economy in areas such as green energy, digitalization, and private sector development.

The government expects to adopt the Euro in early 2024, after having joined the European Exchange Rate Mechanism (ERM II) in July 2020 and the EU’s Banking Union in October 2020. The adoption of the euro will eliminate currency risk and help reduce transaction costs with some of the country’s key European trading partners.

There are no legal limits on foreign ownership or control of firms. With some exceptions, foreign entities are given the same treatment as national firms and their investments are not screened or otherwise restricted. There is strong growth in software development, technical support, and business process outsourcing. The Information Technology (IT) and back-office outsourcing sectors have attracted a number of U.S. and European companies to Bulgaria, and many have established global and regional service centers in the country. The automotive sector has also attracted U.S. and foreign investors in recent years.

Foreign investors remain concerned about rule of law in Bulgaria. Along with endemic corruption, investors cite other problems impeding investment including difficulty obtaining needed permits, unpredictability due to frequent regulatory and legislative changes, sporadic attempts to negate long-term government contracts, and an inefficient judicial system. The new government coalition which came to power in December 2021 cited rule of law reform as its highest priority.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 78 of 180 http://www.transparency.org/research/cpi/overview
Global Innovation Index 2021 35 of 132 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2021 USD 608 https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 USD 9,630 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD

 

1. Openness To, and Restrictions Upon, Foreign Investment 

3. Legal Regime 

4. Industrial Policies 

5. Protection of Property Rights 

6. Financial Sector 

Burkina Faso

Executive Summary

On January 24, 2022, the Burkinabé military officers deposed the democratically-elected government of former President Roch Marc Christian Kabore, dissolved the government and national assembly, and suspended the constitution. The coup leader Lieutenant Colonel Paul-Henri Damiba assumed the role of president of Burkina Faso’s Transition Government. In February 2022, a transitional charter was signed by Transition President LTC Damiba laying out a three-year transition period before democratic elections could be held. Since then, a Transitional government and a Transition Legislative Assembly have been installed.

Burkina Faso is a landlocked country and the world’s seventh poorest country according to the 2020 UN Development Program (UNDP) Human Development Index, ranked at 182 out of 189 countries. Burkina Faso has an estimated population of 22 million inhabitants (as of June 2022) according to the United Nations, and the IMF estimates its growth domestic product (GDP) at US$ 19.62 billion. Burkina Faso’s economy rebounded in 2021 and grew at an estimated 8.5 percent, attributable to increases in gold exports and the services sector, according to the World Bank. The economy is forecasted to grow at 5.6 percent in 2022. The fiscal deficit stood at 5.5 percent of GDP in 2022, but could reach 6.6 percent of GDP in 2022 as a result of the multitude of challenges Burkina Faso faces, including security, humanitarian, food, and social, etc. Over 40 percent of the Burkinabe population live below the poverty line, and the country ranks 144th out of 157 countries in the World Bank’s Human Capital Index. Some 80 percent of the country’s population is engaged in agriculture—mostly subsistence—with only a small fraction directly involved in agribusiness. In 2020, as a response to the COVID-19 crisis, the Burkinabe government announced a series of socio-economic measures ranging from tax breaks to subsidies and food support to low-income families. The overall cost of the measures was estimated at US$656 million.

Overall, Burkina Faso welcomes foreign investment and actively seeks to attract foreign partners to aid in its development. It has partially put in place the legal and regulatory framework necessary to ensure that foreign investors are treated fairly, including setting up a venue for commercial disputes and streamlining the issuance of permits and company registration requirements. More progress is needed to diminish the dominance of state-owned firms in certain sectors and to enforce intellectual property protections.

Burkina Faso ranks 100th of 177 countries in the Heritage Foundation’s economic freedom report 2022 Economic Freedom Index. Among the 51 African countries in the report, Burkina Faso ranked 14th, improving its 21st position in the 2021 economic freedom report. Burkina Faso’s corruption perception score improved slightly from 40 in 2020 to 42 in 2021 and improved the country’s ranking from 86th to 78th of 180 countries.

The gold mining industry has boomed in the last decade, and the bulk of foreign investment is in the mining sector, mostly from Canadian firms. Moroccan, French and UAE companies control local subsidiaries in the telecommunications industry, while foreign investors are also active in sectors such as agriculture, transport and logistics, energy, and financial technology. There is a growing foreign investment interest in the security sector. In June 2015, a new mining code was approved to standardize contract terms and better regulate the sector. In 2018, the parliament adopted a new investment code that offers many advantages to foreign investors. This code offers a range of tax breaks and incentives to lure foreign investors, including exemptions from value-added tax (VAT) on certain equipment. Effective tax rates as a result are lower than the regional average, though the tax system is complex, and compliance can be burdensome. Opportunities for U.S. firms exist in many sectors, but including in agriculture and manufacturing

Burkina Faso remains committed to a market-based economy without barriers to trade. Over the last 15 years, the national power utility’s Société Nationale de l’Eléctricité du Burkina (SONABEL) customer base and energy demand ballooned. Between 2015 and 2021, SONABEL customer base grew by 64%. However, supply can only meet the demand in non-peak periods. Burkina Faso imports nearly 70 percent of its electricity from neighboring Ghana and Cote d’Ivoire and faces electricity reliability and affordability challenges. It also imports other energy products such as gasoline and gas through a network of foreign companies to meet local demand. the Millennium Challenge Corporation (MCC) suspended the US$ 500 million compact with the Government of Burkina Faso. The Compact aimed to unlock economic growth by strengthening electricity sector effectiveness, energy reliability cost-effectiveness, and grid development and access, creating a more favorable investment environment for firms in the energy sector and the wider economy and spurring further foreign direct investment in Burkina Faso.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 78 of 180 2021 Corruption Perceptions Index – Explore the… – Transparency.org
Global Innovation Index 2020 115 of 132 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 NA https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 $770 GNI per capita, Atlas method (current US$) | Data (worldbank.org)

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

Burma

Executive Summary

On February 1, 2021, the Burmese military seized power in a coup d’état that reversed much of the economic progress of recent years. The military’s brutal crackdown on peaceful protests destabilized the country, prompted widespread opposition, and created a sharp deterioration in the investment climate. Burma’s economy shrank by 18 percent in 2021, with a forecast for one percent growth in 2022, according to the World Bank. The regime’s ongoing violence, repression, and economic mismanagement have significantly reduced Burma’s commercial activity, compounded by the pro-democracy Civil Disobedience Movement that emerged in response to the coup. Many routine business services like customs, ports, and banks are not fully operational as of April 2022. Immediately after the coup, the military detained the civilian leadership of economic and other ministries as well as the Central Bank of Myanmar (CBM) and replaced them with appointees who are beholden to the regime. The CBM has imposed severe foreign exchange restrictions that limit commercial activity, and the regime severely limits access to U.S. dollars. Frequent power outages and reliance on generators have dramatically raised costs for business. The regime’s suspensions of internet and other telecommunications have restricted access to information and seriously hindered business operations. Due to COVID-19 concerns, commercial international flights resumed only on April 17, 2022. Many foreign companies have suspended operations, invoked force majeure to exit investments, and evacuated foreign national staff. The rule of law is absent, regime security forces engage in random violence, there are attacks in response by pro-democracy People’s Defense Forces, and arbitrary detentions of perceived regime opponents including labor organizers and journalists. Companies invested in the market face a heightened reputational risk. There is also the potential for the regime to expropriate property or nationalize private companies. In response to the coup, the U.S. government has imposed targeted sanctions, including on members of the regime’s so-called State Administration Council (SAC), ministers, and other authorities. The U.S. has also suspended our Trade and Investment Framework Agreement and instituted more stringent export controls. In the 2022 Business Advisory for Burma, the United States reaffirmed that it does not seek to curtail legitimate business and responsible investment in Burma. Nevertheless, investors should exercise extreme caution, avoid joint ventures with regime-affiliated businesses, and conduct heightened due diligence when considering new investments in this market.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 140 of 180 https://www.transparency.org/en/cpi/2021/index/mmr
Global Innovation Index 2021 127 of 132 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 -6.0 https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 $1,350 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

2. Bilateral Investment Agreements and Taxation Treaties

Burma has signed and ratified bilateral investment agreements with China, India, Japan, South Korea, Laos, Philippines, and Thailand. It has also signed bilateral investment agreements with Israel and Vietnam, although those have not yet entered into force. Texts of the agreements or treaties that have come into force are available on the UNCTAD website at:  https://investmentpolicy.unctad.org/international-investmentagreements/countries/144/myanmar  

Burma does not have a bilateral investment treaty or a free trade agreement with the United States. In March 2021, the United States suspended the bilateral Trade and Investment Framework Agreement in response to the coup.

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

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

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

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

Burma is not a member of the OECD Inclusive Framework on Base Erosion and Profit Sharing.

The Tax Administrative Law (TAL) went into effect on October 1, 2019. This tax law provides guidance on administrative procedures on the following tax laws: the Income Tax Law; the Commercial Tax Law; the Special Goods Tax Law; and any other taxes deemed as such by the Internal Revenue Department. The law includes an advanced ruling system, an anti-avoidance provision, and the imposition of interest on unpaid or overpaid taxes. The TAL also clarified certain provisions under the existing tax laws with respect to tax filing and payment procedures, maintenance of documents, re-assessment of tax returns, changes to the appeal process, and the imposition of penalties.

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

Burundi

Executive Summary

Located in Central Africa, Burundi is one of the seven member states of the East African Community (EAC).  Burundi is one of the world’s most impoverished countries, with 87 percent of the population living below the World Bank’s poverty measure of $1.90 per day, 80-90 percent of the population reliant on agriculture (mostly subsistence farming) and a youth unemployment rate of about 65 percent. Economic growth is insufficient to create employment for Burundi’s rapidly growing population and President Ndayishimiye, in power since June 2020, has actively promoted good political and economic governance to improve the business environment by fighting corruption and promoting fiscal transparency.  His administration is actively seeking to increase existing value chains to find new sources of employment and revenue and to find new revenue streams.

The Government of Burundi (GoB) is also seeking to attract more foreign direct investment (FDI). Since taking office President Ndayishimiye has made or hosted multiple state visits with potential trade and development partners.  Given the importance of agriculture, the GoB is promoting initiatives to modernize and diversify agricultural production, seeking to increase production of crops beyond coffee and tea.  To attract FDI, the GoB must address an array of longstanding challenges, including: poor governance and weak institutional capacity; pervasive corruption; an exchange rate gap between the official and parallel market rates that fluctuates between 50-70 percent; financial restrictions and capital controls that limit access to and expatriation of foreign exchange; a low-skilled workforce; only 12 percent electrification nationwide; poor internet connectivity; and limited availability of reliable economic statistics.

The GoB is working to develop infrastructure, including photovoltaic and hydroelectric power plants, roads construction, rehabilitation of Bujumbura Port and the construction of a railway joining Burundi, DRC and Tanzania to improve access to the country, reduce transportation costs and boost regional trade.  The demand for electricity and water significantly exceeds capacity, and the transmission system is old and poorly maintained, leading to rolling blackouts and outages.  In the mining sector, the GoB is introducing a new mining code and industry-wide regulations it says will promote greater transparency.  As of March 2022, all foreign mining companies’ operations remain pending revision and renegotiation of new contracts/agreements based on a “win-win” principle and implementation of the new mining code.

The COVID-19 pandemic and associated border closures resulted in a sharp economic slowdown in 2020, and the IMF estimates GDP shrank by around 1 percent, before rebounding by 3.6 percent in 2021.  Testing capacity is low and vaccination rates remain among the lowest in the world. Burundian authorities have prepared a COVID-19 response plan to limit the disease spread and cushion its macroeconomic and social impacts; however, its implementation has been constrained by limited financing and domestic resistance, including from some at high levels of government.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 169 of 180 http://www.transparency.org/research/cpi/overview
Global Innovation Index 2020 N/A https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 N/A https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 USD 230 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

Cabo Verde

Executive Summary

The Government of Cabo Verde welcomes international investment, provides prospective investors “one-stop shop” assistance through its investment promotion agency Cabo Verde TradeInvest, and offers incentives and tax breaks for investments in multiple sectors, most notably tourism and information and communication technology. Growth is projected to slowly accelerate in 2022 as tourism inflows from Europe increase and the COVID-19 pandemic recedes, helped by an efficient vaccination rollout throughout the country. However, increases in food and energy costs stemming from the Ukraine crisis could hinder economic recovery. Cabo Verde’s political stability, democratic institutions, and economic freedom lend predictability to its business environment. Free and fair elections, good governance, prudent macroeconomic management, openness to trade, increasing integration into the global economy, and the adoption of effective social development policies all contribute to a favorable climate for investment. Cabo Verde receives high marks on international indicators for transparency and lack of corruption. There are few regulatory barriers to foreign investment in Cabo Verde, and foreign investors receive the same treatment as Cabo Verdean nationals regarding taxes, licenses and registration, and access to foreign exchange. The country’s strategic location and growing connectivity with other West African nations make it a potential gateway for investors interested in a foothold from which to expand to the continent.

As Cabo Verde’s low proportion of arable land, scant rainfall, lack of natural resources, territorial discontinuity, and small population make it a high-cost economy with few economies of scale, the country relies on foreign investment, imports, development aid, and remittances. Despite the challenges, in 2007 the country became one of the first to graduate from least developed country status, and it met most of its Millennium Development Goals by 2015. As the COVID-19 pandemic has demonstrated, the economy’s dependence on tourism, which accounted directly for 25 percent of GDP and more than 40 percent indirectly pre-pandemic, makes it vulnerable to external shocks. In addition, the pandemic caused the government to put plans to privatize state-owned enterprises on hold, though privatization of ports and airports management and water and electricity could move forward later. While the business and investment climates continue to improve, there remain bureaucratic, linguistic (relatively few English or French speakers), and cultural challenges to overcome.

The government’s new Cabo Verde Ambition 2030 plan builds on its Strategic Plan for Sustainable Development and promises to open opportunities in sustainable tourism, renewable energy, blue and digital economies, and the transformation of Cabo Verde into a transportation and logistics platform. Cabo Verde aims to generate 50 percent of its electricity from renewable sources by 2030 and 100 percent by 2040. Diversification of the economy remains a priority, but high public debt levels, which reached a record estimated 158.4 percent of GDP in 2021, limit government funding capacity.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perception Index 2021 39 of 180 http://www.transparency.org/research/cpi/overview
Global Innovation Index 2021 89 of 132 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) N/A N/A https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 $3,060 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

Cambodia

Executive Summary

The COVID-19 pandemic has had a significant adverse impact on Cambodia’s economy. Despite a surge of cases in 2021, Cambodia’s economy demonstrated resilience in some sectors (agriculture, manufacturing) and showed signs of gradual recovery from the previous year’s economic disruptions, achieving 2.2  percent gross domestic product (GDP) growth. This follows a 3.1 percent contraction of its GDP in 2020. Having adopted a “living with COVID” stance to reopen its economy and attract international tourists, the Royal Government of Cambodia (RGC) in March 2022 dropped all quarantine and testing requirements for fully vaccinated travelers. The World Bank predicts Cambodia’s GDP growth to rebound to 4.5  percent in 2022.

The RGC has made attracting investment from abroad a top priority, and in October 2021 passed a new Law on Investment.  Foreign direct investment (FDI) incentives available to investors include 100 percent foreign ownership of companies, corporate tax holidays, reduced corporate tax rates, duty-free import of capital goods, and no restrictions on capital repatriation.  In response to the COVID-19 pandemic, the government enacted economic recovery measures to boost competitiveness and support the economy, including a long-awaited Competition Law, a Public-Private Partnership Law, and provided tax breaks to the hardest hit businesses, such as those in the tourism and restaurant sectors. The government also delayed the implementation of a capital gains tax to 2024 and established an SME Bank of Cambodia to support small- and medium-sized enterprises.

Despite these incentives, Cambodia has not attracted significant U.S. investment. Apart from the country’s relatively small market size, other factors dissuading U.S. investors include: systemic corruption, a limited supply of skilled labor, inadequate infrastructure (including high energy costs), a lack of transparency in some government approval processes, and preferential treatment given to local or other foreign companies that engage in acts of corruption or tax evasion or take advantage of Cambodia’s weak regulatory environment. Foreign and local investors alike lament the government’s failure to adequately consult the business community on new economic policies and regulations. In light of these concerns, on November 10, 2021, the U.S. Departments of State, Treasury, and Commerce issued a business advisory to caution U.S. businesses currently operating in, or considering operating, in Cambodia to be mindful of interactions with entities involved in corrupt business practices, criminal activities, and human rights abuses. Notwithstanding these challenges, several large American companies maintain investments in the country, for example, Coca-Cola’s $100 million bottling plant and a $21 million Ford vehicle assembly plant slated to open in 2022.

In recent years, Chinese FDI — largely from state-run or associated firms — has surged and has become a significant driver of growth in Cambodia.  Chinese businesses, many of which are state-owned enterprises, may not assess the challenges in Cambodia’s business environment in the same manner as U.S. businesses.  In 2021, Cambodia recorded FDI inflows of $655 million, with approximately 52 percent reportedly coming from the PRC.

Physical infrastructure projects, including commercial and residential real estate developments, continue to attract the bulk of FDI. However, there has been some increased investments in manufacturing, including garment and travel goods factories, as well as agro-processing.

In 2022, both the Cambodia-China Free Trade Agreement (CCFTA) and the Regional Comprehensive Economic Partnership (RCEP) agreement entered into force.

Climate change remains a critical issue in Cambodia due to its vulnerability to extreme weather occurrences, high rates of deforestation, and low environmental accountability.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perception Index 2021 157 of 180 http://www.transparency.org/research/cpi/overview
Global Innovation Index 2021 109 of 132 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 1994-2021 $1.58 billion https://apps.bea.gov/international/factsheet/

http://www.cambodiainvestment.gov.kh

World Bank GNI per capita 2020 $1,500 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

Cameroon

Executive Summary

Cameroon, the largest economy in the Central African Economic and Monetary Union (CEMAC), continues to face the repercussions of the COVID-19 pandemic; however, growth has started to recover from a 2020 recession. The International Monetary Fund (IMF) projects Cameroon’s gross domestic product (GDP) to increase by 4.6 percent in 2022. Cameroon’s current account balance also improved in 2021 and early 2022. The government continues to implement its 2020-2030 National Development Strategy and development projects, especially in road infrastructure, transport, energy, and health, albeit with delays. Cameroon utilized its hosting of the Africa Cup of Nations soccer tournament in early 2022 to hasten the completion of some long-awaited projects and promote Cameroon to investors.

Cameroon maintains strong competitive advantages because of a bilingual population, a relatively diversified economy, and its location as a gateway to the Central African region. It offers immense investment potential in infrastructure, extractive industries, consumer markets, and modern communication technology (for example, internet broadband, fiber optic cable, and data centers). However, Cameroon’s telecommunication infrastructure is overutilized and in need of upgrades, which often results in network outages. Agricultural processing and transport infrastructure, such as seaports, airports, and rail, need investments, especially for modernization and maintenance. More investment opportunities exist in the financial sector as only 15 percent of Cameroonians have access to formal banking services.

Corruption and weak governance structures continue to hamper Cameroon’s business climate.

The IMF approved a three-year, $689.5 million hybrid Extended Credit Facility-Extended Fund Facility arrangement in July 2021 to advance structural fiscal reforms, improve governance, and continue mitigating the health, economic, and social consequences of the pandemic while ensuring domestic and external sustainability. Cameroon’s 2022 budget aligns with its National Development Strategy and IMF program and sets a target to reduce the budget deficit from -3.2 percent in 2021 to -2 percent in 2022.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 144 of 180 http://www.transparency.org/research/cpi/overview
Global Innovation Index 2021 123 of 132 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 $-19 million https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 $1,520 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

Canada

Executive Summary

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

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

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

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

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

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

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

Chad

Executive Summary

Chad is Africa’s fifth largest country by surface area, encompassing three bioclimatic zones. Chad is landlocked, bordering Libya to the north, Sudan to the east, Central African Republic (CAR) to the south, and Cameroon, Nigeria, and Niger to the west (with which it shares Lake Chad). The nearest port — Douala, Cameroon — is 1,700 km from the capital, N’Djamena. Chad is one of six countries that constitute the Central African Economic and Monetary Community (CEMAC), a common market. Chad’s human development is one of the lowest in the world according to the UN Human Development Index (HDI). Poverty afflicts a large proportion of the population.

The Government of Chad (GOC) actively solicits foreign investment, especially from North America. Opportunities for foreign investment exist in Agribusiness; Agricultural, Construction, Building & Heavy Equipment; Automotive & Ground Transportation; Education; Energy & Mining; Environmental Technologies; Food Processing & Packaging; Health Technologies; Information Technology; Industrial Equipment & Supplies; Information & Communication; and Services. Since oil production began in 2003, the petroleum sector has dominated economic activity and been the largest target of foreign investment, including from U.S. companies. Agriculture and livestock breeding are also important economic activities, employing most of the population. In recent years, the GOC has prioritized agriculture, solar energy production, gold mining, livestock breeding and processing, and information technology to diversify the economy and lessen fiscal dependence on volatile global energy markets.

Chad’s investment climate is challenging. Private sector development suffers from a lack of transport infrastructure, GDP growth, skilled labor, reliable electricity, adequate contract enforcement, good governance, and attractive tax rates. Frequent border closures with neighboring countries complicate trade. The COVID-19 pandemic, and associated restrictions, halted Chad’s modest 2019 economic recovery following several years of recession caused by low global oil prices and disruptive debt payments to Glencore. Overall vaccination rates remain low. Existing IMF and World Bank programs aim to improve governance, increase transparency, and reduce internal arrears. Private sector financing is limited, and low GDP growth constrains government investment. Corruption and historically frequent replacement of senior level government figures present further roadblocks, as does cumbersome French-based labor law. The GOC’s interest in maintaining a stake in investment projects, while facilitating access to key decision makers, also introduces financial and operational risks.

Despite these challenges, the success of several foreign investments into Chad illustrates opportunities for experienced, dedicated, and patient investors. Successful investors typically operate with trusted local partners. The oil sector will mark 20 years of operations in 2023. Singapore-based Olam International entered Chad’s cotton market in 2018. Mindful of the imperative to enact reforms, the GOC operationalized a Presidential Council to Improve the Business Climate in January 2021. With rich natural resources, minimally developed agriculture and meat processing sectors, ample sunshine, increasing telecommunications coverage, and a rapidly growing population, Chad presents an opportunity for targeted investment in key sectors.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2022 164 of 180 http://www.transparency.org/research/cpi/overview
Global Innovation Index 2021 N/A https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) N/A N/A https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 $630 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

Real Property

The Chadian Civil Code protects property rights. Since 2013, landowners may register land titles with the One-Stop Land Titling Office (Guichet Unique pour les Affaires Foncieres). However, enforcement of these rights is difficult because most landowners do not have a title or a deed for their property. In 2022, an effort by the Food and Agricultural Organization of the United Nations (FAO) to advise the government on a more systematic framework to approach property issues marked the first major effort in many years to address property rights conflicts.

The office of Domain and Registration (Direction de Domaine et Enregistrement) in the Ministry of Finance and Budget is responsible for recording property deeds and mortgages. In practice, this office asserts authority only in urban areas; rural property titles are managed by traditional leaders who apply customary law. Chadian courts frequently deal with cases of multiple or conflicting titles to the same property. A significant portion of the legal system’s bandwidth is involved in ongoing land disputes. In cases of multiple titles, the earliest title issued usually has precedence. Fraud is common in property transactions. By law, all land for which no title exists is owned by the government and can only be given to a separate entity by presidential decree. There have been incidents in which the government has reclaimed land for which individuals held titles, which government officials then granted to other individuals without the backing of presidential decrees.

The GOC does not provide clear definitions and protections of traditional use rights of indigenous peoples, tribes, or farmers.

6. Financial Sector

Chile

Executive Summary

With the second highest GDP per capita in Latin America (behind Uruguay), Chile has historically enjoyed among the highest levels of stability and prosperity in the region. However, widespread civil unrest broke out throughout the country in 2019 in protest of the government’s handling of the economy and perceived systemic inequality. Pursuant to a political accord, Chile held a plebiscite in October 2020 in which citizens chose to redraft the constitution. Uncertainty about the outcome of the redrafting process may impact investment. Due to Chile’s solid macroeconomic policy framework, the country boasts one of the strongest sovereign bond ratings in Latin America, which has provided fiscal space for the Chilean government to respond to the economic contraction resulting from the COVID-19 pandemic through stimulus packages and other measures. As a result, Chile’s economic growth in 2021 was, according to the Central Bank’s latest estimation, between 11.5 percent and 12 percent. The same institution forecasts Chile’s economic growth in 2022 will be in the range of 1 to 2 percent due largely to the gradual elimination of COVID-19 economic stimulus programs.

Chile has successfully attracted large amounts of Foreign Direct Investment (FDI) despite its relatively small domestic market. The country’s market-oriented policies have created significant opportunities for foreign investors to participate in the country’s economic growth. Chile has a sound legal framework and there is general respect for private property rights. Sectors that attract significant FDI include mining, finance/insurance, energy, telecommunications, chemical manufacturing, and wholesale trade. Mineral, hydrocarbon, and fossil fuel deposits within Chilean territory are restricted from foreign ownership, but companies may enter into contracts with the government to extract these resources. Corruption exists in Chile but on a much smaller scale than in most Latin American countries, ranking 27 – along with the United States – out of 180 countries worldwide and second in Latin America in Transparency International’s 2021 Corruption Perceptions Index.

Although Chile is an attractive destination for foreign investment, challenges remain. Legislative and constitutional reforms proposed in response to the social unrest and the pandemic have generated concerns about the future government policies on property rights, rule of law, tax structure, the role of government in the economy, and many other issues. Importantly, the legislation enabling the constitutional reform process requires that the new constitution must respect Chile’s character as a democratic republic, its judicial sentences, and its international treaties (including the U.S.-Chile Free Trade Agreement). Despite a general respect for intellectual property (IP) rights, Chile has not fully complied with its IP obligations set forth in the U.S.-Chile FTA and remains on the U.S. Trade Representative (USTR) Special 301 Report for not adequately enforcing IP rights. Environmental permitting processes, indigenous consultation requirements, and cumbersome court proceedings have made large project approvals increasingly time consuming and unpredictable, especially in cases with political sensitivities. The current administration has stated its willingness to continue attracting foreign investment.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2020 27 of 180 http://www.transparency.org/research/cpi/overview
Global Innovation Index 2021 53 of 132 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country (US$ billion, historical stock positions) 2020 23.0 https://apps.bea.gov/international/factsheet/
World Bank GNI per capita (US$) 2020 13,470 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

China

Executive Summary

In 2021, the People’s Republic of China (PRC) was the number two global Foreign Direct Investment (FDI) destination, behind the United States. As the world’s second-largest economy, with a large consumer base and integrated supply chains, China’s economic recovery following COVID-19 reassured investors and contributed to high FDI and portfolio investments. The PRC implemented major legislation in 2021, including the Data Security Law in September and the Personal Information Protection Law in November.

China remains a relatively restrictive investment environment for foreign investors due to restrictions in key sectors and regulatory uncertainties. Obstacles include ownership caps and requirements to form joint venture (JV) partnerships with local firms, industrial policies to develop indigenous capacity or technological self-sufficiency, and pressures to transfer technology as a prerequisite to gaining market access. New data and financial rules announced in 2021 also created significant uncertainty surrounding the financial regulatory environment. The PRC’s pandemic-related visa and travel restrictions significantly affected foreign businesses operations, increasing labor and input costs. An assertive Chinese Communist Party (CCP) and emphasis on national companies and self-reliance has heightened foreign investors’ concerns about the pace of economic reforms.

Key developments in 2021 included:

  • The Rules for Security Reviews on Foreign Investments came into effect January 18, expanding PRC vetting of foreign investment that may affect national security.
  • The National People’s Congress (NPC) adopted the Anti-Foreign Sanctions Law on June 10.
  • The Cyberspace Administration of China (CAC) issued draft revisions to its Cybersecurity Review Measures to broaden PRC approval authority over PRC companies’ overseas listings on July 10.
  • China formally applied to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) on September 16.
  • On November 1, the Personal Information Protection Law (PIPL) went into effect and China formally applied to join the Digital Economy Partnership Agreement (DEPA).
  • On December 23, President Biden signed the Uyghur Forced Labor Prevention Act. The law prohibits importing goods into the United States that are mined, produced, or manufactured wholly or in part with forced labor in the PRC, especially from Xinjiang.
  • On December 27, the National Reform and Development Commission (NDRC) and the Ministry of Commerce (MOFCOM) updated its foreign FDI investment “negative lists.”

While PRC pronouncements of greater market access and fair treatment of foreign investment are welcome, details and effective implementation are needed to ensure equitable treatment.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 66 of 180 http://www.transparency.org/research/cpi/overview 
Global Innovation Index 2021 12 of 131 https://www.globalinnovationindex.org/analysis-indicator 
U.S. FDI in partner country ($M USD, historical stock positions) 2020 USD 123.8 https://apps.bea.gov/international/factsheet/  
World Bank GNI per capita 2020 USD 10,550 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD 

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

Colombia

Executive Summary

With improving security conditions in metropolitan areas, a market of 50 million people, an abundance of natural resources, and an educated and growing middle-class, Colombia continues to be an attractive destination for foreign investment in Latin America. Colombia ranked 67 out of 190 countries in the “Ease of Doing Business” index of the World Bank’s 2020 Doing Business Report (most recent report).

The Colombian economy grew by 10.6 percent in 2021, the largest increase in gross domestic product (GDP) since the statistical authority started keeping records in 1975. This followed a 6.8 percent collapse in 2020 due to the negative effects of the pandemic and lower oil prices, the first economic contraction in more than two decades. In July 2021, rating agencies Fitch and Standard & Poor’s (S&P) downgraded Colombia below investment grade status, citing the increasing fiscal deficit (7.1 percent of GDP for 2021) as the main reason for the downgrade. The Colombian Government passed a tax reform that entered into effect in January 2022, the Social Investment Law, that seeks to reactivate the economy, generate employment, and contribute to the fiscal stability of the country.

Colombia’s legal and regulatory systems are generally transparent and consistent with international norms. The country has a comprehensive legal framework for business and foreign direct investment (FDI). The 2012 U.S.-Colombia Trade Promotion Agreement (CTPA) has strengthened bilateral trade and investment. Colombia’s dispute settlement mechanisms have improved through the CTPA and several international conventions and treaties. Weaknesses include protection of intellectual property rights (IPR), as Colombia has yet to implement certain IPR-related provisions of the CTPA. Colombia became the 37th member of the Organization for Economic Cooperation and Development (OECD) in 2020, bringing the obligation to adhere to OECD norms and standards in economic operations.

The Colombian government has made a concerted effort to develop efficient capital markets, attract investment, and create jobs. Restrictions on foreign ownership in specific sectors still exist. FDI inflows increased 4.8 percent from 2020 to 2021, with 67 percent of the 2021 inflow dedicated to the extractives sector. Roughly half of the Colombian workforce in metropolitan areas is employed in the informal economy, a share that increases to four-fifths in rural areas. In 2021, the unemployment rate was 13.7 percent with 3.4 million people unemployed. The employed population reached 21.6 million, an increase of 0.9 percent compared to 2020.

Since the 2016 peace agreement between the government and the Revolutionary Armed Forces of Colombia (FARC), Colombia has experienced a significant decrease in terrorist activity. Several powerful narco-criminal operations still pose threats to commercial activity and investment, especially in rural zones outside of government control.

Corruption remains a significant challenge. The Colombian government continues to work on improving its business climate, but U.S. and other foreign investors continue to voice complaints about non-tariff, regulatory, and bureaucratic barriers to trade, investment, and market access at the national, regional, and municipal levels. Stakeholders express concern that some regulatory rulings in Colombia target specific companies, resulting in an uneven playing field. Investors generally have access at all levels of the Colombian government, but cite a lack of effective and timely consultation with regulatory agencies in decisions that affect them. Investors also note concern regarding the national competition and regulatory authority’s (Superintendencia de Industria y Comercio, SIC) differing rulings for different companies on similar issues, and slow processing at some regulatory agencies, such as at food and drug regulator INVIMA.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 87 of 180 http://www.transparency.org/research/cpi/overview
Global Innovation Index 2021 67 of 132 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 $7,767 https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 $5,790 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

Costa Rica

Executive Summary

Costa Rica is the oldest continuous democracy in Latin America and the newest member of the Organization for Economic Cooperation and Development (OECD), with an established government institutional framework, stable society, and a diversified upper-middle-income economy. The country’s well-educated labor force, relatively low levels of corruption, geographic location, living conditions, dynamic investment promotion board, and attractive free trade zone incentives all appeal to investors. Foreign direct investment inflow in 2020 was USD 1.76 billion, or 2.8 percent of GDP, with the United States accounting for USD 1.2 billion. Costa Rica recorded 7.6 percent GDP growth in 2021 (the highest level since 2008) as it recovered from a 4.5 percent contraction in 2020 largely due to the effects of the Covid-19 pandemic.

Costa Rica has had remarkable success in the last two decades in establishing and promoting an ecosystem of export-oriented technology companies, suppliers of input goods and services, associated public institutions and universities, and a trained and experienced workforce. A similar transformation took place in the tourism sector, with a plethora of smaller enterprises handling a steadily increasing flow of tourists eager to visit despite Costa Rica’s relatively high prices. Costa Rica is doubly fortunate in that these two sectors positively reinforce each other as they both require and encourage English language fluency, openness to the global community, and Costa Rican government efficiency and effectiveness. A 2019 study of the free trade zone (FTZ) economy commissioned by the Costa Rican Investment and Development Board (CINDE) shows an annual 9 percent growth from 2014 to 2018, with the net benefit of that sector reaching 7.9 percent of GDP in 2018. This sector continued to expand during the pandemic. The value of exports increased by 24 percent in 2021, representing the highest growth in 15 years.

The Costa Rican investment climate is threatened by a high and persistent government fiscal deficit, underperformance in some key areas of government service provision, including health care and education, high energy costs, and deterioration of basic infrastructure. The Covid-19 world recession damaged the Costa Rican tourism industry, although it is recovering. Furthermore, the government has very little budget flexibility to address the economic fallout and is struggling to find ways to achieve debt relief, unemployment response, and the longer-term policy solutions necessary to continue compliance under the current stabilizing agreement with the International Monetary Fund (IMF). On the plus side, the Costa Rican government has competently managed the crisis despite its tight budget and Costa Rican exports are proving resilient; the portion of the export sector that manufactures medical devices, for example, is facing relatively good economic prospects and companies providing services exports are specialized in virtual support for their clients in a world that is forced to move in that direction. Moreover, Costa Rica’s accession in 2021 to the Organization for Co-operation and Development (OECD) has exerted a positive influence by pushing the country to address its economic weaknesses through executive decrees and legislative reforms in a process that began in 2015. Also in the plus column, the export and investment promotion agencies CINDE and the Costa Rican Foreign Trade Promoter (PROCOMER) have done an excellent job of protecting the Free Trade Zones (FTZs) from new taxes by highlighting the benefits of the regime, promoting local supply chains, and using the FTZs as examples for other sectors of the economy. Nevertheless, Costa Rica’s political and economic leadership faces a difficult balancing act over the coming years as the country must simultaneously exercise budget discipline and respond to demands for improved government-provided infrastructure and services.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 39 of 180 https://www.transparency.org/en/cpi/2021/
index/cri
Global Innovation Index 2021 56 of 132 https://www.globalinnovationindex.org/analysis-
indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 USD 2.0bill https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 USD 11,530 http://data.worldbank.org/indicator/NY.GNP.
PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

Côte d’Ivoire

Executive Summary

Côte d’Ivoire (CDI) offers a welcoming environment for U.S. investment.  The Ivoirian government wants to deepen commercial cooperation with the U.S. The Ivoirian and foreign business community in CDI considers the 2018 investment code generous with welcome incentives and few restrictions on foreign investors.  Côte d’Ivoire’s resiliency to the COVID-19 crisis led to quick economic recovery.  Gross Domestic Product (GDP) growth stayed positive at two percent in 2020 and rebounded to 6.5 percent in 2021, with government of CDI projecting average growth at 7.65 percent during the period 2021-2025.  International credit rating agency Fitch upgraded the country’s political risk rating in July 2021 from B+ to BB-, while the International Monetary Fund’s (IMF) assessment confirms CDI’s economic resilience, despite the Omicron variant of COVID.  However, possible repetition of 2021 energy shortages, poor transparency, and delays in reforms could dampen confidence.

U.S. businesses operate successfully in several Ivoirian sectors including oil and gas exploration and production; agriculture and value-added agribusiness processing; power generation and renewable energy; IT services; the digital economy; banking; insurance; and infrastructure.  The competitiveness of U.S. companies in IT services is exemplified by one company that altered the local payment system by introducing a digital payment system that rapidly increased its market share, forcing competitors to lower prices.

Côte d’Ivoire is well poised to attract increased Foreign Direct Investments (FDI) based on the government’s strong response to the pandemic, the buoyancy of the economy, high-level support for private sector investment, and clear priorities set forth in the new 2021-2025 National Development Plan (PND – Plan National de Développement).  An important factor is Côte d’Ivoire’s resurgence as a regional economic and transportation hub.  Government authorities are continuing to implement structural reforms to improve the business environment, modernize public administration, increase human capital, and boost productivity and private sector development.  However, this will not come without challenges and uncertainties in the medium term, particularly regarding the evolution of the pandemic and global recovery as well as regulatory and transparency concerns.  Government authorities underscore their commitment to strengthening peace and security systems in the northern zone of the country, while striving for inclusive growth in the context of post-pandemic recovery.  Finally, recent political instability in northern and western neighboring countries Burkina Faso, Mali, and Guinea, could impede investor confidence in the region, especially when it comes to security.

Doing business with the Ivoirian government remains a significant challenge in some areas such as procurement, taxation, and regulatory processes.  Some new public procurement procedures adopted in 2019 were only implemented in 2021, including implementation of an e-procurement module, and improved evaluation, prioritization, selection, and monitoring procedures.  This is a work in process, and concerns remain that these procedures are not consistently and transparently applied.  Similar concerns circulate about tax procedures, especially retroactive assessments based on changes in tax formulas.  An overly complicated tax system and slow, opaque government decision-making processes hinder investment.  Government has identified VAT (Value Added Tax), mining, digitalization, and property taxes as key areas for broadening the tax base and improving state revenues.  Other challenges include low levels of literacy and income, weak access to credit for small businesses, corruption, and the need to broaden the tax base to relieve some of the tax-paying burden on businesses.

Table 1: Key Metrics and Rankings 
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 105 of 180 http://www.transparency.org/research/cpi/overview
World Bank’s Doing Business Report 2020 110 of 190 http://www.doingbusiness.org/en/rankings
Global Innovation Index 2021 114 of 131 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2019 -$495 https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 $2,280 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD

 

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

Croatia

Executive Summary

Croatia’s EU membership has enhanced its economic stability and provided new opportunities for trade and investment. Characteristics that make Croatia an attractive destination for foreign investment include a geostrategic location with diverse topography and temperate climate, well-developed infrastructure, and a well-educated multilingual workforce. The Croatian government settled a longstanding investment dispute with a U.S. investor in December 2021.  Historically, the most promising sectors for investment in Croatia have been tourism, telecommunications, pharmaceuticals and healthcare, and banking. Investment opportunities are growing in Croatia’s robust IT sector, and the coming years will offer new opportunities related to the energy transition. Croatia also offers visas for so-called “digital nomads” to work in Croatia for up to one year without having to pay local taxes.

Despite the ongoing effects of the COVID-19 pandemic, the economy experienced a robust rebound of 10.4 percent growth in 2021.  Tourism in 2021 exceeded all expectations, and the sector, which accounts for as much as 20 percent of GDP, achieved 88 percent of record-breaking 2019 revenues. Throughout the pandemic, the government distributed more than $1.5 billion in job-retention and economic stabilization measures that significantly helped maintain employment. Unemployment in January 2022 was at 7.8 percent. In early 2022, the government announced nearly $800 million worth of measures to help citizens and businesses cope with rising energy costs. The European Commission estimates the Croatian economy will grow 4.8 percent in 2022 and 3.0 percent in 2023.

Croatia will receive more than $30 billion in EU funding through 2030, including approximately $7 billion through the EU’s Recovery and Resilience Facility (RRF), which has the potential to provide a significant boost to the economy if the government directs the funds to productive activities that stimulate job creation and economic growth. The government intends to spend approximately 40 percent of RRF funds in support of climate-related and clean energy objectives, including initiatives to improve energy efficiency in public and private buildings, accelerate development of renewable sources of energy, modernize the electricity distribution and transmission grid to facilitate the integration of renewable energy sources, and promote greater investments in geothermal energy. Croatia joined the European Exchange Rate Mechanism (ERM II) in July 2020, and the government expects to enter the eurozone on January 1, 2023. Croatia also received an invitation from the OECD in early 2022 to begin the accession process.

The Croatian government has taken some positive steps to improve the business climate, but it has been slow to reform the judiciary, which is most often mentioned as one of the greatest barriers to investment. In addition, the economy is burdened by a large government bureaucracy, underperforming state-owned enterprises, and low regulatory transparency. The COVID-19 pandemic accelerated digitalization efforts, which has helped decrease excessive bureaucratic procedures for both citizens and companies. Government reforms also seek to liberalize the services market, diversify capital markets and improve access to alternative financing, and reform tax incentives for research and development. Croatia’s labor laws provide strong protections to workers and there are no risks to doing business responsibly in terms of labor laws and human rights. The government is willing to meet at senior levels with interested investors and to assist in resolving problems.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perception Index 2021 63 of 180 https://www.transparency.org/en/cpi/2021/index/hrv 
Global Innovation Index 2021 48 of 128 https://www.wipo.int/edocs/pubdocs/en/wipo_pub_gii_2021.pdf 
U.S. FDI in partner country ($M USD, historical stock positions) 2021 $295 million https://www.hnb.hr/en/statistics/statistical-data/rest-of-the-world/foreign-direct-investments 
World Bank GNI per capita 2020 $27,185 https://data.worldbank.org/indicator/NY.GNP.PCAP.PP.KD 

 

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

Cyprus

Executive Summary

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

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

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

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

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

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

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

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

Czechia

Executive Summary 

The Czech Republic is a medium-sized, open economy with 71 percent of its GDP based on exports, mostly from the automotive and engineering industries.  According to the Czech Statistical Office, most of the country’s exports go to the European Union (EU), with 32.4 percent going to Germany alone.  The United States is the Czech Republic’s second largest non-EU export destination, following the United Kingdom.  While the Czech GDP dropped by 5.6 percent due to the economic impact of COVID-19 in 2020, it rebounded in 2021 to 3.3 percent according to the Czech Statistical Office.  The Ministry of Finance forecasts 3.1 percent growth for 2022.

The “Bill on Screening of Foreign Investments” entered into force May 1, 2021.  The law gives the government the ability to screen greenfield investments and acquisitions by non-EU investors.

The Czech Republic has taken strides to diversify its traditional investments in engineering into new fields of research and development (R&D) and innovative technologies.  EU structural funding has enabled the country to open a number of world-class scientific and high-tech centers.  EU member states are the largest investors in the Czech Republic.

The United States announced on February 15, 2020 plans to provide up to USD 1 billion in financing through the Development Finance Corporation (DFC) to the Three Seas Initiative Investment Fund, the dedicated investment vehicle for the Three Seas Initiative and its participating Central and Eastern European countries.  The Three Seas Initiative seeks to reinforce security and economic growth in the region through the development of energy, transportation, and digital infrastructure.  In December 2020 the DFC approved the first tranche of U.S. financial support for the Three Seas Initiative Investment Fund amounting to USD 300 million.

The European Bank for Reconstruction and Development (EBRD) agreed March 24, 2021, to a request from the Czech cabinet to return as an investor to the Czech Republic after a 13-year pause to help mitigate the impact of the COVID-19 pandemic on the economy.  The EBRD’s investments in the Czech Republic primarily focus on private sector assistance and should reach EUR 100 – 200 million annually (USD109-218 million).  The EBRD plans to be involved in investment projects in the Czech Republic temporarily (maximum five years).

The continued economic fallout from COVID-19 resulted in the Czech Republic’s highest historic state budget deficit of 419.7 billion crowns (USD 18.2 billion) in 2021.  In 2021, the Czech Republic appropriated approximately USD17 billion for the COVID-19 response, including USD7.7 billion in direct support, USD 6.7 billion in healthcare and social services expenses, and USD2.3 billion in loan guarantees.

The Czech Republic has adopted environmental strategies and policies to address the climate crisis.  Public procurement policies include environmental considerations, and the government provides subsidies to companies for using modern low-carbon technologies, renewables, and resource-effective processes.

There are no significant risks to doing business responsibly in areas such as labor and human rights in the Czech Republic.

The Czech Republic fully complies with EU and the Organization for Economic Cooperation and Development (OECD) standards for labor laws and equal treatment of foreign and domestic investors.  Wages continue to trail those in neighboring Western European countries (Czech wages are roughly one-third of comparable German wages).  While wage growth slowed in 2020 following the coronavirus pandemic, resulting in a 3.1 percent year-on-year increase, wages rose by 6.1 percent in 2021, according to the Czech Statistical Office.  As of the fourth quarter of 2021, wages grew primarily in the real estate, accommodation, and hospitality sectors.  As of January 2022, the unemployment rate remained the lowest in the EU, at only 2.3 percent.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 49 of 180 http://www.transparency.org/research/cpi/overview
Global Innovation Index 2021 24 of 132 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 5,629 https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 22,070 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment 

2. Bilateral Investment Agreements and Taxation Treaties   

The Czech Republic and the United States have shared a bilateral investment treaty (BIT) for decades.  The government of Czechoslovakia signed the original BIT with the United States in 1992, and the Czech Republic adopted this treaty in 1993, after the breakup of Czechoslovakia.  The Czechs amended the treaty in 2003, along with other new EU entrants that had U.S. BITs, following negotiations with the European Commission about conflicts within the EU acquis communautaire.

Several dozen countries have signed and ratified investment agreements with the Czech Republic, and some are in the process of ratification.  The full list of agreements, including ratification dates, can be found on the Ministry of Finance website in Czech language only at:  http://www.mfcr.cz/cs/legislativa/dohody-o-podpore-a-ochrane-investic/prehled-platnych-dohod-o-podpore-a-ochra.  The list of all BITs between the Czech Republic and other countries is available in English at:  https://investmentpolicy.unctad.org/international-investment-agreements/countries/55/czechia.

A bilateral U.S.-Czech Convention on Avoidance of Double Taxation has been in force since 1993.  In 2007, the U.S. and Czech governments signed a bilateral Totalization Agreement that exempts Americans working in the Czech Republic from paying into both the Czech and U.S. social security systems.  The agreement took effect January 1, 2009.  In 2013, the U.S. and Czech governments signed a Supplementary Totalization Agreement amending the original agreement to reflect new Czech legislation on health insurance.  In 2014, the United States and the Czech Republic signed an Agreement on Improvement of International Tax Compliance and to implement the U.S. Foreign Account Tax Compliance Act (FATCA).

The Czech Republic is a member of the OECD Inclusive Framework on Base Erosion and Profit Shifting and a party to the Inclusive Framework’s October 2021 deal on the two-pillar solution to global tax challenges, including a global minimum corporate tax.

3. Legal Regime  

4. Industrial Policies  

5. Protection of Property Rights  

6. Financial Sector  

Democratic Republic of the Congo

Executive Summary

The Democratic Republic of the Congo (DRC) is the largest country in Sub-Saharan Africa and one of the richest in the world in terms of natural resources. With 80 million hectares (197 million acres) of arable land and 1,100 minerals and precious metals, the DRC has the resources to achieve prosperity for its people. Despite its potential, the DRC often cannot provide adequate food, security, infrastructure, and health care to its estimated 100 million inhabitants, of which 75 percent live on less than two dollars a day.

The ascension of Felix Tshisekedi to the presidency in 2019 and his government’s commitment to attracting international, and particularly U.S. investment, have raised the hopes of the business community for greater openness and transparency. In January 2021, the DRC government (GDRC) became eligible for preferential trade preferences under the Africa Growth and Opportunity Act (AGOA), reflecting progress made on human rights, anti-corruption, and labor. Tshisekedi created a presidential unit to address business climate issues. In late 2020 Tshisekedi ejected former President Joseph Kabila’s party from the ruling coalition and in April 2021 he appointed a new cabinet.

Overall investment is on the rise, fueled by multilateral donor financing and private domestic and international finance. The natural resource sector has historically attracted the most foreign investment and continues to attract investors’ attention as global demand for the DRC’s minerals grows. The primary minerals sector is the country’s main source of revenue, as exports of copper, cobalt, gold, coltan, diamond, tin, and tungsten provide over 95 percent of the DRC’s export revenue. The highly competitive telecommunications industry has also experienced significant investment, as has the energy sector through green sources such as hydroelectric and solar power generation. Several breweries and bottlers, some large construction firms, and limited textiles production are active. Given the vast needs, there are commercial opportunities in aviation, road, rail, border security, water transport, and the ports. The agricultural and forestry sectors present opportunities for sustainable economic diversification in the DRC, and companies are expressing interest in developing carbon credit markets to fund investment.

Overall, businesses in the DRC face numerous challenges, including poor infrastructure, a predatory taxation system, and corruption. The COVID-19 pandemic slowed economic growth and worsened the country’s food security, and the Russia’s attacks on Ukraine have raised global prices on imported foods and gasoline. Armed groups remain active in the eastern part of the country, making for a fragile security situation that negatively affects the business environment. Reform of a non-transparent and often corrupt legal system is underway. While laws protecting investors are in effect, the court system is often very slow to make decisions or follow the law, allowing numerous investment disputes to last for years Concerns over the use of child labor in the artisanal mining of copper and cobalt have served to discourage potential purchasers. USG assistance programs to build capacity for labor inspections and enforcement are helping to address these concerns.

The government’s announced priorities include greater efforts to address corruption, election reform, a review of mining contracts signed under the Kabila regime, and improvements to mining sector revenue collection. The economy experienced increased growth in 2021 based on renewed demand for its minerals.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 169 of 180 http://www.transparency.org/research/cpi/overview
Global Innovation Index N/A N/A https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2021 $25 https://apps.bea.gov/international/factsheet/
World Bank GNI per capita (USD) 2020 $550 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

Denmark

Executive Summary

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

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

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

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

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

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

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

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

Djibouti

Executive Summary

Djibouti, a country with few resources, recognizes the crucial need for foreign direct investment (FDI) to stimulate economic development. The country’s assets include a strategic geographic location, free zones, an open trade regime, and a stable currency. Djibouti has identified a number of priority sectors for investment, including transport and logistics, real estate, energy, agriculture, and tourism. Djibouti’s investment climate has improved in recent years, which has led to interest by U.S. and other foreign firms. There are, however, a number of reforms still needed to promote investment.

In 2020, according to the UN Conference of Trade and Development, FDI stock represented 58.53% of GDP, up from 52.5% in 2018. Real GDP growth has remained between 5% and a little over 8% per year for the last five years. Inflation decreased to 0.1 % in 2018 then peaked at an estimated 3.3% in 2019 and decreased to 2.9% in 2020. In recent years, Djibouti undertook a surge of foreign-backed infrastructure loans to posture themselves as the “Singapore of Africa.” Major projects have included a new gas terminal and pipeline to Ethiopia, a new port, free zones, improved road systems, a railroad connecting Djibouti and Addis Ababa, and a water pipeline from Ethiopia. Djibouti launched the first phase of an ambitious port and free zone project, Djibouti Damerjog Industrial Development (DDID) free-trade zone, scheduled to be built in three phases of five years each. The project includes a multipurpose port, a liquefied natural gas terminal, a livestock terminal, dry docks and a ship repair area, a power plant and a factory that will produce construction materials. DDID, which is expected to attract foreign investors, will offer all the preferential policies guaranteed by the free zone authority, such as tax exemption, minimized restrictions on foreign labor and competitive water and electricity rates. In April 2018, the Government of Djibouti enacted tax, labor, and financial reforms to improve its investment climate.

Various business climate reforms were introduced in 2020 with the objectives of improving competitiveness both regionally and internationally. These reforms included starting online registration for companies and the creation of the Djibouti Port Community System platform which is a portal that provides a comprehensive set of online services to the business community.

Economic development and foreign investment are hindered by high electricity costs, high unemployment, an unskilled workforce, a large informal sector, regional instability, opaque business practices, compliance risks, corruption, and a weak financial sector. The World Bank estimated the government’s public debt-to-GDP ratio was 66.7% in 2019 with a projection of 69.9% in 2020 which will gradually decrease over the years. The majority of the debt is owed to Chinese entities.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perception Index 2021 128 of 180 https://www.transparency.org/en/cpi/2021 
Global Innovation N/A N/A https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) N/A N/A https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 $3,310 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD

 

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

Dominica

Executive Summary

The Commonwealth of Dominica (Dominica) is a member of the Organization of Eastern Caribbean States (OECS) and the Eastern Caribbean Currency Union (ECCU).  The Government of Dominica strongly encourages foreign direct investment, particularly in industries that create jobs, earn foreign currency, and have a positive impact on its citizens.  Dominica remains vulnerable to external shocks such as climate change impacts, natural hazards, and global economic downturns.  According to Eastern Caribbean Central Bank (ECCB) figures, the economy of Dominica had an estimated GDP of $409.9 million USD (1,107.78 billion Eastern Caribbean dollars) in 2021, which signified a slight recovery from a 15.4 percent contraction in 2020 due to the ongoing COVID-19 pandemic and the resulting stagnation of the tourism sector.  The IMF forecasts real GDP growth of 7.9 percent in 2022 and expects GDP to reach pre-pandemic levels by 2023.

The economy also continues to recover from the devastation caused by Hurricane Maria in 2017.  Losses from Hurricane Maria were estimated at $1.37 billion or 226 percent of GDP.  Prior to the onset of the COVID-19 pandemic, the government was primarily focused on reconstruction efforts, with support from the international community.  During the COVID-19 pandemic, the Government of Dominica has received financial support from the International Monetary Fund (IMF) and the World Bank to provide fiscal assistance and macro-economic stability and support in health-related expenditures, loss of household income, food security, and the agricultural sector.

Through its economic policies, the government is seeking to stimulate sustainable and climate-resilient economic growth by implementing a revised macroeconomic framework that includes strengthening the nation’s fiscal framework.  The government states it is committed to creating a vibrant business climate to attract more foreign investment.

Dominica remains a small emerging market in the Eastern Caribbean, with investment opportunities mainly in the service sector, particularly in eco-tourism, information and communication technologies, and education.  Other opportunities exist in alternative energy, including geothermal energy, and capital works due to reconstruction and new tourism projects.

The government provides some investment incentives for businesses that are considering establishing operations in Dominica, encouraging both domestic and foreign private investment.  Foreign investors can repatriate all profits and dividends and can import capital. Dominica’s legal system is based on British common law.  It does not have a bilateral investment treaty with the United States, though it does have bilateral investment treaties with the UK and Germany.

In 2018, the Government of Dominica signed an Intergovernmental Agreement to implement the U.S. Foreign Account Tax Compliance Act (FATCA), making it mandatory for banks in Dominica to report the banking information of U.S. citizens.

Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 45 of 180 http://www.transparency.org/research/cpi/overview 
Global Innovation Index N/A N/A https://www.globalinnovationindex.org/analysis-indicator 
U.S. FDI in partner country ($M USD, historical stock positions) N/A N/A https://apps.bea.gov/international/factsheet/ 
World Bank GNI per capita 2020 7,270 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD 

1. Openness To, and Restrictions Upon, Foreign Investment

2. Bilateral Investment Agreements and Taxation Treaties

Dominica has not signed a bilateral investment treaty with the United States.  It benefits from the Caribbean Basin Economic Recovery Act (CBERA), which was implemented in January 1984. CBERA is intended to facilitate the development of stable Caribbean Basin economies by providing beneficiary countries with duty-free access to the U.S. market for most goods. Dominica has bilateral investment treaties with the UK and Germany.  Dominica has bilateral tax treaties with the United States and the UK.

Dominica is a member of the OECD Inclusive Framework on Base Erosion and Profit Sharing and is party to the Inclusive Framework’s October 2021 deal on the two-pillar solution to global tax challenges, including a global minimum corporate tax.

Dominica is also party to the following agreements:

Caribbean Community (CARICOM)

The Treaty of Chaguaramas established CARICOM in 1973 to promote economic integration among its 15 member states.  Investors operating in Dominica have preferential access to the entire CARICOM market.  The Revised Treaty of Chaguaramas established the CSME, which permits the free movement of goods, capital, and labor within CARICOM member states.

Organization of Eastern Caribbean States

The Revised Treaty of Basseterre established the OECS.  The OECS consists of seven full members: Antigua and Barbuda, Dominica, Grenada, Montserrat, Saint Kitts and Nevis, Saint Lucia, and Saint Vincent and the Grenadines, and four associate members: Anguilla, Martinique, Guadeloupe, and the British Virgin Islands.  The OECS aims to promote harmonization among member states concerning foreign policy, defense and security, and economic affairs.  The six independent countries of the OECS ratified the Revised Treaty of Basseterre, establishing the OECS Economic Union in 2011.  The Economic Union established a single financial and economic space within which all factors of production, including goods, services, and people, move without hindrance.

CARIFORUM- EU Economic Partnership Agreement

The European Community and the Caribbean Forum (CARIFORUM) states signed an Economic Partnership Agreement (EPA) in 2008.  CARIFORUM consists of the independent Anglophone CARCOM member states, the Dominican Republic and Suriname. The overarching objectives of the EPA are to alleviate poverty in CARIFORUM states, to promote regional integration and economic cooperation, and to foster the gradual integration of the CARIFORUM states into the world economy by improving their trade capacity and creating an investment-conducive environment.  The EPA promotes trade-related developments in areas such as competition, intellectual property, public procurement, the environment, and protection of personal data.

CARIFORUM-UK Economic Partnership Agreement

The UK and CARIFORUM signed an EPA in 2019, committing to trade continuity after Britain’s departure from the European Union.  The CARIFORUM-UK EPA eliminates tariffs on all goods imported from CARIFORUM states into the UK, while those Caribbean states will continue to gradually cut import tariffs on most of the region’s imports from the UK.

Caribbean Basin Initiative

The objective of the Caribbean Basin Initiative is to promote economic development through private sector initiatives in Central America and the Caribbean by expanding foreign and domestic investment in non-traditional sectors, diversifying economies, and expanding exports.  It permits duty-free entry of products manufactured or assembled in Dominica into the United States.

Caribbean/Canada Trade Agreement

The Caribbean/Canada Trade Agreement (CARIBCAN) is an economic and trade development assistance program for Commonwealth Caribbean countries.  Through CARIBCAN, Canada provides duty-free access to its national market for the majority of its products originating in Commonwealth Caribbean countries.

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

Dominica

Executive Summary

The Commonwealth of Dominica (Dominica) is a member of the Organization of Eastern Caribbean States (OECS) and the Eastern Caribbean Currency Union (ECCU).  The Government of Dominica strongly encourages foreign direct investment, particularly in industries that create jobs, earn foreign currency, and have a positive impact on its citizens.  Dominica remains vulnerable to external shocks such as climate change impacts, natural hazards, and global economic downturns.  According to Eastern Caribbean Central Bank (ECCB) figures, the economy of Dominica had an estimated GDP of $409.9 million USD (1,107.78 billion Eastern Caribbean dollars) in 2021, which signified a slight recovery from a 15.4 percent contraction in 2020 due to the ongoing COVID-19 pandemic and the resulting stagnation of the tourism sector.  The IMF forecasts real GDP growth of 7.9 percent in 2022 and expects GDP to reach pre-pandemic levels by 2023.

The economy also continues to recover from the devastation caused by Hurricane Maria in 2017.  Losses from Hurricane Maria were estimated at $1.37 billion or 226 percent of GDP.  Prior to the onset of the COVID-19 pandemic, the government was primarily focused on reconstruction efforts, with support from the international community.  During the COVID-19 pandemic, the Government of Dominica has received financial support from the International Monetary Fund (IMF) and the World Bank to provide fiscal assistance and macro-economic stability and support in health-related expenditures, loss of household income, food security, and the agricultural sector.

Through its economic policies, the government is seeking to stimulate sustainable and climate-resilient economic growth by implementing a revised macroeconomic framework that includes strengthening the nation’s fiscal framework.  The government states it is committed to creating a vibrant business climate to attract more foreign investment.

Dominica remains a small emerging market in the Eastern Caribbean, with investment opportunities mainly in the service sector, particularly in eco-tourism, information and communication technologies, and education.  Other opportunities exist in alternative energy, including geothermal energy, and capital works due to reconstruction and new tourism projects.

The government provides some investment incentives for businesses that are considering establishing operations in Dominica, encouraging both domestic and foreign private investment.  Foreign investors can repatriate all profits and dividends and can import capital. Dominica’s legal system is based on British common law.  It does not have a bilateral investment treaty with the United States, though it does have bilateral investment treaties with the UK and Germany.

In 2018, the Government of Dominica signed an Intergovernmental Agreement to implement the U.S. Foreign Account Tax Compliance Act (FATCA), making it mandatory for banks in Dominica to report the banking information of U.S. citizens.

Table 1
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 45 of 180 http://www.transparency.org/research/cpi/overview 
Global Innovation Index N/A N/A https://www.globalinnovationindex.org/analysis-indicator 
U.S. FDI in partner country ($M USD, historical stock positions) N/A N/A https://apps.bea.gov/international/factsheet/  
World Bank GNI per capita 2020 7,270 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD   

1. Openness To, and Restrictions Upon, Foreign Investment

2. Bilateral Investment Agreements and Taxation Treaties

Dominica has not signed a bilateral investment treaty with the United States.  It benefits from the Caribbean Basin Economic Recovery Act (CBERA), which was implemented in January 1984. CBERA is intended to facilitate the development of stable Caribbean Basin economies by providing beneficiary countries with duty-free access to the U.S. market for most goods. Dominica has bilateral investment treaties with the UK and Germany.  Dominica has bilateral tax treaties with the United States and the UK.

Dominica is a member of the OECD Inclusive Framework on Base Erosion and Profit Sharing and is party to the Inclusive Framework’s October 2021 deal on the two-pillar solution to global tax challenges, including a global minimum corporate tax.

Dominica is also party to the following agreements:

Caribbean Community (CARICOM)

The Treaty of Chaguaramas established CARICOM in 1973 to promote economic integration among its 15 member states.  Investors operating in Dominica have preferential access to the entire CARICOM market.  The Revised Treaty of Chaguaramas established the CSME, which permits the free movement of goods, capital, and labor within CARICOM member states.

Organization of Eastern Caribbean States

The Revised Treaty of Basseterre established the OECS.  The OECS consists of seven full members: Antigua and Barbuda, Dominica, Grenada, Montserrat, Saint Kitts and Nevis, Saint Lucia, and Saint Vincent and the Grenadines, and four associate members: Anguilla, Martinique, Guadeloupe, and the British Virgin Islands.  The OECS aims to promote harmonization among member states concerning foreign policy, defense and security, and economic affairs.  The six independent countries of the OECS ratified the Revised Treaty of Basseterre, establishing the OECS Economic Union in 2011.  The Economic Union established a single financial and economic space within which all factors of production, including goods, services, and people, move without hindrance.

CARIFORUM- EU Economic Partnership Agreement

The European Community and the Caribbean Forum (CARIFORUM) states signed an Economic Partnership Agreement (EPA) in 2008.  CARIFORUM consists of the independent Anglophone CARCOM member states, the Dominican Republic and Suriname. The overarching objectives of the EPA are to alleviate poverty in CARIFORUM states, to promote regional integration and economic cooperation, and to foster the gradual integration of the CARIFORUM states into the world economy by improving their trade capacity and creating an investment-conducive environment.  The EPA promotes trade-related developments in areas such as competition, intellectual property, public procurement, the environment, and protection of personal data.

CARIFORUM-UK Economic Partnership Agreement

The UK and CARIFORUM signed an EPA in 2019, committing to trade continuity after Britain’s departure from the European Union.  The CARIFORUM-UK EPA eliminates tariffs on all goods imported from CARIFORUM states into the UK, while those Caribbean states will continue to gradually cut import tariffs on most of the region’s imports from the UK.

Caribbean Basin Initiative

The objective of the Caribbean Basin Initiative is to promote economic development through private sector initiatives in Central America and the Caribbean by expanding foreign and domestic investment in non-traditional sectors, diversifying economies, and expanding exports.  It permits duty-free entry of products manufactured or assembled in Dominica into the United States.

Caribbean/Canada Trade Agreement

The Caribbean/Canada Trade Agreement (CARIBCAN) is an economic and trade development assistance program for Commonwealth Caribbean countries.  Through CARIBCAN, Canada provides duty-free access to its national market for the majority of its products originating in Commonwealth Caribbean countries.

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

Dominican Republic

Executive Summary

Foreign direct investment (FDI) plays an important role for the Dominican economy, and the Dominican Republic is one of the main recipients of FDI in the Caribbean and Central America. The government actively courts FDI with generous tax exemptions and other incentives to attract businesses to the country. Historically, the tourism, real estate, telecommunications, free trade zones, mining, and financing sectors are the largest FDI recipients.

Besides financial incentives, the country’s membership in the Central America Free Trade Agreement-Dominican Republic (CAFTA-DR) is one of the greatest advantages for foreign investors. Observers credit the agreement with increasing competition, strengthening rule of law, and expanding access to quality products in the Dominican Republic. The United States remains the single largest investor in the Dominican Republic. CAFTA-DR includes protections for member state foreign investors, including mechanisms for dispute resolution.

Foreign investors report numerous systemic problems in the Dominican Republic and cite a lack of clear, standardized rules by which to compete and a lack of enforcement of existing rules. Complaints include perceptions of widespread corruption at both national and local levels of government; delays in government payments; weak intellectual property rights enforcement; bureaucratic hurdles; slow and sometimes locally biased judicial and administrative processes, and non-standard procedures in customs valuation and classification of imports. Weak land tenure laws and interference with private property rights continue to be a problem. The public perceives administrative and judicial decision-making to be inconsistent, opaque, and overly time-consuming. A lack of transparency and poor implementation of existing laws are widely discussed as key investor grievances.

U.S. businesses operating in the Dominican Republic often need to take extensive measures to ensure compliance with the Foreign Corrupt Practices Act. Many U.S. firms and investors have expressed concerns that corruption in the government, including in the judiciary, continues to constrain successful investment in the Dominican Republic.

The current government, led by President Luis Abinader, made a concerted effort in its first full year of government to address issues of corruption and transparency that are a core issue for social, economic, and political prosperity, including prosecutorial independence, long-awaited electricity sector reform, and the empowerment of the supreme audit institution, the Chamber of Accounts. More work has repeatedly been promised, but passage remains uncertain as each measure is still subject to administrative or legislative processes, including approval of new public procurement legislation, passage of draft civil asset forfeiture legislation, the law for reform of the management of government assets, and a modern foreign investment law.

The Dominican Republic, an upper middle-income country, has been the fastest growing economy in Latin America over the past 50 years, according to World Bank data. It grew by 12.3 percent in 2021, 4.7 percent when compared with 2019 (pre-pandemic). Tax revenues were 12.7 percent higher than what was stipulated in the Initial Budget for 2021; coupled with budgetary discipline, the government closed its deficit to 2.7 percent of GDP. However, inflation at the end of 2021 was 8.50 percent, double the target of 4.0 percent ±1.0. Despite the government efforts to reduce public spending and increase revenues, absent meaningful fiscal reform, public debt continued to grow in 2021, reaching $47.7 billion at the end of November 2021 (if debt to the Central Bank is added, the public debt reached $62.04 billion), and a total service of debt of $5.9 billion – resulting in decrease in the debt to GDP ratio, but an increase in the total value of government debt. The government continues to apply large subsidies to different sectors of the economy such as the electricity sector and hydrocarbons. In 2021, the government allocated $1.03 billion to the subsidy for Electricity Distribution Companies (EDE’s) and $266.9 million directly to fuel.

According to the 2022 Climate Change Performance Index, the Dominican Republic is one of the most vulnerable countries in the world to the effects of climate change, though it represents only 0.06% of global greenhouse gas emissions. As a small island developing state, the Dominican Republic is particularly vulnerable to the effects of extreme climate events, such as storms, floods, droughts, and rising sea levels. Combined with rapid economic growth (over 5 percent until 2020) and urbanization (more than 50 percent of population in cities, 30 percent in Santo Domingo), climate change could strain key socio-economic sectors such as water, agriculture and food security, human health, biodiversity, forests, marine coastal resources, infrastructure, and energy. The National Constitution calls for the efficient and sustainable use of the nation’s natural resources in accordance with the need to adapt to climate change. The government is acting, both domestically and in coordination with the international community, to mitigate the effects of climate change.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 128 of 180 http://www.transparency.org/research/cpi/overview
Global Innovation Index 2021 93 of 131 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 $2,806 https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 $7,260 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

Ecuador

Executive Summary

The government of Ecuador under President Guillermo Lasso has adopted an ambitious economic reform agenda to drive investment. Private sector leaders in Ecuador emphasize the “Lasso Effect” in investment given the surge of optimism following the April 2021 election of the region’s most pro-business president in decades. “More Ecuador in the world and more of the world in Ecuador” – President Lasso’s key message for his presidency – includes the administration’s drive to attract $30 billion in investment over his four-year administration. Indeed, investment is growing – with both international and domestic companies searching for opportunities in this traditionally protectionist market that once garnered little attention compared to neighbors Colombia and Peru. Public-private partnerships (PPPs) are the cornerstone of the administration’s investment drive, including the establishment of a PPP Secretariat and the consolidation of PPP-related tax rules and regulations.

The Ecuadorian government is taking positive steps to improving fiscal stability. In September 2020, the International Monetary Fund approved a $6.5 billion, 27-month Extended Fund Facility for Ecuador and has already disbursed $4.8 billion to aid in economic stabilization and reform. The IMF program is in line with the government’s efforts to correct fiscal imbalances and to improve transparency and efficiency in public finance. The Ecuadorian Central Bank reported solid GDP growth of 4.2 percent in 2021 and projects 2.8 percent GDP growth in 2022. The Ecuadorian government remains committed to the sustainability of public finances and to continue a fiscal consolidation path. The fiscal deficit narrowed to 3.5 percent of GDP in 2021 (from over 7 percent of GDP in 2020) and is expected to narrow further to a little over 2 percent of GDP in 2022 due to improved tax collection, prudent public spending, and high oil prices.

Still, the Lasso administration faces major challenges to its investment agenda given the country’s long-term reputation as a high-risk country for investment. A challenging relationship with the National Assembly complicates the passage of needed economic reform legislation. While the administration’s November 2021 tax reform passed into law, the National Assembly soundly defeated President Lasso’s proposed investment promotion bill March 24. Serious budget deficits and the COVID-induced economic recession force the government to employ cost cutting measures and limit public investment. Ecuador has traditionally struggled to structure tenders and PPPs that are bankable, transparent, and competitive. This has discouraged private investment and attracted companies that lack a commitment to quality construction, accountability and transparency, environmental sustainability, and social inclusion. Corruption remains widespread, and Ecuador is ranked in the bottom half of countries surveyed for Transparency International’s Perceptions of Corruption Index. In addition, economic, commercial, and investment policies are subject to frequent changes and can increase the risks and costs of doing business in Ecuador.

Ecuador is a dollarized economy that has few limits on foreign investment or repatriation of profits, with the exception of a currency exit tax. It has a population that generally views the United States positively, and the Lasso Administration has expanded bilateral ties and significantly increased cooperation with the United States on a broad range of economic, security, political, and cultural issues.

Sectors of Interest to Foreign Investors

Petroleum and Gas: Per the 2008 Constitution, all subsurface resources belong to the state, and the petroleum sector is dominated by one state-owned enterprise (SOE) that cannot be privatized. Presidential Decree 95 published July 2021 opened private sector participation in oil exploration and production, with a goal to double oil production to 1 million barrels per day by 2028. The government can offer concessions of its refineries, sell off SOE gasoline stations, issue production-sharing contracts for oil exploration and exploitation, and prepare the SOE to be listed publicly on the stock market. The government maintained its consumer fuel subsidies since May 2020. The Ecuadorian government plans three oil field tenders in 2022 including concessions for Intracampos II and III and Block 60–Sacha. Given its declining and underdeveloped gas fields, the government plans to launch a tender for its Amistad offshore gas field. Additionally, the government announced potential tenders for a South-East concession, a private operator for the Esmeraldas refinery, and another to build and operate a new Euro 5 quality refinery.

Mining: The Ecuadorian government plans to accelerate mining development to increase revenues and diversify its economy. Presidential Decree 151, published August 2021, seeks to promote private sector participation in mining exploration and production. The decree allows for private sector investment, joint ventures with the state-owned mining enterprise (SOE); seeks to combat illegal mining; and establishes an Advisory Board to guide the government on best practices for responsible mining. The government announced plans to relaunch its mining cadastre in 2022, which was closed in 2018 due to irregularities in granting concessions. Ecuador has two operating mines — a gold mine operated by a Canadian company and a copper mine operated by a PRC-affiliated company. In 2021 the government issued two new mining concessions and announced plans to issue concessions for 12 additional strategic mining projects.

Electricity: Hydroelectric electricity accounts for 80 percent of Ecuador’s electricity generation. The PRC-built 1500 MW Coca Codo Sinclair (CCS) hydro power plant designed to provide 30 percent of Ecuador’s electricity has never generated its total installed power capacity and has been undergoing repairs since it began operating in 2016. CCS is also at risk from regressive erosion from the adjacent Coca River. The government contracted U.S. Army Corp of Engineers engineering services December 2021 to develop a solution to mitigate the river erosion. The government plans to develop wind, solar, hydro, biomass, biogas, geothermal, biofuel, combined cycle, and gas-fired electrical generation plants to diversify the energy matrix. It awarded a 200 MW solar tender and a 110 MW wind tender to private operators in 2020. It launched tenders for a 500 MW renewable energy block, a 400 MW combined cycle power plant, and a Northeast Interconnection transmission line in December 2021. The government imported its first LNG cargo December 2021 followed by a second shipment in February 2022.

Telecommunications: The Lasso administration is prioritizing rural connectivity as its major telecommunications policy. In mid-2021, the Ministry of Telecommunications (MINTEL) received from the International Telecommunication Union (ITU) the valuation report for the 2.5 GHz (gigahertz) and 700 MHz (megahertz) bands. The cost set is reserved. Likewise, MINTEL asked the ITU for the valuation of the 3.5 GHz, 850, 900 AWS and 1900 bands, which in turn will allow new players in the market and the future deployment of the fifth generation of technologies (5G). Three 5G technology connectivity tests have taken place in Ecuador, though there is no target date for the beginning of 5G commercial operations. Ecuador is due to renegotiate the concession contracts with the mobile network operators, which expire in 2023. New terms and conditions of the concession rights and use of frequencies are currently in the works including technical, legal, and regulatory requirements. The current negotiations do not include the frequency bands for the 5G network and are instead focused on the frequencies currently assigned to operators.

ECommerce: In 2020, E-Commerce sales reached $2.3 billion record sales, an overnight digital transformation due to the pandemic. In 2021, according to Ecuador´s Electronic Commerce Chamber, E-Commerce sales grew 20 to 40 percent ($460 to $920 million, approximately). While many Ecuadorians are interested in purchasing online, they are limited in their ability to receive international shipments due to logistics and customs problems upon arrival in Ecuador. The Ministry of Production launched the National E-Commerce Strategy in 2021, establishing a framework for facilitating the digital transformation in the country. The strategy focuses on strengthening the current legal framework, capacity building for small and medium enterprises (SMEs), and improving logistics and payment gateway capabilities. Since the issuance of the National E-Commerce Strategy, no new regulations have entered into force to facilitate its application and the objectives set forth therein. The government is also promoting the development of the Andean Digital Agenda together with the other Andean Community countries, whose update will be promulgated in the first half of this year.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank