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

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

• Arms and ammunition and other defense equipment and machinery.
• Forest plantation and mechanized extraction within the bounds of reserved forests.
• Production of nuclear energy.
• Security printing (items such as currency, visa foils, and tax stamps).

The Bangladesh Investment Development Authority (BIDA) is the principal authority tasked with supervising and promoting private investment. The BIDA Act of 2016 approved the merger of the now-disbanded Board of Investment and the Privatization Committee. BIDA is directly supervised by the Prime Minister’s Office and the Executive Chairman of BIDA holds a rank equivalent to Senior Secretary, the highest rank within the civil service. BIDA performs the following functions:

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

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

In addition to BIDA, there are three other Investment Promotion Agencies (IPAs) responsible for promoting investments in their respective jurisdictions.

• Bangladesh Export Processing Zone Authority (BEPZA) promotes investments in Export Processing Zones (EPZs). The first EPZ was established in the 1980s and there are currently eight EPZs in the country. Website:
• Bangladesh Economic Zones Authority (BEZA) plans to establish approximately 100 Economic Zones (EZs) throughout the country over the next several years. Site selections for 97 EZs have been completed as of February 2022, of which 10 private EZs are already licensed and operational while development of several other public and private sector EZs are underway. While EPZs accommodate exporting companies only, EZs are open for both export- and domestic-oriented companies. Website:
• Bangladesh Hi-Tech Park Authority (BHTPA) is responsible for attracting and facilitating investments in the high-tech parks Bangladesh is establishing across the country. Website:

Foreign and domestic private entities can establish and own, operate, and dispose of interests in most types of business enterprises. Bangladesh allows private investment in power generation and natural gas exploration, but efforts to allow full foreign participation in petroleum marketing and gas distribution have stalled. Regulations in the area of telecommunication infrastructure currently include provisions for 60 percent foreign ownership (70 percent for tower sharing). In addition to the four sectors reserved for government investment, there are 17 controlled sectors that require prior clearance/ permission from the respective line ministries/authorities. These are:

• Fishing in the deep sea.
• Bank/financial institutions in the private sector.
• Insurance companies in the private sector.
• Generation, supply, and distribution of power in the private sector.
• Exploration, extraction, and supply of natural gas/oil.
• Exploration, extraction, and supply of coal.
• Exploration, extraction, and supply of other mineral resources.
• Large-scale infrastructure projects (e.g., elevated expressway, monorail, economic zone, inland container depot/container freight station).
• Crude oil refinery (recycling/refining of lube oil used as fuel).
• Medium and large industries using natural gas/condensate and other minerals as raw material.
• Telecommunications service (mobile/cellular and land phone).
• Satellite channels.
• Cargo/passenger aviation.
• Sea-bound ship transport.
• Seaports/deep seaports.
• VOIP/IP telephone.
• Industries using heavy minerals accumulated from sea beaches.

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

BIDA is responsible for screening, reviewing, and approving investments in Bangladesh, except for investments in EPZs, EZs, and High-Tech Parks, which are supervised by BEPZA, BEZA, and BHTPA respectively. Both foreign and domestic companies are required to obtain approval from relevant ministries and agencies with regulatory oversight. In certain sectors (e.g., healthcare), foreign companies may be required to obtain a No Objection Certificate (NOC) from the relevant ministry or agency stating the specific investment will not hinder local manufacturers and is in line with the guidelines of the ministry concerned. Since Bangladesh actively seeks foreign investments, instances where one of the Investment Promotion Agencies (IPAs) declines investment proposals are rare.

In 2013 Bangladesh completed an investment policy review (IPR) with the United Nations Conference on Trade and Development (UNCTAD):  https://unctad.org/en/pages/PublicationWebflyer.aspx?publicationid=756  

A Trade Policy Review was done by the World Trade Organization in April 2019 and can be found at:  https://www.wto.org/english/tratop_e/tpr_e/tp485_e.htm   

In February 2018, the Bangladesh Parliament passed the “One Stop Service Bill 2018,” which aims to streamline business and investment registration processes. The four IPAs – BIDA, BEPZA, BEZA, and BHTPA – are mandated to provide one-stop services (OSS) to local and foreign investors under their respective jurisdictions. Expected streamlined services include company registration, taxpayer’s identification number (TIN) and value added tax (VAT) registration, work permit issuance, power and utilities connections, capital and profit repatriation, and environment clearance. In 2019 Bangladesh made reforms in three key areas: starting a business, getting electricity, and getting credit. BIDA offers 56 services under its OSS as of February 2022and has a plan to expand to 154 services covering 35 agencies. The GOB is also planning to integrate the services of all four investment promotion agencies under a single online platform. Progress on realizing a comprehensive OSS for businesses has been slowed by bureaucratic delays and a lack of interagency coordination.

Companies can register their businesses at the Office of the Registrar of Joint Stock Companies and Firms (RJSC): www.roc.gov.bd . However, the online business registration process, while improving, can at times be unclear and inconsistent. Additionally, BIDA facilitates company registration services as part of its OSS, which is available at:  https://bidaquickserv.org . BIDA also facilitates other services including office set-up approval, work permits for foreign employees, environmental clearance, outward remittance approval, and tax registration with National Board of Revenue. Other agencies with which a company must typically register are:

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

It takes approximately 20 days to start a business in the country according to the World Bank. The company registration process at the RJSC generally takes one or two days to complete. The process for trade licensing, tax registration, and VAT registration required as of 2021 seven days, one day, and one week respectively.

Outward foreign direct investment is generally restricted through the Foreign Exchange Regulation Act of 1947. As a result, the Bangladesh Bank plays a key role in limiting outbound investment. In September 2015, the government amended the Foreign Exchange Regulation Act of 1947 by adding a “conditional provision” that permits outbound investment for export-related enterprises. Private sector contacts note the few international investments approved by the Bangladesh Bank have been limited to large exporting companies with international experience. However, the government is considering an overseas investment guideline to allow outbound investment opportunities for local exporters and any company operating in the domestic market for 10 years. This will allow local companies and NGOs with outbound investments to enlist in foreign stock markets. However, Bangladesh’s total outbound investment in a single fiscal year would be capped at 5 percent of the central bank’s foreign exchange reserves for that fiscal year under the regulation being considered. Bangladesh Investment Development Authority (BIDA) has been working to formulate a workable policy regarding this since 2016.

Since 1989, the government has gradually moved to decrease regulatory obstruction of private business. Various chambers of commerce have called for privatization and for a greater voice for the private sector in government decisions, but at the same time many chambers support protectionism and subsidies for their own industries. The result is policy and regulations which are often unclear, inconsistent, or little publicized. Registration and regulatory processes are frequently alleged by businesses to be used as rent-seeking opportunities. The major rule-making and regulatory authority exists at the national level under each Ministry with many final decisions being made at the top-most levels, including the Prime Minister’s Office (PMO). The PMO is actively engaged in directing policies, as well as foreign investment in government-controlled projects.

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

The Environment Conservation Act 1995 (ECA ’95) as amended in 2010 and the Biodiversity Act of 2018 are the main acts governing environmental protection in Bangladesh. The ECA ’95 replaced the earlier environment pollution control ordinance of 1992 and provides the legal basis for Environment Conservation Rules, 1997 (ECR’97). The objective of the Biodiversity Act is equitable sharing of benefits arising out of the use of biological resources. The main objectives of ECA’95 are conservation of the natural environment, improvement of environmental standards, and control and mitigation of environmental pollution. According to the act, all industrial projects require before being undertaken an Environmental Clearance Certificate from the Director General. In issuing the certificate, the projects are classified into the following four categories – Green, Orange-A, Orange-B, and Red.

Environmental Clearance for the Green category is through a comparatively simple procedure. In the case of Orange-A, Orange-B and Red Categories, site clearance is mandatory at the beginning, then Environmental Impact Assessment approval and finally Environmental Clearance is issued. The Environment Clearance is to be renewed after three years for the Green category and one year for Orange-A, Orange-B and Red categories. Red Category projects require an Environmental Impact Statement prior to approval.

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

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

Bangladesh passed the Financial Reporting Act of 2015 which created the Financial Reporting Council in 2016 aimed at establishing transparency and accountability in the accounting and auditing system. The country follows Bangladesh Accounting Standards and Bangladesh Financial Reporting Standards, which are largely derived from International Accounting Standards and International Financial Reporting Standards. However, the quality of reporting varies widely. Internationally known firms have begun establishing local offices in Bangladesh and their presence is positively influencing the accounting norms in the country. Some firms can provide financial reports audited to international standards while others maintain unreliable (or multiple) sets of accounting records. Regulatory agencies do not conduct impact assessments for proposed regulations; consequently, regulations are often not reviewed based on data-driven assessments. Not all national budget documents are prepared according to internationally accepted standards.

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

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

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

General Contact for WTO-TBT National Enquiry Point:
Email: bsti_std@bangla.net;  bsti_ad@bangla.net 
Website:  http://www.bsti.gov.bd/  

Focal Point for TBT:
Mr. Md. Golam Baki,Deputy Director (Certification Marks), BSTI
Email: bakibsti@gmail.comTel: +88-02-48116665Cell: +8801799828826, +8801712240702

Focal Point for other WTO related matters, except sanitary and phytosanitary systems:
Mr. Md. Hafizur Rahman,Director General, WTO Cell, Ministry of Commerce
Email: dg.wto@mincom.gov.bdTel: +880-2-9545383Cell: +88 0171 1861056

Mr. Mohammad Ileas Mia,Director-1, WTO Cell, Ministry of Commerce
Email: director1.wto@mincom.gov.bdTel: +880-2-9540580Cell: +88 01786698321

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

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

Some notable commercial laws include:

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

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

Major laws affecting foreign investment include: the Foreign Private Investment (Promotion and Protection) Act of 1980, the Bangladesh Export Processing Zones Authority Act of 1980, the Companies Act of 1994, the Telecommunications Act of 2001, and the Bangladesh Economic Zones Act of 2010.

Bangladesh industrial policy offers incentives for “green” (environmental) high-tech or “transformative” industries. It allows foreigners who invest $1 million or transfer $2 million to a recognized financial institution to apply for Bangladeshi citizenship. The GOB will provide financial and policy support for high-priority industries (those creating large-scale employment and earning substantial export revenue) and creative industries – architecture, arts and antiques, fashion design, film and video, interactive laser software, software, and computer and media programming. Specific importance is given to agriculture and food processing, RMG, ICT and software, pharmaceuticals, leather and leather products, and jute and jute goods.

In addition, Petrobangla, the state-owned oil and gas company, has modified its production sharing agreement contract for offshore gas exploration to include an option to export gas. In 2019, Parliament approved the Bangladesh Flag Vessels (Protection) Act 2019 with a provision to ensure Bangladeshi flagged vessels carry at least 50 percent of foreign cargo, up from 40 percent. In 2020, the Ministry of Commerce amended the digital commerce policy to allow fully foreign-owned e-commerce companies in Bangladesh and remove a previous joint venture requirement.

The One Stop Service (OSS) Act of 2018 mandated the four IPAs to provide OSS to local and foreign investors in their respective jurisdictions. The move aims to facilitate business services on behalf of multiple government agencies to improve ease of doing business. In 2020, BIDA issued time-bound rules to implement the Act of 2018. Although the IPAs have started to offer a few services under the OSS, corruption and excessive bureaucracy have held back the complete and effective roll out of the OSS. BIDA has a “one-stop” website that provides information on relevant laws, rules, procedures, and reporting requirements for investors at:  http://www.bida.gov.bd/ .

Aside from information on relevant business laws and licenses, the website includes information on Bangladesh’s investment climate, opportunities for businesses, potential sectors, and how to do business in Bangladesh. The website also has an eService Portal for Investors which provides services such as visa recommendations for foreign investors, approval/extension of work permits for expatriates, approval of foreign borrowing, and approval/renewal of branch/liaison and representative offices.

Bangladesh formed an independent agency in 2011 called the “Bangladesh Competition Commission (BCC)” under the Ministry of Commerce. Parliament then passed the Competition Act in 2012. However, the BCC has not received sufficient resources to operate effectively.

In 2018, the Bangladesh Telecommunication Regulatory Commission (BTRC) finalized Significant Market Power (SMP) regulations to promote competition in the industry. In 2019, BTRC declared the country’s largest telecom operator, Grameenphone (GP), the first SMP based on its revenue share of more than 50 percent and customer shares of about 47 percent. Since the declaration, the BTRC has attempted to impose restrictions on GP’s operations, which GP has challenged in the judicial system.

Since the Foreign Investment Act of 1980 banned nationalization or expropriation without adequate compensation, Bangladesh has not nationalized or expropriated property from foreign investors. In the years immediately following independence in 1971, widespread nationalization resulted in government ownership of more than 90 percent of fixed assets in the modern manufacturing sector, including the textile, jute and sugar industries and all banking and insurance interests, except those in foreign (but non-Pakistani) hands. However, the government has taken steps to privatize many of these industries since the late 1970s and the private sector has developed into a main driver of the country’s sustained economic growth.

Many laws affecting investment in Bangladesh are outdated. Bankruptcy laws, which apply mainly to individual insolvency, are sometimes disregarded in business cases because of the numerous falsified assets and uncollectible cross-indebtedness supporting insolvent banks and companies. A Bankruptcy Act was passed by Parliament in 1997 but has been ineffective in addressing these issues. Some bankruptcy cases fall under the Money Loan Court Act-2003 which has more stringent and timely procedures.

Current regulations permit a tax holiday for designated “thrust” (strategic) sectors and infrastructure projects established between July 1, 2019 and June 30, 2024. The thrust sectors enjoy tax exemptions graduated from 90 percent to 20 percent over a period of five to ten years depending on the zone where the business is established. Industries set up in Export Processing Zones (EPZs) and Special Economic Zones (SEZs) are also eligible for tax holidays. Details of fiscal and non-fiscal incentives are available on the following websites:

BIDA: http://bida.gov.bd/?page_id=146 

BEPZA: https://www.bepza.gov.bd/content/incentives-facilities 

BEZA: https://www.beza.gov.bd/investing-in-zones/incentive-package/ 

Strategic sectors eligible for tax exemptions include: certain pharmaceuticals, automobile manufacturing, contraceptives, rubber latex, chemicals or dyes, certain electronics, bicycles, fertilizer, biotechnology, commercial boilers, certain brickmaking technologies, compressors, computer hardware, home appliances, insecticides, pesticides, petrochemicals, fruit and vegetable processing, textile machinery, tissue grafting, tire manufacturing industries, agricultural machineries, furniture, leather and leather goods, cell phones, plastic recycling, and toy manufacturing.

Eligible physical infrastructure projects are allowed tax exemptions graduated from 90 percent to 20 percent over a period of 10 years. Physical infrastructure projects eligible for exemptions include deep seaports, elevated expressways, road overpasses, toll roads and bridges, EPZs, gas pipelines, information technology parks, industrial waste and water treatment facilities, liquefied natural gas (LNG) terminals, electricity transmission, rapid transit projects, renewable energy projects, and ports.

Independent non-coal fired power plants (IPPs) commencing production after January 1, 2015 are granted a 100 percent tax exemption for five years, a 50 percent exemption for years six to eight, and a 25 percent exemption for years nine to 10. For new coal-fired IPPs commencing production before June 30, 2023 (provided operators contracted with the government before June 30, 2020), the tax exemption rate is 100 percent for the first 15 years of operations. For power projects, import duties are waived for imports of capital machinery and spare parts.

The valued-added tax (VAT) rate on exports is zero. For companies exporting only, duties are waived on imports of capital machinery and spare parts. For companies primarily exporting (80 percent of production and above), an import duty rate of 1 percent is charged for imports of capital machinery and spare parts identified and listed in notifications to relevant regulators. Import duties are also waived for EPZ industries and other export-oriented industries for imports of raw materials consumed in production.

The GOB provides special incentives to encourage non-resident Bangladeshis to invest in the country. Incentives include the ability to buy newly issued shares and debentures in Bangladeshi companies. Further, non-resident Bangladeshis can maintain foreign currency deposits in Non-resident Foreign Currency Deposit (NFCD) accounts.

In the past several years, U.S. companies have experienced difficulties securing the investment incentives initially offered by Bangladesh. Several companies have reported instances where infrastructure guarantees (ranging from electricity to gas connections) are not fully delivered or tax exemptions are delayed, either temporarily or indefinitely. These challenges are not specific to U.S. or foreign companies and reflect broader challenges in the business environment.

Bangladesh government does not provide any specific incentives for businesses owned by women.

In 2020, the Government of Bangladesh established that all power generation companies will enjoy full tax exemption with the exception of coal-based generation. This incentive will be available to all power generation companies who start operation before December 31, 2022. The government is seeking to increase use of renewable energy and has offered incentives such as tax breaks for net-metered solar rooftop installation.

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

Joint ventures, wholly foreign-owned investments, and wholly Bangladeshi-owned companies are all permitted to operate and enjoy equal treatment in the EPZs.

In 2010, Bangladesh enacted the Special Economic Zone Act allowing for the creation of privately owned SEZs to produce for export and domestic markets. The SEZs provide special fiscal and non-fiscal incentives to domestic and foreign investors in designated underdeveloped areas throughout Bangladesh.

Although land, whether for purchase or lease, is often critical for investment and as security against loans, antiquated real property laws and poor record-keeping systems can complicate land and property transactions. Instruments take effect from the date of execution, not the date of registration, so a bona fide purchaser can often be uncertain of title. Land registration records have been historically prone to competing claims. Land disputes are common, and both U.S. companies and citizens have filed complaints about fraudulent land sales. For example, sellers fraudulently claiming ownership have transferred land to good faith purchasers while the actual owners were living outside of Bangladesh. In other instances, U.S.-Bangladeshi dual citizens have purchased land from legitimate owners only to have third parties make fraudulent claims of title to extort settlement compensation. A 2015 study by leading Bangladeshi think tank Policy Research Institute (PRI) revealed one in seven households in the country faced land disputes. Bangladesh ranks 184 among 190 countries for ease of registering property in the World Bank’s Doing Business 2020 Report.

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

Article 42 of the Bangladesh Constitution guarantees a right to property for all citizens, but property rights are often not protected due to a weak judicial system. The Transfer of Property Act of 1882  and the Registration Act of 1908  are the two main laws regulating transfer of property in Bangladesh but these laws have no specific provisions covering foreign and/or non-resident investors. Currently, foreigners and non-residents can incorporate a company with the Registrar of Joint Stock Companies and Firms. The company would be considered a local entity and would be able to buy land in its name.

Intellectual property rights (IPR) and rights enforcement is not a priority for the Government of Bangladesh and it has not invested heavily in IPR protection. As a result, counterfeit goods are readily available in Bangladesh, and a significant portion of business software is pirated. Several U.S. firms, including fast-moving consumer goods manufacturers, film studios, pharmaceutical products, apparel goods, and software firms, have reported systematic violations of their IPRs. Investors note police are willing to investigate counterfeit goods producers when informed but are unlikely to initiate independent investigations.

The Government of Bangladesh has recently taken steps to develop its IP system. In February 2021, the Cabinet gave its final approval of a draft Bangladesh Patents Bill and in-principal approval of a draft Bangladesh Industry-Designs Bill to replace the Patents and Designs Act 1911. The bills aim to make necessary updates to existing regulations and improve IPR in Bangladesh. However, as of March 2022 the potential impact of the bills remains uncertain because the government had yet to make the drafts public for stakeholder review. The bills require approval by the Parliament before going into effect. A National IP policy was developed in 2018 but has not been fully implemented. Public awareness of IPR is slowly growing through efforts from industry associations like the Intellectual Property Rights Association of Bangladesh, AMCHAM, Bangladesh, and REACT. Bangladesh is a member of the World Intellectual Property Organization (WIPO) and acceded to the Paris Convention on Intellectual Property in 1991.

Bangladesh has slowly made progress toward bringing its legislative framework into compliance with the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). The government enacted a Copyright Law in 2000 (amended in 2005), a Trademarks Act in 2009, and a Geographical Indication of Goods (Registration and Protection) Act in 2013, in addition to the recent action on bills replacing the Patents and Designs Act.

Several government agencies are empowered to act against counterfeiting, including the National Board of Revenue (NBR), Customs, Mobile Courts, the Rapid Action Battalion (RAB), and the Bangladesh Police. However, enforcement agencies do not have appropriate resources nor are given the appropriate attention or priority to execute complaints filed by IP right holders. Accordingly, enforcement actions such as raids and seizures have become costly, time-consuming, and often nonproductive. In a positive development, in December 2019, the National Board of Revenue implemented the Intellectual Property Rights of Receipts of Imports: Rules of Implementation 2018. The rules intend to help stakeholders, though the bond requirement, for taking any enforcement action is a concern for the stakeholders. As per Rule 5 of the Intellectual Property Rights (Imported Goods) Enforcement Rules,2007, Industry is required to execute a specific bond of an amount equal to 110 percent of the value of the goods and furnish security in the form of a Bank Guarantee of an amount equal to 25 percent of the bond value within three days from date of confiscation of the goods. It is an issue as it is challenging to get all internal approval and get the bond executed within three days. Secondly, the bond is on hold until the case is disposed of, and thirdly it isn’t easy to do the valuation of a product.

The Department of National Consumer Rights Protection (DNCRP) is charged with tracking and reporting on counterfeit goods, and the NBR/Customs tracks counterfeit goods seizures at ports of entry. However, reports are not publicly available.

Resources for Intellectual Property Rights Holders:

John Cabeca
Intellectual Property Counselor for South Asia
U.S. Patent and Trademark Office
Foreign Commercial Service
email: john.cabeca@trade.gov
website: https://www.uspto.gov/ip-policy/ip-attache-program
tel: +91-11-2347-2000

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

Capital markets in Bangladesh are still developing, and the financial sector remains highly dependent on bank lending. Current regulatory infrastructure inhibits the development of a tradeable bond market.

Bangladesh is home to the Dhaka Stock Exchange (DSE) and the Chittagong Stock Exchange (CSE), both of which are regulated by the Bangladesh Securities and Exchange Commission (BSEC), a statutory body formed in 1993 and attached to the Ministry of Finance. The DSE market capitalization stood at $64.8 billion at the end of January 2022, rising 16.3 percent year-over-year as stock prices rose amid speculative behavior and increased liquidity due to relaxed monetary policy.

Although the Bangladeshi government has a positive attitude toward foreign portfolio investors, participation in the exchanges remains low due to what is still limited liquidity for shares and the lack of publicly available and reliable company information. The DSE has attracted some foreign portfolio investors to the country’s capital market. However, the volume of foreign investment in Bangladesh remains a small fraction of total market capitalization. As a result, foreign portfolio investment has had limited influence on market trends and Bangladesh’s capital markets have been largely insulated from the volatility of international financial markets. Bangladeshi markets continue to rely primarily on domestic investors.

In 2019, BSEC undertook a number of initiatives to launch derivatives products, allow short selling, and invigorate the bond market. To this end, BSEC introduced three rules: Exchange Traded Derivatives Rules 2019, Short-Sale Rules 2019, and Investment Sukuk Rules 2019. Other recent, notable BSEC initiatives include forming a central clearing and settlement company – the Central Counterparty Bangladesh Limited (CCBL) – and promoting private equity and venture capital firms under the 2015 Alternative Investment Rules. In 2013, BSEC became a full signatory of the International Organization of Securities Commissions (IOSCO) Memorandum of Understanding.

BSEC has taken steps to improve regulatory oversight, including installing a modern surveillance system, the “Instant Market Watch,” providing real time connectivity with exchanges and depository institutions. As a result, the market abuse detection capabilities of BSEC have improved significantly. A mandatory Corporate Governance Code for listed companies was introduced in 2012 but the overall quality of corporate governance remains substandard. Demutualization of both the DSE and CSE was completed in 2013 to separate ownership of the exchanges from trading rights. A majority of the members of the Demutualization Board, including the Chairman, are independent directors. Apart from this, a separate tribunal has been established to resolve capital market-related criminal cases expeditiously. However, both domestic and foreign investor confidence on the stock exchanges’ governance standards remains low.

The Demutualization Act 2013 also directed DSE to pursue a strategic investor who would acquire a 25 percent stake in the bourse. Through a bidding process DSE selected a consortium of the Shenzhen and Shanghai stock exchanges in China as its strategic partner, with the consortium buying the 25 percent share of DSE for taka 9.47 billion ($112.7 million).

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

The Bangladesh Bank (BB) acts as the central bank of Bangladesh. It was established through the enactment of the Bangladesh Bank Order of 1972. General supervision and strategic direction of the BB has been entrusted to a nine-member Board of Directors, which is headed by the BB Governor. A list of the bank’s departments and branches is on its website: https://www.bb.org.bd/aboutus/dept/depts.php .

According to the BB, four types of banks operate in the formal financial system: State Owned Commercial Banks (SOCBs), Specialized Banks, Private Commercial Banks (PCBs), and Foreign Commercial Banks (FCBs). Some 61 “scheduled” banks in Bangladesh operate under the control and supervision of the central bank as per the Bangladesh Bank Order of 1972. The scheduled banks, include six SOCBs, three specialized government banks established for specific objectives such as agricultural or industrial development or expatriates’ welfare, 43 PCBs, and nine FCBs as of February 2021. The scheduled banks are licensed to operate under the Bank Company Act of 1991 (Amended 2013). There are also five non-scheduled banks in Bangladesh, including Nobel Prize recipient Grameen Bank, established for special and definite objectives and operating under legislation enacted to meet those objectives.

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

Unlike banks, FIs are prohibited from:

• Issuing checks, pay-orders, or demand drafts.
• Receiving demand deposits.
• Involvement in foreign exchange financing.

Microfinance institutions (MFIs) remain the dominant players in rural financial markets. The Microcredit Regulatory Authority (MRA), the primary regulator of this sector, oversees 746 licensed microfinance institutions as of October 2021, excluding Grameen Bank which is governed under a separate law. In 2020, the MRA-listed microfinance institutions had 33.3 million members while Grameen Bank had an additional 9.3 million members.

The banking sector has had a mixed record of performance over the past several years. Industry experts have reported a rise in risky assets because of poor governance as well as the economic fallout of the COVID-19 pandemic. Total domestic credit stood at 50.4 percent of gross domestic product at end of November 2021. The state-owned Sonali Bank is the largest bank in the country while Islami Bank Bangladesh and Standard Chartered Bangladesh are the largest local private and foreign banks respectively. The gross non-performing loan (NPL) ratio was 8.1 percent at the end of September 2021, down from 8.9 percent in September 2020. However, the decline in the NPLs was primarily caused by regulatory forbearance rather than actual reduction of stressed loans. At 20.1 percent SCBs had the highest NPL ratio, followed by 11.4 percent of Specialized Banks, 5.5 percent of PCBs, and4.1 percent of FCBs as of September 2021.

In 2017, the BB issued a circular warning citizens and financial institutions about the risks associated with cryptocurrencies. The circular noted that using cryptocurrencies may violate existing money laundering and terrorist financing regulations and cautioned users may incur financial losses. The BB issued similar warnings against cryptocurrencies in 2014.

Foreign investors may open temporary bank accounts called Non-Resident Taka Accounts (NRTA) in the proposed company name without prior approval from the BB to receive incoming capital remittances and encashment certificates. Once the proposed company is registered, it can open a new account to transfer capital from the NRTA account. Branch, representative, or liaison offices of foreign companies can open bank accounts to receive initial suspense payments from headquarters without opening NRTA accounts. In 2019, the BB relaxed regulations on the types of bank branches foreigners could use to open NRTAs, removing a previous requirement limiting use of NRTA’s solely to Authorized Dealers (ADs).

In 2015, the Bangladesh Finance Ministry announced it was exploring establishing a sovereign wealth fund in which to invest a portion of Bangladesh’s foreign currency reserves. In 2017, the Cabinet initially approved a $10 billion “Bangladesh Sovereign Wealth Fund,” (BSWF) to be created with funds from excess foreign exchange reserves but the plan was subsequently scrapped by the Finance Ministry.

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

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

• CSR Bangladesh:
• CSR Centre Bangladesh:

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

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

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

Department of State

• Country Reports on Human Rights Practices;
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities;
• U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises; and;
• Xinjiang Supply Chain Business Advisory 

Department of the Treasury

• OFAC Recent Actions

Department of Labor

• Findings on the Worst Forms of Child Labor Report;
• List of Goods Produced by Child Labor or Forced Labor;
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World and;
• Comply Chain.

Bangladesh is one of the most climate-vulnerable countries in the world. The government established the Bangladesh Climate Change Strategy and Action Plan (BCCSAP) to address the adverse effects of climate change. In this plan, 44 programs under six thematic areas were identified. The Bangladesh Climate Change Trust Fund (BCCTF) was created in 2010 from the Government’s own revenue sources to combat climate change impacts as well as to implement the BCCSAP. The BCCTF has funded $449.3M in approximately 800 projects to implement key aspects of the BCCSAP. Taking into account the challenges of environment, environment and biodiversity conservation and management, the government has finalized the National Environment Policy 2018 and published it in 2019 with the aim of developing the overall environmental conservation management of the country. The Department of Environment, under the Ministry of Environment, Forest and Climate Change, has adopted a “blue-economy” action plan to conserve marine environment, prevent marine pollution, ensure environmental management, and conserve marine and coastal biodiversity while ensuring marine resource extraction and mainstream development activities.

Bangladesh aims to reach 30 percent renewable energy by 2030 and at least 40 percent by 2041. Bangladesh launched the Mujib Climate Prosperity Plan (MCPP) in November 2021. The MCPP is built on the foundation of the Eighth Five Year Plan (2021-2025) and shifts Bangladesh’s trajectory from one of vulnerability to resilience and then prosperity. The plan highlights engagement with domestic implementation partners including the Public Private Partnership (PPP) Authority and the Bangladesh Investment Development Authority (BIDA). The MCPP expects investment opportunities of approximately $80 billion in resilient projects in energy, water, transport, supply chains and value chains. Optimized finance structures to attract FDI and mobilize domestic private sector capital include the use of public private partnerships as a key solution to climate investment with the PPP Authority. The Bangladesh Bank can use different tools to incentivize investment in low-carbon and climate-resilient infrastructure.

The MCPP further outlines opportunities for technology-transfer partnerships and building manufacturing capacity in Bangladesh including in areas such as green hydrogen, solar, electric vehicles, modernized power grid and other resilient infrastructure.

According to a BloombergNEF’s Climatescope report, in 2021 Bangladesh ranked 24 among 109 countries as an emerging attractive market for energy transition investment. Bangladesh ranks 69th in the MIT Technology Review’s Green Future Index. The overall ranking shows the performance of the economies relative to each other and aggregates scores generated across the following five pillars: carbon emissions, energy transition, green society, clean innovation and climate policy. In the Global Green Growth Institute’s Global Green Growth Index, Bangladesh Ranked 18th among 33 Asian countries. This index measures sustainability targets for four green growth dimensions – efficient and sustainable resource use, natural capital protection, green economic opportunities, and social inclusion.

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

• The Bangladesh Police (Criminal Investigation Department) – Most predicate offenses.
• The National Board of Revenue – VAT, taxation, and customs offenses.
• The Department of Narcotics Control – drug related offenses.

The current Awami League-led government has publicly underscored its commitment to fighting corruption and reaffirmed the need for a strong ACC, but opposition parties claim the ACC is used by the government to harass political opponents. Efforts to ease public procurement rules and a recent constitutional amendment diminishing the independence of the ACC may undermine institutional safeguards against corruption. Bangladesh is a party to the UN Anticorruption Convention but has not joined the OECD Convention on Combating Bribery of Public Officials. Corruption is common in public procurement, tax and customs collection, and among regulatory authorities. Corruption, including bribery, raises the costs and risks of doing business. By some estimates, off-the-record payments by firms may result in an annual reduction of two to three percent of GDP. Corruption has a corrosive impact on the broader business climate market and opportunities for U.S. companies in Bangladesh. It also deters investment, stifles economic growth and development, distorts prices, and undermines the rule of law.

Mohammad Moinuddin AbdullahChairmanAnti-Corruption Commission, Bangladesh1, Segun Bagicha, Dhaka 1000+88-02-8333350 chairman@acc.org.bd 

Contact at “watchdog” organization:

Mr. Iftekharuzzaman
Executive Director
Transparency International Bangladesh (TIB)
MIDAS Centre (Level 4 & 5), House-5, Road-16 (New) 27 (Old)
Dhanmondi, Dhaka -1209+880 2 912 4788 / 4789 / 4792
edtib@ti-bangladesh.org, info@ti-bangladesh.org, advocacy@ti-bangladesh.org

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

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

Bangladesh’s comparative advantage in cheap labor for manufacturing is partially offset by lower productivity due to poor skills development, inefficient management, pervasive corruption, and inadequate infrastructure.  According to the 2016-2017 Labor Force Survey, 85 percent of the Bangladeshi labor force is employed in the informal economy.  Bangladeshi workers have a strong reputation for hard work, entrepreneurial spirit, and a positive and optimistic attitude.  With an average age of 26 years, the country boasts one of the largest and youngest labor forces in the world.  However, training is not well aligned with labor demand. Bangladesh’s labor laws specify acceptable employment conditions, working hours, minimum wage levels, leave policies, health and sanitary conditions, and compensation for injured workers.  Freedom of association and the right to join unions are guaranteed in the constitution.  In practice, however, compliance and enforcement of labor laws are weak, and companies frequently discourage or prevent formation of worker-led labor unions, preferring pro-factory management unions. In a notable exception to the national labor law, Export Processing Zones (EPZs) do not allow trade unions and heavily restrict other labor activity normally permitted under the broader Bangladesh Labor Act. The EPZ labor law does allow worker welfare associations, to which 74 percent of workers belong, according to the government.

Since two back-to-back tragedies killed over 1,250 workers – the Tazreen Fashions fire in 2012 and the Rana Plaza collapse in 2013 – Bangladesh made significant progress in garment factory fire and structural safety remediation, thanks mostly to two Western brand-led initiatives, the Alliance for Bangladesh Worker Safety (Alliance), comprised of North American brands, and the Accord on Fire and Building Safety in Bangladesh (Accord), which was formed by European brands. Major accidents and workplace deaths in the garment sector dropped precipitously as a result – only four workers died in 2021.  Monitoring and remediation of RMG factories exporting to non-Western countries was overseen by the government, with assistance from the International Labor Organization (ILO) under the National Initiative.  By 2021, fewer than half the factories under the National Initiative had completed initial remediation of safety issues, and both the Alliance and Accord had closed their Bangladesh operations.  North American brands continued to monitor manufacturers’ safety maintenance and training through a new organization, Nirapon. The Accord, under High Court order, transitioned its staff and operations to the newly formed RMG Sustainability Council (RSC), overseen by a board consisting of manufacturers, brands, and worker representatives.  The government has announced plans to form an Industrial Safety Unit to oversee factory safety in National Initiative garment factories as well as all manufacturing. On July 8, 2021, a devastating fire at the Hashem Foods Factory Ltd took the lives of 54 workers including 19 children. In the wake of the fire on July 15, the Prime Minister’s Office announced the formation of a 24-member national committee led by the Bangladesh Investment Development Authority (BIDA) and headed by the Prime Minister’s Private Sector Advisor Salman Rahman. The committee prioritized 32 industrial sectors considering their propensity for and likelihood of accidents. BIDA announced in December 2021 it would produce a sector-wide report after analyzing the inspection data and will take steps to enforce workplace safety compliance in the non-export sectors.

The U.S. government suspended Bangladesh’s access to the U.S. Generalized System of Preferences (GSP) over labor rights violations following a six-year formal review conducted by the U.S. Trade Representative. The decision, announced in 2013 in the months following the Rana Plaza collapse, was accompanied by a 16-point GSP Action Plan to help start Bangladesh’s path to reinstatement of the trade benefits.  While some progress was made in the intervening years, several key issues have not been adequately addressed.  Despite revisions intended to make Bangladesh more compliant with international labor standards, the Bangladesh Labor Act (BLA) and EPZ Labor Act (ELA) still restrict the freedom of association and formation of unions and maintain separate administrative systems for workers inside and outside of export processing zones.

Under the current BLA, legally registered unions are entitled to submit charters of demands and bargain collectively with employers, but this has rarely occurred in practice.  The government counts nearly 1,000 registered trade unions, but labor leaders estimate there are fewer than 100 active trade unions in the country’s dominant sector, RMG, and only 30 to 40 are capable enough to negotiate with owners.  The law provides criminal penalties for conducting unfair labor practices such as retaliation against union members for exercising their legal rights, but charges are rarely brought against employers and the labor courts have a large backlog of cases.  Labor organizations reported most workers did not exercise their rights to form unions, attend meetings, or bargain collectively due to fear of reprisal.  From January to December 2021, a total of 6 workers died and 163 were injured due to police interference and about 137 of them belonged to the garment sector.  The garment sector is reeling from the skilled labor crisis and missing opportunities to secure new orders from eager buyers coming to Bangladesh to procure garments after COVID-19-related factory closures in Vietnam, Cambodia, and Burma.  The local apparel industry has long courted buyers who historically have sourced from other countries to buy from Bangladesh producers.  However, in 2020, at the peak of Covid-19, Bangladesh apparel industries furloughed around 357,000 workers; following lockdown restrictions, the sector re-hired just a handful of the workers.  Some of those furloughed returned to their villages and others switched to new professions.  Industry groups are focusing on developing automation technologies and processes to boost productivity and increase production capacity.

The labor law differentiates between layoffs and terminations; no severance is paid if a worker is fired for misconduct.  In the case of downsizing or “retrenchment,” workers must be notified and paid 30 days’ wages for each year of service.  The law requires factories and establishments to notify Bangladesh’s Department of Inspection for Factories and Establishments a week prior to temporarily laying off workers due to a shortage of work or material.  Laid off workers are entitled to their full housing allowance.  For the first 45 days, they are also entitled to half their basic wages, then 25 percent thereafter.  Workers who were employed for less than one year are not eligible for compensation during a layoff.  However, the press and trade unions report employers not only fail to pay workers their severance or benefits, but also their regular wages.  In 2021 alone, workers and organizers staged 172 labor protests in the garment sector over back wages, factory layoffs, and demands to reopen closed factories.  No unemployment insurance or other social safety net programs exist, although the government had begun discussing how to establish them with the help of development partners and brands.  In early 2022, the Government of Bangladesh announced a universal pension scheme from fiscal year (FY) 2022-23.

The government does not consistently and effectively enforce applicable labor laws.  For example, the law establishes mechanisms for conciliation, arbitration, and dispute resolution by a labor court and workers in a collective bargaining union have the right to strike in the event of a failure to reach a settlement.  In practice, few strikers followed the cumbersome and time-consuming legal requirements for settlements and strikes or walkouts often occur spontaneously.  The government was partnered with the ILO to introduce a dispute settlement system within its Department of Labor.

The BLA guarantees workers the right to conduct lawful strikes, but with many limitations.  For example, the government may prohibit a strike deemed to pose a “serious hardship to the community” and may terminate any strike lasting more than 30 days.  The BLA also prohibits strikes at factories in the first three years of commercial production, and at factories controlled by foreign investors.

The U.S. government funds efforts to improve occupational safety and health alongside labor rights in the readymade garment sector in partnership with other international partners, civil society, businesses, and the Bangladeshi government.  The United States works with other governments and the International Labor Organization (ILO) to discuss and assist with additional labor reforms needed to fully comply with international labor conventions.  In early 2021, the government submitted a draft action plan to the EU and ILO describing how it planned to bring its laws and practices into compliance with international labor standards over time.  In February 2022, the government submitted the progress report to ILO and the report will be discussed in the ILO Governing Body on March 21.  The U.S. government is closely monitoring the development and implementation of the plan to ensure it sufficiently addresses long-standing recommendations.

*Host Country Source:  Bangladesh Bank, Bangladesh Bureau of Statistics

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

Although the military regime has told investors and foreign chambers of commerce it welcomes foreign investment, its actions have undercut pre-coup efforts to improve the enabling environment for investment. A number of foreign investors have withdrawn from the market, evacuated foreign national employees, or suspended their operations in Burma.

The 2016 Myanmar Investment Law (MIL) and the 2018 Companies Law continue to govern treatment of foreign investment. The MIL includes a “negative list” of prohibited and restricted sectors for foreign investment. The Companies Law implemented August 1, 2018, permits foreign investment of up to 35 percent in domestic companies— which also opened the stock exchange to limited foreign participation.

The Directorate for Investment and Company Administration (DICA), which is part of the Ministry of Investment and Foreign Economic Relations (MIFER), serves as Burma’s investment promotion agency. However, following the coup, the regime named former military major Aung Naing Oo to lead the Ministry and he terminated staff he deemed unsupportive of the regime. DICA as a consequence has limited operations because of staff boycotts and firings. Previously, DICA encouraged and facilitated foreign investment by providing information, fostering networks between investors, and providing market advice to potential investors.

The regime maintains a private sector advisory forum with the Union of Myanmar Chamber of Commerce and Industry, which principally includes domestic businesses. However, military authorities have summoned business leaders for command appearances rather than to conduct voluntary consultations. The U.S. Trade Representative suspended the U.S.-Myanmar Trade and Investment Framework in March 2021. Foreign Chambers of Commerce have limited interactions with the military regime following the coup, mainly by issuing letters of protest to regime economic policies that undermine the private sector. Regime-controlled media regularly praises PRC and Russian business cooperation.

Limits on Foreign Control and Right to Private Ownership and Establishment

Generally, foreign and domestic private entities have the right to establish and own business enterprises and engage in remunerative activity with some sectoral exceptions. Under Article 42 of the Myanmar Investment Law, the Burmese government restricts investment in certain sectors. Some sectors are only open to government or domestic investors. Other sectors require foreign investors to set up a joint-venture with a citizen of Burma or citizen-owned entity or obtain a recommendation from the relevant ministries.

The State-Owned Economic Enterprises Law, enacted in March 1989, stipulates that SOEs have the sole right to carry out a range of economic activities in certain sectors, including teak extraction, oil and gas, banking and insurance, and electricity generation. However, in practice many of these areas have been opened to private sector investment. For instance, the 2016 Rail Transportation Enterprise Law allows foreign and local businesses to make certain investments in railways, including in the form of public-private partnerships.

The Myanmar Investment Commission (MIC), “in the interest of the State,” can also make exceptions to the State-Owned Enterprises Law. The MIC has routinely granted exceptions, including through joint ventures or special licenses in the areas of insurance, mining, petroleum and natural gas extraction, telecommunications, radio and television broadcasting, and air transport services, although whether such exceptions will continue to be granted after the coup is unclear.

As one of their key functions, DICA and the MIC are responsible for screening and approving inbound foreign investment to ensure it does not pose a risk to national security, as well as to determine if the investment furthers Burma’s growth and development. However, since the coup, the military regime has independently approved many foreign investments, including electricity generation projects, for example, that were not submitted to the DICA or MIC.

The regime frequently favors regime-owned or affiliated businesses as well as those run by cronies.

In 2020, the OECD conducted an investment review for Myanmar, which can be found at http://www.oecd.org/investment/countryreviews.htm 

In February 2021, the World Trade Organization produced a trade policy review for Myanmar based on pre-coup information, which can be found at http://www.wto.org/english/tratop_e/tpr_e/tpr_e.htm 

Following the coup, the military regime’s approach to governance has caused a sharp reduction in commercial activities including in Yangon and Mandalay. Many routine services that businesses require like customs, ports, and banks were not fully operational as of April 2022. Many companies report difficulty accessing bank funds to pay employees and suppliers, and there is limited foreign and local currency available. The security situation is volatile and unpredictable, and some companies’ local staff have been killed by security forces and foreign-owned factories have been burned. The civilian government previously provided limited business facilitation services through DICA, but services are restricted at present.

The previous civilian government instituted online company registration through “MyCo” ( https://www.myco.dica.gov.mm ). Investors were able to submit forms, pay registration fees, and check availability of a company name through a searchable company registry on the “MyCo” website. However, military regime officials have publicly threatened to take down the company registration website so it may not continue to operate, and military-imposed restrictions on internet and mobile access limit businesses’ ability to access this website.

The MIC is responsible for verification and approval of investment proposals above USD5 million. Companies can use the DICA website to retrieve information on requirements for MIC permit applications and submit a proposal to the MIC. If the proposal meets the criteria, it is supposed to be accepted within 15 days. If accepted, the MIC will review the proposal and is supposed to reach a decision within 90 days. In 2016, state and regional investment committees were granted the right to approve any investment of less than USD5 million. The World Bank assessed pre-coup that it takes on average seven days to start a business in Burma involving six procedures. Following the coup, it is likely to take substantially longer to register a business because of the suspension of many government services, bank closures, and internet access restrictions and suspensions. Post-coup, the MIC has approved several pending investment applications. According to DICA data, the number of new companies registered has declined 87 percent in the last 12 months compared to the year earlier.

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.

The military regime has not demonstrated an interest in providing, or an ability to provide, clear rules. Regulatory and legal transparency are significant challenges for foreign investors in Burma. The military established the SAC, which is vested with authority to make and issue laws, regulations, and notifications with no oversight or transparency. Previously, government ministries drafted most laws and regulations relevant to foreign investors, which were reviewed by the Attorney General and then voted on and discussed by Parliament. The current law-making process is opaque and amendments to laws have been made without public consultation.

Burma is not legally obligated to share regulatory development plans with the public or conduct public consultations.

There is not a centralized online location where key regulatory actions are published similar to the Federal Register in the United States. The Burmese government previously published new regulations and laws in government-run newspapers and “The State Gazette,” and also sometimes posted new regulations on government ministries’ official Facebook pages. Presently, the military regime announces some regulatory changes via state media or in the Commander-in-Chief’s public addresses, but copies of the changes are not easily accessibly or routinely posted anywhere.

There are no oversight or enforcement mechanisms to ensure the government follows administrative processes.

Foreign investors previously could appeal adverse regulatory decisions. For instance, under the Myanmar Investment Law, the MIC serves as the regulatory body and has the authority to impose penalties on any investor who violates or fails to comply with the law. Investors have the right to appeal any decision made by the MIC to the government within 60 days from the date of decision.

Under the military regime, there is no demonstrated action or espoused commitment to transparent public finance and debt obligations. There are allegations that the military is incurring off-budget debt and using government funds beyond which was allocated in the government budget. Prior to the coup, public finance, and debt obligations, exclusive of contingent liabilities, were public and transparent. Budget reports were published on the Ministry of Planning, and Finance website ( https://myanmar.gov.mm/ministry-of-planning-finance ). Prior to 2021, the budget was published on the Ministry of Planning, Finance, and Industry website (https://www.mopfi.gov.mm/en/content/budget-news). Burma has issued the annual Citizen Budget in the Burmese language since FY 2015-16. The Ministry of Planning, Finance, and Industry has published quarterly budget execution reports, six-month-overview-of-budget-execution reports, and annual budget execution reports on its website since FY 2015-16. However, details regarding the budget allocations for defense expenditures were not transparent, a problem that has been exacerbated since the military coup. The Burmese government also previously published its debt obligation report on the Treasury Department’s Facebook page. (See:  https://www.facebook.com/pages/biz/Treasury-Department-of-Myanmar-777018172438019/  ). The Public Expenditure and Financial Accountability (PEFA) program reviewed Burma’s public finance system in 2020 ( https://www.pefa.org/about ).

The government does not promote or require environmental, social, and governance disclosure to help investors and consumers distinguish between high- and low-quality investments. Businesses seeking to legally extract mineral resources, however, are required to prepare an environmental management plan to receive a license to mine from the regime.

Burma has been a member of the Association of Southeast Asian Nations (ASEAN) since July 1997. However, there is not a consistent relationship between ASEAN and Burma regulatory standards. As an ASEAN member state, Burma’s regulatory systems are expected to conform to harmonization principles established in the ASEAN Trade in Goods Agreement (ATIGA) to support regional economic integration.

Burma’s regulatory system does not consistently use international norms or standards. It contains a mix of unique Burma-developed standards and some British-colonial era standards. Prior to the coup, the government had been making progress on legal reforms to ensure the country’s regulations and standards reflected international norms or standards, including ASEAN-developed standards. In an example of ASEAN regulatory harmonization, Burma officially joined the ASEAN Single Window in March 2020 with the launch of the National Single Window Routing Platform, which streamlined the import process by adopting the ASEAN Certificate of Origin Form D.

Burma is a WTO member, but it does not regularly notify draft technical regulations to the WTO Committee on Technical Barriers to Trade.

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

Immediately following the 2021 coup, the military regime replaced several members of the Supreme Court with judges seen as more reliable to its interests. After several weeks of largely peaceful protest and increasingly violent responses by security forces including arbitrary detentions, the military regimes placed several Yangon townships under martial law, where court proceedings are conducted by military judges who have meted out harsh punishments with limited to no due process rights for those accused.

The Ministry of Home Affairs, led by an active-duty military minister appointed by the Commander-in-Chief, controls the Myanmar Police Force, which files cases directly with the courts. The Attorney General prosecutes criminal cases in civilian court and reviews pending legislation. The current Attorney General, Dr Thida Oo, was appointed the day after the coup by Commander-in-Chief Min Aung Hlaing . The Attorney General’s Office was reorganized as a ministry  on August 30, 2021. On January 31, 2022, the U.S. Department of the Treasury  added Attorney General, Dr Thida Oo to its Specially Designated Nationals list. While foreign companies have the right to bring cases to and defend themselves in local courts, there are deep concerns about the impartiality and lack of independence of the courts.

Burma does not have specialized civil or commercial courts.

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

Certain regulatory actions are appealable and are adjudicated with the respective ministry. For instance, according to the Myanmar Investment Law, investment disputes that cannot be settled amicably are “settled in the competent court or the arbitral tribunal in accord with the applicable laws.” An investor dissatisfied with any enforcement action made by the regulatory body has the right to appeal to the government within 60 days from the date of administrative decision. The government may amend, revoke, or approve any decision made by the regulatory body. This decision is considered final and conclusive.

The Myanmar Investment Law outlines the procedures the MIC must take when considering foreign investments. The MIC evaluates foreign investment proposals and stipulates the terms and conditions of investment permits. The MIC does not record foreign investments that do not require MIC approval. Many smaller investments may go unrecorded. Foreign companies may register locally without an MIC license, in which case they are not entitled to receive the benefits and incentives provided for in the Myanmar Investment Law.

There is no “one-stop-shop” for investors except in Special Economic Zones. Burma has three Special Economic Zones (SEZs) in Thilawa, Dawei, and Kyauk Phyu with preferential policies for businesses that locate there, including “one-stop-shop” service. Of the three SEZs, Thilawa is the only SEZ currently in operation.

A Competition Law went into effect in 2017. The objective of the law is to protect public interest from monopolistic acts, limit unfair competition, and prevent abuse of dominant market position and economic concentration that weakens competition. The Myanmar Competition Commission serves as the regulatory body to enforce the Competition Law and its rules. The Commission is chaired by the Minister of Commerce, with the Director General of the Department of Trade serving as Secretary. Members also include a mixture of representatives from relevant line ministries and professional bodies, such as lawyers and economists.

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

However, under previous military regimes, private companies have been nationalized. The current military regime has threatened private banks with nationalization if they fail to reopen, including threatening to transfer certain deposits in private banks to state-owned or military-affiliated banks. In addition, security forces have physical cut private company’s fiber wires and the military regimes onerous restrictions and suspension of mobile internet service have deprived private telecommunication operators and internet service providers of their property without any compensation offered. The military regime has also banned a number of private media print outlets from publication and restricted citizen’s access to other private company’s internet platforms.

There is a significant risk of nationalization and expropriation by the military regime, particularly in the financial and telecommunications sectors. There is no expectation of due process should the military regime pursue nationalization of private companies despite the provisions in the Myanmar Investment Law prohibiting nationalization and expropriation.

In February 2020, the government of Burma passed the new Insolvency Law. The law adopted the UNCITRAL Model Law on cross-border insolvency, providing greater legal certainty on transnational insolvency issues.

The legislation established an insolvency regime that addresses both corporate and personal insolvency, with a focus on protecting micro, small and medium-sized enterprises. With regards to personal insolvency, the new law encourages debtors to enter into a voluntary legally binding arrangement with their creditors. This agreement allows part or all of the debt to be written off over a fixed period of time. The law also provides equitable treatment for creditors by enabling an efficient liquidation process to ensure creditors receive maximum financial recovery from the property value of a non-viable business.

The law also established the Myanmar Insolvency Practitioners’ Regulatory Council to act as an independent regulatory body and assigned DICA the role of Registrar with the authority to fine individuals contravening the law. In addition, the court with legal jurisdiction can order an individual to make good on the default within a specified time.

In January 2020, the Ministry of Investment and Foreign Economic Relations (MIFER) announced tax exemptions for investments made in five priority sectors in all 14 states and regions in Burma as well as the capital territory. The tax exemption period is three, five, or seven years depending on the location. For a list of priority sectors by state and regions, please see MIFER’s website at:  http://www.mifer.gov.mm/region.  

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

Burma has no established sovereign guarantee mechanism for foreign direct investments nor does it generally provide joint financing for foreign direct investment projects.

The government does not offer any incentives, such as feed-in tariffs, discounts on electricity rates, or tax incentives for clean energy investments.

Burma has three Special Economic Zones (SEZs) in Thilawa, Dawei, and Kyauk Phyu with preferential policies for businesses that locate there. Of the three SEZs, Thilawa is the only SEZ currently in operation. Under the Myanmar Special Economic Zones Law, investors located in a Special Economic Zone may apply for income tax exemption for the first five years from the date of commencement of commercial operations, followed by a reduction of the income tax rate by 50 percent for the succeeding five-year period. Under the law, if profits during the third five-year period are re‐invested within one year, investors can apply for a 50 percent reduction of the income tax rate for profits derived from such re‐investment. In 2015, the government issued rules governing the SEZs, including the establishment of on-site one-stop-service centers to ease the approval and permitting of investments in SEZs, incorporate companies, issue entry visas, issue the relevant certificates of origin, collect taxes and duties, and approve employment permits and/or permissions for factory construction and other investments.

Foreign investors must recruit at least 25 percent of their skilled employees from the local labor force in the first two years of their investment. The local employment ratio increases to 50 percent for the third and fourth years, and 75 percent for the fifth and sixth years. In August 2021, the regime recommended private banks name a citizen of Myanmar as CEO. The investors are also required to submit a report to the MIC with details of the practices and training methods that have been adopted to improve the skills of Burmese nationals.

Foreign investors may appoint expatriate senior management, technical experts, and consultants, but are required to submit a copy of the expatriate’s passport, proof of ability, and profile to the MIC for approval.

In part because of travel restrictions implemented in 2020 by the Burmese government to prevent the spread of COVID-19 including the suspension of international commercial flights, as well as regime-instituted additional measures, foreign investors have found it difficult to enter Burma or to travel within the country to check on investments. These restrictions were lifted on April 17, 2022. Business travelers may receive e-visas. Several foreign investors have complained about inability to secure or renew required work or residency permits for foreign employees.

Foreign investors are not required to use domestic content in goods or technology. Burma is developing laws, rules, and regulations on information technology (IT) and data protection standards but does not currently have a legal requirement for foreign IT providers to turn over source code and/or provide access to surveillance. Burma has not implemented data localization laws although the military regime proposed such laws in 2022. In 2021, the military regime has required some IT companies to disclose all wi-fi subscribers’ identities and provide all their usage data including websites visited. The regime Ministry of Transport and Communications and the State Administrative Council appear to both have authority to initiate these data requests. In January 2022, the regime proposed banning VPNs as part of an updated Cyber Security Law; no implementation has taken place to date.

Property rights and interests are not consistently enforced. Land disputes involving foreign investments are common and land titling is opaque. Mortgages and liens exist, but there is not a reliable recording system.

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

The 2016 Condominium Law allows for up to 40 percent of condominium units of “saleable floor area” to be sold to foreign buyers.

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

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

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

In practice because of opaque land titling and unclear ownership, squatters de facto are permitted to use land that is unoccupied or land where ownership is contested or where they have an established history of living on that property.

Prior to the coup, Burma had expanded its legal intellectual property protections, but enforcement was limited. Burma’s Parliament passed four intellectual property laws in 2019 – the Trademark Law, Industrial Design Law, Patent Law, and Copyright Law.

Burma does not maintain publicly available data on seizures of counterfeit goods, although occasionally the government will announce seizures of counterfeit goods in government media or previously on Facebook government accounts. The Myanmar Police Force’s Criminal Investigative Department (CID) investigates and seizes counterfeit goods, including brands, documents, gold, products, and money, but not medicines. The CID currently does not record the value of the amount seized.

Burma is not listed in the USTR’s Special 301 report or the notorious market report.

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

The military regime’s attitude towards foreign portfolio investment is unknown. Previously, the Burmese government had gradually opened to foreign portfolio investment, but both the stock and bond markets are small and lack sufficient liquidity to enter and exit sizeable positions.

Burma has a small stock market with infrequent trading. In July 2019, the Securities and Exchange Commission announced that foreign individuals and entities are permitted to hold up to 35 percent of the equity in Burmese companies listed on the Yangon Stock Exchange.

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

The CBM sets commercial loan interest rates and saving deposit rates that banks can offer, so banks cannot conduct risk-based pricing for credit. Consequently, credit is not strictly allocated on market terms. Foreign investors generally seek financing outside of Burma because of the lack of sophisticated credit instruments offered by Burmese financial institutions and lack of risk-based pricing.

There is limited penetration of banking services in the country, but the usage of mobile payments had grown rapidly prior to the coup. A government 2020 census found 14 percent of the population has access to a savings account through a traditional bank. The banking system is fragile with a high volume of non-performing loans (NPLs). Financial analysts estimate that NPLs at some local banks account for 40 to 50 percent of outstanding credit but accurate calculations are hard because of accounting inconsistencies about what constitutes a non-performing loan.

According to Central Bank of Myanmar’s report for FY 2020-2021, total assets in Burma’s banking system were 75 trillion kyat (USD 40.5 billion).

The CBM is responsible for the country’s monetary and exchange rate policies as well as regulating and supervising the banking sector.

Prior to the coup, the government had gradually opened the banking sector to foreign investors. The government began awarding limited banking licenses to foreign banks in October 2014. In November 2018, the CBM published guidelines that permit foreign banks with local licenses to offer “any financing services and other banking services” to local corporations. Previously, foreign banks were only allowed to offer export financing and related banking services to foreign corporations.

No U.S. banks have a correspondent relationship with Burmese banks. Following the military coup and the imposition of U.S. sanctions on Burma, including on two large military holding companies, some non-U.S. international banks are considering whether to terminate their correspondent banking relationship with Burmese banks.

Foreigners are allowed to open a bank account in Burma in either U.S. dollars or Burmese kyat. In April 2022, the CBM issued rules requiring most accounts with foreign currency holdings to be converted into Myanmar kyat at a fixed rate within one business day excluding foreign investment businesses, diplomatic missions, UN missions and international development partners. To open a bank account, foreigners must provide proof of a valid visa along with proof of income or a letter from their employer.

The Germany development agency GIZ published the fifth edition the GIZ Banking Report in January 2021.

According to Chapter 15 of the Myanmar Investment Law, foreign investors can convert, transfer, and repatriate profits, dividends, royalties, patent fees, license fees, technical assistance and management fees, shares and other current income resulting from any investment made under this law. Nevertheless, in practice, the transfer of money in or out of Burma has been difficult, as many international banks have internal prohibitions on conducting business in Burma given the long history of sanctions and significant money-laundering risks. The intermittent closure of banks following the coup, shortage of U.S. dollars, and low cash withdrawal limits, and CBM restrictions on holding foreign currency have further limited investors’ ability to conduct foreign exchange transactions and other necessary business operations.

Under the Foreign Exchange Management Law, transfer of funds can be made only through licensed foreign exchange dealers, using freely usable currencies. The CBM grants final approval on any new loans or loan transfers by foreign investors. According to a new regulation in the Foreign Exchange Management Law, foreign investors applying for an offshore loan must get approval from the CBM. Applications are submitted through the MIC by providing a company profile, audited financial statements, draft loan agreement, and a recent bank credit statement.

In April 2022, the Central Bank fixed the exchange rate at 1850 kyat/1 USD. In April 2022, the black-market exchange rate was roughly 2010 kyat/1 USD.

According to the Myanmar Investment Law, foreign investors can remit foreign currency through authorized banks. Nevertheless, in practice, the transfer of money in or out of Burma has been difficult, as many international banks have internal prohibitions on conducting business in Burma given the long history of sanctions and significant money-laundering risks. The military coup and the regime’s economic policies, including restrictions placed on holding and transferring foreign currencies, has further exacerbated these investment remittance challenges.

The challenge of repatriating remittances through the formal banking system are also reflected in the continued use of informal remittance services (such as the “hundi system”) by both the public and businesses. On November 15, 2019, the CBM adopted the Remittance Business Regulation in order to bring these informal networks into the official financial system. The regulations require remittance business licenses to conduct inward and outward remittance businesses from the Central Bank. It is unclear how the military regime will proceed with this regulation and the training of businesses to grant them a license to conduct remittances.

Burma does not have a sovereign wealth fund.

State-owned enterprises (SOEs) in Burma are active in various sectors, including natural resource extraction, print news, energy production and distribution, banking, mobile telecommunications, and transportation. SOEs employ approximately 145,000 people, according to a 2018 report by the Natural Resource Governance Institute. The 1989 State-Owned Economic Enterprises Law does not establish a system of monitoring enterprise operations, hence detailed information on Burmese SOEs is difficult to obtain. However, according to commercial statements, the total net income of all SOEs during fiscal year 2020`21 was approximately USD 828 million. The top profit-making SOEs are found in the natural resource sector, namely the Myanma Oil and Gas Enterprise, Myanma Gems Enterprise, and Myanma Timber Enterprise. Within Burma, there are 32 SOEs managed directly by six ministries without independent boards.

SOEs enjoy several advantages including serving in some cases as the market regulator, preferential land access, and access to low-interest credit. According to the State-Owned Economic Enterprises Law, SOEs wield regulatory powers that provide SOEs a significant market advantage, including through an ability to recommend specific tax exemptions to the MIC on behalf of private sector joint-venture partners and to monitor private sector companies’ compliance with contracts. In addition, the law stipulates that SOE managers have sole discretion in awarding contracts and licenses to private sector partners with limited oversight. SOEs can secure loans at low interest rates from state-owned banks, with approval from the cabinet. Private enterprises, unlike SOEs, are forced to provide land or other real estate as collateral in order to be considered for a loan. SOEs have historically had an advantage over private entities in land access because under the Constitution the State owns all the land.

In April 2021, the U.S. Department of Treasury sanctioned three Burmese SOEs for their roles in financing the military regime: the Myanma Gems Enterprise, the Myanma Timber Enterprise; and the Myanmar Pearl Enterprise. In March 2021, the U.S. Department of Treasury also sanctioned two Myanmar military holding companies: Myanmar Economic Corporation and Myanmar Economic Holdings Limited, and those sanctions also apply to entities that are owned, directly or indirectly, 50 percent or more by one or more blocked entities or persons. Investors should conduct careful due diligence, including by consulting the Special Designated National list, to identify which entities are subject to U.S. sanctions given the broad scope of these firms and their privileged position in the economy.

The military regime has not publicly announced any plans or timeline for privatization and in the past has preferred nationalization and supporting state-owned enterprises. Prior to the coup, the civilian government had been implementing a privatization plan, which permitted foreign investment.

The military regime has not demonstrated any awareness or commitment to responsible business. On the contrary, the regime had enacted policies and practices that undermine economic governance and the rule of law. Moreover, security forces are engaged in an escalating pattern of human rights abuses including mass detentions, extrajudicial killings, and violence deliberately targeting civilians. These human rights abuses have seriously also impacted the business community. Two foreign national business advisors were detained and put under house arrest without charge and one economic advisor was charged for violation of the official secrets acts, with no credible evidence provided to support the charge. Local businesspeople have been interrogated and subject to detention without charges by security forces. Several employees of local businesses have been killed by security forces.

Although there are labor unions, independent NGOs, and business associations in Burma, their ability to operate has been several constrained and in some cases these organizations have been openly targeted by the military regime’s security forces. Child and forced labor are present in Burma. For more information on the human rights and labor situation, please refer to the additional resources.

The Extractive Industries Transparency Initiative (EITI) Secretariat suspended Burma’s participation in the EITI initiative following the military coup. Burmese government officials do not regularly participate in meetings of the Voluntary Principles on Security and Human Rights, although several businesses, civil society organization, and diplomats participate in Burma country discussions.

The regime has not demonstrated an interest in protecting the environment. On the contrary, the regime has pursued environmentally destructive projects like hydro-electric dams. Illegal timber harvesting and mining have increased under the regime with little regard to existing environmental regulations.

The government of Burma is not a signatory of The Montreux Document on Private Military and Security Companies, a supporter of the International Code of Conduct or Private Security Service Providers, or a participant in the International Code of Conduct for Private Security Service Providers’ Association. The Myanmar Centre for Responsible Business is a civil society member of the International Code of Conduct Association.

Department of State

Country Reports on Human Rights Practices ( https://www.state.gov/reports-bureau-of-democracy-human-rights-and-labor/country-reports-on-human-rights-practices/);

Trafficking in Persons Report ( https://www.state.gov/trafficking-in-persons-report/);

Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities ( https://www.state.gov/key-topics-bureau-of-democracy-human-rights-and-labor/due-diligence-guidance/) and;

North Korea Sanctions & Enforcement Actions Advisory ( https://home.treasury.gov/system/files/126/dprk_supplychain_advisory_07232018.pdf ).

Department of Labor

Findings on the Worst forms of Child Labor Report ( https://www.dol.gov/agencies/ilab/resources/reports/child-labor/findings  );

List of Goods Produced by Child Labor or Forced Labor ( https://www.dol.gov/agencies/ilab/reports/child-labor/list-of-goods );

Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World ( https://www.dol.gov/general/apps/ilab ) and;

Comply Chain ( https://www.dol.gov/ilab/complychain/ ).

Although the pre-coup civilian government made some progress in addressing corruption, including opening — with U.S. support — two new Anti-Corruption Commission branch offices in November 2020, law enforcement and judicial institutions do not have the independence or capacity to be effective in the fight against corruption under the new military regime.  Corruption is rampant within the military, and the post-coup military regime appointed new members to the Anti-Corruption Commission. The military regime has used the Anti-Corruption Commission (ACC) to investigate politically motivated corruption charges, including against deposed State Counsellor Aung San Suu Kyi and deposed President Win Myint. Business leaders whom the regime believes are not adequately supportive of the regime have been detained and charged with corruption and/or tax evasion.

In 2018, the government amended its anti-corruption law to give the ACC authority to scrutinize government procurements. Family members of politicians can also be prosecuted under the anti-corruption law, though office holders face higher penalties.

Some companies are legally required to have compliance programs to detect and prevent bribery of government officials. Under Burma’s Anti-Money Laundering Law, law firms, banks, and companies operating in the insurance and gemstone sectors are required to appoint compliance officers and conduct heightened due diligence on certain customers.

Burma does not have laws to counter conflicts-of-interest in awarding contracts or government procurement. However, prior to the coup the President’s office issued orders to prevent conflicts-of-interest for construction contracts and several ministries had put in place internal rules to avoid conflicts-of-interest in awarding tenders. In the private sector, some of Burma’s largest companies have developed anti-corruption policies, which they have published on-line.

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

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

The military regime does not provide protection to NGOs investigating corruption.

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

Burma has a long history of civil wars and military coups marked by violence. In the aftermath of the February coup, Burmese security forces launched a brutal crackdown against the people of Burma, who peacefully protested the coup and the military’s upending of their democratic transition. In the face of brutal force by the regime, the people of Burma have disrupted the military’s ability to govern by launching a nationwide Civil Disobedience Movement, including general strikes and protests. Burma is also home to multiple long-running insurgencies in border regions, where the military competes for control with various ethnic armed organizations (EAOs). Shortly after the February 2021 coup, the military launched brutal and unprovoked attacks against EAOs, perceived opponents, and peaceful demonstrators across the country seeking to terrorize the public into submission. On September 7, 2021, the National United Government (NUG) announced a “People’s Defensive War against the military regime.” Violence is widespread and could continue to escalate.

There have been several reported fires and explosion targeting foreign businesses since the coup, including at Chinese-owned factories, an agricultural storage facility, and military related companies. Attacks resulting in destruction of property and injuries have also been reported at banks and ATMs as well. Foreign businesses are concerned about the potential for violence and destruction of property to escalate, although principally the targets have been companies or infrastructure associated with the military or companies that are perceived to be supportive of the military. The Chinese government has reportedly sought increased regime protection for an oil and gas pipeline that runs through Burma to China because of the deteriorating security situation.

The military regime has also declared martial law in several industrial townships in Yangon, suspending even the veneer of civil liberties and allowing security forces to be more aggressive in response to protests.

Protestors and military opponents have organized boycotts of businesses that have ties to the military regime with great success.

Due to the February 1, 2021 coup, progress on labor reforms stalled and in most cases reversed. The national labor tripartite dialogue among the government, employers, and union leaders, which had been an important forum for advancing workers’ rights before the coup, dissolved in February after several large labor unions withdrew in protest. Burma’s labor union leaders, who have been active in organizing strikes and peaceful demonstrations against the regime since February 1, have been openly targeted by the military, and several union leaders have been killed or arrested. The regime has responded to organized labor’s participation in the CDM, declaring 16 labor-related organizations illegal and issuing warrants for the arrest of more 70 union organizers. The U.S. government released a statement noting it is closely monitoring the labor situation and potential impact on Burma’s Generalized System of Preferences (GSP) eligibility. The EU has made similar statements questioning future GSP eligibility if labor practices continue to deteriorate.

Burma has a large supply of mostly unskilled workers. Skilled labor and managerial staff are in high demand and short supply. According to the government, 70 percent of Burma’s population is employed in agriculture. From the World Bank’s 2014 “Ending Poverty and Boosting Prosperity in a Time of Transition” report on Burma, 73 percent of the total labor force in Burma was employed in the informal sector in 2010, or 57 percent if one excludes agricultural workers. Casual laborers represented another 18 percent, mainly from the rural areas. Unpaid family workers represent another 15 percent.

Many companies struggle to find and retain skilled labor. The military’s nationalization of schools in 1964, its discouragement of English language classes in favor of Burmese, the lack of investment in education by the previous governments of Burma, and the repeated closing of Burmese universities from 1988 to the mid-2000’s have taken a toll on the country’s workforce. Most people in the 15- to 39-year-old demographic lack technical skills and English proficiency. To address this skilled labor shortage, Burma’s Employment and Skill Development Law went into effect in December 2013. The law provides for compulsory contributions on the part of employers to a “skill development fund,” although this provision has not been implemented.

In October 2011, the Burmese government passed the Labor Organization Law, which legalized the formation of trade unions and allows workers to strike. As of April 2019, roughly 2,900 enterprise-level unions had been formed in a variety of industries ranging from garments and textiles to agriculture to heavy industry. The passage of the Labor Organization Law engendered a labor movement in Burma, and there has been a low, yet increasing, level of awareness of labor issues among workers, employers, and even civilian government officials. Still, at present, the use of collective bargaining remains limited. Strikes are increasingly common in the post-coup environment as a form of political protest against the military regime and pre-coup were common in response to employment grievances, particularly in factories.

Prior to the military coup, the Burmese government was bringing the legal system into compliance with international labor standards. The civilian government had passed a number of labor reforms and amended a range of labor-related laws, such as the Shops and Establishment Law, the Payment of Wages Law, and the Occupational Safety and Health Law. In 2019, Parliament also passed the Settlement of Labor Disputes Law. Under this law, parties to labor disputes can seek mediation through arbitration councils. All stakeholders have a say in the selection of arbitration mediators. If arbitration fails, disputes enter the court system. Parliament approved Burma’s ratification of an international treaty to abolish child labor in the country (Minimum Age Convention 138) in December 2019. A mechanism to submit forced labor complaints became operational in February 2020 although it is unclear if the current military regime is accepting or investigating complaints under this mechanism. Complaints of forced labor made against the military itself are resolved through internal military procedures and the outcome of these complaints are not shared publicly.

In March 2022, the Governing Body of the International Labor Organization (ILO) decided to establish a Commission of Inquiry due to the deterioration of International Labor Standards in Myanmar following the military coup in February 2021.

* Source for Host Country Data

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

Chad Wilton
Economic Officer
U.S. Embassy Rangoon
110 University Avenue/Kamayut Township 11041
Rangoon, Burma
+95-1-753-6509
wiltoncl@state.gov 

FDI has played an essential role in China’s economic development. Though the PRC remains a relatively restrictive environment for foreign investors, PRC government officials tout openness to FDI, promising market access expansion and non-discriminatory, “national treatment” for foreign enterprises through improvements to the business environment.  They also have made efforts to strengthen China’s regulatory framework to enhance market-based competition.

MOFCOM reported FDI flows grew by about 15 percent year-on-year, reaching USD 173 billion, however, foreign businesses continue to express concerns over China’s pandemic restrictions.  In 2021, U.S. businesses’ concerns with China’s COVID-19 restrictive travel restrictions were at the top of the agenda, along with concerns over PRC’s excessive cyber security and data-related requirements, preferential treatment for domestic companies – including state-owned enterprises – under various industrial policies, preference for domestic technologies and products in the procurement process, an opaque regulatory system, and inconsistent application of laws protecting intellectual property rights (IPR). U.S.-China geopolitical tensions were also cited as a significant concern. See the following:

• American Chamber of Commerce China 2021 American Business in China White Paper 
• American Chamber of Commerce China 2021 Business Climate Survey
• U.S.-China Business Council’s 2021 China Business Environment Member Survey

China’s International Investment Promotion Agency (CIPA), under MOFCOM, oversees attracting foreign investment and promoting China’s overseas investment. Duties include implementing overseas investment policy; guiding domestic sub-national and international investment promotion agencies; promoting investment in industrial parks at the national, subnational, and cross-border level; organizing trainings in China and abroad for overseas investment projects; and, engaging international and multilateral economic organizations, foreign investment promotion agencies, chambers of commerce, and business associations. The agency has offices worldwide, including CIPA Europe in Hungary, CIPA Germany, and a representative office in the Hague to promote investment in the Benelux area. CIPA maintains an “Invest in China” website which lists laws, regulations, and rules relevant to foreign investors. The China Association of Enterprises with Foreign Investments (CAEFI) is a non-profit organization overseen by MOFCOM. The association and corresponding provincial institutions have hotlines to receive foreign investor complaints.

Entry into China’s market is regulated by the country’s “negative lists,” which identify the sectors in which foreign investment is restricted or prohibited, and a catalogue for encouraged foreign investment, which identifies the sectors and locations (often less developed regions) in which the government encourages investment.

• The Special Administrative Measures for Foreign Investment Access to Pilot Free Trade Zones (the “FTZ Negative List”) applies to China’s 20 FTZs and one free trade port. 
• The Special Administrative Measures for Foreign Investment Access (̈the “Nationwide Negative List”) came into effect on January 1, 2022.
• The Industry Catalogue for Encouraged Foreign Investment (released December 27, 2020) encourages FDI inflows to key sectors, in particular semiconductors and other high-tech industries.
• The Industrial Catalogue for Encouraged Foreign Investment in Western Region.  The “encouraged list” is subdivided into a cross-sector nationwide catalogue and a separate catalogue for western and central regions, China’s least developed regions. 

In restricted industries, foreign investors face equity caps or JV requirements to ensure control by a PRC national and enterprise.  Due to these requirements, foreign investors that wish to participate in China’s market must enter partnerships, which sometimes require transfer of technology. However, even in “open” sectors, a variety of factors, including ability to access local government officials and preferences, enhanced ability to impact local rules and standards, perceptions of better understanding of the PRC market, and access to procurement opportunities, led many foreign companies to rely on the JV structure to operate in the PRC market.

Below are a few examples of industries where investment restrictions apply:

• Preschool to higher education institutes require a PRC partner with a dominant role.
• Establishment of clinical trials for new drugs require a PRC partner who holds the IPR tied to data drawn from the clinical research.

Examples of foreign investment sectors requiring PRC majority stake include:

• Radio/television market survey.
• Basic telecommunication services outside free trade zones.

The 2021 negative lists made minor modifications to some industries, reducing the number of restrictions and prohibitions from 33 to 31 in the nationwide negative list, and from 30 to 27 in China’s pilot FTZs. Notable changes included openings in the automotive and satellite television broadcasting manufacturing sectors. Sectors that remain closed to foreign investment include rare earths, film production and distribution, and tobacco products.  However, the government continues to constrain foreign investors in a myriad of ways beyond caps on ownerships. For instance, in the pharmaceutical sector, while JV requirements were eliminated in the 1990s, foreign companies must partner with local PRC institutions for clinical trials. Other requirements that place undue burden on foreign investors include but are not limited to: applying higher standards for quality-related testing, prohibitions on foreign parties in JVs conducting certain business activities, challenges in obtaining licenses and permits, mandatory intellectual property sharing related to certain biological material, and other implicit and explicit downstream regulatory approval barriers.

The negative list regulating pilot FTZ zones will lift all barriers to foreign investment in all manufacturing sectors, widen foreign investor access to some service sectors, and allow foreign investment into the radio and TV-based market research sector.  For the market research sector, caveats include a 33 percent foreign investor ownership cap and PRC citizenship requirements for legal representatives. While U.S. businesses welcomed market openings, foreign investors remained underwhelmed by the PRC’s lack of ambition and refusal to provide more significant liberalization.  Foreign investors noted the automotive sector openings were inconsequential since the more lucrative electric vehicle (EV) sector was opened to foreign investors in 2018, whereas the conventional auto sector is saturated. Foreign investors cited this was in line with the government announcing liberalization mainly in industries that domestic PRC companies already dominate.

In addition to the PRC’s system for managing foreign investments, MOFCOM and NDRC also maintain a system for managing which segments of the economy are open to non-state-owned investors. The most recent Market Access Negative List  was issued on December 10, 2020.

The Measures for Security Reviews on Foreign Investments  came into effect January 18, 2021, revising the PRC’s framework for vetting foreign investments that could affect national security. The NDRC and the Ministry of Commerce will administer the new measures which establish a mechanism for reviewing investment activities across a range of sectors perceived to implicate PRC national security, including agriculture, energy and resources, cultural products, and more.

China is not a member of the Organization for Economic Co-Operation and Development (OECD), but the OECD Council established a country program of dialogue and co-operation with China in October 1995. The OECD completed its most recent investment policy review for China in 2022.

• OECD 2022 Report 

China’s 2001 accession to the World Trade Organization (WTO) boosted its economic growth and advanced its legal and governmental reforms.  The WTO completed its most recent trade policy review for China in 2021, highlighting FDI grew at a slower pace than in previous periods but remains a major driver of global growth and a key market for multinational companies.

• WTO Trade Policy Review for China
• USTR 2021 Report to Congress on China’s WTO Compliance
• International Monetary Fund (IMF) information on China 

Created in 2018, the State Administration for Market Regulation (SAMR) is responsible for business registration processes.  Under SAMR’s registration system, parties are required to report when they (1) establish a Foreign Invested Enterprise (FIE); (2) establish a representative office in China; (3) acquire stocks, shares, assets or other similar equity of a domestic China-based company; (4) re-invest and establish subsidiaries in China; and (5) invest in new projects.  Foreign companies still report challenges setting up a business relative to their PRC competitors. Many companies offer consulting, legal, and accounting services for establishing operations in China. Investors should review their options carefully with an experienced advisor before investing.

• Invest in China
• The State Council Information on Doing Business in China  
• Filing a Complaint as a Foreign Company
• Nationwide Government Service Platform  

Since 2001, China has pursued a “going-out” investment policy.  At first, the PRC encouraged SOEs to invest overseas, but in recent years, China’s overseas investments have diversified with both state and private enterprises investing in nearly all industries and economic sectors.  China remains a major global investor and in 2021, total outbound direct investment (ODI) increased for the first time in four years to reach $153.7 billion, a 12 percent increase year-on-year, according to the 2020 Statistical Bulletin of China’s Outward Foreign Direct Investment .

China’s government created “encouraged,” “restricted,” and “prohibited” outbound investment categories to suppress significant capital outflow pressure in 2016 and to guide PRC investors to more “strategic sectors.” The Sensitive Industrial-Specified Catalogue of 2018  further restricted outbound investment in sectors like property, cinemas, sports teams, and non-entity investment platforms and encouraged outbound investment in sectors that supported PRC national objectives by acquiring advanced manufacturing and high-tech assets.  PRC firms involved in sectors cited as priorities in the Strategic Emerging Industries, New Infrastructure Initiative, and MIC 2025 often receive preferential government financing and subsidies for outbound investment.

In 2006, the PRC established the Qualified (QDII) program to channel domestic funds into offshore assets through financial institutions. While the quota tied to this program has fluctuated over the years based on capital flight concerns, in 2021 the State Administration of Foreign Exchange (SAFE) approved new quotas for 17 institutions under the program to allow a potential $147.3 billion in outbound investment.

In 2013, the PRC government established a pilot program allowing global asset management companies more opportunities to raise RMB-denominated funds from high net-worth PRC-based individuals and institutional investors to invest overseas. These programs include the Qualified Domestic Limited Partnership (QDLP) pilot program and the Shenzhen-specific Qualified Domestic Investment Entity (QDIE) program. In 2021, the China Securities Regulatory Commission (CSRC) and SAFE expanded the pilot areas to at least seven jurisdictions and quotas for the QDLP to $10 billion, respectively. In April, the Shenzhen Financial Regulatory Bureau amended the Administrative Measures of Shenzhen for Implementation of the Pilot Program for Overseas Investment by Qualified Domestic Investors (“Shenzhen QDIE Measures”) to include investments in the securities market that aligns it with the QLDP program.

One of China’s WTO accession commitments was to establish an official journal dedicated to the publication of laws, regulations, and other measures pertaining to or affecting trade in goods, services, trade related aspects of IPR (TRIPS), and the control of foreign exchange. Despite mandatory 30-day public comment periods, PRC ministries continue to post only some draft administrative regulations and departmental rules online, often with a public comment period of less than 30 days. As part of the Phase One Agreement, China committed to providing at least 45 days for public comment on all proposed laws, regulations, and other measures implementing the Phase One Agreement. While China has made some progress, U.S. businesses operating in China consistently cite arbitrary legal enforcement and the lack of regulatory transparency among the top challenges of doing business in China.

In China’s state-dominated economic system, the relationships between the CCP, the PRC government, PRC business (state- and private-owned), and other PRC stakeholders are blurred. Foreign-invested enterprises (FIEs) perceive that China prioritizes political goals, industrial policies, and a desire to protect social stability at the expense of foreign investors, fairness, and the rule of law. The World Bank Global Indicators of Regulatory Governance gave China a composite score of 1.75 out 5 points, attributing China’s relatively low score to stakeholders not having easily accessible and updated laws and regulations; the lack of impact assessments conducted prior to issuing new laws; and other concerns about transparency.

For accounting standards, PRC companies use the Chinese Accounting Standards for Business Enterprises (ASBE) for all financial reporting within mainland China. Companies listed overseas or in Hong Kong may choose to use ASBE, the International Financial Reporting Standards, or Hong Kong Financial Reporting Standards.

While the government of China made many policy announcements in 2021 that will provide impetus to ESG reporting, stock exchanges on mainland China (not including Hong Kong) have not made ESG reporting mandatory. For instance, currently eighteen  PRC companies are signatories to the UN Principles for Responsible Investment. While the PRC government did announce its green finance taxonomy known as China’s “Catalogue of Green Bond Supported Projects”, experts cited the taxonomy lacks mandatory reporting and verification. On November 4, the People’s Bank of China and the European Commission also jointly launched a sustainable finance taxonomy to create comparable standards on green finance products. Mainland ESG efforts were also primarily focused on environmental and social impact-related, and less so on governance-related reporting. China’s goal to peak carbon emissions before 2030 and reach carbon neutrality by 2060 will drive reporting on decarbonization plans and targets and could increase alignment with international standards such as those outlined in the Task Force on Climate-Related Financial Disclosures (TCFD) recommendations. The PRC government also incorporated non-mandatory ESG-like principles into overseas development initiatives such as its signature Belt and Road Initiative (BRI) via its Guiding Opinions on Promoting Green Belt and Road Construction. For instance, the PRC adopted the Green Investment Principles (GIP) for greening investment for BRI projects; under this initiative members – including major PRC policy banks funding BRI projects – are expected to provide their first TCFD disclosure by 2023. Obstacles contacts cited include a shortage of quality data and ESG professionals, such as third-party auditors which are required to support evidence based ESG reporting.

In December, MEE issued new disclosure rules  requiring five types of domestic entities to disclose environmental information on an annual basis, effective February 8, 2022. The rules will apply only to listed companies and bond issuers that were subject to environmental penalties the previous year and other MEE-identified entities, including those that discharged high levels of pollutants. Entities must disclose information on environmental management, pollution generation, carbon emissions, and contingency planning for environmental emergencies. These same companies and bond issuers must also disclose climate change and environmental protection information related to investment and financing transactions.

On June 28, the CSRC issued final amendments requiring listed companies disclose environmental penalties and encouraging carbon emissions disclosures. It also issued guidelines on the format and content of annual reports and half-year reports of listed companies, requiring them to set up a separate “Section 5 Environmental and Social Responsibility” to encourage carbon emission reduction related disclosure. In May, the Ministry of Ecology and Environment (MEE) issued a plan  for strengthening environmental disclosure requirements by 2025. Most contacts assessed investors are the key drivers of increased ESG disclosures.

As part of its WTO accession agreement, China agreed to notify the WTO Committee on Technical Barriers to Trade (TBT) of all draft technical regulations. However, China continues to issue draft technical regulations without proper notification to the TBT Committee.

The PRC is also a member of the Regional Comprehensive Economic Partnership (RCEP), which entered into force on January 1, 2022. Although RCEP has some elements of a regional economic bloc, many of its regulatory provisions (for example on data flow) are weakened by national security exemptions.

On September 16, China submitted a written application to join the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) to New Zealand (the depositary of the agreement). The PRC would face challenges in addressing obligations related to SOEs, labor rights, digital trade, and increased transparency.

China’s legal system borrows heavily from continental European legal systems, but with “Chinese characteristics.” The rules governing commercial activities are found in various laws, regulations, departmental rules, and Supreme People’s Court (SPC) judicial interpretations, among other sources. While China does not have specialized commercial courts, it has created specialized courts and tribunals for the hearing of intellectual property disputes (IP), including in Beijing, Guangzhou, Shanghai, and Hainan.  The PRC’s constitution and laws are clear that PRC courts cannot exercise power independent of the Party. Further, in practice, influential businesses, local governments, and regulators routinely influence courts. Outside of the IP space, U.S. companies often hesitate in challenging administrative decisions or bringing commercial disputes before local courts due to perceptions of futility or fear of government retaliation.

The PRC’s new foreign investment law, the FIL, came into force on January 1, 2020, replacing the previous foreign investment framework. The FIL provides a five-year transition period for foreign enterprises established under previous foreign investment laws, after which all foreign enterprises will be subject to the same domestic laws as PRC companies, such as the Company Law. The FIL standardized the regulatory regimes for foreign investment by including the negative list management system, a foreign investment information reporting system, and a foreign investment security review system all under one document. The FIL also seeks to address foreign investors complaints by explicitly banning forced technology transfers, promising better IPR, and the establishment of a complaint mechanism for investors to report administrative abuses. However, foreign investors remain concerned that the FIL and its implementing regulations provide PRC ministries and local officials significant regulatory discretion, including the ability to retaliate against foreign companies.

The December 2020 revised investment screening mechanism under the Measures on Security Reviews on Foreign Investments (briefly discussed above) came into effect January 18 without any period for public comment or prior consultation with the business community. Foreign investors complained China’s new rules on investment screening were expansive in scope, lacked an investment threshold to trigger a review, and included green field investments – unlike most other countries. Moreover, new guidance on Neutralizing Extra-Territorial Application of Unjustified Foreign Legislation Measures, a measure often compared to “blocking statutes” from other markets, added to foreign investors’ concerns over the legal challenges they would face in trying to abide by both their host-country’s regulations and China’s. Foreign investors complained that market access in China was increasingly undermined by national security-related legislation. While not comprehensive, a list of official PRC laws and regulations is here .

On June 10, the Standing Committee of the NPC adopted the Law of the People’s Republic of China on Countering Foreign Sanctions (“Anti-Foreign Sanctions Law” or AFSL). The AFSL gives the government explicit authority to impose countermeasures related to visas, deportation, and asset freezing against individuals or organizations that broadly endanger China’s “sovereignty, security, or development interests.” The law also calls for Chinese citizens and organizations harmed by foreign “sanctions” to pursue damages via PRC civil courts.

On October 13, MOF issued a circular prohibiting discrimination against foreign-invested enterprises (FIEs) in government procurement for products “produced in China.” The circular required that suppliers not be restricted based on ownership, organization, equity structure, investor country, or product brand, to ensure fair competition between domestic and foreign companies. The circular also required the abolition of regulations and practices violating the circular by the end of November, including the establishment of alternative databases and qualification databases. This circular may have been intended to address the issuance of Document No. 551 in May by MOF and the Ministry of Industry and Information Technology (MIIT) (without publishing on official websites), titled “Auditing guidelines for government procurement of imported products,” outlining local content requirements for hundreds of items, many of which are medical devices, including X-ray machines and magnetic resonance imaging equipment. It is unclear whether Document 551 will be rescinded or revised based on this circular. Additionally, the circular applies only to FIEs and does not provide fair treatment for imported products from companies overseas. While the circular does state FIEs should be afforded equal treatment, the circular does not address concerns about localization pressures created by Document 551. Further, the circular provides no guidance on what constitutes a “domestic product” and does not address treatment of products manufactured in China that incorporate content from other jurisdictions, key concerns for a wide range of U.S. firms.

In November 2021, the PRC government announced transformation of the Anti-Monopoly Bureau of the SAMR, renaming it the National Anti-Monopoly Bureau, adding three new departments, and doubled staffing. The National Anti-Monopoly Bureau enforces China’s Anti-Monopoly Law (AML) and oversees competition issues at the central and provincial levels.  The bureau reviews mergers and acquisitions, and investigates cartel and other anticompetitive agreements, abuse of a dominant market positions, including those related to IP, and abuse of administrative powers by government agencies. The bureau also oversees the Fair Competition Review System (FCRS), which requires government agencies to conduct a review prior to issuing new and revising administrative regulations, rules, and guidelines to ensure such measures do not inhibit competition. SAMR issues implementation guidelines to fill in gaps in the AML, address new trends in China’s market, and help foster transparency in enforcement. Generally, SAMR has sought public comment on proposed measures, although comment periods are sometimes less than 30 days.

In October 2021, SAMR issued draft amendments to the AML for public comment. Revisions to the AML are expected to be finalized in 2022 and likely will include changes such as stepped-up fines for AML violations and specification of the factors to consider in determining whether an undertaking in the internet sector has abused a dominant market position. In February 2021, SAMR published (after public comment) the “Antitrust Guidelines for the Platform Economy.” The Guidelines address monopolistic behaviors of online platforms operating in China.

Foreign companies have long expressed concern that the government uses AML enforcement in support of China’s industrial policies, such as promoting national champions, particularly for companies operating in strategic sectors. The AML explicitly protects the lawful operations of government authorized monopolies in industries that affect the national economy or national security. U.S. companies expressed concerns that in SAMR’s consultations with other PRC agencies when reviewing M&A transactions, those agencies raise concerns not related to competition concerns to block, delay, or force transacting parties to comply with preconditions – including technology transfer – to receive approval.

China’s law prohibits nationalization of FIEs, except under vaguely specified “special circumstances” where there is a national security or public interest need. PRC law requires fair compensation for an expropriated foreign investment but does not detail the method used to assess the value of the investment.  The Department of State is not aware of any cases since 1979 in which China has expropriated a U.S. investment, although the Department has notified Congress through the annual 527 Investment Dispute Report of several cases of concern.

The PRC introduced bankruptcy laws in 2007, under the Enterprise Bankruptcy Law (EBL), which applies to all companies incorporated under PRC laws and subject to PRC regulations. In May 2020, the PRC released the Civil Code, contract and property rights rules. Despite the NPC listing amendments to the EBL as a top work priority for 2021, the NPC has not released the amendments to the public. Court-appointed administrators – law firms and accounting firms that help verify claims, organize creditors’ meetings, list, and sell assets online – look to handle more cases and process them faster.  As of 2021 official statements cited 5,060 institutional administrators and 703 individual administrators.

On August 18, the Law Enforcement Inspection Team of the Standing Committee of the NPC was submitted its report on the enforcement of enterprise bankruptcy to the 30th meeting of the Standing Committee of the Thirteenth NPC for deliberation. While the report is unavailable publicly, the Supreme People’s Court (SPC) website issued a press release  noting the report found that from 2007 to 2020, courts at all levels nationwide accepted 59,604 bankruptcy cases, and concluded 48,045 bankruptcy cases (in 2020 there were 24,438 liquidation and bankruptcy cases). Of the total liquidation and bankruptcy cases recorded in that same period, 90 percent involved private enterprises. The announcement also cited the allocation of additional resources, including future establishment of at least 14 bankruptcy tribunals and 100 Liquidation & Bankruptcy Divisions and specialized collegial panels to handle bankruptcy cases. As of August 2021, bankruptcy cases are handled by 417 bankruptcy judges, 28 high people’s courts, and 284 intermediate people’s courts.

In 2021 the government added a new court in Haikou. National data is unavailable for 2021, but local courts have released some information that suggest a nearly 10 percent increase in liquidation and bankruptcy cases in Jiangxi province and about a 66 percent increase in Guangzhou, the capital city of Guangdong province. While PRC authorities are taking steps to address corporate debt and are gradually allowing some companies to fail, companies generally avoid pursing bankruptcy because of the potential for local government interference and fear of losing control over the outcome. According to the SPC, 2.899 million enterprises closed business in 2020, of which only 0.1 percent or 3,908 closed because of bankruptcy.

In August 2020, Shenzhen released the Personal Bankruptcy Regulations of Shenzhen Special Economic Zone, to take effect on March 1, 2021. This is the PRC’s first regulation on personal bankruptcy. On July 19, the Shenzhen Intermediate People’s Court of Guangdong Province, China served a ruling on Liang Wenjin approving his personal bankruptcy reorganization plan. This was the first personal bankruptcy case closed by Shenzhen Court since the implementation of the Personal Bankruptcy Regulations of Shenzhen Special Economic Zone and is the first personal bankruptcy reorganization case in China.

The Personal Bankruptcy Regulations is China’s first set of rules on personal bankruptcy, which formally establishes the personal bankruptcy system in China for the first time. At present, the Personal Bankruptcy Regulations is only applicable in Shenzhen. Numerous other localities have also begun experimenting with legal remedies for personal insolvency, in part to deter debtors from taking extreme measures to address debt.

To attract foreign investment, different provinces and municipalities offer preferential packages like a temporary reduction in taxes and/or import/export duties, reduced costs for land use, research and development subsidies, and funding for initial startups. Often, these packages stipulate that foreign investors must meet certain benchmarks for exports, local content, technology transfer, or other requirements. However, many economic sectors that China deems sensitive due to broadly defined national or economic security concerns remain closed to foreign investment.

As part of efforts to attract green investment, China and the EU issued a green investment taxonomy on the sidelines of the 26th U.N. Climate Change Conference of the Parties (COP26) on November 4. The International Platform on Sustainable Finance (IPSF) Taxonomy Working Group issued the Common Ground Taxonomy- Climate Change Mitigation (CGT) to accelerate cross-border sustainability-focused investments and scale up the mobilization of green capital internationally. The CGT listed 80 economic activities across six industries as sustainable, including: (1) agriculture, forestry and fishing; manufacturing; (2) electricity, gas, steam and air conditioning supply; (3) construction; (4) water supply, and sewage, waste management and remediation activities; as well as (6) transportation and storage. The taxonomy includes criteria for calculating a project’s contribution to mitigating climate change. This taxonomy was the result of consultations held between the EU and China over the two years to conduct analyses between China’s “Catalogue of Green Bond Supported Projects” and the “EU Taxonomy Climate Delegated Act.” Green finance contacts reported the CGT would likely promote the issuance of cross-border green investment products and lower or avoid the cost of double certification. Environmental NGO contacts, however, noted the CGT was focused on climate change mitigation, without taking into consideration the principle of “do no significant harm.” The CGT is not legally binding for either the EU or China and is not formally endorsed by other members of the IPSF. Please see climate issues section for additional information on government incentives towards attracting green investment.

In 2013, the State Council announced the Shanghai pilot FTZ to provide open and high-standard trade and investment services to foreign companies. China gradually scaled up its FTZ pilot program to a total of 20 FTZs and one Free Trade Port (FTP), which are in all or parts of Fujian, Guangdong, Guangxi, Hainan (FTZ and FTP), Hebei, Heilongjiang, Henan, Hubei, Jiangsu, Liaoning, Shaanxi, Shandong, Sichuan, Yunnan, and Zhejiang provinces; Beijing, Chongqing, Shanghai, and Tianjin municipalities. The goal of China’s FTZs/FTP is to provide a trial ground for trade and investment liberalization measures and to introduce service sector reforms, especially in financial services, that China expects to eventually introduce in other parts of the domestic economy. The FTZs promise foreign investors “national treatment” investment in industries and sectors not listed on China’s negative lists.

Special Economic Zones (SEZs) in China include: Shantou, Shenzhen, Zhuhai, (Guangdong Province); Xiamen (Fujian Province) Hainan Province; Shanghai Pudong New Area; and Tianjin Binhai New Area.

In 2021, the PRC formulated the first negative list in the field of cross-border trade in services, effective in Hainan Free Trade Port. Separately, the PRC government has shortened the negative list for foreign investment in Pilot Free Trade Zones. In 2021, the seventh revision to the free trade zone negative list reduced close off sectors from 30 items to 27 items. Please see above section on negative lists for more details.

The government of China owns all urban land and only the state can issue long-term land leases to individuals and companies, including foreigners, subject to many restrictions. China’s property law stipulates that residential property rights renew automatically, while commercial and industrial grants renew if it does not conflict with other public interest claims. Several foreign investors have reported revocation of land use rights so that PRC developers could pursue government-designated building projects. Investors often complain about insufficient compensation in these cases. In rural China, the registration system suffers from unclear ownership lines and disputed border claims, often at the expense of local farmers whom village leaders exclude in favor of “handshake deals” with commercial interests. China’s Securities Law defines debtor and guarantor rights, including rights to mortgage certain types of property and other tangible assets, including long-term leases. PRC law does not prohibit foreigners from buying non-performing debt, but it must be acquired through state-owned asset management firms, and it is difficult to liquidate.

The PRC remained on the USTR Special 301 Report Priority Watch List in 2022 and was subject to continued Section 306 monitoring. Multiple PRC-based physical and online markets were included in the 2021 USTR Review of Notorious Markets for Counterfeiting and Piracy. Of note, in 2021, the PRC government took steps toward addressing long-standing U.S. concerns on a wide range of IP issues, from patents to trademarks to copyrights and trade secrets. The reforms addressed the granting and protection of IP rights as well as their enforcement, and included changes made in support of the Phase One Trade Agreement. In September 2021, the CCP Central Committee and State Council jointly issued the “Outline for Building a Strong Intellectual Property Nation (2021-2035).” The Outline was China’s second long-term plan to promote IP development since the 2008 National IP Strategy Outline, and provided a high-level framework and specific goals for reforms of China’s entire IP ecosystem, including mechanisms to incentivize the creation and utilization of IP, as well as the systems and mechanisms for protecting and enforcing it. The State Council in October issued the “National 14th Five-year Plan IP Protection and Utilization Plan” which provided a list of IP-related tasks to achieve during 2021-2025. The Plan called for expedited revisions to the Patent Law, Trademark Law, Copyright Law, Anti-Monopoly Law, Science and Technology Advancement Law, and e-Commerce law, and to strengthen legislation in areas such as geographical indicators and trade secrets. In 2021, China’s IP progress also included the implementation of a judicial interpretation related to punitive damages on IP infringements, the gradual elimination of subsidies linked to patent applications, and administrative measures addressing trademark and patent protection and enforcement, as well as enforcement of copyright and trade secrets.

Despite these reforms, IP rights remain subject to Chinese government policy objectives, which appear to have intensified in 2021. For U.S. companies in China, infringement remained both rampant and a low-risk “business strategy” for bad-faith actors. Further, enforcement and regulatory authorities continue to signal to U.S. rights holders that application of China’s IP system remains subject to the discretion of the PRC government and its policy goals. High-level remarks by PRC leader Xi Jinping and senior leaders signaled China’s commitment to cracking down on IP infringement in the years ahead. However, they also reflected China’s vision of the IP system as an important tool for limiting foreign ownership and control of critical technology and ensuring national security. While on paper China’s IP protection and enforcement mechanisms have inched closer to near parity with other foreign markets, in practice, fair, transparent, and non-discriminatory treatment will very likely continue to be denied to U.S. rights holders whose IP ownership and exploitation impede PRC economic development and national security goals.

For detailed information on China’s environment for IPR protection and enforcement, please see the following reports: 

• U.S.-China Phase One Agreement   
• USTR Section 301 Report on China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation    
• USTR 2021 Special 301 Report (see section on China)   
• USTR’s 2021 National Trade Estimate Report on Foreign Trade Barriers in China (see section on China)   
• USTR’s 2021 Report to Congress on China’s WTO Compliance
• USTR’s 2021 Notorious Market Report (see China) 

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

China’s leadership has stated that it seeks to build a modern, highly developed, and multi-tiered capital market. Since their founding over three decades ago, the Shanghai and Shenzhen Exchanges, combined, are ranked the third largest stock market in the world with over USD 12.2 trillion in assets. China’s bond market has similarly expanded significantly to become the second largest worldwide, totaling approximately USD 18.6 trillion. In 2021, China took steps to open certain financial sectors such as mutual funds, securities, and asset management, but multinational companies still report barriers to entering the PRC insurance markets. As an example, in September, Black Rock was the first firm given approval to sell mutual funds to PRC nationals as the first wholly foreign owned mutual fund. Direct investment by private equity and venture capital firms increased but also faced setbacks due to China’s capital controls, which obfuscate the repatriation of returns. Though the PRC is taking steps to liberalize its capital markets, PRC companies that seek overseas investment have historically tended to list in the United States or Hong Kong; PRC and U.S. regulations on exchanges and geopolitics may begin to impact this trend. As of 2021, 24 sovereign entities and private sector firms, including the Asian Development Bank, Hungary, and BMW, have since issued RMB 106.5 billion yuan, roughly USD 16.7 billion, in 72 “Panda Bonds,” Chinese renminbi (RMB)-denominated debt issued by foreign entities in China. China’s private sector can also access credit via bank loans, bond issuance, trust products, and wealth management products. However, most bank credit flows to state-owned firms, largely due to distortions in China’s banking sector that have incentivized lending to state-affiliated entities over their private sector counterparts.  China has been an IMF Article VIII member since 1996 and generally refrains from restrictions on payments and transfers for current international transactions. However, the government has used administrative and preferential policies to encourage credit allocation towards national priorities, such as infrastructure investments and industrial policy.

The PRC’s monetary policy is run by the PBOC, the PRC’s central bank. The PBOC has traditionally deployed various policy tools, such as open market operations, reserve requirement ratios, benchmark rates and medium-term lending facilities, to control credit growth. The PBOC had previously also set quotas on how much banks could lend but ended the practice in 1998. As part of its efforts to shift towards a more market-based system, the PBOC announced in 2019 that it will reform its one-year loan prime rate (LPR), which would serve as an anchor reference for other loans. The one-year LPR is based on the interest rate that 18 banks offer to their best customers and serves as the benchmark for rates provided for other loans. In 2020, the PBOC requested financial institutions to shift towards use of the one-year LPR for their outstanding floating-rate loan contracts from March to August. Despite these measures to move towards more market-based lending, the PRC’s financial regulators still influence the volume and destination of PRC bank loans through “window guidance” – unofficial directives delivered verbally – as well as through mandated lending targets for key economic groups, such as small and medium sized enterprises. In 2020, the China Banking and Insurance Regulatory Commission (CBIRC) also began issuing laws to regulate online lending by banks including internet companies such as Ant Financial and Tencent, which had previously not been subject to banking regulations. In 2021, PBOC and CBIRC issued circulars emphasizing the need to emphasize and encourage financial stability among real estate developers.

The CBIRC oversees the PRC’s 4,607 lending institutions, about USD 54 trillion in total assets. China’s “Big Five” – Agricultural Bank of China, Bank of China, Bank of Communications, China Construction Bank, and Industrial and Commercial Bank of China – dominate the sector and are largely stable, but has experienced regional banking stress, especially among smaller lenders. Reflecting the level of weakness among these banks, in September 2021, the PBOC announced in “China Financial Stability Report 2020” that 422 or 9.6 percent of the 4,400 banking financial institutions received a “fail” rating (high risk) following an industry-wide review in in the second quarter of 2021. The assessment deemed 393 firms, all small and medium sized rural financial institutions, “extremely risky.” The official rate of non-performing loans among China’s banks is relatively low: 1.7 percent as of the end of 2021. However, analysts believed the actual figure may be significantly higher. Bank loans continue to provide most credit options (reportedly around 63.6 percent in 2021) for Chinese companies, although other sources of capital, such as corporate bonds, equity financing, and private equity are quickly expanding in scope, reach, and sophistication in China.

As part of a broad campaign to reduce debt and financial risk, Chinese regulators have implemented measures to rein in the rapid growth of China’s “shadow banking” sector, which includes wealth management and trust products. These measures have achieved positive results. In December 2020, CBIRC published the first “Shadow Banking Report,” and claimed that the size of China’s shadow banking had shrunk sharply since 2017 when China started tightening the sector. By the end of 2019, the size of China’s shadow banking by broad measurement dropped to 84.8 trillion yuan from the peak of 100.4 trillion yuan in early 2017. PBOC estimated in January 2021 that the outstanding balance of China’s shadow banking was around RMB 32 trillion yuan at the end of 2020. Alternatively, Moody’s estimated that China’s shadow banking by broad measurement dropped to RMB 57.8 trillion yuan in the first half of 2021 and shadow banking to GDP ratio dropped to 52.9 percent from 58.3 percent at the end of 2020. Foreign owned banks can now establish wholly owned banks and branches in China, however, onerous licensing requirements and an industry dominated by local players, have limited foreign banks market penetration. Foreigners are eligible to open a bank account in China but are required to present a passport and/or Chinese government issued identification.

China officially has only one sovereign wealth fund (SWF), the China Investment Corporation (CIC), which was launched in 2007 to help diversify China’s foreign exchange reserves. Overall, information and updates on CIC and other funds that function like SWFs was difficult to procure. CIC is ranked the second largest SWF by total assets by Sovereign Wealth Fund Institute (SWFI). With USD 200 billion in initial registered capital, CIC manages over USD 1.2 trillion in assets as of 2021 and invests on a 10-year time horizon. In 2021, CIC reported that during the 2020 period it increased its information technology-related holdings while cutting holdings of overseas equities and bonds. CIC has two overseas branches, CIC International (Hong Kong) Co., Ltd. and CIC Representative Office in New York. CIC has since evolved into three subsidiaries:

• CIC International was established in September 2011 with a mandate to invest in and manage overseas assets.  It conducts public market equity and bond investments, hedge fund, real estate, private equity, and minority investments as a financial investor.
• CIC Capital was incorporated in January 2015 with a mandate to specialize in making direct investments to enhance CIC’s investments in long-term assets.
• Central Huijin makes equity investments in China’s state-owned financial institutions.

China also operates other funds that function in part like sovereign wealth funds, including: China’s National Social Security Fund, with an estimated USD 450 billion in assets in 2021; the China-Africa Development Fund (solely funded by the China Development Bank), with an estimated USD 10 billion in assets (2020); the SAFE Investment Company, with an estimated USD 417.8 billion in assets; and China’s state-owned Silk Road Fund, established in December 2014 with USD 40 billion in assets to foster investment in BRI countries. China’s state-run funds do not report the percentage of assets invested domestically. However, China’s state-run funds follow the voluntary code of good practices known as the Santiago Principles and participate in the IMF-hosted International Working Group on SWFs. While CIC affirms they do not have formal government guidance to invest funds consistent with industrial policies or designated projects, CIC is expected to pursue government objectives.

China has approximately 150,000 wholly-owned SOEs, of which 50,000 are owned by the central government, and the remainder by local or provincial governments.  SOEs account for 30 to 40 percent of total gross domestic product (GDP) and about 20 percent of China’s total employment. Non-financial SOE assets totaled roughly USD 30 trillion. SOEs can be found in all sectors of the economy, from tourism to heavy industries.  State funds are spread throughout the economy and the state may also be the majority or controlling shareholder in an ostensibly private enterprise. China’s leading SOEs benefit from preferential government policies aimed at developing bigger and stronger “national champions.” SOEs enjoy preferential access to essential economic inputs (land, hydrocarbons, finance, telecoms, and electricity) and exercise considerable power in markets like steel and minerals.  SOEs also have long enjoyed preferential access to credit and the ability to issue publicly traded equity and debt.  A comprehensive, published list of all PRC SOEs does not exist.

PRC officials have indicated China intends to utilize OECD guidelines to improve the SOEs independence and professionalism, including relying on Boards of Directors that are free from political influence.  However, analysts believe minor reforms will be ineffective if SOE administration and government policy remain intertwined, and PRC officials make minimal progress in primarily changing the regulation and business conduct of SOEs.  SOEs continue to hold dominant shares in their respective industries, regardless of whether they are strategic, which may further restrain private investment in the economy.  Among central SOEs managed by the State-owned Assets Supervision and Administration Commission (SASAC), senior management positions are mainly filled by senior party members who report directly to the CCP, and double as the company’s party secretary.  SOE executives often outrank regulators in the CCP rank structure, which minimizes the effectiveness of regulators in implementing reforms.  While SOEs typically pursue commercial objectives, the lack of management independence and the controlling ownership interest of the state make SOEs de facto arms of the government, subject to government direction and interference.  SOEs are rarely the defendant in legal disputes, and when they are, they almost always prevail.  U.S. companies often complain about the lack of transparency and objectivity in commercial disputes with SOEs.

Since 2013, the PRC government has periodically announced reforms to SOEs that included selling SOE shares to outside investors or a mixed ownership model, in which private companies invest in SOEs and outside managers are hired.  The government has tried these approaches to improve SOE management structures, emphasize the use of financial benchmarks, and gradually infuse private capital into some sectors traditionally monopolized by SOEs like energy, finance, and telecommunications. For instance, during an August 25 press conference, State-owned Assets Supervision and Administration Commission (SASAC) officials announced that in the second half of the year central SOE reform would focus on the advanced manufacturing and technology innovation sectors. As part of these efforts, they claimed SASAC would ensure mergers and acquisitions removed redundancies, stabilize industrial supply chains, withdraw from non-competitive businesses, and streamline management structures. In practice, however, reforms have been gradual, as the PRC government has struggled to implement its SOE reform vision and often preferred to utilize a SOE consolidation approach.  Recently, Xi and other senior leaders have increasingly focused reform efforts on strengthening the role of the state as an investor or owner of capital, instead of the old SOE model in which the state was more directly involved in managing operations.

SASAC issued a circular on November 20, 2020, directing tighter control over central SOEs overseas properties held by individuals on behalf of SOEs. The circular aims to prevent leakage of SOE assets held by individuals and SOE overseas variable interest entities (VIEs). According to the circular, properties held by individuals should be approved by central SOEs and filed with SASAC.

In Northeast China, privatization efforts at provincial and municipal SEOs remains low, as private capital makes cautious decisions in making investment to local debt-ridden and inefficient SOEs. On the other hand, local SOEs prefer to pursue mergers and acquisitions with central SOEs to avoid being accused of losing state assets. There is no available information on whether foreign investors could participate in privatization programs.

Since 2012, China has undergone a large-scale anti-corruption campaign, with investigations reaching into all sectors of the government, military, and economy. CCP General Secretary Xi labeled endemic corruption an “existential threat” to the very survival of the Party.  In 2018, the CCP restructured its Central Commission for Discipline Inspection (CCDI) to become a state organ, calling the new body the National Supervisory Commission-Central Commission for Discipline Inspection (NSC-CCDI). The NSC-CCDI wields the power to investigate any public official.  From 2012 to 2021, the NSC-CCDI claimed it investigated roughly four million cases. In the first three quarters of 2021, the NSC-CCDI investigated 470,000 cases and disciplined 414,000 individuals, of whom 22 were at or above the provincial or ministerial level. Since 2014, the PRC’s overseas fugitive-hunting campaign, called “Operation Skynet,” has led to the capture of more than 9,500 fugitives suspected of corruption who were living in other countries, including over 2,200 CCP members and government employees. In most cases, the PRC did not notify host countries of these operations. In 2021, the government reported apprehending 1,273 alleged fugitives and recovering approximately USD 2.64 billion through this program.

In March 2021, the CCP Amendment 11 to the Criminal Law, which increased the maximum punishment for acts of corruption committed by private entities to life imprisonment, from the previous maximum of 15-year imprisonment, took effect. In June 2020 the CCP passed a law on Administrative Discipline for Public Officials, continuing efforts to strengthen supervision over individuals working in the public sector. The law enumerates targeted illicit activities such as bribery and misuse of public funds or assets for personal gain. Anecdotal information suggests anti-corruption measures are applied inconsistently and discretionarily.  For example, to fight commercial corruption in the medical sector, the health authorities issued “blacklists” of firms and agents involved in commercial bribery, including several foreign companies. While central government leadership has welcomed increased public participation in reporting suspected corruption at lower levels, direct criticism of central leadership or policies remains off-limits and is seen as an existential threat to China’s political and social stability. China ratified the United Nations Convention against Corruption in 2005 and participates in the Asia-Pacific Economic Cooperation (APEC) and OECD anti-corruption initiatives. China has not signed the OECD Convention on Combating Bribery, although PRC officials have expressed interest in participating in the OECD Working Group on Bribery as an observer. Corruption Investigations are led by government entities, and civil society has a limited scope in investigating corruption beyond reporting suspected corruption to central authorities.

Liaoning set up a provincial watchdog, known as the “Liaoning Business Environment Development Department” to inspect government disciplines and provide a mechanism for the public to report corruption and misbehaviors through a “government service platform.” In 2021, Liaoning reported handling 8,091 cases and recovering approximately USD 290 million in ill-gotten gains by government agencies and SOEs through this program.

The following government organization receives public reports of corruption:

Anti-Corruption Reporting Center of the CCP Central Commission for Discipline Inspection and the Ministry of Supervision, Telephone Number:  +86 10 12388.

Foreign companies operating in China face a growing risk of political violence, most recently due to U.S.-China political tensions. PRC authorities have broad authority to prohibit travelers from leaving China and have imposed “exit bans” to compel U.S. citizens to resolve business disputes, force settlement of court orders, or facilitate PRC investigations. U.S. citizens, including children, not directly involved in legal proceedings or wrongdoing have also been subject to lengthy exit bans to compel family members or colleagues to cooperate with Chinese courts or investigations. Exit bans are often issued without notification to the foreign citizen or without clear legal recourse to appeal the exit ban decision. A 2020 independent report presented evidence that since 2018, more than 570,000 Uyghurs were implicated in forced labor picking cotton. There was also reporting that Xinjiang’s polysilicon and solar panel industries are connected to forced labor. In 2021, PRC citizens, with the encouragement of the PRC government, boycotted companies that put out statements on social media affirming they do not use Xinjiang cotton in their supply chain. Some landlords forced companies to close retail outlets during this boycott due to fears of being associated with boycotted companies. The ongoing PRC crackdown on virtually all opposition voices in Hong Kong and continued attempts by PRC organs to intimidate Hong Kong’s judges threatens the judicial independence of Hong Kong’s courts – a fundamental pillar for Hong Kong’s status as an international hub for investment into and out of China.  Apart from Hong Kong, the PRC government has also previously encouraged protests or boycotts of products from countries like the United States, the Republic of Korea (ROK), Japan, Norway, Canada, and the Philippines, in retaliation for unrelated policy decisions such as the boycott campaigns against Korean retailer Lotte in 2016 and 2017 in response to the ROK government’s decision to deploy the Terminal High Altitude Area Defense (THAAD); and the PRC’s retaliation against Canadian companies and citizens for Canada’s arrest of Huawei’s Chief Financial Officer Meng Wanzhou.

For U.S. companies operating in China, finding, developing, and retaining domestic talent at the management and skilled technical staff levels remain challenging for foreign firms, especially as labor costs, including salaries and inputs continue to rise. COVID-19 control and related travel measures have also made it difficult to recruit or retain foreign staff. Foreign companies also complain of difficulty navigating China’s labor and social insurance laws, including local implementation guidelines. Compounding the complexity, due to ineffective enforcement of labor laws and high mandatory social insurance contributions, many PRC domestic employers and employees will not sign formal employment contracts, putting foreign firms at a disadvantage. The All-China Federation of Trade Unions (ACFTU) is the only union recognized under PRC law.  Establishing independent trade unions is illegal.  The law allows for “collective bargaining,” but in practice, focuses solely on collective wage negotiations.  The Trade Union Law gives the ACFTU, a CCP organ chaired by a Politburo member, control over all union organizations and activities, including enterprise-level unions.  ACFTU enterprise unions require employers to pay mandatory fees, often through the local tax bureau, equaling a negotiated minimum of 0.5 percent to a standard two percent of total payroll.  While labor laws do not protect the right to strike, “spontaneous” protests and work stoppages occur.  Official forums for mediation, arbitration, and other mechanisms of alternative dispute resolution often are ineffective in resolving labor disputes.  Even when an arbitration award or legal judgment is obtained, getting local authorities to enforce judgments is problematic.

The PRC has not ratified the International Labor Organization (ILO) conventions on freedom of association, collective bargaining, or forced labor, but it has ratified conventions prohibiting child labor and employment discrimination. Uyghurs and members of other minority groups are subjected to forced labor in Xinjiang and throughout China via PRC government-facilitated labor transfer programs.

In 2021, the U.S government updated its business advisory on risks for businesses and individuals with exposure to entities engaged in forced labor and other human rights abuses linked to Xinjiang. This update highlights the extent of the PRC’s state-sponsored forced labor and surveillance taking place amid its ongoing genocide and crimes against humanity in Xinjiang. The Advisory stresses that businesses and individuals that do not exit supply chains, ventures, and/or investments connected to Xinjiang could run a high risk of violating U.S. law. In fiscal year 2021, CBP issued four Withhold Release Orders  (WROs) against PRC goods produced with forced labor. The Commerce Department added PRC commercial and government entities to its Entity List for their complicity in human rights abuses and the Department of Treasury sanctioned Wang Junzheng, the Secretary of the Party Committee of the Xinjiang Production and Construction Corps (XPCC) and Chen Mingguo, Director of the Xinjiang Public Security Bureau (XPSB) to hold human rights abusers accountable in Xinjiang. In June 2021, the U.S. Department of Labor added polysilicon for China to an update of the List of Goods Produced by Child Labor or Forced Labor. The Department of Labor has listed 18 goods as produced by forced labor in China. Some PRC firms continued to employ North Korean workers in violation of UN Security Council sanctions. Pursuant to UN Security Council resolution (UNSCR) 2397, all DPRK nationals earning income, subject to limited exceptions, were required to have been repatriated to the DPRK by 22 December 2019.

* Source for Host Country Data: National Bureau of Statistics 

Table 4: Sources of Portfolio Investment
Data not available.

Demonstrating its commitment to improving the business environment in Fiji, the Fiji Parliament passed the Investment Act 2021 which will eventually replace the Foreign Investment Act 1999. The new law aims to improve ease of doing business in Fiji by streamlining the business registration process; attracting foreign and domestic investment; and providing equity for investors with transparent, reliable, efficient, and fair rules and procedures. Previously, all foreign investors were required to register for a Foreign Investment Registration Certificate (FIRC). The new law not only removes the requirement for a FIRC but also strengthens the rights and obligations of the investors. Fiji’s Ministry of Commerce, Trade, Tourism, and Transport (MCTTT) is currently working with the International Finance Corporation (IFC) to draft the regulations of the Act. The new law will come into effect once a notice in the Gazette is issued.

Under the new law, both domestic and foreign investors will undergo the business registration process with the Registrar of Companies and annually report to Investment Fiji. One of the investors’ rights under the law is in reference to national treatment and the most-favored-nation principle whereby foreign investors must be treated no less favorably in like circumstances than domestic investors with respect to the acquisition, expansion, management, conduct, operation, sale, or other disposition of investments in Fiji. Fiji’s Department of Immigration is responsible for managing investor permits for non-citizen investors.

Investment Fiji is responsible for the promotion of foreign investment in the interest of national development. The three main services provided by Investment Fiji include investment promotion, investment facilitation (project management), and trade promotion. In addition to registering and assisting with the implementation of foreign investment projects, Investment Fiji hosts information seminars for visiting foreign business delegations and participates at investment missions overseas. The process of foreign investor registration by Investment Fiji will be phased out when the new law takes effect.

Investment Fiji has recently placed more focus on providing facilitation support for both new and existing foreign and domestic investors. The Fijian government supports and encourages existing businesses to re-invest. Several industry associations have been established which provide a forum for companies to share concerns and ideas in the industry. Examples of these industry associations include the Textile, Clothing, and Footwear (TCF) Council of Fiji, Business Process Outsourcing (BPO) Council of Fiji, and the Fiji Manufacturers Association.

Investors are free to invest in all sectors and regions in Fiji provided it does not contravene the Investment Act 2021 and other laws in place.

Investment in the fisheries sector requires a 30 percent local equity in the project.

Some investment activities are reserved for Fiji nationals or are subject to restrictions. For all other business activities, there is no minimum investment requirement. There are currently 17 reserved activities exclusively for Fiji citizens, mainly in the services sector, and eight restricted activities that fall under the Foreign Investment Act 1999 and Foreign Investment Regulations 2009. These will soon be phased out and will be replaced with a new list of reserved and restricted activities currently being drafted for the Investment Act 2021. The current list of reserved and restricted areas can be found at  https://global-uploads.webflow.com/5fc6b3ad7010ef7a53f68376/60d8f22321e2187f849ac435_Checklist%202020.pdf

Investment Fiji helps vet foreign investment proposals to ensure that the projects are in the interest of national development and to support implementation of projects. The Investment Act 2021 has provisions to restrict investment for the protection of national security interests. Investments in a sector that may have potential effects on critical infrastructure such as energy, transport, communications, data storage, or financial infrastructure; critical technologies; the security of supply of critical inputs; or access to sensitive information or the ability to control sensitive information must have their proposals submitted for Ministerial approval.

The Fiji government’s MCTTT revised the recently passed Investment Act 2021. The International Finance Corporation, a member of the World Bank Group, in collaboration with foreign development partners, provided technical expertise in the review.

The Fiji Civil Society Organization released a 2016-2019 report on Sustainable Development Goals. The report details ways in which civil society and community groups contribute to the achievement of the 17 SDGs in Fiji. This includes Goals 7, 8, 9 & 10 on “affordable and clean energy; and decent work and economic growth” and “industry, innovation, and infrastructure; and reduced inequality.”

Australia is the largest donor for civil society in Fiji and currently supports CSOs through bilateral, regional, and global initiatives.

The Fiji government’s bizFiji website ( www.business-fiji.com ) is an information portal for new and existing businesses, as well as foreign investors. The portal provides information on the business registration process, how to obtain construction permits, and included application forms and links to all the required agencies, including the Registrar of Companies, Fiji Revenue and Customs Services (FRCS), Fiji National Provident Fund, National Occupational Health and Safety Services, and Fiji National University. The government’s reforms to improve the ease and reduce the cost of doing business include the removal of the business license requirement for low-risk businesses, reducing the processing times from five days to 48 hours to issue business licenses, and the removal of several requirements for existing businesses. Since the launch of bizFiji in 2019, the government has worked to develop a single online clearance system to improve registration processes, but inefficiencies remain.

For foreign investors, the bizFiji website is also linked to the Investment Fiji website. The registration form and procedures, and regulations for foreign investment is available at the Investment Fiji issue of the Foreign Investment Registration Certificate (FIRC). Applications for a FIRC and payment of the requisite application fee of $1,336 (FJD$2,725) must be submitted to Investment Fiji. Investors need to meet the requirements listed under the Foreign Investment Act (FIA) and the 2009 Foreign Investment Regulation as well as ensure that the investment activity does not fall under the reserved and restricted activities lists. The registration process for investment applications takes at least five working days and sometimes longer if the paperwork is incomplete. Once the Investment Act 2021 comes into effect, the requirement to register with Investment Fiji will be removed.

Investors are also required to obtain the necessary permits and licenses from other relevant authorities and should be prepared for delays. There are no special services or preferences to facilitate investment and business operations by micro, small, and medium sized enterprises, or by women.

Contact: Ministry of Commerce, Trade, Tourism and Transport, Level 2 and 3, Civic Tower, Victoria Parade, Suva; Telephone: (679) 330 5411; Website: www.mcttt.gov.fj 

The Reserve Bank of Fiji (RBF) tightened exchange controls for any outward investment by individuals, companies, and non-bank financial institutions, including the Fiji National Provident Fund, which require clearance from the RBF.

Laws passed in parliament are available to the public on the parliament website and published in an official gazette. The lack of consultation with the private sector and other stakeholders on proposed laws and regulations remains an area of concern. The business community has complained that the government enacts new regulations with little prior notice or publicity. There is a perception among foreign investors that there is a lack of transparency in government procurement and approval processes. Some foreign investors considering investment in Fiji have encountered lengthy and costly bureaucratic delays, shuffling of permits among government ministries, inconsistent and changing procedures, lack of technical capacity, costly penalties due to the interpretation of tax regulations by the Fiji Revenue and Customs Service (FRCS), and slow decision-making. The Biosecurity Authority of Fiji (BAF) regulates all food and animal products entering Fiji and has stringent and costly point-of-origin inspection and quarantine requirements for foreign goods. The government does not require companies to file an environmental, social and governance (ESG) disclosure.

Fiji’s constitution provides for public access to government information and for the correction or deletion of false or misleading information. Although the constitution requires that a freedom of information law be enacted, there is no such law yet. Proposed bills or regulations, including investment regulations, are made available and usually posted on the relevant ministry or regulatory authority’s website. The parliamentary website ( http://www.parliament.gov.fj/ ) is a centralized online location that publishes laws and regulations passed in parliament. The government’s public finances and debt obligations are also made available annually in the budget documents.

Fiji is a member of the Melanesian Spearhead Group (MSG) that allows for the duty-free trade of goods between Fiji, Papua New Guinea, Vanuatu, and Solomon Islands. Fiji has been a member of the WTO since January 1996. According to Fiji’s trade profile on the WTO website, there are no records of disputes. Fiji ratified the WTO’s Trade Facilitation Agreement in 2017.

The legal system in Fiji developed from British law. Fiji maintains a judiciary consisting of a Supreme Court, a Court of Appeal, a High Court, and magistrate courts. The Supreme Court is the final court of appeal.

Both companies and individuals have recourse to legal treatment through the system of local and superior courts. A foreign investor theoretically has the right of recourse to the courts and tribunals of Fiji with respect to the settlement of disputes, but government laws have been used to block foreign investors from legal recourse in investment takeovers, tax increases, or write-offs of interest to the government.

The Foreign Investment Act (FIA) and the 2009 Foreign Investment Regulation regulate foreign investment in Fiji. However, these laws will be replaced when the Investment Act 2021, passed in parliament in 2021, is implemented. At time of writing, all businesses with a foreign-investment component in their ownership are required to register and obtain a Foreign Investment Registration Certificate (FIRC). Information on the registration procedures, regulations, and registration requirements for foreign investment is available at the Investment Fiji website: http://www.investmentfiji.org.fj . Amendments to the FIA also require that foreign investors seek approval prior to any changes in the ownership structure of the business, with penalties incurred for non-compliance.

The Fiji government’s bizFiji website (www.business-fiji.com), an information portal for businesses and foreign investors, includes links to the Investment Fiji website. Since the launch of bizFiji in 2019, the government has worked to develop a single online clearance system to improve registration processes, but inefficiencies remain.

The Fiji Competition and Commerce Commission (FCCC) regulates monopolies, promotes competition, and controls prices of selected hardware, basic food items, and utilities, to ensure a fair, competitive, and equitable market.

Expropriation has not historically been a common phenomenon in Fiji. A foreign investor theoretically has the same right of recourse as a Fijian enterprise to the courts and other tribunals of Fiji to settle disputes. In practice, the government has acted to assert its interests with laws affecting foreign investors.

In 2013, the government amended the Foreign Investment Decree with provisions to permit the forfeiture of foreign investments as well as significant fines for breaches of compliance with foreign investment registration conditions.

Fiji’s Companies Act 2015 has provisions relating to solvency and negative solvency. According to the 2020 World Bank Doing Business survey, prior to COVID-19, in terms of resolving insolvency, it took an estimated 1.8 years at a cost of ten percent of the estate to complete the process, with an estimated recovery rate of 46.5 percent of value.

Fiji offers incentives for a range of sectors to encourage investments in agriculture, residential housing development, energy, audio & visual, retirement village / aged care facilities, health sector, tourism, manufacturing, and the information communication technology (ICT) / business process outsourcing (BPO) sector.

Government is increasingly participating in public private partnerships. Although it does not practice issuing guarantees to foreign direct investments, it has previously offered a tax holiday for the entire period of the partnership agreement.

Fiji offers tax holidays for investments in biofuel production for investments of at least $117,925 (FJD$250,000). The tax holidays range from five to 13 years depending on the level of investment. The incentive package further includes duty free importation of plant, machinery, and equipment for initial establishment of the factory and duty-free importation of chemical required for biofuel production. The importation of all agricultural items will be subject to zero duty provided a support letter is obtained from Fiji’s Ministry of Agriculture.

A five-year tax holiday is offered to investors for new renewable energy projects and power cogeneration upon approval. Investment projects for electric vehicle charging station businesses will receive a seven-year tax holiday and will be granted a subsidy up to a maximum of five percent of the total capital outlay incurred in the development of electric vehicle charging stations, provided the capital expenditure is at least $47,170 (FJD$100,000), and will be allowed to carry loss forward to eight years. Any business investing in electric buses shall be allowed a tax deduction of 55 percent.

The northern and selected maritime regions of Fiji have been declared Tax Free Regions (TFR) to encourage development in these isolated outposts. The specific areas include Vanua Levu, Rotuma, Kadavu, Levuka, Lomaiviti, Lau, and the Nausori-Lautoka region (from Nausori Airport side of the Rewa River (excluding township boundary) to the Ba side of the Matawalu River). Businesses established in these regions which meet the prescribed requirements enjoy a corporate tax holiday of up to 13 years and import duty exemption on raw materials, machinery, and equipment. The Wairabetia Economic Zone (WEZ) is a government project planned to be established by 2023 in Lautoka to provide the necessary facilities to support businesses with the provision of developed lots close to Lautoka Port and Nadi airport.

The government does not follow “forced localization.” However, immigration “time post” permits reserved for specialist positions encourage the transfer of knowledge and skills from expatriate workers to local workers. Investors permits are granted and extended by the Department of Immigration based on recommendations submitted by Investment Fiji through a progress report. The progress report provides the Department of Immigration an update on the progress of the investment project by the foreign investor.

There are performance requirements to use domestic content in goods to qualify for trade under the trade agreements between Fiji and partner countries, and to receive the “Fijian Made” branding by the MCTTT. These requirements apply to both foreign and domestic investors. Investment incentives are applied systematically.

To support the implementation of newly approved investments, Investment Fiji established a monitoring system to assist companies in obtaining necessary approvals to commence operations. The investing firm must ensure that commercial production begins within 12 months for investments under $1.18 million (FJD$2.5 million) or within 18 months of the date of approval of the project for investments above $1.18 million (FJD$2.5 million).

The U.S. Embassy is unaware of any policies regulating data storage or requiring foreign IT providers to turn over source code or provide access to surveillance.

Under the Investment Act 2021, any new investments relating to data storage or access to sensitive information or the ability to control sensitive information must have their proposals vetted by the MCTTT.

Land tenure and usage in Fiji is a highly complex and sensitive issue. Fiji’s Land Sales Act of 2014 restricts ownership of freehold land inside a city or town council boundaries areas to Fijian citizens. There are exceptions to allow foreigners to purchase strata title land, which is defined as ownership in part of a property including multi-level apartments or subdivisions. Foreigners are still allowed to purchase, sell, or lease freehold land for industrial or commercial purposes, residential purposes within an integrated tourism development, or for the operation of a hotel licensed under the Hotel and Guest Houses Act. The Land Sales Act also requires foreign landowners who purchase approved land to build a dwelling valued at a minimum of $117,925 (FJD$250,000) on the land within two years or face an annual tax of 20 percent of the land value (applied as ten percent every six months). Freehold land currently owned by a non-Fijian can pass to the owners’ heirs and will not be deemed a sale.

Foreign landowners criticized the government of Fiji for the speed at which the act was passed and the perceived lack of consultation with landowners and developers. The application of the Land Sales Act continues to create uncertainty among foreign investors. The Fiji government has yet to provide full clarification of the act, such as defining what constitutes an integrated tourism development. The limited capacity of construction and architecture firms makes it difficult to comply with the two-year time frame for building a dwelling before tax penalties set in.

According to the pre-COVID-19 World Bank’s 2020 Doing Business Report, registering property took a total of 69 days and involved four main processes, including conducting title searches at the Titles Office, presenting transfer documents for stamping at the Stamp Duty office, obtaining tax clearance on capital gains tax, and settlement at the Registrar of Titles Office.

Ethnic Fijians communally hold approximately 87 percent of all land. Crown land owned by the government accounts for four percent while the remainder is freehold land, which private individuals or companies hold. All land owned by ethnic Fijians, commonly referred to as iTaukei land, is held in a statutory trust by the iTaukei Land Trust Board (TLTB) for the benefit of indigenous landholding units.

To improve access to land, the government established a land bank in the Ministry of Lands under the land use decree for the purpose of leasing land from indigenous landowning units (collections of households; under the indigenous communal landowning system, land is not owned by individuals) through the TLTB and subleasing the land to individual tenants for lease periods of up to 99 years.

The constitution includes other new provisions protecting land leases and land tenancies, but observers noted that the provisions had unintended consequences, including weakening the overall legal structure governing leases.

The availability of Crown land for leasing is usually advertised. This does not, however, preclude consideration given to individual applications in cases where land is required for special purposes. Government leases for industrial purposes can last up to 99 years with rents reassessed every ten years. TLTB leases for land nearer to urban locations are normally for 50-75 years. Annual rent is reassessed every five years. The maximum rent that can be levied in both cases is six percent of unimproved capital value. Leases also usually carry development conditions that require lessees to effect improvements within a specified time.

Apart from the requirements of the TLTB and Lands Department, town planning, conservation, and other requirements specified by central and local government authorities affect the use of land. Investors are urged to seek local legal advice in all transactions involving land.

Fiji’s copyright laws are in conformity with World Trade Organization (WTO) Trade Related Aspects of Intellectual Property (TRIPS) provisions. However, the enforcement of these laws remains weak, and capacity is a challenge.

Illegal materials and reproductions of films, sound recordings, and computer programs are widely available throughout Fiji. In 2021, Fiji’s parliament passed new intellectual property laws including the protection of trademarks, patents, and designs. The laws are yet to be implemented.

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

The capital market is regulated and supervised by the Reserve Bank of Fiji (RBF). Twenty companies were listed on the Suva-based South Pacific Stock Exchange (SPSE). At the end of September 2021, market capitalization was $1.52 billion (FJD$3.212 billion), an annual decline of 5.9 percent compared to September 2020. To promote greater activity in the capital market, the government lowered corporate tax rates for listed companies to ten percent and exempted income earned from the trading of shares in the SPSE from income tax and capital gains tax. The RBF issued the Companies (Wholesale Corporate Bonds) Regulations 2021 to develop the domestic corporate bond market by providing a simplified process for the issuance of corporate bonds to eligible wholesale investors only.

Foreign investors are allowed to get credit from authorized banks and other lending institutions without the approval of the RBF for loans up to $4.7 million (FJD$10 million), provided the debt-to-equity ratio of 3:1 is satisfied.

Fiji has a well-developed banking system supervised by the Reserve Bank of Fiji. The RBF regulates the Fiji monetary and banking systems, manages the issuance of currency notes, administers exchange controls, and provides banking and other services to the government. In addition, it provides lender-of-last-resort facilities and regulates trading bank liquidity.

There are six commercial banks with established operations in Fiji: ANZ Bank, Bank of Baroda, Bank of South Pacific, Bred Bank, Home Finance Corporation (HFC), and Westpac Banking Corporation, with the HFC the only locally owned bank. Non-banking financial institutions also provide financial assistance and borrowing facilities to the commercial community and to consumers. These institutions include the Fiji Development Bank, Credit Corporation, Kontiki Finance, Merchant Finance, and insurance companies. As of December 2021, total assets of commercial banks amounted to $5.77 billion (FJD$12.223 billion). The RBF reported that liquidity reached $0.94 billion (FJD$1.99 billion) in December 2021 and were sufficient and did not pose a risk to bank solvency. However, the RBF also noted that existing levels of non-performing loans could rise, with the ending of moratoriums offered by financial institutions to COVID-19 affected customers. To open a bank account, foreign investors need to provide a copy of the Foreign Investment Registration Certificate (FIRC) issued by Investment Fiji.

The Fiji government does not maintain a sovereign wealth fund or asset management bureau in Fiji. The country’s pension fund scheme, the Fiji National Provident Fund, which manages and invests members’ retirement savings, accounts for a third of Fiji’s financial sector assets. The fund invests in equities, bonds, commercial paper, mortgages, real estate, and various offshore investments.

State-owned enterprises (SOEs) in Fiji are concentrated in utilities and key services and industries including aerospace (Fiji Airways, Airports Fiji Limited); agribusiness (Fiji Pine Ltd); energy (Energy Fiji Limited); food processing (Fiji Sugar Corporation, Pacific Fishing Company); information and communication (Amalgamated Telecom Holdings); and media (Fiji Broadcasting Corporation Ltd). There are 25 SOEs with combined assets valued at $3.87 billion (FJD $8.2 billion) in 2019. The SOEs include 10 Government Commercial Companies which operate commercially and are fully owned by the government, five Commercial Statutory Authorities (CSA) which have regulatory functions and charge nominal fees for their services, seven Majority Owned Companies, and two Minority Owned Companies with some government equity. The SOEs that provide essential utilities, such as energy and water, also have social responsibility and non-commercial obligations. A list of SOEs is published in government’s annual budget documentation.

Aside from the CSAs, SOEs do not exercise delegated governmental powers. SOEs benefit from economies of scale and may be favored in certain sectors. The Fiji Broadcasting Company Ltd (FBCL) is exempt from the Media Decree, which governs private media organizations and exposes private media to criminal libel lawsuits. The government has pursued a policy of opening or deregulating various sectors of the economy.

The government is pursuing public private partnership (PPP) models in energy, aviation infrastructure, and public housing, often seeking technical assistance from development partners including the International Finance Corporation to implement these arrangements and to encourage more private sector participation. In 2021, a Japanese consortium acquired 44 percent shareholding in state utility company Energy Fiji Limited. Foreign investors are already partnering in public-private partnership arrangements in the health and maritime port sectors. In 2018, the government signed the first public private partnership agreement in the medical sector with Fiji’s pension fund and an Australian company to develop, upgrade, and operate the Ba and Lautoka hospitals, the country’s two major hospitals in the western region. The PPP arrangements were finalized and in April 2022, and the new Ba hospital opened. The Ministry of Economy publishes these opportunities as Tenders or Expressions of Interest ( http://www.economy.gov.fj/ ).

Responsible Business Conduct (RBC) is increasingly promoted, and the government has included legal provisions to protect the environment, consumers, human rights, and labor rights, although its monitoring and enforcement of RBC is mixed. The media, civil society organizations, and labor unions play active roles in promoting RBC. In 2019, a foreign-owned tourism development project was cancelled after the media highlighted extensive environmental degradation by the project developers.

Department of State

• Country Reports on Human Rights Practices;
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities;
• U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises; and;
• Xinjiang Supply Chain Business Advisory 

Department of the Treasury

• OFAC Recent Actions

Department of Labor

• Findings on the Worst Forms of Child Labor Report;
• List of Goods Produced by Child Labor or Forced Labor;
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World and;
• Comply Chain.

The Fiji government has identified climate change as the single largest threat to Fiji’s development aspirations. The National Climate Change Policy 2018-2030 (NCCP) is the country’s overarching policy instrument for climate change and is closely aligned to Fiji’s 20-year National Development Plan. The NCCP outlines Fiji’s priorities and strategies in reducing present and future climate risks, while maximizing the country’s long-term gains in development.

The NCCP and the Low Emission Development Strategy (LEDS) solidifies Fiji’s commitment to achieve net-zero emissions by 2050. In 2021, Fiji signed a five-year agreement that will reward up to $12.5 million (approx. FJ$26 million) for its efforts to reduce carbon emissions from deforestation and forest degradation. The landmark agreement is with the Forest Carbon Partnership Facility (FCPF), a global partnership housed at the World Bank. Fiji’s emission reductions program will address the main drivers of deforestation and forest degradation through integrated land use planning, native forest conservation, and sustainable pine and mahogany plantations.

The government has raised several financing initiatives to raise budgetary resources to towards implementing its climate change commitments, including the issue of its first-ever sovereign of green bond in November 2017 on the London Stock Exchange, the introduction of an Environmental and Climate Adaptation Levy (ECAL) previously applicable on prescribed services, and a plastic bag levy to promote the use of reusable bags. However, public procurement policies do not include environmental and green growth standards.

The legal code provides criminal penalties for corruption by officials, but corruption cases often proceeded slowly. In 2021, parliament enacted the “high court amendment” law that created a specialized court to enable specific judges and magistrates to preside over and speedily resolve anticorruption cases.

The government established the Fiji Independent Commission Against Corruption (FICAC), which has broad powers of investigation. FICAC’s public service announcements encouraging citizens to report corrupt government activities have had some effect on systemic corruption. The government adequately funded FICAC, but some observers questioned its independence and viewed some of its high-profile prosecutions as politically motivated. The media publishes articles on FICAC investigations into abuse of office, and anonymous blogs report on government corruption. FICAC in collaboration with the United Nations Pacific Regional Anti-corruption agency (UN-PRAC) launched a nationwide anti-bribery campaign. However, Fiji’s relatively small population and limited circles of power often lead to personal relationships playing a major role in business and government decisions. Fiji acceded to the UN Convention Against Corruption (UNCAC) in 2008.

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

Mr. Rashmi Aslam
Commissioner
Fiji Independent Commission Against Corruption (FICAC)
P.O. Box 2335, Government Buildings, Suva, FIJI
(679) 3310290
info@ficac.org.fj 

Contact at a “watchdog” organization:

Civic Leaders for Clean Transactions (CLCT) Integrity Fiji
60 Robertson Road, Suva
integrityfiji73@gmail.com
www.facebook.com/civicleaders 

The country held general elections in November 2018 and international observers deemed elections credible. Although civil unrest is uncommon, the Public Order Act restricts freedoms of speech, assembly, and movement to preserve public order. The Online Safety law may also restrict free speech in the digital space. In 2021, there were reports that authorities used the POA’s wide provisions to restrict freedom of expression and of association, and arrest citizens critical of the government on social media. The next elections are expected in 2022.

Labor market conditions at the end of 2021 improved with the lifting of the travel restrictions and the reopening of international borders. The number of workers in the informal sector increased during the COVID-19 pandemic. According to the International Labor Organization (ILO), an estimated 66 percent of the workforce was in the informal sector.

The ILO estimates that Fiji’s labor force in 2020 was 361,369, with a labor force participation rate of 75.4 percent for males and 56.7 percent for females. Education is compulsory until age 17, with male and female students in Fiji achieving largely the same level of education. Fiji continues to face acute labor shortages in a broad range of fields, including the medical, management, engineering, and financial sectors, and increasingly, competent trade-skilled people in the construction, electrical, and plumbing trades. Fiji participates in the Pacific Australia Labor Mobility (PALM) Scheme and Fijians were employed in meat works, hospital, accommodation, and aged care sectors. As of April 2022, close to 800 Fijians were employed in meat works under PALM.

The Ministry of Employment, Productivity, and Industrial Relations has responsibility for the administration of labor laws and the encouragement of good labor relations. The Employment Relations (Amendment) Act of 2016 restored the 2007 Employment Relations Promulgation (ERP) as the primary basis for the right of workers to join trade unions. Trade unions are independent of the government. The ERP prohibits forced labor, discrimination in employment based on ethnicity, gender, and other prohibited grounds, and stipulates equal remuneration for work of equal value. There are workplace safety laws and regulations, and safety standards apply equally to both citizens and foreign workers. The government announced a rise in the national minimum hourly wage rate to $1.89 (FJD$4) in the revised FY2021-2022.

U.S. Embassy Suva
158 Princes Road, Tamavua, Suva
(679) 3314466
commercialsuva@state.gov 

Changes in India’s foreign investment rules are notified in two different ways: (1) Press Notes issued by the Department for Promotion of Industry and Internal Trade (DPIIT) for most sectors, and (2) legislative action for insurance, pension funds, and state-owned enterprises in the coal sector. FDI proposals in sensitive sectors will, however, require the additional approval of the Home Ministry.

The DPIIT, under the Ministry of Commerce and Industry, is the lead investment agency, responsible for the formulation of FDI policy and the facilitation of FDI inflows. It compiles all policies related to India’s FDI regime into a single document that is updated every year. This updated policy compilation can be accessed at: http://dipp.nic.in/foreign-direct–investment/foreign–direct–investment-policy.  The DPIIT disseminates information about India’s investment climate and, through the Foreign Investment Implementation Authority (FIIA), plays an active role in resolving foreign investors’ project implementation problems. The DPIIT oftentimes consults with lead ministries and stakeholders. However, there have been specific incidences where some relevant stakeholders reported being left out of consultations.

In most sectors, foreign and domestic private entities can establish and own businesses and engage in remunerative activities. However, there are sectors of the economy where the government continues to retain equity limits for foreign capital as well as management and control restrictions. For example, India caps FDI in the Insurance Sector at 74 percent and mandates that insurance companies retain “Indian management and control.” Similarly, India allows up to 100 percent FDI in domestic airlines but has yet to clarify governing substantial ownership and effective control (SOEC) rules. A list of investment caps is accessible in the DPIIT’s consolidated FDI circular at: https://dpiit.gov.in/foreign-direct-investment/foreign-direct-investment-policy .

The Indian Government has continued to liberalize FDI policies across sectors. Notable changes during 2021 included:

Increasing the FDI cap for the insurance sector to 74 percent from 49 percent, albeit while retaining an “Indian management and control” requirement.

Increased the FDI cap for the pensions sector to 74 percent from 49 percent. The rider of “Indian management and control” is applicable in the pension sector.

Eliminated the FDI cap in the telecom sector. 100 percent FDI allowed for insurance intermediaries.

Eliminated the FDI cap for insurance intermediaries and state-run oil companies.

Increased the FDI cap for defense manufacturing units to 74 percent from 49 percent and up to 100 percent if the investment is approved under the Government Route review process.

Since the abolition of the Foreign Investment Promotion Board (FIPB) in 2017, FDI screening has been progressively liberalized and decentralized. All FDI into India must complete either an “Automatic Route” or “Government Route” review process. FDI in most sectors fall under the Automatic Route, which simply requires a foreign investor to notify India’s central bank, the Reserve Bank of India (RBI), and comply with relevant domestic laws and regulations for that sector. In contrast, investments in specified sensitive sectors – such as defense – require review under the Government Route to obtain the prior approval of the ministry with jurisdiction over the relevant sector along with the concurrence of the DPIIT.

In 2020, India issued Press Note 3 requiring all proposed FDI by nonresident entities located in (or having “beneficial owners” in) countries that share a land border with India to obtain prior approval via the Government Route. This screening requirement applies regardless of the size of the proposed investment or relevant sector. The rule primarily impacted the People’s Republic of China, whose companies had more FDI in India, but other neighboring countries affected include Pakistan, Bangladesh, Nepal, Myanmar, and Bhutan.

A. Third-party investment policy reviews

https://www.oecd.org/economy/india-economic-snapshot/ 

https://www.worldbank.org/en/country/india/overview 

https://www.wto.org/english/tratop_e/tpr_e/tp503_e.htm 

B. Civil society organization reviews of investment policy-related concerns

https://www.ncaer.org/publication_details.php?pID=370 

https://www.orfonline.org/research/jailed-for-doing-business/ 

The DPIIT is responsible for formulation and implementation of promotional and developmental measures for growth of the industrial sector. The DPIIT also is responsible for the overall industrial policy and facilitating and increasing FDI flows to the country.

However, Invest India  is the government’s lead investment promotion and facilitation agency and is managed in partnership with the DPIIT, state governments, and business chambers. Invest India works with investors through their investment lifecycle to provide support with market entry strategies, deep dive industry analysis, partner search, and policy advocacy as required. Businesses can register online through the Ministry of Corporate Affairs (MCA) website: http://www.mca.gov.in/ .

To fast-track the regulatory approval process, particularly for major projects, the government created the digital multi-modal Pro-Active Governance and Timely Implementation (PRAGATI) initiative in 2015. The Prime Minister personally monitors the PRAGATI process, to ensure government entities meet project deadlines. As of September 2021, the Prime Minister had chaired 38 PRAGATI meetings with 297 projects, worth around $200 billion, approved and cleared. In 2014, the government also formed an inter-ministerial committee, led by the DPIIT, to track investment proposals requiring inter-ministerial approvals. Business and government sources report this committee meets informally on an ad hoc basis as they receive reports from companies and business chambers seeking assistance with stalled projects.

According to data from the Ministry of Commerce’s India Brand Equity Foundation (IBEF), outbound investment from India has both increased and changed which countries and sectors it targets. During the last ten years, Overseas Investment Destination (OID) shifted away from resource-rich countries, such as Australia, UAE, and Sudan, toward countries providing higher tax benefits, such as Mauritius, Singapore, the British Virgin Islands, and the Netherlands. Indian firms invest overseas primarily through mergers and acquisitions (M&A) to get direct access to newer and more extensive markets and better technologies and increasingly achieve a global reach. According to RBI data, outward investment from India in 2021 totaled around $29 billion compared with around $30 billion the previous year. The RBI’s recorded total of outward investment includes equity capital, loans, and issuance of guarantees.

Policies pertaining to foreign investments are framed by the DPIIT, and implementation is undertaken by lead federal ministries and sub-national counterparts. Some government policies are written in a way that can be discriminatory to foreign investors or favor domestic industry. For example, India bars foreign investors from engaging in multi-brand retail, which also limits foreign e-Commerce investors to a “market-place model.” On most occasions major rules are framed after thorough discussions by government authorities and require the approval of the cabinet and, in some cases, the Parliament as well. However, in some instances the rules have been enacted without any consultative process.

The Indian Accounting Standards were issued under the supervision and control of the Accounting Standards Board, a committee under the Institute of Chartered Accountants of India (ICAI), and has government, academic, and professional representatives. The Indian Accounting Standards are named and numbered in the same way as the corresponding International Financial Reporting Standards. The National Advisory Committee on Accounting Standards recommends these standards to the MCA, which all listed companies must then adopt. These can be accessed at: https://www.mca.gov.in/content/mca/global/en/acts-rules/ebooks/accounting-standards.html 

India is a member of the South Asia Association for Regional Cooperation (SAARC), an eight- member regional block in South Asia. India’s regulatory systems are aligned with SAARC’s economic agreements, visa regimes, and investment rules. Dispute resolution in India has been through tribunals, which are quasi-judicial bodies. India has been a member of the WTO since 1995, and generally notifies all draft technical regulations to the WTO Committee on Technical Barriers to Trade; however, at times there are delays in publishing the notifications. The Governments of India and the United States cooperate in areas such as standards, trade facilitation, competition, and antidumping practices.

India adopted its legal system from English law and the basic principles of the Common Law as applied in the UK are largely prevalent in India. However, foreign companies need to adjust for Indian law when negotiating and drafting contracts in India to ensure adequate protection in case of breach of contract. The Indian judiciary provides for an integrated system of courts to administer both central and state laws. The judicial system includes the Supreme Court as the highest national court, as well as a High Court in each state or a group of states which covers a hierarchy of subordinate courts. Article 141 of the Constitution of India provides that a decision declared by the Supreme Court shall be binding on all courts within the territory of India. Apart from courts, tribunals are also vested with judicial or quasi-judicial powers by special statutes to decide controversies or disputes relating to specified areas.

Courts have maintained that the independence of the judiciary is a basic feature of the Constitution, which provides the judiciary institutional independence from the executive and legislative branches.

The government has a policy framework on FDI, which is updated every year and formally notified as the Consolidated FDI Policy ( https://dpiit.gov.in/foreign-direct-investment/foreign-direct-investment-policy ). The DPIIT issues policy pronouncements on FDI through the Consolidated FDI Policy Circular, Press Notes, and press releases that are also notified by the Ministry of Finance as amendments to the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 under the Foreign Exchange Management Act (FEMA), 1999. These notifications take effect from the date of issuance of the Press Notes/Press Releases, unless specified otherwise therein. In case of any conflict, the relevant Notification under the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 will prevail. The payment of inward remittance and reporting requirements are stipulated under the Foreign Exchange Management (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019 issued by the RBI.

The government has introduced “Make in India” and “Self-Reliant India” programs that include investment policies designed to promote domestic manufacturing and attract foreign investment. The “Digital India” program aims to open new avenues for the growth of the information technology sector. The “Start-up India” program creates incentives to enable start-ups to become commercially viable and grow. The “Smart Cities” program creates new avenues for industrial technological investment opportunities in select urban areas.

The central government has successfully established independent and effective regulators in telecommunications, banking, securities, insurance, and pensions. India’s antitrust body, the Competition Commission of India (CCI) reviews cases against cartelization and abuse of dominance and is a well-regarded regulator. The CCI’s investigations wing is required to seek the approval of the local chief metropolitan magistrate for any search and seizure operations. The CCI conducts capacity-building programs for government officials and businesses.

Tax experts confirm that India does not have domestic expropriation laws in place. The Indian Parliament on August 6, 2021, repealed a 2012 law that authorized retroactive taxation. In first proposing the repeal on August 5, Finance Minister Nirmala Sitharaman committed the government to refund the disputed amounts from outstanding cases under the old law. The Indian government has been divesting from state owned enterprises (SOEs) since 1991. In February 2021, the Finance Minister detailed an ambitious program to privatize roughly $24 billion in state owned enterprises as part of the FY 2021-22 (March 31-April 1) budget.

India made resolving contract disputes and insolvency easier with the enactment of the Insolvency and Bankruptcy Code (IBC) in 2016. The World Bank noted that the IBC introduced the option of insolvency resolution for commercial entities as an alternative to liquidation or other mechanisms of debt enforcement, reshaping the way insolvent companies can restore their financial well-being or are liquidated. The IBC created effective tools for creditors to successfully negotiate and receive payments. As a result, the overall recovery rate for creditors jumped from 26.5 to 71.6 cents on the dollar, and the time required for resolving insolvency also was reduced from 4.3 years to 1.6 years. India is now, by far, one of the best performers in South Asia in resolving insolvency and does better than the average for OECD high-income economies in terms of the recovery rate, time taken, and cost of proceedings.

India enacted the Arbitration and Conciliation Act in 1996, based on the United Nations Commission on International Trade Law (UNCITRAL) model to align its adjudication of commercial contract dispute resolution mechanisms with global standards. The government established the International Center for Alternative Dispute Resolution (ICADR) as an autonomous organization under the Ministry of Law and Justice to promote the settlement of domestic and international disputes through alternate dispute resolution. The World Bank has also funded ICADR to conduct training for mediators in commercial dispute settlement.

Judgments of foreign courts have been enforced under multilateral conventions, including the Geneva Convention. India is a signatory to the convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention). However, Indian firms are known to file lawsuits in domestic courts to delay paying an arbitral award. Several cases are currently pending, the oldest of which dates to 1983. In 2021, Amazon received an interim award against Future Retail from the Singapore International Arbitration Centre. However, Future Retail has refused to accept the findings and initiated litigation in Indian courts. India is not a member state to the International Centre for the Settlement of Investment Disputes (ICSID).

The Permanent Court of Arbitration (PCA) at The Hague and the Indian Law Ministry agreed in 2007 to establish a regional PCA office in New Delhi, although this remains pending. The office would provide an arbitration forum to match the facilities offered at The Hague but at a lower cost.

In November 2009, the Department of Revenue’s Central Board of Direct Taxes established eight dispute resolution panels across the country to settle the transfer-pricing tax disputes of domestic and foreign companies. In 2016 the government approved amendments that would allow Commercial Courts, Commercial Divisions, and Commercial Appellate Divisions of the High Courts Act to establish specialized commercial divisions within domestic courts to settle long-pending commercial disputes.

Since formal dispute resolution is expensive and time consuming, many businesses choose methods, including ADR, for resolving disputes. The most used ADRs are arbitration and mediation. India has enacted the Arbitration and Conciliation Act based on the UNCITRAL Model Law. In cases that involve constitutional or criminal law, traditional litigation remains necessary.

The introduction and implementation of the IBC in 2016 overhauled of the previous framework for insolvency with much-needed reforms. The IBC created a uniform and comprehensive creditor-driven insolvency resolution process that encompasses all companies, partnerships, and individuals (other than financial firms). According to the World Bank, the time required for resolving insolvency was reduced significantly from 4.3 years to 1.6 years after implementation of the IBC. The law, however, does not provide for U.S. style Chapter 11 bankruptcy provisions.

In August 2016, the Indian Parliament passed amendments to the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, and the Debt Recovery Tribunals Act. These amendments targeted helping banks and financial institutions recover loans more effectively, encouraging the establishment of more asset reconstruction companies (ARCs), and revamping debt recovery tribunals. The Finance Minister announced in her February 2021 budget speech to Parliament plans to establish the National Asset Reconstruction Company Limited (NARCL), or “bad bank” to resolve large cases of corporate stress. In October 2021, the RBI approved the license to set up the NARCL.

On May 10, 2021, the Securities and Exchange Board of India (SEBI) issued a circular to introduce new environment, social, and governance (ESG) reporting requirements for the top 1,000 listed companies by market capitalization. According to this circular, new disclosure will be made in the format of the Business Responsibility and Sustainability Report (BRSR), which is a notable departure from SEBI’s existing Business Responsibility Report and a significant step toward bringing sustainability reporting up to existing financial reporting standards. BRSR reporting will be voluntary for FY 2021-22 and mandatory from FY 2022-23 for the top 1,000 listed companies by market capitalization. This is to provide companies subject to these requirements with sufficient time to adapt to the new requirements.

The regulatory environment in terms of foreign investment has been eased to make it investor friendly. The measures taken by the government opened new sectors for foreign direct investment, increased the investment limit of existing sectors, and simplified other conditions of the FDI policy. The government also adopted production linked incentives to promote manufacturing in pharmaceuticals, automobiles, textiles, electronics, and other sectors. Details can be accessed at- https://www.investindia.gov.in/production-linked-incentives-schemes-india 

The government established several foreign trade zone initiatives to encourage export-oriented production. These include Special Economic Zones (SEZs), Export Processing Zones (EPZs), Software Technology Parks (STPs), and Export Oriented Units (EOUs). According to the Ministry of Commerce and Industry, as of February 2022, 425 SEZ’s have been approved and 376 SEZs were operational with 5,604 operating units. The SEZs are treated as foreign territory, and businesses operating within the zones are not subject to customs regulations, FDI equity caps, or industrial licensing requirements and enjoy tax holidays and other tax breaks. Since 2018, the Indian government also announced guidelines for the establishment of the National Industrial and Manufacturing Zones (NIMZs), envisaged as integrated industrial townships to be managed by a special purpose vehicle and led by a government official. So far, three NIMZs have received “final approval” and 13 more have received “in-principal approval.” In addition, eight investment regions along the Delhi-Mumbai Industrial Corridor (DIMC) have also been established as NIMZs. EPZs are industrial parks with incentives for foreign investors in export-oriented businesses. STPs are special zones with similar incentives for software exports. EOUs are industrial companies, established anywhere in India, that export their entire production and are granted duty-free import of intermediate goods; income tax holidays; exemption from excise tax on capital goods, components, and raw materials; and a waiver on sales taxes. These initiatives are governed by separate rules and granted different benefits, details of which can be found at: http://www.sezindia.nic.in,  

https://www.stpi.in/  

http://www.fisme.org.in/export_schemes/DOCS/B- 

1/EXPORT%20ORIENTED%20UNIT%20SCHEME.pdf and http://www.makeinindia.com/home. 

The Indian government does issue guarantees to investments but only for strategic industries.

The government has an ambitious target of installing 500 gigawatts of renewable energy (RE) by 2030 and has introduced several schemes and policies  supporting clean energy deployment. State governments used to provide feed-in tariffs during the initial stages of RE development. However, with the RE sector becoming competitive, the scheme was discontinued in 2016. Most projects now are awarded through a Tariff Based Competitive Bidding Process . The Ministry of New & Renewable Energy (MNRE) provides ‘ Must Run ’ status to RE projects. MNRE offers Production Linked Incentives (PLI) under the National Program on High Efficiency Solar PV Modules. The PLI scheme was initially offered for just under $617 million and was oversubscribed. Under the FY 2022-23 budget, it was expanded by another $2.6 billion. The Ministry of Heavy Industry (MHI) launched the National Electric Mobility Mission to provide a roadmap for the faster adoption of electric vehicles. Can be accessed at https://policy.asiapacificenergy.org/sites/default/files/National%20Electric%20Mobility%20Mission%20Plan%202020.pdf . MHI also launched a PLI scheme National Program on Advance Chemistry Cell (ACC) Battery Storage  to promote battery manufacturing. The Department of Science & Technology leads Carbon Capture Utilization & Storage (CCUS)  efforts to enable near-zero CO2 emissions from power plants and carbon-intensive industries with the program limited to R&D and pilots. The Bureau of Energy Efficiency (BEE) leads the National Mission on Enhanced Energy Efficiency  and manages several programs promoting Energy Efficiency  across sectors, including buildings, E-Mobility, fuel efficiency for heavy duty vehicles and passenger cars, demand side management, standards, and labelling and certification. The National Hydrogen Mission was launched in August 2021, with the aim to meeting Climate targets and making India a green hydrogen hub. Carbon Capture Utilization & Storage (CCUS)  efforts to enable near-zero CO2 emissions from power plants and carbon-intensive industries with the program limited to R&D and pilots. The Bureau of Energy Efficiency (BEE) leads the National Mission on Enhanced Energy Efficiency  and manages several programs promoting Energy Efficiency  across sectors, including buildings, E-Mobility, fuel efficiency for heavy duty vehicles and passenger cars, demand side management, standards, and labelling and certification. The National Hydrogen Mission was launched in August 2021, with the aim to meeting Climate targets and making India a green hydrogen hub.

Preferential Market Access (PMA) for government procurement has created substantial challenges for foreign firms operating in India. The government and SOEs give a 20 percent price preference to vendors utilizing more than 50 percent local content. However, PMA for government procurement limits access to the most cost effective and advanced ICT products available. In December 2014, PMA guidelines were revised and reflect the following updates:

1. Current guidelines emphasize that the promotion of domestic manufacturing is the objective of PMA, while the original premise focused on the linkages between equipment procurement and national security.
2. Current guidelines on PMA implementation are limited to hardware procurement only. Former guidelines were applicable to both products and services.
3. Current guidelines widen the pool of eligible PMA bidders, to include authorized distributors, sole selling agents, authorized dealers, or authorized supply houses of the domestic manufacturers of electronic products, in addition to OEMs, provided they comply with the following terms:
   1. The bidder shall furnish the authorization certificate by the domestic manufacturer for selling domestically manufactured electronic products.
   2. The bidder shall furnish the affidavit of self-certification issued by the domestic manufacturer to the procuring agency declaring that the electronic product is domestically manufactured in terms of the domestic value addition prescribed.
   3. It shall be the responsibility of the bidder to furnish other requisite documents required to be issued by the domestic manufacturer to the procuring agency as per the policy.
4. The current guidelines establish a ceiling on fees linked with the compliance procedure. There would be a complaint fee of roughly $3,000, or one percent of the value of the domestically manufactured electronic product being procured, subject to a maximum of about $7,500, whichever is higher.In January 2017, the Ministry of Electronics & Information Technology (MeitY) issued a draft notification under the PMA policy, stating a preference for domestically manufactured servers in government procurement. A current list of PMA guidelines, notified products, and tendering templates can be found on MeitY’s website: http://meity.gov.in/esdm/pma 

In April 2018, the RBI, announced, without prior stakeholder consultation, that all payment system providers must store their Indian transaction data only in India. The RBI mandate went into effect on October 15, 2018, despite repeated requests by industry and U.S. officials for a delay to allow for more consultations. In July 2019, the RBI, again without prior stakeholder consultation, retroactively expanded the scope of its 2018 data localization requirement to include banks, creating potential liabilities going back to late 2018. The RBI policy overwhelmingly and disproportionately has affected U.S. banks and investors, who depend on the free flow of data to both achieve economies of scale and to protect customers by providing global real-time monitoring and analysis of fraud trends and cybersecurity. In 2021, the RBI banned American Express, Diners Club, and Mastercard from issuing new cards for non-compliance with the data localization rule. In November 2021, the RBI deemed Diners Club compliant and permitted them to resume issuing new cards, but the ban on Mastercard and American Express continues.

In addition to the RBI data localization directive for payments companies and banks, the government formally introduced its draft Personal Data Protection Bill (PDPB) in December 2019 which has remained pending in Parliament. The PDPB would require “explicit consent” as a condition for the cross-border transfer of sensitive personal data, requiring users to fill out separate forms for each company that held their data. Additionally, Section 33 of the bill would require a copy of all “sensitive personal data” and “critical personal data” to be stored in India, potentially creating redundant local data storage. The localization of all “sensitive personal data” being processed in India could directly impact IT exports. In the current draft no clear criteria for the classification of “critical personal data” has been included. The PDPB also would grant wide authority for a newly created Data Protection Authority to define terms, develop regulations, or otherwise provide specifics on key aspects of the bill after it becomes a law. The implementation of a New Information Technology Rule through Intermediary Guidelines and a Digital Media Ethics Code added further uncertainty to how existing rules will interact with the PDPB and how non-personal data will be handled.

In India, a registered sales deed does not confer title of land ownership and is merely a record of the sales transaction that only confers presumptive ownership and can still be disputed. Instead, the title is established through a chain of historical transfer documents that originate from the land’s original established owner. Accordingly, before purchasing land, buyers should examine all the documents that establish title from the original owner. Many owners, particularly in urban areas, do not have access to the necessary chain of documents. This increases uncertainty and risks in land transactions.

Several cities, including Delhi, Kolkata, Mumbai, and Chennai, have grown according to a master plan registered with the central government’s Ministry of Urban Development. Property rights are generally well-enforced in such places, and district magistrates – normally senior local government officials – notify land and property registrations. Banks and financial institutions provide mortgages and liens against such registered property.

In other urban areas, and in areas where illegal settlements have been established, titling often remains unclear. The government launched the National Land Records Modernization Program (NLRMP) in 2008 to clarify land records and provide landholders with legal titles. The program requires the government to survey an area of approximately 2.16 million square miles, including over 430 million rural households, 55 million urban households, and 430 million land records. Initially scheduled for completion in 2016, the program is now scheduled to conclude in 2021.

Although land title falls under the jurisdiction of state governments, both the Indian Parliament and state legislatures can make laws governing “acquisition and requisitioning of property.” Land acquisition in India is governed by the Land Acquisition Act (2013), which entered into force in 2014, and continues to be a complicated process due to the lack of an effective legal framework. Land sales require adequate compensation, resettlement of displaced citizens, and 70 percent approval from landowners. The displacement of poorer citizens is politically challenging for local governments.

Foreign and domestic private entities are permitted to establish and own businesses in trading companies, subsidiaries, joint ventures, branch offices, project offices, and liaison offices, subject to certain sector-specific restrictions. The government does not permit FDI in real estate, other than company property used to conduct business and for the development of most types of new commercial and residential properties. Foreign Institutional Investors (FIIs) can invest in initial public offerings (IPOs) of companies engaged in real estate. They can also participate in pre-IPO placements undertaken by real estate companies without regard to FDI restrictions.

Businesses that intend to build facilities on land they own are also required to take the following steps: 1) register the land and seek land use permission if the industry is located outside an industrially zoned area; 2) obtain environmental site approval; 3) seek authorization for electricity and financing; and 4) obtain appropriate approvals for construction plans from the respective state and municipal authorities. Promoters must also obtain industry-specific environmental approvals in compliance with the Water and Air Pollution Control Acts. Petrochemical complexes, petroleum refineries, thermal power plants, bulk drug makers, and manufacturers of fertilizers, dyes, and paper, among others, must also obtain clearance from the Ministry of Environment and Forests.

The Real Estate Act, 2016 aims to protect the rights and interests of consumers and promote uniformity and standardization of business practices and transactions in the real estate sector. Details are available at: http://mohua.gov.in/cms/TheRealEstateAct2016.php 

The Foreign Exchange Management Regulations and the Foreign Exchange Management Act set forth the rules that allow foreign entities to own immoveable property in India and convert foreign currencies for the purposes of investing in India. These regulations can be found at: https://www.rbi.org.in/scripts/Fema.aspx . Foreign investors operating under the Automatic Route are allowed the same rights as an Indian citizen for the purchase of immovable property in India in connection with an approved business activity.

Traditional land use rights, including communal rights to forests, pastures, and agricultural land, are protected according to various laws, depending on the land category and community residing on it. Relevant legislation includes the Scheduled Tribes and Other Traditional Forest Dwellers (Recognition of Forest Rights) Act 2006, the Tribal Rights Act, and the Tribal Land Act.

India remained on the Priority Watch List in the USTR Office’s 2022 Special 301 Report due to concerns over weak intellectual property (IP) protection and enforcement. The 2022 Review of Notorious Markets for Counterfeiting and Piracy includes physical and online marketplaces located in or connected to India.

In the field of copyright, procedural hurdles, cumbersome policies, and ineffective enforcement continue to remain concerns. In February 2019, the Cinematograph (Amendment) Bill, 2019, which would criminalize illicit camcording of films, was tabled in the Parliament and remains pending. In June 2021, the Ministry of Information and Broadcasting sought public comments on the Draft Cinematograph (Amendment) Bill, 2021. While the draft Bill proposes to enhance the penalties against piracy envisaged in the earlier 2019 bill, it also creates new concerns for the right holders by exempting all exceptions to copyright infringement covered by Section 52 of the India Copyright Act. The expansive granting of licenses under Chapter VI of the Indian Copyright Act and overly broad exceptions for certain uses have raised concerns regarding the strength of copyright protection and complicated the market for music licensing. In April 2021, India abolished the Intellectual Property Appellate Board (IPAB) and transferred its duties to the High Courts and Commercial Courts, creating uncertainties throughout the IP landscape, including raising concerns regarding the efficient adjudication of contentious IP matters. In addition, the abolishment left open how certain IP royalties will be set, collected, and distributed across the country.

In August 2021, the DPIIT issued a notice requesting stakeholder comments on the recommendation of the July 2021 Department Related Parliamentary Standing Committee on Commerce (DRPSCC) Report to amend Section 31D of the Indian Copyright Act to extend statutory licensing to “internet or digital broadcasters.” The recommendation broadens the scope of statutory licensing to encompass not only radio and television broadcasting, but also online transmissions, despite a High Court ruling earlier in 2019 that held that statutory broadcast licensing does not include online transmissions. If implemented to permit statutory licensing for interactive transmissions, the DRPSCC Report’s recommendation would not only have severe implications for rights holders who make their content available online, but also raise serious concerns about India’s compliance with relevant international obligations.

In the field of patents, the potential threat of compulsory licenses and patent revocations, and the narrow patentability criteria under the Indian Patents Act, burden companies across industry sectors. Patent applications continue to face expensive and time consuming pre- and post-grant oppositions and excessive reporting requirements. In October 2020, India issued a revised “Statement of Working of Patents” (Form 27), required annually by patentees. While some stakeholders have welcomed the revised version of Form 27, concerns remain as to whether the requirement and its associated penalties suppress innovation, and whether Indian authorities will treat as confidential the sensitive business information that parties are required to disclose on the form.

India has made some progress on certain administrative decisions in past years, upholding patent rights, and developing specific tools and remedies to support the rights of a patent holder. Nonetheless, concerns remain over revocations and other challenges to patents, especially patents for agriculture, biotechnology, and pharmaceutical products. In addition to India’s application of its compulsory licensing law, the Indian Supreme Court in 2013 interpreted Section 3(d) of India’s Patent Law, as creating a “second tier of qualifying standards for patenting chemical substances and pharmaceuticals.”

India currently lacks an effective system for protecting against unfair commercial use, as well as unauthorized disclosure, of undisclosed tests or other data generated to obtain marketing approval for pharmaceutical and agricultural products. Investors have raised concerns with respect to allegedly infringing pharmaceuticals being marketed without advance notice or adequate time or opportunity for parties to achieve early resolution of potential IP disputes.

U.S. and Indian companies have advocated for eliminating gaps in India’s trade secrets regime, such as through the adoption of legislation that would specifically address the protection of trade secrets. While India’s National Intellectual Property Rights Policy called in 2016 for trade secrets to serve as an “important area of study for future policy development,” this work has not yet been prioritized.

India issued a revised Manual of Patent Office Practice and Procedure in November 2019 that requires patent examiners to look to the World Intellectual Property Organization’s Centralized Access to Search and Examination (CASE) system and Digital Access Service (DAS) to find prior art and other information filed by patent applicants in other jurisdictions.

Other recent developments include India’s steps toward reducing delays and examination backlogs for patent and trademark applications. In addition, India actively promotes IP awareness and commercialization throughout India through the Cell for IPR Promotion and Management (CIPAM), a professional body under the aegis of the DPIIT, and through the Innovation Cell of the Ministry of Education. Following the IPAB’s abolition in July 2021, the Delhi High Court created an Intellectual Property Division (IPD) to deal with all matters related to Intellectual Property Rights (IPR), including those previously covered by the IPAB.

In July 2021, DRPSCC issued a report on “Review of the Intellectual Property Rights Regime in India” that is largely based on a premise that stronger protection and enforcement of IP would lead to better economic and social development in the country. The report makes many positive recommendations and emphasizes that India’s IP regime should comply with “International agreements, rules and norms” and be compatible with other nations and foreign entities. Some of the DRPSCC’s recommendations are problematic and raise serious concern from the perspective of U.S. innovators and creators, such as those relating to statutory licensing for “internet or digital broadcasters” under copyright law, and compulsory licensing under patent law.

Resources for Intellectual Property Rights Holders:

John Cabeca
Intellectual Property Counselor for South Asia
U.S. Patent and Trademark Office
Foreign Commercial Service
email: john.cabeca@trade.gov
website: https://www.uspto.gov/ip-policy/ip-attache-program 
tel: +91-11-2347-2000

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

Indian stocks experienced significant losses at the start of 2021, stemming from the effects of the COVID-19 pandemic on the economy. By midyear, markets began to recover, with India’s stock benchmarks reaching record highs and becoming among the top performers globally. Indian companies raised a combined $15.57 billion through 121 IPOs in 2021, the highest amount ever raised in a single calendar year compared with the previous high of $8.4 billion in 2017.

Foreign investment inflows drove markets higher through February 2021. However, these investments began exiting the market when faced with the potential for faster-than-expected withdrawal of monetary stimulus and the Delta variant of COVID-19. Domestic institutional investors compensated outflows of foreign investment through significant investment in Indian stocks. Foreign investors’ net investment in 2021 was about $7 billion, significantly lower than the $14.5 billion in 2020 and $19 billion in 2019. Domestic investors put about $12.5 billion in 2021 into Indian domestic equity markets. Indian investors opened 27.4 million new stock trading accounts in 2021, up from 10.5 million accounts opened in 2020.

The SEBI is considered one of the most progressive and well-run of India’s regulatory bodies.  The SEBI regulates India’s securities markets, including enforcement activities and is India’s direct counterpart to the U.S. Securities and Exchange Commission (SEC).  The Board oversees seven exchanges: BSE Ltd. (formerly the Bombay Stock Exchange), the National Stock Exchange (NSE), the Metropolitan Stock Exchange, the Calcutta Stock Exchange, the Multi Commodity Exchange (MCX), the National Commodity & Derivatives Exchange Limited, and the Indian Commodity Exchange.

Foreign venture capital investors (FVCIs) must register with the SEBI to invest in Indian firms. They can also set up domestic asset management companies to manage funds. All such investments are allowed under the automatic route, subject to SEBI and RBI regulations, as well as FDI policy. FVCIs can invest in many sectors, including software, information technology, pharmaceuticals and drugs, biotechnology, nanotechnology, biofuels, agriculture, and infrastructure.

Companies incorporated outside India can raise capital in India’s capital markets through the issuance of Indian Depository Receipts (IDRs) based on SEBI guidelines. Standard Chartered Bank, a British bank was the only foreign entity to list in India but delisted in June 2020. Experts attribute the lack of interest in IDRs to initial entry barriers, lack of clarity on conversion of the IDRs holdings into overseas shares, lack of tax clarity, and the regulator’s failure to popularize the product.

External commercial borrowing (ECB), or direct lending to Indian entities by foreign institutions, is allowed if it conforms to parameters such as minimum maturity; permitted and non-permitted end-uses; maximum all-in-cost ceiling as prescribed by the RBI; funds are used for outward FDI or for domestic investment in industry, infrastructure, hotels, hospitals, software, self-help groups or microfinance activities, or to buy shares in the disinvestment of public sector entities. The rules are published by the RBI: https://rbi.org.in/Scripts/BS_ViewMasDirections.aspx?id=11510 

According to RBI data, ECB by corporations and non-banking financial companies reached $38.8 billion in 2021. Companies have been increasingly tapping overseas markets for funds to take advantage of low interest rates in global markets. On December 8, 2021, the RBI announced a switch in calculation of interest rates for ECB and trade credits from the London Interbank Offered Rate (LIBOR) to alternative reference rates (ARRs).

The RBI has taken several steps in the past few years to bring the activities of the offshore Indian rupee (INR) market in Non-Deliverable Forwards (NDF) onshore, with the goal of deepening domestic markets, enhancing downstream benefits, and obviating the need for an NDF market. FPIs with access to currency futures or the exchange-traded currency options market can hedge onshore currency risks in India and may directly trade in corporate bonds.

The RBI allowed banks to freely offer foreign exchange quotes to non-resident Indians. The RBI has stated that trading on INR derivatives would be allowed and settled in foreign currencies in International Financial Services Centers (IFSCs). In June 2020, the RBI allowed foreign branches of Indian banks and branches located in IFSCs to participate in the NDF. With the INR trading volume in the offshore market higher than the onshore market, the RBI felt the need to limit the impact of the NDF market and curb volatility in the movement of the INR. In August 2021, the RBI released a working paper  discussing the influence of offshore markets on onshore markets.

The International Financial Services Centre at Gujarat International Financial Tech-City (GIFT City) is being developed to compete with global financial hubs. In January 2016, BSE Ltd. was the first exchange to start operations there. The NSE, domestic banks, and foreign banks have also started IFSC banking units in GIFT city. As part of its FY 2021-22 budget proposal, the government recommended establishing an international arbitration center in GIFT City to help facilitate faster resolution of commercial disputes, akin to the operation of the Singapore International Arbitration Centre (SIAC) or London Commercial Arbitration Centre (LCAC).

The public sector remains predominant in the banking sector, with public sector banks (PSBs) accounting for about 66 percent of total banking sector assets. However, the share of public banks in total loans and advances has fallen sharply in the last five years (from 70.84 percent in FY 2015-16 to 58.68 percent in FY 2021-22), primarily driven by stressed balance sheets and non-performing loans. In recent years, several new licenses were granted to private financial entities, including two new universal bank licenses and 10 small finance bank licenses. The government announced plans in 2021 to privatize two PSBs. This followed Indian authorities consolidating 10 public sector banks into four in 2019, which reduced the total number of PSBs from 18 to 12. However, the government has yet to introduce the necessary legislation needed to privatize PSBs. Although most large PSBs are listed on exchanges, the government’s stakes in these banks often exceeds the 51 percent legal minimum. Aside from the large number of state-owned banks, directed lending and mandatory holdings of government paper are key facets of the banking sector. The RBI requires commercial banks and foreign banks with more than 20 branches to allocate 40 percent of their loans to priority sectors which include agriculture, small and medium enterprises, export-oriented companies, and social infrastructure. Additionally, all banks are required to invest 18 percent of their net demand and time liabilities in government securities.

PSBs continue to face two significant hurdles: capital constraints and poor asset quality. As of September 2021, gross non-performing loans represented 6.9 percent of total loans in the banking system, with the PSBs having a larger share of 8.8 percent of their loan portfolio. The government announced its intention to set up the NARCL and India Debt Resolution Company Limited (IDRCL) to take over legacy stressed assets from bank balance sheets. With the IBC in place, banks are making progress in non-performing asset recognition and resolution.

To address asset quality challenges faced by public sector banks, the government has injected $32 billion into public sector banks in recent years. The capitalization largely aimed to address the capital inadequacy of public sector banks and marginally provide for growth capital. Bank mergers and capital raising from the market, improved public sector banks’ total capital adequacy ratio (CAR) from 13.5 percent in September 2020 to 16.6 percent in September 2021.

Women’s lack of sufficient access to finance remained a major impediment to women’s entrepreneurship and participation in the workforce. According to experts, women are more likely than men to lack financial awareness, confidence to approach a financial institution, or possess adequate collateral, often leaving them vulnerable to poor terms of finance. Despite legal protections against discrimination, some banks reportedly remained unwelcoming toward women as customers. International Finance Corporation (IFC) analysts have described Indian women-led Micro, Small, and Medium Enterprises (MSME) as a large but untapped market that has a total finance requirement of $29 billion (72 percent for working capital). However, 70 percent of this demand remained unmet, creating a shortfall of $20 billion.

The government-affiliated think tank NITI-Aayog provides information on networking, mentorship, and financing to more than 25,000 members via its Women Entrepreneurship Platform (WEP), launched in March 2018. The government’s financial inclusion scheme Pradhan Mantri Jan Dhan Yojana (PMJDY) provides universal access to banking facilities with at least one basic banking account for every adult, financial literacy, access to credit, insurance, and pension. As of March 2, 2022, 249 million women comprised 55 percent of the program’s 448 million beneficiaries. In 2015, the government started the Micro Units Development and Refinance Agency Ltd. (MUDRA), which supports the development of micro-enterprises. The initiative encourages women’s participation and offers collateral-free loans of around $15,000 to non-corporate, non-farm small and micro enterprises. As of October 29, 2021, 215 million loans have been extended to women borrowers.

In FY 2016, the Indian government established the National Infrastructure Investment Fund (NIIF), India’s first sovereign wealth fund, to promote investments in the infrastructure sector. The government agreed to contribute $3 billion to the fund, with an additional $3 billion raised from the private sector primarily from foreign sovereign wealth funds, multilateral agencies, endowment funds, pension funds, insurers, and foreign central banks. Currently, the NIIF manages over $4.3 billion in assets through its funds: Master Fund, Fund of Funds, and Strategic Opportunities Fund. The NIIF Master Fund is focused on investing in core infrastructure sectors including transportation, energy, and urban infrastructure.

The government owns or controls interests in key sectors with significant economic impact, including infrastructure, oil, gas, mining, and manufacturing. The Department of Public Enterprises ( http://dpe.gov.in ) controls and formulates all the policies pertaining to SOEs, and is headed by a minister to whom the senior management reports. The Comptroller and Auditor General audits the SOEs. The government has taken several steps to improve the performance of SOEs, also called Central Public Sector Enterprises (CPSEs), including improvements to corporate governance. This was necessary as the government planned to disinvest its stake from these entities.

According to the Public Enterprise Survey 2019-20, as of March 2020 there were 366 CPSEs, of which 256 are operational with a total turnover of $328 billion. The report revealed that 96 CPSEs were incurring losses and 14 units are under liquidation.

Foreign investment is allowed in CPSEs in all sectors. The Master List of CPSEs can be accessed at http://www.bsepsu.com/list-cpse.asp . While the CPSEs face the same tax burden as the private sector, they receive streamlined licensing that private sector enterprises do not on issues such as procurement of land.

The government has not generally privatized its assets but instead adopted a gradual disinvestment policy that dilutes government stakes in SOEs without sacrificing control. However as announced in the FY 2021-22 budget, the government has recommitted to the process of privatization of loss-making SOEs with an ambitious disinvestment target of $24 billion. In addition to completing the privatization of national carrier Air India in early 2022, the government has prioritized privatizing the Bharat Petroleum Corporation Limited and reducing its shares in the state-owned Life Insurance Corporation (LIC). Details about the privatization program can be accessed at the Ministry of Finance site for Disinvestment ( https://dipam.gov.in/ ).

FIIs can participate in these disinvestment programs. Earlier limits for foreign investors were 24 percent of the paid-up capital of the Indian company and 10 percent for non-resident Indians and persons of Indian origin. The limit is 20 percent of the paid-up capital in the case of public sector banks. There is no bidding process. The shares of the SOEs being disinvested are sold in the open market.

Among Indian companies there is a general awareness of standards for responsible business conduct. The MCA administers the Companies Act of 2013 and is responsible for regulating the corporate sector in accordance with the law. The MCA is also responsible for protecting the interests of consumers by ensuring competitive markets. The Companies Act of 2013 also established the framework for India’s corporate social responsibility (CSR) laws, mandating that companies spend an average of two percent of their average net profit of the preceding three fiscal years. While the CSR obligations are mandated by law, non-government organizations (NGOs) in India also track CSR activities and provide recommendations in some cases for effective use of CSR funds. According to the MCA website, in FY 2020-21, 8,633 companies spent $2.72 billion on more than 25,000 CSR projects across India.

The MCA released the National Guidelines on Responsible Business Conduct, 2018 (NGRBC) on March 13, 2019, to improve the 2011 National Voluntary Guidelines on Social, Environmental & Economic Responsibilities of Business. The NGRBC aligned with the United Nations Guiding Principles on Business & Human Rights (UNGPs).

India does not adhere to the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Afflicted and High-Risk Areas. There are provisions to promote responsible business conduct throughout the supply chain.

India is neither a member of Extractive Industries Transparency Initiative (EITI), nor a member of the Voluntary Principles on Security and Human Rights.

Department of State

• Country Reports on Human Rights Practices;
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities;
• U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises; and;
• Xinjiang Supply Chain Business Advisory 

Department of the Treasury

• OFAC Recent Actions

Department of Labor

• Findings on the Worst Forms of Child Labor Report;
• List of Goods Produced by Child Labor or Forced Labor;
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World and;
• Comply Chain.

The Government of India launched the National Action Plan on Climate Change (NAPCC) on June 30, 2008, outlining eight “National Missions: on climate change. These include:

1. National Solar Mission
2. National Mission for Enhanced Energy Efficiency
3. National Mission on Sustainable Habitat
4. National Water Mission
5. National Mission for Sustaining the Himalayan Eco-system
6. National Mission for a Green India
7. National Mission for Sustainable Agriculture
8. National Mission on Strategic Knowledge for Climate Change

In addition, India has the Biological Diversity Act 2002 that focuses on the conservation of biological resources, managing its sustainable use, and enabling the fair and equitable sharing of benefits arising out of the use and knowledge of biological resources with the local communities. The Act has a three-tier structure to regulate access to biological resources:

The National Biodiversity Authority (NBA)

The State Biodiversity Boards (SBBs)

The Biodiversity Management Committees (BMCs) (at local level)

India does not yet have a system of ecosystem services, but the government is currently discussing within its interagency and with outside stakeholders the value of developing a strategy for ecosystem services.

During the CoP 26 in Glasgow, Prime Minister Modi announced that India planned to reach net-zero carbon emissions by 2070. The government is now developing a strategy and a detailed plan to achieve that goal.

The government has regulatory systems in place that include pollution standards, biodiversity off-sets through compensatory forestation, and a forest policy and wildlife management plans with numerous national parks and wildlife sanctuaries that protect forests and biodiversity. At CoP 26 Prime Minister Modi called for making LIFE – Lifestyle for Environment – a global movement that advances sustainable lifestyles as a part of addressing the climate crisis.

While there is no sustainable public procurement law in India, the General Financial Rules (GFR) 2017 contain provisions that allow purchasing authorities to include environmental criteria when making procurements. Ministry of Finance procurement manuals also emphasize this ability. Various public sector entities and some government departments have started considering environmental and energy efficiency criteria in their procurement decisions. In addition, the government constituted a taskforce on sustainable public procurement in 2018 with the mandate to:

Review international best practices in Sustainable Public Procurement (SPP)

Identify the current status of SPP in India across Government organizations

Prepare a draft Sustainable Procurement Action Plan

Recommend an initial set of product/service categories (along with their specifications) where SPP can be implemented

However, the government has not yet developed a sustainable procurement action plan or policy mandating sustainable public procurement.

India is a signatory to the United Nation’s Conventions Against Corruption and is a member of the G20 Working Group against corruption. India, with a score of 40, ranked 86 among 180 countries in Transparency International’s 2020 Corruption Perception Index.

Corruption is addressed by the following laws: The Companies Act, 2013; the Prevention of Money Laundering Act, 2002; the Prevention of Corruption Act, 1988; the Code of Criminal Procedures, 1973; the Indian Contract Act, 1872; and the Indian Penal Code of 1860. Anti- corruption laws amended since 2004 have granted additional powers to vigilance departments in government ministries at the central and state levels and elevated the Central Vigilance Commission (CVC) to be a statutory body. In addition, the Comptroller and Auditor General is charged with performing audits on public-private-partnership contracts in the infrastructure sector based on allegations of revenue loss to the exchequer.

Other statutes approved by parliament to tackle corruption include:

The Benami Transactions (Prohibition) Amendment Act of 2016

The Real Estate (Regulation and Development) Act, 2016, enacted in 2017

The Whistleblower Protection Act, 2011 was passed in 2014 but has yet to be operationalized

The Companies Act, 2013 established rules related to corruption in the private sector by mandating mechanisms for the protection of whistleblowers, industry codes of conduct, and the appointment of independent directors to company boards. However, the government has not established any monitoring mechanism, and it is unclear the extent to which these protections have been instituted. No legislation focuses particularly on the protection of NGOs working on corruption issues, though the Whistleblowers Protection Act, 2011 may afford some protection once implemented.

In 2013, Parliament enacted the Lokpal and Lokayuktas Act, which created a national anti- corruption ombudsman and required states to create state-level ombudsmen within one year of the law’s passage. A national ombudsman was appointed in March 2019.

India is a signatory to the United Nations Conventions against Corruption and is a member of the G20 Working Group against Corruption. India is not a party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

The Indian chapter of Transparency International was closed in 2019.

Matt Ingeneri
Economic Growth Unit Chief
U.S. Embassy New Delhi
Shantipath, Chanakyapuri New Delhi
+91 11 2419 8000 ingeneripm@state.gov 

Mr. Suresh Patel
Central Vigilance Commissioner
Satarkta Bhavan , Block-A
GPO Complex, INA New Delhi – 110 023
Ph: +91-11- 24651020
www.cvc.gov.in 

India is a multiparty, federal, parliamentary democracy with a bicameral legislature. The president, elected by an electoral college composed of the state assemblies and parliament, is the head of state, and the prime minister is the head of government. National parliamentary elections are held every five years. Under the constitution, the country’s 28 states and eight union territories have a high degree of autonomy and have primary responsibility for law and order. Electors chose President Ram Nath Kovind in 2017 to serve a five-year term. Following the May 2019 national elections, Prime Minister Modi’s Bharatiya Janata Party (BJP) led National Democratic Alliance (NDA) received a larger majority in the lower house of Parliament, or Lok Sabha, than it had won in the 2014 elections and returned Modi for a second term as prime minister. Observers considered the parliamentary elections, which included more than 600 million voters, to be free and fair, although there were reports of isolated instances of violence.

Although there are more than 20 million unionized workers in India, unions still represent less than five percent of the total work force. Most of these unions are linked to political parties. Unions are typically strong in state-owned enterprises. A majority of the unionized work force can be found in the railroads, port and dock, banking, and insurance sectors. According to provisional figures from the Ministry of Labor and Employment (MOLE), over 672,000 workdays were lost to strikes and lockouts during 2021. Nonetheless, the International Labor Organization and International Monetary Fund both estimate India’s informal economy accounts for over 80 percent of overall employment. Labor unrest occurs throughout India, though the reasons and affected sectors vary widely. Most reported labor problems are the result of workplace disagreements over pay, working conditions, and union representation.

To reduce the number and complexity of India’s previous 29 national labor statutes, address statutory contradictions, improve compliance, and improve labor rights protections by shifting businesses and workers into the formal economy, the parliament consolidated and reformed India’s national labor laws, beginning with passage of the Code on Wages in 2019. During 2020, the parliament passed the Industrial Relations Code; the Occupational Safety, Health and Working Conditions Code; and the Code on Social Security. These laws’ reforms expanded minimum wage and social security coverage to informal sector workers in agriculture and the growing gig economy, raised the threshold for small and medium sized enterprise exemptions from 100 to 300 employees to foster growth of medium sized enterprises and move workers into the formal economy, expanded the authorized use of contract labor, and gave employers greater hiring and firing flexibility. Details of the laws can be accessed at https://labour.gov.in/labour-law-reforms . The new labor laws require adoption by India’s states for full implementation, which remains ongoing.

The Maternity Benefits Act, 1961, as amended in 2017, mandates 26 weeks of paid maternity leave for women. The Act also mandates for all industrial establishments employing 50 or more workers to have a creche for babies to enable nursing mothers to feed the child up to four times in a day.

The Child Labor Act, 1986 establishes a minimum age of 14 years for work and 18 years as the minimum age for hazardous work. The Bonded Labor Act, 1976 prohibits the use of bonded/forced labor.

There are no reliable unemployment statistics for India due to the informal nature of most employment. During the COVID-19 pandemic experts claimed the unemployment rate spiraled as people in the informal sector lost their jobs. The Centre for Monitoring Indian Economy (CMIE) reported that the average unemployment in October-December period of 2021 was around 7.54 percent.

Matt Ingeneri
Economic Growth Unit Chief
U.S. Embassy New Delhi
Shantipath, Chanakyapuri
New Delhi
+91 11 2419 8000
ingeneripm@state.gov

Indonesia is an attractive destination for foreign direct investment (FDI) due to its relatively young demographics, strong domestic demand, stable political situation, abundant natural resources, and well-regarded macroeconomic policy. Indonesian government officials often state that they welcome increased FDI, aiming to create jobs, spur economic growth, and court foreign investors, notably focusing on infrastructure development, export-oriented manufacturing, mining refinery industries, and green investment. To further improve the investment climate, the government issued the Omnibus Law on Job Creation (Law No. 1/2020) in October 2020 to amend dozens of prevailing laws deemed to hamper investment. It introduced a risk-based approach for business licensing, simplified environmental requirements and building certificates, tax reforms to ease doing business, more flexible labor regulations, and the establishment of the priority investment list. It also streamlined the business licensing process at the regional level. At the same time, investors cite concerns over restrictive technical regulations, policy inconsistency, bureaucratic inefficiency, lack of infrastructure, sanctity of contract issues, and corruption.

The Ministry of Investment / Investment Coordinating Board (BKPM) serves as an investment promotion agency, a regulatory body, and the agency in charge of approving planned investments in Indonesia. As such, it is the first point of contact for foreign investors, particularly in manufacturing, industrial, and non-financial services sectors. In August 2021, BKPM launched the Risk-Based Online Single Submission (OSS), an integrated online system that streamlines almost all business licensing and permitting processes (except in the oil and gas, and financial sectors).  Under the OSS, businesses deemed lower risk will face fewer administrative requirements to obtain permits and licenses. The GOI abolished building permit requirements and relaxed environmental licenses, which the government deemed were major sources of corruption in the business licensing process. The OSS system intends to streamline permit issuance, but integrating overlapping authorities across ministries into one system, both at the national and subnational level, remains challenging. The Omnibus Law on Job Creation requires local governments to integrate their license systems into the OSS. The law allows the central government to take over local governments’ authority if local governments are not performing. The government has provided investment incentives particularly for “priority” sectors (please see the section on Industrial Policies).

As part of the implementation of the Omnibus Law on Job Creation, the Indonesian government enacted Presidential Regulation No. 10/2021 to introduce a significant liberalization of foreign investment in Indonesia, repealing the 2016 Negative List of Investment (DNI). In contrast to the previous regulation, the new investment list sets a default principle that all business sectors are open for investment unless stipulated otherwise. It details the seven sectors that are closed to investment, explains that public services and defense are reserved for the central government, and outlines four categories of sectors that are open to investment: priority investment sectors that are eligible for incentives; sectors that are reserved for micro, small, and medium enterprises (MSMEs) and cooperatives or open to foreign investors who cooperate with them; sectors that are open with certain requirements (i.e., with caps on foreign ownership or special permit requirements); and sectors that are fully open for foreign investment. Although hundreds of sectors that were previously closed or subject to foreign ownership caps are in theory open to 100 percent foreign investment, in practice technical and sectoral regulations may stipulate different or conflicting requirements that still need to be resolved.

In total, 245 business fields listed in the new Investment Priorities List, or DPI, are eligible for fiscal and non-fiscal incentives, notably pioneer industries, export-oriented manufacturing, capital intensive industries, national infrastructure projects, digital economy, labor-intensive industries, as well as research and development activities. Restrictions on foreign ownership in telecommunications and information technology (e.g., internet providers, fixed telecommunication providers, mobile network providers), construction services, oil and gas support services, electricity, distribution, plantations, and transportation were removed. Healthcare services including hospitals/clinics, wholesale of pharmaceutical raw materials, and finished drug manufacturing are fully open for foreign investment, which was previously capped in certain percentages. The regulation also reduced the number of business fields that are subject to certain requirements to only 46 sectors. Domestic sea transportation and postal services are allowed up to 49 percent of foreign ownership, while press, including magazines and newspapers, and broadcasting sectors are open up to 49 percent and 20 percent, respectively, but only for business expansion or capital increases. Small plantations, industry related to special cultural heritage, and low technology industries or industries with capital less than IDR10 billion (USD 700,000) are reserved for MSMEs and cooperatives. Foreign investors in partnership with MSMEs and cooperatives can invest in certain designated areas. The new investment list shortened the number of restricted sectors from 20 to 7 categories including cannabis, gambling, fishing of endangered species, coral extraction, alcohol, industries using ozone-depleting materials, and chemical weapons. In addition, while education investment is still subject to the Education Law, Government Regulation No. 40/2021 permits education and health investment as business activities in special economic zones.

In 2016, Bank Indonesia (BI) issued Regulation No. 18/2016 on the implementation of payment

transaction processing. The regulation governs all companies providing the following services: principal, issuer, acquirer, clearing, final settlement operator, and operator of funds transfer. The BI Regulation capped foreign ownership of payments companies at 20 percent, though it contained a grandfathering provision. BI’s Regulation No. 19/2017 on the National Payment Gateway (NPG) subsequently imposed a 20 percent foreign equity cap on all companies engaging in domestic debit switching transactions. Firms wishing to continue executing domestic debit transactions are obligated to sign partnership agreements with one of Indonesia’s four NPG switching companies. In December 2020, BI issued umbrella Regulation No. 22/23/2020 on the Payment System, which implements BI’s 2025 Payment System Blueprint and introduces a risk-based categorization and licensing system. The regulation entered into force on July 1, 2021. It allows 85 percent foreign ownership of non-bank payment services providers, although at least 51 percent of shares with voting rights must be owned by Indonesians, and foreign investors may only hold 49 percent of voting shares. The 20 percent foreign equity cap remains in place for payment system infrastructure operators who handle clearing and settlement services, and a grandfathering provision remains in effect for existing licensed payment companies. U.S. payment systems companies have stated that the new regulations could further limit access to Indonesia’s financial services market. Prior regulations required authorization, clearing, and settlement to be processed onshore. The new regulations add initiation of a payment as an onshore processing requirement. The regulations do not specify requirements by product. While the regulations provide for offshore processing if certain requirements are met, it is subject to BI approval.

OJK Regulation No. 12/POJK.03/2021, issued in August 2021, increased the foreign equity cap for commercial banks to 99 percent subject to OJK evaluation and approval, and foreign entities should meet requirements as follows: be committed to support the development of the Indonesian economy; obtain recommendations from the supervisory authority of the country of origin; and have a rating of at least 1 level above the lowest investment rating for bank financial institutions, 2 levels above the lowest investment rating for nonbank financial institutions, and 3 levels above the lowest investment rating for legal entities that are not financial institutions. This new regulation does not repeal the regulations listed in POJK 56 of 2016 article 2 and article 6 paragraph 1, stating that foreign entities may own shares of a bank representing more than 40 percent of the Bank’s capital subject to the approval of the Financial Services Authority (OJK). Foreigners may purchase equity in state-owned firms through initial public offerings and the secondary market. Capital investments in publicly listed companies through the stock exchange are generally not subject to the limitation of foreign ownership as stipulated in Presidential Regulation No. 10/2021.

Government Regulation 14/2018 (Regulation 14) on foreign ownership in insurance companies set the maximum threshold for foreign equity ownership of an Indonesian insurance company to 80 percent but exempted insurance companies with existing foreign ownership levels that exceed 80 percent. Subsequently, the government issued Government Regulation 3/2020 to strengthen the grandfathering provisions of Regulation 14 by allowing foreign investors to inject capital and maintain their existing capital share, repealing the obligation under Regulation 14 for a local shareholder to make a corresponding 20 percent capital injection in the event of a capital increase. In June 2020, OJK issued Regulation 39/2020, which provides for the phased elimination of the domestic cession requirements for purchase of reinsurance from companies domiciled in a country with whom Indonesia has a bilateral agreement. The regulation also phased out the requirement for domestic reinsurance obligations for simple risks by the end of 2020, and for non-simple risks in 2022.

Indonesia’s vast natural resources have attracted significant foreign investment and continue to offer significant prospects. However, some companies report that a variety of government regulations have made doing business in the resources sector increasingly difficult, and Indonesia now ranks 69th of 78 jurisdictions in the Fraser Institute’s 2020 Mining Policy Perception Index. In 2012, Indonesia banned the export of raw minerals, dramatically increased the divestment requirements for foreign mining companies, and required major mining companies to renegotiate their contracts of work with the government. The full export ban did not come into effect until January 2017, when the government also issued new regulations allowing exports of copper concentrate and other specified minerals, while imposing onerous requirements.

Of note for foreign investors, provisions of the regulations require that to export mineral ores, companies with contracts of work must convert to mining business licenses – and be subject to prevailing regulations – and must commit to build smelters within the next five years. Also, foreign-owned mining companies must gradually divest 51 percent of shares to Indonesian interests over ten years, with the price of divested shares determined based on a “fair market value” determination that does not consider existing reserves. In January 2020, the government banned the export of nickel ore for all mining companies, foreign and domestic, in the hopes of encouraging construction of domestic nickel smelters. In March 2021, the Ministry of Energy and Natural Resources issued a Ministerial Decision to allow mining business licenses holders who have not reached smelter development targets to continue exporting raw mineral ores under certain conditions. The 2020 Mining Law returned the authority to issue mining licenses to the central government. Local governments only retain authority to issue small scale mining permits.

In December 2020, the Ministry of Energy and Natural Resources issued Ministerial Decision No. 255.K/30/MEM/2020 that mandates coal mining companies fulfill 25 percent of its production for Domestic Market Obligation (DMO) and set the maximum price of coal for domestic power generation at $70/ton. In January 2022, the government of Indonesia banned exports of coal for all mining companies due to low DMO fulfillment, leading to the risk of power blackouts. The government has lifted the coal export ban and imposed stricter control to allow exports only for coal mining companies that have fulfilled DMO requirements.

The latest World Trade Organization (WTO) Investment Policy Review of Indonesia was conducted in February 2021 and can be found on the WTO website: directdoc.aspx (wto.org) 

The last OECD Investment Policy Review of Indonesia, conducted in 2020, can be found on the OECD website:

https://www.oecd.org/investment/oecd-investment-policy-reviews-indonesia-2020-b56512da-en.htm 

The 2021 UNCTAD Report on ASEAN Investment can be found here: http://investasean.asean.org/files/upload/ASEAN%20Investment%20Report%202020-2021.pdf

Business and Human Rights Resource Center’s Reports:

• Report on Human Rights Impact Assessment for Japanese Business Investmnt in Indonesia:
• Investigation Into Deforestation at An Indonesian Company:

Global Witness country-specific reports can be accessed here:

https://www.globalwitness.org/en/campaigns/environmental-activists/indonesia-palm-oil-traders-are-failing-land-and-environmental-defenders/ 

List of conflicts related to environmental and human rights involving companies investing in Indonesia can be seen on Environmental Justice can be accessed here: https: https://ejatlas.org/ 

In order to conduct business in Indonesia, foreign investors must be incorporated as a foreign-owned limited liability company (PMA) through the Ministry of Law and Human Rights. Once incorporated, a PMA must fulfill business licensing requirements through the OSS system. In February 2021, the Indonesian government issued Government Regulation No. 5/2021, introducing a risk-based approach and streamlined business licensing process for almost all sectors. The regulation classifies business activities into categories of low, medium, and high risk, which will further determine business licensing requirements for each investment. Low-risk business activities only require a business identity number (NIB) to start commercial and production activities. An NIB also serves as the import identification number, customs access identifier, halal guarantee statement (for low risk), and environmental management and monitoring capability statement letter (for low risk). Medium-risk sectors must obtain an NIB and a standard certification.

Under the regulation, a standard certificate for medium-low risk is a self-declared statement that certain business standards were fulfilled, while a standard certificate for medium-high risk must be verified by the relevant government agency. High-risk sectors must apply for full business licenses, including an environmental impact assessment (AMDAL). A business license remains valid while the business operates in compliance with Indonesian laws and regulations. A grandfather clause applies to existing businesses that have obtained business licenses. Guidance on the business application process through the Risk-Based OSS can be found at https://oss.go.id/panduan.  The OSS system is an online portal which allows foreign investors to apply for and track the status of licenses and other services online. Foreign investors are generally prohibited from investing in MSMEs in Indonesia, although Presidential Regulation No. 10/2021 opened some opportunities for partnerships in farming, two- and three-wheeled vehicles, automotive spare parts, medical devices, ship repair, health laboratories, and jewelry/precious metals.

According to Presidential Instruction 7/2019, the Ministry of Investment/BKPM is responsible for issuing “investment licenses” (the term used to encompass both NIB and other business licenses) that have been delegated from all relevant ministries and government institutions to foreign entities through the OSS system. BKPM has also been tasked to review policies deemed unfavorable for investors. While the OSS’s goal is to help streamline investment approvals, investments in the mining, oil and gas, and financial sectors still require licenses from related ministries and authorities. Certain tax and land permits, among others, typically must be obtained from local government authorities. Though Indonesian companies are only required to obtain one approval at the local level, businesses report that foreign companies must often seek additional approvals to establish a business. Government Regulation No. 6/2021 requires local governments to integrate their business licenses system into the Risk-Based OSS system and standardize services through a service-level agreement between the central and local governments.

Indonesia’s outward investment is limited, as domestic investors tend to focus on the large domestic market. BKPM is responsible for promoting and facilitating outward investment, to include providing information about investment opportunities in other countries. BKPM also uses its investment and trade promotion centers abroad to match Indonesian companies with potential investment opportunities. The government neither restricts nor provides incentives for outward private sector investment. The Ministry of State-Owned Enterprises (SOEs) encourages Indonesian SOEs through the SOE Go Global Program to increase their investment abroad, aiming to improve Indonesia’s supply chain and establish demand for Indonesian exports in strategic markets. According to the United Nation Conference on Trade and Development (UNCTAD), Indonesia recorded USD 4.5 billion outward direct investments in 2020, increasing 33.3 percent.

Indonesia currently has 26 bilateral investment agreements in force. In 2014, Indonesia began to abrogate its existing BITs by allowing the agreements to expire. However, Indonesia ratified a new BIT with Singapore in March 2021, marking the first investment treaty signed and entered into force after years of review. Indonesia reportedly developed a new model BIT which is currently reflected in the investment chapter of newly signed trade agreements. A detailed list of Indonesia’s investment agreements can be found at https://investmentpolicy.unctad.org/international-investment-agreements/countries/97/indonesia .

Indonesia is a member of the Association of Southeast Asian Nations (ASEAN). In November 2020, 10 ASEAN Member States and five additional countries (Australia, China, Japan, Korea and New Zealand) signed the Regional Comprehensive Economic Partnership (RCEP), representing around 30 percent of the world’s gross domestic product and population. RCEP encompasses trade in goods, services, investment, economic and technical cooperation, intellectual property rights, competition, dispute settlement, e-commerce, SMEs, and government procurement.

Indonesia is actively engaged in bilateral FTA negotiations. Indonesia recently signed trade agreements with Australia, Chile, Mozambique, the European Free Trade Association (Iceland, Liechtenstein, Norway, and Switzerland), and South Korea. Indonesia is currently negotiating Bilateral Trade Agreements with the European Union, United Arab Emirates, Canada, and other countries.

The United States and Indonesia signed a Trade and Investment Framework Agreement (TIFA) on July 16, 1996. This Agreement is the primary mechanism for discussions of trade and investment issues between the United States and Indonesia. The two countries also signed the Convention between the Government of the Republic of Indonesia and the Government of the United States of America for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income in Jakarta on July 11, 1988.  This was amended with a Protocol, signed on July 24, 1996. There is no double taxation of personal income.

Indonesia is a member of the OECD Inclusive Framework on Based Erosion and Profit Shifting. The government 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.

Indonesia continues to bring its legal, regulatory, and accounting systems into compliance with international norms and agreements, but foreign investors have indicated they still encounter challenges in comparison to domestic investors and have criticized the current regulatory system for its failure to establish clear and transparent rules for all actors. Certain laws and policies establish sectors that are either fully off-limits to foreign investors or are subject to substantive conditions. To improve the investment climate and create jobs, Indonesia overhauled more than 70 laws and thousands of regulations through the enactment of the Omnibus Law on Job Creation. In November 2021, Indonesia’s Constitutional Court ruled the Omnibus Law on Job Creation was conditionally unconstitutional due to its non-alignment with the standard formulation of laws and regulations, specifically that the law did not have the appropriate public participation during its formulation and deliberation process. The court ordered government officials to amend the procedural flaws in the law within two years and that no new implementing regulations for the Omnibus Law should be issued, although implementing regulations that had already been issued up to the date of the court ruling remain in force.

U.S. businesses cite regulatory uncertainty and a lack of transparency as two significant factors hindering operations. U.S. companies note that regulatory consultation in Indonesia is inconsistent, despite the existence of Law No. 12/2011 on the Development of Laws and Regulations and implementation of Government Regulation No. 87/204, which states that the community is entitled to provide oral or written input into draft laws and regulations. The law also sets out procedures for revoking regulations and introduces requirements for academic studies as a basis for formulating laws and regulations. Nevertheless, the absence of a formal consultation mechanism has been reported to lead to different interpretations among policy makers of what is required. Laws and regulations are often vague and require substantial interpretation by the implementers, leading to business uncertainty and rent-seeking opportunities.

Decentralization has introduced another layer of bureaucracy and red tape for firms to navigate. In 2016, the Jokowi administration repealed 3,143 regional bylaws that overlapped with other regulations and impeded the ease of doing business. However, a 2017 Constitutional Court ruling limited the Ministry of Home Affairs’ authority to revoke local regulations and allowed local governments to appeal the central government’s decision. The Ministry continues to play a consultative function in the regulation drafting stage, providing input to standardize regional bylaws with national laws. The Omnibus Law on Job Creation provided a legal framework to streamline regulations. It establishes the norms, standards, procedures, criteria (NSPK) and performance requirements in administering government affairs for both the central and local governments. Law No. 11/2020 aims to harmonize licensing requirements at the central and regional levels. Under that law and its implementing regulations, the central government has the authority to take over regional business licensing if local governments do not meet performance requirements. Local governments must also obtain recommendations from the Ministries of Home Affairs and Finance prior to implementing local tax regulations.

In 2017, Presidential Instruction No. 7/2017 was enacted to improve coordination among ministries in the policy-making process. The regulation requires lead ministries to coordinate with their respective coordinating ministry before issuing a regulation. The regulation also requires ministries to conduct a regulatory impact analysis and provide an opportunity for public consultation. The presidential instruction did not address the frequent lack of coordination between the central and local governments. The Omnibus Law on Job Creation enhanced the predictability of trade policy by moving the authority to issue trade regulations from the ministry-level (Ministry of Trade regulation) to the cabinet-level (government regulation).

Indonesia ratified the Kyoto Protocol in 2014 and the 2015 Paring Agreement in 2019 and issued Presidential Regulation 59/2017 on the implementation of the SDGs to support reforms in tackling issued related environment, social, and governance, and climate changes. The government made reforms to attract green investment, among others, through the issuance of the Omnibus Law on Job Creation. The Indonesian Financial Services Authority (OJK) has been actively promoting sustainable financing by developing a sustainable finance roadmap, establishing a task force for sustainable finance in financial sectors, and developing green bonds regulations. The Minister of Finance issued the first green sukuk (Islamic bonds) in February 2018.

As an ASEAN member, Indonesia has successfully implemented regional initiatives, including the real-time movement of electronic import documents through the ASEAN Single Window, which reduces shipping costs, speeds customs clearance, and limits corruption opportunities. Indonesia has also ratified the ASEAN Comprehensive Investment Agreement (ACIA), ASEAN Framework Agreement on Services (AFAS), and the ASEAN Mutual Recognition Arrangement and committed to ratify the Regional Comprehensive Economic Partnership.

Notwithstanding the progress made in certain areas, the often-lengthy process of aligning national legislation has caused delays in implementation. The complexity of interagency coordination and/or a shortage of technical capacity are among the challenges being reported.

Indonesia joined the WTO in 1995. Indonesia’s National Standards Body (BSN) is the primary government agency to notify draft regulations to the WTO concerning technical barriers to trade (TBT) and sanitary and phytosanitary standards (SPS); however, in practice, notification is inconsistent. In December 2017, Indonesia ratified the WTO Trade Facilitation Agreement (TFA). Indonesia has met 88.7 percent of its commitments to the TFA provisions to date, including publication of information, consultations, advance rulings, detention and test procedures, goods clearance, import/export formalities, and goods transit.

Indonesia is a Contracting Party to the Aircraft Protocol to the Convention of International Interests in Mobile Equipment (Cape Town Convention). However, foreign investors bringing aircraft to Indonesia to serve the general aviation sector have faced difficulty utilizing Cape Town Convention provisions to recover aircraft leased to Indonesian companies. Foreign owners of leased aircraft that have become the subject of contractual lease disputes with Indonesian lessees have been unable to recover their aircraft in certain circumstances.

Indonesia’s legal system is based on civil law. The court system consists of District Courts (primary courts of original jurisdiction), High Courts (courts of appeal), and the Supreme Court (the court of last resort). Indonesia also has a Constitutional Court. The Constitutional Court has the same legal standing as the Supreme Court, and its role is to review the constitutionality of legislation. Both the Supreme and Constitutional Courts have authority to conduct judicial review.

Corruption continues to plague Indonesia’s judiciary, with graft investigations involving senior judges and court staff. Many businesses note that the judiciary is susceptible to influence from outside parties. Certain companies have claimed that the court system often does not provide the necessary recourse for resolving property and contractual disputes and that cases that would be adjudicated in civil courts in other jurisdictions sometimes result in criminal charges in Indonesia.

Judges are not bound by precedent and many laws are open to various interpretations. A lack of clear land titles has plagued Indonesia for decades, although land acquisition law No. 2/2012 includes legal mechanisms designed to resolve some past land ownership issues. The Omnibus Law on Job Creation also created a land bank to facilitate land acquisition for priority investment projects. In January 2022, President Jokowi established a task force to formulate land use policy and conduct mapping of land use on mining, plantation, and forestry activities, and provide recommendations to the Ministry of Investment on revocation of land permits that are not being utilized. Government Regulation No. 27/2017 provided incentives for upstream energy development and regulates recoverable costs from production sharing contracts. Indonesia has also required mining companies to renegotiate their contracts of work to include higher royalties, more divestment to local partners, more local content, and domestic processing of mineral ore.

Indonesia’s commercial code, grounded in colonial Dutch law, has been updated to include provisions on bankruptcy, intellectual property rights, incorporation and dissolution of businesses, banking, and capital markets. Application of the commercial code, including the bankruptcy provisions, remains uneven, in large part due to corruption and training deficits for judges and lawyers.

FDI in Indonesia is regulated by Law No. 25/2007 (the Investment Law) which was amended by the Omnibus Law of Job Creation. Under the law, any form of FDI in Indonesia must be in the form of a limited liability company with minimum capital of IDR 10 billion (USD 700,000), excluding land and building and with the foreign investor holding shares in the company. The Omnibus Law on Job Creation allows foreign investors to invest below IDR 10 billion in technology-based startups in special economic zones. The Law also introduces several provisions to simplify business licensing requirements, reforms rigid labor laws, introduces tax reforms to support ease of doing business, and establishes the Indonesian Investment Authority (INA) to facilitate direct investment. In addition, the government repealed the 2016 Negative Investment List through the issuance of Presidential Regulation No. 10/2021, introducing major reforms that removed restrictions on foreign ownership in hundreds of sectors that were previously closed or subject to foreign ownership caps. Several sectors remain closed to investment or are otherwise restricted. Presidential Regulation No. 10/2021 contains a grandfather clause that clarifies that existing investments will not be affected unless treatment under the new regulation is more favorable or the investment has special rights under a bilateral agreement. The Indonesian government also expanded business activities in special economic zones to include education and health. (See section on limits on foreign control regarding the new list of investments.)  The website of the Indonesia Investment Coordinating Board (BKPM) provides information on investment requirements and procedures:   https://nswi.bkpm.go.id/guide.   Indonesia mandates reporting obligations for all foreign investors through the OSS system as stipulated in BKPM Regulation No. 6/2020. (See section two for Indonesia’s procedures for licensing foreign investment.)

The Indonesian Competition Authority (KPPU) implements and enforces the 1999 Indonesia Competition Law. The KPPU reviews agreements, business practices and mergers that may be deemed anti-competitive, advises the government on policies that may affect competition, and issues guidelines relating to the Competition Law. Strategic sectors such as food, finance, banking, energy, infrastructure, health, and education are the KPPU’s priorities. The Omnibus Law on Job Creation and its implementing regulation, Government Regulation No. 44/2021, removes criminal sanctions and the cap on administrative fines, which was set at a maximum of IDR 25 billion (USD 1.7 million) under the previous regulation. Appeals of KPPU decisions must be processed through the commercial court.

Indonesia’s political leadership has long championed economic nationalism, particularly concerning mineral and oil and gas reserves. According to Law No. 25/2007 (the Investment Law), the Indonesian government is barred from nationalizing or expropriating an investor’s property rights, unless provided by law. If the Indonesian government nationalizes or expropriates an investors’ property rights, it must provide market value compensation.

Presidential Regulation No. 77/2020 on Government Use of Patent and the Ministry of Law and Human Rights (MLHR) Regulation No. 30/2019 on Compulsory Licenses (CL) enables patent right expropriation in cases deemed in the interest of national security or due to a national emergency. Presidential Regulation No. 77/2020 allows a GOI agency or Ministry to request expropriation, while MLHR Regulation No. 30/2019 allows an individual or private party to request a CL. GOI issued Presidential decrees number 100 and number 101 in November 2021 announcing government use of the Remdesivir and Favipiravir Patents to secure needed COVID-19 drugs supply. This decree will remain in effect for three years, extendable until the end of the global Covid-19 pandemic and requires the assigned company to compensate Remdesivir and Favirapir patent holders one percent of its net annual sales.

Indonesia seeks to facilitate investment through fiscal incentives, non-fiscal incentives, and other benefits. Fiscal incentives are in the form of tax holidays, tax allowances, and exemptions of import duties for capital goods and raw materials for investment. Presidential Regulation No. 10/2021 on investment establishes 245 priority fields that are eligible for tax and other incentives, such as facilitated licensing and land use, to encourage investment in those sectors. The Omnibus Law on Job Creation offers a variety of tax incentives, including eliminating income tax on dividends earned in Indonesia and on certain income, including dividends earned abroad, if they are invested in Indonesia. The Law also exempts dozens of goods and services from value added tax (VAT). The provisions in the Omnibus Law on Job Creation complement several regulations in Law No. 2/2020, which was issued earlier in 2020. Law No. 2 cut the corporate income tax rate, lowering it to 22 percent for 2020 and 2021, and to 20 percent for 2022. However, the Tax Harmonization Law No. 7/2021 reversed this tax cut, keeping corporate income tax for 2022 at 22 percent. In addition, a company can claim a further 3 percent reduction if it is publicly listed, with a total number of shares traded on an Indonesian stock exchange of at least 40 percent. A zero import duty for incompletely knocked down battery-based electronic vehicles came into effect on February 22, 2022 under MOF regulation No. 13/2022. This regulation aims to make Indonesia a production base and export hub of electric motor vehicles. The government is also reportedly preparing incentives to encourage the development of renewable energy and mining down streaming industries as part of the implementation Government Regulation 96/2021 concerning the Implementation of Mineral and Coal Mining Business Activities. However, there is no issued policy yet on these incentives. Investment incentives are outlined at  https://www.investindonesia.go.id/cn/invest-with-us/faq .

To cope with soaring demand and to improve domestic production of medical devices and supplies amid the COVID-19 pandemic, the government through BKPM Regulation No. 86/2020 streamlined licensing requirements for manufacturers of pharmaceuticals and medical devices. The Ministry of Health also accelerated product registration and certification for medical devices and household health supplies. Moreover, the Ministry of Trade issued Regulation 28/2020 to relax import requirements for certain medical-related products.

The Ministry of Finance (MOF) issued Regulation No. 92/2021 to accelerate the provision of fiscal facilities on the import of goods needed for the handling of COVID-19 such as oxygen, laboratory test kits and reagents, virus transfer, medicines, medical equipment and personal protective equipment and Regulation 188/2020 to provide exemptions of import duties and taxes on the import of COVID-19 vaccines. Indonesia’s Customs Authority also implemented a “rush handling policy” to speed up the vaccine import process. MOF Regulation 20/2021 and its amendments were issued to increase motor vehicle sales to support the post-pandemic economic recovery by reformulating the sales tax on luxury goods, specifically motor vehicles. Under Regulation 141/2021, MOF reformulated the sales tax for luxury motor vehicles based on efficiency levels and emissions levels, which aimed to reduce emissions from motor vehicles and to encourage the use of energy-efficient and environmentally friendly motor vehicles.

Indonesia offers numerous incentives to foreign and domestic companies that operate in special economic and trade zones throughout Indonesia. The largest zone is the free trade zone (FTZ) island of Batam, Bintan, and Karimun, located just south of Singapore. The Omnibus Law on Job Creation and its implementing regulation, Government Regulation No. 41/2021 strengthened and unified the three islands (Batam, Bintan, and Karimun) into one integrated Free Trade Zone for the next 25 years to create an international logistics hub to support the industrial, trade, maritime, and tourism sectors. Investors in FTZs are exempted from import duty, income tax, VAT, and sales tax on imported capital goods, equipment, and raw materials. Fees are assessed on the portion of production destined for the domestic market which is “exported” to Indonesia, in which case fees are owed only on that portion. Foreign companies are allowed up to 100 percent ownership of companies in FTZs. Companies operating in FTZs may lend machinery and equipment to subcontractors located outside the zone for two years.

Indonesia also has numerous Special Economic Zones (SEZs), regulated under Law No. 39/2009, Government Regulation No. 1/2020 on SEZ management, and Government Regulation No. 12/2020 on SEZ facilities. These benefits include reduction of corporate income taxes (depending on the size of the investment), luxury tax, customs duty and excise, and expedited or simplified administrative processes for import/export, expatriate employment, immigration, and licensing. Under the Omnibus Law on Job Creation, foreign technology start-up investments located within SEZs are exempt from the minimum investment threshold of IDR 10 billion (USD 700,000), excluding land and buildings. There are minimal export processing requirements within the SEZs. New business activities in the education and health sectors (for which licensing services remain under the central government’s authority) will be allocated by zones and determined by the administrator of the SEZ. The Law lifted limits of imported goods into SEZs but maintained restrictions on specific banned goods in accompanying laws and regulations. It also introduced new tax facilities and incentives for taxpayers in SEZs. As of March 2022, Indonesia has identified twelve SEZs in manufacturing and tourism centers that are operational and six under construction.

Indonesian law also provides for several other types of zones that enjoy special tax and administrative benefits. Among these are Industrial Zones/Industrial Estates (Kawasan Industri), bonded stockpiling areas (Tempat Penimbunan Berikat), and Integrated Economic Development Zones (Kawasan Pengembangan Ekonomi Terpadu). Indonesia is home to 135 industrial estates that host thousands of industrial and manufacturing companies. Ministry of Finance Regulation No. 105/2016 provides several different tax and customs accommodations available to companies operating out of an industrial estate, including corporate income tax reductions, tax allowances, VAT exemptions, and import duty exemptions depending on the type of industrial estate. Bonded stockpile areas include bonded warehouses, bonded zones, bonded exhibition spaces, duty free shops, bonded auction places, bonded recycling areas, and bonded logistics centers.

Companies operating in these areas enjoy concessions in the form of exemption from certain import taxes, luxury goods taxes, and value-added taxes, based on a variety of criteria for each type of location. Most recently, bonded logistics centers (BLCs) were introduced to allow for larger stockpiles, longer temporary storage (up to three years), and a greater number of activities in a single area. The Ministry of Finance issued Regulation No. 28/2018, providing additional guidance on the types of BLCs and shortening approval for BLC applications. By October 2019, Indonesia had designated 106 BLCs in 159 locations, with plans to approve more in eastern Indonesia. In 2021, the Ministry of Finance and the Directorate General for Customs and Excise (DGCE) updated regulations (MOF Regulation No. 65/2021 and DGCE Regulation No. 9/2021) to streamline the licensing process for bonded zones. Together the two regulations are intended to reduce processing times and the number of licenses required to open a bonded zone.

Shipments from FTZs and SEZs to other places in the Indonesia customs area are treated similarly to exports and are subject to taxes and duties. Bonded zones have a domestic sales quota of 50 percent of the initial realization amount on export, sales to other bonded zones, sales to free trade zones, and sales to other economic areas (unless otherwise authorized by the Indonesian government). Sales to other special economic regions are only allowed for further processing to become capital goods, and to companies with a license from the economic area organizer for the goods relevant to their business.

Indonesia expects foreign investors to contribute to the training and development of Indonesian nationals, allowing the transfer of skills and technology required for their effective participation in the foreign companies’ management. Generally, a company can hire foreigners only for positions that the government has deemed open to non-Indonesians. Employers must have training programs aimed at replacing foreign workers with Indonesians. If a direct investment enterprise wants to employ foreigners, the enterprise should submit an Expatriate Placement Plan (RPTKA) to the Ministry of Manpower.

Indonesia recently made significant changes to its foreign worker regulations. Government Regulation No. 34/2021, an implementing regulation of the Omnibus Law on Job Creation, on the utilization of foreign workers stipulates specific documents required for the RPTKA and introduces different types of RPTKA for temporary works (e.g. film production, audits, quality control, inspection and installation of machinery), employment for work under six months, employment that does not require payment to the Foreign Worker Utilization Compensation Fund (DKPTKA), and employment in SEZs. Under the regulation, an RPTKA is not required for commissioners or executives. Foreigners working in technology-based startups are also exempted from the RPTKA requirement in the first three months. Expatriates can use an endorsed RPTKA to apply with the immigration office in their place of domicile for a Limited Stay Visa or Semi-Permanent Residence Visa (VITAS/VBS). Expatriates receive a Limited Stay Permit (KITAS) and a blue book, valid for up to two years and renewable for up to two extensions without leaving the country. While a technical recommendation from a relevant ministry is no longer required, ministries may still establish technical competencies or qualifications for certain jobs or prohibit the use of foreign workers for specific positions, by informing and obtaining approval from the Ministry of Manpower. Foreign workers who plan to work longer than six months in Indonesia must apply for employee social security and/or insurance.

Government Regulation No. 34/2021 outlines the types of businesses that can employ foreign workers, sets requirements to obtain health insurance for expatriate employees, requires companies to appoint local “companion” employees for the transfer of technology and skill development, and requires employers to facilitate Indonesian language training for foreign workers. Any expatriate who holds a work and residence permit must contribute USD 1,200 per year to the DKPTKA for local manpower training at regional manpower offices. Ministry of Manpower Decree No. 228/2019 details the number of jobs open for foreign workers across 18 sectors, ranging from construction, transportation, education, telecommunications, and professionals. Foreign workers must obtain approval from the Manpower Minister or designated officials to apply for positions not listed in the decree. Some U.S. firms report difficulty in renewing KITASs (residency cards/IDs) for their foreign executives.

Indonesia notified the WTO of its compliance with Trade-Related Investment Measures (TRIMS) on August 26, 1998. The 2007 Investment Law states that Indonesia shall provide the same treatment to both domestic and foreign investors originating from any country. Nevertheless, the government pursues policies to promote local manufacturing that could be inconsistent with TRIMS requirements, such as linking import approvals to investment pledges or requiring local content targets in some sectors.

In 2019, Indonesia issued Government Regulation No. 71/2019 to replace Regulation No. 82/2012, further detailed in Ministry of Communication and Information Technology (MCIT) Regulation No. 5/2020, which classifies electronic system operators (ESO) into two categories:  public and private. Public ESOs are either a state institution or an institution assigned by a state institution but not a financial sector regulator or supervisory authority. Private ESOs are individuals, businesses and communities that operate electronic systems. Public ESOs must manage, process, and store their data in Indonesia, unless the storage technology is not available locally. Private ESOs have the option to choose where they will manage, process, and store their data. However, if private ESOs decide to process data outside of Indonesia, they must provide access to their systems and data for government supervision and law enforcement purposes. For private financial sector ESOs, Government Regulation 71/2019 provides that such firms are “further regulated” by Indonesia’s financial sector supervisory authorities regarding the private sector’s ESO systems, data processing, and data storage. MCIT Regulation No. 10/2021 requires private sector operator to register within six months period after the effective implementation of risk-based business licensing through the OSS system. The policy has not been implemented as MCIT is still waiting for an official statement from BKPM on the operational of the Risk-Based OSS system. MCIT also issued Regulation 13/2021 in October, requiring a minimum of 35 percent local content requirement (LCR) for 4G and 5G device distributed and used in Indonesia starting in mid-April 202, while previously it was set at 30 percent.

Additionally, to implement Government Regulation 71/2019, the Financial Services Authority (OJK) issued Regulation No. 13/2020 that became effective March 31, 2020. It is an amendment to Regulation No. 38/2016, which allows banks to operate their electronic data processing systems and disaster recovery centers outside of Indonesia, provided that the system receives approval from OJK. OJK issued Regulation 4/2021, effective on March 9, 2021, which allows some non-bank financial institution data to be transferred and stored outside of Indonesia subject to OJK approval. Unless approved by OJK, data centers and disaster recovery centers must be in Indonesia. Certain core banking data and non-bank financial institution’s core systems must also be stored onshore/within Indonesia. OJK will evaluate whether offshore data arrangements could diminish its supervisory efficiency or negatively affect the bank’s performance, and if the data center complies with Indonesia’s laws and regulations. Data may be mirrored or placed in offshore systems, subject to OJK approval, such as for global integrated analysis, global risk management analysis with headquarters, and integrated anti-money laundering and terrorist financing analysis.

The Basic Agrarian Law of 1960, the predominant body of law governing land rights, recognizes the right of private ownership and provides varying degrees of land rights for Indonesian citizens, foreign nationals, Indonesian corporations, foreign corporations, and other legal entities. Indonesia’s 1945 Constitution states that all natural resources are owned by the government for the benefit of the people. This principle was augmented by the passage of Land Acquisition Law No. 2/2012, which was amended by the Omnibus Law on Job Creation (Law No. 11/2020), that enshrined the concept of eminent domain and established mechanisms for fair market value compensation and appeals. The National Land Agency registers property under Government Regulation No. 18/2021, though the Ministry of Environment and Forestry (KLHK) administers all “forest land.”  The regulation introduced e-registration to cut bureaucracy and minimize land disputes. Registration is not conclusive evidence of ownership, but rather strong evidence of such. It allows foreigners domiciled in Indonesia to have housing property with land under a “right to use” status for a maximum of 30 years, with extensions available for up to 20 additional years, as well as a “right to own” status for apartments located in special economic zones, free trade zones, and industrial areas. The Omnibus Law on Job Creation aims to reduce uncertainty around the roles of the central and local governments, including around spatial planning and environmental and social impact assessments (AMDALs), by simplifying the licensing process through implementation of a risk-based approach. The Omnibus Law also created a land bank to facilitate land acquisition for priority investment projects.

Indonesia remains on the priority watch list in the U.S. Trade Representative’s (USTR) Special 301 Report due to the lack of adequate and effective IP protection and enforcement. Indonesia’s patent law continues to raise serious concerns, including patentability criteria and compulsory licensing. Indonesia is amending the Patent Law, in addition to the amendment made through the Omnibus Law and hopes for the amendment deliberation to start in 2022. Counterfeiting and piracy are pervasive, IP enforcement remains weak, and there are continued market access restrictions for IP-intensive industries. According to U.S. stakeholders, Indonesia’s failure to protect intellectual property and enforce IP rights laws has resulted in high levels of physical and online piracy. Local industry associations have reported large amounts of pirated films, music, and software in circulation in Indonesia in recent years, causing potentially billions of dollars in losses. Indonesian physical markets, such as Mangga Dua Market, and online markets Tokopedia and Bukalapak, were included in USTR’s Notorious Markets List in 2021.

The Omnibus Law on Job Creation amended key articles in Patent Law No. 13/2016 and the Trademark and Geographical Indications Law No. 20/2016. While Patent Law amendments require the patent holder to exercise their patented invention locally within 36 months after the patent is granted, the new amendments provide flexibility to IP holders to meet local “working” requirements. The new law also revokes a provision requiring patent holders to support technology transfer, investment, and employment in local manufacturing as a condition of patent protection. The law reduces the processing time required for simple patent applications from 12 months to 6 months.

In January 2020, Indonesia ratified the Marrakesh Treaty through Presidential Regulation No. 1/2020 to facilitate access to public works for persons who are blind, visually impaired, or otherwise print-disabled. Indonesia also ratified the Beijing Treaty on IPR protection for audiovisual performances to protect actors through Presidential Regulation No. 21/2020. Indonesia deposited its instrument of accession to the Madrid Protocol with the World Intellectual Property Organization (WIPO) in 2017 and issued implementing regulations in 2018. Under the new rules, applicants desiring international mark protection under the Madrid Protocol must first register their application with DGIP and be Indonesian citizens, domiciled in Indonesia, or have clear industrial or commercial interests in Indonesia. Although the Trademark Law of 2016 expanded recognition of non-traditional marks, Indonesia still does not recognize certification marks. In response to stakeholder concerns over a lack of consistency in the treatment of internationally well-known trademarks, the Supreme Court issued Circular Letter 1/2017, which advised Indonesian judges to recognize cancellation claims for well-known international trademarks with no time limit stipulation.

Ministry of Finance (MOF) Regulation No. 6/2019 grants the Directorate General of Customs and Excise (DGCE) legal authority to hold shipments believed to contain imitation goods for up to two days, pending inspection. Under Regulation No. 6/2019, rights holders are notified by DGCE (through a recordation system) when an incoming shipment is suspected of containing infringing products. If the inspection reveals an infringement, the rights holder has four days to file a court injunction to request a shipment suspension. Rights holders are required to provide a refundable monetary guarantee of IDR 100 million (USD 6,600) when they file a claim with the court. If the court sides with the rights holder, then the guarantee money will be returned to the applicant. DGCE intercepted three suspected infringement product imports in 2020 by using this recordation system, as only 17 trademarks and two copyrights are registered in the recordation system. Despite business stakeholder concerns, the GOI retains a requirement that only companies with offices domiciled in Indonesia may use the recordation system.

Trademark, Patent, and Copyright legislation require a rights-holder complaint for investigation. DGIP and BPOM investigators lack the authority to make arrests so must rely on police cooperation for any enforcement action. DGIP created an IP Enforcement Task Force in late 2021 to include DGIP, the Indonesian National Policy (INP) Criminal Investigation Agency, DGCE, MCIT, and BPOM. The Task Force is more focused on IP Enforcement and is promising but has not fully ramped up its efforts and more time is needed to evaluate its long-term effectiveness.

Additional information regarding treaty obligations and points of contact at local IP offices, can be found at the World Intellectual Property Organization (WIPO) country profile website:

http://www.wipo.int/directory/en/  . For a list of local lawyers, see:  https://id.usembassy.gov/attorneys.

The Indonesia Stock Exchange (IDX) index has 766 listed companies as of December 2021 with a daily trading volume of USD 922.2 million and market capitalization of USD 571 billion (IDR 8,284 trillion). Over the past six years, there has been a 45.9 percent increase in the number listed companies, but the IDX is dominated by its top 50 listed companies, which represent 69.2 percent of the market cap. There were 54 initial public offerings in 2021 – three more than in 2020. During the fourth quarter of 2021, domestic entities conducted 75 percent of total IDX stock trades.

Government treasury bonds are the most liquid bonds offered by Indonesia. Corporate bonds are less liquid due to less public knowledge of the product and the shallowness of the market. The government issues sukuk (Islamic treasury notes) as part of its effort to diversify Islamic debt instruments and increase their liquidity and issued the first in Southeast Asia Sustainable Development Goals (SDG) bond to fund projects that benefit communities and the environment. This SDG bond was issued in the global capital market, denominated in Euros, and listed in the Singapore and Frankfurt Stock Exchanges. Indonesia’s sovereign debt as of February 2022 was rated as BBB by Standard and Poor’s, BBB by Fitch Ratings and Baa2 by Moody’s. Foreigners held 19 percent of government bonds in January 2022

OJK began overseeing capital markets and non-banking institutions in 2013, replacing the Capital Market and Financial Institution Supervisory Board. In 2014, OJK also assumed BI’s supervisory role over commercial banks. Foreigners have access to the Indonesian capital markets and are a major source of portfolio investment. Indonesia respects International Monetary Fund (IMF) Article VIII by refraining from restrictions on payments and transfers for current international transactions.

Although there is some concern regarding the operations of the many small and medium sized family-owned banks, the banking system is generally considered sound, with banks enjoying some of the widest net interest margins in the region. As of December 2021, commercial banks had IDR 9,913.6 trillion (USD 683 billion) in total assets, with a capital adequacy ratio of 25.67 percent. Outstanding loans grew by 4.4 percent in 2021, a significant improvement from the 2,4 percent contraction in 2020, due to the COVID-19 pandemic. Gross non-performing loans (NPL) in December 2021 decreased to 3 percent from 3.06 percent the previous year. NPL rates were partly mitigated through a loan restructuring program implemented by OJK as part of the COVID-19 recovery efforts.

The Financial Services Authority (OJK) issued a regulation on credit restructuring in 2020 to support businesses hit by the pandemic and maintain financial stability, which was extended until March 2023 to prepare banks and debtors for a “soft landing” and give banks time to adequately provision for potential loan losses. The amount of credit restructured under this policy declined from IDR 830.5 trillion (USD 57.2 billion) in 2020 to IDR 693.6 trillion (USD 47.8 billion) in 2021. Most of the loans were restructured by extending the maturity, delaying payments, or reducing the interest rate, which provided borrowers with temporary liquidity relief. Loans at risk, a broader measure of potential troubled loans than the NPL ratio, decreased from 23.4 percent at the end of 2020 to 19.5 percent in December 2021.

OJK Regulation No. 56/03/2016 limits bank ownership to no more than 40 percent by any single shareholder, applicable to foreign and domestic shareholders. This does not apply to foreign bank branches in Indonesia. Foreign banks may establish branches if the foreign bank is ranked among the top 200 global banks by assets. A special operating license is required from OJK to establish a foreign branch. The OJK granted an exception in 2015 for foreign banks buying two small banks and merging them. To establish a representative office, a foreign bank must be ranked in the top 300 global banks by assets. OJK regulation No. 12/POJK.03/2021, issued in August 2021, increased the foreign equity cap for commercial banks to 99 percent, subject to OJK evaluation and approval.

On March 16, 2020, OJK issued Regulation No. 12/POJK.03/2020 on commercial bank consolidation. The regulation aimed to strengthen the structure and competitiveness of the national banking industry by increasing bank capital and encouraging consolidation of banks in Indonesia. This regulation increased minimum core capital requirements for commercial banks and Capital Equivalency Maintained Asset requirements for foreign banks with branch offices by least IDR 3 trillion (USD 209 million), by December 31, 2022.

In 2015, OJK eased rules for foreigners to open a bank account in Indonesia. Foreigners can open a bank account with a balance between USD 2,000-50,000 with just their passport. For accounts greater than USD 50,000, foreigners must show a supporting document such as a reference letter from a bank in the foreigner’s country of origin, a local domicile address, a spousal identity document, copies of a contract for a local residence, and/or credit/debit statements.

Growing digitalization of banking services, spurred on by innovative payment technologies in the financial technology (fintech) sector, complements the conventional banking sector. Peer-to-peer (P2P) lending companies and e-payment services have grown rapidly over the past decade. Indonesian policymakers are hopeful that these fintech services can reach underserved or unbanked populations and micro, small, and medium-sized enterprises (MSMEs). In October 2021, OJK launched a Digital Banking transformation blueprint providing the agency’s policy vision for digital banking that consist of 5 elements: 1) data protection, transfer, and governance, 2) technology governance, architecture, emerging technology, 3) IT risk management, outsourcing, and cybersecurity, 4) platform sharing and cooperation of financial/non-financial institutions, and 5) institutional capacity, culture, leadership, and talent management.

OJK Regulation 77/2016 on peer-to-peer (P2P) lending introduces various guidelines, obligations, and restrictions for P2P lending services, and the organization of P2P lending service providers. This regulation caps foreign ownership of P2P services at 85 percent and mandates data localization. Nonbank financial service suppliers may do business in Indonesia as a joint venture or be partially owned by foreign investors but cannot operate in Indonesia as a branch or subsidiary of a foreign entity. Indonesia issued a moratorium on October 2021 for peer-to-peer (P2P) lending licenses to combat illegal platforms. Under OJK Regulation 13/2018, financial technology companies must register with OJK and implement a regulatory sandbox to test new services and business models. As of December 2021, total fintech lending reached USD 20.4 billion in loan disbursements, with USD 2 billion outstanding, while payment transactions using e-money in 2021 grew by 49.06 percent y-o-y to USD 21.06 billion. The value of digital banking transactions increased by 45.6 percent y-o-y to USD 2.7 trillion. According to OJK data, only 39 percent of the population currently use digital banking, therefore significant growth potential remains.

The government places no restrictions or time limitations on investment remittances. However, certain reporting requirements exist. Banks should adopt Know Your Customer (KYC) principles to carefully identify customers’ profile to match transactions. Indonesia does not engage in currency manipulation.

As of 2015, Indonesia is no longer subject to the intergovernmental Financial Action Task Force (FATF) monitoring process under its on-going global Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) compliance process. It continues to work with the Asia/Pacific Group on Money Laundering (APG) to further strengthen its AML/CTF regime. In 2018, Indonesia was granted observer status by FATF, a necessary milestone toward becoming a full FATF member.

The Indonesian Investment Authority (INA), also known as the sovereign wealth fund, was legally established by the 2020 Omnibus Law on Job Creation. INA’s supervisory board and board of directors were selected through competitive processes and announced in January and February 2021. The government initially capitalized INA with USD 2 billion through injections from the state budget and added another USD 4.04 billion from the state budget in October 2021. INA aims to attract foreign equity and invest that capital in long-term Indonesian assets to improve the value of the assets through enhanced management. According to Indonesian government officials, the fund will consist of a master portfolio with sector-specific sub-funds, such as infrastructure, oil and gas, health, tourism, and digital technologies.

INA reportedly inked MoUs with several parties such as with Caisse de dépôt et placement du Québec (CDPQ), APG Asset Management (APG), and the Abu Dhabi Investment Authority (ADIA) on May 2021, to establish Indonesia’s first infrastructure investment platform; with state-owed energy/oil company Pertamina on May 19, to carry out investment cooperation in the energy sector; and with BP Jamsostek on May 24, to carry out investment activity cooperation. INA partnered with state-owned airport operator Angkasa Pura II to accelerate Jakarta’s Soekarno-Hatta airport expansion on October 28; partnered with Dubai Ports (DP) World on October 29 to invest USD 7.5 billion into Indonesian seaport facilities; and made an agreement with the Abu Dhabi growth fund (ADG) on November 25, to invest up to USD 10 billion in Indonesia.

Indonesia had 114 state-owned enterprises (SOEs) and 28 subsidiaries divided into 12 sectors, as of December 2019. By February 2022 that number had been reduced to 41 SOEs divided into 12 sectors mainly through consolidation or merger, although a small number of SOEs have also been liquidated due to ineffectiveness. As of December 2021, 28 were listed on the Indonesian stock exchange. Two SOEs plan IPOs in 2022, namely PT Pertamina Geothermal Energy and PT ASDP Indonesia Ferry (Persero). SOEs make up 55 percent of the economy.

In 2017, Indonesia announced the creation of a mining holding company, PT Inalum. In 2020, three state owned sharia banks were merged. In January 2022, Minister of SOEs, Erick Thohir, stated that in total, nine SOE holding companies will be formed by 2024, including pharmaceutical, insurance, survey services, food industry, manufacturing industry, defense state-owned holdings, the media industry, port services, and transportation and tourism services holding.

Several of this holding companies have already been formed, including pharmaceutical holding (Lead by PT Bio Farma, formed in early 2020), Indonesia battery holding (formed on March 26, 2021), Port Service Holding (a merger of PT Pelindo I to Pelindo IV, formed on October 1, 2021), Indonesia Financial Group (IFG) as an insurance holding formed in October 2020, Holding of SOE hotels (Wika as the lead of the holding, formed in December 2020), Ultra Micro Holding (BRI, Pegadaian and PNM, formed Sept 13, 2021), ID Food or Holding of food SOEs (lead by PT Rajawali Nusantara Indonesia, formed on January 7), Injourney as a tourism holding company (PT Aviasi Pariwisata Indonesia, formed on January 13), and Defend ID as the defense industry holding (with Len Industry as the lead of the holding, formed on March 2).

Since his appointment by President Jokowi in November 2019, Minister of SOEs Erick Thohir has underscored the need to reform SOEs in line with President Jokowi’s second-term economic agenda. Thohir has noted the need to liquidate underperforming SOEs, ensure that SOEs improve their efficiency by focusing on core business operations, and introduce better corporate governance principles. Thohir has spoken publicly about his intent to push SOEs to undertake initial public offerings (IPOs) on the Indonesian Stock Exchange. He also encourages SOEs to increase outbound investment to support Indonesia’s supply chain in strategic markets, including through acquisition of cattle farms, phosphate mines, and salt mines.

Information regarding SOEs can be found at the SOE Ministry website ( http://www.bumn.go.id/  ) (Indonesian language only).

There are also an unknown number of SOEs owned by regional or local governments. SOEs are present in almost all sectors/industries including banking (finance), tourism (travel), agriculture, forestry, mining, construction, fishing, energy, and telecommunications (information and communications).

Indonesia is not a party to the WTO’s Government Procurement Agreement. Private enterprises can compete with SOEs under the same terms and conditions with respect to access to markets, credit, and other business operations. However, many sectors report that SOEs receive strong preference for government projects. SOEs purchase some goods and services from the private sector and foreign firms. SOEs publish an annual report and are audited by the Supreme Audit Agency (BPK), the Financial and Development Supervisory Agency (BPKP), and external and internal auditors.

While some state-owned enterprises have offered shares on the stock market, Indonesia does not have an active privatization program. The government capitalized Indonesia Investment Authority (INA) with USD 4 billion in state-owned assets to attract equity investments in those assets, which may eventually be sold to investors or listed on the stock market.

Indonesian businesses are required to undertake responsible business conduct (RBC) activities under Law No. 40/2007 concerning Limited Liability Companies. In addition, sectoral laws and regulations have further specific provisions on RBC. Indonesian companies tend to focus on corporate social responsibility (CSR) programs offering community and economic development, and educational projects and programs. This is at least in part caused by the fact that such projects are often required as part of the environmental impact permits (AMDAL) of resource extraction companies, and those companies face domestic and international scrutiny of their operations. Because a large proportion of resource extraction activity occurs in remote and rural areas where government services are reported to be limited or absent, these companies face very high community expectations to provide such services themselves. Despite significant investments – especially by large multinational firms – in CSR projects, businesses have noted that there is limited general awareness of those projects, even among government regulators and officials. Yet, lack of regulations, oversight and enforcement measures deter stakeholders’ from more consistently adhering to environment, social, and governance standards (ESG).

The government does not have an overarching strategy to encourage or enforce RBC but regulates each area through the relevant laws (environment, labor, corruption, etc.). Some companies report that these laws are not always enforced evenly. In 2017, the National Commission on Human Rights launched a National Action Plan on Business and Human Rights in Indonesia, based on the UN Guiding Principles on Business and Human Rights.

OJK regulates corporate governance issues, but the regulations and enforcement are not yet up to international standards for shareholder protection.

Indonesia does not adhere to the OECD Guidelines for Multinational Enterprises, and the government is not known to have encouraged adherence to those guidelines. Many companies claim that the government does not encourage adherence to the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas or any other supply chain management due diligence guidance. Indonesia is an active member of the Extractive Industries Transparency Initiative (EITI). As part of EITI requirement, payment made to governments in the extractive industries are disclosed through a system database managed by the Ministry of Energy and Mineral Resources (ESDM) as it continues to improve data and information transparency.

President Jokowi was elected on a strong good-governance platform, but his performance on this remains inconsistent. Corruption remains a serious problem in the view of many, including some U.S. companies. The Indonesian government has issued detailed directions on combating corruption in targeted ministries and agencies, and the 2018 release of the updated and streamlined National Anti-Corruption Strategy mandates corruption prevention efforts across the government in three focus areas (licenses, state finances, and law enforcement reform). The Corruption Eradication Commission (KPK) was established in 2002 as the lead government agency to investigate and prosecute corruption. KPK is one of the most trusted and respected institutions in Indonesia. The KPK has taken steps to encourage companies to establish effective internal controls, ethics, and compliance programs to detect and prevent bribery of public officials. By law, the KPK is authorized to conduct investigations, file indictments, and prosecute corruption cases involving law enforcement officers, government executives, or other parties connected to corrupt acts committed by those entities; attracting the “attention and the dismay” of the general public; and/or involving a loss to the state of at least IDR 1 billion (approximately USD 66,000). The government began prosecuting companies that engage in public corruption under new corporate criminal liability guidance issued in a 2016 Supreme Court regulation, with the first conviction of a corporate entity in January 2019. Giving or accepting a bribe is a criminal act, with possible fines ranging from USD 3,850 to USD 77,000 and imprisonment up to a maximum of 20 years to life, depending on the severity of the charge. Presidential decree No. 13/2018 issued in March 2018 clarifies the definition of beneficial ownership and outlines annual reporting requirements and sanctions for non-compliance.

Indonesia’s ranking in Transparency International’s Corruption Perceptions Index in 2021 rose to 96 out of 180 countries surveyed, compared to 102 out of 180 countries in 2020. Indonesia’s score of public corruption in the country, according to Transparency International, rose to 38 in 2020 from 37 in 2020 (scale of 0/very corrupt to 100/very clean). Indonesia ranks below neighboring Timor Leste, Malaysia, and Brunei.

Corruption reportedly remains pervasive despite laws to combat it.  In September 2019, the Indonesia House of Representatives (DPR) passed Law No. 19/2019 on the Corruption Eradication Commission (KPK) which revised the KPK’s original charter, reducing the Commission’s independence and limiting its ability to pursue corruption investigations without political interference. The current KPK Commissioner has stated that KPK’s main role will no longer be prosecution, but education and prevention. Although there have been some notable successful prosecutions including against members of the President’s cabinet, the 2019 changes to the KPK have led to a significant decline in investigations and prosecutions.

Indonesia ratified the UN Convention against Corruption in September 2006. However, Indonesia is not yet compliant with key components of the convention, including provisions on foreign bribery. Indonesia has not yet acceded to the OECD Anti-Bribery Convention but attends meetings of the OECD Anti-Corruption Working Group. Several civil society organizations function as vocal and competent corruption watchdogs, including Transparency International Indonesia and Indonesia Corruption Watch.

Resources to Report Corruption

Komisi Pemberantasan Korupsi (Anti-Corruption Commission)
Jln. Kuningan Persada Kav 4, SetiabudiJakarta Selatan 12950
Email:  informasi@kpk.go.id 

Indonesia Corruption Watch
Jl. Kalibata Timur IV/D
No. 6 Jakarta Selatan 12740
Tel: +6221.7901885 or +6221.7994015
Email:  info@antikorupsi.org 

As in other democracies, politically motivated demonstrations occasionally occur throughout Indonesia, but are not a major or ongoing concern for most foreign investors. Since the Bali bombings in 2002 that killed over 200 people, and other follow-on high-profile attacks on western targets Indonesian authorities have aggressively continued to pursue terrorist cells throughout the country, disrupting multiple aspirational plots. Despite these successes, violent extremist networks, terrorist cells, and lone wolf-style ISIS sympathizers have conducted small-scale attacks against law enforcement, government, and non-Muslim places of worship with little or no warning.

Foreign investors in Papua face unique challenges. Indonesian security forces occasionally conduct operations against small armed separatist groups, including the Free Papua Movement, a group that is most active in the central highlands region. Low-intensity communal, tribal, and political conflict also exists in Papua and has caused deaths and injuries. Anti-government protests have resulted in deaths and injuries, and violence has been committed against employees and contractors of at least one large corporation there, including the death of a New Zealand citizen in an attack on March 30, 2020, as well as armed groups seizing aircraft and temporarily holding pilots and passenger’s hostage. Additionally, racially-motivated attacks against ethnic Papuans in East Java province led to violence in Papua and West Papua in late 2019, including riots in Wamena, Papua that left dozens dead and thousands more displaced. Continued attacks and counter attacks between security personnel and local armed groups have exacerbated the region’s issues with internally displaced persons.

Travelers to Indonesia can visit the U.S. Department of State travel advisory website for the latest information and travel resources:

https://travel.state.gov/content/travel/en/international-travel/International-Travel-Country-Information-Pages/Indonesia.html.

Companies have reported that the labor market faces several structural barriers, including skills shortages and lagging productivity, restrictions on the use of contract workers, and complicated labor laws. Recent significant increases in the minimum wage for many provinces have made unskilled and semi-skilled labor more costly. In the bellwether Jakarta area, the Governor set the 2022 minimum wage to IDR 4,641,854 ($324.56), compared to the central government’s IDR 4,453,935 ($311.42), a move opposed by the Ministry of Manpower and private companies. Unions staged frequent, largely peaceful protests across Indonesia in 2021 demanding the government increase the minimum wage, decrease the price for basic needs, and stop companies from outsourcing and employing foreign workers.

The 2020 Omnibus Law on Job Creation introduced labor reforms, intended to attract investors, boost economic growth and create jobs. The Law aims to make the labor market more flexible to encourage job creation and more formal sector employment, as over half of Indonesia’s workers are in the informal sector. Restrictions on the types of work that can be outsourced were lifted and a new working hours arrangement was established to accommodate jobs in the digital economy era. The Law abolished sectoral minimum wages and reformulated the calculation of minimum wage at the provincial and regency/city level based on economic growth or inflation variables. A new unemployment benefit is now officially part of the public safety net for workers, and severance pay requirements were reduced. The business community’s initial reactions to the law were cautiously optimistic, while labor unions, student groups, and religious organizations staged strikes and protests against the law’s labor reforms. Labor unions cite the loss of limits on temporary employment contracts and expansion of outsourcing flexibility as concerns.

Indonesia’s Constitutional Court ruled November 2021 that the passing of the Omnibus Law on Job Creation (No. 11/2020 ) was unconstitutional due to the opaqueness of the process by which the law was created and the fact that proposed revisions were not fully shared with the public. The court ordered lawmakers to revise the law within two years. The Omnibus Law, a key pillar for President Jokowi’s reform agenda intended to facilitate investment and create a friendlier business environment, has been the source of controversy among labor and environmental stakeholders, who assert that the law stripped away labor and environmental protections. Some green NGOs described the court’s decision as a “small win” for the environmental NGO community. Parts of the law already enacted via implementing regulations are still considered constitutionally valid during the two-year grace period set by the court though many of the law’s implementing regulations have not yet been released. The ruling stipulates that the government should not issue new regulations of a strategic nature related to the law until improvements are made to the current law.

Until the onset of the COVID-19 pandemic, unemployment had remained steady at 4.38 percent. As of August 2021, Statistics Indonesia recorded that the unemployment rate jumped to 6.49 percent, or 9.1 million people, lower than the same period in 2020 which reached 7.07 percent or 9.77 million people. Meanwhile the number of workers who were furloughed or worked in shorter working hours due to COVID-19 was much higher.

Employers note that the skills provided by the education system is lower than that of neighboring countries, and successive Labor Ministers have listed improved vocational training as a top priority. Labor contracts are relatively straightforward to negotiate but are subject to renegotiation, despite the existence of written agreements. Local courts often side with citizens in labor disputes, contracts notwithstanding. On the other hand, some foreign investors view Indonesia’s labor regulatory framework, respect for freedom of association, and the right to unionize as an advantage to investing in the country. Expert local human resources advice is essential for U.S. companies doing business in Indonesia, even those only opening representative offices.

Labor unions are independent of the government; about 7.6 percent of the workforce is unionized. The law, with some restrictions, protects the rights of workers to join independent unions, conduct legal strikes, and bargain collectively. Indonesia has ratified all eight of the core ILO conventions underpinning internationally accepted labor norms. The Ministry of Manpower maintains an inspectorate to monitor labor norms, but enforcement is stronger in the formal sector. A revised Social Security Law, which took effect in 2014, requires all formal sector workers to participate. Subject to a wage ceiling, employers must contribute an amount equal to 4 percent of workers’ salaries to this plan. In 2015, Indonesia established the Social Security Organizing Body of Employment (BPJS-Employment), a national agency to support workers in the event of work accident, death, retirement, or old age.

Additional information on child labor, trafficking in persons, and human rights in Indonesia can be found online through the following references:

Child Labor Report:  https://www.dol.gov/agencies/ilab/resources/reports/child-labor/indonesia  .

Trafficking in Persons Report: https://www.state.gov/reports/2020-trafficking-in-persons-report/indonesia/

Human Rights Report:  https://www.state.gov/reports/2020-country-reports-on-human-rights-practices/indonesia/

*Indonesia Investment Coordinating Board (BKPM), January 2022

There is a discrepancy between U.S. FDI recorded by BKPM and BEA due to differing methodologies. While BEA recorded transactions in balance of payments, BKPM relies on company realization reports. BKPM also excludes investments in oil and gas, non-bank financial institutions, and insurance.

Source: IMF Coordinated Direct Investment Survey, 2020 for inward and outward investment data.

Source: IMF Coordinated Portfolio Investment Survey, 2020. Sources of portfolio investment are not tax havens.

The Bank of Indonesia published comparable data.

Marc CookEconomic Section
U.S. Embassy Jakarta
+62-21-50831000
BusinessIndonesia@state.gov

Mauritius actively seeks foreign investment. According to several surveys and metrics, Mauritius is among the freest and most business-friendly countries in Africa. Mauritius outperforms all other African countries on the Human Development Index where, in 2020, it ranked 66 out of 189 countries. The 2022 Index of Economic Freedom, published by the Heritage Foundation, ranked Mauritius first among 47 countries in the Sub-Saharan Africa region and 30th globally, compared to being 13th in 2021. This decline in the ranking is due to a drop in the country’s fiscal health score. The index also highlighted that while property rights and judicial effectiveness are strong, government integrity is relatively weak.

The Economic Development Board (EDB) is the single gateway government agency responsible for promoting investment in Mauritius and helping guide investors through the country’s legal and regulatory requirements. In terms of investor retention policy, the EDB provides aftercare services that consider future business environment requirements for survival and/or expansion. The EDB has a customer service unit that receives investor suggestions and complaints, and it organizes workshops and roundtable sessions to inform investors about changes in investment policies. In 2021, the EDB also set up a Business Support Facility that provides facilitation and advisory services to all businesses in Mauritius: https://business-support-portal.edbmauritius.org/business-support-facility/ .

A non-citizen can hold, purchase, or acquire real property under the Non-Citizens (Property Restriction) Act (NCPRA), subject to government approval. The NCPRA can be accessed on this link: https://dha.govmu.org/Pages/Services/PRA.aspx . A non-citizen is eligible for a residence permit upon purchasing residential property under the government-regulated Property Development Scheme (PDS), Integrated Resort Scheme (IRS), and Real Estate Scheme (RES) as long as the investment exceeds $375,000 or its equivalent in any freely convertible foreign currency.

No government approval is required in certain situations provided under the NCPRA, namely: (i) holding of immoveable property for commercial purposes under a lease agreement not exceeding 20 years; (ii) holding of shares in companies that do not own immoveable property; (iii) holding of immoveable property by inheritance or effect of marriage to a citizen under the “régime legal de communauté”; (iv) holding of shares in companies listed on the Stock Exchange of Mauritius; and (v) through a unit trust scheme or any collective investment vehicle as defined in the Securities Act.

Regarding business activities, the GoM generally does not discriminate between local and foreign investment. There are, however, some business activities where foreign involvement is restricted. These include television broadcasting, sugar production, newspaper and magazine publishing, and certain operations in the tourism sector.

In 2019, the Independent Broadcasting Authority (IBA) Act was amended to increase the allowable equity participation of a foreign company investing in broadcasting to 49.9 percent from 20 percent. Control by foreign nationals in broadcasting was likewise capped at 49.9 percent. The IBA Act can be accessed via http://www.iba.mu/legal.htm .

In the sugar sector, no foreign investor is allowed to make an investment that would result in 15 percent or more of the voting capital of a Mauritian sugar company being held by foreign investors. However, foreign investors may be exempt from this rule subject to authorization by the Financial Services Commission. Further details can be accessed on the following link: https://www.stockexchangeofmauritius.com/media/2124/securities-investment-by-foreign-investors-rules-2013.pdf .

In the tourism sector, there are conditions on investment by non-citizens in the following activities: (i) guesthouse/tourist accommodation; (ii) pleasure craft; (iii) diving; and (iv) tour operators. Generally, the conditions include a minimum investment amount, number of rooms, or a maximum equity participation, depending on the business activity.

In the construction sector, foreign consultants or contractors are required to register with the Construction Industry Development Board (CIDB). Details on registration procedures are available at http://cidb.govmu.org/English/Consultants-Contractors/Pages/default.aspx .

The Investment Office of the EDB screens foreign investment proposals and provides a range of services to potential investors. The EDB is a useful resource for investors exploring business opportunities in Mauritius and assists with occupation permits, licenses, and clearances by coordinating with relevant local authorities. In 2021, the U.S. Embassy in Port Louis did not receive negative comments from U.S. businesses regarding the fairness of the government’s investment screening mechanisms.

The Investment Office of the EDB reviews proposals for economic benefit, environmental impact, and national security concerns. The EDB then advises potential investors on specific permits or licenses required, depending on the nature of the business. Foreign investors may apply through the EDB for necessary permits; alternately, investors may apply directly to the relevant authorities. In the event an investment fails the review process, the prospective investor may appeal the decision within the EDB or with the relevant government ministry.

In response to the COVID-19 crisis, the GoM relaxed investment terms and conditions for foreign investors in 2020. For instance, the minimum investment for obtaining an occupation permit was halved to $50,000. The GoM also removed the minimum turnover and minimum amount invested for the Innovator Occupation Permit. Professionals with an occupation permit and foreign retirees with a residence permit were able to invest in other ventures without any shareholding restrictions. The permanent residence permit validity was doubled to 20 years. Non-citizens who had a residence permit under the various real estate schemes were no longer required to hold an occupation or work permit to invest and work in Mauritius. Additionally, the GoM introduced a 10-year Family Occupation Permit, which allows foreign families to invest and reside in Mauritius for a period of 10 years in exchange for a minimum contribution of $250,000 to the COVID-19 Projects Development Fund. More information is available at https://residency.mu/ .

In 2020, the Non-Citizens (Employment Restriction) Act was amended to enable the following categories of individuals to engage in any occupation without a permit: (a) the holder of an occupation permit issued under the Immigration Act; (b) the holder of a residence permit issued under the Immigration Act; (c) a non-citizen who has been granted a permanent resident permit under the Immigration Act; and (d) a member of the Mauritian diaspora under the Mauritian Diaspora Scheme. In 2021, the GoM also introduced the premium investor certificate, which allows companies investing at least $11 million, as well as companies involved in the manufacture of pharmaceuticals and medical devices, to benefit from incentives.

In 2018, the United Nations Conference on Trade and Development (UNCTAD) published its 2017 Report on the Implementation of the Investment Policy Review (IPR) for Mauritius.

UNCTAD worked with the GoM on the Industrial Policy and Strategic Plan, launched in December 2020, found here: https://unctad.org/system/files/official-document/gdsinf2020d5_en.pdf .

In November 2021, Mauritius concluded its fifth trade policy review with the World Trade Organization. The review concluded that Mauritius’ openness to trade and its stable and robust democratic system have contributed to its economic success in recent years. The review also highlighted that, after two decades of liberalizing reforms, Mauritius has transformed into an almost duty-free economy, with the notable exception of sugar, on which Most Favored Nation tariff rates reach 100 percent. The trade policy review is available at https://www.wto.org/english/tratop_e/tpr_e/s417_e.pdf .

After the GoM put in place new measures to improve its anti-money laundering/combating the financing of terrorism (AML/CFT) regime, in October 2021, the Financial Action Task Force (FATF) removed Mauritius from the list of jurisdictions under increased monitoring concerning AML/CFT. In January 2022, the European Union Commission likewise removed Mauritius from its list of high-risk third countries.

The GoM recognizes the importance of a good business environment to attract investment and achieve a higher growth rate. In 2019, the Business Facilitation (Miscellaneous Provisions) Act entered into force. The main reforms brought about by this legislation were expediting trade fee payments, reviewing procedures for construction permits, reviewing fire safety compliance requirements, streamlining of business licenses, and implementing numerous trade facilitation measures.

The incorporation of companies and registration of business activities falls under the provisions of the Companies Act of 2001 and the Business Registration Act of 2002. All businesses must register with the Corporate and Business Registration Department (CBRD); the registration can be completed online at https://companies.govmu.org/Pages/default.aspx . In 2020, the Business Registration Act was amended so that the CBRD became the central repository of business licenses and information. According to the amendment, all government agencies must electronically forward a copy of any permit, license, authorization, or clearance to the registrar for publication in the Companies and Businesses Registration Integrated System (“CBRIS”). As a general rule, a company incorporated in Mauritius can be 100 percent foreign owned with no minimum capital.

Upon completion of the registration process, the CBRD issues a certificate of incorporation. The company can subsequently apply for occupation permits (work and residence permits) and incentives offered to investors. EDB’s investment facilitation services are available to all investors, domestic and foreign. To this end, a Business Support Facility was established at the EDB in 2021. For more information, see https://business-support-portal.edbmauritius.org/ .

In partnership with the Corporate and Business Registration Department, the Mauritius Network Services (MNS) has implemented the Companies and Business Registration Integrated System, a web-based portal that allows electronic submission for incorporation of companies and application for the Business Registration Number, file statutory returns, pay yearly fees, register businesses, and search for business information.

In March 2019, the National Electronic Licensing System (NELS), which is co-financed by the European Union, was officially launched. NELS is a single point of entry for the processing of permits and licenses needed to start and operate a business. Through NELS, the submission of business licensing (including the Building and Land Use Permit, Environmental Impact Assessment, Occupation Certificate, Land Conversion Certificate, etc.) can now be done electronically.

In 2020, the Economic Development Board Act was amended to allow companies to log any obstacles relating to obtaining licenses, permits, authorizations, or other clearances; to enquire about any issue and make recommendations to government agencies; and to publish any actions taken to resolve the reported obstacles.

Mauritius also implemented the e-Registry System, where a national register of real estate properties and statistics on land dispute resolutions are now publicly available. An independent mechanism for filing of complaints was also implemented. The e-Registry System features an electronic dashboard for registry searches, submission of documents, online payment of registration fees, and electronic copies of registered documents.

The GoM imposes no restrictions on capital outflows.  Due to the small size of the Mauritian economy, the government encourages Mauritian entrepreneurs to invest overseas, particularly in Africa, to expand and grow their businesses.  As part of its Africa Strategy, the government established the Mauritius Africa Fund, a public company with a budget of $13.8 million to support Mauritian investment in Africa.  Through the Fund, the government participates as an equity partner for up to 10 percent of the seed capital invested by Mauritian investors in projects targeted towards Africa.  The government has signed agreements with Senegal, Madagascar, and Ghana to establish and manage Special Economic Zones (SEZ) in these countries. The GoM and has invited local and international firms to set up operations in the SEZs.  As per the 2018 Finance Act, Mauritian companies collaborating with the Mauritius Africa Fund for development of infrastructure in the SEZs benefit from a five-year tax holiday.  To further facilitate investment, Mauritius has also signed Investment Promotion and Protection Agreements and Double Taxation Avoidance Agreements with African states.

Additionally, since 2012, the Board of Investment (now restructured as the Investment Office of the EDB) has been operating an Africa Center of Excellence, a special office dedicated to facilitating investment from Mauritius into Africa.  This office also acts as a repository of business information for Mauritian entrepreneurs about investment opportunities in different sectors in Africa.

According to the most recent figures available from the Bank of Mauritius, in 2020, gross direct investment flows abroad (excluding the offshore sector) amounted to $68 million.  The top three sectors for outward investment were accommodation and food service activities (32 percent), manufacturing (12 percent), and real estate activities (9 percent).  Investment abroad was focused mainly on developing countries, particularly in Africa, which received $31 million.  Seychelles was the top recipient country, receiving $22 million.

Since 2006, the GoM has reformed trade, investment, tariffs, and income tax regulations to simplify the framework for doing business. Trade licenses and many other bureaucratic hurdles have been reduced or abolished. With a well-developed legal and commercial infrastructure and a tradition that combines entrepreneurship and representative democracy, Mauritius is one of Africa’s most successful economies. Business Mauritius, the coordinating body of the Mauritian private sector, participates in discussions with and presents papers to government authorities on laws and regulations affecting the private sector.

Regulatory agencies do not request comments on proposed bills from the general public. Both the notice of the introduction of a government bill and a copy of the bill are distributed to every member of the Legislative Assembly and published in the Government Gazette before enactment. Bills with a “certificate of urgency” can be enacted with summary process. All proposed regulations are published on the Legislative Assembly’s website and are publicly available. At the time of writing of this report, the government was drafting a bill that would require regulatory bodies to submit an impact of upcoming regulations on the business environment.

Companies in Mauritius are regulated by the Companies Act of 2001, which incorporates international best practices and promotes accountability, openness, and fairness. To combat corruption, money laundering and terrorist financing, the government also enacted the Prevention of Corruption Act, the Prevention of Terrorism Act, and the Financial Intelligence and Anti-Money Laundering Act. The National Code on Corporate Governance encourages companies to present a balanced assessment of the organization’s financial, environmental, social, and governance performance and outlook in its annual report and on its website. While Mauritius does not have a freedom of information act, members of the public may request information by contacting the permanent secretary of the relevant ministry.

Budget documents, including the executive budget proposal, enacted budget, and end-of-year report, are publicly available and provide a substantial picture of Mauritius’ planned expenditures and revenue streams.

Mauritius is a member of the Southern African Development Community (SADC) and the Common Market for Eastern and Southern Africa (COMESA). The GoM implements its commitments to these regional economic institutions with domestic legal and regulatory adjustments, as appropriate). Mauritius is a signatory to the Tripartite Free Trade Area and the African Continental Free Trade Area (AfCFTA). AfCFTA took effect in January 2021. Negotiations are still ongoing regarding the Tripartite FTA.

Mauritius has been a member of the World Trade Organization (WTO) since 1995. The GoM notifies all draft technical regulations to the WTO Committee on Technical Barriers to Trade to the extent possible. In July 2014, Mauritius notified its category A commitments to the WTO, and was among the first African countries to do so. Mauritius was also the fourth country to submit its instrument of acceptance for the Trade Facilitation Agreement (TFA). Mauritius notified its category B & C commitments and its corresponding indicative dates of implementation in 2015. It also indicated its requirements to implement category C measures. With the coming into force of the WTO Trade Facilitation Agreement (TFA) in February 2017, Mauritius is implementing all its category A commitments.

Of TFA’s 36 measures, Mauritius has classified 27 as category A, five as B, and four as C. Discussions with donors to obtain technical assistance to finance trade facilitation projects listed under category C are ongoing. Mauritius has already secured assistance from the World Bank and the World Customs Organization.

To coordinate efforts to implement the TFA, in 2015 Mauritius set up a National Committee on Trade Facilitation co-chaired by representatives from government and the private sector. Members include MRA Customs, the Ministry of Agro-Industry and Food Security, the Ministry of Finance and Economic Development, the Mauritius Chamber of Commerce and Industry and the Economic Developments Board, among others. The committee meets twice a year and discussion topics include identification of the TFA, policy recommendations of trade facilitation, dissemination of information on trade facilitation, and addressing the bottlenecks to trade due to the COVID-19 pandemic.

Mauritius is also part of the Cotonou Agreement, a 2000 treaty between the EU and the African, Caribbean and Pacific Group of States. On December 3, 2020, the EU and the Organization of African, Caribbean and Pacific States (OACPS) reached a new agreement that succeeded the Cotonou Partnership Agreement and is expected to be signed in June 2022. The agreement will focus on human rights, democracy, and governance; security; human and social development; environmental sustainability and climate change; sustainable growth; and migration and mobility.

The Mauritian legal system is based on a unique mixture of traditions. Mauritius draws legal principles from both French civil law and British common law traditions; its procedures are largely derived from the English system, while its substance is based in the Napoleonic Code of 1804. Commercial and contractual law is also based on the civil code. However, some specialized areas of law are comparable to other jurisdictions. For example, its company law is practically identical to that of New Zealand. Mauritian courts often resolve legal disputes by drawing on current legislation, the local legal tradition, and by means of a comparative approach utilizing various legal systems. The highest court of appeal is the judicial committee of the Privy Council of England. Mauritius is a member of the International Court of Justice. Mauritius established a Commercial Court in 2009 to expedite the settlement of commercial disputes.

In 2020, the Courts Act was amended to provide for the creation of a Financial Crimes Division within the Supreme Court and the Intermediate Court. An amendment to the Courts Act provided for the establishment of a Land Division court at the Supreme Court to expedite land dispute resolutions.

The GoM and judiciary are supportive of arbitration. Mauritius has two arbitration centers and is a party to the New York Convention 1958 and the United Nations Convention on Transparency in Treaty-based Investor State Arbitration.

Contracts are legally enforceable and binding. Ownership of property is enforced with the registration of the title deed with the Registrar-General and payment of the registration duty. Mauritian courts have jurisdiction to hear intellectual property claims, both civil and criminal. The judiciary is independent, and the domestic legal system is generally non-discriminatory and transparent.

U.S. Embassy Port Louis is not aware of any recent cases of government or other interference in the court system affecting foreign investors.

The Economic Development Board Act of 2017 governs investment in Mauritius, while the Companies Act of 2001 contains the regulations governing incorporation of businesses. The Corporate and Business Registration Department (CBRD) of the Ministry of Finance and Economic Development administers the Companies Act of 2001, the Business Registration Act of 2002, the Insolvency Act of 2009, the Limited Partnerships Act of 2011, and the Foundations Act of 2012. The Economic Development Board website provides information on investment incentives, procedures to establish a company in Mauritius, and occupation/work permits: https://www.edbmauritius.org/.

The Competition Commission of Mauritius (CCM) is an independent statutory body established in 2009 to enforce Competition Act 2007. It is mandated to safeguard competition by preventing and remedying anticompetitive business practices in Mauritius. Anticompetitive business practices, also called restrictive business practices, may be in the form of cartels, abuse of monopoly situations, and mergers that lessen competition.

The institutional design of the Competition Commission houses both an adjudicative and an investigative organ under one body. While the Executive Director has power to investigate restrictive business practices (the Investigative Arm), the commissioners determine the cases (the Adjudicative Arm) on the basis of reports from the Executive Director. Any party dissatisfied with an order or direction of the commission may appeal to the Supreme Court within 21 days.

Since it began operations, the Competition Commission has undertaken 62 investigations, of which 50 have been completed and 12 are ongoing as of March 2022. To date, the commission has also conducted 312 enquiries, which are preliminary research exercises prior to proceeding to investigations. The Competition Commission conducts market studies and five of the eight market studies have been completed. It has also issued six papers to the government on policy matters affecting competition.

Regionally, the Competition Commission has assessed 166 mergers across the Common Market for Southern and Eastern Africa Free Trade Area (COMESA) member states that affected Mauritius. It has also assisted the African Competition Forum (ACF) on two cross-country market studies.

The Competition Commission has also initiated a process to review and amend the Competition Act of 2007 to enable more effective enforcement. The process is expected to be completed in 2022.

The Constitution includes a guarantee against nationalization. However, in 2015, the government passed the Insurance (Amendment) Act to enable the Financial Services Commission (FSC) to appoint special administrators in cases where there is evidence that the liabilities of an insurer and its related companies exceed assets by 1 billion rupees (approximately $25 million) and that such a situation “is likely to jeopardize the stability and soundness of the financial system of Mauritius.” The special administrators are empowered to seize and sell assets. The government enacted this law in the immediate aftermath of the financial scandal explained below.

In April 2015, the Bank of Mauritius, the central bank, revoked the banking license of Bramer Bank, the banking arm of Mauritian conglomerate British American Investment (BAI) Group, citing an inadequate capital reserve ratio. As a result, Bramer Bank entered receivership and, by May 2015, the receiver had transferred the assets and liabilities of Bramer Bank to a newly created state-owned bank, the National Commercial Bank Ltd., thus effectively nationalizing Bramer Bank. In January 2016, the GoM merged the National Commercial Bank with another government-owned bank, resulting in Maubank, a new bank dedicated mainly to servicing small- and medium-sized enterprises. The GoM owns over 99 percent of Maubank shares. Efforts to privatize the bank in 2018 did not produce any results.

The government likewise took over much of Bramer’s parent, the BAI Group. The FSC placed the BAI Group in conservatorship, alleging fraud and corporate mismanagement in BAI’s insurance business. Following passage of the Insurance (Amendment) Act in 2015, the FSC created the National Insurance Company, which took over the BAI Group’s core insurance business, and the National Property Fund, which took over other BAI Group assets, including a hospital and several retail outlets. CIEL Healthcare, a local private company, bought the hospital in 2017.

In 2015, BAI’s former chairman filed a dispute against the GoM with the United Nations Commission on International Trade Law (UNCITRAL), alleging that the government illegally appropriated BAI’s assets. The former chairman, who is a Mauritian-French dual national, claimed that Mauritius had breached the Mauritius-France bilateral investment treaty and requested the restitution of his assets and payment of compensation by way of arbitration administered by the Permanent Court of Arbitration. The court concluded that it lacked jurisdiction over the dispute and ruled in favor of the GoM. The former chairman had appealed this decision to the French-speaking Court of First Instance in Brussels, which ruled in favor of the GoM in June 2021. In May 2019, the former chairman filed two cases in the Mauritian Supreme Court to challenge the appointment of the special administrator for the Bramer Banking Corporation and BAI Co Ltd, the holding company of the BAI group. Both cases are ongoing.

Bankruptcy is not criminalized in Mauritius. The Insolvency Act of 2009 amended and consolidated the law relating to insolvency of individuals and companies and the distribution of assets in the case of insolvency and related matters. Most notably, the Act introduced administration procedures, providing creditors the option of a more orderly reorganization or restructuring of a business than in liquidation. A bankrupt individual is automatically discharged from bankruptcy three years after adjudication but may apply to be discharged earlier. The Act draws on the Model Law on Cross-Border Insolvency adopted by the United Nations Commission on International Trade Law in 1997.

There were no special procedures that foreign creditors must comply with when submitting claims in insolvency proceedings. The law provides that foreign creditors have the same rights regarding the commencement of, and participation in, an insolvency proceeding as Mauritian creditors. The Second Schedule to the Insolvency Act applies to foreign creditors with respect to the procedures for proving their debts.

The creditor must send to the liquidator of the company an affidavit, sworn by the creditor or an authorized person, that verifies the debt and contains a statement of account showing the particulars of the debt. The affidavit must also state whether the creditor is a secured creditor. Section 132 of the Act outlines the conditions under which a liquidator may be appointed for a foreign company and related procedures.

In 2020, the Insolvency Act was amended to give the Bankruptcy Division of the Supreme Court power to order that a deed of company arrangement be binding on the company and all classes of creditors where there are at least two classes of creditors and one of the classes resolves that the company executes the deed.

Mauritius applies investment incentives uniformly to both domestic and foreign investors. The incentives are outlined in the Income Tax Act, the Customs Act, and the Value Added Tax Act. A number of incentives have been implemented to attract investors to Mauritius. These include: (i) reduced corporate tax rate of three percent for companies engaged in global trading activities; (ii) investment tax credit of five percent over three years on the cost of new plant and machinery excluding motor vehicles; (iii) five year tax holiday for Mauritian companies collaborating with the Mauritius Africa Fund with respect to investment in the development of infrastructure in Special Economic Zones, and; (iv) five year tax holiday on income derived from smart parking solutions or other green initiatives.

Mauritius offers prospective investors a low-tax jurisdiction and a number of other fiscal incentives, including the following: (i) flat corporate and income tax rate of 15 percent or lower depending on business activity; (ii) 100 percent foreign ownership permitted; (iii) no minimum foreign capital required; (iv) no tax on dividends or capital gains; (v) free repatriation of profits, dividends, and capital; (vi) accelerated depreciation on acquisition of plant, machinery, and equipment; (vii) exemption from customs duty on imported equipment; and (viii) access to an extensive network of double taxation avoidance treaties.

Additionally, the government has established a Property Development Scheme (PDS) to attract high net worth non-citizens who want to acquire residences in Mauritius. Buyers of a residential unit valued over $375,000 in certain projects are eligible to apply for a residence permit in Mauritius. The residential unit can be leased or rented out by the owner.

The Regulatory Sandbox License (RSL) was implemented to promote innovation by eliminating barriers to investment in cutting-edge technology. An RSL gives an investor fast-track authorization to conduct business activity in a sector even if there is not yet a legal or regulatory framework in place for the sector. Further details on the RSL can be accessed via the following link: https://www.edbmauritius.org/schemes .

The government offers tax incentives to companies that make clean energy investments through provisions in the 1995 Income Tax Act, the Customs Act, and the Value Added Tax Act. The tax incentives for a company include (i) double deduction of the expenditure of a fast charger for an electric car; (ii) an annual allowance of 100 percent on the capital expenditure for the acquisition of a solar energy unit; (iii) an annual allowance of 50 percent each year for a maximum two years on the capital expenditure for the acquisition of green technology equipment; (iv) tax exemption on interest earned by a company that invests in renewable energy projects through debentures and bonds; (v) eight-year tax holiday for a company that used deep ocean water for providing air conditioning services; (vi) customs duty and value-added tax exemption on any purchase of photovoltaic systems and chargers for electric vehicles.

The Mauritius Freeport, a free trade zone, was established in 1992 and is a customs-free zone for goods destined for re-export. The freeport has grown dramatically in its 26-year history: developed space of cold and dry warehouses, processing units, open air storage facilities, and offices increased from 5,000 square meters in 1993 to over 400,000 square meters in 2021. Due to the pandemic, trade volume decreased to 258,972 metric tons in 2021 from 268,930 metric in 2020, and trade value increased to $816 million from $607 million during the same period.

As of 2022, there were nine third-party freeport developers, three private freeport developers, and more than 200 freeport operators, representing over 3,500 jobs. Top trading partners for import in 2021 were Taiwan, China, India, Singapore and South Africa. Top trading partners for export in 2021 were South Africa, Madagascar, Reunion, United States and Taiwan. Top goods traded through the freeport included live animals, foodstuffs and beverages, plastic, and metal products.

The government’s objective is to promote the country as a regional warehousing, distribution, marketing, and logistics center for eastern and southern Africa and the Indian Ocean rim. Through its membership in COMESA, SADC, and the IOC, Mauritius offers preferential access to a market of over 600 million consumers, representing an import potential of $100 billion. Companies operating in the freeport are exempt from corporate tax. Foreign-owned firms operating in the freeport have the same investment incentives and opportunities as local entities.

Activities carried out in the freeport include warehousing and storage, breaking bulk, sorting, grading, cleaning and mixing, labeling, packing, repacking and repackaging, minor processing and light assembly, manufacturing activity, ship building, repairs and maintenance of ships, aircrafts, and heavy-duty equipment, storage, maintenance and repairs of empty containers, export-oriented seaport and airport based activities, freight forwarding services, quality control and inspection services, and vault activity for storing precious stones and metals, works of art, and the like.

The Data Protection Act (DPA) of 2017 governs the protection of personal data in Mauritius. The GoM established the Data Protection Office in 2009. The Data Protection Commissioner is responsible for upholding the rights of individuals set forth in the DPA and for enforcing the obligations imposed on data controllers and processors. In 2016, Mauritius ratified the Council of Europe’s Convention for Protection of Individuals regarding Automatic Processing of Personal Data (Convention 108). Mauritius is the second non-European country and the first African country to sign the convention. The agreement gives individuals the right to protection of their personal data. In September 2020, Mauritius signed the Amending Protocol to the Convention for the Protection of Individuals regarding the Processing of Personal Data and, at the same time, deposited the instrument of ratification, becoming the sixth state to ratify the modernized Convention 108.

Mauritian data protection law tracks the European Union’s Regulation on the Protection of Natural Persons with regards to the Processing of Personal Data and on the Free Movement of such Data, commonly known as the General Data Protection Regulation. Mauritius’ DPA applies only when processing of personal data is concerned. Failure to comply with Section 28 of the DPA, which establishes the lawful purposes for which personal data may be processed, can result in a fine and up to five years imprisonment. Section 29 sets requirements for processing special categories of data, such as ethnic origin, political adherence, and mental health condition.

There are no enforcement procedures for investment performance requirements.

Real property rights are respected in Mauritius. A non-citizen can hold, purchase, or acquire immovable property under the Non-Citizens (Property Restriction) Act, subject to the government’s approval. Ownership of property is memorialized with the registration of the title deed with the Registrar-General and payment of the registration duty. The recording system of mortgages and liens is reliable. Traditional use rights are not an issue in Mauritius as there were no indigenous peoples present at the time of European colonization.

Intellectual property rights (IPR) in Mauritius are protected by three pieces of legislation, namely the Industrial Property Act of 2019, the Copyrights Act of 2014, and the Protection against Unfair Practices (Industrial Property Rights) Act of 2022.

The 2019 Industrial Property Act and the accompanying regulations entered into force on January 31, 2022. This act consolidates all industrial property-related issues in one statute. The protection framework covers patents; trademarks; industrial designs; utility models; layout-designs of integrated circuits; plant varieties; trade names, and geographic indications.

The Industrial Property Act also allows the international filing of trademarks under the Madrid Protocol, the international filing of industrial designs under the Hague Agreement, and the filing of patent applications under the Patent Cooperation Treaty. However, Mauritius has not yet acceded to these international instruments. In 2017, the Copyright Act was amended to redefine and better safeguard the interests of copyright owners and to put in place a new regulatory framework for the Mauritius Society of Authors (MASA). MASA is responsible for collection of copyright fees and for administering the economic rights of copyright owners.

Mauritius is a member of the World Intellectual Property Organization (WIPO) and party to the Paris and Bern Conventions for the protection of industrial property and the Universal Copyright Convention. Mauritius is a member of the African Regional Intellectual Property Organization (ARIPO). However, as Mauritius has not yet acceded to the Harare or Banjul Protocols, it cannot be designated in patent, trademark or design applications filed via the ARIPO system. Trademark and patent laws comply with the WTO’s Trade Related Aspects of Industrial Property Rights (TRIPS) agreement. A trademark is initially registered for 10 years and may be renewed for successive periods of 10 years. A patent is granted for a maximum of 20 years. . While IP legislation in Mauritius is consistent with international norms, enforcement is relatively weak. In practice, police will usually take action against IP infringements only in cases where the IP owner has an official representative in Mauritius, as the courts require a representative to testify that the products seized are counterfeit.

The Customs Department of the Mauritius Revenue Authority is the primary agency responsible for safeguarding Mauritian borders against counterfeit goods and piracy, and is also the competent authority that enforces IP rights. The Customs Department requires owners or authorized users of patents, industrial designs, collective marks, marks or copyrights to apply in writing to the Director General to suspend clearance of goods suspected of infringing intellectual property rights. Once an application is approved, it remains valid for two years. There are no administrative costs to pay for an application. It is recommended to file an application as a preventive measure. Customs may act upon its own initiative to suspend clearance if there is evidence that IP rights are being infringed. Customs will then contact the owner or authorized user for follow-up actions. For this reason, it is best for foreign companies to have a local representative in Mauritius. Owners of IP rights are recommended to join the Interface Public Members (IPM) which allows Customs officers to access operational data input by right owners concerning their products, thus facilitating the identification of counterfeit goods.

The Customs Department keeps a record of counterfeit goods seized. Customs has authority to seize and destroy counterfeit goods. In 2021, the Customs Department carried out seizures of a total of 30,036 goods valued at $78,030, a significant decline from pre-pandemic figures. The infringing party is responsible for paying for the storage and/or destruction of the counterfeit goods. Mauritius is not listed in the 2021 U.S. Trade Representative (USTR) Special 301 Report or the 2021 Notorious Market List.

IPR Law Firms in Mauritius*

Sanjeev Ghurburrun
Director, Geroudis
River Court, St Denis Street
Port Louis, Mauritius
Tel: +230 210 3838; Fax: + 230 210 3912
Email: sanjeev@geroudis.com
www.geroudis.com 

Marc Hein
Chairman, Juristconsult Chambers
Level 12 Nexteracom Tower II, Ebene Cyber City
Ebene, Mauritius
Tel: +230 465 0020; Fax: +230 465 0021
Email: mhein@juristconsult.com
www.juristconsult.com 

Michael Hough
CEO, Eversheds Sutherland
Suite 310, 3rd Floor Barkly Wharf, Le Caudan Waterfront
Port Louis, Mauritius
Tel: +230 5726 3941; fax: +230 211 0780
Email: michaelhough@eversheds-sutherland.mu
www.eversheds-sutherland.com 

Marius Schneider, Attorney at Law
Nora Ho Tu Nam, Senior Associate
IPvocate Africa Legal Advisers Ltd
Ebene Junction, Rue de la Democratie
Ebene, Mauritius
Tel: +230 466 8183
Email: office@ipvocateafrica.com
www.IPvocateAfrica.com 

*Law firms listed for convenience and should NOT be taken to imply U.S. Government endorsement.

The GoM welcomes foreign portfolio investment.

The Stock Exchange of Mauritius (SEM) was created in 1989 and was opened to foreign investors following the lifting of foreign exchange controls in 1994. Foreign investors do not need approval to trade shares, except for when doing so would result in their holding more than 15 percent in a sugar company, a rule detailed in the Securities (Investment by Foreign Investors) Rules of 2013. Incentives to foreign investors include no restrictions on the repatriation of revenue from the sale of shares and exemption from tax on dividends for all resident companies and for capital gains of shares held for more than six months.

The SEM currently operates two markets: the Official Market and the Development and Enterprise Market (DEM). As of December 2020, the shares of 58 companies (local, global business, and foreign companies) were listed on the Official Market, representing a market capitalization of $7.0 billion, a fall of 17 percent from the previous financial year. This fall is mainly attributed to the impact of the COVID-19 pandemic. Unique in Africa, the SEM can list, trade, and settle equity and debt products in U.S. dollars, Euros, Pounds Sterling, South African Rand, as well as Mauritian Rupees. A variety of new asset classes of securities such as global funds, depositary receipts, mineral companies, and specialist securities including exchange-traded funds and structured products have also been introduced on the SEM. In June 2021, guidelines for the issue and listing of sustainable bonds were published. The DEM was launched in 2006 and the shares of 38 companies were listed on this index with a market capitalization of $1.1 billion as of December 2020, falling by 10 percent from December 2019. Foreign investors accounted for 41.2 percent of the trading volume on the exchange for the financial year 2020-2021, which was the highest foreign participation recorded since the financial year 2015-2016.

Standard & Poor’s, Morgan Stanley, Dow Jones, and FTSE have included the Mauritius stock market in a number of their stock indices. Since 2005, the SEM has been a member of the World Federation of Exchanges. The SEM is also a partner exchange of the Sustainable Stock Exchanges Initiative. In 2018, in line with its strategy to digitalize its investor services, the SEM launched the mySEM mobile application. In November 2020, the SEM amended its internal AML/CFT policies and procedures to align with the revamped AML/CFT framework. In 2021, the SEM secured a $600,000 grant from the African Development Bank to implement a state-of-the-art trading platform. The new trading platform is expected to go live by the end of March 2022.

In 2020, the slowdown in domestic economic activity resulting from the COVID-19 pandemic caused many listed companies to publish reduced earnings and defer dividend payments.

The government respects IMF Article VIII by refraining from restrictions on payments and transfers for current international transactions.

A variety of credit instruments is available to local and foreign investors through the banking system.

Mauritius has a sophisticated banking sector. As of March 2022, 19 banks were licensed to undertake banking business, of which eight were local banks, eight were foreign-owned subsidiaries, and three were branches of foreign banks. One bank conducts solely Islamic banking. One bank, under conservatorship since April 1, 2020, was acquired and recapitalized by a new shareholder on October 15, 2021. Further details can be obtained at https://www.bom.mu/financial-stability/supervision/licensees/list-of-licensees .

In 2021, the Mauritian banking sector accounted for an estimated 8 percent of GDP (excluding bank-owned leasing businesses) and is the main component of financial services, which contribute 12 percent of GDP. The total assets of the sector represented 420 percent of GDP at the end of September 2021, compared to 397 percent at the end of March 2021. The banking landscape is relatively concentrated, with the two, long-established domestic entities: the Mauritius Commercial Bank (MCB) and the State Bank of Mauritius (SBM), which together constitute about 46 percent of the market share for total deposits, advances, and assets total domestic market. Maubank, a state-owned bank, became operational in 2016 following a merger between the Mauritius Post & Cooperative Bank and the National Commercial Bank. The Bank of China started operations in Mauritius in 2016. Other foreign banks present in Mauritius include HSBC, Barclays Bank, Bank of Baroda, Habib Bank, BCP Bank (Mauritius), Standard Bank, Standard Chartered Bank, State Bank of India, and Investec Bank. Per the Bank of Mauritius, total banking assets as of December2021 amounted to $48 billion. Mauritian banks are compliant with international norms such as Basel III, IFRS 9, US Foreign Account Tax Compliance Act (FATCA), and the OECD’s Common Reporting Standard (CRS).

At the end of December 2021, non-banking, deposit-taking institutions, comprising leasing companies and finance companies, held assets amounting to $1.6 billion, an increase of about 2 percent since December 2020.

According to the Banking Act of 2004, all banks are free to conduct business in all currencies. There are also six non-bank deposit-taking institutions, as well as 12 money changers and foreign exchange dealers. There are no official government restrictions on foreigners opening bank accounts in Mauritius, but banks may require letters of reference or proof of residence for their due diligence. The Bank of Mauritius carries out the supervision and regulation of banks as well as non-bank financial institutions authorized to accept deposits. The Bank of Mauritius has endorsed the Core Principles for Effective Banking Supervision as set out by the Basel Committee on Banking Supervision.

In July 2017, the Banking Act was amended to double the minimum capital requirement from $ 5.8 million to $11.2 million. The Central Bank began reporting the liquidity coverage ratio in 2017 to improve the liquidity profile of banks and their ability to withstand potential liquidity disruptions.

As part of its COVID-19 response, the BoM made $132 million available through commercial banks as special relief funds to help meet cash flow and working capital requirements. The cash reserve ratio applicable to commercial banks was reduced from 9 percent to 8 percent. The BoM also put on hold the Guideline on Credit Impairment Measurement and Income Recognition, which took effect in January 2020.

In July 2019, the Bank of Mauritius Act was amended to allow the Bank of Mauritius to use special reserve funds in exceptional circumstances and with approval of the central bank’s board for the repayment of central government external debt obligations, provided that repayments would not adversely affect the bank’s operations. This provision was used in January 2020 to repay government debt worth $450 million, raising concerns about the central bank’s independence. The Mauritius Investment Corporation (MIC), a fully owned subsidiary of BoM, was also established with an initial capital of $2 billion drawn from the BoM’s reserves to provide support to economic operators through a range of equity and quasi-equity instruments. The latest International Monetary Fund Article IV report highlights that in response to the pandemic and in coordination with the government, the BoM deployed policies that led to a substantial deterioration of its balance sheet and could make it challenging to fulfill the price-stability mandate going forward.

Most major banks in Mauritius have correspondent banking relationships with large banks overseas. In recent years, according to industry experts, no banks have lost correspondent banking relationships, and none reported being in jeopardy of doing so as of April 2022. The National Payment Systems (Authorization and Licensing) Regulations, which entered into force in June 2021, provides for the authorization of operators of payment systems, clearing systems, and settlement systems and licensing of payment service providers.

In October 2021, the Bank of Mauritius launched the Climate Change Centre, which will integrate climate-related and environmental financial risks into its regulatory, supervisory, and monetary policy frameworks, while also supporting the development of sustainable finance. In February 2021, the BoM became a member of the Global Financial Innovation Network (GFIN). The BoM is currently working on a central bank digital currency (CBDC) pilot roll-out with technical assistance from the IMF.

In January 2019, the Bank of Mauritius signed a memorandum of cooperation with the Mauritius Police Force on financial crimes and illicit activities relating to the financial services sector. In February 2020, the Financial Action Task Force (FATF) named Mauritius as a jurisdiction under increased monitoring, commonly known as the Grey List. At that time, Mauritius made a high-level political commitment to work with the FATF and the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG) to strengthen the effectiveness of its AML/CFT regime. Since the completion of its Mutual Evaluation Report in 2018, Mauritius has made progress on a number of its recommended actions to improve technical compliance and effectiveness, including amending the legal framework to require legal persons and legal arrangements to disclose of beneficial ownership information and improving the processes of identifying and confiscating proceeds of crimes. In October 2021, the Financial Action Task Force (FATF) removed Mauritius from the list of jurisdictions under increased monitoring concerning anti-money laundering/combating the financing of terrorism (AML/CFT) based on the following reforms: (i) outreach work to promote understanding of money-laundering and terrorist financing risks and obligations; (ii) development of effective risk-based supervision plans for the regulator; (iii) improved focus on access to beneficial ownership information in a timely manner; and (iv) training to law enforcement authorities to ensure that they have capabilities to carry out money laundering investigations. In January 2022, the European Union Commission removed Mauritius from its list of high-risk third countries.

Effective March 2019, the Financial Services Commission (FSC) allows businesses that provide custodial services for digital assets. The FSC is the integrated regulator for the non-banking financial services sector and global business. In August 2020, the Peer-to-Peer Lending Rules, which enable the operation of peer-to-peer lending platforms in Mauritius by operators holding licenses issued by the FSC, entered into force. And in November 2021, the FSC launched the regulatory framework for crowdfunding. The Virtual Asset and Initial Token Offering Services Act 2021, which sets out a comprehensive legislative framework to regulate the business activities of virtual assets service providers and initial token offerings, entered into force in February 2022. Any person who is a virtual asset service provider, an issuer of initial token offerings in accordance with the Act, or a custodian (digital assets) in accordance with the Financial Services Act, needs to apply for a license or registration with the FSC.

The GoM does not have a Sovereign Wealth Fund.

The government’s stated policy is to act as a facilitator to business, leaving production to the private sector. The government, however, still controls key services directly or through parastatal companies in the power and water, television broadcasting, and postal service sectors.

The government also holds controlling shares in the State Bank of Mauritius, Air Mauritius (the national airline), and Mauritius Telecom. These state-controlled companies have Boards of Directors on which seats are allocated to senior government officials. The government nominates the chairperson and CEO of each of these companies. In April 2020, Air Mauritius requested voluntary administration, similar to Chapter 11 bankruptcy in the United States, because it could not comply with financial obligations. The national airline exited voluntary administration in September 2021 following a $280 million government bailout in the form of a loan arrangement through the central bank’s Mauritius Investment Corporation. In October 2021, a newly created state-owned enterprise, Airport Holdings Ltd., acquired 9.43 million shares in Air Mauritius, gaining effective control of the airline.

The government also invests in a wide variety of Mauritian businesses through its investment arm, the State Investment Corporation. The government is also the owner of Maubank and the National Insurance Company.

Two parastatal entities are involved in the importation of agricultural products: the Agricultural Marketing Board (AMB) and the State Trading Corporation (STC). The AMB’s role is to ensure that the supply of certain basic food products is constant, and their prices remain affordable. The STC is the only authorized importer of petroleum products, liquefied petroleum gas, and flour. SOEs purchase from or supply goods and services to private sector and foreign firms through tenders.

Audited accounts of SOEs are published in their annual reports. Mauritius is part of the OECD network on corporate governance of state-owned enterprises in southern Africa.

The Declaration of Assets Act (DoA Act) was enacted in December 2018 and took effect in June 2019. It provides that certain key officials of the public sector, including chief executives of state-owned enterprises, must declare their assets and liabilities with the Independent Commission Against Corruption (ICAC). The declaration includes the assets and liabilities of spouses and minor children. This declaration is published on the website of ICAC. A list of SOEs is published in the Declaration of Assets (State-owned Enterprises) Regulations 2019: https://www.icac.mu/declaration-of-assets/ .

The government has no specific privatization program. In 2017, however, as part of its broader water reform efforts, the government agreed to a World Bank recommendation to appoint a private operator to maintain and operate the country’s potable water distribution system. Under the World Bank’s proposed public-private partnership, the Central Water Authority (CWA) would continue to own distribution and supply assets, and will be responsible for business planning, setting tariffs, capital expenditure, and monitoring and enforcing the private operator’s performance.

In March 2018, despite protest by trade unions and consumer associations, the Minister of Energy and Public Utilities reiterated his intention to engage by the end of the year a private operator as a strategic partner to take over the water distribution services of the CWA. To date, this has not materialized. The government has said for years it planned to sell control of Maubank, into which it has injected about $173 million since it nationalized the bank in 2015. In the 2019-2020 budget speech, the prime minister said the government would sell non-strategic assets to reduce government debt. The prime minister’s office never identified a list of assets, but in parliament the prime minister has mentioned Maubank, the National Insurance Company, and Casinos of Mauritius as possible divestments.

The National Committee for Corporate Governance (NCCG) was established under Section 63 of the Financial Reporting Act (2004) and is the coordinating body responsible for all matters pertaining to corporate governance in Mauritius. The NCCG was attached to the Ministry of Financial Services and Good Governance until 2021, when it was recognized as a corporate body following an amendment to the Financial Reporting Act. The purpose of the Committee is to: (i) establish principles and practices of corporate governance; (ii) promote the highest standards of corporate governance; (iii) promote public awareness about corporate governance principles and practices; and (iv) act as the national coordinating body responsible for all matters pertaining to corporate governance. The latest Code of Corporate Governance for Mauritius (2016) was launched on February 13, 2017 and can be accessed at https://nccg.mu/full-code. In 2021, the NCCG also launched a Corporate Governance Scorecard to introduce an objective and quantitative element for companies to report on compliance. The Financial Reporting Council (FRC), also set up under the Financial Reporting Act (2004), aims to advocate for the provision of high-quality reporting of financial and non-financial information by public interest entities and to improve the quality of accountancy and audit service. Mauritius does not have a dedicated center for research on corporate governance.

The Ministry of Financial Services and Good Governance was established following the December 2014 elections. Its mandate is to provide guidance and support for enforcement of good governance and the eradication of corruption. In 2015, the Financial Services Commission introduced a Code of Business Conduct as part of its Fair Market Conduct Program. The Financial Services Commission has also introduced several measures in 2020 and 2021 to comply with recommendations made by the Financial Action ask Force for enhancing anti-money laundering and combatting terrorism financing standards.

The Mauritius Institute of Directors (MIoD) is an independent, private sector-led organization that also promotes high standards and best practices of corporate governance, with additional information available at http://www.miod.mu .

In 2017, the government set up a National Corporate Social Responsibility (CSR) Foundation, which operated under the Ministry of Social Integration and Economic Empowerment. In 2019, this foundation became the National Social Inclusion Foundation (NSIF). The NSIF is managed by a council consisting of members from the private and public sectors, civil society, and academia. Under the 2016 Finance Act, every company registered in Mauritius must set up a CSR fund and annually contribute the equivalent of 2 percent of its taxable income from of the previous year. In 2017 and 2018, companies were required to remit at least 50 percent of their CSR funds to tax authorities for the National CSR Foundation. The required contribution increased in 2019 to 75 percent for CSR funds set up on or after January 1, 2019. The NSIF is supposed to channel the money to NGO projects in priority areas identified by the government. These priority areas are poverty alleviation, educational support, social housing, family protection, people with severe disabilities, and victims of substance abuse. Further details can be found on the NSIF and MRA websites: https://www.nsif.mu  and https://www.mra.mu/download/CSRGuide.pdf .

Department of State

• Country Reports on Human Rights Practices;
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities;
• U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises; and;
• Xinjiang Supply Chain Business Advisory 

Department of the Treasury

• OFAC Recent Actions

Department of Labor

• Findings on the Worst Forms of Child Labor Report;
• List of Goods Produced by Child Labor or Forced Labor;
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World and;
• Comply Chain.

Mauritius is highly vulnerable to climate change and its impacts on socio-economic development. The Climate Change Act, which took effect in 2021, created an inter-ministerial council on climate change chaired by the prime minister to set national targets and objectives. The cabinet must approve all decisions that fall under this law. This act also provided for the creation of a Department on Climate Change under the Ministry of Environment, which is now operational.

In November 2021, at the Conference of Parties 26 (COP 26), the GoM pledged to reduce its greenhouse gas emissions to 40 percent of the business-as-usual scenario 2030 figures. To achieve this target, the government plans to undertake major reforms in its energy, transport, waste, refrigeration and air-conditioning, agriculture, and conservation sectors. Details on the reforms for each of the six sectors will be available in the Nationally Determined Contributions (NDCs) action plan, which is scheduled for publication in April 2022.  The Ministry of Environment is also working on policies to reach net-zero carbon emissions by 2070, and on a national mitigation strategy and action plan. The latter includes the development of an online NDC registry, which will serve as a monitoring, reporting, and verification tool to track biodiversity and ecosystem services to implement Mauritius’ NDC.  The registry will record data on Mauritius’ adaptation and mitigation actions as well as financial and technological support required and received.

The current NDC indicates that the government plans to finance part of the $6.5 billion required to implement the NDC targets through private sector contributions. The private sector in Mauritius has indicated interest in investing in solar, hydro, and biomass renewable energy technologies.

Regulatory incentives that preserve clean air and biodiversity include: (i) exemption on excise duty applied for the purchase of a 180-kw electric car; (ii) 50 percent excise duty applied for the purchase of a hybrid car; (iii) 50 percent of registration fee applied for the purchase of both a 180-kw electric car and a hybrid car; (iv) excise duty on PET plastic bottles; (v) a petroleum levy on petroleum products; (vi) an environmental protection fee for battery and tyres upon purchase of an electric or hybrid car, (vii) a carbon levy upon purchase of a conventional motor car; and (viii) a permit fee for companies operating in a marine protected area.

The government also offers tax incentives to companies who make clean energy investments through provisions in the Income Tax Act 1995, the Customs Act, and the Value Added Tax Act.  The tax incentives for a company include (i) double deduction of the expenditure of a fast charger for an electric car; (ii) an annual allowance of 100 percent on the capital expenditure for the acquisition of a solar energy unit; (iii) an annual allowance of 50 percent (straight line) on the capital expenditure for the acquisition of green technology equipment; (iv) tax exemption on interest perceived by a company that invests in renewable energy projects through debentures and bonds; (v) eight-year tax holiday for companies that use deep ocean water for providing air conditioning services; (vi) customs duty and value added tax exemptions on any purchases of photovoltaic systems and chargers for electric vehicles.

The tax incentives government provided on solar energy equipment encouraged investments in power production from solar energy. Statistics indicate that solar energy power production increased by 3.5 percent from 2018 to 2020.

The European Union is currently providing technical assistance to the government to improve its public procurement policies under the ‘Switch to Green’ facility. The objective of the project is to encourage public organizations to make their activities more environmentally friendly through the adoption of sustainable consumption practices with respect to energy and water conservation, waste minimization, paperless work, and adoption of sustainable technology and business practices to improve service delivery.

The prevalence of corruption in Mauritius is low by regional standards, but graft and nepotism nevertheless remain concerns and are increasingly a source of public frustration. Several high-profile cases involving corruption have reinforced the perception that corruption exists at the highest political levels, despite the fact that Mauritian law provides for criminal penalties for corruption by officials. According to Transparency Mauritius, the absence of a law regulating the financing of political parties fuels corruption. A former prime minister was arrested in 2015 on allegations of money laundering, though courts have since dismissed all charges. The state prosecutors appealed the last dismissal in late 2019 and court proceedings are ongoing, with the latest hearing held in February 2022. A minister in the previous government stepped down in 2016 after allegations of bribery. In March 2017, allegations surfaced concerning possible political interference in the Financial Services Commission’s issuance of an investment banking license to Angolan billionaire Alvaro Sobrinho, who is being investigated for alleged corruption in Portugal. In March 2018, the president of Mauritius resigned after press reported that she bought apparel, jewelry, and a laptop computer with a credit card provided by an NGO financed by the same Angolan businessman. In June 2020, the prime minister dismissed his deputy prime minister following allegations of bribery and corruption in a public energy contract. In February 2021, the minister of commerce stepped down amid allegations of corruption and abuse of power.

Investors should know that while the constitution and law require arrest warrants to be based on sufficient evidence and issued by a magistrate, police may detain an individual for up to 21 days under a “provisional charge” based on a reasonable suspicion, with the concurrence of a magistrate. Two French businessmen claimed that, in February 2015, authorities held them against their will. A U.S. investor has been unable to leave Mauritius since February 1, 2020, without charges filed against him.

In 2002, the government adopted the Prevention of Corruption Act, which led to the establishment of an Independent Commission Against Corruption (ICAC). ICAC has the power to investigate corruption and money laundering offenses and can also seize the proceeds of corruption and money laundering. The director and board members of ICAC are nominated by the prime minister. The Good Governance and Integrity Reporting Act of 2015 was announced as a measure to recover “unexplained wealth” and came into force in early 2016. Critics of the act dislike its presumption of guilt, which requires the accused to demonstrate a lawful source of questionable assets, as well as the application of the law retroactively for seven years. The 2018 Declaration of Assets Act (DoA) entered into force in June 2019 and defines which public officials are required to declare assets and liabilities to the ICAC. These public officials include members of the National Assembly, mayors, chairpersons and chief executive officers of state-owned enterprises and statutory bodies, among others. This declaration is published on the website of ICAC: https://www.icac.mu/declaration-of-assets/disclosure-of-declarations/ .

Mauritius’ rating by the Corruption Perceptions Index of Transparency International improved in 2021. The country was rated the 49th least-corrupt nation out of 180 countries, compared to 52nd in 2020 and 56th in 2019. However, Mauritius retained its first rank in overall governance in Africa for the 10th consecutive year, according to the 2020 Ibrahim Index of African Governance.

U.S. investors, in conversations with embassy personnel, have not identified corruption as an obstacle to investment in the country. They have, however, encountered attempts for bribery.

Although the country lacks laws on political party financing, Mauritius has legislation to combat corruption by public officials. These include laws dealing with the declaration of assets, asset recovery, prevention of corruption, anti-money laundering, and criminal offenses related to abuse of office by public officials.

However, legal loopholes exist, and enforcement is weak. Allegations of corruption and misallocation of government contracts by public entities occurred in 2020, namely the use of emergency procurement procedures during the pandemic to allegedly enrich friends and family of those in power.

According to Transparency Mauritius, more companies have introduced control and risk management protocols and adopted code of ethics and good business conduct, even if these do no target government officials. The Prevention of Corruption Act targets mainly the public sector, but there is no whistleblower protection law.

Mauritius has ratified the UNCAC, but has not yet adopted all the recommendations, such as the criminalization of corruption in the private sector. According to Transparency Mauritius, NGOs involved in fighting corruption are not given enough protection and funding.

Navin Beekharry
Director-General
Independent Commission Against Corruption
Reduit Triangle, Moka, Mauritius
+230 402 6600
icacoffice@intnet.mu

Rajen Bablee
Director
Transparency Mauritius
4th Floor, Fon Sing Building, 12 Edith Cavell Street, Port Louis, Mauritius
+ 230 213 0796
transparency.mauritius@gmail.com

Mauritius has a long tradition of political and social stability. Civil unrest and political violence are uncommon. Free and fair national elections are held every five years with the last general elections held in November 2019. Those most recent elections took place without incident. The current prime minister, Pravind Jugnauth previously served as finance minister, and was appointed prime minister 2017 after his father resigned (in accordance with the constitution). Jugnauth won reelection in 2019. In August 2020 and February 2021, civilians engaged in mass protests following allegations of corruption and mismanagement by the government. The protests were orderly and without incident.

Crime rates are low, but petty and violent crime can occur. Visitors should keep track of their belongings at all times due to the potential for pickpocketing and purse-snatching, especially in crowded and tourist areas. Visitors should also avoid walking alone, particularly on isolated beaches and at night, and should avoid demonstrations.

According to the GoM, employment of Mauritians stood at 476,100 in September 2021 (289,100 males and 187,000 females), a decrease from 507,100 in 2020, and 591,000 in 2019. The number of unemployed stood at 49,800 in September 2021, a decrease from 52,200 in 2020. In 2019, the number of unemployed was estimated at 39,700. The unemployment rate for the third quarter of 2021 was estimated at 9.5 percent, compared to 10.5 percent in the second quarter of 2021 and 10.4 percent in the third quarter of 2020. Employment in large establishments (employing 10 or more persons) as of March 2021 was estimated at 305,532 (186,227 male and 119, 305 female) out of which 30, 013 were foreign workers (23,961 males and 6,052 females).

The labor market remains restricted by rising unemployment among graduates and low-skilled workers, and a high number of unemployed women. It is further characterized by a persistent mismatch between qualifications of the unemployed and the skills required in an increasingly services-oriented economy. Government labor market programs aimed at building human capital have been extended, with policies to develop skills of the unemployed focusing on apprenticeships and placements. In November 2016, the government introduced the National Skills Development Program (NSDP), a fully-funded technical training program for youth, which was still running as of April 2020. The NSDP is managed by the Human Resource Development Council (HRDC), which operates under the Ministry of Education and is responsible for promoting the development of the labor force in Mauritius. The HRDC, with technical and financial support from the French development agency, is also devising a National Skills Development Strategy (NSDS) for 2020-2024. The aim of the NSDS is to improve the effectiveness and efficiency of skills development programs. The HRDC, in collaboration with the Economic Development Board (EDB), has also established a Skills Development Support Scheme for Foreign Direct Investment to support foreign investors in training their employees. Through this scheme, the HRDC provides eligible employers up to 80 percent of the total amount disbursed on training; the remaining 20 percent is incurred by the employer. The objective is to develop technical expertise and specialization, and likewise boost the skills base for attracting FDI.

In 2018, the government introduced the SME Employment Scheme, which allows SMEs to employ recent graduates, whose monthly stipends are paid by the government for one year. In 2019, the government expanded the program to diploma holders.

In 2017, the National Assembly passed the National Employment Act. This act repealed the Employment and Training Act and introduced a modern legislative framework. The act provides the labor market with information on supply and demand of skills, job seekers, and training institutions; promotes placement and training of job seekers, including young persons and persons with disabilities; and promotes labor migration and home-based work.

In November 2017, the Equal Opportunities Act was amended to protect prospective employees with criminal records from discrimination when being considered for recruitment or promotion.

In 2018, the government introduced a minimum monthly wage of 9,000 Mauritian rupees (approximately $209) for all workers, which impacted over 100,000 low-paid workers. In November 2019, the cabinet, following a recommendation from the National Wage Consultative Council, increased the minimum wage again to 10,200 rupees ($237), effective January 2020. The minimum wage was further increased to 10,575 rupees ($246) in January 2022.

Workers’ rights are protected under the 2019 Workers’ Rights Act. The legislation provides, among others: a portable retirement gratuity fund; fair compensation in case of termination; harmonization of working conditions in different sectors; the flexibility to request the right to work from home either on a full- or part-time basis; and equal remuneration for equal work. The act also expands the Equal Opportunities Act through several measures against discrimination in employment and occupation.

Trade unions are independent of the government and employers. Mauritius has an active trade union movement that about 25 percent of the workforce, and labor-management relations are generally positive. The last major strike affecting the economy took place in 1979. The government generally seeks to avoid strikes through a system that promotes settlement through negotiation or arbitration. Disputes are resolved at the Conciliation and Mediation Section of the Ministry of Labor or at the Commission for Conciliation and Mediation. If the matter is not resolved, it is referred to the Employment Relations Tribunal. Mauritius participates actively in the annual International Labor Organization (ILO) conference in Geneva, Switzerland, and adheres to ILO core conventions protecting workers’ rights.

Anjana Khemraz-Chikhuri
Economic & Commercial Assistant
U.S. Embassy to Mauritius and Seychelles, Port-Louis, Mauritius
+ 230 202 4400
ChikhuriA@state.gov

There are many structural impediments to increasing foreign investment in the FSM.  The FSM has no department dedicated to promoting investment nor any ongoing dialogue with potential investors.  These challenges, both regulatory and political, affect foreign investment and economic progress in general, and addressing them requires a constitutional and political will to change that is unlikely in the foreseeable future.  Some political leaders at the state and national levels are owners of the largest businesses on the islands and strongly oppose the required structural changes that would result in increased competition.  The FSM scores in the lowest quintile in almost all measures and international indices of economic activity and climate for doing business.

In theory, the country’s courts support contractual agreements, but enforcement of judicial decisions is weak.  Foreign firms doing business in the FSM have difficulty collecting debts owed by FSM governments, companies, and individuals, even after obtaining favorable judgments.  For these reasons, the World Bank ranked the FSM very low in protecting minority investors (185th of 190 countries) and enforcing contracts (183rd of 190 countries).  U.S. companies and individuals considering doing business with parties in the FSM should exercise due diligence and negotiate credit and payment arrangements that fully protect their interests.

All four of the FSM states have limits on foreign ownership of small- and medium-sized businesses.  Large projects are assessed by the respective state governments on a case-by-case basis.  Each state requires a separate application for foreign investment permits. Foreign investment is strictly limited by local ownership requirements (51-60 percent minimum, depending on sector) and residency requirements of more than five years.  Financing through bank loans is limited due to a weak financial sector.  Local small- and medium-sized businesses are protected from foreign competition through legal restrictions.  Larger projects in competition with a business sector already owned by public figures face strong political opposition.  Politicians enthusiastically receive large and unrealistic development proposals, but do not move forward primarily due to land issues and traditional landowner disputes.  The FSM does not maintain an investment screening mechanism for inbound foreign investment.

N/A

FSM lacks a single window for online business registration or information portals providing comprehensive business registration information.  The FSM Department of Resources and Development (R&D) maintains information on trade and investment on its website.  However, all information is woefully out of date.  Post understands obtaining licenses and permits in a timely manner may depend more on the relationship of the investor (or local legal counsel) with the official in charge, rather than any clear procedure or timeline.  The World Bank’s 2020 Ease of Doing Business report ranked the FSM as 158th of 190 countries globally in terms of procedures to register a business (Note: The World Bank is currently gathering data for its Business Enabling Environment Report that will replace the Ease of Doing Business Report).

The FSM government does not promote, incentivize, or restrict outward investment. Given the small population and lack of capital formation, outward investment is negligible.

The FSM is not a signatory to any convention on transparency in international investment. Transparency of government actions is typically based more on personalities than on the law. Regulatory bodies sometimes involve themselves in issues beyond their jurisdiction. Conversely, other regulations are not uniformly enforced.  It is often difficult to obtain public records, although some states and government organizations do require open meetings.  While basic laws are accessible on the internet, text or summaries of proposed regulations are published before enactment but are not printed in an official journal or publication, and there is no appeal or administrative review process. In addition, government audits and statistical reports are not prepared promptly, and timely data are often unavailable (the most recent publications Using three or four year old data).

The websites that provide the most relevant economic data on FSM are:

National Public Auditor http://www.fsmopa.fm 

Department of Resources & Development http://www.fsmrd.fm  

FSM Statistics http://www.fsmstatistics.fm 

The FSM signed on to the Pacific Island Countries Trade Agreement (PICTA) in 2001 but did not ratify the agreement.  PICTA is a free trade agreement on trade in goods among 14 members of the Pacific Islands Forum (excluding Australia and New Zealand).  Eleven countries – Cook Islands, Fiji, Kiribati, Nauru, Niue, Papua New Guinea, Samoa, Solomon Islands, Tonga, Tuvalu, and Vanuatu — have ratified PICTA.  The FSM is not a member of any regional economic block, nor is it a member of the WTO.

The FSM follows the U.S. common law system and uses U.S. case law as precedent.  There are no specialized courts except for Land Courts in Pohnpei and Kosrae.  All four states have State Courts and State Supreme Courts.  The judicial system remains independent of the executive branch, but is reported to be slow, weak, and lacking the ability to enforce judgments properly.  Regulations or enforcement actions are appealable. Appeals may be adjudicated in either the State or National courts.

In September 2018, the Pohnpei State Legislature overrode the Governor’s veto of a bill on foreign investment regulations.  The bill became state law over the objection of several local business leaders.  The new law placed all decision-making power into the hands of one person, the Registrar of Corporations.

FSM national and state governments use a “traffic light” system to regulate businesses, with red for prohibited, amber for restricted, and green for unrestricted.  Industry classifications in this system vary from state to state. The individual states directly regulate all foreign investment, except in the areas of deep ocean fishing, banking, insurance, air travel, and international shipping, which are regulated at the federal level.  Thus, a prospective investor who plans to operate in more than one state must obtain separate permits in each state, and often follow different regulations as well.

The following are the regulations pertaining to restrictions by sector in each of the states:

FSM National

Red: Arms manufacture, minting of currency, nuclear power, radioactive goods.
Amber: Increased scrutiny before approval for non-traditional banking services and insurance.
Green: Banking, fishing, air transport, international shipping.

Kosrae State

Red: manufacture of toxic or biohazard materials, gambling, casinos, fishing using sodium/cyanide or compressed air.  (Note: There is also currently a ban on all business transactions on Sundays in the capital town. End Note.)
Amber: Real estate brokerage, non-ecology-based tourism, trade in reef fish, coral harvesting.
Green: Eco-tourism, export of local goods, professional services.

Pohnpei State

Red: None presently defined, determined by board from among amber candidates.
Amber: Everything not classified as green.
Green: Businesses with greater than 60 percent FSM ownership, initial capitalization of $250,000 or more, professional services with capitalization of $50,000 or more, and Special Investment Sector businesses with 51 percent FSM ownership in retail, trade, exploration, development, and extraction of land or marine based mineral resources or timber.

Chuuk State

Red:  Determined by the Director, none codified in law.
Amber:  Casinos, lotteries, and industries that pollute the environment, destroy local culture and tradition, or deplete natural resources.
Green:  Eco-tourism, professional services, intra-state airline services, exports of local goods.

Yap State

Red:  Manufacture of toxic materials, weapons, ammunition, commercial export of reef fish, activities injurious to the health and welfare of the citizens of Yap.
Amber:  None at present.
Green:  All others.

There is no law or agency governing competition in the FSM nor does the government require environmental, social, or governance disclosure to help investors and consumers distinguish between high-and-low quality investments.

The FSM Foreign Investment Act of 1997 guarantees no compulsory acquisition or expropriation of property of any foreign investment for which a Foreign Investment Permit is issued, except for violation of laws and regulations and in certain extraordinary circumstances.  Those extraordinary circumstances include cases in which such action would be consistent with existing FSM eminent domain law, when such action is necessary to serve overriding national interests, or when either the FSM Congress or the FSM Secretary of Resources and Development has initiated expropriation.  There has been no history of expropriation involving foreign investors or U.S. companies.

A bankruptcy law has been in existence since 2005, but was used only three times, generally to avoid taxes.

There are currently no government programs or incentives to attract foreign investment.

There is no government agency tasked with developing an industrial strategy; however, the FSM government has made recommendations for growth in several sectors, most notably tourism, fishing, and aquaculture, without substantive measures to realize those goals.  The telecommunications sector was opened to meet World Bank conditions for broadband development.  However, rivalries between the state-owned telecom operator and the state-owned infrastructure operator have held back the development of broadband infrastructure to meet the needs of both businesses and consumers.  The largest state-owned enterprise, Vital Energy, the parent of FSM Petroleum Corporation (FSMPC), built its first solar power plant in Guam in 2013 and plans to expand its renewable energy capacity into FSM in the future.

Politicians have called for expansion of the tourism sector, but have created no tax, licensing, or leasing incentives to encourage investment.  Although there is considerable potential for growth in the tourism sector, the remoteness of the FSM, land ownership prohibitions, business ownership restrictions, and the current lack of hotel facilities and tourism services mean growth in the tourism sector is unlikely to meet local expectations.  Data prior to the onset of the COVID-19 pandemic show that growth fell in the areas of scuba diving, boating, and fishing.  The March 2020 FSM border closure brought the sector to a standstill, where it currently remains due to onerous quarantine restrictions.

The United Nations Educational, Scientific and Cultural Organization (UNESCO) adopted the significant archaeological site of Nan Madol as a World Heritage Site in 2016 and has been working toward designating other sites in Yap, Kosrae, and Chuuk.  Other efforts, including those by the U.S. Embassy and National Geographic Society, are underway to highlight the considerable cultural heritage extant in the FSM.

The government currently does not offer incentives for green energy investments.

There are no Foreign Trade Zones, Free Trade Zones, Special Economic Zones, or Free Ports in the FSM.

The FSM government mandates local employment when qualified individuals are available. U.S. citizens may reside in and work in the FSM indefinitely.  Citizens of other countries must apply for the appropriate permits. (Note: The Philippine government in 2017 imposed restrictions on the entry of new Filipino workers into the FSM under the Philippines Overseas Worker Program.  Filipinos make up the vast majority of foreign workers in the FSM).  There are no defined performance requirements for investments.

The most important impediments to foreign direct investment (FDI) are derived from land and contract issues.  Foreign ownership of land is prohibited; most land is owned and passed on within the clan structure, leading to conflicting title claims, the need to negotiate leases with multiple parties, and the possibility of changes when the original senior lessor dies.  Dual citizenship is illegal, so Micronesian citizens born in the United States are unable to inherit or own property unless they renounce their U.S. citizenship. There is no system for land title insurance in any of the country’s four states.  The combination of these factors ranked the FSM at 187th out of 190 countries globally in the World Bank’s Ease of Doing Business report’s assessment of registering property.

Although foreign nationals, including corporations, cannot own real property, they can own buildings or other structures and lease the land beneath on a long-term basis.

Intellectual property rights (IPR) in the FSM are nominally protected and the country is a member state of the World Intellectual Property Organization (WIPO).  The country is not listed in the USTR Special 301 Report, nor is it listed in the Notorious Market Report. The Embassy has not received complaints from U.S. firms regarding IPR issues, and the only U.S. corporations currently operating in FSM are United Airlines and Matson Shipping.  The only three U.S. chains present (Ace Hardware, True Value Hardware, and NAPA auto parts) are 100 percent locally owned franchises.

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

There are no stock or commodities exchanges in the FSM.

The two commercial banks operating in the country, the Bank of Guam and the Bank of the FSM, can only make small, short-term unsecured loans because of the prohibition of using land or businesses as collateral, difficulties inherent in collecting debts, and the inability to identify collateral that can be attached and sold in the event of default.  There are no credit reporting agencies.  The Bank of the FSM is prohibited by its charter from investing in any securities not insured by the U.S. government, so the bulk of its holdings are in U.S. Treasury bonds.  The Bank of Guam operates as a deposit collector and transactions facilitator in the FSM, with most of its loans made in Guam.

The Bank of the FSM is protected from takeover by a trigger from the Federal Deposit Insurance Corporation (FDIC) that will cancel its insurance status if foreign ownership exceeds 30 percent.  Foreigners are not allowed to open accounts with the bank unless they provide proof of local residence and work permits and fulfill U.S. Treasury “know thy customer” requirements.

Money exchange companies such as Western Union operate within FSM and handle the majority of remittances.

Since most businesses are family owned, there are no shares that can be acquired for mergers, acquisitions, or hostile takeovers. The FSM enacted a secured transaction law in 2005 and established a filing office in October 2006 primarily to serve the foreign corporate registration market.

The FSM has no sovereign wealth fund, but the government established a national trust fund modeled on the Compact Trust Fund to provide additional government income after 2023. That fund is managed by a U.S.-based commercial fund manager.

The FSM has established state monopolies and maintains state-owned enterprises (SOEs) in the areas of fuel distribution, telecommunications, and copra production.  These companies are Vital Energy (the parent of FSM Petroleum Corporation, FSMPC), the FSM Telecommunications Corporation, the FSM Telecommunications Cable Corporation, and the FSM Coconut Development Authority, which was folded into Vital Energy in 2014.  Legislation passed in 2016 opened the telecom market to private companies to qualify for World Bank funding for broadband development, including a submarine fiber optic cable to Yap and Palau.  Other prominent SOEs include the National Fisheries Corporation, the FSM Development Bank, the College of Micronesia, and Caroline Islands Air, Inc.

FSM does not currently adhere to the convention on the Organization of Economic Cooperation and Development (OECD) guidelines on corporate governance of SOEs.

There is currently no privatization program in the FSM.

There is little awareness or definition of responsible business conduct (RBC) in the FSM.  However, most local businesses are small and generally responsive to the community in which they operate.  The two U.S.-based companies in the FSM generally follow RBC principles.  The host government does not promote RBC or factor it into evaluations for public contracts, nor does the country adhere to the convention on OECD guidelines for multinational enterprises.

Department of State

• Country Reports on Human Rights Practices;
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities;
• U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises; and;
• Xinjiang Supply Chain Business Advisory 

Department of the Treasury

• OFAC Recent Actions

Department of Labor

• Findings on the Worst Forms of Child Labor Report;
• List of Goods Produced by Child Labor or Forced Labor;
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World and;
• Comply Chain.

The FSM Climate Change Policy Assessment (CCPA) takes stock of the Federated States of Micronesia’s climate response plans, from the perspective of their macroeconomic and fiscal implications.  CCPA explores the possible impact of climate change and natural disasters and the cost of FSM’s planned response.  It suggests macroeconomically relevant reforms that could strengthen the national strategy and identifies policy gaps and resource needs.  FSM has made progress toward its Nationally Determined Contribution mitigation pledge by beginning to expand renewable power generation and improve its efficiency. The authorities plan to continue this and encourage the take-up of energy efficient building design and appliances. Accelerating adaptation investments is paramount, which requires addressing critical capacity constraints and increasing grant financing.  It is recommended that FSM needs to increase its capacity to address natural disaster risks following the expiry of Compact-related assistance in 2023.  It is advised to improve climate data collection and use, including on the costs of high and low intensity disasters and disaster response expenditure.

The FSM government has not introduced any policies to reach net-zero carbon emissions by 2050 as the FSM is a negligible contributor to global emissions.  Hence, there are no regulatory incentives that target mitigation.  Public procurement policies are focused on adaptation and climate resilience, namely reducing and responding to climate-induced natural disasters.  Sea level rise and increased salinity in ground water has already begun to affect agricultural production on the country’s more remote outer islands.

Accelerating adaptation investments is paramount, which requires addressing critical capacity

constraints and increasing grant financing.  FSM’s overall planning for adaptation is fragmented

and individual sectoral projects include varying levels of adaptation measures.  Progress has been hindered by capacity constraints, particularly in investment project execution at the state level.  However, FSM has a financing gap of $400–500 million over the next 15 years between its ambitious climate change investment plans and currently available grant funding.

The FSM has laws prohibiting corruption and there are penalties for corrupt acts.  The National Office of the Public Auditor, with support from the Department of Justice, is the entity most active in anti-corruption activities.  Several senior ex-FSM Government officials were convicted of corruption under the FSM Financial Management Act, usually involving procurement fraud.  An FSM government transportation official pled guilty April 3, 2019, in U.S. District Court to conspiring to launder bribe money he accepted from a U.S.-citizen president of a Honolulu civil engineering company.  The official was then-FSM President Christian’s son-in-law who served 18 months in prison in the United States and was subsequently deported back to the FSM in 2021.  Corruption is not a predicate offense under the money laundering statute.  Bribery is punishable by imprisonment for not more than 10 years in addition to disqualification from holding any government position.  Traditional custom permits a lawbreaker to ask and receive forgiveness by paying a fine to those victimized.  Given many FSM national, state, and municipal government officials also own businesses, there exists significant potential for conflicts of interest.

The degree to which government officials accept direct bribes is unknown but believed to be commonplace, especially deriving from state actors.  Pohnpei State and Yap State are currently prosecuting corruption cases. The Yap State governor and lieutenant governor reported receiving cash envelopes in inauguration presents which they promptly handed to Yap State’s Acting Attorney General who conducted an investigation.  The FSM has not signed or ratified the UN Convention on Corruption or the OECD Convention on Combating Bribery.

The FSM has no government agency specifically assigned with responsibility for combatting corruption.  State prosecutors are the usual avenue for prosecuting corruption, with several cases brought to trial in the last few years, especially in Pohnpei State.  The Public Auditor highlighted irregularities but relies on government prosecutors for enforcement capability. The Department of Justice in prior years prosecuted cases, but activity in this area recently has been varied; Pohnpei State and Yap State have been more active.

The principal contact for these types of cases is:

Joses Gallen
Attorney General, FSM Department of Justice
Palikir, Pohnpei
+691-320-2608
jrg.fsm@gmail.com 

There are no non-governmental “watchdog” organizations in the FSM that monitor corruption.

FSM enjoys a stable, democratic form of government with no history of civil or political strife. The islands became part of a UN Trust Territory under U.S. administration following World War II, after periods of Spanish, German, and Japanese control.  In 1979, the islands adopted a constitution, formally becoming the Federated States of Micronesia.  Independence came in 1986 under a Compact of Free Association with the United States that was amended and renewed in 2004 and portions related to financial assistance currently are being renegotiated.  Under this agreement, the U.S. Government guarantees the FSM’s external security.

The country’s last presidential election was held in March 2019, in which incumbent Peter Christian lost his bid for a second term to current President David W. Panuelo.  The population’s main concerns during the campaign season were related to the high unemployment rate, depletion of marine resources from overfishing, corruption, and a reliance on foreign aid.

Wages in FSM are low with minimum wage laws for government employees in all states and the federal government.  Only Pohnpei has a minimum wage for the private sector at $1.75 per hour.  However, employers report that they cannot hire employees for less than $3.00 per hour.  Employment in the public sector is preferred because the wages are significantly higher.  The minimum hourly wage for employment with the national government was $2.65.  The minimum hourly wage for government workers in the individual states was: Pohnpei $2.00, Chuuk $1.25, Kosrae $1.42 and Yap $1.60.  The FSM’s minimum wage was last adjusted January 1, 2015.

There are no laws regulating hours of work (although a 40-hour work week is standard practice, with 32 hours standard in Kosrae State), nor are there enforceable standards of occupational safety and health.  While there was one federal regulation that required that employers provide a safe workplace, neither the Department of Health nor the Environmental Protection Agency has enforcement capability, resulting in varying working conditions.  There is no law for either the public or private sector that permits workers to remove themselves from dangerous work situations without jeopardizing their continued employment.

Skilled labor in FSM is limited, with few FSM citizens trained to perform tasks of any technical nature.  Foreign workers, primarily Filipinos, are typically hired to fill roles requiring technical skills. In September 2018, after having banned all Filipino workers from working in the FSM in mid-2018, the Philippine Department of Foreign Affairs revised its deployment ban on Philippine labor coming to the FSM to ban only new recruits, exempting the 2,000 Filipino workers already in country.  Philippine overseas foreign workers were FSM’s main source for educated and skilled labor but, with the ban in place, this pool can no longer be replenished.

A labor dispute at a privately run hospital in Pohnpei led to the dismissal or resignation of several doctors and surgeons, all from the Philippines.  As a result, service hours were cut and capacities are in doubt. The hospital is one of the embassy’s preferred medical providers, as the island’s only other hospital did not meet hygienic standards, although the medical care itself was generally adequate for non-specialized treatment.  Likewise, wage disputes in Yap state resulted in the mass resignation of 40 doctors and nurses from the Yap State Hospital, triggering a state of emergency and frantic search for replacement medical personnel.

Most doctors, nurses, accountants, lawyers, engineers, construction foremen, and heavy equipment operators are overseas workers from the Philippines.

The FSM has no collective bargaining or strikes.  Unemployment is high, and workers are easily replaced.  There is no child labor, except in small family businesses.  Occupational safety and health standards are low.

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

Table 4: Sources of Portfolio Investment
Data not available.

Frank Talluto
Economic/Consular Officer
1286 U.S. Embassy Place, Kolonia, Pohnpei 96941
+691 320-2187
TallutoFP@state.gov

New Zealand has an open and transparent economy. Foreign investment is generally encouraged without discrimination. Some restrictions do apply in a few areas of critical interest including certain types of land, significant business assets, and fishing quotas. These restrictions are facilitated by a screening process conducted by the Overseas Investment Office (OIO), described in the next section.

New Zealand maintains an expanding network of bilateral investment treaties and free trade agreements that include investment components.  New Zealand also has a well-developed legal framework and regulatory system, and the judicial system is generally effective in enforcing property and contractual rights.  Investment disputes are rare, and there have been no major disputes in recent years involving U.S. companies.

The Labour Party-led government elected in 2017 and re-elected in 2020 has continued its program of tighter screening of some forms of foreign investment and has moved to restrict the availability of permits for oil and gas exploration by applying section 20B of the Overseas Investment Act 2005, which will be discussed in greater detail below for its discretionary aspect. The opposition National Party, gaining ground in early 2022 polling, wants to lift restrictions on exploration, as well as ease requirements for “responsible mining.” The current Labour government has also focused on different aspects of trade agreement negotiation compared with the previous government, such as an aversion to investor-state dispute settlement provisions.

New Zealand otherwise screens overseas investments to ensure quality investments are made that benefit New Zealand. The screening process is undertaken by the Overseas Investment Office (OIO), the government agency responsible for regulating foreign direct investment into the country. The Office is responsible for high value investments in “significant business assets,” investments in sensitive land, and investments in fishing quota. The Overseas Investment Act (OIA) 2005 was amended in 2021 with a package of reforms aimed at strengthening aspects of the OIA for high-risk investments, while also seeking to streamline the approval process for low-risk applications. Depending on the type of investment, overseas investors must pass one or more of a series of tests. They are as follows:

Investor Test

Benefit to New Zealand Test

National Interest Assessment

The Investor Test: The purpose of this test is to determine if an overseas investor is qualified to own or control assets considered sensitive to New Zealand. The Investor Test assesses the potential for the investor to be a risk to New Zealand by assessing the investor’s character and capability. Factors considered include past convictions, immigration or tax disputes, and any past probation on serving as a company director. More information can be found here:

https://www.legislation.govt.nz/act/public/2005/0082/latest/LMS468073.html 

Investors who have met the conditions of the screening process for the Investor Test, and whose circumstances have not changed, do not need to be reassessed for any subsequent approval. More information can be found here: https://www.linz.govt.nz/overseas-investment/discover/overseas-investment-tests/investor-test 

The Benefit to New Zealand Test: The purpose of this test is to screen for the investment’s potential to benefit New Zealand. This test is applied to investments involving sensitive land or a fishing quota. Benefit is assessed against seven factors, including the potential for positive impact on the economy or the environment, enhanced public access, and protection of sacred indigenous land. The OIO considers the potential for economic benefit to be the most important of these factors. The Benefit to New Zealand Test also screens for participation in the investment by New Zealanders. Applications by overseas investors that include oversight or participation by New Zealanders are given greater weight. More information can be found here: https://www.linz.govt.nz/overseas-investment/discover/overseas-investment-tests/benefit-new-zealand-test/oversight-or-participation-new-zealanders 

National Interest Test: In 2020, due to the stress placed on businesses by Covid, the Labour Government introduced a further National Interest Assessment. This threshold serves to potentially deny overseas investment that is at cross purposes with New Zealand’s strategic interests. The Minister of Finance, along with the OIO, reviews these applications. The National Interest Test is mandatory for applications that involve either land or assets that will be used for Strategically Important Businesses (SIBs) or land or assets that involve investment by a foreign government. SIBs include a wide cross-section of investment interests that impact national security, such as critical infrastructure or companies that are direct suppliers to the security agencies. More information can be found here: https://www.linz.govt.nz/overseas-investment/discover/overseas-investment-tests/national-interest-assessment 

During the peak of the Covid pandemic in 2020, the Government put in place the Emergency Notification Regime (ENR), a temporary protocol requiring investments of any type to go through a screening process. The ENR aimed to protect New Zealand assets from fire sales during a period of heightened market uncertainty. It was lifted in 2021 when it became clear to the Government that the impact to the economy of Covid had been mitigated, though the ENR still applies to transactions entered into prior to June 7, 2021. The ENR was replaced with the National Security and Public Order notification protocol, which applies to overseas investments in SIBs or Significant Business Assets (SBAs). More information can be found here:

https://www.linz.govt.nz/overseas-investment/discover/find-out-if-you-need-notify-us-your-transaction 

SIBs versus SBAs: The OIO screens for investments in both Strategically Important Businesses (see above), and for Significant Business Assets (SBAs). The vast majority (70-80 percent) of investor applications trigger the SBA screening. An SBA is defined as an investment in New Zealand securities, assets, or businesses worth more NZD 100 million (USD 70 million), or an investment that acquires 25 percent or more ownership or controlling interest in a New Zealand asset. For some investors, the dollar threshold is higher, such as those investors who are citizens of countries with whom New Zealand has an FTA. For Australian investors, the threshold is NZD 552 million (USD 386 million). Consent is needed for overseas investors who want to invest in a significant business asset or in New Zealand business assets worth less than NZ$

100 million if those assets involve sensitive land or fishing quota.

Land is considered “sensitive” if it is residential, larger than five hectares (12 acres) of farmland, or if it is any land that is used for commercial or industrial purposes. Sensitive land is also located on some domestic islands, where there is no size threshold. In marine and coastal areas, there is no minimum size to meet the sensitivity threshold. For a detailed table explaining the different types of sensitivities and what land may be subject to greater restrictions, please visit:

https://www.linz.govt.nz/overseas-investment/discover/our-investment-pathways/investing-land-provide-benefit-new-zealand/identifying-sensitive-land 

Crown entity New Zealand Trade and Enterprise (NZTE) is New Zealand’s primary investment promotion agency. In addition to its domestic presence, NZTE has 41 international offices, including four in the United States. The NZTE helps investors develop investment plans, access opportunities, and facilitate connections with private sector advisors based in New Zealand. They also offer ongoing support once an investment has been made. https://www.nzte.govt.nz/investment-and-funding/how-we-help .

Under certain conditions, foreign investors can bid alongside New Zealand businesses for government funding for research and development (R&D) grants.  For more see:  https://www.mbie.govt.nz/science-and-technology/science-and-innovation/international-opportunities/new-zealand-r-d/ .   Most of the programs that are operated by NZTE, the Ministry of Business, Innovation, and Employment (MBIE), and Callaghan Innovation, provide financial assistance, and support through skills and knowledge, or supporting innovative business ventures in the early stages of operation. For more see: https://www.business.govt.nz/how-to-grow/getting-government-grants/what-can-i-get-help-with/ .

The New Zealand-United States Business Council, established in 2001, is a non-partisan organization funded by business and the government. It fosters a strong and mutually beneficial relationship between New Zealand and the United States through both government-to-government contacts, and business-to-business links. The American Chamber of Commerce in Auckland provides a platform for New Zealand and U.S. businesses to network among themselves and with government agencies. To visit Council’s and the Chamber’s websites, please visit:

https://www.nzuscouncil.org/ 

https://www.amcham.co.nz/ 

The New Zealand government does not discriminate against U.S. or other foreign investors in their rights to establish and own business enterprises. It has placed separate limitations on foreign ownership of strategic businesses, such as airline Air New Zealand and telecommunications infrastructure provider Chorus Limited.

While waivers are granted, in some cases for investment of “significant economic value,” they are limited and subject to a technical, bespoke process that requires direct contact with the OIO: https://www.linz.govt.nz/overseas-investment/contact 

The 2022 OECD Economic Survey of New Zealand offered a number of key recommendations, particularly around growth sustainability and the Government’s response to Covid-19. Link to the OECD Survey here: https://www.oecd-ilibrary.org/economics/oecd-economic-surveys-new-zealand-2022_a4fd214c-en 

The most recent WTO Trade Policy review was in 2015. Linked here: https://bit.ly/35uMLDq 

In 2022, the NZUS Business Council, along with economics consultancy Sense Partners, produced a report on New Zealand’s bilateral trade relationship with the United States. The report highlighted a trade relationship in the services sector (e.g., computer services, gaming) that is becoming increasingly important: the United States is now New Zealand’s largest services export market. The report’s key takeaway is that the bilateral relationship is strong and presents ample opportunity for future growth. To read the report, please visit: https://www.nzuscouncil.org/wp-content/uploads/2022/03/REPORT-NZUS-trade-relationship-Stability-and-diversity-in-a-time-of-change.pdf

The New Zealand government has shown a strong commitment to continue efforts to facilitate business. There are no restrictions on the movement of funds into or out of the country. Overseas investors are required to adhere to legislation that applies equally domestic businesses. The global trend to tighten anti-money laundering laws has increased the reporting requirements of the banking sector. To prevent the increasing use of New Zealand-based shell companies for illegal activities, legislation was introduced in 2014 that requires a New Zealander to serve as company director. For more information:

https://www.legislation.govt.nz/act/public/2014/0046/latest/DLM4094913.html 

The Companies Office maintains a business registry of publicly available information on company directors. The website is accessed by creditors and those interested in doing business with the company or its directors. Registration is completed online. Those registering a new company typically register with the Companies Office, along with the Inland Revenue Department (IRD):

https://companies-register.companiesoffice.govt.nz/ 

https://www.ird.govt.nz/ 

The New Zealand Business Number (NZBN) Act 2016 allocates unique identifiers to eligible businesses to allow them to conduct business efficiently. Tax registration is required if a company is an employer or if the company pays the Goods and Services Tax (GST), which is currently 15 percent. The threshold for GST registration is NZD 60,000 (USD 42,000) of turnover over a one-year period. For more information about New Zealand and taxation, including the 2016 extension of GST registration to overseas suppliers of “remote services” to New Zealanders, please visit: https://www.ird.govt.nz/gst/registering-for-gst 

The New Zealand government does not place restrictions on domestic investors to invest abroad.

NZTE is the government’s international business development agency. It promotes outward investment and provides resources and services for New Zealand businesses to prepare for export and advice on how to grow internationally. The Ministry of Foreign Affairs and Trade (MFAT) and Customs New Zealand each operates business outreach programs that advise businesses on how to maximize the benefit from FTAs to improve the competitiveness of their goods offshore. They also provide information on how to meet requirements such as rules of origin.

New Zealand laws governing competition are transparent, non-discriminatory, and consistent with international norms. The country ranks high on the World Bank’s Global Indicators of Regulatory Governance, scoring 4.25 out of a possible 5.0, but is marked down for lack of transparency at some government departments responsible for communicating regulatory plans that are in the pipeline. Draft bills and regulations, including those related to FTAs and investment law, are generally made available for public comment through a consultation process. The Treaty of Waitangi – New Zealand’s founding document that commits to protect the indigenous Māori culture and to enable Māori to live in New Zealand as Māori – is foundational to public policy in the country. Governing the Crown’s relationship with Māori, the Treaty’s impact on regulation and investment has resulted in a focus on equitable outcomes for Māori in relevant sectors. For more information on Treaty principles, please visit:

https://www.mbie.govt.nz/business-and-employment/employment-and-skills/employment-strategy/maori-employment-action-plan/te-tiriti-principles/ 

More information about regulations, including The Overseas Investment Regulatory System and a regulatory timeline can be found here: https://www.treasury.govt.nz/information-and-services/regulation 

Most standards are developed through Standards New Zealand, a business unit within MBIE. And most standards in New Zealand are set in coordination with Australia. Regulations are developed by “Order in Council,” or law made by someone other than Parliament, that give effect to the government’s decisions. Orders in Council are the main method the Government uses to put into action the decisions that need legal force, such as new or amended regulations.

MBIE is responsible for the stewardship of 16 regulatory systems covering about 140 statutes. In June 2019, MBIE released a discussion paper on the proposed IP Laws Amendment Bill, an omnibus bill that is intended to make technical amendments to the Patents Act 2013, the Trademarks Act 2002, and the Designs Act 1953 to ensure that they remain workable. In November 2019, the Regulatory Systems (Economic Development) Amendment Act 2019 passed and amended about 14 Acts including laws regarding business insolvency, takeovers, trademarks, and limited partnerships. More information about these proposed amendments can be found here: https://www.mbie.govt.nz/have-your-say/proposed-intellectual-property-laws-amendment-bill/ 

Accounting, legal, and regulatory procedures are transparent and widely available online. New Zealand accounting standards are issued by the New Zealand Accounting Standards Board. International Financial Reporting Standards (IFRS) are adopted via New Zealand equivalents, which fully adhere to IFRS. These Standards are developed by the International Accounting Standards Board (IASB) and the International Sustainability Standards Board (ISSB). Foreign companies whose securities are publicly traded in New Zealand are required to apply NZ IFRS, although the Registrar of Companies and the Financial Markets Authority can give exceptions in certain circumstances. For more information, please visit: https://www.ifrs.org/use-around-the-world/use-of-ifrs-standards-by-jurisdiction/view-jurisdiction/new-zealand/ 

New Zealand does not have a government-mandated Environmental, Social, and Governance (ESG) sustainability reporting framework or standard. In October 2021, the government approved legislation for a mandatory climate disclosure law that will require financial entities with assets greater than NZD 1 billion (USD 700 million) to report the expected impact of climate change on businesses, such as how they will manage climate risks.

Draft bills and regulations including those relating to FTAs and investment law, are generally made available for public comment, through a public consultation process. In a few instances there has been criticism of New Zealand governments choosing to follow a “truncated” or shortened public consultation process or adding a substantive legislative change after public consultation through the process of adding a Supplementary Order Paper to the Bill.

While regulations are not in a centralized location in a form similar to the United States Federal Register, the New Zealand government requires the major regulatory departments to publish an annual regulatory stewardship strategy.

The Regulatory Quality Team within the New Zealand Treasury is responsible for the strategic coordination of the Government’s regulatory management system. Treasury exercises stewardship over the regulatory management system to maintain and enhance the quality of government-initiated regulation. The Treasury’s responsibilities include the oversight of the performance of the regulatory management system as a whole and making recommendations on changes to government and Parliamentary systems and processes. These functions complement the Treasury’s role as the government’s primary economic and fiscal advisor. New Zealand’s major regulatory departments are the Department of Internal Affairs, IRD, MBIE, Ministry for the Environment, Ministry of Justice, the Ministry for Primary Industries, the Ministry of Transport, and the Financial Markets Authority.

In recent years, there has been a revision to the Regulatory Impact Assessment (RIA) requirements in order to help New Zealand’s regulatory framework keep up with global standards. To improve transparency in the regulatory process, RIAs are published on the Treasury’s website at the time the relevant bill is introduced to Parliament, or the regulation is published in the newspaper, or at the time of Ministerial release. An RIA provides a high-level summary of the problem being addressed, the options and their associated costs and benefits, the consultation undertaken, and the proposed arrangements for implementation and review.

In 2018, the government introduced three omnibus bills that contain amendments to legislation including economic development, employment relations, and housing: https://www.mbie.govt.nz/cross-government-functions/regulatory-stewardship/regulatory-systems-amendment-bills/ . The government’s objective with this package of legislation is to ensure that they are effective, efficient, and accord with best regulatory practice by providing a process for making continuous improvements to regulatory systems that do not warrant standalone bills. In November 2019, the Regulatory Systems (Economic Development) Amendment Act 2019 passed and amended about 14 Acts including laws regarding business insolvency, takeovers, trademarks, and limited partnerships. In June 2019, MBIE released a discussion paper on the proposed IP Laws Amendment Bill, an omnibus bill that is intended to make technical amendments to the Patents Act 2013, the Trademarks Act 2002, and the Designs Act 1953 to ensure that they remain workable.

The Resource Management Act 1991 (RMA) has drawn criticism from foreign and domestic investors as a barrier to investment in New Zealand. The RMA regulates access to natural and physical resources such as land and water. Critics contend that the resource management process mandated by the law is unpredictable, protracted, and subject to undue influence from competitors and lobby groups. In some cases, companies have been found to exploit the RMA’s objections submission process to stifle competition. Investors have raised concerns that the law is unequally applied between jurisdictions because of the lack of implementing guidelines. The Resource Management Amendment Act 2013 and the Resource Management (Simplifying and Streamlining) Amendment Act 2009 were passed to help address these concerns. In 2020, the Resource Management Act was amended under the RMA Act 2020. The objectives of the amendment were to reduce the complexity of the RMA, increase certainty, restore public participation opportunities, and improve RMA processes. For more information: https://environment.govt.nz/acts-and-regulations/acts/resource-management-amendment-act-2020/#overview-of-the-changes 

The Covid pandemic has encouraged New Zealand’s efforts to boost the digitization of government services. In 2022, the Digital Identity Program was introduced, which aims to incorporate the country’s long-term strategy for a digital public service. The Program offers a regulatory framework that sets out rules for the delivery of digital identity services. It modernizes the digital identity system by innovating how people access and share their information. And under the concept of mutual recognition, it aligns with other likeminded countries such as Australia and Canada in its provision of digital identity services. The Program also touches on free trade agreements by considering a digital trust framework that promotes privacy and security, and allows for easier electronic transacting, thereby reducing barriers in digital trade. For more information, please visit: https://www.digital.govt.nz/digital-government/programmes-and-projects/digital-identity-programme/about-the-digital-identity-programme/ 

The Government of New Zealand is generally transparent about its public finances and debt obligations. The annual budget for the government and its departments publish assumptions, and implications of explicit and contingent liabilities on estimated government revenue and spending.

In recent years, the Government of New Zealand has introduced laws to enhance regulatory coordination with Australia as part of their Single Economic Market agenda. In February 2017, the Patents (Trans-Tasman Patent Attorneys and Other Matters) Amendment Act took effect creating a single body to regulate patent attorneys in both countries. Other areas of regulatory coordination include insolvency law, financial reporting, food safety, competition policy, consumer policy and the 2013 Trans-Tasman Court Proceedings and Regulatory Enforcement Treaty, which allows the enforcement of civil judgements between both countries.

On December 1, 2020, the Privacy Act 2020 came into force, replacing the Privacy Act 1993. The Privacy Act 2020 provides the rules in New Zealand for protecting personal information and puts responsibilities on agencies and organizations about how they must go about fulfilling this statutory requirement. The Act has 13 Information Privacy Principles and requires agencies to report to the Privacy Commissioner if they have a “notifiable privacy breach.”

New Zealand is a Party to the WTO Agreement on Technical Barriers to Trade (TBT). Standards New Zealand is responsible for operating the TBT Enquiry Point on behalf of MFAT. From 2016, Standards New Zealand became a business unit within MBIE administered under the Standards and Accreditation Act 2015. Standards New Zealand establishes techniques and processes built from requirements under the Act and from the International Organization for Standardization.

New Zealand ratified the WTO Trade Facilitation Agreement (TFA) in 2015 and it entered into force in February 2017. New Zealand was already largely in compliance with the TFA which is expected to benefit New Zealand agricultural exporters and importers of perishable items to enhanced procedures for border clearances.

New Zealand’s legal system is derived from the English system and comes from a mix of common law and statute law. The judicial system is independent of the executive branch and is generally transparent and effective in enforcing property and contractual rights. The highest appeals court is a domestic Supreme Court, which replaced the Privy Council in London and began hearing cases July 1, 2004. New Zealand courts can recognize and enforce a judgment of a foreign court if the foreign court is considered to have exercised proper jurisdiction over the defendant according to private international law rules. New Zealand has well-defined and consistently applied commercial and bankruptcy laws. Arbitration is a widely used dispute resolution mechanism and is governed by the Arbitration Act of 1996, Arbitration (Foreign Agreements and Awards) Act of 1982, and the Arbitration (International Investment Disputes) Act 1979.

Legislation to modernize and consolidate laws underpinning contracts and commercial transactions came into effect in September 2017. The Contract and Commercial Law Act 2017 consolidates and repeals 12 acts that date between 1908 and 2002. The Private International Law (Choice of Law in Tort) Act, passed in December 2017, clarifies which jurisdiction’s law is applicable in actions of tort and abolishes certain common law rules, and establishes the general rule that the applicable law will be the law of the country in which the events constituting the tort in question occur.

Overseas investments in New Zealand assets are screened only if they are defined as sensitive by the Overseas Investment Office (OIO). The OIO, a dedicated unit located within Land Information New Zealand (LINZ), administers the Overseas Investment Act, which sets out the criteria for assessing applications for foreign investment. The government ministers for finance, land information, and primary industries are responsible for assessing OIO recommendations and can choose to override OIO recommendations on approved applications. Ministers’ decisions on OIO applications can be appealed by the applicant in the New Zealand High Court. Ministers have the power to confer a discretionary exemption from the requirement for a prospective investor to seek OIO consent under certain circumstances. For more see: http://www.linz.govt.nz/regulatory/overseas-investment .

The OIO monitors foreign investments after approval. All consents are granted with reporting conditions, which are generally standard in nature. Investors must report regularly on their compliance with the terms of the consent. Offenses include: defeating, evading, or circumventing the OIO Act; failure to comply with notices, requirements, or conditions; and making false or misleading statements or omissions. If an offense has been committed under the Act, the High Court has the power to impose penalties, including monetary fines, ordering compliance, and ordering the disposal of the investor’s New Zealand holdings.

In 2017 the Government announced a reform of the Overseas Investment Act shortly after being elected and has already implemented Phase One reforms with strengthened requirements for screening foreign investment in residential houses, building residential housing developments, and farmland acreage. Screening for investments in forestry were eased slightly to help meet the Government’s One Billion Tree policy. Phase Two began in 2019 when the Government consulted on and released details for the introduction of a National Interest test to the screening process to protect New Zealand assets deemed sensitive and “high-risk.” In 2020, in response to the economic impact of COVID-19, the Government agreed to further changes to the OIA. Measures were introduced to reduce the regulatory burden of the screening process for inward foreign investment and implementations from Phase Two reforms were delayed. In February 2022, the private sector called on the OIO to remove its “Forestry Pathway” exemption due to over-investment in the sector by foreign investors who are reportedly sidelining farmland for forestry, a situation that is also impacting New Zealand’s access to domestic carbon credits.

In February 2020 New Zealand reported its first conviction under the Overseas Investment Act. The offender was charged for obstructing an OIO investigation that was initiated because he had not obtained OIO consent for his property purchase and for later submitting a fraudulent application. A second criminal conviction was reported in June 2020 after the offender was found to have submitted a fraudulent loan agreement.

The Land Information New Zealand (LINZ) website reports on enforcement actions taken against foreign investors, including the number of compliance letters issued, the number of warnings and their circumstances, referrals to professional conduct body in relation to an OIO breach, and disposal of investments. For more see: https://www.linz.govt.nz/overseas-investment/enforcement/enforcement-action-taken .

The Commerce Act 1986 prohibits contracts, arrangements, or understandings that have the purpose, or effect, of substantially lessening competition in a market, unless authorized by the Commerce Commission, an independent Crown entity. Before granting such authorization, the Commerce Commission must be satisfied that the public benefit would outweigh the reduction of competition. The Commerce Commission has legislative power to deny an application for a merger or takeover if it would result in the new company gaining a dominant position in the New Zealand market. The Commerce Commission also enforces certain pieces of legislation that, through regulation, aim to provide the benefits of competition in markets with certain natural monopolies, such as the dairy, electricity, gas, airports, and telecommunications industries.

The Dairy Industry Restructuring Act of 2001 (DIR) established dairy co-operative Fonterra Co-operative Group Limited (Fonterra).  The DIR is designed to manage Fonterra’s dominant position in the domestic dairy market, until sufficient competition has emerged. A review by the Commerce Commission in 2016 found competition insufficient, but the findings from a subsequent review in 2018 resulted in the introduction of the DIR Amendment Bill (No 3) which passed its first reading in August 2019 and was finalized and passed on August 6, 2020.

This amendment aims to ease the requirement that Fonterra accept all milk from new suppliers, allowing the cooperative the option to refuse milk if it does not meet environmental standards or if it comes from newly converted dairy farms.  The bill will also limit Fonterra’s discretion in calculating the base milk price. It also requires Fonterra’s dairy companies to enable supplying shareholders to transfer their shares to share milkers by agreement.

The Commerce Commission is also charged with monitoring competition in the telecommunications sector and motor fuel market. It has a regulatory role to promote competition within the electricity industry, which has natural monopolies in the transmission and distribution businesses. In March 2020, the Commission completed a project that set a default to determine price caps that will apply to the 17 electricity distributors in New Zealand from April 2020 to March 2025.

The Commerce (Criminalization of Cartels) Amendment Act was passed in April 2019 to align New Zealand law with other jurisdictions – particularly Australia – by criminalizing cartel behavior. The Commerce Commission has international cooperation arrangements with Australia since 2013 and Canada since 2016, to allow the sharing of compulsorily acquired information, and provide investigative assistance. The arrangements help effective enforcement of both competition and consumer law. In May 2020, the Commerce Commission issued guidance easing restrictions on businesses to collaborate in order to ensure the provision of essential goods and services to New Zealand consumers during the COVID-19 pandemic.

In January 2019, the Government announced proposed amendments to section 36 of the Commerce Act, which relates to the misuse of market power. The government is seeking consultation on repealing sections of the Commerce Act that shield some intellectual property arrangements from competition law, to prevent dominant firms misusing market power by enforcing their patent rights in a way they would not do if there were a more competitive market. It also seeks to strengthen laws and enforcement powers against the misuse of market power by aligning it with Australia and other developed economies, particularly because New Zealand competition law currently does not prohibit dominant firms from engaging in conduct with an anti-competitive effect. Section 36 of the Act only prohibits conduct with certain anti-competitive purposes.

Expropriation is generally not an issue in New Zealand, and there are no outstanding cases.

The government’s KiwiBuild program aims to build 100,000 affordable homes by 2028, with half being in Auckland. The NZD 3.8 billion (USD 2.7 billion) Housing Acceleration Fund also targets the national housing shortage with an infrastructure fund of public and private developments. Recent and legacy legislation has made it easier for the government and developers to acquire and develop land, particularly in high-density urban areas.

Under the Public Works Act 1981, the New Zealand government has the ability to force landowners to sell in order to facilitate public works projects. There is little public dissent over the issue; New Zealanders are generally satisfied with the Act’s provisions for fair market value compensation, although there have been high-profile disputes over sacred Māori land that have been litigated in court. In August 2020, the Urban Development Act (UDA) was passed into law. The Act established powers for Kainga Ora, a newly created Crown Agency that provides rental housing for families in need and facilitates urban development through residential building projects. Under the UDA, compulsory acquisition powers were created for Kainga Ora, who can theoretically make a forced acquisition of residential land after meeting critical thresholds, such as the establishment of a Special Development Project process that has government oversight. In December 2021, the Resource Management Act was amended, weakening the consent process required in order to build residential developments in medium- to high-density urban areas. While the aim of the Act was to urgently address the housing shortage, for which there is bipartisan agreement, there was some concern that the consultation process was overly swift. Overall, the thrust of all three pieces of legislation is to support needed development. The most recent legislation makes this process easier for residential development. To date, there have been no cases involving compulsory acquisition of residential property, nor has the issue been of great concern.

The lack of precedent for due process in the treatment of residents affected by liquefaction of residential land caused by the Canterbury earthquake in 2011 resulted in prolonged court cases against the Government based largely on the amount of compensation offered to insured home and/or landowners and the lack of any compensation for uninsured owners. One offer made by the government to uninsured Christchurch landowners for 50 percent of the rated value of their property was deemed unlawful in the Court of Appeal in 2013. A later offer was made by the government to uninsured residents, but only for the value of their land and not their house.

In 2018, the government opted to settle with a group of uninsured home and landowners, but some objected to the compensation because it was based on 2007/08 rating valuations. There were also reports some insurance companies paid out less to policy holders than the full value of some houses if they found based on the structural characteristics of the house that it was repairable, even though the repairs would be legally prohibited if in the RRZ. LINZ currently manages Crown-owned land in the Christchurch Residential Red Zone (RRZ) and can temporarily agree short-term leases of this land under the Greater Christchurch Regeneration Act 2016. For more see: https://www.linz.govt.nz/crown-property/types-crown-property/christchurch-residential-red-zone .

Bankruptcy is addressed in the Insolvency Act 2006, the Receiverships Act 1993, and the Companies Act 1993. New Zealand bankrupts are subject to conditions on borrowing and international travel, and violations are considered offences and punishable by law. The registration system operated by the Companies Office within MBIE, is designed to enable New Zealand creditors to sue an overseas company in New Zealand, rather than forcing them to sue in the country’s home jurisdiction. An overseas company’s assets in New Zealand can be liquidated for the benefit of creditors. All registered ‘large’ overseas companies are required to file financial statements under the Companies Act of 1993. See: https://www.companiesoffice.govt.nz/companies/learn-about/overseas-companies/managing-an-overseas-company-in-new-zealand 

The government has recognized the need for more insolvency law reform beyond the 2006 Act which repealed the Insolvency Act 1967. The Regulatory Systems (Economic Development) Amendment Act which passed in November 2019 included amendments to the Insolvency Act that strengthened some regulations and assigned more powers to the Official Assignee. After the previous government established an Insolvency Working Group in 2015, MBIE published a proposed set of reforms in November 2019, based on the group’s recommendations from 2017. The current government plans to introduce an insolvency law reform bill in early 2020. The omnibus COVID-19 Response (Further Management Measures) Legislation Bill passed on May 15 included provisions to provide temporary relief for businesses facing insolvency, and exemptions for compliance, due to the COVID-19 pandemic.

New Zealand has no specific economic incentive regime because of its free trade policy. The New Zealand government, through its bodies such as Tourism New Zealand and NZTE, assists certain sectors such as tourism and the export of locally manufactured goods. The government generally does not have a practice of jointly financing—or issuing guarantees—for foreign direct investment projects. It does provide some opportunities and initiatives for foreign investors to apply for joint financing if the projects involve R&D, science, or innovation that will benefit the economy.

Callaghan Innovation is a stand-alone Crown Entity established in February 2013. It connects businesses with research organizations offering services, and the opportunity to apply for government funding and grants that support business innovation and capability building. Callaghan Innovation requires businesses applying for any of their research and development grants to have at least one director who is resident in New Zealand and to have been incorporated in New Zealand, have a center of management in New Zealand, or have a head office in New Zealand. For more information see: http://www.business.govt.nz/support-and-advice/grants-incentives .

Through Business.Govt.NZ, an agency in association with MBIE, NZTE, and Callaghan Innovation, targeted support is offered for underrepresented investors such as Māori. For more information about grants and funding or mentoring, see: https://www.business.govt.nz/how-to-grow/getting-government-grants/grants-and-help-for-your-new-business/ 

New Zealand does not have any foreign trade zones or duty-free ports. New Zealand does not have any Special Economic Zones, although the government asked MBIE to investigate the possibility in 2017.

The government of New Zealand does not maintain any measures that violate the Trade Related Investment Measures text in the WTO. There are no government mandated requirements for company performance or local employment, and foreign investors that do not require OIO approval are treated equally with domestic investors. Overseas investors that require OIO approval must comply with legal obligations governing the OIO and the conditions of its approval.

Investors are generally required to report annually to the OIO for up to five years from consent, but if benefits are expected to occur after that five-year period, monitoring will reflect the time span within which benefits will occur. Failure to meet obligations under the investors’ consent can result in fines, court orders, or forced disposal of their investment.

Businesses wanting to establish in New Zealand and seeking to relocate their employees to New Zealand will need to apply for and satisfy the conditions of the Employees of Relocating Business Resident Visa: https://www.immigration.govt.nz/new-zealand-visas/apply-for-a-visa/about-visa/relocating-with-an-employer-resident-visa .

New Zealand supports the ability to transfer data across borders, and to not force businesses to store their data within any particular jurisdiction. While data localization and cloud computing is not specifically legislated for, all businesses must comply with the Privacy Act 1993 to protect customers’ “personal information.” However, under certain circumstances, approval is required from the Commissioner of Inland Revenue to store electronic business and tax records outside of New Zealand, and under Section 23 of the Tax Administration Act 1994. Alternatively, taxpayers can use an IRD-authorized third party to store their information without having to seek individual approval. It remains the taxpayer’s responsibility to meet their obligations to retain business records for the retention period (usually seven years) required under the Act.

Indigenous data sovereignty is highly topical in New Zealand. The principles of Māori data sovereignty refer to the inherent rights that the indigenous peoples of New Zealand have in relation to the collection, storage, and usage of Māori data. This is particularly relevant for those public and private sector entities sharing data via cloud applications across borders. In November 2021, the Waitangi Tribunal in Wai 2522 determined that CPTPP breaches the Crown’s obligations to Māori by failing to protect Māori rights and interests in data sovereignty and in the digital domain. The Waitangi Tribunal is a permanent commission of inquiry established under the Treaty of Waitangi Act of 1975 that makes recommendations on claims brought by Māori to the courts around issues relating to Māori rights that are in breach of the original Treaty of Waitangi. The Tribunal opted to refrain from making formal recommendations and is planning to put processes in place after mediation between claimants and the Crown. Going forward, free trade agreements will be subject to greater scrutiny as they pertain to the rights of the indigenous.

Under the CPTPP trade agreement, the New Zealand government has retained the ability to maintain and amend regulations related to data flows with CPTPP countries, but in such a way that does not create barriers to trade. These rules come with a “public policy safeguard” that gives CPTPP governments the discretion to control the movement and storage of data for legitimate public policy objectives to ensure governments can respond to the changing technology in areas such as privacy, data protection, and cybersecurity. As part of CPTPP, New Zealand has committed not to impose ‘localization requirements’ that would force businesses to build data storage centers or use local computing facilities in CPTPP markets in order to provide certainty to businesses considering their investment choices. Another provision requires CPTPP countries not to impede companies delivering cloud computing and data storage services.

The Digital Economy Partnership Agreement (DEPA), which came into effect on January 7, 2021 for Singapore, New Zealand and Chile, includes a series of modules covering measures that affect the digital economy. Module 4 on Data Issues includes binding provisions on personal data protection and cross-border data flows that build on the CPTPP. In addition to the CPTPP obligations, DEPA encourages the adoption of data protection trust-marks for businesses to verify conformance with privacy standards. The agreement is an open plurilateral one that allows other countries to join the agreement as a whole, select specific modules to join, or replicate the modules in other trade agreements.

In March 2018, the government introduced the Privacy Bill that replaced the Privacy Act 1993. The bill aims to modernize privacy regulations and came into effect on June 30, 2020. It incorporates provisions in the European General Data Protection Regulation (GDPR). The provisions of the bill extend the law’s reach to apply to agencies located outside of New Zealand if that agency is doing business in New Zealand. The bill also introduces a requirement to report serious privacy breaches.

New Zealand does not have any requirements for foreign information technology (IT) providers to turn over source code or provide access to encryption, although there may be obligations on individuals to assist authorities under Section 130 of the Search and Surveillance Act 2012. This Act will be reviewed in 2022 as part of the Government’s response to Royal Commission of Inquiry into the 2019 terror attack on the Christchurch mosques.

There is not a particular government agency that enforces all privacy law, however the Office of the Privacy Commissioner is empowered through the Privacy Act 1993 and has a wide ability to consider developments or actions that affect personal privacy. Separately, New Zealand courts have developed a privacy tort allowing individuals to sue another for breach of privacy.

The government encourages businesses to switch from fossil fuels to cleaner power to fuel their industry.  In October 2021, the government announced 23 new projects that will receive government co-investment from Round Two of the Government Investment in Decarbonizing Industry (GIDI) Fund.  The recipients will receive NZD 28.7 million (USD 20 million) and will match this with NZD 54.5 million (USD 38.2 million) of their own funding.  The approved projects cover a range of sectors including meat, dairy, and other food production, as well as timber, energy supply, and chemical manufacturing. All applicants had to demonstrate significant economic and employment impact from their projects, have carbon reduction plans, and be ready to complete projects by October 2023.  The first two rounds of the GIDI Fund supported projects that will deliver lifetime emissions cuts of 6.6 million tons.  This equates to 14-18 percent of the gross long-lived emission reductions required from the Climate Commission’s first carbon budget for the period 2022-2025.

New Zealand recognizes and enforces secured interest in property. Most privately owned land in New Zealand is regulated by the Land Transfer Act 2017. These provisions guide the issuance of land titles, the registration of interest in land against land titles, and guarantee of title by the State. The Registrar-General of Land develops standards and sets an assurance program for the land rights registration system. New Zealand’s legal system protects and facilitates acquisition and disposition of all property rights. Mortgages are widely available and liens are used as security. For more information: https://www.treasury.govt.nz/information-and-services/other-services/bona-vacantia-ownerless-property/standard-requirements/liens 

Land leasing by foreign or non-resident investors is governed by the OIO Act. About eight percent of New Zealand land is owned by the Crown. The Land Act 1948 created pastoral leases which run for 33 years and can be continually renewed. Rent is reviewed every 11 years, basing the rent on how much stock the land can carry for pastoral farming. The Crown Pastoral Land Act 1998 and its amendments contain provisions governing pastoral leases that apply to foreign and domestic lease holders. Holders of pastoral leases have exclusive possession of the land, and the right to graze the land, but require permission to carry out other activities on their lease.

There are several types of land ownership in New Zealand: freehold title, leasehold, unit title, strata title, and cross-lease. Most of the land in New Zealand is freehold, also referred to as “fee simple,” or absolute ownership of the land and anything built on it. Unit titles make up the most common form of ownership for apartment developments and for commercial multi-unit developments. For more information on types of property ownership: https://www.settled.govt.nz/ 

Prior to purchasing property or land in New Zealand, prospective buyers are encouraged to perform due diligence by accessing a report from Land Information New Zealand (LINZ): https://www.linz.govt.nz/ 

Unoccupied, legally purchased property has historically been subject to adverse possession, a legal method allowing squatters to take ownership of a property after 20 continuous years of occupation. The method, a narrow exception to a legal principle under the Land Transfer Amendment Act of 1963, has been used in more than 200 applications since 1993. The Act was repealed in 2017 and replaced with the Land Transfer Act, which still provides for some squatters’ rights. More information on the Land Transfer Act 2017 can be found here:

https://www.linz.govt.nz/land/land-registration/land-transfer-act-2017 

New Zealand has a strong record on intellectual property rights (IPR) protection and is an active participant in international efforts to strengthen IPR enforcement globally. In 1984, New Zealand joined the World Intellectual Property Organization (WIPO) and is a member of a multitude of WIPO bodies and treaties. New Zealand participates in the Trade Related Aspects of Intellectual Property Rights (TRIPS) Council. The country operates on a common law legal system and enjoys a strong and independent justice system. The Intellectual Property Office of New Zealand (IPONZ) assists those whose copyright has been infringed upon. There are both civil and criminal enforcement options. These options are administered through a variety of agencies, including MBIE and the Customs Service. Though there have been isolated incidents of IP theft, it is uncommon. https://www.iponz.govt.nz/about-ip/copyright/enforcing-copyright/ 

In 2018, the government began a public consultation to review the Copyright Act. This is the first step in making changes to copyright law and regulations, which were last reviewed in 2004. In 2019, MBIE published the results of the public consultation that outlined revised objectives for copyright law in New Zealand. In 2020, based on advice from stakeholders, the results of the consultation were withdrawn from the public. The government is now publicly consulting on potential changes to the objectives themselves. While the particulars of these revisions are unclear, the overarching theme is to ensure New Zealand’s copyright laws and regulations are fit for purpose in a rapidly changing technological environment. For more:

https://www.mbie.govt.nz/business-and-employment/business/intellectual-property/copyright/review-of-the-copyright-act-1994/ 

New Zealand does not publish specific statistics on seizures of counterfeited goods. The country has a robust procedure for the prosecution of IPR violations. New Zealand Police are authorized to investigate and prosecute trademark counterfeiters.

New Zealand is not listed in USTR’s Special 301 report. It is not mentioned in the Review of Notorious Markets for Counterfeiting and Piracy.

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

The New Zealand government has a generally positive attitude toward foreign portfolio investment, provided the investment is not considered to be sensitive in nature by the screening body, the Overseas Investment Office (OIO). New Zealand welcomes sustainable, productive, and inclusive investment.

The New Zealand Exchange, or the NZX, is the country’s securities and futures exchange. The Financial Market Authority (FMA) is the government agency responsible for regulating investments and financial markets. The regulatory system is effective, transparent, and supportive of inward flows. In 2020, the market capitalization of listed domestic companies in New Zealand was 63 percent of GDP, at USD 132 billion. The small size of the market reflects in part the risk averse nature of New Zealand investors, preferring residential property and bank term deposits over equities or credit instruments for investment. As of year-end 2021, New Zealand’s stock of investment in residential property is valued at NZD 1.7 trillion (USD 1.2 trillion).

New Zealand adheres to International Monetary Fund (IMF) Article VIII and does not place restrictions on payments and transfers for international transactions.

Credit is allocated on market terms for a variety of instruments, but foreigners and non-residents find difficulty in securing lending in New Zealand. To open a bank account, the applicant must be a permanent resident. Bank deposits are currently not guaranteed. In 2022, the Labour government plans to introduce a bill that will guarantee deposits up to NZD 100,000 (USD 70,000) from 2023.

Banking services in the country are robust; bank account penetration is nearly 100 percent. The sector is dominated by Australian banks; by total assets, three of the country’s four largest banks are Australian owned. Overall, the banking sector is worth NZD 644 billion (USD 450 billion) by total assets, small by global standards. Loans and advances account for the vast majority (80 percent) of bank assets. Derivatives are held mainly for hedging purposes. The RBNZ estimates that the non-performing loans ratio is 0.4 percent – out of a total loan portfolio worth NZD 522 billion (USD 350 billion).

The banking sector has undergone reforms to better withstand shocks. In 2019, the RBNZ proposed a significant increase to banks’ capital requirements to safeguard them from shocks to the financial system. Increased capital requirements will now be phased in over a five- to seven-year period. By the end of the transition period in 2028, all registered banks in the country will have to meet the new requirements, which will be some of the most stringent in the world and may squeeze access to credit.

Worth NZD 60 billion (USD 42 billion), the New Zealand Superannuation Fund (NZ Super) is the country’s sovereign wealth fund. 85 percent of the fund is invested offshore in both developed and emerging markets, the bulk of it in passive funds in North America. 4 percent of the fund is invested domestically in timber, bonds, private companies, rural land, and infrastructure. NZ Super is a member country of the International Forum of Sovereign Wealth Funds (IFSWF) and assesses the performance of the fund against the Santiago Principles. The fund has historically ranked as fully compliant with the Principles.

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

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

Beginning in the mid-1980s, the government began a rapid course of deregulation and privatization that lasted through the late 1990s. The Ports of Auckland were partially privatized in 1988. The government sold its holdings in Bank of New Zealand, one of the country’s largest banks, in 1992 to National Australian Bank. Air New Zealand was sold to a consortium in 1988. Other telecoms, and energy and transportation companies were sold off. Some of these interests were re-purchased by the government, such as Air New Zealand moving back to into government ownership in 2001.

In 2014 the government completed a program of asset sales to raise funds to reduce public debt. It involved the partial sale of three energy companies and Air New Zealand, with the government retaining its majority share in each. The bulk of the initial share float was made available to New Zealand share brokers and international institutions, and unsold shares were made available to foreign investors. Foreign investors are free to purchase shares on the secondary market.

Subsequent “public private partnerships” in the infrastructure space in the mid-2000s offered the public a chance to participate in government-sponsored projects. In 2019, the Infrastructure Transaction Unit was created within Treasury as an interim measure to provide support to agencies and local authorities in planning and delivering major infrastructure projects. The New Zealand Infrastructure Commission Act was passed in September 2019, to create Crown Entity InfraCom, and it will be responsible for delivering New Zealand’s Public Private Partnership (PPP) Program https://infracom.govt.nz/major-projects/public-private-partnerships/ . The government is increasing its focus on PPP due to its significant NZD 15 billion (USD 10.5 billion) funding package announced in December 2019 and May 2020.

MBIE administers the procurement process. In October 2019, MBIE issued substantive changes to the New Zealand Government’s Procurement Rules. The Procurement Rules contain a specific section on non-discrimination, which in part states, “All suppliers must be given an equal opportunity to bid for contracts. Agencies must treat suppliers from another country no less favorably than New Zealand suppliers. Procurement decisions must be based on the best value for money, which isn’t always the cheapest price, over the whole-of-life of the goods, services or works. Suppliers must not be discriminated against because of a) the country the goods, services or works come from; or b) their degree of foreign ownership or foreign business affiliations.” Where applicable foreign bidders who are ultimately successful, may still be required to meet tax obligations and approval from the Overseas Investment Office. More information can be found here: www.procurement.govt.nz 

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

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

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

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

Department of State

• Country Reports on Human Rights Practices;
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities;
• U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises; and;
• Xinjiang Supply Chain Business Advisory 

Department of the Treasury

• OFAC Recent Actions 

Department of Labor

• Findings on the Worst Forms of Child Labor Report ;
• List of Goods Produced by Child Labor or Forced Labor ;
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World  and;
• Comply Chain .

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

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

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

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

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

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

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

The Serious Fraud Office and the New Zealand Police investigate bribery and corruption matters. Agencies such as the Office of the Controller and Auditor-General and the Office of the Ombudsmen act as watchdogs for public sector corruption. These agencies independently report on and investigate state sector activities.

Serious Fraud Office
P.O. Box 7124 – Wellesley Street
Auckland, 1141
New Zealand
www.sfo.govt.nz 

Transparency International New Zealand is the recognized New Zealand representative of Transparency International, the global civil society organization against corruption.

Transparency International New Zealand
P.O. Box 5248 – Lambton Quay
Wellington, 6145
New Zealand
www.transparency.org.nz 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The Government of Samoa welcomes business and investors. Samoa’s fertile soil, English-speaking and educated workforce, and tropical climate offer advantages to focused investors, though the country’s distance from major markets affects the cost of imports and exports. Historically the main productive sectors of the economy are agriculture and tourism, and the economy depends heavily on overseas remittances.

For investors, Samoa offers a trained, productive and industrially adaptable work force that communicates well in English; competitive wage rates; free repatriation of capital and profits; well-developed, reasonably priced transport infrastructure, telecommunications, water supply, and electricity; industry incentive packages for tourism and manufacturing sectors; a stable financial environment with single-digit inflation; a balanced budget and international reserves; relatively low corporate and income taxes; and a pleasant and safe lifestyle.

All businesses in the greater Apia area have access to broadband and Wi-Fi, which is reasonably reliable and fast, but relatively expensive. In rural Upolu and on Savaii Island there is limited availability of high-speed internet, but reliable Wi-Fi through personal mobile routers is universal. In 2018, Samoa completed the installation of a National Broadband Highway which provides fiber optic data services and 4G LTE cellular data speeds to the entire country. 4G LTE data speeds are operative and commercially available nationwide.

Foreign Investors are permitted 100% ownership in all different sectors of industry except for restricted activities below.

The following businesses are reserved for Samoan Citizens only:

1. Bus transport services for the general public;
2. Taxi transport services for the general public;
3. Rental vehicles;
4. Retailing;
5. Saw milling; and
6. Traditional elei garment designing and printing.

Please see Samoa’s Foreign Investment Amendment Act 2011 for a more detailed Restricted List: http://www.paclii.org/cgi-bin/sinodisp/ws/legis/consol_act_2020/fia2000219/fia2000219.html?stem=&synonyms=&query=foreign%20investment%20act .

The Investment Promotion division of the Ministry of Commerce Industry and Labor (MCIL) provides information about investing and doing business in Samoa:

https://www.mcil.gov.ws/services/investment-promotion-and-industry-development/investment-promotion/ .

Foreign Investors are permitted 100% ownership in all different sectors of the industry except for conditions for restricted activities listed above.

Please see Samoa’s Foreign Investment Amendment Act 2011 for a more detailed Restricted List at: http://www.paclii.org/cgi-bin/sinodisp/ws/legis/consol_act_2020/fia2000219/fia2000219.html?stem=&synonyms=&query=foreign%20investment%20act 

The World Trade Organization conducted a Trade Policy review of Samoa in 2019: https://www.wto.org/english/tratop_e/tpr_e/tp486_e.htm .

The IMF’s regular Article IV reports are available at: https://www.imf.org/en/countries/wsm?selectedfilters=Article%20IV%20Staff%20Reports#whatsnew .

Samoa’s latest national investment policy statement can be found here: https://www.mcil.gov.ws/services/investment-promotion-and-industry-development/investment-promotion/ .

The Strategy for the Development of Samoa can be found here:

https://www.mof.gov.ws/services/economic-policy-planning/national-development-plans-for-samoa/ .

Samoa’s Trade, Commerce, and Manufacturing Sector Plan 2017/2018 – 2020/2021 are available here: https://www.mof.gov.ws/services/economic-policy-planning/sector-plans/ .

The Ministry of Commerce, Industry and Labor (MCIL) administers Samoa’s foreign investment policy and regulations ( https://www.mcil.gov.ws/ ). To open a branch of an existing corporation in Samoa, one must register the company for about USD 115. For a company to qualify as a “Samoan company,” the majority of shareholders must be Samoan. The fee to register an overseas company is about USD 115. All businesses with foreign shareholdings must obtain and hold valid foreign investment registration certificates. The application fee is about USD 50 and can be obtained by contacting MCIL. Certificates are valid until the business terminates activity. If a business does not commence activity within 2 years after a certificate is issued, the certificate becomes invalid. Upon approval of the FIC, the foreign investor is then required to apply for a business license before operating in Samoa. Fees range from USD 100-USD $250, depending on the type of business.

Land has a special status in Samoa, as it does in most Pacific Island countries. Under the country’s land classification system, about 80 percent of all land is customary land, owned by villages, with the remainder either freehold (private) or government-owned. The standard method for obtaining customary land, which cannot be bought or sold, is through long-term leases that must be negotiated with the local communities. A typical lease for business use might be for 30 years, with the option of a further 30 years after that, but longer terms can be negotiated. It should be noted that customary land cannot be mortgaged, and thus cannot be used as collateral to raise capital or credit. Freehold land, mostly based in and around Apia can be bought, sold and mortgaged. Only Samoan citizens may buy freehold land unless approval is obtained from Samoa’s Head of State.

The Foreign Investment Amendment Act 2011 is the preeminent legislation on foreign investment: http://www.paclii.org/cgi-bin/sinodisp/ws/legis/consol_act_2020/fia2000219/fia2000219.html?stem=&synonyms=&query=foreign%20investment%20act .

Business Registration

• Step 1: Register your company and obtain a Foreign Investment Certificate at MCIL. https://www.mcil.gov.ws/services/business-registration/foreign-investment-registration/ 

• Step 2: Obtain a business license and register for VAGST and PAYE from the Ministry of Revenue. https://www.revenue.gov.ws/business-license-matters/ 

• Step 3: Register with the National Provident Fund. http://npf.ws/empregistration 

• Step 4: Register with the Accident Compensation Corporation. https://acc.gov.ws/levy-registration/ 

• Step 5: Apply for Foreign Employment Employee Permit. https://www.mcil.gov.ws/services/employment/foreign-employment-employee/ 

• Step 6: Apply for Residence Permit. This allows non-citizens to reside in Samoa. https://mpmc.gov.ws/divisions/immigration/ 

Many parts of these registrations can be done online, but some may require payment in person.

MCIL has an Investment Promotion and Industry Development Division (IPIDD) with services available to all investors:

https://www.mcil.gov.ws/services/investment-promotion-and-industry-development/ .

Samoa’s Ministry of Revenue only distinguishes between small/medium enterprises (less than USD 400,000 in annual turnover) and large enterprises (over USD 400,000 in annual turnover). Priority service is given to large enterprises.

There is minimal outward investment from Samoa beyond several stationery and apparel stores having branches in New Zealand and American Samoa. The government and economy are more focused on increasing exports of Samoan products. The government does not appear to restrict investment abroad.

Pacific Islands Trade and Invest ( https://pacifictradeinvest.com/about/ ) is a resource for companies looking to establish themselves overseas.

The Government uses transparent policies and effective laws to establish “clear rules of the game.” Accounting, legal and regulatory procedures are all consistent with international norms. According to the Samoa Institute of Accountants, businesses adhere to International Financial Reporting Standards (IFRS) and International Standards on Auditing and Quality Assurance.

Draft bills are made available through the parliamentary website, https://www.palemene.ws/parliament-business/bills/ , but are not made available for formal public comment. Those who wish to make a comment on the bill are given the opportunity to do so before a Parliamentary Committee. Public notices are televised and printed on local newspaper for the awareness of the public that there is an avenue to voice their opinions on drafted Government policies.

The Office of the Regulator (OOTR) was established in 2006 under the Telecommunications Act 2005 to provide regulatory services for the telecommunications sector in Samoa. However, the Broadcasting and Postal Services Acts 2010 were recently approved by Parliament, which also provide regulatory framework for broadcasting and postal sectors in Samoa. These Acts require the Regulator to establish a fair, unbiased and ethical regime for implementing the objects of these Acts including licensing of telecommunications, broadcasting and postal services, promotion of new services and investment, consumer protection, prevention of anti-competitive activities by service providers, and management of the radio spectrum and national number plans. OOTR also approves the Electric Power Corporation’s Power Purchase Agreements with Independent Power Providers and reviews EPC’s Power Extension Plan.

Finances and expenditures of the government are published twice on an annual basis, and available through the parliament website. Debt obligations are published on a quarterly basis by the Samoa Bureau of Statistics through its quarterly reports.

Samoa is a member of the Pacific Islands Forum, which is an 18-member inter-governmental organization that aims to enhance cooperation between the independent countries of the Pacific Ocean.

Samoa’s system of government is based on the Westminster Parliamentary system. Samoa’s Companies Act 2001 contains a modern regulatory regime based on New Zealand company law.

The Samoan legal system has its foundations in English and Commonwealth statutory and common law. Various business structures utilized in common law are recognized: sole traders, partnerships, limited liability companies, joint ventures and trusts (including unit trusts). These structures are regulated by legislation including the Companies Act 2001, Partnership Act 1975, Trustee Act 1975 and Unit Trusts Act 2008. Samoa’s Companies Act 2001 contains a modern regulatory regime based on New Zealand company law. It allows the incorporation of a sole person company (i.e., one person being both shareholder and director) and directors need not be resident in Samoa.

A Samoa incorporated private company is a separate legal entity and a corporation under Samoan law. It must file an annual return with the Registrar of Companies specifying details of directors, shareholders, registered office etc. There is no requirement for private companies to file annual financial reports with the Companies Registry nor are there any minimum capital requirements.

The judicial system is largely independent from the executive branch. In December 2020, the National Parliament passed into law three controversial bills that fundamentally changed country’s constitution and judicial system. The three bills, the Constitution Amendment Bill, Lands and Titles Bill, and Judicature Bill, were passed by Parliament with a vote of 41-4. The bills were opposed by the judiciary and the Samoa Law Society for lack of consultation and the impact on human rights and rule of law. The Australian and New Zealand Law Societies, and other international organizations issued statements in support of the judiciary and the law society. The new laws have in effect divided the judicial system into parallel courts of equal standing: one to deal with criminal and civil matters, and the other with customary land and titles. There are outstanding questions about the constitutionality of the new laws.

The Ministry of Commerce, Industry and Labor administers Samoa’s foreign investment policy and regulations under the Foreign Investment Amendment Act 2011. All businesses with any foreign ownership require foreign investment approval by MCIL. ( https://www.mcil.gov.ws/ ).

The Ministry of Commerce, Industry, and Labor’s Fair Trading and Codex Alimentarius Division (FTCD) handles competition related concerns. The main pieces of legislation regarding competition are the Fair Trading Act 1998, the Consumer Information Act 1989, and the Measures Ordinance 1960.

Samoa’s constitution prohibits expropriation without compensation, and expropriation cases in Samoa are rare. There was one significant case that occurred in 2009 over land designated for a new six-story government building. A business signed a 20-year lease with the government in 2005 but was then asked to move in 2008 to make way for the new building. The business moved but won a settlement in the Court of Appeals against the government for a much larger sum than the government initially offered the business for vacating the land.

The Alternative Dispute Resolution Act of 2007 (amended 2013) outlines ADR procedures for both criminal and civil proceedings. Samoa has an Accredited Mediators of Samoa Association that was put in place to help resolve (largely commercial) disputes.

Bankruptcies are governed by the Samoa Bankruptcy Act of 1908, which gives broad rights to the judiciary to issue orders related the property of any debtor or bankrupt who becomes subject to the Act. The judiciary has the authority to decide all questions of priorities.

Samoa’s government is very reluctant to provide government guarantees or financing for projects. In rare circumstances, the government may provide land for certain business projects, or be instrumental in securing land of interest.

The Industry Development and Investment Promotion Division (IDIPD) under MCIL administers several schemes designed to assist businesses that produce for overseas and domestic markets, enhancing development of domestic businesses as well as property developers in the tourism industry, and also businesses in the private sector. Such schemes offer duty concessions on imported goods for the tourism and manufacturing industries and income tax exemptions for up to five years for hotel operators.

The government does not offer incentives for clean energy investments.

Samoa does not have any Free Trade Zones, Duty Free Zones, Special Economic Zones, or areas with special tax treatment.

In order to hire a non-Samoan citizen for a job, one must prove that the required skillset is not available through the local labor force. It is not an onerous task to hire non-residents.

There is no forced localization in terms of goods or technology.

There is no forced localization of data other than the industry exceptions outlined in the Intellectual Property section below.

Leasing of Land: In accordance with the Alienation of Customary Land Act 1965 and the Alienation of Freehold Land Act 1972, land may be leased for up to 30 years renewable once in the case of land leased or licensed for industrial purposes or a hotel and 20 years renewable once in the other cases.

Land holdings and ownership in Samoa fall into three (3) categories:

1. Customary Land: These lands are not for sale but can be leased out to foreigners as well as locals. All leased lands in this category are registered with the Ministry of Natural Resource and Environment. In case of dispute, ownership is decided by the Ministry of Justice and Courts Administration.
2. Public Land: The Ministry of Environment and Natural Resources administers the database of Government land available for lease. Applications for leasing of land should be submitted to the Chairman of the Samoa Land Board.
3. Freehold Land: Freehold land cannot be sold or leased to someone who is not a citizen of Samoa, except with the proper consent of the Head of State.

Samoa has legislation protecting patents, utility models, designs, and trademarks. Enforcement is moderate.

To protect and safeguard intellectual property in Samoa, the Government has passed the following laws:

a) Copyrights Act 1998 – applies to work including books, pamphlets, articles, computer programs, speeches, lectures, musical works, audiovisual, works of architecture etc.

b) Intellectual Property Act 2013 – for the registration and enforcement of rights of owners of Trademarks, Patents, Industrial designs, GI, and Plant varieties.

Samoa is not on USTR’s Special 301 list or the Notorious Markets Report.

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

The capital market is regulated by the Central Bank of Samoa (CBS). Since January 1998, the Central Bank has implemented monetary policy by issuing its own Securities using market-based techniques – commonly known as Open Market Operations (OMO). CBS Securities are the predominant monetary policy instrument, which is issued to influence the amount of liquidity in the financial system.

Capital markets in Samoa are in their infancy with the Unit Trust of Samoa (UTOS) domestic market established in 2010, and no international stock exchange.

Samoa has accepted the obligations of IMF Article VIII, Sections 2, 3, and 4, and maintains an exchange system that is free of restrictions on payments and transfers for current international transactions.

Samoa is well-served with banking and finance infrastructure. It has four commercial banks, complimented by a dynamic development bank. The sector is ably regulated by the Central Bank of Samoa. The largest banks are regional operators ANZ and BSP, which offer a wide range of services based upon electronic banking platforms. Although they service all markets, they tend to dominate the top-end, encompassing corporate, government and high net worth individuals. Samoa is still a cash-based society, however, and this has enabled two locally owned entrants, the National Bank of Samoa and Samoa Commercial Bank, to each garner double-digit market share, despite entering the market quite recently.

The banking sector appears healthy although recent reports have indicated the state-owned development bank is carrying a significant amount of bad debt, over 20% of its loan portfolio. The government also interfered with the bank’s attempts to foreclose on non-performing assets.

With its International Finance Centre (Samoa International Finance Authority – SIFA)—the first Pacific center to be white-listed by the OECD—and a well-structured financial services sector, Samoa is well placed to service the needs of both local and offshore businesses.

The Government, through the Central Bank, has been largely resistant of block chain technologies. Their skepticism is somewhat warranted with the discovery of several cryptocurrency schemes operating in the country widely believed to be scams.

There is no sovereign wealth fund or asset management bureau in Samoa. The country has the Samoa National Provident Fund which manages and invests members’ savings for their retirement.

Private enterprises are allowed to compete with public enterprises under the same terms and conditions. Laws and rules do not offer preferential treatment to SOEs. State-owned enterprises are subject to budget constraints, and these are enforced.

SOEs are active in the Energy, Water, Tourism, Aviation, Banking, Agriculture supplies, and Ports/Airports sectors. Laws do not provide for a leading role for SOEs or limit private enterprise activity in sectors in which SOEs operate. SOEs have government-appointed boards and operate with varying degrees of autonomy with respect to their governing Ministry.

SOEs follow a normal corporate structure with a board of directors and executive management. All SOEs have boards of directors who are appointed by a cabinet minister. Some SOEs have board seats allocated specifically to the heads of certain government ministries.

By law SOEs are required to present financials to their board of directors, shareholding Ministry and the National Auditor. Timely compliance, however, varies between SOEs.

Samoa does not have an active privatization program. The most recent major privatizations in Samoa were in broadcasting (2008) and telecommunications (2011), both resulting in significant gains in efficiency and benefits to both producer and consumer. The 2011 telecommunications privatization was to a foreign company.

Procedures for establishing all businesses are provided under existing legislation, including the Companies Amendment Act 2006, the Foreign Investment Amendment Act 2011, the Business License Act 1998, the Labour and Employment Relations Act 2013, the Central Bank Act and Guidelines, and the Health Ordinance 1959 (Part 11, 111 clause 13 & 15).

There is a general awareness of responsible business conduct (RBC) among both producers and consumers, and foreign and local enterprises to follow generally accepted RBC principles such as the OECD Guidelines for Multinational Enterprises. Firms that pursue RBC are viewed favorably but consumers generally prioritize value for money ahead of RBC claims.

The government fairly enforces domestic laws and protects human rights. The government encourages local enterprises to follow generally accepted RBC principals. A national contact point is not known.

There are no extractive industries in Samoa.

Department of State

• Country Reports on Human Rights Practices;
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities;
• U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises; and;
• Xinjiang Supply Chain Business Advisory 

Department of the Treasury

• OFAC Recent Actions

Department of Labor

• Findings on the Worst Forms of Child Labor Report;
• List of Goods Produced by Child Labor or Forced Labor;
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World and;
• Comply Chain.

Samoa’s Nationally Determined Contribution – available at https://www4.unfccc.int/sites/NDCStaging/Pages/All.aspx  – provides the basis for the country’s climate strategy. Samoa’s NDC recognizes that the island nation is particularly vulnerable to the effects of climate change due to its geographic location and its economic reliance on fisheries, agriculture, and tourism. The NDC states that Samoa is already experiencing higher average temperatures, greater frequency in extreme rainfall events, sea level rise, and increases in ocean acidification and coastal erosion.

Per its NDC, Samoa aims to reduce its overall greenhouse gas emissions by 26 percent in 2030 as compared to 2007 levels. As part of its adaptation plan, Samoa aims to expand the area of mangrove forests by five percent by 2030 (relative to 2018), expand the area under agroforestry by five percent by 2030 (relative to 2018), and increase total forest cover by two percent by 2030 (relative to 2013). Samoa developed Community Integrated Management (CIM) Plans to identify prioritized adaption plans for each of Samoa’s 368 villages. Samoa’s contribution to the world’s greenhouse gases is negligible.

Samoa’s Ministry of Natural Resources and Environment also released a Climate Change Policy in 2020, available at https://www.mnre.gov.ws/wp-content/uploads/2021/03/Samoa-Climate-Change-Policy-2020-2030.pdf . The policy aims to improve coordination of climate change work in the country and enhance cooperation and collaboration between government and all stakeholders.

The government does not specify legally binding expectations on private sector contributions to achieving relevant targets and goals, but the government is very focused on climate-friendly policies and any project that depends on government support or approval would benefit from climate-friendly practices. Public procurement practices may include environmental and green growth considerations. The government does not formally offer regulatory incentives for climate-friendly policies.

With limited domestic resources, Samoa’s government is explicit that its climate goals cannot be achieved without external financing.

Samoa ratified the UN Anticorruption Convention in 2018. It is not signatory to the OECD Convention on Combatting Bribery. Corruption has not been specifically identified as an obstacle to foreign investment. Both corruption and bribery are criminalized and prosecuted, and the laws appear to be impartially applied.

The Office of the Ombudsman is charged with investigating official corruption. There are no international, non-governmental “watchdog” organizations represented locally. Samoa was not assessed by the Transparency International’s CPI report 2021 report.

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

Ms. Luamanuvao Katalaina Sapolu
Ombudsman
Level 2, SNPF Plaza, Savalalo
P.O. BOX 3036 Apia, Samoa
(685) 25394
info@ombudsman.gov.ws

Contact at a “watchdog” organization:

UN Office on Drugs and Crime (UNDOC)
Bangkok, Thailand
+66 2 288 2100
fo.thailand@unodc.org

Samoa is a peaceful parliamentary democracy with no history of politically motivated violence or civil disturbance. The risk of civil disorder is low. There is no civil strife or insurrection. There are no significant border disputes at risk of escalating into conflict. Law and order is well maintained by the Samoa Police Service with support from the village chiefs and other traditional/church authorities if required. There are no examples of politically motivated damage to projects or installations in recent years.

Samoa experienced a measles epidemic in 2019 and the government implemented strict border closures in 2020 due to the COVID-19 pandemic. Both severely affected local business with varying degrees of cessation of economic activity. Samoa has demonstrated that it will take extreme measures to prevent loss of life, even at the expense of massive economic losses.

The 2016 Census placed the total workforce at 57,585 people, with the unemployment rate at 3.7 percent, and 36 percent of the workforce engaged in subsistence living. Although the government does not release regular unemployment figures, only about 11 percent of the population – 23,134 people – were registered as employed in the formal sector in the quarter ended December 31, 2021.

Wages and salaries are comparatively low. Private sector minimum wage is roughly USD 1.17 an hour.

Local skilled labor is available in sufficient quantities to undertake most types of building work, except for some specialized skills and supervisory-level manpower, which is recruited locally and from abroad. To hire foreign workers, one must provide MCIL and Samoan immigration with justification that the position cannot be filled locally. This process is viewed as fair and straightforward.

Samoan First Union, the country’s only private sector union, was officially launched in 2015. It is an extension of the New Zealand-based First Union. One of their major pushes was for a WST 3 (USD 1.17) minimum wage, which was achieved in 2019.

Collective bargaining in the private sector is allowed, but not common in Samoa. The Labor and Employment Relations Act 2013, the Occupational Safety and Health Regulations 2014, and the Labor and Employment Relations Regulations 2015 are the most current pieces of labor legislation, all of which meet core international standards.

Labor laws are not waived to attract new investment.

More information can be found through Samoa’s Child Labor Report

Funefe’ai Dikaiosune Atoa Tamaalii
Political-Economic Specialist
U.S. Embassy, Apia, Samoa
(+685) 21631 X2241
AtoaTamaaliiD@state.gov 

Singapore maintains a heavily trade-dependent economy characterized by an open investment regime, with some licensing restrictions in the financial services, professional services, and media sectors. The government was committed to maintaining a free market, but also actively plans Singapore’s economic development, including through a network of state wholly owned and majority-owned enterprises (SOEs). As of April, the top three Singapore-listed SOEs (DBS, Singtel, CapitaLand Investment Limited) accounted for 15.6 percent of the Singapore Exchange (SGX) capitalization. Some observers have criticized the dominant role of SOEs in the domestic economy, arguing that they have displaced or suppressed private sector entrepreneurship and investment.

Singapore’s legal framework and public policies are generally favorable toward foreign investors. Foreign investors are not required to enter joint ventures or cede management control to local interests, and local and foreign investors are subject to the same basic laws. Apart from regulatory requirements in some sectors (see also: Limits on National Treatment and Other Restrictions), eligibility for various incentive schemes depends on investment proposals meeting the criteria set by relevant government agencies. Singapore places no restrictions on reinvestment or repatriation of earnings or capital. The judicial system, which includes international arbitration and mediation centers and a commercial court, upholds the sanctity of contracts, and decisions are generally considered to be transparent and effectively enforced.

The Economic Development Board (EDB) is the lead promotion agency that facilitates foreign investment into Singapore ( https://www.edb.gov.sg ). EDB undertakes investment promotion and industry development and works with foreign and local businesses by providing information and facilitating introductions and access to government incentives for local and international investments. The government maintains close engagement with investors through EDB, which provides feedback to other government agencies to ensure that infrastructure and public services remain efficient and cost competitive. EDB maintains 18 international offices, including in Chicago, Houston, New York, San Francisco, and Washington D.C.

Exceptions to Singapore’s general openness to foreign investment exist in sectors considered critical to national security, including telecommunications, broadcasting, domestic news media, financial services, legal and accounting services, ports, airports, and property ownership. Under Singaporean law, articles of incorporation may include shareholding limits that restrict ownership in such entities by foreign persons.

Since 2000, the Singapore telecommunications market has been fully liberalized. This move has allowed foreign and domestic companies seeking to provide facilities-based (e.g., fixed line or mobile networks) or services-based (e.g., local and international calls and data services over leased networks) telecommunications services to apply for licenses to operate and deploy telecommunication systems and services. Singapore Telecommunications (Singtel) – majority owned by Temasek, a state-owned investment company with the Ministry of Finance as its sole shareholder – faces competition in all market segments. However, its main competitors, M1 and StarHub, are also SOEs. In April 2019, Australian company TPG Telecom began providing telecommunications services.  Approximately 30 mobile virtual network operator services (MVNOs) have also entered the market. The four Singapore telecommunications companies compete primarily on MVNO partnerships and voice and data plans.

As of April, Singapore had 76 facilities-based operators offering telecommunications services. Since 2007, Singtel has been exempted from dominant licensee obligations for the residential and commercial portions of the retail international telephone services. Singtel is also exempted from dominant licensee obligations for wholesale international telephone services, international managed data, international intellectual property transit, leased satellite bandwidth (including VSAT, DVB-IP, satellite TV Downlink, and Satellite IPLC), terrestrial international private leased circuit, and backhaul services. The Infocomm Media Development Authority (IMDA) granted Singtel’s exemption after assessing the market for these services had effective competition. IMDA operates as both the regulatory agency and the investment promotion agency for the country’s telecommunications sector. IMDA conducts public consultations on major policy reviews and provides decisions on policy changes to relevant companies.

To facilitate the 5th generation mobile network (5G) technology and service trials, IMDA waived frequency fees for companies interested in conducting 5G trials for equipment testing, research, and assessment of commercial potential. In April 2020, IMDA granted rights to build nationwide 5G networks to Singtel and a joint venture between StarHub and M1. In December 2021, IMDA also extended license and granted rights for TPG Telecom to build 5G networks. IMDA announced a goal of full 5G coverage by the end of 2025.  These three companies, along with TPG Telecom, are also now permitted to launch smaller, specialized 5G networks to support specialized applications, such as manufacturing and port operations.  Singapore’s government did not hold a traditional spectrum auction, instead charging a moderate, flat fee to operate the networks and evaluating proposals from the MVNOs based on their ability to provide effective coverage, meet regulatory requirements, invest significant financial resources, and address cybersecurity and network resilience concerns. The announcement emphasized the importance of the winning MVNOs using multiple vendors, to ensure security and resilience.  Singapore has committed to being one of the first countries to make 5G services broadly available, and its tightly managed 5G-rollout process continues apace, despite COVID-19.  The government views this as a necessity for a country that prides itself on innovation, even as these private firms worry that the commercial potential does not yet justify the extensive upfront investment necessary to develop new networks.

The local free-to-air broadcasting, cable, and newspaper sectors are effectively closed to foreign firms. Section 44 of the Broadcasting Act restricts foreign equity ownership of companies broadcasting in Singapore to 49 percent or less, although the act does allow for exceptions. Individuals cannot hold shares that would make up more than 5 percent of the total votes in a broadcasting company without the government’s prior approval. The Newspaper and Printing Presses Act restricts equity ownership (local or foreign) of newspaper companies to less than 5 percent per shareholder and requires that directors be Singaporean citizens. Newspaper companies must issue two classes of shares, ordinary and management, with the latter available only to Singaporean citizens or corporations approved by the government. Holders of management shares have an effective veto over selected board decisions.

Singapore regulates content across all major media outlets through IMDA. The government controls the distribution, importation, and sale of media sources and has curtailed or banned the circulation of some foreign publications. Singapore’s leaders have also brought defamation suits against foreign publishers and local government critics, which have resulted in the foreign publishers issuing apologies and paying damages. Several dozen publications remain prohibited under the Undesirable Publications Act, which restricts the import, sale, and circulation of publications that the government considers contrary to public interest. Examples include pornographic magazines, publications by banned religious groups, and publications containing extremist religious views. Following a routine review in 2015, IMDA’s predecessor, the Media Development Authority, lifted a ban on 240 publications, ranging from decades-old anti-colonial and communist material to adult interest content.

Singaporeans generally face few restrictions on the internet, which is readily accessible. The government, however, subjected all internet content to similar rules and standards as traditional media, as defined by the IMDA’s Internet Code of Practice. Internet service providers are required to ensure that content complies with the code. The IMDA licenses the internet service providers through which local users are required to route their internet connections. However, the IMDA has blocked various websites containing objectionable material, such as pornography and racist and religious-hatred sites. Online news websites that report regularly on Singapore and have a significant reach are individually licensed, which requires adherence to requirements to remove prohibited content within 24 hours of notification from IMDA. Some view this regulation as a way to censor online critics of the government, and in September 2021 IMDA suspended the license of alternative news website The Online Citizen with immediate effect for allegedly failing to declare its sources of funding.

In April 2019, the government introduced legislation in parliament to counter “deliberate online falsehoods.” The legislation, called the Protection from Online Falsehoods and Manipulation Act (POFMA) entered into force on October 2, 2019, requires online platforms to publish correction notifications or remove online information that government ministers classify as factually false or misleading, and which they deem likely to threaten national security, diminish public confidence in the government, incite feelings of ill will between people, or influence an election. Non-compliance is punishable by fines and/or imprisonment and the government can use stricter measures such as disabling access to end-users in Singapore and forcing online platforms to disallow persons in question from using its services in Singapore. Opposition politicians, bloggers, alternative news websites, and as of recent posts about COVID-19 have been the target of the majority of POFMA cases thus far and many of them used U.S. social media platforms. Besides those individuals, U.S. social media companies were issued most POFMA correction orders and complied with them. U.S. media and social media sites continue to operate in Singapore, but a few major players have ceased running political ads after the government announced that it would impose penalties on sites or individuals that spread “misinformation,” as determined by the government.  On January 31, 2020, the Singaporean government temporary lifted the exemption of social media platforms, search engines and Internet intermediaries from complying with POFMA, with the goal of combatting false information on the evolving COVID-19 situation.

In September, the Ministry of Home Affairs introduced the Foreign Interference (Countermeasures) Act (FICA) to strengthen the country’s ability to “prevent, detect, and disrupt foreign interference” in domestic politics conducted through hostile information campaigns and the use of local proxies. The bill was passed in October 2021 and expanded the government’s powers and tools to control “foreign influence,” but has yet to take effect. Under FICA, the minister for home affairs could compel internet and social media service providers to disclose information, remove online content, block user accounts, and take “countermeasures” against “politically significant persons” who are or are suspected of working on behalf of or receiving funding from “foreign political organizations” and “foreign principals.” While the government provided assurances that “legitimate business activities” would not be targeted by the legislation, opposition parties, foreign businesses, and civil society groups expressed concerns about the law’s expansion of executive powers and potential impacts on the rights to freedom of expression, association, participation in public affairs, and privacy.

Mediacorp TV is the only free-to-air TV broadcaster and is 100 percent owned by the government via Temasek Holdings (Temasek). Mediacorp reported that its free-to-air channels are viewed weekly by 80 percent of residents. Local pay-TV providers are StarHub and Singtel, which are both partially owned by Temasek or its subsidiaries. Local free-to-air radio broadcasters are Mediacorp Radio Singapore (owned by Temasek Holdings), SPH Radio (owned by SPH Media Limited), and So Drama! Entertainment (owned by the Ministry of Defense). BBC World Services is the only foreign free-to-air radio broadcaster in Singapore.

To rectify the high degree of content fragmentation in the Singaporean pay-TV market and shift the focus of competition from an exclusivity-centric strategy to other aspects such as service differentiation and competitive packaging, the IMDA implemented cross-carriage measures in 2011, requiring pay-TV companies designated by IMDA to be Receiving Qualified Licensees (RQL) – currently Singtel and StarHub – to cross-carry content subject to exclusive carriage provisions. Correspondingly, Supplying Qualified Licensees (SQLs) with an exclusive contract for a channel are required to carry that content on other RQL pay-TV companies. In February 2019, the IMDA proposed to continue the current cross-carriage measures. The Motion Picture Association (MPA) has expressed concern this measure restricts copyright exclusivity. Content providers consider the measures an unnecessary interference in a competitive market that denies content holders the ability to negotiate freely in the marketplace, and an interference with their ability to manage and protect their intellectual property. More common content is now available across the different pay-TV platforms, and the operators are beginning to differentiate themselves by originating their own content, offering subscribed content online via personal and tablet computers, and delivering content via fiber networks.

Streaming services have entered the market, which MPA has found leads to a significant reduction in intellectual property infringements.  StarHub and Singtel have both partnered with multiple content providers, including U.S. companies, to provide streaming content in Singapore and around the region.

The Monetary Authority of Singapore (MAS) regulates all banking activities as provided for under the Banking Act. Singapore maintains legal distinctions between foreign and local banks and the type of license (i.e., full service, wholesale, and offshore banks) held by foreign commercial banks. As of April, 30 foreign full-service licensees and 97 wholesale banks operated in Singapore. An additional 21 merchant banks were licensed to conduct corporate finance, investment banking, and other fee-based activities. Offshore and wholesale banks are not allowed to operate Singapore dollar retail banking activities. Only full banks and “Qualifying Full Banks” (QFBs) can operate Singapore dollar retail banking activities but are subject to restrictions on their number of places of business, ATMs, and ATM networks. Additional QFB licenses may be granted to a subset of full banks, which provide greater branching privileges and greater access to the retail market than other full banks. As of April, there were 10 banks operating QFB licenses. China Construction Bank received the most recent QFB award in December 2020.

Following a series of public consultations conducted by MAS over a three-year period, the Banking Act 2020 came into operation on February 14, 2020. The amendments include, among other things, the removal of the Domestic Banking Unit (DBU) and Asian Currency Unit (ACU) divide, consolidation of the regulatory framework of merchant banks, expansion of the grounds for revoking bank licenses and strengthening oversight of banks’ outsourcing arrangements. Newly granted digital banking licenses under foreign ownership apply only to wholesale transactions.

The government initiated a banking liberalization program in 1999 to ease restrictions on foreign banks and has supplemented this with phased-in provisions under the USSFTA, including removal of a 40 percent ceiling on foreign ownership of local banks and a 20 percent aggregate foreign shareholding limit on finance companies. The minister in charge of MAS must approve the merger or takeover of a local bank or financial holding company, as well as the acquisition of voting shares in such institutions above specific thresholds of 5, 12, or 20 percent of shareholdings.

Although Singapore’s government has lifted the formal ceilings on foreign ownership of local banks and finance companies, the approval for controllers of local banks ensures that this control rests with individuals or groups whose interests are aligned with the long-term interests of the Singapore economy and Singapore’s national interests. Of the 30 full-service licenses granted to foreign banks, three have gone to U.S. banks (Bank of America, Citibank, JP Morgan Chase Bank). U.S. financial institutions enjoy phased-in benefits under the USSFTA. Since 2006, only one U.S.-licensed full-service banks has obtained QFB status (Citibank). U.S. and foreign full-service banks with QFB status can freely relocate existing branches and share ATMs among themselves. They can also provide electronic funds transfer and point-of-sale debit services and accept services related to Singapore’s compulsory pension fund. In 2007, Singapore lifted the quota on new licenses for U.S. wholesale banks.

Locally and non-locally incorporated subsidiaries of U.S. full-service banks with QFB status can apply for access to local ATM networks. However, no U.S. bank has come to a commercial agreement to gain such access. Despite liberalization, U.S. and other foreign banks in the domestic retail-banking sector still face barriers. Under the enhanced QFB program launched in 2012, MAS requires QFBs it deems systemically significant to incorporate locally. If those locally incorporated entities are deemed “significantly rooted” in Singapore, with a majority of Singaporean or permanent resident members, Singapore may grant approval for an additional 25 places of business, of which up to ten may be branches. Local retail banks do not face similar constraints on customer service locations or access to the local ATM network. As noted above, U.S. banks are not subject to quotas on service locations under the terms of the USSFTA.

Credit card holders from U.S. banks incorporated in Singapore cannot access their accounts through the local ATM networks. They are also unable to access their accounts for cash withdrawals, transfers, or bill payments at ATMs operated by banks other than those operated by their own bank or at foreign banks’ shared ATM network. Nevertheless, full-service foreign banks have made significant inroads in other retail banking areas, with substantial market share in products like credit cards and personal and housing loans.

In January 2019, MAS announced the passage of the Payment Services Bill after soliciting public feedback. The bill requires more payment services such as digital payment tokens, dealing in virtual currency, and merchant acquisition, to be licensed and regulated by MAS. In order to reduce the risk of misuse for illicit purposes, the new law also limits the amount of funds that can be held in or transferred out of a personal payment account (e.g., mobile wallets) in a year. Regulations are tailored to the type of activity performed and addresses issues related to terrorism financing, money laundering, and cyber risks. In December 2020, MAS granted four digital bank licenses: two to Sea Limited and a Grab/Singtel consortium for full retail banking and two to Ant Group and the Greenland consortium (a China-based conglomerate).

Singapore has no trading restrictions on foreign-owned stockbrokers. There is no cap on the aggregate investment by foreigners regarding the paid-up capital of dealers that are members of the SGX. Direct registration of foreign mutual funds is allowed provided MAS approves the prospectus and the fund. The USSFTA relaxed conditions foreign asset managers must meet in order to offer products under the government-managed compulsory pension fund (Central Provident Fund Investment Scheme).

The Legal Services Regulatory Authority (LSRA) under the Ministry of Law oversees the regulation, licensing, and compliance of all law practice entities and the registration of foreign lawyers in Singapore. Foreign law firms with a licensed Foreign Law Practice (FLP) may offer the full range of legal services in foreign law and international law, but cannot practice Singapore law except in the context of international commercial arbitration. U.S. and foreign attorneys are allowed to represent parties in arbitration without the need for a Singaporean attorney to be present. To offer Singapore law, FLPs require either a Qualifying Foreign Law Practice (QFLP) license, a Joint Law Venture (JLV) with a Singapore Law Practice (SLP), or a Formal Law Alliance (FLA) with a SLP. The vast majority of Singapore’s 130 foreign law firms operate FLPs, while QFLPs and JLVs each number in the single digits.

The QFLP licenses allow foreign law firms to practice in permitted areas of Singapore law, which excludes constitutional and administrative law, conveyancing, criminal law, family law, succession law, and trust law. As of December 2020, there are nine QFLPs in Singapore, including five U.S. firms. In January 2019, the Ministry of Law announced the deferral to 2020 of the decision to renew the licenses of five QFLPs, which were set to expire in 2019, so the government can better assess their contribution to Singapore along with the other four firms whose licenses were also extended to 2020. Decisions on the renewal considers the firms’ quantitative and qualitative performance, such as the value of work that the Singapore office will generate, the extent to which the Singapore office will function as the firm’s headquarter for the region, the firm’s contributions to Singapore, and the firm’s proposal for the new license period.

A JLV is a collaboration between a FLP and SLP, which may be constituted as a partnership or company. The director of legal services in the LSRA will consider all the relevant circumstances including the proposed structure and its overall suitability to achieve the objectives for which JLVs are permitted to be established. There is no clear indication on the percentage of shares that each JLV partner may hold in the JLV.

Law degrees from designated U.S., British, Australian, and New Zealand universities are recognized for purposes of admission to practice law in Singapore. Under the USSFTA, Singapore recognizes law degrees from Harvard University, Columbia University, New York University, and the University of Michigan. Singapore will admit to the Singapore Bar law school graduates of those designated universities who are Singapore citizens or permanent residents, and ranked among the top 70 percent of their graduating class or have obtained lower-second class honors (under the British system).

Engineering and architectural firms can be 100 percent foreign owned. Engineers and architects are required to register with the Professional Engineers Board and the Board of Architects, respectively, to practice in Singapore. All applicants (both local and foreign) must have at least four years of practical experience in engineering, of which two are acquired in Singapore. Alternatively, students can attend two years of practical training in architectural works and pass written and/or oral examinations set by the respective board.

Many major international accounting firms operate in Singapore. Registration as a public accountant under the Accountants Act is required to provide public accountancy services (i.e., the audit and reporting on financial statements and other acts that are required by any written law to be done by a public accountant) in Singapore, although registration as a public accountant is not required to provide other accountancy services, such as bookkeeping, accounting, taxation, and corporate advisory work. All accounting entities that provide public accountancy services must be approved under the Accountants Act and their supply of public accountancy services in Singapore must be under the control and management of partners or directors who are public accountants ordinarily resident in Singapore. In addition, if the accounting entity firm has two partners or directors, at least one of them must be a public accountant. If the business entity has more than two accounting partners or directors, two-thirds of the partners or directors must be public accountants.

Singapore further liberalized its gas market with the amendment of the Gas Act and implementation of a Gas Network Code in 2008, which were designed to give gas retailers and importers direct access to the onshore gas pipeline infrastructure. However, key parts of the local gas market, such as town gas retailing and gas transportation through pipelines remain controlled by incumbent Singaporean firms. Singapore has sought to grow its supply of liquefied natural gas (LNG), and BG Singapore Gas Marketing Pte Ltd (acquired by Royal Dutch Shell in February 2016) was appointed in 2008 as the first aggregator with an exclusive franchise to import LNG to be sold in its re-gasified form in Singapore. In October 2017, Shell Eastern Trading Pte Ltd and Pavilion Gase Pte Ltd were awarded import licenses to market up to 1 million tons per annum or for three years, whichever occurs first. This also marked the conclusion of the first exclusive franchise awarded to BG Singapore Gas Marketing Pte Ltd.

Beginning in November 2018 and concluding in May 2019, Singapore launched an open electricity market (OEM). Previously, Singapore Power was the only electricity retailer. As of October 2019, 40 percent of resident consumers had switched to a new electricity retailer and were saving between 20 and 30 percent on their monthly bills.  During the second half of 2020, the government significantly reduced tariffs for household consumption and encouraged consumer OEM adoption. To participate in OEM, licensed retailers must satisfy additional credit, technical, and financial requirements set by Energy Market Authority in order to sell electricity to households and small businesses. There are two types of electricity retailers: Market Participant Retailers (MPRs) and Non-Market Participant Retailers (NMPRs). MPRs have to be registered with the Energy Market Company (EMC) to purchase electricity from the National Electricity Market of Singapore (NEMS) to sell to contestable consumers. NMPRs need not register with EMC to participate in the NEMS since they will purchase electricity indirectly from the NEMS through the Market Support Services Licensee (MSSL). As of April 2020, there were 12 retailers in the market, including foreign and local entities.   In 2021, a number of the electricity retailers withdrew from selling electricity due to high natural gas prices globally, resulting in unfavorable market conditions.

Foreign and local entities may readily establish, operate, and dispose of their own enterprises in Singapore subject to certain requirements. A foreigner who wants to incorporate a company in Singapore is required to appoint a local resident director; foreigners may continue to reside outside of Singapore. Foreigners who wish to incorporate a company and be present in Singapore to manage its operations are strongly advised to seek approval from the Ministry of Manpower (MOM) before incorporation. Except for representative offices (where foreign firms maintain a local representative but do not conduct commercial transactions in Singapore) there are no restrictions on carrying out remunerative activities. As of October 2017, foreign companies may seek to transfer their place of registration and be registered as companies limited by shares in Singapore under Part XA (Transfer of Registration) of the Companies Act ( https://sso.agc.gov.sg/Act/CoA1967 ). Such transferred foreign companies are subject to the same requirements as locally incorporated companies.

All businesses in Singapore must be registered with the Accounting and Corporate Regulatory Authority (ACRA). Foreign investors can operate their businesses in one of the following forms: sole proprietorship, partnership, limited partnership, limited liability partnership, incorporated company, foreign company branch or representative office. Stricter disclosure requirements were passed in March 2017 requiring foreign company branches registered in Singapore to maintain public registers of their members. All companies incorporated in Singapore, foreign companies, and limited liability partnerships registered in Singapore are also required to maintain beneficial ownership in the form of a register of controllers (generally individuals or legal entities with more than 25 percent interest or control of the companies and foreign companies) aimed at preventing money laundering.

While there is currently no cross-sectional screening process for foreign investments, investors are required to seek approval from specific sector regulators for investments in certain firms. These sectors include energy, telecommunications, broadcasting, the domestic news media, financial services, legal services, public accounting services, ports and airports, and property ownership. Under Singapore law, Articles of Incorporation may include shareholding limits that restrict ownership in corporations by foreign persons.

Singapore does not maintain a formalized investment screening mechanism for inbound foreign investment. There are no reports of U.S. investors being especially disadvantaged or singled out relative to other foreign investors.

Singapore underwent a trade policy review with the World Trade Organization (WTO) in July 2016, after which no major policy recommendations were raised. ( https://www.wto.org/english/thewto_e/countries_e/singapore_e.htm )

The OECD and UN Industrial Development Organization (UNIDO) released a joint report in February 2019 on the ASEAN-OECD Investment Program. The program aims to foster dialogue and experience sharing between OECD countries and Southeast Asian economies on issues relating to the business and investment climate. The program is implemented through regional policy dialogue, country investment policy reviews, and training seminars. ( http://www.oecd.org/investment/countryreviews.htm )

The OECD released a Transfer Pricing Country Profile for Singapore in February. The profiles focus on countries’ domestic legislation regarding key transfer pricing principles, including the arm’s length principle, transfer pricing methods, comparability analysis, intangible property, intra-group services, cost contribution agreements, transfer pricing documentation, administrative approaches to avoiding and resolving disputes, safe harbors, and other implementation measures. ( https://www.oecd.org/tax/transfer-pricing/transfer-pricing-country-profile-singapore.pdf )

The OECD released a peer review report in March 2018 on Singapore’s implementation of internationally agreed tax standards under Action Plan 14 of the base erosion and profit shifting (BEPS) project. Action 14 strengthens the effectiveness and efficiency of the mutual agreement procedure, a cross-border tax