Policies Towards Foreign Direct Investment

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

The urgency for Algeria to diversify its economy away from reliance on hydrocarbons has increased amid low and fluctuating oil prices since mid-2014, a youth population bulge, and increased domestic consumption of energy resources. The government reiterated its intention to diversify in its August 2020 plan to recover from the COVID-19 crisis. The government has sought to reduce the country’s persistent trade deficit through import substitution policies, currency depreciation, and import tariffs as it attempts to preserve rapidly diminishing foreign exchange reserves. On January 29, 2019, the government implemented tariffs between 30-200 percent on over one-thousand goods it assessed were destined for direct sale to consumers. Companies that set up local manufacturing operations can receive permission to import materials the government would not otherwise approve for import if the importer can show materials will be used in local production. Certain regulations explicitly favor local firms at the expense of foreign competitors, most prominently in the pharmaceutical sector, where an import ban the government implemented in 2009 remains in place on more than 360 medicines and medical devices. Frequent, unpredictable changes to business regulations have added to the uncertainty in the market.

Algeria eliminated state enterprises’ “right of first refusal” on most transfers of foreign holdings to foreign shareholders, with the exception of identified “strategic” sectors. Though the 2020 Complementary Finance Law eliminated the 51/49 domestic ownership requirement with the exception of “strategic sectors,” the 2021 Finance Law restored the requirement for importers of products for domestic resale, and regulations governing the auto industry released in September 2020 required automobile importers to be wholly domestically owned.

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

ANDI is the primary Algerian government agency tasked with recruiting and retaining foreign investment. ANDI runs branches in Algeria’s 58 states (wilayas) which are tasked with facilitating business registration, tax payments, and other administrative procedures for both domestic and foreign investors. U.S. companies report that the agency is understaffed and ineffective. Its “one-stop shops” only operate out of physical offices and do not maintain dialogue with investors after they have initiated an investment. The agency’s effectiveness is undercut by its lack of decision-making authority, particularly for industrial projects, which is exercised by the Ministry of Industry, the Minister of Industry themself, and in many cases the Prime Minister.

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

Limits on Foreign Control and Right to Private Ownership and Establishment

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

Foreign and domestic private entities have the right to establish and own business enterprises and engage in all forms of remunerative activity. However, the 51/49 rule requires majority Algerian ownership in all projects involving foreign investments in the “strategic sectors” of energy, mining, defense, transportation infrastructure, and pharmaceuticals (with the exception of innovative products), as well as for importers of goods for resale in Algeria.

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

Algerian government officials defended the 51/49 requirement as necessary to prevent capital flight, protect Algerian businesses, and provide foreign businesses with local expertise. For sectors where the requirement remains, officials contend a range of tailored measures can mitigate the effect of the 51/49 rule and allow the minority foreign shareholder to exercise other means of control. Some foreign investors use multiple local partners in the same venture, effectively reducing ownership of each individual local partner to enable the foreign partner to own the largest share.

The Algerian government does not officially screen FDI, though Algerian state enterprises have a “right of first refusal” on transfers of foreign holdings to foreign shareholders in identified strategic industries. Companies must notify the Council for State Participation (CPE) of these transfers. In addition, initial foreign investments remain subject to approvals from a host of ministries that cover the proposed project, most often the Ministries of Commerce, Health, Pharmaceutical Industry, Energy, Telecommunications and Post, Industry, and Mines. U.S. companies have reported that certain high-profile industrial proposals, such as for automotive assembly, are subject to informal approval by the Prime Minister. In 2017, the government instituted an Investments Review Council chaired by the Prime Minister for the purpose of “following up” on investments; in practice, the establishment of the council means FDI proposals are subject to additional government scrutiny. According to the 2016 Investment Law, projects registered through the ANDI deemed to have special interest for the national economy or high employment generating potential may be eligible for extensive investment advantages. For any project over 5 billion dinars (approximately USD 38 million) to benefit from these advantages, it must be approved by the Prime Minister-chaired National Investments Council (CNI). The CNI previously met regularly, though it is not clear how the agenda of projects considered at each meeting is determined. Critics allege the CNI is a non-transparent mechanism which could be subject to capture by vested interests. In 2020 the operations of the CNI and the CPE were temporarily suspended pending review by the former Ministry of Industry, but a final decision as to their status has not been made.

Other Investment Policy Reviews

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

Business Facilitation

Algeria’s online information portal dedicated to business creation www.jecreemonentreprise.dz and the business registration website www.cnrc.org.dz are under maintenance and have been so for more than a year. The Ministry of Commerce is currently developing a new electronic portal at https://cnrcinfo.cnrc.dz/qui-somme-nous/ . The websites provide information about several business registration steps applicable for registering certain kinds of businesses. Entrepreneurs report that additional information about requirements or regulation updates for business registration are available only in person at the various offices involved in the creation and registration process. The Ministry of Foreign Affairs also recently established an Information Bureau for the Promotion of Investments and Exports (BIPIE) to support Algerian diplomats working on economic issues abroad, as well as provide local points of contact for Algerian companies operating overseas.

In the World Bank’s 2020 Doing Business report, Algeria’s ranking for starting a business was unchanged at 157 out of 190 countries ( http://www.doingbusiness.org/en/data/exploreeconomies/algeria ).

This year’s improvements were modest and concerned only three of the ten indicator categories. The World Bank report lists 12 procedures that cumulatively take an average of 18 days to complete to register a new business. New business owners seeking to establish their enterprises have sometimes reported the process takes longer, noting that the most updated version of regulations and required forms are only available in person at multiple offices, therefore requiring multiple visits.

Outward Investment

Algeria does not restrict domestic investors from investing overseas, provided they can access foreign currency for such investments. The exchange of Algerian dinars outside of Algerian territory is illegal, as is the carrying abroad of more than 10,000 dinars in cash at a time (approximately USD 76; see section 7 for more details on currency exchange restrictions).

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

Transparency of the Regulatory System

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

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

There is no mechanism for public comment on draft laws, regulations, or regulatory procedures. Copies of draft laws are generally not made publicly accessible before enactment, although the Ministry of Finance published a draft of the 2021 Finance Law in October before its consideration by Parliament. Government officials often give testimony to Parliament on draft legislation, and that testimony typically receives press coverage. Occasionally, copies of bills are leaked to the media. All laws and some regulations are published in the Official Gazette (www.joradp.dz ) in Arabic and French, but the database has only limited online search features and no summaries are published. Secondary legislation and/or administrative acts (known as “circulaires” or “directives”) often provide important details on how to implement laws and procedures. Administrative acts are generally written at the ministry level and not made public, though may be available if requested in person at a particular agency or ministry. Public tenders are often accompanied by a book of specifications only provided upon payment.

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

The National Economic, Social, and Environmental Council (CNESE) studies the effects of Algerian government policies and regulations in economic, social, and environmental spheres. CNESE provides feedback on proposed legislation, but neither the feedback nor legislation are necessarily made public.

Information on external debt obligations up to fiscal year 2019 is publicly available online via the Central Bank’s quarterly statistical bulletin. The statistical bulletin describes external debt and not public debt, but the Ministry of Finance’s budget execution summaries reflect amalgamated debt totals. The Ministry of Finance is planning to create an electronic, consolidated database of internal and external debt information, and in 2019 published additional public debt information on its website. A 2017 amendment to the 2003 law on currency and credit covering non-conventional financing authorizes the Central Bank to purchase bonds directly from the Treasury for a period of up to five years. The Ministry of Finance indicated this would include purchasing debt from state enterprises, allowing the Central Bank to transfer money to the treasury, which would then provide the cash to, for example, state owned enterprises in exchange for their debt. In September 2019, the Prime Minister announced Algeria would no longer use non-conventional financing, although the Ministry of Finance stressed the program remains available until 2022.

International Regulatory Considerations

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

Legal System and Judicial Independence

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

Laws and Regulations on Foreign Direct Investment

The 51/49 investment rule requires a majority Algerian ownership in “strategic sectors” as prescribed in the 2020 Complementary Finance Law (see section 2). There are few other laws restricting foreign investment. In practice, the many regulatory and bureaucratic requirements for business operations provide officials avenues to informally advance political or protectionist policies. The investment law enacted in 2016 charged ANDI with creating four new branches to assist with business establishment and the management of investment incentives. ANDI’s website (www.andi.dz/index.php/en/investir-en-algerie ) lists the relevant laws, rules, procedures, and reporting requirements for investors. Much of the information lacks detail – particularly for the new incentives elaborated in the 2016 investments law – and refers prospective investors to ANDI’s physical “one-stop shops” located throughout the country. The website has been nonfunctional for several months.

There is an ongoing effort by the customs service, under the Ministry of Finance, to establish a new digital platform featuring one-stop shops for importers and exports to streamline bureaucratic processes. The Ministry expects the service to begin in 2021.

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

Expropriation and Compensation

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

Dispute Settlement

ICSID Convention and New York Convention

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

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

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

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

International Commercial Arbitration and Foreign Courts

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

Local courts recognize and have the authority to enforce foreign arbitral awards. Nearly all contracts between foreign and Algerian partners include clauses for international arbitration.

The Ministry of Justice oversees enforcement of arbitral awards against SOEs. Alternative dispute resolution mechanisms are not widely used.

Bankruptcy Regulations

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

Since the resignation of former President Abdelaziz Bouteflika in early 2019, the courts have given the government authority to put several companies in receivership and have appointed temporary heads to direct them following the arrests of their CEOs as part of a broad anti-corruption drive. The status and viability of several of those companies is unclear.

Investment Incentives

While the government previously required 51 percent Algerian ownership of all investments, the 2020 budget law restricted this requirement to the energy, mining, defense, transportation infrastructure, and pharmaceuticals manufacturing sectors, and the 2021 budget law extended the requirement to importers of goods for resale in Algeria.

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

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

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

The government does not issue guarantees for private investments, or jointly financed foreign direct investment projects. In practice, however, the government is disinclined to allow companies that employ significant numbers of Algerians – whether private or public – to fail and may take on fiscal responsibilities to ensure continued employment for workers. President Tebboune’s administration also indicated more flexibility in considering alternative financing methods for future projects, which might include joint financing.

Foreign Trade Zones/Free Ports/Trade Facilitation

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

Performance and Data Localization Requirements

The Algerian government does not officially mandate local employment, but companies usually must provide extensive justification to various levels of the government as to why an expatriate worker is needed. Any person or legal entity employing a foreign citizen is required to notify the Ministry of Labor. Some businesses have reported instances of the government pressuring foreign companies operating in Algeria, particularly in the hydrocarbons sector, to limit the number of expatriate middle and senior managers so that Algerians can be hired for these positions. Contacts at multinational companies have alleged this pressure is applied via visa applications for expatriate workers. U.S. companies in the hydrocarbons industry have reported that, when granted, expatriate work permits are usually valid for no longer than six months and are delivered up to three months late, requiring firms to apply perpetually for renewals. Government-imposed restrictions on routine international travel since March 2020 in response to COVID-19 have caused difficulties for foreign companies attempting to rotate their expatriate staff into and out of Algeria.

In 2017, the Algerian government began instituting forced localization in the auto sector. New regulations governing the sector issued in September 2020 require companies producing or assembling cars in the country to achieve a local integration rate of at least 30 percent within the first year of operation, rising to 50 percent by the company’s fifth year of operation. Since 2014, the government has required car dealers to invest in industrial or “semi-industrial” activities as a condition for doing business in Algeria. Dealers seeking to import new vehicles must obtain an import license from the Ministry of Commerce. Since January 2017, the Ministry has not issued any licenses, and the process of assigning new import quotas to qualified importers under the new 2020 specifications are on hold pending review by the new Minister of Industry. As the Algerian government further restricts imports, localization requirements are expected to broaden to other manufacturing industries over the next several years. For example, a tender launched in 2018 for 150 megawatts of photovoltaic solar energy power plants mandated that bidders be Algerian legal entities, and specifications released in 2020 governing consumer appliance manufacturing mandate local content thresholds.

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

Real Property

Secured interests in property are generally recognized and enforceable, but court proceedings can be lengthy and results unpredictable. All property not clearly titled to private owners remains under government ownership. As a result, the government controls most real property in Algeria, and instances of unclear titling have resulted in conflicting claims of ownership, which has made purchasing and financing real estate difficult. Several business contacts have reported significant difficulty in obtaining land from the government to develop new industrial activities; the state prefers to lease land for 33-year terms, renewable twice, rather than sell outright. The procedures and criteria for awarding land contracts are opaque.

Property sales are subject to registration at the tax inspection and publication office at the Mortgage Register Center and are part of the public record of that agency. All property contracts must go through a notary.

According to the World Bank Doing Business report, Algeria ranks 165 out of 190 countries for ease of registering property.

Intellectual Property Rights

Patent and trademark protection in Algeria remains covered by a series of ordinances dating from 2003 and 2005, and representatives of U.S. companies operating in Algeria reported that these laws were satisfactory in terms of both the scope of what they cover and the penalties they mandate for violations. A 2015 government decree increased coordination between the National Office of Copyrights and Related Rights (ONDA), the National Institute for Industrial Property (INAPI), and law enforcement to pursue patent and trademark infringements. An Algerian court ruled in favor of a U.S. pharmaceutical company in late 2020 in the first case of alleged patent infringement by a local producer pursued in the courts by a U.S. company.

ONDA, under the Ministry of Culture, and INAPI, under the Ministry of Industry, are the two entities within the Algerian government that protect IPR. ONDA covers literary and artistic copyrights as well as digital software rights, while INAPI oversees the registration and protection of industrial trademarks and patents. Despite strengthened efforts at ONDA, INAPI, and the General Directorate for Customs (under the Ministry of Finance), which have seen local production of pirated or counterfeit goods nearly disappear since 2011, imported counterfeit goods are prevalent and easily obtained. Algerian law enforcement agencies annually confiscate hundreds of thousands of counterfeit items, including clothing, cosmetics, sports items, foodstuffs, automotive spare parts, and home appliances. Software firms estimate that more than 85 percent of the software used in Algeria, and a similar percentage of titles used by government institutions and state-owned companies, is not licensed.

Algeria moved from the Priority Watch List to the Watch List of USTR’s Special 301 Report ( https://ustr.gov/issue-areas/intellectual-property/Special-301 ) in 2021.

Resources for Intellectual Property Rights Holders:

Peter Mehravari

Patent Attorney

Intellectual Property Attaché for the Middle East & North Africa

U.S. Embassy Abu Dhabi | U.S. Department of Commerce U.S. Patent & Trademark Office

Tel: +965 2259 1455 Peter.Mehravari@trade.gov 

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

Capital Markets and Portfolio Investment

The Algiers Stock Exchange has five stocks listed – each at no more than 35 percent equity. There is a small and medium enterprise exchange with one listed company. The exchange has a total market capitalization representing less than 0.1 percent of Algeria’s GDP. Daily trading volume on the exchange averages around USD 2,000. Despite its small size, the market is regulated by an independent oversight commission that enforces compliance requirements on listed companies and traders.

Government officials have expressed their desire to reach a capitalization of USD 7.8 billion and enlist up to 50 new companies. Attempts to list additional companies have been stymied by a lack both of public awareness and appetite for portfolio investment, as well as by private and public companies’ unpreparedness to satisfy due diligence requirements that would attract investors. Proposed privatizations of state-owned companies have also been opposed by the public. Algerian society generally prefers material investment vehicles for savings, namely cash. Public banks, which dominate the banking sector (see below), are required to purchase government securities when offered, meaning they have little leftover liquidity to make other investments. Foreign portfolio investment is prohibited – the purchase of any investment product in Algeria, whether a government or corporate bond or equity stock, is limited to Algerian residents only.

Money and Banking System

The banking sector is roughly 85 percent public and 15 percent private as measured by value of assets held and is regulated by an independent central bank. Publicly available data from private institutions and U.S. Federal Reserve Economic Data show estimated total assets in the commercial banking sector in 2017 were roughly 13.9 trillion dinars (USD 116.7 billion) against 9.2 trillion dinars (USD 77.2 billion) in liabilities. The central bank had mandated a 12 percent reserve requirement until mid-2016, when in response to a drop in liquidity the bank lowered the threshold to eight percent. In August 2017, the ratio was further reduced to 4 percent in an effort to inject further liquidity into the banking system. The decrease in liquidity was a result of all public banks buying government bonds in the first public bond issuance in more than 10 years; buying at least five percent of the offered bonds is required for banks to participate as primary dealers in the government securities market. The bond issuance essentially returned funds to the state that it had deposited at local banks during years of high hydrocarbons profits. In January 2018, the bank increased the retention ratio from 4 percent to 8 percent, followed by a further increase in February 2019 to a 12 percent ratio in anticipation of a rise in bank liquidity due to the government’s non-conventional financing policy, which allows the Treasury to borrow directly from the central bank to pay state debts. In response to liquidity concerns caused by the oil price decline and COVID-19 crisis, the bank progressively decreased the reserve requirement from 12 percent to 3 percent between March and September 2020.

The IMF and Bank of Algeria have noted moderate growth in non-performing assets since 2015, currently estimated between 12 and 13 percent of total assets. The quality of service in public banks is generally considered low as generations of public banking executives and workers trained to operate in a statist economy lack familiarity with modern banking practices. Most transactions are materialized (non-electronic). Many areas of the country suffer from a dearth of branches, leaving large amounts of the population without access to banking services. ATMs are not widespread, especially outside the major cities, and few accept foreign bankcards. Outside of major hotels with international clientele, hardly any retail establishments accept credit cards. Algerian banks do issue debit cards, but the system is distinct from any international payment system. The Minister of Commerce announced a plan to require businesses to use electronic payments for all commercial and service transactions, though a government deadline for all stores to deploy electronic payment terminals was delayed for the third time to the end of 2021. In addition, approximately 6.1 trillion dinars (USD 46 billion), or one-third, of the money supply is estimated to circulate in the informal economy.

Foreigners can open foreign currency accounts without restriction, but proof of a work permit or residency is required to open an account in Algerian dinars. Foreign banks are permitted to establish operations in the country, but they must be legally distinct entities from their overseas home offices.

In 2015, the Financial Action Task Force (FATF) removed Algeria from its Public Statement, and in 2016 it removed Algeria from the “gray list.” The FATF recognized Algeria’s significant progress and the improvement in its anti-money laundering/counter terrorist financing (AML/CFT) regime. The FATF also indicated Algeria has substantially addressed its action plan since strategic deficiencies were identified in 2011.

Foreign Exchange and Remittances

Foreign Exchange

There are few statutory restrictions on foreign investors converting, transferring, or repatriating funds, according to banking executives. Monies cannot be expatriated to pay royalties or to pay for services provided by resident foreign companies. The difficultly with conversions and transfers results mostly from the procedures of the transfers rather than the statutory limitations: the process is bureaucratic and requires almost 30 different steps from start to finish. Missteps at any stage can slow down or completely halt the process. Transfers should take roughly one month to complete, but often take three to six months. Also, the Algerian government has been known to delay the process as leverage in commercial and financial disputes with foreign companies.

Expatriated funds can be converted to any world currency. The IMF classifies the exchange rate regime as an “other managed arrangement,” with the central bank pegging the value of the Algerian dinar (DZD) to a “basket” composed of 64 percent of the value of the U.S. dollar and 36 percent of the value of the euro. The currency’s value is not controlled by any market mechanism and is set solely by the central bank. As the Central Bank controls the official exchange rate of the dinar, any change in its value could be considered currency manipulation. When dollar-denominated hydrocarbons profits fell starting in mid-2014, the central bank allowed a slow depreciation of the dinar against the dollar over 24 months, culminating in about a 30 percent fall in its value before stabilizing around 110 dinars to the U.S. dollar in late 2016. The 2020 Finance Law forecast a 10 percent depreciation of the dinar against the dollar over three years. However, the government allowed the dinar to depreciate eleven percent against the dollar in 2020 and has forecasted an 18 percent depreciation through 2023 in the 2021 Finance Law. Despite devaluation in the official rate, imbalances in foreign exchange supply and demand caused by the COVID-19 outbreak and travel restrictions beginning in March 2020 led to a steep decline in the value of the euro and dollar on the foreign exchange black market.

The 2021 Finance Law includes provisions to curb import activity, requiring importers of most products to make payment 30 days after the date of shipment of goods, with exceptions for strategic products, food items, or other items of “emergency character.”  As importers are required to request import approvals well in advance of the shipment of the goods, the new measure exposes importers to significant exchange rate uncertainty.

Remittance Policies

There have been no recent changes to remittance policies. Algerian exchange control law remains strict and complex. There are no specific time limitations, although the bureaucracy involved in remittances can often slow the process to as long as six months. Personal transfers of foreign currency into the country must be justified and declared as not for business purpose. There is no legal parallel market through which investors can remit; however, there is a substantial black market for foreign currency, where the dollar and euro trade at a significant premium above official rates, although economic disruptions related to the outbreak of COVID-19 in March 2020 led to interruptions in the functioning of the black market. With the more favorable informal rates, local sources report that most remittances occur via foreign currency hand-carried into the country. Under central bank regulations revised in September 2016, travelers to Algeria are permitted to enter the country with up to 1,000 euros or equivalent without declaring the funds to customs. However, any non-resident can only exchange dinars back to a foreign currency with proof of initial conversion from the foreign currency. The same regulations prohibit the transfer of more than 10,000 dinars (USD 75) outside Algeria.

Private citizens may convert up to 15,000 dinars (USD 118) per year for travel abroad, and must demonstrate proof of their intention to travel abroad through plane tickets or other official documents.

In April 2019, the Finance Ministry announced the creation of a vigilance committee to monitor and control financial transactions to foreign countries. It divided operations into three categories relating to 1) imports, 2) investments abroad, and 3) transfer abroad of profits.

Sovereign Wealth Funds

Algeria’s sovereign wealth fund (SWF) is the “Fonds de Regulation des Recettes (FRR).” The Finance Ministry’s website shows the fund decreased from 4408.2 billion dinars (USD 37.36 billion) in 2014 to 784.5 billion dinars (USD 6.65 billion) in 2016. The data has not been updated since 2016. Algerian media reported the FRR was spent down to zero as of February 2017. Algeria is not known to have participated in the IMF-hosted International Working Group on SWFs.

State-owned enterprises (SOEs) comprise more than half of the formal Algerian economy. SOEs are amalgamated into a single line of the state budget and are listed in the official business registry. To be defined as an SOE, a company must be at least 51 percent owned by the state.

Algerian SOEs are bureaucratic and may be subject to political influence. There are competing lines of authority at the mid-levels, and contacts report mid- and upper-level managers are reluctant to make decisions because internal accusations of favoritism or corruption are often used to settle political and personal scores. Senior management teams at SOEs report to their relevant ministry; CEOs of the larger companies such as national hydrocarbons company Sonatrach, national electric utility Sonelgaz, and airline Air Algerie report directly to ministers. Boards of directors are appointed by the state, and the allocation of these seats is considered political. SOEs are not known to adhere to the OECD Guidelines on Corporate Governance.

Legally, public and private companies compete under the same terms with respect to market share, products and services, and incentives. In reality, private enterprises assert that public companies sometimes receive more favorable treatment. Private enterprises have the same access to financing as SOEs, but they work with private banks and they are less bureaucratic than their public counterparts. Public companies generally refrain from doing business with private banks and a 2008 government directive ordered public companies to work only with public banks. The directive was later officially rescinded, but public companies continued the practice. However, the heads of Algeria’s two largest state enterprises, Sonatrach and Sonelgaz, both indicated in 2020 that given current budget pressures they are investigating recourse to foreign financing, including from private banks. SOEs are subject to the same tax burden and tax rebate policies as their private sector competitors, but business contacts report that the government favors SOEs over private sector companies in terms of access to land.

SOEs are subject to budget constraints. Audits of public companies can be conducted by the Court of Auditors, a financially autonomous institution. The constitution explicitly charges it with “ex post inspection of the finances of the state, collectivities, public services, and commercial capital of the state,” as well as preparing and submitting an annual report to the President, heads of both chambers of Parliament, and Prime Minister. The Court makes its audits public on its website, for free, but with a time delay, which does not conform to international norms.

The Court conducts audits simultaneously but independently from the Ministry of Finance’s year-end reports. The Court makes its reports available online once finalized and delivered to the Parliament, whereas the Ministry withholds publishing year-end reports until after the Parliament and President have approved them. The Court’s audit reports cover the entire implemented national budget by fiscal year and examine each annual planning budget that is passed by Parliament.

The General Inspectorate of Finance (IGF), the public auditing body under the supervision of the Ministry of Finance, can conduct “no-notice” audits of public companies. The results of these audits are sent directly to the Minister of Finance, and the offices of the President and Prime Minister. They are not made available publicly. The Court of Auditors and IGF previously had joint responsibility for auditing certain accounts, but they are in the process of eliminating this redundancy. Further legislation clarifying whether the delineation of responsibility for particular accounts which could rest with the Court of Auditors or the Ministry of Finance’s General Inspection of Finance (IGF) unit has yet to be issued.

Privatization Program

There has been limited privatization of certain projects previously managed by SOEs, and so far restricted to the water sector and possibly a few other sectors. However, the privatization of SOEs remains publicly sensitive and has been largely halted.

Multinational, and particularly U.S. firms operating in Algeria, are spreading the concept of responsible business conduct (RBC), which has traditionally been less common among domestic firms. Companies such as Occidental, Cisco, Microsoft, Boeing, Dow, Halliburton, Pfizer, and Berlitz have supported programs aimed at youth employment, education, and entrepreneurship. RBC activities are gaining acceptance as a way for companies to contribute to local communities while often addressing business needs, such as a better-educated workforce. The national oil and gas company, Sonatrach, funds some social services for its employees and supports desert communities near production sites. Still, many Algerian companies view social programs as the government’s responsibility. While state entities welcome foreign companies’ RBC activities, the government does not factor them into procurement decisions, nor does it require companies to disclose their RBC activities. Algerian laws for consumer and environmental protections exist but are weakly enforced.

Algeria does not adhere to the OECD or UN Guiding Principles and does not participate in the Extractive Industries Transparency Initiative. Algeria ranks 73 out of 89 countries for resource governance and does not comply with rules set for disclosing environmental impact assessments and mitigation management plans, according to the most recent report by National Resource Governance Index published in 2017.

Additional Resources

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 () and;
• North Korea Sanctions & Enforcement Actions Advisory ().

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 current anti-corruption law dates to 2006. In 2013, the Algerian government created the Central Office for the Suppression of Corruption (OCRC) to investigate and prosecute any form of bribery in Algeria. The number of cases currently being investigated by the OCRC is not available. In 2010, the government created the National Organization for the Prevention and Fight Against Corruption (ONPLC) as stipulated in the 2006 anti-corruption law. The Chairman and members of this commission are appointed by a presidential decree. The commission studies financial holdings of public officials, though not their relatives, and carries out studies. Since 2013, the Financial Intelligence Unit has been strengthened by new regulations that have given the unit more authority to address illegal monetary transactions and terrorism funding. In 2016, the government updated its anti-money laundering and counter-terrorist finance legislation to bolster the authority of the financial intelligence unit to monitor suspicious financial transactions and refer violations of the law to prosecutorial magistrates. Algeria signed the UN Convention Against Corruption in 2003.

The new Algerian constitution, which the President approved in December 2020, includes provisions that strengthen the role and capacity of anti-corruption bodies, particularly through the creation of the High Authority for Transparency, Prevention, and Fight against Corruption. This body is tasked with developing and enabling the implementation of a national strategy for transparency and preventing and combatting corruption.

The Algerian government does not require private companies to establish internal codes of conduct that prohibit bribery of public officials. The use of internal controls against bribery of government officials varies by company, with some upholding those standards and others rumored to offer bribes. Algeria is not a participant in regional or international anti-corruption initiatives. Algeria does not provide protections to NGOs involved in investigating corruption. While whistleblower protections for Algerian citizens who report corruption exist, members of Algeria’s anti-corruption bodies believe they need to be strengthened to be effective.

International and Algerian economic operators have identified corruption as a challenge for FDI. They indicate that foreign companies with strict compliance standards cannot effectively compete against companies which can offer special incentives to those making decisions about contract awards. Economic operators have also indicated that complex bureaucratic procedures are sometimes manipulated by political actors to ensure economic benefits accrue to favored individuals in a non-transparent way. Anti-corruption efforts have so far focused more on prosecuting previous acts of corruption rather than on institutional reforms to reduce the incentives and opportunities for corruption. In October 2019, the government adopted legislation which allowed police to launch anti-corruption investigations without first receiving a formal complaint against the entity in question. Proponents argued the measure is necessary given Algeria’s weak whistle blower protections.

Currently the government is working with international partners to update legal mechanisms to deal with corruption issues. The government also created a new institution to target and deter the practice of overbilling on invoices, which has been used to unlawfully transfer foreign currency out of the country.

The government imprisoned numerous prominent economic and political figures in 2019 and 2020 as part of an anti-corruption campaign. Some operators report that fear of being accused of corruption has made some officials less willing to make decisions, delaying some investment approvals. Corruption cases that have reached trial deal largely with state investment in the automotive, public works sectors, and hydrocarbons, though other cases are reportedly under investigation.

Resources to Report Corruption

Central Office for the Suppression of Corruption (OCRC)

Mokhtar Lakhdari, General Director

Placette el Qods, Hydra, Algiers +213 21 68 63 12

+213 21 68 63 12 www.facebook.com/263685900503591/ 

www.facebook.com/263685900503591/  no email address publicly available

no email address publicly available

National Organization for the Prevention and Fight Against Corruption (ONPLC)

Tarek Kour, President

14 Rue Souidani Boudjemaa, El Mouradia, Algiers +213 21 23 94 76

+213 21 23 94 76 www.onplc.org.dz/index.php/ 

www.onplc.org.dz/index.php/  contact@onplc.org.dz 

contact@onplc.org.dz 

Watchdog organization:

Djilali Hadjadj

President

Algerian Association Against Corruption (AACC) www.facebook.com/215181501888412/ 

www.facebook.com/215181501888412/  +213 07 71 43 97 08

+213 07 71 43 97 08 aaccalgerie@yahoo.fr 

aaccalgerie@yahoo.fr  10. Political and Security Environment

Following nearly two months of massive protests, known as the hirak, former President Abdelaziz Bouteflika resigned on April 2, 2019, after 20 years in power. His resignation launched an eight-month transition, resulting in the election of Abdelmadjid Tebboune as president in December 2019. Voter turnout was approximately 40 percent and the new administration continues to focus on restoring government authority and legitimacy. Following historically low turnout of 24 percent in the November 2020 constitutional referendum and President Tebboune’s lengthy medical absences in late 2020 and early 2021, hirak protests resumed in February 2021. Demonstrations have taken place in Algeria’s major wilayas (states) and have focused largely on political reform, as protestors continue to call for an overhaul of the Algerian government. President Tebboune dissolved parliament in February and Algeria will hold new parliamentary elections in June.

Prior to the hirak, which began in 2019, demonstrations in Algeria tended to concern housing and other social programs and were generally smaller than a few hundred participants. While most protests were peaceful, there were occasional outbreaks of violence that resulted in injuries, sometimes resulting from efforts of security forces to disperse the protests. Hirak protests remain relatively peaceful, though security forces occasionally use heavy-handed tactics to suppress protesters. Smaller protests due to socioeconomic conditions still occur sporadically throughout the country, but mostly in the largely marginalized areas of the south.

Government reactions to public unrest typically include tighter security control on movement between and within cities to prevent further clashes, significant security presence in anticipated protest zones, and promises of either greater public expenditures on local infrastructure or increased local hiring for state-owned companies. During the first few months of 2015, there were a series of protests in several cities in southern Algeria against the government’s program to drill test wells for shale gas. These protests were largely peaceful but sometimes resulted in clashes, injury, and rarely, property damage. Government pronouncements in 2017 that shale gas exploration would recommence did not generate protests.

On April 27, 2020, an Algerian court sentenced an expatriate manager and an Algerian employee of a large hotel to six months in prison on charges of “undermining the integrity of the national territory” for allegedly sharing publicly available security information with corporate headquarters outside of Algeria.

The Algerian government requires all foreign employees of foreign companies or organizations based in Algeria to contact the Foreigners Office of the Ministry of the Interior before traveling in the country’s interior so that the government can evaluate security conditions. The Algerian government also requires U.S. Embassy employees to request permission and a police escort to visit the Casbah in Algiers and to coordinate travel with the government on any trip outside of the Algiers wilaya (state). In response to the COVID-19 outbreak, the Algerian government imposed ongoing lockdowns or curfews throughout the country, cancelled events and gatherings, suspended public transportation and domestic and international flights, and required 50 percent of all non-essential employees to stay at home. Though restrictions on domestic travel have been lifted, restrictions on international travel persisted into 2021. These restrictions may impact where and when certain U.S. consular services can be provided.

In February 2020, ISIS claimed responsibility for a suicide bomber who attacked a military barrack in southern Algeria, killing a soldier. This was met with a swift response by Algerian security services against the militants responsible for the attacks, and the Algerian army continues to carry out counterterrorism operations throughout the country.

According to official Defense Ministry announcements, Algerian security forces “neutralized” 37 terrorists (21 killed, 9 arrested, and 7 surrendered) and arrested an additional 108 “supporters” of terrorism in 2020.  Army detachments also destroyed 251 terrorist hideouts and seized a large quantity of ammunition and explosives during the year

U.S. citizens living or traveling in Algeria are encouraged to enroll in the Smart Traveler Enrollment Program (STEP) via the State Department’s travel registration website, https://step.state.gov/step, to receive security messages and make it easier to be located in an emergency. 11. Labor Policies and Practices

There is a shortage of skilled labor in Algeria in all sectors. Business contacts report difficulty in finding sufficiently skilled plumbers, electricians, carpenters, and other construction/vocational related areas. Oil companies report they have difficultly retaining trained Algerian engineers and field workers because these workers often leave Algeria for higher wages in the Gulf. Some white-collar employers also report a lack of skilled project managers, supply chain engineers, and sufficient numbers of office workers with requisite computer and soft skills.

Official unemployment figures are measured by the number of persons seeking work through the National Employment Agency (ANEM). While the official unemployment rate for 2020 has not yet been published, the National Representative for Major Risks at the Interior Ministry Hamid Afra said in March 2021 that Algeria shed more than one million jobs in 2020 during the COVID-19 pandemic. Minister of Labor El Hachemi Djaaboub also reported in March 2021 that job vacancies fell by 30% in 2020, dropping from 437,000 vacancies in 2019 to 300,000. Additionally, the subsidy allotted to finance vocational integration (le dispositif d’insertion professionnelle) decreased from 135 billion dinars in 2013 to 32 billion in 2021.

The government has undertaken efforts to protect formal sector employment during the COVID-19 crisis. In general, finding a job is regulated by the government and is bureaucratically complex. Prospective employees must register with the labor office, submit paper resumes door to door, attend career fairs, and comb online job offerings. According to the Office of National Statistics, 81 percent of university graduates say that they favor “family relationships” or “the family network” as the best way to look for a job.

The private sector accounts for 62.2 percent of total employment with 7.014 million people, with 37.8 percent in the public sector, employing 4.267 million people. Additionally, the International Labor Organization (ILO) estimates that more than one-third of all employment in Algeria takes place in the informal economy. The Ministry of Vocational Training sponsors programs that offer training to at least 300,000 Algerians annually, including those who did not complete high school, in various professional programs.

Companies must submit extensive justification to hire foreign employees, and report pressure to hire more locals (even if jobs could be replaced through mechanization) under the implied risk that the government will not approve visas for expatriate staff. There are no special economic zones or foreign trade zones in Algeria.

The constitution provides workers with the right to join and form unions of their choice provided they are Algerian citizens. The country has ratified the ILO’s conventions on freedom of association and collective bargaining but failed to enact legislation needed to implement these principles fully. The General Union of Algerian Workers (UGTA) is the largest union in Algeria and represents a broad spectrum of employees in the public sectors. The UGTA, an affiliate of the International Trade Union Conference, is an official member of the Algerian “tripartite,” a council of labor, government, and business officials that meets annually to collaborate on economic and labor policy. The Algerian government liaises almost exclusively with the UGTA, however, unions in the education, health, and administration sectors do meet and negotiate with government counterparts, especially when there is a possibility of a strike. Collective bargaining is legally permitted but not mandatory.

Algerian law provides mechanisms for monitoring labor abuses and health and safety standards, and international labor rights are recognized under domestic law, but are only effectively regulated in the formal economy. However, typical labor inspections were greatly reduced in 2020 due to COVID-19 restrictions. The government has shown an increasing interest in understanding and monitoring the informal economy, evidenced by its 2018 partnerships with the ILO and current cooperation with the World Bank on several projects aimed at better quantifying the informal sector.

Sector-specific strikes occur often in Algeria, though general strikes are less common. The law provides for the right to strike, and workers exercise this right, subject to conditions. Striking requires a secret ballot of the whole workforce, and the decision to strike must be approved by a majority vote of the workers at a general meeting. The government may restrict strikes on several grounds, including economic crisis, obstruction of public services, or the possibility of subversive actions. Furthermore, all public demonstrations, including protests and strikes, must receive prior government authorization. By law, workers may strike only after 14 days of mandatory conciliation or mediation. The government occasionally offers to mediate disputes. The law states that decisions agreed to in mediation are binding on both parties. If mediation does not lead to an accord, workers may strike legally after they vote by secret ballot. The law requires that a minimum level of essential public services must be maintained, and the government has broad legal authority to requisition public employees. The list of essential services includes banking, radio, and television. Penalties for unlawful work stoppages range from eight days to two months imprisonment.

Since the beginning of the COVID-19 crisis, there have been periodic strikes affecting companies in various sectors as a result of the economic recession caused by the pandemic. Several strikes were initiated by workers in the northern regions, particularly in the industrial zones of Tizi-Ouzou, Béjaïa, and Bordj Bou Arreridj. In January 2021, employees of the electronics and household appliance group Condor demanded the firing of the director of the company appointed by the courts and back payment for salaries from December 2020.

Stringent labor-market regulations likely inhibit an increase in full-time, open-ended work. Regulations do not allow for flexibility in hiring and firing in times of economic downturn. For example, employers are generally required to pay severance when laying off or firing workers. Unemployment insurance eligibility requirements may discourage job seekers from collecting benefits due to them, and the level of support claimants receive is minimal. Employers must have contributed up to 80 percent of the final year salary into the unemployment insurance scheme in order for the employees to qualify for unemployment benefits.

The law contains occupational health and safety standards, but enforcement of these standards is uneven. There were no known reports of workers dismissed for removing themselves from hazardous working conditions. If workers face hazardous conditions, they may file a complaint with the Ministry of Labor, which is required to send out labor inspectors to investigate the claim. Nevertheless, the high demand for unemployment in Algeria gives an advantage to employers seeking to exploit employees.

Because Algerian law does not provide for temporary legal status for migrants, labor standards do not protect economic migrants from sub-Saharan Africa and elsewhere working in the country without legal immigration status. However, migrant children are protected by law from working.

The Ministry of Labor enforces labor standards, including compliance with the minimum wage regulation and safety standards. Companies that employ migrant workers or violate child labor laws are subject to fines and potentially prosecution.

The law prohibits participation by minors in dangerous, unhealthy, or harmful work or in work considered inappropriate because of social and religious considerations. The minimum legal age for employment is 16, but younger children may work as apprentices with permission from their parents or legal guardian. The law prohibits workers under age 19 from working at night. While there is currently no list of hazardous occupations prohibited to minors, the government reports it is drafting a list which will be issued by presidential decree. Although specific data was unavailable, children reportedly worked mostly in the informal sector, largely in sales, often in family businesses. They are also involved in begging and agricultural work. There were isolated reports that children were subjected to commercial sexual exploitation.

The Ministry of Labor is responsible for enforcing child labor laws. There is no single office charged with this task, but all labor inspectors are responsible for enforcing laws regarding child labor. In 2018, the Ministry of Labor focused one month specifically on investigating child labor violations, and in some cases prosecuted individuals for employing minors or breaking other child-related labor laws. While the government claims to monitor both the formal and informal sectors, contacts note that their efforts largely focus on the formal economy.

The National Authority of the Protection and Promotion of Children (ONPPE) is an inter-agency organization, created in 2016, which coordinates the protection and promotion of children’s rights. As a part of its efforts, ONPPE continues to hold educational sessions for officials from relevant ministries, civil society organizations, and journalists on issues related to children, including child labor and human trafficking. Due to COVID-19, in 2020 ONPPE held only two such sessions. 12. U.S. International Development Finance Corporation (DFC), and Other Investment Insurance or Development Finance Programs

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

* Source for Host Country Data: No Host Country data available.

Table 3: Sources and Destination of FDI

The latest data available for Algeria is from 2019.

Table 4: Sources of Portfolio Investment

Data not available. 14. Contact for More Information

U.S. Embassy Algiers
Political and Economic Section
5 Chemin Cheikh Bachir El-Ibrahimi, El Biar Algiers, Algeria (+213) 0770 082 153
(+213) 0770 082 153
Algiers_polecon@state.gov 

Policies Towards Foreign Direct Investment

Although the GRA demonstrated political will to significantly increase foreign direct investment (FDI), Angola remains a difficult operating environment for investment to thrive. FDI remains low, volatile, and largely concentrated in the extractives sector. The GRA continues to pursue an ambitious plan to reform the business and investment environment. The Private Investment Law (“PIL”) introduced in 2018 has proven to be slow to promote FDI and retain investment. At the end of May 2020, the Economic Committee of the Council of Ministers gathered to discuss some changes to the PIL, with a particular focus on attracting foreign investment through a mechanism to negotiate benefits and special conditions depending on the specific project. There have been, however, no legislative changes related to foreign direct investment since the enactment of the 2018 PIL and the Competition Law of 2018.

President João Lourenço implemented economic reform policies that provide a level playing field for domestic and foreign investors and leveraged efforts to combat and deter corruption and money laundering. Foreign investors were also encouraged to participate in the ongoing Privatization Program designed to privatize over 195 State-Owned Enterprises (SOES) by 2022. AIPEX, the country’s Private Investment and Export Promotion Agency is billed as the investors ‘one stop shop’ for business establishment. AIPEX is tasked with facilitating investment and is also supposed to manage the state’s investment portfolio to ensure the equitable implementation of the PIL and distribution of private investment, especially foreign investment. Theoretically the country prioritizes investment retention, but it does not appear to have institutional capacity to pursue and advocate for investment retention.

Limits on Foreign Control and Right to Private Ownership and Establishment

The 2018 PIL establishes the general principles and basis of private investment in Angola, determining the benefits and concessions that the GRA grants private investors and the criteria for accessing them, as well as establishing rights, duties and guarantees of private investors. The PIL is applied to private investments of any value, whether it is carried out by domestic or foreign investors, although waivers may exist under a bilateral agreement framework. Companies incorporated in conformity with the Angolan law, even with capital from abroad are, for all legal purposes, subject to the existing Angolan legislation. After the completion of a private investment project, foreign investors have the right, after approval by the GRA and settlement of taxes, to transfer abroad:

1. Values corresponding to dividends;
2. Values corresponding to the proceeds of the liquidation of their enterprises;
3. Values corresponding to due compensations;
4. Values corresponding to royalties or other earnings of remuneration from indirect investments, associated with the transfer of technology.

These processes are very bureaucratic and tedious. Foreign investors and companies with majority foreign ownership are only eligible for domestic credit after having fully implemented their respective investment projects.

On October 20, 2020 Presidential Decree No. 271/20, revoking Order No. 127/03, of 25 November 2003, was published, approving the new Legal Framework on Local Content in the Oil Sector. The statute aims to promote economic diversification, the participation of local businesses in the oil sector, the increase of domestic production and reduction of imports of goods for the sector, as well as the creation of employment and increased training of Angolans in the oil industry workforce. The statute establishes new rules on ‘Angolanization’ and procurement of goods and services for the sector, which will have a significant impact on company activities. For example, priority will be given to procurement of nationally produced goods and services, especially the obligation to contract Angolan companies included in the database approved by the National Oil, Gas and Biofuels Agency (ANPG). In addition, all companies operating in any segment of the petroleum-sector value chain will be required to present an annual local content plan to the ANPG. Failure to comply with the rules established in the new statute will result in fines in local currency to the equivalent of between USD 50,000 and USD 300,000. Additional penalties may also be applied, such as barring companies from entering new contracts or operating altogether.

Although the GRA eliminated the 35 percent local content requirement in foreign investment and encourages foreign companies to invest in the domestic economy, some FDI screening processes continue. Foreign ownership remains limited to 49 percent in the oil and gas sector, 50 percent in insurance, and 10 percent in the banking and telecommunications sectors, though there have been some exceptions recently in which the foreign investment goes beyond the limit. There are several objectives that the GRA seeks to accomplish through its FDI screening processes: 1) create jobs for Angolans or transfer expertise to Angolan companies as part of an “Angolanization” plan; 2) protect sensitive industries such as defense and finance; 3) prevent capital flight or other behavior that could threaten the stability of the Angolan economy; and 4) diversify the economy and increase competitiveness of local industries.

Other Investment Policy Reviews

Angola has been a member of the World Trade Organization (WTO) since 1996. The WTO performed a policy review of Angola in September 2015. At the government’s request, the last Investment Policy Review (IPR) of Angola’s business and economic environments was completed on September 30, 2019 by the United Nations Conference on Trade and Development (UNCTAD of Angola’s The IPR was part of a broader EU funded technical assistance project aimed to assist Angola in attracting and benefitting from FDI beyond the extractives industry and to support the GRA’s objective of increasing economic diversification and sustainable development. The full report and policy recommendations are accessible at: https://unctad.org/en/PublicationsLibrary/diaepcb2019d4_en.pdf

The review identified remaining policy gaps and bottlenecks, including the complex system for FDI entry and establishment, burdensome operational regulations, the persistence of restrictive business practices and a lack of institutional capacity and coordination. These affect the country’s ability to fully take advantage of its strategic location, abundant natural resources, and preferential access to external markets.

The Review also devoted special attention to investment in agribusiness and its contribution to sustainable development. It calls for measures to foster responsible investment and promote inclusive modes of production in agriculture. The recommendations emphasize the need to strike a policy balance between food security and export development objectives, improve access to land and infrastructure, and promote entrepreneurship and skills development.

Business Facilitation

The World Bank Doing Business 2020 report ranked Angola 177 out of 190 countries and recorded an improvement in Angola’s monitoring and regulation of power outages, and in facilitating trade through the implementation of an automated customs data management system, ASYCUDA (Automated System for Customs Data) World, and by upgrading its port community system to allow for electronic information exchange between different parties involved in the import/export process. To commence a business, investors typically register with the General Tax Administration (AGT) Social Security Institute (INSS), National Press, and a local bank Launching a business typically requires 36 days, compared with a regional average of 27 days, with Angola ranked 146 out of the 190 economies evaluated.

The Covid-19 pandemic highlighted the urgency of trade facilitation reform to improve competitiveness in non-oil business sectors. With this, export procedures in the country cost USD 240 and take 98 hours, compared to an average of USD 173 and 72 hours for sub-Saharan Africa. Many of the reforms necessary to improve conditions for Angolan businesses, such as automating customs procedures or creating a single window, are addressed by the World Trade Organization’s Trade Facilitation Agreement, which Angola ratified in April 2019. To facilitate opening, changing, or closing a company, the Guiche Único de Empresas one stop shop for investors (GUE) was folded into the Private Investment and Export Promotion Agency (AIPEX) in 2019. It combines the main public services for constitution of companies, GUE and AIPEX, allowing the investor to open and register companies and be able to access the tax benefits and other incentives resulting from the Private Investment Law.

On October 19, 2020, to facilitate the establishment of businesses and as a COVID-19 imposed biosafety measure, the GRA simplified procedures by creating an online registration portal for companies (www.gue.gov.ao). The online portal will allow for faster registry of companies (taking only 30-60 minutes) and replace the publication of the company registry in the Gazette (Diário da República), a procedure that took more than five days. There is still the option to set up a company in person, which is estimated to also take as little as 30 minutes to an hour. The cost to establish a sole proprietorship is USD 16 dollars and USD 54 for partnerships, corporations, and other entities. Payments are also made electronically.

In April 2020, to simplify bureaucracy and in anticipation of the economic slowdown eventually caused by COVID-19, the GRA proposed revoking the procedure for issuing business licenses for all economic activities and requiring companies to carry out statistical registration in the act of incorporation. With the abolition of the Company License Document (a commercial permit) and Statistical Registration, to begin business activities, companies need to register their activity with the local administration office. The office will issue an electronic operating license. Some exclusions from this regime are foreseen, such as those related to the trade in foodstuffs, live plant species, animals, birds and fisheries, medicines, car sales, lubricants and chemicals. For these sectors, a physical license is still required as they are considered high risk economic activities which may affect human, animal, environmental and state safety.

The state-run private investment and export promotion agency’s website is http://www.aipex.gov.ao/PortalAIPEX/#!/  . Contact Information: Departamento de Promoção e Captação do Investimento; Agencia de Investimento Privado e Promoção de Investimentos e Exportações de Angola (AIPEX). Rua Kwamme Nkrumah No.8, Maianga, Luanda, Angola Tel: (+244) 995 28 95 92| 222 33 12 52 Fax: (+244) 222 39 33 81.

Outward Investment

The Angolan Government does not promote or incentivize outward investment, nor does it restrict Angolans from investing abroad. Investors are free to invest in any foreign jurisdiction. According to data from the BNA, in 2018, the government did not invest abroad but received returns on previous investments abroad.

Domestic investors prefer to invest in Portuguese-speaking countries, with few investing in neighboring countries in Sub-Saharan Africa. The bulk of investment is in real estate, fashion, fashion accessories, and domestic goods. Due to foreign exchange constraints, there has been very little or no investment abroad by domestic investors. Although investing in real estate is cheaper abroad, a few invest in real estate domestically. The average Angolan invests in affordable investments with quick returns.

Transparency of the Regulatory System

Angola’s regulatory system is complex, vague, and inconsistently enforced. In many sectors, no effective regulatory system exists due to a lack of institutional and human capacity. The banking system is slowly beginning to adhere to International Financial Reporting Standards (IFRS). SOEs are still far from practicing IFRS. The public does not participate in draft bills or regulations formulation, nor does a public online location exist where the public can access this information for comment or hold government representatives accountable for their actions. The Angolan Communications Institute (INACOM) sets prices for telecommunications services and is the regulatory authority for the telecommunications sector. Revised energy-sector licensing regulations have permitted some purchase power agreements (PPA) participation.

Overall, Angola’s national regulatory system does not conform to other international regulatory systems. However, Angola is part of the Common Market for Eastern and Southern Africa (COMESA), the Community of Portuguese Speaking Countries (CPLP), and the SADC, among other organizations. Angola has yet to join the SADC Free Trade Zone of Africa as a full member. On March 21, 2018 together with 44 African countries, Angola joined the African Continental Free Trade Area (AfCFTA), an agreement aimed at paving the way for a liberalized market for goods and services across Africa. Angola is also a member of the Port Management Association of Eastern and Southern Africa (PMAESA), which seeks to maintain relations with other national port authorities or associations, regional and international organizations and governments of the region to hold discussions on matters of common interest.

Angola became a member of the WTO on November 23, 1996. However, it is not party to the Plurilateral Agreements on Government Procurement, the Trade in Civil Aircraft Agreement and has not yet notified the WTO of its state-trading enterprises within the meaning of Article XVII of the GATT. A government procurement management framework introduced in late 2010 stipulates a preference for goods produced in Angola and/or services provided by Angolan or Angola-based suppliers. Technical Barriers to Trade regimes are not coordinated. There have been no investment policy reviews for Angola from either the OECD or UNCTAD in the last four years. Angola conducts several bilateral negotiations with Portuguese Speaking countries (PALOPS), Cuba and Russia and extends trade preferences to China due to credit facilitation terms, while attempting to encourage and protect local content.

Regulatory reviews are based on scientific, or data driven assessments or baseline surveys. Evaluations are based on data, but not made available for public comment.

The National Assembly is Angola’s main legislative body with the power to approve laws on all matters (except those reserved by the constitution to the government) by simple majority (except if otherwise provided in the constitution). Each legislature comprises four legislative sessions of twelve months starting annually on October 15. National Assembly members, parliamentary groups, and the government hold the power to put forward all draft-legislation. However, no single entity can present draft laws that involve an increase in the expenditure or decrease in the State revenue established in the annual budget.

The president promulgates laws approved by the assembly and signs government decrees for enforcement. The state reserves the right to have the final say in all regulatory matters and relies on sectorial regulatory bodies for supervision of institutional regulatory matters concerning investment. The Economic Commission of the Council of Ministers oversees investment regulations that affect the country’s economy including the ministries in charge. Other major regulatory bodies responsible for getting deals through include:

• The National Gas and Biofuels Agency (ANPG) is the government regulatory and oversight body responsible for regulating oil exploration and production activities. On February 6, 2019, the parastatal oil company Sonangol launched the National Gas and Biofuels Agency (ANPG) through the Presidential decree 49/19. The ANPG is the national concessionaire of hydrocarbons in Angola, authorized to conduct, execute and ensure oil, gas and biofuel operations run smoothly, a role previously held by Sonangol. The ANPG must also ensure adherence to international standards and establish relationships with other international agencies and sector relevant organizations.
• The Regulatory Institute of Electricity and Water Services (IRSEA) is the regulatory authority for renewable energies and enforcing powers of the electricity regulatory authority.
• The Angolan Communications Institute (INACOM): The institute sets prices for telecommunications services and is the regulatory authority for the telecommunications sector. Revised energy-sector licensing regulations have improved legal protection for investors to attract more private investment in electrical infrastructure, such as dams and hydro distribution stations.
• As of October 1, 2019, a 14 percent VAT regime came into force, replacing the existing 10 percent Consumption Tax. The General Tax Administration (AGT) is the office that oversees tax operations and ensures taxpayer compliance. The new VAT tax regime aims to boost domestic production and consumption and reduce the incidence of compound tax created for businesses unable to recover consumption tax incurred. VAT may be reclaimed on purchases and imports made by taxpayers, making it neutral for business.

Angola acceded to the New York Convention on August 24, 2016, paving the way for effective recognition and enforcement in Angola of awards rendered outside of Angola and subject to reciprocity. Angola participates in the New Partnership for Africa’s Development (NEPAD), which includes a peer review mechanism on good governance and transparency. Enforcement and protection of investors is under development in terms of regulatory, supervisory, and sanctioning powers. Investor protection mechanisms are weak or almost non-existent.

There are no informal regulatory processes managed by nongovernmental organizations or private sector associations, and the government does not allow the public to engage in the formulation of legislation or to comment on draft bills. Procurement laws and regulations are unclear, little publicized, and not consistently enforced. Oversight mechanisms are weak, and no audits are required or performed to ensure internal controls are in place or administrative procedures are followed. Inefficient bureaucracy and possible corruption frequently lead to payment delays for goods delivered, resulting in an increase in the price the government must pay.

No regulatory reform enforcement mechanisms have been implemented since the last ICS report, in particular those relevant to foreign investors. The Diário da República (the Federal Register equivalent), is a legal document where key regulatory actions are officially published.

International Regulatory Considerations

On September 14, 2020 the GRA officially announced its intention to join the 54 countries that already apply the Standard Initiative for Extractive Industries Transparency (EITI).

In a letter to the Chairman of the EITI Board, dated September 14, 2020, the Minister of Mineral, Oil and Gas Resources, Diamantino Pedro Azevedo, described the steps already taken for the implementation of the EITI. These include the signing of Presidential Decree 117/20, appointing the Minister as chair of the National EITI Coordinating Committee, and a public statement announcing the government’s commitment to join the EITI initiative.

Angola’s overall national regulatory system does not conform to other international regulatory systems and is overseen by its constitution. Angola is not a full member of the International Standards Organization (ISO), but has been a corresponding member since 2002. The Angolan Institute for Standardization and Quality (IANORQ) within the Ministry of Industry & Commerce coordinates the country’s establishment and implementation of standards. Angola is an affiliate country of the International Electro-technical Commission that publishes consensus-based International Standards and manages conformity assessment systems for electric and electronic products, systems and services.

A government procurement management framework introduced in late 2010 stipulates a preference for goods produced in Angola and/or services provided by Angolan or Angola-based suppliers. Technical Barriers to Trade (TBT) regimes are not coordinated. Angola acceded to the Kyoto Convention on February 23, 2017.

Legal System and Judicial Independence

Angola’s legal system is primarily based on the Portuguese legal system and can be considered civil law based, with legislation as the primary source of law. Courts base their judgments on legislation and there is no binding precedent as understood in common law systems. The constitution is considered the supreme law of Angola (article 6(1)) and all laws and conduct are valid only if they conform to the constitution (article 6(3.))

The Angolan justice system is slow, arduous, and often partial. Legal fees are high, and most businesses avoid taking commercial disputes to court in the country. The World Bank’s Doing Business 2020 survey ranks Angola 186 out of 190 countries on contract enforcement, and estimates that commercial contract enforcement, measured by time elapsed between filing a complaint and receiving restitution, takes an average of 1,296 days, at an average cost of 44.4 percent of the claim.

Angola has commercial legislation that governs all contracts and commercial activities but no specialized court. On August 5, 2020, the Economic Council of Ministers approved the opening of the Court for Litigation on Commercial, Intellectual, and Industrial Property Matters, at the Luanda First Instance Court. With the introduction of this commercial court, the GRA hopes the business environment and trust in public institutions will improve. Prior to this arrangement, trade disputes were resolved by judges in the Courts of Common Pleas. The commercial legislation provides that before going to court, investors can challenge the decision under the terms of the administrative procedural rules, either through a complaint (to the entity responsible for the decision) or through an appeal (to the next level above the entity responsible for the decision). In the new system, investors will be able, in general, to appeal to civil and administrative courts. Both administrative procedures and lawsuits are extremely bureaucratic and time-consuming. Investors exercising their right to appeal should expect decisions to take months, or even years, in the case of court decisions. In 2008, the Angolan attorney general ruled that Angola’s specialized tax courts were unconstitutional. The ruling effectively left businesses with no legal recourse to dispute taxes levied by the Ministry of Finance, as the general courts consistently rule that they have no authority to hear tax dispute cases and refer all cases back to the Ministry of Finance for resolution. Angola’s Law 22/14, of December 5, 2014, which approved the Tax Procedure Code (TPC), sets forth in its Article 5 that the courts with tax and customs jurisdiction are the Tax and Customs Sections of the Provincial Courts and the Civil, Administrative, Tax and Customs Chamber of the Supreme Court. Article 5.3 of the law specifically states that tax cases pending with other courts must be sent to the Tax and Customs Section of the relevant court, except if the discovery phase (i.e., the production of proof) has already begun.

In 2008, the Angolan attorney general ruled that Angola’s specialized tax courts were unconstitutional. The ruling effectively left businesses with no legal recourse to dispute taxes levied by the Ministry of Finance, as the general courts consistently rule that they have no authority to hear tax dispute cases and refer all cases back to the Ministry of Finance for resolution. Angola’s Law 22/14, of December 5, 2014, which approved the Tax Procedure Code (TPC), sets forth in its Article 5 that the courts with tax and customs jurisdiction are the Tax and Customs Sections of the Provincial Courts and the Civil, Administrative, Tax and Customs Chamber of the Supreme Court. Article 5.3 of the law specifically states that tax cases pending with other courts must be sent to the Tax and Customs Section of the relevant court, except if the discovery phase (i.e., the production of proof) has already begun.

The judicial system is administered by the Ministry of Justice at trial level for provincial and municipal courts and the supreme court nominates provincial court judges. In 1991, the constitution was amended to guarantee judicial independence. However, per the 2010 constitution, the president appoints supreme court judges for life upon recommendation of an association of magistrates and appoints the attorney general. Confirmation by the General Assembly is not required. Angola enacted a new Criminal Code and a new Criminal Procedure Code in November 2020 which entered into force on February 9, 2021 to better align the legal framework with internationally accepted principles and standards, with an emphasis on white-collar crimes and corruption. The system lacks resources and independence to play an effective role though the legal reforms extend criminal liability for corruption offenses and other crimes to legal entities; provide for private sector corruption offenses to face similar fines and imprisonment to the punishments applicable to the public sector and modernize and broaden the list of criminal offenses against the financial system.

There is a general right of appeal to the court of first instance against decisions from the primary courts. To enforce judgments/orders, a party must commence further proceedings called executive proceedings with the civil court. The main methods of enforcing judgments are:

• Execution orders (to pay a sum of money by selling the debtor’s assets).
• Delivery of assets; and
• Provision of information on the whereabouts of assets.

The Civil Procedure Code also provides ordinary and extraordinary appeals. Ordinary appeals consist of first appeals, review appeals, interlocutory appeals, and full court appeals, while extraordinary appeals consist of further appeals and third-party interventions. Generally, an appeal does not operate as a stay of the decision of the lower court unless expressly provided for as much in the Civil Procedure Code.

Laws and Regulations on Foreign Direct Investment

The GRA is favorable to FDI and offers freedom of establishment in all sectors with exception a few that have been traditionally been closed to FDI: military aircraft and security equipment, the activities of the Central Bank, ports, and airports. However, in 2020, the GRA encouraged foreign investors to take over management of ports and airports under the Privatization Program (PROPRIV). The acquisition of holdings is also possible. A special investment regime applies to the oil, gas, diamond, and financial sectors. Investment values exceeding USD 10m, require an investment contract with the Angolan Government and must be authorized by the Council of Ministers and finally approved by the President.

Investment values exceeding USD 10m, require an investment contract with the Angolan Government and must be authorized by the Council of Ministers and finally approved by the President.

Investors, foreigners or not, theoretically have the same right of access to incentives, even if the policy of “Angolanization” aims to promote the employment of nationals. Regarding capital repatriations, the law guarantees foreign investors the right to transfer dividends or other income from direct investment out of the country. Starting in 2020, importing capital from foreign investors willing to invest in Angolan companies is immune from licensing by the Angolan central bank.

AIPEX is the investment and export promotion regulation center tasked with promoting Angola’s export potential, legal framework, environment, and investment opportunities in the country and abroad. Housed within the Ministry of Industry & Commerce, AIPEX is also responsible for ensuring the application of the 2018 NPIL on foreign direct investments, entered into force on June 26, 2018.

Competition and Antitrust Laws

On May 17, 2018 Angola’s National Assembly approved the nation’s first anti-trust law. The law set up the creation of the Competition Regulatory Authority, which prevents and cracks down on actions of economic agents that fail to comply with the rules and principles of competition. The Competition Regulatory Authority of Angola (Autoridade Reguladora da Concorrência – ARC) was created by Presidential Decree no. 313/18, of December 21, 2018, and it succeeds the now defunct Instituto da Concorrência e Preços. It has administrative, financial, patrimonial and regulatory autonomy, and is endowed with broad supervisory and sanctioning powers, including the power to summon and question persons, request documents, carry out searches and seizures, and seal business premises.

The ARC is responsible, in particular, for the enforcement of the new Competition Act of Angola, approved by Law no. 5/18, of May 10, 2018 and subsequently implemented by Presidential Decree no. 240/18, of October 12. The Act has a wide scope of application, pertaining to both private and state-owned undertakings, and covers all economic activities with a nexus to Angola. The Competition Act prohibits agreements and anti-competitive practices, both between competitors (“horizontal” practices, the most serious example of which are cartels), as well as between companies and its suppliers or customers, within the context of “vertical” relations.

Equally prohibited is abusive conduct practiced by companies in a dominant position, such as the refusal to provide access to essential infrastructures, the unjustified rupture of commercial relations and the practice of predatory pricing, as well as the abusive exploitation, by one or more companies, of economically dependent suppliers or clients. Prohibited practices are punishable by heavy fines that range from one to ten percent of the annual turnover of the companies involved. Offending companies that collaborate with the ARC, by disclosing conduct until then unknown or producing evidence on a voluntary basis, may benefit from significant fine reductions, under a leniency program yet to be developed and implemented by the ARC. Considering the ample powers and potentially heavy sanctions at the disposal of the ARC, companies present in (or planning to enter) Angola are well advised to consider carefully the impact of the new law on their activities, in order to mitigate any risk that its market conduct may be found contrary to the Competition Act.

With the surge of the privatization agenda in 2019 and ongoing anti-corruption and asset recovery strategy and privatization of SOEs program, the Institute of Assets and State Equity (IGAPE) also emerged in providing oversight for acquisitions and mergers

Expropriation and Compensation

Under the Land Tenure Act of November 9, 2004 and the General Regulation on the Concession of Land (Decree no 58/07 of July 13, 2007), all land belongs to the state and the state reserves the right to expropriate land from any settlers. The state is only allowed to transfer ownership of urban real estate to Angolan nationals and may not grant ownership over rural land to any private entity (regardless of nationality), corporate entities or foreign entities. The state may allow for land usage through a 60-year lease to either Angolan or foreign persons (individuals or corporate), after which the state reserves legal right to take over ownership.

On January 24, 2020 Parliament approved the revised Law of Expropriations by Public Utility putting into practice the general principles contained in articles 15, no. 3 and 37, of the Angolan Constitution, which recognize the right to private property and establish that expropriations are only allowed when based on reasons of public interest and upon payment of fair and prompt compensation. The National Assembly also approved Law No. 1/21 on January 7, 2020, which approves the Expropriation Law and revokes legislation that governed this matter since before Angola’s independence. Despite the reforms, expropriation without compensation remains a common practice with idle or underdeveloped areas frequently reverting to the state with little or no compensation to the claimants who paid for the land, who in most cases allege unfair treatment.

In order to implement these fundamental principles, the Expropriation Law establishes the specific procedure that governs expropriation. The new law justifies expropriation for public utility and for other purposes such as defense and national security, the creation of new housing clusters, development of Special Economic Zones and Free Trade Zones, industrial use of mines and mineral deposits, water resources, operation of public services, operation of public transport systems, construction and assembly of power plants, substations and transmission lines integrated in the linked electrical system, as well as any other cases of public utility that may be established in special legislation.

Dispute Settlement

ICSID Convention and New York Convention

Angola is not a member state to the International Centre for Settlement of Investment Disputes (ICSID Convention) but has ratified the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. On March 6, 2017, the Government of Angola deposited its instrument of accession to the Convention with the UN Secretary General. The Convention entered into force on June 4, 2017. Its ratification was endorsed domestically via resolution No. 38/2016, published in the Official Gazette of Angola on August 12, 2016.

Investor-State Dispute Settlement

The Angolan Arbitration Law (Law 16/2003 of July 25) (Voluntary Arbitration Law — VAL) provides for domestic and international arbitration. Substantially inspired by Portuguese 1986 arbitration law, it cannot be said to strictly follow the UN Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration. The VAL contains no provisions on definitions, rules on interpretation, adopts the disposable rights criterion in regard to arbitration, does not address preliminary decisions or distinguish between different types of awards, and permits appeal on the merits in domestic arbitrations, unless the parties have otherwise agreed.

Angola is also a member of the Multilateral Investment Guarantee Agency (MIGA), which can provide dispute settlement assistance as part of its political risk insurance products and eligibility for preferential trade benefits under the African Growth Opportunity Act. The United States and Angola have signed a TIFA, which seeks to promote greater trade and investment between the two nations.

There have not been any judicial proceedings or claims under the TIFA. Angola has no FTA agreement with the United States.

U.S. Embassy Luanda is aware of one ongoing formal investment dispute involving an American company since 2017. To date, the U.S. investor’s complaints against the GRA remain unsettled. The GRA denies being party to the investor dispute and advised the plaintiff to file a case in Angolan courts against its business partner. The GRA recognizes this case as being an investor-to-investor and not investor-to-state dispute.

International Commercial Arbitration and Foreign Courts

Other means of alternative dispute resolution are not mandatory by law and, therefore not commonly used in commercial disputes. Under the Public Procurement Law, in the case of a dispute related to the termination of a public works contract, before the judicial proceeding takes place it is mandatory that an extrajudicial conciliation attempt be made. The extrajudicial conciliation attempt takes place before a committee composed of one representative of each of the parties and chaired by the President of the Superior Council of Public Works or a member designated by him for this purpose, within 30 days after the written application and answer of the parties. If the attempt to conciliate is successful, the written terms and conditions must be submitted to the approval of the Minister of Public Works and are then valid as enforceable title.

Angola recognizes and enforces foreign arbitration rulings against its government. However, extra-judicial cases against foreign investors are rare. Although not widely implemented, the Government of Angola and public sector companies recognize the use of arbitration to settle disputes with foreign arbitration awards issued in foreign courts.

Commercial contracts usually include arbitration clauses if foreign companies are involved. Arbitration proceedings are more flexible than litigation through the courts and less time is required to obtain a resolution. Additionally, appointed arbitrators are often experts in the matters in dispute and, as such, the decisions are of higher quality. However, arbitration proceedings are sometimes more expensive than judicial proceedings.

Bankruptcy Regulations

Angola ranks 168 out of 190 on the World Bank’s Doing Business 2020 report on resolving insolvency. Banks are bound to comply with prudential rules aimed at ensuring that they always maintain a minimum amount of funds not less than the minimal stock capital to ensure adequate levels of liquidity and solvability. The Bankruptcy Regime is summarized in the antiquated Code of Civil Procedure. The Ministry of Justice has begun to conduct studies to identify the most appropriate mechanisms for insolvency resolution, as well as to deepen its general legal and regulatory framework, taking as references the best international practices.

Banking insolvency is regulated by the Law on Financial Institutions No. 12/2015 of June 17, 2015. Based on this law, the BNA increases the social capital requirement for banks operating in the country to guard against possible damages to clients and the financial system. All monetary deposits up to 12.5 million Kwanzas (USD 27,000 equivalent) are also to be deposited into the BNA’s Deposit Guarantee Funds account (Presidential Decree 195/18 of 2018) so that clients (both local and foreign) are guaranteed a refund in case of bankruptcy by their respective bank. Article 69 of the law expressly states that it is the responsibility of the President of the Republic to create the fund, but it is silent on the rules governing its operation or the amounts guaranteed by the fund.

While Angola’s arbitration law (Arbitration Law No. 16/03) for insolvency adopted in 2013 introduced the concept of domestic and international arbitration, the practice of arbitration law is still not widely implemented. The law criminalizes bankruptcy under the following classification: condemnation in Angola or abroad for crimes of fraudulent bankruptcy, i.e., involvement of shareholders or managers in fraudulent activities that result in the bankruptcy, negligence bankruptcy, forgery, robbery, or involvement in other crimes of an economic nature. The Ministry of Finance, the BNA and the Capital Markets Commission (CMC) oversee credit monitoring and regulation.

Investment Incentives

The New Private Investment Law (NPIL) issued in 2018 seeks to incentivize incoming investment. Investment incentives in the NPIL include:

• Elimination of the minimum investment value and the value required to qualify for incentives in foreign and local investments, previously set at USD 1,000,000 and USD 500,000 respectively. There is no lower limit to invest and qualify for incentives.
• Elimination of the obligation for foreign investors to establish a partnership with an Angolan entity with at least a 35 percent stake in the capital structure of investments in the electricity and water, tourism, transport and logistics, construction, media, telecommunications and IT sectors. Under the new law, investors will decide on their capital structure and origin.
• Granting to foreign investors “the right and guarantee to transfer abroad” dividends or distributed profits, the proceeds of the liquidation of their investments, capital gains, the proceeds of indemnities and royalties, or other income from remuneration of indirect investments related to technology transfer after proof of implementation of the project and payment of all tax dues.

Investment incentives are now granted by AIPEX, the State’s investment agency; the president had that responsibility under the 2015 investment law. Companies need to apply for such incentives when submitting an investment application to AIPEX and the relevant ministry. The NPIL restructures the country into three economic development zones (zones A through C) determined by political and socio-economic factors, up from two as per the 2015 investment law. For Zone A, investors have a 3-year moratorium on taxes reduced between 25- 50 percent of the tax levied on the distribution of profits and dividends. For Zone B, it is between three to six years with a 50 to 60 percent tax reduction, and for Zone C between six to eight years with a tax reduction between 60-70 percent of the tax levied on distribution of profits and dividends.

1. The State guarantees “non-public interference in the management of private companies” and “non-cancellation of licenses without administrative or judicial processes.”
2. The State provides a new and simplified procedure for the approval of investment projects, along with the adoption of measures aimed at accelerating the contractual process. It also provides special rights projects (undefined), including easier access to visas for investors and priority in the repatriation of dividends, and capital.

Note: Angola is a signatory to the Agreement on Trade-Related Investment Measures (TRIMs) applicable to foreign investment.

Foreign Trade Zones/Free Ports/Trade Facilitation

Angola is a signatory to SADC but not a member of the SADC Free Trade Area. Angola is analyzing and revising its tariff schedule to accommodate beneficial adjustments in regional trade under the SADC Free Trade Area.

Under the NPIL, Angola is divided into three economic zones, zone A through C. Zone A offers a three-year tax exemption for capital tax and a reduction in the tax burden by 25-50 percent; Zone B a three to six-year tax exemption for capital tax with a reduction in the tax burden by 50-60 percent; and, for Zone C, an eight-year tax exemption for capital tax with a with a 60-70 percent reduction in the tax burden.

Porto Caio is under construction in the province of Cabinda. The port is designated as a Free Trade Zone (FTZ) and is slated to provide numerous opportunities for warehousing, distribution, storage, lay down area and development of oil and gas related activity. The Port will also serve as a new major gateway to international markets from the west coast of Angola, and the development will facilitate exports and render them more cost-effective for companies.

Although the government has not yet established regional or international free trade zones, on March 21, 2018 the government signed an agreement to join the AfCFTA. The AfCFTA, by bringing together all 54 members of the African Union will be the largest FTZ in the world since the emergence of the WTO. The agreement’s implementation could create a market of 1.2 billion consumers.

On October 12th, Law no. 35/20 – the Free Trade Zones Law (“FTZL”) – was passed. The FTZL has established benefits to be conceded to investors by the Angolan Government, aiming at attracting foreign investment in Angola thus creating economic growth. All types of investment are permitted in the Free Zones, specifically investment in agriculture, industry (that use Angolan raw materials and are focused on exports) and technology.

All types of investment are permitted in the Free Zones, specifically investment in agriculture, industry (that use Angolan raw materials and are focused on exports) and technology.

Specific aspects pertaining to the access to Free Zones (such as monetary requirements, number of jobs created investments in fixed assets) shall be determined in the investment contract.

Access to the Free Zones is permitted to companies, joint ventures, groups of companies or any other form of companies’ representation, whose scope meets the purpose of the Free Zones.

The investments made in Free Zones must consider environmental protection interests.

Activities to be developed in the Free Zones

In the Free Zones investors are allowed to carry out industrial activities, agriculture, technology activities, as well as commercial and service activities. It is possible to carry out other activities which are not specified by the FTZL, provided that such activities target an international market and relevant authorities authorize the activities.

Investment Operations

Internal, external and mixed (also known as indirect) investments operations are permitted. All investment operations are subject to the private investment regulations in force in Angola.

Use of the Free Zones

The use of the Free Zones is granted for a minimum period of 25 (twenty-five) years which may be extended for equal period of time.

Benefits

According to the FTZL benefits pertaining to Industrial Tax, VAT, Custom Rights, Land, Capital and other benefits may be granted to the investors in the Free Zones. In the Free Zones, tax and customs benefits are applicable and are not limited in time.

Tax benefits may include:

• Reduction of the taxable basis;
• Accelerated depreciation and reincorporation;
• Tax credits;
• Exemption and reduction of rates and taxes;
• Contributions and importation rights;
• Deferral of tax payment;
• other exceptional measures.

In order to benefit from these measures, investors may not exercise the same economic activity in Angolan territory.

Special Regimes

Free Trade Zones permit special benefits regarding migration, labor, foreign-exchange and financial, to be specifically defined.

Facilities

The relevant authorities must create facilities for the investors to have priority access to services and simplified processes to obtain licenses and authorizations.

Local Content / Employment

In addition to the Local Content regulations currently in force in Angola, the FTZL creates an obligation for investors to give preference in employing Angolan employees. Nevertheless, investors may employ foreign qualified employees provided that the number of Angolan employees is higher.

Capital Repatriation

After the implementation of the foreign investment, and in accordance with the foreign-exchange special regime, foreign investors are granted the right to transfer to foreign territory:

1. Dividends or profits;
2. The result of the liquidation of the investment including capital gains;
3. Any amounts that are due to the investor, as established by acts and contracts;
4. Compensations attributed due to the extension of the Free Zones for national interest reasons;
5. Royalties or other incomes related to indirect investments, in connection with the transfer or concession of technology.

Performance and Data Localization Requirements

Angola widely observes a policy to restrict the number of foreign workers and the duration of their employment. The policy aims to promote local workforce recruitment and progression. Decree 6/01, of 2001 establishes that expatriate workers can only be recruited if the Labor Inspectorate gets confirmation from the employer that no Angolan personnel duly qualified to perform the job required is available in the local market. The same decree limits foreign employment to 36 months and temporary employment less than 90 days on the explicit authorization of the Labor Inspectorate. Employers must register an employment contract entered with a foreign national within 30 days at the employment center. The registration includes submission of a copy of the job description approved by the Labor Inspectorate during registration of the employment contract and the payment of a registration fee of 5 percent of the gross salary plus all the benefits.

Companies must deregister employees upon termination of the contract. Deregistration applies to all levels of personnel from administrative staff to boards of directors. Foreign employees require work permits, and no employment is authorized on tourist visas. The visa application procedure, though improved, remains complex, slow and inconsistent. Processes and requirements vary according to the labor market situation at the time of application, the type of work permit being applied for, the nationality of the applicant, the country of application, and personal circumstances of the assignee and any family dependents.

Through the NPIL Angola created the investor visa, granted by the immigration authority to foreign investors, representatives, or attorneys of an investing company, to carry out an approved investment proposal. It allows for multiple entries, and a stay of two years, renewable, for the same period. The NPIL liberalizes foreign investment, limits mandates for local hiring, and primarily calls for strict enforcement on labor sourcing in the petroleum sector. International oil companies are working with the government on a new local-content initiative that will establish more explicit sourcing requirements for the petroleum sector in staffing and material. Specific to the oil sector, because of its significance to the Angolan economy, the Petroleum Activities Law requires Sonangol and its services providers to acquire materials, equipment, machinery, and consumer goods produced in Angola.

Currently, local content regulations offer only guidelines that are loosely enforced, and companies lack clarity on how to satisfy Angolan government’s regulation. While the lack of enforcement may make it easier for foreign companies to comply with local content regulations, the lack of specificity challenges companies in their business planning. For example, it is difficult for companies to compare their competitive position against each other when competing for lucrative concessions and licenses from the government, as local content is sometimes considered during competition for government tenders. Legal guidance to get the guarantees for investors under the NPIL is strongly encouraged.

Regulations around data management including encryption are still at nascent stages. Data storage The Institute for Communications of Angola (INACOM) oversees and regulates data in liaison with the Ministry of Telecommunications.

The President of Angola passed, Decree No. 214/16 on 10 October 2016, establishing the organizational framework of the data protection authority. The Ministry of Telecommunications and Information Technology (‘MTTI’) announced, on 9 October 2019, that the National Database Protection Agency (APD) had become operational.

Real Property

Transparency and land property rights are critical for Angolan economic development, given that two thirds of Angolans work in agriculture and are directly dependent on land property rights. However, the Land Act (Lei de Terras de Angola) has not been revised since its approval in December 2004. While the Land Act is a crucial step toward addressing issues of land tenure, normalization of land ownership in Angola persists with problems such as difficulties in completing land claims, land grabbing, lack of reliable government records, and unresolved status of traditional land tenure. Among other provisions, the law included a formal mechanism for transforming traditional land property rights into legal land property rights (clean titles). During the civil war, a transparent system of land property rights did not exist, so it was crucial to re-establish one shortly after the end of hostilities in 2002.

According to the “Land Act,” the State may transfer or constitute, for the benefit of Angolan natural or legal persons, a multiplicity of land rights on land forming part of its private domain. Although, it is possible to transfer ownership over some categories of land, the transfer of State land almost never implies the transfer of its ownership, but only the formation of minor land rights with leasehold being the most common form in Angola. The recipient of private property rights from the State can only transfer those rights with consent of the local authority and after a period of five years of effective use of the land according to the Land Act. Weak land tenure legislation and lack of secure legal guarantees (clean titles) are the reasons given by most commercial banks for their greater than 80 percent refusal rate for loans since land is used as collateral. Foreign real-estate developers therefore seek out public-private partnership (PPP) arrangements with State actors who can provide protection against land disputes and financial risks involved in projects that require significant cash outlays to get started.

Registering parcels of land over 10,000 hectares must be approved by the Council of Ministers. Registering property takes 190 days on average, ranking 167 out of 173 according to the World Bank’s Doing Business 2020 survey, with fees averaging three percent of property value. Owners must also wait five years after purchasing before reselling land. There are no written regulations setting out guidelines defining different forms of land occupation, including commercial use, traditional communal use, leasing, and private use. Over the years, the government has given out large parcels of land to individuals in order to support the development of commercial agriculture. However, this process has largely proceeded in an unsystematic way and does not follow any formal rule change on land tenure by the State.

Before obtaining proof of title nationwide, an Angolan citizen or an Angolan legal entity must also obtain the Real or Leasing Rights (“Usufruct”) of the Land from the Institute of Planning and Urban Management of Luanda (IPGUL), an often-time-consuming procedure that can take up to a year or more. However, if a company already owns the land, it must secure a land property title deed from the Real Estate Registry in Luanda. An updated property certificate (“certidão predial”) is obtained from the relevant Real Estate Registry, with the complete description of the property including owner(s) information and any charges, liens, and/or encumbrances pending on the property. The complex administration of property laws and regulations that govern land ownership and transfer of real property as well as its tedious registration process may reduce investor appetite for real estate investments in Angola. Dispatch no. 174/11 of March 11, 2011 mandates the total fees for the “certidão predial” include stamp duty (calculated according to the Law on Stamp Duty); justice fees (calculated according to the Law on Justice Fees); fees to justice officers (according to the set contributions for the Justice budget); along with notary and other fees. The total fee is also dependent on the current value of the fiscal unit (UCF).

Intellectual Property Rights

Angola is a member of the World Intellectual Property Organization (WIPO) and follows international patent classifications of patents, products, and services to identify and codify requests for patents and trademark registration. Angola is also member of the Paris Convention where each contracting state must grant the same IP protection to nationals of other contracting states and provides for the right of priority in the case of patents, trademarks and designs. It also recognizes the goods and services classes from the Nice Classification and allows for multi-class filing. The Nice Classification, established by the Nice Agreement, is an international classification for the registration of trademarks.

Trademark registration is mandatory to be granted rights over a mark. Angolan trademarks are valid for 10 years from the filing date and renewable for further periods of 10 years.

The Instituto Angolano de Propriedade Intelectual (IAPI) is the governmental body within the Ministry of Industry & Commerce charged with implementing patent and trademark law. The Ministry of Culture, Tourism & Environment oversees copyright law.

Implemented by the Presidential Decree No. 62/20 of March 4, the new official fees related to Industrial Property procedures in Angola, were published in the Official Gazette of the Angola Republic. The new fees came into force on March 20, 2020 and reflect an increase of values in all Industrial Property procedures practiced in this jurisdiction, updating rates that have remained unchanged for more than 20 years. The most significant alteration with respect to trademarks, consists of joining in a single fee, paid at the time of the registration application, the filing fees, the first and second publication fees, and the granting and registration certificate fees.

With regard to patents, additional fees are due for each claim after the 15th. Additionally, the request for the anticipation or postponement of the publication of a patent is now provided by the new applicable fees.

Angola is not listed in United States Trade Representative’s (USTR) Special 301 report nor the notorious market report.

For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/  . The U.S. Embassy point of contact for IPR related issues is Logan Council ( CouncilLR@state.gov ). For legal counsel, refer to Angola’s Country Commercial Guide Local Professional Services List ( http://export.gov/ccg/angola090710.asp 

Capital Markets and Portfolio Investment

There is a visible effort by the government to create more attractive conditions for foreign investment as reflected in the attempt to create a more favorable social and political climate, the new legislation on private investment and in a greater liberalization of capital movements. The dangers of absorption by the local partner or the impossibility of transferring profits are thus mitigated. The BNA abolished the licensing previously required on importing capital from foreign investors allocated to the private sector and exporting income associated with such investments. This measure compliments the need to improve the capture of FDI and portfolio investment and it is in line with the privatization program for public companies (PROPRIV) announced through Presidential Decree No. 250/19 of August 5, 2019 which encourages foreign companies to participate. In addition to the operations, BNA is also exempt from licensing, the export of capital resulting from the sale of investments in securities traded on a regulated market and the sale of any investment, in which the buyer is also not – foreign exchange resident, pursuant to Notice No. 15/2019.

BODIVA is Angola’s Debt and Securities Stock Exchange. The Stock Exchange (BODIVA) allows through a platform the trading of different types of financial instruments available to investors with rules (self-regulation), systems (platforms) and procedures that assure market fairness and integrity to facilitate portfolio investment. However, there is no effective regulatory system to encourage and facilitate portfolio investment which is poorly explored. At the moment, only local commercial banks have the ability to potentially list on the nascent stock exchange.

The central bank (BNA) partially observes IMF Article VIII on refraining from restrictions on payments and transfers for current international transactions. Foreign exchange crises and the loss of correspondent banking relationships since 2015 have prompted the BNA to adopt restrictive monetary policies that negatively affect Angola’s payment system, seen in the delay in foreign exchange denominated international transfers.

Credit is not allocated on market terms. Foreign investors do not normally access credit locally. For Angolan investors, credit access is very limited, and if available, comes with a collateral requirement of 125 percent, so most either self-finance, or seek financing from non-Angolan banks and investment funds such as the “Angola Invest” government-subsidized funding program for micro, small and medium private enterprises (SMEs). The fund, sourced from the Annual State Budget, ended on September 25, 2018, further reducing funding opportunities for many SMEs. Banks credit issue appetite also lies more on government than the private sector as credit to government is more profitable for these commercial banks.

Money and Banking System

Angola is over-banked. Although four banks have been closed since 2018, 26 banks still operate in Angola. The top seven banks control nearly 80% of sector deposits, but the rest of the sector includes a large number of banks with minimal scale and weak franchises. 47% of income-earners utilize banking services, with 80% being from the urban areas. Angolan banks focus on profit generating activities including transactional banking, short-term trade financing, foreign exchange, and investments in high-interest government bonds.

The banking sector largely depends on monetary policies established by Angola’s central bank, the Banco Nacional de Angola (BNA). Thanks to the ongoing IMF economic and financial reform agenda, the BNA is adopting international best practices and slowly becoming autonomous. On February 13, 2021 President Joao Lourenco issued an edict granting autonomy to the BNA, a decision taken after IMF recommendations. The reforms taken under the Lourenco administration have lessened the political influence over the BNA and allowed it to more freely adopt strategies to build resilience from external shocks on the economy. As Angola’s economy depends heavily on oil to fuel its economy, so does the banking sector. The BNA periodically monitors minimum capital requirements for all banks and orders the closure of non-compliant banks.

Although the RECREDIT Agency purchased non-performing loans (NPLs) of the state’s parastatal BPC bank, NPLs remain high at 32%, a decrease of 5% since 2016. Credit availability is minimal and often supports government-supported programs. The GRA obliged banks to grant credit more liberally in the economy, notably by implementing a Credit Support Program (PAC). For instance, the BNA has issued a notice obliging Angolan commercial banks to grant credit to national production in the minimum amount equivalent to 2.5% of their net assets until the end of 2020.

The country has not lost any additional correspondent banking relationships since 2015. The BNA is currently working on reforms to convince international banks to reestablish correspondent banking relationships. The majority of transactions go via third party correspondent banking services in Portugal banks, a costly option for all commercial banks. At the time of issuing this report no correspondent banking relationships were at jeopardy.

Foreign banking institutions are allowed to operate in Angola and are subject to BNA oversight.

The Monetary Policy Committee (MPC) of the BNA met in March 2020, to consider recent changes to the main economic indicators, and taking into account the COVID-19 pandemic and its impact on the domestic economy. The MPC paid particular attention to the external accounts, and their implications for the conduct of monetary and exchange rate policies. The MPC has accordingly decided to:

• Maintain the base interest rate, BNA rate, at 15.5%;
• Maintain the interest rate on the liquidity absorption facility with an overnight maturity, at 0%;
• Reduce the interest rate on the liquidity absorption facility with a seven-day maturity, from 10% to 7%;
• Maintain reserve requirement coefficients for national and foreign currencies at 22% and 15%, respectively;
• Establish a liquidity facility with a maximum value of Kz 100 billion for the acquisition of government securities held by non-financial corporations:
• Extend to the 54 products defined in PRODESI the credit granted with recourse to the reserve requirements, and establish a minimum number of loans to be granted per bank;
• Exempt from the limits established per type of payment instrument, the import of products included in the basic food basket, and of and these continue to cripple lending appetite of commercial banks to the private sector medicines;
• Set April 1 as the start date for the use of the Bloomberg platform by the oil companies and by the National Agency of Petroleum, Gas and Biofuels, for the sale of foreign currency to commercial banks.

Foreign Exchange and Remittances

Foreign Exchange

The Angolan National Bank (Banco Nacional de Angola –BNA) published Notice no. 15/2019, of December 30, 2019, which establishes the rules and procedures applicable to foreign exchange operations conducted by non-resident entities related to: (a) foreign direct investment; (b) investment in securities (portfolio investment); (c) divestment operations; and (d) income earned by non-residents from direct investment or portfolio investment (the “Notice”). The notice also applies to all foreign exchange transactions relating to “foreign investment projects that were registered with BNA prior to its publication.” Investments made by non-resident foreign exchange entities in the oil sector are excluded from the scope of the Notice.

The notice distinguishes foreign direct investment and portfolio investment. Direct investment is investment made in the “creation of new companies or other legal entities” or through the acquisition of shareholdings in non-listed Angolan companies or, if listed in a regulated market when the investment gives the external investor a right of control equal to 10% or more. In turn, portfolio investment represents the investment in securities. In the case of the purchase of securities representing the capital of a listed company, portfolio investment will be considered only when the voting rights associated with the investment are less than 10% of the listed company’s capital stock.

Since dropping the peg on the dollar in 2018, the local currency fluctuates freely. In October 2019, the BNA fully liberalized the foreign exchange regime, abandoning the trading band that had been in place since January 2018. Its previous policy of controlled exchange rate adjustment prevented the kwanza from depreciating by more than 2.0% at currency auctions. The BNA also has allowed oil companies to directly sell foreign currency to commercial banks. The BNA said the move is expected to normalize the foreign exchange market through the reduction of its direct intervention with oil firms, increase the number of foreign currency suppliers, and revive the country’s foreign exchange market. The exchange rate is determined by the rate on the day of sale of forex to commercial banks. On June 22, 2020, the BNA adopted Bloomberg’s foreign exchange electronic trading system (FXGO) and its electronic auction system to bring greater efficiency and transparency to Angola’s forex market.

Remittance Policies

Based on the notice issued on December 23, 2019 as per above, as long as adequate supporting documentation is submitted to the commercial bank, foreign investors can freely transfer within 5 days abroad:

1. dividends, interest and other income resulting from their investments;
2. shareholder loan repayments;
3. proceeds of the sale of securities listed on the stock exchange;
4. when the participated entity is not listed on the stock exchange, the proceeds of the sale, when the purchaser is also a foreign investor and the amount to be transferred abroad by the seller is equal to the amount to be transferred from abroad by the purchaser, in foreign currency;

The transfer abroad of capital, requiring the purchase of foreign currency, when the participated entity is not listed on the stock exchange, requires prior exchange control approval when it relates to the following:

1. The sale of the whole or a part of an investment;
2. The dissolution of the participated entity;
3. Any other corporate action that would reduce the capital of the participated entity.

There may be delays greater than 60 days if the documentation submitted to the BNA is not complete such as a tax due statement from the General Tax Agency and companies’ balance sheet statements.

The BNA has facilitated remittances of international supplies by introducing payment by letters of credit. Also, the 2018 NPIL grants foreign investors “the right and guarantee to transfer abroad” dividends or distributed profits, the proceeds of the liquidation of their investments, capital gains, the proceeds of indemnities and royalties, or other income from remuneration of indirect investments related to technology transfer after proof of implementation of the project and payment of all taxes due. The government continues to prioritize foreign exchange for essential goods and services including the food, health, defense, and petroleum industries.

Sovereign Wealth Funds

In October 2012, former President Eduardo dos Santos established a petroleum funded USD 5 billion sovereign wealth fund called the Fundo Soberano de Angola (FSDEA). The FSDEA was established in accordance with international governance standards and best practices as outlined in the Santiago Principles.

In February 2015, the FSDEA was recognized as transparent by the Sovereign Wealth Fund Institute (SWFI), receiving a score of 8 out of 10. The FSDEA has the express purpose of profit maximization with a special emphasis on investing in domestic projects that have a social component ( http://www.fundosoberano.ao/investments/  ). Jose Filomeno dos Santos (Zenu), son of former President Jose Eduardo dos Santos, was appointed chairman of FSDEA in June 2013, but was removed by President Lourenco in 2017, and is appealing a five-year jail term pronounced in August 2020, following his trial for money laundering, embezzlement and fraud. Former Minister Carlos Alberto Lopes was named new head of the FSDEA that same year.

Half of the initial endowment of FSDEA was invested in agriculture, mining, infrastructure, and real estate in Angola and other African markets, and the other half was supposedly allocated to cash and fixed-income instruments, global and emerging-market equities, and other alternative investments. The FSDEA is in possession of approximately USD 3.35 billion of its private equity assets previously under the control of QG and given to economic and financial hardship, the fund’s equity was reduced by USD 2 billion to finance the Program for Intervention in the Municipalities in 2019 and USD 1.5 billion for the fight against the Covid-19 pandemic in 2020. The FSDEA also announced that the government will use the remainder, USD 1.5 billion of the fund’s assets to support social programs on condition of future repayment through increased tax on the BNA’s rolling debts.

In Angola, certain SOEs exercise delegated governmental powers, especially in the mining sector where the government is the sole concessionaire. Foreign investors may sometimes find demands made by SOEs excessive, and under such conditions, SOEs have easier access to credit and government contracts. There is no law mandating preferential treatment to SOEs, but in practice they have access to inside information and credit. Currently, SOEs are not subject to budgetary constraints and quite often exceed their capital limits.

SOEs, often benefitting from a government mandate, operate mostly in the extractive; transportation; commerce; banking; and construction, building, and heavy equipment sectors. All SOEs in Angola are required to have boards of directors, and most board members are affiliated with the government. SOEs are not explicitly required to consult with government officials before making decisions. By law, SOEs must publish annual financial reports for the previous year in the national daily newspaper Jornal de Angola by April 1. Such reports are not always subject to publicly released external audits (though the audit of state oil firm Sonangol is publicly released). The standards used are often questioned. Not all SOEs fulfill their legal obligations, and few are sanctioned.

Angola’s supreme audit institution, Tribunal de Contas, is responsible for auditing SOEs. However, reports from the Tribunal de Contas are only made public after a few years. The most recently published report, for 2017, was published in 2019. Angola’s fiscal transparency would be improved by ensuring its supreme audit institution’s audits of SOEs and the government’s annual financial accounts are made public within a reasonable period. Publicly available audit reports would also improve the transparency of contracts between private companies and SOEs.

In November 2016, the Angolan Government revised Law 1/14 “Legal Regime on Issuance and Management of Direct and Indirect Debt,” which now differentiates between ‘direct’ and ‘indirect’ public debt. The GRA considers SOE debt as indirect public debt, and only accounts in its state budget for direct government debt, thus effectively not reflecting some substantial obligations in fact owed by the government. President Lourenço has launched various reforms to improve financial sector transparency, enhance efficiency in the country’s SOEs as part of the National Development plan 2018-2022 and Macroeconomic Stability Plan. The strategy included the prospective privatization of 195 SOE assets that are deemed not profitable to the state. The privatization will possibly include the restructuring of the national air carrier TAAG, as well as Sonangol and its subsidiaries. The latter intends to sell off its non-core businesses as part of its restructuring strategy to make the parastatal more efficient.

Angola is not a party to the WTO’s Government Procurement Agreement (GPA). Angola does not adhere to the OECD guidelines on corporate governance for SOEs.

Privatization Program

In 2020 the GRA increased the number of assets to be privatized by 2022 from 90 to 195 through the Angola Debt and Securities Exchange market (BODIVA) and under the supervision of the Institute of Management of Assets and State Holdings (IGAPE). The privatization program “PROPRIV,” implements the Government’s Interim Macroeconomic Stabilization Program (PEM), which aims to rid the government of unprofitable public institutions. The GRA plans to privatize part of state-owned Angola Telecommunications Company, companies in the oil and energy sector, as well as several textile and beverages industries. The GRA has stated that the privatization process will be open to interested foreign investors and has guaranteed a transparent bidding process. The tenders are open to local and foreign investors. In 2020 PROPRIV helped the government raise over USD 500 million through the privatization of 33 assets following public tenders.

The oil company Sonangol, the State’s largest SOE, sold 14 of the 20 companies it planned to privatize in 2019. It also sold 19 out of 26 planned to be sold in 2020. The Covid-19 pandemic has slowed privatization efforts, and the rest of the total 70 assets to be privatized will likely be sold in 2021 and 2022. The list includes divestments in the subsidiaries and assets of Sonangol Cabo Verde – Sociedade e Investimentos and Óleos de São Tomé and Príncipe, as well as stakes in Founton (Gibraltar), Sonatide Marine (Cayman Islands), Solo Properties Knightbridge (United Kingdom), Societé Ivoiriense de Raffinage (Cote d’Ivoire), Puma Energy Holdings (Singapore) and Sonandiets Services (Panama), by 2021.

Sonangol will sell its stake in WTA-Houston Express and French company WTA, as well as assets in Portuguese real estate companies Puaça, Diraniproject III and Diraniproject V, in Sonacergy – Serviços e Construções, Sonafurt International Shipping and Atlantis Viagens e Turismo. Sonangol also holds assets to be privatized in Angolan companies in the Health, Education, Transport, Telecommunications, Energy, Civil Construction, Mineral Resources and Oil and Banking sectors.

The sale of more than 60 non-core assets will make the company “financially more robust,” and allow it to focus on its core business.

The GRA created a privatization commission on February 27, 2018 and a website https://igape.minfin.gov.ao/PortalIGAPE/#!/sala-de-imprensa/noticias/5413/anuncio-de-concurso-tender-announcement   for submission of tenders. Full tender documents can be obtained by visiting the below link: http://www.ucm.minfin.gov.ao/cs/groups/public/documents/document/zmlu/mdu4/~edisp/minfin058842.zip

Alternatively, contact igape@minfin.gov.ao .

The government has few initiatives to promote responsible business conduct. On March 26, 2019, the UNDP launched the National Network of Corporate Social Responsibility, called “RARSE,” to promote the creation of a platform to reconcile responsible business conduct with the needs of the population. The government, through the Ministry of Education, also held a campaign under the theme, “Countries that have a good education, that enforce laws, condemn corruption, privilege and practice citizenship, have as a consequence successful social and economic development.” The government has enacted laws to prevent labor by children under 14 and forced labor, although resource limitations hinder adequate enforcement. In June 2018, the government passed a National Action Plan (2018-2022) to eradicate the worst forms of child labor (the PANETI). With limitations, the laws protect the rights to form unions, collectively bargain, and strike. Government interference in some strikes has been reported. The Ministry of Public Administration, Employment, and Social Security has a hotline for workers who believe their rights have been infringed. Angola’s Chamber of Commerce and Industry established the Principles of Ethical Business in Angola.

The GRA does not fully meet the minimum standards for the elimination of trafficking in persons but is making significant efforts to do so. Those efforts to Angola being led to Angola being upgraded to Tier 2 in 2020. A National Action Plan to Combat and Prevent Trafficking in Persons in 2019 included measures to improve the capacities of coordination agencies, investigating more potential trafficking cases, convicting more traffickers, training front-line responders, conducting some awareness-raising activities, and improving data collection on trafficking crimes through use of the Southern African Development Community (SADC) regional data collection tool.

The government continues to strengthen its bilateral efforts on anti-corruption and improved governance. On July 1, 2019, the government signed a Memorandum of Understanding (MOU) on Security and Public Order with the United States. The MOU enables the two governments to cooperate in the fields of information exchange related to the prevention, investigation, and combatting of criminal activity, including the collection and processing of evidence. The MOU encourages the exchange of information on criminal investigation techniques, the implementation of professional training programs, and exchange of delegations.

To support increasing fiscal transparency and sustainable debt management, the U.S. Government offers ongoing technical assistance to the Financial Intelligence Unit on Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT). The United States also provides periodic technical assistance to the Ministry of Finance and communicates with the Angolan banking sector to adopt international best practices that will help Angola prepare for the Financial Action Taskforce review starting in 2021.

In 2015, Angola organized an interagency technical working group to explore Angola’s possible membership in the Voluntary Principles on Security and Human Rights (VPs) and the Extractive Industries Transparency Initiative (EITI). Angola formally announced its intention to join the EITI in September 2020. Angola has been a member of the Kimberley Process (KP) since 2003 and chaired the KP in 2015.

Angola is not a party to the WTO’s GPA, and does not adhere to the OECD guidelines on corporate for SOEs.

Additional Resources 

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 and;
• North Korea Sanctions & Enforcement Actions Advisory

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.

Angola occupies the 142nd place out of 180 in the Corruption perception index  of the organization Transparency International, in clear progress since the last report (+19 places).

Corruption remains a strong impediment to doing business in Angola and has had a corrosive impact on international market investment opportunities and on the broader business climate. Angola has a comprehensive anti-corruption legal framework, but implementation remains a severe challenge.

In January 2020, the government issued a general conduct guide mostly for the National Public Procurement Service, the regulatory and supervisory body of public procurement in Angola, outlining whistleblowing responsibilities for corruption and related offences in public procurement. Since coming into office on an anti-corruption platform, President Lourenco has led a concerted effort to restore investor confidence by prioritizing anti-corruption and the fight against nepotism. Following approval in October 2019, a new law on anti-money laundering, combating the Financing of Terrorism, and the proliferation of weapons of mass destruction came into force in January 2020, superseding Law No. 34/11, of 12 December 2011. The new law incorporates several IMF and the Financial Action Task Force (FATF) recommendations. Importantly, it now recognizes and politically exposed persons as any national or foreign person that holds or has held a public office in Angola, or in any other country or jurisdiction, or in any international organization, and subjects them to greater scrutiny by the financial sector. Other significant improvements in the new law include:

• The definition of “ultimate beneficial owner” was expanded to encompass, notably, all persons that hold, directly or indirectly, a controlling interest in a company, including the control of the share capital, voting rights or a significant influence in the company. There is no longer a minimum threshold to determine the existence of control.
• Identification and diligence duties are now applicable to occasional transactions executed via wire transfers in an amount of more than USD 1,000, in national or foreign currency.
• The scope of the duty to communicate suspicious transactions in cash or wire transfers has been amended and is now applicable to transactions between USD 5,000 and USD 15,000, depending on the underlying operation.
• Payment service providers that control the ordering and reception of a wire transfer must consider the information received from the sender and the beneficiary to determine whether there is a duty to report.
• The Tax Authorities now have a duty to report suspicious cross-border payments.

The president approved a set of amendments to the Public Contracts Law on November 16, 2018, which imposed further requirements for the declaration of assets and income, interests, impartiality, confidentiality, and independence in the formation and execution of public contracts. In December 2018, the Government of Angola rolled out a national anti-corruption strategy (NACS) billed under the motto, “Corruption – A fight for all and by all.” The five-year strategy, developed in concert with the UNDP, is designed to improve government transparency, accountability, and responsiveness to citizen needs. The NACS focuses on three pillars in the fight against corruption – prevention, prosecution, and institutional capacity building.

Crimes linked to corruption are enforced through the Public Probity Law of 2010. President Lourenco’s mandate for senior government officials requires all public officials to disclose their assets and income once every two years, and it prohibits public servants from receiving money or gifts from private business deals. The Attorney General’s Office has indicted two members of Parliament on corruption charges since the publication of the country’s anti-corruption strategy in 2018. The Penal Code makes it a criminal offense for private enterprises to engage in business transactions with public officials.

Angola has incorporated regional anti-corruption guidelines and into their domestic legislation, including: the SADC “Protocol Against Corruption,” the African Union’s “Convention on Preventing and Combating Corruption,” and the United Nation’s “Convention against Corruption.” Angola does not have an independent body to investigate and prosecute corruption cases, and enforcement of existing laws is generally weak or non-existent. However, the Attorney General’s office has a department focused on investigating of corruption crimes and recovering Assets. Three institutions – the Audit Court, the Inspector General of Finance, and the Office of the Attorney General – perform many of the anti-corruption duties in Angola. http://www.business-anti-corruption.com/country-profiles/sub-saharan-africa/angola/initiatives/public-anti-corruption-initiatives.aspx  

The government also passed the Law on the Repatriation of Financial Resources in June 2018, which established the terms and conditions for the repatriation of financial resources held abroad by resident individuals and legal entities with registered offices in Angola. The law exempted individuals and legal entities, who voluntarily repatriated their financial resources within a period of 180 days following the date of entry into force of the Law, by transferring the funds to an Angolan bank account, from any obligation or liability of tax, foreign exchange and criminal charge. Upon expiry of the grace period for repatriation, the law allowed for the possibility of forced repatriation by the government. The government estimates that USD 30 billion of Angolan assets are sheltered overseas though some estimates point to as much as USD 100 billion. In early 2019, the government established the National Asset Recovery Service (SNRA), an institution linked to the Attorney General’s Office (PGR), in charge of ensuring compliance with the repatriation law. Attorney General Helder Pita Groz announced in December 2020 that since the establishment of the SRNA, Angola had recovered more than USD 5 billion in assets and cash. Also, in January 2019, the National Assembly approved the new Penal Code, which includes harsher punishment for active and passive corruption. While a substantial proportion of Angolans (44%) see corruption as declining, a majority (54%) say the GRA is doing a poor job in fighting corruption. The perception persists that the GRA is using the fight against corruption as a tool to crack down on political opponents within the ruling MPLA party. More than half (55%) believe that people who report corruption to the authorities risk retaliation or other negative consequences. The national police are widely perceived as more corrupt than any other public officials with whom citizens regularly interact.

Private sector companies have individual internal controls for ethics, compliance and tracking fraudulent activities. However, they do not have a mechanism to detect and report irregularities related to dealings with public officials. It is important for U.S. companies, regardless of their size, to assess the business climate in the sector in which they will be operating or investing, and to have an effective compliance program or measures to prevent and detect corruption, including foreign bribery. U.S. individuals and firms operating or investing in Angola, should take the time to become familiar with the relevant anticorruption laws of both Angola and the United States in order to properly comply with them, and where appropriate, to seek legal counsel.

Angola is not a member state to the UN Anticorruption Convention or the OECD Convention on Combatting Bribery. On March 26, 2018 it ratified and published in the national gazette the African Union Convention on the Prevention and Fight against Corruption and now takes legislative measures against illicit enrichment (Article 8), confiscation and seizure of proceeds and means of corruption (Article 16), and international cooperation in matters of corruption and money laundering (Article 20).

Resources to Report Corruption

Hélder Pitta Grós
Procurador Geral da Republica (Attorney General of the Republic)
Procurador Geral da Republica (Attorney General’s Office)
Travessa Antonio Marques Monteiro 22, Maianga
Telephone: 244-222-333172

Angola maintains a politically stable environment. Politically motivated violence is not a high risk, and incidents are rare. The last significant incident of political violence happened in 2010 during an attack against the Togolese national soccer team by FLEC-PM (Front for the Liberation of the Enclave of Cabinda—Military Position) in the northern province of Cabinda. FLEC threatened Chinese workers in Cabinda in 2015 and claimed in 2016 that they would return to active armed struggle against the Angolan government forces. No attacks have since ensued and the FLEC has remained relatively inactive.

President Lourenco has pledged to govern for all Angolans and to combat two of the country’s major problems: corruption and mismanagement of public funds. President Lourenco’s government seeks reform of the state and national cohesion. Local elections – “Autarquias” –were anticipated to take place in 2020 but have not yet occurred due to the COVID-19 pandemic and the lack of key legislation governing the elections.

Angola is also becoming more assertive and demonstrating a more steadfast commitment to peace and stability in Africa, particularly in the Great Lakes region. In 2019 and 2020 it facilitated an agreement to end mounting tensions between the Rwanda and Uganda. Angola maintains the rotating presidency of the International Conference on the Great Lakes Region (ICGLR) and has played an important convening role on the situation in the Central African Republic.

With Angola’s economy continuing to struggle, social dissatisfaction is on the rise and is triggering reactions particularly among Angolan young adults who take to the streets occasionally to protest against overall economic hardship and unrealized political pledges. Large pockets of the population live in poverty without adequate access to basic services, and the country could benefit from more inclusive development policies. According to the 2018/2019 Expenditure and Income Survey from the National Institute of Statistics, the poverty index was at 40.6%. A social protection scheme program has been launched with a pilot cash transfer project which will benefit over 1.6 million vulnerable families until 2022 around the country.

The Angolan labor force has limited technical skills, English language capabilities, and managerial ability. Many employers find it necessary to invest heavily in educating and training their Angolan staff. Angola’s labor force was estimated to be 13.1 million in 2019. The literacy rate is estimated to be 70 percent (82 percent male, 60.7 percent female). According to the National Statistics Institute, in 2019, the unemployment rate in the population aged 15 and above was around 31 percent, although more than 60 percent of all jobs are in the informal sector. Eighty-six percent of primary school age children attend school. The law mandates that children must attend school for six years beginning at age six. Twenty-nine percent of boys and seventeen percent of girls attend high school.

There are gaps in compliance with international labor standards which may pose a reputational risk to investors. Children are sometimes employed in agriculture, construction, fishing, and coal industries. Forced labor is sometimes used in agricultural, fishing, construction, domestic services, and artisanal diamond mining sectors. Additional information is available in the 2019 Trafficking in Persons Report, (https://www.state.gov/reports/2020-trafficking-in-persons-report/angola/), 2020 Country Report on Human Rights Practices (https://www.state.gov/reports/2020-country-reports-on-human-rights-practices/angola/), and 2019 Findings on the Worst Forms of Child Labor, ().

Angola’s General Labor Law (Law No. 2/00), updated in 2015, recognizes the right of workers, except members of the armed forces and police, to form and join independent unions, to collectively bargain, and to strike, but these rights are either limited or restricted. To establish a union, a minimum of 30 percent of workers from a sector at the provincial level must participate and prior authorization by authorities with accompanying bureaucratic approvals is required. Unlike workers in the private sector, civil service employees do not have the right to collective bargaining. While the law allows unions to conduct their activities without government interference, it also places some restrictions on engaging in a strike. Strict bureaucratic procedures must be followed for a strike to be considered legal. The government can deny the right to strike or obligate workers to return to work for members of the armed forces, police, prison staff, fire fighters, other “essential services” public sector employees, and oil workers. The government may intervene in labor disputes that affect national security, particularly strikes in the oil sector. The definition of civil service workers providing “essential services” is broadly defined, encompassing the transport sector, communications, waste management and treatment, and fuel distribution.

Collective labor disputes are to be settled through compulsory arbitration by the Ministry of Labor, Public Administration and Social Security. The law does not prohibit employer retribution against strikers, but it does authorize the government to force workers back to work for “breaches of worker discipline” or participation in unauthorized strikes. The law prohibits anti-union discrimination and stipulates that worker complaints be adjudicated in the labor court. Under the law, employers are required to reinstate workers who have been dismissed for union activities.

The General Labor Law also spells out procedures for hiring workers. For work contracts of indefinite duration, the law provides for a basic probationary period of up to six months, during which the worker or employer can terminate the contract without notice or justification. After the probationary period ends, dismissed workers have the right to appeal to a labor court. Many employers prefer to reach a monetary settlement with workers when a dispute arises, rather than bring cases before the labor court. The World Bank’s Doing Business 2020 report found that fired workers with one to ten years of service received on average 13.6 weeks of salary compensation. The notice period before dismissing a worker is 4.3 weeks.

The government conducts annual surveys of the oil industry to implement a requirement that oil companies hire Angolan nationals when qualified applicants are available. If no qualified nationals apply for the position, then the companies may request the government’s permission to hire expatriates. Outside of the petroleum sector, policies to encourage “Angolanization” of the labor force, i.e., the hiring of locals, discourages bringing in expatriates. However, the associated visa processes for the oil industry are currently easier and faster due to a special process the Angolan Ministry of Petroleum offers companies in that sector. Additionally, working visas for other sectors have also become easier to obtain and the GRA launched an investor’s visa in 2018.

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

Table 4: Sources of Portfolio Investment
Data not available.

Dorcas Makaya, Economic Specialist
United States Embassy, Luanda
Rua Houari Boumedienne 32 Miramar, Angola
Telephone: +244 222 641 154
Email: MakayaDC@state.gov

Policies Towards Foreign Direct Investment

The Beninese government encourages foreign investment, which it views as critical for economic development and successful implementation of the $15 billion PAG. APIEX aims to promote foreign direct investment and reduce administrative barriers to doing business. APIEX serves as the single investment promotion center and conduit of information between foreign investors and the Beninese government. It is the technical body responsible for reviewing applications for approval under the Investment Code and the administrative authority for special economic zones (SEZs). The agency has significantly reduced processing times for registration of new companies (from 15 days to one day) and construction permits (from 90 to 30 days), but the World Bank 2020 Doing Business report indicates that it takes 88 days to deal with construction permits. In practice, APIEX faces capacity constraints, processing times can be longer than stated, and its website is often out of date and lacks information on the latest regulations and laws. The Investment Code, amended in 2020, establishes conditions, advantages, and rules applicable to domestic and foreign direct investment. Additional information on business startup is available at https://monentreprise.bj/  .

Limits on Foreign Control and Right to Private Ownership and Establishment

Beninese law guarantees the right to own and transfer private property. The court system enforces contracts, but the judicial process is inefficient and suffers from corruption. Enforcement of rulings is problematic. Most firms entering the market work with an established local partner and retain a competent Beninese attorney. A list of English-speaking lawyers and legal counselors is available on the Embassy’s website: https://bj.usembassy.gov/u-s-citizen-services/attorneys/

Other Investment Policy Reviews

Business Facilitation

In an effort to facilitate business travel and tourism, Benin implements a visa-free system for African nationals and an online e-visa system for other foreign nationals. The country is working to open four new trade offices abroad to enhance Benin’s international business opportunities. One is already underway in Shenzhen, China; others are planned for Europe, the United States, and the Middle East.

Benin’s 2017 Property Code made property registration simpler and less expensive in order to boost the real estate market, improve access to credit, and reduce corruption in the registration process. The measures apply to real personal property, estate and mortgage taxes, and property purchase receipts. In order to register property, individuals and businesses must present a taxpayer identification number (registration for which is free). Land registration and property purchase certifications are free, but there is a fee for obtaining a property title.

Benin Control – a private company operating under the supervision of the Ministry of Infrastructure and Transport – is charged with expediting customs clearances and minimizing processing barriers to clearing cargo at the Port of Cotonou. Benin Control makes it possible to obtain cargo clearance within as little as 48 hours after its off-loading at the Port of Cotonou, though in practice this can take longer. The reinstitution of the cargo inspection and scanning program known as PVI, first tried in 2012, resumed operations at the Port of Cotonou in 2017. Under the PVI program, Benin Control scans between 30 and 45 randomly selected shipping containers per hour. Benin Control bills all containers exiting the Port of Cotonou – regardless of whether they are selected for scanning – at the rate of 35,000 FCFA ($68) for a 20-foot container, and 45,000 FCFA ($78) for a 40-foot container.

The government, through the state-owned Benin Water Company (SONEB) and Beninese Electric Energy Company (SBEE), provides service connections to potable water and electricity free of charge to Small and Medium Size Enterprises and Industries.  Eligible companies are responsible for paying the water and electricity meter installation fees.  Online application is available at https://www.soneb.bj/soneb15/pme-pmi-raccordement-gratuit and https://www.sbee.bj/site/demande-de-raccordement-des-pme-pmi-conditions/

Outward Investment

Benin has bilateral investment treaties signed and in force with the Belgium-Luxembourg Economic Union, Burkina Faso, Canada, Germany, Kuwait, Netherlands, Switzerland, and the United Kingdom.  Benin is listed as a member country to International Investment Agreements with the Economic Community of West African States (ECOWAS), the West African Economic and Monetary Union (WAEMU), and the African Union.  The United States and WAEMU have an Agreement Concerning the Development of Trade and Investor Relations, which contains investment provisions.  Benin does not have a bilateral taxation treaty with the United States, though as of 2021 it was eligible under the African Growth and Opportunity Act (AGOA) to export certain items duty-free to the United States.

Transparency of the Regulatory System

Benin is a member of UNCTAD’s international network of transparent investment procedures. Foreign and domestic investors can find detailed information on administrative procedures applicable to investment and income generating operations at https://unctad.org/news/how-un-helped-benin-become-worlds-fastest-place-start-business-mobile-phone , including the number of steps, name and contact details of the entities and persons in charge of procedures, required documents and conditions, costs, processing time, and legal bases justifying the procedures. There is no rule to prevent a monopoly over a particular business sector. The Benin Private Investment Council ( http://www.cipb.bj/ ) is the only business-related think-tank or body that advocates for investors. Generally, draft bills are not available for public comment though promulgated laws are available at https://sgg.gouv.bj/documentheque/lois/ . Individuals, including non-citizens, have the option to file appeals about or challenge enacted laws with the Constitutional Court.

International Regulatory Considerations

Benin is a member of WAEMU and the Organization for the Harmonization of African Business Law (OHADA) and has adopted OHADA’s Universal Commercial Code (codified law) to manage commercial disputes and bankruptcies within member countries. Benin is also a member of OHADA’s Common Court of Justice and Arbitration and the International Center for the Settlement of Investment Disputes (ICSID). OHADA provisions govern bankruptcy. Debtors may file for reorganization only, and the creditors may file for liquidation only. Benin is a member of the WTO and notifies all draft technical regulations to the organization’s Committee on Technical Barriers to Trade (TBT).

Legal System and Judicial Independence

Benin has a civil law system. The legal framework includes various legislative and regulatory texts covering family law, land law, labor law, criminal law, criminal procedure, and civil, commercial, social, and administrative proceedings. The Cotonou commercial court, created in 2017, enforces commercial laws and regulations. In 2018, Benin created an anti-terrorism, drugs, and economic crimes court (CRIET), which until recently lacked a mechanism for substantive appeal. The CRIET has convicted and sentenced numerous government detractors and political opponents, raising concerns about its independence. In February 2020, Benin created an appeals chamber within the CRIET. In general, judicial processes are slow, and challenges to the enforcement of court decisions are common. Magistrates and judges, though independent by law, are appointed by the Executive. Benin’s courts enforce rulings of foreign courts and international arbitration.

Laws and Regulations on Foreign Direct Investment

The Investment Code provides the legal framework for foreign direct investment. The Code establishes conditions, advantages, and rules applicable to domestic and foreign direct investment. The GOB website https://benindoingbusiness.bj/  makes available online information on foreign direct investment regulations and procedures, though its website is often incomplete and out of date. Benin is a member of OHADA’s Common Court of Justice and Arbitration (CCJA) and the International Center for the Settlement of Investment Disputes (ICSID). Investors may include arbitration provisions in their contracts in order to avoid prolonged entanglements in the Beninese courts. The United Nations investment guide for Benin ( https://www.theiguides.org/public-docs/guides/benin/ ) provides a general guide for foreign direct investment steps and procedures.

Competition and Antitrust Laws

Benin’s legal framework does not address anti-trust or competition issues. The government does not have an agency or office that reviews transactions for competition-related concerns.

Expropriation and Compensation

The government is forbidden by law from nationalizing private enterprises operating in Benin.

In July 2020 West African hotel developer Teyliom International filed a request for arbitration with the World Bank International Center for Settlement of Investment Disputes (ICSID) in relation to the Beninese government’s expropriation of a hotel the company had been constructing in Cotonou. The arbitration case is currently pending at ICSID.

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

Dispute Settlement

ICSID Convention and New York Convention

Benin is a member of ICSID. Benin is a party to the New York Convention of 1958 on the Recognition and enforcement of Foreign Arbitral Awards.

Investor-State Dispute Settlement

Benin does not have a bilateral investment treaty with the United States.

There is an ongoing investment dispute between the Beninese government and a U.S. immigration and aviation security company. In 2016, the U.S. company alleged the government canceled a contract for the provision of immigration security systems at Cotonou’s airport. In 2017, the U.S. company filed a request for arbitration with the International Chamber of Commerce (ICC). In 2019, the ICC found the government at fault for cancelling the contract and issued a $95 million judgment in favor of the U.S. company. In 2020, the ICC upheld its earlier decision. The government has not respected the ICC decision.

Since 2010, three other disputes between U.S. investors and the Beninese government were resolved in favor of the U.S. investors.

International Commercial Arbitration and Foreign Courts

Benin has adopted OHADA’s Universal Commercial Code (codified law) to manage commercial disputes and bankruptcies. Benin is a member of the OHADA, CCJA, and ICSID.

Bankruptcy Regulations

OHADA provisions govern bankruptcy. Debtors may file for reorganization only, and creditors may file for liquidation only. Benin ranked 108 out of 190 in the “Resolving Insolvency” category of the 2020 World Bank Doing Business report.

Investment Incentives

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

Foreign Trade Zones/Free Ports/Trade Facilitation

The Investment Code allows for the creation of SEZs and establishes incentives such as tax reductions for investors. There are currently three SEZs in Benin, but only one, located in southern Benin, is active. SEZ zone investors may benefit from reduced tax liability on profits and exemptions for import and export duties. Investors must meet several criteria including employing a minimum number of Beninese nationals, safeguarding the environment, and meeting nationally accepted accounting standards. Local entities and foreign investors enjoy the same opportunities.

Performance and Data Localization Requirements

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

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

Real Property

The Land Act, amended in 2017, codifies real property rights. Land ownership disputes account for roughly 80 percent of the cases seen by Beninese tribunals. The Land Act is designed to ensure fair access to land and protect ownership rights. The Land Act establishes a transparent legal procedure for obtaining and documenting ownership, reduces property speculation in urban and rural areas, and encourages land development. The Land Act stipulates that development projects financed by international or multinational agencies cannot implement or result in forced evictions. The state is obligated to do everything possible at each stage of project development to ensure due respect of economic, social, and cultural rights recognized by international conventions and the Beninese constitution.

Secured interests in real and personal property are recognized and enforced. Secured interests in property are registered with the Land Office of the Ministry of Finance. However, it is recommended that foreign and non-resident investors buy land with title deeds and the services of a notary public in order to avoid land disputes that may result from the acquisition process. Large land leases for investment in rural areas are enforced by local city halls in conformity with the Land Act. Additional information regarding the acquisition of property may be found at the Beninese Land Agency’s website at https://www.andf.bj/ 

Intellectual Property Rights

The 2005 Law on Copyright and Related Rights regulates intellectual property rights. Benin is a member of the World Intellectual Property Organization (WIPO) and has acceded to WIPO treaties and conventions on copyrights and intellectual property protection. However, enforcement of intellectual property rights in Benin is constrained by the government’s limited capacity.

Benin is not included in the United States Trade Representative (USTR) Special 301 Report or the Notorious Markets List.

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

Capital Markets and Portfolio Investment

Government policy supports free financial markets, subject to oversight by the Ministry of Finance and the West African States Central Bank (BCEAO). Foreign investors may seek credit from Benin’s private financial institutions and the WAEMU Regional Stock Exchange (Bureau Regional des Valeurs Mobilieres – BRVM) headquartered in Abidjan, Cote d’Ivoire, with local branches in each WAEMU member country. There are no restrictions for foreign investors to establish a bank account in Benin and obtain loans on the local market. However, proof of residency or evidence of company registration is required to open a bank account.

Money and Banking System

The banking sector is generally reliable. Twelve private commercial banks operate in Benin in addition to the BCEAO and a planned subsidiary of the African Development Bank. Taking into account microfinance institutions, roughly 22.5 percent of the population had access to banking services in 2018, the latest year for which data is available. In recent years, non-performing loans have been growing; 15 percent of total banking sector assets are estimated to be non-performing. The BCEAO regulates Beninese banks. Foreign banks are required to obtain a banking license before operating branches in Benin. They are subject to the same prudential regulations as local or regional banks. Benin has lost no correspondent banking relationships during the last three years. There is no known current correspondent banking relationship in jeopardy. Foreigners are required to present proof of residency to open bank accounts.

Foreign Exchange and Remittances

Foreign Exchange

All funds entering the country from abroad for investment purposes require reporting and registration with the Ministry of Finance at the time of arrival of funds. Evidence of registration is required to justify remittances of investment capital, earnings, loan/lease repayments, or royalties. Such remittances are allowed without restrictions. Funds entering the country from abroad for investment purposes must be converted into local currency. For the purposes of repatriating such funds, either the invested funds or the interest/earnings or royalties can be converted into any world currency.

The currency of Benin is BCEAO-CFA Franc (international code: XOF). XOF has a fixed parity with the Euro and fluctuates against all other currencies based on this parity. This parity was established at the time of the Euro’s creation (January 1, 1999) and has not changed since then. The parity stands at XOF 655.957= EUR 1.00, guaranteed by the French government under an arrangement between the Treasury of France and the European Union.

Remittance Policies

There have been no recent changes to investment remittance policies. Banks require documents to justify remittances related to investments. The waiting time to remit investment returns does not exceed 60 days in practice.

Sovereign Wealth Funds

Benin does not have a sovereign wealth fund.

There are several wholly owned SOEs operating in the country, including public utilities, fixed and mobile telecommunications, postal services, port and airport management, gas distribution, pension funds, agricultural production, and hotel and convention center management. There is also a number of partially owned SOEs in Benin. Some of these receive subsidies and assistance from the government. There are no available statistics regarding the number of individuals employed by SOEs.

With the exception of public utilities, pension funds, and landline telephone service for which the public telephone company retains a monopoly, many private enterprises compete with public enterprises on equal terms.

SOE senior management may report directly to a government ministry, a parent agency, or a board of directors comprised of senior government officials along with representatives of civil society and other parastatal constituencies. SOEs are required by law to publish annual reports and hold regular meetings of their boards of directors. Financial statements of SOEs are reviewed by certified accountants, private auditors, and the government’s Bureau of Analysis and Investigation (BAI). The government audits SOEs, though it does not make available information on financial transfers to and from SOEs.

SOEs are established pursuant to presidential decrees, which define their mission and responsibilities. The government appoints senior management and members of the Board of Directors. SOEs are generally run like private entities and are subject to the same tax policies as the private sector. The courts process disputes between SOEs and private companies or organizations.

Privatization Program

Foreign investors may participate in privatization programs. The Talon administration has targeted divestiture programs rather than total privatization of state-owned enterprises.  The state-owned telecommunications company, Benin Telecom Infrastructure, is targeted for either a divestiture program or dissolution by 2021.  With support from MCC, SBEE is managed privately through a management contract through 2023, even though the government retains full ownership.  The government is pursuing major transactions to attract private investment into thermal and solar power generation, as well as natural gas supply for power generation. In 2017, the government signed a three-year renewable management contract for the Port of Cotonou with the Belgian firm Port of Antwerp International (PAI).  PAI took over management of the port in May 2018. The move was intended to improve port management and attract foreign investors to fund a planned project to modernize and expand the port.

In general, government policies and public tenders are made public online and in the newspapers. Anti-corruption and human rights NGOs and activists are active in Benin, though their ability to report misconduct and violations of good governance has weakened under the current government. There are government-funded agencies in charge of monitoring business conduct. They include the High Commission for the Prevention of Corruption (HCPC) created in April 2020 (replacing the National Anti-Corruption Authority), ARCEP, the Court of Accounts, the National Financial Information Processing Unit, and the National Commission on Systems and Freedom.

Additional Resources 

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 and;
• North Korea Sanctions & Enforcement Actions Advisory

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.

Benin has laws aimed at combatting corruption, though corruption remains a recurring problem in areas including public administration, government procurement, customs and taxation, and the judiciary. The new HCPC is the lead government entity on corruption issues and has the authority to refer corruption cases to court. The HCPC has the authority to combat money laundering, electoral fraud, and economic fraud in the public and private sectors. Benin’s State Audit Office is also responsible for identifying and acting against corruption in the public sector. The CRIET processes cases related to economic crimes, which can include corruption. In 2018, the National Assembly approved the lifting of parliamentary immunity of a small number of opposition parliamentarians accused of corruption or embezzlement during their past positions in former governments.

Bribery is illegal and subject to up to 10 years’ imprisonment, but enforcement is uneven. Private companies often establish their own codes of conduct.

Beninese procurement law allows for open and closed bid processes. Contracts are often awarded based on government solicitations to short-listed companies with industry-specific expertise, often identified based on companies’ commercial activities conducted in other overseas markets. The government often uses sole sourcing for projects, including for PAG implementation, and in these cases does not publish procurement requests before selecting a vendor. Foreign companies have expressed concerns about unfair treatment, biased consideration, and improper practices specific to the process of selecting short-listed companies.

Benin is a signatory of the UN Anticorruption Convention and the OECD Convention on Combatting Bribery of Foreign Public Officials in International Business Transactions.

Resources to Report Corruption

Government of Benin Haut-Commissariat a la Prevention de la Corruption (HCPC)
Haut-Commissariat a la Prevention de la Corruption (HCPC)
01 BP 7060 Cotonou, Benin
+229 21 308 686
anlc.benin@yahoo.fr

Ms. Blanche Sonon
President
Social Watch Benin
02 BP 937, Cotonou, Benin
+229 21042012 – 229 95961644
swbenin@socialwatch-benin.org

Benin has been a stable democracy since 1990, enjoying until recently a reputation for regular, peaceful, and inclusive elections. In 2018, the National Assembly adopted, and the government implemented stringent rules for political parties to qualify to participate in legislative elections. In 2019 and 2021 the government held legislative and presidential elections, respectively, that were not fully competitive. The National Assembly is currently made up exclusively by two pro-government parties. Elections-related unrest in 2019 and 2021 resulted in several deaths. The largest security issues facing Benin are the threat of terrorism spilling across its porous northern borders and piracy offshore in the Gulf of Guinea.

The government adheres to internationally recognized rights and labor standards. Benin’s constitution guarantees workers’ freedom to organize, assemble, and strike. Government authorities may declare strikes illegal if they are deemed a threat to public order or the economy and may require those on strike to maintain minimum services. In 2018, the Constitutional Court reinstated a law prohibiting public employees in the defense, health, justice, and security sectors from striking, and a new law limited strikes to a maximum of 10 days per year for private-sector workers and public employees not covered by the existing ban. Approximately 75 percent of salaried employees belong to unions. There are several union confederations. Unions are obliged to operate independently of government and political parties, but in practice often act to further political aims. Benin’s labor code, as revised in 2017, is favorable to employers.

The official unemployment rate in 2018, the last year for which data is available, was 2.3 percent, though estimates of actual unemployment figures are significantly higher. Unskilled and skilled labor and qualified professionals are generally available. Nearly 90 percent of youth between the ages of 15 and 29 work in the informal sector. The standard legal workweek is 40 hours and payment of overtime is allowed.

In 2017, the government adopted a law on the framework for private sector and government employment, termination of employment, and placement of labor in Benin.  The law sets a maximum limit of three to nine months’ salary (calculated using the last 12 months of salary) to be paid to an employee in case of abusive termination of employment or layoffs.  If fired on legitimate grounds, but short of being caught red-handed doing something unlawful, an employee with a minimum of one year on the job is entitled to receive two months’ salary as severance pay.  The law also allows for multiple renewals of limited time contracts. Under the former law, private companies who dismissed employees for unsatisfactory performance were routinely sued.

* Source for Host Country Data:  Recent GOB data not available

Table 4: Sources of Portfolio Investment
Data not available.

Contact for More Information
Political and Economic Section
U.S. Embasy, Boulevard de la Marina, Cotonou
00229-21300650
BeninCommercial@state.gov

Policies Towards Foreign Direct Investment

The GoB publicly emphasizes the importance of attracting (FDI) and drafted an investment facilitation law recommended by the 2014 Organization for Economic Co-operation and Development (OECD) Investment Review. While the draft was completed in 2016 with technical assistance from UNCTAD, it was never enacted. The draft is still under review and will be presented to Parliament for approval. The GoB has launched initiatives to promote economic activity and foreign investment in specific areas, such as establishing a diamond hub which brought more value-added businesses (i.e., cutting and polishing) into the country. Additional investment opportunities in Botswana include large water, electricity, transportation, and telecommunication infrastructure projects. Economists have also noted Botswana’s considerable potential in the mining, mineral processing, beef, tourism, solar energy, and financial services sectors. BITC assists foreign investors with projects intended to diversify export revenue, create employment, and transfer skills to Botswana citizens. The High Level Consultative Council (HLCC), chaired by the President, and an Exporter Roundtable organized by BITC and Botswana’s Exporters and Manufacturers Association (BEMA), are mechanisms employed by the GoB to focus on a healthy business environment for FDI.

Limits on Foreign Control and Right to Private Ownership and Establishment

Botswana’s 2003 Trade Act reserves licenses for citizens in 35 sectors, including butcheries, general trading establishments, gas stations, liquor stores, supermarkets (excluding chain stores), bars (other than those associated with hotels), certain types of restaurants, boutiques, auctioneers, car washes, domestic cleaning services, curio shops, fresh produce vendors, funeral homes, hairdressers, various types of rental/hire services, laundromats, specific types of government construction projects under a certain dollar amount, certain activities related to road and railway construction and maintenance, and certain types of manufacturing activities including the production of furniture for schools, welding, and bricklaying. The law allows foreigners to participate in these sectors as minority joint venture partners in medium-sized businesses. Foreigners can hold the majority share if they obtain written approval from the trade minister.

The Ministry of Investment, Trade, and Industry (MITI) administers the citizen participation initiative and takes an expansive interpretation of the term chain stores, so that it encompasses any store with more than one outlet. This broad interpretation has resulted in the need to apply exemptions to certain supermarkets, simple specialty operations, and general trading stores. These exceptions were generally granted prior to 2015 and many large general merchandise markets, restaurants, and grocery networks are owned by foreigners as a result. Since 2015, the GoB has denied some exception requests, but reports they have approved some based on localization agreements directly negotiated between the ministry and the applying company. These agreements reportedly include commitments to purchase supplies locally and capacity building for local workers and industry. BITC conducts due diligence on companies that are looking to invest in the country and the Directorate of Intelligence Services (DIS) handles background checks for national security.

Other Investment Policy Reviews

In December of 2014, the OECD released an Investment Policy Review on Botswana. ( http://www.oecd-ilibrary.org/finance-and-investment/oecd-investment-policy-reviews-botswana-2014_9789264203365-en ).

Botswana has been a World Trade Organization (WTO) member since 1995. In 2016, the WTO conducted a trade policy review of the Southern African Customs Union to which Botswana belongs ( https://www.wto.org/english/tratop_e/tpr_e/tp322_e.htm ).

Business Facilitation

To operate a business in Botswana, one needs to register a company with the GoB’s CIPA through the OBRS at:   https://www.cipa.co.bw/types-of-entities 

CIPA asserts that the company registration process can be completed in a day and is integrated with BURS which allows for a fast-tracked tax registration in 30 days. Additional work is required to open bank accounts and obtain necessary licenses and permits. The World Bank ranked Botswana 159 out of 190 in its ease of starting a business category.

BITC ( www.bitc.co.bw ), the GoB’s investment promotion agency, was designed to serve as a one-stop shop to assist investors in setting up a business and finding a location for operation. BITC’s ability to streamline procedures varies based on GoB entity and bureaucratic requirements. BITC assesses investment projects on their ability to diversify the economy away from its continued dependence on diamond mining, contribute towards export-led growth, and job creation for and skills transfer to Batswana citizens. BITC also hosts the Botswana Trade Portal ( https://www.botswanatradeportal.org.bw ) that is designed to ease trade across borders. It is a single point of contact for all information relating to import and export to and from Botswana and represents a number of ministries and parastatals.

Botswana has several incentives and preferences for both citizen-owned and locally based companies. Foreign-owned companies can benefit from local procurement preferences which are usually required for government tenders. MITI instituted a program in 2015 to give locally based small companies a 15 percent preferential price margin in GoB procurement, with mid-sized companies receiving a 10 percent margin, and large companies a five percent margin. Under this policy, MITI defines small companies as having less than five million pula in annual revenue reflected in their financial statements, medium companies with five to 20 million pula in revenue, and large companies with revenues exceeding 20 million pula. The directive applies to 27 categories of goods and services ranging from textiles, chemicals, and food, as well as a broad range of consultancy services. The government can also offer up to 50 million pula in funding through Citizen Entrepreneurial Development Agency (CEDA) to joint ventures between foreign and citizen owned companies.

For Companies Act registration purposes, enterprises are classified as: Micro Enterprises – fewer than six employees including the owner and an annual revenue below 60 thousand pula; Small Enterprises – fewer than 25 employees and an annual revenue between 60 thousand and 1.5 million pula; Medium Enterprises – fewer than 100 employees and annual revenue between 1.5 and 5 million pula; Large Enterprises – over 100 employees and an annual revenue of at least 5 million pula. This classification system permits foreigners to participate as minority shareholders in medium-sized enterprises in the 35 business sectors reserved for citizens.

Outward Investment

The GoB neither promotes nor restricts outward investment.

The United States and the Southern Africa Customs Union (SACU), which includes Botswana, signed a Trade, Investment, and Development Cooperative Agreement (TIDCA) in 2008. The TIDCA establishes a forum for consultative discussions, cooperative work, and possible agreements on a wide range of trade issues, with a special focus on customs and trade facilitation, technical barriers to trade, sanitary and phytosanitary (SPS) measures, and trade and investment promotion.

SACU has free trade agreements with Iceland, Liechtenstein, Norway, Switzerland, and the European Free Trade Association. SACU countries and MERCOSUR (Argentina, Brazil, Paraguay, and Uruguay) signed reciprocal preferential trade agreements (PTA) in December 2008 and April 2009, respectively. The PTA establishes fixed preference margins as a first step towards the creation of a free trade area between SACU and MERCOSUR. Botswana has ratified the agreement and is awaiting remaining Member States to complete ratification for the agreement to be implemented.

For more information on SACU’s tariff regime see the WTO document: http://www.wto.org/english/tratop_e/tpr_e/s222-00_e.doc .

Botswana is also a member of the Southern African Development Community (SADC), and is currently implementing the SADC Protocol on Trade. For more information about SADC, visit: www.sadc.int.

In June 2016, Botswana signed an Economic Partnership Agreement (EPA) with the European Union as part of the SADC EPA Group. The EPA guarantees access to the EU market without any duties or quotas for Botswana and gives asymmetric access to the SADC EPA Group.

The EPA between the United Kingdom, the Southern African Customs Union, and Mozambique (UK-SACUM EPA) is complete and is expected to be implemented in the 2021/22 financial year.

Botswana has a trade agreement with Zimbabwe, which provides duty-free access for goods with at least 25 percent local content.

In 2018, Botswana signed the Tripartite Free Trade Area (TFTA) agreement consisting of 26 countries of the three Regional Economic communities of the Common Market for Eastern and Southern Africa (COMESA), East African Commission (EAC), and SADC.

The African Continental Free Trade Agreement (AfCFTA), of which Botswana is a signatory, commenced trading officially on January 1, 2021. AfCFTA was founded in 2018 to promote intra-African trade and to pave the way for a future continental customs union.

Transparency of the Regulatory System

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

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

The Public Procurement and Asset Disposal Board (PPADB) oversees all government tenders. Prospective government contractors are required to register with the PPADB. The PPADB maintains a process by which tender decisions can be challenged; bidders can also challenge a tender procedure in the courts. The PPADB publishes its decisions concerning awarded tenders, prequalification lists, and newly registered contractors. Since 2014, PPADB has partnered with the United States Trade and Development Agency’s (USTDA) Global Procurement Initiative, a shared commitment to utilizing best-value determination procurement practices and promoting professionalization in procurement.

PPADB successfully implemented the Integrated Procurement Management System (IPMS) to level the procurement playing field by automating contractor registration, e-bidding and other operations. This has enabled them to introduce a Procurement Plan Platform where government entities list all their procurement plans for the year, allowing companies to plan ahead. An e-bidding system, which is in the pilot stage, will allow companies to compete for and submit tenders online.

Online services are available at https://ipms.ppadb.co.bw/login 

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

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

International Regulatory Considerations

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

Legal System and Judicial Independence

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

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

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

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

Laws and Regulations on Foreign Direct Investment

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

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

Competition and Antitrust Laws

Botswana has developed anti-trust legislation and policies to ensure appropriate competition in business. Under the Competition Act, the Competition Authority (CA) monitors mergers and acquisitions. In 2019, the CA expanded its mandate by taking over the operations of the Consumer Protection Act from MITI and rebranded itself as the Competition and Consumer Authority (CCA). CCA has already taken up the responsibilities of consumer education and is also resuscitating consumer groups across the country. During the year 2019/2020, the CCA engaged in stakeholder education to combat bid rigging. The authority investigated a total of 32 competition related cases and successfully closed 50 percent of them; the remaining 50 percent are under investigation and have been carried over to the 2020/21 financial year. The CCA is empowered to reject mergers deemed not in the public interest. CCA interprets this power to mean that it can prohibit mergers that concentrate most shares in the hands of foreign investors.

Expropriation and Compensation

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

Dispute Settlement

ICSID Convention and New York Convention

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

Investor-State Dispute Settlement

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

International Commercial Arbitration and Foreign Courts

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

Bankruptcy Regulations

Botswana’s commercial and bankruptcy laws are comprehensive. Secured and unsecured creditors enjoy similar rights under bankruptcy proceedings as those they would enjoy in the United States. Botswana ranks number 84 out of 190 countries on the ease of resolving insolvency according to the World Bank’s doing business report.

Investment Incentives

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

Botswana’s tax rates are relatively low at 22 percent on corporate taxable income and 7.5 percent withholding tax on all dividends distributed. However, withholding tax increased to 10 percent on April 1, 2021. MITI can grant manufacturing companies the reduced level of 15 percent taxable income. Companies can pay the reduced rate of 15 percent of profit with accreditation from the Innovation Hub or the International Financial Services Centre on approved operations.

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

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

Foreign Trade Zones/Free Ports/Trade Facilitation

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

Performance and Data Localization Requirements

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

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

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

Business leaders cite difficulty securing work permits combined with local skills deficits and constrained labor productivity among the foremost business constraints in Botswana. However, since President Masisi assumed power in April 2018, GoB reports indicate permits for foreign workers have increased with approval rates exceeding 90 percent. Select grants are available to foreign investors who partner with Botswana citizens. The Citizen Entrepreneurial Development Agency has established a venture capital fund to provide equity to citizens and ventures between citizens and foreign investors. Most GoB loans and grants are designed specifically for citizen-owned contracting firms or for small enterprises and are therefore not available to foreign investors.

The GoB, the largest procuring entity in the country, has directed central government, local authorities, and state-owned enterprises to purchase all products and services from locally based manufacturers and service providers if the goods and services are locally available, competitively priced, and meet tender specifications in terms of quality standards as certified or recognized by the Botswana Bureau of Standards. Local preferences arise from numerous sources. n 2015, MITI instituted a preferential procurement program for local companies based on company size – small companies receive a 15 percent preferential price margin on GoB procurement, mid-sized companies receive a 10 percent margin, and large companies a five percent margin. The directive applies to 27 categories of goods and services ranging from textiles to chemicals, and food, in addition to a broad range of consultancy services. In 2014, the GoB and the Chamber of Mines created a committee to oversee the purchasing of mining supplies with a 10 percent preference towards those produced locally. The 2012 Citizen Economic Empowerment Policy also emphasized the preference for local companies and the GoB’s PPADB registers citizen-owned companies for preference purposes. In 2020, the GoB announced new policy that all government contracts less than ~USD 900,000 were reserved for Motswana-owned businesses.

For a foreign firm to qualify with the Department of Industrial Affairs as a local manufacturer or service provider to sell goods or services to the GoB, the firm must be registered with the Registrar of Companies and possess a relevant license or waiver letter. These procedures can be completed online, however, companies may choose to engage the services of a Company Secretary to perform these and other required documentation services. Tenders are generally designed based on the products available in the local market and with locally based companies in mind. In addition, many tenders require local registration as a prerequisite for bids and the GoB frequently breaks up large-scale projects into a series of tenders. These requirements make it difficult to compete for tenders from outside Botswana.

Real Property

Property rights are enforced in Botswana. The World Bank ranks Botswana 82 out of 190 in the Registering Property category. There are three main categories of land in Botswana: freehold, state land, and tribal land. Tribal and state land cannot be sold to foreigners. There are no restrictions on the sale of freehold land, but only an approximate five percent of land in Botswana is freehold. All minerals in Botswana, even those on private lands, are viewed as property of the State. In the capital city of Gaborone, the number of freehold plots is limited. In 2019, the GoB increased the rate of Transfer Duty on the sale and transfer of property to non-citizens (both individuals and companies) from five percent to 30 percent.

State land represents about 25 percent of land in Botswana. On application to the Department of Lands, both foreign-owned and local enterprises registered in Botswana may lease state land for industrial or residential use. Commercial use leases are for 50 years and residential leases are for 99 years. Waiting periods tend to be long for leasehold applications, but subleases from current leaseholders are available. In 2014, the GoB changed its implementing regulation to allow companies with fewer than five employees to operate in residential areas if their operations do not pose a health or safety risk to residents.

Tribal land represents 70 percent of land in Botswana. To obtain a lease for tribal land, the investor must approach the relevant local Land Board. Processes are unlikely to be streamlined or consistent across Land Boards.

Since independence, the trend in Botswana has been to increase the area of tribal land at the expense of both state and freehold land. Landlord-tenant law in Botswana tends to be moderately pro-landlord.

In addition to helping investors who meet its criteria obtain appropriate land leaseholds, BITC has also built factory units for lease to industrialists with the option to purchase at market value.

Intellectual Property Rights

Botswana’s legal intellectual property rights (IPR) structure is adequate, although some improvements are needed. The key challenge facing the GoB is effective implementation. CIPA was established in 2014 and is comprised of three offices: the Companies and Business Office, the Industrial Property Office, and the Copyright Office. Intellectual property is registered through CIPA. CIPA’s priorities are to strengthen and implement Botswana’s IPR regime and to improve interagency cooperation. IPR infringement occurs in Botswana primarily through the sale of counterfeit items in low-end sales outlets. According to CIPA, targeted raids by local law enforcement have reduced the availability of counterfeit goods across the country. In 2019, CIPA and the Botswana Police Service seized 3,888 counterfeit CDs and DVDs valued at USD 30,000 compared to nearly 13,000 counterfeits valued at over USD 107,000 seized in 2017. The U.S. government continues to work with the GoB to modernize and improve enforcement of IPR.

IPR is protected under the Industrial Property Act of 2010, which provides protections on patents, trademarks, utility designs, handicrafts, traditional knowledge, and geographic indicators. The 2000 Copyright and Neighboring Rights Act also protects art and literary works, and the 1975 Registration of Business Names Act oversees corporate name and registration procedures. Other IPR-related laws include the Competition Act, the Value Added Tax Act, the Botswana Penal Code, the Customs and Excise Duty Act, the Monuments and Relics Act, the Broadcasting Act, and the Societies Act.

Botswana is not included in the United States Trade Representative (USTR) Special 301 Report or the Notorious Markets List.

Botswana is a signatory to the Beijing Treaty on Audiovisual Performances, the Hague Agreement Concerning the International Deposit of Industrial Designs, the Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks, the Convention establishing the World Intellectual Property Organization (WIPO), the WIPO Copyright Treaty, the WIPO Performances and Phonograms Treaty, the Patent Cooperation Treaty, the Berne Convention for the Protection of Literary and Artistic Works, and the Paris Convention for the Protection of Industrial Property.

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

Resources for Rights Holders

Goitseone Montsho
Economic/Commercial Specialist
MontshoG@state.gov 
+267 373-2431

Local lawyers’ list: https://bw.usembassy.gov/u-s-citizen-services/local-resources-of-u-s-citizens/attorneys/

Capital Markets and Portfolio Investment

The government encourages foreign portfolio investment, although there are limits on foreign ownership in certain sectors. It also embraces the establishment of new and diverse financial institutions to support increased foreign and domestic investment and to fill existing gaps where finance is not commercially available. There are nine commercial banks, one merchant bank, one offshore bank, two statutory deposit-taking institutions, and one credit union operating in Botswana. All have corresponding relationships with U.S. banks. Additional financial institutions include various pension funds, insurance companies, microfinance institutions, stock brokerage companies, asset management companies, statutory finance institutions, collective investment undertakings, and statutory funds. Historically, commercial banks have accounted for 92 percent of total deposits and 98 percent of total loans in Botswana. A large portion of the population does not participate in the formal banking sector.

Money and Banking System

The central bank, the Bank of Botswana, acts as banker and financial advisor to the GoB and is responsible for the management of the country’s foreign exchange reserves, the administration of monetary and exchange rate policies, and the regulation and supervision of financial institutions in the country. Monetary policy in Botswana is widely regarded as prudent, and the GoB has successfully managed to maintain a sensible exchange rate and a stable inflation rate, generally within the target of three to six percent.

Banks may lend to non-resident-controlled companies without seeking approval from the Bank of Botswana. Foreign investors usually enjoy better access to credit than local firms. In July 2014, USAID’s Development Credit Authority (now DFC – U.S. International Development Finance Corporation), in collaboration with ABSA (formerly Barclays Bank of Botswana), implemented a program to allow small and medium-sized enterprises (SME) to access up to USD 15 million in loans in an effort to diversify the economy.

At the end of 2019, there were 25 companies on the Domestic Board and eight companies on the Foreign Equities Board of the Botswana Stock Exchange (BSE). In addition, there were 46 listed bonds and three exchange traded funds listed on the Exchange. The total market capitalization for listed companies at year-end 2019 was USD 37 billion, though one company constitutes the majority of that figure, Anglo-American plc, which has a market capitalization of approximately USD 30 billion. The BSE is still highly illiquid compared to larger African markets and is dominated by mining companies which adds to index volatility. Laws prohibiting insider trading and securities fraud are clearly stipulated under Section 35 – 37 of the Securities Act, 2014 and charges for contravening these laws are listed under Section 54 of the same Act.

The government has legitimized offshore capital investments and allows foreign investors, individuals and corporate bodies, and companies incorporated in Botswana, to open foreign currency accounts in specified currencies. The designated currencies are U.S. Dollar, British Pound sterling, Euro, and the South African Rand. There are no known practices by private firms to restrict foreign investment participation or control in domestic enterprises. Private firms are not permitted to adopt articles of incorporation or association which limit or prohibit foreign investment, participation, or control.

In general, Botswana exercises careful control over credit expansion, the pula exchange rate, interest rates, and foreign and domestic borrowing. Banking legislation is largely in line with industry norms for regulation, supervision, and payments. However, Botswana failed to meet the compliance requirements of the Financial Action Task Force (FATF), resulting in a grey listing in October 2018. Botswana is implementing an action plan to remedy the situation. In February 2021, FATF listed Botswana among the countries that had made significant progress toward combating money laundering and terrorist financing despite the challenges posed by COVID-19. FATF encouraged the GoB to continue to address the strategic deficiencies. The Non-Bank Financial Institutions Regulatory Authority (NBFIRA) was established in 2008 and provides regulatory oversight for the non-banking sector. It extends know-your-customer practices to non-banking financial institutions to help deter money laundering and terrorist financing. NBFIRA is also responsible for regulating the International Financial Services Centre, a hub charged with promoting the financial services industry in Botswana.

Foreign Exchange and Remittances

Foreign Exchange

There are no foreign exchange controls in Botswana or restrictions on capital outflows through financial institutions. Commercial banks are required to ensure customers complete basic forms indicating name, address, purpose, and other details prior to processing funds transfer requests or loan applications. The finance ministry monitors data collected on the forms for statistical information on capital flows, but the form does not require government approval prior to processing a transaction and does not delay capital transfers.

To encourage portfolio investment, develop domestic capital markets, and diversify investment instruments, non-residents can trade in and issue Botswana pula-denominated bonds with maturity periods of more than one year, provided such instruments are listed on the Botswana Stock Exchange (BSE). Only Botswana citizens can purchase Botswana’s Letlole National Savings Certificate (equivalent to a U.S. Treasury bond). Foreigners can hold shares in BSE-listed Botswana companies.

Travelers are not restricted to the amount of currency they may carry but are required to declare to customs at the port of departure any cash amount exceeding 10,000 pula (~USD 905). There are no quantitative limits on foreign currency access for current account transactions.

Bank accounts denominated in foreign currency are allowed in Botswana. Commercial banks offer accounts denominated in U.S. Dollars, British Pounds, Euros and South African Rand. Businesses and other bodies incorporated or registered domestically may open accounts without prior approval from the Bank of Botswana. The GoB also permits the issuance of foreign currency denominated loans.

Upon disinvestment by a non-resident, the non-resident is allowed immediate repatriation of all proceeds including profits, rents, and fees.

The Botswana Pula has a crawling peg exchange rate and is tied to a basket of currencies of major trading partner countries. In 2018 the weights of the pula basket currencies were maintained at 45 percent for the South African Rand and 55 percent for the Special Drawing Rights (consisting of the U.S. Dollar, the Euro, British Pound, Japanese Yen, and Chinese Renminbi) respectively. Government maintained these exchange rate parameters for 2021. However, the downward rate of crawl of the pula exchange was adjusted from 1.51 percent to 2.87 percent per annum in May 2020. Movements of the South African Rand against the U.S. Dollar heavily influence the Pula. There is no difficulty in obtaining foreign exchange. Shortages of foreign exchange that would lead banks to block transactions are highly unlikely.

Remittance Policies

There are no restrictions or limitations placed on foreign investors in converting, transferring, or repatriating funds associated with an investment.

Sovereign Wealth Funds

The Bank of Botswana maintains a long-term sovereign wealth fund, known as the Pula Fund, in addition to a regular foreign reserve account providing basic import cover. The Pula Fund was established under the Bank of Botswana Act and forms part of the country’s foreign exchange reserves, which are primarily funded by diamond revenues. The Pula Fund is wholly invested in foreign currency-denominated assets and is managed by the Bank of Botswana Board with input from recognized international financial management and investment firms. All realized market currency gains or losses are reported in the Bank of Botswana’s income statement. The Fund has been affected severely by the COVID-19 pandemic, with the GoB making withdrawals to address significant COVID-19-related revenue shortfalls. As a result, the Pula Fund, long a fiscal cushion against economic shocks, is significantly depleted from 20 percent of GDP in 2011 to 7 percent of GDP as of mid-2020 – from $1.69 billion to $510 million – a decline of more than 70 percent. Botswana is a founding member of the International Forum of Sovereign Wealth Fund and was one of the architects of the Santiago Principles in 2008. More information is available at: https://www.bankofbotswana.bw/sites/default/files/BOTSWANA-PULA-FUND-SANTIAGO-PRINCIPLES.pdf

State-owned enterprises (SOEs), known as “parastatals,” are majority or 100 percent owned by the GoB. There is a published list of SOEs at the GoB portal ( www.gov.bw ) with profiles of financial and development SOEs. Some SOEs are state-sanctioned monopolies, including the Botswana Meat Commission, the Water Utilities Corporation, Botswana Railways, and the Botswana Power Corporation.

The same business registration and licensing laws govern private and government-owned enterprises. No law or regulation prohibits or restricts private enterprises from competing with SOEs. Botswana law requires SOEs to publish annual reports, and private sector accountants or the Auditor General audits SOEs depending on how they are constituted. GoB ministries together with their respective SOEs are compelled on an annual basis to appear before the Parliamentary Public Accounts Committee to provide reports and answer questions regarding their performance. Some SOEs are not performing well and have been embroiled in scandals involving alleged fraud and mismanagement. Botswana is not party to the Government Procurement Agreement within the framework of the WTO.

Privatization Program

The GOB has committed to privatization on paper. It established a task force in 1997 to privatize all of its state-owned companies and formed a Public Enterprises Evaluation and Privatization Agency (PEEPA) to oversee this process. Implementation of its privatization commitments has been limited to the January 2016 sale offer of 49 percent of the stock of the state-owned Botswana Telecommunications Corporation to Botswana citizens only. In February 2017, the GoB issued an Expressions of Interest for the privatization of its national airline, but progress stopped due to the decision to re-fleet the airline before privatization. In early 2019, President Masisi announced the Botswana Meat Commission was being placed in the hands of a private management company prior to privatization. Conversely, the GoB has created new SOEs such as the Okavango Diamond Company, the Mineral Development Company, and Botswana Oil Limited in recent years. A Rationalization Strategy covering all parastatals has been developed and its implementation will address issues such as duplication of activities, overlapping mandates, and issues of corporate governance. This may finally result in some SOEs being privatized or merged while some may be closed.

The GoB, some foreign and local firms, and customers, recognized and embraced Responsible Business Conduct (RBC), although Botswana is not an adherent of the OECD’s RBC Guidelines for Multinational Enterprises and has not specified its definition of RBC. Large companies in the mining, communications technology, food supply, and financial services sectors have established RBC programs, sponsor projects, and support local nonprofit concerns. However, the ethos has not taken hold in many smaller firms. The U.S. Embassy worked with the local chamber of commerce, Business Botswana, on the issue of corporate social responsibility and ethical compliance to help enlist companies to sign onto a Corporate Code of Conduct that covers, among other things, conflicts of interest, bribery, political interference, political party funding, procurement and bidding, and issues surrounding residence and work permits. To date more than 300 firms have signed the Code of Conduct.

The Companies Act also sets out the expectations of business conduct and governance for directors and shareholders for both private and public companies. Botswana is not a member of the Extractive Industries Transparency Initiative. Botswana’s Mines and Minerals Act and associated regulations govern mineral contracts and licenses. Botswana’s laws and procedures for awarding mining contracts are fairly well developed. Mining licenses are required to undergo a public comment period before they are awarded, and that rule is followed.

Additional Resources 

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 and;
• North Korea Sanctions & Enforcement Actions Advisory

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.

Botswana has a reputation for relatively low corruption levels and a willingness to prosecute corrupt officials. Transparency International ranks Botswana as the least corrupt country in Africa (35th worldwide). Investors with experience in other developing nations describe the relative lack of obstruction or interference by law enforcement or other government agents as among the country’s most important assets. Nevertheless, private sector representatives note rising corruption levels in government tender procurements.

The major corruption investigation body is the Directorate on Corruption and Economic Crime (DCEC). Anecdotal reports on the DCEC’s effectiveness vary. The DCEC has embarked on an education campaign to raise public awareness about the cost of corruption and is also working with GoB departments to reform their accountability procedures. Corruption is punishable by a prison term of up to 10 years, a fine of USD 50,000, or both. The GoB has prosecuted high-level officials. Corruption allegations have surfaced recently around pension fund management and government procurement procedures and are still under investigation.

The 2000 Proceeds of Serious Crime Act expanded the DCEC’s mandate to include combatting money laundering. The 2009 Financial Intelligence Act provides a comprehensive legal framework to address money laundering and establishes a financial intelligence agency (FIA). The FIA, which operates under the Ministry of Finance and Development Planning, cooperates with various institutions, such as Directorate of Public Prosecutions, Botswana Police Service, Bank of Botswana, the Non-Banking Financial Institutions Regulatory Authority, the DCEC, and foreign FIAs to uncover and investigate suspicious financial transactions. Botswana is a member of the Eastern and Southern Africa Anti-Money Laundering Group, a regional standards-setting body for ensuring appropriate laws, policies, and practices to fight money laundering and the financing of terrorism. In October 2018, Botswana was “grey-listed” by the Financial Action Task Force and is currently implementing an action plan to address shortcomings that led to the listing.

UN Anticorruption Convention, OECD Convention on Combatting Bribery

Botswana is not a party to the OECD Anti-Bribery Convention, but it is a party to the 2005 United Nations Convention against Corruption.

Resources to Report Corruption

Contacts for agencies responsible for combating corruption:

Mr. Tymon Katlholo
Director General
Directorate on Corruption and Economic Crime
Madirelo Extension 6, Gaborone, Botswana
+267 3914002/+267 3604200
dcec@gov.bw 

Mr. Kgakgamalo Ketshajwang (Acting)
Executive Director
Public Procurement and Asset Disposal Board
Private Bag 0058, Gaborone, Botswana
+267 3602000
webmaster@ppadb.co.bw 

Dr. Abraham Sethibe
Director
Financial Intelligence Agency
Private Bag 0190, Gaborone, Botswana
+267 3998400
asethibe@gov.bw 

Complainants can also reach out to ministers of the relevant ministries for a particular tender and provide a copy of the complaint to the Public Procurement and Asset Disposal Board (PPADB) Executive Chairperson.

The threat of political violence is low in Botswana. Public demonstrations are rare and seldom turn violent. The last large-scale strikes which involved public sector employees occurred April-June 2011 and were not violent. In September 2015, roughly 200 people participated in a peaceful march organized by an opposition political party to protest water shortages in the capital. In August 2016, police forcefully dispersed a small demonstration protesting unemployment outside the National Assembly. In February and March 2017, some student-led protests occurred at tertiary institutions necessitating police deployment but were not overtly political. There were multiple reports of police brutality, including the use of rubber whips and rubber bullets. Another peaceful march against corruption was held in March 2018. This followed allegations of embezzlement of the National Petroleum Fund by a company charged with the management of the funds together with some GoB officials. In late 2019, following general election, the Umbrella for Democratic Change (UDC) held a peaceful march of no more than 200 people protesting the election results.

Botswana has a high unemployment rate and a constricted worker skills base. The latest statistics released in 2019 showed an increase of unemployment from 17.7 percent to just over 20 percent, although the real rate is likely higher due to the way the GoB counts who is included in the statistic. Statistics Botswana recorded unemployment for the quarter ending December 2020 at 24.5 percent. This was slightly higher than the 23.2 percent recorded during the first quarter of 2020, showing the effects of the lockdown and other disruptions caused by the pandemic. The numbers are expected to rise when the State of Emergency (SOE) is lifted as a significant number of companies have been affected by COVID-19 and the SOE forbids them from laying off staff. Employers can expect to engage in significant training efforts, depending on the industry. Retention of workers and absenteeism can pose problems. In addition, managers often cite workforce productivity as a point of frustration. The lack of trained local citizen professionals is generally addressed by contracting expatriates if they can secure work permits. There is minimal labor strife in Botswana. In 2015, there were a handful of small and peaceful strikes, the most notable of these was by a portion of BURS officials, but as with most unions across sectors, only a portion of BURS officials were unionized, allowing the GoB to maintain customs operations.

The Employment Act provides basic guidelines for employment in Botswana. The legislation sets requirements for a minimum wage, length of the workweek, annual and maternity leave, hiring and termination. Standards set by the Act are consistent with international best practice as described by International Labor Organization (ILO) model legislation and guidelines.

Employment-related litigation occurs and is both an example of trust in the court system and a cost to doing business in Botswana. Employers avoid considerable expense and frustration if they observe the provisions of the Employment Act, relevant labor regulations, and prudence in advance of potential litigation. Before a potential litigant goes to one of 11 labor courts, the parties must attempt mediation through the Department of Labor. Court cases offering severance terms for employees laid off due to fluctuating market conditions are also common. Section 25 of the Employment Act allows employers to terminate contracts for reducing the size of their work force, known as redundancy, using the first-in-last-out principle. This method of terminating contracts is separate from firing for serious misconduct as specified by Section 26 of the Act. The GoB has social safety net programs in place to assist the unemployed and destitute.

Collective bargaining is common in government and the private sector and the Labor Commissioner can grant collective bargaining authority upon request. The largest unions are comprised of public sector workers.

In August 2016 Parliament passed a Trade Disputes Act with a list of services deemed “essential” and barred from striking that exceeds international labor standards. The Ministry of Employment, Labor Productivity, and Skills Development is coordinating with the ILO and other partners to review labor laws to ensure they align with ILO standards. The tri-partite labor law committee recommended that all services listed as essential be cancelled except aviation, health, electrical, water and sanitation, fire, and air traffic control services.

* Source for Host Country Data: Bank of Botswana 2019 Annual Report

Table 3: Sources and Destination of FDI

According to the Bank of Botswana, investment in Botswana totaled 86.3 billion Pula in 2018, of which 30.8 billion Pula were non-FDI investments. Africa (36 percent) and Europe (54 percent) accounted for most of the 55.5 billion Pula influx of FDI. Within these regions, South Africa and the United Kingdom were the predominant players, accounting for 10.9 and 27.4 billion Pula respectively. Little data on FDI sources is available for countries and regions with limited investments in Botswana. Mining accounted for 38.6 percent of Foreign Investment inflows in 2018.

Table 4: Sources of Portfolio Investment
IMF Coordinated Direct Investment Survey data are not available for Botswana. 2019 estimates for Botswana’s net international investments increased by 9.1 percent from 57.8 billion Pula in 2018 to 62.6 billion Pula in 2019. On the assets side, direct investments, portfolio investments increased by 9.3 percent, 20.7 percent respectively, while foreign exchange reserves and other investments decreased by 8.7 percent and 4.5 percent respectively. Portfolio investment increased due to the rise in equity and debt securities invested abroad.

Goitseone Montsho
Economic/Commercial Specialist
+267 395-3982 / 373-2431
MontshoG@state.gov 

Policies Towards Foreign Direct Investment

The Government of Burundi (GoB) is generally supportive of FDI and seeks investment as a means to promote economic growth. Uneven implementation of laws and regulations, however, limits the predictability of the environment for Burundian and foreign investors alike. The GoB has not implemented laws, regulations, or economic or industrial strategies that limit market access or discriminate against foreign investors. There is a minimum initial foreign investment of $50,000, which does not apply to domestic investors. An overview of the legal framework for foreign investment can be found at: http://www.eatradehub.org/burundi_investment_policy_assessment_2018_presentation 

Based on the Burundi Investment Code enacted in 2008, the government established the Burundi Investment Promotion Agency (API) in 2009. API is the government authority in charge of promoting investment, improving the business climate, and facilitating market entry for investors in Burundi. API offers a range of services to potential investors, including assistance in acquiring the licenses, certificates, approvals, authorizations, and permits required by law to set up and operate a business enterprise in Burundi. API has set up a “one-stop shop” to facilitate and simplify business registration in Burundi. For now, investors must be physically present in country to register with API. API provides investors with information on investment and export promotion, assists them with legal formalities, including obtaining the required documents, and intervenes when laws and regulations are not properly applied. API also designs reforms required for the improvement and the ease of doing business environment and ensures that the impact of investments on development is beneficial and sustainable.

The GoB conducts dialogue with national and foreign investors to promote investment. API is the initial and primary point of entry for investors, but government ministries meet regularly with private investors to discuss regulatory and legal issues.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign and domestic companies have the same rights to establish and own businesses in the country and engage in all forms of activities. However, there are restrictions on foreign investments in weaponry, ammunition, and any sort of military or para-military enterprises. There are no other restrictions nor are there any other sectors in which foreign investors are denied the same treatment as domestic firms. There are no general limits on foreign ownership or control.

Article 63 of the 2013 mining code stipulates that the GoB must own at least 10 percent of shares in any foreign company with an industrial mining license and state participation cannot be diluted in the event of an increase in the share capital.

Burundi does not maintain an investment screening mechanism for inbound foreign investment.

Other Investment Policy Reviews

No investment policy review from a multilateral organization has taken place in the last three years. The most recent review was performed in 2010 by UNCTAD.

Business Facilitation

In addition to fiscal advantages provided in the investment code, Burundi has implemented reforms, including reinforcing the capabilities of the one-stop shop at API, simplifying tax procedures for small and medium enterprises, launching an electronic single window for business transactions, and harmonizing commercial laws with those of the East African Community.

Business registration takes approximately four hours and costs 40,000 Burundian francs (around $21). For more details and information on registration procedures, time and costs, investors may visit API’s website at https://www.investburundi.bi/ .

There is no specific mechanism for ensuring equitable treatment of women and underrepresented minorities.

Outward Investment

The host government does not have mechanisms for promoting or incentivizing outward investment. The host government does not restrict domestic investors from investing abroad.

Transparency of the Regulatory System

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

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

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

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

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

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

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

International Regulatory Considerations

Burundi is a member of the East African Community (EAC), a regional economic bloc composed by six member states, the republics of Burundi, Kenya, Rwanda, South Sudan, Tanzania, and Uganda. The EAC Integration process is anchored on four pillars: a customs union, a common market, a monetary union, and political federation. Each member state must harmonize its national regulatory system with that of the EAC.

Burundian law and regulations reference several standards, including the East African Standards, Codex Alimentarius Standards, the International Organization for Standardization (ISO), and Burundi’s own standards. ISO remains the main standard of reference.

The country joined the WTO on July 23, 1995. According to the Ministry of Trade, Transport, Industry and Tourism, Burundi has not notified the WTO Committee on Technical Barriers to Trade of all its draft technical regulations.

Legal System and Judicial Independence

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

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

Laws and Regulations on Foreign Direct Investment

There were no major laws, regulations, or judicial decisions pertaining to foreign investment in the past year. In 2014, API created a follow-up mechanism to make sure that investors are implementing projects for which they received tax exemptions and other advantages provided in the investment code.

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

Competition and Antitrust Laws

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

Expropriation and Compensation

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

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

Dispute Settlement

ICSID Convention and New York Convention

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

Investor-State Dispute Settlement

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

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

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

International Commercial Arbitration and Foreign Courts

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

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

Bankruptcy Regulations

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

Investment Incentives

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

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

Foreign Trade Zones/Free Ports/Trade Facilitation

Burundi already belongs to the trading blocs of the EAC, the CEPGL (Economic Community of the Great Lakes Countries), COMESA, and the Economic Community of the States of Central Africa (CEEAC). In 2020, GoB adopted new laws to accelerate its integration into other trading blocs such as the African Continental Free Trade Area (AfCFTA), and the Tripartite Free Trade Area (TFTA) between COMESA, EAC and SADC (Southern Africa Development Community). GoB also began harmonizing its policies and legal framework with those of regional entities to advance regional integration, improve its competitiveness, and take better advantage of external economic potentials. However, as the enabling regulations do not yet exist, Burundi does not yet have operational free economic zones.

One of the objectives on Burundi’s agenda is urgent integration into AfCTA, one of the largest free trade areas in the world since the formation of the World Trade Organization with a total of 55 member states. The AfCFTA aims to stimulate intra-African trade (BIAT) and Burundi wants to share in these gains. Burundi and Tanzania are the only countries within the East African Community that have not yet ratified the agreement. The GoB has already set up an ad hoc committee to accelerate the process of integration within AfCTA, and negotiations are underway with a view to ratifying the instruments of this agreement in the very near future. Burundi expects tangible benefits from this large continental market (1.2 billion people with a GDP of over USD 2.5 trillion and a purchasing power of more than USD 4 trillion) due to its strategic location and natural resources.

In addition, the GoB is working to establish its first Special Economic Zone (ZESB) in order to enhance growth and development after the breakdown of cooperation with several European countries. ZESB is still under construction on the Warubondo site (a strategic location of 5.43 square km area located between Burundi and neighboring DRC with easy access to Bujumbura city, Bujumbura International Airport, Bujumbura Port and Lake Tanganyika). ZESB is a result of a business partnership between GoB and private foreign investors and its main objective is to revive the industrial sector and to promote exports. The economic model behind this partnership is that the zone will be a window for foreign investors, but all the products produced within the zone will bear the label “Made in Burundi.”

Performance and Data Localization Requirements

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

Burundian visa requirements are not excessively onerous and do not generally inhibit the mobility of foreign investors and their employees. Since 2015, Burundi has removed the possibility for visitors to apply for a visa upon arrival at the airport unless authorized by the PAFE (immigration authority). Travelers to Burundi must apply for visas in one of the Burundian missions abroad. A foreigner holding a residency visa is permitted to work in Burundi. A two-year residence visa (renewable) costs USD500 and it can only be issued after making a refundable deposit of USD1,500 in a local bank (BANCOBU). There are no government/authority-imposed conditions to invest except for a minimum investment requirement of USD50,000 applicable to foreign investors only.

The 2000 Arusha Agreements for peace and reconciliation for Burundi and the Constitution recommend ethnic and gender quotas for new hires (60 percent from the Hutu ethnic group, 40 percent from the Tutsi ethnic group and 30 percent women) in state and security institutions. However, neither the Constitution nor the Arusha Agreements mention ethnic or gender quotas for the private sector. In 2017, a law was passed obliging International Non-Governmental Organizations (INGOs) to recruit local staff while respecting the ethnic and gender quotas that apply to state institutions. Between December 2018 and April 2019, several INGOs decided to close their doors rather than submit to the requirements, arguing that the practices based on ethnicity were against their principles and values and the only recruitment criteria should be competency-based.

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

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

Real Property

Secured interests in both real and movable property are nominally recognized under Burundian law. The Burundi land code, adopted in 2011, recognizes the right to property and protection for Burundians and for foreigners. Foreigners enjoy the same rights and protection as nationals, subject to the principle of reciprocity (which means that the foreign country must in return recognize the same rights for Burundians). The state can give property to foreigners for industrial, commercial, cultural use, and can rent them out, but full ownership is reserved for Burundians. The legal system and the investment code are designed to protect and facilitate the acquisition and disposition of all property rights.

The Land Titles Service registers real estate and security instruments, such as mortgages. Property titles are accepted as a guarantee by commercial banks, but documents for properties located outside the capital city of Bujumbura are less easily accepted because of multiple conflicts and crimes related to the land in rural areas (more than 80 percent of the litigations in courts and tribunals are related to conflicts over land).

Land titling in Burundi has historically been a lengthy, opaque and centralized process although the Burundian land code appears simple. As a result, some applicants, especially those with limited financial resources or contacts, fail to title their land while others with resources and good contacts sometimes bribe land titling agents to speed up the procedure. To address these issues, in December 2019, the GoB implemented several initiatives aimed at: (1) informing the population on the procedure for registering land and obtaining title deeds; (2) establishing in all provinces of the country one-stop windows where persons interested in titling land have access to all necessary government offices to carry out the titling, and; (3) combating, in accordance with the law, all forms of corruption related to the property’s registration process. The GoB has been slow to decentralize land titling for financial reasons and it is likely that the government will still need assistance to make its initiatives a reality.

The legal system and the investment code do not differentiate between local and foreign investors regarding land acquisition or lease. However, land acquisition is based on reciprocity between Burundi and the investor’s home country, obliging a foreign country to recognize the same rights for Burundians in the foreign country as the foreigners of their country enjoy in Burundi.

Properties in urban and rural areas must be registered. However, according to estimates, more than 90 percent of houses and land in rural areas are not registered and around 80 percent of the litigations in the Burundian courts and tribunals are conflicts over land. When a property has been legally purchased, it cannot be legally confiscated by the state except when it is the subject of an expropriation procedure in accordance with legal and regulatory procedures.

Intellectual Property Rights

Burundi has adopted the 1995 World Trade Organization (WTO) Agreement on Trade-Related Aspects of International Property Rights (TRIPS), which introduced global minimum standards for the protection and enforcement of virtually all intellectual property rights (IPR). The legal system and the investment code aim to protect and facilitate the acquisition and disposition of all property rights, including intellectual property rights IPR. The law also guarantees protection for patents, copyrights, and trademarks. However, there is no record of enforcement action on intellectual property IPR infringement violations. No IPR-related law has been enacted during the past year and no bills are pending.

Agents of Burundian institutions in charge of the fight against piracy and counterfeiting (Burundian Revenue Office, Ministries of Trade and Public Health) have already benefited from various sources of support in terms of capacity building on industrial property rights and the fight against piracy and counterfeiting on the part of multilateral partners, but these institutions lack modern tools for detecting counterfeits. Although these institutions have already committed themselves to carry out reforms in this sector (a multisectoral committee responsible for promoting procedures to combat counterfeiting and piracy and monitoring has been set up), they still need to set up a database of recognized trademarks, in which all the information on trademarks registered at customs is compiled and to require this procedure for all companies or representatives of multinationals to be effective.For now, the Burundi Bureau of Standardization (BBN) is the state authority responsible for monitoring the quality of consumer products on the market; however, this Bureau lacks the necessary expertise and resources to be effective.  Counterfeiters who are apprehended are fined and their products are seized. There are no statistics available on seizures of counterfeit goods. Burundi is not listed in the United States Trade Representative (USTR) Special 301 Report or the Notorious Market List. 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 and Portfolio Investment

Although there are no regulatory restrictions on foreign portfolio investment, Burundi does not have capital markets that would enable it. Capital allocation within Burundi is entirely dependent on commercial banks.

The country does not have its own stock market. There is no regulatory system to encourage and facilitate portfolio investment. Existing policies do not actively facilitate nor impede the free flow of financial resources into product and factor markets.

There is no regulation restricting international transactions. In practice, however, the government restricts payments and transfers for international transactions due to a shortage of foreign currency.

In theory, foreign investors have access to all existing credit instruments and on market terms. In practice, available credit is extremely limited.

Money and Banking System

Burundi has very limited banking services penetration according to the most recent national survey on financial inclusion conducted by the central bank. In this 2016 survey, the Bank of the Republic of Burundi (BRB) found a penetration level of approximately 22 percent.  Several local commercial banks have branches in urban centers. Micro-finance institutions mostly serve rural areas. The Burundian government is a minority shareholder in three banks.The banking sector’s soundness has improved with capitalization and liquidity ratios above regulatory standards and profitability indicators on the rise. However, bank portfolio quality remains a concern, with the level of non-performing loans (NPLs) reaching six percent when five percent is the benchmark rate among East African Community states. The sector also suffered from shortages of foreign currency following the Central Bank’s establishment of de facto capital controls in 2019.

The financial sector includes 14 credit institutions (Banks) including a new youth investment bank and an agricultural bank, 40 microfinance institutions, 16 insurance companies, three social security institutions and three payment institutions. A bank for women is also under development. All these institutions aim at reducing unemployment by creating job opportunities, particularly small and medium-scale entrepreneurship. The banking market is dominated by the three largest and systemically important banks: Credit Bank of Bujumbura (BCB), Burundi Commercial Bank (BANCOBU), and Interbank Burundi (IBB).Foreign banks can establish operations in the country.  Foreign banks operating in the country include ECOBANK (Pan African Bank-West Africa), CRDB (Tanzanian Bank), DTB and KCB (both Kenyan Banks).  The central bank directs banking regulatory policy, including prudential measures for the banking system.  Foreigners and locals are subject to the same conditions when opening a bank account; the only requirement is the presentation of identification.

Foreign Exchange and Remittances

Foreign Exchange

According to the law, after paying taxes, there are no restrictions on expatriating funds associated with an investment. In practice, foreign investors have encountered difficulties in converting funds associated with investments into foreign currency due to de facto capital controls implemented by the BRB in 2019.

According to the GoB, funds associated with an investment can be converted into a freely usable currency at a legal market rate, pending their availability. Due to a shortage of foreign currency, the central bank prioritizes companies in specific strategic industries for access to foreign exchange accommodation. In practice, the Burundian franc (BIF) is not freely convertible at the official government rate.

The BRB publishes the daily exchange rate on its website each morning. In practice, the BIF fluctuates, and the government has imposed de facto capital controls to prevent abrupt exchange rate movements; there is a significant gap between the official rate and a floating parallel unofficial market rate.

Remittance Policies

The government has not passed any new laws regarding a change to investment remittances policies. The average delay for remitting investment returns (once all taxes have been paid) is three months due to general inefficiency in the banking sector and the rarity of such transactions in an environment with very little foreign direct investment.

Sovereign Wealth Funds

Burundi does not have a sovereign wealth fund.

There are five SOEs in Burundi with 100 percent government ownership: REGIDESO (public utility company), ONATEL (telecom), SOSUMO (sugar), OTB (tea), COGERCO (cotton) and ODECA (Coffee). No statistics on assets are available for these companies as their reports are not available to the public. Board members for SOEs are appointed by the GoB and report to its ministries. The GoB has a minority (40 percent) share in Brarudi, a branch of the Heineken Group, and in three banking companies.

There is no published list of SOEs.

SOEs have no market-based advantages and compete with other investors under the same terms and conditions; however, Burundi does not adhere to the OECD guidelines on corporate governance for SOEs.

Privatization Program

In 2002, Burundi entered an active phase of political stabilization, national reconciliation and economic reform. In 2004, it received an emergency post-conflict program from the IMF and the World Bank, paving the way for the development of the Strategic Framework for Growth and Poverty Alleviation (PRSP). After the 2005 elections, the GoB made the decision to open several state-owned enterprises in different sectors of the economy to private investment, including foreign investment. The Burundian government, considering coffee a strategic sector of its economy, decided to opt for the privatization of the coffee sector first in an effort to modernize it. However, following the crisis of 2015, the GoB decided to suspend immediately the privatization program. At that time, it had not yet privatized other sectors such as tea or sugar. In late 2019, the GoB regained control of the coffee sector, citing as its rationale perceived mismanagement on the part of the privatized companies during the 2015-2019. It is unclear if or when the privatization program will continue.

The privatization program was open to all potential buyers, including foreigners, and there was no explicit discrimination against foreign investors at any stage of the investment process. Public bidding was mandatory. The process is transparent and non-discriminatory. When the government intends to sell a business or shares in a business, offers are published in local newspapers.

According to the investment code, any new enterprise is required to consider environmental issues and employee rights in its investment and business plan. The government has taken no comprehensive measures to implement policies or international standards regarding responsible business practices. The government routinely engages investors about including public and community benefits in investment projects, but has no clearly defined standards.

There have not been any high-profile or controversial instances of private sector impact on human rights violations in the recent past. No reliable information is available on the maintenance and enforcement of domestic laws with respect to labor and employment rights, consumer protections, and environmental protections. In January 2019, the BRB issued a regulation relating to the protection of consumers of financial products and services in view of the complexity and growing diversity of the range of the services and products offered in Burundi.

There are no corporate governance, accounting, or executive compensation standards in place to protect the interests of shareholders. There are no organizations focused specifically on RBC in the country.

As a member of the International Conference on the Great Lakes Region (ICGLR), the government has acceded to the OECD due diligence mechanism and the regional system for certification and traceability of certain minerals extracted from national mines (tin, tantalum, and tungsten), as well as against conflict minerals that can be smuggled from the neighboring Democratic Republic of Congo (DRC). In May 2014, Burundi became the third country in the Great Lakes region of Africa to implement an internationally accepted system of due diligence and mineral traceability system. However, some civil society organizations report a noticeable lack of transparency in the Burundian mining sector (involvement of some senior GoB officials in the trafficking of gold from the DRC).

The government does not participate in the EITI yet. There are no domestic transparency measures/policies that require the disclosure of payments made to the government.

Additional Resources

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/).

The government has an anti-corruption law and an enforcement organization, the Anti-Corruption Brigade, responsible for enforcing this legislation. Cabinet members, parliamentarians, and officials appointed by presidential decree have immunity from prosecution on corruption charges, insulating them from accountability. Laws designed to combat corruption do not extend to family members of officials or to political parties.

Article 60 of the April 2016 law “Bearing Measures for the Prevention and Punishment of Corruption and Related Offenses” regulates conflicts of interest, including in awarding government procurement. Burundian legislation criminalizes bribery of public officials, but there is no specific requirement for private companies to establish internal codes of conduct.

Burundi is a signatory to the UN Anti-Corruption Convention and the OECD Convention on Combating Bribery. Burundi has also been a member of the East African Anti-Corruption Authority since joining the EAC in 2007. The country does not provide protections to NGOs involved in investigating corruption.

A number of U.S. firms have specifically noted corruption as an obstacle to direct investment in Burundi. Corruption is most pervasive in the award of licenses and concessions, which takes place in a non-transparent environment with frequent allegations of bribery and cronyism. Many customs officials are also reportedly corrupt, regularly extorting bribes from exporters and importers.

President Ndayishimiye has prioritized anti-corruption and efficiency efforts, particularly in state-owned enterprises, firing 40 director-level public employees and promising more punitive actions against corrupt or underperforming employees.

Resources to Report Corruption

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

Name: Roger Ndikumana
Title: Commissaire Général
Organization: Anti-Corruption Brigade
Address: PO Box 890 Bujumbura
Telephone Number: (+257) 22 25 62 37
Email Address: brigadeanticorruption@yahoo.fr 

Contact at a “watchdog” organization (international, regional, local, or nongovernmental organization operating in the country/economy that monitors corruption, such as Transparency International):

Name: Gabriel Rufyiri
Title: President
Organization: OLUCOME
Address: 47, Chaussée Prince Louis Rwagasore, n°47, 1st Floor
Telephone Number: (+257) 79 30 82 97
Email Address: rufyirig@gmail.com  / olucome2003@gmail.com 

Burundi has experienced cycles of ethnic and political violence since its independence in 1962. Periods before and after national elections have often been marked by political violence and civil disturbance. The May 2020 elections were largely peaceful, and the GoB has since consolidated power and security gains. Political tensions between the ruling party and opposition remain. The new administration has made efforts to reduce tensions with neighboring countries, including Rwanda, and to increase participation in regional security cooperation.

Unskilled local labor is widely available, while there are shortages for skilled workers in some sectors; no statistics are available on the shortage of specialized labor skills. According to government policy, the hiring of nationals should be prioritized except in cases in which no local expertise is available. Formal sector employment is limited, and official figures for unemployment are unreliable. Youth unemployment is estimated at approximately 65 percent.

According to the investment code, any new enterprise is required to take into account environmental issues and employee rights in its investment and business plan. The government has taken no comprehensive measures to implement policies or international standards regarding responsible business practices. The government routinely engages investors about including public and community benefits in investment projects but has no clearly defined standards.

No reliable information is available on the maintenance and enforcement of domestic laws with respect to labor and employment rights, consumer protections, and environmental protections. There are no known examples of labor laws being waived in order to attract or retain investment.

The labor code allows for employers to respond to fluctuating market conditions with layoffs of workers. Labor laws do not differentiate between layoffs and firing for severance. The government has a social insurance program that provides limited coverage to workers laid off for economic reasons.

Burundi is a member of the International Labor Organization (ILO) and its domestic labor law is in compliance with international labor standards. Workers’ unions are legally authorized, and there are laws and regulations that prohibit child and forced labor and any kind of discrimination. In practice, child labor occurs, and some union activity is restricted. Burundi has ratified all of the ILO fundamental conventions protecting workers’ rights; however, protection of core labor rights continues to be inadequate. In the private sector, labor-management relations are usually conducted according to international standards that allow for collective bargaining. Burundi’s Labor Inspectorate has the authority to settle disputes between workers and employers, which can also be managed through civil judicial procedures. No strikes that posed an investment risk occurred during the past year. Since November 2020, a new labor code to replace the 1993 code was adopted with the main objective of complying with the various conventions that the country has since ratified, and above all responding to criteria for regional and international integration. This new code includes protections for employees and more flexibility and surety of contracts.

NAME: Andrew Partin
TITLE: Economic Affairs Officer
ADDRESS OF MISSION/AIT: Embassy of the United States of America in Bujumbura
TELEPHONE NUMBER: (+257) 22 20 73 10
EMAIL ADDRESS: partinaj@state.gov

NAME: Tresor Ntandikiye
TITLE: Economic Specialist
ADDRESS OF MISSION/AIT: Embassy of the United States of America in Bujumbura
TELEPHONE NUMBER: (+257) 22 20 74 26
EMAIL ADDRESS: BujumburaEcon@state.gov

Policies Towards Foreign Direct Investment

The GOC’s policies towards foreign direct investment (FDI) are generally positive. Chad’s laws and regulations encourage FDI, and there are few formal restrictions on foreign trade and investment. Under Chadian law, foreign and domestic entities may establish and own business enterprises.

The National Investment Charter of 2008 permits full foreign ownership of companies in Chad. The only limit on foreign control is on ownership of companies deemed related to national security. The National Investment Charter guarantees both foreign companies and individuals equal standing with Chadian companies and individuals in the privatization process. In principle, tenders for foreign investment in state-owned enterprises (SOEs) and for government contracts are conducted through open international bid procedures. The National Investment Charter also offers incentives to certain foreign companies establishing significant operations in Chad, including up to five years of tax-exempt status.

Chad’s National Agency for Investment and Exports (ANIE, Agence Nationale des Investissements et des Exports), an agency of the Ministry of Industrial and Commercial Development & Private Sector Promotion, facilitates foreign investment. ANIE’s mandate is to contribute to the creation of a business environment that meets international standing, promote investment and exports, support the development of SMEs, and inform GOC decision makers about economic policy. ANIE acts as a one-stop shop for new investors.

Limits on Foreign Control and Right to Private Ownership and Establishment

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

Other Investment Policy Reviews

UNCTAD published a French-language Investment Policy Review on Chad in July 2019 ( https://investmentpolicy.unctad.org/publications/1212/investment-policy-review-of-chad ).

The World Trade Organization (WTO) published a joint trade policy review for Chad, Cameroon, Republic of Congo, Gabon, and Central African Republic in 2013 ( https://www.wto.org/english/tratop_e/tpr_e/tp385_e.htm ), and a standalone trade policy review for Chad in 2007 ( https://www.wto.org/english/tratop_e/tpr_e/tp275_e.htm ).

The OECD has not published any investment policy reviews of Chad.

Business Facilitation

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

The World Bank’s Doing Business 2020 report ranked Chad 182 out of 190 countries for ease of starting a business, which included factors beyond registration such as permitting and access to office space, energy, and capital.

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

Outward Investment

The GOC does not offer any programs or incentives encouraging outward investment. The GOC does not restrict domestic investors from investing abroad.

Transparency of the Regulatory System

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

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

Chad develops forward regulatory plans to encourage foreign investment and budget support. Government ministries draft regulations, subject to approval by the Secretary General of the Government, Council of Ministers, National Assembly, and President. National regulations are most relevant to foreign investors. There are no informal regulatory processes managed by nongovernmental organizations or private sector associations. The GOC occasionally provides opportunities for local associations, such as the National Council of Employers (CNPT, Conseil National du Patronat Tchadien) or the CCIAMA to comment on proposed laws and regulations pertaining to investment. All contracts and practices are subject to legal review, which can be weak.

The Government publishes all budget information, including on the Ministry of Finance and Budget website. Other proposed laws and regulations are not published in draft form for public comment. The Observatory on Public Finance is an online framework for the dissemination of public finance data and the operationalization of the Code of Transparency and Good Governance. This code is an implementation of one of the six CEMAC Directives on the new harmonized framework for public financial management.

The Presidential Council to Improve the Business Climate was announced in 2018, met once in late 2019, and formally launched in January 2021 due to the negative impact of COVID-19 in 2020. This effort to reform Chad’s investment climate and improve Chad’s performance in World Bank assessments is still in its embryonic stage.

Chad is not listed on www.businessfacilitation.org .

International Regulatory Considerations

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

Legal System and Judicial Independence

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

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

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

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

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

Laws and Regulations on Foreign Direct Investment

The National Investment Charter encourages foreign direct investment. Chad is a member of CEMAC and OHADA. Since 2017, Chad is gradually implementing business and economic laws and regulations based on CEMAC standards and OHADA Uniform Acts.

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

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

Competition and Anti-Trust Laws

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

Expropriation and Compensation

Chadian law protects businesses from nationalization and expropriation, except in cases where expropriation is in the public interest. There were no government expropriations of foreign-owned property in 2020. There are no indications that the GOC intends to expropriate foreign property in the near future.

Chad’s Fourth Republic Constitution adopted in May 2018 and amended in December 2020 prohibits seizure of private property except in cases of urgent public need, of which there are no known cases. A 1967 Land Law prohibits deprivation of ownership without due process, stipulating that the state may not take possession of expropriated properties until 15 days after the payment of compensation. The government continues to work on reform of the 1967 law.

Dispute Settlement

ICSID Convention and New York Convention

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

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

Investor-State Dispute Settlement

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

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

International Commercial Arbitration and Foreign Courts

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

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

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

Bankruptcy Regulations

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

The World Bank’s Doing Business 2020 report ranked Chad’s ease of resolving insolvency at 155 of 190 ( http://www.doingbusiness.org/data/exploreeconomies/chad/#resolving-insolvency ).

Investment Incentives

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

To spur investment into target sectors, the GOC authorized tax credits, discounts, and exemptions for investments in the agriculture, animal husbandry, solar and wind energy, information technology, oil, and plastics sectors in the 2021 Finance Law.

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

The GOC does not issue guarantees but jointly finances some foreign direct investments, with mixed results.

Foreign Trade Zones/Free Ports/Trade Facilitation

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

Performance and Data Localization Requirements

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

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

There are no requirements for foreign IT providers to turn over source code and/or provide access to surveillance (backdoors into hardware and software or turn over keys for encryption). There are no rules on maintaining a certain amount of data storage within Chad.

Real Property

The Chadian Civil Code protects property rights. Since 2013, landowners may register land titles with the One-Stop Land Titling Office (Guichet Unique pour les Affaires Foncieres). However, enforcement of these rights is difficult because a majority of landowners do not have a title or a deed for their property.

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

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

The World Bank’s Doing Business 2020 report ranked Chad 131 of 190 in ease of registering property. The report cited the high cost of property valuation plus other associated costs for registering property as the major impediment. Time required and number of procedures are on par with the rest of Sub-Saharan Africa. ( https://www.doingbusiness.org/en/data/exploreeconomies/chad#DB_rp )

Intellectual Property Rights

Chad is a member of the African Intellectual Property Organization (OAPI) and the World Intellectual Property Organization (WIPO). Chad ratified the revised Bangui Agreement (1999) in 2000 and the Berne Convention in 1971. The GOC adheres to OAPI rules within the constraints of its administrative capacity.

Within the Ministry responsible for trade, the Department of Industrial Property and Technology addresses intellectual property rights (IPR) issues. This department is the National Liaison Unit (SNL) within the OAPI and is the designated point of contact under Article 69 of the World Trade Organization (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).

Counterfeit pharmaceuticals and artistic works, including music and videos, are common in Chad. Counterfeit watches, sports clothing, footwear, jeans, cosmetics, perfumes, and other goods are also readily available on the Chadian market. These products are not produced locally and are generally imported through informal channels. Despite limited resources, Chadian customs officials make occasional efforts to enforce copyright laws, normally by seizing and burning counterfeit medicines, CDs, and mobile phones.

Chad does not regularly track and report on seizures of counterfeit goods. Occasionally, Chadian authorities will announce such a seizure in the local press. Customs officers have the authority to seize and destroy counterfeit goods ex officio. The Government pays for storage and destruction of such goods.

Chad is not listed on the United States Trade Representative (USTR) Special 301 Report or Notorious Markets List. For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .

Capital Markets and Portfolio Investment

Chad’s financial system is underdeveloped. There are no capital markets or money markets in Chad. A limited number of financial instruments are available to the private sector, including letters of credit, short- and medium-term loans, foreign exchange services, and long-term savings instruments.

Commercial banks offer credit on market terms, often at rates of 12 to 25 percent for short-term loans. Access to credit is available but is prohibitively expensive for most Chadians in the private sector. Medium-term loans are difficult to obtain, as lending criteria are rigid. Most large businesses maintain accounts with foreign banks and borrow money outside of Chad. There are ATMs in some major hotels, N’Djamena airport, and in most neighborhoods of N’Djamena, and in major cities.

Chad does not have a stock market and has no effective regulatory system to encourage or facilitate portfolio investments. A small regional stock exchange, known as the Central African Stock Exchange, in Libreville, Gabon, was established by CEMAC countries in 2006. Cameroon, a CEMAC member, launched its own market in 2005. Both exchanges are poorly capitalized.

Money and Banking System

Chad’s banking sector is small and continues to streamline lending practices and reduce the volume of bad debt accumulated before and during the 2016-2017 economic crisis. While Chad’s banking rate remains low due to low aggregate savings and limited exposure to and trust in banks, according to the World Bank it increased from 9 to 22 percent between 2009 and 2017.

Chad’s four largest banks have been privatized. The former Banque Internationale pour l’Afrique au Tchad (BIAT) became a part of Togo-based Ecobank; the former Banque Tchadienne de Credit et de Depôt was re-organized as the Societe Generale Tchad; the former Financial Bank became part of Togo-based Orabank; and the former Banque de Developpement du Tchad (BDT) was reorganized as Commercial Bank Tchad (CBT), in partnership with Cameroon-based Commercial Bank of Cameroon. There are two Libyan banks in Chad, BCC (formerly Banque Libyenne) and BSCIC (Banque Sahelo-Saharienne pour l’Investissement et le Commerce), along with one Nigerian bank — United Bank for Africa (UBA). In 2018, the GOC funded a new bank Banque de l’Habitat du Tchad (BHT) with the GOC as majority shareholder with 50 percent of the shares and two public companies, the National Social Insurance Fund (Caisse Nationale de Prevoyance Sociale, CNPS) and the Chadian Petroleum Company (Societe des Hydrocarbures du Tchad, SHT), each holding 25 percent.

Chad, as a CEMAC member, shares a central bank with Cameroon, Central African Republic, Republic of Congo, Equatorial Guinea, and Gabon – the Central African Economic Bank (BEAC, Banque des Etats de l’Afrique Centrale), headquartered in Yaounde, Cameroon.

Foreigners must establish legal residency in order to establish a bank account.

Foreign Exchange and Remittances

Foreign Exchange

The BEAC implemented foreign exchange regulation in 2019 that required full repatriation of export earnings and centralizing foreign currency holdings with the BEAC, though extractive industry companies received an exemption through December 2021.

The government does not restrict converting funds associated with an investment (including remittances of investment capital, earnings, loan repayments, lease payments, royalties) into a freely usable currency at legal market-clearing rates. There are currently no restrictions on repatriating these funds, although there are some limits associated with transferring funds. Individuals transferring funds exceeding 1,000 USD must document the source and purpose of the transfer with the local sending bank. Transactions of 10,000 USD or more for individuals and 50,000 USD or more for companies are automatically notified to the COBAC. Companies and individuals transferring more than 800,000 USD out of Chad need BEAC authorization to do so. Authorization may take up to three working days. To request authorization for a transfer, companies and individuals must submit contact information for the sender and recipient, a delivery timetable, and proof of the sender’s identity. Approvals are routine, although the Central Bank has occasionally temporarily restricted capital outflows. Businesses can obtain advance approval for regular money transfers.

Chad is a member of the African Financial Community (CFA) and uses the Central African CFA Franc (FCFA) as its currency. The FCFA is pegged to the Euro at a fixed rate of one Euro to 655.957 FCFA exactly (100 FCFA = 0.152449 Euro). There are no official restrictions on obtaining foreign exchange, but in practice foreign exchange can be difficult to acquire.

Remittance Policies

There are no recent changes to or plans to change investment remittance policies. There are no time limitations on remittances, dividends, returns on investment, interest, and principal on private foreign debt, lease payments, royalties, or management fees.

Chad does not engage in currency manipulation.

Chad is a member state of the Action Group against Money Laundering in Central Africa (GABAC), which is in the process of becoming a Financial Action Task Force (FATF)-style regional body. On the national level, the National Financial Investigation Agency (ANIF) has implemented GABAC recommendations to prevent money laundering and terrorist financing.

Sovereign Wealth Funds

The GOC does not currently maintain a Sovereign Wealth Fund.

All Chadian SOEs operate under the umbrella of government ministries. SOE senior management reports to the minister responsible for the relevant sector, as well as a board of directors and an executive board. The President of the Republic appoints SOE boards of directors, executive boards, and CEOs. The boards of directors give general directives over the year, while the executive boards manage general guidelines set by the boards of directors. Some executive directors consult with their respective ministries before making business decisions.

The GOC operates SOEs in several sectors, including Energy and Environmental Industries; Agribusiness; Construction, Building and Heavy Equipment; and Information and Communication. The percentage SOEs allocate to research and development (R&D) is unknown.

There were no reports of discriminatory action taken by SOEs against the interests of foreign investors in 2020, and some foreign companies operated in direct competition with SOEs. Chad’s Public Tender Code (PTC) provides preferential treatment for domestic competitors, including SOEs.

SOEs are not subject to the same tax burden and tax rebate policies as their private sector competitors and are often afforded material advantages such as preferential access to land and raw materials. SOEs receive government subsidies under the national budget; however, in practice they do not respect the budget. State and company funds are often commingled.

Chad is not a party to the Agreement on Government Procurement within the framework of the WTO. Chadian practices are not consistent with the OECD Guidelines on Corporate Governance for SOEs.

Privatization Program

Foreign investors are permitted and encouraged to participate in the privatization process. There is a public, non-discriminatory bidding process. Having a local contact in Chad to assist with the bidding process is important. To combat corruption, the GOC has recently hired private international companies to oversee the bidding process for government tenders. Despite the GOC’s willingness to privatize loss-making SOEs, there remain several obstacles to privatization.

The Chamber of Commerce submitted a ‘white paper’ (livre blanc) in 2018 with recommendations for the GOC to facilitate and simplify private sector operations, including establishing a Business Observatory and a Presidential Council, which would implement over 70 recommendations to improve the investment climate in Chad. The Presidential Council became operational in January 2021.

Chad is considering privatization in the following sectors:

• Information & Communication (SOTEL Tchad)
• Food Processing & Packaging (the Société Tchadienne de Jus de Fruit (STJF), which produces fruit juice in Doba; and the Société Moderne de Abbatoires (SMA), a slaughterhouse and meat packaging company in Farcha)

There is a general awareness of Responsible Business Conduct (RBC) among firms in Chad. Most Western firms operating in Chad engage in RBC, particularly those in the petroleum and telecommunications sectors. For example, Esso Exploration and Production Chad, Inc. (EEPCI), a significant oil producer, has implemented Environmental Management Plans (EMPs), prioritizing hiring local residents and local purchase of goods and services, establishing international safety standards, and protecting biodiversity. A critical part of EMP has been the Land Use Management Action Plan (LUMAP) that compensates individuals and communities for land used by the project. LUMAP has distributed approximately $1.7 million in cash, in-kind goods, and training. EMP’s efforts are complemented by the ExxonMobil Foundation, which supports projects to improve girls’ education and fight malaria.

Many foreign firms commit to extensive local staff training efforts, purchase local goods, and donate excess equipment to charities or local governments. Internet companies Airtel and Tigo, as well as some banks, continue to engage in RBC focused on public awareness campaigns countering violent extremism and promoting social cohesion.

While work safety and environmental protection regulations exist, the government does not always enforce them, and companies do not always adhere to them. There are a number of local NGOs, particularly in the southern oil-producing regions, which monitor safety and environmental protection in the oil sector, and which have held government and private companies publicly accountable. EEPCI adheres to U.S. Occupational Safety and Health Administration (OSHA) guidelines for recording accidents and injuries and implements a rigorous program of safety procedures and protocols.

Chad joined the Extractive Industries Transparency Initiative (EITI) in 2010.

Additional Resources

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

North Korea Sanctions & Enforcement Actions Advisory

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 

Foreign investors should be aware that corruption remains common in Chad and constitutes a significant deterrent to U.S. investment. Corruption is most pervasive in government procurement, award of licenses or concessions, dispute settlement, regulation enforcement, customs, and taxation.

Chad is not a signatory country of the UN Convention Against Corruption (UNCAC). Chad is not a party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (“the OECD Anti-Bribery Convention”).

There is an independent Court of Auditors (Cour des Comptes), equivalent to a supreme audit institution (SAI), to enhance independent oversight of government decisions, although its members are nominated by presidential decree. Concurrently, the GOC created a General Inspectorate for State Control within the Presidency to oversee government accountability. No reports have been published, however. In addition to these bodies, the National Assembly’s Finance Committee carries out verifications of the GOC’s annual financial statement. No audits have been made publicly available during the reporting period.

A February 2000 anti-corruption law stipulates penalties for corrupt practices. The law does not single out family members and political parties. As in other developing countries, low salaries for most civil servants, judicial employees, and law enforcement officials, coupled with a weak state system and a culture of rent seeking, have contributed to corruption.

The Ministry of Finance and Budget set up a toll-free number (700) to fight corruption and embezzlement. According to the Minister of Finance and Budget, the toll-free number 700 allows each economic operator or any other individual to alert the Inspectorate General of Finance to denounce any unscrupulous agent who seeks to be corrupted in the context of the issue of administrative paper or the payment of a tax. There are no specific laws to counter conflict of interest. The GOC does not require private companies to establish internal codes of conduct that, among other things, prohibit bribery of public officials.

Local NGO Center for Studies and Research on Governance, Extractive Industries, and Sustainable Development (CERGIED), formerly GRAMP-TC (Groupe Alternatif de Recherche et de Monitoring de Petrole – Tchad), tracks government expenditures of oil revenue. There are no indications that anti-corruption laws are enforced differently on foreign investors than on Chadian citizens. There is no specific protection for NGOs involved in investigating corruption.

Resources to Report Corruption

Government agency contact responsible for combating corruption:

Inspection Generale d’Etat

Ministry of Finance and Budget toll free number 700 (inside Chad)

Presidence de la Republique

Ndjamena, Chad +235 22 51 51 39 / 22 51 44 37

+235 22 51 51 39 / 22 51 44 37

Contact at watchdog organizations:

Gilbert Maoundonodji

Coordinator

CERGIED (formerly GRAMP –TC)

BP 4021, N’Djamena, Chad
+235 6058 2016 / 9317 7678

+235 6058 2016 / 9317 7678

infos@cergied.org  / secretariat@cergied.org  / https://cergied.org/ 

infos@cergied.org  / secretariat@cergied.org  / https://cergied.org/ 

Chad has enjoyed political stability since 2008. There have been no reported incidents in recent years involving politically motivated damage to projects and/or installations, including during the 2008 disturbances. President Deby is completing his fifth elected presidential term and is eligible to participate in the next presidential elections, scheduled for April 2021. Socio-economic conditions occasionally spark demonstrations and protests against the Government. In many cases, the government either denied permits for demonstrations or suppressed them using tear gas, arresting participants and organizers. Extended periods of reduced oil revenues add to socioeconomic stress. The spread of the COVID-19 pandemic strains Chad’s limited medical infrastructure and disrupts trade routes with neighboring countries and international air travel.

Regional violent extremist organizations threaten Chadian and Western interests. Boko Haram’s violence has choked off vital trade routes with Nigeria and the road between N’Djamena and Douala, Cameroon, the principal port serving Chad. This has increased costs for imports and decreased exports. Violent extremist organizations may threaten foreign investments along the Lake Chad Basin.

For up-to-date information on political and security conditions in Chad, please refer to the Consular Affairs Bureau’s Travel Warning and Country Specific Information at http://www.travel.state.gov. The Embassy encourages all U.S. Citizens visiting Chad to register with the Embassy upon arrival or online via the STEP program.

U.S. businesses and organizations in Chad are welcome to inquire at the Embassy about joining the Overseas Security Advisory Committee (OSAC).

Chad has a shortage of skilled labor in most sectors. Although there is an increasing pool of university graduates able to fill entry-level management and administrative positions, skilled workers still represent a very small percentage of the total labor pool. Eighty percent of the Chadian labor force is estimated to work in the informal sector, with many engaged in subsistence activities including farming, herding, and fishing. Unskilled and day laborers are readily available. Few Chadians speak English. Acceptable translators and interpreters are available. Some government ministries and SOEs provide job-related training to their employees.

Chad’s population demonstrates a significant youth bulge, leading to widespread youth unemployment. Laborers are motivated but frequently undereducated. According to UNESCO, Chad’s literacy rate is 22 percent.

Chad has ratified all eight Fundamental Conventions of the International Labor Organization. International labor rights such as freedom of association, the elimination of forced labor, child labor, employment discrimination, minimum wage, occupational safety and health, and weekly work hours are recognized within the labor code. However, gaps remain in law and practice. Chadian labor law derives from French law and tends to provide strong protection for Chadian workers; priority is given to Chadian nationals. Labor unions operate independently from the government and, in fact, often challenge the government. The two main labor federations, the Confederation Libre des Travailleurs du Tchad (CLTT) and the Union des Syndicats Tchadiens (UST), to which most individual unions belong, are the most influential.

The labor court is the labor dispute mechanism in Chad. In case of a dispute, the aggrieved party contacts a labor inspector directly or through the labor union to settle the dispute or lodge a complaint with the labor court.

Labor unions practice collective bargaining, and the labor code monitors labor abuses, health, and safety standards in low-wage assembly operations. The enforcement of the code is not effectively conducted; most disputes are based on contract termination. Child labor remains a problem. Children were involved in the following sectors: street begging in urban centers, street work as hawkers and porters, carpentry, vehicle garages, gold mining in the north of the country, service industries such as waiters/waitresses, and as domestic workers. Child labor is common in the agriculture sector. Children are also involved in cattle-herding and charcoal production. In some regions, children are involved in catching, smoking, and selling fish. Chadian cattle are included on the U.S. Government’s List of Goods Produced by Child Labor or Forced Labor.

The GOC may provide incentives for foreign businesses but does not waive laws to attract or retain investment, as the Chadian labor law strongly supports workers. 12. U.S. International Development Finance Corporation (DFC) and Other Investment Insurance Programs

Please note that the following tables include FDI statistics from three different sources, and therefore will not be identical. Table 2 uses BEA data when available, which measures the stock of FDI by the market value of the investment in the year the investment was made (often referred to as historical value). This approach tends to undervalue the present value of FDI stock because it does not account for inflation. BEA data is not available for all countries, particularly if only a few US firms have direct investments in a country. In such cases, Table 2 uses other sources that typically measure FDI stock in current value (or, historical values adjusted for inflation). Even when Table 2 uses BEA data, Table 3 uses the IMF’s Coordinated Direct Investment Survey (CDIS) to determine the top five sources of FDI in the country. The CDIS measures FDI stock in current value, which means that if the U.S. is one of the top five sources of inward investment, U.S. FDI into the country will be listed in this table. That value will come from the CDIS and therefore will not match the BEA data.

* Source for Host Country Data: N/A.

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

Table 4: Sources of Portfolio Investment
Data not available.

Economic and Commercial Officer

U.S. Embassy N’Djamena,

Rondpoint Chagoua BP 413

N’Djamena Chad.
+235 2251-5017 Ext 24408 and 24289

NDjamena-Commercial@state.gov 

Policies Towards Foreign Direct Investment

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

In most sectors, there are no laws that limit foreign investment. There are restrictions, however, on foreign investment in the health sector, law and accounting firms, and travel agencies.

Land tenure is a complicated and sensitive issue. Land tenure disputes exist all over the country owing to multiple forms of traditional collective tenure and the lack of formal private land ownership in most areas. Companies that wish to purchase land must have the property surveyed before obtaining title. Surveying is tightly controlled by a small group of companies and can often cost more than the value of the parcel of land. Freehold land tenure in rural areas is difficult to negotiate, however, and can inhibit foreign investment. Most businesses, including agribusinesses and forestry companies, circumvent the complicated land purchase process by acquiring long-term leases instead. There are regulations designed to control land speculation in urban areas, but they do not prevent foreigners from owning land.

The Ivoirian government’s investment promotion agency, the Center for the Promotion of Investment in Côte d’Ivoire (CEPICI), promotes and attracts national and foreign investment. Its services are available to all investors, provided through a one-stop shop intended to facilitate business creation, operation, and expansion. CEPICI ensures that investors receive incentives outlined in the investment code and facilitates access to industrial land. More information is available at http://www.cepici.gouv.ci/ .

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

Limits on Foreign Control and Right to Private Ownership and Establishment

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

There are no general, economy-wide limits on foreign ownership or control, and few sector-specific restrictions. There are no laws specifically directing private firms to adopt articles of incorporation or association that limit or prohibit foreign investment, participation, or control in those firms, and no such practices have been reported.

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

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

Other Investment Policy Reviews

Côte d’Ivoire has not conducted an investment policy review (IPR) through the OECD. The WTO last conducted a Trade Policy Review in October 2017, which can be found at https://www.wto.org/english/tratop_e/tpr_e/tp462_e.htm .

UNCTAD published an Investment Policy Review for Côte d’Ivoire in February 2020, which can be found at https://unctad.org/webflyer/investment-policy-review-cote-divoire 

The Government of Côte d’Ivoire provides information about sector policies and business opportunities in publicly available reports. More information can be found at: https://www.cepici.gouv.ci/ .

Business Facilitation

The CEPICI manages Côte d’Ivoire’s online information portal containing all documents dedicated to business creation and registration ( https://cotedivoire.eregulations.org/ ). All the necessary documentation for registration is available online, however actual registration must be done in person. Further information on business registration is also available on CEPICI’s website ( http://www.cepici.gouv.ci/ ).

Businesses can register at the CEPICI’s One-Stop Shop (Guichet Unique) in Abidjan. The One-Stop Shop allows businesses to register with the commercial registrar (Registre du Commerce et du Crédit Immobilier), the tax authority (Direction Générale d’Impôts) and the social security institute (Caisse Nationale de Prévoyance Sociale). The One-Stop Shop also publishes the legal notice of incorporation on CEPICI’s website. All necessary documents for registration are also available on the website. Registration takes between one and three days. The business licensing process, controlled by sector-specific governing bodies, is separate from the registration process.

Women have equal access to the registration process. There have not been any reports of discrimination in that regard.

Outward Investment

Côte d’Ivoire does not promote or incentivize outward investment.

However, the government does not restrict domestic investors from investing abroad.

Transparency of the Regulatory System

The government aims for transparency in law and policy to foster competition and provide clear rules of the game and a level playing field for domestic and foreign investors. Transparency of the Ivoirian regulatory system is a concern; both foreign and Ivoirian companies complain that new regulations are issued with little warning and without a period for public comment.

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

Regulatory authority and decision-making exist only at the national level. Sub-national jurisdictions do not regulate business. For most industries or sectors, regulations are developed through the ministry responsible for that sector. In the telecommunications, electricity, cocoa, coffee, cotton, and cashew sectors, the government has established control boards or independent agencies to regulate the sector and pricing. Companies have complained that rules for buying prices determined by the agriculture commodity regulatory agencies tend to be opaque and local prices are set arbitrarily without reference to world prices.

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

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

Regulatory actions are published in the Journal Officiel de la République de Côte d’Ivoire (Official Journal of the Republic of Côte d’Ivoire), which is available for purchase at newsstands and by subscription on the Journal’s website http://www.sgg.gouv.ci/jo.php  and at https://abidjan.net/ .

The Autorité Nationale de Régulation des Marchés Publics (National Regulatory Authority for Public Procurement; ANRMP), polices transparency in public procurement and private sector compliance with public procurement rules. Consumers, trade associations, private companies, and individuals have the right to file complaints with ANRMP to hold the government to its own administrative processes.

The U.S. Government does not have any knowledge of regulatory system reforms that have been announced since the last ICS report, including enforcement reforms. The government has fully implemented regulatory reforms announced in prior years, with the goal of creating an enabling business environment, fostering competition, and building investor confidence.

Public and private institutions tasked with controlling and regulating various sectors make regulatory enforcement mechanisms available to the public.

Regulatory bodies regularly publish and promote access to their data for the business community and development partners, allowing for scientific and data-driven reviews and assessments. Quantitative analysis and public comments are made available.

The Ivoirian government promotes transparency of public finances and debt obligations (including explicit and contingent liabilities) with the publication of this information through the following websites: http://budget.gouv.ci 

https://www.tresor.gouv.ci/tres/fr_FR/rapport-de-la-dette-publique/ 

International Regulatory Considerations

The Ivoirian government incorporates WAEMU directives into its public procurement bidding policy, processes, and auditing. This includes separating auditing and regulating functions and increasing advance payment for the initial procurement of goods and services from 25 to 30 percent. The ANRMP regulates public procurement with a view to improving governance and transparency. It has the authority to sanction private-sector entities that do not comply with public-procurement regulations and to provide recommendations to ministries to address irregularities.

Ivoirian laws, codes, professional-association standards, and regional-body membership obligations are incorporated in the country’s regulatory system. The private sector often follows European norms to take advantage of the Ivoirian trade agreement with the EU – Côte d’Ivoire’s largest market.

Côte d’Ivoire has been a WTO member since 1995 but has not notified all draft technical regulations to the WTO Committee on Technical Barriers to Trade. Côte d’Ivoire signed the Trade Facilitation Agreement (TFA) in December 2013 and ratified it in December 2015. The National TFA Committee (NTFC) coordinates TFA implementation.

Legal System and Judicial Independence

The Ivoirian legal system is based on the French civil-law model. The law guarantees to all the right to own and transfer private property. Rural land, however, is governed by a separate set of laws, which makes ownership and transfer very difficult. The court system enforces contracts.

Côte d’Ivoire is a signatory to OHADA, which provides common corporate law and arbitration procedures for the 16 member states. The Commercial Court of Abidjan adjudicates corporate law cases and contract disputes. Mediation is also available through the Ivoirian legal framework in addition to the Commercial Court and the Arbitration Tribunal. The Commercial Court of Abidjan retains jurisdiction for the entire country.

The Ivoirian judicial system is ostensibly independent, but magistrates are sometimes subject to political or financial influence. Judges sometimes fail to prove that their decisions are based on the legal or contractual merits of a case and often rule against foreign investors in favor of entrenched interests. The greatest complaint from investors is the slow dispute-resolution process. Cases are often postponed or appealed without a reasonable explanation, moving from court to court for years or even decades. Regulations or enforcement actions are appealable and adjudicated through the national court system.

Laws and Regulations on Foreign Direct Investment

The 2018 Investment Code is the primary governing authority for investment conduct. The Code does not restrict foreign investment or the repatriation of funds. The Code offers a mixture of fiscal incentives, combining tax exoneration and tax credits to encourage investment. The government also offers incentives to promote small businesses and entrepreneurs, low-cost housing construction, factories, and infrastructure development, which the government considers key to the country’s economic development. Some sectors have additional laws that govern investment activity in those sectors. In mining, for example, the Mining Code allows a period for holding permits for ten years with a possibility to extend for two more years on a limited permit area of 400 square kilometers.

As of January 2021, the Government of Côte d’Ivoire has been preparing a bill detailing local content requirements for the petroleum sector for consideration by the legislature (see also Performance and Data Localization Requirements).

The CEPICI provides a one-stop shop website to assist investors. More information on Côte d’Ivoire’s laws, rules, procedures, and reporting requirements can be found at: www.apex-ci.org/ 

www.cepici.gouv.ci/ 

Competition and Antitrust Laws

The Ministry of Commerce, Industry and Small Business Promotion, through the Commission on Anti-Competition Practices, is responsible for reviewing competition–related concerns under the 1991 competition law, which was updated in 2013. ANRMP is responsible for reviewing the awarding of contracts.

No significant competition cases were reported over the past year.

Expropriation and Compensation

The Ivoirian constitution guarantees the right to own property and freedom from expropriation without compensation. The government may expropriate property with due compensation (fair market value) at the time of expropriation in the case of “public interest.” Perceived corruption and weak judicial and security capacity, however, have resulted in poor enforcement of private property rights, particularly when the entity in question is foreign and the plaintiff is Ivoirian or a long-established foreign resident.

Dispute Settlement

ICSID Convention and New York Convention

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

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

Investor-State Dispute Settlement

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

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

In the past 10 years, foreign investors have had investment disputes, which have often been resolved through arbitration or amicable settlement. There have been no reported disputes involving U.S. firms in the past 10 years. As Côte d’Ivoire is a signatory to the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards, local courts are obliged to enforce foreign arbitral awards.

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

International Commercial Arbitration and Foreign Courts

The Abidjan-based regional Joint Court of Justice and Arbitration (CCJA) provides a means of solving contractual disputes. The arbitration tribunal has the ability to enforce awards more quickly, but most business contracts are written to specify that disputes will be settled in Ivoirian courts, thus the Ivoirian court system is the first resort.

Côte d’Ivoire is a member of OHADA, whose provisions adopted in 1999 have replaced domestic law on arbitration. The unified law is based on the model law of the United Nations Commission on International Trade Law (UNICITRAL).

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

The U.S. government is not aware of cases in which Côte d’Ivoire’s domestic courts have shown preferential treatment for state-owned enterprises involved in investment disputes.

Bankruptcy Regulations

Côte d’Ivoire is ranked 85 out of 190 countries for ease of resolving insolvency, according to the World Bank’s Doing Business Report. As a member of OHADA, Côte d’Ivoire has both commercial and bankruptcy laws that address the liquidation of business liabilities. OHADA is a regional system of uniform laws on bankruptcy, debt collection, and rules governing business transactions. OHADA permits three different types of bankruptcy liquidation: an ordered suspension of payment to permit a negotiated settlement; an ordered suspension of payment to permit restructuring of the company, similar to Chapter 11; and the complete liquidation of assets, similar to Chapter 7. Creditors’ rights, irrespective of nationality, are protected equally by the Act. Bankruptcy is not criminalized. Court-ordered monetary settlements resulting from declarations of bankruptcy are usually paid out in local currency.

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

Investment Incentives

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

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

Foreign Trade Zones/Free Ports/Trade Facilitation

Created in 2008, the Ivoirian free trade zone (FTZ) for information technology and biotechnology (VITIB) is located in the town of Grand Bassam in the greater Abidjan area. In 2014, VITIB established the Mahatma Gandhi Technology Park at Grand Bassam. Bonded warehouses do exist, and bonded zones within factories are allowed. High port costs and maritime freight rates have inhibited the development of in-bond manufacturing or processing, and there are consequently no general foreign trade zones.

An FTZ also exists at the Port of Abidjan specifically for fish processing. In force since December 2005, this FTZ is reserved for companies that earn at least 90% of their turnover from exports. Eligible companies are exempt from all duties and taxes, including on imported and exported goods and services. They also enjoy preferential rates for water, electricity, telephone, and fuel supplied by public or semi-public establishments. A fee applies to FTZ companies, the amount of which is fixed by decree.

Performance and Data Localization Requirements

The government strongly encourages investors and firms to hire Ivoirian employees via incentives outlined in the Investment Code, but this is not a requirement. In January 2021, the Ministry of Petroleum, Energy and Renewable Energy announced plans to introduce a local content law for the oil and gas sector. A draft bill has since been endorsed by the Council of Ministers and is ready for submission to the legislature for deliberation. The text of the bill is not yet publicly available and specific measures have not been publicly reported.

The 2018 Investment Code guarantees the freedom to designate senior management and board members.

Citizens of Economic Community of West African States (ECOWAS) countries can legally work in Côte d’Ivoire without additional permissions and do not need a residency permit. For other nationalities, visas and permits for work and residency are required. The investment promotion agency CEPICI facilitates the visa and permit process. The process is not onerous and does not inhibit the ability of foreign investors and their employees to enter and exit the country.

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

The government does occasionally place conditions on location, local content, equity ownership, import substitution, export requirements, host country employment, and technology. For example, the Ivoirian government required that one U.S. fast food franchise use locally sourced key ingredients, which it is able to do. The government also makes use of a number of tax exemptions and customs exonerations to incentivize companies to do more value-added processing in Côte d’Ivoire.

There are no performance requirements for investments.

Cellular telephone companies must meet technology performance requirements to maintain their licenses. The U.S. government does not know of any requirements that Côte d’Ivoire imposes on foreign information technology firms to give the government source code or provide access to encryption.

There are no requirements that prevent or unduly impede companies from freely transmitting customer or other business-related data. Data transmission or transfer is subject to prior authorization of the telecom regulatory board Autorité de Régulation des Télécommunications (Telecommunications Regulatory Authority of Côte d’Ivoire; ART-CI).

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

Real Property

The Ivoirian civil code provides for the enforcement of private property rights, and the government has undertaken reform efforts to secure property rights. Mortgages and liens exist. Secured interests in property are enforced by the Land Registry Office of the Ministry of Economy and Finance. In the World Bank’s Doing Business 2020 report, Côte d’Ivoire is ranked 112 out of 190 countries for registering property.

Foreign and/or nonresident investors who wish to lease land must obtain a permit for the development of the site, as well as a prefectural or sub-prefectural order recognizing occupation of the site.

The Audace Institute, an independent Ivoirian think tank, estimates that 96 percent of land does not have a clear title. The World Bank estimates that only 30 percent of property owners have clear title. The Ministry of Agriculture and Rural Development requires that all land to be titled be professionally surveyed. The surveying, which must be performed by one of the few companies authorized by the Ministry of Agriculture and Rural Development to execute land surveys in Côte d’Ivoire, can cost more than the value of the land. A lack of title and a conflict between modern land tenure law and traditional practice hinders resolution of land tenure disputes.

It is not necessary to occupy legally purchased property in order to retain title.

Intellectual Property Rights

The Ivoirian Civil Code includes measures to protect intellectual property rights (IPR), but the government has limited capacity to enforce them. The government’s Office of Intellectual Property (Office ivoirien de la propriété intellectuelle; OIPI) is charged with ensuring the protection of patents, trademarks, industrial designs, and commercial names. Patents are valid for 10 years, with the possibility of two extensions of five years each. Trademarks are valid for 10 years and are renewable indefinitely. Copyrights are valid for 50 years. The Ivoirian Copyright Office (Bureau ivoirien du droit d’auteur; BURIDA) has a labeling system in place to prevent counterfeiting and to protect audio, video, literary, and artistic property rights in music and computer programs. While Ivoirian IPR law is in conformity with standards established by the World Trade Organization (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), the country lacks customs checks at its porous borders, limiting the law’s impact.

The government has not adopted any IPR-related laws or regulations in the past year. In 2020, the Ministry of Culture, Art, and Entertainment Business put committees in place to study and make recommendations for the reform and restructuring of BURIDA. BURIDA and the Ministry plan to implement the recommendations – which are not yet public – throughout 2021.

The National Committee to Combat Counterfeiting (Comité national de la lutte contre la contrefaçon; CNLC) coordinates national efforts against counterfeit and pirated goods. By law, the government must protect intellectual property on both exported and imported goods. Customs has the power to seize imported products that violate IPR laws even if installed with other equipment, including equipment detained, marketed, or illegally supplied. Such seizures, generally of counterfeit consumer goods (increasingly medicines), are routinely publicized on government websites and media outlets, although statistics on seizures are unavailable. IPR violations are prosecuted, and penalties vary from imprisonment of three months to two years and fines from 100,000 to 5,000,000 CFA (USD 166 to 8,333 based on an average exchange rate of 600 CFA to one U.S. dollar).

Côte d’Ivoire is not listed in the United States Trade Representative (USTR) Special 301 Report or the Notorious Markets List.

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 and Portfolio Investment

Government policies generally encourage foreign portfolio investment.

The Regional Stock Exchange (BRVM) is located in Abidjan and the BRVM lists companies from the eight countries of the WAEMU. The existing regulatory system effectively facilitates portfolio investment through the West African Central Bank (BCEAO) and the Regional Council for Savings Investments (CREPMF). There is sufficient liquidity in the markets to enter and exit sizeable positions.

Government policies allow the free flow of financial resources into the product and factor markets.

The BCEAO respects IMF Article VIII on payment and transfers for current international transactions.

Credit allocation is based on market terms and has increased to support the private sector and economic growth, specifically for large businesses. Foreign investors can acquire credit on the local market.

Money and Banking System

As of December 2020, there were 29 commercial banks and two credit institutions in Côte d’Ivoire. Banks are expanding their national networks, especially in the secondary cities outside Abidjan, as domestic investment has increased up-country. The total number of bank branches has more than doubled from 324 in 2010 to 725 branches in 2019 (latest data available). According to the World Bank, in 2017 (latest data available) 41 percent of the population over the age of 15 have a bank account. Alternative financial services available include mobile money and microfinance for bill payments and transfers. Many Ivoirians prefer mobile money over banking, but mobile money does not yet offer the same breadth of financial services as banks.

Most Ivoirian banks are compliant with the BCEAO’s minimum capital requirements. Some public banks have large numbers of nonperforming loans. The government has been restructuring and privatizing the commercial banking sector over the past decade in order to remove low performers from government accounts.

The estimated total assets of the five largest banks are around USD 14 billion and account for more than half of total bank assets in the country.

The BCEAO is common to the eight member states of the WAEMU and manages banking regulations.

Foreign banks are allowed to operate in Côte d’Ivoire; at least one has been in Côte d’Ivoire for decades. They are subject to the WAEMU Banking Commission’s prudential measures and regulations. There have been no reports of Côte d’Ivoire losing any correspondent banking relationships in the past three years. No correspondent banking relationships are known to be in jeopardy.

Foreign Exchange and Remittances

Foreign Exchange

There are no restrictions on the transfer or repatriation of capital and income earned, or on investments financed with convertible foreign currency. Once an investment is established and documented, the government regularly approves the remittances of dividends and/or repatriation of capital. The same holds true for requests for other sorts of transactions (e.g. imports, licenses, and royalty fees).

Funds associated with investments funded with convertible currency are freely convertible into any world currency.

Côte d’Ivoire is a member of WAEMU, which uses the West African CFA Franc (XOF). The French Treasury holds the foreign exchange reserves of WAEMU member states and supports the fixed exchange rate of 655.956 CFA to the Euro. In December 2019, the Ivoirian President, concurrently serving as chairman of WAEMU, announced in the presence of the French President the forthcoming transition from the CFA to a new common regional currency to be called the Eco; details about the timeline or modalities of the change have not yet been published.

Remittance Policies

There are no recent changes or plans to change investment remittance policies.

There are no time limitations on remittances. Total personal remittances received by Ivoirians were about USD 338 million in 2019 or 0.6 percent of GDP.

Sovereign Wealth Funds

Côte d’Ivoire does not have a sovereign wealth fund, although there are reports as of late 2020 that the government is in the process of creating one.

Companies owned or controlled by the state are subject to national laws and the tax code. The Ivoirian government still holds substantial interests in many firms, including the refinery SIR (49 percent), the public transport firm (60 percent), the national television station RTI (98 percent), the national lottery (80 percent), the national airline Air Côte d’Ivoire (58 percent), and the land management agency Agence de Gestion Foncière AGEF (35 percent). Total assets of State-Owned Enterprises (SOEs) were USD 796 million and total net income of SOEs was USD 116 million in 2018 (latest figures). Of the 82 SOEs, 28 are wholly government-owned, 12 are majority government-owned, in seven the government has a blocking minority, and in 35 the government has a minority of shares. Each SOE has an independent board. The government has begun the process of divestiture for some SOEs (see next section). There are active SOEs in the banking, agri-business, mining, and telecom industries.

The published list of SOEs is available at https://dgpe.gouv.ci/ind ex.php?p=portefeuille_etat 

SOEs competing in the domestic market do not receive non-market-based advantages from the government. They are subject to the same tax burdens and policies as private companies.

Côte d’Ivoire does not adhere to OECD guidelines for SOE corporate governance (it is not a member of OECD).

Privatization Program

The government has been pursuing SOE privatization for decades. Most recently, in 2017, the government sold 90 percent of its shareholdings in the Ivoirian Textile Development Company (Compagnie Ivoirienne du Développement du Textile; CIDT) as well as in the Ity Mining Company (Société des mines d’Ity; SMI). In 2018, the government sold 51 percent of the Housing Bank of Côte d’Ivoire (Banque d’Habitat de Côte d’Ivoire; BHCI).

Contracts for participation in SOE privatization are competed through a French-language public tendering process, for which foreign investors are encouraged to submit bids. The Privatization Committee, which reports to the Prime Minister, maintains a website at: http://privatisation.gouv.ci .

The private sector, the government, NGOs, and local communities are becoming progressively aware of the importance of Responsible Business Conduct (RBC) with regard to environmental, social, and governance issues in Côte d’Ivoire.

Investors seeking to implement projects in energy, infrastructure, agriculture, forestry, waste management, and extractive industries are required by decree to provide an environmental impact study prior to approval. Foreign businesses, particularly in mining, energy, and agriculture, often provide social infrastructure, including schools and health care clinics, to communities close to their sites of operation. Companies are not required under Ivoirian law to disclose information relating to RBC, although many companies, especially in the cocoa sector, publicize their work. Cocoa companies publicize efforts to improve sustainability and combat the worst forms of child labor. As a part of public-procurement reform, the Ministry of Budget plans to include social needs in public-procurement contracts to support job creation, fair trade, decent working conditions, social inclusion and compliance with social standards. On the environment, suggested reforms include the selection of goods and services that have a smaller impact on the environment.

There are reports of children subjected to forced labor in agricultural work, particularly on cocoa farms. In February 2021, several individuals from Mali sued major international chocolate manufacturers in U.S. courts for supporting child labor and child trafficking in Côte d’Ivoire.

The government, through the Ministry of Employment and Social Protection, sets workplace health and safety standards and is responsible for enforcing labor laws.

The OHADA outlines corporate governance standards that protect shareholders.

There are government-funded agencies in charge of monitoring business conduct. Human rights, environmental protection, and civil society NGOs report misconduct and violations of good governance practices.

While international firms are aware of OECD guidelines and international best practices in RBC, most local firms have limited familiarity with international standards.

Côte d’Ivoire participates in the Extractive Industries Transparency Initiative (EITI) and discloses revenues and payments in the oil, gas, and mineral sectors. More information can be found at: www.cnitie.ci/ .

Côte d’Ivoire is not a signatory of the Montreux Document on Private Military and Security Companies. Some private security companies operating in the country are participants of the International Code of Conduct for Private Security Service Providers’ Association (ICoCA).

Additional Resources 

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 and;
• North Korea Sanctions & Enforcement Actions Advisory

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.

Corruption is a concern for businesses. In 2013, the Ivoirian government issued Executive Order number 2013-660 related to preventing and fighting against corruption. The High Authority for Good Governance serves as the government’s anti-corruption authority. Its mandate includes raising awareness about corruption, investigating corruption in the public and private sectors, and collecting mandated asset disclosures from certain public officials (e.g., the president, ministers, and mayors) upon their entry and exit from office. The High Authority, however, does not have a mandate to prosecute; it must refer cases to the Attorney General who decides whether or not to take up those cases. The country’s financial intelligence office, CENTIF, has broad authority to investigate suspicious financial transactions, including those of government officials. Despite the establishment of these bodies and credible allegations of widespread corruption, there have been few charges filed, and few prosecutions and judgments against prominent people for corruption. The domestic business community generally assesses that these watchdog agencies lack the power and/or will to combat corruption effectively. In April 2021, the government formally added Good Governance and Anti-Corruption to the title and portfolio of the Ministry of Capacity Building.

Anti-corruption laws extend to family members of officials and to political parties.

The country’s Code of Public Procurement No. 259 and the associated WAEMU directives cover conflicts-of-interest in awarding contracts or government procurement.

Under the Ivoirian Penal Code, a bribe by a local company to a foreign official is a criminal act.

Some private companies use compliance programs or measures to prevent bribery of government officials. U.S. firms underscore to their Ivoirian counterparts that they are subject to the Foreign Corrupt Practices Act (FCPA).

Côte d’Ivoire ratified the UN Anti-Corruption Convention, but the country is not a signatory to the OECD Anti-Bribery Convention (which is open to non-OECD members). In 2016, Côte d’Ivoire joined the Partnership on Illicit Finance, which obliges it to develop an action plan to combat corruption.

There are no special protections for NGOs involved in investigating corruption.

Corruption in many forms is deeply ingrained in public- and private-sector practices and remains a serious impediment to investment and economic growth in Côte d’Ivoire. Many companies cite corruption as the most significant obstacle to investment in Côte d’Ivoire. It has the greatest impact on judicial proceedings, contract awards, customs, and tax issues. Lack of transparency and failure to follow the government’s own tendering procedures in the awarding of contracts lead businesses to conclude bribery was involved. Businesses have reported encountering corruption at every level of the civil service, with some judges appearing to base their decisions on bribes. Clearance of goods at the ports often requires substantial “commissions,” and the Embassy has heard anecdotal accounts of customs agents rescinding valuations that were declared by other customs colleagues in an effort to extract bribes from customers. The demand for bribes can mean that containers stay at the Port of Abidjan for months, incurring substantial demurrage charges, despite companies having the proper paperwork in order.

No local industry or non-profit groups offer services for vetting potential local investment partners.

Resources to Report Corruption

Inspector General of Finance
(Brigade de Lutte Contre la Corruption)
Lassina Sylla
Inspector General
TELEPHONE: +225 20212000/2252 9797
FAX: +225 20211082/2252 9798
HOTLINE: +225 8000 0380
http://www.igf.finances.gouv.ci/ 
info@igf.finances.gouv.ci 

High Authority for Good Governance

(Haute Autorité pour la Bonne Gouvernance)
N’Golo Coulibaly
President
TELEPHONE: +225 272 2479 5000
FAX: +225 2247 8261

Police Anti-Racketeering Unit
(Unité de Lutte Contre le Racket –ULCR)
Alain Oura
Unit Commander
TELEPHONE: +225 272 244 9256
info@ulcr.ci 

Social Justice
(Initiative pour la Justice Sociale, la Transparence et la Bonne Gouvernance en Côte d’Ivoire)
Ananeraie face pharmacie Mamie Adjoua
Abidjan
TELEPHONE: +225 272 177 6373
socialjustice.ci@gmail.com 

In 2016, the country adopted a new constitution, creating the position of Vice-President (currently vacant), and a Senate, which first convened in April 2018. In the period around elections in 2018 and 2020, demonstrations and protests by political parties and their supporters were common and occasionally led to vandalism, destruction of public and private property, and violent clashes with security forces and with other civilians. Unions also engage in protests that sometimes become violent. President Alassane Ouattara was elected to a third term in October 2020. In the run up to the 2020 presidential election, the lack of political party-consensus on the composition of the country’s Independent Electoral Commission, the contentious reform of the Electoral Code, the constitutional validation of the incumbent president’s eligibility for a third term, and the exclusion of significant opposition figures from the race, aggravated political divides within the country. National Assembly elections in March 2021, however, passed largely peacefully, and the opposition won a substantial number of seats.

Côte d’Ivoire’s security situation has significantly improved since its 2010-2011 post-electoral violence. In early 2017, some Ivoirian soldiers mutinied, demanding payment of bonuses. The government responded by largely acceding to their demands and pledging to improve living and working conditions for armed and security forces, which it has steadily done over the ensuing years. Côte d’Ivoire suffered a terrorist attack in March 2016 in the popular tourist town of Grand Bassam in which attackers killed 22 people. Al-Qaeda in the Islamic Maghreb claimed responsibility for the attack. In June 2020 and March 2021, the country experienced other attacks in the Ivoirian-Burkinabe border town of Kafolo, which the government attributed to unidentified terrorists. Al-Qaeda and other extremist organizations continue to pose a major terrorism risk to the region. Côte d’Ivoire continues to cooperate with international partners to combat the increasing terrorism/extremist threat emanating from the Sahel to its immediate North.

The official unemployment rate is 3.5 percent, however, unemployment is difficult to measure in the informal sector, which comprises 60-80% of the Ivoirian economy. The official unemployment rate among those aged 15-24 is 5.5 percent. Forty-seven percent of the non-agricultural workforce is employed in the informal economy. Official statistics fail to fully account for the large informal economy throughout the country, and do not accurately portray the general dearth of well-paying employment opportunities. Despite the government’s efforts, child labor remained a widespread problem in rural and urban areas, particularly on cocoa and coffee plantations, as well as in artisanal gold mining areas and in domestic work.

There are significant shortages of skilled labor in higher education fields, including information technology, engineering, finance, management, health, and science. The Ivoirian government is working with the Millennium Challenge Corporation (MCC) to build and develop four technical and vocational training centers as part of a five-year Compact valued at nearly USD 525 million.

Labor laws favor the employment of Ivoirians in private enterprises. Any vacant position must be advertised for two months. If after two months no qualified Ivoirian is found, the employer may recruit a foreigner provided it plans to recruit an Ivoirian to fill the position within the next two years.

There are no restrictions on employers adjusting employment in response to fluctuating market conditions. Employees terminated for reasons other than theft or flagrant neglect of duty have the right to termination benefits. Unemployment insurance and other social-safety programs exist for employees laid off for economic reasons. For the roughly 60-80% percent of workers employed in the informal sector, unemployment insurance is not an option. However, there are other social-safety-net programs that apply to informal economy workers, including monthly stipends and waiving of universal health care fees.

Labor laws are not waived to attract or retain investment.

Collective bargaining agreements are in effect in many major business enterprises and sectors of the civil service. A prolonged teachers’ strike in 2019 was submitted for arbitration but due to the fractured nature of the teachers’ unions, not all parties agreed to the decision.

Labor disputes are submitted to the labor inspector for amicable settlement before engaging in any legal proceedings. If this attempt to settle the dispute fails, then the labor court can be engaged to resolve the dispute.

No strike has posed an investment risk during the last year.

There are no gaps between Ivoirian and international labor standards in law or practice that pose a reputational risk to investors.

The government did not adopt any new labor-related laws or regulations in 2020. In 2017, the government passed a law forbidding most forms of child labor for children under 12 and restricting it for minors aged 13 to 17. The law’s passage put Ivoirian law on par with ILO standards for child labor.

Table 4: Sources of Portfolio Investment
Data not available.

U.S. Embassy Abidjan
Political/Economic Section
Cocody Riviera Golf
BP 730 Abidjan Cidex 03
Republic of Cote d’Ivoire
Phone: (+225) 22-49-40-00

Policies Towards Foreign Direct Investment

The ascension of Felix Tshisekedi to the Presidency in January 2019 and his welcoming attitude toward foreign direct investment (FDI), particularly from the United States, have raised hopes that the DRC government (GDRC) can impose and follow through on favorable FDI policies.  Favorable FDI laws exist, but the judicial system is slow to protect investors’ rights and is susceptible to political pressure and corruption.  Investors hope Tshisekedi can create a more favorable enabling environment by business climate reform, better rule of law, and tackling corruption. The DRC’s rich endowment of natural resources, large population and generally open trading system provide significant potential opportunities for U.S. investors.

The major regulations governing FDI are found in the Investment Code Act (No. 004/2002 of 21 February 2002). Current regulations reserve the practice of small retail commerce in DRC to nationals and ban foreign majority-ownership of agricultural concerns.  The ordinance of August 8, 1990, clearly stipulates that “small business can only be carried out by Congolese.”  Foreign investors should limit themselves to import trade as well as wholesale and semi-wholesale trade. Investors have expressed concern that the ban on foreign agricultural ownership will stifle any attempts to kick-start the agrarian sector.

The National Investment Promotion Agency (ANAPI) is the official investment agency, which provides investment facilitation services for initial investments over USD 200,000.  It is mandated to promote the positive image of the DRC and specific investment opportunities; advocate for the improvement of the business climate in the country and provide administrative support to new foreign investors who decide to establish or expand their economic activities on the national territory.  More information is available at https://www.investindrc.cd/.

The GDRC maintains an ongoing dialogue with investors to hear their concerns. There are several public and private sector forums which speak to the government on the investment climate in specific sectors.  In 2019 President Tshisekedi created the business climate cell (CCA) to monitor the improvement of the economic environment and the business climate in the DRC, and to interface with the business community.  The CCA in June 2020 presented a roadmap for reform.  The public-private Financial and Technical Partners (PTF) mining group represents countries with significant mining investments in the DRC. The Federation of Congolese Enterprises (FEC), which is a privileged partner of the government and the workers’ unions, has a dialogue on business interests with the government.  The FEC has relayed information to the government about the effects of the COVID-19 pandemic on the private sector.  The FEC is also tracking post-Covid-19 investment sectors.

Limits on Foreign Control and Right to Private Ownership and Establishment

The GDRC provides the right for foreign and domestic private entities to establish and own business enterprises and engage in all forms of remunerative activity.

The DRC law reserves small commerce exclusively for Congolese nationals and does not allow foreign investors to own more than 49 percent of an agribusiness.  Many investors note that in practice the GDRC requires foreign investors to hire local agents and participate in a joint venture with the government or local partners.

The GDRC promulgated a mining code in 2018 which increased royalty rates from two to ten percent, raised tax rates on “strategic” metals, and imposed a surcharge on “super profits” of mining companies.  The government unilaterally removed a stability clause contained in the previous mining code protecting investors from any new fees or taxes for ten years.  Removal of the stability clause may deter future investment in the mining sector.  The Tshisekedi government has indicated that it is willing to reopen discussions on the new mining code.

The GDRC does not maintain an organization to screen inbound investment.  The Presidency and the ministries serve this purpose de facto.

Other Investment Policy Reviews

The DRC has not undergone a World Trade Organization (WTO), Organization for Economic Cooperation and Development (OECD), or a United Nations Conference on Trade and Development (UNCTAD) Investment Policy Review in the last three years.  Cities with high custom clearance traffic use Sydonia https://asycuda.org/wp-content/uploads/Etude-de-Cas-SYDONIA-Contr%C3%B4le-de-la-Valeur-RDC.pdf, which is an advanced software system for custom administrations in compliance with ASYCUDA WORLD. (ASYCUDA is a large technical assistance software program recommended by UNCTAD for custom clearance management.)

Business Facilitation

The GDRC operates a “one-stop-shop” for Business Creation (GUCE) that brings together all the government entities involved in the registration of a company in the DRC.  The goal is to permit the quick and simple registration of companies through one office in one location.  In October 2020, President Tshisekedi instructed the government to restructure GUCE in order to ease its work with the various state organizations involved in its operation.  More information is available at https://guichetunique.cd/.

At the one-stop-shop, companies fill in a “formulaire unique” in order to register with the: Commercial Registry (GUCE); tax administration (Direction Générale des Impots); Ministry of Labor; and National Institute for Social Security (Institut National de Sécurité Sociale (“INSS”)).  The Labor Inspection Department and the National Office of Employment (l’Office National de l’Emploi (“ONEM”)) are also to be notified of the establishment of the company.  Companies may also need to obtain an operating permit, as required from some municipal councils.  The registration process now officially takes three days, but in practice it can take much longer.  Some businesses have reported that the GUCE has considerably shortened and simplified the overall process of business registration.

Outward Investment

The GDRC does not prohibit outward investment, nor does it particularly promote or incentivize it.

There are no current government restrictions preventing domestic investors from investing abroad, and there are no currently blacklisted countries with which domestic investors are precluded from doing business.

The U.S. DRC Bilateral Investment Treaty (BIT) was signed in 1984 and entered into force in 1989.  The BIT guarantees reciprocal rights and privileges to each country’s investors and provides that, should a claim arise under the treaty, it can be submitted to a dispute resolution mechanism through international arbitration.  U.S. companies have at times reported difficulties with the tax authorities from arbitrary enforcement of the taxation code.

The DRC has bilateral investment treaties in force with France, Germany, Switzerland, and the United States.  Treaties have been signed with Belgium-Luxembourg Economic Union, China, Egypt, Greece, India, Italy, Jordan, Portugal, Republic of Korea, South Africa, and Ukraine but these have not yet entered into force.  Kenya is currently negotiating a BIT. Lebanon, Côte d’Ivoire, and Burkina Faso have negotiated, but not signed, BITs with the DRC.  In October 2016, the DRC and Rwanda signed an agreement on a simplified trade regime covering only small-scale commerce between the countries.

The AfCFTA is a continent-wide free-trade agreement brokered by the African Union (AU) that began on 1 January 2021, but hard work lies ahead.  The DRC signed the African Continental Free Trade Agreement (AfCFTA) in March 2018 and ratified it in April 2021.  The Presidency will enact the law in 2021.  The agreement aims to facilitate imports and exports among member countries – with lower or no tariffs, free access to the market and market information, and the elimination of trade barriers – and offer numerous benefits to SMEs.

On January 1, 2021, the DRC again became eligible for benefits under the African Growth and Opportunity Act (AGOA), after a 10-year exclusion due to concerns over human rights violations. AGOA provides African countries with duty-free access to the U.S. market for over 1,800 products for 20 years. Congo’s main exports of copper, and cobalt were tariff-free under the United States’ Generalized System of Preferences trade program.

There is no bilateral taxation treaty between the United States and the DRC.  In 2015, Zambia and the DRC signed a bilateral taxation treaty that abolished customs taxes across their common border.

Transparency of the Regulatory System

Passed in 2019, the Law on Pricing, Freedom and Competition (the “Competition Act”) created a new Competition Commission charged with limiting control by one party over a market.  DRC law mandates review if the turnover achieved is equal to or exceeds the amount determined by Decree of the Prime Minister upon proposal of the Minister of the Economy; if the parties hold a combined market share of 25% or more; or if the contemplated transaction creates / reinforces an already dominant position.  DRC law requires notification prior to a corporate merger. It is unclear what penalties apply if there is no pre-notification.

The DRC is a member of the regional competition bodies, COMESA and OHADA. OHADA does not have an operational merger control regime in place, while COMESA does have merger control. Merger activities in the DRC should be conducted with COMESA in mind.

There are no informal regulations run by private or nongovernmental organizations that discriminate against foreign investors.  However, some U.S. investors perceive the regulations in the mining code on local content as discriminatory against foreign investment.

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

There are no formal or informal provisions systematically employed by the GDRC to impede foreign investment.  Companies most often complain of facing administrative hurdles as laws and regulations are often poorly or unevenly applied.

Proposed laws and regulations are rarely published in draft format for public discussion and comment; discussion is typically limited to the governmental entity that proposes the draft law and Parliament prior to enactment.  Sometimes the government will hold a public hearing after public appeals.

The Official Gazette of the DRC is a specialized service of the Presidency of the Republic, which publishes and disseminates legislative and regulatory texts, judicial decisions, acts of companies, associations and political parties, designs, industrial models, trademarks as well as any other act referred to in the law.  More information is available at http://www.leganet.cd/.

There are no formal or informal provisions systematically employed by the GDRC to impede foreign investment.  Companies often complain of facing administrative hurdles as laws and regulations are often poorly or unevenly applied.

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

Tshisekedi created the Business Climate Unit (CCA) by a presidential order issued in February 2020. The mission of the CCA is to monitor the national business climate and enact regulatory reforms.  The CCA announced a roadmap for reform in June 2020, but has yet to implement the recommended reforms.

In November 2020, the GDRC launched the construction of the first Special Economic Zone, with the aim of attracting foreign investment and stimulating the creation of local businesses. This free zone offers tax and regulatory advantages for investors and entrepreneurs including a 5-to-10-year tax exemption. More information is available at https://www.azes-rdc.com/.

The roadmap details priority and urgent reforms and awaits action by the Prime Minister and the new cabinet. In the long term, the first Special Economic Zone will promote exports and create 3,500 direct jobs.

The DRC is a member of the Extractive Industries Transparency Initiative (EITI), a multi-stakeholder initiative to increase transparency in transactions between governments and companies in the extractive industries.  The DRC’s validation process for compliance with the EITI Standard commenced in November 2018.  The initial report published by the International EITI Secretariat in April 2019 stated that the DRC EITI failed to adequately address 13 of the requirements of the EITI Standard, with two of these assessed as unmet with inadequate progress.  The report also stressed the need to clarify the financial flows of state-owned enterprises (SOEs) in the DRC’s extractive sector.

In 2020, the DRC failed to meet the minimum requirements of fiscal transparency according to the State Department’s Fiscal Transparency report.  While the DRC publishes budgets that are publicly available and timely, the published budgets were not reliable indicators of actual government spending.

International Regulatory Considerations

The DRC is a member of several regional economic blocs, including the Southern African Development Community (SADC), the Common Market for Eastern and Southern Africa (COMESA), the Organization for the Harmonization of Business Law in Africa (“OHADA”), the Economic Community of Central African States (ECCAS), and the Economic Community of the Great Lakes Countries (ECGLC).

According to the Congolese National Standardization Committee, the DRC has adopted 470 harmonized COMESA standards, which are based on the European system.

The DRC is a member of the World Trade Organization (WTO) and seeks to comply with Trade Related Investment Measures (TRIM) requirements, including notifying regulations to the WTO Committee on Technical Barriers to Trade (TBT).

Legal System and Judicial Independence

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

The DRC has written commercial and contractual law.  In 2018, the DRC established thirteen commercial courts located in DRC’s main business cities, including Kinshasa, Lubumbashi, Matadi, Boma, Kisangani, and Mbuji-Mayi.  These courts are designed to be led by professional judges specializing in commercial matters and exist in parallel to the judicial system.  A lack of qualified personnel and reluctance by some DRC jurisdictions to fully recognize OHADA law and institutions have hindered the development of commercial courts.  Legal documents in the DRC can be found at: http://www.leganet.cd/index.htm.

The current executive branch has generally not interfered with judicial proceedings.  The current judicial process is not procedurally reliable and its rulings are not always respected.

The national court system provides an appeals mechanism under the OHADA framework.

Laws and Regulations on Foreign Direct Investment

The 2002 Investment Code governs most foreign direct investment (FDI), providing for the protection of investments.  In practice, an inadequate legal system has insufficiently protected foreign investors in the event of a dispute.  Mining, hydrocarbons, finance, and other sectors have sector-specific investment laws.

ANAPI is the DRC agency with the mandate to simplify the investment process, make procedures more transparent, assist new foreign investors, and improve the image of the country as an investment destination (www.investindrc.cd).

The GDRC has a “Guichet Unique,” which is a one-stop shop to simplify business creation, cutting processing time from five months to three days, and reducing incorporation fees from $3,000 to $120. (www.guichetunique.cd ). A “one-stop-shop” also exists for import-export business, covering aspects such as the collection of taxes and transshipment operations. (https://segucerdc.cd/ ).

Competition and Antitrust Laws

There is no national agency that reviews transactions for competition or antitrust-related concerns.  As a member of COMESA, the DRC follows the COMESA Competition Regulations and rules, and the COMESA competition body regulates competition.  In May 2020, Tshisekedi instructed the cabinet to better defend the GDRC’s interests in outstanding investor disputes, including if necessary, by agreeing to a settlement.  This decision followed the announcement of two international court decisions unfavorable to the GDRC, which put the government liable for hundreds of millions of dollars.

Expropriation and Compensation

The GDRC may proceed with an expropriation when it benefits the public interest, and the person or entity subject to an expropriation should receive fair compensation.

Companies report that the GDRC levies heavy fines in a form of financial expropriation.  A government agency imposes fines due to a company’s failure to pay a tax, though often the tax regime is unclear and multiple government bodies impose different taxes.  Companies that appeal these fines through the courts often encounter a long wait.  There has not been an expropriation of property in the past three years, but there are a number of existing and long-standing claims made against the GDRC.

Some claims have been taken to arbitration, though many arbitral judgments against the GDRC are not paid in a timely manner, if at all.

Dispute Settlement

ICSID Convention and New York Convention

The DRC is a member of the International Center for Settlement of Investment Disputes (ICSID) Convention and a Contracting State to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention).

There is no specific domestic legislation providing for the enforcement of awards under the New York Convention.  It is important to note that the New York Convention does not apply toward disputes relating to immovable property, which includes mining rights.

Investor-State Dispute Settlement

The DRC is subject to international arbitration.  A U.S. mining company sued under the BIT to recover losses suffered when FARDC troops sacked its mine in Kasai Central Province in 1995. The arbitration courts ruled the GDRC liable for damages totaling $13 million, and the GDRC started paying back the awarded amount plus interest to the U.S. Company.

There have been charges of extrajudicial action against foreign investors, including levying fines and imprisonment.  In one case an investor left the country after being jailed on charges of corruption.

International Commercial Arbitration and Foreign Courts

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

OHADA‘s UAA offers an alternative dispute resolution mechanism for settling disputes between two parties where the place of arbitration is situated in a Member State.  Disputes must be submitted to the Common Court of Justice and Arbitration (CCJA) in Abidjan in accordance with the provisions of the OHADA Treaty and the OHADA Arbitration Rules.

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

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

In general, companies which fail to find a favorable judgment in domestic courts go to international courts for relief.  This often drags the judicial process on for years.  For domestic cases involving SOEs the courts often rule in favor of the SOEs.  One attorney estimated that  about five percent of cases have any transparency.

Bankruptcy Regulations

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

According to the World Bank’s Doing Business Report, there were no foreclosure, liquidation or reorganization proceedings filed in the country in 2020, making it impossible to assess the time, cost or outcome for an insolvency proceeding.  According to the World Bank, the DRC ranked 168th out of 190 countries on ease of resolving insolvency.

Investment Incentives

Investment incentives can range from tax breaks to duty exemptions, and are dependent upon the location and type of enterprise, the number of jobs created, the degree of training and promotion of local staff, and the export-producing potential of the operation.  Investors who wish to take advantage of customs and tax incentives in the 2002 Investment Code must apply to ANAPI, which submits applications to the Ministries of Finance and Planning for final approval.  The government does not have a history of providing guarantees or jointly financing FDI projects.

Foreign Trade Zones/Free Ports/Trade Facilitation

The DRC does not have any designated free trade areas or free port zones.  President Tshisekedi has signaled that he will revive stalled efforts to join the East African Community (EAC).  In March 2021, the DRC Parliament ratified  the African Continental Free Trade Area (AfCFTA).  The Treaty awaits enactment by the executive branch.

On November 4, 2020, The GDRC launched the construction of the first Special Economic Zone, with the aim of attracting foreign investment and stimulating the creation of local businesses. This free zone offers tax and regulatory advantages for investors and entrepreneurs including a 5-to-10-year tax exemption. More information is available at https://www.azes-rdc.com/.

Performance and Data Localization Requirements

Foreign investors must negotiate many of the conditions of their investments with ANAPI.  Performance requirements agreed upon with ANAPI typically include a timeframe for the investment, use of OHADA accounting procedures and periodic authorized GDRC audits, protection of the environment, periodic progress reports to ANAPI, and the maintenance of international and local norms for the provision of goods and services.  The investor must also agree that all imported equipment and capital will remain in-country for at least five years.

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

In response to private sector complaints, in June 2020 the GDRC repealed a law on subcontracting in the private sector that mandated the use of local companies and restricted using foreign entities.

The DRC does not have specific legislation on data storage or limits on the transmission of data.  The GDRC does not force IT companies to hand over encryption data.

Real Property

The DRC’s Constitution protects private property ownership without discriminating between foreign and domestic investors.  Despite this provision, the GDRC has acknowledged the absence of enforcement protecting property rights.  Congolese law related to real property rights enumerates provisions for mortgages and liens.  Real property (buildings and land) is protected and registered through the Ministry of Land’s Office of the Mortgage Registrar.  Land registration may not fully protect property owners, as records are often incomplete and legal disputes over land deals are common.  Many owners lack a clear registered title to the land.  In addition, there is no specific regulation of real property lease or acquisition.

Less than 10 percent of land have a clear property title, but the GDRC is in the process of promoting and encouraging people to regularize property titles by buying a final title called a “Record Certificate” (Certificat d’Enregistrement).  Ownership interest in personal property (e.g., equipment, vehicles, etc.) is protected and registered through the Ministry of the Interior’s Office of the Notary.

Intellectual Property Rights

Intellectual property rights (IPR) are legally protected in the DRC, but enforcement of IPR regulations is limited.  The DRC’s intellectual property laws date from the 1980s and remain in force.  However, enforcement is weak, and IPR theft is common.  The country is a signatory to a number of relevant agreements with international organizations such as the World Intellectual Property Organization (WIPO) and the World Trade Organization (WTO) and is subject to the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).  Despite being officialy party to several international agreements that set minimum standards for IP, enforcement is lax due to low capacity, and a lack of awareness among consumers and businesses.  The government does not keep a record of IPR violations.

The DRC is not included in the U.S. Trade Representative (USTR) Special 301 Report or Notorious Markets List.

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

Capital Markets and Portfolio Investment

Portfolio investment is nonexistent in the DRC and there is no domestic stock market.  A small number of private equity firms are actively investing in the mining industry.  The institutional investor base is not well developed, with only an insurance company and a state pension fund as participants.  There is no market for derivatives in the country.  Cross-shareholding and stable shareholding arrangements are also not common.  Credit is allocated on market terms, but there are occasional complaints about unfair privileges extended to certain investors in profitable sectors such as mining and telecommunications.

Although reforms have been initiated, the Congolese financial system remains small, heavily dollarized, characterized by fragile balance sheets, and cumbersome to use.  Further reforms are needed to strengthen the financial system, support its expansion, and spur economic growth.  Inadequate risk-based controls, weak enforcement of regulations, low profitability, and excessive reliance on demand deposit undermine the shock resilience of the financial system.

The Central Bank of Congo (BCC) refrains from payments and transfers on current international transactions.  The DRC’s capital market remains underdeveloped and consists mainly of the issuance of treasury bonds.  In 2019, the BCC issued its first domestic bond in 24 years, which was oversubscribed.  Most of the buyers were local Congolese banks.

It is possible for foreign firms to borrow from local banks, but their options are limited.  Maturities for loans are usually limited to 3-6 months, and interest rates are typically around 16-21 percent.  The inconsistency of the legal system, the often-cumbersome business climate, and the difficulty in obtaining inter-bank financing discourages banks from providing long-term loans.  There are limited possibilities to finance major projects in the domestic currency, the Congolese franc (CDF).

Money and Banking System

The Congolese financial system is improving but remains fragile.  The BCC controls monetary policy and regulates the banking system.  Banks are concentrated primarily in Kinshasa, Kongo Central, North and South Kivu, and Haut Katanga provinces. Banking rate penetration is roughly 7 percent or about 4.1 million accounts, which places the country among the most under-banked nations in the world.  Mobile banking has the potential to greatly increase banking customers as an estimated 35 million Congolese use mobile phones.

There is no debt market. The financial health of DRC banks is fragile, reflecting high operating costs and exchange rates. The situation improved in a weak economic environment in 2019 as deposits have increased, which could point to a better year in 2020 considering the asset quality measures taken by the BCC, allowing banks to absorb the economic impact of the covid-19 pandemic.  Fees charged by banks are a major source of revenue.

The financial system is mostly banking-based with aggregate asset holdings estimated at USD 5.1 billion.  Among the five largest banks, four are local and one is controlled by foreign holdings.  The five largest banks hold almost 65 percent of bank deposits and more than 60 percent of total banks assets, about $3.1 billion.  There are no statistics on non-performing loans, as many banks only record the balance due instead of the total amount of their non-performing loans.

Citigroup is the only correspondent bank. All foreign banks accredited by the BCC are considered Congolese banks with foreign capital and fall under the provisions and regulations covering the credit institutions’ activities in the DRC.  There are no restrictions on foreigners establishing an account in a DRC bank.

Foreign Exchange and Remittances

Foreign Exchange

The international transfer of funds is permitted when channeled through local commercial banks.  On average, bank declaration requirements and payments for international transfers take less than one week to complete.  The Central Bank is responsible for regulating foreign exchange and trade.  The only currency restriction imposed on travelers is a $10,000 limit on the amount an individual can carry when entering or leaving the DRC.

The GDRC requires the BCC to license exporters and importers.  The DRC’s informal foreign exchange market is large and unregulated and offers exchange rates slightly more favorable than the official rate.  BCC regulations set the Congolese franc (CDF) as the main currency in all transactions within the DRC, required for the payment of fees in education, medical care, water and electricity consumption, residential rents, and national taxes.  Exceptions to this rule occur where both parties involved, and the appropriate monetary officials, agree to use another currency.  The CDF exchange rate floats freely, but the BCC carefully monitors the rate and intervenes to shore up the exchange rate.

Remittance Policies

There are no legal restrictions on converting or transferring funds.  Exchange regulations require a 60-day waiting period for in-country foreigners to remit income.  Foreign investors may remit through parallel markets when they are legally established and recognized by the Central Bank.

Sovereign Wealth Funds

The DRC does not have any reported Sovereign Wealth Funds, though the 2018 Mining Code discusses a Future Fund to be capitalized by a percentage of mining revenues.

There are 20 DRC state-owned enterprises (SOEs) operating in the mining, transportation, energy, telecommunications, finance, and hospitality sectors.  In the past, Congolese SOEs have stifled competition and have been unable to provide reliable electricity, transportation, and other important services over which they have monopolies.  Some SOEs and other Congolese parastatal organizations are in poor financial and operational state due to indebtedness and the mismanagement of resources and employees.  The list of SOEs can be found at: http://www.leganet.cd/Legislation/Droit%20Public/EPub/d.09.12.24.04.09.htm

There is limited reporting on the assets of SOEs and other parastatal enterprises, making valuation difficult.  DRC law does not grant SOEs an advantage over private companies in bidding for government contracts or obtaining preferential access to land and raw materials.  The government is often accused of favoring SOEs over private companies in contracting and bidding.

The DRC is not a party to the WTO’s procurement agreement (GPA), but nominally adheres to the OECD guidelines on Corporate Governance for SOEs. The DRC is a Participating Country in the Southern Africa SOE network, with the Ministry of Portfolio and the Steering Committee for SOE reforms designated as Regularly Participating Institutions.

Privatization Program

The DRC has no official privatization program.

The DRC has not defined responsible business conduct (RBC) for most industries, but the Labor Code includes provisions to protect employees, and there are legal provisions that require businesses to protect the environment.  The Global Compact Network DRC, a public-private consortium affiliated with the United Nations, encourages locally operating businesses to adopt sustainable and socially responsible policies.  In 2016, the DRC issued the Guide on Corporate Social Responsibility (CSR Guide) for the mining sector in Haut Katanga.

The GDRC has taken actions of limited impact to support RBC by encouraging companies to develop and adhere to a code of ethics and respect for labor rights and the environment.  However, the DRC does not possess a legal framework to protect the rights of consumers, and there are no existing domestic laws to protect individuals from adverse business impacts.

Reports of children working in the DRC’s artisanal mines has led to international pressure to find ways to ensure the DRC’s minerals supply chain is free of child labor.  Development pressures have resulted in reports of threats against environmental activists.  The DRC has adopted OECD due diligence guidelines on responsible mineral supply chains as defined by the United Nations Group of Experts, as well as various resolutions of the UN Security Council related to business and human rights in the Congolese mining sector.  The DRC participates in the Extractive Industries Transparency Initiative (EITI), and publishes reports on its revenue from natural resources, although in recent years the reports have been late or incomplete.

The 2018 Mining Code provides domestic transparency measures requiring the disclosure of payments made to government entities.  PROMINES, a technical parastatal body financed by the GDRC and the World Bank, works to improve transparency in the artisanal mining sector.  Amnesty International, Pact Inc., Global Witness, and the Carter Center have published reports on RBC in the DRC mining sector.  The Dodd-Frank Act mandated companies publicly listed in the United States to declare their supply chains for DRC-sourced “3Ts” (tin, tungsten, and tantalum) and gold.  Many U.S. multinationals appear to be complying voluntarily to avoid possible reputational damage.

The DRC has a private security industry but does not support the Montreux Document on Private Military and Security Companies.  It does not support the International Code of Conduct or Private Security Service Providers, nor does it participate in the International Code of Conduct for Private Security Service Providers’ Association (ICoCA).

Additional Resources

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 ) and;
• 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/).

The Tshisekedi government has used public prosecutions of high-level officials and the creation of an anti-corruption unit to improve the DRC’s reputation on corruption.  DRC’s 2020 Corruption Perception Index score—170th out of 180—underlines the deep roots of corruption in the country.  The DRC constitution includes laws intended to fight corruption and bribery by all citizens, including public officials.  Anti-corruption laws extend to family members and political parties.  Private companies have applied their own controls to limit corruption and have in the past been more effective at controlling it.

In March 2020, President Tshisekedi created the National Agency for the Prevention and Fight Against Corruption.  Currently corruption investigations are ongoing for three Managing Directors of SOEs.  In June 2020, the court convicted Tshisekedi’s former Chief of Staff Vital Kamerhe of embezzlement and public corruption and sentenced him to 20 years in prison.  Accused of having embezzled funds allocated to Primary, Secondary and Technical Education (EPST), the General Inspector of EPST and General Director of the Service for Control and Payment of Teachers (SECOPE) were sentenced in March 2021 to 20 years of hard labor by the Court of Appeal of Kinshasa/Gombe.

The DRC is a signatory to both the UN Anticorruption Convention and the African Union Convention on Preventing and Combating Corruption but has not fully ratified the latter.  The DRC is not a signatory to the OECD Convention on Combating Bribery.  The DRC ratified a protocol agreement with the Southern African Development Community (SADC) on fighting corruption.  NGOs such as the consortium “The Congo is Not for Sale,” have an important role in revealing corrupt practices, and the law protects NGOs in a whistleblower role.

U.S. firms see corruption and harassment by local security forces as one of the main hurdles to investment in the DRC, particularly in the awarding of concessions, government procurement, and taxation treatment.

Resources to Report Corruption

Official government agency:

Agence de Prévention et de Lutte contre la Corruption (APLC)
Tel: +243 893 302 819

Nongovernmental organization:

Transparency International
Ligue Congolaise de Lutte contre la Corruption (LICOCO)
Avenue Luango No14, Quartier 1, N’djili
Kinshasa
+243 81 60 49 837
licocordc@gmail.com
http://www.licocordc.org

In January 2019, Felix Tshisekedi became President in the DRC’s first peaceful transition of power. Following President Felix Tshisekedi’s establishment of a new political alliance known as the “Sacred Union”, the former Prime Minister stepped down in February 2021.  On February 15, a week after he was sworn in as Head of the African Union, President Tshisekedi appointed Jean-Michel Lukonde as Prime Minister.  Maintaining public support for the Tshisekedi government will ultimately require the administration to deliver on the campaign slogan of “the people first.”

The security situation continues to be a concern and the U.S. Embassy through its travel advisory (https://travel.state.gov/content/travel/en/international-travel/International-Travel-Country-Information-Pages/DemocraticRepublicoftheCongoDRC.html) keeps a list of areas where it does not recommend travel by U.S. citizens.  Thousands of members of armed groups have been disarming and turning themselves in to the United Nations’ DRC peacekeeping operation (MONUSCO) and the GDRC since President Tshisekedi’s election, according to international observers, with inconsistent demobilization processes and high recidivism rates.  International statistics indicate that over 140 small and medium sized armed groups and organized criminal groups continue to operate in 17 of the DRC’s 26 provinces, primarily in the east of the country.  The foreign terrorist organization-designated ISIS-DRC (a.k.a the Allied Democratic Forces (ADF) rebel group) in eastern DRC is one of the country’s most notorious and intractable armed groups and its members have shown no interest in demobilizing.  ISIS-DRC has been spreading violence throughout the eastern part of DRC fat an increasing pace since 2014 and killed at least 840 people in 2020 President Tshisekedi is cognizant of the important role security plays in attracting foreign investment, and has encouraged the Congolese army to work with MONUSCO to eliminate armed groups.

US citizens and interests are not being specifically targeted by armed groups but can easily fall victim to violence or kidnapping by being in the wrong place at the wrong time.  The Armed Conflict Location and Event Dataset tracks political violence in developing countries, including the DRC, http://www.acleddata.com/.  Kivu Security Tracker (www.kivusecurity.org) is another database for information on attacks in eastern DRC.  The Department of State continues to advise U.S. citizen travelers to review the Embassy’s Travel Advisory and country information page (https://travel.state.gov/content/travel/en/international-travel/International-Travel-Country-Information-Pages/DemocraticRepublicoftheCongoDRC.html) for the latest security information.

The DRC labor market has a large and low-skilled labor force with high youth unemployment.  Expatriates frequently fill jobs requiring technical training in the key mining sector.  About 85 percent of the non-agricultural workforce is in the informal sector.  About 60 percent of the total workforce is in agriculture.

DRC labor law stipulates that for businesses with over 100 employees, 10 percent of all employees should be local.  If the managing director is a foreigner, his or her deputy or secretary general is expected to be a Congolese citizen. The government can waive these provisions depending on the sector of activity and expertise available. There is no onerous conditionality, visa, residence, or work permit requirements inhibiting the mobility of foreign investors and their employees.

The DRC faces a deficit in skilled labor across all sectors. There are few formal vocational training programs, though Article 8 of the labor law stipulates that all employers should provide training to their employees.  To address the high unemployment rate, the GDRC enacted a policy giving Congolese a preference in hiring over expatriates. Laws prevent firms from firing workers under most conditions without compensation. These restrictions have deterred hiring and encouraged the use of temporary contracts in lieu of permanent hiring.  There is no government safety net to compensate laid-off workers.

Congolese law bans collective bargaining in certain sectors, including by civil servants and public employees, and the law does not provide adequate protection against anti-union discrimination.  While the right to strike is recognized, there are provisions which require unions to obtain permission and adhere to lengthy compulsory arbitration and appeal procedures before starting a strike.  Unions often strike for higher wages or the payment of back wages.

The DRC government ratified the International Labor Organization’s (ILO) eight core conventions, but some Congolese laws continue to be inconsistent with the ILO Convention on Forced Labor.

DRC law prohibits discrimination in employment and occupation based on race, gender, language, or social status.  The law does not specifically protect against discrimination based on religion, age, political opinion, national origin, disability, pregnancy, sexual orientation, gender identity, or HIV-positive status.  Additionally, no law specifically prohibits discrimination in the employment of career public service members.  According to some businesses, the government does not effectively enforce relevant employment laws.

Labor law defines different standard workweeks, ranging from 45 to 72 hours, for various jobs, and prescribes rest periods and premium pay for overtime.  Employers in both the formal and informal sectors often do not respect these provisions. The law does not prohibit compulsory overtime.

The labor code specifies health and safety standards, but the government does not effectively enforce labor standards in the informal sector, and enforcement is uneven to non-existent in the formal sector. The Ministry of Labor employs 146 labor inspectors, but the Labor Inspector General reports that funding is not enough to facilitate the conduct of efficient labor inspections.

There is an active U.S.-DRC Investment Incentive Agreement in force.  The U.S. International Development Finance Corporation (DFC) provides political risk insurance and project financing to U.S. investors and non-governmental organizations.  Though there are currently no DFC projects in the DRC, though DFC is open to working on future projects.

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

Table 4: Sources of Portfolio Investment
Data not available.

Kinshasa Economic Section
Jeremy Chen, Deputy Economic Chief
KinshasaEcon@state.gov

Economic and Commercial Section
310 Avenue des Aviateurs, Kinshasa, Gombe, DRC
Phone: (243) 081 556-0151, Fax: (243) 81 55 60 175
Email:  KinshasaEcon@state.gov

Policies Towards Foreign Direct Investment

Djibouti’s laws encourage FDI, with state-run media providing favorable coverage of projects funded by foreign entities. The government sees FDI as a driving force behind Djibouti’s economic growth. Faced with a high unemployment rate of over 47%, FDI is expected to generate jobs.

There are no laws, practices, or mechanisms that discriminate against foreign investors. Navigating the bureaucracy, however, can be complicated. Certain sectors, most notably public utilities, are state-owned and are not open to investors. The state-owned enterprise (SOE) Djibouti Electricity (EDD) had a monopoly on electricity production for decades, however in July 2015, the Djiboutian government approved a bill liberalizing the production of electricity. The energy sector is now open to competition through Power Purchase Agreements, however EDD retains all rights to the transmission and distribution of electricity. The liberalization of production has resulted in the private development of wind, solar, and waste to energy resources.

Djibouti’s National Investment Promotion Agency (NIPA), created in 2001 under the Ministry of Finance, promotes private-sector investment, facilitates investment operations, and works to modernize the country’s regulatory framework. NIPA assists foreign and domestic investors by disseminating information and streamlining administrative procedures. In March 2017, NIPA’s one-stop-shop was officially inaugurated. The NIPA is the main coordinator of the one-stop-shop which houses several agencies. NIPA has identified several priority sectors for investment, including infrastructure and renewable energy.

A new Minister of Investment position was created in 2016 to further attract and reach out to potential investors. The Minister reports directly to the presidency.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign and domestic private entities have equal rights in establishing and owning business enterprises and engaging in all forms of remunerative activity. Furthermore, foreign investors are not required by law to have a local partner except in the insurance industry, and there, only if the company is registered as a local company and not a branch of an existing foreign company. There is no established screening process for FDI; it is encouraged and given favorable tax status. Specific terms are negotiated on a case-by-case basis. Many companies therefore have a unique status created by agreement with varying preferences and advantages. Some foreign companies choose to have a local partner to help them better navigate the local bureaucracy and cultural sensitivities.

Other Investment Policy Reviews

The OECD, WTO, and the UNCTAD have not conducted an investment policy review (IPR) for Djibouti in the last three years. Post is not aware of any other multilateral organization having an IPR for Djibouti in the last three years.

Business Facilitation

The government of Djibouti has facilitated the registration of business by reducing the capital needed for investment, simplifying the formalities needed to register with the Intellectual Property office, and simplifying certain tax procedures. The most important result is the finalization of a one-stop shop, called Guichet Unique, managed by NIPA. The Guichet Unique ( http://www.guichet-unique.dj ) brings together all the agencies with which a company must register.

Typically, a company registers with the following Djiboutian offices: Office of Intellectual Property, Tax office, and the Social Security office. Online registration is not possible; the normal registration process takes 14 days, according to the World Bank. In Djibouti, new businesses must have every document notarized to begin operations.

Outward Investment

The government neither promotes nor restricts outward investment.

Djibouti does not have a bilateral investment treaty (BIT), nor does it have a bilateral taxation treaty with the United States. However, Djibouti is eligible to benefit from the African Growth and Opportunity Act (AGOA). The Common Market for Eastern and Southern Africa (COMESA), of which Djibouti is a member, signed a Trade and Investment Framework Agreement (TIFA) with the United States in 2001.

In March 2018, Djibouti signed the trade agreement for the African Continental Free Trade Area (AfCFTA), paving the way for a liberalized market for goods and services across the continent. A total of 54 countries have signed the agreement and Djibouti is one of 30 countries to have ratified the agreement. Djibouti has signed bilateral investment treaties with several countries. There is no publicly available list of these treaties, and the terms are not standardized from one treaty to the next. Other treaties to which Djibouti is a party include ESA (Eastern and South Eastern Africa)-EU Interim Economic Partnership Agreement, COMESA, Agreement for the Promotion, Protection and Guarantee of Investment among Member States of the Organization of Islamic Conference, Cotonou Agreement, AU Treaty, League of Arab States Investment, Arab League Investment Agreement, and Arab Economic Unity Agreement.

Business tax exoneration is given to all newly registered foreign and Djiboutian companies for the first three years of operations for those operating in Classes V through VIII (110,000 DJF (621 USD) to 513,000 DJF (worth of annual business taxes). For those above Class VIII (>513,000 DF (2,898) worth of annual business taxes) and for all banks, they are exonerated from the “proportional” business tax which is equivalent to 20% of their business revenues. Business value added tax (VAT) and consumption tax exoneration is provided to foreign and domestic businesses working in the hospitality, heavy- and light-industrial, real estate and land development sectors during the construction and onboarding phases of the project. As soon as the project begins operations, then the tax exoneration ends. For example, a hotel that is undergoing construction may receive VAT and consumption tax exonerations until the hotel opens for business.

Real estate and sales tax reduction from 10% to 3% is provided for all sales and purchases of land, buildings, and homes for all transactions made by any entity including individuals, foreign or domestic businesses, organizations, schools, etc. Previously, only businesses could receive a tax break of paying 5% sales or purchase tax on land and buildings in their first purchase.

Corporate (profit) tax exoneration is provided for all businesses that enter the market with an initial investment of 50 million DJF (282,486 USD) or more, for up to seven years.

Transparency of the Regulatory System

Government policies are sometimes not transparent, and do not foster competition on a non-discriminatory basis. Likewise, the legal, regulatory, and accounting systems are not always transparent nor are they consistent with international norms. Rule-making and regulatory authority exists at the state level.

The Djiboutian accounting system is loosely based on the French accounting system as it existed at independence (1977) and has been updated since that time. Legal and regulatory procedures are complex and unevenly enforced. Draft bills are initiated in a process of public consultation in which stakeholders participate. Regulatory actions including laws and decrees are available online at the following site: https://www.presidence.dj/recherchetexte.php .

The State General Inspection (SGI) is tasked with ensuring human and material resources in the public sector are properly utilized. It also acts as the enforcement mechanism.

The regulatory regime is written in a way that promotes open competition, at least in the sectors that are open to private investment. Implementation of the law is sometimes not transparent, and public functions such as licensing and issuing permits are not always done in a systematic fashion. Application of the rules is not always consistent. The laws are proposed by the ministry, and then debated and passed by the parliament. The promulgation by the president is the last stage. Public finances and the terms of debt obligations are opaque. Ministries and regulatory agencies do not develop forward regulatory plans – that is, a public list of anticipated regulatory changes or proposals intended to be adopted/implemented within a specified time frame

International Regulatory Considerations

Djibouti is a member of the Intergovernmental Authority on Development (IGAD) and the Common Market for Eastern and Southern Africa (COMESA). The regulatory systems in these countries are not yet harmonized. European norms and standards, especially French, are referenced in Djibouti. Djibouti is a member of the WTO.

Legal System and Judicial Independence

Djibouti’s legal system is based on Civil law, inherited from the French Napoleonic Code. It consists of three courts: a Court of First Instance presided over by a single judge; a Court of Appeals, with three judges; and the Supreme Court. In addition, Islamic law (shariah) and traditional law is practiced. Djibouti has a written commercial code and specialized courts, including commercial, criminal, administrative, and civilian courts.

The court system is de jure independent from executive power. However, this is not always the case in practice so most investors in the market request the right to counsel, including agreements for arbitration, in a recognized international court. International lawyers practicing in Djibouti have reported effective application of maritime and other commercial laws, but in the past, foreign companies operating in Djibouti have reported that court deliberations were biased or delayed.

Laws and Regulations on Foreign Direct Investment

The country’s legal system has no discriminatory policy against foreign investment, and frequently negotiates extended tax breaks and other incentives to attract larger investments. The NIPA website has useful information and acts as a guide for investors:  www.djiboutinvest.com. The agency oversees the “guichet unique”, which acts as the one stop shop for investing in Djibouti: www.guichet-unique.dj .

The Djibouti Office of Industrial and Commercial Protection (ODPIC) is the agency in charge of registering businesses. Its website contains information about the registration process:  https://odpic.net/ .

Competition and Antitrust Laws

In 2008, Djibouti adopted a law on competition and consumer protection, which does not cover state-owned enterprises. Under this law, the Government of Djibouti regulates prices in areas where competition remains limited. For example, the government regulates postal services, telecommunications, utilities, and urban transport services. Djibouti does not have an agency that specifically promotes competition and does not have a comprehensive strategy to restrict market monopolies

Expropriation and Compensation

Foreign companies enjoy the same benefits as domestic companies under Djibouti’s Investment Code. The Investment Code stipulates that “no partial or total, temporary or permanent expropriation will take place without equitable compensation for the damages suffered.” There are no known recent cases of U.S. companies in Djibouti being subject to expropriation. There have been cases of foreign companies facing de facto expropriation via fines, while other companies have had their concession to run a public service unilaterally revoked. The government may expropriate land when it is needed for public utility. In that case, the government will compensate the landowner by providing land at a different location or by cash settlement.

Dispute Settlement

ICSID Convention and New York Convention

Djibouti recently became a member state of ICSID. On April 12, 2019, Djibouti signed the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention, also known as the Washington Convention). Djibouti made its deposit of ratification on June 9, 2020 for an entry into force on July 9, 2020.

Djibouti is a contracting member of the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards.

Investor-State Dispute Settlement

Djibouti’s government has had only a few investment disputes in the past several years, none with U.S. businesses. In some cases, the disputes have been settled in international arbitration courts and the government has abided by those decisions. In other cases, there has been de facto expropriation through large fines. As in any country, a strong, enforceable contract is important.

The government passed a law in November 2017 permitting the government to unilaterally alter or terminate contracts. Using this law, in February 2018, Djibouti’s president issued a decree abrogating the government’s contract with the Emirati company, DP World, concerning the Doraleh Container Terminal, later nationalizing the equipment, physical assets, and land. DP World continued to hold 33.33% of shares until July 2018, when the government terminated the shareholders’ agreement with DP World and later nationalized all shares. Throughout, DP World has continued to claim that the 30-year 2006 Doraleh Container Terminal concession agreement remains in force.

In January 2020, the London Court of International Arbitration decided Djibouti should restore DP World’s rights to operate Doraleh Container Terminal for 25 years, in line with the original deal. It was the court’s fifth ruling in favor of DP World since Djibouti nationalized the port. In response, Djibouti’s president released an official communiqué rejecting the court ruling, stating “As the Republic of Djibouti has consistently indicated since the termination of the concession, the only possible outcome is allocation of fair compensation in accordance with international law.”

International Commercial Arbitration and Foreign Courts

There is no domestic arbitration body within the country. In February 2014, the IGAD countries agreed to set up an international Business Arbitration Center in Djibouti. This institution provides a mechanism for resolving business disputes and helps create a more transparent business environment in the region by reinforcing the principles of contract law and increasing the number of lawyers practicing commercial and contract law in Djibouti. Djibouti’s rule of law is weak as it relates to business disputes involving non-Djiboutian. Investment dispute cases are not made public.

Bankruptcy Regulations

Djibouti has bankruptcy laws, and bankruptcy is not criminalized. Insolvency laws are a bright spot in Djibouti’s investment climate, as the country ranked 44 out of 190 by the World Bank in 2020 in this area.

Investment Incentives

Tax benefits and incentives fall under two categories detailed in the investment code. Investments greater than DJF 50 million (USD 282,486) that create several permanent jobs may be exempted from license and registration fees, property taxes, taxes on industrial and commercial profits, and taxes on the profits of corporate entities. Imported raw materials used in manufacturing are exempted from the internal consumption tax. These exemptions apply for up to a maximum of ten years after companies start producing materials in Djibouti. Incentives are often unique to an individual company or investment and are agreed upon with relevant ministries. Projects can be delayed if all relevant ministries are not consulted during negotiations. To promote exports, Djibouti has multiple free zones where companies enjoy full exemption from direct and indirect taxes for a period of up to ten years.

Foreign Trade Zones/Free Ports/Trade Facilitation

The Djibouti Free Zone (DFZ) is located on 40 hectares and offers office space, warehouses, light industrial units, and hangars. Businesses located in the Free Zone do not pay corporate taxes, have a simplified registration process, and receive other benefits such as assistance obtaining work permits and visas. Currently, 180 companies from more than 30 countries operate out of the Free Zone. In December 2013, the DAM Commercial Free Zone opened in the Damerjog region, south of Djibouti City. In March 2018, the Djibouti Ports and Free Zone Authority and China Merchants Group began construction on a large free zone called Djibouti International Free Trade Zone (DIFTZ). The first phase, a 240-hectare pilot zone is currently operational. It consists of four industrial clusters which will focus on trade and logistics, export processing, business, and financial support services, as well as manufacturing and duty-free merchandise retail. When complete it will cover 4,800 hectares and offer office space, warehouses, industrial units, and will be connected directly with the ports in later phases. It will be the largest free zone in Africa.

Performance and Data Localization Requirements

The government mandates local employment as long as the qualifications or expertise is available locally. However, these schemes are not equally applied to senior management and board of directors where foreign employment is more readily accepted. The process for visas, work permits, and other requirements in order to operate as a foreign employee is not onerous and is easily accessible through Djibouti’s Guichet Unique. Work permits follow a graduated fee schedule: 200,000 Djibouti francs (USD 1,124), 100,000 Djibouti francs (USD 563) and 50,000 Djibouti francs (USD 281) according to the qualifications required for a position.

The government does not follow “forced localization.” The Djiboutian investment code guarantees investors the right to freely import all goods, equipment, products, or material necessary for their investments; display products and services; determine and run marketing policy and production; choose customers and suppliers; and set prices. Performance requirements are not a pre-condition for establishing, maintaining, or expanding foreign direct investments. Incentives do, however, increase with the size of the investment and the number of jobs created.

There are no measures that prevent or unduly impede companies from freely transmitting customer or other business-related data outside the economy/country’s territory. However, there are no mechanisms that are used to enforce rules on local data storage within Djibouti.

Real Property

http://www.doingbusiness.org/data/exploreeconomies/djibouti#registering-property .

Intellectual Property Rights

Djibouti’s legal structure for protecting and enforcing IPR within Djibouti is weak but developing. There are few existing protections. However, the government passed a law that protects artists’ copyrights.

Djibouti ratified the World Intellectual Property Organization (WIPO) Convention, the Paris Convention on the Protection of Industrial Rights, and the Berne Convention on the Protection of Literature and Art Works. The Ministry of Communication and the Djibouti Office for Intellectual Property Rights are responsible for safeguarding intellectual property after registering products. Counterfeit products are commonly available in Djibouti’s markets. Infringing products include clothing, watches, electronics, and bags. Because of the nascent nature of IPR protections, counterfeit products are rarely seized, and no statistics on seizures are published. There have been reports of seizures of counterfeit money; however, statistics are unavailable.

Djibouti is not listed in the U.S Trade Representative (USTR) Special 301 report or the Notorious Markets List. Compared to other industries, the sale of counterfeit goods does not appear to be at higher risk of labor rights violations, including child labor, forced labor, and dangerous working conditions. For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at  http://www.wipo.int/directory/en/ .

The Embassy POC is Political Economic Officer Joseph Chamberlain at DjiboutiCommerce@state.gov .

For a list of local lawyers, see: https://dj.usembassy.gov/u-s-citizen-services/attorneys/

Capital Markets and Portfolio Investment

In recent years, Djibouti has relied heavily on foreign investment, and the government is open and receptive to foreign investors. Portfolio investment in Djibouti is primarily done through private equity. Some multinational companies with investments in Djibouti are publicly traded. Investments in Djibouti are inherently illiquid for that reason, and the purchase or sale of any sizeable investment in Djibouti affects the market accordingly. Djibouti does not have its own stock market. Existing policies facilitate the free flow of financial resources into the product and factor markets.

Credit is allocated on market terms, and foreign companies do not face discrimination in obtaining it. Generally, however, only well-established businesses obtain bank credit, as the cost of credit is high. Credit is available to the private sector, whether foreign or domestic. Where credit is not available, it is primarily due to the associated risk and not structural factors.

Money and Banking System

Three large banks, Bank of Africa, Bank for Commerce and Industry – Mer Rouge, and CAC bank dominate Djibouti’s banking sector. While these 3 banks account for the majority share of deposits in-country, there are 13 total banks, all established in the last 14 years. In 2011 a new banking law went into effect, fixing the minimum capital requirement for financial institutions at DJF 1 billion (USD 5,651,250) and extended the scope of the law to include financial auxiliaries, such as money transfer agencies and Islamic financial institutions. In addition to the three names banks above, foreign banks include Silkroad Bank, Bank of China the Burkina Faso-based International Business Bank.

The banking sector suffers from a lack of consistent supervision, but it has been improving. Non-performing loans decreased from 16.26% in 2019 to 13.31% in 2020. The total assets of all the banks were estimated to be USD 3.1 billion in 2020, of which 80% were held by the 4 largest banks. The country has a Central Bank, which is in charge of delivering licenses to banks and supervising them. Foreign banks or branches are allowed to establish operations in the country. They are subject to the same regulations as local banks. Djibouti has not announced that it intends to implement or allow the implementation of blockchain technologies in its banking transactions. Some banks have begun to provide mobile and e-banking services. In June 2020, Djibouti Telecom launched D-Money, a new Digital Mobile Money service which allows users to make digital money transfers and payments directly from mobile phones.

Foreign Exchange and Remittances

Foreign Exchange

Djibouti has no foreign exchange restrictions. Businesses are free to repatriate profits. There are no limitations on converting or transferring funds, or on the inflow and outflow of cash. The Djiboutian franc, which has been pegged to the U.S. dollar since 1949, is stable. The fixed exchange rate is 177.71 Djiboutian francs to the U.S. dollar. Funds can be transferred by using banks or international money transfer companies such as Western Union, all monitored by the Central Bank.

Remittance Policies

There are no recent changes or plans to change investment remittance policies. There are no time limitations on remittances. The government does not issue bonds on the open market, and cash-like instruments are not in common use in Djibouti, so direct currency transfers are the only practical method of remitting profits.

Sovereign Wealth Funds

In mid-2020 the Djiboutian government announced the creation of a Sovereign Wealth Fund. According to a government statement, the state-owned fund will target investments locally and in neighboring countries in the Horn of Africa. It will focus on industries including telecommunications, technology, energy, and logistics. The fund will act as a long-term investor and is required to reinvest the entire net profits of its activity. The government aims to fund it to $1.5 billion within ten years. Article 12 of Law N° 75/AN/20/8th L creating the Sovereign Fund of Djibouti states the fund adopts and implements best practice in terms of transparency and performance reporting in accordance with the Santiago Principles. As of mid-2021, the fund was not yet operational.

• Law No. 75/AN/20/8th L establishing the Sovereign Fund of Djibouti – https://www.presidence.dj/texte.php?ID=75&ID2=2020-03-29&ID3=Loi&ID4=6&ID5=2020-03-31&ID6=n
• Decree No. 2020-127/PRE approving the statutes and determining certain initial resources of the Sovereign Fund of Djibouti – https://www.presidence.dj/texte.php?ID=2020-127&ID2=2020-06-30&ID3=D%E9cret&ID4=12&ID5=2020-06-30&ID6=n
• Decree No. 2020-111/PRE appointing the members of the Board of Directors and the Director General of the Sovereign Fund of Djibouti – https://www.presidence.dj/texte.php?ID=2020-111&ID2=2020-06-24&ID3=D%E9cret&ID4=12&ID5=2020-06-30&ID6=n

Wholly owned SOEs control telecommunications, water, and electricity distribution in Djibouti. Major print, television, and radio outlets are also state-run. Additionally, Djibouti’s ports, airport, and free zones are managed by an SOE. There is a state-owned national airline that is wholly managed by the ports and free zones authority. SOEs are required by law to publish an annual report. The Court of Auditors is charged with auditing SOEs, but they have not yet released assets, income, employment, or other details about the SOEs. There is no publicly available list of SOEs.

State-run services, such as municipal garbage collection and real estate, do not hold legal monopolies, but are afforded material advantages by the government, e.g., government-backed loan guarantees for the real estate sector. Djibouti is not party to the Government Procurement Agreement (GPA) within the framework of the World Trade Organization (WTO).

In order to exercise ownership in SOEs, the government uses several laws and decrees, most of which were promulgated in the 1990s. The established practices are not consistent with OECD guidelines. No centralized ownership entity exists. SOE senior management reports directly to the relevant line ministry. There is also an independent board of directors whose members are chosen from other ministries

Privatization Program

A few SOEs have been privatized, such as a milk factory several years ago and a water bottling plant in 2015. No particular sector is targeted. The bidding process is not clear and transparent, which makes the participation of foreign investors difficult.

There is nascent but growing awareness among both companies and consumers in Djibouti of Responsible Business Conduct (RBC). Businesses which might harm the environment are, in general, obligated to conduct studies on the environmental impact before proceeding with their project. The government does not promote RBC in a systematic way, although it does acknowledge good corporate social responsibility and covers it favorably in state media. However, the government does not factor RBC policies or practices into its procurement decisions. There are no corporate governance, accounting, or executive compensation standards to protect stakeholders. The government does not adhere to OECD guidelines in RBC matters. There have been reports that the government does not effectively and fairly enforce domestic laws relating to labor rights, environmental protections, consumer protections, and human rights. There are no independent NGOs, investment funds, worker organizations, or associations that monitor RBC in Djibouti. Djibouti has a salt extraction industry, but it does not participate in the Extractive Industries Transparency Initiative or the Voluntary Principles on Security and Human Rights.

Additional Resources 

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 and;
• North Korea Sanctions & Enforcement Actions Advisory

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.

Resources to Report Corruption

Djibouti has several laws to combat corruption by public officials. These laws were either passed by the government or contained in the Penal Code. However, there have been no records of cases to combat corruption by public officials. Corruption laws are extended to all family members of officials and across political parties, but they have not been applied in a non-discriminatory manner. Djibouti does not have laws or regulations to counter conflict-of-interest in awarding contracts or government procurement.

Djibouti is a party to the UN Convention against Corruption. There are two government entities responsible for investigating corruption and enforcing the regulations. The State General Inspection (SGI) is tasked with ensuring human and material resources in the public sector are properly utilized. The Court of Auditors is mandated to verify and audit all public establishments for transparency and accountability, and to implement necessary legal sanctions. Both institutions are mandated to produce annual corruption reports. Despite the legal mandates, both institutions lack the authority to push for meaningful reform. The National Commission for Anti-Corruption is also mandated to enforce the laws on combatting corruption and provide safe haven for whistleblowers. This Commission launched a program in March 2018 to urge high-ranking government officials to publicly declare all of their assets. However, its effectiveness has not been proven so far. The contracting code and other laws passed by Djibouti contain provisions to counter conflict-of-interest contracts or government procurement.

According to a law passed in 2013, the government requires private and public companies to establish internal codes of conduct that prevent and prohibit bribery of public officials. However, these codes have not been implemented. Likewise, the government requirement that private companies use internal controls, ethics, and compliance to detect and prevent bribery of government officials is not enforced. Djibouti is not party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. Djibouti is a signatory country of the UN Convention against Corruption. Djibouti ranked 147 out of 180 countries in the 2020 Corruption Perceptions Index of Transparency International.

U.S. firms have not specifically noted corruption as an obstacle to foreign direct investment in Djibouti, but there were allegations of foreign companies having to meet requirements such as renting houses owned by senior officials or hiring certain employees as a condition of receiving government procurement contracts. In addition, one company reported harassment of employees by local competitors. Prosecution and punishment for corruption is rare.

Resources to Report Corruption

Contact at government agency responsible for combating corruption is listed below:

Fatouma Mahamoud Abdillahi
President
Commission Nationale Independante pour la Prevention et de Lutte Contre la Corruption
Plateau du Serpent
+253 21 35 16 03
anticorruption@intnet.d j

No “watchdog” organization is present in Djibouti.

Djibouti has seen only very limited episodes of political violence over the last two decades.  In the last ten years, there have been no known incidents of political violence leading to damage to foreign investments.  Both the ruling coalition party and the recognized opposition parties favor foreign direct investment into Djibouti and local attitudes towards foreigners are positive.

Djibouti held presidential elections April 09, 2021, with President Ismael Omar Guelleh winning a fifth consecutive term with 98% of the vote. His 22-year reign has contributed to stability and economic growth, but questions of succession and subsequent instability remain. The country unilaterally seized, in February 2018, DP World’s 33% stake in the Doraleh Container Terminal, a case DP World continues to pursue in international courts.

Djibouti was recently awarded the International Peace Award by the journal Jeune Afrique for its secure environment, despite being surrounded by countries facing instability.  According to data acquired by the Armed Conflict Location and Event Data Project, Djibouti’s instances of violence and disordered has significantly declined in the past three years.

Djibouti’s official unemployment rate is 47%. Youth unemployment, defined locally as the share of the labor force between age 15 and 24 without work but is available and actively seeing employment, has remained between 11% and 12% in the past three decades. Estimates of a sizeable informal labor market of up to 75% exist in Djibouti, with a larger informal market outside of the capital city of Djibouti. The formal labor market is heavily service- or government-oriented with growing markets in construction, logistics, and transportation. Skilled Djiboutian workers, especially in high-demand trades such as construction, are in short supply.

Djibouti has complicated labor laws that favor the employee, especially in the areas of disputes and termination. Vocational and professional training facilities remain limited. The World Bank, the Ministry of Finance, USAID, and other entities are working on a variety of initiatives to address the shortage of workforce development programs. The government has promoted entrepreneurship as a means of stimulating the economy. The government, in partnership with the World Bank and European Union, recently opened the entrepreneurship and leadership center (CLE – Centre Leadership Entreprenariat ) to assist start-up companies.

Foreign workers are legally allowed to work in Djibouti only if their qualifications or expertise are not available among the nationals. In January 2017, the cost for a work permit was reviewed and classified in three different categories based on the type of profession with respective annual fees of 50,000 Djibouti francs (USD 281), 100,000 Djibouti francs (USD 563) and Djibouti francs 200,000 (USD 1,125). The National Agency for Employment, Training, and Professional Integration (ANEFIP) maintains a database of Djiboutian job-seekers and issues work permits to foreign workers.

Employers have to abide by the Labor Code. Workers who are laid off get more compensation than employees who are fired. No unemployment insurance or other social safety net programs exist for workers laid off for economic reasons. Only those workers who contributed to the social insurance for 25 years and are sixty years of age are entitled to retirement benefits.

Minimum wage is DJF 45,000 (USD 254) per month. By law, all employers are obligated to make social security payments on behalf of their employees, through the National Council for Social Security. Two large labor unions exist in Djibouti, but only the Djiboutian Workers Union is recognized by international organizations.

Labor laws are not waived to attract investment, but the investment code and free zones have separate legal provisions to attract investment. By law, labor unions are independent of the government and employers. In practice they can be influenced by the government and/or employers. In case of labor disputes, the Labor Inspector will bring together the employer and the employee to settle the case acting as a mediator. If the mediation fails, then the case will be sent to the Court. The process is opaque and the results are not publicized.

In November 2020, the National Assembly amended the Labor Code to require companies employing 11 or more employees to report annually on the status of its workforce. This report aims to prevent companies from hiring foreigners illegally, not respecting the legally allowed pregnancy leave, and/or illegally firing employees.

* Ministry of Finance and Economy

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

Table 4: Sources of Portfolio Investment
Data not available.

Joseph Chamberlain
U.S. Embassy Djibouti
Lot 350-B Haramouss
B.P. 185
Djibouti
+253 (21) 45 30 00
djibouticommerce@state.gov 

Policies Towards Foreign Direct Investment

Egypt’s completion of the three-year, $12-billion IMF Extended Fund Facility between 2016 and 2019, and its associated reform package, helped stabilize Egypt’s macroeconomy, introduced important subsidy and social spending reforms, and helped restore investor confidence in the Egyptian economy.  The flotation of the Egyptian Pound (EGP) in November 2016 and the restart of Egypt’s interbank foreign exchange (FX) market as part of this program was the first major step in restoring investor confidence that immediately led to increased portfolio investment and should lead to increased FDI over the long term.  Other important reforms have included a new investment law and an industrial licensing law in 2017, a new bankruptcy law in 2018, a new customs law in 2020, and other reforms aimed at reducing regulatory overhang and improving the ease of doing business. Egypt’s government has announced plans to improve its business climate further through investment promotion, facilitation, more efficient business services, and the implementation of investor-friendly policies.

With few exceptions, Egypt does not legally discriminate between Egyptian nationals and foreigners in the formation and operation of private companies. The 1997 Investment Incentives Law was designed to encourage domestic and foreign investment in targeted economic sectors and to promote decentralization of industry away from the Nile Valley. The law allows 100 percent foreign ownership of investment projects and guarantees the right to remit income earned in Egypt and to repatriate capital.

The Tenders Law (Law 89 of 1998) requires the government to consider both price and best value in awarding contracts and to issue an explanation for refusal of a bid. However, the law contains preferences for Egyptian domestic contractors, who are accorded priority if their bids do not exceed the lowest foreign bid by more than 15 percent.

The Capital Markets Law (Law 95 of 1992) and its amendments, including the most recent in February 2018, and relevant regulations govern Egypt’s capital markets.  Foreign investors are able to buy shares on the Egyptian Stock Exchange on the same basis as local investors.

The General Authority for Investment and Free Zones (GAFI, http://gafi.gov.eg) is the principal government body that regulates and facilitates foreign investment in Egypt, and reports directly to the Prime Minister.

The Investor Service Center (ISC) is an administrative unit within GAFI that provides “one-stop-shop” services, easing the way for global investors looking for opportunities presented by Egypt’s domestic economy and the nation’s competitive advantages as an export hub for Europe, the Middle East, and Africa. This is in addition to promoting Egypt’s investment opportunities in various sectors.

The ISC provides a start-to-end service to the investor, including assistance related to company incorporation, establishment of company branches, approval of minutes of Board of Directors and General Assemblies, increases of capital, changes of activity, liquidation procedures, and other corporate-related matters. The Center also aims to issue licenses, approvals, and permits required for investment activities within 60 days from the date of request. Other services GAFI provides include:

Advice and support to help in the evaluation of Egypt as a potential investment location;

Identification of suitable locations and site selection options within Egypt;

Assistance in identifying suitable Egyptian partners; and

Aftercare and dispute settlement services. ​

The ISC plans to establish branches in each of Egypt’s Governorates by the end of 2021.  Egypt maintains ongoing communication with investors through formal business roundtables, investment promotion events (conferences and seminars), and one-on-one investment meetings.

Limits on Foreign Control and Right to Private Ownership and Establishment

The Egyptian Companies Law does not set any limitation on the number of foreigners, neither as shareholders nor as managers/board members, except for Limited Liability Companies where the only restriction is that one of the managers must be an Egyptian national. In addition, companies are required to obtain a commercial and tax license, and pass a security clearance process.  Companies are able to operate while undergoing the often lengthy security screening process.  However, if the firm is rejected, it must cease operations and may undergo a lengthy appeals process.  Businesses have cited instances where Egyptian clients were hesitant to conclude long-term business contracts with foreign businesses that have yet to receive a security clearance. They have also expressed concern about seemingly arbitrary refusals, a lack of explanation when a security clearance is not issued, and the lengthy appeals process. Although the Government of Egypt has made progress streamlining the business registration process at GAFI, inconsistent treatment by banks and other government officials has in some cases led to registration delays.

Sector-specific limitations to investment include restrictions on foreign shareholding of companies owning lands in the Sinai Peninsula. Likewise, the Import-Export Law requires companies wishing to register in the Import Registry to be 51 percent owned and managed by Egyptians. Nevertheless, the new Investment Law does allow wholly foreign companies investing in Egypt to import goods and materials. In January 2021 the Egyptian government removed the 20-percent foreign ownership cap for international and private schools in Egypt.

The ownership of land by foreigners is complicated, in that it is governed by three laws: Law 15 of 1963, Law 143 of 1981, and Law 230 of 1996.  Land/Real Estate Law 15 of 1963 explicitly prohibits foreign individual or corporation ownership of agricultural land (defined as traditional agricultural land in the Nile Valley, Delta and Oases). Law 15/1963 stipulates that no foreigners, whether natural or juristic persons, may acquire agricultural land.  Law 143/1981 governs the acquisition and ownership of desert land. Certain limits are placed on the number of feddans (one feddan is approximately equal to one acre) that may be owned by individuals, families, cooperatives, partnerships, and corporations regardless of nationality. Partnerships are permitted to own 10,000 feddans. Joint stock companies are permitted to own 50,000 feddans.

Under Law 230/1986, non-Egyptians are allowed to own real estate (vacant or built) only under the following conditions:

• Ownership is limited to two real estate properties in Egypt that serve as accommodation for the owner and his family (spouses and minors) in addition to the right to own real estate needed for activities licensed by the Egyptian Government.
• The area of each real estate property does not exceed 4,000 m².
• The real estate is not considered a historical site.

Exemption from the first and second conditions is subject to the approval of the Prime Minister. Ownership in tourist areas and new communities is subject to conditions established by the Cabinet of Ministers. Non-Egyptians owning vacant real estate in Egypt must build within a period of five years from the date their ownership is registered by a notary public. Non-Egyptians cannot sell their real estate for five years after registration of ownership, unless the Prime Minister consents to an exemption.

Other Investment Policy Reviews

In December 2020, the World Bank published a Country Private Sector Diagnostic report for Egypt, which analyzed key structural economic reforms that the Egyptian government should adopt in order to encourage private-sector-led economic growth. The report also included recommendations for the agribusiness, manufacturing, information technology, education, and healthcare sectors. https://www.ifc.org/wps/wcm/connect/publications_ext_content/ifc_external_publication_site/publications_listing_page/cpsd-egypt

https://www.ifc.org/wps/wcm/connect/publications_ext_content/ifc_external_publication_site/publications_listing_page/cpsd-egypt

The Organization for Economic Cooperation and Development (OECD) signed a declaration with Egypt on International Investment and Multinational Enterprises on July 11, 2007, at which time Egypt became the first Arab and African country to sign the OECD Declaration, marking a new stage in Egypt’s drive to attract more foreign direct investment (FDI).  On July 8, 2020, the OECD released an Investment Policy Review for Egypt that highlighted the government’s progress implementing a proactive reform agenda to improve the business climate, attract more foreign and domestic investment, and reap the benefits of openness to FDI and participation in global value chains. https://www.oecd.org/countries/egypt/egypt-continues-to-strengthen-its-institutional-and-legal-framework-for-investment.htm  

https://www.oecd.org/countries/egypt/egypt-continues-to-strengthen-its-institutional-and-legal-framework-for-investment.htm  

In January 2018 the World Trade Organization (WTO) published a comprehensive review of the Egyptian Government’s trade policies, including details of the Investment Law’s (Law 72 of 2017) main provisions. https://www.wto.org/english/tratop_e/tpr_e/s367_e.pdf 

https://www.wto.org/english/tratop_e/tpr_e/s367_e.pdf 

The United Nations Conference on Trade Development (UNCTAD) published an Information and Communications Technology (ICT) Policy Review for Egypt in 2017, in which it highlighted the potential for investments in the ICT sector to help drive economic growth and recommended specific reforms aimed at strengthening Egypt’s performance in key ICT policy areas.   https://unctad.org/en/PublicationsLibrary/dtlstict2017d3_en.pdf 

https://unctad.org/en/PublicationsLibrary/dtlstict2017d3_en.pdf   

Business Facilitation

GAFI’s ISC ( https://gafi.gov.eg/English/Howcanwehelp/OneStopShop/Pages/default.aspx ) was launched in February 2018 and provides start-to-end service to the investor, as described above.  The Investment Law (Law 72 of 2017) also introduces “Ratification Offices” to facilitate obtaining necessary approvals, permits, and licenses within 10 days of issuing a Ratification Certificate.

Investors may fulfill the technical requirements of obtaining the required licenses through these Ratification Offices, directly through the concerned authority, or through its representatives at the Investment Window at GAFI.  The Investor Service Center is required to issue licenses within 60 days from submission. Companies can also register online.  GAFI has also launched e-establishment, e-signature, and e-payment services to facilitate establishing companies.

Outward Investment

Egypt promotes and incentivizes outward investment. According to the Egyptian government’s FDI Markets database for the period from January 2003 to January 2021, outward investment featured the following:

• Egyptian companies implemented 278 Egyptian FDI projects. The estimated total value of the projects, which employed about 49,000 workers, was $24.26 billion.
• The following countries respectively received the largest amount of Egyptian outward investment in terms of total project value: The United Arab Emirates (UAE), Saudi Arabia, Algeria, Kenya, Jordan, Ethiopia, Germany, Libya, Morocco, and Nigeria.
• The UAE, Saudi Arabia, and Algeria accounted for about 28 percent of the total amount.
• Elsewedy Electric was the largest Egyptian company investing abroad, implementing 21 projects with a total investment estimated to be $2.1 billion.

Egypt does not restrict domestic investors from investing abroad.

Transparency of the Regulatory System

The Egyptian government has made efforts to improve the transparency of government policy and to support a fair, competitive marketplace.  Nevertheless, improving government transparency and consistency has proven difficult, and reformers have faced strong resistance from entrenched bureaucratic and private interests.  Significant obstacles continue to hinder private investment, including the reportedly arbitrary imposition of bureaucratic impediments and the length of time needed to resolve them.  Nevertheless, the impetus for positive change driven by the government reform agenda augurs well for improvement in policy implementation and transparency.

Enactment of laws is the purview of the Parliament, while executive regulations are the domain of line ministries.  Under the Constitution, the president, the cabinet, and any member of parliament can present draft legislation.  After submission, parliamentary committees review and approve, including any amendments.  Upon parliamentary approval, a judicial body reviews the constitutionality of any legislation before referring it to the president for his approval.

Although notice and full drafts of legislation are typically printed in the Official Gazette (similar to the Federal Register in the United States), there is no centralized online location where the government publishes comprehensive details about regulatory decisions or their summaries, and in practice consultation with the public is limited.  In recent years, the Ministry of Trade and other government bodies have circulated draft legislation among concerned parties, including business associations and labor unions. This has been a welcome change from previous practice, but is not yet institutionalized across the government.

While Egyptian parliaments have historically held “social dialogue” sessions with concerned parties and private or civic organizations to discuss proposed legislation, it is unclear to what degree the current Parliament will adopt a more inclusive approach to social dialogue.  Many aspects of the 2016 IMF program and related economic reforms stimulated parliament to engage more broadly with the public, marking some progress in this respect.

Accounting, legal, and regulatory procedures are transparent and consistent with international norms.  The Financial Regulatory Authority (FRA) supervises and regulates all non-banking financial markets and instruments, including capital markets, futures exchanges, insurance activities, mortgage finance, financial leasing, factoring, securitization, and microfinance.  It issues rules that facilitate market efficiency and transparency. FRA has issued legislation and regulatory decisions on non-banking financial laws which govern FRA’s work and the entities under its supervision. ( http://www.fra.gov.eg/jtags/efsa_en/index_en.jsp  )

The criteria for awarding government contracts and licenses are made available when bid rounds are announced.  The process actually used to award contracts is broadly consistent with the procedural requirements set forth by law.  Further, set-aside requirements for small and medium-sized enterprise (SME) participation in GoE procurement are increasingly highlighted. The FRA publishes key laws and regulations to the following website: http://www.fra.gov.eg/content/efsa_en/efsa_pages_en/laws_efsa_en.htm  

http://www.fra.gov.eg/content/efsa_en/efsa_pages_en/laws_efsa_en.htm  

The Parliament and the independent “Administrative Control Authority” both ensure the government’s commitment to follow administrative processes at all levels of government.

The cabinet develops and submits proposed regulations to the president following discussion and consultation with the relevant ministry and informal consultation with other interest groups. Based on the recommendations provided in the proposal, including recommendations by the presidential advisors, the president issues “Presidential Decrees” that function as implementing regulations.  Presidential decrees are published in the Official Gazette for enforcement.

The degree to which ministries and government agencies responsible for drafting, implementing, or enforcing a given regulation coordinate with other stakeholders varies widely.  Although some government entities may attempt to analyze and debate proposed legislation or rules, there are no laws requiring scientific studies or quantitative regulatory impact analyses prior to finalizing or implementing new laws or regulations. Not all issued regulations are announced online, and not all public comments received by regulators are made public.

The government made its budget documents widely and easily accessible to the general public, including online.  Budget documents did not include allocations to military state-owned enterprises, nor allocations to and earnings from state-owned enterprises.  Information on government debt obligations was publicly available online, but up-to-date and clear information on state-owned enterprise debt guaranteed by the government was not available.  According to information the Central Bank has provided to the World Bank, the lack of information available about publicly guaranteed private-sector debt meant that this debt was generally recorded as private-sector non-guaranteed debt, thus potentially obscuring some contingent debt liabilities.

International Regulatory Considerations

In general, international standards are the main reference for Egyptian standards.  According to the Egyptian Organization for Standardization and Quality Control, approximately 7,000 national standards are aligned with international standards in various sectors.  In the absence of international standards, Egypt uses other references referred to in Ministerial Decrees No. 180/1996 and No. 291/2003, which stipulate that in the absence of Egyptian standards, the producers and importers may use European standards (EN), U.S. standards (ANSI), or Japanese standards (JIS).

Egypt is a member of the WTO, participates actively in various committees, and notifies technical regulations to the WTO Committee on Technical Barriers to Trade.  Egypt ratified the Trade Facilitation Agreement (TFA) in June 2017 (Presidential decree No. 149/2017), and deposited its formal notification to the WTO on June 24, 2019.  Egypt notified indicative and definitive dates for implementing Category B and C commitments on June 20, 2019, but to date has not notified dates for implementing Category A commitments.  In August 2020 the Egyptian Parliament passed a new Customs Law, Law 207 of 2020, that includes provisions for key TFA reforms, including advance rulings, separation of release, a single-window system, expedited customs procedures for authorized economic operators, post-clearance audits, and e-payments.

Legal System and Judicial Independence

Egypt’s legal system is a civil codified law system based on the French model.  If contractual disputes arise, claimants can sue for remedies through the court system or seek resolution through arbitration.  Egypt has written commercial and contractual laws. The country has a system of economic courts, specializing in private-sector disputes, which have jurisdiction over cases related to economic and commercial matters, including intellectual property disputes.  The judiciary is set up as an independent branch of the government.

Regulations and enforcement actions can be appealed through Egypt’s courts, though appellants often complain about the lengthy judicial process, which can often take years.  To enforce judgments of foreign courts in Egypt, the party seeking to enforce the judgment must obtain an exequatur (a legal document issued by governments allowing judgements to be enforced).  To apply for an exequatur, the normal procedures for initiating a lawsuit in Egypt must be satisfied. Moreover, several other conditions must be satisfied, including ensuring reciprocity between the Egyptian and foreign country’s courts, and verifying the competence of the court rendering the judgment.

Judges in Egypt enjoy a high degree of public trust, according to Egyptian lawyers and opinion polls, and are the designated monitors for general elections.  The Judiciary is proud of its independence and can point to a number of cases where a judge has made surprising decisions that run counter to the desires of the regime.  The judge’s ability to interpret the law can sometimes lead to an uneven application of justice.

Laws and Regulations on Foreign Direct Investment

No specialized court exists for foreign investments.

The 2017 Investment Law (Law 72 of 2017) as well as other FDI-related laws and regulations, are published on GAFI’s website,  https://gafi.gov.eg/English/StartaBusiness/Laws-and-Regulations/Pages/default.aspx .

In 2017 the Parliament also passed the Industrial Permits Act, which reduced the time it takes to license a new factory by mandating that the Industrial Development Authority (IDA) respond to a request for a license within 30 days of the request being filed.  As of February 2020, new regulations allow IDA regional branch directors or their designees to grant conditional licenses to industrial investors until other registration requirements are complete.

In 2016, the Import-Export Law was revised to allow companies wishing to register in the Import Registry to be 51 percent owned and managed by Egyptians; formerly the law required 100 percent Egyptian ownership and management.  In November 2016, the inter-ministerial Supreme Investment Council also announced seventeen presidential decrees designed to spur investment or resolve longstanding issues. These include:

• Forming a “National Payments Council” that will work to restrict the handling of FX outside the banking sector;
• Producers of agricultural crops that Egypt imports or exports will get tax exemptions;
• Five-year tax exemptions for manufacturers of “strategic” goods that Egypt imports or exports;
• Five-year tax exemptions for agriculture and industrial investments in Upper Egypt; and
• Begin tendering land with utilities for industry in Upper Egypt for free as outlined by the Industrial Development Authority.

Competition and Anti-Trust Laws

The Egyptian Competition Law (ECL), Law 3 of 2005, provides the framework for the government’s competition rules and anti-trust policies. The ECL prohibits the abuse of dominant market positions, which it defines as a situation in which a company’s market share exceeds 25 percent and in which the company is able to influence market prices or volumes regardless of competitors’ actions. The ECL prohibits vertical agreements or contracts between purchasers and suppliers that are intended to restrict competition, and also forbids agreements among competitors such as price collusion, production-restriction agreements, market sharing, and anti-competitive arrangements in the tendering process. The ECL applies to all types of persons or enterprises carrying out economic activities, but includes exemptions for some government-controlled public utilities. In early 2019, the Egyptian Parliament endorsed a number of amendments to the ECL, including controls on price hikes and prices of essential products and higher penalties for violations.

In addition to the ECL, other laws cover various aspects of competition policy. The Companies Law (Law 159/1981) contains provisions on mergers and acquisitions; the Law of Supplies and Commerce (Law 17 of 1999) forbids competition-reducing activities such as collusion and hoarding; and the Telecommunications Law (Law 10 of 2003), the Intellectual Property Law (Law 82 of 2002), and the Insurance Supervision and Control Law (Law 10 of 1981) also include provisions on competition.

The Egyptian Competition Authority (ECA) is responsible for protecting competition and prohibiting the monopolistic practices defined within the ECL. The ECA has the authority to receive and investigate complaints, initiate its own investigations, and take decisions and necessary steps to stop anti-competitive practices. The ECA’s enforcement powers include conducting raids; using search warrants; requesting data and documentation; and imposing “cease and desist orders” on violators of the ECL. The ECA’s enforcement activities against government entities are limited to requesting data and documentation, as well as advocacy.

Expropriation and Compensation

Egypt’s Investment Incentives Law provides guarantees against nationalization or confiscation of investment projects under the law’s domain.  The law also provides guarantees against seizure, requisition, blocking, and placing of assets under custody or sequestration.  It offers guarantees against full or partial expropriation of real estate and investment project property.  The U.S.-Egypt Bilateral Investment Treaty also provides protection against expropriation.  Private firms are able to take cases of alleged expropriation to court, but the judicial system can take several years to resolve a case.

Dispute Settlement

ICSID Convention and New York Convention

Egypt acceded to the International Convention for the Settlement of Investment Disputes (ICSID) in 1971 and is a member of the International Center for the Settlement of Investment Disputes, which provides a framework for the arbitration of investment disputes between the government and foreign investors from another member state, provided the parties agree to such arbitration. Without prejudice to Egyptian courts, the Investment Incentives Law recognizes the right of investors to settle disputes within the framework of bilateral agreements, the ICSID, or through arbitration before the Regional Center for International Commercial Arbitration in Cairo, which applies the rules of the United Nations Commissions on International Trade Law.

Egypt adheres to the 1958 New York Convention on the Enforcement of Arbitral Awards; the 1965 Washington Convention on the Settlement of Investment Disputes between States and the Nationals of Other States; and the 1974 Convention on the Settlement of Investment Disputes between the Arab States and Nationals of Other States.  An award issued pursuant to arbitration that took place outside Egypt may be enforced in Egypt if it is either covered by one of the international conventions to which Egypt is party or it satisfies the conditions set out in Egypt’s Dispute Settlement Law 27 of 1994, which provides for the arbitration of domestic and international commercial disputes and limited challenges of arbitration awards in the Egyptian judicial system.  The Dispute Settlement Law was amended in 1997 to include disputes between public enterprises and the private sector.

To enforce judgments of foreign courts in Egypt, the party seeking to enforce the judgment must obtain an exequatur.  To apply for an exequatur, the normal procedures for initiating a lawsuit in Egypt and several other conditions must be satisfied, including ensuring reciprocity between the Egyptian and foreign country’s courts and verifying the competence of the court rendering the judgment.

Egypt has a system of economic courts specializing in private-sector disputes that have jurisdiction over cases related to economic and commercial matters, including intellectual property disputes. Despite these provisions, business and investors in Egypt’s renewable energy projects have reported significant problems resolving disputes with the Government of Egypt.

Investor-State Dispute Settlement

The U.S.-Egypt Bilateral Investment Treaty allows an investor to take a dispute directly to binding third-party arbitration.  The Egyptian courts generally endorse international arbitration clauses in commercial contracts.  For example, the Court of Cassation has, on a number of occasions, confirmed the validity of arbitration clauses included in contracts between Egyptian and foreign parties.

A new mechanism for simplified settlement of investment disputes aimed at avoiding the court system altogether has been established.  In particular, the law established a Ministerial Committee on Investment Contract Disputes, responsible for the settlement of disputes arising from investment contracts to which the State, or a public or private body affiliated therewith, is a party. This is in addition to establishing a Complaint Committee to consider challenges connected to the implementation of Egypt’s Investment Law.  Finally, the decree established a Committee for Resolution of Investment Disputes, which will review complaints or disputes between investors and the government related to the implementation of the Investment Law.  In practice, Egypt’s dispute resolution mechanisms are time-consuming but broadly effective.  Businesses have, however, reported difficulty collecting payment from the government when awarded a monetary settlement.

Over the past 10 years, there have been several investment disputes involving both U.S. persons and foreign investors.  Most of the cases have been settled, though no definitive number is available. Local courts in Egypt recognize and enforce foreign arbitral awards issued against the government.  There are no known extrajudicial actions against foreign investors in Egypt during the period of this report.

International Commercial Arbitration and Foreign Courts

Egypt allows mediation as a mechanism for alternative dispute resolution (ADR), a structured negotiation process in which an independent person known as a mediator assists the parties to identify and assess options, and negotiate an agreement to resolve their dispute.  GAFI has an Investment Disputes Settlement Center, which uses mediation as an ADR.

The Economic Court recognizes and enforces arbitral awards. Judgments of foreign courts may be recognized and enforceable under local courts under limited conditions.

In most cases, domestic courts have found in favor of state-owned enterprises (SOEs) involved in investment disputes.  In such disputes, non-government parties have often complained about the delays and discrimination in court processes.

Many foreign investors employ clauses that specify that U.S. companies employ contractual clauses that specify binding international (not local) arbitration of disputes in their commercial agreements.

Bankruptcy Regulations

Egypt passed a Bankruptcy Law (Law 11 of 2018) in January 2018, which was designed to speed up the restructuring of troubled companies and settlement of their accounts.  It also replaced the threat of imprisonment with fines in cases of bankruptcy.  As of July 2020, the Egyptian government was considering but had not yet implemented amendments to the 2018 law that would allow debtors to file for bankruptcy protection, and would give creditors the ability to determine whether debtors could continue operating, be placed under administrative control, or be forced to liquidate their assets.

In practice, the paperwork involved in liquidating a business remains convoluted and protracted; starting a business is much easier than shutting one down. Bankruptcy is frowned upon in Egyptian culture, and many businesspeople still believe they may be found criminally liable if they declare bankruptcy.

Investment Incentives

The Investment Law 72/2017 gives multiple incentives to investors as described below.  In August 2019, President Sisi ratified amendments to the Investment Law that allow its incentive programs to apply to expansions of existing investment projects in addition to new investments.

General Incentives:

• All investment projects subject to the provisions of the new law enjoy the general incentives provided by it.
• Investors are exempted from the stamp tax, notary fees, registration of the Memorandum of Incorporation of the companies, credit facilities, and mortgage contracts associated with their business for five years from the date of registration in the Commercial Registry, in addition to the registration contracts of the lands required for a company’s establishment.
• If the establishment is under the provisions of the new investment law, it will benefit from a two-percent unified custom tax over all imported machinery, equipment, and devices required for the set-up of such a company.

Special Incentive Programs:

• Investment projects established within three years of the date of the issuance of the Investment Law (Law 72 of 2017) will enjoy a perpetual deduction from their net profit subject to the income tax;
• 50 percent deduction of depreciated investment costs from taxes, infrastructure fees, and cost of lands for projects in regions the government has identified as most in need of development, as well as designated projects in Suez Canal Special Economic Zone and the “Golden Triangle” along the Red Sea between the cities of Safaga, Qena, and El Quseer; or
• 30 percent deduction of depreciated investment costs from taxes, infrastructure fees, and land costs for projects elsewhere in Egypt; and
• Provided that such deduction shall not exceed 80 percent of the paid-up capital of the company, the incentive could be utilized over a maximum of seven years.

Additional Incentive Program:

The Cabinet of Ministers may decide to grant additional incentives for investment projects in accordance with specific rules and regulations as follows:

• The establishment of special customs ports for exports and imports of the investment projects.
• The state may incur part of the costs of the technical training for workers.
• Free allocation of land for a few strategic activities may apply.
• The government may bear in full or in part the costs incurred by the investor to invest in utility connections for the investment project.
• The government may refund half the price of the land allocated to industrial projects in the event of starting production within two years from receiving the land.

Other Incentives related to Free Zones according to Investment Law 72/2017:

• Exemption from all taxes and customs duties.
• Exemption from all import/export regulations.
• The option to sell a certain percentage of production domestically if customs duties are paid.
• Limited exemptions from labor provisions.
• All equipment, machinery, and essential means of transport (excluding sedan cars) necessary for business operations are exempted from all customs, import duties, and sales taxes.
• All licensing procedures are handled by GAFI. To remain eligible for benefits, investors operating inside the free zones must export more than 50 percent of their total production.
• Manufacturing or assembly projects pay an annual charge of one percent of the total value of their products excluding all raw materials. Storage facilities are to pay one percent of the value of goods entering the free zones, while service projects pay one percent of total annual revenue.
• Goods in transit to specific destinations are exempt from any charges.

Other Incentives related to the Suez Canal Economic Zone (SCZone): 100 percent foreign ownership of companies allowed.

• 100 percent foreign ownership of companies allowed.
• 100 percent foreign control of import/​export activities allowed.
• Imports are exempted from customs duties and sales tax.
• Customs duties on exports to Egypt imposed on imported components only, not the final product.
• Fast-track visa services.
• A full service one-stop shop for registration and licensing.
• Allowing enterprises access to the domestic market; duties on sales to domestic market will be assessed on the value of imported inputs only.

The Tenders Law (Law 89/1998) requires the government to consider both price and best value in awarding contracts and to issue an explanation for refusal of a bid. However, the law contains preferences for Egyptian domestic contractors, who are accorded priority if their bids do not exceed the lowest foreign bid by more than 15 percent.

The Ministry of Industry & Foreign Trade and the Ministry of Finance’s Decree No. 719/2007 provides incentives for industrial projects in the governorates of Upper Egypt (Upper Egypt refers to governorates in southern Egypt). The decree provides an incentive of 15,000 EGP (approx. $940) for each job opportunity created by the project, on the condition that the investment costs of the project exceed 15 million EGP (approx. $940,000). The decree can be implemented on both new and ongoing projects.

Foreign Trade Zones/Free Ports/Trade Facilitation

Public and private free-trade zones are authorized under GAFI’s Investment Incentive Law No. 72 of 2017. Free zones are located within the national territory, but are considered to be outside Egypt’s customs boundaries, granting firms doing business within them more freedom on transactions and exchanges. Companies producing largely for export (normally 80 percent or more of total production) may be established in free-trade zones and operate using foreign currency. Free-trade zones are open to investment by foreign or domestic investors. Companies operating in free-trade zones are exempted from sales taxes or taxes and fees on capital assets and intermediate goods. The Legislative Package for the Stimulation of Investment, issued in 2015, stipulated a one-percent duty paid on the value of commodities upon entry for storage projects and a one-percent duty upon exit for manufacturing and assembly projects.

There are currently nine public free trade zones in operation in the following locations: Alexandria; Damietta; Ismailia; Qeft; Media Production City; Nasr City; Port Said; Shebin el Kom; and Suez. Private free-trade zones may also be established with a decree by GAFI but are usually limited to a single project. Export-oriented industrial projects are given priority.  There is no restriction on foreign ownership of capital in private free zones.

The Special Economic Zones (SEZ) Law 83/2002 allows establishment of special zones for industrial, agricultural, or service activities designed specifically with the export market in mind.  The law allows firms operating in these zones to import capital equipment, raw materials, and intermediate goods duty free. Companies established in the SEZs are also exempt from sales and indirect taxes and can operate under more flexible labor regulations. The first SEZ was established in the northwest Gulf of Suez.

Investment Law 72 of 2017 authorized creation of investment zones with Prime Ministerial approval. The government regulates these zones through a board of directors, but the zones are established, built, and operated by the private sector. The government does not provide any infrastructure or utilities in these zones. Investment zones enjoy the same benefits as free zones in terms of facilitation of license-issuance, ease of dealing with other agencies, etc., but are not granted the incentives and tax/custom exemptions enjoyed in free zones. Projects in investment zones pay the same tax/customs duties applied throughout Egypt. The aim of the law is to assist the private sector in diversifying its economic activities. There are currently five investment zones located in Cairo, Giza, and Ismailia, and in 2019 GAFI approved the development of an additional 12 investment zones in the Alexandria, Dakhalia, Damietta, Fayoum, Giza, Qalyubia, and Sharkia governorates.

The Suez Canal Economic Zone (