Policies towards Foreign Direct Investment

The government encourages FDI, particularly in the tourism and financial services sector. The National Investment Policy (NIP) and the Commercial Enterprises Act (CEA) explicitly encourage foreign investment in certain sectors of the economy: touristic resorts; upscale villas, condominium, timeshare, and second home development; international business centers; aircraft and maritime services; marinas; information and data processing; information technology services; light industry manufacturing and assembly; agro-industries; mari-culture; food and beverage processing; banking and other financial services; offshore medical centers and services; e-commerce; arbitration; international arbitrage; computer programming; software design and writing; bioinformatics and analytics; and data storage and warehousing.

The Bahamas has an investment promotion strategy that includes multiple government agencies working to attract foreign direct investment. The Bahamas Investment Authority (BIA) ( www.bahamas.gov.bs/bia ) takes the lead on administering investment policies, functions as the investment facilitation agency, and acts as a ‘one stop shop’ to assist investors in navigating the cumbersome approvals process. All foreign investors must apply for approval from the BIA. Each administration has consistently supported new investment and has generally honored agreements made by previous administrations. The current government has introduced policies and legislative support for Small and Medium Enterprises (which represent 85 percent of registered businesses), and in 2018 launched the Small Business Development Centre (SBDC). The SBDC provides business advisory services, training, professional development opportunities, incubation services, access to capital, and advocacy for individual businesses. In response to the pandemic and to create opportunities for Bahamian entrepreneurs, the government earmarked $250 million in 2020 for loans and grants over five years to local small and medium enterprises.

The Bahamas reserves certain sectors of the economy for Bahamian investors. The reserved areas are: wholesale and retail operations (although international investors may engage in the wholesale distribution of any product they produce locally); agencies engaged in import or export; real estate agencies and domestic property management; domestic newspapers and magazine publications; domestic advertising and public relations firms; nightclubs and restaurants except specialty, gourmet, and ethnic restaurants, and those operating in a hotel, resort or tourist attraction; security services; domestic distribution of building supplies; construction companies except for special structures requiring foreign expertise; personal cosmetic or beauty establishments; commercial fishing including both deep water fishing and shallow water fishing of crustaceans, mollusks, fish, and sponges; auto and appliance services; public transportation including boat charters; and domestic gaming. The government does make exceptions to this policy on a case-by-case basis, and the Embassy is aware of several cases in which the Bahamian government has granted foreign investors full market access.

With the exception of these sectors, the Bahamian government does not give preferential treatment to investors based on nationality, and investors have equal access to incentives, which include land grants, tax concessions, and direct marketing and budgetary support. The government provides guidelines for investment through the National Investment Policy (NIP), administered by the BIA, and through the Commercial Enterprises Act (CEA) administered by the Ministry of Financial Services, Trade & Industry and Immigration. The CEA provides incentives to domestic and foreign investors to establish specific investment projects, including approval of a specified number of work permits for senior posts and the expedited issuance of work permits.

Large foreign investment projects, particularly those that require environmental and economic impact assessments, require approval by the National Economic Council (NEC) of The Bahamas. This process generally requires review by multiple government agencies prior to NEC consideration. Bureaucratic impediments are not limited to the NEC approvals process, and the country continues to lag on international metrics related to starting a business. According to the 2020 World Bank Doing Business rankings, The Bahamas scores 119 out of 190 countries overall, 181 in registering property, 77 in getting construction permits, 152 in access to credit, and 71 in resolving insolvency. All these categories saw a decrease in ratings from 2019 metrics, with the exception of getting construction permits. The Embassy is aware of cases of significant delays in the approvals process, including cases where the Bahamian government failed to respond to investment applications. Despite bureaucratic challenges and the impact of COVID-19, investment continues in tourism, finance, construction, and fast-food franchises.

In response to the losses from Hurricane Dorian and the economic fallout from COVID-19, the government announced efforts to accelerate FDI, including liberalization of requirements for investment and accelerating the review process for proposals. In April 2020, the government also appointed an Economic Recovery Committee (ERC) – a public-private coalition to develop recommendations for government policies to addresses the economic impact of the COVID-19 pandemic. The ERC’s full report can be accessed via https://opm.gov.bs/economic-recovery-committee-executive-summary-report-2020/ .

The ERC’s nearly two dozen recommendations were intended to transform the Bahamian investment regime, remove structural impediments, and incentivize domestic and foreign investment. The government accepted certain recommendations, including the establishment of an entrepreneur visa for persons wishing to work or study from The Bahamas for one year ( www.bahamasbeats.com ), limiting approvals for projects under $10 million, creating special economic zones on lesser developed islands, and establishing an autonomous agency to oversee a modern investment regime (INVESTBAHAMAS). With this new agency in place, bureaucratic delays, functionality and transparency are expected to improve. The agency will reportedly give priority to high-tech financial products, biotechnology, renewable energy investments, and climate adaptability projects. INVESTBAHAMAS remains in the planning stages.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign investors have the right to establish private enterprises and, after approval, most companies operate unencumbered. Key considerations for approval include economic impact, job creation, infrastructural development, economic diversification, environmental protection and corporate social responsibility. With the assistance of a local attorney, investors can create the following types of businesses: sole proprietorship, limited or general partnership, joint stock company, or subsidiary of a foreign company. The most popular all-purpose vehicles for foreign investors are the International Business Company (IBC) and the Limited Duration Company (LDC). Both benefit from income, capital gains, gift, estate, inheritance, and succession tax exemptions. Investors are required to establish a local company and be registered to operate in The Bahamas.

Other Investment Policy Reviews

The Bahamas ranks 119 out of 190 countries in terms of “ease of doing business” in the 2020 World Bank Doing Business Report. See http://doingbusiness.org/rankings . The Bahamas is the only Western Hemisphere country not in the WTO, and therefore has never benefitted from a WTO trade policy review. The current government launched accession negotiations with the WTO in April 2019, initially announcing the goal of full membership later the same year. However, the government later described the 2019 target as purely aspirational, confirming it was unlikely accession would take place before 2025. A vocal domestic constituency opposes WTO accession on the grounds that membership will hurt domestic producers and service providers.

Neither the OECD nor UNCTAD have conducted investment policy reviews. The Bahamas achieved the G-20 standard on transparency and cooperation on tax matters, a standard initially advanced by the OECD.

Business Facilitation

According to the 2020 World Bank Doing Business Index, starting a business in The Bahamas takes 12 days, requires seven procedures, and costs the same for both men and women. In 2017, the Bahamian government streamlined this process and launched an e-business portal, which allowed companies to apply for or renew their business licenses online ( http://inlandrevenue.finance.gov.bs/business-licence/copy-applying-b-l/ ).

In 2020, as part of the business license application process, the government expanded provisional licenses for many small, domestic businesses so the majority would be able to start operations while awaiting formal approval. The government also removed the fee for starting a new business and renewed business licenses in under 48 hours. Foreign companies and most larger businesses are not eligible for provisional licenses, expedited renewals, or new business license fee exemptions.

All companies with an annual turnover of $100,000 or more are required to register with the government to receive a Tax Identification Number and a Value Added Tax Certificate. The lengthy registration processes are generally viewed as an impediment to the ease of doing business.

Outward Investment

The Bahamian government neither promotes nor prohibits its citizens from investing internationally, however, all outward direct investments by residents require the prior approval of the Exchange Control Department of the Central Bank of The Bahamas ( https://www.centralbankbahamas.com/exchange-control-notes-and-guidelines ). Applications are considered in light of the probable impact the investments may have on The Bahamas’ balance of payments, specifically business activities that promote the receipt of foreign currency.

Transparency of the Regulatory System

The Bahamas’ legal and regulatory systems are transparent and generally consistent with international norms. The Bahamian government is reforming public accounting procedures to conform to international financial reporting standards. In March 2021, the government passed a suite of legislation aimed at improving the country’s fiscal governance by enhancing transparency and accountability. The legislation included the Public Debt Management Bill (2021) that seeks to enshrine proper debt management policies into law and improve transparency concerning central government and SOE debt; the Public Finance Management Bill (2021) that expands budgetary and fiscal reporting requirements for central government and SOEs; the Statistics Bill (2021) that transforms the current Department of Statistics into a quasi-independent National Statistics Institute; and the Public Procurement Bill (2020), that overhauls current arrangements for government contracts to improve transparency and accountability.

Proposed legislation is available at the Government Publications Office and public engagement is encouraged, particularly on controversial legislation. There is no equivalent to the Federal Register, but the government regularly updates its website ( www.bahamas.gov.bs ) to list draft legislation, bills before parliament, and its legislative agenda. Regulatory system reform legislation has not been fully implemented. Public consultation on investment proposals is not required by law. The Embassy is unaware of any informal regulatory processes managed by non-governmental organizations (NGOs) or private sector associations that restrict foreign participation in the economy.

The Fiscal Responsibility Act (FRA) was passed in 2018 to establish broad parameters related to revenue, expenditure, deficits, and public debt. It also calls for an annual Fiscal Strategy Report (FSR) which provides a three-year fiscal forecast that sets targets for the preparation of the government’s annual budgets. The 2020 FSR gave a detailed synopsis of the state of public finances and future plans for revenue, expenditure, debt, and economic growth. The government presents the FSR and makes financial information available during the budget submissions to parliament. The information is also published on the government’s budget website ( www.bahamasbudget.gov.bs ) in simple and non-technical language.

Although efforts have been made to fulfill FRA reporting obligations, The Bahamas’ supreme audit institution, the Office of the Auditor General, has not published a timely audit report of the government’s budget for several years. The last publicly available audit covers fiscal year 2016/2017. Acknowledging the need to meet international standards, the Office of the Auditor General is liaising with the U.S. Global Accountability Office to identify ways to fulfill its reporting obligations.

The government has taken on increasing levels of debt during the COVID-19 pandemic in order to provide social safety nets while stimulating the economy. Some observers consider the debt levels unsustainable and have even speculated about the possibility of default. The Central Bank of The Bahamas denies this speculation and provides quarterly updates on debt obligations on its website ( www.centralbankbahamas.com ).

International Regulatory Considerations

The Bahamas is not a member of the WTO, so does not notify the WTO Committee on Technical Barriers to Trade (TBT) of draft technical regulations. As part of WTO accession negotiations launched in 2018, The Bahamas announced it is reviewing investment policies with the aim of developing comprehensive, WTO-compliant investment legislation. The Bahamas is not a member of UNCTAD’s international network of transparent investment procedures, nor is it a member of a regional economic bloc.

The Bahamas has enacted basic laws governing standards. The Bahamas Bureau of Standards and Quality (BBSQ), launched in 2016, governs standards for goods and services, particularly metrology (weights and balances). BBSQ also cooperates with other ministries on quality standards, such as sanitary and phytosanitary standards with the Ministry of Agriculture and Marine Resources and the Bahamas Health and Food Safety Agency (BAHFSA). BBSQ serves as the country’s focal point on trade barrier issues and is supported by the EU and the Caribbean Regional Organization for Standards and Quality (CROSQ) in the development of national standards. Trade barriers are not a hindrance to trade with the United States and U.S. products are widely accepted.

Legal System and Judicial Independence

The Bahamian legal system is based on English common law and foreign nationals are afforded full rights in Bahamian legal proceedings. Contracts are legally enforced through the courts, however, there are instances where local and foreign investors have civil disputes tied up in the court system for many years. Investors have been defrauded of sums ranging from several hundred thousand to several million dollars, but the court system has lacked the capacity to recover their investments. Throughout 2020, a U.S. investor and a government utility company were engaged in a civil dispute concerning the termination of a contract, non-payment for services provided, and ownership of equipment and materials. This case is ongoing.

The judiciary is independent and allegations of government interference in the judicial process are rare. With the recommendation of the Prime Minister, the Governor General appoints the highest-ranking officials in the judicial system, including the Chief Justice of the Supreme Court, the Attorney General, the Director of Public Prosecutions, and the President of the Court of Appeals. The Bahamas is a member of the Commonwealth of Nations and uses the Privy Council Judicial Committee in London as the final court of appeal and also contributes financially to the operations of the Caribbean Court of Justice. The Bahamas continues to advance efforts to develop its reputation as a center for international arbitration by drafting legislation to govern domestic arbitration and incorporate key provisions of the Model Law of the United Nations Commission on International Trade Law (UNCITRAL). The legislation has not yet been passed.

In 2020, the government announced it continued to leverage alternative dispute resolution (ADR) as a method of resolving disputes without resorting to the court system, including by establishing an ADR unit in mid-August 2020 and developing a two-year strategic plan to promote this method for settling commercial and other types of disputes.

Judgments by British courts and select Commonwealth countries can be registered and enforced in The Bahamas under the Reciprocal Enforcement of Judgments Act. Court judgments from other countries, including those of the United States, must be litigated in local courts and are subject to Bahamian legal requirements. The current government is taking steps to increase judicial transparency and efficiency. Their goal is to modernize the justice system by digitizing court records, streamlining court administration, constructing a new Supreme Court complex, and drafting new rules and legislation to govern court procedures. Progress has been mixed.

Laws and Regulations on Foreign Direct Investment

While some public pronouncements have been made on FDI policies, no major laws, regulations, or judicial decisions have been passed since the 2020 Investment Climate Statement. The government has drafted a Foreign Investment Bill purported to codify the existing National Investment Policy, align with international best practices, and bring additional transparency, accountability, and predictability to the country’s foreign investment process. The Embassy is not aware of efforts to advance this Bill in 2020.

Competition and Anti-Trust Laws

The Utilities Regulation and Competition Authority (URCA) regulates the telecommunications and energy sectors and imposes antitrust restrictions in these sectors. However, there is no legislation governing competition or anti-trust. A Competition (Antitrust) Bill has been drafted in line with The Bahamas’ CARIFORUM-EU obligations and WTO accession requirements, and initial public consultations were held in August 2018. The Embassy is not aware of any efforts to advance this Bill in 2020.

URCA continues to build technical capacity with the support of the U.S. Government.

Expropriation and Compensation

Property rights are protected under Article 27 of the Bahamian constitution, which prohibits the deprivation of property without prompt and adequate compensation. There have been compulsory acquisitions of property for public use, but in all instances, there was satisfactory compensation at fair market value.

The Emergency Power (COVID-19) Regulations, passed in March 2020 to stem COVID-19 infections, grant the government authorization to requisition any building, ship, aircraft, or article if it is reasonably required for any statutory purpose for the duration of the emergency. At the conclusion of the requisition, the government is to make prompt and adequate compensation to the owner. The Regulations are expected to expire upon cancelation of the state of emergency. The Embassy is not aware of any instance in 2020 where the government invoked this law.

Dispute Settlement

ICSID Convention and New York Convention

The Bahamas is a member of both the World Bank’s International Centre for Settlement of Investment Disputes (ICSID) Convention and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (commonly known as the New York Convention). Disputes between companies are generally handled in local courts, but foreign investors can refer cases to ICSID and in at least one instance, recourse was sought in a U.S. court in a dispute involving a $4 billion resort development. The Bahamas’ Arbitration Act of 2009 enacted the New York Convention and provides a legal framework.

Investor-State Dispute Settlement

Order 66 of the Rules of the Bahamian Supreme Court provides rules for arbitration proceedings. The 1958 United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards entered into force for The Bahamas on March 20, 2007. This convention provides for the enforcement of agreements for commercial disputes. Under the convention, courts of a contracting state can enforce such an agreement by referring the parties to arbitration. There are no restrictions on foreign investors negotiating arbitration provisions in private agreements.

The Bahamas is a signatory to Economic Partnership Agreements between CARIFORUM and the European Union (2008) and CARIFORUM and the United Kingdom (2019). Both agreements include dispute settlement provisions and procedures. The Bahamas has not yet ratified either of the trade agreements, but provisionally applies both.

Investment disputes in The Bahamas that directly involve the Bahamian government are rare and there is no history of extrajudicial action against foreign investors.

International Commercial Arbitration and Foreign Courts

The Bahamas is a member of the World Bank’s Multilateral Investment Guarantee Agency (MIGA), which insures investors against current transfer restrictions, expropriation, war and civil disturbances, and breach of contract by member countries. Local courts enforce and recognize foreign arbitral awards and foreign investors are provided national treatment. The Embassy is not aware of any cases involving state owned enterprises that resulted in litigation.

Bankruptcy Regulations

Company liquidations, voluntary or involuntary, proceed according to the Companies Act. Liquidations are routinely published in newspapers in accordance with the legislation. Creditors of bankrupt debtors and liquidated companies participate in the distribution of the bankrupt debtor’s or liquidated company’s assets according to statute. U.S. investors should be aware that there is no equivalent to Chapter 11 bankruptcy law provisions to protect assets located in The Bahamas.

The Bahamas ranked 152 out of 190 countries with regards to getting credit in the 2020 Ease of Doing Business report, indicating relatively weak credit reporting systems and the ineffectiveness of collateral and bankruptcy laws in facilitating lending. Recognizing the need for credit reforms, the Credit Reporting Act was passed in February 2018, and the Central Bank confirmed that Italian-based CRIF S.P.A. would launch The Bahamas’ first credit bureau in 2021. Bahamian commercial banks and other lenders will be required to share their clients’ credit history with CRIF and allowed to access credit reports.

Capital Markets and Portfolio Investment

The government encourages the free flow of capital markets, and the Central Bank supports this flow through its regulatory functions. The Bahamas is an Article VIII member of the IMF and has agreed not to place restrictions on currency transactions, such as payments for imports. The Bahamas Securities Commission regulates the activities of investment funds, securities, and capital markets ( www.scb.gov.bs ). The fledgling local stock market, established in 1999, excludes foreign investors but is effectively regulated by the Securities Commission.

There are no legal limitations on foreigners’ access to the domestic credit market, and commercial banks make credit available at market rates. The government encourages Bahamian-foreign joint ventures, which are eligible for financing through both commercial banks and the Bahamas Development Bank ( http://www.bahamasdevelopmentbank.com/ ).

Customarily, the government does not prohibit its citizens from investing internationally. However, all outward direct investments by residents, including foreign portfolio investments, require the prior approval of the Exchange Control Department of the Central Bank of The Bahamas ( www.centralbankbahamas.com/exchange – controls). Applications are assessed by their probable impact on The Bahamas’ balance of payments, specifically business activities that promote the receipt of foreign currency.

In an effort to maintain adequate foreign reserves during the economic crisis brought on by COVID-19, the Central Bank suspended purchases of foreign currency on May 4, 2020 for specific transactions that could drain reserves and jeopardize the country’s ability to maintain a fixed, one-to-one exchange rate with the U.S. dollar. The Central Bank also suspended Bahamian investments in U.S.-dollar denominated investment funds created by local brokers seeking higher returns in overseas markets. The Central Bank warned it was prepared to act swiftly in imposing even harsher restrictions, if necessary, to maintain the country’s fixed exchange rate and to conserve foreign currency reserves. The suspension remained in place throughout 2020 and had not been lifted as of spring 2021.

Money and Banking System

The financial sector of The Bahamas is highly developed and consists of savings banks, trust companies, offshore banks, insurance companies, a development bank, a publicly controlled pension fund, a housing corporation, a public savings bank, private pension funds, cooperative societies, credit unions, commercial banks, and the state-owned Bank of The Bahamas. These institutions provide a wide array of services via several types of financial intermediaries. The financial sector is regulated by The Central Bank of The Bahamas, the Securities Commission, Insurance Commission, the Inspector of Financial and Corporate Service Providers, and the Compliance Commission.

According to the Central Bank’s Quarterly Economic Review of December 2020, the contraction in domestic credit outpaced the reduction in the deposit base during the fourth quarter of 2020. Consequently, both bank liquidity and external reserves expanded, bolstered by foreign currency inflows from the government’s external borrowings. However, banks’ credit indicators deteriorated during the fourth quarter due to the adverse impact of the COVID-19 pandemic. Further, data from the third quarter revealed a reduction in banks’ overall profitability, reflecting higher levels of provisioning for bad debt.

In the external sector, the estimated current account balance went from a surplus in 2019 to a deficit during the final quarter of 2020. The services account also moved from surplus to deficit, as travel restrictions associated with the COVID-19 pandemic led to a significant reduction in travel receipts. In contrast, the surplus on the capital and financial account increased considerably, owing primarily to an expansion in debt-financed government spending.

In the domestic banking sector, four of the eight commercial banks are subsidiaries of Canadian banks, three are locally owned, and one is a branch of a U.S.-based institution. Continued reorganization by the Canadian banks has severely limited banking services on some of the less populated islands.

The Central Bank’s strategic goals include responding to the loss of brick-and-mortar banks by implementing digital banking across the country. To this end, the Central Bank introduced the “Sand Dollar” in December 2019, the first central bank-backed digital currency in the world. The introduction of the new currency aims to provide individuals with efficient and non-discriminatory access to financial services. Since its launch, domestic financial and political elites have welcomed the financial inclusion of unbanked and underbanked residents. To date, nine firms (including clearing banks, money transfer services, credit unions and payment service providers) have successfully completed the cybersecurity assessment and been authorized to distribute Sand Dollars within their proprietary mobile wallets.

Although Sand Dollar accounts and transactions are theoretically subject to the same stringent anti-money laundering and Know Your Customer (KYC) safeguards as traditional commercial banks, the Central Bank’s capacity to enforce these safeguards, as well as account audit capabilities, may be limited. Additional information on the Sand Dollar can be accessed via www.sanddollar.bs/ .

Foreign Exchange and Remittances

Foreign Exchange Policies

The Bahamas maintains a fixed exchange rate policy, which pegs the Bahamian dollar one-to-one with the U.S. dollar. The legal basis for the policy is the Exchange Control Act of 1974 and Exchange Control Regulations. The controls ensure adequate foreign exchange flows are always available to support the fixed parity of the Bahamian dollar against the U.S. dollar. The peg removes issues of rate conversions and allows for unified pricing of goods and services for tourists and residents. To maintain this structure, individuals and corporations resident in The Bahamas are subject to restrictions on foreign exchange transactions, including currency purchases, payments, and investments. Similarly, Bahamians cannot make payments or investments in foreign currencies without Central Bank approval.

Exchange controls are not an impediment to foreign investment in the country. The government requires all non-resident investors in The Bahamas to register with the Central Bank, and the government allows non-resident investors who finance their projects substantially from foreign currency transferred into The Bahamas to convert and repatriate profits and capital gains freely. They do this with minimal bureaucratic formalities and without limitations on the inflows or outflows of funds.

In the administration of exchange controls, the Central Bank does not withhold or delay approval for legitimate foreign exchange purchases for currency transactions and, in the interest of facilitating international trade, it delegates this authority to major commercial banks and selected trust companies. International and local commercial banks, which are registered by the Central Bank as ‘Authorized Dealers,’ may administer and conduct foreign currency transactions with residents of The Bahamas. Similarly, private banks and trust companies which are designated as ‘Authorized Agents’ are permitted to act as depositories for foreign securities of residents and to conduct securities transactions for non-resident companies under their management.

The Central Bank directly approves foreign exchange transactions that fall outside of the delegated authority, including loans, dividends, issues and transfer of shares, travel facilities, and investment currency. The government has continued gradual liberalization of exchange controls over the years with the most recent measure implemented in April 2016. The most recent measures delegated increased authority to commercial banks for exchange control and seek to regularize nationals holding accounts in the United States by allowing nationals to open U.S. dollar denominated accounts within the jurisdiction.

Remittance Policies

There are no restrictions on investment remittances. Foreign investors who receive a Central Bank designation as a non-resident may open foreign currency-denominated bank accounts and repatriate those funds freely. In addition, with Central Bank approval, a foreign investor may open an account denominated in Bahamian currency to pay local expenses. As mentioned, increased authority has been delegated to commercial banks and money transfer businesses.

The Bahamas is one of 25 member countries that make up the Caribbean Financial Action Task Force (CFATF), an organization dedicated to address the problem of money laundering. The organization’s most recent peer review evaluation and follow-up reports can be found at ( https://www.cfatf-gafic.org/index.php/member-countries/the-bahamas ).

Sovereign Wealth Funds

The Bahamian government passed omnibus legislation for the effective management of the oil and gas sector in 2017, which included the creation of a sovereign wealth fund, but has not yet promulgated supporting regulations. Discussions of a possible sovereign wealth fund were reignited when the Bahamas Petroleum Company, an Isle of Man-registered company, began exploratory oil drilling in Bahamian waters. The company confirmed in February 2021 that its exploratory drilling did not produce commercially viable quantities of oil.

The government nevertheless announced plans in January 2021 to accelerate the establishment of a Sovereign Wealth Fund and an accompanying National Infrastructure Fund. The government stressed the funds would derive income from royalty payments from all the country’s natural resources (such as salt, sand, rock and aragonite exports), not just potential earnings from oil exploration. The government suggested both funds would mobilize public assets and private capital to generate hundreds of millions of dollars in infrastructure investments across the country. The government committed to embrace international best practices designed to address issues of transparency, accountability and the governance structure of such funds.

State-Owned Enterprises (SOEs) are active in the utilities and services sectors of the Bahamian economy. A list of the 25 SOEs available on www.bahamas.gov.bs  includes key SOEs, such as Bahamasair Holdings Ltd. (the national airline); Public Hospitals Authority; Civil Aviation Authority; Nassau Airport Development Authority; University of The Bahamas; Health Insurance Authority; Bank of The Bahamas; Bahamas Power and Light (BPL); Water and Sewerage Corporation (WSC); Broadcasting Corporation of The Bahamas (ZNS); Nassau Flight Services; and the Hotel Corporation of The Bahamas.

In April 2019, the government announced plans to introduce a State-Owned Enterprises Bill to impose proper corporate governance and address the risk inefficient SOEs pose to its financial health. The Embassy is unaware of efforts to advance this Bill in 2020, though a suite of legislation passed in March 2021 aimed at improving the country’s fiscal governance may also improve the performance and accountability of SOEs.

Within the past decade, no SOE has returned profits or paid dividends, although SOEs account for significant government expenditure, with approximately $408 million budgeted for fiscal year 2020-2021. The latest budget also reveals that on average, nearly 16 percent of the government’s recurrent spending goes to SOE subventions, noting several SOEs required increased funding given the financial stress brought on by the COVID-19 pandemic. However, the government has maintained SOE reforms are integral to its fiscal consolidation plans and announced plans to reduce subsidies by $100 million annually over the next four years. Cost-recovery measures are to begin in mid-2021 for Bahamasair and the Water & Sewerage Cooperation in particular. The savings from SOE reform are expected to assist with meeting additional debt servicing obligations.

The government has permitted foreign investment in sectors where SOEs operate and has approved licenses to private suppliers of electrical and water and sewerage services. These licenses have been issued for private real estate developments or where there is limited government capacity to provide services. An exception is the city of Freeport on the island of Grand Bahama, which has its own licensing authority and maintains monopolies for the provision of electricity, water, and sanitation services.

Privatization Program

The Bahamian government has not taken definitive steps to privatize SOEs but has held up public-private partnerships as the preferred model going forward. The government divested 49 percent of the Bahamas Telecommunication Company in 2011 but issued a second license for cellular services and retained 51 percent equity in the new company. In his February 2018 speech, the then-Deputy Prime Minister announced the government’s intention to divest additional equity in the Bahamian telecommunications sector. In February 2019, the government accepted UK-based Global Ports Holding’s $250 million proposal to redevelop the Nassau Cruise Port, entering a 25-year lease agreement with the company. In early 2019, the company announced a bond offering to raise $130 million for the new port.

The Bahamas has no history of politically motivated violence and, barring a few incidents leading up to general elections in 2019, the political process is violence-free and transparent. These incidents were minor and included damage to political party installations, signage, billboards, harassing social media posts and a few reported altercations between opposing party members.

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

Table 4: Sources of Portfolio Investment
Data not available.

Policies Towards Foreign Direct Investment

The GOB has a liberal approach to foreign investment and actively seeks to attract foreign investors and businesses. Increasing FDI is a top GOB priority. The GOB permits 100 percent foreign ownership of a business or branch office, without the need for a sponsor or local business partner. The GOB does not tax corporate income, personal income, wealth, capital gains, withholding or death/inheritance. There are no restrictions on repatriation of capital, profits or dividends, aside from income generated by companies in the oil and gas sector, where profits are taxable at the rate of 46 percent. Bahrain Economic Development Board (EDB), charged with promoting FDI in Bahrain, places particular emphasis on attracting FDI to the manufacturing, logistics, ICT, financial services and tourism and leisure sectors. As a reflection of Bahrain’s openness to FDI, the EDB won the 2019 United Nations Top Investment Promotion Agency in the Middle East award for its role in attracting large-scale investments.

The United States and Bahrain signed an MOU in 2021 to establish a U.S Trade Zone in Bahrain, which aims to facilitate U.S. trade to the Gulf Cooperation Council (GCC) market.

To date, U.S. investors have not alleged any legal or practical discrimination against them based on nationality.

Limits on Foreign Control and Right to Private Ownership and Establishment

The GOB permits foreign and domestic private entities to establish and own business enterprises and engage in all forms of remunerative activity. The GOB imposes only minimal limits on foreign control, and the right of ownership and establishment of a business. The Ministry of Industry, Commerce, and Tourism (MoICT) maintains a small list of business activities that are restricted to Bahraini ownership, including press and publications, Islamic pilgrimage, clearance offices, and workforce agencies. The U.S.-Bahrain FTA outlines all activities in which the two countries restrict foreign ownership.

U.S citizens may own and operate companies in Bahrain, though many such individuals choose to integrate influential local partners into the ownership structure to facilitate quicker resolution of bureaucratic issues such as labor permits, issuance of foreign visas, and access to industrial zones. The most common challenges faced by U.S firms are those related to bureaucratic government processes, lack of market information, and customs clearance.

Other Investment Policy Reviews

The World Trade Organization (WTO) conducts a formal Trade Policy Review of Bahrain every seven years. Its last formal review  was in 2014. Bahrain is on the WTO’s Provisional Programme of Reviews for December 2021.

Business Facilitation

Bahrain ranked 43 out of 190 countries on the World Bank’s overall Ease of Doing Business Indicator in 2020.

The CBB’s regulatory sandbox allows local and international FinTech firms and digitally focused financial institutions to test innovative solutions in a regulated environment, allowing successful firms to obtain licensing upon successful product application.

The MoICT operates the online commercial registration portal “Sijilat” ( www.sijilat.bh ) to facilitate the commercial registration process. Through Sijilat, local and foreign business owners can obtain a business license and requisite approvals from relevant ministries. The business registration process normally takes two to three weeks but can take longer if a business requires specialized approvals. In practice, some business owners retain an attorney or clearing agent to assist them through the commercial registration process.

In addition to obtaining primary approval to register a company, most business owners must also obtain licenses from the following entities to operate their businesses:

• MoICT
• Electricity and Water Authority
• The Municipality in which their business will be located
• Labour Market Regulatory Authority
• General Organization for Social Insurance
• National Bureau for Revenue (Mandatory if the business revenue exceeds BD 37,500)

To incentivize foreign investment in Bahrain’s targeted sectors and investment zones, the GOB provides industrial lands at reduced rental rates; customs duty exemptions for industrial and manufacturing projects, including imports of raw material, plant machinery equipment, and spare parts; and a five-year exemption of the “Bahrainization” recruitment restriction.

Outward Investment

The GOB neither promotes nor incentivizes outward investment. The GOB does not restrict domestic investors from investing abroad.

Transparency of the Regulatory System

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

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

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

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

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

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

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

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

According to the World Bank, the GOB does not have the legal obligation to publish the text of proposed regulations before their enactment and there is no period of time set by law for the text of the proposed regulations to be publicly available. Bahrain, therefore, ranks among the countries with low rule-making transparency. ( http://rulemaking.worldbank.org/en/data/explorecountries/bahrain )

Bahrain’s laws can be drafted or proposed by the Cabinet or originate in the bicameral National Assembly, comprised of an elected, lower house Council of Representatives (COR) and an appointed, upper house Consultative Council. The independent Legislation and Legal Opinion Commission drafts legislation based on the proposals. The King’s signature is required to ratify any laws following parliamentary approval; laws are in force once published in the Official Gazette. The King may issue royal decrees (known as Decree Laws), that are immediately effective once issued, unless otherwise stated; some royal decrees are later re-drafted as legislation.  GOB ministers and heads of agencies are authorized to issue regulations that pertain to the administration of their respective bodies.

Bahrain is a member of the GCC, which created a Unified Economic Agreement to expedite trade and the movement of people and goods within GCC borders.  It also has adopted a number of unified GCC model laws, such as the GCC Trademark Law.  Bahrain is a signatory to the Apostille Convention and is a member of the Permanent Court of Arbitration.  It is a dualist state, therefore, international treaties are not directly incorporated into its law and must be approved by the National Assembly and ratified by the King.

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

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

International Regulatory Considerations

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

Legal System and Judicial Independence

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

High-ranking judges in Bahrain come from prominent families, and in some cases, may be non-Bahraini citizens. Bahraini law borrows elements from European other Arab states’ legal codes.

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

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

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

Judgments of foreign courts are recognized and enforceable under local courts. Article nine of the U.S.-Bahrain BIT outlines the disposition of U.S. investment cases within the Bahraini legal system. The most common investment-related concern in Bahrain has been the slow or incomplete application of the law. In general, the judicial process is fair, and cases can be appealed.

Laws and Regulations on Foreign Direct Investment

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

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

Bahrain generally permits 100 percent foreign ownership of new industrial entities and the establishment of representative offices or branches of foreign companies without local sponsors or business partners. Wholly foreign-owned companies may be set up for regional distribution services and may operate within the domestic market as long as they do not exclusively pursue domestic commercial sales. Private investment (foreign or Bahraini) in petroleum extraction is permitted.

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

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

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

Competition and Anti-Trust Laws

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

MoICT’s Consumer Protection Directorate is responsible for ensuring that the law determining price controls is implemented and that violators are punished.

Expropriation and Compensation

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

Dispute Settlement

ICSID Convention and New York Convention

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

Investor-State Dispute Settlement

Article 9 of The U.S.-Bahrain BIT provides for three dispute settlement options:

1. Submitting the dispute to a local court or administrative tribunals of the host country.
2. Invoking dispute-resolution procedures previously agreed upon by the foreign investor or company and the host country government; or,
3. Submitting the dispute for binding arbitration to the International Center for Settlement of Investment Disputes (ICSID) or, the Additional Facility of ICSID, or ad hoc arbitration using the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL), or any other arbitral institution or rules agreed upon by both parties.

Bahrain Chamber for Dispute Resolution Court

The Bahrain Chamber for Dispute Resolution (BCDR) Court was established by Legislative Decree No. 30 of 2009. It operates in partnership with the American Arbitration Association (AAA). BCDR’s casework emanates from disputes brought before the BCDR Court and BCDR’s international arbitration wing, BCDR-AAA.

The BCDR Court administers disputes in excess of 500,000 Bahraini Dinars (approximately USD 1.3 million) in which at least one party is a financial institution licensed by the Central Bank of Bahrain, or the dispute is of an international commercial nature.

Between its establishment in 2010 and the end of 2020, BCDR registered 298 cases under its jurisdiction as a court with monetary claims totaling over USD 5.79 billion. Of these cases, 27 percent were decided or settled within 6 months; 43 percent were decided/settled within 6 to 12 months; 14 percent were decided or settled within 12 to 18 months; seven percent were decided or settled within 18 to 24 months; three percent were decided or settled after 24 months; one percent was suspended, and 5.0 percent are ongoing.

BCDR-AAA International Arbitration Center

BCDR-AAA is an international arbitration center with jurisdiction over disputes with respect to which the parties have agreed in writing that the BCDR-AAA Arbitration Rules shall apply.

As of December 2020, BCDR-AAA registered 17 cases under its jurisdiction as an international arbitration center, one in 2013, one in 2015, three in 2016, five in 2017, two in 2019, and five in 2020. Of these cases only seven are ongoing, one filed in 2017, one filed in 2019, five filed in 2020, and the rest were awarded or settled.

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

The United Nations Conference on Trade and Development (UNCTAD) reported that Bahrain faced its first known Investor-State Dispute Settlement (ISDS) claim in 2017. The case involved investor claims over the CBB’s 2016 move to close the Manama branch of Future Bank, a commercial bank whose shareholders included Iranian banks. Bahrain and Iran are party to a BIT. UNCTAD reported another investor-state dispute case involving Qatar Airways in 2020.

International Commercial Arbitration and Foreign Courts

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

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

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

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

Bankruptcy Regulations

The GOB enacted its original bankruptcy and insolvency law through Decree by Law No. 11 in 1987.  In May 2018, the GOB issued and ratified Law No. 22, updating the original legislation. Modeled on U.S. Chapter 11 legislation, the law introduces reorganization whereby a company’s management may continue business operations during the administration of a case. The Bankruptcy Law also includes provisions for cross-border insolvency, and special insolvency provisions for small and medium-sized enterprises that were further amended in July 2020 and enhanced creditors rights and expediting liquidation proceedings. The Bahrain credit reference bureau, known as “BENEFIT,” is licensed by the CBB and operates as the credit monitoring authority in Bahrain.

Capital Markets and Portfolio Investment

Consistent with the GOB’s liberal approach to foreign investment, government policies facilitate the free flow of financial transactions and portfolio investments. Expatriates and Bahraini nationals have ready access to credit on market terms. Generally, credit terms are variable, but often are limited to 10 years for loans under USD 50 million. For major infrastructure investments, banks often offer to assume a part of the risk, and Bahrain’s wholesale and retail banks have shown extensive cooperation in syndicating loans for larger risks. Commercial credit is available to private organizations in Bahrain but has been increasingly crowded out by the government’s local bond issuances.

In 2016, the GOB launched a new fund designed to inject greater liquidity in the Bahrain Bourse, worth USD 100 million. The Bahrain Liquidity Fund is supported by a number of market participants and acts as a market maker, providing two-way quotes on most of the listed stocks with a reasonable spread to allow investors to actively trade their stocks. Despite these efforts, the market remains relatively small compared to others in the region.

In October 2019, the GOB established a BD 130 million (USD 344 million) Liquidity Fund to assist distressed companies in restructuring financial obligations, which was expanded in March 2020 to BD 200 million (USD 530 million) in response to the Covid-19 pandemic.

The GOB and the CBB are members of the IMF and fully compliant with Article VIII.

Money and Banking System

The CBB is the single regulator of the entire financial sector, with an integrated regulatory framework covering all financial services provided by conventional and Islamic financial institutions. Bahrain’s banking sector remains quite healthy despite sustained lower global oil prices. Bahrain’s banks remain well capitalized, and there is sufficient liquidity to ensure a healthy rate of investment. Bahrain remains a financial center for the GCC region, though many financial firms have moved their regional headquarters to Dubai over the last decade. The GOB continues to be a driver of innovation and expansion in the Islamic finance sector. In 2020, Bahrain ranked as the GCC’s leading Islamic finance market and placed third globally, according to the ICD-Thomson Reuters Islamic Finance Development Indicator (IFDI).

Bahrain has an effective regulatory system that encourages portfolio investment, and the CBB has fully implemented Basel II standards, while attempting to bring Bahraini banks into compliance with Basel III standards. Bahrain’s banking sector includes 91 retail banks, of which 61 are wholesale banks, 17 are branches of foreign banks, and 13are locally incorporated. Of these, eight are representative offices, and 18 are Islamic banks.

There are no restrictions on foreigners opening bank accounts or corporate accounts. Bahrain is home to many prominent financial institutions, among them Citibank, American Express, and JP Morgan Chase. Ahli United Bank is Bahrain’s largest bank with total assets estimated at USD 40.1 billion as of December 2020.

Bahrain implemented the Real-Time Gross Settlement (RTGS) System and the Scripless Securities Settlement (SSS) System in 2007 to enable banks to carry out their payment and securities-related transactions securely on a real time basis.

In 2017, Bahrain became the first in the GCC to introduce fintech “sandbox” regulations that enabled the launch of cryptocurrency and blockchain startups. The same year, the CBB released additional regulations for conventional and Sharia-compliant financing-based crowdfunding businesses.  Any firm operating electronic financing/lending platforms must be licensed in Bahrain under the CBB Rulebook Volume 5 – Financing Based Crowdfunding Platform Operator.  In February 2019, the CBB issued cryptocurrency regulations.

Foreign Exchange and Remittances

Foreign Exchange

Bahrain has no restrictions on the repatriation of profits or capital and no exchange controls. Bahrain’s currency, the Bahraini Dinar (BD), is fully and freely convertible at the fixed rate of USD 1.00 = BD 0.377 (1 BD = USD 2.659). There is no black market or parallel exchange rate. There are no restrictions on converting or transferring funds, whether or not associated with an investment.

Remittance Policies

The CBB is responsible for regulating remittances, and its regulations are based on the Central Bank Law ratified in 2006. Foreign workers comprise the majority of the labor force in Bahrain, many of whom remit significant quantities of funds to their countries of origin. Commercial banks and currency exchange houses are licensed to provide remittances services.

Commercial banks and currency exchange houses require two forms of identification before processing a routine remittance request, and any transaction exceeding USD 10,000 must include a documented source of the income.

Bahrain enables foreign investors to remit funds through a legal parallel market, with no limitations on the inflow or outflow of funds for remittances of profits or revenue. The GOB does not engage in currency manipulation tactics.

The GCC is a member of the Financial Action Task Force (FATF). Bahrain is a member of the Middle East and North Africa Financial Action Task Force (MENAFATF), whose headquarters are located in Bahrain. Participating countries commit to combat the financing of terrorist groups and activities in all its forms and to implement FATF recommendations. The GOB hosted the MENAFATF’s 26th Plenary Meeting Manama in 2017.

Sovereign Wealth Funds

Bahrain established Mumtalakat, its sovereign wealth fund, in 2006. Mumtalakat, which maintains an investment portfolio valued at roughly BD 7.1 billion (USD 18.9 billion) as of 2019, issues an annual report online. The annual report follows international financial reporting standards and is audited by external auditing firms. By law, state-owned enterprises (SOEs) under Mumtalakat are audited and monitored by the National Audit Office. In 2019, Mumtalakat received the highest-possible ranking in the Linaburg-Maduell Transparency Index for the sixth consecutive year, which specializes in ranking the transparency of sovereign wealth funds. However, Bahrain’s sovereign wealth fund does not follow the Santiago Principles.

Mumtalakat holds majority stakes in several firms. Mumtalakat invests 63 percent of its funds in the Middle East, 29 percent in Europe, and eight percent in the United States. The fund is diversified across a variety of business sectors including real estate and tourism, financial services, food and agriculture, and industrial manufacturing.

Mumtalakat often acts more as an active asset management company than a sovereign wealth fund, including by taking an active role in managing SOEs. Most notably, Mumtalakat has been instrumental in helping Gulf Air, Bahrain’s state-owned airline, restructure and contain losses. A significant portion of Mumtalakat’s portfolio is invested in 31 Bahrain-based SOEs.

Through 2016, Mumtalakat had not been directly contributing to the State Budget. Beginning in September 2017, however, Mumtalakat annually contributed USD 53 million to the State Budget, which was increased to USD 106 million in the 2021-2022 State Budget.

Bahrain’s major SOEs include the Bahrain Petroleum Company (BAPCO), Aluminum Bahrain (ALBA), Gulf Petrochemical Industries Company (GPIC), Gulf Air, Bahrain Telecommunications Company (BATELCO), National Bank of Bahrain (NBB), Bahrain Flour Mills, Tatweer Petroleum, and Arab Shipbuilding and Repair Yard (ASRY). While the GOB maintains full ownership of oil production, refineries, and heavy industries, it allows investment in ALBA, BATELCO, and ASRY, and encourages private sector competition in the banking, manufacturing, telecommunications, shipyard repair, and real estate sectors.

The SOEs are managed by two government-run holding companies: The National Oil and Gas Authority (NOGA) Holding Company, which owns nine energy sector companies, and Mumtalakat, which owns 31 domestic companies in all other sectors. The full portfolio of the NOGA Holding Company can be viewed at www.nogaholding.com/portfolio/ , while the full portfolio of Mumtalakat companies can be viewed at www.bmhc.bh .

Bahrain is not a party to the WTO Government Procurement Agreement (GPA), however, in 2008 Bahrain was granted “observer” status in the GPA committee.

Private enterprises can, in theory, compete with SOEs under the same terms and conditions with respect to market share, products/services, and incentives. In practice, however, given the relatively small size of Bahrain’s economy, large SOEs such as ALBA, BAPCO, GPIC and ASRY have an outsized influence in the market.

In 2002, the GOB instituted guidelines to ensure its SOEs were in line with OECD policies on corporate governance. SOEs produce quarterly reports. The National Audit Office monitors all SOEs and annually reports any irregularities, mismanagement, and corruption.

Both funds are managed by government-appointed boards: Mumtalakat’s board is chaired by the Deputy Prime Minister Khalid bin Abdulla Al Khalifa, and NOGA Holding’s board is chaired by the Minister of Oil Mohammed bin Khalifa Al Khalifa.

All Bahraini SOEs have an independent board of trustees with well-structured management. The Mumtalakat Holding Company is represented by a Board of Trustees appointed by the Crown Prince, while NOGA Holding’s Board of Trustees is appointed by a Royal Decree. Each holding company then appoints the Board of Trustees for the SOEs under its authority. In some cases, the appointment of the Board of Trustees is politically driven.

Privatization Program

The GOB has been supportive of privatization as part of its Economic Vision 2030, and advocates for increased foreign investment as a means of driving private sector growth. The GOB’s decision to privatize the telecommunications sector in the early 2000s is an example of incentivizing private sector growth in Bahrain. In 2018, the GOB began to privatize some government administered medical services, such as pre-employment screenings. It has also begun the process of privatizing other support services at GOB medical facilities, such as transportation, cleaning, laundry, textiles, maintenance, and security.

In May 2019, the GOB loosened foreign ownership restrictions in the oil and gas sector, allowing 100 percent foreign ownership in oil and gas extraction projects, under certain production-sharing agreements.

Bahrain is an open, liberal Gulf state that enjoys close diplomatic ties with the United States. Bahrain experiences intermittent cycles of violence, the most recent period of unrest took place in 2011-2014. In 2016 and 2017, the GOB dissolved the country’s two largest opposition political societies and closed the country’s only independent newspaper. On May 13, 2018, the Parliament passed a law banning members of political societies dissolved by the GOB from running in elections that took place later that year. Since 2017, protests centered on sociopolitical or economic demands have largely dissipated or been controlled by GOB authorities.

Neither demonstrators nor violent extremists have generally targeted Americans or other Western expatriates. American citizens visiting Bahrain and companies interested in investing in Bahrain should visit the Embassy’s website to receive the most up-to-date information about the security situation and register with the Embassy’s consular section.

* Source for Host Country Data: www.data.gov.bh 

Policies Towards Foreign Direct Investment

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

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

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

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

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

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

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

• Bangladesh Export Processing Zone Authority (BEPZA) promotes investments in Export Processing Zones (EPZs). The first EPZ was established in the 1980s and there are currently eight EPZs in the country. Website: https://www.bepza.gov.bd/
• Bangladesh Economic Zones Authority (BEZA) plans to establish approximately 100 Economic Zones (EZs) throughout the country over the next several years. Site selections for 97 EZs have been completed as of February 2021, of which 11 private EZs are already licensed and operational while development of several other public and private sector EZs are underway. While EPZs accommodate exporting companies only, EZs are open for both export- and domestic-oriented companies. Website: https://www.beza.gov.bd/
• Bangladesh Hi-Tech Park Authority (BHTPA) is responsible for attracting and facilitating investments in the high-tech parks Bangladesh is establishing across the country. Website: http://bhtpa.gov.bd/

Limits on Foreign Control and Right to Private Ownership and Establishment

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

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

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

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

Other Investment Policy Reviews

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

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

Business Facilitation

In February 2018, the Bangladesh Parliament passed the “One Stop Service Bill 2018,” which aims to streamline business and investment registration processes. The four IPAs — BIDA, BEPZA, BEZA, and BHTPA — are mandated to provide one-stop services (OSS) to local and foreign investors under their respective jurisdictions. Expected streamlined services include company registration, taxpayer’s identification number (TIN) and value added tax (VAT) registration, work permit issuance, power and utilities connections, capital and profit repatriation, and environment clearance. In 2019 Bangladesh made reforms in three key areas: starting a business, getting electricity, and getting credit. These and other regulatory changes led to an improvement by eight ranks on the World Bank’s Doing Business score, moving up from 176 to 168 of the 190 countries rated. BIDA offers more than 40 services under its OSS as of March 2021 and has a plan to expand to 154 services covering 35 agencies. The GOB is also planning to integrate the services of all four investment promotion agencies under a single online platform. Progress on realizing a comprehensive OSS for businesses has been slowed by bureaucratic delays and a lack of interagency coordination.

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

City Corporation – Trade License

National Board of Revenue – Tax & VAT Registration

Chief Inspector of Shops and Establishments – Employment of Workers Notification

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

Outward Investment

Outward foreign direct investment is generally restricted through the Foreign Exchange Regulation Act of 1947. As a result, the Bangladesh Bank plays a key role in limiting outbound investment. In September 2015, the government amended the Foreign Exchange Regulation Act of 1947 by adding a “conditional provision” that permits outbound investment for export-related enterprises. Private sector contacts note the few international investments approved by the Bangladesh Bank have been limited to large exporting companies with international experience.

Transparency of the Regulatory System

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

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

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

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

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

International Regulatory Considerations

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

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

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

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

Focal Point for TBT:

Mr. Md. Golam Baki,
Deputy Director (Certification Marks), BSTI;
Email: baki_cm@bsti.gov.bd,
Tel: +88-02-8870288,
Cell: +8801799828826, +8801712240702

Focal Point for other WTO related matters:

Mr. Md. Hafizur Rahman,
Director General, WTO Cell, Ministry of Commerce
Email: dg.wto@mincom.gov.bd,
Tel: +880-2-9545383,
Cell: +88 0171 1861056

Mr. Mohammad Mahbubur Rahman Patwary,
Director-1, WTO Cell, Ministry of Commerce
Email: director1.wto@mincom.gov.bd,
Tel: +880-2-9540580,
Cell: +88 0171 2148758

Legal System and Judicial Independence

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

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

Some notable commercial laws include:

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

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

Laws and Regulations on Foreign Direct Investment

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

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

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

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

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

Competition and Anti-Trust Laws

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

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

Expropriation and Compensation

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

Dispute Settlement

ICSID Convention and New York Convention

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

Investor-State Dispute Settlement

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

International Commercial Arbitration and Foreign Courts

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

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

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

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

Implementing Alternative Dispute Resolution (ADR) procedures in Bangladesh is impeded by a lack of funding for courts to provide ADR services, limited cooperation by lawyers, and instances of ADR participants acting in bad faith. Slow adoption of ADR mechanisms and sluggish judicial processes impede the enforcement of contracts and the resolution of business disputes in Bangladesh.

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

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

Bankruptcy Regulations

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

Capital Markets and Portfolio Investment

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

Bangladesh is home to the Dhaka Stock Exchange (DSE) and the Chittagong Stock Exchange (CSE), both of which are regulated by the Bangladesh Securities and Exchange Commission (BSEC), a statutory body formed in 1993 and attached to the Ministry of Finance. As of February 2021, the DSE market capitalization stood at $54.8 billion, rising 35.8 percent year-over-year bolstered by increased liquidity and some sizeable initial public offerings.

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

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

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

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

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

Money and Banking System

The Bangladesh Bank (BB) acts as the central bank of Bangladesh. It was established on December 16, 1971 through the enactment of the Bangladesh Bank Order of1972. General supervision and strategic direction of the BB has been entrusted to a nine–member Board of Directors, which is headed by the BB Governor. A list of the bank’s departments and branches is on its website: https://www.bb.org.bd/aboutus/dept/depts.php .

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

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

Unlike banks, FIs are prohibited from:

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

Microfinance institutions (MFIs) remain the dominant players in rural financial markets. According to the Bangladesh Microcredit Regulatory Authority, as of June 2019, there were 724 licensed micro-finance institutions operating a network of 18,977 branches with 32.3 million members. Additionally, Grameen Bank had nearly 9.3 million microfinance members at the end of 2019 of which 96.8 percent were women. A 2014 Institute of Microfinance survey study showed that approximately 40 percent of the adult population and 75 percent of households had access to financial services in Bangladesh.

The banking sector has had a mixed record of performance over the past several years. Industry experts have reported a rise in risky assets. Total domestic credit stood at 46.8 percent of gross domestic product at end of June 2020. The state-owned Sonali Bank is the largest bank in the country while Islami Bank Bangladesh and Standard Chartered Bangladesh are the largest local private and foreign banks respectively as of December 2020. The gross non-performing loan (NPL) ratio was 7.7 percent at the end of December 2020, down from 9.32 percent in December 2019. However, the decline in the NPLs was primarily caused by regulatory forbearance rather than actual reduction of stressed loans. Following the outbreak of COVID-19 in 2020, the central bank directed all banks not to classify any new loans as non-performing till December 2020. Industry contacts have predicted reported NPLs will demonstrate a sharp rise after the exemption expires unless the central bank grants additional forbearance in alternate forms. At 22.5 percent SCBs had the highest NPL ratio, followed by 15.9 percent of Specialized Banks, 5.9 percent of FCBs, and 5.6 percent of PCBs as of September 2020.

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

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

Foreign Exchange and Remittances

Foreign Exchange

Free repatriation of profits is allowed for registered companies and profits are generally fully convertible. However, companies report the procedures for repatriating foreign currency are lengthy and cumbersome. The Foreign Investment Act guarantees the right of repatriation for invested capital, profits, capital gains, post-tax dividends, and approved royalties and fees for businesses. The central bank’s exchange control regulations and the U.S.-Bangladesh Bilateral Investment Treaty (in force since 1989) provide similar investment transfer guarantees. BIDA may need to approve repatriation of royalties and other fees.

Bangladesh maintains a de facto managed floating foreign exchange regime. Since 2013, Bangladesh has tried to manage its exchange rate vis-à-vis the U.S. dollar within a fairly narrow range. Until 2017, the Bangladesh currency – the taka – traded between 76 and 79 taka to the dollar. The taka has depreciated relative to the dollar since October 2017 reaching 84.95 taka per dollar as of March 2020, despite interventions from the Bangladesh Bank from time to time. The taka is approaching full convertibility for current account transactions, such as imports and travel, but not for financial and capital account transactions, such as investing, currency speculation, or e-commerce.

Remittance Policies

There are no set time limitations or waiting periods for remitting all types of investment returns. Remitting dividends, returns on investments, interest, and payments on private foreign debts do not usually require approval from the central bank and transfers are typically made within one to two weeks. Some central bank approval is required for repatriating lease payments, royalties and management fees, and this process can take between two and three weeks. If a company fails to submit all the proper documents for remitting, it may take up to 60 days. Foreign investors have reported difficulties transferring funds to overseas affiliates and making payments for certain technical fees without the government’s prior approval to do so. Additionally, some regulatory agencies have reportedly blocked the repatriation of profits due to sector-specific regulations. The U.S. Embassy also has received complaints from American citizens who were not able to transfer the proceeds of sales of their properties.

The central bank has recently made several small-scale reforms to ease the remittance process. In 2019, the BB simplified the profit repatriation process for foreign firms. Foreign companies and their branches, liaison, or representative offices no longer require prior approval from the central bank to remit funds to their parent offices outside Bangladesh. Banks, however, are required to submit applications for ex post facto approval within 30 days of profit remittance. In 2020, the Bangladesh Bank relaxed regulations for repatriating disinvestment proceeds, authorizing banks to remit up to 100 million taka (approximately $1.2 million) in equivalent foreign currency without the central bank’s prior approval. The central bank also eased profit repatriation and reinvestment by allowing banks to transfer foreign investors’ dividend income into their foreign currency bank accounts.

The Financial Action Task Force (FATF) notes Bangladesh has established the legal and regulatory framework to meet its Anti-Money Laundering/Counterterrorism Finance (AML/CTF) commitments. The Asia/Pacific Group on Money Laundering (APG), an independent and collaborative international organization based in Bangkok, evaluated Bangladesh’s AML/CTF regime in 2018 and found Bangladesh had made significant progress since the last Mutual Evaluation Report (MER) in 2009, but still faces significant money laundering and terrorism financing risks. The APG reports are available online:  http://www.fatf-gafi.org/countries/#Bangladesh  

Sovereign Wealth Funds

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

Bangladesh’s 49 major non-financial SOEs, many of which are holding corporations owning or overseeing smaller state-owned entities, are spread among seven sectors – industrial; power, gas and water; transport and communication; trade; agriculture; construction; and services. The list of non-financial SOEs and relevant budget details are published in Bangla in the Ministry of Finance’s SOE Budget Summary 2020-21:  https://mof.gov.bd/site/view/budget_mof_sow/2020-21/SOE-Budget .

The SOE contribution to gross domestic product, value-added production, employment generation, and revenue earning is substantial. SOEs usually report to the relevant ministries, though the government has allowed some enhanced autonomy for certain SOEs, such as Biman Bangladesh Airlines. SOEs maintain control of rail transportation whereas private companies compete freely in air and road transportation. Bangladesh has restructured its corporate governance of SEOs as per the guidelines published by the Organization for Economic Cooperation and Development (OECD), but the country’s practices are not up to OECD standards. While SOEs are required to prepare annual reports and make financial disclosures, disclosure documents are often unavailable to the public. Each SOE has an independent Board of Directors composed of both government and private sector nominees who report to the relevant regulatory ministry. Most SOEs have strong ties with the government, and the ruling party nominates most SOE leaders. As the government controls most of the SOEs, domestic courts tend to favor the SOEs in investment disputes.

The government has taken recent steps to restructure several SOEs to improve competitiveness. This included conversion of Biman Bangladesh Airline, the national airline, into a public limited company to initiate a rebranding and a fleet renewal program involving purchase of 12 aircraft from Boeing. Five of six state-owned commercial banks – Sonali, Janata, Agrani, Rupali, and BASIC – were converted to public limited companies; only Rupali Bank is publicly listed. In July 2020, the government announced closure of 25 out of 26 state-owned jute mills under the Bangladesh Jute Mills Corporation amid mounting losses due to mismanagement and outdated technology.

The Bangladesh Petroleum Act of 1974 grants the government the authority to award natural resources contracts, and the Bangladesh Oil, Gas and Mineral Corporation Ordinance of 1984 gives Petrobangla, the state-owned oil and gas company, authority to assess and award natural resource contracts and licenses to both SOEs and private companies. Currently, oil and gas firms can pursue exploration and production ventures only through production-sharing agreements with Petrobangla.

Privatization Program

The Bangladeshi government has privatized 74 state-owned enterprises (SOEs) over the past 20 years, but SOEs still retain an important role in the economy, particularly in the financial and energy sectors. Of the 74 SOEs, 54 were privatized through outright sale and 20 through offloading of shares.

Since 2010, the government’s privatization drive has slowed. Previous privatization drives were plagued by allegations of corruption, undervaluation, political favoritism, and unfair competition. Nonetheless, the government has publicly stated its goal is to continue the privatization drive. SOEs can be privatized through a variety of methods, including:

• Sales through international tenders.
• Sales of government shares in the capital market.
• Transfers of some portion of the shares to the employees of the enterprises when shares are sold through the stock exchange.
• Sales of government shares to a private equity company (restructuring).
• Mixed sales methods.
• Management contracts.
• Leasing.
• Direct asset sales (liquidation).

In 2010, 22 SOEs were included in the Privatization Commission’s (now the BIDA) program for privatization. However, a 2010 study on privatized industries in Bangladesh conducted by the Privatization Commission found only 59 percent of the entities were in operation after being privatized and 20 percent were permanently closed – implying a lack of planning or business motivation of their private owners. In 2014, the government declared SOEs would not be handed over to private owners through direct sales. Offloading shares of SOEs in the stock market, however, can be a viable way to ensure greater accountability of the management of the SOEs and minimize the government’s exposure to commercial activities. The offloading of shares in an SOE, unless it involves more than 50 percent of its shares, does not divest the government of the control over the enterprise. Both domestic and foreign companies can participate in privatization programs. Additional information is available on the BIDA website at: http://bida.gov.bd/?page_id=4771

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

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

The source of information described in Table 4 is the Coordinated Portfolio Investment Survey (CPIS) of the International Monetary Fund (IMF).  Website: https://data.imf.org/?sk=B981B4E3-4E58-467E-9B90-9DE0C3367363&sId=1481577785817.

Policies Towards Foreign Direct Investment

The government of Barbados, through Invest Barbados, welcomes foreign direct investment with the stated goals of creating jobs, earning foreign exchange, transferring technology, enhancing skills, and contributing to economic growth. In 2021, the government announced plans to focus on encouraging foreign direct investment in renewable energy, manufacturing, technology, and biogenetic engineering.

Barbados encourages investment in the following key sectors: international financial services, information technology, and ship registration, as well as developing areas like financial technology, creative industries, agricultural processing, medical schools, medical tourism, and renewable energy. In the international financial services sector, the government maintains regulatory oversight via the Central Bank of Barbados to prevent money laundering and tax evasion.

Through Invest Barbados, the government facilitates domestic and foreign private investment. Invest Barbados’ mandate is to actively promote Barbados as a desirable investment location, to provide advice, and to assist prospective investors. Invest Barbados also provides customized support for investors to assist with the expansion and sustainability of the initial investment. It also serves as the primary liaison for existing investors. In April 2020, the government established a Jobs and Investment Council charged with supporting economic activity during the COVID-19 pandemic and post-pandemic recovery. In March 2021, the government announced plans to establish a Barbados Free Zone to help attract foreign direct investment.

Investors interested in doing business in Barbados must register in person with the country’s Corporate Affairs and Intellectual Property Office. While this is a requirement for foreign and domestic investors, the continuing barriers to international travel posed by COVID-19 currently make it more difficult for foreign investors without established local partners and legal representation to comply with this requirement. The government of Barbados has announced plans to fully digitize the registration process before the end of 2021.

Limits on Foreign Control and Right to Private Ownership and Establishment

There are no limits on foreign control in Barbados. Nationals and non-nationals may establish and own private enterprises and private property in Barbados. These rights extend to the acquisition and disposition of interests in private enterprises.

No industries are closed to private enterprise, although the government reserves the right not to allow certain investments. Some activities, such as telecommunications, utilities, broadcasting, franchises, banking, and insurance require a government license. There are no quotas or other restrictions on foreign ownership of a local enterprise or participation in a joint venture.

Other Investment Policy Reviews

Barbados has not conducted a trade policy review in the last three years.

Business Facilitation

Invest Barbados is the main investment promotion agency that attracts and facilitates foreign investment. Invest Barbados offers guidance and direction to new and established investors seeking to pursue investment opportunities in Barbados. The process is transparent and considers the size of capital investment as well as the economic impact of a proposed project.

Invest Barbados offers a website that is useful for navigating applicable laws, rules, procedures, and registration requirements for foreign investors. This is available at http://www.investbarbados.org . Invest Barbados’ iGuide website is an online guide which provides local and foreign investors with up-to-date information required to make certain investment decisions, including steps for setting up a business, opportunities for investment, labor and other business costs, and legal requirements, among other data. This is available at https://www.theiguides.org/public-docs/guides/barbados . The Corporate Affairs and Intellectual Property Office (CAIPO) maintains an online e-registry filing service for matters pertaining to the Corporate Registry. It is available to registered agents, who are usually attorneys. Information is available at www.caipo.gov.bb .

Barbados ranks 102nd out of 190 countries in the ease of starting a business, which takes seven procedures and approximately 16 days on average to complete, according to the 2020 World Bank Doing Business report. The general practice is to retain an attorney to prepare relevant incorporation documents. The business must register with CAIPO, the Barbados Revenue Authority, the Customs and Excise Department, and any relevant sector-specific licensing agencies.

The government of Barbados continues to facilitate programs and partnerships to assist entrepreneurs who are women and/or people with disabilities. The government of Barbados remains committed to working with civil society and other organizations to meet the UN Sustainable Development Goals by 2030.

Outward Investment

While no incentives are offered, Barbados generally encourages local companies to invest in other countries, particularly within the Caribbean region. Local companies in Barbados are actively encouraged to take advantage of export opportunities related to the country’s membership in the Caribbean Community (CARICOM) and the Caribbean Single Market and Economy (CSME). The Barbados Investment Development Corporation (BIDC) provides market development support for domestic companies seeking to enhance their export potential.

Transparency of the Regulatory System

Barbados’ legal framework establishes clear rules for foreign and domestic investors regarding tax, labor, environmental, health, and safety concerns. These regulations are in keeping with international standards. The Ministry of Finance, Economic Affairs and Investment and Invest Barbados provide oversight aimed at ensuring the transparency of investment.

Rulemaking and regulatory authority rest with the bicameral parliament of the government of Barbados. The House of Assembly consists of 30 members who are elected in single-seat constituencies. The Senate consists of 21 members who are appointed by the Governor General. Responsibility for Senate appointments is expected to shift in the second half of 2021 when Barbados intends to remove the UK’s Queen Elizabeth as head of state and becomes a republic.

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

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

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

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

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

Although some bills are not subject to public consultation, input from various stakeholder groups and agencies is enlisted during the initial drafting of legislation. Public awareness campaigns, through print and electronic media, are used to inform the general public. Copies of regulations are circulated to stakeholders and are published in the Official Gazette after passage in parliament. The Official Gazette is available at https://gisbarbados.gov.bb/the-official-gazette/ .

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

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

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

International Regulatory Considerations

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

The Barbados National Standards Institution (BNSI) oversees a laboratory complex housing metrology, textile, engineering, and chemistry/microbiology laboratories. The primary functions of the BSNI include the preparation, promotion, and implementation of standards in all sectors of the economy, including the promotion of quality systems, quality control, and certification. The Standards Act (2006) and the Weights and Measures Act (1977) and Regulations (1985) govern the work of the BNSI. In February, BSNI launched a project intended to enhance metrology capacity in concert with a draft bill that would upgrade the organization’s governance structure and laboratory systems to bring them in line with international testing and certification standards. As a signatory to the World Trade Organization (WTO) Agreement to Technical Barriers to Trade, Barbados, through the BSNI, is obligated to harmonize all national standards to international norms to avoid creating technical barriers to trade.

Barbados ratified the WTO Trade Facilitation Agreement in 2018. With full implementation, the Agreement improves the speed and efficiency of border procedures, facilitates trade costs reduction, and enhances participation in the global value chain. In 2019 Barbados implemented the Automated System for Customs Data, which streamlined document compliance and inspections by port authorities. The government also increased issuance fees for certificates of origin, making trade more expensive. In the 2020 World Bank Doing Business report, Barbados is ranked 132nd out of 190 countries for trading across borders.

Legal System and Judicial Independence

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

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

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

Laws and Regulations on Foreign Direct Investment

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

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

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

Competition and Antitrust Laws

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

Expropriation and Compensation

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

Dispute Settlement

ICSID Convention and New York Convention

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

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

Investor-State Dispute Settlement

The Barbados Arbitration Act (1976) and the Foreign Arbitral Awards Act (1980) provide for arbitration of investment disputes. Barbados does not have a bilateral trade treaty or a free trade agreement with an investment chapter with the United States. U.S. Embassy Bridgetown is not aware of any current investment disputes in Barbados.

Barbados ranks 170th out of 190 countries in enforcing contracts according to the 2020 World Bank Doing Business Report. Dispute resolution in Barbados generally takes an average of 1,340 days. The slow court system and bureaucracy are widely seen as the main hindrances to timely resolutions of commercial disputes. Through the Arbitration Act of 1976, local courts recognize and enforce foreign arbitral awards issued against the government. In 2019, the Supreme Court of Judicature Act was amended to include the establishment of a commercial division in the High Court which will oversee proceedings regarding arbitration. The U.S. Embassy does not know of recent cases of investment disputes in Barbados involving U.S. or other foreign investors.

International Commercial Arbitration and Foreign Courts

The Supreme Court of Barbados is the domestic arbitration body. Local courts enforce foreign arbitral awards. In 2019, two new court protocols in the Supreme and Magistrate courts were introduced for alternative dispute mechanisms in mediation and arbitration to be available to judges and attorneys for the remediation of civil matters.

Bankruptcy Regulations

Under the Bankruptcy and Insolvency Act (2002), Barbados has a bankruptcy framework that recognizes certain debtor and creditor rights. The Act gives a potentially bankrupt company three options: bankruptcy (voluntary or involuntary), receivership, or reorganization of the company. The Companies Act provides for the insolvency and/or liquidation of a company incorporated under this Act. In 2019, the Supreme Court of Judicature Act was amended to include the establishment of a commercial division in the High Court which will oversee proceedings connected to bankruptcy and insolvency. Barbados ranked 35th out of 190 countries in resolving insolvency in the 2020 World Bank Doing Business Report.

Capital Markets and Portfolio Investment

Barbados has a small stock exchange, an active banking sector, and opportunities for portfolio investment. Local policies seek to facilitate the free flow of financial resources, although some restrictions may be imposed during exceptional periods of low liquidity. The CBB independently raises or lowers interest rates without government intervention. There are a variety of credit instruments in the commercial and public sectors that local and foreign investors may access.

Barbados continues to review legislation in the financial sector to strengthen and improve the regulatory regime and attract and facilitate retention of foreign portfolio investments. The government continues to improve its legal, regulatory, and supervisory frameworks to strengthen the banking system. The Anti-Money Laundering Authority and its operating arm, the government’s Financial Intelligence Unit, review anti-money laundering policy documents and analyze prudential returns.

The Securities Exchange Act of 1982 established the Securities Exchange of Barbados, which was reincorporated as the Barbados Stock Exchange (BSE) in 2001. The BSE operates a two-tier electronic trading system comprised of a regular market and an innovation and growth market (formerly the junior market). Companies applying for listing on the regular market must observe and comply with certain requirements. Specifically, they must have assets of at least 500,000 USD (1 million Barbados dollars) and adequate working capital, based on the last three years of their financial performance, as well as three-year performance projections. Companies must also demonstrate competent management and be incorporated under the laws of Barbados or another regulated jurisdiction approved by the Financial Services Commission. Applications for listing on the innovation and growth market are less onerous, requiring minimum equity of one million shares at a stated minimum value of 100,000 USD (200,000 Barbados dollars). Reporting and disclosure requirements for all listed companies include interim financial statements and an annual report and questionnaire. Non-nationals must obtain exchange control approval from the CBB to trade securities on the BSE.

The BSE has computerized clearance and settlement of share certificates through the Barbados Central Securities Depository Inc., a wholly owned subsidiary of the BSE. Under the Property Transfer Tax Act, the FSC can accommodate investors requiring a traditional certificate for a small fee. The FSC also regulates mutual funds in accordance with the Mutual Funds Act.

The BSE adheres to rules in accordance with International Organization of Securities Commissions guidelines designed to protect investors; ensure a fair, efficient, and transparent market; and reduce systemic risk. Public companies must file audited financial statements with the BSE no later than 90 days after the close of their financial year. The authorities may impose a fine not exceeding 5,000 USD (10,000 Barbados dollars) for any person under the jurisdiction of the BSE who contravenes or is not in compliance with any regulatory requirements.

The BSE launched the International Securities Market (ISM) in 2016. It is designed to operate as a separate market, allowing issuers from Barbados and other international markets. To date, the ISM has five listing sponsors.

The BSE collaborates with its regional partners, the Jamaica Stock Exchange and the Trinidad and Tobago Stock Exchange, through shared trading software. The capacity for this inter-exchange connectivity provides a wealth of potential investment opportunities for local and regional investors. The BSE obtained designated recognized stock exchange status from the UK in 2019. It is also a member of the World Federation of Exchanges.

Barbados has accepted the obligations of Article VIII, Sections 2, 3, and 4 of the IMF Articles of Agreement and maintains an exchange system free of restrictions on current account transactions.

Money and Banking System

The government established the Central Bank of Barbados (CBB) in 1972. The CBB manages Barbados’ currency and regulates its domestic banks.

The Barbados Deposit Insurance Corporation (BDIC) provides protection for depositors. Oversight of the entire financial system is conducted by the Financial Oversight Management Committee, which consists of the CBB, the BDIC, and the FSC. The private sector has access to financing on the local market through short-term borrowing and credit, asset financing, project financing, and mortgage financing.

Commercial banks and other deposit-taking institutions set their own interest rates. The CBB requires banks to hold 17.5 percent of their domestic deposits in stipulated securities.

Bitt, a Barbadian company, developed digital currency DCash in partnership with the Eastern Caribbean Central Bank (ECCB). The first successful DCash retail central bank digital currency (CDBC) consumer-to-merchant transaction took place in Grenada in February following a multi-year development process. The CBB and the FSC established a regulatory sandbox in 2018 where financial technology entities can do live testing of their products and services. This allowed regulators to gain a better understanding of the product or service and to determine what, if any, regulation is necessary to protect consumers. Bitt completed its participation and formally exited the sandbox in 2019. Bitt has no immediate plans to launch DCash in Barbados, and will focus first on four of Barbados’ Eastern Caribbean neighbors. Bitt also offers a digital access exchange, remittance channel, and merchant-processing gateway available via mMoney, a mobile application.

The Caribbean region has witnessed a withdrawal of correspondent banking services by U.S., Canadian, and European banks in recent years due to concerns that the region is high-risk.

Foreign Exchange and Remittances

Foreign Exchange

Barbados’ currency of exchange is the Barbadian dollar (BBD). It is issued by the CBB. Barbados’ foreign exchange operates under a liberal system. The Barbadian dollar has been pegged to the U.S. dollar at a rate of BBD 2.00: USD 1.00 since 1975. This creates a stable currency environment for trade and investment in Barbados.

Remittance Policies

Companies can freely repatriate profits and capital from foreign direct investment if they are registered with the CBB at the time of investment. The CBB has the right to stagger these conversions depending on the level of international reserves available to the CBB at the time capital repatriation is requested.

The Ministry of Finance, Economic Affairs and Investment controls the flow of foreign exchange and the Exchange Control Division of the CBB executes foreign exchange policy under the Exchange Control Act. Individuals may apply through a local bank to convert the equivalent of 10,000 USD (20,000 Barbados dollars) per year for personal travel and up to a maximum of 25,000 USD (50,000 Barbados dollars) for business travel. The CBB must approve conversion of any amount over these limits. International businesses, including insurance companies, are exempt from these exchange control regulations.

Barbados is a member of the CFATF. In 2014, the government of Barbados signed an Intergovernmental Agreement in observance of FATCA, making it mandatory for banks in Barbados to report the banking information of U.S. citizens.

Sovereign Wealth Funds

Currently, the CBB does not maintain a sovereign wealth fund. In the past, the government announced plans to create a sovereign wealth fund to ensure national wealth is available for present and future generations of Barbados. Barbadians 18 years and older are expected to gain a stake in the fund after it is established. It is envisioned that the fund will hold governmental assets, including on- and offshore real property, revenues from oil and gas products, and non-tangible assets such as trademarks, patents, and intellectual property.

State-owned enterprises (SOEs) in Barbados work in partnership with ministries, or under their remit, and carry out certain ministerial responsibilities. There are 33 SOEs in Barbados operating in areas such as travel and tourism, investment services, broadcasting and media, sanitation services, sports, and culture. Pre-pandemic total net income was estimated at 60 million USD (120 million Barbados dollars).

SOEs in Barbados are not found in the key areas earmarked for investment. They are all wholly owned government entities. They are headed by boards of directors to which their senior management reports.

As part of the ongoing BERT program, the government of Barbados is addressing the expenditure position of the SOEs by defining clear objectives for SOE reforms, reducing the wage bill of these entities, and implementing other necessary reform measures.

Privatization Program

Barbados does not currently have a targeted privatization program. The government has announced plans for public-private partnerships in airport management and broadcasting services, which will still see the government retaining ownership of these entities. The process remains open to foreign investors and is transparent. More information can be obtained at http://www.gisbarbados.gov.bb .

Barbados does not have a recent history of politically motivated violence or civil unrest.

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

Table 4: Sources of Portfolio Investment
Data not available.

Policies Towards Foreign Direct Investment

Attracting FDI is one of the government’s stated foreign policy priorities; net inflows of FDI have been included in the list of government performance targets since December 2015. The GOB has no specific requirements for foreigners wishing to establish a business in Belarus. Despite this official pro-investment stance, both the central and local governments’ policies reflect a deeply rooted, Soviet-style distrust of private enterprise – whether local or foreign. Technically the legal regime for foreign investments should be no less advantageous than the domestic one, yet FDI in many key sectors is limited, particularly in the petrochemical, agricultural, and alcohol production industries. FDI is prohibited for national security reasons in defense as well as production and distribution of narcotics and dangerous and toxic substances. FDI can also be restricted in activities and operations prohibited by law or in the interests of environmental protection, historical, and cultural values, public order, morality protection, public health, and rights and freedoms of individuals. Investments in businesses that have a dominant position in the commodity markets of Belarus are not allowed without approved by the Ministry of Trade and Antimonopoly Regulation.

Belarusian law officially provides for equal treatment and rights for all investors and foreign investors have the same right as local investors to conduct business operations in Belarus by incorporating separate legal entities. However, selective application of existing laws and practices often discriminate against the private sector, including foreign investors, regardless of the country of their origin. Investments in sectors dominated by SOEs have been known to come under threat from regulatory bodies. Local business owners and independent media observe that selective law enforcement and unwritten practices discriminate against private businesses, including those operated by foreign investors regardless of their country of origin. Serious concerns remain about the independence of the judicial system and its ability to objectively adjudicate cases rather than favor the powerful central government and state companies.

Belarus’ investment promotion agency is the National Agency of Investments and Privatization (NAIP). The NAIP is tasked with representing the interests of Belarus as it seeks to attract FDI into the country. The NAIP is a one-stop shop with services available to all investors, including: organizing fact-finding missions to Belarus; assisting with visa formalities; providing information on investment opportunities, special regimes and benefits, and procedures necessary for making investment decisions; selecting investment projects; and providing solutions and post-project support. https://investinbelarus.by/en/naip-and-what-we-do/ 

To maintain an ongoing dialogue with investors, Belarus has established the Foreign Investment Advisory Council (FIAC) chaired by the Prime Minister. FIAC activities include: developing proposals to improve investment legislation; participating in examining corresponding regulatory and legal acts; and approaching government agencies for the purpose of adopting, repealing or modifying the regulatory and legal acts that restrict the rights of investors. The FIAC includes the heads of government agencies and other state organizations subordinate to the GOB, as well as heads of international organizations and foreign companies and corporations.

Limits on Foreign Control and Right to Private Ownership and Establishment

While the GOB claims foreign and domestic private entities have the right to establish and own business enterprises and engage in all forms of remunerative activity, in reality the GOB imposes limits on a case-by-case basis. The limits on foreign equity participation in Belarus are above the average for the 20 countries covered by the World Bank Group’s Investing Across Borders indicators for Eastern Europe and the Central Asia region. Belarus limits foreign equity ownership in service industries in particular. Sectors such as fixed-line telecommunications services, electricity transmission and distribution, and railway freight transportation are closed to foreign equity ownership. In addition, a comparatively large number of sectors are dominated by government monopolies, including, but not limited to, those mentioned above. Those monopolies make it difficult for foreign companies to invest in Belarus. Finally, the government may restrict investments in the interests of national security (including environmental protection, historical and cultural values), public order, morality protection, and public health, as well as rights and freedoms of people.

While Belarus has no formal national security investment screening mechanism, it retains significant elements of a Soviet-style command economy and screens investments through an informal and hierarchical process that escalates through the bureaucracy depending on the size of the investment or the size of incentives an investor seeks from the GOB. The President and his administration prescreen and approve even multi-million-dollar foreign investments.

Additionally, Belarus’ Ministry of Antimonopoly Regulation and Trade is responsible for reviewing transactions for competition-related concerns (whether domestic or international).

Other Investment Policy Reviews

The UN Conference on Trade and Development reviewed Belarus’ investment policy in 2009 and made recommendations regarding the improvement of its investment climate. http://unctad.org/en/Docs/diaepcb200910_en.pdf  

Individuals and legal persons can apply for business registration via the web portal of the Single State Register ( http://egr.gov.by/egrn/index.jsp?language=en ) – a resource that includes all relevant information on establishing a business and provides a single window for securing all necessary clearances and permissions from municipal authorities, tax and social security administrations, etc. Business registration normally takes no more than a day.

Belarus has a regime allowing for a simplified taxation system for micro and small businesses, including foreign-owned businesses. Belarus defines enterprises as follows:

Micro enterprises – fewer than 15 employees;Small enterprises – from 16 to 100 employees;Medium-sized enterprises – from 101 to 250 employees.

For more on starting a business in Belarus see: https://www.belarus.by/en/business/companies 

Outward Investment

The government does not promote or incentivize outward investment, nor does it restrict domestic investors from investing abroad. According to government statistics, Belarusian businesses’ outward investments in 2020 totaled $4.9 billion.

Transparency of the Regulatory System

According to Belarusian law, drafts of laws and regulations pertaining to investment and doing business are subject to public discussion, although the authorities rarely pay heed to public views. Draft legislation is published on government agencies’ websites. The government officially claims that its policies are transparent, and the implementation of laws is consistent with international norms to foster competition and establish clear rules of the road. However, independent economic experts note that private sector businesses are often discriminated against in relation to public sector businesses. In particular, SOEs receive government subsidies, benefits and exemptions, including cheaper loans and debt forgiveness, that is generally unavailable to private sector companies. Observers report that Lukashenka and his inner circle control private businesses that receive preferential treatment from the government.

International Financial Reporting Standards (IFRS) have been a part of Belarus’ legislative framework since 2016. Public-interest entities, which include banks, insurance companies, and public corporations with subsidiary companies, are required to publish their financial statements, which comply with the IFRS. Such statements are subject to statutory audit. The IFRS in Belarus can be accessed at: http://www.minfin.gov.by/ru/accounting/inter_standards/docs/ 

International Regulatory Considerations

Belarus’ Ministry of Finance posts regular updates and information on budgetary policy, public finances, and debt obligations on its website: http://www.minfin.gov.by/en/budgetary_policy/   and http://www.minfin.gov.by/en/public_debt/.

Belarus is not a WTO member but continues to seek membership. Belarus planned to complete its negotiations on WTO accession at the 12th WTO Ministerial Conference in June 2020 in Nur-Sultan, Kazakhstan, which was canceled due to the COVID-19 pandemic. Under its latest five-year development plan, the government asserts that it plans to bring the country’s legislation in line with WTO standards and secure Belarus’s actual accession to WTO no later than 2025.

Belarus is a member of the Eurasian Economic Union (EAEU); EAEU regulations and decisions supersede the national regulatory system.

Legal System and Judicial Independence

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

According to the 2020 Human Rights Report: “The constitution provides for an independent judiciary, but authorities did not respect judicial independence and impartiality. Observers believed corruption, inefficiency, and political interference with judicial decisions were widespread.” Businesses complain the authorities selectively enforce regulations and criminal laws and that cases are often politically motivated. For example, in June 2020 executives at Belgazprombank were arrested on financial crimes charges and the bank was put under government administration after the bank’s chairperson Viktar Babaryka sought to compete as a candidate in the 2020 presidential election. In another example, in September 2020 the authorities arrested several employees of an IT company on financial crimes charges in what many said was retaliation for the political activities of the company’s CEO. In November 2020, Belarusian authorities allegedly seized over $500,0000 from local bank accounts associated with the charitable foundation @BY_Help, which sought to provide financial assistance to the victims of government oppression. At the February 2021 All Belarusian People’s Assembly, Lukashenka said he had ordered the closure of over 200 private businesses because of their perceived participation in the October 26, 2020 “People’s Ultimatum” organized by political opposition.

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

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

Laws and Regulations on Foreign Direct Investment

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

The GOB regularly updates the following websites with the latest in laws, rules, procedures and reporting requirements for foreign investors: http://www.investinbelarus.by/en/    http://www.economy.gov.by/  http://president.gov.by/en/official_documents_en/ 

Competition and Antitrust Laws

Issued in 2016, Presidential decree number 188 authorized the Ministry of Antimonopoly Regulation and Trade to counteract monopolistic activities and promote market competition.

Expropriation and Compensation

According to Article 12 of the Investment Code, neither party may expropriate or nationalize investments both directly and indirectly by means of measures similar to expropriation or nationalization, for other purposes than for the public benefit and on a nondiscriminatory basis; according to the appropriate legal procedure; and on conditions of compensation payment. Belarus has signed 68 bilateral agreements on the mutual protection and encouragement of investments which include obligations regarding expropriation.

In 2018, there was one nationally-reported case of nationalization – the Motor Sich aircraft repair factory in Orsha. The GOB claimed it compensated the Ukrainian owner market value for its shares, but the owner expressed dissatisfaction with the compensation. There was no public information about the Ukrainian owner pursuing the case further.

In 2018, the Belarusian parliament drafted amendments to the 2013 law on investment to establish procedures for paying compensation for the nationalized and confiscated property, but Lukashenka refused to sign them into law. There have been no instances of expropriation of business property as a penalty for violations of law since 2018.

Dispute Settlement

ICSID Convention and New York Convention

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

Investor-State Dispute Settlement

Belarus and the United States signed a Bilateral Investment Treaty (BIT), but entry into force is pending exchange of instruments of ratification. Most of the BITs concluded by Belarus include a provision on international investment arbitration as a mechanism for settling investor-State disputes and recognize the binding force of the awards issued by tribunals. Under Belarusian law, if an international treaty signed by Belarus establishes rules other than those established by local law, the rules of the international treaty prevail.

Since 2017, Belarus has faced three investment arbitration claims involving investors from the Netherlands and Russia. There were no known investment disputes between Belarusian government authorities and American investors in 2020.

International Commercial Arbitration and Foreign Courts

Judgments of foreign courts are accepted and enforced if there is a relevant international agreement signed by Belarus. Courts recognize and enforce foreign arbitral awards. The Belarusian Chamber of Commerce and Industry has an International Arbitration Court. The 2013 “Law on Mediation,” as well as codes of civil and economic procedures, established various alternative ways of addressing investment disputes.

Bankruptcy Regulations

Belarus’ 2012 bankruptcy law, related presidential edicts, and government resolutions are not always consistently applied. Additional legal acts, such as the Civil Code and Code of Economic Procedures, also include certain regulations on bankruptcy-related issues. Under the bankruptcy law, foreign creditors have the same rights as Belarusian creditors. Belarusian law criminalizes false and intentional insolvency as well as concealing insolvency. According to the World Bank’s 2020 Doing Business Index, Belarus was ranked 74 in Resolving Insolvency (rankings available at  http://www.doingbusiness.org/data/exploreeconomies/belarus ).

Capital Markets and Portfolio Investment

The Belarusian government officially claims to welcome portfolio investment. There have been no reports in 2020 on any impediments regarding such investment or a free flow of any financial instruments. The Belarusian Currency and Stock Exchange is open to foreign investors, but it is still largely undeveloped because the government only allows companies to trade stocks if they meet certain but often burdensome criteria. Private companies must be profitable and have net assets of at least EUR 1 million. In addition, any income from resulting operations is taxed at 24 percent. Finally, the state owns more than 70 percent of all stocks in the country, and the government appears hesitant and unwilling to trade in them freely. Bonds are the predominant financial instrument on Belarus’ corporate securities market.

In 2001, Belarus joined Article VIII of the IMF’s Articles of Agreement, undertaking to refrain from restrictions on payments and transfers under current international transactions. Loans are allocated on market terms and foreign investors are able to get them. However, the discount rate of 7.75 percent (as of March 2020) makes credit too expensive for many private businesses, which, unlike many SOEs, do not receive subsidized or reduced-interest loans.

Businesses buy and sell foreign exchange at the Belarusian Currency and Stock Exchange through their banks. Belarus used to require businesses to sell 10-20 percent of foreign currency revenues through the Belarusian Currency and Stock Exchange, however in late 2018 the National Bank abolished the mandatory sale rule.

Resources for Rights Holders

U.S. Embassy MinskEconomic Sectiontel.+375 (17) 210-1283e-mail:  usembassyminsk@state.gov 

Money and Banking System

Belarus has a central banking system led by the National Bank of the Republic of Belarus, which represents the interest of the state and is the main regulator of the country’s banking system. The President of Belarus appoints the Chair and Members of the Board of the National Bank, designates auditing organizations to examine its activities, and approves its annual report. Although the National Bank officially operates independently from the government, there is a history of government interference in monetary and exchange rate policies.

As of March 2021, the banking system of Belarus included 24 commercial banks and three non-banking credit and finance organizations. According to the National Bank, the share of non-performing loans in the banking sector was 4.8 percent as of January 1, 2021. The country’s seven largest commercial banks of systemic importance, all of which have some government share, accounted for 85 percent of the approximately USD 90.5 billion in total assets across the country’s banking sector. There are five representative offices of foreign banks in Belarus, with China’s Development Bank opening most recently in 2018. Regular banking services are widely available to customers regardless of national origin.

Belarusian law does not allow foreign banks to establish operations of their branches in Belarus. The subsidiaries of foreign banks are allowed to operate in Belarus and are subject to prudential measures and other regulations like any Belarusian bank. The U.S. Embassy is not aware of Belarus losing any correspondent banking relationships in the past three years. Foreign nationals are allowed to establish a bank account in Belarus without establishing residency status.

According to the IMF, Belarus’s state-dominated financial sector faces deep domestic structural problems and external sector challenges. Domestic structural problems include heavy state involvement in the banking and corporate sector, the lack of hard budget constraints for SOEs given state support, and high dollarization. Externally, Belarus’s economy remains exposed to spillovers from the Russian economy and Belarus’s foreign currency reserves offer a limited buffer to potential external shocks. The banking sector remains vulnerable to external shocks, given the high level of dollarization and the exposure to government and SOE debt. The political unrest following the August 2020 election led to deposit outflows from the banks, exacerbating risks to the banks’ financial portfolios. In September 2020, S&P Global Ratings downgraded Belarus’s long-term sovereign rating from stable to negative, citing the growing risks for the financial stability of Belarus’s banking system.

Foreign Exchange and Remittances

Foreign Exchange

According to the GOB, Belarus’ foreign exchange regulations do not include any restrictions or limitations regarding converting, transferring, or repatriating funds associated with investment. Foreign exchange transactions related to FDI, portfolio investments, real estate purchasing, and opening bank accounts are carried out without any restrictions. Foreign exchange is freely traded in the domestic foreign exchange market. Foreign investors can purchase foreign exchange from their Belarusian accounts in Belarusian banks for repaying investments and transferring it outside Belarus without any restrictions.

Since 2015, the Belarusian Currency and Stock Exchange has traded the U.S. dollar, the euro, and the Russian ruble in a continuous double auction regime. Local banks submit bids for buying and selling foreign currency into the trading system during the entire trading session. The bids are honored if and when the specified exchange rates are met. The National Bank uses the average weighted exchange rate of the U.S. dollar, the euro, and the Russian ruble set during the trading session to set official exchange rates from the day on which the trades are made. The cross rates versus other foreign currencies are calculated based on the data provided by other countries’ central banks or information from Reuters and Bloomberg. The stated quote becomes effective on the next calendar day and is valid until the new official exchange rate come into force. The IMF lists Belarus’ exchange rate regime in the floating exchange rate category.

Remittance Policies

There were no reports of problems exchanging currency or remitting revenues earned abroad.

Sovereign Wealth Funds

Belarus does not have a Sovereign Wealth Fund. The GOB manages the State Budget Fund of National Development, which supports major economic and social projects in the country.

Although SOEs are outnumbered by private businesses, SOEs dominate the economy in terms of assets. According to experts, the share of Belarus’ GDP derived from SOEs is at least 70 percent. Belarus does not consider joint stock companies, even those with 100 percent government ownership of the stocks, to be state-owned and generally refers to them as part of the non-state sector, rendering official government statistics regarding the role of SOEs in the economy misleading. According to media reports, SOEs receive preferential access to government contracts, subsidized credits, and debt forgiveness. While SOEs are generally subject to the same tax burden and tax rebate policies as their private sector competitors, private enterprises do not have the same preferential access to land and raw materials. Since Belarus is not a WTO member, it is not a party to the Government Procurement Agreement (GPA).

Privatization Program

The GOB officially claims to welcome “strategic investors,” including foreign investors, and claim that any state-owned or state-controlled enterprise can be privatized. However, Belarus’ privatization program is in practice extremely limited. Notably, in April 2020, the government sold its controlling share in Belarus’ fifteenth-largest bank, Paritetbank. Otherwise, there was no privatization of state-controlled companies from 2018 to 2020. One SOE was bought by private investors in 2017, and no companies or shares were privatized in 2016. In early 2019, Belarus’ State Property Committee approved a list of 23 joint stock companies for full or partial privatization in 2019. Also in 2019, the World Bank concluded a pilot SOE privatization project that identified and helped prepare 12 Belarusian SOEs for privatization. However, the GOB allowed sale of the government share in these companies on the condition that the purchasing investors preserve existing jobs and production lines.

The State Property Committee reported that the government sold its minority share (under 25 percent) in two enterprises in 2019. The State Property Committee announced in early 2021 that it has no plans for any mass privatization in Belarus in 2021. For a list of open-joint stock companies whose shares are available for privatization, as well as a description of the assets and conditions for privatization, visit: http://gki.gov.by/en/inf_for_investors-ifi_on_priv/ .

Investors interested in assets on the published privatization list are encouraged to forward a brief letter of interest to the State Property Committee. A special commission reviews offers and makes a recommendation to the President on the process of privatization – via tender, auction, or direct sale. Investors may also send a letter of interest regarding assets that are not on the State Property Committee list and the government will examine such offers.

Additionally, the State Property Committee occasionally organizes and holds privatization auctions. Many of the auctions organized by the State Property Committee have low demand as the government conditions privatizations with strict requirements, including preserving or creating jobs, continuing in the same line of work or production, or launching a successful business project within a limited period of time, etc.

In 2016, Belarusian joint stocks were allowed trans-border placement via issuing depositary receipts, but to date this instrument of attracting investments has not been used in Belarus.

In 2020, Belarus experienced widespread peaceful protests in the leadup to and after the fraudulent August 2020 election that were met with violence by state security services. However, in the Embassy’s estimation, the potential is low for widespread, politically-inspired violence that would adversely affect foreign property interests.

According to official statistics, Belarus received $1.4 billion in FDI (on a net basis) in 2020, while government forecasted for 2020 at least $1.7 billion. Belarus received $1.3 billion in FDI in 2019, $1.6 billion in 2018, USD 1.2 billion in FDI in 2017, and $1.3 billion in 2016. The list of top-10 countries, which invested in Belarus in 2020 includes Russia (21.7 percent), Cyprus (17.7 percent), Netherlands (8.4 percent), Germany (5.4 percent), USA (3.0 percent), Lithuania (2.6 percent), Switzerland (2.2 percent), UK (1.9 percent), Czech Republic (1.7 percent), China (1.7 percent), are considered the top ten foreign investors in Belarus.

* Source for Host Country Data: The National Bank of Belarus ( http://www.nbrb.by ); Ministry of Economy ( https://www.economy.gov.by/ ); National Statistical Committee ( https://www.belstat.gov.by/en/ ).

Policies Towards Foreign Direct Investment

Belgium maintains an open economy and its prosperity remains highly dependent on international trade.  Since World War II, making Belgium attractive to foreign investors has been the cornerstone of successive Belgian governments’ foreign and commercial policy.  Competence over policies that weigh on the attractiveness of Belgium as a destination for foreign direct investment (FDI) lie predominantly with the federal government, which is responsible for developing domestic competition policy, wage setting policies, labor law and most energy and fiscal policies.  Attracting FDI is, however, a responsibility of Belgium’s three regional governments and their investment promotion agencies: Flanders Investment and Trade (FIT), Wallonia Foreign Trade and Investment Agency (AWEX), and Brussels Invest and Export (BIE).  One of their most visible activities is the organization of the Royal Trade Missions.  In October 2021, a Royal Trade Mission led by Princess Astrid is planned to visit Atlanta, New York City, and Boston.  Neither the federal government nor the regional governments currently maintain a formal dialogue with investors.

There are no laws in place that discriminate against foreign investors.  Belgian authorities are developing a national security-based investment screening law, which will not likely be finalized and delivered to Parliament for a vote before the second half of 2021.  The Belgian government, however, has coordinated with the European Commission on its investment screening mechanism.  In practice, this arrangement allows the European Commission to issue opinions when an investment poses a threat to the security or public order of more than one member state.  Furthermore, the regulation sets certain requirements for EU member states that wish to maintain or adopt a screening mechanism at the national level.  Member states will keep the last word on whether or not a specific investment should or should not be allowed in their territory.

Limits on Foreign Control and Right to Private Ownership and Establishment

There are currently no limits on foreign ownership or control in Belgium and there are no distinctions between Belgian and foreign companies when establishing or owning a business, or setting up a remunerative activity.  The forthcoming investment screening mechanism may establish some limits based on national security.

Other Investment Policy Reviews

In July 2019 the OECD published an in-depth productivity review of Belgium:

https://www.oecd.org/belgium/in-depth-productivity-review-of-belgium-88aefcd5-en.htm

Belgium was included in the WTO Trade Policy Review of the European Union, which took place February 18-20, 2020: https://www.wto.org/english/tratop_e/tpr_e/tp495_e.htm

Business Facilitation

In order to set up a business in Belgium, one must:

1. Deposit at least 20% of the initial capital with a Belgian credit institution and obtain a standard certification confirming that the amount is held in a blocked capital account;

2. Deposit a financial plan with a notary, sign the deed of incorporation and the by-laws in the presence of a notary, who authenticates the documents and registers the deed of incorporation. The authentication act must be drawn up in either French, Dutch or German (Belgium’s three official languages); and

3. Register with one of the Registers of legal entities, VAT and social security at a centralized company docket and obtain a company number.

In most cases, the business registration process can be completed within one week (https://www.business.belgium.be/en/setting_up_your_business).  The process is bureaucratic and can be challenging for foreigners, particularly if they do not speak the language of the region.  Assistance from the regional Investment Authorities (see below) is recommended; these authorities are competitive and will offer support and incentives to companies considering establishing in their territory.  Contacting the office of the U.S. Foreign Commercial Service at the U.S. Embassy in Brussels for assistance is also recommended.

Based on the number of employees, the projected annual turnover and the shareholder class, a company will qualify as a small or medium-sized enterprise (SME) according to the meaning of the Promotion of Independent Enterprise Act of February 10, 1998.  For a small or medium-sized enterprise, registration will only be possible once a certificate of competence has been obtained. The person in charge of the daily management of the company must prove his or her knowledge of business management, with diplomas and/or practical experience.  In the Global Enterprise Register, Belgium currently scores 7 out of 10 for ease of setting up a limited liability company.

Business facilitation agencies provide for equitable treatment of women and under-represented minorities in the economy.

A company is expected to allow trade union delegations if it employs 20 or more full-time equivalents (FTEs).

The three Belgian regions each have their own investment promotion agency, whose services are available to all foreign investors:

Flanders: Flanders Investment & Trade, https://www.flandersinvestmentandtrade.com/en

Wallonia: Invest in Wallonia, http://www.investinwallonia.be/home

Brussels: Brussels Invest & Export, http://why.brussels/

Outward Investment

Belgium does not actively promote outward investment.  There are no restrictions for domestic investors to invest in certain countries, other than those that fall under UN or EU sanction regimes.

Transparency of the Regulatory System

The Belgian government has adopted a generally transparent competition policy.  The government has implemented tax, labor, health, safety, and other laws and policies to avoid distortions or impediments to the efficient mobilization and allocation of investment, comparable to those in other EU member states.  Draft bills are never made available for public comment, but have to go through an independent court for vetting and consistency.  Belgium publishes all its relevant legislation and administrative guidelines in an official Gazette, called Le Moniteur Belge (www.moniteur.be).

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

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

International Regulatory Considerations

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

Through the European Union, Belgium is a member of the WTO, and notifies all draft technical regulations to the WTO Committee on Technical Barriers to Trade (TBT).  Belgium does not maintain any measures that are inconsistent with the Agreement on Trade-Related Investment Measures (TRIMs) obligations.

Legal System and Judicial Independence

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

Laws and Regulations on Foreign Direct Investment

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

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

There are three different regional Investment Authorities:

Flanders: www.flandersinvestmentandtrade.com

Wallonia; www.awex.be

Brussels: https://be.brussels/brussels

Competition and Antitrust Laws

The contact address for competition-related concerns:

Federal Competition Authority

City Atrium, 6th floor

Vooruitgangsstraat 50

1210 Brussels

tel: +32 2 277 5272

fax: +32 2 277 5323

email: info@bma-abc.be

EU member states are responsible for competition and anti-trust regulations if there are no cross-border dimensions. If cross-border effects are present, EU law applies and European institutions are competent.

Expropriation and Compensation

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

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

Dispute Settlement

ICSID Convention and New York Convention

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

Investor-State Dispute Settlement

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

International Commercial Arbitration and Foreign Courts

Alternative Dispute Resolution is not mandatory by law and is therefore not commonly used in disputes, except for matters where the determination by an expert is sought, whether appointed by the parties in agreement or in accordance with a contractual clause or appointed by the court in the context of dispute resolution.

Belgium has no domestic arbitration bodies.  Local courts recognize and enforce foreign arbitral awards. Judgments of foreign courts are recognized and enforceable under the local courts.  There are no reports or complaints targeting Court proceedings involving State Owned Enterprises (SOEs) or alleged favoritism for them.

Bankruptcy Regulations

Belgian bankruptcy law is governed by the Bankruptcy Act of 1997 and is under the jurisdiction of the commercial courts.  The commercial court appoints a judge-auditor to preside over the bankruptcy proceeding and whose primary task is to supervise the management and liquidation of the bankrupt estate, in particular with respect to the claims of the employees.  Belgian bankruptcy law recognizes several classes of preferred or secured creditors.  A person who has been declared bankrupt may subsequently start a new business unless the person is found guilty of certain criminal offences that are directly related to the bankruptcy.  The Business Continuity Act of 2009 provides the possibility for companies in financial difficulty to enter into a judicial reorganization.  These proceedings are to some extent similar to Chapter 11 as the aim is to facilitate business recovery.  In the World Bank’s 2020 Doing Business Index, Belgium ranks number 9 (out of 190) for the ease of resolving insolvency.

Capital Markets and Portfolio Investment

Belgium has policies in place to facilitate the free flow of financial resources. Credit is allocated at market rates and is available to foreign and domestic investors without discrimination. Belgium is fully served by the international banking community and is implementing all relevant EU financial directives. At the same time, in 2020 Belgium ranked 67th out of 190 for “getting credit” on the World Bank’s “Doing Business” rankings, and in the bottom quintile among OECD high income countries.

The Belgian city of Bruges established the world’s first stock market almost 600 years ago, and the Belgian bourse is well-established today. On Euronext, a company may increase its capital either by capitalizing reserves or by issuing new shares. An increase in capital requires a legal registration procedure, and new shares may be offered either to the public or to existing shareholders. A public notice is not required if the offer is to existing shareholders, who may subscribe to the new shares directly. An issue of bonds to the public is subject to the same requirements as a public issue of shares: the company’s capital must be entirely paid up, and existing shareholders must be given preferential subscription rights.  Details on the shareholders of the Bel20 (benchmark stock market index of Euronext Brussels) can be found on http://www.gresea.be/Qui-sont-les-actionnaires-du-BEL-20.

In 2016, the Belgian government passed legislation to improve entrepreneurial financing through crowdfunding and more flexible capital venture rules.

Money and Banking System

Because the Belgian economy is directed toward international trade, more than half of its banking activities involve foreign countries. Belgium’s major banks are represented in the financial and commercial centers of dozens of countries by subsidiaries, branch offices, and representative offices. The country does have a central bank, the National Bank of Belgium (NBB), whose governor is also a member of the Governing Council of the European Central Bank (ECB).  Being a Eurozone member state, the NBB is part of the Euro system, meaning that it has transferred the sovereignty over monetary policy to the ECB.

Belgium has one of highest number of banks per capita in the world. Following a review of the 2008 financial crisis, the Belgian government decided in 2012 to shift the authority of bank supervision from the Financial Market Supervision Authority (FMSA) to the NBB. In 2017, supervision of systemically important Belgian banks shifted to the ECB. The country has not lost any correspondent banking relationships in the past three years, nor are there any correspondent banking relationships currently in jeopardy.

Since the introduction of the Single Supervisory Mechanism (SSM), the vast majority of the Belgian banking sector’s assets are held by banks that come under SSM supervision, including the “significant institutions” KBC Bank, Belfius Bank, Argenta, AXA Bank Europe, Bank of New-York Mellon and Bank Degroof/Petercam. Other banks governed by Belgian law – such as BNP Paribas Fortis and ING Belgium – are also subject to SSM supervision as they are subsidiaries of non-Belgian “significant institutions.”

In 2018, the banking sector conducted its business in a context of gradual economic recovery and persistently low interest rates. That situation had two effects: it put pressure on the sector’s profitability and caused a credit default problem in some European banks. The National Bank of Belgium designated eight Belgian banks as domestic systemically important institutions, and divided them into two groups according to their level of importance. A 1.5% capital surcharge was imposed on the first group (BNP Paribas Fortis, KBC Group and Belfius Bank). The second group (AXA Bank Europe, Argenta, Euroclear and The Bank of New York Mellon) is required to hold a supplementary capital buffer of 0.75%. These surcharges are being phased in over a three-year period.

Under pressure from the European Union, bank debt has decreased in volume overall, from close to 1.6 trillion euros in 2007 to just over 1 trillion euros in 2018, according to the National Bank of Belgium, particularly in the risky derivative markets.

It remains to be seen how the economic fallout of the COVID-19 crisis will impact banks on a long-term basis in Belgium.

Belgian banks use modern, automated systems for domestic and international transactions. The Society for Worldwide Interbank Financial Telecommunications (SWIFT) is headquartered in Brussels. Euroclear, a clearing entity for transactions in stocks and other securities, is also located in Brussels.

Opening a bank account in the country is linked to residency status.  The U.S. FATCA (Foreign Account Tax Compliance Act) requires Belgian banks to report information on U.S. account holders directly to the Belgian tax authorities, who then release the information to the IRS.

With regard to cryptocurrencies, the National Bank of Belgium has no central authority overseeing the network.

Unlike most other EU countries, there are no cryptocurrency ATMs, and the NBB has repeatedly warned about potential adverse consequences of the use of cryptocurrencies for financial stability.

Foreign Exchange and Remittances

Foreign Exchange

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

Remittance Policies

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

Sovereign Wealth Funds

Belgium has a sovereign wealth fund (SWF) in the form of the Federal Holding and Investment Company (FPIM-SFPI), a quasi-independent entity created in 2004 and now mainly used as a vehicle to manage the banking assets which were taken on board during the 2008 banking crisis. The SWF has a board whose members reflect the composition of the governing coalition and are regularly audited by the “Cour des Comptes” or national auditor. At the end of 2019, its total assets amounted to € 2.35 billion.  The majority of the funds are invested domestically. Its role is to allow public entities to recoup their investments and support Belgian banks. The SWF is required by law to publish an annual report and is subject to the same domestic and international accounting standards and rules. The SWF routinely fulfills all legal obligations. However, it is not a member of the International Forum of Sovereign Wealth Funds.

Belgium has approximately 80,000 employees working in SOEs, mainly in the railways, telecoms and general utility sectors. There are also several region-owned enterprises where the regions often have a controlling majority.  Private enterprises are allowed to compete with SOEs under the same terms and conditions, but since the EU started to liberalize network industries such as electricity, gas, water, telecoms and railways, there have been regular complaints in Belgium about unfair competition from the former state monopolists. Complaints have ranged from lower salaries (railways) to lower VAT rates (gas and electricity) to regulators with a conflict of interest (telecom). Although these complaints have now largely subsided, many of these former monopolies are now market leaders in their sector, due mainly to their ability to charge high access costs to legacy networks that were fully amortized years ago.

Privatization Program

Belgium currently has no scheduled privatizations. There are ongoing discussions about the relative merits of a possible privatization of the state-owned bank Belfius and the government share in telecom operator Proximus. There are no indications that foreign investors would be excluded from these eventual privatizations.

Belgium is a peaceful, democratic nation comprising federal, regional, and municipal political units: the Belgian federal government, the regional governments of Flanders, Wallonia, the Brussels capital region, and 581 communes (municipalities). Political divisions do exist between the Flemish and the Walloons, but they are addressed in democratic institutions and generally resolved through compromise. The Federal Council of Ministers, headed by the prime minister, remains in office as long as it retains the confidence of the lower house (Chamber of Representatives) of the bicameral parliament.

* Source for Host Country Data:

https://data.imf.org/?sk=B981B4E3-4E58-467E-9B90-9DE0C3367363&sId=1481577785817 )

Policies Towards Foreign Direct Investment

Belize’s government encourages FDI to relieve fiscal pressure and diversify the economy.  While the government is interested in attracting FDI, certain bureaucratic and regulatory requirements impede investment and growth.

There are no laws that explicitly discriminate against foreign investors.  In practice, however, investors complain that lack of transparency, land insecurity, bureaucracy, delays, and corruption are factors that make it difficult to do business in Belize. In 2020, businesses increasingly complained that foreign exchange shortages constrained both local and foreign owned operations as the Central Bank of Belize tighten measures to obtain approval for foreign exchange. U.S. firms have also identified challenges in participating and competing in areas related to the bidding, procurement and dispute settlement processes, particular to SOEs.

The Belize Trade and Investment Development Service (BELTRAIDE; www.belizeinvest.org.bz ) is the investment and export promotion agency.  It promotes FDI through various incentive packages and identified priority sectors for investment such as agriculture, agro-processing, fisheries and aquaculture, logistics and light manufacturing, food processing and packaging, tourism and tourism-related industries, business process outsourcing (BPOs), and sustainable energy.  Export-orientated businesses operating in less developed areas also receive preferential treatment.

The Economic Development Council, https://edc.gov.bz , is a public-private sector advisor body established to advance public sector reforms, to promote private sector development and to inform policies for growth and development.  The Cabinet Sub–Committee on Investment is composed of ministers whose portfolios are directly involved in considering and approving investment proposals.  Additionally, there is an Office of the Ombudsman who addresses issues of official wrongdoing.

Limits on Foreign Control and Right to Private Ownership and Establishment

Belize acknowledges the right for foreign and domestic private entities to establish and own business enterprises and engage in remunerative activities.  Foreign and domestic entities must first register their business before engaging in business. They must also register for the appropriate taxes, including business tax and general sales tax, as well as obtain a social security number and trade license.

Generally, Belize has no restrictions on foreign ownership and control of companies; however, foreign investments must be registered with the Central Bank of Belize and adhere to the Exchange Control Act and related regulations.  To register a business name with the government, foreigners must apply with a Belizean partner or someone with a permanent residence. Additionally, persons seeking to open a bank account must also comply with Central Bank regulations. These may differ based on the applicant’s residency status and whether the individual is seeking to establish a local or foreign currency account.  Note: many Belizeans perceive foreigners to receive favorable treatment from the government over access to capital during the start-up process.

Foreign investments must be registered and obtain an “Approved Status” from the Central Bank to facilitate inflows and outflows of foreign currency.  Investments with “Approved Status” are generally granted permission to repatriate funds gained from profits, dividends, loan payments and interest.  Additionally, the Exchange Control Regulation Act was amended in 2020 to relax the requirement for non-residents to obtain prior permission from the Central Bank to conduct transaction in securities and real estate. The amendment now provides for prior written notice to the Central Bank with full particulars of the transaction.

Some investment incentives show preference to Belizean-owned companies.  For example, to qualify for a tour operator license, a business must be majority-owned by Belizeans or permanent residents of Belize ( http://www.belizetourismboard.org ).  This qualification is negotiable particularly where a tour operation would expand into a new sector of the market and does not result in competition with local operators.  The government does not impose any intellectual property transfer requirements.

The Cabinet Sub-Committee on Investment investigates investment projects which do not fall within Belize’s incentive regime or which may require special considerations.  For example, an investment may require legislative changes, a customized memorandum of understanding or agreement from the government, or a public–private partnership.  The government assesses proposals based on size, scope, and the incentives requested.  In addition, proposals are assessed on a five-point system that analyses: 1) socio-economic acceptability of the project; 2) revenues to the government; 3) employment; 4) foreign exchange earnings; and 5) environmental considerations.  There is no statutory timeframe for considering projects as the process largely depends on the nature and complexity of the project.

Foreign investors undertaking large capital investments are advised to adhere to environmental laws and regulations.  Government requires project developers to prepare an Environmental Impact Assessment (EIA), should a project meet certain parameters such as land area, location, or industry criteria.  When purchasing land or planning to develop in or near an ecologically sensitive zone, government recommends that the EIA fully address any measures by the investor to mitigate environmental risks.  Developers must obtain environmental clearance prior to the start of site development.  The Department of Environment website, http://www.doe.gov.bz  has more information on the Environmental Protection Act and other regulations, applications and guidelines.

Other Investment Policy Reviews

In the past three years, there has been no investment policy review of Belize by the Organization for Economic Cooperation and Development (OECD) or the United Nations Conference on Trade and Development (UNCTAD).  Belize concluded its third Trade Policy Review in the World Trade Organization (WTO) in 2017.

Business Facilitation

BELTRAIDE ( http://www.belizeinvest.org.bz  ), a statutory body of the Government of Belize, operates as the country’s investment and export promotion agency.  Its investment facilitation services are open to all investors – foreign and domestic.  While there are support measures to advance greater inclusion of women and minorities in entrepreneurial initiatives and training, the business facilitation measures do not generally distinguish by gender or economic status.

In the midst of the COVID-19 pandemic, the government launched its National Economic Recovery Strategy, as well as, various fiscal and economic stimulus packages. In April 2020, BELTRAIDE concluded an online National Rapid Private Sector Economic Impact Assessment Survey to determine some of the challenges MSMEs faced as a result of the pandemic. Government thereafter launched its MSME Support Program (MSP) in August 2020 to offer an estimated US $7 million in financial relief through small grants, loans and wage subsidies to enterprises affected by the pandemic.

The Belize Companies and Corporate Affairs Registry (tel: +501 822 0421; email: info@belizecompaniesregistry.gov.bz ; website: https://belizecompaniesregistry.gov.bz  ) is responsible for the registration process of all local businesses and companies.  On line services are available by downloading requisite forms off the Registry’s website, making payments to a local bank and emailing proof of payments. Belize does not operate a single-window registration process.

Businesses must register with the tax department to pay business and general sales tax.  They must also register with their local city council or town board to obtain a trade license to operate a business.  An employer should also register employees for social security.  The 2020 Doing Business report ( http://www.doingbusiness.org  ) estimates it takes on average 48 days to start a company in Belize.  The same report ranks Belize at 135 of 190 economies, losing ten spots compared to 2019.

Outward Investment

Belize does not promote or incentivize outward investments.  Its government does not restrict domestic investors from investing abroad.  However, the Central Bank places currency controls on investment abroad, with Central Bank approval required prior to foreign currency outflows.

Transparency of the Regulatory System

There are no reports that Government policies, processes and laws significantly distort or discriminate against foreign investors.  Nonetheless, some investors have complained of systematic shortfalls including that the regime for incentives did not always meet their needs, that land titles are not always reliable and secure, and that bureaucratic delays or corruption can hinder doing business in Belize. U.S. firms have also identified challenges in participating and competing in areas related to the bidding, procurement and dispute settlement processes, particular to SOEs.

There are no NGOs or private sector associations that manage regulatory processes.  NGOs and private sector associations do lobby on behalf of their members but have no statutory authority.

Regulatory authority exists both at the local and national levels with national laws and regulations being most relevant to foreign businesses.  The cabinet dictates government policies that are enacted by the legislature and implemented by the various government ministries.  There are also quasi-governmental organizations mandated by law to manage specific regulatory processes on behalf of the Government of Belize, e.g. the Belize Tourism Board, BELTRAIDE, and the Belize Agricultural Health Authority.  Regulations exist at the local level, primarily relating to property taxes and registering for trade licenses to operate businesses in the municipality.

Some supra-national organizations and regulatory structures exist.  For example, some elements of international trade affecting U.S. businesses are affected by CARICOM treaties, as in the case of the export of sugar within CARICOM.

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

Draft bills or regulations are generally made available for public comment through a public consultation process.  Once introduced in the House of Representatives, draft bills are sent to Standing Committees, which then meet and invite the public and interested persons to review, recommend changes, or object to draft laws prior to further debate.  The mechanism for drafting bills, enacting regulations and legislation generally apply across the board and include investment laws and regulations.  Public comments on draft legislation are not generally posted online nor made publicly available.  In a few instances, laws are passed quickly without meaningful publication, public review or public debate.

Government does not generally disclose the basis on which it reviews regulations.  Some government agencies make scientific studies publicly available for example studies related to environmental impact assessments.

Some government ministries also make available policies, laws, and regulations pertinent to their portfolio available on their respective ministry websites or Facebook pages.  Printed copies of the Belize Government Gazette contain proposed as well as enacted laws and regulations and are publicly available for a subscription fee.  Additionally, enacted laws are published free of cost on the website of the National Assembly or Parliament but there is a delay of a few weeks in updating the website.

Regulations and enforcement actions are appealable with regulatory decisions subject to judicial review.  The Office of the Ombudsman also may investigate allegations of official wrongdoing but has no legal authority to bring judicial charges.  Reports of wrongdoing are submitted to the affected Ministry. Additionally, the Annual Report of the Ombudsman is tabled before the National Assembly and is a publicly available document.

In March 2021, the Government amended the Central Bank Act authorizing the Central Bank to provide emergency programs and facilities to a wide array of institutions, including banks, financial institutions, statutory corporations and other similar bodies. These emergency programs and facilities will allow for wider array of financial support to businesses, including the “purchase of financial assets including debt, equity and securities, credit facilities or discounting of notes, drafts or bills of exchange.” Through this measure the Government hopes to make available US $25 million in liquidity to invest in the productive sector, particularly in tourism businesses. Additionally, this amendment increased the limit of direct advances that the Central Bank can make to Central Government from 8.5 percent to 12 percent of the previous year’s recurrent revenues.

Further legislative reforms introduced in February 2021 purport to increase transparency with regard to Government finances but are yet to be finalized in the National Assembly. The first was a motion to reconstitute the Public Accounts Committee (PAC) to include three representatives from the social partners. This change will allow for a combined majority to the opposition and social partners representatives. The Committee is chaired by a member of the Opposition. The amendment provides a significant shift to public transparency as the PAC was previously a defunct committee of the legislature where the Government majority ruled. The PAC holds an important function in examining, considering and reporting on Government’s budget and public expenditures as well as reports of the Auditor General. The second motion was an amendment to the Finance and Audit Reform Act that will establish a contingency fund to be used for urgent and unforeseen expenditures for which there are no other provisions. And the third motion will amend the Contractor General Act and establish a Public Contracts Commission to monitor the award and implementation of public contracts and to investigate fraud, corruption, mismanagement, waste or abuse in the award of public contracts.

Information on public finance, both the government’s budget and its debt obligations (including explicit and contingent liabilities) are widely accessible to the general public, with most documents available online.  The budget documents do not include information on contingent or state owned enterprise debt unless Government guarantees or is paying these debts. Nonetheless, the audited annual reports of all major State Owned Enterprises (SOEs) were publicly available on their websites.  The Auditor General’s report on government spending, however, is often years delayed.

International Regulatory Considerations

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

Besides CARICOM, Belize is a member of the Central American Integration System (SICA) at a political level but is not a part of the Secretariat of Central American Economic Integration (SIECA) that supports economic integration with Central America.  Belize is also a member of the WTO and adheres to the organization’s agreements and reporting system.

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

Legal System and Judicial Independence

The Belize Constitution is the supreme law and is founded on the principle of separation of powers with independence of the judiciary from the executive and legislative branches of government.  As a former British colony, Belize follows the English Common Law legal system, which is based on established case law and precedent.

Belize has a written Contract Act, supported by precedents from the national courts as well as from the wider English-speaking and Commonwealth case law.  Contracts are enforced through the courts.  There are specialized courts that deal with family related matters including divorce and child custody, but no specialized courts to deal with commercial disputes or cases.

The judicial system remains independent of the executive branch for the most part.  Case law exists where the judiciary has ruled against the government, and its judgements are respected and authoritative.  The highest appellate court exists outside of Belize at the Caribbean Court of Justice, providing a level of independence for the judiciary.  Notwithstanding, the current judicial system has some systemic problems – frequent adjournments, delays, and a backlog of cases caused by only a small number of judges and justices.  General information relating to Belize’s judicial and legal system, including links to Belize’s Constitution, Laws and judicial decisions are available at the Judiciary of Belize website www.belizejudiciary.org .

Businesses and citizens may appeal regulations and enforcement actions.  Regulatory decisions are also subject to judicial review.  Judgments by the Belize Supreme Court and the Court of Appeal are available at http://www.belizejudiciary.org .

As a Member of the Caribbean Community (CARICOM), Belize is also a member of the Caribbean Court of Justice ( www.ccj.org ) based in Trinidad and Tobago. This Court has two jurisdictions in relation to CARICOM Members States. In its appellate jurisdiction, the CCJ is the final court of appeal for both civil and criminal matters emanating from CARICOM Member States. In its original jurisdiction, this Court is responsible for interpreting and applying the Revised Treaty of Chaguaramas, the treaty establishing the Caribbean Community and CARICOM Single Market and Economy.

Laws and Regulations on Foreign Direct Investment

The country has an English Common Law legal system supplemented by local legislation and regulations.  The legal system does not generally discriminate against foreign investment and there are no restrictions to foreign ownership.  The Exchange Control Act and its subsidiary laws and regulations, however, provide the legal framework that applies to foreign ownership and control. Other laws stipulate that foreign investment can qualify for incentives; citizens have the right to private property; contracts are legally binding and enforceable, and regulations are subject to judicial review among other provisions favorable to foreign investment.

Major laws enacted or amended are generally available in the National Assembly’s website at www.nationalassembly.gov.bz .  For the previous year, these include:

• International Banking Act
• Deposit Insurance Act
• Mutual Administrative Assistance in Tax Act
• Electronic Transactions Amendment Act
• Cybercrime Act

There is no “one-stop-shop” website for investment and the laws, rules, procedures, and reporting requirements related to investors differ depending on the nature of the investment.  BELTRAIDE provides advisory services for foreign investors relating to procedures for doing business in Belize and incentives available to qualifying investors.  Further information is available at the BELTRAIDE website:  http://www.belizeinvest.org.bz 

Competition and Antitrust Laws

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

Expropriation and Compensation

The Government has used the right of eminent domain in several cases to appropriate private property, including land belonging to foreign investors.  There were no new expropriation cases in 2020. However, claimants in previous cases of expropriation assert that the Government failed to adhere to agreements entered into by a previous administration.  Belizean law requires that the government assess and compensate according to fair market value.  Expropriation cases can take several years to settle and there are a few cases where compensation is still pending.  Belize nationalized two companies in public-private partnership: Belize Electricity Limited and Belize Telemedia Limited.  These actions were challenged in the courts and resolved in 2015 and 2017, respectively.

Dispute Settlement

ICSID Convention and New York Convention

Belize formally acceded to the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) on March 15, 2021. Even though the Convention was extended to Belize by an act of the United Kingdom when Belize was a colony, Belize did not sign on to the Convention after independence.

The Arbitration Act governs arbitration and expressly incorporates three international conventions into domestic law.  These conventions include the 1923 Geneva Protocol on Arbitration Clauses; the Convention on the Execution of Foreign Arbitral Awards; and the New York Convention.  A 2013 Caribbean Court of Justice judgment also upheld the Arbitration Act giving effect to the New York Convention in domestic law.

The United Kingdom on behalf of Belize signed the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID convention) in 1965 and the country has not ratified it.

Investor-State Dispute Settlement

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

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

Over the past decade, the Government of Belize has been involved in approximately five to eight investment disputes with one involving a U.S. company.  Most cases were initially entered in arbitration panels, but were eventually appealed either before the U.S. District Court of Columbia or the Caribbean Court of Justice (CCJ).  Most of the judgments went against the Government, which has settled the majority and continues to settle other cases.

Local courts are empowered to recognize and enforce foreign arbitral awards against the government, but these are generally challenged up to the CCJ.  The Crown Proceedings (Amendment) Act and the Central Bank of Belize (International Immunities) Act were passed in 2017, affecting the enforcement of foreign arbitral awards against the government.  Essentially, the Crown Proceedings Amendment Act provides that should a foreign judgment be entered against the government, but a court in Belize later declares the judgement “unlawful, void or otherwise invalid”, the foreign judgment would be legally set aside.  The Act also provides for hefty penalties of fines and/or imprisonment on a person, individual or legal, seeking to enforce the foreign judgment after being set aside.  The Central Bank (International Immunities) Act restates the immunity of the Central Bank of Belize assets “from legal proceedings in other states.”  This Act similarly provides for penalties of fines and/or imprisonment on a person, individual or legal, which initiates any such proceedings.

There has not been a history of extrajudicial actions against foreign investors.

International Commercial Arbitration and Foreign Courts

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

Local courts are empowered to recognize and enforce foreign arbitral, but these are generally challenged up to the Caribbean Court of Justice (CCJ).

Cases involving State Owned Enterprises (SOEs) have gone before domestic courts with rulings both in favor and against the SOE.  Foreign businesses generally consider these rulings fair and impartial.

Bankruptcy Regulations

The Bankruptcy Act of Belize provides for bankruptcy filings.  The Act provides for the establishment of receivership, trustees, adjudication and seizures of the property of the bankrupt.  The court may order the arrest of the debtor as well as the seizure of assets and documents in the event the debtor may flee or avoid payment to creditors.  The Act also provides for imprisonment on conviction of certain specified offenses.  The Director of Public Prosecutions may also institute proceedings for offenses related to the bankruptcy proceedings.   The bankruptcy law generally outlines actions a creditor may take to recoup his losses.  Bankruptcy protections are not as comprehensive as U.S. bankruptcy law.

Belize ranked 135 of 190 economies in the 2020 World Bank’s Doing Business Report.  The poor ranking was attributed to low depth of credit information, the lack of a credit bureau and of a collateral registry as well as problems related to payment of debts in situations of bankruptcy.  According to this report, a receivership proceeding takes at least two years until the creditor is repaid all or part of the money owed and has a cost of 22.5 percent of the debt.  Additionally, the insolvency procedure does not have a good framework to commence operations, to manage debtor´s assets, and to involve creditors in the reorganization proceedings, among others.

Capital Markets and Portfolio Investment

Belize’s financial system is small with little to no foreign portfolio investment transactions.  It does not have a stock exchange and capital market operations are rudimentary.  The government securities market is underdeveloped and the market for corporate bonds is almost non-existent.

Temporary restrictions are currently in place for certain current international transactions that relate to the IMF’s Article VIII obligation not to restrict payments and transfers for current international transactions.

Additionally, credit is made available on market terms with interest rates largely set by local market conditions prevailing within the commercial banks.  The credit instruments accessible to the private sector include loans, overdrafts, lines of credit, credit cards, and bank guarantees.  Foreign investors can access credit on the local market.  Under the International Banking Act, foreign investors/nonresidents may access credit from international banks registered and licensed in Belize. However, permission to access credit from the domestic banks requires Central Bank approval.

The Belize Development Finance Corporation (DFC), a state-owned development bank, offers loan financing services in various sectors.  To qualify for a loan from DFC, an individual must be a Belizean resident or citizen, while a company must be majority 51 percent Belizean owned.  The National Bank of Belize is a state-owned bank that provides concessionary credit primarily to public officers, teachers, and low income Belizeans.

Money and Banking System

A financial inclusion survey undertaken by the Central Bank of Belize in 2019 showed that approximately 65.5 percent of adult Belizeans had access to a financial account.  Belize’s financial system remains underdeveloped with a banking sector that may be characterized as stable but fragile.  The Central Bank of Belize (CBB) ( https://www.centralbank.org.bz ) is responsible for formulating and implementing monetary policy focusing on the stability of the exchange rate and economic growth.

The Central Bank of Belize in November 2020 approved the sale of Scotia Bank Belize Limited by the Caribbean International Holdings Limited, the parent company Belize Bank Limited. The approval effectively makes the controversial Lord Ashcroft’s Belize Bank Limited the largest bank in the country. Concerns were initially raised on the possible effects on Belize’ correspondent banking situation and the potential withdraw of foreign exchange from the banking system.

To respond to the economic fallout caused by the COVID-19 pandemic, the Central Bank in April 2020 reduced the statutory liquid asset and cash reserve requirement by two percent points in an effort to expand liquidity and facilitate credit flow in the economy. In March 2021, the Government amended the Central Bank Act authorizing the Central Bank to provide emergency programs and facilities to a wide array of institutions including banks, financial institutions, statutory corporations and other similar bodies. These emergency programs and facilities will allow for wider array of financial support to businesses including the “purchase of financial assets including debt, equity and securities, credit facilities or discounting of notes, drafts or bills of exchange.” Through this measure the Government hopes to make available US $25 million in liquidity to invest in the productive sector, particularly in tourism businesses.

Additionally, this amendment increased the limit of direct advances that the Central Bank can make to Central Government from 8.5 percent to 12 percent of the previous year’s recurrent revenues.

Other measures which the Central Bank has put in place in the last year, to position the banking sector withstand shocks include several guidance to ease banking customers’ debt service payments like moratoria on interest and principal payments, consolidating and restructuring credit facilities, waiving loan, credit, and penalty fees. The Central Bank also issued guidance whereby forbearance measures to extend to December 2021.

Generally, there are no restrictions on foreigners opening bank accounts in Belize.  However, persons seeking to open a bank account must comply with Central Bank regulations. Regulations differ based on residency status and whether the individual is seeking to establish a local bank account or a foreign currency account.   Foreign banks and branches are allowed to operate in the country with all banks subject to Central Bank measures and regulations.  Since 2015, all banks have regained correspondent banking relations.  These relationships are still tenuous, with delays in transactions, and fewer services offered at higher costs.

In the last few years, Belize has enacted a number of reforms to strengthen the anti-money laundering and counterterrorism-financing regime, including amendments to the Money Laundering and Terrorism (Prevention) Amendment Act and the International Business Companies (Amendment) Act.  In addition, the National Anti-Money Laundering Committee (NAMLC) is headed by the Financial Intelligence Unit with inter-agency support from key financial and law enforcement authorities.

Foreign Exchange and Remittances

Foreign Exchange

Belize has a stable currency, with the Belize dollar pegged to the United States Dollar since May 1976 at a fixed exchange rate of BZ $2.00 to the US $1.00.

The Government of Belize has established currency controls, and foreign investors seeking to convert, transfer, or repatriate funds must comply with Central Bank regulations.  Foreign investments must be registered at the Central Bank to facilitate inflows and outflows of foreign currency.  Foreign investors must register their inflow of funds to obtain an “Approved Status” for their investment and generally are approved for repatriation of funds thereafter. Additionally, he Exchange Control Regulation Act was amended in 2020 to relax the requirement for non-residents to obtain prior permission from the Central Bank to conduct transaction in securities and real estate. The amendment now provides for prior written notice to the Central Bank with full particulars of the transaction.

Businesses complained that foreign exchange shortages in 2020 constrained both local and foreign operations as the Central Bank of Belize tighten measures to obtain approval for foreign exchange. As such domestic banks prioritized foreign exchange sales to ensure that payments for essential goods and services are covered.

Remittance Policies

As mentioned above, foreign investors must obtain an “Approved Status” for their investment and register their inflow and outflow of funds with the Central Bank. Additionally, the Exchange Control Regulation Act was amended in 2020 to relax the requirement for non-residents to obtain prior permission from the Central Bank to conduct transaction in securities and real estate. The amendment now provides for prior written notice to the Central Bank with full particulars of the transaction.

Generally, there are no time limitations on remittances.  Where there is a waiting period, it depends on the availability of foreign exchange, but does not generally exceed 60 days. The Central Bank however, placed a temporary suspension on all payments of cash dividends and repatriation of profits effective December 29, 2020 to June 30, 2021.

Sovereign Wealth Funds

Belize does not have a sovereign wealth fund.

State Owned Enterprises (SOEs) exist largely in the utilities sectors, usually as a result of the government nationalization.  The Government is the majority shareholder in the Belize Water Services Limited, the country’s sole provider of water services, the Belize Electricity Limited, the sole distributor of electricity, and the Belize Telemedia Limited, the largest telecommunications provider in the country. The Public Utilities Commission regulates all utilities.

To staff these companies’ boards of directors, SOEs usually select senior government officials, members of local business bureaus and chambers of commerce, labor organizations, and quasi-governmental agencies.  The board serves to direct policy and shape business decisions of the SOE that is ostensibly independent.  Current and previous administrations have been accused of nepotism and cronyism, and have been criticized for having conflicts of interest when board members or directors are also represented in organizations that do business with the SOEs.

There is no published list of SOEs.  The following are the major SOEs operating in the country.  Information relating to their operations is available on their websites:

• Belize Electricity Limited at ;
• Belize Telemedia Limited at ;
• Belize Water Services Limited at

There are no third-party market analysis sources that evaluate whether SOEs receive non-market advantages by the government.  The Belize Electricity Limited and the Belize Water Services Limited are the only service providers in their respective sectors.  The Belize Telemedia Services, on the other hand, competes with one other provider for mobile connectivity and there are multiple players that provide internet and data services.  U.S. firms have identified challenges in participating and competing in areas related to the bidding, procurement and dispute settlement processes, particular to SOEs.

Privatization Program

The Government does not currently have a privatization program.

Belize has traditionally enjoyed one of the most stable political environments in the region, having held peaceful and transparent democratic elections since independence on September 21, 1981.  In general elections, the two major political parties usually trade leadership. The current People’s United Party gained an overwhelming majority in the November 2020 General Elections, winning twenty-six of the thirty-one electoral divisions. At the municipal level, elections were held in March 2021 and the People’s United Party again won all nine municipalities.  The two parties are not strongly divergent in policy, being viewed largely as center-left and center-right, with party affiliation largely following family and place of origin.

Incidents including damage to projects or installations affecting investments in Belize are rare.

In November 2014, the Belize Sugar Cane Farmers Association (BSCFA) and American Sugar Refineries (ASR) failed to reach a contract agreement before the harvesting season.  While the dispute was eventually resolved, there were some reports of fields being burned and farmers being threatened for breaking ranks with BSCFA.

Neighboring Guatemala’s long-standing territorial claim on Belize has persisted for almost two centuries and has caused international political insecurity.  After the proposed OAS simultaneous referenda failed to materialize in 2013, Guatemala and Belize held separate referenda in April 2018 and in May 2019, respectively, each agreeing to refer the dispute to the ICJ.  In its Memorial of December 2020, Guatemala filed its case before the ICJ claiming Belize’s continental land, islands, and seas. Belize will file its Counter Memorial in June 2022. Parallel to the ICJ process, both Governments continue efforts to reestablish amicable relations which have been strained in recent years due to incursions and natural resources extraction by Guatemalan citizens along bordering areas. Confrontations between Guatemalan nationals and Belize law enforcement authorities on Belizean territory and Belizean nationals and Guatemalan law enforcement authorities in the southern Sarstoon waters have contributed to strained relations.

The second major security concern is the high level of crime countrywide.  Some incidents are gang related while others are random target against innocent civilians and tourists.  While Belize has an unusually high murder rate per capita, violent crime has not historically targeted American citizens or businesses.

Turf and local gang-related crimes are often concentrated in south side Belize City.  Nonetheless, Belize is seeing a nationwide emergence of MS-13, likely a result of gang members fleeing El Salvador.  Although a small presence at this time, these gang members easily integrate into established El Salvadorian communities in Belize resulting in sporadic violence.  Gang-related criminal activities increase the burden on an already stressed and under-resourced police force.

* Source for Host Country Data:

The IMF’s Coordinated Direct Investment Survey does not have Belize data related to Inward and Outward Direct Investment.  Statistics on foreign direct investments in Belize by country of origin is limited, including the total invested by U.S. investors.  The Central Bank of Belize recorded total inflows of FDI at US $98.86 million in 2020 and outflows at US $27.1 million in the same period.  Major sources of FDI include the United States, Canada and the United Kingdom.  FDI inflows were concentrated primarily in construction, real estate, hotel and restaurant and financial intermediation.
Table 3: Sources and Destination of FDI
Data not available

Table 4: Sources of Portfolio Investment
Data not available

Policies Towards Foreign Direct Investment

The 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

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.

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.

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.

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

Table 4: Sources of Portfolio Investment
Data not available.

Policies Towards Foreign Direct Investment 

Bermuda welcomes foreign direct investment (FDI). The Bermuda Business Development Agency (BDA) is an independent, public-private partnership, funded by both the Bermuda Government and the private sector. The agency is governed by a Board of Directors comprised of senior industry professionals representing the diversity of Bermuda’s financial services sector.  The BDA carries out pro-active, targeted marketing and business development strategies to stimulate growth in the Bermuda economy and create and maintain jobs. (http://bda.bm)

The BDA acts as a partner for existing Bermuda-based companies and assists entities that are considering establishing operations in Bermuda. It connects prospective companies with industry partners and relevant representatives in the Bermuda Monetary Authority (BMA) and the Bermuda Government’s Business Development Unit, making formal introductions, troubleshooting, and communicating with clients to simplify the process. The BDA has segmented its business development efforts into four distinct pillars or industry areas of focus: Risk (insurance, reinsurance, captives, and insurance linked securities), Asset Management, Trust & Private Client, and International Commerce (technology, international markets, etc.). These are key sectors of the Bermuda marketplace, or areas for potential growth, and the BDA has separate business development managers, strategies and goals for each.

Limits on Foreign Control and Right to Private Ownership and Establishment 

The 60/40 rule in Bermuda requires all companies to be controlled by at least 60% Bermudians. In February 2020, the Bermuda Government proposed to introduce a bill that will reduce the current required ownership regulations for a local company from 60% owned by a Bermudian, to 40%, as outlined in the 2020 Budget Report, to help stimulate and promote economic competition.

Some local businesses support relaxing the 60/40 rule to encourage FDI, increase liquidity in the local market, and boost the economy. Other businesses oppose it out of concern that they might not be able to compete with majority foreign-owned businesses.

In addition to ownership regulations, there are restrictions governing ownership of land by businesses.

‘Control’ is defined as the percentage of Bermudian directors, and the percentage of its shares beneficially owned by Bermudians, in the company being not less than 60% in each case. Amendments are expected to create more opportunities and foreign investments by Permanent Resident Certificate (PRC) holders who reside on the island.

Local companies can be exempted from the 60/40 rule by obtaining a license (pursuant to section 114B of the Companies Act) from the Minister of Finance, who decides if the granting of a license is in the best interest of the country. When considering an application for a Section 114B license, the Minister considers:

• The economic situation in Bermuda and the due protection of persons already engaged in business in Bermuda.
• The nature and previous conduct of the company and the persons having an interest in the company whether as directors, shareholders or otherwise.
• Any advantage or disadvantage which may result from the company carrying on business in Bermuda.
• The desirability of retaining in the control of Bermudians the economic resources of Bermuda.

Certain activities are excluded from the requirement of a license, including:

• Doing business with other exempted undertakings (e.g., exempted companies, permit companies, exempted partnerships and exempted unit trust schemes) in furtherance of the business of the exempted company that is being conducted outside Bermuda.
• Dealing in securities of exempted undertakings, local companies, or partnerships; and
• Carrying on business as manager or agent for, or consultant or advisor to, any exempted company or permit company which is affiliated (whether or not incorporated in Bermuda) with the exempted company or an exempted partnership in which the exempted company is a partner or, in the case of mutual funds, selling or distributing their shares in Bermuda.

In 2012 local companies were exempted from the 60/40 rule if its shares were listed on a designated Stock Exchange, the company conducted business in a material way in a ‘prescribed industry,’ or if the company was a wholly owned subsidiary of such a listed company.

The prescribed industries are capital-heavy and include, inter alia, telecommunications, energy, insurance, hotel operations, banking, or international transportation services (by ship or aircraft).

Other Investment Policy Reviews 

Bermuda is a World Trade Organization (WTO) member through the United Kingdom. Bermuda has not conducted an investment policy review through the OECD, WTO, or UNCTAD within the past three years.

Business Facilitation 

The Investment Business Act 2003 is the statutory basis for regulating investment business in Bermuda. The act provides a licensing regime for any person or entity (unless otherwise exempted or excluded) engaging in investment business, as defined by the act, either in or from Bermuda.

There are several options for registering a business in Bermuda which depend on the nature of the business and whether business will be conducted in the local market. The Registrar of Companies (ROC) is responsible for the day-to-day responsibilities regarding the administration of companies including name reservation, fees, insolvency and real estate. (https://www.gov.bm/department/registrar-companies).

Formation of a limited company, partnership or LLC, which does not require consent of the Minister of Finance may be accomplished within one day after an application is received. Where a business requires the consent from the Minister, the processing time can take up to one week. The ROC reviews all information relating to the company, and all personal declarations from the proposed beneficial owners.

The Bermuda Government requires those seeking to establish a limited company, partnership or LLC, to get assistance from a law firm, accounting firm, or corporate service provider (CSP) located in Bermuda for guidance on completing steps towards establishing a company, including:

• Name reservation
• Disclosure and vetting of proposed beneficial owners of the company, including personal declarations where required
• Drafting the Memorandum of Association and byelaws of the company
• Based on the nature of the proposed business activities, any license or permit applications required to be submitted
• Selecting a registered office in Bermuda
• Selection of directors, officers, and company secretary
• Payment of government fees
• Regulations for the emerging Fintech industry have been established. Fintech Bermuda offers information to assist those seeking to establish a digital business on the island (https://fintech.bm/start-a-business/) In 2018, the Government of Bermuda established the Digital Asset Business Act, which outlines the foundation for the government’s regulatory approach towards the industry. The Bermuda Business Development Agency (BDA) also provides guidance for those seeking to establish a digital business on the island and can provide information about immigration, tax and social insurance applications. The BDA also liaises with the Bermuda Monetary Authority, Department of Immigration, Ministry of Finance, Fintech Business Unit and ROC as needed for new incorporations and to monitor the processing of new applications.

Outward Investment 

Bermuda is not involved in outward investment.

Transparency of the Regulatory System 

Bermuda is a cooperative jurisdiction and practices ethical transparency standards. Bermuda’s legal, regulatory and accounting systems adhere to a high level of transparency, compliance, cooperation and exchange of information.

Bermuda is a member of regulatory standard-setting bodies for banking (via the Basel Committee on Bank Supervision), insurance (via the International Association of Insurance Supervisors or IAIS), and investment business (via the Financial Services Authority or FSA).  In December 2013, Bermuda signed the Foreign Account Transaction Compliance Act (FATCA) Intergovernmental Model 2 Agreement with the U.S. to promote transparency on tax matters, having concluded a FATCA-type agreement with the UK in the previous month.  Bermuda financial institutions now automatically transmit FATCA information to the U.S. and UK.

The BMA is the sole regulatory body for financial services, responsible for the licensing, supervision, and regulation of financial institutions conducting deposit-taking, insurance, investment, and trust business on the island.  The Bermuda Government continues to strengthen its anti-money laundering and anti-terrorism financing (AML/ATF) framework to ensure a high level of compliance with international standards.  Amendments to the Proceeds of Crime Act in 2013 created an obligation to report suspicions of money laundering or terrorist financing and to allow civil proceedings before the Supreme Court for the recovery of property obtained through unlawful conduct. Neither unlicensed nor unregistered entities are permitted to operate in the financial services sector.

Bermuda’s Financial Intelligence Agency is a member of the Egmont Group of Financial Intelligence Units.  It shares information with other agencies, within and outside Bermuda.  The BMA Amendment (No. 3) Act 2004 clarified the power of the BMA to share information with other overseas authorities.  Other laws that authorize the sharing of information with overseas regulators include the Banks and Deposit Companies Act 1999, the Trusts (Regulation of Trust Business) Act 2001, and the Investment Act 2003.

The Investment Business Amendment Act 2012, the Trust (Regulation of Trust Business) Amendment Act 2012, and the Banks and Deposit Companies Amendment Act 2012 regulate investment businesses, trusts, and banks in the areas of civil penalties, public censure, prohibitions against providing certain services, and publication of decisions.  The Investment Business Act 2003 granted the BMA stronger intervention powers, including the ability to cooperate with foreign bodies, while the Investment Business Investment Act 2012 brought the Bermuda Stock Exchange (BSX) under the regulation of the BMA.  Other provisions provide for criminal penalties, e.g., the Banks and Deposit Companies Amendment Act.

The BMA regulates collective investment schemes (CIS).  The 1997 Proceeds of Crime Act (POCA) and the 2006 Investment Funds Act (IFA) regulate fund administrators. CIS are also subject to IFA, which clarifies and codifies the current regulation of funds in order to strengthen Bermuda’s position in the international funds market.

For more information and a list of Bermuda laws, visit www.bermudalaws.bm. For draft legislation and bills, visit, http://www.parliament.bm.

International Regulatory Considerations 

In February 2020, EU Finance Ministers (ECOFIN) listed Bermuda as a ‘cooperative jurisdiction’ with respect to tax good governance. ECOFIN endorsed the assessment of the European Commission and the EU’s Code of Conduct Group on Business Taxation (CoCG) that Bermuda has met its commitments to address concerns raised by the EU in 2019, relating to economic substance requirements. The announcement followed Bermuda’s placement on the EU’s ‘Blacklist’ of uncooperative jurisdictions and ‘Grey-list’ respectively, for jurisdictions that have undertaken sufficient commitment to reform tax policies. The Government reported that the listings were a result of a technical error in its submission to the EU and not because of regulation standards.

Legal System and Judicial Independence 

Bermuda’s legal system is based on the English common law of England and Wales and has a Westminster form of government. The Judiciary is established by the Bermuda Constitution as a separate and independent branch of government and is considered to be competent, fair and reliable. The court system is made up of the Court of Appeal, Supreme Court and Magistrates’ Court. There is a specialized Commercial Court within the Supreme Court which also includes civil matters. The final appeal stage is the UK’s Privy Council. Bermuda’s legal system marked its 400th anniversary in 2016.

Laws and Regulations on Foreign Direct Investment 

The Bermuda Monetary Authority (BMA) acts as Bermuda’s principal regulatory body. It is responsible for processing applications for incorporation and approving the issue of shares. It approves the beneficial ownership of all entities created in Bermuda and supervises and regulates the financial services sector. The BMA also acts as a central bank, advising the government on banking, financial and monetary matters. www.bma.bm

The Registrar of Companies, previously a department of the Ministry of Finance, is now a division of the Bermuda Monetary Authority. It monitors and regulates all companies operating within Bermuda. The Registrar’s responsibilities include incorporating and registering new companies and international partnerships, granting licenses to allow overseas companies and partnerships to do business on the Island, collecting and storing public documents such as prospectuses, and registering charges against companies.

The BMA also assists other authorities in Bermuda to detect and prevent financial crime and develops risk-based financial regulations that it applies to the supervision of Bermuda’s banks, trust companies, investment businesses, and insurance companies. The Companies Act 1981 as amended is the principal statute governing the formation and operation of Bermuda companies and foreign investment.

Compliance with Organization for Economic Cooperation and Development (OECD) guidelines that seek to eliminate separate regulatory regimes for local and international companies may have been a factor contributing to the decision to ease ownership restrictions. The Limited Liability Company Act was passed in 2016, which introduced the limited liability company (LLC) vehicle, a hybrid entity which merges characteristics of both a partnership and a company limited by shares, for the first time ever in Bermuda. This provides a useful alternative structuring option to complement the existing choice of vehicles available in Bermuda. 2016 also saw the introduction of the Contracts (Rights of Third Parties) Act 2016 modelled on the UK equivalent which allows parties to vary the common law doctrine of privacy of contract. Bermuda is the leading market for the relatively recent mass influx of insurance-linked securities, catastrophe bonds and other alternative risk transfer vehicles. Insurance-linked funds converge the investment funds industry and insurance/reinsurance industry, and Bermuda is by far the most popular jurisdiction for ILS-linked fund managers with approximately US$55 billion in aggregate under management in Bermuda.

Bermuda continues to promote transparency and global compliance standards and has adopted the OECD’s Common Reporting Standard as an early adopter jurisdiction which took effect on 1 January 2016. In April 2016, Bermuda became the 33rd signatory of the Multilateral Competent Authority Agreement for Country-by-Country reporting which is a component of the OECD’s base erosion and profit shifting (BEPS) project.

Bermuda’s commercial (re)insurance regime also became fully equivalent with Directive 2009/138/EC on the taking-up and pursuit of the business of insurance and reinsurance (Solvency II Directive), as amended in 2016 meaning Bermuda has “third-country equivalence”. This is a significant step for Bermuda and Bermuda commercial reinsurers, insurers and insurance groups as it ensures that they are on equal footing when operating in Europe or globally.

Recent company law changes mean that Bermuda companies are now required to file director information with the Registrar of Companies to be held in a central database that will be open to public inspection and 2016 saw the implementation of the requirement by the Bermuda Monetary Authority for Bermuda’s corporate service providers to be licensed and regulated.

https://uk.practicallaw.thomsonreuters.com/2-607-8906?transitionType=Default&contextData=(sc.Default)&firstPage=true&comp=pluk&bhcp=1

Competition and Anti-Trust Laws 

The Regulatory Authority promotes fair business practices and promotes sustainable competition in the telecommunications sector, covering services such as fixed and mobile telephone, long distance, internet access and subscription television and Regulate electricity licensees to ensure compliance with the provisions of the Electricity Act 2016.

The Registrar of Companies, now a division of the Bermuda Monetary Authority, monitors and regulates all companies operating within Bermuda.

Expropriation and Compensation 

The Housing Loan Insurance (Mortgage) Regulations 1984 and the Municipalities Act 1923 regulate expropriations. There is no history of expropriation in Bermuda without proper compensation and no expropriator acts against foreign investors.

Dispute Settlement 

ICSID Convention and New York Convention

Through the United Kingdom, Bermuda has ratified the convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention).  Under the convention, foreign arbitral awards are enforceable within Bermuda’s domestic courts. Likewise, under the United Kingdom, Bermuda is also a member state to the International Centre for Settlement of Investment Disputes (ICSID Convention).

Bankruptcy Regulations 

The Bankruptcy Act 1989, the Companies Act 1981, and the Companies (Winding Up) Rules 1982 govern bankruptcy and the winding-up of companies. The Supreme Court (the first instance court of general jurisdiction) administers the bankruptcy process. A foreign creditor may apply for the bankruptcy of an individual or for the winding-up of a company provided the creditor follows the procedures set out in the aforementioned statutes.

Capital Markets and Portfolio Investment 

The Bermuda Stock Exchange (BSX) offers a variety of domestic and international listing options. Established in 1971, the BSX is globally recognized for commercially sensible listing requirements and partners with the Bermuda Monetary Authority (BMA) and Bermuda Business Development Agency (BBDA) to further develop Bermuda’s reputation.

Bermuda does not have a central bank, but the BMA issues and redeems notes and coins, supervises, regulates, and inspects financial institutions which operate in or from Bermuda, and generally promotes the financial stability and soundness of financial institutions.  The BMA does not, however, determine interest rates, which are set by the market, regulated by the Ministry of Finance, and usually follow the Federal Reserve System rates.

Bermuda does not have developed capital markets and does not control monetary policy.  Commercial credit lines are normally arranged through U.S. or other overseas institutions.  Credit is allocated on market terms, and foreign investors may get credit on the local and international markets.  The private sector has access to various credit instruments via local banks.  Many companies, particularly the larger ones, maintain external banking relationships.

Money and Banking System 

Bermuda is a highly successful offshore financial center. The Bermuda Monetary Authority (BMA) oversees financial services with a risk-based approach to the regulation and supervision of banks and deposit companies in Bermuda. The regulatory and supervisory framework is supported by principal legislation, The Banks and Deposit Companies Act 1999, which is regularly supplemented with updated statements of principles, policy and guidance.

There are four banks on the island – HSBC Bank Bermuda Ltd., Clarien Bank Ltd., Bank of Butterfield Ltd. and Bermuda Commercial Bank.

The BMA published the ‘Basel III for Bermuda Banks – Final Rule’ effective from 1 January 2015, which was updated in November 2017. The Authority’s final Basel III document outlines a range of new capital and liquidity standards as prescribed by the Basel Committee on Banking Supervision (BCBS). The Authority has adopted all three pillars as proposed by Basel III: i) Pillar I – minimum capital requirements; ii) Pillar II – supervisory review process; and iii) Pillar III – market discipline.

Whilst the final Basel III rules supersede Basel II, elements of Basel II and corresponding guidance will remain in force subject to future revisions, and as such relevant components of the Authority’s ‘Revised Framework for Regulatory Capital Assessment’ remain applicable.

Guidance for Basel III and Basel II can be found at, https://www.bma.bm/document-centre/policy-and-guidance-banking 

The BMA updated its regulatory framework in response to new international standards proposed by the Basel Committee. The following changes were introduced throughout 2018 and 2019:

• Net Stable Funding Ratio (NSFR) as a new component to our liquidity requirements
• Revisions to our stress testing guidance to include new standards around Interest Rate Risk in the Banking Book (IRRBB)
• New required forms and templates for the Pillar 3 Disclosure requirement
• Transitional arrangements for the regulatory treatment of new accounting standards around provisions

The BMA helped to establish a Banking Liaison Panel (BLP) in 2017 – a statutory body contemplated in the Banking (Special Resolution Regime) Act 2016. In addition, the Authority joined the IAIS Resolution Working Group with a view to commencing work on a special resolution regime for large international insurers.

The Banks and Deposit Companies Act 1999 implemented the Base Committee’s Core Principles for Effective Banking Supervision.  Bermuda banks are compliant with the Basel II Accord and have either implemented or are moving toward full implementation of Basel III.

Supervision is intended to assist the Authority with assessing the ongoing financial viability of a money service provider, the fitness and propriety of its management, the prudent conduct of its business and its compliance with the Money Service Business Act 2016 (the Act).

The BMA’s supervision of money service businesses involves regular meetings with senior management of licensed firms, together with scrutiny of financial and statistical information in connection with the institution’s business activities and periodic compliance visits to the institution’s premises. In addition to prudential assessments, a review of compliance in relation to the Proceeds of Crime (Anti-Money Laundering and Anti-Terrorist Financing) Regulations 2008 also forms part of the Authority’s visits.

The Authority expects licensed institutions to cooperate fully in providing all relevant information and documents without its having routine recourse to legal powers as provided under the Act.

Section 2 of the Act defines money service business as “the business of providing any or all of the following services to the public”, including:

• Money transmission services.
• Cashing checks which are made payable to customers and guaranteeing checks.
• Issuing, selling or redeeming drafts, money orders or traveler’s checks for cash.
• Payment services business.
• Operating a bureau de change whereby cash in one currency is exchanged for cash in another currency.”

Institutions licensed under the Banks and Deposit Companies Act 1999 are exempted from the Act. In addition, where a company provides any of the services listed above as an ancillary service to its clients and does not levy a separate charge, the Authority is not likely to treat such an activity as being within scope of the Act. For further details, please refer to section 7 of the Guidance Notes.

The Digital Asset Business Act 2018 (the Act) is the statutory basis for regulating Digital Asset Business (DAB) in Bermuda. The Act provides for a licensing regime for any person or undertaking (unless otherwise exempted) which carries out any of the following activities:

• Issuing, selling or redeeming virtual coins, tokens or any other form of digital assets.
• Operating as a payment service provider business utilizing digital assets which
• Includes the provision of services for the transfer of funds.
• Operating as an electronic exchange.
• Providing custodial wallet services.
• Operating as a digital asset’s services vendor.

According to the Act, “digital asset” means anything that exists in binary format and comes with the right to use it and includes a digital representation of value that—

• Is used as a medium of exchange, unit of account, or store of value and is
• Not legal tender, whether or not denominated in legal tender;
• Is intended to represent assets such as debt or equity in the promoter;
• Is otherwise intended to represent any assets or rights associated with such assets; but does not include—
• A transaction in which a person grants value as part of an affinity or rewards program, which value cannot be taken from or exchanged with the person for legal tender, bank credit or any digital asset, or a
• Digital representation of value issued by or on behalf of the publisher and used within an online game, game platform, or family of games sold by the same publisher or offered on the same game platform.

There have been notable employment changes at the Rosebank location of Butterfield Bank. Eleven positions were made redundant in April 2019 and over thirty employees accepted early retirement packages. It was reported that the closure was a result of increased use of electronic services, causing a fifty percent reduction in the volume of in-person transactions. Butterfield Bank has three other locations on the island that are still operating at full capacity.

Foreign Exchange and Remittances 

Foreign Exchange

The Bermuda Dollar (BMD) is interchangeable with U.S. currency with an exchange rate of 1:1. Both currencies are freely interchangeable and transferable without any restrictions.

The BMA issues Bermuda’s national currency and manages exchange control transactions. It administers the Exchange Control Act 1972 that states that no capital or exchange controls apply to non-residents or to the various forms of offshore entities, which are free to import and export funds in all currencies.

The Exchange Control Regulations 1973 and the Companies Act 1981 regulate the issue, transfer, redemption, and repurchase of securities.  For exchange control purposes, the BMA must give prior approval for issues to and transfers of securities in Bermuda companies involving non-residents, except where general permission has been granted pursuant to the Notice to the Public of June 2005.

The 2009 Proceeds of Crime (Anti-Money Laundering and Anti-Terrorist Financing) Amendment gave the BMA the authority to oversee all money transactions involving wire transfers.  The act requires financial institutions to verify the accuracy and completeness of the information on the payer before authorizing the transfer of funds. The institution must also retain all the records pertaining to the transaction for a period of no less than five years.  In 2013, amendments created an obligation to report suspicious money transactions which could possibly be linked to money laundering or to monies being used to fund terrorism. It established a civil proceeding before the Supreme Court for the purpose of recovering money obtained through unlawful conduct.

In 2009, Bermuda updated the 1898 Revenue Act to strengthen the requirements related to cross-border transporting of currency and negotiable instruments.  The threshold was set at USD 10,000, after a financial transaction surpasses that amount; the financial institution is automatically required to report the transaction.  Passengers arriving to Bermuda (regardless of point of embarkation) must complete a mandatory declaration form. This mandatory disclosure system applies to all outgoing passengers traveling to the U.S., Canada, and the UK.

The 2010 Foreign Currency Purchase Tax Amendment Act is applied to the purchase of all non-local currencies, including the USD.

Bermuda is a member of the Caribbean Financial Action Task Force (CFATF), an organization of states and territories of the Caribbean basin which have agreed to implement common countermeasures against money laundering, and it is listed under the 2014 International Narcotics Control Strategy Report (INCSR) as being a monitored country.

The Bermuda Financial Network (BFN) Limited is a local international financial services firm. Its main objective is to facilitate banking transactions for consumer and business including e-commerce and money service businesses. In May 2008, the BFN was granted a Money Service Business License from the Bermuda Monetary Authority (BMA) in conjunction with the launch of its Western Union agency in Bermuda which offers international money transfer services. The BFN provides guidance on compliance policies and procedures with local regulations. Money transfer services are popular among foreign workers looking to send funds to their families overseas. The Money Shop is another business providing financial services in Bermuda with money transfer options through MoneyGram or wire transfers.

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

Remittance Policies

The Bermuda Financial Network (BFN) Limited is a local international financial services firm. Their main objective is to facilitate banking transactions for consumer and business including e-commerce and money service businesses. The BFN provides guidance on compliance policies and procedures with local regulations. Money transfer services are popular among foreign workers looking to send funds to their families overseas through businesses including The Money Shop, MoneyGram and Western Union.

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

Sovereign Wealth Funds 

Not applicable/information unavailable.

Bermuda has some traditional state-owned enterprises (SOEs) that compete with the private sector, including public transit, waste management, and the postal service.  Governance of SOEs is led by a politically appointed Cabinet Minister.  SOEs must provide financial information to the Minister, who submits the information annually to the Auditor General.  Most are prohibited from having a board of directors but may have an advisory board.

Bermuda also has quasi-autonomous, non-governmental organizations (QUANGOs)/Public Authorities, established under their respective legislative incorporation acts.  The Government of Bermuda controls several other organizations either through the possession of shares or voting rights or by some other means.  These organizations include the National Sports Center, Port Royal Golf Course, Ocean View Golf Course, Bermuda College, Bermuda Housing Trust, Bermuda Housing Corporation, Bermuda Land Development Corporation, West End Development Corporation, Bermuda Hospitals Board, Bermuda Health Council, the Regulatory Authority (telecommunications), Bermuda Tourism Authority, Bermuda Economic Development Corporation, Pension Commission, and parish councils.

SOEs purchase or supply goods or services locally.  However, the vast majority of goods are imported, because Bermuda produces virtually nothing of its own.  Bermuda’s state-owned businesses are heavily subsidized, but nothing in law prohibits private-sector competition.  Bermuda has no state-owned banks, development banks, or sovereign wealth funds or other state-owned investment vehicle.

Bermuda is not a party to the Government Procurement Agreement (GPA) within the framework of the World Trade Organization.

Privatization Program

In 2017, a public-private partnership between the Bermuda Airport Authority, Government of Bermuda and Bermuda Skyport Corporation led to Bermuda’s new airport redevelopment project. The new L.F. Wade International Airport Passenger Terminal opened its doors to the public in December 2020. The Bermuda Airport Authority is the public sector party to the agreement, representing the interests of the Government of Bermuda and owner of the L.F. Wade International Airport. The Bermuda Skyport Corporation Limited is the private sector party to the project agreement. Skyport, a wholly owned subsidiary of Aecon, was responsible for delivering the new airport terminal building and is responsible for its ongoing operation and maintenance. The Authority continues to retain oversight of Skyport’s operations and maintenance for the duration of the project agreement.

Other examples of public-private partnerships are the King Edward VII Memorial Hospital Redevelopment Project and the establishment of the Bermuda Tourism Authority, formerly a government entity. In awarding contracts, the Government of Bermuda does not always follow established bidding processes if the Accountant General agrees that not doing so is in the public interest.

Information not available.

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Data not available

Table 3: Sources and Destination of FDI
Data not available

Table 4: Sources of Portfolio Investment
Data not available

Policies Towards Foreign Direct Investment

In general, Bolivia remains open to FDI.  The 2014 investment law guarantees equal treatment for national and foreign firms.  However, it also stipulates that public investment has priority over private investment (both national and foreign) and that the Bolivian Government will determine which sectors require private investment.

U.S. companies interested in investing in Bolivia should note that in 2012 Bolivia abrogated the BIT it signed with the United States and a number of other countries.  The Bolivian Government of former President Evo Morales claimed the abrogation was necessary for Bolivia to comply with the 2009 Constitution.  Companies that invested under the U.S. –Bolivia BIT will be covered until June 10, 2022, but investments made after June 10, 2012 are not covered.

Pursuant to Article 320 of the 2009 Constitution, Bolivia no longer recognizes international arbitration forums for disputes involving the government.  The parties also cannot settle the dispute in an international court.  However, the implementation of this article is still uncertain.

Specifically, Article 320 of the Bolivian Constitution states:

1. Bolivian investment takes priority over foreign investment.
2. Every foreign investment will be subject to Bolivian jurisdiction, laws, and authorities, and no one may invoke a situation for exception, nor appeal to diplomatic claims to obtain more favorable treatment.
3. Economic relations with foreign states or enterprises shall be conducted under conditions of independence, mutual respect and equity.  More favorable conditions may not be granted to foreign states or enterprises than those established for Bolivians.
4. The state makes all decisions on internal economic policy independently and will not accept demands or conditions imposed on this policy by states, banks or Bolivian or foreign financial institutions, multilateral entities or transnational enterprises.
5. Public policies will promote internal consumption of products made in Bolivia.

Article 262 of the Constitution states:

“The fifty kilometers from the border constitute the zone of border security.  No foreign person, individual, or company may acquire property in this space, directly or indirectly, nor possess any property right in the waters, soil or subsoil, except in the case of state necessity declared by express law approved by two thirds of the Plurinational Legislative Assembly.  The property or the possession affected in case of non-compliance with this prohibition will pass to the benefit of the state, without any indemnity.”

The judicial system faces a huge backlog of cases, is short staffed, lacks resources, has problems with corruption, and is believed to be influenced by political actors.  Swift resolution of cases, either initiated by investors or against them, is unlikely.  The Marcelo Quiroga Anti-Corruption law of 2010 makes companies and their signatories criminally liable for breach of contract with the government, and the law can be applied retroactively.  Authorities can use this threat of criminal prosecution to force settlement of disputes.  Commercial disputes can often lead to criminal charges and cases are often processed slowly.  See our Human Rights Report as background on the judicial system, labor rights and other important issues.

Article 129 of the Bolivian Arbitration Law No. 708, established that all controversies and disputes that arise regarding investment in Bolivia will have to be addressed inside Bolivia under Bolivian Laws.  Consequently, international arbitration is not allowed for disputes involving the Bolivian Government or state-owned enterprises.

Bolivia does not currently have an investment promotion agency to facilitate foreign investment.

Limits on Foreign Control and Right to Private Ownership and Establishment

There is a right for foreign and domestic private entities to establish and own business enterprises and engage in remunerative activity.

There are some areas where investors may judge that preferential treatment is being given to their Bolivian competitors, for example in key sectors where private companies compete with state owned enterprises.  Additionally, foreign investment is not allowed in matters relating directly to national security.

The Constitution specifies that all hydrocarbon resources are the property of the Bolivian people and that the state will assume control over their exploration, exploitation, industrialization, transport, and marketing (Articles 348 and 351).  The state-owned and operated company, Yacimientos Petrolíferos Fiscales Bolivianos (YPFB) manages hydrocarbons transport and sales and is responsible for ensuring that the domestic market demand is satisfied at prices set by the hydrocarbons regulator before allowing any hydrocarbon exports.  YPFB benefitted from government action in 2006 that required operators to turn over their production to YPFB and to sign new contracts that gave YPFB control over the distribution of gasoline, diesel, and liquid petroleum gas (LPG) to gas stations.  The law allows YPFB to enter into joint venture contracts with national or foreign individuals or companies wishing to exploit or trade hydrocarbons or their derivatives.  For companies working in the industry, contracts are negotiated on a service contract basis and there are no restrictions on ownership percentages of the companies providing the services.

The Constitution (Article 366) specifies that every foreign enterprise that conducts activities in the hydrocarbons production chain will submit to the sovereignty of the state, and to the laws and authority of the state.  No foreign court case or foreign jurisdiction will be recognized, and foreign investors may not invoke any exceptional situation for international arbitration, nor appeal to diplomatic claims.

According to the Constitution, no concessions or contracts may transfer the ownership of natural resources or other strategic industries to private interests.  Instead, temporary authorizations to use these resources may be requested at the pertinent ministry (Mining, Water and Environment, Public Works, etc.).  The Bolivian Government needs to renegotiate commercial agreements related to forestry, mining, telecommunications, electricity, and water services, in order to comply with these regulations.

The Telecommunications, Technology and Communications General Law from 2012 (Law 164, Article 28) stipulates that the licenses for radio broadcasts will not be given to foreign persons or entities.  Further, in the case of broadcasting associations, the share of foreign investors cannot exceed 25 percent of the total investment, except in those cases approved by the state or by international treaties.

The Central Bank of Bolivia is responsible for registering all foreign investments.  According to the 2014 investment law, any investment will be monitored by the ministry related to the particular sector.  For example, the Mining Ministry is in charge of overseeing all public and private mining investments.  Each Ministry assesses industry compliance with the incentive objectives.  To date, only the Ministry of Hydrocarbons and Energy has enacted a Law (N 767) to incentivize the exploration and production of hydrocarbons.

Other Investment Policy Reviews

Bolivia underwent a World Trade Organization (WTO) trade policy review in 2017.  In his concluding remarks, the Chairperson noted that several WTO members raised challenges impacting investor confidence in Bolivia, due primarily to Bolivia’s abrogation of 22 BITs following the passage of its 2009 constitution.  However, some WTO members also commended Bolivia for enacting a new investment promotion law in 2014 and a law on conciliation and arbitration, both of which increased legal certainty for investors, according to those members.

Business Facilitation

According to the World Bank’s Doing Business 2020 rankings, Bolivia ranks 150 out of 190 countries on the ease of doing business, much lower than most countries in the region.  Bolivia ranks 175 out of 190 on the ease of starting a business.

FUNDEMPRESA is a mixed public/private organization authorized by the central government to register and certify new businesses.  Its website is www.fundempresa.org.bo and the business registration process is laid out clearly within the tab labeled “processes, requirements and forms.”  However the registration cannot be completed entirely online. A user can download the required forms from the site and can fill them out online but then has to mail the completed forms or deliver them to the relevant offices.  A foreign applicant would be able to use the registration forms.  The forms do ask for a “cedula de identidad,” which is a national identification document; however, foreign users usually enter their passport numbers instead.  Once a company submits all documents required to FUNDEMPRESA, the process takes between 2-4 working days.

The steps to register a business are: (1) register and receive a certificate from Fundempresa; (2) register with the Bolivian Internal Revenue Service (Servicio de Impuestos Nacionales) and receive a tax identification number; (3) register and receive authorization to operate from the municipal government in which the company will be established; (4) if the company has employees, it must register with the national health insurance service and the national retirement pension agency in order to contribute on the employees’ behalf;  and (5) if the company has employees, it must register with the Ministry of Labor.  According to Fundempresa, the process should take 30 days from start to finish.  All steps are required and there is no simplified business creation regime.

Outward Investment

The Bolivian Government does not promote or incentivize outward investment.  Nor does the government restrict domestic investors from investing abroad.

Transparency of the Regulatory System

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

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

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

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

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

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

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

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

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

International Regulatory Considerations

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

Legal System and Judicial Independence

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

Laws and Regulations on Foreign Direct Investment

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

Competition and Anti-Trust Laws

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

Expropriation and Compensation

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

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

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

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

Dispute Settlement

ICSID Convention and New York Convention

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

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

Investor-State Dispute Settlement

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

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

International Commercial Arbitration and Foreign Courts

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

Bankruptcy Regulations

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

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

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

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

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

Capital Markets and Portfolio Investment

The government’s general attitude toward foreign portfolio investment is neutral.  Established Bolivian firms may issue short or medium-term debt in local capital markets, which act primarily as secondary markets for fixed-return securities.  Bolivian capital markets have sought to expand their handling of local corporate bond issues and equity instruments.  Over the last few years, several Bolivian companies and some foreign firms have been able to raise funds through local capital markets.  However, the stock exchange is small and is highly concentrated in bonds and debt instruments (more than 95 percent of transactions).  The amount of total transactions in 2020 was around 35 percent of GDP.

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

In October 2012, Bolivia returned to global credit markets for the first time in nearly a century, selling USD 500 million worth of 10-year bonds at the New York Stock Exchange.  The sovereign bonds were offered with an interest rate of 4.875 percent and demand for the bonds well surpassed the offer, reaching USD 1.5 billion.  U.S. financial companies Bank of America, Merrill Lynch, and Goldman Sachs were the lead managers of the deal.  In 2013, Bolivia sold another USD 500 million at 5.95 percent for ten years.  HSBC, Bank of America, and Merrill Lynch were the lead managers of the deal.  In 2017, Bolivia sold another USD 1 billion at 4.5 percent for ten years, with Bank of America and JP Morgan managing the deal.  The resources gained from the sales were largely used to finance infrastructure projects.  A sovereign bond issuance of up to $3 billion was approved by the National Assembly for 2021 but had not yet occurred as of May 2021.

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

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

Money and Banking System

The Bolivian banking system is small, composed of 16 banks, 6 banks specialized in mortgage lending, 3 private financial funds, 30 savings and credit cooperatives, and 8 institutions specialized in microcredit.  Of the total number of personal deposits made in Bolivia through December 2020 (USD 29 billion), the banking sector accounted for 80 percent of the total financial system.  Similarly, of the total loans and credits made to private individuals (USD 28 billion) through December 2020, 80 percent were made by the banking sector, while private financial funds and the savings and credit cooperatives accounted for the other 20 percent.

Bolivian banks have developed the capacity to adjudicate credit risk and evaluate expected rates of return in line with international norms.  The banking sector was stable and healthy with delinquency rates at less than 2.0 percent in 2020. In 2020, delinquency rates rose after the government permitted clients to defer bank loan payments until June 2021 without penalty as a mitigating measure for the COVID-19 pandemic.  While delinquency rates still remain relatively low, there are concerns this measure could potentially harm the banking sector’s stability.

In 2013, a new Financial Services Law entered into force.  This new law enacted major changes to the banking sector, including deposit rate floors and lending rate ceilings, mandatory lending allocations to certain sectors of the economy and an upgrade of banks’ solvency requirements in line with the international Basel standards.  The law also requires banks to spend more on improving consumer protection, as well as providing increased access to financing in rural parts of the country.

Credit is now allocated on government-established rates for productive activities, but foreign investors may find it difficult to qualify for loans from local banks due to the requirement that domestic loans be issued exclusively against domestic collateral.  Since commercial credit is generally extended on a short-term basis, most foreign investors prefer to obtain credit abroad.  Most Bolivian borrowers are small and medium-sized enterprises (SMEs).

In 2007, the government created a Productive Development Bank (Banco de Desarrollo Productivo) to boost the production of small, medium-sized and family-run businesses.  The bank was created to provide loans to credit institutions which meet specific development conditions and goals, for example by giving out loans to farmers, small businesses, and other development focused investors.  The loans are long term and have lower interest rates than private banks can offer in order to allow for growth of investments and poverty reduction.

In September 2010, the Bolivian Government bought the local private bank Banco Union as part of a plan to gain partial control of the financial sector.  Banco Union is one of the largest banks, with a share of 10.8 percent of total national credits and 12.7 percent of the total deposits; one of its principal activities is managing public sector accounts.  Bolivian government ownership of Banco Union was illegal until December 2012, when the government enacted the State Bank Law, allowing for state participation in the banking sector.

There is no strong evidence of “cross-shareholding” and “stable-shareholding” arrangements used by private firms to restrict foreign investment, and the 2009 Constitution forbids monopolies and supports antitrust measures.  In addition, there is no evidence of hostile takeovers (other than government nationalizations that took place from 2006-14).

The financial sector is regulated by ASFI (Supervising Authority of Financial Institutions), a decentralized institution that is under the Ministry of Economy.  The Central Bank of Bolivia (BCB) oversees all financial institutions, provides liquidity when necessary, and acts as lender of last resort.  The BCB is the only monetary authority and is in charge of managing the payment system, international reserves, and the exchange rate.

Foreigners are able to establish bank accounts only with residency status in Bolivia.

Blockchain technologies in Bolivia are still in the early stages.  Currently, the banking sector is analyzing blockchain technologies and the sector intends to propose a regulatory framework in coordination with ASFI in the future.

Three different settlement mechanisms are available in Bolivia: (1) the high-value payment system administered by the Central Bank for inter-bank operations; (2) a system of low value payments utilizing checks and credit and debit cards administered by the local association of private banks (ASOBAN); and (3) the deferred settlement payment system designed for small financial institutions such as credit cooperatives.  This mechanism is also administered by the Central Bank.

Foreign Exchange and Remittances

Foreign Exchange

The Banking Law (#393, 2013) establishes regulations for foreign currency hedging and authorizes banks to maintain accounts in foreign currencies.  A significant, but dropping, percentage of deposits are denominated in U.S. dollars (currently less than 14 percent of total deposits).  Bolivian law currently allows repatriation of profits, with a 12.5 percent withholding tax.  However, a provision of the 2009 Constitution (Article 351.2) requires reinvestment within Bolivia of private profits from natural resources.  Until specific implementing legislation is passed, it is unclear how this provision will be applied.  In addition, all bank transfers in U.S. dollars within the financial system and leaving the country must pay a Financial Transaction Tax (ITF) of 2 percent.  This tax applies to foreign transactions for U.S. dollars leaving Bolivia, not to money transferred internally.

Any banking transaction above USD 10,000 (in one operation or over three consecutive days) requires a form stating the source of funds.  In addition, any hard currency cash transfer from or to Bolivia equal to or greater than USD 10,000 must be registered with the customs office.  Amounts between USD 20,000 and USD 500,000 require authorization by the Central Bank and quantities above USD 500,000 require authorization by the Ministry of the Economy and Public Finance.  The fine for underreporting any cash transaction is equal to 30 percent of the difference between the declared amount and the quantity of money found.  The reporting standard is international, but many private companies in Bolivia find the application cumbersome due to the government requirement for detailed transaction breakdowns rather than allowing for blanket transaction reporting.

Administrative Resolution 398/10 approved in June 2010 forces Bolivian banks to reduce their investments and/or assets outside the country to an amount that does not exceed 50 percent of the value of their net equity.

The Central Bank charges a fee for different kinds of international transactions related to banking and trade.  The current list of fees and the details can be found at:

https://www.bcb.gob.bo/webdocs/01_resoluciones/RD%20152%202019.pdf

Law 843 on tax reform directly affects the transfer of all money to foreign countries.  All companies are charged 25 percent tax, except for banks which can be charged 37.5 percent, on profits under the Tax Reform Law, but when a company sends money abroad, the presumption of the Bolivian Tax Authority is that 50 percent of all money transmitted is profit.  Under this presumption, the 25 percent tax is applied to half of all money transferred abroad, whether actual or only presumed profit.  In practical terms, it means there is a payment of 12.5 percent as a transfer tax.

Currency is freely convertible at Bolivian banks and exchange houses.  The Bolivian Government describes its official exchange system as an “incomplete crawling peg.”  Under this system, the exchange rate is fixed, but undergoes micro-readjustments that are not pre-announced to the public.  There is a spread of 10 basis points between the exchange rate for buying and selling U.S. dollars.  The Peso Boliviano (Bs) has remained fixed at 6.96 Bs/USD  1 for selling and 6.86 Bs/USD  1 for buying since October 2011.  The parallel rate closely tracks the official rate, suggesting the market finds the Central Bank’s policy acceptable.  In order to avoid distortions in the exchange rate market, the Central Bank requires all currency exchange to occur at the official rate ±1 basis point.

Remittance Policies

Each remittance transaction from Bolivia to other countries has a USD 2,500 limit per transaction, but there is no limit to the number of transactions that an individual can remit.  The volume of remittances sent to and from Bolivia has increased considerably in the past five years, and the central bank and banking regulator are currently analyzing whether to impose more regulations sometime in the future.  Foreign investors are theoretically able to remit through a legal parallel market utilizing convertible, negotiable instruments, but, in practice, the availability of these financial instruments is limited in Bolivia.  For example, the Bolivian Government mainly issues bonds in Bolivianos and the majority of corporate bonds are also issued in Bolivianos.

The official exchange rate between Bolivianos and dollars is the same as the informal rate.  The government allows account holders to maintain bank accounts in Bolivianos or dollars and make transfers freely between them.  Business travelers may bring up to USD 10,000 in cash into the country.  For amounts greater than USD 10,000, government permission is needed through sworn declaration.

Sovereign Wealth Funds

Neither the Bolivian Government nor any government-affiliated entity maintains a sovereign wealth fund.

The Bolivian Government has set up companies in sectors it considers strategic to the national interest and social well-being, and has stated that it plans to do so in every sector it considers strategic or where there is either a monopoly or oligopoly.

The Bolivian Government owns and operates more than 60 businesses including energy and mining companies, a telecommunications company, a satellite company, a bank, a sugar factory, an airline, a packaging plant, paper and cardboard factories, and milk and Brazil nut processing factories, among others.  In 2005, income from state-owned business in Bolivia other than gas exports represented only a fraction of a percent of Gross Domestic Product (GDP).  As of 2015, public sector contribution to GDP (including SOEs, investments, and consumption of goods and services) has risen to over 40 percent of GDP.

The largest SOEs are able to acquire credit from the Central Bank at very low interest rates and convenient terms.  Some private companies complain that it is impossible for them to compete with this financial subsidy.  Moreover, SOEs appear to benefit from easier access to licenses, supplies, materials and land; however, there is no law specifically providing SOEs with preferential treatment in this regard.  In many cases, government entities are directed to do business with SOEs, placing other private companies and investors at a competitive disadvantage.

The government registered budget surpluses from 2006 until 2013, but began experiencing budget deficits in 2014.  Close to 50 percent of the deficit was explained by the performance of SOEs, such as Bolivia’s state-owned oil and gas company.  According to the 2009 Constitution, all SOEs are required to publish an annual report and are subject to financial audits.  Additionally, SOEs are required to present an annual testimony in front of civil society and social movements, a practice known as social control.

Privatization Program

There are currently no privatization programs in Bolivia.

Bolivia is prone to social unrest, which can include violence.  Given the country’s reliance on a few key thoroughfares, conflict often disrupts transportation and distribution networks.  The majority of civil disturbances are related to domestic issues, usually workers pressuring the government for concessions by marching or closing major transportation arteries.  Protests in late 2019 surrounding fraudulent elections and the subsequent resignation of long-serving president Evo Morales did get violent, but none of the political violence targeted foreigners.  Outside of the volatile months of October and November 2019, while protests and blockades are frequent, they only periodically affect commerce.  In November 2019, however, election-related conflicts and protests led to two weeks of significant interruption to commerce in La Paz and elsewhere, directly affecting distribution of essential services or travel in and out of the city.  In 2020, strict quarantine and lockdown measures severely affected commerce economy-wide and caused numerous businesses to close or otherwise impeded business operations.  In addition, during approximately ten days in August 2020 during the midst of the COVID-19 pandemic, protestors blocked key highways, denying resident access to foodstuffs, fuel, and badly needed oxygen supplies.

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