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Algeria

Executive Summary

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

Following his December 2019 election, President Abdelmadjid Tebboune has promised economic and political reforms, though progress has been slow due to COVID-19, his own extended absences for medical reasons, and a lack of popular support. Algeria adopted a new Constitution in December 2020 and after dissolving parliament in February 2021, President Tebboune announced legislative elections will take place in June 2021.

In 2020, the government eliminated the so-called “51/49” restriction that required majority Algerian ownership of all new businesses, though it retained the requirement for “strategic sectors,” identified as energy, mining, defense, transportation infrastructure, and pharmaceuticals manufacturing (with the exception of innovative products). In the 2021 Finance Law, the government reinstated the 51/49 ownership requirement – with retroactive application – for any company importing items into Algeria with an intent to resell. The government passed a new hydrocarbons law in 2019, improving fiscal terms and contract flexibility in order to attract new international investors. The new law encouraged major international oil companies to sign memorandums of understanding with the national hydrocarbons company, Sonatrach. The government did not meet its goal of issuing all 43 regulatory texts enacting the legislation by March 31, 2021; thus far only 10 have been released. The Algerian government took several steps, including establishing a standalone ministry dedicated to the pharmaceutical industry and issuing regulations to resolve several long-standing issues, to improve market access for U.S. pharmaceutical companies.

Algeria’s economy is driven by hydrocarbons production, which historically accounts for 95 percent of export revenues and approximately 60 percent of government income. Following the significant drop in oil prices in March 2020, the government cut budgeted expenditures by 50 percent and significantly reduced investment in the energy sector. Though the 2021 budget boosted state spending by 10 percent amidst a modest recovery in global hydrocarbon prices, Algeria continues to run a persistent budget deficit. Despite a significant reduction in revenues, the historically debt-averse government continued to resist seeking foreign financing, preferring to attract foreign direct investment (FDI) to boost employment and replace imports with local production. Traditionally, Algeria has pursued protectionist policies to encourage the development of local industries. The import substitution policies it employs tend to generate regulatory uncertainty, supply shortages, increased prices, and limited selection for consumer goods. The government depreciated the Algerian dinar approximately 15% over the last year in an effort to conserve its foreign exchange reserves, resulting in significant food inflation.

The government has taken measures to minimize the economic impact of the COVID-19 pandemic, including delaying tax payments for small businesses, extending credit and restructuring loan payments, and decreasing banks’ reserve requirements.

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

Table 1: Key Metrics and Rankings

Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2020 104 of 180 http://www.transparency.org/research/cpi/overview 
World Bank’s Doing Business Report 2020 157 of 190 http://www.doingbusiness.org/en/rankings 
Global Innovation Index 2020 121 of 131 https://www.globalinnovationindex.org/analysis-indicator 
U.S. FDI in partner country ($M USD, historical stock positions) 2019 $2.7 billion https://apps.bea.gov/international/factsheet/ 
World Bank GNI per capita 2019 $4,010 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD 

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

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

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

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

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

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

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

Limits on Foreign Control and Right to Private Ownership and Establishment

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

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

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

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

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

Other Investment Policy Reviews

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

Business Facilitation

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

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

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

Outward Investment

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

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

3. Legal Regime

Transparency of the Regulatory System

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

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

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

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

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

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

International Regulatory Considerations

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

Legal System and Judicial Independence

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

Laws and Regulations on Foreign Direct Investment

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

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

4. Industrial Policies

Investment Incentives

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

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

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

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

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

Foreign Trade Zones/Free Ports/Trade Facilitation

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

Performance and Data Localization Requirements

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

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

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

5. Protection of Property Rights

Real Property

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

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

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

Intellectual Property Rights

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

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

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

Resources for Intellectual Property Rights Holders:

Peter Mehravari

Patent Attorney

Intellectual Property Attaché for the Middle East & North Africa

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

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

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

6. Financial Sector

Capital Markets and Portfolio Investment

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

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

Money and Banking System

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

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

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

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

Foreign Exchange and Remittances

Foreign Exchange

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

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

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

Remittance Policies

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

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

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

Sovereign Wealth Funds

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

7. State-Owned Enterprises

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

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

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

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

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

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

Privatization Program

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

8. Responsible Business Conduct

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

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

Additional Resources

Department of State

  • Country Reports on Human Rights Practices ();
  • Trafficking in Persons Report ();
  • Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities () and;
  • North Korea Sanctions & Enforcement Actions Advisory ().

Department of Labor

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

9. Corruption

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

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

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

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

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

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

Resources to Report Corruption

Central Office for the Suppression of Corruption (OCRC)

Mokhtar Lakhdari, General Director

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

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

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

no email address publicly available

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

Tarek Kour, President

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

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

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

contact@onplc.org.dz 

Watchdog organization:

Djilali Hadjadj

President

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

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

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

aaccalgerie@yahoo.fr  10. Political and Security Environment

10. Political and Security Environment

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

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

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

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

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

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

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

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

11. Labor Policies and Practices

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

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

Host Country Statistical source* USG or international statistical source USG or International Source of Data: BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) ($M USD) N/A N/A 2020 $144.9 billion www.worldbank.org/en/country 
Foreign Direct Investment Host Country Statistical source* USG or international statistical source USG or international Source of data: BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) N/A N/A 2019 $2,749 BEA data available at https://apps.bea.gov/international/factsheet/ 
Host country’s FDI in the United States ($M USD, stock positions) N/A N/A N/A N/A BEA data available at https://www.bea.gov/international/direct-investment-and-multinational-enterprises-comprehensive-data 
Total inbound stock of FDI as % host GDP N/A N/A 2019 18.9% UNCTAD data available athttps://unctad.org/topic/investment/world-investment-report

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

Table 3: Sources and Destination of FDI

Direct Investment from/in Counterpart Economy Data
From Top Five Sources/To Top Five Destinations (US Dollars, Millions)
Inward Direct Investment Outward Direct Investment
Total Inward 20,743 100% Total Outward 2,511 100%
United States 5,609 27% Italy 999 40%
France 2,215 11% Spain 368 15%
Italy 2,143 10% Switzerland 278 11%
Spain 1,458 7% Peru 234 9%
United Kingdom 1,377 7% Libya 126 5%
“0” reflects amounts rounded to +/- USD 500,000.

The latest data available for Algeria is from 2019.

Table 4: Sources of Portfolio Investment

Data not available. 14. Contact for More Information

14. Contact for More Information

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

Libya

Executive Summary

Libya presents a challenging investment climate. Reconstruction needs, severely underserved consumer demand, and abundant natural resources provide many opportunities for domestic and foreign investors, and the Government of National Unity (GNU), which took office in March 2021, has expressed a strong desire to receive greater foreign investment and partner with foreign companies. Nonetheless, the country’s prospects for foreign investment continue to be hampered by security risks posed by the presence of non-state militias, foreign mercenaries, and extremist and terrorist groups, and opaque bureaucracy, onerous regulations, and widespread rent-seeking activity in public administration.  The Libyan government has a long history of not honoring contracts and payments, and several U.S. firms continue to be owed back payments for work done before and after the 2011 revolution. The sectors that have historically attracted the most significant investment into Libya are: oil and gas, electricity, and infrastructure.

Following years of civil conflict, Libya’s warring parties signed a ceasefire in October 2020 that paved the way for a United Nations-facilitated political process that resulted in the country’s first unified national government since 2014. The GNU is an interim government charged with leading the country toward national elections scheduled for December 24, 2021. Despite the current government’s limited time-horizon, Prime Minister Dabaiba has committed his administration to creating a more enabling business environment and to engaging U.S. companies, particularly in the fields of healthcare, electricity, security, and oil and gas.

Libya holds Africa’s largest (and the world’s ninth largest) proven oil reserves and Africa’s fifth largest gas reserves.  Most government revenues derive from the sale of crude oil.  Libya’s oil production has been making a gradual recovery from repeated attacks on oil infrastructure by ISIS-Libya and other armed groups in 2016 and a nine-month forced shutdown in 2020 due to the civil conflict. Production has reached 1.3 million barrels per day (bpd) as of March 2021.  Technocrats heading the NOC, an independent, apolitical institution, continue to lay the groundwork for the long-term development and stabilization of the energy sector.

The Privatization and Investment Board (PIB), supervised by the Ministry of Economy, is the primary governmental body for encouraging private foreign investment in Libya.

The Investment Law of 2010 provides the primary legal framework for foreign investment promotion. Passed prior to the 2011 revolution that toppled the Qadhafi regime, the law lifted many FDI restrictions and provided a series of incentives to encourage private investment. No significant laws related to investment have been passed since the revolution.

Perceived corruption is deeply embedded in Libya and is widespread at all levels of public administration. The lack of transparency or accountability mechanisms in the management of oil reserves and revenues, the issuance of government contracts, and the enforcement of often ambiguous regulations continue to provide government officials with substantial opportunities for rent-seeking activities.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2020 173 of 180 http://www.transparency.org/research/cpi/overview
World Bank’s Doing Business Report 2020 186 of 190 http://www.doingbusiness.org/en/rankings
Global Innovation Index N/A N/A https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 TBD https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 TBD http://data.worldbank.org/indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

The Libyan government’s efforts to attract FDI, primarily through the PIB and NOC, are relatively recent. Until the 1990s, FDI was only permitted in the oil sector through sovereign contracts to which the state was a party. A number of foreign investment laws were passed in subsequent years to encourage and regulate FDI, culminating in “Law No. 9 of the year 1378 PD (2010) Regarding Investment Promotion” (known as the 2010 Investment Law). Though promulgated prior to Libya’s 2011 revolution, the law remains in effect. This new law lifted many FDI restrictions and provided a series of incentives to qualifying investments, such as tax and customs exemptions on equipment, a five-year income tax exemption, a tax exemption on reinvested profits and exemptions on production tax expert fees for goods produced for export markets. It also allowed for investors to transfer net profits overseas, defer losses to future years, import necessary goods, and hire foreign labor if local labor was unavailable. Foreign workers may acquire residency permits and entry reentry visas for five years and transfer earnings overseas.

The law regulates the establishment of foreign-owned companies and the setting up of branches in representative offices. Branches are allowed to be opened in a large number of sectors, including: construction for contracts over LYD 50 million; electricity works; oil exploration; drilling and installation projects; telecommunications construction and installation; industry; surveying and planning; installation and maintenance of medical machines and equipment; and hospital management. However, the investment law restricts full foreign ownership of investment projects to projects worth over LYD 5 million, except in the case of limited liability companies, and requires 30 percent of workers to be Libya nationals and to receive training. Foreign investors are prevented from owning land or property in Libya and are allowed only the temporary leasing of real estate. Investment in “strategic industries” – in particular, Libya’s upstream oil and gas sector, which is controlled by the NOC – requires a foreign entity to enter into a joint venture with a Libyan firm that will retain a majority stake in the enterprise. It is not clearly defined which industries other than upstream oil and gas may be considered strategic.

The most important investment promotion institution Libya is the PIB, established in 2009 to assume responsibility for the Libyan privatization program and oversee and regulate FDI activities. The PIB’s screening process for incoming FDI to Libya is not clearly defined; the bidding criteria and process for investment are not published or transparent, and it is therefore not clear whether foreign investors have faced discrimination. The PIB states that it reviews bids or proposals for general consistency with Libya’s national security, sovereignty, and economic interest. The Minister of Economy must give final approval to all FDI projects, at the recommendation of the PIB. There is no information available on the timeline of the approval process or any potential outcomes of the process other than an affirmative or negative decision by the PIB or Minister of Economy. The PIB maintains that it keeps all company information confidential. U.S. firms have repeatedly expressed frustration about the slow pace by which the Libyan government makes business-related decisions. Despite these complaints, some U.S. firms have successfully invested in Libya, particularly in the country’s oil and gas sector.

Limits on Foreign Control and Right to Private Ownership and Establishment

The ownership of real estate in Libya is restricted to Libyan nationals and wholly-owned Libyan companies. The 2010 Investment Law permits the ownership of real estate in Libya by locally established project vehicles of foreign investors. However, such ownership is limited to leasehold ownership only. Foreign investors are allowed lease property from public holdings and private Libyan citizens, according to Article 17 of the 2010 Investment Law. There is considerable ambiguity in both the public and private rental markets; many aspects of these arrangements are left to local officials.

Other Investment Policy Reviews

Libya has not undergone any recent investment policy reviews by the OECD, UNCTAD, WTO, or any other international body. An ongoing UN-facilitated audit of Libya’s banking sector may provide insights into the disposition of Libya’s assets in recent years.

Business Facilitation

Business registration procedures in Libya are lengthy and complex. The Ministry of Economy is the main institution for processing business registration requirements. The Libyan government does not maintain an online information portal on regulations for new business registration or online registration functionality for registering a new business. There are multiple corporate structures based on the type of business undertaken (e.g. limited liability, joint venture, branch office) and each has specific registration requirements. Some requirements apply to all businesses, including: obtaining a Commercial Register certificate, registering with the Chamber of Commerce and the tax and labor departments, and obtaining a working license. If a company will be importing items, a statistical code will be required. If the company will be obtaining letters of credit in Libya, a Central Bank code will be required. A specialized agent must complete these tasks on behalf of the registering company. For the simplest corporate structure (limited liability with no Central Bank code) the process can take two to three months if the registration agent is familiar with the procedures.

Outward Investment

Libya is a member of the Islamic Corporation for the Insurance of Investment and Export Credit, which provides investment and export credit insurance for entities in member states. FDI outflows in 2018 were USD 315 million, compared to USD 2.7 billion in 2010. The Libyan government does not formally promote or incentivize outward investment. Stress in the banking sector has reduced liquidity, and this has negatively affected the ability of Libyan citizens to acquire the hard currency to invest abroad.

2. Bilateral Investment Agreements and Taxation Treaties

Libya has signed bilateral investment protection agreements with China (2010 – not in force), Republic of Congo (2010 – not in force), the United Kingdom (2009 – not in force), Turkey (2009), Singapore (2009), Indonesia (2009 – not in force), Slovakia (2009 – not in force), Russian Federation (2008), Spain (2007), Kenya (2007 – not in force), India (2007), Iran (2006), San Marino (2006 – not in force), Republic of Korea (2006), Tunisia (2005), Germany (2004), Cyprus (2004), Qatar (2004 – not in force), France (2004), Serbia (2004), Belgium-Luxembourg Economic Union (2004), Ethiopia (2004), Switzerland (2003), Malta (2003 – not in force), Portugal (2003), Croatia (2002), Austria (2002), South Africa (2002 – not in force), Algeria (2001- not in force), Ukraine (2001), Italy (2000), Morocco (2000), Belarus (2000), Bulgaria (1999), Gambia (1995 – not in force), Syria (1993), and Egypt (1990). Libya has entered into a double taxation agreement with the following countries: Algeria, Belarus, Egypt, India, Italy, Kuwait, Malta, Pakistan, Singapore, Sudan, Saudi Arabia, Tunisia, and the United Kingdom.

Libya does not have a bilateral investment treaty, a Free Trade Agreement, or a bilateral taxation treaty with the United States, but signed a Trade and Investment Framework Agreement (TIFA) with the United States in December 2013 that the Libyan government ratified in February 2019.

3. Legal Regime

Transparency of the Regulatory System

The Libyan regulatory system lacks transparency, and there is a general lack of clarity regarding the function and responsibilities of Libyan government institutions. Transparency International placed Libya 173 out of 180 countries (“1” indicates least corrupt) in its 2020 Corruption Perceptions Index, and Libya ranks 186 out of 190 on the World Bank’s ‘Ease of Doing Business’ Index. Libya’s bureaucracy is one of the most opaque and amorphous in the Middle East region; its legal and policy frameworks are similarly difficult to navigate. The issuance of licenses and permits is often delayed for significant periods for unspecified reasons, and the adjudication of these applications is most often done in a subjective and non-transparent fashion. This has created an environment ripe for graft and rent-seeking behavior.

Neither ministries nor regulatory agencies publish the text or summary of proposed regulations before their enactment. Accurate, current information about key commercial regulations is difficult to obtain. These factors serve as a deterrent to foreign investment.

International Regulatory Considerations

Libya is not a member of the WTO. The WTO received Libya’s application on June 10, 2004. The General Council established a Working Party on July 27, 2004, but no formal progress on Libya’s application has been made.

Legal System and Judicial Independence

The 2011 Constitutional Declaration currently functions as the interim constitution; a new constitutional framework for the nation is likely to emerge following December elections. It states Islam is the state religion and sharia is the principal source of legislation. The Libyan civil code begins with a preliminary title containing general dispositions regarding law, sources of law, application of the law, and general dispositions regarding the legal definition of persons as well as the classification of things and property. Thereafter, the code is divided into two parts and four books. The first part addresses obligations or personal rights and contains similarly named subdivisions: Book I (Obligations in General) and Book II (Specific Contracts).  The second part of both codes is entitled “Real Rights” and contains Books III (Principal Real Rights) and Book IV (Accessory Real Rights). In the absence of a legal provision, the Libyan civil code requires courts to adjudicate matters “in accordance with the principles of Islamic law.”  In the absence of an Islamic rule on a particular matter, the Libyan civil code requires courts to look to “prevailing custom,” and in the absence of any custom, “to the principles of natural law and the rules of equity.”

Article 89 of the Libyan Civil Code states that “a contract is created, subject to any special formalities that may be required by law for its conclusion, from the moment that two persons have exchanged concordant intentions.”  The Libyan court system consists of three levels: the courts of first instance; the courts of appeals; and the Supreme Court, which is the final appellate level. Libya’s justice system has remained weak throughout the post-revolutionary period, and enforcement of laws remains a challenge for the government.

Laws and Regulations on Foreign Direct Investment

Laws and regulations on investment and property ownership allow domestic and foreign entities to establish business enterprises and engage in remunerative activities. Investment law and commercial law differ in their foreign ownership restrictions for business enterprises. Article 7 of the 2010 Investment Law specifies, in general accordance with standard international practice, conditions a project must fulfill in part or in full in order to qualify as an investment rather than a commercial vehicle. Investment projects that meet the conditions set out in the 2010 Investment Law enjoy a number of benefits, such as relief from income taxes for a set number of years. Further, a foreign investor may wholly own the enterprise if the foreign investment exceeds LYD 5 million. This is reduced to LYD 2 million if a Libyan partner holds at least half of the investment. For investment projects that do not meet the conditions set out in the 2010 Investment Law, these benefits do not apply and Libya’s Commercial Code stipulates no more than 49 percent foreign ownership unless the enterprise is a branch of a foreign company, which the foreign company can then fully own.

Competition and Antitrust Laws

Chapter 11 of the Libyan Commercial Code deals with the issue of competition and prohibits market abuse. The Commercial Code provides for the establishment of a Competition Committee to be responsible for reviewing complaints and investigating them and, in cases where the law has been violated, referring the cases to public prosecution. There is not an active Competition Committee at the moment, and since these issues are regulated by law and considered violations, interested/damaged parties can pursue legal action directly.

Expropriation and Compensation

Article 23 of the 2010 Investment Law provides an express guarantee against the nationalization, expropriation, forcible seizure, confiscation, imposition of receivership, freeze or subjection of procedures of similar effect, except by virtue of a law or court ruling and fair and equitable indemnity, and provides such procedures be applied indiscriminately. Article 43 of executive regulation No. 449 of 2010 implementing the law reinforces those provisions. The Libyan government’s history of state expropriation of private property, including the assets of foreign companies, most prevalent during the 1980s, had already been in decline before the law’s passage. There have been no reports of nationalizations or expropriations under the current investment law.

Dispute Settlement

ICSID Convention and New York Convention

Libya is not a signatory to either the International Center for Settlement of Investment Disputes or the U.N. Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the ‘New York Convention’) and has not taken steps to accede to either. In the case of commercial disputes, most foreign entities currently opt to try cases before the International Chamber of Commerce, whose judgments Libya has a history of respecting. Libya is a member of the 1983 Riyadh Convention on Judicial Cooperation, which facilitates recognition and enforcement of judgments and arbitral awards among the Arab member states.

Investor-State Dispute Settlement

Libya is not a signatory to a treaty or investment agreement in which binding international arbitration of investment disputes is recognized. Article 24 of the 2010 Investment Law mandates disputes initiated by a foreign investor or the state be settled by competent Libyan courts, unless there is an agreement between Libya and the state to which the investor is subject that includes provisions for alternative arbitration procedures.

International Commercial Arbitration and Foreign Courts

The Libyan Civil Code provides for the enforcement of foreign decisions or arbitral awards if they meet the following requirements: the decision must be issued from a competent authority, according to the laws of the country of origin of the decision; the parties must have been duly summoned to appear before the court that handed down the decision and must have been duly represented (the laws of the foreign country also apply in terms of summons to and presence before the court); the decision must not contradict decisions already issued by Libyan courts; and the decision must not include anything that conflicts with the principles of public order in Libya. Libya’s justice system remains weak, making enforcement of foreign judgments and arbitral awards through the Libyan courts challenging and lengthy.

Bankruptcy Regulations

Libya does not have a separate bankruptcy law, but bankruptcy issues are covered under articles 1012 and 1013 of the 2010 Commercial Code. According to this legislation, bankruptcy proceeds in two phases. The first is preventative reconciliation, during which the debtor attempts to rectify the financial situation of the business through an agreement with creditors under court supervision. The second phase commences in the event of the agreement’s failure, whereby the court intercedes to protect the rights of the creditors through liquidation. Libya is tied for last for ease of resolving insolvency in the World Bank’s ‘Ease of Doing Business’ index.

4. Industrial Policies

Investment Incentives

Investments set up according to the 2010 Investment Law benefit from the following incentives: tax and customs exemptions on equipment, a five-year income tax exemption, a tax exemption on reinvested profits and exemptions on production tax expert fees for goods produced for export markets. It also allowed for investors to transfer net profits overseas, defer losses to future years, import necessary goods, and hire foreign labor if local labor is unavailable.

Foreign Trade Zones/Free Ports/Trade Facilitation

Libyan Law Number 215 of 2006 established the Zuwara Free Trade Zone (ZFTZ), and Law Number 495 of 2000 (amended by Law Number 32 of 2006) created the Misrata Free Trade Zone (MFTZ). Both the ZFTZ and the MFTZ are overseen by the Libya Free Trade Zone Board, created by Law Number 168 of 2006. By law, the ZFTZ and MFTZ are financially and administratively independent, and are free to legislate “within the boundaries of Libyan law.”

Performance and Data Localization Requirements

The host government does not follow forced localization. The 2010 Investment Law mandates that 30 percent of a foreign-owned company’s workforce consist of Libyans. Exemptions are available if the required skills for a position are not available on the local labor market.

U.S. citizens traveling to Libya on business visas require an invitation from/sponsorship by a company operating in Libya. Obtaining a Libyan business visa regularly requires several weeks or months. Libyan Embassies in third countries have followed varying rules and procedures regarding the issuance of visas, but all visa applications require approval by the Libyan Ministry of Foreign Affairs. Libyan law prohibits using a tourist visa to travel to Libya for business purposes. The Government of Libya does not allow persons with passports bearing an Israeli visa or entry/exit stamps from Israel to enter Libya. Further information can be found in the Consular Information Sheet for Libya at the State Department website travel.state.gov. The 2010 Investment Law grants investors the right to a residence permit for a period of five years, subject to renewal if the project continues.

5. Protection of Property Rights

Real Property

Libyan property rights are complicated by past government policy actions and a weak regulatory environment. The Libyan government eliminated all private property rights in March 1978 and eliminated most private businesses later in the same year. The renting of property was illegal, and ownership of property was limited to a single dwelling per family, with all other properties being redistributed. Reduced rate “mortgages” were paid directly to the Libyan government, but many Libyans were exempted from these payments based on family income. This process, and destruction of official documents that followed several years later, has served to greatly complicate any subsequent effort to prove clear title to property throughout Libya. Post-revolutionary governments have made little progress on improving the situation. As a consequence of the ambiguity of property ownership, banks are reluctant to take property as collateral for loans until property disputes are resolved. Libya is tied for last place for ease of registering property in the World Bank’s ‘Ease of Doing Business’ index.

Intellectual Property Rights

Article 1286 of the 2010 Commercial Code covers a set of rules which seek to protect intellectual innovations and the non-material aspects of industrial and commercial projects. It prohibits infringement of trademarks and transgression on registered trade names and logos; bans all acts of forgery, trademark or local counterfeiting, and all forms of intellectual property violations; and outlines the nature of financial and criminal procedures against those violations. The law provides for enforcement of the rules regulating registered industrial designs and models as well as information systems. Some additional laws providing protection of intellectual property rights (IPR) have been passed, such as Law No. 7 of 1984 and Law No. 8 of 1959 on patents, commercial designs, and models. The trademark office in the Ministry of Economy is responsible for enforcing the law of consumer and intellectual property protection, but trademark violations are widespread, especially in the retail sector, and enforcement generally requires a specific legal claim. U.S. brands remain vulnerable to such activity.

While Libya is in the process of applying for entry to the WTO, it is not currently a member, and thus is not a party to TRIPS (Agreement on Trade-Related Aspects of Intellectual Property Rights). The IMF has asked Libya to bring its IPR regime in line with international best practice.

Resources for Intellectual Property Rights Holders:

Peter Mehravari
Patent Attorney
Intellectual Property Attaché for the Middle East & North Africa
U.S. Embassy Abu Dhabi | U.S. Department of Commerce U.S. Patent & Trademark Office
Tel: +965 2259 1455
Peter.Mehravari@trade.gov 

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

6. Financial Sector

Capital Markets and Portfolio Investment

The Libyan government passed a law in 2007 to establish a stock market, primarily to support privatization of SMEs, but it is not well-capitalized, has few listings, and does not have a high volume of trading. Capital markets in Libya are underdeveloped, and the absence of a venture capital industry limits opportunities for SMEs with growth potential and innovative start-ups to access risk financing for their ventures.

Money and Banking System

Libya has been attempting to modernize its banking sector since before the revolution, including through a privatization program that has opened state-owned banks to private shareholders. The Central Bank of Libya (CBL) owns the Libyan Foreign Bank, which operates as an offshore bank, with responsibility for satisfying Libya’s international banking needs (apart from foreign investment). The banking system is governed by Law No. 1 of 2005, as amended by Law No. 46 of 2012 on Islamic banking. In accordance with that amendment, Law No. 1 of 2013 prohibits interest in all civil and commercial transactions. The banking modernization program has also been seeking, among other components, to establish electronic payment systems and expand private foreign exchange facilities.

The CBL is responsible for the receipt of all of Libya’s oil revenues, prints Libyan dinars, and controls the country’s foreign exchange reserves. After being effectively divided since 2014 between its eastern and western branches as a result of the civil conflict, the CBL is beginning the process of reunifying following the establishment of a unity government in March 2021. Both CBL branches are currently undergoing an audit by a respected international firm, which will help restore integrity, transparency and confidence in the Libyan financial system and create a foundation for the CBL’s reunification.

The CBL in Tripoli controls access to all foreign currency in Libya, and it provides Libyans access to hard currency by issuing letters of credit (LCs). Access to LCs in Libya has historically been an issue, but in January 2021 the CBL set a single, unified foreign exchange rate (described in the next section), which is expected to increase importers’ access to LCs.

The availability of financing on the local market is weak. Libyan banks can only offer limited financial products, loans are often made on the basis of personal connections (rather than business plans), and public bank managers lack clear incentives to expand their portfolios. Lack of financing acts as a brake on Libya’s development, hampering both the completion of existing projects and the start of new ones. This has been particularly damaging in the housing sector, where small-scale projects often languish for lack of steady funding streams. Libya tied for last on the ease of getting credit in the World Bank ‘Ease of Doing Business’ index.

Foreign Exchange and Remittances

Foreign Exchange

The 2010 Investment Law provides investors the right to open an account in a convertible currency in a Libyan commercial bank and to obtain local and foreign financing. The Libyan Banking Law (Law No. 1 of 2005) allows any Libyan person or entity to retain foreign exchange and conduct exchanges in that currency. Libyan commercial banks are allowed to open accounts in foreign exchange and conduct cash payments and transfers (including abroad) in foreign currency. Commercial banks operating in Libya may grant credit in foreign exchange and transact in foreign exchange among themselves.

The Central Bank set a single, unified official exchange rate of 4.48 LYD/USD in January 2021. Previously, the official rate was 1.4 LYD/USD for the purposes of government procurement, while private entities were charged roughly 3.7 LYD/USD by the Central Bank. There exists a significant black market for hard currency that for the past several years typically exchanged Libyan dinars for foreign exchange at a rate nearly double the official private rate, but the CBL’s setting of a single exchange rate has thus far significantly lowered the black market rate, which hovered around 5 LYD/USD as of March 21, 2021. Entities engaging in foreign exchange must be licensed by the Central Bank. Foreign exchange facilities are available at most large hotels and airports, and ATMs are becoming more widely available. The importation of currency must be declared at time of entry. The Central Bank’s Decree No. 1 of 2013 regulates foreign exchange, including by specifying authorities for the execution of foreign transfers, and by prescribing limits on the transfer of currency abroad for different public and private entities.

Most firms seeking to receive payment for services/products in Libya operate using letters of credit facilitated through foreign banks (often based in Europe). Foreign energy companies remitting large sums often make arrangements for direct transfers to accounts offshore. While the introduction of the foreign exchange fee in September 2018 greatly facilitated the Central Bank’s issuance of LCs, in response to the January 2020 oil shutdown the Central Bank has generally limited LCs to a minimum of $100,000 with a three-month limit to complete transactions.

Remittance Policies

The 2010 Investment Law allows for the remittance of net annual profits generated by an investment and of foreign invested capital in case of liquidation, expiration of the project period, or insurmountable impediments to the investment within the first six months. As noted, the Central Bank charges a foreign exchange fee of 163 percent on sales of Libyan dinars for hard currency.

Sovereign Wealth Funds

Libya maintains a sovereign wealth fund called the Libya Investment Authority (LIA). UN Security Council Resolution 1970 (2011) froze many of the LIA’s assets outside Libya. The freeze on the LIA’s assets is intended to preserve Libya’s assets through its post-revolutionary transition for the benefit of all Libyans. An evaluation of the LIA’s assets in 2012 put their value at USD 67 billion; a new assets valuation has just been completed by an international firm but the figure has yet to be publicly released. The international community and private consultancies continue to provide technical assistance to the LIA to help it improve its governance, including adherence to the Santiago Principles, a set of 24 widely accepted best practices for the operation of sovereign wealth funds. The LIA is also currently undergoing an audit by an international firm.

7. State-Owned Enterprises

The PIB Is responsible for matters related to privatization of state-owned enterprises (SOEs). All enterprises in Libya were previously state-owned. Except for the upstream oil and gas sector, no state-owned enterprise is considered to be efficient. The state is deeply involved in utilities, oil and gas, agriculture, construction, real estate development and manufacturing, and the corporate economy.

Privatization Program

Libya has gone through three previous phases of privatization, the latest between 2003 and 2008 during which 360 SOEs ranging from small to large in various sectors were either fully or partially privatized or brought in private partners through public-private partnerships. However, restrictions to individual shares and foreign ownership – individual investors’ share of the capital was restricted to 15 percent and local ownership had to be 30 percent – limited interest in the privatization program. Accusations of fraud further discouraged investments. Nonetheless, the food industry, healthcare, construction materials, downstream oil and gas, and education sectors are now partially or fully privatized. Fragile governments and lack of security since 2011 have impeded implementation of further privatization programs.

8. Responsible Business Conduct

There is not a general awareness of, expectation of, or standards for responsible business conduct (RBC) in Libya, nor of businesses’ obligation to proactively conduct due diligence to ensure they are doing no harm (including with regards to environmental, social, and governance issues). The Libyan government has not taken measures to define or encourage RBC, such as promoting the OECD or UN Guiding Principles on Business and Human Rights or establishing a national contact point or ombudsman for stakeholders to get information or raise concerns about RBC. As far as domestic laws exist in relation to human rights, labor rights, consumer protection, environmental protections, and other laws/regulations intended to protect individuals from adverse business impacts, the capacity of the government to enforce these laws is very limited.

Libya is not a signatory of the Montreux Document on Private Military and Security Companies, and is not a participant in the International Code of Conduct for Private Security Service Providers’ Association (ICoCA).

Additional Resources

Department of State

Department of Labor

9. Corruption

Foreign firms have identified corruption as an obstacle to FDI; corruption is pervasive in virtually all sectors of the economy, especially in government procurement. Officials frequently engage with impunity in corrupt practices such as graft, bribery, nepotism, money laundering, human smuggling, and other criminal activities. Although Libyan law provides some criminal penalties for corruption by officials, the government does not enforce the law effectively. Internal conflict and the weakness of public institutions further undermine enforcement. No financial disclosure laws, regulations, or codes of conduct require income and asset disclosure by appointed or elected officials.

The Libyan Audit Bureau, the highest financial regulatory authority in the country, has made minimal efforts to improve transparency. The Audit Bureau has investigated mismanagement at the General Electricity Company of Libya that had lowered production and led to acute power cuts. Other economic institutions such as the Ministry of Finance and the Central Bank published some economic data during the year.

Libya has signed and ratified the UN Anticorruption Convention. It is not party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

Resources to Report Corruption

Akram Bannur
General Secretary
National Anti-Corruption Commission of Libya
+218 91 335 8583
Bannurakram@outlook.com 

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

Ibrahim Ali
Chairman
Libyan Transparency International
+218916344442
info@transparency-libya.org 

10. Political and Security Environment

There is a significant recent history of politically-motivated damage and seizure by force of economic infrastructure and installations, particularly in the oil and gas industry. Most recently, forces allied with Libyan National Army Commander Haftar forced the near-total shutdown of Libya’s energy sector in January 2020, which was eventually lifted in September 2020. The October 2020 ceasefire and the peaceful transfer of power in March 2021 to a unity government that has the support of both the outgoing GNA and the LNA has markedly reduced the civil disturbances that had been a daily occurrence. However, rival armed groups continue to jockey for control over the country’s political institutions and economic resources, which means that insecurity and instability remains a cause for concern.

11. Labor Policies and Practices

Libya’s labor market is characterized by a dominant public sector that employs 85 percent of the active labor force in the Libyan economy, according to the World Bank. Just four percent of the labor force works for private firms. The Libyan labor market has many skilled workers with high levels of education, but high public sector wages and benefits result in outsized expectations among job seekers, particularly among the highly-skilled. The World Bank has estimated Libya’s unemployment rate to be around 20 percent, and youth unemployment to be around 50 percent – numbers that, given the already bloated public sector, indicate a lack of private sector jobs for skilled and unskilled Libyans. The World Bank also noted significant “mismatches” between the skills Libyan degree holders possess and those demanded by foreign and domestic employers in Libya. The 2010 Investment Law permits investors to hire foreign workers when national substitutes are not available.

The law does not provide the right for workers to form and join independent unions. Formal sector workers are automatically members of the General Trade Union Federation of Workers, but can opt out on request. Foreign workers are not permitted to organize. Workers are permitted to bargain collectively, but the law stipulates that cooperative agreements must conform to the “national economic interest,” thus significantly limiting collective bargaining. The government has the right to set and cut salaries without consulting workers. According to Freedom House, some trade unions formed after the 2011 revolution, but they remain in their infancy, and collective-bargaining activity was severely limited due to the ongoing hostilities and weak rule of law. There is no data available about the prevalence of collective bargaining, or about the effectiveness of labor dispute or arbitration services.

Workers may call strikes only after exhausting all conciliation and arbitration procedures. Over the past year, employees organized spontaneous strikes, boycotts, and sit-ins in a number of workplaces. The government or one of the parties has the right to demand compulsory arbitration, though state penalties for noncompliance were not sufficient to deter violations.

The law did not criminalize all forms of forced or compulsory labor.  Article 425 of the penal code criminalized slavery and prescribed penalties of five to 15 years’ imprisonment. Article 426 criminalized the buying and selling of slaves and prescribed penalties of up to 10 years’ imprisonment.  However, other forms of forced labor were not criminalized.  The government did not effectively enforce these laws, and the resources, inspections, and penalties for violations were not commensurate with those prescribed for other serious crimes such as kidnapping. There have been numerous anecdotal reports of migrants and IDPs being subjected to forced labor by human traffickers. Private employers have sometimes used detained migrants from prisons and detention centers as forced labor on farms or construction sites; when the work was completed or the employers no longer required the migrants’ labor, employers returned them to detention facilities.

The law prohibits children younger than 18 from being employed except in a form of apprenticeship. It was unclear whether child labor occurred, and no information was available concerning whether the law limits working hours or sets occupational health and safety restrictions for children. It was not clear whether the government had the capacity to enforce compulsory or child labor laws, nor was it clear whether non-enforcement of these laws posed a commercial risk to investors.

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source* USG or international statistical source USG or International Source of Data:  BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) ($M USD) N/A TBD 2020 TBD www.worldbank.org/en/country
Foreign Direct Investment Host Country Statistical source* USG or international statistical source USG or international Source of data:  BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) N/A TBD 2020 TBD BEA data available at https://apps.bea.gov/international/factsheet/
Host country’s FDI in the United States ($M USD, stock positions) N/A N/A N/A N/A BEA data available at https://www.bea.gov/
international/direct-investment-and-multinational-enterprises-comprehensive-data
Total inbound stock of FDI as % host GDP N/A N/A N/A N/A UNCTAD data available at https://stats.unctad.org/handbook/
EconomicTrends/Fdi.html 
  

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

Table 4: Sources of Portfolio Investment
Data not available.

14. Contact for More Information

Daniel Liss
Economic Officer
Libya External Office – U.S. Embassy Tunis
+216 58 542 066
MoralesPR@state.gov

Tunisia

Executive Summary

In 2020, Tunisia’s economy was heavily impacted by the COVID-19 pandemic. Containment measures affected most business sectors and resulted in an unprecedented GDP contraction of 8.8 percent in 2020. The country still faces high unemployment, high inflation, and rising levels of public debt.

Parliament approved an initial government led by Prime Minister Fakhfakh in February 2020; however, Fakhfakh resigned in July 2020.  Parliament subsequently approved a government led by current Prime Minister Hichem Mechichi in September 2020.

Before the pandemic, successive governments had advanced some much-needed structural reforms to improve Tunisia’s business climate, including an improved bankruptcy law, investment code, an initial “negative list,” a law enabling public-private partnerships, and a supplemental law designed to improve the investment climate. The Government of Tunisia (GOT) encouraged entrepreneurship through the passage of the Start-Up Act. The GOT passed a new budget law that ensures greater budgetary transparency and makes the public aware of government investment projects over a three-year period. These reforms are intended to help Tunisia attract both foreign and domestic investment.

Tunisia’s strengths include its proximity to Europe, sub-Saharan Africa, and the Middle East; free-trade agreements with the EU and much of Africa; an educated workforce; and a strong interest in attracting foreign direct investment (FDI). Sectors such as agribusiness, aerospace, infrastructure, renewable energy, telecommunication technologies, and services are increasingly promising. The decline in the value of the dinar over recent years has strengthened investment and export activity in the electronic component manufacturing and textile sectors.

Nevertheless, substantial bureaucratic barriers to investment remain and additional economic reforms have yet to be achieved. State-owned enterprises play a large role in Tunisia’s economy, and some sectors are not open to foreign investment. The informal sector, estimated at 40 to 60 percent of the overall economy, remains problematic, as legitimate businesses are forced to compete with smuggled goods.

Since 2011, the United States has provided more than USD 500 million in economic growth-related assistance, in addition to loan guarantees in 2012, 2014, and 2016 that enabled the GOT to borrow nearly USD 1.5 billion at low interest.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2020 69 of 180 http://www.transparency.org/research/cpi/overview 
World Bank’s Doing Business Report 2020 78 of 190 http://www.doingbusiness.org/en/rankings 
Global Innovation Index 2020 65 of 131 https://www.globalinnovationindex.org/analysis-indicator 
U.S. FDI in partner country ($M USD, historical stock positions) 2019 320 https://apps.bea.gov/international/factsheet/ 
World Bank GNI per capita 2019 USD 3,370 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD 

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

The GOT is working to improve the business climate and attract FDI. The GOT prioritizes attracting and retaining investment, particularly in the underdeveloped interior regions, and reducing unemployment. More than 3,650 foreign companies currently operate in Tunisia, and the government has historically encouraged export-oriented FDI in key sectors such as call centers, electronics, aerospace and aeronautics, automotive parts, textile and apparel, leather and shoes, agro-food, and other light manufacturing. In 2020, the sectors that attracted the most FDI were energy (33.8 percent), the electrical and electronic industry (22.4 percent), agro-food products (10.6 percent), services (9.2 percent), and the mechanical industry (9 percent). Inadequate infrastructure in the interior regions results in the concentration of foreign investment in the capital city of Tunis and its suburbs (46 percent), the northern coastal region (23 percent), the northwest region (14.4 percent), and the eastern coastal region (12 percent). Internal western and southern regions attracted only 4.6 percent of foreign investment despite special tax incentives for those regions.

The Tunisian Parliament passed an Investment Law (#2016-71) in September 2016 that went into effect April 1, 2017 to encourage the responsible regulation of investments. The law provided for the creation of three major institutions:

  • The High Investment Council, whose mission is to implement legislative reforms set out in the investment law and decide on incentives for projects of national importance (defined as investment projects of more than 50 million dinars and 500 jobs).
  • The Tunisian Investment Authority, whose mission is to manage investment projects of more than 15 million dinars and up to 50 million dinars. Investment projects of less than 15 million dinars are managed by the Agency for Promotion of Industry and Innovation (APII).
  • The Tunisian Investment Fund, which funds foreign investment incentive packages.

These institutions were all launched in 2017. However, the Foreign Investment Promotion Agency (FIPA) continues to be Tunisia’s principal agency to promote foreign investment. FIPA is a one-stop shop for foreign investors. It provides information on investment opportunities, advice on the appropriate conditions for success, assistance and support during the creation and implementation of the project, and contact facilitation and advocacy with other government authorities.

Under the 2016 Investment Law (article 7), foreign investors have the same rights and obligations as Tunisian investors. Tunisia encourages dialogue with investors through FIPA offices throughout the country.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign investment is classified into two categories: “Offshore” investment is defined as commercial entities in which foreign capital accounts for at least 66 percent of equity, and at least 70 percent of the production is destined for the export market. However, investments in some sectors can be classified as “offshore” with lower foreign equity shares. Foreign equity in the agricultural sector, for example, cannot exceed 66 percent and foreign investors cannot directly own agricultural land, but agricultural investments can still be classified as “offshore” if they meet the export threshold.

  • “Offshore” investment is defined as commercial entities in which foreign capital accounts for at least 66 percent of equity, and at least 70 percent of the production is destined for the export market. However, investments in some sectors can be classified as “offshore” with lower foreign equity shares. Foreign equity in the agricultural sector, for example, cannot exceed 66 percent and foreign investors cannot directly own agricultural land, but agricultural investments can still be classified as “offshore” if they meet the export threshold.
  • “Onshore” investment caps foreign equity participation at a maximum of 49 percent in most non-industrial projects. “Onshore” industrial investment may have 100 percent foreign equity, subject to government approval.

Pursuant to the 2016 Investment Law (article 4), a list of sectors outlining which investment categories are subject to government authorization (the “negative list”) was set by decree no. 417 of May 11, 2018. The sectors include natural resources; construction materials; land, sea and air transport; banking, finance, and insurance; hazardous and polluting industries; health; education; and telecommunications. The decree specified the deadline to respond to authorization requests for most government agencies and fixed a deadline of 60 days for all other government decision-making bodies not specifically mentioned in the decree.

The decree went into effect on July 1, 2018.

Other Investment Policy Reviews

The WTO completed a Trade Policy Review for Tunisia in July 2016. The report is available here: https://www.wto.org/english/tratop_e/tpr_e/tp441_e.htm .

The OECD completed an Investment Policy Review for Tunisia in November 2012. The report is available here: http://www.oecd.org/daf/inv/investment-policy/tunisia-investmentpolicyreview-oecd.htm .

Business Facilitation

In May 2019, the Tunisian Parliament adopted law 2019-47, a cross-cutting law that impacts legislation across all sectors. The law is designed to improve the country’s business climate and further improve its ranking in the World Bank’s Doing Business Report. The law simplified the process of creating a business, permitted new methods of finance, improved regulations for corporate governance, and provided the private sector the right to operate a project under the framework of a public-private partnership (PPP).

This legislation and previous investment laws are all referenced on the United Nations Conference on Trade and Development (UNCTAD) website: https://investmentpolicy.unctad.org/country-navigator/221/tunisia .

The World Bank Doing Business 2020 report ranks Tunisia 19 in terms of ease of starting a business. In the Middle East and North Africa, Tunisia ranked second after the UAE, and first in North Africa ahead of Morocco, Egypt, Algeria, and Libya: https://www.doingbusiness.org/en/data/exploreeconomies/tunisia#DB_sb .

The Agency for Promotion of Industry and Innovation (APII) and the Tunisia Investment Authority (TIA) are the focal point for business registration. Online project declaration for industry or service sector projects for both domestic and foreign investment is available at: www.tunisieindustrie.nat.tn/en/doc.asp?mcat=16&mrub=122 .

The new online TIA platform allows potential investors to electronically declare the creation, extension, and renewal of all types of investment projects. The platform also allows investors to incorporate new businesses, request special permits, and apply for investment and tax incentives. https://www.tia.gov.tn/ .

APII has attempted to simplify the business registration process by creating a one-stop shop that offers registration of legal papers with the tax office, court clerk, official Tunisian gazette, and customs. This one-stop shop also houses consultants from the Investment Promotion Agency, Ministry of Employment, National Social Security Authority (CNSS), postal service, Ministry of Interior, and the Ministry of Trade and Export Development. Registration may face delays as some agencies may have longer internal processes. Prior to registration, a business must first initiate an online declaration of intent, to which APII provides a notification of receipt within 24 hours.

The World Bank’s Doing Business 2020 report indicates that business registration takes an average of nine days and costs about USD 90 (253 Tunisian dinars): http://www.doingbusiness.org/en/data/exploreeconomies/tunisia#DB_sb .

For agriculture and fisheries, business registration information can be found at: www.apia.com.tn .

In the tourism industry, companies must register with the National Office for Tourism at: http://www.tourisme.gov.tn/en/investing/administrative-services.html .

The central points of contact for established foreign investors and companies are the Tunisian Investment Authority (TIA): https://www.tia.gov.tn/en  and the Foreign Investment Promotion Agency (FIPA): http://www.investintunisia.tn .

Outward Investment

The GOT does not incentivize outward investment, and capital transfer abroad is tightly controlled by the Central Bank.

3. Legal Regime

Transparency of the Regulatory System

Per the 2014 constitution, Tunisia has adopted a semi-parliamentary political system whereby power is shared among the Parliament, the Presidency of the Republic, and the Government, which is composed of a ministerial cabinet led by a Prime Minister (Head of Government). The Presidency and the Government fulfill executive roles. The Government creates the majority of laws and regulations; however, the Presidency of the Republic and Parliament also develop and propose laws.

The Parliament debates and votes on the adoption of legislation. Draft legislation is accessible to the public via the Parliament’s website.

Ministerial decrees and other regulations are debated at the level of the Government and adopted by a Ministerial Council headed by the Prime Minister.

After adoption by Parliament and signature by the President of the Republic, all laws, decrees, and regulations are published on the website of the Official Gazette and enforced by the Government at the national level.

The Government takes few proactive steps to raise public awareness of the public consultation period for new draft laws and decrees. Civil society, NGOs, and political parties are all pushing for increased transparency and inclusiveness in rulemaking. Many draft bills, such as the budget law, were reviewed before submission for a final vote under pressure from civil society. Business associations, chambers of commerce, unions, and political parties reviewed the 2016 Investment Law prior to final adoption.

In January 2019, the Tunisian Parliament passed the Organic Budget Law, which is a foundational law defining the parameters for the government’s annual budgeting process. The law aims to bring the budget process in line with principles expressed in the 2014 constitution by enlarging Parliament’s role in the budgetary process and strengthening the financial autonomy of the legislative and judiciary branches.  The law requires the government to organize its budget by policy objective, detail budget projections over a three-year timeframe, and revise its accounting system to ensure greater transparency.

In May 2020, the government adopted decree #2020-316, establishing simplified conditions and procedures for granting project concessions and their monitoring based on a new public-private partnership (PPP) approach. The decree aims to further promote investment by young entrepreneurs (under the age of 35) and projects of all sizes, including those less than 15 million dinars ($5.5 million).

Not all accounting, legal, and regulatory procedures are in line with international standards. Publicly listed companies adhere to national accounting norms.

The Parliament has oversight authority over the GOT but cannot ensure that all administrative processes are followed.

The World Bank Global Indicators of Regulatory Governance  for Tunisia are available here: http://rulemaking.worldbank.org/en/data/explorecountries/tunisia .

Tunisia is a member of the Open Government Partnership, a multilateral initiative that aims to secure concrete commitments from governments to promote transparency, empower citizens, fight corruption, and harness new technologies to strengthen governance: http://www.opengovpartnership.org/country/tunisia .

Most of Tunisia’s public finances and debt obligations are debated and voted on by the Parliament.

International Regulatory Considerations

As part of its negotiations toward a comprehensive free-trade agreement with the EU, the GOT is considering incorporating a number of EU standards in its domestic regulations.

Tunisia became a member of the WTO in 1995 and is required to notify the WTO regarding draft technical regulations on Technical Barriers to Trade (TBT). However, in October 2018 the Ministry of Commerce released a circular that temporarily restricted the import of certain goods without going through the WTO notification process, which negatively impacted some business operations without forewarning.

In February 2017, Tunisia domestically ratified the WTO Trade Facilitation Agreement (TFA) and presented its instrument of ratification to the WTO in July 2020 for all categories A, B, and C. However, Tunisia has yet to communicate indicative and definitive dates under category B and is overdue in submitting notifications related to technical assistance requirements and support and information on assistance and capacity building (Article 22.3). Tunisia has also yet to submit two transparency notifications related to: (1) import, export, and transit procedures, contact information of enquiry points, (Article 1.4) and (2) contact points for customs cooperation (Article 12.2.2).

Legal System and Judicial Independence

The Tunisian legal system is secular and based on the French Napoleonic code and meets EU standards. While the 2014 Tunisian constitution guarantees the independence of the judiciary, constitutionally mandated reforms of courts and broader judiciary reforms are still ongoing.

Tunisia has a written commercial law but does not have specialized commercial courts.

Regulations or enforcement actions can be appealed at the Court of Appeals.

Laws and Regulations on Foreign Direct Investment

The 2016 Investment Law directs tax incentives towards regional development promotion, technology and high value-added products, research and development (R&D), innovation, small and medium-sized enterprises (SMEs), and the education, transport, health, culture, and environmental protection sectors. Foreign investors can apply for government incentives online through the Tunisian Investment Authority (TIA) website: https://www.tia.gov.tn/en .

The primary one-stop-shop webpage for investors looking for relevant laws and regulations is hosted at the Investment and Innovation Promotion Agency website, http://www.tunisieindustrie.nat.tn/en/doc.asp?mcat=12&mrub=209 . The 2016 Investment Law (article 15) calls for the creation of an Investor’s Unique Point of Contact within the ministry in charge of investment to assist new and existing investors to launch and expand their projects.

In addition, the Parliament has adopted a number of economic reforms since 2015, including laws concerning renewable energy, competition, public-private partnerships (PPP), bankruptcy, and the independence of the Central Bank of Tunisia, as well as a Start-Up Act to promote the creation of new businesses and entrepreneurship.

Competition and Antitrust Laws

The 2015 Competition Law established a government appointed Competition Council to reduce government intervention in the economy and promote competition based on supply and demand.

This law voided previous agreements that fixed prices, limited free competition, or restricted the entry of new companies as well as those that controlled production, distribution, investment, technical progress, or supply centers. While the law ensures free pricing of most products and services, there are a few protected items, such as bread, water, and electricity, for which the GOT can still intervene in pricing. Moreover, in exceptional cases of large increases or collapses in prices, such as sharp price increases of surgical masks, sanitizer, and disinfection products during the COVID-19 pandemic, the Ministry of Trade and Export Development reserved the right to regulate prices for a period of up to six months. The ministry can also intervene in some other sectors to ensure free and fair competition. However, the Competition Council can make exceptions to its anti-trust policies if it deems it necessary for overall technical or economic progress.

The Competition Council also has the power to investigate competition-inhibiting cases and make recommendations to the Ministry of Trade and Export Development upon the Ministry’s request.

Expropriation and Compensation

There are no outstanding expropriation cases involving U.S. interests. The 2016 Investment Law (article 8) states that investors’ property may not be expropriated except in cases of public interest. Expropriation, if carried out, must comply with legal procedures, be executed without discrimination on the basis of nationality, and provide fair and equitable compensation.

U.S. investments in Tunisia are protected by international law as stipulated in the U.S.-Tunisia Bilateral Investment Treaty (BIT). According to Article III of the BIT, the GOT reserves the right to expropriate or nationalize investments for the public good, in a non-discriminatory manner, and upon advance compensation of the full value of the expropriated investment. The treaty grants the right to prompt review by the relevant Tunisian authorities of conformity with the principles of international law. When compensation is granted to Tunisian or foreign companies whose investments suffer losses owing to events such as war, armed conflict, revolution, state of national emergency, civil disturbance, etc., U.S. companies are accorded “the most favorable treatment in regard to any measures adopted in relation to such losses.”

Dispute Settlement

ICSID Convention and New York Convention

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

Investor-State Dispute Settlement

U.S. investments in Tunisia are protected by international law as stipulated in the U.S.-Tunisia Bilateral Investment Treaty (BIT). The BIT stipulates that procedures shall allow an investor to take a dispute with a party directly to binding third-party arbitration.

Disputes involving U.S. persons are relatively rare. Over the past 10 years, there were three dispute cases involving U.S. investors; two were settled and one is still ongoing. U.S. firms have generally been successful in seeking redress through the Tunisian judicial system.

The Tunisian Code of Civil and Commercial Procedures allows for the enforcement of foreign court decisions under certain circumstances, such as arbitration.

There is no pattern of significant investment disputes or discrimination involving U.S. or other foreign investors.

International Commercial Arbitration and Foreign Courts

The Tunisian Arbitration Code brought into effect by Law 93-42 of April 26, 1993, governs arbitration in Tunisia. Certain provisions within the code are based on the United Nations Commission on International Trade Law (UNCITRAL) model law. Tunisia has several domestic dispute resolution venues. The best known is the Tunis Center for Conciliation and Arbitration. When an arbitral tribunal does not adhere to the rules governing the process, either party can apply to the national courts for relief. Unless the parties have agreed otherwise, an arbitral tribunal may, on the request of one of the parties, order any interim measure that it deems appropriate.

Bankruptcy Regulations

Parliament adopted in April 2016 a new bankruptcy law that replaced Chapter IV of the Commerce Law and the Recovery of Companies in Economic Difficulties Law. These two laws had duplicative and cumbersome processes for business rescue and exit and gave creditors a marginal role. The new law increases incentives for failed companies to undergo liquidation by limiting state collection privileges. The improved bankruptcy procedures are intended to decrease the number of non-performing loans and facilitate access of new firms to bank lending.

According to the World Bank Doing Business 2020 report, Tunisia’s recovery rate (how much creditors recover from an insolvent firm at the end of insolvency proceedings) is about 51.3 cents on the dollar, compared to 27.3 cents for MENA and 70.2 cents for OECD high-income countries.

4. Industrial Policies

Investment Incentives

Preferential status is usually linked to the percentage of foreign corporate ownership, percentage of production for the export market, and investment location. The 2016 Investment Law provides investors with a broad range of incentives linked to increased added value, performance and competitiveness, use of new technologies, regional development, environmental protection, and high employability.

To incentivize the employment of new university graduates, the GOT assumes the employer’s portion of social security costs (16 percent of salary) for the first seven years of the investment, with an extension of up to 10 years in the interior regions. Investments with high job-creation potential may benefit from the purchase of state-owned land at the price of one Tunisian dinar per square meter. Investors who purchase companies in financial distress may also benefit from tax breaks and social security assistance. These advantages are determined on a case-by-case basis.

Further benefits are available for offshore investments, such as tax exemptions on profits and reinvested revenues, duty-free import of capital goods with no local equivalents, and full tax and duty exemption on raw materials, semi-finished goods, and services necessary for operation.

On March 9, 2017, the GOT adopted decree no. 2017-389 on financial incentives to investment in priority sectors, economic performance areas, and regional development. Investors have to declare their projects through the regional APII offices to receive incentives. Investors can also request incentives online through the Tunisian Investment Authority (TIA) website: https://www.tia.gov.tn/en .

According to the World Bank’s Doing Business 2020 report, Tunisia’s overall ranking improved to 78 out of 190 countries, from 80 the previous year.

Foreign Trade Zones/Free Ports/Trade Facilitation

Tunisia has free-trade zones, officially known as “Parcs d’Activités Economiques,” in Bizerte and Zarzis. While the land is state-owned, a private company manages the free-trade zones. They enjoy adequate public utilities and fiber-optic connectivity. Companies established in the free-trade zones are exempt from taxes and customs duties and benefit from unrestricted foreign exchange transactions, as well as limited duty-free entry into Tunisia of inputs for transformation and re-export. Factories operate as bonded warehouses and have their own assigned customs personnel.

For example, companies in Bizerte’s free-trade zone may rent space for three Euros per square meter annually – a level unchanged since 1996 – plus a low service fee. Long-term renewable leases, up to 25 years, are subject to a negotiable 3 percent escalation clause. Expatriate personnel are allowed duty-free entry of personal vehicles. During the first year of operations, companies within the zone must export 100 percent of their production. Each following year, the company may sell domestically up to 30 percent of the previous year’s total volume of production, subject to local customs duties and taxes. Lease termination has not been a problem, and all companies that desired to depart the zone reportedly did so successfully.

Performance and Data Localization Requirements

Foreign resident companies face restrictions related to the employment and compensation of expatriate employees. The 2016 Investment Law limits the percentage of expatriate employees per company to 30 percent of the total work force (excluding oil and gas companies) for the first three years and to 10 percent starting in the fourth year. There are somewhat lengthy renewal procedures for annual work and residence permits, and the GOT has announced its intention to ease them in the future. Although rarely enforced, legislation limits the validity of expatriate work permits to two years.

Central Bank regulations impose administrative burdens on companies seeking to pay for temporary expatriate technical assistance from local revenue. For example, before it receives authorization to transfer payment from its operations in Tunisia, a foreign resident company that utilizes a foreign accountant must document that the service is necessary, fairly valued, and unavailable in Tunisia. This regulation hinders a foreign resident company’s ability to pay for services performed abroad.

The host government does not follow “forced localization,” but encourages the use of domestic content.

There are no requirements for foreign information technology (IT) providers to turn over source code that is protected by the intellectual property law; however, they are required to inform the Ministry of Communication Technologies and Digital Economy about encrypted equipment.

Public companies and institutions are prohibited by the Ministry of Communication Technologies from freely transmitting and storing personal data outside of the country.

Private and public institutions must comply with the recommendations of the National Authority for Personal Data Protection (INPDP) when handling personal data, even if it is business-related. The National Institute of Office Automation and Micro-computing (INBMI) enforces the rules on local data storage.

Until recently, performance requirements were generally limited to investment in the petroleum sector. Now, such requirements are in force in sectors such as telecommunications and for private sector infrastructure projects on a case-by-case basis. These requirements tend to be specific to the concession or operating agreement (e.g., drilling a certain number of wells, or producing a certain amount of electricity).

5. Protection of Property Rights

Real Property

Secured interests in property are enforced in Tunisia. Mortgages and liens are in common use, and the recording system is reliable.

Foreign and/or non-resident investors are allowed to lease any type of land but can only acquire non-agricultural land.

A large portion of privately held land, especially agriculture land, has no clear title, and the government is investing a great deal of effort to encourage people to clear and register their properties. For the past 10 years, it has been estimated that privately held land accounts for approximately 45 percent of all land.

Properties legally purchased must be duly registered to ensure they remain the property of their actual owners, even if they have been unoccupied for a long time.

According to the World Bank’s Doing Business 2020 report, registering a property in Tunisia is done in five steps, takes 35 days, and costs around 6.1 percent of the total property cost. In North Africa, Tunisia ranks second after Morocco but is ahead of Egypt, Algeria, and Libya.

Intellectual Property Rights

Tunisia is a member of the World Intellectual Property Organization (WIPO) and signatory to the United Nations Agreement on the Protection of Patents and Trademarks. The agency responsible for patents and trademarks is the National Institute for Standardization and Industrial Property (INNORPI — Institut National de la Normalisation et de la Propriété Industrielle). Tunisia also is party to the Madrid Protocol for the International Registration of Marks. Foreign patents and trademarks should be registered with INNORPI.

Tunisia’s patent and trademark laws are designed to protect owners duly registered in Tunisia. In the area of patents, foreign businesses are guaranteed treatment equal to that offered to Tunisian nationals. Tunisia updated its legislation to meet the requirements of the WTO agreement on Trade-Related Aspects of Intellectual Property (TRIPS).

Copyright protection is the responsibility of the Tunisian Copyright Protection Organization (OTDAV — Office Tunisien des Droits d´Auteurs et des Droits Voisins), which also represents foreign copyright organizations.

The 2009 Intellectual Property Law greatly expanded the scope of protections.  The minimum fine for counterfeiting is 10,000 Tunisian dinars (approximately USD 3,700), and copyright protection is valid for the holder’s lifetime. Customs agents have the authority to seize suspected counterfeit goods immediately.  Tunisia’s 2014 constitution enshrined intellectual property protection in article 41.

If customs officials suspect a copyright violation, they are permitted to inspect and seize suspected goods. For products utilizing foreign trademarks registered at INNORPI, the Customs Code empowers customs agents to enforce intellectual property rights (IPR) throughout the country. Tunisian copyright law applies to literary works, art, scientific works, new technologies, and digital works. Its application and enforcement, however, have not always been consistent with foreign commercial expectations. Print, audio, and video media are particularly susceptible to copyright infringement in Tunisia. Smuggling of illegal items takes place through Tunisia’s porous borders.

In 2015, the GOT issued a decree defining registration and arbitration procedures for trade and service marks and establishing a national trademark registry. The new decree contained provisions governing the registration of trademarks under the Madrid Protocol and included improvements such as the extension of the deadline for opposition to the registration of trademarks, as well as the electronic filing of applications for trademarks registration.

In March 2020, the Tunisian Parliament approved the government’s request for Tunisia to host the headquarters of the Pan-African Intellectual Property Body (PAIPO). Tunisia is waiting for at least 14 African countries to ratify the formation of PAIPO in order for it to enter into force.

The registration of pharmaceutical drugs in Tunisia requires that the product is both registered and marketed in the country of origin. In 2005, Tunisia removed its restriction on pharmaceutical imports where there are similar generic products manufactured locally.

Resources for Rights Holders

Peter Mehravari
Intellectual Property Attaché for the Middle East and North Africa
U.S. Embassy Abu Dhabi
U.S. Department of Commerce Global Markets
U.S. Patent and Trademark Office
Tel: +965 2259 1455
peter.mehravari@trade.gov 

AmCham Tunisia:  http://www.amchamtunisia.org.tn/

Attorneys list: https://tn.usembassy.gov/u-s-citizen-services/local-resources-of-u-s-citizens/attorneys/

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

6. Financial Sector

Capital Markets and Portfolio Investment

Tunisia’s financial system is dominated by its banking sector, with banks accounting for roughly 85 percent of financing in Tunisia. Overreliance on bank financing impedes economic growth and stronger job creation. Equity capitalization is relatively small; Tunisia’s stock market provided 9.1 percent of corporate financing in 2019 according to the Financial Market Council annual report. Other mechanisms, such as bonds and microfinance, contribute marginally to the overall economy.

Created in 1969, the Bourse de Tunis (Tunis stock exchange) listed 80 companies as of December 2020. The total market capitalization of these companies was USD 8.41 billion, equivalent to 23.1% of the GDP. During the last five years, the exchange’s regulatory and accounting systems have been brought more in line with international standards, including compliance and investor protections. The exchange is supervised and regulated by the state-run Capital Market Board. Most major global accounting firms are represented in Tunisia. Firms listed on the stock exchange must publish semiannual corporate reports audited by a certified public accountant. Accompanying accounting requirements exceed what many Tunisian firms can, or are willing to, undertake. GOT tax incentives attempt to encourage companies to list on the stock exchange. Newly listed companies that offer a 30 percent capital share to the public receive a five-year tax reduction on profits. In addition, individual investors receive tax deductions for equity investment in the market. Capital gains are tax-free when held by the investor for two years.

Foreign investors are permitted to purchase shares in resident (onshore) firms only through authorized Tunisian brokers or through established mutual funds. To trade, non-resident (offshore) brokers require a Tunisian intermediary and may only service non-Tunisian customers. Tunisian brokerage firms may have foreign participation, as long as that participation is less than 50 percent. Foreign investment of up to 50 percent of a listed firm’s capital does not require authorization.

Money and Banking System

According to the Central Bank of Tunisia (CBT) annual report on banking supervision published in March 2021, Tunisia hosts 30 banks, of which 23 are onshore and seven are offshore. Onshore banks include three Islamic banks, two microcredit and SME financing banks, and 18 commercial universal banks.

Domestic credit to the private sector provided by banks stood at 64 percent of GDP in 2019. According to the World Bank, this level is higher than the MENA region average of 56.7 percent. In the World Bank’s Doing Business 2020 survey, Tunisia’s ranking in terms of ease of access to credit fell from 99 in 2019 to 104 in 2020. Tunisia’s banking system penetration has grown by five percent annually for the past five years. 87 percent of banks are located in the coastal regions, with about 41 percent in the greater Tunis area alone.

Tunisia’s banking system activity is mainly within the 23 onshore banks, which accounted for 92.3 percent of assets, 93.8 percent of loans, and 97 percent of deposits in 2019. The onshore banks offer identical services targeting Tunisia’s larger corporations. Meanwhile, SMEs and individuals often have difficulty accessing bank capital due to high collateral requirements.

The CBT report noted that tighter monetary policy resulted in a slowdown in credit activity in 2019, affecting both loans to professionals (which only grew by 4.8% compared to an increase of 10.2% in 2018) and loans to individuals (0.4% compared to 5.5% in 2018).

Foreign banks are permitted to open branches and establish operations in Tunisia under the offshore regime and are subject to the supervision of the Central Bank.

Government regulations control lending rates. This prevents banks from pricing their loan portfolios appropriately and incentivizes bankers to restrict the provision of credit. Competition among Tunisia’s many banks has the effect of lowering observed interest rates; however, banks often place conditions on loans that impose far higher costs on borrowers than interest rates alone. These non-interest costs may include collateral requirements that come in the form of liens on real estate. Often, collateral must equal or exceed the value of the loan principal. Collateral requirements are high because banks face regulatory difficulties in collecting collateral, thereby adding to costs. According to the CBT banking supervision report, nonperforming loans (NPLs) were at 13.4 percent of all bank loans in 2019, mostly in the agriculture (27.1 percent) and tourism (47 percent) sectors.

Beyond the banks and stock exchange, few effective financing mechanisms are available in the Tunisian economy. A true bond market does not exist, and government debt sold to financial institutions is not re-traded on a formal, transparent secondary market. Private equity remains a niche element in the Tunisian financial system. Firms experience difficulty raising sufficient capital, sourcing their transactions, and selling their stakes in successful investments once they mature. The microfinance market remains underexploited, with non-governmental organization Enda Inter-Arabe the dominant lender in the field.

The GOT recognizes two categories of financial service activity: banking (e.g., deposits, loans, payments and exchange operations, and acquisition of operating capital) and investment services (reception, transmission, order execution, and portfolio management). Non-resident financial service providers must present initial minimum capital (fully paid up at subscription) of 25 million Tunisian dinars (USD 8.9 million) for a bank, 10 million dinars (USD 3.5 million) for a non-bank financial institution, 7.5 million dinars (USD 2.6 million) for an investment company, and 250,000 dinars (USD 89,000) for a portfolio management company.

Foreign Exchange and Remittances

Foreign Exchange

The Tunisian Dinar can only be traded within Tunisia, and it is illegal to move dinars out of the country.  The dinar is convertible for current account transactions (export-import operations, remittances of investment capital, earnings, loan or lease payments, royalties, etc.).  Central Bank authorization is required for some foreign exchange operations.  For imports, Tunisian law prohibits the release of hard currency from Tunisia as payment prior to the presentation of documents establishing that the merchandise has been shipped to Tunisia. In 2020, the dinar appreciated 4 percent against the dollar and 2 percent against the Euro.

Non-residents are exempt from most exchange regulations.  Under foreign currency regulations, non-resident companies are defined as having:

  • Non-resident individuals who own at least 66 percent of the company’s capital, and
  • Capital fully financed by imported foreign currency.

Foreign investors may transfer funds at any time and without prior authorization.  This applies to principal as well as dividends or interest capital.  The procedures for repatriation are complex, however, and within the discretion of the Central Bank.  The difficulty in the repatriation of capital and dividends is one of the most frequent complaints of foreign investors in Tunisia.

There are no limits to the amount of foreign currency that visitors can bring to Tunisia to exchange into local currency.  However, amounts exceeding the equivalent of 25,000 dinars (USD 8,900) must be declared to customs at the port of entry.  Non-residents must also report foreign currency imports if they wish to re-export or deposit more than 5,000 dinars (USD 1,780).  Tunisian customs authorities may require currency exchange receipts on exit from the country.

Remittance Policies

Tunisia’s 2016 Investment Law enshrines the right of foreign investors to transfer abroad funds in foreign currency with minimal interference from the Central Bank.  Ministerial decree no. 417 of May 2018 states that the Central Bank of Tunisia must decide on foreign currency remittance requests within 90 days. In case of no response, the investor may contact the Higher Investment Authority, which will give final approval within 30 days.

Sovereign Wealth Funds

By decree no. 85-2011, the GOT established a sovereign wealth fund, “Caisse des Depots et des Consignations” (CDC), to boost private sector investment and promote small and medium enterprise (SME) development. It is a state-owned investment entity responsible for independently managing a portion of the state’s financial assets. The CDC was set up with support from the French CDC and the Moroccan CDG (Caisse de Depots et de Gestion) and became operational in early 2012. The original impetus for the creation of the CDC was to manage assets confiscated from the former ruling family as independently as possible to serve the public interest. More information is available about the CDC at www.cdc.tn . As of December 2019, CDC had 8.2 billion dinars (USD 2.8 billion) in assets and 348 million dinars (USD 118 million) in capital.

All CDC investments are made locally, with the objective of boosting investments in the interior regions and promoting SME development.

The CDC is governed by a supervisory committee composed of representatives from different ministries and chaired by the Minister of Finance.

7. State-Owned Enterprises

There are 110 state-owned enterprises (SOEs) and public institutions in Tunisia per the Ministry of Finance’s most recent (May 2020) report on public enterprises. SOEs are still prominent throughout the economy but are heavily indebted. Per the February 2021 IMF Article IV report, the debt of Tunisia’s 30 major SOEs was about 40 percent of GDP in 2019, and debt equivalent to about 15 percent of GDP was covered by government guarantees as of mid-2020. Annual budgetary transfers amounted to 7-8 percent of GDP in mid-2020, with 40 percent of transfers directed to three SOEs in the form of subsidies for cereals, fuel, and electricity.

Many SOEs compete with the private sector, in industries such as telecommunications, banking, and insurance, while others hold monopolies in sectors considered sensitive by the government, such as railroad, transportation, water and electricity distribution, and port logistics. Importation of basic food staples and strategic items such as cereals, rice, sugar, and edible oil also remains under SOE control.

The GOT appoints senior management officials to SOEs, who report directly to the ministries responsible for the companies’ sector of operation. SOE boards of directors include representatives from various ministries and personnel from the company itself. Similar to private companies, the law requires SOEs to publish independently audited annual reports, regardless of whether corporate capital is publicly traded on the stock market.

The GOT encourages SOEs to adhere to OECD Guidelines on Corporate Governance, but adherence is not enforced. Investment banks and credit agencies tend to associate SOEs with the government and consider them as having the same risk profile for lending purposes.

Privatization Program

The GOT allows foreign participation in its privatization program. A significant share of Tunisia’s FDI in recent years has come from the privatization of state-owned or state-controlled enterprises. Privatization has occurred in many sectors, such as telecommunications, banking, insurance, manufacturing, and fuel distribution, among others.

In 2011, the GOT confiscated the assets of the former regime. The list of assets involved every major economic sector. According to the Commission to Investigate Corruption and Malfeasance, a court order is required to determine the ultimate handling of frozen assets.

Because court actions frequently take years –and with the government facing immediate budgetary needs – the GOT allowed privatization bids for shares in Ooredoo (a foreign telecommunications company of which 30 percent of shares were confiscated from the previous regime), Ennakl, Alpha Ford), and City Cars (car distribution), Goulette Shipping Cruise (cruise terminal management), Airport VIP Service (business lounge management), and Banque de Tunisie and Zitouna Bank (banking). The government is expected to sell some of its stakes in state-owned banks; however, no clear plan has been adopted or communicated so far due to fierce opposition by labor unions.

8. Responsible Business Conduct

Tunisia adopted law no. 35 in June 2018 to encourage Corporate Social Responsibility (CSR). The law requires companies to allocate a portion of their budgets to finance CSR projects such as those in sustainable development, green economy, and youth employment. According to the law, an organization in charge of monitoring CSR projects will be created to ensure that the projects comply with the principles of good governance and sustainable development. Tunisia is an adherent to the OECD Guidelines for Multinational Enterprises.

Since 1989, the public sector has been subject to a government procurement law that requires labor, environmental, and other impact studies for large procurement projects. All public institutions are subject to audits by the Court of Auditors (Cour des Comptes).

The Tunisian Central Bank issued a circular in 2011 setting guidelines for sound and prudent business management and guaranteeing and safeguarding the interests of shareholders, creditors, depositors and staff. The circular also established policies on recruitment, appointment, and remuneration, as well as dissemination of information to shareholders, depositors, market counterparts, regulators, and the general public.

In January 2019, the High Committee for Administrative and Financial Control (HCCAF) under the Presidency of the Government, published a guide on best practices for improved governance of public enterprises and establishments.

In May 2019, the Parliament adopted law no. 2019-47, which introduced in Chapter 5 a set of articles designed to improve corporate governance and increase transparency. For example, the new legislation required that all companies listed on Tunisia’s stock exchange have on their board of directors at least two independent members, and separate individuals serving as the chairman of the board and the chief executive officer.

On October 14, 2020, the High Instance for Public Procurement (HAICOP) under the Presidency of the Government, published a report on risk management strategy in public procurement.

The national point of contact for OECD for Multinational Enterprises guidelines is:

Ministry of Economy, Finance, and Investment Support
Avenue Mohamed V
1002 Tunis
Tel: +216 7184 9596
Fax: +216 7179 9069

Tunisia has not yet joined the Extractive Industries Transparency Initiative (EITI). However, Tunisia participated in the eighth world conference of the EITI in Paris, France, in 2019.

Per Tunisia’s 2014 constitution, projects related to commercial development of oil, natural gas, or minerals are subject to Parliamentary approval.

Additional Resources 

Department of State

Department of Labor

9. Corruption

Most U.S. firms involved in the Tunisian market do not identify corruption as a primary obstacle to foreign direct investment. However, some have reported that routine procedures for doing business (customs, transportation, and some bureaucratic paperwork) are sometimes tainted by corrupt practices. Transparency International’s Corruption Perceptions Index 2020 gave Tunisia a score of 44 out of 100 and a rank of 69 among 180 countries marking a slight improvement compared to a score of 43 and a rank of 74 in 2019. Regionally, Tunisia is ranked 7 for transparency among MENA countries and first in North Africa, ahead of Morocco, Algeria, Egypt, and Libya. Transparency International expressed concern that Tunisia’s score has not improved in recent years despite advances in anti-corruption legislation, including laws to protect whistleblowers, improve access to information, and encourage asset declarations by public officials or individuals with public trust roles.

Recent government efforts to combat corruption include: the seizure and privatization of assets belonging to Ben Ali’s family members; assurances that price controls on food products, and gasoline are respected; enhancement of commercial competition in the domestic market; establishment of a Minister in Charge of Public Service, Good Governance, Anti-corruption; arrests of corrupt businessmen and officials; and harmonization of Tunisian corruption laws with those of the European Union.

The constitution requires those holding high government offices to declare assets “as provided by law.” In 2018, Parliament adopted the Assets Declaration Law, identifying 35 categories of public officials required to declare their assets upon being elected or appointed and upon leaving office. By law, the National Authority for the Combat Against Corruption (INLUCC) is then responsible for publishing the lists of assets of these individuals on its website. In addition, the law requires other individuals in specified professions that have a public role to declare their assets to the INLUCC, although this information is not made public. This provision applies to journalists, media figures, civil society leaders, political party leaders, and union officials. The law also enumerates a “gift” policy, defines measures to avoid conflicts of interest, and stipulates the sanctions that apply in cases of illicit enrichment. In 2019, Tunisia’s newly elected government officials declared their assets, including the 217 Members of Parliament. The declaration of assets was also made in September 2020 when a new government was formed.

In February 2017, Parliament passed law no. 2017-10 on corruption reporting and whistleblower protection. The legislation was a significant step in the fight against corruption, as it establishes the mechanisms, conditions, and procedures for denouncing corruption. Article 17 of the law provides protection for whistleblowers, and any act of reprisal against them is considered a punishable crime. For public servants, the law also guarantees the protection of whistleblowers against possible retaliation from their superiors. In September 2017, the GOT established the Independent Access to Information Commission.  This authority was prescribed in the 2016 Access to Information Law to proactively encourage government agencies to comply with the new law and to adjudicate complaints against the government for failing to comply with the law. Following the passage of the access to information and whistleblower protection laws, the government initiated an anti-corruption campaign led by then prime minister Youssef Chahed.  A series of arrests and investigations targeted well-known businesspersons, politicians, journalists, police officers, and customs officials.  Preliminary charges included embezzlement, fraud, and taking bribes.

Tunisia’s penal code devotes 11 articles to defining and classifying corruption and assigns corresponding penalties (including fines and imprisonment). Several other regulations also address broader concepts of corruption. Detailed information on the application of these laws and their effectiveness in combating corruption is not publicly available, and there are no GOT statistics specific to corruption. The Independent Commission to Investigate Corruption handled corruption complaints from 1987 to 2011. The commission referred 5 percent of cases to the Ministry of Justice. In 2012, the commission was replaced by the National Authority to Combat Corruption (INLUCC), which has the authority to forward corruption cases to the Ministry of Justice, give opinions on legislative and regulatory anti-corruption efforts, propose policies and collect data on corruption, and facilitate contact between anti-corruption efforts in the government and civil society. Tunisia’s constitution stipulates that INLUCC is a temporary institution, and that Parliament must appoint members to a permanent Institute for Good Governance and Anticorruption.  Parliament has not announced a timeline for establishing this permanent institution. Prime Minister Fakhfakh resigned on July 15, 2020, following allegations of a conflict of interest involving his partial ownership of companies that received government contracts.  In apparent retaliation for his ouster, Fakhfakh dismissed then INLUCC president Chawki Tabib, replacing him with Imed Boukhris, a former judge.

During a March 16, 2019 press conference, INLUCC president Chawki Tabib said that it takes 7-10 years on average for corruption cases to be processed in the judicial system. In 2018, the Tunisian Financial Analysis Committee, which operates under the auspices of the Central Bank as a financial intelligence unit, announced that it froze approximately 200 million dinars ($70 million) linked to suspected money-laundering transactions. The committee received approximately 600 reports of suspicious transactions related to corruption and illicit financial flows during the year.

Since 1989, a comprehensive law designed to regulate each phase of public procurement has governed the public sector. The GOT also established the Higher Commission on Public Procurement (HAICOP) to supervise the tender and award process for major government contracts. The government publicly supports a policy of transparency. Public tenders require bidders to provide a sworn statement that they have not and will not, either by themselves or through a third party, make any promises or give gifts with a view to influencing the outcome of the tender and realization of the project. Starting September 2018, the government imposed by decree that all public procurement operations be conducted electronically via a bidding platform called Tunisia Online E-Procurement System (TUNEPS). Despite the law, competition on government tenders appears susceptible to corrupt behavior. Pursuant to the Foreign Corrupt Practices Act (FCPA), the U.S. Government requires that American companies requesting U.S. Government advocacy certify that they do not participate in corrupt practices.

Resources to Report Corruption

Contacts at agencies responsible for combating corruption:

Imed Boukhris
President
The National Anti-Corruption Authority (Instance Nationale de Lutte Contre la Corruption – INLUCC)
http://www.inlucc.tn 
71 Avenue Taieb Mhiri, 1002 Tunis Belvédère – Tunisia
+216 71 840 401 / Toll Free: 80 10 22 22
contact@inlucc.tn 

“Watchdog” organization

Achraf Aouadi
President
I WATCH Tunisia
14 Rue d’Irak 1002 Lafayette, Tunisia
+ 216 71 844 226
contact@iwatch.tn 

10. Political and Security Environment

In September 2020, the Parliament approved the new government under the leadership of Prime Minister Mechichi after being nominated by President Kais Saied. Mechichi replaced former Prime Minister Elyess Fakhfakh, who resigned in July 2020.

President Kais Saied was elected in the aftermath of presidential and parliamentary elections held in September and October 2019, the country’s first elections since its post-revolution constitution was ratified in 2014, which were widely regarded as well-executed and credible.  The transition of power was smooth and without incident, following a clear procedure outlined by the 2014 constitution.

In the 10 years since the revolution, Tunisia has made significant progress in the areas of civil society and rights-based reforms, but economic indicators continue to lag and have been a major driver of frequent protests.  Public opinion polls indicated that corruption, poor economic conditions, and persistently high unemployment fuel public discontent with the political class. While ideological differences with respect to religion dominate much of the political discord, differing economic ideologies – whether Tunisia will follow a statist economic model or a liberal one – have more tangible effects on policy.  The country’s first municipal elections, held in May 2018, were a critical first step in the decentralization process to help alleviate some of the economic disparity between the relatively wealthy coastal areas and the relatively poor interior of the country.

Two major terrorist attacks targeting the tourism sector occurred in 2015, killing dozens of foreign tourists at the Bardo National Museum in Tunis and a beach hotel in Sousse. Security conditions have markedly improved since then.  Travelers are urged to visit www.travel.state.gov for the latest travel alerts and warnings regarding Tunisia.

11. Labor Policies and Practices

According to the National Institute of Statistics (INS) 2020 figures, Tunisia has a labor force of 3.4 million, 26 percent of which are women and 74 percent men. The number of unemployed in 2020 reached 721,000 people. The official 2020 unemployment rate was 17.4 percent (representing the unemployment rate for the fourth quarter of 2020). Official statistics do not count underemployment or provide disaggregated data by geography. As Tunisia works on creating a sustainable economy for its new democracy, professionals, such as IT engineers, doctors, and professors, continue to seek employment abroad. Tunisian interlocuters maintain that around 70 percent of Tunisian young professionals seek employment in other countries after graduation. Additionally, an INS study estimated that 44.8 percent of the Tunisian workforce is employed in the parallel economy, including 11.8 percent in agriculture and fisheries.

Over the past two decades, the structure of the workforce remained relatively stable, and as of the last quarter of 2020, it stood at 13.3 percent in agriculture and fishing, 33.9 percent in industry, and 52.8 percent in commerce and services. Tunisia has developed its industrial sector and created low-skilled employment, although several manufacturers struggle to find qualified technical workers. Tunisian law provides workers with the right to organize, form and join unions, and bargain collectively. The law prohibits anti-union discrimination by employers and retribution against strikers. The government generally enforces applicable laws.

Currently, four national labor confederations operate in Tunisia. The oldest and largest is the General Union of Tunisian Workers (UGTT — Union Générale des Travailleurs Tunisiens). The others are the General Confederation of Tunisian Workers (CGTT — Confederation Générale des Travailleurs Tunisiens), the Tunisian Labor Union (UTT — Union Tunisienne du Travail), created in May 2011, and the Tunisian Labor Organization (OTT — Organisation Tunisienne du Travail), created in August 2013. However, based on the criteria established by the Ministry of Social Affairs in 2018, only UGTT can negotiate with the government on behalf of all Tunisian workers within the National Council of Social Dialogue, which has drawn criticism from other labor federations. UGTT claims about one third of the salaried labor force as members, although more are covered under UGTT-negotiated contracts. Wages and working conditions are established through triennial collective bargaining agreements between the UGTT, the national employers’ association (UTICA — Union Tunisienne de l’Industrie, du Commerce, et de l’Artisanat), and the GOT. These tripartite agreements set industry standards and generally apply to about 80 percent of the private sector labor force, regardless of whether individual companies are unionized. The regional tripartite commissions also arbitrate labor disputes. Employees have strong legal protections against dismissal. According to the labor code, employer bankruptcy is not a just cause for termination of an employee contract. Dismissal of an employee for economic considerations requires notification to the regional labor inspectorate for review and concurrence.

Public Wage Increase: On September 15, 2020, the GOT agreed to disburse the third tranche of the latest public wage increase, with the increase retroactive to August 2020.  No discussions were held regarding a wage increase for 2020.

Minimum Wage Increase: On December 31, 2020, the Ministry of Social Affairs announced a raise in the minimum wage (SMIG). For the 48-hour regime, the minimum wage rose to 429.31 dinars per month. For the 40-hour regime, it rose to 365.73 dinars per month. The daily minimum wage for specialized and skilled farm workers is 17.4 dinars and 18.17 dinars respectively.

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Tunisia
Host Country Statistical source* USG or international statistical source USG or International Source of Data: BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) ($M USD) 2019 39,212 2019 38,797 www.worldbank.org/en/country 
Foreign Direct Investment Host Country Statistical source* USG or international statistical source USG or international Source of data: BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) 2019 270 2019 320 BEA data available at
https://apps.bea.gov/international/factsheet/ 
Host country’s FDI in the United States ($M USD, stock positions) N/A N/A 2019 1 BEA data available at
https://www.bea.gov/international/
direct-investment-and-multinational-
enterprises-comprehensive-data 
Total inbound stock of FDI as % host GDP* 2019 40.35% 2019 76.16% UNCTAD data available at
https://stats.unctad.org/handbook/
EconomicTrends/Fdi.html 

*Source: Tunisia’s Foreign Investment Promotion Agency (FIPA) year-end December 2019 data, published in July 2020.

FIPA, which is the host country statistical source for FDI stock, does not track the stock of foreign investment in energy and uses statistics that have been constant since 2010.

Table 3: Sources and Destination of FDI
Foreign Direct Investment Flows (excluding energy) in Tunisia in 2020*
From Top Five Sources/To Top Five Destinations (US Dollars, Millions)
Inward Direct Investment Outward Direct Investment
Total Inward 431.8 100% Total Outward 72 100%
France 164.5 38.1% N/A
Italy 58.3 13.5%
Luxembourg 38.4 8.9%
Germany 37.1 8.6%
U.K. 31 7.2%
“0” reflects amounts rounded to +/- USD 500,000.

*Source: Tunisia’s Foreign Investment Promotion Agency (FIPA) year-end December 2020 data, published in February 2021 and Tunisia Central Bank data published in March 2021.

Tunisia was not covered by the IMF’s Coordinated Direct Investment Survey (CDIS).

Table 4: Sources of Portfolio Investment
Portfolio Investment Assets in Tunisia in 2020
Top Five Partners (Millions, current US Dollars)
Total Equity Securities Total Debt Securities
All Countries 18.32 100% All Countries N/A 100% All Countries N/A 100%

*Source: Tunisia’s Foreign Investment Promotion Agency (FIPA) year-end December 2020 data, published in February 2021. (Tunisia was not covered by the IMF’s Coordinated Portfolio Investment Survey (CPIS)). 14. Contact for More Information

14. Contact for More Information

Embassy Tunis Commercial Section
Commercial Officer
U.S. Embassy Tunis, Les Berges du Lac, 1053, Tunisia
+216 71 107 000
TunisCommercial@state.gov 

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