Burma

2. Bilateral Investment Agreements and Taxation Treaties

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

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

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

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

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

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

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

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

4. Industrial Policies

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

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

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

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

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

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

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

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

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

5. Protection of Property Rights

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

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

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

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

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

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

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

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

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

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

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

11. Labor Policies and Practices

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

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

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

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

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

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

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) 2020 $76.19 billion 2021 N/A www.worldbank.org/en/country
Foreign Direct Investment Host Country Statistical source* USG or international statistical source USG or international Source of data:  BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) 2020 N/A 2021 N/A BEA data available at https://apps.bea.gov/international/factsheet/
Host country’s FDI in the United States ($M USD, stock positions) 2019 -$1 million 2020 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 2020 44.3% 2021 N/A UNCTAD data available at

https://unctad.org/topic/investment/world-investment-report 

* Source for Host Country Data

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

14. Contact for More Information

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

Cambodia

4. Industrial Policies

Cambodia’s new Law on Investment offers varying types of investment incentives for projects that meet specified criteria. Investors seeking incentives as part of a QIP must submit an application to the CDC and pay an application fee of KHR 7 million (approximately $1,750), which covers securing necessary approvals, authorizations, licenses, or registrations from all relevant ministries and entities, including stamp duties.

The new Law on Investment provides investment incentives to QIPs classified into three types: basic incentives, additional incentives, and special incentives. Basic incentives include income tax exemptions, special depreciation rates, and eligibility for customs duty exemptions and VAT exemptions for the import of construction equipment and materials. Additional incentives include VAT exemptions for the purchase of locally produced production inputs, while special incentives may be granted to investment projects that have a high potential to contribute to national economic development.

Investment projects located in designated special promotion zones or export-processing zones are also entitled to the same incentives. More information about the criteria and investment areas eligible for incentives can be found at the following link .

The CDC is required to seek approval from the Council of Ministers for investment proposals that involve capital of $50 million or more, politically sensitive issues, the exploration and exploitation of mineral or natural resources, or infrastructure concessions. The CDC is also required to seek approval for investment proposals that will have a negative impact on the environment or the government’s long-term strategy.

To facilitate the country’s development, the Cambodian government has shown great interest in increasing exports via geographically defined special economic zones (SEZs).  Cambodia is currently drafting a Law on Special Economic Zones, which is now undergoing technical review within the CDC. There are currently 25 special SEZs, which are located in Phnom Penh, Koh Kong, Kandal, Kampot, Sihanoukville, and the borders of Thailand and Vietnam. The main investment sectors in these zones include garments, shoes, bicycles, food processing, auto parts, motorcycle assembly, and electrical equipment manufacturing.

Cambodia permits investors to hire foreign nationals for employment as managers, technicians, or skilled workers if the qualifications/expertise are not available in Cambodia. According to Cambodia’s Labor Law, the number of foreign employees should not exceed ten percent of the total number of Cambodian employees. In practice, Cambodia can request an increase in this allotment from the Ministry of Labor.

Cambodia does not have any forced localization policy that obligates foreign investors to use domestic contents in goods or technology. Cambodia also does not currently require foreign information technology providers to turn over source code.

5. Protection of Property Rights

Mortgages exist in Cambodia and Cambodian banks often require certificates of property ownership as collateral before approving loans. The mortgage recordation system, which is handled by private banks, is generally considered reliable.

Cambodia’s 2001 Land Law provides a framework for real property security and a system for recording titles and ownership. Land titles issued prior to the end of the Khmer Rouge regime (1975-79) are not recognized due to the severe dislocations that occurred during that period. The government is making efforts to accelerate the issuance of land titles, but in practice, the titling system is cumbersome, expensive, and subject to corruption. Most property owners lack documentation proving ownership. Even where title records exist, recognition of legal titles to land has not been uniform, and there are reports of court cases in which judges have sought additional proof of ownership.

Foreigners are constitutionally forbidden to own land in Cambodia; however, the 2001 Land Law allows long and short-term leases to foreigners. Cambodia also allows foreign ownership in multi-story buildings, such as condominiums, from the second floor up.

Infringement of intellectual property rights (IPR) is prevalent in Cambodia. Counterfeit apparel, footwear, cigarettes, alcohol, pharmaceuticals, and consumer goods, and pirated software, music, and books are some of the examples of IPR-infringing goods found in the country.

Though Cambodia is not a major center for the production or export of counterfeit or pirated materials, local businesses report that the problem is growing because of the lack of enforcement. To date, Cambodia has not been listed by the Office of the U.S. Trade Representative in its annual Special 301 Report, which identifies trade barriers to U.S. companies due to the IPR environment.

To combat the trade in counterfeit goods, the Cambodian Counter Counterfeit Committee (CCCC) was established in 2014 under the Ministry of Interior to investigate claims, seize illegal goods, and prosecute counterfeiters. The Economic Police, Customs, the Cambodia Import-Export Inspection and Fraud Repression Directorate General, and the Ministry of Commerce also have IPR enforcement responsibilities; however, the division of responsibility among each agency is not clearly defined. This causes confusion to rights owners and muddles the overall IPR environment.  Though there has been an increase in the number of seizures of counterfeit goods in recent years, in general such actions are not taken unless a formal complaint is made.

In 2020, the U.S. Patent and Trademark Office concluded a memorandum of understanding (MOU) with Cambodia on accelerated patent recognition, creating a simplified procedure for U.S. patents to be registered in Cambodia. The patent recognition application form can be found at this link .

For additional information about treaty obligations and points of contact at local IP offices, please see the World Intellectual Property Organization’s country profiles at this link .

11. Labor Policies and Practices

The COVID-19 pandemic has had a significant impact on Cambodia’s labor sector. In particular, Cambodia’s garment and manufacturing sector, which is heavily reliant on global supply chains for inputs and on demand from the United States and Europe, experienced severe disruptions due to COVID-19. Cambodia’s labor force numbers about 9.2 million people. A small number of Vietnamese, Thai, and Bangladeshi migrant workers are employed in Cambodia, and in recent years Chinese-run infrastructure projects and other businesses imported an increasing number of Chinese laborers, who typically earn more than their Cambodian counterparts.  Cambodia’s garment sector employs 800,000 people, mostly female. Most of Cambodia’s factories producing for export are foreign-owned, and top managers are also almost all foreign.

Around 65 percent of the population is under the age of 30. The United Nations estimates that around 300,000 new job seekers enter the labor market each year. The agricultural sector employs about 40 percent of the labor force.

The country has a substantial number of informal workers. Estimates vary, but only 19 percent of the nearly 9.2 million-strong workforce enjoy social protection under the National Social Security Fund, with the remaining 81 percent therefore meeting a common definition of informal workers. Such workers dominate the agricultural sector. These workers are not covered by wage, hour and occupational safety and health laws and inspections.

Cambodia’s 2016 Trade Union Law (TUL) erects barriers to freedom of association and the rights to organize and bargain freely. The International Labor Organization (ILO) has stated publicly that the law could hinder Cambodia’s obligations to international labor conventions 87 and 98. To address those concerns, Cambodia passed an amended TUL in early 2020, but the amended law does not fully address ILO, NGO, and union concerns about the law’s curbs on freedom of association. In addition, Cambodia has only implemented and enforced a minimum wage in the export garment and footwear sectors. All labor laws apply in Cambodia’s SEZs, but independent unions report that zone and SEZ factory management are often hostile to unions and that union formation and activity is particularly difficult in SEZs.

Unresolved labor disputes are mediated first on the shop floor, after which they are brought to the Ministry of Labor and Vocational Training. If reconciliation fails, then the cases may be brought to the Arbitration Council, an independent state body that interprets labor regulations in collective disputes, such as when multiple employees are dismissed. Since the 2016 Trade Union Law went into force, Arbitration Council cases have decreased from over 30 per month to fewer than five.

A strike and demonstration at Cambodia’s largest casino and hotel complex that began in December 2021 has drawn global attention from the ILO, international unions, and media, and may pose an investment risk. Rights groups and the ILO have expressed concerns in particular about the criminalization of peaceful union activity; government authorities charged 11 union leaders and members with “incitement” and put them in pre-trial detention for more than two months. In response to this dispute and broader concerns over freedom of association, the ILO sent a fact-finding mission to Cambodia in March 2022.

14. Contact for More Information

Moses An
Economic and Commercial Officer
U.S. Embassy Phnom Penh
No. 1, Street 96, Sangkat Wat Phnom, Phnom Penh, Cambodia
Phone: (855) 23-728-000
Email: CamInvestment@state.gov

Ghana

4. Industrial Policies 

Investment incentives differ slightly depending upon the law under which an investor operates.  For example, while all investors operating under the Free Zone Act are entitled to a ten-year corporate tax holiday, investors operating under the GIPC law are not.  Tax incentives vary depending upon the sector in which the investor is operating.

All investment-specific laws contain some incentives.  The GIPC law allows for import and tax exemptions for plant inputs, machinery, and parts imported for the purpose of the investment.  Chapters 82, 84, 85, and 89 of the Customs Harmonized Commodity and Tariff Code zero-rate these production items.  In 2015, the Government of Ghana imposed a new five percent import duty on some items that were previously zero-rated to conform to the new Economic Community of West African States (ECOWAS) common external tariff.

The Ghanaian tax system is replete with tax concessions that considerably reduce the effective tax rate.  The minimum incentives are specified in the GIPC law and are not applied in an ad hoc or arbitrary manner.  Once an investor has been registered under the GIPC law, the investor is entitled to the incentives provided by law.  The government has discretion to grant an investor additional customs duty exemptions and tax incentives beyond the minimum stated in the law.

The GIPC website ( www.gipc.gov.gh ) provides a thorough description of available incentive programs.  The law also guarantees an investor all the tax incentives provided for under Ghanaian law.  For example, rental income from commercial and residential property is exempt from tax for the first five years after construction.  Similarly, income from a company selling or leasing out premises is income tax exempt for the first five years of operation.  Rural banks and cattle ranching are exempt from income tax for ten years and pay eight percent thereafter.

The corporate tax rate is 25 percent, and this applies to all sectors, except income from non-traditional exports (eight percent tax rate), companies principally engaged in the hotel industry (22 percent rate), and oil and gas exploration companies (35 percent tax rate).  For some sectors there are temporary tax holidays.  These sectors include Free Zone enterprises and developers (0 percent for the first ten years and 15 percent thereafter); real estate development and rental (0 percent for the first five years and 25 percent thereafter); agro-processing companies (0 percent for the first five years, after which the tax rate ranges from 0 percent to 25 percent depending on the location of the company in Ghana), and waste processing companies (0 percent for seven years and 25 percent thereafter).  In December 2019, to attract investments under the Ghana Automotive Development Policy, corporate tax holidays among other import duty and value-added tax exemptions were granted to manufacturers or assemblers of semi-knocked-down vehicles (0 percent for three years) and complete knocked down vehicles (0 percent for ten years).  Tax rebates are also offered in the form of incentives based on location.  A capital allowance in the form of accelerated depreciation is applicable in all sectors except banking, finance, commerce, insurance, mining, and petroleum.  Under the Income Tax Act, 2015 (Act 896), all businesses can carry forward tax losses for at least three years.

Ghana has no discriminatory or excessively burdensome visa requirements.  While ECOWAS nationals do not require a visa to enter Ghana for 90 days, they need a work and residence permit to live and work in Ghana.  The current fees for work and residence permit for ECOWAS nationals is USD 500 while that for non-ECOWAS nationals is USD 1,000.  A foreign investor who invests under the GIPC Act is automatically entitled to a specific number of visas/work permits based on the size of the investment.  When an investment of USD 50,000 but not more than USD 250,000 or its equivalent is made in convertible currency or machinery and equipment, the enterprise can obtain a visa/work permit for one expatriate employee.  An investment of USD 250,000, but not more than USD 500,000, entitles the enterprise to two visas/work permits.  An investment of USD 500,000, but not more than USD 700,000, allows the enterprise to bring in three expatriate employees.  An investment of more than USD 700,000 allows an enterprise to bring in four expatriate employees.  An enterprise may apply for extra visas or work permits, but the investor must justify why a foreigner must be employed rather than a Ghanaian.  There are no restrictions on the issuance of work and residence permits to Free Zone investors and employees.  Overall, the process of issuing work permits is not very transparent.

Free Trade Zones (called Free Zones in Ghana) were first established in May 1996, with one near Tema Steelworks, Ltd., in the Greater Accra Region, and two other sites located at Mpintsin and Ashiem near Takoradi in the Western Region.  The seaports of Tema and Takoradi, as well as the Kotoka International Airport in Accra and all the lands related to these areas, are part of the Free Zone.  The law also permits the establishment of single factory zones outside or within the areas mentioned above.  Under the law, a company qualifies to be a Free Zone company if it exports more than 70 percent of its products.  Among the incentives for Free Zone companies are a ten-year corporate tax holiday and zero import duty.

To make it easier for Free Zone developers to acquire the various licenses and permits to operate, the Ghana Free Zones Authority ( www.gfzb.gov.gh ) provides a “one-stop approval service” to assist in the completion of all formalities.  A lack of resources has limited the effectiveness of the Authority.  Foreign employees of Free Zone businesses require work and residence permits.

In most sectors, Ghana does not have performance requirements for establishing, maintaining, and expanding a business.  Investors are not required to purchase from local sources or employ prescribed levels of local content, except in the mining sector, the upstream petroleum sector, and the power sector, which are subject to substantial local content requirements.  Similar legislation is being drafted for the downstream petroleum sector, and a National Local Content Policy is being debated by Cabinet that may extend to a broad array of sectors of the economy, but there is no clear timeline for its approval.

Generally, investors are not required to export a specified percentage of their output, except for Free Zone enterprises which, in accordance with the Free Zone Act, must export at least 70 percent of their products.  Government officials have intimated that local content requirements should be applied to sectors other than petroleum, power, and mining, but no local content regulations have been promulgated for other sectors.

As detailed earlier in this report, there are a few areas where the GOG does impose performance requirements, including the mining, oil and gas, insurance, and telecommunications sectors.

5. Protection of Property Rights 

The legal system recognizes and enforces secured interest in property.  However, the process to get clear title over land is difficult, complicated, and lengthy.  It is important to conduct a thorough search at the Lands Commission to ascertain the identity of the true owner of any land being offered for sale.  Investors should be aware that land records can be incomplete or non-existent and, therefore, clear title may be impossible to establish.  Ghana passed a new land law, Land Act, 2020 (Act 1036), which revised, harmonized, and consolidated laws on land to ensure sustainable land administration and management.  The new law makes it possible to transfer and create or register interests in land by electronic means to speed up conveyancing, supports decentralized land service delivery, and includes provisions relating to property rights of spouses by ensuring that spouses are deemed to be party to the interest in land that is jointly acquired during the marriage.  These changes are expected to improve accessibility and secured tenure.

Mortgages exist, although there are only a few thousand due to factors such as land ownership issues and scarcity of long-term finance.  Mortgages are regulated by the Home Mortgages Finance Act, 2008 (Act 770), which has enhanced the process of foreclosure.  A mortgage must be registered under the Land Act, 2020 (Act 1036), for it to take effect.  Registration with the Land Title Registry is a reliable system of recording the transaction.

The protection of intellectual property rights (IPR) is an evolving area of law in Ghana.  There has been progress in recent years to afford protection under both local and international law.  Ghana is a party to the Universal Copyright Convention, the Berne Convention for the Protection of Literary and Artistic Works, the Paris Convention for the Protection of Industrial Property, the Patent Cooperation Treaty (PTC), the Singapore Trademark Law Treaty (STLT), and the Madrid Protocol Concerning the International Registration of Marks.  Ghana is also a member of the World Intellectual Property Organization (WIPO), the English-speaking African Regional Intellectual Property Organization (ARIPO), and the World Trade Organization (WTO).  In 2004, Ghana’s Parliament ratified the WIPO internet treaties, namely the WIPO Copyright Treaty and the WIPO Performance and Phonograms Treaty.  Ghana also amended six IPR laws to comply with the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), including:  copyrights, trademarks, patents, layout-designs (topographies) of integrated circuits, geographical indications, and industrial designs.  Except for the copyright law, implementing regulations necessary for fully effective promulgation have not been passed.

The Government of Ghana launched a National Intellectual Property Policy and Strategy in January 2016, which aimed to strengthen the legal framework for protection, administration, and enforcement of IPR and promote innovation and awareness, although progress on implementation stalled.  Enforcement remains weak, and piracy of intellectual property continues.  Although precise statistics are not available for many sectors, counterfeit computer software is regularly available at street markets, and counterfeit pharmaceuticals have found their way into public hospitals.  Counterfeit products have also been discovered in such disparate sectors as industrial epoxy, cosmetics, drinking spirits, and household cleaning products.  Based on cases where it has been possible to trace the origin of counterfeit goods, most have been found to have been produced outside the region, usually in Asia.  IPR holders have access to local courts for redress of grievances, although the few trademark, patent, and copyright infringement cases that U.S. companies have filed in Ghana have reportedly moved through the legal system slowly.

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

Please contact the following at Mission Ghana if you have further questions regarding IPR issues:

U.S. Embassy, Economic Section
No. 24 Fourth Circular Road, Cantonments, Accra, Ghana
Tel: +233(0) 302 741 000 (Omit the (0) after the area code when dialing from abroad)
Email: AccraICS@state.gov

The United States Embassy in Accra maintains a list of local attorneys, which is available through the U.S. Foreign Commercial Service ( https://www.trade.gov/ghana-contact-us) or U.S. Citizen Services ( https://gh.usembassy.gov/u-s-citizen-services/attorneys/).

American Chamber of Commerce Ghana
No. 10 Mensah Wood Avenue, East Legon, Accra.P.O. Box CT2869, Cantonments-Accra, Ghana
Tel: +233 (0) 302 247 562/ +233 (0) 307 011 862 (Omit the (0) after the area code when dialing from abroad)
Email: info@amchamghana.org
Website: http://www.amchamghana.org/. 

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

India

4. Industrial Policies

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

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

https://www.stpi.in/  

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

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

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

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

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

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

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

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

5. Protection of Property Rights

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Resources for Intellectual Property Rights Holders:

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

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

11. Labor Policies and Practices

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

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

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

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

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

14. Contact for More Information

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

Indonesia

2. Bilateral Investment Agreements and Taxation Treaties

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

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

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

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

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

4. Industrial Policies

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

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

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

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

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

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

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

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

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

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

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

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

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

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

5. Protection of Property Rights

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

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

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

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

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

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

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

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

11. Labor Policies and Practices

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

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

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

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

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

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

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

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

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

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

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)  

2021

$1,187 2020 $1,058 https://data.worldbank.org/
country/Indonesia
Host Country Statistical source* USG or international statistical source USG or international Source of data: BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) 2021 $2,537.2 2020 $18,715 https://apps.bea.gov/iTable/iTable.cfm?
reqid=2&step=1&isuri=1#reqid=2&step=1&isuri=1
Host country’s FDI in the United States ($M USD, stock positions) N/A N/A 2020 $461 https://apps.bea.gov/iTable/iTable.cfm?
reqid=2&step=1&isuri=1#reqid=2&step=1&isuri=1
Total inbound stock of FDI as % host GDP 2021 2.6% 2020 22.7% /World Investment Report 2021:
Country-Fact-Sheets

*Indonesia Investment Coordinating Board (BKPM), January 2022

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

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 2020 Outward Direct Investment 2020
Total Inward 240,507 100% Total Outward  88,847 100%
Singapore 57,994 24.1% Singapore 31,240 35.2%
United States 31,859 13.2% China

(PR Mainland)

24,673 27.8%
Netherlands 31,554 13.1% France 19,432 21.9%
Japan 25,594 10.6% Cayman Islands 3,445 3.9%
China (PR: Hong Kong) 13,577 5.6% British Virgin Islands 2,868 3.2%
“0” reflects amounts rounded to +/- USD 500,000.

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

Table 4: Sources of Portfolio Investment
Portfolio Investment Assets 2019
Top Five Partners (Millions, US Dollars)
Total Equity Securities Total Debt Securities
All Countries 22,957 100% All Countries 8,757 100% All Countries 14,200 100%
Singapore 16,604 72.3% Singapore 8,06 92.1% Singapore 8,542 60.1%
British Virgin Islands 2,210 9.6% India 450 5.1% British Virgin Islands 2,210 15.6%
United States 950 4.1% Guernsey 81 0.9% United States 948 6.7%
 United Arab Emirates 599 2.6% China

(PR Hong Kong)

59 0.6% United Arab Emirates 599 4.2%
India 457 2.0% Japan 57 0.6% China

(PR Hong Kong)

361 2.5%

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

The Bank of Indonesia published comparable data.

14. Contact for More Information

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

Sri Lanka

4. Industrial Policies

The Inland Revenue Act of 2017, implemented April 1, 2018, includes concessionary corporate tax rates for investments in certain sectors and increased capital allowances (depreciation) on capital investments.

As per the 2021 budget revisions, which still apply, the standard rate of corporate tax is 14 percent for: a) small and medium companies (with an annual income of less than LKR 500 million or $3.2 million); b) companies exporting goods and services; and c) companies engaged in education services; promotion of tourism; d) companies engaged in construction and e) companies engaged in healthcare services. Companies engaged in information technology services and agricultural business are exempt from taxes. A 40 percent corporate tax rate applies to companies engaged in gaming, liquor, and tobacco related businesses. An 18 percent tax on manufacturing and 24 percent tax on Trading, banking, finance, insurance, and similar businesses. The 2022 budget introduced a retroactive surcharge Tax at 25 percent on persons and entities with taxable income exceeding Rs. 2 billion for the financial year 2020/21.

For further information on investment incentives and other investment-related issues, potential investors should contact BOI directly ( www.investsrilanka.com  or info@Board of Investment.lk .) and refer the Inland Revenue Act 24 of 2017 http://www.ird.gov.lk/en/sitepages/default.aspx 

The Women Entrepreneur Development Program of the Sri Lanka Export Development Board (EDB) seeks to engage more women participation in agriculture and manufacturing-based exporter sectors. https://www.srilankabusiness.com/exporters/assisting-women-in-business.html . EDB launched SheTrades ( www.Shetrades.co m) in 2016 in partnership with the International Trade Center (ITC) as a platform for women-owned businesses, organizations, companies and ITC SheTrades partner institutions to showcase their businesses, build strong networks, strike business deals, increase their credibility and connect to markets. Companies and individual buyers can use shetrades.com to include more women entrepreneurs in their supply chains, by sourcing specific products & services from women-owned businesses.

Sri Lanka has 15 free trade zones, also called “export processing zones,” which are administered by the BOI. Foreign investors have the same investment opportunities as local entities in these zones. Export-oriented companies located within and outside the zones are eligible to import project-related material and inputs free of customs import duties although such imports may be subject to other taxes.

In the past, firms preferred to locate their factories near the Colombo harbor or airport to reduce transportation time and cost. However, excessive concentration of industries around Colombo has caused heavy traffic, higher real estate prices, environmental pollution, and a scarcity of labor. The BOI and the government now encourage export-oriented factories to locate in industrial zones farther from Colombo, although Sri Lanka’s limited road network create other challenges for outlying zones.

In 2019, the China Harbor Engineering Company (CHEC) completed the reclamation of 269 hectares of land adjacent to Colombo’s port and historic downtown to form the Colombo Port City Special Economic Zone (SEZ), which government officials describe as a future “international commercial and financial hub.” CHEC invested $1.4 billion in the land reclamation and basic infrastructure of the Port City, in return for which it will have control, via lease, of 116 of the 178 total hectares of marketable land on the site, the balance of which the government will control. Parliament approved on May 20, 2021, legislation to govern the SEZ and establish a commission to act as promoter, manager, regulator, and “single window investment facilitator” to attract foreign direct investment to the project. The legislation also includes tax exemptions and other incentives for potential investors. The legislation was amended prior to approval by a simple majority in Parliament following a Supreme Court ruling on multiple legal challenges to the bill’s constitutionality, though concerns remain about the potential risk of illicit financial flows.

Sri Lanka’s State Pharmaceutical Corporation (SPC), a state-owned enterprise established a dedicated pharmaceutical manufacturing zone in Hambantota. The Sri Lankan government has earmarked some 400 acres of land in the Hambantota-Arabokka area and announced tax exemptions for foreign companies ready to set up manufacturing units. The SPC has also approached Indian manufacturers about the possibility of establishing manufacturing centers in the dedicated pharmaceutical manufacturing zone in Hambantota. The goal being to produce at least 40 percent of pharmaceuticals for domestic needs and up to $1 billion in annual pharmaceutical exports. In addition to favorable taxation benefits, all infrastructure facilities will be supplied by the Sri Lanka Board of Investment.

Employment of foreign personnel is permitted when there is a demonstrated shortage of qualified local labor. Technical and managerial personnel are in short supply, and this shortage is likely to continue in the near future. Foreign laborers do not experience significant problems in obtaining work or residence permits. Sri Lanka has seen a rise in foreign laborers, mainly in construction sites, with some reportedly working without proper work visas. Foreign investors who remit at least $250,000 can qualify for a five-year resident visa under the Resident Guest Scheme Visa Program: ( http://www.immigration.gov.lk/web/index.php?option=com_content&view=article&id=154&Itemid=200&lang=en ). Sri Lanka offers dual citizenship status to Sri Lankans who have obtained foreign citizenship in seven designated countries, including the United States. Tourist and business visas are granted for one month with possible extensions.

Sri Lanka has no specific requirements for foreign information technology providers to turn over source code or provide access to surveillance. Provisions relating to interception of communications for cybercrime issues are subject to court supervision under the Computer Crimes Act (CCA) of 2007. Sri Lanka became a party to the Budapest Cybercrime Convention in 2015, and safeguards based on the convention are in force. Although there is no comprehensive legislative protection of electronic data, the CCA has a provision to protect data and information. The government is currently formulating data protection legislation. There is no ban on the sale of electronic data for marketing purposes.

5. Protection of Property Rights

Secured interests in real property in Sri Lanka are generally recognized and enforced, https://www.hg.org/legal-articles/intellectual-property-law-in-sri-lanka-21205  but many investors claim protection can be flimsy. A reliable registration system exists for recording private property including land, buildings, and mortgages, although problems reportedly exist due to fraud and forged documents. In 1998 the government introduced Bim Saviya Program (Title Registration) to provide stronger and clear Land ownership with the view of improving Land Utilization with the aid of new technology. This program aims to avoid unnecessary disputes due to land ownership or boundaries. Property registration required, on average, completion of eight procedures lasting 39 days. Sri Lanka prohibits the sale of land to foreign nationals and to enterprises with foreign equity exceeding 50 percent. Foreign investors are eligible to lease lands in Sri Lanka to establish their projects and plants under the BOI. Foreigners can freely buy properties as long as they are willing to pay the Land Tax for foreigners at 100 percent of the property value. An alternative is to lease the land for 99 years, bringing the tax down to 7 percent.

Under current law, the Prescription Ordinance stipulates that a person holding continuous “adverse possession” of real property for ten years without challenge is entitled to ownership of that property. (Prescription, Cap. 81, No. 22 of 1871, § 3, COMMONLII.)

Sri Lanka is a party to major intellectual property agreements. The country adopted an intellectual property law in 2003 intended to meet U.S.-Sri Lanka bilateral IPR agreements and trade-related aspects of intellectual property rights (TRIPS) agreement obligations. The law governs copyrights and related rights; industrial designs; patents, trademarks, and service marks; trade names; layout designs of integrated circuits; geographical indications; unfair competition; databases; computer programs; and undisclosed information (e.g., trade secrets). While it is not compulsory to register a trademark, it is recommended to register a trademark for easy and effective enforcement. For registration and grant of industrial designs and patents, an applicant must file formal applications with the Director-General of Intellectual Property. Copyright protection is accorded without any formality of registration in Sri Lanka. While trade secrets infringement is considered under the umbrella of unfair competition in the Sri Lankan IP framework, Sri Lanka lacks a separate substantive piece of legislation governing trade secrets.

The Government of Sri Lanka has taken concrete steps to strengthen its IP regime. The National Intellectual Property Office (NIPO) has shown its intention to accede to the Madrid Protocol, and the Sri Lankan Parliament approved the proposal to accede to the Madrid Protocol in 2020. The necessary amendments in the existing IP Act have been initiated to facilitate Sri Lanka’s entry into the Madrid protocol. In 2019, the Sri Lankan Government amended its Information Technology (IT) policy. The amended policy requires government agencies only to use licensed or open-source software. However, the Government has yet to put systems to monitor compliance with the policy. In February 2022, the Sri Lankan cabinet approved parliamentary discussion on possible amendments to the IP Act. The objective of the proposed amendment is to incorporate changes to include a fair use exemption for copyrighted audio works to be copied and edited into an accessible format (for disabled persons) and provide protection to Geographical Indications products.

The Sri Lankan Government has also made attempts to improve the NIPO by upgrading and modernizing its infrastructure and recruiting new examiners for both trademark and patents, which has led to a decrease in backlogs of trademark and patent examinations.

Along with a comprehensive IPR law, Sri Lanka also has good enforcement practices. In 2010, the Sri Lankan government established special anti-piracy and counterfeit unit in the Criminal Investigation Division (CID) of the police to address IPR concerns specifically. The CID is the primary investigation arm of Sri Lanka and was established in 1870. The Sri Lankan Government has also established an IPR unit in the Social Protection Unit of Sri Lankan Customs to focus on IPR related issues ( https://www.customs.gov.lk/ ). Sri Lanka Customs Department is also working towards developing a trademark database to advance IPR protection and enforcement, though it is yet to be implemented.

The overall IP ecosystem in Sri Lanka has improved in recent years. However, the lack of effective strategic policy coordination among entities involved in the implementation and execution of laws and judicial redressal being time-consuming and challenging has led to freely available counterfeit products in Sri Lanka. Counterfeit goods, particularly imports, are still widely available, and music and software piracy are reportedly widespread. Foreign and U.S. companies in the recording, software, movie, clothing, and consumer product industries claim that inadequate IPR protection and enforcement weaken their businesses in Sri Lanka. Local agents of well-known U.S. and other international companies representing recording, software, movie, clothing, and consumer products industries continue to complain that the lack of adequate IPR protection damages their business interests in Sri Lanka.

Better coordination among enforcement authorities and government institutions – such as the NIPO, Sri Lankan Customs, Sri Lankan Police, and more trained staff and resources – is needed to strengthen Sri Lanka’s IPR regime. Although infringement of intellectual property rights is a punishable offense under the IP law with criminal and civil penalties, Sri Lanka does not track and report on seizures of counterfeit goods.

Sri Lanka is currently not on the Special 301 report Watch List or the Notorious Markets List. Sri Lanka does not track and report on its seizures of counterfeit goods.

Resources for Intellectual Property Rights Holders:

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

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at Information by Country: Sri Lanka (wipo.int) 

Local lawyers list: https://lk.usembassy.gov/u-s-citizen-services/local-resources-of-u-s-citizens/attorneys-2/

Describe the process of protecting and enforcing IP within the country/economy. https://www.wipo.int/edocs/mdocs/aspac/en/wipo_inn_tyo_12/wipo_inn_tyo_12_ref_t3srilanka.pdf

Sri Lankan Customs will seize and destroy counterfeit or illicit goods https://www.customs.gov.lk/destruction-of-counterfeit-and-pirated-goods-on-world-ip-day/ 

11. Labor Policies and Practices

Both local and international businesses have cited labor shortages as a major problem in Sri Lanka. In 2020, 8.1 million Sri Lankans were employed: 46 percent in services, 27 percent in industry and 26 percent in agriculture. Approximately 70 percent of the employed are in the informal sector. The government sector also employs over 1.4 million people.

Sri Lanka’s labor laws afford many employee protections. Many investors consider this legal framework somewhat rigid, making it difficult for companies to reduce their workforce even when market conditions warrant doing so. The cost of dismissing an employee in Sri Lanka is calculated based upon a percentage of wages averaged over 54 salary weeks, one of the highest in the world. There is no unemployment insurance or social safety net for laid off workers.

Labor is available at relatively low cost, though higher than in other South Asian countries. Sri Lanka’s labor force is largely literate (particularly in local languages), although weak in certain technical skills and English. The average worker has eight years of schooling, and two-thirds of the labor force is male. The government has initiated educational reforms to better prepare students for the labor market, including revamping technical and vocational education and training. While the number of students pursuing computer, accounting, business skills, and English language training programs is increasing, the demand for these skills still outpaces supply with many top graduates seeking employment outside of the country.

Youth are increasingly uninterested in labor-intensive manual jobs, and the construction, plantation, apparel, and other manufacturing industries report a severe shortage of workers. The garment industry reports up to a 40 percent staff turnover rate. Lack of labor mobility in the North and East is also a problem, with workers reluctant to leave their families and villages for employment elsewhere

A significant proportion of the unemployed seek “white collar” employment, often preferring stable government jobs. Most sectors seeking employees offer manual or semi-skilled jobs or require technical or professional skills such as management, marketing, information technology, accountancy and finance, and English language proficiency. Investors often struggle to find employees with the requisite skills, a situation particularly noticeable as the tourism industry opens new hotels.

Many service sector companies rely on Sri Lankan engineers, researchers, technicians, and analysts to deliver high-quality, high-precision products and retention is reasonably good in the information technology sector. Foreign and local companies report a strong worker commitment to excellence in Sri Lanka, with rapid adaptation to quality standards.

Women face workforce restrictions such as caps on overtime work, limits on nighttime shifts and restrictions from certain jobs. In 2021 the labor market was characterized by high female unemployment and low female labor force participation: an estimated 55 percent of public sector employees were men and 45 percent women while 70 percent of employees outside the public sector were men and only 30 percent women.

As of 2021 due the covid pandemic a total of 807,800 Sri Lankan registered as migrant workers working abroad with the respective Sri Lankan embassies overseas. Remittances from migrant workers, averaged about $5.49 billion in 2021, making up Sri Lanka’s second largest source of foreign exchange. Most of this labor force is unskilled (i.e., housemaids and factory laborers) and located primarily in the Middle East. Sri Lanka is also losing many of its skilled workers to more lucrative jobs abroad. Approximately 6,000 Sri Lankans work in Bangladeshi garment factories.

Sri Lanka has seen a gradual rise in foreign workers. Most foreign workers are from India, Bangladesh, and the PRC, many reportedly without proper work visas or other documentation.

Approximately 9.5 percent of the workforce is unionized, and union membership is declining. There are more than 2,000 registered trade unions (many of which have 50 or fewer members), and several federations. About 18 percent of labor in the industry and service sector is unionized. Most of the major trade unions are affiliated with political parties, creating a highly politicized labor environment. This is not the case for private companies, which typically only have one union or workers’ council to represent employees. There are also some independent unions. All workers, other than police, armed forces, prison service, and those in essential services, have the right to strike. The President can designate any industry an essential service. Workers may lodge complaints to protect their rights with the Commissioner of Labor, a labor tribunal, or the Supreme Court.

Unions represent workers in many large private firms, but workers in small-scale agriculture and small businesses typically do not belong to unions. The tea industry, however, is highly unionized, and public sector employees are unionized at high rates. Labor in the export processing zone (EPZ) enterprises tend to be represented by non-union worker councils, although unions also exist within the EPZs. The International Labor Organization’s (ILO) Freedom of Association Committee observed that Sri Lankan trade unions and worker councils can co-exist but advises that there should not be any discrimination against those employees choosing to join a union. The right of worker councils to engage in collective bargaining has been recognized by the ILO.

Collective bargaining exists but is not universal. The Employers’ Federation of Ceylon, the main employers’ association in Sri Lanka, assists member companies in negotiating with unions and signing collective bargaining agreements. While about a quarter of the 660 members of the Employers’ Federation of Ceylon are unionized, approximately 90 of these companies (including a number of foreign-owned firms) are bound by collective agreements. Several other companies have signed memorandums of understanding with trade unions. However, there are only a few collective bargaining agreements signed with companies located in EPZs.

All forms of forced and compulsory labor are prohibited. In March of 2016, the government introduced a national minimum wage set at LKR 10,000 ($36) per month or LKR 400 ($1.45) per day. The National Minimum Wage of Workers Act was amended in 2021, increasing the minimum wage to LKR 12,500 ($45) monthly and LKR 500 ($1.81) per day. Forty-four “wage boards” established by the Ministry of Labor set minimum wages and working conditions by sector and industry in consultation with unions and employers. The minimum wages established by these sector-specific wage boards tend to be higher than the minimum wage.

Sri Lankan law does not require equal pay for equal work for women. The law prohibits most full-time workers from regularly working more than 45 hours per week without receiving overtime (premium pay). In addition, the law stipulates a rest period of one hour per day. Regulations limit the maximum overtime hours to 15 per week. The law provides for paid annual holidays, sick leave, and maternity leave. Occupational health and safety regulations do not fully meet international standards.

Child labor is prohibited and virtually nonexistent in the organized sectors, although child labor occurs in informal sectors. The minimum legal age for employment is set at 16 years of age. The minimum age for employment in hazardous work is 18 years of age.

Sri Lanka is a member of the ILO and has ratified 31 international labor conventions, including all eight of the ILO’s core labor conventions. The ILO and the Employers’ Federation of Ceylon are working to improve awareness of core labor standards and the ILO also promotes its “Decent Work Agenda” program in Sri Lanka.

A 2019 Labor Survey estimated that 62 percent of the country’s workforce was employed informally. Most working in the informal economy are reportedly self-employed, and the informal sector accounts for an estimated 87.5 percent of total employment in agriculture. Those working in the informal economy lack job protections and entitlements.

14. Contact for More Information

Luis Salas
Economic Officer
U.S. Embassy Colombo, Sri Lanka
Phone: +94-11-249-8500
Email: commercialcolombo@state.gov 

The Philippines

4. Industrial Policies

The Philippines’ Investment Priorities Plan (IPP) enumerates investment activities entitled to incentives facilitated by BOI, such as an income tax holiday. Non-fiscal incentives include the following: employment of foreign nationals, simplified customs procedures, duty exemption on imported capital equipment and spare parts, importation of consigned equipment, and operation of a bonded manufacturing warehouse.

The transitional 2020 IPP provides incentives for the following activities: COVID-19 mitigation, manufacturing (e.g., agro-processing, modular housing components, machinery, and equipment); agriculture, fishery, and forestry (e.g., hatcheries, postharvest facilities, nurseries); integrated circuit design, creative industries, and knowledge-based services (e.g., IT-Business Process Management services for the domestic market); repair, maintenance, and overhaul of aircraft; charging/refueling stations for alternative energy vehicles; industrial waste treatment; telecommunications (e.g., connectivity facilities and mobile broadband services); engineering, procurement, and construction; healthcare and disaster risk reduction management services (e.g., hospitals, drug rehabilitation centers, and quarantine and evacuation centers); mass housing; infrastructure and logistics (e.g., airports, seaports, and PPP projects); inclusive business models (activities of medium and large enterprises in agribusiness and tourism that include micro and small enterprises in their value chains); energy (development of energy sources, power generation plants, and ancillary services); innovation drivers (e.g., fabrication laboratories); and environment (e.g., climate change-related projects). Further details of the 2020 IPP are available on the BOI website (http://boi.gov.ph/). The BOI was tasked to update the investment priorities and formulate a Strategic Investment Priorities Plan to replace the IPP in light of the enactment of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act on March 26, 2021 under the Comprehensive Tax Reform Program.

Domestic-oriented foreign-owned enterprises whose foreign ownership exceeds 40 percent may qualify for BOI incentives, such as specific tax credits and tax exemptions, if the enterprise’s proposed activity is listed in the SIPP or meets the criteria of industry tiers and/or location.

The first package of the Tax Reform for Acceleration and Inclusion (TRAIN) law, which took effect January 1, 2018, removed the 15 percent special tax rate on gross income of employees of multinational enterprises’ regional headquarters (RHQ) and regional operating headquarters (ROHQ) located in the Philippines. RHQ and ROHQ employees are now subject to regular income tax rates, usually at higher and less competitive rates than before the implementation of the TRAIN law.

Export-oriented businesses enjoy preferential tax treatment when located in export processing zones, free trade zones, and certain industrial estates, collectively known as economic zones, or ecozones. Businesses located in ecozones are considered outside customs territory and are allowed to import capital equipment and raw material free of customs duties, taxes, and other import restrictions. Goods imported into ecozones may be stored, repacked, mixed, or otherwise manipulated without being subject to import duties and are exempt from the Bureau of Customs’ Selective Pre-shipment Advance Classification Scheme. While some ecozones are designated as both export processing zones and free trade zones, individual businesses within them are only permitted to receive incentives under a single category.

The BOI imposes a higher export performance requirement on foreign-owned enterprises (70 percent of production) than on Philippine-owned companies (50 percent of production) when providing incentives under SIPP.

Companies registered with BOI and PEZA may employ foreign nationals in supervisory, technical, or advisory positions for five years from date of registration (possibly extendable upon request). Top positions and elective officers of majority foreign-owned BOI-registered enterprises (such as president, general manager, and treasurer, or their equivalents) are exempt from employment term limitation. Foreigners intending to work locally must secure an Alien Employment Permit from the Department of Labor and Employment (DOLE), renewable every year with the duration of employment (which in no case shall exceed five years). The BOI and PEZA facilitate special investor’s resident visas with multiple entry privileges and extend visa facilitation assistance to foreign nationals, their spouses, and dependents.

The 2006 Biofuels Act establishes local content requirements for diesel and gasoline. Regarding diesel, only locally produced biodiesel is permitted. For gasoline, all local ethanol must be bought off the market before imports are allowed to meet the blend requirement, and the local ethanol production may only be sourced from locally produced sugar/molasses feedstock.

The Philippines does not impose restrictions on cross-border data transfers. Sensitive personal information is protected under the 2012 Data Privacy Act, which provides penalties for unauthorized processing and improper disposal of data even if processed outside the Philippines.

5. Protection of Property Rights

The Philippines recognizes and protects property rights, but the enforcement of laws is weak and fragmented. The Land Registration Authority and the Register of Deeds (http://www.lra.gov.ph/ ), which facilitate the registration and transfer of property titles, are responsible for land administration, with more information available on their websites. Property registration processes are tedious and costly. Multiple agencies are involved in property administration, which results in overlapping procedures for land valuation and titling processes. Record management is weak due to a lack of funds and trained personnel. Corruption is also prevalent among land administration personnel and the court system is slow to resolve land disputes. The Philippines ranked 120th out of 190 economies in terms of ease of property registration in the World Bank’s 2020 Ease of Doing Business report.

The Philippines is not listed on the United States Trade Representative’s (USTR) Special 301 Watch List. The country has a generally robust intellectual property rights (IPR) regime in place, although enforcement is irregular and inconsistent. The total estimated value of counterfeit goods reported seized in 2021 was close to USD 500 million, significantly higher than the USD 193 million recorded in 2020 and the previous record high of USD 472 million in 2018, a sign of enforcement activities returning to pre-pandemic levels. The sale of imported counterfeit goods in local markets has visibly decreased since the start of the COVID-19 pandemic, though the amount of counterfeit goods sold online has dramatically increased due to the shift of most businesses to online activities.

The Intellectual Property (IP) Code provides a legal framework for IPR protection, particularly in key areas of patents, trademarks, and copyrights. The Intellectual Property Office of the Philippines (IPOPHL) is the implementing agency of the IP Code, with more information available on its website (https://www.ipophil.gov.ph/). The Philippines generally has strong patent and trademark laws. IPOPHL’s IP Enforcement Office (IEO) reviews IPR-related complaints and visits establishments reportedly engaged in IPR-related violations. However, weak border protection, corruption, limited enforcement capacity by the government, and lack of clear procedures continue to weaken enforcement. In addition, IP owners still must assume most enforcement and storage costs when counterfeit goods are seized.

Enforcement actions are often not followed by successful prosecutions. The slow and capricious judicial system keeps most IP owners from pursuing cases in court. IP infringement is not considered a major crime in the Philippines and takes a lower priority in court proceedings, especially as the courts become more crowded with criminal cases deemed more serious, which receive higher priority. Many IP owners opt for out-of-court settlements (such as ADR) rather than filing a lawsuit that may take years to resolve in the unpredictable Philippine courts.

The IPOPHL has jurisdiction to resolve certain disputes concerning alleged infringement and licensing through its Arbitration and Mediation Center.

The Philippines has been a member of the World Intellectual Property Organization (WIPO) since 1980. For additional information about treaty obligations and points of contact at the local IP offices, see WIPO’s country profiles at http://www.wipo.int/directory/en/.

11. Labor Policies and Practices

Managers of U.S. companies in the Philippines report that local labor costs are relatively low and workers are highly motivated, with generally strong English language skills. As of December 2021, the Philippine labor force reached 49.5 million workers, with an employment rate of 93.4 percent and an unemployment rate of 6.6 percent. These figures include employment in the informal sector and do not capture the substantial rates of underemployment in the country. Youths between the ages of 15 and 24 made up more than 28.9 percent of the unemployed. More than half of all employment was in the services sector, with 56.6 percent. Agriculture and industry sectors constitute 25.6 percent and 17.8 percent, respectively.

Compensation packages in the Philippines tend to be comparable with those in neighboring countries. Regional Wage and Productivity Boards meet periodically in each of the country’s 16 administrative regions to determine minimum wages. The non-agricultural daily minimum wage in Metro Manila is approximately USD 10, although some private sector workers receive less. Most regions set their minimum wage significantly lower than Metro Manila. Violation of minimum wage standards is common, especially non-payment of social security contributions, bonuses, and overtime. Philippine law also provides for a comprehensive set of occupational safety and health standards. The Department of Labor and Employment (DOLE) has responsibility for safety inspection, but a shortage of inspectors has made enforcement difficult.

The Philippine Constitution enshrines the right of workers to form and join trade unions. The trend among firms using temporary contract labor to lower employment costs continues despite government efforts to regulate the practice. The DOLE Secretary has the authority to end strikes and mandate a settlement between parties in cases involving national interest. DOLE amended its rules concerning disputes in 2013, specifying industries vital to national interest: hospitals, the electric power industry, water supply services (excluding small bottle suppliers), air traffic control, and other industries as recommended by the National Tripartite Industrial Peace Council (NTIPC). Economic zones often offer on-site labor centers to assist investors with recruitment. Although labor laws apply equally to economic zones, unions have noted some difficulty organizing inside the zones.

The Philippines is signatory to all International Labor Organization (ILO) core conventions but has faced challenges with enforcement. Unions allege that companies or local officials use illegal tactics to prevent workers from organizing. The quasi-judicial National Labor Relations Commission reviews allegations of intimidation and discrimination in connection with union activities. Meanwhile, the NTIPC monitors the application of international labor standards.

Reports of forced labor in the Philippines continue, particularly in connection with human trafficking in the commercial sex, domestic service, agriculture, and fishing industries, as well as online sexual exploitation of children.

14. Contact for More Information

John Avrett, Economic Officer
U.S. Embassy Manila
1201 Roxas Boulevard, Manila, Philippines
Telephone: (+632) 5301.2000
Email: ManilaEcon@state.gov 

Vietnam

4. Industrial Policies

Foreign investors are exempt from import duties on goods imported for their own use that cannot be procured locally, including machinery; vehicles; components and spare parts for machinery and equipment; raw materials; inputs for manufacturing; and construction materials. Remote and mountainous provinces and special industrial zones are allowed to provide additional tax breaks and other incentives to prospective investors.

Investment incentives, including lower corporate income tax rates, exemption of some import tariffs, or favorable land rental rates, are available in the following sectors: advanced technology; research and development; new materials; energy; clean energy; renewable energy; energy saving products; automobiles; software; waste treatment and management; and primary or vocational education.

The government rarely issues guarantees for financing FDI projects; when it does so, it is usually because the project links to a national security priority. Joint financing with the government occurs when a foreign entity partners with an SOE. The government’s reluctance to guarantee projects reflects its desire to stay below a statutory 65 percent public debt-to-GDP ratio cap, and a desire to avoid incurring liabilities from projects that would not be economically viable without the guarantee. This has delayed approval of many large-scale FDI projects.

Vietnam’s Ministry of Industry and Trade (MOIT) is seeking to implement a Direct Power Purchase Agreement (DPPA) pilot scheme which, for the first time, will enable renewable energy generators to directly sell clean electricity to private-sector customers. Under current electricity regulations in Vietnam, Electricity Vietnam (EVN) has a statutory monopoly over the transmission, distribution, wholesale, and retail of electricity and is also the sole off taker in the market. The pilot scheme is expected to run from 2022 to 2024 and support Vietnam’s transition in the liberalization of Vietnam’s wholesale and retail electricity markets. It is anticipated that DPPAs will be introduced into the market on a permanent basis from 2025 onwards.

Vietnam has prioritized efforts to establish and develop different kinds of foreign trade zones (FTZs) over the last decade. Industrial Zones (IZs) are dedicated areas for industrial activities; Export Processing Zones (EPZs) are specific kind of IZ, focused on export-oriented production and activities.  Vietnam currently has more than 350 IZs and EPZs. Many foreign investors report that it is easier to implement projects in IZs than in other types of zoned land because they do not have to be involved in site clearance and infrastructure construction. Enterprises in FTZs pay no duties when importing raw materials if they export the finished products. Customs warehouse companies in FTZs can provide transportation services and act as distributors for the goods deposited.

Additional services relating to customs declaration, appraisal, insurance, reprocessing, or packaging require the approval of the provincial customs office. In practice, the time involved for clearance and delivery of goods by provincial custom officials can be lengthy and unpredictable. Companies operating in economic zones are entitled to more tax reductions as measures to incentivize investments.

According to the Law on Investment (LOI) 2020, Article 11 “Guarantees for business investment activities,” the State cannot require investors to:

  • Give priority to purchase or use of domestic goods/services; or only purchase or use goods/services provided by domestic producers/service providers;
  • Achieve a certain export target; restrict the quantity, value, types of goods/services that are exported or domestically produced/provided;
  • Import a quantity/value of goods that is equivalent to the quantity/value of goods exported; or balance foreign currencies earned from export to meet import demands;
  • Reach a certain rate of import substitution;
  • Reach a certain level/value of domestic research and development;
  • Provide goods/service at a particular location in Vietnam or overseas; and
  • Have the headquarters situated at a location requested by a competent authority.

There are additional market entry requirements and limitations for investments in “conditional” sectors listed in Appendix IV of the LOI. As of March 2022, MPI and respective ministries and regulatory agencies are working to specify detailed conditions for each sector. All investors, foreign or domestic, must obtain formal approval, in the form of business licenses or other certifications, to satisfy “necessary conditions for reasons of national defense, security or order, social safety, social morality, and health of the community.”

In addition, the LOI 2020 also introduces the regulation of sectors “with market entry restrictions,” including: (i) Percentage ownership limits; (ii) Restrictions on the form of investment; (iii) Restrictions on the scope of business and investment activities; (iv) Financial capacity of the investors and partners; and (v) Other conditions under international treaties and Vietnamese law. As of March 2022, MPI is drafting additional guidance to specify conditions for each sector.

In addition to market access conditions, the LOI 2020 adds two additional conditions for foreign investors investing in or acquiring capital/share in a Vietnamese company as follows:

  • The investment must not compromise national defense and security of Vietnam; and
  • The investment must comply with the conditions relating to the use of sea-lands, borderlands, and coastal lands in accordance with the applicable laws.

The term “national defense and security” is not defined under the LOI 2020; this ambiguity gives regulatory agencies considerable flexibility to restrict investment activities in sensitive sectors or locations. Future investment projects could also be ratified based on other laws, National Assembly Resolution, Ordinance, National Assembly Standing Committee’s Resolution, Government Decree and international treaties, which has been creating complexity and volatility in Vietnam’s business investment.

For existing investment projects, the extension of the investment term will not be granted to any project using outdated technology, having any potential negative impact on the environment, or involving any exploitation of natural resources.

On January 1, 2019, the Law on Cybersecurity (LOCS) came into effect, requiring cross-border services to store data of Vietnamese users in Vietnam and establish local presence, despite sustained international and domestic opposition to the regulation. The government committed to consider comments from the U.S. government, companies, and trade associations and promised to consult with the U.S. government before finalization. In September 2020, the Ministry of Public Security (MPS) released a partial draft Decree to guide the implementation of the LOCS, which requires foreign services providers to localize their data and establish local presence only when they violate Vietnamese laws and fail to cooperate with MPS to address their violations. However, local companies must comply with data localization requirements, which would cause unnecessary burdens for local companies and foreign business partners. The draft Decree is also expected to prescribe procedures for law enforcement to handle digital evidence, which may include source code and/or access to encryption, to serve criminal investigation. As of March 2022 the latest version of the draft Decree is reportedly with the Office of the Government for the Prime Minister’s approval.

In early 2020, the MPS released a draft outline of the Personal Data Protection Decree (PDPD) and then published the first full draft in February 2021 for public comment. Industry and human rights activists have major concerns about data localization provision for personal data, including requirements for local presence, licensing, and registration procedures. If implemented as written, the heavy-handed regulations of cross-border transfer of personal data would affect a wide range of Internet companies. In February 2022, Deputy Prime Minister Vu Duc Dam announced that the GVN sent the draft Decree to National Assembly, specifically to the National Assembly Standing Committee, for further review. The Prime Minister set out the deadline of May 2022 for the approval of the Decree and also tasked the MPS to start developing a new Law on Data Privacy.

5. Protection of Property Rights

The State collectively owns and manages all land in Vietnam, and therefore neither foreigners nor Vietnamese nationals can own land. However, the government grants land-use and building rights, often to individuals. According to the Ministry of National Resources and Environment (MONRE), as of September 2018 – the most recent time period in which the government has made figures available – the government has issued land-use rights certificates for 96.9 percent of land in Vietnam. If land is not used according to the land-use rights certificate or if it is unoccupied, it reverts to the government. If investors do not use land leased within 12 consecutive months or delay land use by 24 months from the original investment schedule, the government is entitled to reclaim the land. Investors can seek an extension of delay but not for more than 24 months. Vietnam is building a national land-registration database, and some localities have already digitized their land records.

State protection of property rights are still evolving, and the law does not clearly demarcate circumstances in which the government would use eminent domain. Under the Housing Law and Real Estate Business Law of November 2014, the government can take land if it deems it necessary for socio-economic development in the public or national interest if the Prime Minister, the National Assembly, or the Provincial People’s Council approves such action. However, the law loosely defines “socio-economic development.”

Disputes over land rights continue to be a significant driver of social protests in Vietnam. Foreign investors also may be exposed to land disputes through merger and acquisition activities when they buy into a local company or implement large-scale infrastructure projects.

Foreign investors can lease land for renewable periods of 50 years, and up to 70 years in some underdeveloped areas. This allows titleholders to conduct property transactions, including mortgages on property. Some investors have encountered difficulties amending investment licenses to expand operations onto land adjoining existing facilities. Investors also note that local authorities may seek to increase requirements for land-use rights when current rights must be renewed, particularly when the investment in question competes with Vietnamese companies.

Vietnam does not have a strong record on protecting and enforcing intellectual property (IP). Fractured authority and lack of coordination among ministries and agencies responsible for enforcement are the primary obstacles, and capacity constraints related to enforcement persist, in part, due to a lack of resources and IP expertise. Vietnam has no specialized IP courts and judges, thus continuing to rely heavily on administrative enforcement actions, which have consistently failed to deter widespread counterfeiting and piracy.

There were some positive developments in 2020-2021, such as the issuance of a national IP strategy, public awareness campaigns and training activities, and reported improvements on border enforcement in some parts of the country. The 2005 IP Law is currently under revision with amendments planned to be passed in May 2022. It is expected that the law would bring Vietnam’s IP regulations in line with its commitments under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the EU-Vietnam Free Trade Agreement (EVFTA). However, IP enforcement continues to be a challenge.

The United States is closely monitoring and engaging with the Vietnamese government in the ongoing implementation of amendments to the Penal Code, particularly with respect to criminal enforcement of IP violations. Counterfeit goods are widely available online and in physical markets. In addition, issues persist with online piracy (including the use of piracy devices and applications to access unauthorized audiovisual content), book piracy, lack of effective criminal measures for cable and satellite signal theft, and both private and public-sector software piracy.

Vietnam’s system for protecting against the unfair commercial use and unauthorized disclosure of undisclosed tests or other data generated to obtain marketing approval for pharmaceutical products needs further clarification. The United States is monitoring the implementation of IP provisions of the CPTPP, and the EVFTA. The EVFTA grandfathered prior users of certain cheese terms from the restrictions in the geographical indications provisions of the EVFTA, and it is important that Vietnam ensure market access for prior users of those terms who were in the Vietnamese market before the grandfathering date of January 1, 2017.

In its international agreements, Vietnam committed to strengthen its IP regime and is in the process of drafting implementing legislation and other measures in a number of IP-related areas, including in preparation for acceding to the World Intellectual Property Organization (WIPO) Copyright Treaty and the WIPO Performances and Phonograms Treaty. In September 2019, Vietnam acceded to the Hague Agreement Concerning the International Registration of Industrial Designs, and the United States will monitor implementation of that agreement.

The United States, through the U.S.-Vietnam Trade and Investment Framework Agreement (TIFA) and other bilateral fora, continues to urge Vietnam to address IP issues and to provide interested stakeholders with meaningful opportunities for input as it proceeds with these reforms. The United States and Vietnam signed a Customs Mutual Assistance Agreement in December 2019, which will facilitate bilateral cooperation in IP enforcement.

For more information, please see the following reports from the U.S. Trade Representative:

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles .

11. Labor Policies and Practices

Although Vietnam has made some progress on labor issues in recent years, including, in theory, allowing the formation of independent unions, the sole union that has any real authority is the state-controlled Vietnam General Confederation of Labor (VGCL). Workers will not be able to form independent unions legally until the Ministry of Labor, Invalids, and Social Affairs (MOLISA) issues guidance on implementation of the 2019 Labor Code, including decrees on procedures to establish and join independent unions, and to determine the level of autonomy independent unions will have in administering their affairs. MOLISA expects to issue this guidance in 2022.

Vietnam has been a member of the International Labor Organization (ILO) since 1992 and has ratified seven of the core ILO labor conventions (Conventions 100 and 111 on discrimination, Conventions 138 and 182 on child labor, Conventions 29 and 105 on forced labor, and Convention 98 on rights to organize and collective bargaining). In June 2020 Vietnam ratified ILO Convention 105 – on the abolition of forced labor – which came into force July 14, 2021. The EVFTA also requires Vietnam to ratify Convention 87, on freedom of association and protection of the right to organize, by 2023.

Labor dispute resolution mechanisms vary depending on situations. Individual labor disputes and rights-based collective labor disputes must go through a defined process that includes labor conciliation, labor arbitration, and a court hearing. Only interest-based collective labor disputes may legally be pursued via demonstration, and only after undergoing through conciliation and arbitration. However, in practice strikes organized by ad hoc groups at individual facilities are not uncommon, and are usually resolved through negotiation with management. In 2021 there were 105 strikes nationwide, 20 fewer than in 2020 as reported by VGCL.

According to Vietnam’s General Statistics Office (GSO), in 2021 there were 50.7 million people participating in the formal labor force in Vietnam out of over 74.9 million people aged 15 and above, around 1.4 million lower than 2020. The labor force is relatively young, with workers 15-39 years of age accounting for half of the total labor force. 61.6 percent of women in the working age participate to the labor force in comparison to 74.3 percent of men in the working age while 65.3 percent of people in the working age in the urban areas participate in the labor force in comparison to 69.3 percent in the rural areas.

Estimates on the size of the informal economy differ widely. The IMF states 40 percent of Vietnam’s laborers work on the informal economy; the World Bank puts the figure at 55 percent; the ILO puts the figure as high as 79 percent if agricultural households are included. Vietnam’s GSO stated that among 53.4 million employed people, 20.3 million people worked in the informal economy.

An employer is permitted to dismiss employees due to technological changes, organizational changes (in cases of a merger, consolidation, or cessation of operation of one or more departments), when the employer faces economic difficulties, or for disruptive behavior in the workplace. There are no waivers on labor requirements to attract foreign investment.

14. Contact for More Information

Economic Section
U.S. Embassy
7 Lang Ha, Ba Dinh, Hanoi, Vietnam
+84-24-3850-5000
InvestmentClimateVN@state.gov 

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The Lessons of 1989: Freedom and Our Future