Investment Incentives

While the government previously required 51 percent Algerian ownership of all investments, the 2020 budget law restricted this requirement to  the hydrocarbons, mining, defense, and pharmaceuticals manufacturing sectors.

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

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

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

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

Foreign Trade Zones/Free Ports/Trade Facilitation

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

Performance and Data Localization Requirements

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

In 2017, the Algerian government began instituting forced localization in the auto sector.  Regulations issued in December 2017 require companies producing or assembling cars in the country to achieve a local integration rate of at least 15 percent within three years of operation.  The threshold rises to between 40 and 60 percent after a company’s fifth year of operation.  In 2020, the Algerian government announced its intention to increase the baseline local integration for automotive assembly from 15 percent to 35 percent.  Since 2014, the government has required car dealers to invest in industrial or “semi-industrial” activities as a condition for doing business in Algeria.  Dealers seeking to import new vehicles must obtain an import license from the Ministry of Commerce.  Since January 2017, the Ministry has not issued any licenses.  As the Algerian government further restricts imports, localization requirements are expected to broaden to other manufacturing industries over the next several years.  For example, a tender launched in 2018 for 150 megawatts of photovoltaic solar energy power plants mandated that bidders be Algerian legal entities.

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

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

Official unemployment figures are measured by the number of persons seeking work through the National Employment Agency (ANEM).  Unemployment in 2019 dropped slightly to 11.4 percent.  Unemployment is significantly higher among certain demographics, including 29 percent  of young people (ages 16-24).  The rate of unemployed young men decreased in 2019, from 9.9 to 9.1 percent.  The percentage of unemployed young women increased from 2018 from 19.4 percent to 20.4 percent.  Roughly 70 percent of the population is under 30.

An important factor in the increased unemployment rate in 2019 is the government’s continued austerity policy since 2015, which has resulted in the cancellation of several investment projects, the freezing of recruitment in the public sector, and the decision not to replace government positions lost to normal attrition.  Additionally, the subsidy allotted to finance vocational integration (le dispositif d’insertion professionnelle) decreased from 135 billion dinars in 2013 to 44.1 billion in 2019.  In general, finding a job is regulated by the government and bureaucratically complex.  Prospective employees must register with the labor office, submit paper resumes door to door, attend career fairs, and comb online job offerings.  According to the Office of National Statistics, 81 percent of university graduates say that they favor “family relationships” or “the family network” as the best way to look for a job.

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

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

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

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

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

In 2019, there were strikes at the end of the year, largely in the public health and public education sectors.  Medical residents went on strike demanding higher pay, better working conditions, and male residents sought an exemption from mandatory military service requirements.  After weeks of strikes, the Ministry of Health made some concessions in terms of additional benefits for doctors, and the residents resumed work.  Teachers also went on strike for higher pay and complained of perceived inequalities in the pay scale.  After weeks of strikes and a closed-door meeting, the Ministry of Education and unions came to an agreement, but to date no changes have been implemented and periodic teacher strikes continue.

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

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

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

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

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

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

The National Authority of the Protection and Promotion of Children (ONPPE) is an inter-agency organization, created in 2016, which coordinates the protection and promotion of children’s rights.  As a part of its efforts, in 2018 ONPPE held educational sessions for officials from relevant ministries, civil society organizations, and journalists on issues related to children, including child labor and human trafficking.

Investment Incentives

The NPIL seeks to award incentives to attract and retain investment. Investment incentives in the NPIL include:

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

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

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

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

Foreign Trade Zones/Free Ports/Trade Facilitation

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

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

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

Although the government has not yet established regional or international free trade zones, on March 21, 2018 the government signed an agreement to join the AfCFTA. The AfCFTA is the result of the African Free Trade Agreement among all 55 members of the African Union, and will be the largest FTZ in the world since the emergence of the WTO. The agreement’s implementation could create a market of 1.2 billion consumers. The UN Economic Commission for Africa (UNECA) has estimated a 52 percent increase in intra-African trade by 2022. Currently, intra-African trade is only 16 percent, with intra-Latin American at 19 percent, intra-Asian at 51 percent, and intra-European at 70 percent.

Performance and Data Localization Requirements

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

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

Through the NPIL Angola created the investor visa, granted by the immigration authority to foreign investors, representatives, or attorneys of an investing company, to carry out an approved investment proposal. It allows for multiple entries, and a stay of two years renewable for the same period. The NPIL liberalizes foreign investment, few instances translate to “forced localization,” and enforcement procedures for performance requirements are strictly observed in the labor, immigration, and petroleum sectors only. International oil companies are working with the government on a new local-content initiative that will establish more explicit sourcing requirements for the petroleum sector in staffing and material. Specific to the oil sector, because of the significance it represents to the Angolan economy, the Petroleum Activities Law requires Sonangol and its associates to acquire materials, equipment, machinery, and consumer goods produced in Angola.

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

Data storage is not applicable; however, the Institute for Communications of Angola (INACOM) oversees and regulates data in liaison with the Ministry of Telecommunications. Regulations around data management including encryption are still at nascent stages.

The Angolan labor force has limited technical skills, English language capabilities, and managerial ability. Many employers find it necessary to invest heavily in educating and training their Angolan staff. Angola’s labor force was estimated to be 13.1 million in 2019. The literacy rate is estimated to be 70 percent (82 percent male, 60.7 percent female). According to the National Statistics Institute, in 2019, the unemployment rate in the population aged 15 and above was around 31 percent, although more than 60 percent of all jobs are in the informal sector. Eighty six percent of primary school age children attend school. The law mandates that children must attend school for six years beginning at age six. 29 percent of boys and 17 percent of girls attend high school.

There are gaps in compliance with international labor standards which may pose a reputational risk to investors. Children are sometimes employed in agriculture, construction, fishing, and coal industries. Forced labor is sometimes used in agricultural, fishing, construction, domestic services, and artisanal diamond mining sectors. Additional information is available in the 2019 Trafficking in Persons Report, (https://www.state.gov/wp-content/uploads/2019/06/2019-Trafficking-in-Persons-Report.pdf [16 MB] ), 2019 Country Report on Human Rights Practices (https://www.state.gov/reports/2019-country-reports-on-human-rights-practices/), and 2018 Findings on the Worst Forms of Child Labor, (https://www.dol.gov/agencies/ilab/resources/reports/child-labor/angola ).

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

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

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

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

Investment Incentives

The Commonwealth Government and state and territory governments provide a range of measures to assist investors with setting up and running a business and undertaking investment.  Types of assistance available vary by location, industry, and the nature of the business activity.  Austrade provides coordinated government assistance to attracting FDI and is intended to serve as the national point-of-contact for investment inquiries.  State and territory governments similarly offer a suite of financial and non-financial incentives.

The Commonwealth Government also provides incentives for companies engaging in research and development (R&D) and delivers a tax offset for expenditure on eligible R&D activities undertaken during the year.  R&D activities conducted overseas are also eligible under certain circumstances, and the program is jointly administered by AusIndustry (Government agency) and the Australian Taxation Office (ATO).  The Australian Government typically does not offer guarantees on, or jointly finance projects with, foreign investors.

Foreign Trade Zones/Free Ports/Trade Facilitation

Australia does not have any free trade zones or free ports.

Performance and Data Localization Requirements

As a general rule, foreign firms establishing themselves in Australia are not subject to local employment or forced localization requirements, performance requirements and incentives, including to senior management and board of directors.  Proprietary companies must have at least one director resident in Australia, while public companies are required to have a minimum of two resident directors.  See Section 12 below for further information on rules pertaining to the hiring of foreign labor.

Under the Telecommunications (Interception and Access) Amendment (Data Retention) Bill 2015, telecommunications service providers are required to retain and secure, for two years, telecommunications data (not including content); to protect retained data through encryption; and to prevent unauthorized interference and access.  The Bill limits the range of agencies that are able to access telecommunications data and stored communications, establishes a “journalist information warrants regime.”  Australia’s Personally Controlled Electronic Health Records Act prohibits the transfer of health data out of Australia in some situations.

The Government introduced legislation to Parliament in 2018 that would require encrypted messaging services to provide decrypted communications to the Government for selected national security purposes (the Telecommunications and Other Legislation Amendment (Assistance and Access) Act 2018).  This legislation is subject to review by a parliamentary committee at the time of writing.  Companies relying on secure encryption technologies have expressed concern about the impacts of this legislation on the security of the products and the lack of sufficient judicial oversight in reviewing government requests for access to encrypted data.

Australia has a strong framework for the protection of intellectual property (IP), including software source code.  Foreign providers are not required to provide source code to the Government in exchange for operating in Australia.  A current government enquiry is investigating the competition impacts of digital platforms, including the market implications of the algorithms used by these platforms and options for mandating the disclosure of these algorithms to regulators.

Companies are generally not restricted in terms of how they store or transmit data within their operations.  The exception to this is the Personally Controlled Electronic Health Records Act (2012) which does require that certain personal health information is stored in Australia.  The Privacy Act (1988) and associated legislation place restrictions on the communication of personal information between and within entities.  The requirements placed on international companies, and the transmission of data outside of Australia, are not treated differently under this legislation.  The Australian Attorney-General’s Department is the responsible agency for most legislation relating to data and storage requirements.

Australia’s unemployment rate has hovered between 5.0-5.3 percent for the last year, sitting at 5.1 percent in March 2020.   The impact of COVID-19 is expected to see this rise sharply, although the government has implemented large stimulus packages targeted to keeping businesses operating and employees in work.  Average weekly earnings for full time workers in Australia were AUD 1,659 (approximately USD 1,030) as of November 2019.  The minimum wage is set annually and is significantly higher than that of the United States (approximately twice the U.S. minimum wage).  Overall wage growth has been low in recent years, growing only slightly above the rate of inflation.

The Australian Government and its state and territory counterparts are active in assessing and forecasting labor skills gaps across industries.  Tertiary education is subsidized by both levels of governments, and these subsidies are based in part on an assessment of the skills needed by industry.  These assessments also inform immigration policy through the various working visas and associated skilled occupation lists.  Occupations on these lists are updated annually based on assessment of the skills most needed by industry.

Immigration has always been an important source for skilled labor in Australia.  The Department of Home Affairs publishes an annual list of occupations with skill shortages to be used by potential applicants seeking to work in Australia.  The visas available to applicants, and length of stay allowed for, differ by occupation.  The main working visa is the Temporary Skills Shortage visa (subclass 482).  Applicants must have a nominated occupation when they apply which is applicable to their circumstances, and applications are subject to local labor market testing rules.  These rules preference the hiring of Australian labor over foreign workers so long as local workers can be found to fill the advertised job.

Most Australian workplaces are governed by a system created by the Fair Work Act 2009.  Enterprise bargaining takes place through collective agreements made at an enterprise level covering terms and conditions of employment.  Such agreements are widely used in Australia.  A Fair Work Ombudsman assists employees, employers, contractors and the community to understand and comply with the system.  The Fair Work Act 2009 establishes a set of clear rules and obligations about how this process is to occur, including rules about bargaining, the content of enterprise agreements, and how an agreement is made and approved.  Unfair dismissal laws also exist to protect workers who have been unfairly fired from a job.  Australia is a founding member of the International Labour Organization (ILO) and has ratified 58 of the ILO’s conventions.

Chapter 18 of the AUSFTA agreement deals with labor market issues.  The chapter sets out the responsibilities of each party, including the commitment of each country to uphold its obligations as a member of the ILO and the associated ILO Declaration on Fundamental Principles and Rights at Work and its Follow-up (1998).

There were 135 industrial disputes nationwide in 2019, down from 158 in 2018.  Total working days lost to disputes in 2019 fell 40 percent to 64,000 days.

Investment Incentives

Federal and provincial governments in Canada offer a wide array of investment incentives that municipalities are generally prohibited from offering. The incentives are designed to advance broader policy goals, such as boosting research and development or promoting regional economies. The funds are available to any qualified Canadian or foreign investor who agrees to use the monies for the stated purpose. For example, Export Development Canada can support inbound investment under certain specific conditions (e.g., investment must be export-focused; export contracts must be in hand or companies have a track record; there is a world or regional product mandate for the product to be produced). The government also announced the US$940 million Strategic Innovation Fund in 2017, which provides repayable or non-repayable contributions to firms of all sizes across Canada’s industrial and technology sectors in an effort to grow and expand those industries. One of the explicit goals of the program is to attract new investments to Canada.

The Liberal government invested US$730 million over five years, beginning in 2018, to support five business-led supercluster projects that have the potential to accelerate economic and investment growth in Canada. The superclusters are now operational, and feature projects in digital technologies, food production, advanced manufacturing, artificial intelligence in supply chain management, and ocean industries. There are 450 businesses, 60 post-secondary institutions, and 180 other partners involved in the supercluster projects. Several U.S. firms are participants.

Several provinces offer an array of incentive programs and services aimed at attracting foreign investment that lower corporate taxes and incentivize research and development. The Province of Quebec officially re-launched its “Plan Nord” (Northern Plan) in April 2015, a 20-year sustainable development investment initiative that is intended to harness the economic, mineral, energy, and tourism potential of Quebec’s northern territory. Quebec’s government created the “Société du Plan Nord” (Northern Plan Company) to attract investors and work with local communities to implement the plan. Thus far, Plan Nord has helped finance mining projects in northern Quebec and began building the necessary infrastructure to link remote mines with ports. The provincial government is actively seeking other foreign investors who desire to take advantage of these opportunities.

Provincial incentives tend to be more investor-specific and are conditioned on applying the funds to an investment in the granting province. For example, Ontario’s Jobs and Prosperity Fund provides US$2.5 billion from 2013 to 2023 to enhance productivity, bolster innovation, and grow Ontario’s exports. To qualify, companies must have substantive operations (generally three years) and at least US$7.5 million in eligible project costs. Alberta offers companies a 10 percent refundable provincial tax credit worth up to US$300,000 annually for scientific research and experimental development encouraging research and development in Alberta, as well as Alberta Innovation Vouchers worth US$11,000 to US$37,000 to help small early-stage technology and knowledge-driven businesses in Alberta get their ideas and products to market faster. Newfoundland and Labrador provide vouchers worth 75 percent of eligible project costs up to US$11,000 for R&D, performance testing, field trials, and other projects.

Provincial incentives may also be restricted to firms established in the province or that agree to establish a facility in the province. Government officials at both the federal and provincial levels expect investors who receive investment incentives to use them for the agreed purpose, but no enforcement mechanism exists.

Incentives for investment in cultural industries, at both the federal and provincial level, are generally available only to Canadian-controlled firms. Incentives may take the form of grants, loans, loan guarantees, venture capital, or tax credits. Provincial incentive programs for film production in Canada are available to foreign filmmakers.

Foreign Trade Zones/Free Ports/Trade Facilitation

Under the NAFTA, Canada operates as a free trade zone for products made in the United States. Most U.S. made goods enter Canada duty free.

Performance and Data Localization Requirements

As a general rule, foreign firms establishing themselves in Canada are not subject to local employment or forced localization requirements, although Canada has some requirements on local employment for boards of directors. Ordinarily, at least 25 percent of the directors of a corporation must be resident Canadians. If a corporation has fewer than four directors, however, at least one of them must be a resident Canadian. In addition, corporations operating in sectors subject to ownership restrictions (such as airlines and telecommunications) or corporations in certain cultural sectors (such as book retailing, video, or film distribution) must have a majority of resident Canadian directors.

Data localization is an evolving issue in Canada. Privacy rules in two Canadian provinces, British Columbia and Nova Scotia, mandate that personal information in the custody of a public body must be stored and accessed only in Canada unless one of a few limited exceptions applies. These laws prevent public bodies such as primary and secondary schools, universities, hospitals, government-owned utilities, and public agencies from using non-Canadian hosting services. The United States–Mexico–Canada Agreement (USMCA) will help ensure cross-border data flows between Canada and the United States remain open by prohibiting any member of the agreement from requiring the use or location of computing facilities in a particular jurisdiction as a condition of business.

The Canada Revenue Agency stipulates that tax records must be kept at a filer’s place of business or residence in Canada. Current regulations were written over 30 years ago and do not take into account current technical realities concerning data storage.

The federal government and provincial/territorial governments share jurisdiction for labor regulation and standards. Federal employees and those employed in federally-regulated industries, including the railroad, airline, and banking sectors are covered under the federally administered Canada Labor Code. Employees in most other sectors come under provincial labor codes. As the laws vary somewhat from one jurisdiction to another, it is advisable to contact a federal or provincial labor office for specifics, such as minimum wage and benefit requirements.

Analysts note that Canada’s labor story varies significantly by province, with resource-dependent provinces affected more adversely than non-resource dependent provinces as a result of lower oil and other commodity prices. The impact of COVID-19 on the labor force is yet to be fully seen, but analysts have predicted unemployment rates around 10 percent or higher as a result of the pandemic. More than one million Canadians lost their jobs in March 2020 due largely to the outbreak, increasing Canada’s unemployment rate to 7.8 percent from 5.6 percent in February. The Canadian government created an emergency response benefit for workers who lost employment due to COVID-19 as well as wage subsidies and other support for employers.

Canada faces a labor shortage in skilled trades’ professions, such as carpenters, engineers, and electricians. Canada launched several initiatives including the Global Skills Visa, announced in November 2016, to address its skilled labor shortage, including through immigration reform, the inclusion of labor mobility provisions in free trade agreements, including the Canada-EU CETA agreement, and the Temporary Foreign Worker Program (TFWP).

The TFWP is jointly managed by Employment and Social Development Canada (ESDC) and Immigration, Refugees, and Citizenship Canada (IRCC). The International Mobility Program (IMP) primarily includes high skill/high wage professions and is not subject to a labor market impact assessment. The number of temporary foreign workers a business can employ is limited. For more information, see the TFWP website: http://www.cic.gc.ca/english/resources/publications/employers/temp-foreign-worker-program.asp 

Canadian labor unions are independent from the government. Canada has labor dispute mechanisms in place and unions practice collective bargaining. In Canada less than one in three employees belonged to a union or was covered by a collective agreement in 2015, the most recent year for which data is available. In 2015, there were 776 unions in Canada. Eight of those unions – five of which were national and three international – represented 100,000 or more workers each and comprised 45 percent of all unionized workers in Canada (https://www.canada.ca/en/employment-social-development/services/collective-bargaining-data/reports/union-coverage.html). In June 2017, Parliament repealed legislation public service unions had claimed contravened International Labor Organization conventions by limiting the number of persons who could strike.

In 2019, workers for Montreal-based CN rail walked off the job on November 19 over concerns about long hours, fatigue, and “dangerous working conditions.” The strike lasted for seven days from November 19 through November 26, during which the railroad operated at approximately 10 percent capacity. CN Rail carries about $189 billion worth of goods annually. Economists at Toronto-Dominion Bank predicted Canada’s gross domestic product would have lost as much as $1.65 billion if the strike had lasted four more days, until November 30. In the end, the one-week long strike clipped GDP by about 0.1 percent that month according to the Bank of Montreal. The Canadian government focused on finding a negotiated end to the strike amid calls to legislate the workers back to work.

Investment Incentives

To attract foreign investment, different provinces and municipalities offer preferential packages like a temporary reduction in taxes, resources and land use benefits, reduction in import or export duties, special treatment in obtaining basic infrastructure services, streamlined government approvals, research and development subsidies, and funding for initial startups.  Often, these packages stipulate that foreign investors must meet certain benchmarks for exports, local content, technology transfer, and other requirements.  The Chinese government incentivizes foreign investors to participate in initiatives like MIC 2025 that seek to transform China into an innovation-based economy.  Announced in 2015, China’s MIC 2025 roadmap has prioritized the following industries:  new-generation information technology, advanced numerical-control machine tools and robotics, aerospace equipment, maritime engineering equipment and vessels, advanced rail, new-energy vehicles, energy equipment, agricultural equipment, new materials, and biopharmaceuticals and medical equipment.  While mentions of MIC 2025 have all but disappeared from public discourse, a raft of policy announcements at the national and sub-national levels indicate China’s continued commitment to developing these sectors.  Foreign investment plays an important role in helping China move up the manufacturing value chain.  However, foreign investment remains closed off to many economic sectors that China deems sensitive due to broadly defined national or economic security concerns.

Foreign Trade Zones/Free Ports/Trade Facilitation

In 2013, the State Council announced the Shanghai pilot FTZ to provide open and high-standard trade and investment services to foreign companies.  China gradually scaled up its FTZ pilot program to 12 FTZs, launching an additional six FTZs in 2019.  China’s FTZs are in: Tianjin, Guangdong, Fujian, Chongqing, Hainan, Henan, Hubei, Liaoning, Shaanxi, Sichuan, Zhejiang, Jiangsu, Shandong, Hebei, Heilongjiang, Guanxi, and Yunnan provinces.  The goal of all of China’s FTZs is to provide a trial ground for trade and investment liberalization measures and to introduce service sector reforms, especially in financial services, that China expects to eventually introduce in other parts of the domestic economy.  The FTZs promise foreign investors “national treatment” for the market access phase of an investment in industries and sectors not listed on the FTZ negative list, or on the list of industries and economic sectors from which foreign investment is restricted or prohibited.  However, the 2019 FTZ negative list lacked substantive changes, and many foreign firms have reported that in practice, the degree of liberalization in the FTZs is comparable to opportunities in other parts of China.  The stated purpose of FTZs is also to integrate these areas more closely with the OBOR initiative.

Performance and Data Localization Requirements

As part of China’s WTO accession agreement, the PRC government promised to revise its foreign investment laws to eliminate sections that imposed on foreign investors requirements for export performance, local content, balanced foreign exchange through trade, technology transfer, and research and development as a prerequisite to enter China’s market.  In practice, China has not completely lived up to these promises.  Some U.S. businesses report that local officials and regulators sometimes only accept investments with “voluntary” performance requirements or technology transfer that help develop certain domestic industries and support the local job market.  Provincial and municipal governments will sometimes restrict access to local markets, government procurement, and public works projects even for foreign firms that have already invested in the province or municipality.  In addition, Chinese regulators have reportedly pressured foreign firms in some sectors to disclose IP content or provide IP licenses to Chinese firms, often at below market rates.

Furthermore, China’s evolving cybersecurity and personal data protection regime includes onerous restrictions on firms that generate or process data in China, such as requirements for certain firms to store data in China.  Restrictions exist on the transfer of personal information of Chinese citizens outside of China.  These restrictions have prompted many firms to review how their networks manage data.  Foreign firms also fear that PRC laws call for the use of “secure and controllable,” “secure and trustworthy,” etc. technologies will curtail sales opportunities for foreign firms or pressure foreign companies to disclose source code and other proprietary intellectual property.  In October 2019, China adopted a Cryptography Law that includes restrictive requirements for commercial encryption products that “involve national security, the national economy and people’s lives, and public interest.”  This broad definition of commercial encryption products that must undergo a security assessment raises concerns that implementation will lead to unnecessary restrictions on foreign information and communications technology (ICT) products and services.  Further, prescriptive technology adoption requirements, often in the form of domestic standards that diverge from global norms, in effect give preference to domestic firms.  These requirements potentially jeopardize IP protection and overall competitiveness of foreign firms operating in China.

For U.S. companies operating in China, finding, developing, and retaining domestic talent at the management and skilled technical staff levels remain challenging for foreign firms.  In addition, labor costs, including salaries along with other production inputs, continue to rise.  Foreign firms continue to cite air pollution concerns as a major hurdle in attracting and retaining qualified foreign talent.  Chinese labor law does not provide for freedom of association or protect the right to strike.  The PRC has not ratified the International Labor Organization conventions on freedom of association, collective bargaining, or forced labor, but it has ratified conventions prohibiting child labor and employment discrimination.  Foreign companies complain of difficulty navigating China’s labor and social insurance laws, including local implementation guidelines. Compounding the complexity, due to ineffective enforcement of labor contract laws, Chinese domestic employers often hire local employees without contracts, putting foreign firms at a disadvantage.  Without written contracts, workers struggle to prove employment, thus losing basic protections such as severance if terminated.  Moreover, in 2018 and 2019, there were multiple U.S. government, media, and NGO reports that persons detained in internment camps in Xinjiang were subjected to forced labor in violation of international labor law and standards.  In October 2019, CBP issued a Withhold Release Order barring importation into the United States of garments produced by Hetian Taida Apparel Co., Ltd. in Xinjiang, which were determined to be produced with prison or forced labor in violation of U.S. import laws.  The Commerce Department added 28 Chinese commercial and government entities to its Entity List for their complicity in human rights abuses.

The All China Federation of Trade Unions (ACFTU) is the only union recognized under the law.  Establishing independent trade unions is illegal.  The law allows for “collective bargaining,” but in practice, focuses solely on collective wage negotiations.  The Trade Union Law gives the ACFTU, a CCP organ chaired by a member of the Politburo, control over all union organizations and activities, including enterprise-level unions.  ACFTU enterprise unions require employers to pay mandatory fees, often through the local tax bureau, equaling a negotiated minimum of 0.5 percent to a standard two percent of total payroll.  While labor laws do not protect the right to strike, “spontaneous” worker protests and work stoppages regularly occur.  Official forums for mediation, arbitration, and other similar mechanisms of alternative dispute resolution often are ineffective in resolving labor disputes.  Even when an arbitration award or legal judgment is obtained, getting local authorities to enforce judgments is problematic.

Investment Incentives

The Colombian government offers investment incentives, such as income tax exemptions and deductions in specific priority sectors, including the so-called “orange economy,” which refers to the creative industries, as well as agriculture and entrepreneurship.  More recently, the government has offered additional incentives in an effort to generate investments in former conflict municipalities.  Investment incentives through free trade agreements between Colombia and other nations include national treatment and most favored nation treatment of investors; establishment of liability standards assumed by countries regarding the other nation’s investors, including the minimum standard of treatment and establishment of rules for investor compensation from expropriation; establishment of rules for transfer of capital relating to investment; and specific tax treatment.

The government offers tax incentives to all investors, such as preferential import tariffs, tax exemptions, and credit or risk capital.  Some fiscal incentives are available for investments that generate new employment or production in areas impacted by natural disasters and former conflict-affected municipalities.  Companies can apply for these directly with participating agencies.  Tax and fiscal incentives are often based on regional, sector, or business size considerations.  Border areas have special protections due to currency fluctuations in neighboring countries which can impact local economies.  National and local governments also offer special incentives, such as tax holidays, to attract specific industries.

The Colombian government introduced a variety of incentives for specific sectors as part of the 2019 tax reform. Included are:

• Income from hotels built, renovated, or extended through January 1, 2029 in municipalities of less than 200,000 inhabitants will be taxed at nine percent for 20 years. The same facilities in larger municipalities will be taxed at nine percent for 10 years.
• New theme parks, ecotourism and agrotourism enterprises, and boat docks put into operation through January 1, 2029 in smaller municipalities will also be taxed at nine percent for 20 years. The same facilities in municipalities greater than 200,000 population put into service until 2023 will be taxed at nine percent for 10 years.
• Income normally taxed at 33 percent that is invested in agricultural projects or orange (creative) economy initiatives will be tax free.
• Income from the sale of electric power generated by wind, biomass, solar, geothermal, or tidal movement will be tax free provided carbon dioxide emission certificates are sold in accordance with the Kyoto Protocol, and 50 percent of the income from the certificate sale is invested in social projects benefiting the region where the power was generated.
• Income from river transportation services using low-draft vessels is tax free.

Foreign investors can participate without discrimination in government-subsidized research programs, and most Colombian government research has been conducted with foreign institutions.  Investments or grants to technological research and development projects are fully tax deductible in the year the investment was made.  R&D incentives include Value-Added Tax (VAT) exemptions for imported equipment or materials used in scientific, technology, or innovation projects, and qualified investments may receive tax credits.

In a tax reform passed in 2016, the Colombian government created two tax incentives to support investment in the 344 municipalities most affected by the armed conflict (ZOMAC).  Small and microbusinesses that invest in ZOMACs and meet a series of other criteria will be exempt from paying any taxes through 2021, pay 25 percent of the general rate through 2024, and 50 percent through 2027.  Medium and large-sized businesses will pay 50 percent of their normal taxes through 2021 and 75 percent through 2024.  The second component is entitled “works for taxes” (“Obras por Impuestos”), a program through which the private sector can directly fund social investments and infrastructure projects in lieu of paying taxes.

Foreign Trade Zones/Free Ports/Trade Facilitation

To attract foreign investment and promote the importation of capital goods, the Colombian government uses a number of drawback and duty deferral programs.  One example is free trade zones (FTZs).  While DIAN oversees requests to establish FTZs, the Colombian government is not involved in their operations.  Benefits under the FTZ regime include a single 20 percent tax rate and no customs value-added taxes or duties on raw material imports for use in the FTZ.  Each permanent FTZ must meet specific investment and direct job creation commitments, depending on their total assets, during the first three years.  Special FTZs are required to generate a certain number of direct jobs depending on the economic sector.

Colombia also has initiated Special Economic Zones for Exports in the municipalities of Buenaventura, Cucuta, Valledupar, and Ipiales in order to encourage investment.  These zones receive the same import benefits of FTZs, while operators are also exempted from some payroll taxes and surcharges.  In addition, infrastructure projects in the zones are exempt from some income taxes.

Performance and Data Localization Requirements

Performance requirements are not imposed on foreigners as a condition for establishing, maintaining, or expanding investments.  The Colombian government does not have performance requirements, impose local employment requirements, or require excessively difficult visa, residency, or work permit requirements for investors.  Under the CTPA, Colombia grants substantial market access across its entire services sector.

The SIC, under the Deputy Office for Personal Data Protection, is the Data Protection Authority (DPA) and has the legal mandate to ensure proper data protection and has issued a circular defining adequate data protection and responsibilities with respect to international data transfers.  The SIC requires data storage facilities that hold personal data to comply with government requirements for security and privacy, and data storage companies have one year to register.  The SIC enforces the rules on local data storage within the country through audits/investigations and imposed sanctions.

Software and hardware are protected by IPR.  There is no obligation to submit source code for registered software.

An OECD economic survey of Colombia was published in October 2019.  The report mentions progress on labor market reforms, but cites a weakening of the labor market given decelerating economic growth, stalled progress on labor force participation, and high income inequality.  In 2019, the unemployment rate according to government figures was 10.5 percent, an increase over the 2018 rate of 9.7 percent, and one of the highest in Latin America.  According to DANE,  47.7 percent of the urban workforce was working in the informal economy at the end of 2019.  A new National Development Plan, signed into law in May 2019, aims to reduce informality by formalizing hourly work, reform the pension system, and expand social protection.  Colombia has made strong efforts to incorporate Venezuelan migrants into the formal economy.  Colombia has a wide range of skills in its workforce, including managerial-level employees who are often bilingual, but faces large skills gaps.

Labor rights in Colombia are set forth in its Constitution, the Labor Code, the Procedural Code of Labor and Social Security, sector-specific legislation, and ratified international conventions, which are incorporated into national legislation.  Colombia’s Constitution guarantees freedom of association and provides for collective bargaining and the right to strike (with some exceptions).  It also addresses forced labor, child labor, trafficking, discrimination, protections for women and children in the workplace, minimum wages, working hours, skills training, and social security.  Colombia has ratified all eight of the International Labor Organization’s (ILO’s) fundamental labor conventions, and all are in force.  Colombia has also ratified conventions related to hours of work, occupational health and safety, and minimum wage.

The 1991 Constitution protects the right to constitute labor unions.  Pursuant to Colombia’s labor law, any group of 25 or more workers, regardless of whether they are employees of the same company or not, may form a labor union.  Employees of companies with fewer than 25 employees may affiliate themselves with other labor unions.  Colombia has a low trade union density (9.5 percent).  Where unions are present, multiple affiliation sometimes poses challenges for collective bargaining.  The largest and most influential unions are composed mostly of public-sector employees, particularly of the majority state-owned oil company and the state-run education sector.  Only 6.2 percent of all salaried workers are covered by collective bargaining agreements (CBAs), according to the OECD.  The Ministry of Labor has expressed commitment to working on decrees to incentivize sectoral collective bargaining, and to strengthen union representation within companies and regulate strikes in the essential public services sector (i.e. hospitals).

Strikes, when held in accordance with the law, are recognized as legal instruments to obtain better working conditions and employers are prohibited from using strike-breakers at any time during the course of a strike.  After 60 days of strike action, the parties are subject to compulsory arbitration.  Strikes are prohibited in certain “essential public services,” as defined by law, although Colombia has been criticized for having an overly-broad interpretation of “essential.”

Foreign companies operating in Colombia must follow the same hiring rules as national companies, regardless of the origin of the employer and the place of execution of the contract.  No labor laws are waived in order to attract or retain investment.  In 2010, Law 1429 eliminated the mandatory proportion requirement for foreign and national personnel; 100 percent of the workforce, including the board of directors, can be foreign nationals.  Labor permits are not required in Colombia, except for minors of the minimum working age.  Foreign employees have the same rights as Colombian employees.  Employers may use temporary service agencies to subcontract additional workers for peaks of production.  Employers must receive advance permission from the Ministry of Labor before undertaking permanent layoffs.  The Ministry of Labor typically does not grant permission to lay off workers who have enhanced legal protections (those with work-related injuries or union leaders, for example).  The Ministry of Labor has been cracking down on using temporary or contract workers for jobs that are not temporary in nature.

Reputational risks to investors come with a lack of effective and systematic enforcement of labor law, especially in rural sectors.  Homicides of unionists (social leaders) remain a concern.  In January 2017, the U.S. Department of Labor issued a public report of review in response to a submission filed under Chapter 17 (the Labor Chapter) of the CTPA by the American Federation of Labor and Congress of Industrial Organizations and five Colombian workers’ organizations that alleged failures on the part of the government to protect labor rights in line with CTPA commitments.  In January 2018, the Department of Labor published the first periodic review of progress to address issues identified in the submission report.  For additional information on labor law enforcement see:

• Section 7 of Colombia’s Human Rights Report

https://www.state.gov/j/drl/rls/hrrpt

• Department of Labor Findings on the Worst Forms of Child Labor (

https://www.dol.gov/agencies/ilab/resources/reports/child-labor/colombia 

• Lists of Goods Produced with Child or Forced Labor

https://www.dol.gov/agencies/ilab/reports/child-labor/list-of-goods 

Investment Incentives

The Investment Law 72/2017 gives multiple incentives to investors as described below.  In August 2019, President Sisi ratified amendments to the Investment Law that allow its incentives programs to apply to expansions of existing investment projects in addition to new investments.

General Incentives:

• All investment projects subject to the provisions of the new law enjoy the general incentives provided by it.
• Investors are exempted from the stamp tax, fees of the notarization, registration of the Memorandum of Incorporation of the companies, credit facilities, and mortgage contracts associated with their business for five years from the date of registration in the Commercial Registry, in addition to the registration contracts of the lands required for a company’s establishment.
• If the establishment is under the provisions of the new investment law, it will benefit from a two percent unified custom tax over all imported machinery, equipment, and devices required for the set-up of such a company.

Special Incentive Programs:

• Investment projects established within three years of the date of the issuance of the Investment Law will enjoy a deduction from their net profit, subject to the income tax:
  • 50 percent of the investment costs for geographical region (A) (the regions the most in need of development as well as designated projects in Suez Canal Special Economic Zone and the “Golden Triangle” along the Red Sea between the cities of Safaga, Qena and El Quseer);
  • 30 percent of the investment costs to geographical region (B) (which represents the rest of the republic).
• Provided that such deduction shall not exceed 80 percent of the paid-up capital of the company, the incentive could be utilized over a maximum of seven years.

Additional Incentive Program:

The Cabinet of Ministers may decide to grant additional incentives for investment projects in accordance with specific rules and regulations as follows:

• The establishment of special customs ports for exports and imports of the investment projects.
• The state may incur part of the costs of the technical training for workers.
• Free allocation of land for a few strategic activities may apply.
• The government may bear in full or in part the costs incurred by the investor to invest in utility connections for the investment project.
• The government may refund half the price of the land allocated to industrial projects in the event of starting production within two years from receiving the land.

Other Incentives related to Free Zones according to Investment Law 72/2017:

• Exemption from all taxes and customs duties.
• Exemption from all import/export regulations.
• The option to sell a certain percentage of production domestically if customs duties are paid.
• Limited exemptions from labor provisions.
• All equipment, machinery, and essential means of transport (excluding sedan cars) necessary for business operations are exempted from all customs, import duties, and sales taxes.
• All licensing procedures are handled by GAFI. To remain eligible for benefits, investors operating inside the free zones must export more than 50 percent of their total production.
• Manufacturing or assembly projects pay an annual charge of one percent of the total value of their products
• Excluding all raw materials. Storage facilities are to pay one percent of the value of goods entering the free zones while service projects pay one percent of total annual revenue.
• Goods in transit to specific destinations are exempt from any charges.

Other Incentives related to the Suez Canal Economic Zone (SCZone):

• 100 percent foreign ownership of companies.
• 100 percent foreign control of import/​export activities.
• Imports are exempted from customs duties and sales tax.
• Customs duties on exports to Egypt imposed on imported components only, not the final product.
• Fast-track visa services.
• A full service one-stop shop for registration and licensing.
• Allowing enterprises access to the domestic market; duties on sales to domestic market will be assessed on the value of imported inputs only.

The Tenders Law (Law 89/1998) requires the government to consider both price and best value in awarding contracts and to issue an explanation for refusal of a bid. However, the law contains preferences for Egyptian domestic contractors, who are accorded priority if their bids do not exceed the lowest foreign bid by more than 15 percent.

The Ministry of Industry & Foreign Trade and the Ministry of Finance’s Decree No. 719/2007 provides incentives for industrial projects in the governorates of Upper Egypt (Upper Egypt refers to governorates in southern Egypt). The decree provides an incentive of LE 15,000 (approx. $850) for each job opportunity created by the project, on the condition that the investment costs of the project exceed LE 15 million (approx. $850,000). The decree can be implemented on both new and ongoing projects.

Foreign Trade Zones/Free Ports/Trade Facilitation

Public and private free trade zones are authorized under GAFI’s Investment Incentive Law. Free zones are located within the national territory, but are considered to be outside Egypt’s customs boundaries, granting firms doing business within them more freedom on transactions and exchanges. Companies producing largely for export (normally 80 percent or more of total production) may be established in free trade zones and operate using foreign currency. Free trade zones are open to investment by foreign or domestic investors. Companies operating in free trade zones are exempted from sales taxes or taxes and fees on capital assets and intermediate goods. The Legislative Package for the Stimulation of Investment, issued in 2015, stipulated a one percent duty paid on the value of commodities upon entry for storage projects and a one percent duty upon exit for manufacturing and assembly projects.

There are currently 9 public free trade zones in operation in the following locations: Alexandria, Damietta Ismailia, Qeft, Media Production City, Nasr City, Port Said, Shebin el Kom, and Suez. Private free trade zones may also be established with a decree by GAFI but are usually limited to a single project. Export-oriented industrial projects are given priority.  There is no restriction on foreign ownership of capital in private free zones.

The Special Economic Zones (SEZ) Law 83/2002 allows establishment of special zones for industrial, agricultural, or service activities designed specifically with the export market in mind.  The law allows firms operating in these zones to import capital equipment, raw materials, and intermediate goods duty free. Companies established in the SEZs are also exempt from sales and indirect taxes and can operate under more flexible labor regulations. The first SEZ was established in the northwest Gulf of Suez.

Law 19/2007 authorized creation of investment zones, which require Prime Ministerial approval for establishment. The government regulates these zones through a board of directors, but the zones are established, built, and operated by the private sector. The government does not provide any infrastructure or utilities in these zones. Investment zones enjoy the same benefits as free zones in terms of facilitation of license-issuance, ease of dealing with other agencies, etc., but are not granted the incentives and tax/custom exemptions enjoyed in free zones. Projects in investment zones pay the same tax/customs duties applied throughout Egypt. The aim of the law is to assist the private sector in diversifying its economic activities.

The Suez Canal Economic Zone, a major industrial and logistics services hub announced in 2014, includes upgrades and renovations to ports located along the Suez Canal corridor, including West and East Port Said, Ismailia, Suez, Adabiya, and Ain Sokhna. The Egyptian government has invited foreign investors to take part in the projects, which are expected to be built in several stages, the first of which was scheduled to be completed by mid-2020. Reported areas for investment include maritime services like ship repair services, bunkering, vessel scrapping and recycling; industrial projects, including pharmaceuticals, food processing, automotive production, consumer electronics, textiles, and petrochemicals; IT services such as research and development and software development; renewable energy; and mixed use, residential, logistics, and commercial developments. Website for the Suez Canal Development Project: http://www.sczone.com.eg/English/Pages/default.aspx 

Performance and Data Localization Requirements

Egypt has rules on national percentages of employment and difficult visa and work permit procedures.  The application of these provisions that restrict access to foreign worker visas has been inconsistent.  The government plans to phase out visas for unskilled workers, but as yet has not done so. For most other jobs, employers may hire foreign workers on a temporary six-month basis, but must also hire two Egyptians to be trained to do the job during that period.  Only jobs where it is not possible for Egyptians to acquire the requisite skills will remain open to foreign workers. The application of these regulations is inconsistent. The Labor Law allows Ministers to set the maximum percentage of foreign workers that may work in companies in a given sector.  There are no such sector-wide maximums for the oil and gas industry, but individual concession agreements may contain language establishing limits or procedures regarding the proportion of foreign and local employees.

No performance requirements are specified in the Investment Incentives Law, and the ability to fulfill local content requirements is not a prerequisite for approval to set up assembly projects.  In many cases, however, assembly industries still must meet a minimum local content requirement in order to benefit from customs tariff reductions on imported industrial inputs.

Decree 184/2013 allows for the reduction of customs tariffs on intermediate goods if the final product has a certain percentage of input from local manufacturers, beginning at 30 percent local content.  As the percentage of local content rises, so does the tariff reduction, reaching up to 90 percent if the amount of local input is 60 percent or above. In certain cases, a minister can grant tariff reductions of up to 40 percent in advance to certain companies without waiting to reach a corresponding percentage of local content.  In 2010, Egypt revised its export rebate system to provide exporters with additional subsidies if they used a greater portion of local raw materials.

Manufacturers wishing to export under trade agreements between Egypt and other countries must complete certificates of origin and local content requirements contained therein.  Oil and gas exploration concessions, which do not fall under the Investment Incentives Law, do have performance standards, which are specified in each individual agreement and which generally include the drilling of a specific number of wells in each phase of the exploration period stipulated in the agreement.

Egypt does not impose localization barriers on ICT firms.  Egypt’s Data Protection Act, signed into law in July, 2020, will require licenses for cross-border data transfers but does not impose any data localization requirements.  Similarly, Egypt does not make local production a requirement for market access, does not have local content requirements, and does not impose forced technology or intellectual property transfers as a condition of market access.  But there are exceptions where the government has attempted to impose controls by requesting access to a company’s servers located offshore, or request servers to be located in Egypt and thus under the government’s control.

Official statistics put Egypt’s labor force at approximately 29 million, with an official unemployment rate of 9.6 percent as of July 2020.  Prior to the onset of the novel coronavirus pandemic, Egypt’s official unemployment rate had been steadily decreasing, reaching a low of 7.5 percent in July 2019.  Women accounted for 25 percent of those unemployed as of May 2020, according to statistics from Egypt’s Central Agency for Public Mobilization and Statistics (CAPMAS).  Accurate figures are difficult to determine and verify given Egypt’s large informal economy in which some 62 percent of the non-agricultural workforce is engaged, according to ILO estimates.

The government bureaucracy and public sector enterprises are substantially over-staffed compared to the private sector and other international norms.  According to the World Bank, Egypt has the highest number of government workers per capita in the world.  Businesses highlight a mismatch between labor skills and market demand, despite high numbers of university graduates in a variety of fields.  Foreign companies frequently pay internationally competitive salaries to attract workers with valuable skills.

The Unified Labor Law 12//2003 provides comprehensive guidelines on labor relations, including hiring, working hours, termination of employees, training, health, and safety.  The law grants a qualified right for employees to strike, as well as rules and guidelines governing mediation, arbitration, and collective bargaining between employees and employers.   Non-discrimination clauses are included, and the law complies with labor-related International Labor Organization (ILO) conventions regulating the employment and training of women and eligible children. Egypt ratified ILO Convention 182 on combating the Worst Forms of Child Labor in April 2002. On July 2018, Egypt launched the first National Action Plan on combating the Worst Forms of Child Labor. The law also created a national committee to formulate general labor policies and the National Council of Wages, whose mandate is to discuss wage-related issues and national minimum-wage policy, but it has rarely convened and a minimum wage has rarely been enforced in the private sector. .

Parliament adopted a new Trade Unions Law in late 2017, replacing a 1976 law, which experts said was out of compliance with Egypt’s commitments to ILO conventions.  After a March 2016 Ministry of Manpower and Migration (MOMM) directive not to recognize documentation from any trade union without a stamp from the government-affiliated Egyptian Trade Union Federation (ETUF), the new law established procedures for registering independent trade unions, but some of the unions noted that the directorates of the Ministry of Manpower didn’t implement the law and placed restrictions on freedoms of association and organizing for trade union elections.  Executive regulations for trade union elections stipulate a very tight deadline of three months for trade union organizations to legalize their status, and one month to hold elections, which, critics said, restricted the ability of unions to legalize their status or to campaign.  On April 3, 2018, the government registered its first independent trade union in more than two years.

In July 2019 the Egyptian Parliament passed a series of amendments to the Trade Unions Law that reduced the minimum membership required to form a trade union and abolished prison sentences for violations of the law.  The amendments reduced the minimum number of workers required to form a trade union committee from 150 to 50, the number of trade union committees to form a general union from 15 to 10 committees, and the number of workers in a general union from 20,000 to 15,000.  The amendments also decreased the number of unions necessary to establish a trade union federation from 10 to 7 and the number of workers in a trade union from 200,000 to 150,000.  Under the new law, a trade union or workers’ committee may be formed if 150 employees in an entity express a desire to organize.

Based on the new amendments to the Trade Unions Law and a request from the Egyptian government for assistance implementing them and meeting international labor standards, the International Labor Organization’s and International Finance Corporation’s joint Better Work Program launched in Egypt in March 2020.

The Trade Unions law explicitly bans compulsory membership or the collection of union dues without written consent of the worker and allows members to quit unions.  Each union, general union, or federation is registered as an independent legal entity, thereby enabling any such entity to exit any higher-level entity.

The 2014 Constitution stipulated in Article 76 that “establishing unions and federations is a right that is guaranteed by the law.”  Only courts are allowed to dissolve unions.  The 2014 Constitution maintained past practice in stipulating that “one syndicate is allowed per profession.”   The Egyptian constitutional legislation differentiates between white-collar syndicates (e.g. doctors, lawyers, journalists) and blue-collar workers (e.g. transportation, food, mining workers).  Workers in Egypt have the right to strike peacefully, but strikers are legally obliged to notify the employer and concerned administrative officials of the reasons and time frame of the strike 10 days in advance.  In addition, strike actions are not permitted to take place outside the property of businesses.  The law prohibits strikes in strategic or vital establishments in which the interruption of work could result in disturbing national security or basic services provided to citizens.  In practice, however, workers strike in all sectors, without following these procedures, but at risk of prosecution by the government.

Collective negotiation is allowed between trade union organizations and private sector employers or their organizations.  Agreements reached through negotiations are recorded in collective agreements regulated by the Unified Labor law and usually registered at MOMM.  Collective bargaining is technically not permitted in the public sector, though it exists in practice.  The government often intervenes to limit or manage collective bargaining negotiations in all sectors.

MOMM sets worker health and safety standards, which also apply in public and private free zones and the Special Economic Zones (see below).  Enforcement and inspection, however, are uneven.  The Unified Labor Law prohibits employers from maintaining hazardous working conditions, and workers have the right to remove themselves from hazardous conditions without risking loss of employment.

Egyptian labor laws allow employers to close or downsize operations for economic reasons.  The government, however, has taken steps to halt downsizing in specific cases.  The Unemployment Insurance Law, also known as the Emergency Subsidy Fund Law 156//2002, sets a fund to compensate employees whose wages are suspended due to partial or complete closure of their firm or due to its downsizing.  The Fund allocates financial resources that will come from a 1 percent deduction from the base salaries of public and private sector employees.  According to foreign investors, certain aspects of Egypt’s labor laws and policies are significant business impediments, particularly the difficulty of dismissing employees.  To overcome these difficulties, companies often hire workers on temporary contracts; some employees remain on a series of one-year contracts for more than 10 years.  Employers sometimes also require applicants to sign a “Form 6,” an undated voluntary resignation form which the employer can use at any time, as a condition of their employment. Negotiations on drafting a new Labor Law, which has been under consideration in the Parliament for two years, have included discussion of requiring employers to offer permanent employee status after a certain number of years with the company and declaring Form 6 or any letter of resignation null and void if signed prior to the date of termination.

Egypt has a dispute resolution mechanism for workers.  If a dispute concerning work conditions, terms, or employment provisions arises, both the employer and the worker have the right to ask the competent administrative authorities to initiate informal negotiations to settle the dispute. This right can be exercised only within seven days of the beginning of the dispute. If a solution is not found within 10 days from the time administrative authorities were requested, both the employer and the worker can resort to a judicial committee within 45 days of the dispute.  This committee is comprised of two judges, a representative of MOMM and representatives from the trade union, and one of the employers’ associations.  The decision of this committee is provided within 60 days. If the decision of the judicial committee concerns discharging a permanent employee, the sentence is delivered within 15 days.  When the committee decides against an employer’s decision to fire, the employer must reintegrate the latter in his/her job and pay all due salaries.  If the employer does not respect the sentence, the employee is entitled to receive compensation for unlawful dismissal.

Labor Law 12//2003 sought to make it easier to terminate an employment contract in the event of “difficult economic conditions.”  The Law allows an employer to close his establishment totally or partially or to reduce its size of activity for economic reasons, following approval from a committee designated by the Prime Minister.  In addition, the employer must pay former employees a sum equal to one month of the employee’s total salary for each of his first five years of service and one and a half months of salary for each year of service over and above the first five years.  Workers who have been dismissed have the right to appeal.  Workers in the public sector enjoy lifelong job security as contracts cannot be terminated in this fashion; however, government salaries have eroded as inflation has outpaced increases.

Egypt has regulations restricting access for foreigners to Egyptian worker visas, though application of these provisions has been inconsistent.  The government plans to phase out visas for unskilled workers, but as yet has not done so. For most other jobs, employers may hire foreign workers on a temporary six-month basis, but must also hire two Egyptians to be trained to do the job during that period.  Only jobs where it is not possible for Egyptians to acquire the requisite skills will remain open to foreign workers. Application of these regulations is inconsistent.

Investment Incentives

Law No. 2/1994 of June 6, 1994 offers investment incentives in the form of deductions from taxable income: 50 percent of the amount paid to Equatoguinean staff in wages and 200 percent of the cost of training Equatoguinean staff. It also extends/maintains previous license exemptions for imports and exports, allows conversion of sales into foreign currency, and permits transfers abroad of company profits. Decree No. 67/2017 of September 2017 created the “one-stop shop” business portal to promote investment and economic activity by significantly reducing the time needed to register a new company. According to the government, registering a company through the one-stop shop – launched in January 2019 — takes approximately seven (7) days. Decree n° 72/2018 of April 2018 revised decree 127/2014 of September 2014 to foster foreign direct investments. The revised investment law eliminated the need to have a local business partner in foreign companies, except for the hydrocarbons sector. The government sometimes jointly finances foreign direct investment projects, such as construction of social housing.

Foreign Trade Zones/Free Ports/Trade Facilitation

There are currently no known laws, policies, or practices for any areas designated as Free Trade or Duty Free Zones. Three entities have tax-free status: Luba Freeport, the Port of Bata, and the K5 Freeport Oil Centre.

Performance and Data Localization Requirements

The Government of the Republic of Equatorial Guinea used to require a minimum percentage of employees and subcontractors to be Equatoguinean, ranging from 70 to 90 percent. Presidential Decree 72/2018 of April 18, 2018 revised Presidential Decree 127/2014 of September 14, 2014, eliminating this requirement, except for the hydrocarbons sector. The decree requires that Equatoguineans hold certain management positions in the hydrocarbons sector. Foreign investors in the hydrocarbons sector are required to have a significant percentage of domestic content in goods and technology. Companies are supposed to send vacancies to the Ministry of Labor, Employment Promotion, and Social Security. If the Ministry is unable to find a qualified candidate within 30 days, the company may hire an ex-patriate worker.

Equatorial Guinea does not require U.S. citizens to obtain visas, which can be difficult for third-country nationals to obtain and generally requires a government-approved letter of invitation, which can take months to obtain. Residency and work permits can be similarly difficult to obtain and renew. In March 2018, as part of an overall effort to improve transparency and ease the conditions of entry and residence in the country, the cost of a residency permits from USD 700 to USD 343 per year. In December 2019, the government agreed to lower the cost of residency permits to conform with the cost of a business visa (H1B) to the United States (USD 160). Some companies have reported delays in the residency permit process. Work permits, often a pre-requisite for a residency permit, are also difficult and time consuming to obtain. Some businesses report that they have been unable to obtain the annual permits for over five years. There are some reports that certain officials have asked for “expediting” fees that are beyond established government fees and occasionally ask for bribes directly. This is especially problematic at the airport and at customs, according to various accounts.

The Ministries of Mines and Hydrocarbons and of Labor, Employment Promotion, and Social Security, among others, make regular inspections of companies and may apply fines. The Ministry of Mines and Hydrocarbons has fined, suspended, and expelled companies that it perceived did not comply with regulations or laws, especially on local content.

The Government of the Republic of Equatorial Guinea requires internet service providers, whether local or foreign, to turn over source code or provide access to surveillance. According to article 15 of the Telecommunication law (Law 7, dated November 7, 2015), Equatoguinean government offices are supposed to report to the Regulating Organ of Telecommunications (ORTEL) any information concerning official communications lines and networks. The Government of the Republic of Equatorial Guinea has no requirements pertaining to maintaining data storage within the country. The Ministry of Transports, Telecommunications, and Mail reduced the cost of internet in 2019 and 2020 as part of a strategy towards openness and increased access, and both the Telecommunications Regulator (ORTEL) and the Telecommunications Infrastructure Administrator (GITGE) are promoting implementation of the new strategy. The government had announced that internet would be available in all public places, such as airports, banks, and cultural centers, by 2020, though this will likely be delayed by the COVID-19 pandemic. It is already available in some locations, such as the new boardwalk (Paseo Maritimo) in Malabo. Although the government claims that 95 percent of municipalities have access to a fiber optic network, according to the International Telecommunication Union, only 26.2 percent of the population used the internet in 2017.

Equatorial Guinea has a consistent shortage of skilled labor. Unskilled labor is readily available. Youth unemployment is considered widespread but statistics are scarce. According to the government’s 2015 census, which was released in 2018, about 40 percent of the population were not formally working and about 16 percent were unemployed. Officials estimate that close to 50 percent of the country’s workforce participates in the informal economy. Foreign laborers make up an important segment of all sectors of the economy, but generally dominate skilled labor positions, including engineers, pilots, and doctors. Labor laws apply to both foreign and domestic laborers, though in practice rulings tend to favor locals over foreigners when resolving disputes.

The oil and gas industry claims to have a shortage of trained individuals. Companies in the oil and gas sector sponsor training programs, and the government sponsors a limited number of students for short- and long-term international training and academic programs. The industry and the government also run a National Technological Institute of Hydrocarbons, which has 50 students per cohort in a three-year program. The government and companies inaugurated a new building in Mongomo in 2019, after various years in Malabo and Bata.

The agriculture and fishing sectors have shrunk in past decades as the rural population declined 42 percent from 2001 to 2015, according to the government census, and some businesses claim to have a shortage of laborers. Cattle ranchers have brought in migrant workers from the Sahel region of Africa to work with imported cattle.

Despite challenges in finding skilled labor, various laws require hiring nationals. The National Content Law of Equatorial Guinea requires that oil companies hire seventy percent of nationals. Officials of the Ministry of Labor explained that according to the Labor Law (last updated in 2012 and under review for an update), the final target of the government is that 90 percent of workers should be nationals. They also underlined that for companies to fill a position there is a process through the Ministry. If no suitable domestic applicant is found in 30 days, then the company is free to hire a foreigner. Employers must make extensive severance payments even when employment demands fluctuate due to market conditions. Currently there is neither unemployment insurance nor other social safety net programs for workers laid off for economic reasons, though this has been a goal of the government for several years.

Compared to the United States, labor laws in the Republic of Equatorial Guinea are generally favorable toward the employee. Labor disputes may be heard by the congress or in the courts, and the decisions typically favor the employee. Aside from a union of small farmers and the taxi association, the Government of the Republic of Equatorial Guinea does not recognize any labor unions. Small collectives and associations are allowed to register with the government but do not carry out labor advocacy efforts. Collective bargaining is not common. There have not been any strikes during the last year that posed an investment risk and the government typically restricts the occurrence of strikes or protests.

Labor laws include provisions such as regulating industries in which minors may work, as well as requiring written contracts. Short-term contracts are limited to 24 months. Local government enforcement of labor laws is mostly focused on preventing companies from employing and exploiting unauthorized migrants. The Government of the Republic of Equatorial Guinea has regulations to monitor health and safety standards and an inspection force, but some have criticized the effectiveness of their enforcement.

Labor laws differentiate between layoffs and firing (with severance). Unemployment insurance or other social safety net programs do not exist for workers laid off for economic reasons.

There are gaps in compliance in both law and practice with international labor standards. Although the Republic of Equatorial Guinea does not actively enforce internationally recognized labor rights, employees are generally not subjected to abusive work conditions. The government has been ranked Tier 3 in the annual Trafficking in Persons (TIP) Report from 2011-2019, however, and has struggled to identify and combat forced and child labor. The government increased efforts to combat TIP in 2018 and 2019, including the creation of a national action plan and an online portal and hotline for people to anonymously report abuses. Despite this, businesses have noted that the government does not have an adequate labor inspectorate system to identify and remediate labor violations and hold violators accountable, investigate and prosecute unfair labor practices, such as harassment and/or dismissal of union members; nor to investigate and prosecute instances of forced and/or child labor. Reports indicate that violators are rarely held accountable, with both corruption and political patronage used to prevent enforcement of laws and regulations. The law prohibits certain kinds of discrimination, but many gaps are still recorded. The International Labor Organization (ILO) noted in 2018 “with deep concern that, for the last 12 years, the reports due on ratified Conventions have not been received” from the Government of the Republic of Equatorial Guinea. The ILO also offered technical assistance to complete the reports and respond to comments.

In 2020, a new labor law was being drafted, but there was no public information as of May 2020.

Investment Incentives

Some of Gabon’s main industries (oil and gas, mining, and timber) enjoy investment preferences through customs and tax incentives.  For example, oil and mining companies are exempt from customs duties on imported working equipment.  The government has implemented a new tourism code passed in February 2019 that provides tax exemptions to foreign tourism investors during the first eight years of operation.

President Ali Bongo Ondimba outlawed the export of unprocessed wood in 2009 to boost Gabon’s value-added wood products and increase domestic consumption.  The government and Singaporean-based firm Olam partnered to set up the SEZ at Nkok to process timber, and later expanded the mandate of the SEZ to open it to a broader range of businesses.  The SEZ provides a single-window business service to participants and provides new investors with beneficial fiscal incentives, including tax-free operation for 25 years, no customs duties on imported machinery and parts, and 100 percent repatriation of funds.

Gabon’s agriculture code of 2008 gives tax and customs incentives to agricultural operators, with a particular focus on small and medium-sized enterprises.  Land used for agriculture and farm exploitation is exonerated from fiscal tax.  All imported fertilizers and food for ranch exploitation are additionally exempt from customs duties.

As a member of CEMAC, Gabon’s trade with other member countries (Cameroon, Central African Republic, Chad, Republic of Congo, and Equatorial Guinea) is subject to low or no customs duties.

Foreign Trade Zones/Free Ports/Trade Facilitation

Inaugurated in 2011, the special economic zone “SEZ” at Nkok is a public-private partnership between the government of Gabon and Arise, a recently formed company that plans to operate multiple similar industrial facilitation zones in the region based on expected success in Gabon  Singapore-based Olam completed the infrastructure phase for the Nkok SEZ, and multiple companies are actively operating there.  All SEZs offer tax and customs incentives to attract foreign investors.  In 2017, the Gabon Special Economic Zone (GSEZ) inaugurated the New Owendo International Port.  With a surface area of 18 hectares, the terminal has annual capacity of three million tons.  Gabon has plans to expand the number of SEZ facilities.

Performance and Data Localization Requirements

Employment and Investor Requirements

Firms are required to obtain authorization from the Ministry of Labor before hiring foreigners.  Foreign workers must obtain permits before working in Gabon, and the availability of a permit for a job depends on the availability of Gabonese nationals to fill the job in question.  The government may set quotas for the number of foreign workers.  When hiring workers, firms must give priority to Gabonese nationals.  If no Gabonese worker with the appropriate qualifications can be found, a firm is expected to hire a Gabonese to work along with the foreigner and, within a reasonable time, the Gabonese worker should replace that foreigner.  In late 2010, the Gabonese government agreed to National Organization of Petroleum Workers demands to limit foreign workers in the oil sector to 10 percent of a company’s workforce and to require that Gabonese occupy all executive posts.  Foreign firms maintain there is a lack of qualified Gabonese workers, requiring companies to often request authorization to hire foreigners.  Non-Gabonese Africans find it increasingly difficult to obtain employment authorization; non-African expatriates have less difficulty.  Chinese industry in Gabon historically imports its labor force and management.  However, these rules do not apply in Gabon’s SEZ at Nkok, a free trade zone, where investors can bring foreign workers.

Goods, Technology, and Data Treatment

There is no known policy requiring foreign investors to use domestic content.  There is no specific performance requirement imposed as a condition for establishing, maintaining, or expanding investment.  There are no performance requirements for investors, nor are there any requirements for foreign IT providers to turn over source code and/or provide access to encryption.  There are no measurements that prevent or unduly impede companies from freely transmitting customer or other business-related data outside the economy/country’s territory.  No mechanisms exist to enforce rules on local data storage.

Performance Requirements

There is no performance requirement imposed as a condition for establishing, maintaining, or expanding investment.  There is no requirement for investors to buy local products, to export a certain percentage of output, or to invest in a specific geographical area.  There is no blanket requirement that nationals own shares in foreign investments in Gabon or that the share of foreign equity be reduced over time, or that technology be transferred on certain terms.  Nonetheless, many investors find it useful to have a local partner who can help navigate the business environment.

Gabon’s population is approximately 2 million, and third country nationals (TCNs) represent one-third of the population.  Many young Gabonese are unable to acquire vocational skills and are thus excluded from the labor market.  A report in October 2018 indicated 60% of Gabonese under 30 are unemployed.  This is due to the low quality of the basic education system, insufficient output of technical and vocational training, and a lack of resources and effectiveness in the education sector.

Foreign firms report a shortage of highly skilled Gabonese labor.  Chinese industry, in particular, imports the majority of its workers from China.  Authorization from the Ministry of Labor is required in order to hire foreigners.  Reforms adopted in 2010 in the education and research system represent a step towards developing in-service training and encouraging public-private partnerships.  For example, the Petroleum and Gas Institute, located in Port-Gentil and supported by the Gabonese government and oil industry, has been training engineers specialized in oil-related technical areas since 2014.

Labor laws differentiate between layoffs and firing.  There is no unemployment insurance or other social safety net program for workers laid off for economic reasons.

Gabon’s Special Economic Zone is not subject to the same foreign labor restrictions as the rest of the country. 

Collective bargaining is common in Gabon.  Gabon’s French-inspired labor code recognizes the right of workers to form and join independent unions and bargain collectively, and prohibits anti- union discrimination, but the right to strike is limited or restricted.  Strikes may be called only after eight days’ advance notification and only after arbitration fails.  Public sector employees are not allowed to strike if public safety could be jeopardized.  The law does not define essential services sectors in which workers are prohibited from striking.  The Gabonese government strictly enforces the labor code’s mandatory retirement age of 65. Gabon started developing proposals for a new labor code in January 2020.  Despite the January strike, reforms are likely to be announced before the end of 2020 in part of the government’s plans to kick-start the economy after oil price stagnation.

Public and private sector strikes are frequent and disruptive.  From February-June 2018 Gabon court clerks  were on strike, limiting the functions of the justice system.  The civil servants in the financial authorities initiated strikes several times in the past few years; these strikes slow customs processing and work done in the tax, custom, treasury, and hydrocarbons sectors.

Gabon has ratified most of the International Labor Organization (ILO) laws and conventions.  There are no gaps in compliance in law or practice with international labor standards that may pose a reputational risk to investors.

Gabon has no specific trade agreements with the United States that require the execution of U.S. labor laws.

The regulatory environment in terms of foreign investment has been eased to make it investor- friendly.  The measures taken by the Government are directed to open new sectors for foreign direct investment, increase the sectoral limit of existing sectors and simplifying other conditions of the FDI policy.  The Indian government does issue guarantees to investments but only in case of strategic industries.

Foreign Trade Zones/Free Ports/Trade Facilitation

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).  In 2018, the Indian government 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 headed by a government official.  So far, three NIMZs have been accorded final approval and 13 have been accorded in-principle approval.  In addition, eight investment regions along the Delhi-Mumbai Industrial Corridor (DIMC) have also been 12 established as NIMZs.  SEZs are treated as foreign territory; businesses operating within SEZs are not subject to customs regulations, nor have FDI equity caps.  They also receive exemptions from industrial licensing requirements and enjoy tax holidays and other tax breaks.  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 the following: 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. 

Performance and Data Localization Requirements

Preferential Market Access (PMA) for government procurement has created substantial challenges for foreign firms operating in India.  State-owned “Public Sector Undertakings” and the government accord 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 complaint procedure. There would be a complaint fee of INR 200,000 ($3000) or one percent of the value of the Domestically Manufactured Electronic Product being procured, subject to a maximum of INR 500,000 ($7500), 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. 

Research and Development

The Government of India allows for 100 percent FDI in research and development through the automatic route.

Data Storage & Localization

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 the 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 affects 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.  U.S. payments companies have been able to implement the mandate for the most part, though at great cost and potential damage to the long-term security of their Indian customer base, which will receive fewer services and no longer benefit from global fraud detection and AML/CFT protocols.  Similarly, U.S. banks have been able to comply with RBI’s expanded mandate, though incurring significant compliance costs and increased risk of cybersecurity vulnerabilities.

In addition to the RBI data localization directive for payments companies and banks, the government formally introduced its draft Data Protection Bill in December 2019, which contains restrictions on all cross-border transfers of personal data in India.  The Bill is currently under review by a Joint Parliamentary Committee and stipulates that personal data that is considered “critical” can only be stored in India.  The Bill is based on the conclusions of a ten-person Committee of Experts, established by MeitY in July 2017.

Although there are more than 20 million unionized workers in India, unions still represent less than 5 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 & dock, banking and insurance sectors. According to provisional figures form the Ministry of Labor and Employment (MOLE), over 1.74 million workdays were lost to strikes and lockouts during 2018. Labor unrest occurs throughout India, though the reasons and affected sectors vary widely. A majority of the labor problems are the result of workplace disagreements over pay, working conditions, and union representation.

India’s labor regulations are very stringent and complex, and over time have limited the growth of the formal manufacturing sector. In an effort to reduce the number of labor related statutes, the Indian parliament passed the Code on Wages legislation in 2019. This Code combines four previously existing statutes- The Payment of Wages Act, the Minimum Wages Act, the Payment of Bonus Act, and the Equal Renumeration Act- into one code to simplify compliance procedures for employers. Minimum industrial wages vary by state, ranging from about $2.20 per day for unskilled laborers to over $9.30 per day for skilled production workers.  Retrenchment, closure, and layoffs are governed by the Industrial Disputes Act of 1947, which requires prior government permission to lay off workers or close businesses employing more than 100 people, although some states including Haryana, Madhya Pradesh, Rajasthan, and Maharashtra have increased the threshold to 300 people. RBI approval is also required for foreign banks to close branches.  Permission is generally difficult to obtain, which has resulted in the increasing use of contract workers (i.e. non- permanent employees) to circumvent the law.  Private firms successfully downsize through voluntary retirement schemes.

Since the current government assumed office in 2014, much of the movement on labor laws has taken place at the state level, particularly in Rajasthan, where the government has passed major amendments to allow for quicker hiring, firing, laying off, and shutting down of businesses. The Ministry of Labor and Employment launched a web portal in 2014 to assist companies in filing a single online report on compliance with 16 labor-related laws. The government has also drafted a Code on Industrial Relations that is currently being reviewed by a parliamentary committee. India’s major labor unions have opposed labor reforms, arguing that they compromise workers’ safety and job security.

In March 2017, the Maternity Benefits Act was amended to increase the paid maternity leave for women from 12 weeks to 26 weeks.  The amendment also makes it mandatory 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 4 times in a day.

In August 2016, the Child Labor Act was amended establishing a minimum age of 14 years for work and 18 years as the minimum age for hazardous work. In December 2016, the government promulgated legislation enabling employers to pay worker salaries through checks or e-payment in addition to the prevailing practice of cash payment.

There are no reliable unemployment statistics for India due to the informal nature of most employment. A 2019 report from India’s National Statistics Commission claimed that the official unemployment rate in India rose to 6.1 percent in 2018, a 45-year high. In contrast, the unemployment rate was only 2.2 percent the last time when the commission conducted this survey in 2012. The government acknowledges a shortage of skilled labor in high-growth sectors of the economy, including information technology and manufacturing. The current government has established a Ministry of Skill Development and has embarked on a national program to increase skilled labor.

Investment Incentives

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. As part of the Economic Policy Package XVI, Indonesia issued a modified tax holiday scheme in November 2018 through Ministry of Finance (MOF) Regulation 150/2018, which revokes MOF Regulation 35/2018.  This regulation is intended to attract more direct investment in pioneer industries and simplify the application process through the OSS. The period of the tax holiday is extended up to 20 years; the minimum investment threshold is IDR 100 billion (USD 6.6 million), a significant reduction from the previous regulation at IDR 500 billion (USD 33 million). In addition to the tax holiday, depending on the investment amount, this regulation also provides either 25 or 50 percent income tax reduction for the two years after the end of the tax holiday. The following table explains the parameters of the new scheme:

Based on BKPM Regulation 1/2019 as amended by BKPM Regulation 8/2019, the coverage of pioneer sectors was expanded to the digital economy, agricultural, plantation, and forestry, bringing the total to eighteen industries:

1. Upstream basic metals;
2. Oil and gas refineries;
3. Petrochemicals derived from petroleum, natural gas, and coal;
4. Inorganic basic chemicals;
5. Organic basic chemicals;
6. Pharmaceutical raw materials;
7. Semi-conductors and other primary computer components;
8. Primary medical device components;
9. Primary industrial machinery components;
10. Primary engine components for transport equipment;
11. Robotic components for manufacturing machines;
12. Primary ship components for the shipbuilding industry;
13. Primary aircraft components;
14. Primary train components;
15. Power generation including waste-to-energy power plants;
16. Economic infrastructure;
17. Digital economy including data processing; and
18. Agriculture, plantation, and forestry-based processing

Government Regulation No. 9/2016 expanded regional tax incentives for certain business categories in 2016. Apparel, leather goods, and footwear industries in all regions are now eligible for the tax incentives. In this regulation, existing tax facilities are maintained, including:

• Deduction of 30 percent from taxable income over a six-year period
• Accelerated depreciation and amortization
• Ten percent of withholding tax on dividend paid by foreign taxpayer or a lower rate according to the avoidance of double taxation agreement
• Compensation losses extended from 5 to 10 years with certain conditions for companies that are:

1. 1. Located in industrial or bonded zone;
   2. Developing infrastructure;
   3. Using at least 70 percent domestic raw material;
   4. Absorbing 500 to 1000 laborers;
   5. Doing research and development (R&D) worth at least 5 percent of the total investment over 5 years;
   6. Reinvesting capital; or,
   7. Exporting at least 30 percent of their product.

On March 31, 2020, Indonesia issued Government Regulation in Lieu of Law No. 1 of 2020 on State Financial Policy and the Stability of Financial Systems for the Handling of the Coronavirus Disease 2019 Pandemic (Perppu 1/2020). Among its provisions are plans to regulate electronic based trading activity (e-trading) and to charge value-added taxes (VAT) on taxable intangible goods and services from foreign e-commerce parties and other highly-digitalized businesses. Income tax will also be imposed upon foreign e-commerce parties that are judged to meet a “significant economic presence” threshhold, based on consolidated gross circulation of a business group, total sales value, or active Indonesian users. The regulation also introduces an electronic transaction tax (ETT) that will be imposed on foreign entities that are subject to income tax obligations under the aformentioned threshhold but would not otherwise be subject to corporate income tax in Indonesia in the absence of a permanent establishment, where taxing such transactions is prohibited by bilateral tax treaties.  Industry representatives have expressed concern that such provisions seek to circumvent bilateral tax treaties intended to avoid double taxation, including the tax treaty between Indonesia and the United States.  They have also noted a lack of clarity over the Perppu’s implementation and concerns over administrative sanctions and the high cost to comply with new measures.  The new regulation will also also cut the corporate income tax rate, lowering it to 22 percent for 2020 and 2021, and to 20 percent for 2022. 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.

The government provides the facility of Government-Borne Import Duty (Bea Masuk Ditanggung Pemerintah /BMDTP) with zero percent import duty to improve industrial competitiveness and public goods procurement in high value added, labor intensive, and high growth sectors. MOF Regulation 12/2020 provides zero import duty for imported raw materials in 36 sectors including plastics, cosmetics, polyester, resins, other chemical materials, machinery for agriculture, electricity, toys, vehicle components including for electric vehicles, telecommunications, fertilizers, and pharmaceuticals until December 2020.

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 86/2020 streamlined licensing requirement 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.

 At present, Indonesia does not have formal regulations granting national treatment to U.S. and other foreign firms participating in government-financed or subsidized research and development programs. The Ministry of Research and Technology handles applications on a case-by-case basis.

Indonesia’s vast natural resources have attracted significant foreign investment over the last century and continues to offer significant prospects. However, some companies report that a variety of government regulations have made doing business in the resources sector increasingly difficult, and Indonesia now ranks 64th of 76 jurisdictions in the Fraser Institute’s 2019 Mining Policy Perception Index. In 2012, Indonesia banned the export of raw minerals, dramatically increased the divestment requirements for foreign mining companies, and required major mining companies to renegotiate their contracts of work with the government. A ban on the export of raw minerals went into effect in January 2014. However, in July 2014, the government issued regulations that allowed, until January 2017, the temporary export of copper and several other mineral concentrates with export duties and other conditions imposed. When the full export ban came back into effect in January 2017, the government again issued new regulations that allowed exports of copper concentrate and other specified minerals, but imposed more onerous requirements. Of note for foreign investors, provisions of the regulations require that to be able to export non-smelted mineral ores, companies with contracts of work must convert to mining business licenses—and thus be subject to prevailing regulations—and must commit to build smelters within the next five years. Also, foreign-owned mining companies must gradually divest 51 percent of shares to Indonesian interests over ten years, with the price of divested shares determined based on a “fair market value” determination that does not take into account existing reserves. In January 2020, the government banned the export of  nickel ore for all mining companies, foreign and domestic, in the hopes of encouraging construction of domestic nickel smelters. The 2009 mining law devolved the authority to issue mining licenses to local governments, who have responded by issuing more than 10,000 licenses, many of which have been reported to overlap or be unclearly mapped. In the oil and gas sector, Indonesia’s Constitutional Court disbanded the upstream regulator in 2012, injecting confusion and more uncertainty into the natural resources sector. Until a new oil and gas law is enacted, upstream activities are supervised by the Special Working Unit on Upstream Oil and Gas (SKK Migas).

During President Jokowi’s first term, the Indonesian government invested more than  USD 350 billion in infrastructure to connect Indonesia’s more than 17,000 islands. The investments included toll roads, seaports, airports, power generation, telecommunications, and upgrades to Indonesia’s social infrastructure, such as, clean water and sanitation, and housing projects.  President Jokowi has emphasized that he will continue this infrastructure program during his second five-year term, aiming to increase Indonesia’s infrastructure stock from 43 percent of GDP in 2019 to 50 percent in 2024.

Despite high-level attention from Indonesian policymakers, many U.S. companies and investors report that the current institutional arrangement for infrastructure development still suffers from functional overlap, lack of capacity for public-private partnership (PPP) projects in regional governments, lack of solid value-for-money methodologies, crowding out of the private sector by state-owned enterprises (SOEs), legal uncertainty, lack of a solid land-acquisition framework, long-term operational risks for the private sector, unwillingness from stakeholders to be the first ones to test a new policy approach, corruption, and a relatively small Indonesian private sector. As a result of these challenges, the World Bank estimates that Indonesia faces a USD 1.5 trillion infrastructure gap in comparison to other emerging market economies.

Foreign Trade Zones/Free Trade/ Trade Facilitation

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, located just south of Singapore. Neighboring Bintan Island and Karimun Island also enjoy FTZ status. 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 of the zone for a maximum two-year period.

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 a reduction of corporate income taxes for a period of years (depending on the size of the investment), income tax allowances, luxury tax, customs duty and excise, and expedited or simplified administrative processes for import/export, expatriate employment, immigration, and licensing. As of  February 2020, Indonesia has identified fifteen SEZs in manufacturing and tourism centers that are operational or under construction. Eleven SEZs are operational (though development is sometimes limited) at: 1) Sei Mangkei, North Sumatera; 2) Tanjung Lesung, Banten; 3) Palu, Central Sulawesi; 4) Mandalika, West Nusa Tenggara; 5) Arun Lhokseumawe, Aceh; 6) Galang Batang, Bintan, Riau Islands; 7) Tanjung Kelayang, Pulau Bangka, Bangka Belitung Islands; 8) Bitung, North Sulawesi; 9) Morotai, North Maluku; 10) Maloy Batuta Trans Kalimantan, East Kalimantan; and 11) Sorong, Papua. Four more SEZs are under construction: Tanjung Api-Api, South Sumatera; Singhasari, East Java; Kendal, Central Java; and Likupang, North Sulawesi. In 2016, the government began the process of transitioning Batam from an FTZ to SEZ in order to provide further investment incentives. The Indonesian government announced in December 2018 that it plans to transition management of the Batam FTZ to the local government, creating a single regulatory authority on the island. The conversion to an SEZ is still ongoing  and will not affect the status of the neighboring FTZs on Bintan and Karimun islands.

Indonesian law also provides for several other types of zones that enjoy special tax and administrative treatment.  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 103 industrial estates that host thousands of industrial and manufacturing companies.  Ministry of Finance Regulation No. 105/2016 provides several different tax and customs facilities 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 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 designate more in eastern Indonesia.  In 2018, Ministry of Finance and the Directorate General for Customs and Excise (DGCE) issued regulations (MOF Regulation No. 131/2018 and DGCE Regulation No. 19/2018) 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.  Under MOF Regulation 120/2013, bonded zones have a domestic sales quota of 50 percent of the preceding 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 areas are only allowed for further processing to become capital goods, and to companies which have a license from the economic area organizer for the goods relevant to their business.

Performance and Data Localization Requirements

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 management of foreign companies. 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. Under Presidential Regulation No. 20/2018, issued in March 2018, the Ministry of Manpower now has two days to approve a complete RPTKA application, and an RPTKA is not required for commissioners or executives. An RPTKA’s validity is now based on the duration of a worker’s contract (previously it was valid for a maximum of five years). The new regulation no longer requires expatriate workers to go through the intermediate step of obtaining a Foreign Worker Permit (IMTA). Instead, 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. Regulation No. 20/2018 also abolished the requirement for all expatriates to receive a technical recommendation from a relevant ministry. However, ministries may still establish technical competencies or qualifications for certain jobs, or prohibit the use of foreign worker 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.

Regulation No. 20/2018 provides for short-term working permits (maximum six months) for activities such as conducting audits, quality control, inspections, and installation of machinery and electrical equipment. Ministry of Manpower issued Regulation No.10/2018 to implement Regulation 20/2018, revoking its Regulation No. 16/2015 and No. 35/2015. Regulation 10/2018 provides additional details about 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 a fund for local manpower training at regional manpower offices. The Ministry of Manpower issued Decree 228/2019 to widen the number of jobs open for foreign workers across 18 sectors, ranging from construction, transportation, education, telecommunication, and professionals. Foreign workers  have to obtain approval from Manpower Minister or designated officials for applying positions not listed in the decree. Some U.S. firms report difficulty in renewing KITASs for their foreign executives. In February 2017, the Ministry of Energy and Natural resources abolished regulations specific to the oil and gas industry, bringing that sector in line with rules set by the Ministry of Manpower.

With the passage of a defense law in 2012 and subsequent implementing regulations in 2014, Indonesia established a policy that imposes offset requirements for procurements from foreign defense suppliers. Current laws authorize Indonesian end users to procure defense articles from foreign suppliers if those articles cannot be produced within Indonesia, subject to Indonesian local content and offset policy requirements. On that basis, U.S. defense equipment suppliers are competing for contracts with local partners. The 2014 implementing regulations still require substantial clarification regarding how offsets and local content are determined. According to the legislation and subsequent implementing regulations, an initial 35 percent of any foreign defense procurement or contract must include local content, and this 35 percent local content threshold will increase by 10 percent every five years following the 2014 release of the implementing regulations until a local content requirement of 85 percent is achieved. The law also requires a variety of offsets such as counter-trade agreements, transfer of technology agreements, or a variety of other mechanisms, all of which are negotiated on a per-transaction basis. The implementing regulations also refer to a “multiplier factor” that can be applied to increase a given offset valuation depending on “the impact on the development of the national economy.” Decisions regarding multiplier values, authorized local content, and other key aspects of the new law are in the hands of the Defense Industry Policy Committee (KKIP), an entity comprising Indonesian interagency representatives and defense industry leadership. KKIP leadership indicates that they still determine multiplier values on a case-by-case basis, but have said that once they conclude an industry-wide gap analysis study, they will publish a standardized multiplier value schedule. According to government officials, rules for offsets and local content apply to major new acquisitions only, and do not apply to routine or recurring procurements such as those required for maintenance and sustainment.

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 October 10, 2019, Indonesia issued Government Regulation No. 71 (GR71) to replace Regulation No. 82/2012 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 supervision authority. Private ESOs are individuals, businesses and communities that operate electronic system. Public ESOs are required to manage, process, and store their data in Indonesia, unless the storing 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 choose to process data outside of Indonesia, they are required to provide access to their systems and data for government supervision and law enforcement purposes. For private financial sector ESOs, GR71 provides  that such firms are “further regulated” by Indonesia’s financial sector supervisory authorities with regards to the private sector’s ESO systems, data processing, and data storage.

In March 2020, the Ministry of Communication and Information Technology (MCIT) published a proposed draft implementing regulation of GR 71 for private ESOs. Article 6 of the draft requires private ESOs to obtain approval from MCIT before they can manage, process, and store their data outside of Indonesia. This provision has been widely criticized by foreign firms and is more restrictive than the original government regulation (GR71) which allows offshore data storage. Post continues to monitor this issue.

Additionally, pursuant to GR71, the Financial Services Authority (OJK) issued Regulation 13/2020, an amendment to Regulation 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.  Furthermore, OJK will evaluate whether the arrangement for offshore data could diminish its supervisory efficiency, negatively affect the bank’s performance, and if the data center complies with Indonesia’s laws and regulations. The regulation became effective March 31, 2020.

Companies have reported that the Indonesian labor market faces a number of structural barriers, including skills shortages and lagging productivity, restrictions on the use of contract workers, and reduced gaps between minimum wages and average wages. 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 minimum wage was raised again from IDR 3.6 million (USD 256.6) per month in 2018 to IDR 3.94 million (USD 260) per month in 2019. Unions staged largely peaceful protests across Indonesia in 2018 demanding the government increase the minimum wage, decrease the price for basic needs, and stop companies from outsourcing and employing foreign workers. Under the new wage setting policy adopted as part of the 2018 economic stimulus package, annual minimum wage increases will be indexed directly to inflation and GDP growth. Previously, minimum wage adjustments were subject to negotiations between local governments, industry, and unions, and the changes varied widely from year to year and from region to region.

As only about 7.6 percent of the workforce is unionized, the benefits of union advocacy (including increases in minimum wage) do not always filter down to the rest of the workforce. While restrictions on the use of contract workers remain in place, continued labor protests focusing on this issue suggest that government enforcement continues to be lax. Until the onset of the COVID-19 pandemic, unemployment has remained steady at 4.38 percent. Unemployment tends to be higher than the national average among young people.

Indonesian labor is relatively low-cost by world standards, but inadequate skills training and complicated labor laws combine to make Indonesia’s competitiveness lag behind other Asian competitors. Investors frequently cite high severance payments to dismissed employees, restrictions on outsourcing and contract workers, and limitations on expatriate workers as significant obstacles to new investment in Indonesia.

Employers also 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.

Minimum wages vary throughout the country as provincial governors set an annual minimum wage floor and district heads have the authority to set a higher rate. Indonesia’s highly fractured and historically weak labor movement has gained strength in recent years, evidenced by significant increases in the minimum wage. As noted above, recent changes to the minimum wage setting system may make the process less dependent on political factors and more aligned with actual changes in inflation and GDP growth. Labor unions are independent of the government. 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 than in the informal 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.

The government has proposed an omnibus bill on labor reforms intended to attract investors, boost economic growth and create jobs.  The bill covers foreign workers, wages, work hours, redundancy and social security.

A proposed revision to Indonesia’s 2003 labor law may establish more stringent restrictions on outsourcing, currently used by many firms to circumvent some formal-sector job benefits.

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/2019-trafficking-in-persons-report/indonesia/
• Human Rights Report: https://www.state.gov/reports/2018-country-reports-on-human-rights-practices/

Investment Incentives

The government’s primary industrial development strategies, such as the Concepts for Industrial and Innovative Development  2020-2025 and the National Investment Strategy for 2018-2022, aim to diversify the economy from its overdependence on extractive industries.  The Entrepreneurial Code and Tax Code provide tax preferences, customs duty exemptions, investment subsidies, and in-kind grants as incentives for foreign and domestic investment in priority sectors.  Priority sectors include agriculture, metallurgy, extraction of metallic ore, chemical and petrochemical industry, oil processing, food production, machine manufacturing, and renewable energy.  Firms in priority sectors receive tax and customs duty waivers, in-kind grants, investment subsidies, and simplified procedures for work permits.  The government’s preference system applies to new and existing enterprises.  The duration and scope of preferences depends on the priority sector and the size of investment.  All information on priority sectors and preferences is available at: https://invest.gov.kz/doing-business-here/regulated-sectors/ .

The Investment Committee at the Ministry of Foreign Affairs makes decisions on each incentive on a case-by-case basis.  The law also allows the government to rescind incentives, collect back payments, and revoke an investor’s operating license if an investor fails to fulfill contractual obligations.

Potential investors can apply for preferences through the government’s single window portal; these are special offices for serving investors, located in the capital and at district service centers in every region of Kazakhstan.  Submission for investment preferences requires a number of documents, including a comprehensive state appraisal of a proposed investment project.  More information is available here:  https://invest.gov.kz/invest-guide/  and at https://irm.invest.gov.kz/en/support/ 

A governmental guarantee or joint government financing are normally used for large infrastructure projects.

To facilitate the work of foreign investors, especially in targeted, non-extractive industries, the government has approved visa-free travel for citizens of 73 countries, including the United States, Germany, Japan, United Arab Emirates, France, Italy, and Spain.  Residents of these countries may stay in Kazakhstan without visas for up to 30 days.  The government has temporary suspended these rules due to the COVID-19 pandemic.

Since January 2019, foreigners may obtain business, tourist, and medical treatment visas to Kazakhstan online at: www.vmp.gov.kz . Electronic tourist visas are available for citizens of 117 counties; business and medical treatment visas can be issued electronically for citizens of 23 countries.  This system is applicable only for visitors who have letters of invitation and enter Kazakhstan through the Nur-Sultan or Almaty airports.  Businesses registered in the AIFC have a relaxed entry visa regime, allowing them to obtain entry visas upon arrival at the airport and to obtain five-year visas for employees.

Starting from 2020, the government introduced a more liberal regime for visa regulation violations.  Now, foreign visitors are permitted to only pay administrative fines for first and second violations.  The government is currently considering a bill on changes to tax legislation and further improvement of the investment climate.  The bill is expected to introduce new measures to facilitate business activity, including expanded access to investment tax credits, lowered thresholds for tax preferences for investments in the textile industry,  measures designed to stimulate public-private partnership development, and procedures for non-resident foreign investors to register businesses in Kazakhstan remotely.

Foreign Trade Zones/Free Ports/Trade Facilitation

The Law on Special Economic Zones allows foreign companies to establish enterprises in special economic zones (SEZs), simplifies permit procedures for foreign labor, and establishes a special customs zone regime not governed by Eurasian Economic Union rules.  A system of tax preferences exists for foreign and domestic enterprises engaged in prescribed economic activities in Kazakhstan’s thirteen SEZs.  In April 2019, President Tokayev signed amendments which extend the rights of SEZ managing companies and set up a single center to coordinate the activities of all SEZs and industrial zones in Kazakhstan.

Performance and Data Localization Requirements

The government requires businesses to employ local labor and use domestic content, though the country’s WTO accession commitments provide for abolition of most local content requirements over time.  In 2015, Kazakhstan adopted legislative amendments to alter existing local content requirements to meet accession requirements.  Pursuant to these amendments, subsoil use contracts concluded after January 1, 2015 no longer contain local content requirements, and any local content requirements in contracts signed before 2015 will phase out on January 1, 2021.

Kazakhstan’s WTO accession terms require that Kazakhstan relax limits on foreign nationals by increasing the “quota” for foreign nationals to 50 percent (from 30 percent for company executives and from 10 percent for engineering and technical personnel) by January 1, 2021.

Despite these commitments, the government, particularly at the regional level, continues to advocate for international businesses to increase their use of local content.  The USD 36.8 billion investment into the Tengiz oilfield by Tengizchevroil includes an agreement that 32 percent of total investment will be used to procure local content.  The Ministry of Energy announced in March 2017 that foreign companies providing services for the oil and gas sector would need to create joint ventures with local companies to continue to receive contracts at the country’s largest oilfields.  Although these recommendations are not legally binding, companies report feeling obliged to abide by them.  Some companies reported these forced joint ventures or consortia led to the creation of domestic monopolies, rather than to the stimulation of a healthy domestic market of oil service providers.  For example, the Ministry of Energy and the Karachaganak Petroleum Operating Consortium reportedly agreed that a Kazakhstani design research company would carry out at least 50 percent of the design work at the Karachaganak expansion project.

The government regulates foreign labor at the macro and micro levels.  Foreign workers must obtain work permits, which have historically been difficult and expensive to obtain.  Amendments to the Expatriate Workforce Quota and Work Permit Rules: (a) eliminate special conditions for obtaining a work permit for foreign labor (e.g. requirements to train local personnel or create additional vacancies); (b) eliminate the requirement that companies conduct a search for candidates on the internal market prior to applying for a work permit; (c) reduce the timeframe for issuance or denial of work permit from 15 to 7 days; (d) eliminate the required permission of local authorities for the appointment of CEOs and deputies of Kazakhstani legal entities that are 100 percent owned by foreign companies; and (e) expand the list of individuals requiring no permission from local authorities (including non-Kazakhstani citizens working in national holding companies as heads of structural divisions and non-Kazakhstani citizens who are members of the board of directors of national holding companies).

The Ministry of Energy, Ministry of Industry and Infrastructure Development, and Sovereign Welfare Fund Samruk-Kazyna monitor firms compliance with local content obligations, and there are various enforcement tools for companies that do not meet performance requirements.

Following the June 2019 violence at Chevron-operated Tengiz oilfield that reportedly resulted from discontent with wage discrepancy between local and foreign workers with similar qualifications, the Ministry of Labor and Social Protection has sought to revisit the definition of administrative liability and administrative violation to make state control over employers with foreign workers more effective.

The foreign labor quota approved by the government for 2020 reduced the number of work permits for employees of category 3 (specialists) by 37 percent and for category 4 (qualified workers) by 23 percent.  The largest decreases are in administration; real estate; wholesale and retail; construction; professional, scientific and technological activities; and accommodation and catering.  To replace the gap in the foreign workforce, the government is introducing an obligation to replace foreign workers with skilled Kazakhstani labor.

Foreign investors may in theory participate in government and quasi-government procurement tenders, however, they should have production facilities in Kazakhstan and should go through a process of being recognized as a pre-qualified bidder.  In 2019, the government enacted new procurement rules by which only pre-qualified suppliers will be allowed to bid for government contracts.  A key requirement for being recognized as pre-qualified bidder is that the company’s product should be made in Kazakhstan and be added to a register of trusted products.  While this requirement is applied to some selected sectors at the government procurement (e.g. construction, IT, textile), it has been practiced since 2016 for procurement at quasi-sovereign companies under the National Welfare Fund Samruk-Kazyna.

In addition, the National Chamber of Entrepreneurs Atameken introduced in 2018 an industrial certificate which serves as an extra (and costly) tool to prove a company’s financial and production capabilities to participate in tenders.  The industrial certificate also acts as an indirect confirmation of a company’s status as a local producer.  Thus, a foreign investor who plans to bid for government and quasi-government contracts should obtain an industrial certificate.

In 2019, the government introduced significant recycling fees on the importation of combines and tractors.  Although major Western brands were granted a waiver for the fees, the government is expected to revisit the exception.  The government has suggested that foreign producers start local production of their equipment and become eligible for preferential treatment.

The July 2017 EBRD Kazakhstan Diagnostic Paper singles out skills mismatches across sectors as the fifth most important constraint that is holding back private sector growth in Kazakhstan.  The gaps create real operational challenges such as high recruitment and training costs, lower productivity and constraints on innovation and new product development, according to the EBRD.  The existing skills mismatches are not a result of lack of access in education, but rather failure to acquire job-relevant skills and competencies, the EBRD report reads.  The 2019 OECD report on Monitoring Skills Development through Occupational Standards in Kazakhstan echoes the EBRD findings – despite improvements in educational attainment and labor market participation, Kazakhstan faces challenges with respect to skill relevance and availability, especially among large and middle-sized companies.  Strengthening vocational education and training is critical, because skilled manual workers, with medium and high qualifications, represent 40 percent of the total workforce need, according to the OECD.

Many large investors rely on foreign workers and engineers to fill the void.  Kazakhstan approved a quota for 29,300 foreign workers for 2020.  As of February 1, 2020, Labor Ministry had issued 19,100 work permits.  Chinese workers received over 27 percent of all permits, with the rest going to foreign workers from Turkey, U.K., India, Uzbekistan, and others.

The Kazakhstani government has made it a priority to ensure that Kazakhstani citizens are well represented in foreign enterprise workforces.  In 2009, the government instituted a comprehensive policy for local content, particularly for companies in extractive industries.  The government is particularly keen to see Kazakhstanis hired into the managerial and executive ranks of foreign enterprises.  In November 2015, the government amended the legislation on migration and employment that resulted in new rules for foreign labor starting January 2017 (please see details in Part 5, Performance and Data Localization Requirements).  U.S. companies are advised to contact Kazakhstan-based law and accounting firms and the U.S. Commercial Service in Almaty for current information on work permits.  AIFC-registered entities may employ a foreign workforce without any work permits.

Kazakhstan joined the International Labor Organization (ILO) in 1993, and has ratified 24 out of 189 ILO conventions, including eight fundamental conventions pertaining to minimum employment age, prohibition on the use of forced labor and the worst forms of child labor, and prohibition on discrimination in employment, as well as conventions on equal pay and collective bargaining.  In March 2019, Kazakhstan’s Federation of Trade Unions proposed that the Kazakhstani government join five more ILO technical conventions on social security (minimum standards), minimum wage fixing, collective bargaining, part-time work, and safety and health in agriculture, but the country has not ratified any new ILO conventions since then.

In September 2017, the ILO expressed concern over Kazakhstan’s compliance with the Freedom of Association and Protection of the Right to Organize Convention and the Right to Organize and Collective Bargaining Convention by calling on the government to amend the relevant legislation in order to: (1) enable workers to form and join trade unions of their own choosing, (2) allow labor unions to benefit from joint projects with international organizations, and (3) allow financial assistance to labor unions from international organizations.  The Constitution and National Labor Code guarantee basic workers’ rights, including occupational safety and health, the right to organize, and the right to strike.  Amendments to the Labor Code since July 2018 leave many labor-related issues, including dismissals and layoffs, to the discretion of employers.  It imposes tighter collective bargaining restrictions on employees involved in labor disputes.  According to the Ministry of Labor and Social Protection, 33.4 percent of all working enterprises have collective agreements.  Kazakhstan’s three independent labor unions – the Federation of Trade Unions of the Republic of Kazakhstan (FTU), Commonwealth of Trade Unions of Kazakhstan Amanat, and Kazakhstan Confederation of Labor (KCL) – had over three million members, or 40 percent of Kazakhstan’s workforce, as of March 1, 2020.

Article 46 of the Labor Code gives the employer the right to change work conditions due to fluctuating market conditions with proper and timely notifications to employees.  Article 52 of the Labor Code gives the employer the right to cancel an employment contract in case of a decline in production that may lead to the deterioration of economic and financial conditions of the company.  Article 131 of the Labor Code allows for severance of payment of average monthly wages for two months in case of layoffs for economic reasons.  The Ministry of Labor and Social Protection is responsible for offering alternative job openings within state programs of the so-called Employment Road Map, alternative professional training, or temporary jobs to workers laid off for economic reasons.  The 2017-2021 Productive Employment and Mass Entrepreneurship National Program, run by the Ministry of Labor and Social Protection, aims at connecting workers with permanent jobs.  The program provides micro-loans and grants, and equips workers with basic entrepreneurial skills.

Chapter 15 of the Labor Code describes a mechanism for resolution of individual labor disputes via direct negotiations with an employer, mediation commission, and court.  Chapter 16 of the Labor Code identifies a mechanism for resolution of collective labor disputes via direct negotiations with an employer, mediation commission, labor arbitration, and court.

Labor unrest presents a risk where unemployment is high and where the bargaining power of limited skilled labor is relatively high, but authorities have been quick to intervene with controls and mitigating measures.  In June 2019, a violence broke out at the Chevron-operated Tengiz oilfield, in which large mobs of Kazakh men attacked dozens of their colleagues from countries like Jordan and the United Arab Emirates.  The unrest had ostensibly been triggered by an interpersonal conflict, though it was widely acknowledged that festering resentment about pay and working conditions underlaid the violence.  Another conflict that took place on August 12, 2019, in the Zhairem settlement of the Karaganda region reportedly had similar grounds — fifty Zhairem residents trespassed the site of the Zhairem enrichment plant, owned by KazZinc (i.e. Glencore International AG), and started a brawl with Turkish workers.  The altercation resulted in the minor injuries of six Turkish workers.  The regional police brought charges for hooliganism and property theft against seven Zhairem residents.

In September 2019, several strikes over living standards hit the Chinese-run companies in the Mangystau region.  At least 165 workers of Mobil Service Group Ltd that provides transportation services for Oil Construction Company LLP in the Kalamkas field and Karazhanbasmunai JSC in the Karazhanbas field in the Mangystau region went on strike on September 20, 2019 to demand a 100 percent increase of wages and to complain about getting paid up to ten times less than their western and Chinese colleagues.  The labor dispute was resolved after MSG management agreed to raise wages by 50 percent.

Approximately 24 workers of the Sinopec-run Karakudykmunay and Buzachi Operating companies went on strike on September 23, 2019, demanding a 100 percent wage increase.  Over 150 workers wrote letters to the company’s management and to the ruling Nur Otan party prior to the strike.  Another strike over low wages reportedly took place at Buzachi Operating on October 31, 2019, which was later dismissed by the company’s management, stating that it was a regular staff meeting.

On September 30, 2019, a local newspaper published on its website a video message  (https://www.lada.kz/aktau_news/society/73745-rabochie-esche-odnoy-kompanii-v-mangistau-trebovali-povysheniya-zarabotnoy-platy.html ) to President Tokayev allegedly recorded by Emir Oil workers, requesting a 50 percent increase in wages.  Kazakh-Malaysian oil company, Emir Oil Ltd, dismissed this information, stating that the company had been negotiating with workers and gradually implementing a pay increase since March 2019.

Security workers of KMG-Security, a subsidiary of KazMunayGas National Company (KMG NC), held a strike demanding a wage increase and improved working conditions in the oil town of Zhanaozen in the Mangystau region on January 27, 2020.  Their requests have been addressed by KMG NC.  The government is particularly sensitive to any signs of unrest in Zhanaozen, after a seven-month strike of oil workers in the town culminated in riots that killed 15 and injured over 100 in December 2011.

Workers’ rights to strike are limited by several conditions.  It may take over 40 days to initiate the strike in accordance with the law, representatives of labor unions report.  Workers can strike if all arbitration measures defined by law have been exhausted.  Strike votes must be taken in a meeting where at least half of workers are present, and strikers are required to give five days’ notice to their employer, include a list of complaints, and tell the employer the proposed date, time and place of the strike.  Courts have the power to declare a strike illegal at the request of an employer or the General Prosecutor’s office.  Employers may fire striking workers after a court declares a strike illegal.  The Criminal Code enables the government to target labor organizers whose strikes are deemed illegal.

The Labor Union Law generally restricts workers’ freedom of association.  Under the law, any local (and potentially independent) labor union must be affiliated with larger unions, and the right to freely establish and join independent organizations without prior authorization is restricted.  On the basis of this law, in 2016 authorities did not allow the registration of one independent labor union and ordered its liquidation.  In 2018, the U.S. government initiated a review of Kazakhstan’s compliance with the Generalized System of Preferences following a petition by the AFL-CIO, based on the country’s alleged failure to afford internationally-recognized workers’ rights.  The AFL-CIO petition highlights the Law on Unions and also raises concerns about the use of Article 404 of the Criminal Code, which appears to prohibit unregistered organizations.  The amendments were signed into law by President Tokayev on May 4, 2020.  The law removes the requirement of affiliation with a large labor union for local labor unions.  Other changes include softening restrictions on strikes.  Workers employed in the railway, transport and communications, civil aviation, healthcare, and public utilities sectors may strike, if they maintain minimum services for the population, that is, provided there is no harm caused to other people.  The law also reduces the penalty for calls to continue strikes declared illegal by a court.  If such calls do not result in a material violation of rights and interests of other people, they will be classified as criminal misconduct, and penalty will be limited to fines or hours of community service.  The previous law classified such calls as criminal offences, and the penalties included restriction on freedom of movement or imprisonment.

Please see details at the Human Rights Report at: https://www.state.gov/reports/2019-country-reports-on-human-rights-practices/.

The official unemployment rate in Kazakhstan has regularly been near five percent in recent years.  In 2019, Kazakhstan’s unemployment rate stood at 4.8 percent, and youth unemployment rate was 3.7 percent.

Investment Incentives

To attract foreign investment, the GOM offers investment incentives to investors on a national treatment basis. These incentives are contained in Decrees 23/98/M and 49/85/M and are provided so long as companies can prove they are doing one of the following: promoting economic diversification, contributing to the promotion of exports to new unrestricted markets, promoting added value within their activity’s value chain, or contributing to technical modernization. There is no requirement that Macau residents own shares. These incentives are categorized as fiscal incentives, financial incentives, and export diversification incentives.

Fiscal incentives include full or partial exemption from profit/corporate tax, industrial tax, property tax, stamp duty for transfer of properties, and consumption tax. The tax incentives are consistent with the WTO Agreement on Subsidies and Countervailing Measures, as they are neither export subsidies nor import substitution subsidies as defined in the WTO Agreement. In 2019, the GOM put forward an enhanced tax deduction for research and development (R&D) expenditure incurred for innovation and technology projects by companies whose registered capital reached USD 125,000, or whose average taxable profits reached USD 62,500 per year in three consecutive years. The tax deduction amounts to 300 percent for the first USD 375,000 of qualifying R&D expenditure and 200 percent for the remaining amount, subject to a limit of USD 1.9 million in total). In addition, income received from Portuguese speaking countries is exempt from the corporate tax, provided such income has been subject to tax in its place of origin.

Two new laws to encourage financial leasing activities in Macau became effective in April 2019. Under the new regime, the minimum capital requirement of a financial leasing company is reduced from USD 3.75 million to USD 1.25 million. In addition, the acquisition by the financial leasing company of a property exclusively for its sole use has an exemption of up to USD 62,500 from a stamp duty.

Financial incentives include government-funded interest subsidies. Export diversification incentives include subsidies given to companies and trade associations attending trade promotion activities organized by IPIM. Only companies registered with Macau Economic Services (MES) may receive subsidies for costs such as space rental or audio-visual material production. Macau also provides other subsidies for the installation of anti-pollution equipment.

Foreign Trade Zones/Free Ports/Trade Facilitation

Macau is a free port; however, there are four types of dutiable commodities: liquors, tobacco, vehicles, and petrol (gasoline). Licenses must be obtained from the MES prior to importation of these commodities.

In order to promote the MICE (meetings, incentives, conventions, and exhibitions) and logistics industries in Macau, the GOM has accepted the ATA Carnet (Admission Temporaire/Temporary Admission), an international customs document providing an efficient method for the temporary import and re-export of goods that eases the way for foreign exhibitions and businesses.

The latest CEPA addition established principles of trade facilitation, including simplifying customs procedures, enhancing transparency, and strengthening cooperation.

Performance and Data Localization Requirements

Macau does not follow a forced localization policy in which foreign investors must use domestic content in goods or technology.

There are no requirements by the GOM for foreign IT providers to turn over source code and/or provide access to surveillance (i.e., backdoors into hardware and software or turning over keys for encryption).

According to the Personal Data Protection Act (Decree 8/2005), if there is transfer of personal data to a destination outside Macau, the opinion of the Office for Personal Data Protection — the regulatory authority responsible for supervising and enforcing the Act — must be sought to confirm if such destination ensures an adequate level of protection.

In December 2019, Macau’s Cybersecurity Law came into force. With this law, public and private network operators in certain industries have to meet obligations, including providing real-time access to select network data to Macau authorities, with the stated aim of protecting the information network and computer systems. For example, network operators must register and verify the identity of users before providing telecommunication services. The new law creates new investment and operational costs for affected businesses, and has raised some privacy and surveillance concerns.

One major U.S. cloud computing company reported that Macau’s Gaming Inspection and Coordination Bureau had refused permission for potential clients in the gaming sector to export personal data-to-data centers located outside of Macau.

Macau’s unemployment rate in January 2020 was 1.7 percent. Foreign businesses cite a constant shortage of skilled workers – a result of the past decade’s boom in entertainment facilities – as a top constraint on their operations and future expansion. The government is studying proposals to resolve the human resources problem. For example, Macau has labor importation schemes for unskilled and skilled workers who cannot be recruited locally. However, both local and foreign casino operators in Macau are required by law to employ only Macau residents as croupiers. Taxi and bus drivers must also be local residents. There is no such restriction imposed on any other sector of the economy.

Macau does not have any policies that waive labor laws in order to attract or retain investment. The rights for workers to form trade unions and to strike are both enshrined in the Basic Law, but there are no laws in Macau that specifically deal with those rights. The law does not provide that workers can collectively bargain, and while workers have the right to strike, there is no specific protection in the law from retribution if workers exercise this right. Labor unions are independent of the government and employers, by law and in practice.

According to the Labor Relations Law, a female worker cannot be dismissed, except with just cause (e.g., willful disobedience to orders given by superiors, or violation of regulations on occupational hygiene and safety), during her pregnancy or within three months of giving birth. In practice, either the employer or the employee may rescind the labor contract with or without just cause. In general, any circumstance that makes it impossible to continue the labor relation can constitute just cause for rescission of the contract. If the employer terminates the contract with the worker without just cause, the employer must pay the employee severance pay. In addition, Macau’s social security system, which is regulated by Decree 84/89/M, provides local workers with economic aid when they are old, unemployed, or sick.

Workers who believe they were dismissed unlawfully can bring a case to court or lodge a complaint with the Labor Affairs Bureau. Even without formal collective bargaining rights, companies often negotiate with unions, although the government may act as an intermediary. There is no indication that past disputes or appeals were subject to lengthy delays.

The Labor Relations Law does not contain provisions regarding collective bargaining, which is not common at the company or industry level.

The GOM has put measures in place to replace some foreign workers with Macau residents. Macau has a law imposing criminal penalties for employers of illegal migrants and preventing foreign workers from changing employers in Macau. The government has used the proceeds of a tax on the import of temporary workers for retraining local unemployed people.

Effective September 1 2019, the statutory minimum hourly wage rate increased from USD 3.8 to USD 4.0. The Legislative Assembly is discussing a draft bill on mandating across-the-board minimum wages.

Investment Incentives

The Malaysian Government has codified the incentives available for investments in qualifying projects in target sectors and regions.  Tax holidays, financing, and special deductions are among the measures generally available for domestic as well as foreign investors in the following sectors and geographic areas: information and communications technologies (ICT); biotechnology; halal products (e.g., food, cosmetics, pharmaceuticals); oil and gas storage and trading; Islamic finance; Kuala Lumpur; Labuan Island (off Eastern Malaysia); East Coast of Peninsular Malaysia; Sabah and Sarawak (Eastern Malaysia); Northern Corridor.

The lists of application procedures and incentives available to investors in these sectors and regions can be found at: http://www.mida.gov.my/home/invest-in-malaysia/posts/ .

Foreign Trade Zones/Free Ports/Trade Facilitation

The Free Zone Act of 1990 authorized the Minister of Finance to designate any suitable area as either a Free Industrial Zone (FIZ), where manufacturing and assembly takes place, or a Free Commercial Zone (FCZ), generally for warehousing commercial stock.  The Minister of Finance may appoint any federal, state, or local government agency or entity as an authority to administer, maintain and operate any free trade zone.  Currently there are 13 FIZs and 12 FCZs in Malaysia.  In June 2006, the Port Klang Free Zone opened as the nation’s first fully integrated FIZ and FCZ, although the project has been dogged by corruption allegations related to the land acquisition for the site.  The government launched a prosecution in 2009 of the former Transport Minister involved in the land purchase process, though he was later acquitted in October 2013.

The Digital Free Trade Zone (DFTZ) is an initiative by the Malaysian Government, implemented through MDEC, launched in November 2017 with the participation of China’s Alibaba.  DFTZ aims to facilitate seamless cross-border trading and eCommerce and enable Malaysian SMEs to export their goods internationally. According to the Malaysian government, the DFTZ consists of an eFulfilment Hub to help Malaysian SMEs export their goods with the help of leading fulfilment service providers; and an eServices Platform to efficiently manage cargo clearance and other processes needed for cross-border trade.

For more information, please visit https://mydftz.com 

Raw materials, products and equipment may be imported duty-free into these zones with minimum customs formalities. Companies that export not less than 80 percent of their output and depend on imported goods, raw materials, and components may be located in these FZs.  Ports, shipping and maritime-related services play an important role in Malaysia since 90 percent of its international trade by volume is seaborne.  Malaysia is also a major transshipment center.

Goods sold into the Malaysian economy by companies within the FZs must pay import duties.  If a company wants to enjoy Common External Preferential Tariff (CEPT) rates within the ASEAN Free Trade Area, 40 percent of a product’s content must be ASEAN-sourced.  In addition to the FZs, Malaysia permits the establishment of licensed manufacturing warehouses outside of free zones, which give companies greater freedom of location while allowing them to enjoy privileges similar to firms operating in an FZ. Companies operating in these zones require approval/license for each activity. The time needed to obtain licenses depends on the type of approval and ranges from two to eight weeks.

Performance and Data Localization Requirements

Fiscal incentives granted to both foreign and domestic investors historically have been subject to performance requirements, usually in the form of export targets, local content requirements and technology transfer requirements.  Performance requirements are usually written into the individual manufacturing licenses of local and foreign investors.

The Malaysian government extends a full tax exemption incentive of fifteen years for firms with “Pioneer Status” (companies promoting products or activities in industries or parts of Malaysia to which the government places a high priority), and ten years for companies with “Investment Tax Allowance” status (those on which the government places a priority, but not as high as Pioneer Status).  However, the government appears to have some flexibility with respect to the expiry of these periods, and some firms reportedly have had their pioneer status renewed. Government priorities generally include the levels of value-added, technology used, and industrial linkages.  If a firm (foreign or domestic) fails to meet the terms of its license, it risks losing any tax benefits it may have been awarded.  Potentially, a firm could lose its manufacturing license.  The New Economic Model stated that in the long term, the government intends gradually to eliminate most of the fiscal incentives now offered to foreign and domestic manufacturing investors.  More information on specific incentives for various sectors can be found at www.mida.gov.my.

Malaysia also seeks to attract foreign investment in the information technology industry, particularly in the Multimedia Super Corridor (MSC), a government scheme to foster the growth of research, development, and other high technology activities in Malaysia.  However, since July 1, 2018, the Government decided to put on hold the granting of MSC Malaysia Status and its incentives, including extension of income tax exemption period, or adding new MSC Malaysia Qualifying Activities in order to review and amend Malaysia’s tax incentives.  While the MSC Malaysia Status Services Incentive was published on December 31, 2018, the MSC Malaysia Status IP Incentive policy is still under review.  For further details on incentives, see www.mdec.my.  The Malaysia Digital Economy Corporation (MDEC) approves all applications for MSC status.  For more information please visit: https://www.mdec.my/msc-malaysia .

In the services sector, the government’s stated goal is to attract foreign investment in regional distribution centers, international procurement centers, operational headquarter research and development, university and graduate education, integrated market and logistics support services, cold chain facilities, central utility facilities, industrial training, and environmental management.  To date, Malaysia has had some success in attracting regional distribution centers, global shared services offices, and local campuses of foreign universities.  For example, GE and Honeywell maintain regional offices for ASEAN in Malaysia.  In 2016, McDermott moved its regional headquarters to Malaysia and Boston Scientific broke ground on a medical device manufacturing facility.

Malaysia seeks to attract foreign investment in biotechnology but sends a mixed message on agricultural and food biotechnology.  On July 8, 2010, the Malaysian Ministry of Health posted amendments to the Food Regulations 1985 [P.U. (A) 437/1985] that require strict mandatory labeling of food and food ingredients obtained through modern biotechnology.  The amendments also included a requirement that no person shall import, prepare, or advertise for sale, or sell any food or food ingredients obtained through modern biotechnology without the prior written approval of the Director.  There is no ‘threshold’ level on the labeling requirement.  Labeling of “GMO Free” or “Non-GMO” is not permitted.  The labeling requirements only apply to foods and food ingredients obtained through modern biotechnology but not to food produced with GMO feed.  The labeling regulation was supposed to go into force in 2014, but remains to date with no date announced.  A copy of the law and regulations respectively can be found at: http://www.biosafety.nre.gov.my/BiosafetyAct2007.html , and http://www.biosafety.nre.gov.my/BIOSAFETY percent20REGULATIONS percent202010.pdf .

Malaysia has not implemented measures amounting to “forced localization” for data storage.  Bank Negara Malaysia has amended its recent Outsourcing Guidelines to remove the original data localization requirement and shared that it will similarly remove the data localization elements in its upcoming Risk Management in Technology framework.  The government has provided inducements to attract foreign and domestic investors to the Multimedia Super Corridor but does not mandate use of onshore providers.  Companies in the information and communications technology sector are not required to hand over source code.

Malaysia’s two million documented and 3.9 to 5.5 million undocumented foreign workers make up over 30 percent of the country’s workforce.  The previous government pledged to reduce Malaysia’s reliance on foreign labor while bringing the nation’s laws up to international standards, and had taken steps toward reforming a foreign worker recruitment process plagued by allegations of corruption and debt bondage before being replaced by Prime Minister Muhyiddin’s government in March.

Malaysia’s shortage of skilled labor is the most frequently mentioned impediment to economic growth cited in numerous studies.  Malaysia has an acute shortage of highly qualified professionals, scientists, and academics.  U.S. firms operating in Malaysia have echoed this sentiment, noting that the shortage of skilled labor has resulted in more on-the-job training for new hires.

The Malaysian labor market, traditionally accustomed to operating at or near full employment, has been heavily impacted by the prolonged shutdown as part of the government’s response to the global pandemic.  The unemployment rate reached five percent in April 2020, Malaysia’s highest in over 30 years, with economic observers predicting it will climb higher during the year.

Malaysia is a member of the International Labor Organization (ILO).  Labor relations in Malaysia are generally non-confrontational.  While  a system of government controls strongly discourages strikes and restricts the formation of unions, the new government has created a National Labor Advisory Council – comprised of the Malaysian Trade Unions Congress and Malaysian Employer’s Federation – to increase labor participation in unions.  The government amended its Trade Unions Act and Industrial Relations Act in July 2019 to increase freedom of association in Malaysia.  Some labor disputes are settled through negotiation or arbitration by an industrial court.  Malaysian authorities have pledged to move forward with amendments to the country’s labor laws as a means of boosting the economy’s overall competitiveness and combatting forced labor conditions.  The previous government prohibited outsourcing companies, improved oversight of employment agencies, and brought the Employment Act, Children and Young Persons Act, and Occupational Safety and Health Act in line with ILO principles.

Although national unions are currently proscribed due to sovereignty issues within Malaysia, there are a number of territorial federations of unions (the three territories being Peninsular Malaysia, Sabah and Sarawak).  The government has prevented some trade unions, such as those in the electronics and textile sectors, from forming territorial federations.  Instead of allowing a federation for all of Peninsular Malaysia, the electronics sector is limited to forming four regional federations of unions, while the textile sector is limited to state-based federations of unions, for those states which have a textile industry.  Proposed changes to the Trade Unions Act should address this issue and allow unions to form.  Employers and employees share the costs of the Social Security Organization (SOSCO), which covers an estimated 12.9 million workers and has been expanded to cover foreign workers.  No systematic welfare programs or government unemployment benefits exist; however, the Employee Provident Fund, which employers and employees are required to contribute to, provides retirement benefits for workers in the private sector.  Civil servants receive pensions upon retirement.

The regulation of employment in Malaysia, specifically as it affects the hiring and redundancy of workers, remains a notable impediment to employing workers in Malaysia.  The high cost of terminating employees, even in cases of wrongdoing, is a source of complaint for domestic and foreign employers.  The former prime minister formed an Independent Committee on Foreign Workers to study foreign worker policies.  The Committee submitted 40 recommendations for streamlining the hiring of foreign workers and protecting employees from debt bondage and forced labor conditions.  It is unclear whether or how the new government will act on these recommendations.

Executives at U.S. companies operating in Malaysia have reported that the government monitors the ethnic balance among employees and enforces an ethnic quota system for hiring in certain areas.  Race-based preferences in hiring and promotion are widespread in government, government-owned universities, and government-linked corporations.

The former government increased and standardized the minimum wage across the country to RM 1100 (USD 275), a raise from RM 1,000 (USD 250) in Peninsular Malaysia and RM 920 (USD 230) in East Malaysia.

In 2018, the Department of Labor’s Trafficking Victims Protection Reauthorization Act (TVPRA) listing of goods produced with child labor and forced labor included Malaysian palm oil (forced and child labor), electronics (forced labor), and garments (forced labor).  Senior officials across the Malaysian interagency have taken this listing seriously and have been working with the private sector and civil society to address concerns relating to the recruitment, hiring, and management of foreign workers in all sectors of the Malaysian economy, including palm oil and electronics.

Investment Incentives

General requirements to qualify for investment subsidy schemes apply equally to domestic and foreign investors.  Industry-specific, targeted investment incentives have long been a tool of Dutch economic policy to facilitate economic restructuring and to promote economic priorities.  Such subsidies and incentives are spelled out in detailed regulations.  Subsidies are in the form of tax credits disbursed through corporate tax rebates or direct cash payments if there is no tax liability.  For an overview of government subsidies and investment programs, see:  http://english.rvo.nl/subsidies-programmes .

FDI tends to be concentrated in growth sectors including information and communications technology (ICT), biotechnology, medical technology, electronic components, and machinery and equipment.  Investment projects are predominantly in value-added logistics, machinery and equipment, and food.

Since 2010, the government has shifted from traditional industrial support policies to a comprehensive approach to public/private financing agreements in areas where investment is deemed of strategic value.  Government, academia, and industry work together to determine recipient sectors for co-financed (public and private) R&D.  The government’s industrial policy focuses on nine “Top Sectors”:  creative industries, logistics, horticulture, agriculture and food, life sciences, energy, water, chemical industry, and high tech.  (For more information, see https://www.government.nl/topics/enterprise-and-innovation/contents/encouraging-innovation .)

Foreign Trade Zones/Free Ports/Trade Facilitation

The Netherlands has no free trade zones (FTZs) or free ports where commodities can be processed or reprocessed tax-free.  However, FTZs exist for bonded storage, cargo consolidation, and reconfiguration of non-EU goods.  This reflects the key role that transport, transit, logistics, and distribution play in the Dutch economy.  Dutch Customs oversee a large number of customs warehouses, free warehouses, and free zones along many of the Netherlands trade routes and entry points.

Schiphol Airport handles nearly 1.75 million tons of goods per year for distribution, making it the third largest cargo airport in Europe.  Specific parts of Schiphol are designated customs-free zones.  The Port of Rotterdam is Europe’s largest seaport by volume, handling over 37 percent of all cargo shipping on Europe’s Le Havre-Hamburg coastline and processing nearly 470 million tons of goods in 2018.  Many agents operate customs warehouses under varying customs regimes on the premises of the Port of Rotterdam.

Performance and Data Localization Requirements

There are no trade-related investment performance requirements in the Netherlands and no requirements for employment of local capital or managerial personnel.

The Dutch government does not follow a “forced localization” policy and does not require foreign information technology (IT) providers to turn over source code or provide access to surveillance.  The Dutch Data Protection Authority (DPA) monitors and enforces Dutch legislation on the protection of personal data (https://autoriteitpersoonsgegevens.nl/en ).  The Dutch DPA is active in the EU’s Article 29 Working Party, the collective of EU national DPAs.  The primary law on protection of personal data in the Netherlands is the Dutch law implementing EU directive 95/46/EC.  The new European General Data Protection Regulation (GDPR), which is directly applicable in member states, entered into force May 25, 2018, as part of the EU’s comprehensive reform on data protection.

The Dutch DPA recognized U.S. firms that registered and self-certified with the U.S.-EU Safe Harbor program that began in 2000 and focused on safe transfer of personal data between the European Union and the United States.  On July 12, 2016, the European Commission issued an adequacy decision on the EU-U.S. Privacy Shield framework (https://www.privacyshield.gov/welcome ), which replaced the Safe Harbor program, providing a legal mechanism for companies to transfer personal data from the EU to the United States.  In an October 2019 report, the European Commission confirmed that the EU-US Privacy Shield framework continues to ensure an adequate level of protection for personal data transferred from the EU to companies participating in the Privacy Shield program in the United States.  The Dutch government strongly supports Privacy Shield.

The Netherlands has a strongly regulated labor market (over 75 percent of labor contracts fall under some form of collective labor agreement) that comprises a well-educated and multilingual workforce.  Labor/management relations in both the public and private sectors are generally good in a system that emphasizes the concept of social partnership between industry and labor.  Although wage bargaining in the Netherlands is increasingly decentralized, there still exists a central bargaining apparatus where labor contract guidelines are established.

The terms of collective labor agreements apply to all employees in a sector, not only union members.  To avoid surprises, potential investors are advised to consult with local trade unions prior to making an investment decision to determine which, if any, labor contracts apply to workers in their business sector.  Collective bargaining agreements negotiated in recent years have, by and large, been accepted without protest.

Every company in the Netherlands with at least 50 workers is required by law to institute a Works Council (“Ondernemingsraad”), through which management must consult on a range of issues, including investment decisions, pension packages, and wage structures.  The Social Economic Council has helpful programs on establishing employee participation that allow firms to comply with the law on Works Councils.  See https://www.ser.nl/en/SER/About-the-SER/What-does-the-SER-do .

Prior to the Covid-19 outbreak, the annual unemployment rate was forecast to be 3.2 percent in 2020, well below the EU average of 6.5 percent and less than half of Eurozone unemployment.  In March 2020, the Dutch government established various economic relief measures designed to preserve employment by providing Dutch corporations that suffer coronavirus-related problems with wage subsidies up to 90 percent.

The working population consists of 8.9 million persons.  Workers are sought through government-operated labor exchanges, private employment firms, or direct hiring.  At 47 percent, the Netherlands has the highest share of part-time workers in its workforce of all EU member states (in 2017, the EU average of part-time workers was 19 percent).  A rise in female participation in the workforce led to a 37 percent increase in the share of part-time workers in the total working population.  Three-quarters of women and one quarter of men work less than a 36-hour week.  Labor market participation, especially by older workers, is growing, and the number of independent contractors is rapidly increasing.

To ensure continued economic growth and address the impact of an aging population, increased labor market participation is critical.  The age to qualify for a state pension (AOW) will increase from age 65 to 67 by 2023.  Governmental labor market policies are targeted at increasing productivity of the labor force, including the expansion of working hours.  For example, access to daycare is improving in order to raise the average number of hours per week worked by women, which is 10 hours below the average of hours worked by men.

Effective July 1, 2020, the minimum wage for employees older than 20 years is €1,680 ($1,820) per month.

Investment Incentives

The Nigerian government maintains different and overlapping incentive programs.  The Industrial Development/Income Tax Relief Act, Cap 17, Laws of the Federation of Nigeria, 2004 provides incentives to pioneer industries deemed beneficial to Nigeria’s economic development and to labor-intensive industries, such as apparel.  There are currently 99 industries and products that qualify for the pioneer status incentive through the NIPC, following the addition of 27 industries and products added to the list in 2017.  The government has added a stipulation calling for a review of the qualifying industries and products to occur every two years.  Companies that receive pioneer status may benefit from a tax holiday from payment of company income tax for an initial period of three years, extendable for one or two additional years.  A pioneer industry sited in an economically disadvantaged area is entitled to a 100 percent tax holiday for seven years and an additional five percent depreciation allowance over and above the initial capital depreciation allowance.  Additional tax incentives are available for investments in domestic research and development, for companies that invest in LGAs deemed disadvantaged, for local value-added processing, for investments in solid minerals and oil and gas, and for several other investment scenarios.  For a full list of incentives, refer to the NIPC website at https://www.nipc.gov.ng/investment-incentives/ .

The NEPC administers an EEG scheme to improve non-oil export performance.  The program was suspended in 2014 due to concerns about corruption on the part of companies that collected grants but did not actually export.  It was revised and relaunched in 2018.  The federal government set aside 5.12 billion naira (roughly USD 14.2 million) in the 2019 budget for the EEG scheme.  The NEXIM Bank provides commercial bank guarantees and direct lending to facilitate export sector growth, although these services are underused.  NEXIM’s Foreign Input Facility provides normal commercial terms for the importation of machinery and raw materials used for generating exports.  Repayment terms are typically up to seven years, including a moratorium period of up to two years depending on the loan amount and the project being finance.  Agencies created to promote industrial exports remain burdened by uneven management, vaguely defined policy guidelines, and corruption.

The NIPC states that up to 120 percent of expenses on research and development (R&D) are tax deductible, provided that such R&D activities are carried out in Nigeria and relate to the business from which income or profits are derived.  Also, for the purpose of R&D on local raw materials, 140 percent of expenses are allowed.  Long-term research will be regarded as a capital expenditure and written off against profit.

Foreign Trade Zones/Free Ports/Trade Facilitation

The Nigerian Export Processing Zone Authority (NEPZA) allows duty-free import of all equipment and raw materials into its export processing zones.  Up to 100 percent of production in an export processing zone may be sold domestically based on valid permits and upon payment of applicable duties.  Investors in the zones are exempt from foreign exchange regulations and taxes and may freely repatriate capital.  The Nigerian government also encourages private sector participation and partnership with state and local governments under the free trade zones (FTZ) program, resulting in the establishment of the Lekki FTZ (owned by Lagos State), and the Olokola FTZ (which straddles Ogun and Ondo States and is owned by those two states, the federal government, and private oil companies).  Workers in FTZs may unionize but may not strike for an initial ten-year period.

Nigeria ratified the WTO Trade Facilitation Agreement (TFA) in 2016 and the Agreement entered into force in 2017.  Nigeria already implements items in Category A under the TFA and has identified, but not yet implemented, its Category B and C commitments.  In 2016, Nigeria requested additional technical assistance to implement and enforce its Category C commitments.  (See https://www.wto.org/english/tratop_e/tradfa_e/tradfa_e.htm )

Performance and Data Localization Requirements

Foreign investors must register with the NIPC, incorporate as a limited liability company (private or public) with the CAC, procure appropriate business permits, and register with the Securities and Exchange Commission (when applicable) to conduct business in Nigeria.  Manufacturing companies sometimes must meet local content requirements.  Long-term expatriate personnel do not require work permits but are subject to needs quotas requiring them to obtain residence permits that allow salary remittances abroad.  Expatriates looking to work in Nigeria on a short-term basis can either request a temporary work permit, which is usually granted for a two-month period and extendable to six months, or a business visa, if only traveling to Nigeria for the purpose of meetings, conferences, seminars, trainings, or other brief business activities.  Authorities permit larger quotas for professions deemed in short supply, such as deep-water oilfield divers.  U.S. companies often report problems in obtaining quota permits.  The Nigerian government’s Immigration Regulations 2017 introduced additional means by which foreigners can obtain residence in Nigeria.  Foreign nationals who have imported an annual minimum threshold of capital over a certain period may be issued a permanent residence permit, if the investment is not withdrawn.  The Nigerian Oil and Gas Content Development Act, 2010 restricts the number of expatriate managers to five percent of the total number of personnel for companies in the oil and gas sector.

The National Office of Industrial Property Act of 1979 established the National Office for Technology Acquisition and Promotion (NOTAP) to regulate the international acquisition of technology while creating an environment conducive to developing local technology.  NOTAP recommends local technical partners to Nigerian users in a bid to reduce the level of imported technology, which currently accounts for over 90 percent of technology in use in Nigeria.  NOTAP reviews the Technology Transfer Agreements (TTAs) required to import technology into Nigeria and for companies operating in Nigeria to access foreign currency.  NOTAP reviews three major aspects prior to approval of TTAs and subsequent issuance of a certificate:

• Legal – ensuring that the clauses in the agreement are in accordance with Nigerian laws and legal frameworks within which NOTAP operates;
• Economic – ensuring prices are fair for the technology offered; and

• Technical – ensuring transfer of technical knowledge.

U.S. firms complain that the approval process for TTAs is lengthy and can routinely take three months or more.  NOTAP took steps to automate the TTA process to reduce processing time to one month or less; however, from the date of filing the application to the issuance of confirmation of reasonableness, TTA processing still requires 60 business days.  https://notap.gov.ng/sites/default/files/stages_involved.pdf .

The Nigerian Oil and Gas Content Development Act of 2010 has technology-transfer requirements that may violate a company’s intellectual property rights.

The Guidelines for Nigerian Content Development in the ICT sector issued by the NITDA in 2013, require ICT companies to host all consumer and subscriber data locally to ensure the security of government data and promote development of the ICT sector by mandating all government ministries, departments, and agencies to source and procure software from only local and indigenous software development companies.  Enforcement of the guidelines is largely absent as the Nigerian government lacks capacity and resources to monitor digital data flows.  Federal government data is hosted locally in data centers that meet international standards.  In 2019, NITDA updated the 2013 Guidelines for Data Protection (https://nitda.gov.ng/wp-content/uploads/2019/01/Nigeria%20Data%20Protection%20Regulation.pdf ) and rolled out the regulatory framework for providers of public internet access services such that only registered, verified and vetted providers can provide public internet access service in Nigeria.

The NCS and the Nigerian Ports Authority (NPA) exercise exclusive jurisdiction over customs services and port operations respectively.  Nigerian law allows importers to clear goods on their own, but most importers employ clearing and forwarding agents to minimize tariffs and lower landed costs.  Others ship their goods to ports in neighboring countries, primarily Benin, after which they transport overland legally or smuggle into the country.  The Nigerian government began closing land borders to trade in August 2019, reportedly to stem the tide of smuggled goods entering from neighboring countries and has not reopened borders as this year’s report.  The Nigerian government implements a destination inspection scheme whereby all inspections occur upon arrival into Nigeria, rather than at the ports of origin.  In 2013, the NCS regained the authority to conduct destination inspections, which had previously been contracted to private companies.  NCS also introduced the Nigeria Integrated Customs Information System (NICIS) platform and an online system for filing customs documentation via a Pre-Arrival Assessment Report (PAAR) process.  The NCS still carries out 100 percent cargo examinations, and shipments take more than 20 days to clear through the process.

Shippers report that efforts to modernize and professionalize the NCS and the NPA have largely been unsuccessful – port congestion persists and clearance times are long.  A  presidential directive in 2017 for the Apapa Port, which handles over 40 percent of Nigeria’s legal trade, to run a 24-hour operation and achieve 48-hour cargo clearance is not effective.  The port is congested, inefficient and the proliferation of customs units incentivizes corruption from official and unofficial middlemen who complicate and extend the clearance process.  Freight forwarders usually resort to bribery of customs agents and port officials to avoid long delays clearing imported goods through the NPA and NCS.  Other ports face logistical and security challenges leaving most operating well below capacity.  Nigeria does not currently have a true deep-sea port although one is under construction near Lagos but not expected to be finished before 2021.  Smuggled goods routinely enter Nigeria’s seaports and cross its land borders.

Investors sometimes encounter difficulties acquiring entry visas and residency permits. Foreigners must obtain entry visas from Nigerian embassies or consulates abroad, seek expatriate position authorization from the NIPC, and request residency permits from the Nigerian Immigration Service.  In 2018, Nigeria instituted a visa-on-arrival system, which works relatively well, but still requires lengthy processing at an embassy or consulate abroad before an authorization is issued.  Some U.S. businesses have reported being solicited for bribes in the visa-on-arrival program.  Visa-on-arrival is not valid for employment or residence.  Investors report that the residency permit process is cumbersome and can take from two to 24 months and cost USD 1,000 to USD 3,000 in facilitation fees.  The Nigerian government announced a visa rule in 2011 to encourage foreign investment, under which legitimate investors can obtain multiple-entry visas at points of entry.  Obtaining a visa prior to traveling to Nigeria is strongly encouraged.

Nigeria’s skilled labor pool has declined over the past decade due to inadequate educational systems, limited employment opportunities, and the migration of educated Nigerians to other countries, including the United Kingdom, the United States, Canada, and South Africa.  The low employment capacity of Nigeria’s formal sector means that almost three-quarters of all Nigerians work in the informal and agricultural sectors or are unemployed.  Companies involved in formal sector businesses, such as banking and insurance, possess an adequately skilled workforce.  Manufacturing and construction sector workers often require on-the-job training.  The result is that while individual wages are low, individual productivity is also low, which means overall labor costs can be high.  The Buhari Administration is pushing reforms in the education sector to improve the supply of skilled workers but this and other efforts run by state governments are in their initial stages.

Labor organizations in Nigeria remain politically active and are prone to call for strikes on a regular basis against the national and state governments.  While most labor actions are peaceful, difficult economic conditions fuel the risk that these actions could become violent.

Nigeria’s constitution guarantees the rights of free assembly and association, and protects workers’ rights to form or belong to trade unions.  Several statutory laws, nonetheless, restrict the rights of workers to associate or disassociate with labor organizations.  Nigerian unions belong to one of three trade union federations:  the Nigeria Labor Congress (NLC), which tends to represent junior (i.e., blue collar) workers; the United Labor Congress of Nigeria (ULC), which represents a group of unions that separated from the NLC in 2015; and the Trade Union Congress of Nigeria (TUC), which represents the “senior” (i.e., white collar) workers.  According to figures provided by the Ministry of Labor and Employment, total union membership stands at roughly 7 million.  A majority of these union members work in the public sector, although unions exist across the private sector.  The Trade Union Amendment Act of 2005 allowed non-management senior staff to join unions.

Collective bargaining occurred throughout the public sector and the organized private sector in 2019.  However, public sector employees have become increasingly concerned about the Nigerian governments’ and state governments’ failure to honor previous agreements from the collective bargaining process.

Collective bargaining in the oil and gas industry is relatively efficient compared to other sectors. Issues pertaining to salaries, benefits, health and safety, and working conditions tend to be resolved quickly through negotiations.  Workers under collective bargaining agreements cannot participate in strikes unless their unions comply with the requirements of the law, which includes provisions for mandatory mediation and referral of disputes to the Nigerian government.  Despite these restrictions on staging strikes, unions occasionally conduct strikes in the private and public sectors without warning.  Localized strikes occurred in the education, government, energy, power, and healthcare sectors in 2019.  The law forbids employers from granting general wage increases to workers without prior government approval, but the law is not often enforced.

Despite widespread opposition from state governors, in April 2019, President Buhari signed into law a new minimum wage, increasing it from 18,000 naira (USD 50) to 30,000 naira (USD 83) per month.  After months of negotiations, the government finally reached an agreement with organized labor in October 2019 on the consequential adjustments in civil servants’ salaries that must be implemented across the board to apply the new minimum wage.  While the VAT rate was recently raised from 5.5 to 7.5 percent to help fund the increased minimum wage, it will not be enough to offset the cost of the adjustments.  This, in turn, means that the government will need to borrow more money, which will not only increase the debt burden but open it to criticism that that money should be used for critical infrastructure projects rather than civil servant salaries.

The Nigerian Minister of Labor and Employment may refer unresolved disputes to the Industrial Arbitration Panel (IAP) and the National Industrial Court (NIC).  In 2015, the NIC launched an Alternative Dispute Resolution Center.  Union officials question the effectiveness and independence of the NIC, believing it unable to resolve disputes stemming from Nigerian government failure to fulfill contract provisions for public sector employees.  Union leaders criticize the arbitration system’s dependence on the Minister of Labor and Employment’s referrals to the IAP.

Nigeria’s laws regarding minimum age for child labor and hazardous work are inconsistent. Article 59 of the Labor Act of 1974 sets the minimum age of employment at 12, and it is in force in all 36 states of Nigeria.  The Act also permits children of any age to do light work alongside a family member in agriculture, horticulture, or domestic service.

The Federal 2003 Child Rights Act (CRA) codifies the rights of children in Nigeria and must be ratified by each State to become law in its territory.  To date, 25 states and the FCT have ratified the CRA, with all 11 of the remaining states located in northern Nigeria.

The CRA states that the provisions related to young people in the Labor Act apply to children under the CRA, but also that the CRA supersedes any other legislation related to children.  The CRA restricts children under the age of 18 from any work aside from light work for family members; however, Article 59 of the Labor Act applies these restrictions only to children under the age of 12.  This language makes it unclear what minimum ages apply for certain types of work in the country.

While the Labor Act forbids the employment of youth under age 18 in work that is dangerous to their health, safety, or morals, it allows children to participate in certain types of work that may be dangerous by setting different age thresholds for various activities.  For example, the Labor Act allows children age 16 and older to work at night in gold mining and the manufacturing of iron, steel, paper, raw sugar, and glass.  Furthermore, the Labor Act does not extend to children employed in domestic service.  Thus, children are vulnerable to dangerous work in industrial undertakings, underground, with machines, and in domestic service.  In addition, the prohibitions established by the Labor Act and CRA are not comprehensive or specific enough to facilitate enforcement.  In 2013, the National Steering Committee (NSC) for the Elimination of the Worst Forms of Child Labor in Nigeria validated the Report on the Identification of Hazardous Child Labor in Nigeria.  The report has languished with the Ministry of Labor and Employment and still awaits the promulgation of guidelines for operationalizing the report.

The Nigerian government adopted the Trafficking in Persons (Prohibition), Enforcement, and Administration Act of 2015.  While not specifically directed against child labor, many sections of the  law support anti-child labor efforts.  The Violence against Persons Prohibition Act was signed into law in May 2015 and again while not specifically focused on child labor, it covers related elements such as “depriving a person of his/her liberty,” “forced financial dependence/economic abuse,” and “forced isolation/separation from family and friends” and is applicable to minors.

Nigeria’s Labor Act provides for a 40-hour work week, two to four weeks of annual leave, and overtime and holiday pay for all workers except agricultural and domestic workers.  No law prohibits compulsory overtime.  The Act establishes general health and safety provisions, some of which specifically apply to young or female workers, and requires the Ministry of Labor and Employment to inspect factories for compliance with health and safety standards.  Under-funding and limited resources undermine the Ministry’s oversight capacity, and construction sites and other non-factory work sites are often ignored.  Nigeria’s labor law requires employers to compensate injured workers and dependent survivors of workers killed in industrial accidents.

Draft legislation, such as a new Labor Standards Act which includes provisions on child labor, and an Occupational Safety and Health Act that would regulate hazardous work, have remained under consideration in the National Assembly since 2006.

Admission of foreign workers is overseen by the Federal Ministry of the Interior.  Employers must seek the consent of the Ministry in order to employ foreign workers by applying for an “expatriate quota.”  The quota allows a company to employ foreign nationals in specifically approved job designations as well as specifying the validity period of the designations provided on the quota.

There are two types of visas which may be granted, depending on the length of stay.  For short-term assignments, an employer must apply for and receive a temporary work permit, allowing the employee to carry out some specific tasks.  The temporary work permit is a single-entry visa, and expires after three months.  There are no numerical limitations on short-term visas, and foreign nationals who meet the conditions for grant of a visa may apply for as many short-term visas as required.

Investment Incentives

Currently, customs and tax incentives are available to investors in six free trade zones.  State aid is available for investments in free trade zones under EU regional development assistance rules.

In 2007, Romania adopted EU regulations on regional investment aid, and instituted state aid schemes for large investments, SMEs, and job creation.  Both Romanian and EU state aid regulations aim to limit state aid in any form, such as direct state subsidies, debt rescheduling schemes, debt for equity swaps, or discounted land prices.  The European Commission (EC) must be notified of and approve GOR state aid that exceeds the pre-approved monetary threshold for the corresponding category of aid.  To benefit from the remaining state aid schemes, the applicant must secure financing separate from any public support for at least 25 percent of the eligible costs, either through his own resources or through external financing, and must document this financing in strict accordance with Ministry of Finance guidelines.  Under amendments passed in 2010, the state aid scheme for regional projects scores applications based not only on the economics of the project, but also on the GDP per capita and unemployment rate for the county of intended investment.  When granting state aid, the Ministry of Finance requires that the state revenues through taxes equals the state aid granted.  Numerous foreign and U.S firms have successfully applied for and received Romanian State Aid.

The renewable energy support through Green Certificate System, part of the Renewable Energy Law, provided incentives for certain types of renewable energy.  The support is not available for renewable energy investments made after January 1, 2017, but investors that qualified under the support system can trade certificates until 2032.  The Green Certificates are traded in parallel with the energy produced.  The Green Certificates are intended to provide an additional source of revenue for renewable energy producers.  Repeated revisions to the support system — including deferring release of the certificates and lowering the mandatory green certificate quota that consumers and suppliers have to acquire — have created instability, however, in the renewables investment climate.  Energy intensive industrial consumers receive exemptions from acquiring green certificates.

As an EU member state, Romania must receive EC approval for any state aid it grants not covered by the EU’s block exemption regulations.  The Romanian Competition Council acts as a clearinghouse for the exchange of information between the Romanian authorities and the EC.  The failure of state aid grantors to notify the EC properly of aid associated with privatizations has resulted in the Commission launching formal investigations into several privatizations.  Investors should ensure that the government entities with which they work fully understand and fulfill their duty to notify competition authorities.  Investors may wish to consult with EU and Romanian competition authorities in advance to ensure a proper understanding of notification requirements.

Companies operating in Romania can also apply for aid under EU-funded programs that are co-financed by Romania.  When planning a project, prospective applicants must bear in mind that the project cannot start before the financing agreement is finalized; the application, selection, and negotiations can be lengthy.  Applicants also must secure financing for non-eligible expenses and for their co-financing of the eligible expenses.  Finally, reimbursement of eligible expenses – which must be financed upfront by the investor – is often very slow.  Procurements financed by EU-funded programs above a certain monetary threshold must comply with public procurement legislation.  In an effort to increase the rate of EU funds absorption, Romania has amended regulations to allow applicants to use the assets financed under EU-funded programs as collateral.  However, Government of Romania entities’ understaffing and lack of management expertise, cumbersome procedures, and applicants’ difficulty obtaining private financing still significantly impede the absorption and implementation of EU funds.

Foreign Trade Zones/Free Ports/Trade Facilitation

Free Trade Zones (FTZs) received legal authority in Romania in 1992 under the authority of the Ministry of Transportation. General provisions include unrestricted entry and re-export of goods, and exemption from customs duties.  The law further permits the leasing or transfer of buildings or land for terms of up to 50 years to corporations or natural persons, regardless of nationality.  Foreign-owned firms have the same investment opportunities as Romanian entities in FTZs.  Currently six FTZs, primarily located on the Danube River or close to the Black Sea, operate: Sulina, Constanta-Sud Agigea, Galati, Braila, Curtici-Arad, and Giurgiu.  The administrator of each FTZ is responsible for all commercial activities performed within the zone.

Performance and Data Localization Requirements

The government generally does not mandate local employment.  The notable exception is the Offshore Law (Law 256/2018), which requires that at least 25 percent of the employees of offshore titleholders have to be Romanian citizens with fiscal residence in Romania.  There are no excessively onerous visa, residence, work permit, or similar requirements inhibiting mobility of foreign investors or their employees.  There are no government-imposed conditions on permission to invest.  The government does not require investors to establish or maintain data storage in Romania.  Romania neither follows nor is there legislation requiring a “forced localization” policy for goods, technology or data.  Romania does not have requirements for foreign IT providers to turn over source code or provide access for government surveillance.  Romania’s Constitutional Court has twice ruled such specific legislative drafts are unconstitutional.  There are no measures that prevent or unduly impede companies from freely transmitting customer or other business-related data outside the country.  There are no performance requirements imposed as a condition for establishing, maintaining or expanding an investment.

Romania has traditionally boasted a large, skilled labor force at comparatively low wage rates in most sectors.  The labor pool has tightened in highly skilled professions, in particular the information technology and health sectors, due to emigration and a deteriorating primary and secondary education system that fails to adequately prepare many graduates, particularly in rural areas, for university.  The university system is generally regarded as good, particularly in technical fields, though foreign and Romanian business leaders have urged reform of outdated higher education curricula to better meet the needs of a modern, innovation-driven market.  Payroll taxes remain steep.  As a result, an estimated 25 to 30 percent of the labor force works in the underground economy as “independent contractors” where their salaries are neither recorded, nor taxed.  Even for registered workers, underreporting of actual salaries is common.

The unemployment rate in Romania declined by 0.3 percent from 4.2 percent in 2018 to 3.9 percent in 2019, but additional data show a shrinking labor supply.  At 67.8 percent in 2018, the labor force participation rate — the portion of the working age population (15-64 years) who are employed or actively seeking employment — remains among the lowest in the EU.  Romanian employers in the engineering, machinery, IT services, and healthcare sectors report difficulties in hiring and retaining employees as Romania faces a shortage of medium- to high-skill workers.  As Romania’s emigration crisis deepens, other industries including food service and construction also face worker shortages.  According to the EC, Romanians were the largest working age group of EU citizens residing in other member states in 2018 (2,524,000 persons).  Many emigrants are younger and more qualified than the remaining population, constraining the supply of skilled labor.  The World Bank estimates that between 2000 and 2018, Romania’s population fell from 22.5 million to 19.5 million, with emigration accounting for more than 75 percent of the decline.  Unemployment among youth aged 15-24 increased from 16.2 percent in 2018 to 16.8 percent in 2019 and the number of young people neither in education, employment, nor training (NEETs) remains very high.  Romania faces a shortage of healthcare staff as doctors and nurses continue to seek work abroad, motivated not only by the higher salaries, but also by the country’s antiquated medical system.  According to the Ministry of Health, 10,000 doctors left Romania between 2017-2018.

The government lacks a comprehensive strategy to remedy labor shortages despite having taken some steps in recent years to attract and retain talent.  Employees in some sectors have benefitted from fiscal incentives.  For example, IT professionals are eligible for certain income tax exemptions.  In addition, in 2018, the GOR introduced an additional income tax and social contributions exemption for a period of ten years for employees in the construction sector.  The provision also introduced a specific minimum wage of RON 3,000 (USD 717) for construction workers.  In 2017, the government adopted a unitary wage law to establish a more consistent framework for wages across the public sector.  The law provided for a salary increase of at least 25 percent for most public sector employees; wages for some workers in the healthcare sector doubled in nominal terms as of March 2018.  Discussions with unions and businesses continue on the specific applications of the Unitary Wage Law.

The Labor Code regulates the labor market in Romania, controlling contracting, jurisdiction, and the application of regulations.  It applies to both national and foreign citizens working in Romania or abroad for Romanian companies.  As an EU member state, Romania has no government policy that requires the hiring of nationals, but it has annual work permit quotas for other non-EU nationals.  For 2020, the government increased annual work permits to 30,000, up from 20,000 in 2019.  Work permits are valid for one year and are renewable with an individual work contract.  Employers pay a EUR 100 (USD 10813 or RON 473) tax for most foreign workers with the exception of seasonal workers and those present in Romania on student visas, for whom the tax is EUR 25 (USD 278 or RON 117).  The government also reduced the cost of employing non-EU citizens in 2018.  The amended legislation no longer requires employers to pay a minimum wage equivalent to the gross average wage.  Normal minimum wage law applies with the exception that highly skilled non-EU workers must receive at least twice the gross minimum wage.  Foreign companies still resort to expensive staff rotations, special consulting contracts, and non-cash benefits.

Since Romania’s revolution in 1989, labor-management relations have occasionally been tense, the result of economic restructuring and personnel layoffs.  Trade unions, much better organized than employers’ associations, are vocal defenders of their rights and benefits.  Employers are required to make severance payments for layoffs according to the individual labor contracts, company terms and conditions, and the applicable collective bargaining agreements.  The Labor Code differentiates between layoffs and firing; severance payments are due only in case of layoffs.  There is no treatment of labor specific to special economic zones, foreign trade zones, or free ports.

Romanian law allows workers to form and join independent labor unions without prior authorization, and workers freely exercise this right.  Labor unions are independent of the government.  Unions and employee representatives must typically notify the employer before going on strike and must take specific steps provided by law before launching a general strike, including holding discussions and attempting reconciliation with management representatives.  Companies may claim damages from strike organizers if a court deems a strike illegal.  Labor dispute mechanisms are in place to mediate any conflicts between employers and employees regarding economic, social, and professional interests.  Unresolved conflicts are adjudicated in court according to the civil code.  The employee, employer, or labor union may initiate proceedings.  In 2019, employees from household appliances, electrical and railcar industries went on strike.  They sought higher pay, better working conditions, and sufficient staffing.

Union representatives alleged that few incidents of antiunion discrimination are officially reported because it is difficult to prove legally that employers laid off employees in retaliation for union activities.  The government has generally respected the right of association, and union officials state that registration requirements stipulated by law were complicated, but generally reasonable.  The current law permits, but it does not impose, collective labor agreements for groups of employers or sectors of activity.  Companies with more than 21 employees may use collective bargaining, which provides for written agreements between employees and the employer or employers’ association.  According to the Ministry of Labor, companies and employees had finalized 5,886 collective labor agreements as of the third quarter of 2019.  Since 2014, Parliament has periodically considered reintroducing collective bargaining nationwide, a practice that previously established minimum pay and working conditions for the entire economy but the Social Dialogue Act eliminated in 2011.

As an EU and International Labor Organization member state, Romania observes international labor rights.  The law prohibits all forms of forced or compulsory labor, but enforcement is not uniform or effective.  As penalties are insufficient to deter violations, reports indicated that such practices continued to occur, often involving Roma, disabled persons, and children.  The minimum age for most forms of employment is 16, but children may work with the consent of parents or guardians at age 15, provided the tasks correlate with their abilities.  Employment in harmful or dangerous jobs is forbidden for those under the age of 18; the government maintains a list of dangerous jobs in which the employment of minors is restricted.

Romania does not waive or derogate labor laws and regulations to attract or retain investments.  Since 2011, employers have had more flexibility to evaluate employees based on performance and hiring and firing procedures have been significantly relaxed.  The main objective for Romania’s national labor strategy for 2014-2020 is the development of an efficient, dynamic, and flexible workforce.  Romania aims to ensure that by 2020, 70 percent of people aged 20-64 will have access to a quality job which rewards them based on their capacity and competence and ensures a decent standard of living.

The minimum wage has nearly tripled in nominal terms since 2012, rising from RON 700 (USD 167) to RON 2,230 (USD 530) per month in 2020.  In addition, the government  introduced a differentiated minimum wage in December 2018, decreeing that employees with a university degree, as required by the job description and one year on the job, must receive at least RON 2,350 (USD 569) monthly, 5 percent more than other minimum wage workers earn.  Despite these measures, Romania has the highest rate of employed persons at risk of poverty among EU member states: 15 percent in 2018. Conversely, wage increases have been outpacing productivity growth since 2016.  This led to a marked acceleration of hourly labor costs, which posted a 12 percent nominal increase for the fourth quarter of 2019 as compared with the same period in 2018.

Separately, in December 2019, Parliament reduced payroll taxes for part-time workers.  The bill reversed 2017 provisions when in an effort to curtail underreporting of work, the government increased the minimum required payroll taxes that employers must pay for their part-time employees to equal those for a full-time employee earning minimum wage.  Coupled with the change in the legal tax incidence of social contributions described above, the law had the unintended consequence that some employees owed more in social contributions than their monthly earnings.  Subsequently, the government issued an ordinance in February 2018 to allow part-time workers to pay social contributions for their actual gross income only, mandating that the employer make up the difference. Effective January 1, 2020, part-time employees are taxed based on their actual earnings, and employers do not cover additional charges.

In 2018, the government passed new legislation clearly articulating the way the labor code applies to companies employing teleworkers, defining the distinction between teleworkers and employees who work full-time from home.  In addition, a new law regulating internships established standards for the number of interns a company may hire, as well as contract length, minimum pay, and reporting requirements.  The law creates a dedicated Internship Register under the supervision of the Local Labor Force Employment Agency.  Contract length may not exceed 720 hours or six months.  Interns cannot work more than 40 hours per week and must receive wages equivalent to at least 50 percent of the gross minimum wage.  Interns who are minors can work a maximum of 30 hours per week and six hours per day.  Interns may not make up more than five percent of a company’s workforce.  Finally, after Emergency Ordinance 114/2018 restricted day workers to just a few categories (mainly in agriculture), the government backtracked in April 2019 and expanded again the range of activities in which day workers can be employed and included temporary work related to fairs, trade shows, support activities for artistic events and catering, zoos and natural parks as well in the maintenance of green spaces. The Labor Inspectorate has allocated funds to set up an IT system for the Electronic Day Workers Register. Individuals cannot be employed as day laborers for more than 120 days per calendar year with the exception of those working in vineyards, seasonal animal rearing, or seasonal activities in university botanical gardens for whom the limit is 180 days per year.  Workers may not serve as a day laborer for more than 25 consecutive calendar days without a labor contract.  Laborers who violate this law are subject to fines of up to RON 2,000 (USD 478).

Investment Incentives

MISA advertises a number of financial advantages for foreigners looking to invest in the Kingdom, including the lack of personal income taxes and a corporate tax rate of 20 percent on foreign companies’ profits. MISA also lists various SAG-sponsored regional and international financial programs to which foreign investors have access, such as the Arab Fund for Economic and Social Development, the Arab Trade Financing Program, and the Islamic Development Bank.

The Saudi Industrial Development Fund (SIDF), a government financial institution established in 1974, supports private-sector industrial investments by providing medium- and long-term loans for new factories and for projects to expand, upgrade, and modernize existing manufacturing facilities. The SIDF offers loans of 50 to 75 percent of a project’s value, depending on the project’s location. Foreign investors that set up manufacturing facilities in developed areas (Riyadh, Jeddah, Dammam, Jubail, Mecca, Yanbu, and Ras al-Khair), for example, can receive a 15-year loan for up to 50 percent of a project’s value; investors in the Kingdom’s least developed areas can receive a 20-year loan for up to 75 percent of the project’s value. The SIDF also offers consultancy services for local industrial projects in the administrative, financial, technical, and marketing fields. (The SIDF’s website is https://www.sidf.gov.sa/en/Pages/default.aspx .)

The SAG offers several incentive programs to promote employment of Saudi nationals in certain cases. The Saudi Human Resources Development Fund (HRDF) (https://www.hrdf.org.sa/), for example, will pay 30 percent of a Saudi national’s wages for the first year of work, with a wage subsidy of 20 percent and 10 percent for the second and third year of employment, respectively (subject to certain limits and caps).

American and other foreign firms are able to participate in SAG-financed and/or -subsidized research-and-development (R&D) programs. Many of these programs are run though the King Abdulaziz City for Science and Technology (KACST), which funds many of the Kingdom’s R&D programs.

Foreign Trade Zones/Free Ports/Trade Facilitation

Saudi Arabia does not operate free trade zones or free ports. However, as part of its Vision 2030 program, the SAG has announced it will create special zones with special regulations to encourage investment and diversify government revenues. The SAG is considering the establishment of special regulatory zones in certain areas, including at NEOM and the King Abdullah Financial District in Riyadh.

Saudi Arabia has established a network of “economic cities” as part of the country’s efforts to reduce its dependence on oil. Overseen by MISA, these four economic cities aim to provide a variety of advantages to companies that choose to locate their operations within the city limits, including in matters of logistics and ease of doing business. The four economic cities are: King Abdullah Economic City near Jeddah, Prince AbdulAziz Bin Mousaed Economic City in north-central Saudi Arabia, Knowledge Economic City in Medina, and Jazan Economic City near the southwest border with Yemen. The cities are in various stages of development, and their future development potential is unclear, given competing Vision 2030 economic development projects.

The Saudi Industrial Property Authority (MODON in Arabic) oversees the development of 35 industrial cities, including some still under development. MODON offers incentives for commercial investment in these cities, including competitive rents for industrial land, government-sponsored financing, export guarantees, and certain customs exemptions. (MODON’s website is https://www.modon.gov.sa/en/Pages/default.aspx .)

The Royal Commission for Jubail and Yanbu (RCJY) was formed in 1975 and established the industrial cities of Jubail, located in eastern Saudi Arabia on the Persian Gulf coast, and Yanbu, located in north western Saudi Arabia on the Red Sea coast. A significant portion of Saudi Arabia’s refining, petrochemical, and other heavy industries are located in the Jubail and Yanbu industrial cities. The RCJY’s mission is to plan, promote, develop, and manage petrochemicals and energy intensive industrial cities. In connection with this mission, RCJY promotes investment opportunities in the two cities and can offer a variety of incentives, including tax holidays, customs exemptions, low cost loans, and favorable land and utility rates. More recently, the RCJY has assumed responsibility for managing the Ras Al Khair City for Mining Industries (2009) and the Jazan City for Primary and Downstream Industries (2015). (The RCJY’s website is https://www.rcjy.gov.sa).

Performance and Data Localization Requirements

The government does not impose systematic conditions on foreign investment. For example, there are no requirements to locate in a specific geographic area (except for some restrictions on the distribution of retail outlets and the location of industrial activities). Investors are not required to export a certain percentage of output. There is no requirement that the share of foreign equity be reduced over time. Investors are not required to disclose proprietary information to the SAG as part of the regulatory approval process, except where issues of health and safety are concerned.

Although investors have not been required heretofore to purchase from local sources, the situation is changing. In line with its bid to diversify the economy and provide more private sector jobs for Saudi nationals, the SAG has embarked on a broad effort to source goods and services domestically and is seeking commitments from investors to do so. In 2017, the Council of Economic and Development Affairs (CEDA) established the Local Content and Private Sector Development Unit (NAMAA in Arabic) to promote local content and improve the balance of payments. NAMAA is responsible for monitoring and implementing regulations, suggesting new policies, and coordinating with the private sector on all local content matters.

Government-controlled enterprises are also increasingly introducing local content requirements for foreign firms. Aramco’s “In-Kingdom Total Value Added” (IKTVA) program, for example, strongly encourages the purchase of goods and services from a local supplier base and aims to double Aramco’s percentage of locally-manufactured energy-related goods and services to 70 percent by 2021.

In the defense sector, Saudi Arabia’s military is in the process of reforming its procurement processes and policies to incorporate new ambitious goals of Saudi employment and localized production. The SAG has shifted over the last two years away from offsets in favor of “localization” of purchases of goods and services and “Saudization” of the labor force. Previously, the government required offsets in investments equivalent to up to 40 percent of a program’s value for defense contracts, depending on the value of the contract. The SAG is currently mandating increasingly strict localization requirements for government contracts in the defense sector. The SAG’s Vision 2030 program calls for 50 percent of defense materials to be produced and procured locally by 2030, and simultaneously seeks comparable increases in the number of Saudis employed in this sector.

The government encourages recruitment of Saudi employees through a series of incentives (see section 11 on “Labor Policies” for details of the “Saudization” program) and limits placed on the number of visas for foreign workers available to companies. The Saudi electronic visitor visa system defaults to five-year visas for all U.S. citizen applicants. “Business visas” are routinely issued to U.S. visitors who do not have an invitation letter from a Saudi company, but the visa applicant must provide evidence that he or she is engaged in legitimate commercial activity. “Commercial visas” are issued by invitation from Saudi companies to applicants who have a specific reason to visit a Saudi company.

In the fall of 2016, the SAG implemented a series of significant visitor fee increases for expatriates whose countries do not have reciprocity agreements with Saudi Arabia, doubling the cost of a single-entry business visit visa to $533. (U.S. citizens are exempt from such increases on the basis of reciprocity.) The SAG also imposed higher exit and reentry visa fees for all foreign workers residing in the Kingdom, including U.S. citizens. Furthermore, in January 2018, the SAG implemented new fees for expatriate employers ranging between $80 and $107 per employee per month and increased levies on expatriates with dependents to a $54 monthly fee for each dependent (see section 11 on “Labor Policies”). In January 2019, fees on expatriate employees increased to between $133 to $160 per month, and levies on expatriate dependents increased to $80 per month. These fees are scheduled to increase again in 2020 to between $186 to $212, but no additional increases are planned beyond 2020.

Data Treatment

Saudi Arabia is undergoing a digital transformation as part of its Vision 2030 National Transformation Program strategy to enable private sector growth. Emerging technology spheres include significant investment in developing Artificial Intelligence (AI), the Internet of Things (IoT), cloud computing, and other information and communications technology (ICT) sectors. As such, data protection and cybersecurity laws and regulations are rapidly evolving.

Saudi Arabia aims to be the Middle East’s high-technology hub. While there is no dedicated data protection legislation in force in Saudi Arabia, personal data is protected under general provisions of Saudi law imposing strict obligations on businesses in relation to how, who, and when personal data can be collected, used, and stored.

Saudi E-Commerce Law applies to all e-commerce providers (domestic and international) that offer goods and services to customers based in Saudi Arabia. Its provisions regulate e-commerce business practices, requiring transparency and consumer protection, as well as protection of the personal data of customers, with the goal to enhance cybersecurity and trust in online transactions. Data retention is also restricted; service providers are not allowed to retain personal data any longer than required to complete business transactions for which data was collected. Also, sharing of data and customer information with third-party providers is prohibited without express permission.

Saudi Arabia’s Cloud Computing Regulatory Framework (CCF) governs the rights and obligations of cloud service providers, customers, businesses, and government entities, and includes principles of data protection. CCF divides customer data protection into four levels: from non-sensitive to highly sensitive, with security breach notification required to be given to customers, and in certain situations breaches must be registered with the Communication and Information Technology Commission (CITC), which regulates Saudi telecommunications. CCF regulations do not allow cross-border data flows by cloud service providers or customers of sensitive business content from private and government sectors, as well as highly-sensitive and secret content belonging to government agencies and institutions, unless expressly allowed by Saudi law.

Saudi Arabia’s Internet of Things (IoT) Regulatory Framework regulates the use of all IoT services and includes data security, privacy, and protection requirements. IoT providers and implementors must comply with existing and future published laws, regulations, and requirements concerning data management, which will likely continue to focus on cybersecurity and data security. The IoT Regulatory Framework specifies data security measures, such as limited retention and data localization for IoT services and networks, which are also regulated by the CITC.

Saudi Arabia’s Electronic Transactions Law imposes obligations on internet service providers (ISPs) to maintain confidentiality of business information and personal data in electronic transactions.

Saudi Arabia’s Anti-Cyber Crime Law seeks to protect the national economy by deterring cybercrimes such as destruction or alteration of data, illegal access to bank or credit information, interruption of computer and information network transmissions, and other disruptions to ICT infrastructure. The law also requires consent from individuals whose personal data or documents are to be disclosed.

Saudi Arabia’s Essential Cyber Controls (ECC) regulations are currently being drafted with input from multiple Saudi cybersecurity and ICT authorities, and for the first time, in consultation with large American cloud, ISP, and ICT industry representatives, who have provided feedback on how to protect consumer data while still enabling innovation and growth of the digital economy and cross-border trade.

There are no requirements for foreign IT providers to turn over source code or provide access to encryption. Other than a requirement to retain records locally for ten years for tax purposes, there is no requirement regarding data storage or access to surveillance.

The Ministry of Labor and Social Development sets labor policy and, along with the Ministry of Interior, regulates recruitment and employment of expatriate labor, which makes up a majority of the private-sector workforce. About 75 percent of total jobs in the country are held by expatriates, who number roughly 12.6 million out of a total population of approximately 33.4 million. The largest groups of foreign workers come from India, Pakistan, Bangladesh, Egypt, the Philippines, and Yemen. Saudis occupy about 96 percent of government jobs, but only about 25 percent of the total jobs in the Kingdom. Over one-third of Saudi nationals are employed in the public sector.

Saudi Arabia’s General Authority for Statistics estimates unemployment at 5.5 percent for the total population and 12 percent for Saudi nationals (Q3 2019 figures), but these figures mask a high youth unemployment rate, a Saudi female unemployment rate of 21.3 percent, and low Saudi labor participation rates (45.5 percent overall; 18.9 percent for women). With approximately 60 percent of the Saudi population under the age of 30, job creation for new Saudi labor market entrants will prove a serious challenge for years.

The SAG encourages Saudi employment through “Saudization” policies that place quotas on employment of Saudi nationals in certain sectors, coupled with limits placed on the number of visas for foreign workers available to companies. In 2011, the Ministry of Labor and Social Development laid out a sophisticated plan known as Nitaqat, under which companies are divided into categories, each with a different set of quotas for Saudi employment based on company size. Reforms enacted in 2017 refined the program to incentivize further the employment of women, individuals with disabilities, and managerial and high-wage positions. Each company is determined to be in one of four strata based on its actual percentage of Saudi employees, with platinum and green strata for companies meeting or exceeding the quota for their sector and size, and yellow and red strata for those failing to meet it. Expatriate employees in red and yellow companies can move freely to green or platinum companies, without the approval of their current employers, and green and platinum companies have greater privileges in securing and renewing work permits for expatriates.

Over the past few years, the SAG has taken additional measures to strengthen the Nitaqat program and expand the scope of Saudization to require the hiring of Saudi nationals. The Ministry of Labor and Social Development has mandated that certain job categories in specific economic sectors only employ Saudi nationals, beginning with mobile phone stores in 2016. The ministry has since broadened the policy to include car rental agencies, retail sales jobs in shopping malls, and other sectors. The ministry has likewise mandated that only Saudi women can occupy retail jobs in certain businesses that cater to female customers, such as lingerie and cosmetics shops. In 2017, the Ministry of Labor and Social Development began to phase in rules forbidding employment of foreigners in retail sales positions in 12 sectors, including: watches, eyewear, medical equipment and devices, electrical and electronic appliances, auto parts, building materials, carpets, cars and motorcycles, home and office furniture, children’s clothing and men’s accessories, home kitchenware, and confectioneries. Because many retail shops in sectors subject to Saudization are owned and operated by expatriates, these policies have resulted in numerous store closures across the country. Many elements of Saudization and Nitaqat have garnered criticism from the private sector, but the SAG claims these policies have substantially increased the percentage of Saudi nationals working in the private sector over the last several years, despite near-record unemployment levels.

In 2017, the Ministry of Labor and Social Development and the Ministry of Interior launched the latest phase of an ongoing campaign to deport illegal and improperly documented workers. The combination of Saudization and Nitaqat policies, new expatriate fees, increased visa and entry/exit permit fees, the increased VAT, and other measures that have raised the cost of living, has prompted approximately 1.9 million expatriates to depart the Kingdom over the past few years. These measures have also significantly increased labor costs for employers, both Saudi and foreign alike.

Saudi Arabia’s labor laws forbid union activity, strikes, and collective bargaining. However, the government allows companies that employ more than 100 Saudis to form “labor committees” to discuss work conditions and grievances with management. In 2015, the SAG published 38 amendments to the existing labor law with the aim of expanding Saudi employees’ rights and benefits. Domestic workers are not covered under the provisions of the latest labor law; separate regulations covering domestic workers were issued in 2013, stipulating employers provide at least nine hours of rest per day, one day off a week, and one month of paid vacation every two years.

Saudi Arabia has taken significant steps to address labor abuses, but weak enforcement continues to result in credible reports of employer violations of foreign employee labor rights. In some instances, foreign workers and particularly domestic staff encounter employer practices (including passport withholding and non-payment of wages) that constitute trafficking in persons. The Department’s annual Trafficking in Persons Report details concerns about labor law enforcement within Saudi Arabia’s sponsorship system is available at: https://www.state.gov/j/tip/rls/tiprpt/.

Overtime is normally compensated at time-and-a-half rates. The minimum age for employment is 14. The SAG does not adhere to the International Labor Organization’s convention protecting workers’ rights. Non-Saudis have the right to appeal to specialized committees in the Ministry of Labor and Social Development regarding wage non-payment and other issues. Penalties issued by the ministry include banning infringing employers from recruiting foreign and/or domestic workers for a minimum of five years.

Investment Incentives

Investment incentives include the following: exemption from import duties and customs duties; tax credits and deferrals; cash refunds; carry-over of losses; and access to loans.  These are available equally to foreign and domestic investors, but delays in cash refund payments are a frequent complaint of those due them.  Additional information is available on the following websites:

https://www.finance.gov.tt/mof-investment-incentives-in-trinidad-and-tobago/ 

www.investt.com 

The government sometimes jointly finances foreign direct investment projects, but it not common.  One recent example was the government-driven proposal for a Sandals resort in Tobago, for which the government would provide financing for the construction of the development. (This deal eventually fell through.)

Foreign Trade Zones/Free Ports/Trade Facilitation

The Free Zones Act of 1988 (last amended in 1997) established the TT Free Zones Company (TTFZ) to promote export development and encourage both foreign and local investment projects in a relatively bureaucracy-free, duty-free, and tax-free environment.  Foreign owned firms have the same investment opportunities as Trinidad and Tobago entities.  There are currently 15 approved enterprises located in eight free zones.  The majority are located within a multiple-user site in north-central Trinidad, but the minister of trade and industry can designate any suitable area in TT as a free zone.

Free zone enterprises are exempt from customs duties on capital goods, parts, and raw materials for use in the construction and equipping of premises and in connection with the approved activity; import and export licensing requirements; land and building taxes; work permit fees; foreign currency and property ownership restrictions; capital gains taxes; withholding taxes on distribution of profits and corporation taxes or levies on sales or profits; VAT on goods supplied to a free zone; and duty on vehicles for use only within the free zone.

A corporation tax exemption for entities that qualify for free zone status is also in force.  Application to carry out an approved activity in an existing free zone area is made on specified forms to the TTFZ.

Free zone activities that qualify for approval include manufacturing for export, international trading in products, services for export, and development and management of free zones.  Activities that may be carried on in a free zone but do not qualify as approved activities include exploration and production activities involving petroleum, natural gas, or petrochemicals.  For more information, please review the following website: http://ttfzco.com/ 

Performance and Data Localization Requirements

The government does not mandate—although it strongly encourages, through negotiable incentives—projects that generate employment and foreign exchange; provide training and/or technology transfer; boost exports or reduce imports; have local content; and generally contribute to the welfare of the country.

The government does not mandate that locals be recruited to senior management and boards of directors.

Several foreign firms have encountered inconsistencies leading to long delays in the issuance of long-term work permits, but there are no explicit, onerous requirements.

There are no government/authority-imposed conditions on permission to invest.

There are no forced localization requirements.

There are no performance requirements, and thus no enforcement procedures.  There is no indication of an intention to implement across-the-board performance requirements.

Investment incentives are uniform for domestic and foreign investors but offered on a case-by-case, vice across-the-board, basis.

There are no requirements for foreign IT providers to turn over source code and/or provide access to encryption.

There are no measures that prevent or restrict companies from freely transmitting customer or other business-related data outside the country.

There are no rules on local data storage within Trinidad and Tobago.

In 2019, the International Labor Organization estimated unemployment at 2.8 percent. That figure, however, is artificially low due to government make-work programs that absorb excess labor.  The labor market includes many skilled and experienced workers, and the educational level of the population is among the top 10 in North America, according to the Human Development Index, though there is a gap between official literacy statistics and functional literacy.  In 2019, youth unemployment rate (15-24 years of age) was estimated at 6.41 percent.

Agricultural employment accounts for 3.6 percent of total employment while employment in services accounts for over 60 percent.  The estimated non-agricultural workforce in the informal economy is 10 percent of the overall labor force.  Trinidad and Tobago’s workforce includes not only TT nationals but also citizens of 11 other CARICOM countries as part of the free movement of labor without the need to obtain a work permit.  In 2019, Trinidad and Tobago granted 16,523 “Venezuelan migrants” the right to work in the country for a period of one year under a temporary protective status.  The Minister of National Security granted the Venezuelan migrants an automatic 6 months extension in 2020.

Trinidad and Tobago is a net importer of expatriate labor, including doctors, nurses, construction workers, and extractive industry specialists.  There are surpluses of accountants and attorneys and shortages of unskilled workers for the hospitality, retail, and agriculture sectors.  The government subsidizes tertiary-level education for citizens whose income falls within a minimum range.  The Multi-Sector Skills Training Program provides training in construction and hospitality and tourism for eligible citizens of Trinidad and Tobago.  The government also encourages continuing learning opportunities for the disadvantaged via the Skills Training Program, which develops skills that can aid in the creation of home-based production of goods and services and employment generation.

There is no government policy requiring hiring of nationals, though it is encouraged, particularly in the energy sector.

There are no restrictions on employers adjusting employment to respond to fluctuating market conditions via severance.  Labor laws differentiate between layoffs and firing.  The Retrenchment and Severance Benefits Act provides guidance on who is entitled to receive what based on specific circumstances.  Severance pay is usually only paid to retirees and workers who have been made redundant.  An employer is not required to pay severance to workers if everyone is severed, since the business is being closed.  If, however, only a portion of the workforce is rendered redundant, the employer must pay severance.  Unemployment insurance does not exist for workers who have been laid off for economic reasons, but programs designed to help job seekers get employed as quickly as possible are available.  Due to the COVID-19 pandemic, the government instituted a 3-6-month unemployment benefit program for those laid off.

Labor laws are not waived in order to attract or retain investment.  There are no separate labor law provisions for special economic zones, trade zones, or free ports.

Collective bargaining is common, with approximately 15 percent of the population covered by collective bargaining agreements.  Government workers, including civil servants, police officers, firefighters, military personnel, and staff in several state-owned enterprises, are covered by collective bargaining agreements.  Unions are also quite active in the energy, steel, and telecommunications industries.  Collective bargaining takes place between the firm and the recognized majority union rather than on an industry-wide basis.  The government as an employer also bargains collectively.  The process of collective bargaining is regulated by the Industrial Relations Act.  There are close to 30 active, independent labor unions in TT.

The Industrial Relations Act (IRA) provides for dispute resolution through an industrial court in instances where the issue cannot be resolved by collective bargaining or through conciliation efforts by the Ministry of Labor.

There was no strike in the past year that posed an investment risk.

The ILO has not identified any compliance gaps in law or practice regarding international labor standards that may pose a reputational risk to investors.  The government does not have a labor inspectorate system to identify and remediate labor violations, but the industrial court investigates and prosecutes unfair labor practices, such as harassment and/or improper dismissal of union members.

There were no new labor related laws or regulations enacted or in draft over the last year.

Investment Incentives

All free trade zones provide incentives to foreign investors.  Outside the free trade zones, the UAE provides no incentives, although the ability to purchase property as freehold in certain prime developments could be considered an incentive to attract foreign investment.

Foreign Trade Zones/Free Ports/Trade Facilitation

There are numerous free trade zones throughout the UAE.  Foreign companies generally enjoy the same investment opportunities within those zones as Emirati citizens.  The chief attraction of free trade zones is that foreigners may own up to 100 percent of the equity in a free trade zone enterprise.  All free trade zones provide 100 percent import and export tax exemption, 100 percent exemption from commercial levies, 100 percent repatriation of capital and profits, multi-year leases, easy access to ports and airports, buildings for lease, energy connections (often at subsidized rates), and assistance in labor recruitment.  In addition, free trade zone authorities provide extensive support services, such as sponsorship, worker housing, dining facilities, and physical security.

Free trade zones have their own independent authority with responsibility for licensing and helping companies establish their businesses.  Investors can register new companies in a free trade zone, or license branch or representative offices.  In 2018, the Abu Dhabi Department of Economic Development (ADED) introduced dual onshore licenses for all Abu Dhabi free zone companies as part of stimulus package to attract foreign direct investments.  However, free trade zones still have limited liability and are governed by special laws and regulations.  Companies in free trade zones seeking to operate within the UAE may be governed by the new Federal Commercial Companies Law, if the laws of the relevant free trade zone permit them to operate outside of the free zones.

Performance and Data Localization Requirements

The Emiratization Initiative is a federal incentive program that aims to increase the number of Emirati citizens employed within the private sector.  Exact requirements vary by industry, but the Vision 2021 national strategic plan aims to increase the percentage of Emiratis working in the private sector from five percent in 2014 to eight percent by 2021.  Most Emirati citizens are employed by the government or one of its many government-related entities (GREs).

All foreign defense contractors with over USD 10 million in contract value over a five-year period must participate in the Tawazun Economic Program, previously known as the UAE Offset Program.  This program also requires defense contractors that are awarded contracts valued at more than USD 10 million to establish commercially-viable joint ventures with local business partners, which would be projected to yield profits equivalent to 60 percent of the contract value within a specified period, usually seven years.

The UAE does not force foreign investors to use domestic content in goods or technology or compel foreign IT providers to turn over source code, but it strongly encourages companies to utilize local content.  In February 2018, the Abu Dhabi National Oil Company (ADNOC) piloted a new In-Country Value (ICV) strategy, which gives preference in awarding contracts to foreign companies that use local content and employ Emirati citizens.  In February 2020, the Abu Dhabi Department of Economic Development and ADNOC signed an agreement to drive ICV strategy and to standardize ADNOC’s ICV certification program across the Abu Dhabi Government’s procurement process.  Following this agreement, businesses can make a one-time application for a unified ICV certificate that will now be applicable for the Abu Dhabi Government’s commercial evaluation process of goods and services procurement.  UAE government officials have indicated plans to expand the ICV program to other sectors of the economy, and to other emirates, in the coming years.  In 2019, Abu Dhabi Department of Economic Development introduced the Abu Dhabi Local Content (ADLC) initiative as part of Ghadan 21, an accelerator program to encourage private sector participation in Abu Dhabi government tenders.

Despite an economic slowdown in 2019, unemployment among UAE citizens remains low.  Expatriates, who represent over 85 percent of the country’s 9.6 million residents, account for more than 95 percent of private sector workers.  As a result, there would be large labor shortages in all sectors of the economy if not for expatriate workers.  Most expatriate workers derive their legal residency status from their employment.

A significant portion of the country’s expatriate labor population consists of low-wage workers who are primarily from South Asia and work in labor-intensive industries such as construction, maintenance, and sanitation.  In addition, several hundred thousand domestic workers, primarily from South and Southeast Asia and Africa, work in the homes of both Emirati and expatriate families.  Federal labor law does not apply to domestic, agricultural, or public sector workers.  In 2014, the federal government implemented a law mandating a standard contract for all domestic workers.  In 2017, the UAE issued a domestic workers law, which regulates their rights and contracts.  Various regulations require businesses in certain sectors such as financial services to employ minimum quotas of Emiratis.

Under UAE labor law, employers must pay severance to workers who complete one year or more of service except in cases of termination under certain conditions described in Article 120 of the federal labor law, which relate to misconduct by workers.  Expatriate workers do not receive UAE government unemployment insurance.  Termination of UAE nationals in most situations requires prior approval from the Ministry of Human Resources and Emiratization.

A guest worker system generally guarantees transportation back to country of origin at the conclusion of employment.  There have been no reports of excessively onerous visa, residence, work permit, or similar requirements inhibiting mobility of employees.  In June 2018, the UAE cabinet approved a revamped repatriation scheme to replace the USD 817 guarantee employers had to deposit per worker.  Under the new system, repatriation insurance costs USD 16 per year per employee.  In November 2018, the UAE cabinet approved five-year residence visas for investors who purchase property worth USD 1.4 million or more, and 10-year residence visas for individuals who invest USD 2.8 million in a business.  The government also introduced new visas for entrepreneurs, and specialized talent in science, medicine and specialized technical fields.  In 2018, the Ministry of Human Resources and Emiratization introduced a part-time work permit, allowing employees who live in the UAE on a work visa to undertake part-time jobs and to work for multiple employers simultaneously.

Although UAE federal law prohibits the payment of recruitment fees, many prospective workers continue to make such payments in their home countries.  In 2018, the UAE government launched Tadbeer Centers, publicly regulated but privately operated agencies that are meant to replace recruitment agencies by 2020.  There is no minimum wage legally mandated by the UAE; however, some labor-sending countries require their citizens to receive certain minimum wage levels as a condition for allowing them to work in the UAE.  In January 2020, the UAE government introduced a salary requirement for residents seeking to directly sponsor a domestic worker, raising the minimum monthly salary from USD 1,630 to 6,810.

Federal Law No. 8 of 1980 prohibits labor unions.  The law also prohibits public sector employees, security guards, and migrant workers from striking, and allows employers to suspend private sector workers for doing so.  In addition, employers have the ability to cancel the contracts of striking workers, which can lead to deportation.  According to government statistics, there were approximately 30 to 60 strikes per year between 2012 and 2015, the last year for which data is available.  In December 2019, construction workers in Abu Dhabi engaged in an hours-long strike, claiming they had not been paid in months and that each was owed over USD 3,400.  The police intervened to defuse the protests and arrested some of the workers for resisting.  Mediation plays a central role in resolving labor disputes.  The federal Ministry of Human Resources and Emiratization (MHRE) and local police forces maintain telephone hotlines for labor dispute and complaint submissions.  The MHRE manages 11 centers around the UAE that provide mediation services between employers and employees.  Disputes not resolved by the Ministry of Human Resources and Emiratization move to the labor court system.

The MHRE inspects company workplaces and company-provided worker accommodations to ensure compliance with UAE law.  Emirate-level government bodies, including the Dubai Municipality, also carry out regular inspections.  The MHRE also enforces a mid-day break from 12:30 p.m. – 3:00 p.m. during the extremely hot summer months.  The federally-mandated Wage Protection System (WPS) monitors and requires electronic transfer of wages to approximately 4.5 million private sector workers (about 95 percent of the total private sector workforce).  There are reports that small private construction and transport companies work around the WPS to pay workers less than their contractual salaries.  Domestic workers are not paid through the WPS, although the UAE governments hopes to incorporate them into the system beginning in the third quarter of 2020.

Following the promulgation of similar legislation in Abu Dhabi, Dubai’s government fully implemented Law No. 11 in May 2017, which mandates employers provide basic health insurance coverage to their employees or face fines.  Dubai’s mandatory health insurance law covers 4.3 million people, and applies to employees residing in other emirates but working in Dubai.

The multi-agency National Committee to Combat Human Trafficking is the federal body tasked with monitoring and preventing human trafficking, including forced labor.  Child labor is illegal and rare in the UAE.  The UAE continues to participate in the Abu Dhabi Dialogue, engage in the Colombo Process, and partner with other multilateral organizations such as the International Organization for Migration and International Labor Organization in regard to labor exploitation and human trafficking.

Section 7 of the Department of State’s Human Rights Report (http://www.state.gov/j/drl/rls/hrrpt) provides more information on worker rights, working conditions, and labor laws in the UAE.  The Department of State’s Trafficking in Persons Report (https://www.state.gov/j/tip/rls/tiprpt/2018/index.htm) details the UAE government’s efforts to combat human trafficking.