Policies Towards Foreign Direct Investment

Egypt’s completion of the most recent three-year, $13 billion IMF Extended Fund Facility and its associated reform package helped stabilize Egypt’s macroeconomy, introduced important subsidy and social spending reforms, and helped restore investor confidence in the Egyptian economy.  The flotation of the Egyptian Pound (EGP) in November 2016 and the restart of Egypt’s interbank foreign exchange (FX) market as part of this program was the first major step in restoring investor confidence that immediately led to increased portfolio investment and should lead to increased FDI over the long term.  Other important reforms have included a new investment law and an industrial licensing law in 2017, a new bankruptcy law in 2018, and other reforms aimed at reducing regulatory overhang and improving the ease of doing business. Egypt’s government has announced plans to further improve its business climate through investment promotion, facilitation, more efficient business services, and the implementation of investor-friendly policies.

With a few exceptions, Egypt does not legally discriminate between Egyptian nationals and foreigners in the formation and operation of private companies. The 1997 Investment Incentives Law was designed to encourage domestic and foreign investment in targeted economic sectors and to promote decentralization of industry away from the Nile Valley. The law allows 100 percent foreign ownership of investment projects and guarantees the right to remit income earned in Egypt and to repatriate capital.

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

The Capital Markets Law (Law 95 of 1992) and its amendments, including the most recent in February 2018, and regulations govern Egypt’s capital markets.  Foreign investors are able to buy shares on the Egyptian Stock Exchange on the same basis as local investors.

The General Authority for Investment and Free Zones (GAFI, http://gafi.gov.eg) is the principal government body that regulates and facilitates foreign investment in Egypt, and reports directly to the Prime Minister.  Prior to December 2019, GAFI had been a component of the Ministry of Investment and International Cooperation.

”The Investor Service Center (ISC)” is an administrative unit established within GAFI that provides ”one-stop-shop” services, easing the way for global investors looking for opportunities presented by Egypt’s domestic economy and the nation’s competitive advantages as an export hub for Europe, the Arab world and Africa. This is in addition to promoting Egypt’s investment opportunities in various sectors.

ISC provides a full start-to-end service to the investor, including assistance related to company incorporation, establishment of company branches, approval of minutes of Board of Directors and General Assemblies, increase of capital, change of activity, liquidation procedures, and other corporate-related matters. The Center also aims to issue licenses, approvals, and permits required for investment activities, within 60 days from the date of request submissions. Other services GAFI provides include:

Advice and support to help in the evaluation of Egypt as a potential investment location;

Identification of suitable locations and site selection options within Egypt;

Assistance in identifying suitable Egyptian partners;

Aftercare and dispute settlement services.​

ISC Branches are expected to be established in all Egypt’s Governorates.  Egypt maintains ongoing communication with investors through formal business roundtables, investment promotion events (conferences and seminars), and one-on-one investment meetings.

Limits on Foreign Control and Right to Private Ownership and Establishment

The Egyptian Companies Law does not set any limitation on the number of foreigners, neither as shareholders nor as managers/board members, except for Limited Liability Companies where the only restriction is that one of the managers should be an Egyptian national. In addition, companies are required to obtain a commercial and tax license, and pass a security clearance process.  Companies are able to operate while undergoing the often lengthy security screening process.  However, if the firm is rejected, it must cease operations and undergo a lengthy appeals process.  Businesses have cited instances where Egyptian clients were hesitant to conclude long term business contracts with foreign businesses that have yet to receive a security clearance. They have also expressed concern about seemingly arbitrary refusals, a lack of explanation when a security clearance is not issued, and the lengthy appeals process. Although the Government of Egypt has made progress streamlining the business registration process at GAFI, inconsistent treatment by banks and other government officials has in some cases led to registration delays.

Sector-specific limitations to investment include restrictions on foreign shareholding of companies owning lands in the Sinai Peninsula. Likewise, the Import-Export Law requires companies wishing to register in the Import Registry to be 51 percent owned and managed by Egyptians. In 2016, the Ministry of Trade prepared an amendment to the law allowing the registration of importing companies owned by foreign shareholders, but the law has not yet been submitted to Parliament. Nevertheless, the new Investment Law does allow wholly foreign companies which are invested in Egypt to import goods and materials.

Land/Real Estate Law 15 of 1963 explicitly prohibits foreign individual or corporation ownership of agricultural land (defined as traditional agricultural land in the Nile Valley, Delta and Oases). The ownership of land by foreigners is governed by three laws: Law No. 15 of 1963, Law No. 143 of 1981, and Law No. 230 of 1996. Law No. 15 stipulates that no foreigners, whether natural or juristic persons, may acquire agricultural land.  Law No. 143 governs the acquisition and ownership of desert land. Certain limits are placed on the number of feddans (one feddan is equal to approximately one hectare) that may be owned by individuals, families, cooperatives, partnerships and corporations. Partnerships are permitted to own 10,000 feddans. Joint stock companies are permitted to own 50,000 feddans.

Under Law No. 230 non-Egyptians are allowed to own real estate (vacant or built) only under the following conditions:

• Ownership is limited to two real estate properties in Egypt that serve as accommodation for the owner and his family (spouses and minors) in addition to the right to own real estate needed for activities licensed by the Egyptian Government.
• The area of each real estate property does not exceed 4,000 m².
• The real estate is not considered a historical site.

Exemption from the first and second conditions is subject to the approval of the Prime Minister. Ownership in tourist areas and new communities is subject to conditions established by the Cabinet of Ministers. Non-Egyptians owning vacant real estate in Egypt must build within a period of five years from the date their ownership is registered by a notary public. Non-Egyptians cannot sell their real estate for five years after registration of ownership, unless the consent of the Prime Minister for an exemption is obtained.

Other Investment Policy Reviews

The Organization for Economic Cooperation and Development (OECD) signed a declaration with Egypt on International Investment and Multinational Enterprises on July 11, 2007, at which time Egypt became the first Arab and African country to sign the OECD Declaration, marking a new stage in Egypt’s drive to attract more foreign direct investment (FDI).  On July 8, 2020, the OECD released an Investment Policy Review for Egypt which highlighted the government’s progress implementing a proactive reform agenda to improve the business climate, attract more foreign and domestic investment, and reap the benefits of openness to FDI and participation in global value chains.

https://www.oecd.org/countries/egypt/egypt-continues-to-strengthen-its-institutional-and-legal-framework-for-investment.htm 

In January 2018 the World Trade Organization (WTO) published a comprehensive review of the Egyptian Government’s trade policies, including details of the 2017 Investment Law’s main provisions.

https://www.wto.org/english/tratop_e/tpr_e/s367_e.pdf 

The United Nations Conference on Trade Development (UNCTAD) published an Information and Communications Technology (ICT) Policy Review for Egypt in 2017, in which it highlighted the potential for investments in the ICT sector to help drive economic growth and recommended specific reforms aimed at strengthening Egypt’s performance in key ICT policy areas.  https://unctad.org/en/PublicationsLibrary/dtlstict2017d3_en.pdf   UNCTAD published its last comprehensive Investment Policy Review for Egypt in 1999, and an implementation report in 2006.

Business Facilitation

GAFI’s new ISC (https://gafi.gov.eg/English/Howcanwehelp/OneStopShop/Pages/default.aspx ) was launched in February 2018 and provides a full start-to-end service to the investor as described above.  The new Investment Law also introduces ”Ratification Offices” to facilitate obtaining necessary approvals, permits, and licenses within 10 days of issuing a Ratification Certificate.

Investors may fulfill the technical requirements of obtaining the required licenses through these Ratification Offices, directly through the concerned authority, or through its representatives at the Investment Window at GAFI.  The Investor Service Center is required to issue licenses within 60 days from submission. Companies can also register online.  GAFI has also launched e-establishment, e-signature, and e-payment services to facilitate establishing companies.

Outward Investment

Egypt promotes and incentivizes outward investment. According to the Egyptian government’s FDI Markets database for the period from January 2003 to May 2020, outward investment featured the following:

• Egyptian companies implemented 270 Egyptian FDI projects. Estimated total value of the projects, which employed about 50,000 workers, was $25.6 billion.
• The following countries respectively received the largest amount of Egyptian outward investment in terms of total project value: UAE, Saudi Arabia, Algeria, Kenya, Jordan, Ethiopia, Germany, Libya, Morocco and Sudan. The UAE, Saudi Arabia and Algeria accounted for about 28 percent of the total amount.

Elsewedy Electric was the largest Egyptian company investing abroad, implementing 20 projects with a total investment estimated to be $2.1 billion.

Egypt does not restrict domestic investors from investing abroad.

Egypt has signed 115 Bilateral Investment Treaties (BITs), out of which 74 BITs have entered into force. The full list can be found at http://investmentpolicyhub.unctad.org/IIA .

The U.S.-Egypt Bilateral Investment Treaty provides for fair, equitable, and nondiscriminatory treatment for investors of both nations. The treaty includes provisions for international legal standards on expropriation and compensation; free financial transfers; and procedures for the settlement of investment disputes, including international arbitration.

In addition to BITs, Egypt is also a signatory to a wide variety of other agreements covering trade issues. Egypt joined the Common Market for Eastern and Southern Africa (COMESA) in June 1998, and in 2019 deposited its instrument of ratification for the 2018 African Continental Free Trade Agreement (AfCFTA).  In July 1999, Egypt and the United States signed a Trade and Investment Framework Agreement (TIFA). In June 2001, Egypt signed an Association Agreement with the European Union (EU), which entered into force on June 1, 2004. The agreement provided immediate duty free access of Egyptian products into EU markets, while duty free access for EU products into the Egyptian market was phased in over a 12-year period ending in 2016.  In 2010, Egypt and the EU completed an agricultural annex to their agreement, liberalizing trade in over 90 percent of agricultural goods.

Egypt is also a member of the Greater Arab Free Trade Agreement (GAFTA), and a member of the Agadir Agreement with Jordan, Morocco, and Tunisia, which relaxes rules of origin requirements on products jointly manufactured by the countries for export to Europe. Egypt also has an FTA with Turkey, in force since March 2007, and an FTA with the Mercosur bloc of Latin American nations.

In 2004, Egypt and Israel signed an agreement to take advantage of the U.S. Government’s Qualifying Industrial Zone (QIZ) program. The purpose of the QIZ program is to promote stronger ties between the region’s peace partners, as well as to generate employment and higher incomes, by granting duty-free access to goods produced in QIZs in Egypt using a specified percentage of Israeli and local input. Under Egypt’s QIZ agreement, Egypt’s exports to the United States produced in certain industrial areas are eligible for duty-free treatment if they contain a minimum 10.5 percent Israeli content.

The industrial areas currently included in the QIZ program are Alexandria, areas in Greater Cairo such as Sixth of October, Tenth of Ramadan, Fifteenth of May, South of Giza, Shobra El-Khema, Nasr City, and Obour, areas in the Delta governorates such as Dakahleya, Damietta, Monofeya and Gharbeya, and areas in the Suez Canal such as Suez, Ismailia, Port Said, and other specified areas in Upper Egypt. Egyptian exports to the United States through the QIZ program have mostly been ready-made garments and processed foods. The value of the Egyptian QIZ exports to the United States was approximately $752 million in 2017.

Egypt has a bilateral tax treaty with the United States. Egypt also has tax agreements with 59 other countries, including UAE, Kuwait, Saudi Arabia, Mauritius, Bahrain, and Morocco.

The Egyptian Parliament passed and the government implemented a value added tax (VAT) in late 2016, which took the place of the General Sales Tax, as part of the IMF loan and economic reform program.  However, the government decided to postpone the “Stock Market Capital Gains Tax” for three years as of early 2017. In 2016, there were a number of tax disputes between foreign investors and the government, but most of them were resolved through the Tax Department and the Economic Court.

Transparency of the Regulatory System

The Egyptian government has made efforts to improve the transparency of government policy and to support a fair, competitive marketplace.  Nevertheless, improving government transparency and consistency has proven difficult and reformers have faced strong resistance from entrenched bureaucratic and private interests.  Significant obstacles continue to hinder private investment, including the reportedly arbitrary imposition of bureaucratic impediments and the length of time needed to resolve them.  Nevertheless, the impetus for positive change driven by the government reform agenda augurs well for improvement in policy implementation and transparency.

Enactment of laws is the purview of the Parliament, while executive regulations are the domain of line ministries.  Under the Constitution, draft legislation can be presented by the president, the cabinet, and any member of parliament.  After submission, parliamentary committees review and approve, including any amendments.  Upon parliamentary approval, a judicial body reviews the constitutionality of any legislation before referring it to the president for his approval.  Although notice and full drafts of legislation are typically printed in the Official Gazette (similar to the Federal Register in the United States), in practice consultation with the public is limited.  In recent years, the Ministry of Trade and other government bodies have circulated draft legislation among concerned parties, including business associations and labor unions. This has been a welcome change from previous practice, but is not yet institutionalized across the government.

While Egyptian parliaments have historically held “social dialogue” sessions with concerned parties and private or civic organizations to discuss proposed legislation, it is unclear to what degree the current Parliament will adopt a more inclusive approach to social dialogue.  Many aspects of the 2016 IMF program and related economic reforms stimulated parliament to engage more broadly with the public, marking some progress in this respect.

Accounting, legal, and regulatory procedures are transparent and consistent with international norms.  The Financial Regulatory Authority (FRA) supervises and regulates all non-banking financial markets and instruments, including capital markets, futures exchanges, insurance activities, mortgage finance, financial leasing, factoring, securitization, and microfinance.  It issues rules that facilitate market efficiency and transparency. FRA has issued legislation and regulatory decisions on non-banking financial laws which govern FRA’s work and the entities under its supervision. (http://www.fra.gov.eg/jtags/efsa_en/index_en.jsp )

The criteria for awarding government contracts and licenses are made available when bid rounds are announced.  The process actually used to award contracts is broadly consistent with the procedural requirements set forth by law.  Further, set-aside requirements for small- and medium-sized enterprise (SME) participation in GoE procurement are increasingly highlighted. FRA maintains a centralized website where key regulations and laws are published: http://www.fra.gov.eg/content/efsa_en/efsa_pages_en/laws_efsa_en.htm 

The Parliament and the independent “Administrative Control Authority” both ensure the government’s commitment to follow administrative processes at all levels of government.  Egypt does not have an online equivalent of the U.S. Federal Register and there is no centralized online location for key regulatory actions or their summaries.

The cabinet develops and submits proposed regulations to the president following discussion and consultation with the relevant ministry and informal consultation with other interest groups. Based on the recommendations provided in the proposal, including recommendations by the presidential advisors, the president issues “Presidential Decrees” that function as implementing regulations.  Presidential decrees are published in the “Official Gazette” for enforcement.

The specific government agency or entity responsible for enforcing the regulation works with other departments for implementation across the government.  Not all issued regulations are announced online. Theoretically, the enforcement process is legally reviewable.

Before a government regulation is implemented, there is an attempt to properly analyze and thoroughly debate proposed legislation and rules using appropriate available data.  But there are no laws requiring scientific studies or quantitative analysis of impacts of regulations. Not all public comments received by regulators are made public.

The government made its budget documents widely and easily accessible to the general public, including online.  Budget documents did not include allocations to military state-owned enterprises, nor allocations to and earnings from state-owned enterprises.  Information on government debt obligations was publicly available online, but up-to-date and clear information on state-owned enterprise debt guaranteed by the government was not available.  According to information the Central Bank has provided to the World Bank, the lack of information available about publicly guaranteed private sector debt meant that this debt was generally recorded as private sector non-guaranteed debt thus potentially obscuring some contingent debt liabilities.

International Regulatory Considerations

In general, international standards are the main reference for Egyptian standards.  According to the Egyptian Organization for Standardization and Quality Control, approximately 7,000 national standards are aligned with international standards in various sectors.  In the absence of international standards, Egypt uses other references which are referred to in Ministerial decrees No. 180//1996 and No. 291//2003, which stipulate that in the absence of Egyptian standards, the producers and importers may use the following:

European standards (EN)
U.S. standards (ANSI)
Japanese standards (JIS)

Egypt is a member of the WTO, participates actively in various committees, and notifies technical regulations to the WTO Committee on Technical Barriers to Trade.  Egypt ratified the Trade Facilitation Agreement (TFA) on June 22, 2017 by a vote of Parliament and issuance of presidential decree No. 149/2017, and deposited its formal notification to the WTO on June 24, 2019.  Egypt notified indicative and definitive dates for implementing Category B and C commitments on June 20, 2019, but to date has not notified dates for implementing Category A commitments.  In August 2020 the Egyptian Parliament passed a new Customs Law that includes provisions for key TFA reforms, including advance rulings, separation of release, a Single Window system, expedited customs procedures for authorized economic operators, post-clearance audits, and e-payments.

Legal System and Judicial Independence

Egypt’s legal system is a civil codified law system based on the French model.  If contractual disputes arise, claimants can sue for remedies through the court system or seek resolution through arbitration.  Egypt has written commercial and contractual laws. The country has a system of economic courts, specializing in private sector disputes, which have jurisdiction over cases related to economic and commercial matters, including intellectual property disputes.  The judiciary is set up as an independent branch of the government.

Regulations and enforcement actions can be appealed through Egypt’s courts, though appellants often complain about the very lengthy judicial process, which can often take years.  To enforce judgments of foreign courts in Egypt, the party seeking to enforce the judgment must obtain an exequatur (a legal document issued by governments allowing judgements to be enforced).  To apply for an exequatur, the normal procedures for initiating a lawsuit in Egypt must be satisfied. Moreover, several other conditions must be satisfied, including ensuring reciprocity between the Egyptian and foreign country’s courts, and verifying the competence of the court rendering the judgment.

Judges in Egypt are said to enjoy a high degree of public trust and are the designated monitors for general elections.  The Judiciary is proud of its independence and can point to a number of cases where a judge has made surprising decisions that run counter to the desires of the regime.  The judge’s ability to loosely interpret the law can sometimes lead to an uneven application of justice.  The system’s slowness and dependence on paper processes hurts its overall competence and reliability.  The executive branch claims to have no influence over the judiciary, but in practice political pressures seem to influence the courts on a case by case basis.  In the experience of the Embassy, judicial decisions are highly appealable at the national level and this appeal process is regularly used by litigants.

Laws and Regulations on Foreign Direct Investment

No specialized court exists for foreign investments.

The 2017 Investment Law, as well as other FDI-related laws and regulations, are published on GAFI’s website, https://gafi.gov.eg/English/StartaBusiness/Laws-and-Regulations/Pages/default.aspx .

In 2017 the Parliament also passed the Industrial Permits Act, which reduced the time it takes to license a new factory by mandating that the Industrial Development Authority (IDA) respond to a request for a license within 30 days of the request being filed.  As of February 2020, new regulations allow IDA regional branch directors or their designees to grant conditional licenses to industrial investors until other registration requirements are complete.

In 2016, the Import-Export Law was revised to allow companies wishing to register in the Import Registry to be 51 percent owned and managed by Egyptians; formerly the law required 100 percent Egyptian ownership and management.  In November 2016, the inter-ministerial Supreme Investment Council also announced seventeen presidential decrees designed to spur investment or resolve longstanding issues. These include:

• Forming a “National Payments Council” that will work to restrict the handling of FX outside the banking sector;
• A decision to postpone for three years the capital gains taxon stock market transactions;
• Producers of agricultural crops that Egypt imports or exports will get tax exemptions;
• Five-year tax exemptions for manufacturers of “strategic” goodsthat Egypt imports or exports;
• Five-year tax exemptionsfor agriculture and industrial investments in Upper Egypt;
• Begin tendering land with utilities for industry in Upper Egypt for free as outlined by the Industrial Development Authority.

Competition and Anti-Trust Laws

The Investment Incentives Law provides guarantees against nationalization or confiscation of investment projects under the law’s domain. The law also provides guarantees against seizure, requisition, blocking, and placing of assets under custody or sequestration.  It offers guarantees against full or partial expropriation of real estate and investment project property. The U.S.-Egypt Bilateral Investment Treaty also provides protection against expropriation. Private firms are able to take cases of alleged expropriation to court, but the judicial system can take several years to resolve a case.

Expropriation and Compensation

Egypt’s Investment Incentives Law provides guarantees against nationalization or confiscation of investment projects under the law’s domain.  The law also provides guarantees against seizure, requisition, blocking, and placing of assets under custody or sequestration.  It offers guarantees against full or partial expropriation of real estate and investment project property.  The U.S.-Egypt Bilateral Investment Treaty also provides protection against expropriation.  Private firms are able to take cases of alleged expropriation to court, but the judicial system can take several years to resolve a case.

Dispute Settlement

ICSID Convention and New York Convention

Egypt acceded to the International Convention for the Settlement of Investment Disputes (ICSID) in 1971 and is a member of the International Center for the Settlement of Investment Disputes, which provides a framework for the arbitration of investment disputes between the government and foreign investors from another member state, provided the parties agree to such arbitration. Without prejudice to Egyptian courts, the Investment Incentives Law recognizes the right of investors to settle disputes within the framework of bilateral agreements, the ICSID or through arbitration before the Regional Center for International Commercial Arbitration in Cairo, which applies the rules of the United Nations Commissions on International Trade Law.

Egypt adheres to the 1958 New York Convention on the Enforcement of Arbitral Awards; the 1965 Washington Convention on the Settlement of Investment Disputes between States and the Nationals of Other States; and the 1974 Convention on the Settlement of Investment Disputes between the Arab States and Nationals of Other States.  An award issued pursuant to arbitration that took place outside Egypt may be enforced in Egypt if it is either covered by one of the international conventions to which Egypt is party or it satisfies the conditions set out in Egypt’s Dispute Settlement Law 27 of 1994, which provides for the arbitration of domestic and international commercial disputes and limited challenges of arbitration awards in the Egyptian judicial system.  The Dispute Settlement Law was amended in 1997 to include disputes between public enterprises and the private sector.

To enforce judgments of foreign courts in Egypt, the party seeking to enforce the judgment must obtain an exequatur.  To apply for an exequatur, the normal procedures for initiating a lawsuit in Egypt, and several other conditions must be satisfied, including ensuring reciprocity between the Egyptian and foreign country’s courts and verifying the competence of the court rendering the judgment.

Egypt has a system of economic courts specializing in private sector disputes that have jurisdiction over cases related to economic and commercial matters, including intellectual property disputes. Despite these provisions, business and investors in Egypt’s renewable energy projects have reported significant problems resolving disputes with the Government of Egypt.

Investor-State Dispute Settlement

The U.S.-Egypt Bilateral Investment Treaty allows an investor to take a dispute directly to binding third-party arbitration. The Egyptian courts generally endorse international arbitration clauses in commercial contracts. For example, the Court of Cassation has, on a number of occasions, confirmed the validity of arbitration clauses included in contracts between Egyptian and foreign parties.

A new mechanism for simplified settlement of investment disputes aimed at avoiding the court system altogether has been established. In particular, the law established a Ministerial Committee on Investment Contract Disputes, responsible for the settlement of disputes arising from investment contracts to which the State, or a public or private body affiliated therewith, is a party. This is in addition to establishing a Complaint Committee to consider challenges connected to the implementation of Egypt’s Investment Law. Finally, the decree established a Committee for Resolution of Investment Disputes, which will review complaints or disputes between investors and the government related to the implementation of the Investment Law.  In practice, Egypt’s dispute resolution mechanisms are time-consuming but broadly effective.  Businesses have, however, reported difficulty collecting payment from the government when awarded a monetary settlement.

Over the past 10 years, there have been several investment disputes involving both U.S. persons and foreign investors.  Most of the cases have been settled, though no definitive number is available. Local courts in Egypt recognize and enforce foreign arbitral awards issued against the government.  There are no known extrajudicial actions against foreign investors in Egypt during the period of this report.

International Commercial Arbitration and Foreign Courts

Egypt allows mediation as a mechanism for alternative dispute resolution (ADR), a structured negotiation process in which an independent person known as a mediator assists the parties to identify and assess options, and negotiate an agreement to resolve their dispute.  GAFI has an Investment Disputes Settlement Center, which uses mediation as an ADR.

The Economic Court recognizes and enforces arbitral awards.  Judgments of foreign courts may be recognized and enforceable under local courts under limited conditions.

In most cases, domestic courts have found in favor of state-owned enterprises (SOEs) involved in investment disputes.  In such disputes, non-government parties have often complained about the delays and discrimination in court processes.

It is recommended that U.S. companies employ contractual clauses that specify binding international (not local) arbitration of disputes in their commercial agreements.

Bankruptcy Regulations

Egypt passed a new bankruptcy law in January 2018, which should speed up the restructuring and settlement of troubled companies.  It also replaces the threat of imprisonment with fines in cases of bankruptcy.  As of July, 2020, the Egyptian government was considering but had not yet implemented amendments to the 2018 law that would allow debtors to file for bankruptcy protection, and would give creditors the ability to determine whether debtors could continue operating, be placed under administrative control, or forced to liquidate their assets.

In practice, the paperwork involved in liquidating a business remains convoluted and extremely protracted; starting a business is much easier than shutting one down.  Bankruptcy is frowned upon in Egyptian culture and many businesspeople still believe they may be found criminally liable if they declare bankruptcy.

Investment Incentives

The Investment Law 72/2017 gives multiple incentives to investors as described below.  In August 2019, President Sisi ratified amendments to the Investment Law that allow its 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.

Real Property

The Egyptian legal system provides protection for real and personal property.  Laws on real estate ownership are complex and titles to real property may be difficult to establish and trace.  According to the World Bank’s 2020 Doing Business Report, Egypt ranks 130 of 190 for ease of registering property.

The National Title Registration Program introduced by the Ministry of State for Administrative Development has been implemented in nine areas within Cairo.  This program is intended to simplify property registration and facilitate easier mortgage financing. Real estate registration fees, long considered a major impediment to development of the real estate sector, are capped at no more than EGP 2000 (USD 110), irrespective of the property value.  In November 2012, the government postponed implementation of an enacted overhaul to the real estate tax and as of April 2017 no action has been taken.

Foreigners are limited to ownership of two residences in Egypt and specific procedures are required for purchasing real estate in certain geographical areas.

The mortgage market is still undeveloped in Egypt, and in practice most purchases are still conducted in cash.  Real Estate Finance Law 148//2001 authorized both banks and non-bank mortgage companies to issue mortgages. The law provides procedures for foreclosure on property of defaulting debtors, and amendments passed in 2004 allow for the issuance of mortgage-backed securities.  According to the regulations, banks can offer financing in foreign currency of up to 80 percent of the value of a property.

Presidential Decree 17//2015 permitted the government to provide land free of charge, in certain regions only, to investors meeting certain technical and financial requirements.  This provision expires on April 1, 2020 and the company must provide cash collateral for five years following commencement of either production (for industrial projects) or operation (for all other projects).

The ownership of land by foreigners is governed by three laws: Law 15//1963, Law 143//1981, and Law 230//1996.  Law 15//1963 stipulates that no foreigners, whether natural or juristic persons, may acquire agricultural land.  Law 143//1981 governs the acquisition and ownership of desert land. Certain limits are placed on the number of feddans (one feddan is equal to approximately one hectare) that may be owned by individuals, families, cooperatives, partnerships and corporations.  Partnerships are permitted to own up to 10,000 feddans. Joint stock companies are permitted to own up to 50,000 feddans.

Partnerships and joint stock companies may own desert land within these limits, even if foreign partners or shareholders are involved, provided that at least 51 percent of the capital is owned by Egyptians.  Upon liquidation of the company, however, the land must revert to Egyptian ownership. Law 143 defines desert land as the land lying two kilometers outside city borders. Furthermore, non-Egyptians owning non-improved real estate in Egypt must build within a period of five years from the date their ownership is registered by a notary public.  Non-Egyptians may only sell their real estate five years after registration of ownership, unless the consent of the Prime Minister for an exemption is obtained.

Intellectual Property Rights

Egypt remains on the Special 301 Watch List in 2020.  Egypt’s IPR legislation generally meets international standards, and the government has made progress enforcing those laws, reducing patent application backlogs, and in 2019 shut down a number of online illegal streaming websites.  It has also made progress establishing protection against the unfair commercial use, as well as unauthorized disclosure, of undisclosed test or other data generated to obtain marketing approval for pharmaceutical products.  Stakeholders note continued challenges with widespread counterfeiting and piracy, biotechnology patentability criteria, patent and trademark examination criteria, and pharmaceutical-related IP issues.

Multinational pharmaceutical companies complain that local generic drug-producing companies infringe on their patents.  Delays and inefficiencies in processing patent applications by the Egyptian Patent Office compound the difficulties pharmaceutical companies face in introducing new drugs to the local market.  The government views patent linkage as “a legal violation” against the concept of separation of authorities between institutions such as the Egyptian Drug Authority, the Ministry of Health, and the Egyptian Patent Office. As a result, permits for the sale of pharmaceuticals are generally issued without first cross-checking patent filings.

Decree 251/2020, issued in January, 2020, established a ministerial committee to address compulsory patent licensing.  According to Egypt’s 2002 IPR Law, which allows for compulsory patent licenses in some cases, the committee will have the power to issue compulsory patent licenses according to a number of criteria set forth in the law; to determine financial renumeration for the original patent owners; and to approve the expropriation of the patents.

Book, music, and entertainment software piracy is prevalent in Egypt, and a significant portion of the piracy takes place online.  American film studios represented by the Motion Pictures Association of America are concerned about the illegal distribution of American movies on regional satellite channels.

Eight GoE ministries have the responsibility to oversee IPR concerns: Supply and Internal Trade for trademarks, Higher Education and Research for patents, Culture for copyrights, Agriculture for plants, Communications and Information Technology for copyright of computer programs, Interior for combatting IPR violations, Customs for border enforcement, and Trade and Industry for standards and technical regulations.  Article 69 of Egypt’s 2014 Constitution mandates the establishment of a “specialized agency to uphold [IPR] rights and their legal protection.” A National Committee on IPR was established to address IPR matters until a permanent body is established. All IPR stakeholders are represented in the committee, and members meet every two months to discuss issues. The National Committee on IPR is chaired by the Ministry of Foreign Affairs and reports directly to the Prime Minister.

The Egyptian Customs Authority (ECA) handles IPR enforcement at the national border and the Ministry of Interior’s Department of Investigation handles domestic cases of illegal production. The ECA cannot act unless the trademark owner files a complaint.  Moreover, Egypt’s Economic Courts often take years to reach a decision on IPR infringement cases.

ECA’s customs enforcement also tends to focus on protecting Egyptian goods and trademarks. The ECA is taking steps to adopt the World Customs Organization’s (WCO) Interface Public-Members platform, which allows customs officers to detect counterfeit goods by scanning a product’s barcode and checking the WCO trademark database system.

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

IPR Contact at Embassy Cairo:
Christopher Leslie
Trade & Investment Officer
20-2-2797-2735
LeslieCG@state.gov

Capital Markets and Portfolio Investment

To date, high returns on Egyptian government debt have crowded out Egyptian investment in productive capacity.  Consistently positive and relatively high real interest rates have attracted large foreign capital inflows since 2017, most of which has been volatile portfolio capital.  Returns on Egyptian government debt have begun to come down, which could presage investment by Egyptian capital in the real economy.

The Egyptian Stock Exchange (EGX) is Egypt’s registered securities exchange.  About 246 companies were listed on the EGX, including Nilex, as of April 2020.  There were more than 500,000 investors registered to trade on the exchange in 2019 as the Egyptian market attracted 32,000 new investors.  Stock ownership is open to foreign and domestic individuals and entities.  The Government of Egypt issues dollar-denominated and Egyptian pound-denominated debt instruments.  Ownership is open to foreign and domestic individuals and entities.  The government has developed a positive outlook toward foreign portfolio investment, recognizing the need to attract foreign capital to help develop the Egyptian economy.  During 2019 foreign investors’ percentage of total transactions on the EGX reached 33 percent versus Egyptian investors’ percentage of 67 percent.

The Capital Market Law 95/1992, along with the Banking Law 88/2003, constitutes the primary regulatory frameworks for the financial sector. The law grants foreigners full access to capital markets, and authorizes establishment of Egyptian and foreign companies to provide underwriting of subscriptions, brokerage services, securities and mutual funds management, clearance and settlement of security transactions, and venture capital activities. The law specifies mechanisms for arbitration and legal dispute resolution and prohibits unfair market practices.  Law 10//2009 created the Egyptian Financial Supervisory Authority (EFSA) and brought the regulation of all non-banking financial services under its authority.  In 2017, EFSA became the Financial Regulatory Authority (FRA).

Settlement of transactions takes one day for treasury bonds and two days for stocks. Although Egyptian law and regulations allow companies to adopt bylaws limiting or prohibiting foreign ownership of shares, virtually no listed stocks have such restrictions. A significant number of the companies listed on the exchange are family-owned or dominated conglomerates, and free trading of shares in many of these ventures, while increasing, remains limited.  Companies are de-listed from the exchange if not traded for six months.

The Higher Investment Council extended the suspension of capital gains tax for three years, until 2020 as part of efforts to draw investors back. In March 2017, the government announced plans to impose a stamp duty on all stock transactions with a duty of 0.125 percent on all buyers and sellers starting in May 2017, followed by an increase to 0.150 percent in the second year and 0.175 percent thereafter. Egypt’s provisional stamp duty on stock exchange transactions includes for the first time a 0.3 percent levy for investors acquiring more than a third of a company’s stocks. I n May 2019 the government decided to keep the stamp duty at 0.15% without further increase, then in March 2020 the government decided to reduce the stamp tax to 0.125% for non-residents and to 0.05% for non-residents and to push back the introduction of the capital gain tax till January 2022.  Foreign investors will be exempted from the tax.

Foreign investors can access Egypt’s banking system by opening accounts with local banks and buying and selling all marketable securities with brokerages. The government has repeatedly emphasized its commitment to maintaining the profit repatriation system to encourage foreign investment in Egypt, especially since the pound floatation and implementation of the IMF loan program in November 2016. The current system for profit repatriation by foreign firms requires sub-custodian banks to open foreign and local currency accounts for foreign investors (global custodians), which are exclusively maintained for stock exchange transactions. The two accounts serve as a channel through which foreign investors process their sales, purchases, dividend collections, and profit repatriation transactions using the bank’s posted daily exchange rates. The system is designed to allow for settlement of transactions in fewer than two days, though in practice some firms have reported significant delays in repatriating profits due to problems with availability.  Foreign firms and individuals continue to report delays in repatriating funds and problems accessing hard currency for the purpose of repatriating profits.

The Egyptian credit market, open to foreigners, is vibrant and active. Repatriation of investment profits has become much easier, as there is enough available hard currency to execute FX trades. Since the floatation of the Pound in November 2016 FX trading is considered straightforward, given the re-establishment of the interbank foreign currency trading system.

Money and Banking System

Benefitting from the nation’s increasing economic stability over the past two years, Egypt’s banks have enjoyed both ratings upgrades and continued profitability.  Thanks to economic reforms, a new floating exchange system, and a new Investment Law passed in 2017, the project finance pipeline is increasing after a period of lower activity.  Banking competition is improving to serve a largely untapped retail segment and the nation’s challenging, but potentially rewarding, small and medium-sized enterprise (SME) segment.  The Central Bank of Egypt (CBE) has mandated that 20 percent of bank loans go to SMEs within the next three years (four years from 2016).  In December 2019, the Central Bank launched a 100 billion initiative to spur domestic manufacturing through subsidized loans.  Also, with only about a quarter of Egypt’s adult population owning or sharing an account at a formal financial institution (according press and comments from contacts), the banking sector has potential for growth and higher inclusion, which the government and banks discuss frequently.  A low median income plays a part in modest banking penetration.   But the CBE has taken steps to work with banks and technology companies to expand financial inclusion.  The employees of the government, one of the largest employers, must now have bank accounts because salary payment is through direct deposit.

Egypt’s banking sector is generally regarded as healthy and well-capitalized, due in part to its deposit-based funding structure and ample liquidity, especially since the floatation and restoration of the interbank market.  The CBE declared that 4.1 percent of the banking sector’s loans were non-performing in June 2020.  However, since 2011, a high level of exposure to government debt, accounting for over 40 percent of banking system assets, at the expense of private sector lending, has reduced the diversity of bank balance sheets and crowded out domestic investment.  Given the floatation of the Egyptian Pound and restart of the interbank trading system, Moody’s and S&P have upgraded the outlook of Egypt’s banking system to stable from negative to reflect improving macroeconomic conditions and ongoing commitment to reform.  In April 2019 Moody’s upgraded Egypt’s government issuer rating to B2 with stable outlook from B3 positive and affirmed this rating in April 2020 while also changing Egypt’s Macro Profile to “weak-” from “very weak”.

Thirty-eight banks operate in Egypt, including several foreign banks. The CBE has not issued a new commercial banking license since 1979.  The only way for a new commercial bank, whether foreign or domestic, to enter the market (except as a representative office) is to purchase an existing bank.  To this end, in 2013, QNB Group acquired National Société Générale Bank Egypt (NSGB).  That same year, Emirates NBD, Dubai’s largest bank, bought the Egypt unit of BNP Paribas.  In 2015, Citibank sold its retail banking division to CIB Bank.  In 2017, Barclays Bank PLC transferred its entire shareholding to Attijariwafa Bank Group.  In 2016 and 2017, Egypt indicated a desire to partially (less than 35 percent) privatize at least one state-owned banks and a total of 23 firms through either expanded or new listings on the Egypt Stock Exchange.  As of April 2020 the only steps towards implementing this privatization program were offering 4.5 percent of the shares of state-owned Eastern Tobacco Company on the stock market.  The state owned Banque De Caire was planning to IPO some of its shares on the EGX in April but postponed due to the novel coronavirus.

According to the CBE, banks operating in Egypt held nearly EGP 6 trillion ($379 billion) in total assets as of February 2020, with the five largest banks holding EGP 3.9 trillion ($247 billion) at the end of 2019.  Egypt’s three state-owned banks (Banque Misr, Banque du Caire, and National Bank of Egypt) control nearly 40 percent of banking sector assets.

The chairman of the EGX recently stated that Egypt is allowing exploration of the use of blockchain technologies across the banking community.  The FRA will review the development and most likely regulate how the banking system adopts the fast-developing blockchain systems into banks’ back-end and customer-facing processing and transactions. Seminars and discussions are beginning around Cairo, including visitors from Silicon Valley, in which leaders and experts are still forming a path forward.  While not outright banning cryptocurrencies, which is distinguished from blockchain technologies, authorities caution against speculation in unknown asset classes.

Alternative financial services in Egypt are extensive, given the large informal economy, estimated to be from 30 to 50 percent of the GDP.  Informal lending is prevalent, but the total capitalization, number of loans, and types of terms in private finance is less well known.

Foreign Exchange and Remittances

Foreign Exchange

There had been significant progress in accessing hard currency since the floatation of the Pound and re-establishment of the interbank currency trading system in November 2016.  While the immediate aftermath saw some lingering difficulty of accessing currency, as of 2017 most businesses operating in Egypt reported having little difficulty obtaining hard currency for business purposes, such as importing inputs and repatriating profits.   In 2016 the Central Bank lifted dollar deposit limits on households and firms importing priority goods which had been in place since early 2015.  Into 2016, businesses, including foreign-owned firms, which were not operating in priority sectors, encountered difficulty accessing currency, including importers.  But 2017 has seen an elimination of the backlog for demand for foreign currency.  With net foreign reserves of $37 billion as of April 2020, Egypt’s foreign reserves appeared to be well capitalized.

Funds associated with investment can be freely converted into any world currency, depending on the availability of that currency in the local market.  Some firms and individuals report the process taking some time.  But the interbank trading system works in general and currency is available as the foreign exchange markets continue to react positively to the government’s commitment to macro and structural reform.

The stabilized exchange rate operates on the principle of market supply and demand: the exchange rate is dictated by availability of currency and demand by firms and individuals.  While there is some reported informal Central Bank window guidance, the rate generally fluctuates depending on market conditions, without direct market intervention by authorities.  In general, the EGP has stabilized within an acceptable exchange rate range, which has increased the foreign exchange market’s liquidity.  Since the early days following the floatation, there has been very low exchange rate volatility.

Remittance Policies

The 1992 U.S.-Egypt Bilateral Investment Treaty provides for free transfer of dividends, royalties, compensation for expropriation, payments arising out of an investment dispute, contract payments, and proceeds from sales.  Prior to reform implementation throughout 2016 and 2017, large corporations had been unable to repatriate local earnings for months at a time, but given the current record net foreign reserves, repatriation is no longer an issue that companies complain about.

The Investment Incentives Law stipulates that non-Egyptian employees hired by projects established under the law are entitled to transfer their earnings abroad.  Conversion and transfer of royalty payments are permitted when a patent, trademark, or other licensing agreement has been approved under the Investment Incentives Law.

Banking Law 88//2003 regulates the repatriation of profits and capital.  The current system for profit repatriation by foreign firms requires sub-custodian banks to open foreign and local currency accounts for foreign investors (global custodians), which are exclusively maintained for stock exchange transactions.  The two accounts serve as a channel through which foreign investors process their sales, purchases, dividend collections, and profit repatriation transactions using the bank’s posted daily exchange rates.  The system is designed to allow for settlement of transactions in fewer than two days, though in practice some firms have reported short delays in repatriating profits, no longer due to availability but more due to processing steps.

Sovereign Wealth Funds

Egypt’s sovereign wealth fund (SWF), approved by the Cabinet and launched in late 2018, holds 200 billion EGP ($12.7 billion) in authorized capital.  The SWF aims to invest state funds locally and abroad across asset classes and manage underutilized government assets.  The SWF focuses on sectors considered vital to the Egyptian economy, particularly industry, energy, and tourism. The SWF participates in the International Forum of Sovereign Wealth Funds.  The government is currently in talks with regional and European institutions to take part in forming the fund’s sector-specific units.

State and military-owned companies compete directly with private companies in many sectors of the Egyptian economy. According to Public Sector Law 203/1991, state-owned enterprises should not receive preferential treatment from the government, nor should they be accorded any exemption from legal requirements applicable to private companies.  In addition to the state-owned enterprises groups above, 40 percent of the banking sector’s assets are controlled by three state-owned banks (Banque Misr, Banque du Caire, and National Bank of Egypt).   The 226 SOEs in Egypt subject to Law 203/1991 are affiliated with 10 ministries and employ 450,000 workers. The Ministry of Public Sector Enterprises controls 118 companies operating under eight holding companies that employ 209,000 workers.  The most profitable sectors include tourism, real estate, and transportation.  The ministry publishes a list of its SOEs on its website, http://www.mpbs.gov.eg/Arabic/Affiliates/HoldingCompanies/Pages/default.aspx  and http://www.mpbs.gov.eg/Arabic/Affiliates/AffiliateCompanies/Pages/default.aspx .

In an attempt to encourage growth of the private sector, privatization of state-owned enterprises and state-owned banks accelerated under an economic reform program that took place from 1991 to 2008.  Following the 2011 revolution, third parties have brought cases in court to reverse privatization deals, and in a number of these cases, Egyptian courts have ruled to reverse the privatization of several former public companies. Most of these cases are still under appeal.

The state-owned telephone company, Telecom Egypt, lost its legal monopoly on the local, long-distance, and international telecommunication sectors in 2005.  Nevertheless, Telecom Egypt held a de facto monopoly until late 2016 because the National Telecommunications Regulatory Authority (NTRA) had not issued additional licenses to compete in these sectors.  In October 2016, NTRA, however, implemented a unified license regime that allows companies to offer both fixed line and mobile networks.  The agreement allows Telecom Egypt to enter the mobile market and the three existing mobile companies to enter the fixed line market.  The introduction of Telecom Egypt as a new mobile operator in the Egyptian market will increase competition among operators, which will benefit users by raising the bar on quality of services as well as improving prices.  Egypt is not a party to the World Trade Organization’s Government Procurement Agreement.

OECD Guidelines on Corporate Governance of SOEs 

SOEs in Egypt are structured as individual companies controlled by boards of directors and grouped under government holding companies that are arranged by industry, including Petroleum Products & Gas, Spinning & Weaving; Metallurgical Industries; Chemical Industries; Pharmaceuticals; Food Industries; Building & Construction; Tourism, Hotels & Cinema; Maritime & Inland Transport; Aviation; and Insurance.  The holding companies are headed by boards of directors appointed by the Prime Minister with input from the relevant Minister.

Privatization Program

The Egyptian government’s most recent plans to privatize stakes in SOEs began in March 2018 with the successful public offering of a minority stake in the Eastern Tobacco Company.  Since then plans for privatizing stakes in 22 other SOEs, including up to 30 percent of the shares of Banque du Caire, have been delayed due to adverse market conditions and increased global volatility.  Egypt’s privatization program is based on Public Enterprise Law 203//1991, which permits the sale of SOEs to foreign entities.  In 1991, Egypt began a privatization program for the sale of several hundred wholly or partially SOEs and all public shares of at least 660 joint venture companies (joint venture is defined as mixed state and private ownership, whether foreign or domestic).  Bidding criteria for privatizations were generally clear and transparent.

In 2014, President Sisi signed a law limiting appeal rights on state-concluded contracts to reduce third-party challenges to prior government privatization deals.  The law was intended to reassure investors concerned by legal challenges brought against privatization deals and land sales dating back to the pre-2008 period.  Ongoing court cases had put many of these now-private firms, many of which are foreign-owned, in legal limbo over concerns that they may be returned to state ownership.  In early 2018, the Egyptian government announced that it would begin selling off stakes in some of its state-owned enterprises over the next few years through Egypt’s stock exchange.

Responsible Business Conduct (RBC) programs have grown in popularity in Egypt over the last ten years.   Most programs are limited to multinational and larger domestic companies as well as the banking sector and take the form of funding and sponsorship for initiatives supporting entrepreneurship and education and other social activities.  Environmental and technology programs are also garnering greater participation.  The Ministry of Trade has engaged constructively with corporations promoting RBC programs, supporting corporate social responsibility conferences and providing Cabinet-level representation as a sign of support to businesses promoting RBC programming.

A number of organizations and corporations work to foster the development of RBC in Egypt.  The American Chamber of Commerce has an active corporate social responsibility committee.  Several U.S. pharmaceutical companies are actively engaged in RBC programs related to Egypt’s hepatitis-C epidemic.  The Egyptian Corporate Responsibility Center, which is the UN Global Compact local network focal point in Egypt, aims to empower businesses to develop sustainable business models as well as improve the national capacity to design, apply, and monitor sustainable responsible business conduct policies.  In March 2010, Egypt launched an environmental, social, and governance (ESG) index, the second of its kind in the world after India’s, with training and technical assistance from Standard and Poor’s.  Egypt does not participate in the Extractive Industries Transparency Initiative.  Public information about Egypt’s extractive industry remains limited to the government’s annual budget.

Egypt has a set of laws to combat corruption by public officials, including an Anti-Bribery Law (which is contained within the Penal Code), an Illicit Gains Law, and a Governmental Accounting Law, among others. Countering corruption remains a long-term focus.  There have been cases involving public figures and entities, including the arrests of Alexandria’s deputy governor and the secretary general of Suez on several corruption charges and the investigation into five members of parliament alleged to have sold Hajj visas.  However, corruption laws have not been consistently enforced.  Transparency International’s Corruption Perceptions Index ranked Egypt 117 out of 180 in its 2017 survey, a drop of 9 places from its rank of 108 in 2016.  Transparency International also found that approximately 50 percent of Egyptians reported paying a bribe in order to obtain a public service.

Some private companies use internal controls, ethics, and compliance programs to detect and prevent bribery of government officials.  There is no government requirement for private companies to establish internal codes of conduct to prohibit bribery.

Egypt ratified the United Nations Convention against Corruption in February 2005.  It has not acceded to the OECD Convention on Combating Bribery or any other regional anti-corruption conventions.

While NGOs are active in encouraging anti-corruption activities, dialogue between the government and civil society on this issue is almost non-existent, the OECD found in 2009 and a trend that continues today.  While government officials publicly asserted they shared civil society organizations’ goals, they rarely cooperated with NGOs, and applied relevant laws in a highly restrictive manner against NGOs critical of government practices.  Media was also limited in its ability to report on corruption, with Article 188 of the Penal Code mandating heavy fines and penalties for unsubstantiated corruption allegations.

U.S. firms have identified corruption as an obstacle to FDI in Egypt.  Companies might encounter corruption in the public sector in the form of requests for bribes, using bribes to facilitate required government approvals or licenses, embezzlement, and tampering with official documents.  Corruption and bribery are reported in dealing with public services, customs (import license and import duties), public utilities (water and electrical connection), construction permits, and procurement, as well as in the private sector.  Businesses have described a dual system of payment for services, with one formal payment and a secondary, unofficial payment required for services to be rendered.

Resources to Report Corruption

Several agencies within the Egyptian government share responsibility for addressing corruption.   Egypt’s primary anticorruption body is the Administrative Control Authority (ACA), which has jurisdiction over state administrative bodies, state-owned enterprises, public associations and institutions, private companies undertaking public work, and organizations to which the state contributes in any form.  In October 2017, Parliament approved and passed amendments to the ACA law, which grants the organization full technical, financial, and administrative authority to investigate corruption within the public sector (with the exception of military personnel/entities).  The law is viewed as strengthening an institution which was established in 1964.  The ACA appears well funded and well trained when compared with other Egyptian law enforcement organizations.  Strong funding and the current ACA leadership’s close relationship with President Sisi reflect the importance of this organization and its mission.  It is too small for its mission (roughly 300 agents) and is routinely over-tasked with work that would not normally be conducted by a law enforcement agency.

The ACA periodically engages with civil society.  For example, it has met with the American Chamber of Commerce and other organizations to encourage them to seek it out when corruption issues arise.

In addition to the ACA, the Central Auditing Authority (CAA) acts as an anti-corruption body, stationing monitors at state-owned companies to report corrupt practices.  The Ministry of Justice’s Illicit Gains Authority is charged with referring cases in which public officials have used their office for private gain.  The Public Prosecution Office’s Public Funds Prosecution Department and the Ministry of Interior’s Public Funds Investigations Office likewise share responsibility for addressing corruption in public expenditures.

Resources to Report Corruption

Minister of Interior
General Directorate of Investigation of Public Funds
Telephone: 02-2792-1395 / 02-2792 1396
Fax: 02-2792-2389

Stability and economic development remain Egypt’s priorities.  The Egyptian government has taken measures to eliminate politically motivated violence while also limiting peaceful protests and political expression.  Political protests are rare, with the last known demonstrations occurring on September 20, 2019.  Egypt’s presidential elections in March 2018 and senatorial elections in August 2020 proceeded without incident.  A number of small-scale terrorist attacks against security and civilian targets in Cairo and elsewhere in the Nile Valley occurred in 2019.  An attack against a tourist bus in May 2019 injured over a dozen people, and a car bombing outside the National Cancer Institute in Cairo in August 2019 killed 22 people.  Militant groups also committed attacks in the Western Desert and Sinai.  The government has been conducting a comprehensive counterterrorism offensive in the Sinai since early 2018 in response to terrorist attacks against military installations and personnel by ISIS-affiliated militant groups.  In February 2020, ISIS-affiliated militants claimed responsibility for an attack against a domestic gas pipeline in the northern Sinai.  Although the group claimed that the attack targeted the recently-opened natural gas pipeline connecting Egypt and Israel, the pipeline itself was undamaged and the flow of natural gas was not interrupted.

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.

The U.S. International Development Finance Corporation (DFC) is operating in Egypt to provide the capital and risk mitigation tools that investors need to overcome the barriers faced in this region. In 2012, DFC’s predecessor, the Overseas Private Investment Corporation (OPIC), launched the USD 250 million Egypt Loan Guaranty Facility (ELGF), in partnership with USAID, to support bank lending and stimulate job creation.  The ELGF’s main objective is to help SMEs access finance for growth and development, by providing creditors the needed guarantees to help them mitigate loan risks.  This objective goes hand-in-hand with the Central Bank of Egypt’s initiative to support SMEs.  The ELGF expands lending to SMEs by supporting local partner banks as they lend to the target segment and increase access to credit for SMEs.  The result is the promotion of jobs and private sector development in Egypt.  The ELGF and partner banks sign a Guarantee Facility Agreement (GFA) to outline main terms and conditions of credit guarantee.  The two bank partners are Commercial International Bank (CIB) and the National Bank of Kuwait (NBK).  USAID has collaborated with OPIC/ELGF and the CIB to provide training to SME owners and managers on the basics of accounting and finance, banking and loan processes, business registration, and other topics that will help SMEs access financing for business growth.

As of March, 2020, the DFC’s financing tools provide $1.25 billion in financial and insurance support to 12 renewable energy, oil and gas, water supply, and health sector projects in Egypt in addition to the ELGF.  Apache Corporation, the largest U.S. investor in Egypt, has supported its natural gas investment with OPIC and DFC risk insurance since 2004.  In December 2018, the OPIC Board approved a project to provide $430 million in political risk insurance to Noble Energy, Inc. to support the restoration, operation, and maintenance of a natural gas pipeline in Egypt and the supply of natural gas through a pipeline from Israel.  In June 2019, OPIC’s Board approved an $87 million loan guarantee for the development, construction, and operation of the 252 megawatt Lekela Egypt Wind Power project.

* Sources for Host Country Data: Central Bank of Egypt; CAPMAS; GAFI

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

Chris Leslie, Economic Officer, U.S. Embassy Cairo
02-2797-2735
LeslieCG@state.gov

Policies Towards Foreign Direct Investment

Jordan is largely open to foreign investment, and the government is committed to supporting foreign investment. Foreign and local investors are treated equally under the law. The Jordan Investment Commission is the body responsible for implementing the 2014 Investment Law and promoting new and existing investment in Jordan, through a range of measures to incentivize and facilitate investment procedures. The Investment Council, established by the law, which is comprised of the Prime Minister, ministers with economic portfolios, and representatives from the private sector, oversees the management and development of the national investment policy, and is responsible for legislative and economic reforms to facilitate investment.

Investment Law No. 30/2014 identifies the Commission as the key reference point for investors and grants additional authorities to the Investment Window to facilitate and accelerate investment registration. The President of the Commission and the administrative team supervise and centrally approve investment-related matters within the guidelines set by the Investment Council and approved by the government.

The Investment Commission can expedite the provision of government services and provide a number of investment incentives, tax, and customs exemptions. An investment-dedicated “One Window” (https://www.jic.gov.jo/en/  ) provides information and technical assistance to investors, with a mandate to simplify registration and licensing procedures for investment projects that benefit from the Investment Law. In 2018, the Commission launched a “Follow-Up and After Care” section with an aim to remove obstacles facing investors and find appropriate solutions as part of the investment process.

Limits on Foreign Control and Right to Private Ownership and Establishment

Investment and property laws allow domestic and foreign entities to establish businesses that engage in remunerative activities. Foreign companies may open regional and branch offices, branch offices may carry out full business activities, and regional offices may serve as liaisons between head offices and Jordanian or regional clients. The Ministry of Industry, Trade and Supply’s Companies Control Department implements the government’s policy on the establishment of regional and branch offices.

Foreign nationals and firms are permitted to own or lease property in Jordan for investment purposes and are allowed one residence for personal use, provided that their home country permits reciprocal property ownership rights for Jordanians. Depending on the size and location of the property, the Land and Survey Department, the Ministry of Finance, and/or the Cabinet may need to approve foreign ownership of land and property, which must then be developed within five years after the date of approval.

In April 2019, the government amended its regulations governing foreign ownership, expanding ownership percentage in some economic activities, while maintaining the following restrictions::

• Foreigners are prohibited from wholly or partially owning investigation and security services, stone quarrying operations for construction purposes, customs clearance services, and bakeries of all kinds; and are prohibited from trading in weapons and fireworks. The Cabinet, however, may approve foreign ownership of projects in these sectors upon the recommendation of the Investment Council. To qualify for the exemption, projects must be categorized as being highly valuable to the national economy.
• Investors are limited to 50 percent ownership in certain businesses and services, including retail and wholesale trading, engineering consultancy services, exchange houses apart from banks and financial services companies, maritime, air and land transportation services, and related services.
• Foreign firms may not import goods without appointing an agent registered in Jordan; the agent may be a branch office or a wholly owned subsidiary of the foreign firm. The agent’s connection to the foreign company must be direct, without a sub-agent or intermediary. The Commercial Agents and Intermediaries Law No. 28/2001 governs contractual agreements between foreign firms and commercial agents. Private foreign entities, whether licensed under sole foreign ownership or as a joint venture, compete on an equal basis with local companies.

However, according to the Bilateral Investment Treaty with Jordan, U.S. investors are granted several exceptions and are accorded the same treatment as Jordanian nationals, allowing U.S. investors to maintain 100 percent ownership in some restricted businesses. The most up-to-date listing of limitations on investments is available in the FTA Annex 3.1 and may be found at http://www.ustr.gov/trade-agreements/free-trade-agreements/jordan-fta/final-text.

For national security purposes, foreign investors must undergo security screening through the Ministry of Interior, which can be finalized through the “One Window” located at the Investment Commission.

Other Investment Policy Reviews

Jordan has been a World Trade Organization (WTO) member since 2000. The WTO conducted Jordan’s second Trade Policy Review  in November 2015.

In 2012, the United States and Jordan agreed to Statements of Principles for International Investment and for Information and Communication Technology Services, and a Trade and Investment Partnership Bilateral Action Plan, each of which is designed to increase transparency, openness, and governmental and private sector cooperation. The two parties also began discussions on a Customs Administration and Trade Facilitation Agreement. All current treaties and agreements in force between the United States and Jordan may be found here: https://www.state.gov/s/l/treaty/tif/.

In follow up on OECD’s Investment Policy Review of Jordan and Jordan’s adherence to the OECD Declaration on International Investment and Multinational Enterprises in 2013, the MENA-OECD competitiveness program issued a report in 2018 entitled “Enhancing the legal framework for sustainable investment: Lessons from Jordan” (http://www.oecd.org/mena/competitiveness/Enhancing-the-Legal-Framework-for-Sustainable-Investment-Lessons-from-Jorden.pdf ).

Business Facilitation

Businesses in Jordan need to register with the Ministry of Industry, Trade, and Supply’s Companies Control Department, or the Chambers of Commerce or Industry depending on the type of business they conduct; open a bank account, obtain a tax identification number, and obtain a VAT number. They also need to obtain a vocational license from the municipality, receive a health inspection, and register with the Social Security Corporation. In November 2017, the government issued a decision to cancel all non-security related pre-approvals for registering a business and require all approvals before starting operations.

The “Investment Window” at the Jordan Investment Commission (www.jic.gov.jo ) serves as a comprehensive investment center for investors. The window provides its services to both local and foreign investors, particularly those in the agricultural sector, medical, tourism, industrial, ICT-Business Process Outsourcing (BPO), and energy sectors. In 2018, the commission introduced a fast track for investors at Queen Alia International Airport.

In 2017, the Commission further streamlined procedures to register and license investment projects in development zones, introducing a Fast Track Investment Window, reducing the number of committee approvals from 23 to 13, and reducing registration procedures from 15 to 5. These changes reduced the typical time period required to register in development zones from five days to one day. Additionally, the time period to grant exemptions under the investment law has been reduced from two weeks to one, and the time period to grant exemptions under the decisions of the Prime Minister from seven days to one.

Jordan has also adopted a single security approval to replace the 11 approvals that were previously required for new investors. The new approval covers registering and licensing the company, obtaining driving licenses for investors, possessing immovable property for the establishment of investment projects in the industrial and developing zones, in addition to granting residence permits to non-Jordanian investors and their family members. The Companies Control Department has developed and launched a portal for online registration: http://www.ccd.gov.jo/ 

The commission has published a number of online guides, including the investor guide (https://www.jic.gov.jo/en/investor-guide/ ).

In November 2019, under the Jordan Investment Commission’s (JIC), the government introduced several new services including the issuance and renewal investor IDs, issuance and renewal of IDs for investors’ family members, registration of institutions in development zones, first-time registration of individual institutions, changing the method of use, registration and renewal of subscriptions to the Amman Chamber of Commerce (ACC), amendments to subscriptions to the ACC, and issuance of environmental permits. The introduction of these electronic services reduced the time period needed to grant or renew an investor card (an ID card for investors used to facilitate various transactions) to one day. (https://www.jic.gov.jo/en/ ).

In accordance with the Investor Grievances Bylaw No. 163 of 2019, the JIC established a unit to follow up on and address investor complaints, with the aim to resolve legal disputes outside of the formal court proceedings and reduce related cost.

In the 2020 World Bank Group’s Doing Business report  Jordan ranked 75 out of 190. This improvement was attributed to reforms regarding the legal rights of borrowers and lenders, the introduction of a unified legal framework for secured transactions, launching a notice-based collateral registry, improvements to the insolvency law, and implementation of an electronic filing and payment for labor taxes and other mandatory contributions. The number of payments that businesses need to file every year was also cut from twenty-three to nine.

Outward Investment

Jordan does not have a mechanism in place to specifically incentivize outward investment.

Transparency of the Regulatory System

Legal, regulatory and accounting policies, applicable to both domestic and foreign investors, are transparent and promote competition. However, historically red tape and bureaucratic procedures, particularly at the local government level, presented problems for foreign and domestic investors.

The government is gradually implementing policies to improve competition and foster transparency in implementation. These reforms aim to change an existing system influenced in the past by family affiliations and business ties. The Jordan Investment Commission (JIC), through its Fast Track Investment Window, introduced a number of measures to streamline the investment process. All laws and regulations are usually published on the website of the Legislative and Opinion Bureau for public commenting, in addition to executive branch consultations, with the legislative branch and key stakeholders.

Most economic regulations are available on the Jordan Investment Commission website (https://www.jic.gov.jo/ar/investment-regulations-2/ ), or on the Ministry of Industry and Trade and Supply website (https://www.mit.gov.jo/Default/AR). All regulations are published in the Official Gazette (http://pm.gov.jo/newspaper ) or the Legislative and Opinion Bureau (http://www.lob.jo/ ).

The commission issued and published a services and licensing guides outlining processes and fees, in addition to the incentives guide (https://www.jic.gov.jo/en/services-guide/ ). Guides are currently available in Arabic.

Jordan is committed to its fiscal transparency policy, therefore the Ministry of Finance (MoF) publishes a monthly “General Government Finance Bulletin” and that includes detailed information on government’s debt obligations. (www.mof.gov.jo/Portals/0/Mof_content/النشرات والبيانات المالية/نشرة مالية الحكومة/2016/Arabic PDF December 2016.pdf  ).

International Regulatory Considerations

Jordan recognizes and accepts most U.S. standards and specifications. However, Jordan has occasionally required additional product standards for imports. Some of these measures have been viewed as barriers to trade, such as a 2014 restriction imposed on packaging sizes for poultry available for retail resale.

As a member country of the WTO, Jordan is obliged to notify all draft technical regulations to the WTO Committee on Technical Barriers to Trade (TBT).

Jordan is a signatory of the WTO Trade Facilitation Agreement. As of March 2018, Jordan had implemented 81.5 percent of its commitments. Jordan submitted its notifications for Category A before the agreement came into force, and is currently in the final review for categories B and C.

Legal System and Judicial Independence

Jordan has a mixed legal system based on civil law, Sharia Law (Islamic Law), and customary law. The Constitution establishes the judiciary as one of three separate and independent branches of government. Jordanian commercial laws do not make a distinction between Jordanian and non-Jordanian investors. However, plaintiffs complain of judicial backlogs and subsequent delays in legal proceedings. Jordan has introduced economic judicial chambers, established under the Amman First Instance Court and Amman Appeal Court under the provisions of the Law of Formation of the amended Courts No. 30 of 2017. These chambers specialize in the adjudication of certain commercial and investment disputes mentioned in Article 4 of the Courts Formation Law.

Laws and Regulations on Foreign Direct Investment

Jordan’s Investment Law governs local and foreign investment. The law consolidated three entities – the Jordan Investment Board, the Jordanian Development Zones Commission, and the Free Zones Corporation – into the Jordan Investment Commission. The law incorporates a statement of investors’ rights and a legal framework for the newly established Investment Window, which is located at the Investment Commission’s headquarters.

The commission issued and published services and licensing guides outlining processes and fees, in addition to other guides ( https://www.jic.gov.jo/en/publications/ ). The commission also issued a new bylaw that regulates non-Jordanian investments to increase investors’ confidence and attract more foreign investment.

In September 2017, Parliament passed the Monitoring and Inspection of Economic Activities Law No. 33/2017, and amendments to Jordan’s Companies Law No. 34/2017. This law governs the requirements to establish venture capital companies for the purpose of direct investment, or for creating funds, to contribute or invest in high-growth companies that are not listed in the stock market.

In 2018, Jordan passed the Insolvency Law, Movable Assets and Secured Lending Law and Bylaw, the Venture Capital Bylaw, and the Income Tax Law, along with bylaws to ensure proper implementation.

In October 2019, Jordan published an amended Social Security Law stipulating temporary changes to the social security contributions of newly registered entities that meet specific conditions, with an aim to support new companies and startups. The government also issued the Investor Grievance Bylaw and established a special unit to follow up on investors cases. It is also offering 10-year “incentive stability guarantees” to new investors. In January 2020, Jordan passed a new Public Private Partnership (PPP) law, and established a PPP unit to identify and study investment opportunities.

There is no systematic or legal discrimination against foreign participation with respect to ownership and participation in Jordan’s major economic sectors other than the restrictions outlined in the governing regulations. In fact, many Jordanian businesses actively seek engagement with foreign partners as a way to increase their competitiveness and access to other international markets. The government’s efforts have made Jordan’s official investment climate welcoming; however, some U.S. investors have reported hidden costs, citing bureaucratic red tape, vague regulations, and conflicting jurisdictions.

For further details please contact:

Investment Window
Jordan Investment Commission
Telephone: +962 (6) 5608400/9 Ext: 120
P.O.Box 893
Amman 11821 Jordan
E-mail: info@jic.gov.jo

Competition and Anti-Trust Laws

The Jordanian parliament passed amendments to Competition Law No. 33/2004 in 2011 to strengthen the local economic environment and attract foreign investment by providing incentives to improve market competitiveness, protect small and medium enterprises from restrictive anticompetitive practices, and give consumers access to high quality products at competitive prices. The Competition Directorate at the Ministry of Industry, Trade, and Supply conducts market research, examines complaints, and reports violators to the judicial system.

The investor grievance unit established in 2019 at the Jordan Investment Commission can also look into unfair competition cases filed by investors.

Expropriation and Compensation

Article 11 of the Jordanian Constitution stipulates that expropriations are prohibited unless specifically deemed to be in the public interest. In cases of expropriation, the law mandates provision of fair compensation to the investor in convertible currency.

Dispute Settlement

ICSD and New York Conventions

Since 1972, Jordan has been a contracting state to the International Centre for Settlement of Investment Disputes (ICSID Convention). Only a small number of cases between foreign investors and the Jordanian government have been brought before ICSID tribunals. Jordan is also a signatory to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York convention).

In January 2018, the Parliament passed amendments to Arbitration Law 2017, which aims to facilitate the use of arbitration as an alternative to dispute settlement procedures.

Investor-State Dispute Settlement

Under domestic law, foreign investors may seek third party arbitration as a means of settling disputes. Jordan abides by WTO dispute settlement mechanisms, and dispute settlement mechanisms under the U.S.-Jordan FTA are consistent with WTO commitments. Article IX of the United States-Jordan Bilateral Investment Treaty (BIT) establishes procedures for dispute settlements between Jordanians and U.S. persons.

Investment disputes are treated as any other commercial or civil dispute in the Jordanian judicial system. Investment agreements with the Jordanian government as a party generally contain a dispute resolution clause that would refer cases to arbitration in Jordan. On average, it takes three to four years for cases that go through the local court system to reach a verdict. Cases settled through arbitration take between 12 to 18 months. The main challenge regarding litigating cases is being able to conduct proper process of service upon all concerned parties. Another challenge is the lack of specialized investment and commercial courts, limiting judges’ capacity to adequately review cases.

Rulings by U.S. courts or other international arbitration committees can be upheld through the filing of an Enforcement of Ruling motion in a Jordanian court.

International Commercial Arbitration and Foreign Courts

In March 2018, King Abdullah II approved Arbitration Law No. 16, amending the 2001 law. The amendment introduced changes to the procedural framework of arbitrators seated in Jordan, which can be traced in the UNCITRAL model law. The amended law gives more authority to the Arbitral Tribunal and limits the role of the Court of Appeal.

Rulings by U.S. courts or other international arbitration committees can be upheld through the filing of an Enforcement of Ruling motion in a Jordanian court.

Bankruptcy Regulations

The Commercial Code, Civil Code, and Companies Law collectively govern bankruptcy and insolvency proceedings. In December 2017, the cabinet endorsed a bankruptcy bylaw which stipulates procedures for optional and compulsory liquidation, along with the mechanism, liquidation plan, and required documentation and reporting. In 2018, Parliament passed the Insolvency Law, which allows individuals and companies to offset their financial position through a debt management plan. The law helps the insolvent entity to continue its economic activity, rather than directly resorting to bankruptcy, and regulates insolvency proceedings for foreign organizations according to international conventions ratified by Jordan.

Defaulting on loans or issuing checks without adequate available balances is a crime in Jordan and may subject the offender to imprisonment under Jordan’s penal system. While Jordan is reexamining these laws, prison terms for debtors remains a legal practice in Jordan. Investors should conduct thorough due diligence on potential partners and avail themselves of local legal counsel in order to understand best business practices in Jordan and conform with local laws. The U.S. Commercial Service office of the Embassy of the United States in Amman can assist American businesses in these endeavors.

Investment Incentives

Under Investment Law No. 30/2014, the Council of Ministers, upon the recommendation of the Investment Council, may offer investment incentives in accordance with the law and governing regulations for projects outside the Development and Free Zones. The Investment Council and Investment Commission can also offer certain exemptions for projects in the following sectors:

1. Agriculture and livestock
2. Hospitals and specialized medical centers
3. Hotel and touristic facilities
4. Tourism-related entertainment and recreation
5. Contact and communication centers
6. Scientific research centers and medical laboratories
7. Technical and media production

Such incentives include customs exemptions, refunding of the general tax for production inputs, and no sales tax. JIC can provide investors with further information on these exemptions (https://www.jic.gov.jo/en/incentives-outside-the-dz-and-fz/ ). Automatic exemptions are also granted for specific services whether purchased locally or imported. The Income and Sales Tax Department will refund the general tax levied within 30 days from submitting a written request in accordance with the terms and conditions determined by the Regulations Governing Investment Incentives (Number 33 of 2015).

A number of non-automatic exemptions are granted for production requirements and fixed assets used in industrial or handicrafts activities. Such exemptions are subject to administrative procedures and approvals obtained from the Jordan Investment Commission Technical Committee and are governed by the previously referenced regulation.

Article 8-A of the 2014 Investment Law allows the cabinet to grant additional advantages, exemptions, or incentives to any economic activities in the Kingdom. Under this article, the cabinet granted additional incentives to the ICT, tourism, and transport sectors in 2016, as published in the Official Gazette.

Net profits generated from most exports were exempt from income tax until December 2018. The new Income Tax Law No. 38 (2018) imposed taxes on income generated from exports, in accordance with WTO agreements.

In October 2019, the government announced an economic stimulus package granting direct incentives to investors in industrial and commercial sectors, offering cash incentives for companies that replace foreign laborer with Jordanian staff, and covering health insurance for employees and their families.

Foreign Trade Zones/Free Ports/Trade Facilitation

The country is divided into three development areas: Zones A, B, and C. Investments in Zone C, the least developed areas of Jordan, receive the highest level of incentives while those in Zone A receive the lowest level. All agricultural, maritime, transport and railway investments are classified as Zone C, irrespective of location. Hotel and tourism-related projects along the Dead Sea, leisure and recreational compounds, and convention and exhibition centers receive Zone A designations. Qualifying Industrial Zones (QIZs) are zoned according to their geographical location unless granted an exemption. The three-zone classification scheme does not apply to nature reserves and environmental protection areas.

Jordan’s 2014 investment law merged the Development and Free Zones Commission (DFZC) into the newly formed Jordan Investment Commission, an independent governmental body responsible for creating, regulating, and monitoring Jordan’s free trade zones, industrial estates, and development zones. The development areas are the King Hussein Bin Talal Development Area (KHBTDA) in Mafraq, the Ma’an Development Area, the Irbid Development Area (IDA), the Dead Sea Development Zone, the Jabal Ajloun Development Zone, and the King Hussein Business Park Development Zone. The Investment Law assigns the Jordan Industrial Estates Corporation (JIEC) and the Development and Free Zones Corporation (DFZC) as main developers of industrial estates and development and free zones, under the supervision of the Investment Commission.

As part of Jordan’s efforts to foster economic development and enhance its investment climate, the government has created four industrial estates in Amman, Irbid, Karak, and Aqaba, in addition to several privately-run industrial parks, including al-Mushatta, al-Tajamouat, al-Dulayl, Cyber City, al-Qastal, Jordan Gateway, and al-Hallabat. These estates provide basic infrastructure for a wide variety of manufacturing activities, reducing the cost of utilities and providing cost-effective land and buildings. Investors in the estates continue to receive incentives until their contracts expire, and receive various additional exemptions, such as a two-year exemption on income and social services taxes, complete exemptions from building and land taxes, and exemptions or reductions on most municipalities’ fees.

Besides the six public free zones in Zarqa, Sahab, Karak, Karama, Mowaqaar, and Queen Alia Airport, Jordan has over 37 designated private free zones administered by private companies under the DFZC’s supervision. The free zones are outside of the jurisdiction of Jordan Customs and provide a duty and tax-free environment for the storage of goods transiting Jordan.

Jordan has announced plans for new specialized development zones in a number of governorates including two solar parks in Ma’an and Ajloun, and four new industrial parks in Salt, Madaba, Tafileh, and Jarash.

Under Investment Law No. 30 of 2014, establishments operating within Development Zones are subject to a unified tax rate of 5 percent. However, Income Tax Law No. 38 of 2018 modifies the tax rates applicable to entities operating in the Development Zones depending on the source of the income; industrial activities with a local value-added of at least 30 percent are subject to 5 percent income tax rate, while other projects and activities are subject to 10 percent.

The Investment Law also grants entities registered in the Free Zones a tax exemption on ny activities conducted within the borders of the Free Zones, the export of goods and services outside the Kingdom, and associated transit trade. Profits earned on activities pertaining to the sale, disposal, or importation of goods and services within the borders of the Free Zones are subject to tax based on the normal income tax rates applicable to each entity, depending on its status (corporation or individual).

The Aqaba Special Economic Zone (ASEZ) is an independent economic zone not governed by the Investment Commission or the articles in the Investment Law governing investments in free zones or development zones. It offers special tax exemptions, a flat five percent income tax, and facilitates customs handling at Aqaba Port. In recent years, ASEZ has attracted projects, mainly in hotel and property development sectors, valued at over USD 8 billion. The government continues to implement development projects aimed at attracting commerce and tourism through the Port of Aqaba. The Aqaba New Port project, initiated in 2010, became operational November 2018, reaching design capacity in 2019. The new port, 20 km south of the previous port, added four new terminals and expanded general ship berthing and marine services, in addition to adding dedicated terminals for grain silos, liquefied natural gas, phosphates, and propane.

Investors, either foreign or domestic, face specific requirements in trade, services, and industrial projects in free zones. Industrial projects must be related to one of the following industries:

• New industries that depend on advanced technology;
• Industries that require locally available raw material and/or locally manufactured parts;
• Industries that complement domestic industries;
• Industries that enhance labor skills and promote technical know-how; or,
• Industries that provide consumer goods and that contribute to reducing market dependency on imported goods.

For further details, please visit:

• Jordan Investment Commission (http://www.jic.gov.jo/)
• Jordan Industrial Estate Corporation (http://www.jiec.com)
• Aqaba Special Economic Zone (http://www.aqabazone.com/)

Performance and Data Localization Requirements

Jordan has a well-educated and trained labor force of 2.5 million people, of which approximately 700,000 are registered foreign workers. Unregistered foreign workers may be nearly double this number. Most foreign laborers are employed in construction, agriculture, and domestic housekeeping sectors. Approximately 70,000 also work in the QIZs as textile workers.

The Ministry of Labor regulates foreign worker licensing, licensing fees, prohibited sectors, and employer liability. Along with the Ministry of Interior, the Ministry of Labor is responsible for approving the hiring of professional foreign workers by private businesses.

Official unemployment reached 20 percent at the end of 2019, leading the Ministry of Labor to announce new labor regulations aimed at creating jobs for Jordanian youth through the dismissal of foreign labor by 2024. New regulations stipulate increases in permit fees for non-Jordanians and closure of certain jobs to foreign employment altogether.

In February 2020, the government issued Industrial Sector Incentives Bylaw No. 18 granting incentives to industries that employ female Jordanian laborersg and whose finished products contain at least 30 percent local content.

Jordan does not have requirements for foreign IT providers to turn over source code or provide access to surveillance.

Real Property

The legal system reliably facilitates and protects the acquisition and disposition of property rights. Foreign ownership of land and assets is governed by The Leasing of Immovable Assets and Their Sale to Non-Jordanian and Judicial Persons Law No. 47/2006. Under Article 3 of the law, if the buyer’s country of residence has a reciprocal relationship with Jordan, foreign nationals are afforded the right of ownership of property within urban borders in Jordan for residential purposes. According to the law, foreign nationals may rent immovable assets for business or accommodation purposes, provided that the plot of land does not exceed 10 acres and the lease is for no more than three years in duration. Interest in real property is recognized and enforced once recorded in a legal registry.

A new Property law passed in 2019 aims to consolidate 13 laws governing property ownership in one legislation, and addresses issues such as zoning, and the facilitation of ownership and leases for foreign investors.

All land plots in Jordan are titled and registered with the Jordanian Land and Survey Department; any land not titled as private property is considered government property.

According the Ease of Doing Business report of 2020, Jordan ranked 78 out of 190 countries in “Registering Property.”

Intellectual Property Rights

Jordan has passed several laws in compliance with international commitments to protect intellectual property rights (IPR). Laws consistent with Trade Related Aspects of Intellectual Property Rights (TRIPS) now protect trade secrets, plant varieties, and semiconductor chip designs.

Copyrights are registered with The Ministry of Culture’s National Library Department, and patents are registered with the Registrar of Patents and Trademarks at the Ministry of Industry and Trade.

Jordan is a signatory to the Patent Cooperation Treaty and the Madrid Protocol and amended its patent and trademark laws in 2007 to enable ratification of the agreements. Jordan is a signatory to World Intellectual Property Organization (WIPO) treaties on both copyrights and on performances and phonograms, and it has been developing updated laws for copyrights, trademark standards, and customs regulations to meet international standards. Jordanian firms are able to seek joint ventures and licensing agreements with multinational partners.

In 2017, Jordan acceded to the Patent Cooperation Treaty (PCT); the treaty entered into force October 2017. The Ministry of Industry and Trade introduced an e-filing service in 2018 through https://ippd-eservice.mit.gov.jo/ .

Amendments to article 41 of Customs Law No. 33 of 2018 granted more time for legal agents to file trademark violation complaints. Jordan’s record on IPR enforcement has improved in recent years, but more effective enforcement mechanisms and legal procedures are still needed. In particular, a large portion of pirated videos and software remain in the marketplace. Enforcement action against audio/video and software piracy is more frequent and enforcement capability is improving. Since 2000, 6,229 violations of Jordan’s current copyright law have been referred to the judiciary, including 218 cases in 2018 and another 218 cases in 2019. In 2019, Customs also referred 40 counterfeiting cases for prosecution.

The U.S. Patent and Trademark Office has an Intellectual Property Attaché for the Middle East and North Africa region based in the U.S. Embassy in Kuwait City, Kuwait. Please see: https://www.uspto.gov/learning-and-resources/ip-policy/intellectual-property-rights-ipr-attach-program/ip-attach-kuwait  for contact information. Jordan is not listed in USTR’s Special 301 report, nor in the Notorious Markets report.

Jordan is not listed in USTR’s Special 301 report, nor in the Notorious Markets report.

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

Capital Markets and Portfolio Investment

There are three key capital market institutions: the Jordan Securities Commission (JSC), the Amman Stock Exchange (ASE), and the Securities Depository Center (SDC). The ASE launched an Internet Trading Service in 2010, providing an opportunity for investors to engage in securities trading independent of geographic location.

Jordan’s stock market is among the most open among its regional competitors, with no cap on foreign ownership. At the end of 2018, non-Jordanian ownership in companies listed on the ASE represented 51.6 percent of the total market value (35.8 percent Arab investors and 15.7 percent for non-Arab investors). Jordanian ownership in the financial sector was 56.5 percent, 18.3 percent in the services sector and 61.4 percent in the industrial sector. All investors, both foreign and domestic, are permitted to open margin accounts and to engage in short selling (commercial banks hold securities for their clients in a sub-account format).

In spite of recent reforms and technological advances, the ASE suffers from intermittent liquidity problems and low trading activity. The financial market peaked in 2007-2008, with average trading volumes topping USD 118 million per day. Following the global economic downturn, the market declined precipitously, with market capitalization falling from USD 41 billion in 2007 to USD 21 billion as of Dec 31, 2019.

By the end of 2019, the ASE price index had dropped 1815.2 points (4.9 percent) over the same period in 2018, while trading volume declined 31.6 percent, only totaling USD 2.3 billion.

In 2019, the total net profits of listed companies increased to USD 1.3 billion (according to preliminary financial statements provided to the ASE), a slight increase of 0.3 percent over 2018.

Money and Banking System

Jordan has 25 banks, including commercial banks, Islamic banks, and foreign bank branches (Jordan does not distinguish between investment banks and commercial banks.) Banks continue to be profitable and well capitalized with deposits being the primary funding base, and indicators remain strong largely due to strict regulations on lending, particularly mortgage lending. Liquidity ratios and provisioning remain high, while non-performing loan ratios modestly decreased over the past couple of years. Jordan’s rate of non-performing loans, as a percentage of all bank loans, was 4.2 percent in 2017, and reached 4.6 percent in the first half of 2018.

Banking law No. 28 of 2000 does not discriminate between local and foreign banks, however capital requirements differ. The minimum capital requirements for foreign banks are JD 50 million (USD 70.6 million), and JD 100 million (USD 141 million) for local banks. The law also protects depositors’ interests, diminishes money market risk, guards against the concentration of lending, and includes articles on electronic banking practices and anti-money laundering. The CBJ set up an independent Deposit Insurance Corporation (DIC) in 2000 that insures deposits up to JOD 50,000 (USD 71,000). The DIC also acts as the liquidator of banks as directed by the CBJ.

In January 2017, the CBJ established the “Jordan Payments and Clearing Company,” with an aim to establish and develop digital retail and micro payments along with the investment in innovative technology and digital financial services.

There is no legal impediment to applying block-chain technologies in banking transactions. TheCentral Bank actively supports the technology and is running two pilot projects deploying block- chain technologies: the Mobile Payment System (JoMoPay), and another for the verification of bank documents.

Foreign Exchange and Remittances

Foreign Exchange

The Central Bank of Jordan (CBJ) supervises and licenses all currency exchange businesses. These entities are exempt from paying commissions on exchange transactions and therefore enjoy a competitive edge over banks.

The Jordanian Dinar (JD or JOD) is fully convertible for all commercial and capital transactions. Since 1995, the JD has been pegged to the U.S. dollar at an exchange rate of JD 1 to USD 1.41.

Other notable foreign exchange regulations include:

• Non-residents are allowed to open bank accounts in foreign currencies. These accounts are exempted from all transfer-related commission fees charged by the CBJ.
• Banks are permitted to purchase unlimited amounts of foreign currency from their clients in exchange for JODs on a forward basis. Banks are permitted to sell foreign currencies in exchange for JODs on a forward basis for the purpose of covering the value of imports.
• There is no restriction on the amount of foreign currency that residents may hold in bank accounts, and there is no ceiling on the amount residents may transfer abroad. Banks do not require prior CBJ approval for a transfer of funds, including investment-related transfers.

Jordanian law entitles foreigners to remit abroad all returns, profits, and proceeds arising from the liquidation of investment projects. Non-Jordanian workers are permitted to transfer their salaries and compensation abroad.

Remittance Policies

Jordanian law entitles foreigners to remit abroad all returns, profits, and proceeds arising from the liquidation of investment projects. Non-Jordanian workers are permitted to transfer their salaries and compensation abroad.

Sovereign Wealth Funds

Jordan does not have a sovereign wealth fund.

A number of state-owned enterprises (SOEs) exist in Jordan. Seventeen SOEs of different sizes and mandates are fully owned by the government, five of which were established in 2016 and are not yet operational. Wholly-owned SOEs employ around 3,000 individuals, with assets exceeding USD 11 billion.

Most of the operational SOEs are small in terms of the size of operations, assets, number of employees, and income. The largest SOEs are: National Electrical Power Company (NEPCO), Samra Electric Power Company, the Yarmouk Water Company, and Aqaba Development Corporation (ADC).

Jordan’s economy is private sector led, accounting for 71 percent of GDP and 75 percent of net cumulative investment. SOEs in Jordan exercise delegated governmental powers and operating in fields that are not yet open for investment, such as managing the transmission and distribution of electrical power and water. Other activities include logistics, mining, storage and inventory management of strategic products, in addition to economic development activities. The government supports these companies as necessary, for example, the government has issued and guaranteed Treasury bonds for NEPCO since 2011 to ensure continuous power supply for the country.

SOEs generally compete on largely equal terms with private enterprises with respect to access to markets, credit, and other business operations. The law does not provide preferential treatment to SOEs, and they are held accountable by their Board of Directors, typically chaired by the sector-relevant Minister and the Audit Bureau.

The government, enterprises and NGOs are progressively taking initiatives to incorporate Responsible Business Conduct into their practices.

Jordan is not a party to the Government Procurement Agreement.

Privatization Program

Over the last fifteen years, the Jordanian government has engaged in a wide-scale privatization program, including in the telecom, energy, and transportation sectors. The few remaining government assets not privatized, including Jordan Silos and Supply Company, have elicited little private sector interest.

In 2020, Jordan published a new Public Private Partnership Law to support the government’s commitment to broadening the utilization of public-private sector partnerships (PPPs) and encouraging the private sector to play a larger role in the economy. The law does not limit PPPs to certain sectors, or nationalities. A PPP unit housed at the Prime Ministry supports the government in identifying and prioritizing projects and their implementation. The unit has already identified a list of potential PPP projects in several sectors; water, energy, transport, tourism, education, health, environment and information and communication technology.

There is general awareness of responsible business conduct among both manufacturers and consumers in Jordan, with many local and multinational companies voluntarily developing and adopting corporate social responsibility (CSR) programs. CSR efforts predominantly focus on improving infrastructure in adjoining communities or providing better access to educational opportunities.

The amended companies’ law regulates the work of companies by applying the rules of company governance and enhancing the monitoring authorities of shareholders at public liability companies.

The American Chamber of Commerce published in 2016 a framework code of conduct for the private sector, the Jordan Integrity and Anti-Corruption Commission (JIACC) approved and embedded as part of the governance chapter in the amended companies law. The Customs Department released and revised a Golden List Program, which encourages good corporate citizenship amongst trading companies and international best practice for trade across borders.

The government issues a monthly financial bulletin highlighting all revenues, including taxes and royalties paid by extractive industries.

Jordan was the first Middle Eastern country to sign and ratify the United Nations Convention against Corruption (UNCAC) in 2005 and has initiated several reforms in similar spirit over the last two decades; including a code of conduct for the public sector in 2006. Furthermore, the government drafted an action plan to address corruption with Jordan’s National Integrity System (NIS), developed in 2012.

Jordanian Anti-Corruption law defines corruption as any act that violates official duties, all acts related to favoritism and nepotism that could deprive others from their legitimate rights, economic crimes, and misuse of power. However, the use of family, business, and other personal connections to advance personal business interests is endemic and regarded by many Jordanians as part of the culture. In 2006, Parliament approved an Illicit Gains Law, which officially required public office holders and specified government officials to declare their assets. The 2018 amendments to the Illicit Gain Law expanded the employees subject to the financial disclosure requirement to include heads and members of ad hoc municipal councils, executive directors of municipalities and heads and members of governorate councils. The Law requires the prime minister, Cabinet members, and senior employees to provide financial disclosures for themselves, their spouses, and minor children.

In 2006, Parliament also enacted an Anti-Corruption Law that created the Anti-Corruption Commission (ACC) to investigate allegations of corruption. In 2016, the Integrity and Anti-Corruption Commission (“IACC”) came into force by Law No. 13/2016 (“IACC Law”). Two Authorities were merged into one, repealing the Bureau of Ombudsman Law No. 11 of 2008 and the Anti-Corruption Law No. 62/2006.

The IACC received 790 new investigation files on corruption in 2018, of which 173 cases were referred to the Public Prosecutor in the commission, 342 files were closed and archived because either corruption offenses were found and therefore no administrative action was required to correct / rectify the situation, and 275 files still are under investigation.

In 2018, the government issued the Code of Governance Practices of Policies and Legislative Instruments in Government Departments, to improve the predictability of legal and regulatory framework governing the business environment.

In July 2019, Parliament amended the IACC Law granting the IACC more authority to access asset disclosure filings. The amendment empowers the commission to request asset seizures, international travel bans, and suspension of officials under investigation for corruption. The amendment also increases the IACC’s administrative autonomy by enabling the commission to update its own regulations and protecting IACC board members and the chairperson from arbitrary dismissal.

The IACC opened 609 new investigations in 2019. The IACC referred 234 cases to the courts for prosecution, closed 316 for lack of evidence, and transferred three cases within the commission. Another 56 cases remained under investigation.

A new Audit Bureau Law was enacted in October 2018 to strengthen the Bureau performance, capacity and independence in line with INTOSAI standards.

Other related laws include the Penal/Criminal Code, Anti-Money Laundering Law, Right to Access Information Law, and the Economic Crimes Law.

Jordan is not a party to the OECD Convention on Combatting Bribery.

Resources to Report Corruption

H.E. Mohannad Hijazi
Chairman
Jordan Integrity and Anti-Corruption Commission (JIACC)
P.O. Box 5000, Amman, 11953, Jordan
+962 6 550 3150

Contact at “watchdog” organization:

Sawsan Gharaibeh
Director
+962 079 905 2555
swmkgf@gmail.com

And/ Or

Abeer Mdanat
Executive Director
Rasheed Coalition
P.O. Box 582662, Amman, 111585, Jordan
+962 5 585 2528
amdanat@rasheedti.org

While politically motivated violence is rare in Jordan, the threat of terrorism remains high. Terrorist organizations, including the self-proclaimed Islamic State of Iraq and Syria (ISIS), its affiliates, and sympathizers, have successfully conducted attacks in Jordan and continue to plot assaults in the country. Jordan’s prominent role in the Defeat-ISIS Coalition and its shared borders with Iraq and Syria maintains potential for future terrorist incidents. Within the last year, Jordanian authorities have disrupted terrorist plots. Visitors should consult current State Department public announcements at www.travel.state.gov before traveling to Jordan.

Peaceful protests occur frequently but are usually limited to a few hundred (and often only a few dozen) participants. Most demonstrations focus on frustration with perceived economic inequality and corruption or on the Israeli-Palestinian conflict and the status of Jerusalem.

According to the Department of Statistics annual report for 2018, the total population of Jordan is 10.5 million, of which 69 percent are Jordanians (7.3 million) and approximately 31 percent are non-Jordanians, including 1.3 million Syrian refugees. UNHCR has registered 655,435 Syrian refugees in Jordan.

Approximately 70 percent of the population is estimated to be under the age of 30. Literacy rates are 98.2 percent for men and 92.9 percent for women. Jordan has a generally well-educated labor force of about 2.6 million Jordanians. According to the Department of Statistics, official unemployment in 2019 reached 19 percent.

Certain types of work are restricted to Jordanians only. In 2019, the Ministry of Labor increased the number of closed professions from 11 to 28. However, employers may request the Ministry of Labor to review applications for foreign workers in restricted sectors if local expertise cannot be found; these requests have generally been approved. Local labor requirements in development and free zones vary based on the type of economic activity.

Labor unions serve primarily as intermediaries between workers and the Ministry of Labor (MOL) and may engage in collective bargaining on behalf of workers. The 17 recognized unions are all members of the General Federation of Jordanian Trade Unions. Estimates put union membership at less than 10 percent of the labor force. Additionally, there are 40 active professional associations, including many that have mandatory membership, in addition to 15 Independent Unions covering the rest of the professions and trades. According to official figures, about 30 percent of the total labor force, including government workers, belongs to either a union or a professional association. There is a labor mechanism in place for labor dispute resolution beginning with labor inspector mediation. If mediation fails, the Minister of Labor reviews the case, followed by the Conciliation Council, then finally by the Labor Court under the Magistrate and Penalty Court to resolve the case within seven days.

The labor law does not require employers to include retirement plans in employment packages. However, if the employer agreed to provide retirement benefits when the worker was contracted, the employer must fulfill that commitment. The law addresses layoffs, and requires ministerial notification and guarantee of legitimate and entitled benefits and severance, but also allows firing without prior notice on certain conditions. Companies with the appropriate justification may obtain permission from the Ministry of Labor (MOL) to reduce their staff as a result of business restructuring. The social security system provides up to six months of unemployment benefits.

In 2017, Jordan introduced amendments to the labor law regarding flexible work hours and the provision of daycare; the amendments were approved and published in the official gazette in May 2019. The amendments enhanced the work environment for employees, including a definition for flexible work hours, and provisions against gender wage discrimination. The law granted paternity leave for three days, tied the eligibility for daycare to the total number of employees’ children under the age of five (minimum 15 children from the age 0-4 years old), and exempts non-Jordanian children of Jordanian women from needing a work permit.

The amendments establish flexible work hour as agreements to be negotiated between employers and employees but does not mandate them as an employee right. The current law governing daycare requires a business with at least 20 female employees with children between the age of one day and four years, to make daycare services available to the employees. The proposed amendments will require employers with employees, regardless of gender, that cumulatively have 15 or more children under the age of five years, to provide a suitable childcare facility for them.

The government has been reforming and strengthening its legal framework and labor inspections since 2006. In 2010, Jordan fully implemented its Free Trade Agreement (FTA) with the United States, which requires Jordan to continuing making improvements on labor rights issues.

The Better Work Jordan program (BWJ), funded by the U.S. Department of Labor (USDOL), was launched in 2008 as a joint project between the Ministry of Labor, the International Labor Organization (ILO), and the International Finance Corporation to improve garment sector labor standards and conditions, and raise compliance levels through public reporting and technical assistance. In 2016, USDOL removed the Jordanian garment industry from its “List of Goods Produced by Child Labor or Forced Labor.” As of December 2018, 86 garment factories were enrolled in the BWJ program. Following its successes, BWJ is expanding its mandate to cover manufacturing and industrial sectors in order to facilitate their obligations to the European Union’s under newly relaxed rules-of-origin trade agreement requirements. At the end of 2018, 12 companies qualified to benefit from the simplified rules-of-origin initiative. The Ministry of Labor drafted manuals in cooperation with BWJ on Occupational Safety and Health Safety in four sectors; agriculture, chemicals, engineering and plastic in 2019.

In 2019, the Public Private Partnership Unit identified a list of potential projects in diversified sectors that can be potential beneficiaries of DFC products. In October 2019, the Jordan Investment Commission announced 68 investment opportunities with a total worth of USD 4.5 billion. All opportunities can be found at www.jic.gov.jo .

Investments in Jordan have benefited from Overseas Private Investment Corporation (OPIC) insurance and private financing. OPIC backed significant investments in Jordanian private equity ventures and in mortgage financing, with over USD 1 billion in investments in Jordan. OPIC has also been also active in financing projects in Jordan’s burgeoning renewable energy sector. In 2011, OPIC signed a USD 250 million loan guarantee program and established the Jordan Loan Guarantee Facility (JLGF), in partnership with USAID, as a financial inclusion activity aimed at improving access to finance for small and medium sized enterprises in Jordan. OPIC previously extended a USD 250 million loan to support the USD 1 billion Disi water project to bring water to Amman from the Disi aquifer in the south.

Jordan is a member of the Multilateral Investment Guarantee Agency (MIGA), a World Bank agency which guarantees investment against non-commercial risks such as civil war, nationalization, and policy changes. The program covers investments in Jordan irrespective of the investor’s nationality, in addition to Jordanian investments abroad.

* Source for Host Country Data: Central Bank of Jordan

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

Shaden al-Majali
Senior Economic Specialist
+962 6 590 6317
Majalisa@state.gov

Policies Towards Foreign Direct Investment

The GOT is working to improve the business climate and attract FDI.  The GOT prioritizes attracting and retaining investment, particularly in the underdeveloped interior regions, and reducing unemployment.  More than 3,350 foreign companies currently operate in Tunisia, and the government has historically encouraged export-oriented FDI in key sectors such as call centers, electronics, aerospace and aeronautics, automotive parts, textile and apparel, leather and shoes, agro-food, and other light manufacturing.  In 2019, the sectors that attracted the most FDI were energy (37 percent), services (12 percent), the electrical and electronic industry (20.6 percent), the mechanical industry (8.5 percent), and agro-food products (4 percent).  Inadequate infrastructure in the interior regions results in the concentration of foreign investment in the capital city of Tunis and its suburbs (40.4 percent), the northern coastal region (20.5 percent), and the eastern coastal region (26.1 percent).  Internal western and southern regions attracted only 13 percent of foreign investment despite special tax incentives for those regions.

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

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

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

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

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign investment is classified into two categories:

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

Pursuant to the 2016 Investment Law (article 4), a list of sectors outlining which investment categories are subject to government authorization (the “negative list”) was set by decree on May 11, 2018.  The sectors include natural resources; construction materials; land, sea and air transport; banking, finance, and insurance; hazardous and polluting industries; health; education; and telecommunications.  Per the decree, if the relevant government decision-making body does not respond to an investment request within a specified period, typically 60 days, the authorization is automatically granted to the applicant.  The decree went into effect on July 1, 2018.

Other Investment Policy Reviews

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

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

Business Facilitation

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

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

The World Bank Doing Business 2020 report ranks Tunisia 19  in terms of ease of starting a business.  In the Middle East and North Africa, Tunisia ranked second after the UAE, and first in North Africa ahead of Morocco (53), Egypt (114), Algeria (157), and Libya (186):  https://www.doingbusiness.org/en/data/exploreeconomies/tunisia#DB_sb .

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

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

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

The World Bank’s Doing Business 2020 report indicates that business registration takes an average of 9 days and costs about USD 90 (253 Tunisian dinars):   http://www.doingbusiness.org/en/data/exploreeconomies/tunisia#DB_sb .

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

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

The central point of contact for established foreign investors and companies is the Foreign Investment Promotion Agency (FIPA):  http://www.investintunisia.tn .

Outward Investment

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

Tunisia has signed 55 bilateral investment treaties, of which 39 are in force: http://investmentpolicyhub.unctad.org/IIA/CountryBits/213#iiaInnerMenu .

The 2002 Trade and Investment Framework Agreement (TIFA) between Tunisia and the United States remains active.  A meeting of the Bilateral Trade and Investment Council in May 2019 helped promote engagement and cooperative reform efforts.  A Bilateral Investment Treaty (BIT) between Tunisia and the United States entered into force in 1993, and a bilateral agreement on avoidance of double taxation has been effective since January 1990.

In December 2019, Tunisia’s Ministry of Finance issued general public note no. 27/2019 to assist foreign companies, including those from the U.S., to use bilateral taxation treaties to avoid double taxation, penalties, or extra taxes imposed on companies residing in privileged tax territories, such as the State of Delaware, for example

Tunisia and the United States signed an Intergovernmental Agreement on the Foreign Account Tax Compliance Act (FATCA), which went into force in September 2019.  FATCA requires foreign financial institutions to report to the IRS information about financial accounts held by U.S. taxpayers, or by foreign entities in which U.S. taxpayers hold a substantial ownership interest.

Tunisia has multilateral and bilateral trade agreements with approximately 127 countries, including its neighbors, Libya and Algeria.  Tunisia acceded to the Common Market for Eastern and Southern Africa (COMESA) in July 2018,  and is seeking membership into the Economic Community of West African States (ECOWAS), and is a signatory of the African Continental Free Trade Area (AfCFTA).  In January 2008, Tunisia’s Association Agreement with the EU went into effect, eliminating tariffs on industrial goods.  Tunisia and the EU are negotiating a full-fledged free-trade agreement, but it has not yet been concluded.  In addition, Tunisia is a signatory to the World Bank’s Multilateral Investment Guarantee Agency (MIGA), which offers private sector political risk insurance.  Tunisia is a member of the World Trade Organization and maintains bilateral agreements with Turkey and the member states of the European Free Trade Association (EFTA), as well as a multilateral agreements with other Arab League states.

In 2013, the Tunisian Parliament adopted the OECD Multilateral Convention on Mutual Administrative Assistance in Tax Matters.

In April 2020, the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes rated Tunisia “Largely Compliant” on the standard of exchange of information on request (EOIR).  https://www.oecd-ilibrary.org/fr/taxation/global-forum-on-transparency-and-exchange-of-information-for-tax-purposes-tunisia-2020-second-round_fdeb6766-en 

Transparency of the Regulatory System

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

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

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

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

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

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

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

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

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

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

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

International Regulatory Considerations

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

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

Tunisia has yet to ratify the WTO Trade Facilitation Agreement (TFA) that would improve processes at the port of entry.  However, Tunisia submitted a “Category A” notification in September 2014 and a “Category C” notification in September 2019, which should have required the GOT to implement TFA measures by February 2017.

Legal System and Judicial Independence

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

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

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

Laws and Regulations on Foreign Direct Investment

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

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

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

Competition and Anti-Trust Laws

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

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

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

Expropriation and Compensation

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

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

Dispute Settlement

ICSID Convention and New York Convention

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

Investor-State Dispute Settlement

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

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

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

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

International Commercial Arbitration and Foreign Courts

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

Bankruptcy Regulations

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

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

Investment Incentives

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

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

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

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

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

Foreign Trade Zones/Free Ports/Trade Facilitation

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

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

Performance and Data Localization Requirements

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

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

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

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

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

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

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

Real Property

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

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

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

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

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

Intellectual Property Rights

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

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

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

The 2009 Intellectual Property law greatly expanded the current scope of protections.  The minimum fine for counterfeiting is 10,000 Tunisian dinars (approximately USD 3,800), and copyright protection is valid for the holder’s lifetime.  Customs agents have the authority to seize suspected counterfeit goods immediately.  Tunisia’s 2014 constitution enshrined intellectual property protection in article 41.

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

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

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

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

Resources for Rights Holders 

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

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

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

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

Capital Markets and Portfolio Investment 

Tunisia’s financial system is dominated by its banking sector, with banks accounting for roughly 85 percent of financing in Tunisia.  Overreliance on bank financing impedes economic growth and stronger job creation.  Equity capitalization is relatively small; Tunisia’s stock market provided 13.2 percent of corporate financing in 2017 according to the Financial Market Council annual report.  Other mechanisms, such as bonds and microfinance, contribute marginally to the overall economy.

Created in 1969, the Bourse de Tunis (Tunis stock exchange) listed 82 companies as of December 2019.  The total market capitalization of these companies was USD 8.41 billion, equivalent to 23.1% of the GDP.  During the last five years, the exchange’s regulatory and accounting systems have been brought more in line with international standards, including compliance and investor protections.  The exchange is supervised and regulated by the state-run Capital Market Board.  Most major global accounting firms are represented in Tunisia.  Firms listed on the stock exchange must publish semiannual corporate reports audited by a certified public accountant.  Accompanying accounting requirements exceed what many Tunisian firms can, or are willing to, undertake.  GOT tax incentives attempt to encourage companies to list on the stock exchange.  Newly listed companies that offer a 30 percent capital share to the public receive a five-year tax reduction on profits.  In addition, individual investors receive tax deductions for equity investment in the market.  Capital gains are tax-free when held by the investor for two years.

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

Money and Banking System

According to the Central Bank of Tunisia (CBT) annual report on banking supervision published in January 2020, Tunisia hosts 30 banks, of which 23 are onshore and seven are offshore.  Onshore banks include three Islamic banks, two microcredit and SME financing banks, and 18 commercial universal banks.

Domestic credit to the private sector provided by banks stood at 68 percent of GDP in 2018.   According to the World Bank, this level is higher than the MENA region average of 56.7 percent.  In the World Bank’s Doing Business 2020 survey, Tunisia’s ranking in terms of ease of access to credit went down from 99 in 2019 to 104 in 2020.  Tunisia’s banking system penetration has grown by four percent annually for the past five years.  87 percent of banks are located in the coastal regions, with about 41 percent in the greater Tunis area alone.  Tunisia’s banking system activity is mainly within the 23 onshore banks, which accounted for 92 percent of assets, 93 percent of loans, and 97 percent of deposits in 2018.  They offer identical services targeting Tunisia’s larger corporations.  Meanwhile, SMEs and individuals often have difficulty accessing bank capital due to high collateral requirements.

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

Government regulations control lending rates.  This prevents banks from pricing their loan portfolios appropriately and incentivizes bankers to restrict the provision of credit.  Competition among Tunisia’s many banks has the effect of lowering observed interest rates; however, banks often place conditions on loans that impose far higher costs on borrowers than interest rates alone.  These non-interest costs may include collateral requirements that come in the form of liens on real estate.  Often, collateral must equal or exceed the value of the loan principal.  Collateral requirements are high because banks face regulatory difficulties in collecting collateral, thereby adding to costs.  According to the CBT banking supervision report, nonperforming loans (NPLs) were at 13.4 percent of all bank loans in 2018, mostly in the agriculture (27.1 percent) and tourism (46 percent) sectors.

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

The GOT recognizes two categories of financial service activity:  banking (e.g., deposits, loans, payments and exchange operations, and acquisition of operating capital) and investment services (reception, transmission, order execution, and portfolio management).  Non-resident financial service providers must present initial minimum capital (fully paid up at subscription) of 25 million Tunisian dinars (USD 8.5 million) for a bank, 10 million dinars (USD 3.4 million) for a non-bank financial institution, 7.5 million dinars (USD 2.6 million) for an investment company, and 250,000 dinars (USD 85,200) for a portfolio management company.

Foreign Exchange and Remittances

Foreign Exchange 

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

In 2019, the dinar depreciated 10 percent against the dollar and 5 percent against the Euro.

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

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

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

There are no limits to the amount of foreign currency that visitors can bring to Tunisia to exchange into local currency.  However, amounts exceeding the equivalent of 25,000 dinars (USD 8,500) must be declared to customs at the port of entry.  Non-residents must also report foreign currency imports if they wish to re-export or deposit more than 5,000 dinars (USD 1,700).  Tunisian customs authorities may require currency exchange receipts on exit from the country.

Remittance Policies

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

Sovereign Wealth Funds

By decree no.85-2011, the GOT established a sovereign wealth fund, “Caisse des Depots et des Consignations” (CDC), to boost private sector investment and promote small and medium enterprise (SME) development.  It is a state-owned investment entity responsible for independently managing a portion of the state’s financial assets.  The CDC was set up with support from the French CDC and the Moroccan CDG (Caisse de Depots et de Gestion) and became operational in early 2012.  The original impetus for the creation of the CDC was to manage assets confiscated from the former ruling family as independently as possible in order to serve the public interest.  More information is available about the CDC at www.cdc.tn .  As of June 2019, CDC had 7.7 billion dinars (USD 2.6 billion) in assets and 317 million dinars (USD 110 million) in capital.

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

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

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

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

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

Privatization Program

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

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

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

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

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

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

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

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

Ministry of Development, Investment, and International Cooperation
Avenue Mohamed V
1002 Tunis
Tel: +216 7184 9596
Fax: +216 7179 9069

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

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

Most U.S. firms involved in the Tunisian market do not identify corruption as a primary obstacle to foreign direct investment.  However, some have reported that routine procedures for doing business (customs, transportation, and some bureaucratic paperwork) are sometimes tainted by corrupt practices.  Transparency International’s Corruption Perceptions Index 2019 gave Tunisia a score of 43 out of 100 and a rank of 74 among 180 countries which was the same as in 2018.  Regionally, Tunisia is ranked 7 for transparency among MENA countries and first in North Africa, ahead of Morocco, Algeria, Egypt, and Libya.  Transparency International expressed concern that Tunisia’s score has not improved in recent years despite advances in anti-corruption legislation, including laws to protect whistleblowers, improve access to information, and encourage asset declarations by public officials or individuals with public trust roles.

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

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

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

Tunisia’s penal code devotes 11 articles to defining and classifying corruption and assigns corresponding penalties (including fines and imprisonment).  Several other regulations also address broader concepts of corruption.  Detailed information on the application of these laws and their effectiveness in combating corruption is not publicly available, and there are no GOT statistics specific to corruption. The Independent Commission to Investigate Corruption, created in 2011, handled corruption complaints from 1987 to 2011.  The commission referred 5 percent of cases to the Ministry of Justice.  In 2012, the commission was replaced by the National Authority to Combat Corruption (INLUCC), which has the authority to forward corruption cases to the Ministry of Justice, give opinions on legislative and regulatory anti-corruption efforts, propose policies and collect data on corruption, and facilitate contact between anti-corruption efforts in the government and civil society.

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

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

Resources to Report Corruption

Contacts at agencies responsible for combating corruption:

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

“Watchdog” organization

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

In September and October 2019, Tunisia held presidential and parliamentary elections, the country’s first since its post-revolution constitution was ratified in 2014, which were widely regarded as well-executed and credible.  The transition of power was smooth and without incident, following a clear procedure outlined by the 2014 constitution.  Newly elected President Kais Saied designated former Minister of Finance Elyes Fakhfakh to form a new coalition government, which he did on February 27.  In the nine years since the revolution, Tunisia has made significant progress in the areas of civil society and rights-based reforms, but economic indicators continue to lag and have been a major driver of frequent protests.  Public opinion polls indicated that corruption, poor economic conditions, and persistently high unemployment fuel public discontent with the political class.  While ideological differences with respect to religion dominate much of the political discord, differing economic ideologies – whether Tunisia will follow a statist economic model or a liberal one – have more tangible effects on policy.  The country’s first municipal elections, held in May 2018, were a critical first step in the decentralization process, which should help alleviate some of the economic disparity between the relatively wealthy coastal areas and the relatively poor interior of the country.

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

Tunisia has a labor force of approximately 5.4 million.  The official 2019 unemployment rate was 15.5 percent.  However, the registered unemployment for the fourth quarter of 2019 was 14.9 percent.  Approximately 28.2 percent of the unemployed are university graduates, of which three quarters are women.  Official statistics do not count underemployment or provide disaggregated data by geography.  As Tunisia works on creating a sustainable economy for its new democracy, professionals, such as IT engineers, doctors, and professors, continue to seek employment abroad.  Tunisian interlocuters maintain that around 70 percent of Tunisian young professionals seek employment in other countries after graduation.  Additionally, a World Bank study estimated that 41.5 percent of the Tunisian workforce is employed in the parallel economy.  Official statistics do not count underemployment.

Over the past two decades, the structure of the workforce remained relatively stable, and as of the last quarter of 2019, it stood at 13.8 percent in agriculture and fishing, 33.9 percent in industry, and 51.8 percent in commerce and services.  Tunisia has developed its industrial sector and created low-skilled employment, although several manufacturers struggle to find qualified technical workers.   Tunisian law provides workers with the right to organize, form and join unions, and bargain collectively.  The law prohibits anti-union discrimination by employers and retribution against strikers.  The government generally enforces applicable laws.  Currently, four national labor confederations operate in Tunisia.  The oldest and largest is the General Union of Tunisian Workers (UGTT — Union Générale des Travailleurs Tunisiens).  The others are the General Confederation of Tunisian Workers (CGTT — Confederation Générale des Travailleurs Tunisiens), the Tunisian Labor Union (UTT — Union Tunisienne du Travail), created in May 2011, and the Tunisian Labor Organization (OTT — Organisation Tunisienne du Travail), created in August 2013.  UGTT claims about one third of the salaried labor force as members, although more are covered under UGTT-negotiated contracts.  Wages and working conditions are established through triennial collective bargaining agreements between the UGTT, the national employers’ association (UTICA — Union Tunisienne de l’Industrie, du Commerce, et de l’Artisanat), and the GOT.  These tripartite agreements set industry standards and generally apply to about 80 percent of the private sector labor force, regardless of whether individual companies are unionized.  The regional tripartite commissions also arbitrate labor disputes.

Public Wage Increase:  On February 7, 2019, the GOT and UGTT reached an agreement to increase salaries for civil servants commensurate with the October 20, 2018 increase for SOE employees.  Depending on grades and positions, increases ranged from 66 to 90 dinars per month, retroactively covering calendar years 2017 and 2018.  In July and August 2019, the GOT and UGTT negotiated a general pay increase for civil servants, to include a special increase for skilled professionals, covering the 2019 calendar year.  Negotiated increases ranged from 70 to 90 dinars a month depending on the grade and position.

Minimum Wage Increase:  On July 14, 2018, former Prime Minister Youssef Chahed decided to raise the minimum wage (SMIG) by 6 percent retroactively, starting from May 2018, for the 48- and 40-hour work week regimes.  For the 48-hour regime, the minimum wage is 378.56 dinars per month.  For the 40-hour regime, it is 323.43 dinars per month.  In May 2019, Chahed approved an increase in the monthly minimum wage for industrial and agricultural workers to 403 dinars.  The minimum wage exceeds the poverty income level of 180 dinars per month.

The Development Finance Corporation (DFC), a new U.S. government agency, provides financing for private development projects.  Created by the Better Utilization of Investments Leading to Development (BUILD) Act of 2018, the DFC consolidated and modernized the former Overseas Private Investment Corporation (OPIC) and Development Credit Authority (DCA) of the United States Agency for International Development (USAID).  In addition to the existing capabilities of OPIC and DCA, the DFC has an investment cap of USD 60 billion, more than double that of OPIC, and new financial tools.  These tools include equity financing; technical assistance; feasibility studies; the ability to use local currency loans and first-loss guarantees to reduce risks; a “preference” for U.S. investors, rather than a requirement, thereby expanding partnership opportunities with foreign investors; and, a prioritization of low- and lower-middle income countries.

Outside of energy infrastructure projects in Europe and Eurasia, high income countries (as defined by the World Bank) generally do not qualify for DFC support.  OPIC was active in Tunisia since 1963 and executed a number of investments and debt transactions.  From the prior OPIC portfolio in Tunisia, the DFC currently has an active $50-million credit-guarantee facility with local banks to increase access to finance for small and medium-sized enterprises.

*Source: Tunisia’s Foreign Investment Promotion Agency (FIPA) yearend December 2018 published in June 2019.
FIPA, which is the host country statistical source for FDI stock, does not track the stock of foreign investment in energy and uses statistics that are constant 2010.

*Sources: Tunisia’s Foreign Investment Promotion Agency (FIPA) yearend December 2019 published in February 2020.  Central Bank of Tunisia (CBT) yearend December 2019 published in February 2020.

*Source: Tunisia’s Foreign Investment Promotion Agency (FIPA) yearend December 2019 published in February 2020.
Central Bank of Tunisia
*Tunisia was not covered by the IMF’s Coordinated Portfolio Investment Survey (CPIS).

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