Afghanistan

Executive Summary

Afghanistan has a poor, agrarian economy with a small manufacturing base, few value-added industries, and a largely dollarized economy. International financial and security support has been instrumental in growing the Afghan economy from a $2.4 billion GDP in 2001 to $19.3 billion in 2015. In addition, various estimates place the value of the informal economy at up to $4.1 billion. Government expenses will continue to far exceed revenues, resulting in continued dependency on international donors for the foreseeable future, although the Government of National Unity GNU) has been able to significantly increase tax revenue.

The drawdown of international forces significantly slowed economic growth as demand for transport, construction, telecommunications and other services fell. Economic growth averaged 9.4 percent from 2003-12. The IMF estimates growth at three percent for 2017. The IMF notes that a return to growth is conditioned on improvements in the security sector, “strong reform momentum,” and investments in key economic sectors (mining and agriculture). Much higher growth rates are required to support a three percent population growth and roughly 400,000 new entrants into the labor market each year.

Agriculture remains Afghanistan’s most important source of employment: 60-80 percent of Afghanistan’s population works in this sector, although it accounts for just a third of GDP due to insufficient irrigation, uneven rainfall, lack of market access, and other structural impediments. Most Afghan farmers are primarily subsistence farmers.

Investment has declined in recent years, and what remains is largely financed by donors and the public sector. In 2017, the government is undertaking initiatives to attract private-sector Afghan and foreign investment, including promotion of public-private partnerships. New firm registrations tailed off dramatically in 2014, with half as many new firms registered in 2014 compared to 2013. That reduced level has remained relatively constant through 2016. Afghanistan has a small formal financial services sector and domestic credit remains tight.

Challenges to business in Afghanistan center around a still-developing legal environment, security, varying interpretations of tax law, and the impact of corruption on administration.

On the enabling environment for business, the Afghan government at all levels has publicly emphasized its commitment to fostering private sector-led development and increasing domestic and foreign investment. Important government and civil society efforts to build an enabling environment for the private sector and to expand investment by developing natural resources and infrastructure have been hindered by institutional capacity, reliance on top-down decision making and rent-seeking. Some improvements are underway in business licensing in 2016, including the consolidation of business and investment licenses within one ministry and the extension of business license validity from one to three years. Additionally, the government adopted an open access policy calling for liberalization of the telecoms sector, which now awaits implementation.

Afghanistan’s legal and regulatory frameworks and enforcement mechanisms remain irregularly implemented. The existence of three overlapping legal systems — Sharia (Islamic Law), Shura (traditional law and practice), and the formal system under the 2004 Constitution — can be confusing to investors and legal professionals. Corruption hampers fair application of the laws. Commercial regulatory bodies are often understaffed and under capacity. Financial data systems are limited. Crucial sectors such as mining and hydrocarbons lack a regulatory environment and policymaker support conducive for investment.

Afghanistan accessed to the World Trade Organization (WTO) in 2016, a positive sign for business and trade.

Afghanistan’s security challenges remain headline news, particularly for businesses. Nevertheless, domestic and foreign business leaders in most of Afghanistan report corruption and patronage in government are tougher challenges than security.

Although government officials express strong commitment to a market economy and foreign investment, Afghan and foreign business leaders report this attitude is not always reflected in practice. Private sector leaders routinely note that some government officials levy unofficial taxes and inflict bureaucratic delays to extract rents.

Table 1

Albania

Executive Summary

Albania is an upper middle-income country with a GNI per capita of USD 4,300 (2015) and a population of approximately 2.8 million people, more than half of who live in rural areas. Real GDP grew by 3.3 percent through the third quarter of 2016, and growth is projected to reach 3.8 percent in 2017 on public spending increases. Albania received EU candidate status in June 2014 and is working to implement reforms necessary to open EU accession negotiations. In November 2016, Albania received a European Commission recommendation to open EU accession negotiations conditioned primarily upon implementation of a judicial reform package passed earlier the same year.

Despite the government’s stated desire to attract foreign direct investment, corruption in Albania is endemic, particularly in the judiciary, and sanctity of contract and respect for private property remain low. The implementation of the reform of the judicial system has recently begun, but the investment climate remains problematic and Albania is perceived as a difficult place to do business.

Investors report ongoing concerns that regulators use difficult-to-interpret or inconsistent legislation and regulations as tools to dissuade foreign investors and favor politically connected companies. Regulations and laws governing business activity change frequently and without meaningful consultation with the business community. Major foreign investors report pressure to hire specific, politically connected subcontractors and express concern about compliance with the Foreign Corrupt Practices Act while operating in Albania. Reports of corruption in government procurement are commonplace. Several U.S. companies complained last year that they were disqualified from public tenders despite offering the lowest qualified bid, only to see the government award the contract to a local company.

Property rights remain another challenge in Albania, as clear title is difficult to obtain. Some factors include unscrupulous actors who manipulate the corrupt court system to obtain title to land not their own. Compensation for land confiscated by the former communist regime is difficult to obtain and inadequate. Meanwhile, the agency charged with removing illegally constructed buildings often acts without full consultation and fails to follow procedures.

To attract FDI, the GOA approved a new Law on Strategic Investments in 2015. The new law outlines investment incentives and offers fast-track administrative procedures to strategic foreign and domestic investors, depending on the size of the investment and number of jobs created. The government also passed legislation creating Technical Economic Development Areas (TEDAs), similar to free trade zones, but the tender to develop the first TEDA failed and the process stalled. The tender has since reopened for the third time.

Albania climbed 36 notches in the World Bank’s 2017 Doing Business report, ranking 58th out of 190 countries, up from 90th in 2016. The lifting of a moratorium on building permits, which the government froze in 2013 to combat illegal construction, explained much of the improvement. While Albania fared well in the “Dealing with Construction Permits” category, jumping 80 places from 2016, the country lost points or improved only marginally in every other variable measured by the index. Albania continued to score poorly for enforcing contracts and registering property, ranking 116th and 106th, in the overall global rankings.

The Albanian legal system ostensibly does not discriminate against foreign investors. The U.S.—Albanian bilateral investment treaty entered into force in 1998 and ensures that U.S. investors receive most-favored-nation treatment. The Law on Foreign Investment outlines specific protections for foreign investors and allows 100 percent foreign ownership of companies except in the areas of international air passenger transport, electric power transmission, and television broadcasting.

Energy and power, water supply and sewerage, road and rail, mining, and information communication technology represent the best prospects for foreign direct investment in Albania over the next several years.

Table 1

Algeria

Executive Summary

Algeria is a lucrative but challenging market with significant potential for many U.S. businesses. Economic growth has been primarily driven by oil and natural gas production, which have traditionally accounted for more than 90 percent of export revenues, 60 percent of state budget revenues, and 40 percent of GDP. The drop in oil prices since 2014 has reversed the trajectory of both the balance of payments and government budget, the latter of which has been the principal engine of non-hydrocarbons activity, largely through infrastructure spending. The Algerian government has announced it aims to diversify its economy and rely increasingly on the private sector to spur economic growth, with an emphasis on attracting more foreign direct investment (FDI) to boost employment and offset imports via increased local production.

Private sector interlocutors report that multiple sectors potentially offer substantial opportunities for long-term growth for U.S. firms with many having reported double-digit annual profits. Sectors targeted for robust investment include agriculture, tourism, information and communications technology, manufacturing (especially vehicles), energy (both fossil fuel and renewable), construction infrastructure, and healthcare. A new investments law passed in August 2016 offers lucrative, long-term tax exemptions, along with other incentives.

However, significant challenges remain. U.S. companies must overcome language barriers, distance, customs challenges, an entrenched bureaucracy, difficulties in monetary transfers, currency conversion restrictions, and price competition from Chinese, Turkish, French and other European businesses. International firms that operate in Algeria sometimes complain that laws and regulations are constantly shifting and applied unevenly, raising the perception of commercial risk for foreign investors. Business contracts are likewise subject to changing interpretation and revision, which has proved challenging to U.S. and international firms. Other drawbacks include the 51/49 rule that requires majority Algerian ownership of all new foreign partnerships, inadequate enforcement of protections for intellectual property rights (IPR), and limited regional trade. Arduous foreign currency exchange requirements and overly bureaucratic customs processes combine to impede the efficiency and reliability of the supply chain, adding further uncertainty to the market.

Algeria’s adoption of an import substitution policy has severely restricted foreign trade. As of April 2017, 21 imported products now require authorization from the Ministry of Commerce via the issuance of import licenses, and many items—including vehicles, cement, steel, and certain fruits and vegetables—are subject to strict quotas up to 90 percent below import levels in 2014. Delays inherent to the opaque and inefficient system under which licenses are granted has in some instances led to the complete halt of certain imports. For many finished goods, importers are now unable to clear items into Algeria unless they have filed plans to build or are already operating local manufacturing facilities. Although import substitution policies have introduced volatility of supply and price increases, the Algerian government appears to view these policies as a success in the wake of late 2016 announcements of several joint ventures with European and Asian automakers. The Algerian government’s overriding economic policy priority appears to be reducing the import bill to minimize its current account deficit while reducing government capital expenditures, a major source of non-hydrocarbon investment within the country.

Table 1

Andorra

Executive Summary

Andorra is an independent principality with a population of over 85,000 and area of 181 square miles situated between France and Spain in the Pyrenees mountains. Although not a member of the European Union, Andorra is part of the EU Customs Union and, due to a monetary agreement with the EU, uses the euro as its national currency. Andorra has become a popular tourist destination, accounting for about 80% of GDP, visited by approximately 8-10 million people each year who are drawn by the winter sports, summer climate, and duty-free shopping. Andorra has also become a wealthy international commercial center because of its integrated banking sector and low taxes. As part of its effort to modernize its economy, Andorra has opened to foreign investment, and engaged in other reforms, such as advancing tax initiatives aimed at supporting a broader infrastructure.

Andorra is actively seeking to attract foreign investment, and to become a center for entrepreneurs, talent, innovation, and knowledge. In doing so, Andorra has fostered an important project with the Massachusetts Institute of Technology (MIT) on innovation and big data, employing Andorra’s unique economy as a test market.

The Andorran economy is undergoing a process of diversification centered largely on the sectors of tourism, trade, property, and finance. To provide incentives for growth and diversification in the economy, the government began sweeping economic reforms in 2006. The Parliament approved three main regulations to complement the first phase of economic openness: the law of Companies (October 2007), the Law of Business Accounting (December 2007), and the Law of Foreign Investment (April 2008 and June 2012). From 2011 to 2015, the Parliament approved direct taxes in the form of a corporate tax, tax on economic activities, tax on income of non-residents, tax on capital gains, savings taxation, and personal income tax. These regulations aim to establish a transparent, modern, and internationally comparable regulatory framework.

The principal objectives of the economic reform are to attract those investment and businesses which can contribute most to Andorra’s economic development, offering greater diversification of the economy, and contributing high added value. Prior to 2008, when the first law on investment was approved, Andorra had limited foreign investment opportunities, mainly due to concerns about the impact of foreign firms on such a small economy. As a consequence, non-citizens were allowed to own no more than 33 percent of a company; only after residing in the country for a minimum of 20 years were foreigners entitled to own 100 percent.

Even today, all employees wishing to work in Andorra must have work permits, which are subject to annual quotas. While foreigners may now own 100% of a trading enterprise or a holding company in Andorra, the establishment of any new company must first be approved by the government. For a foreign resident, the process for obtaining permissions takes up to one month and is automatically approved if there are no objections. An application can be rejected if the proposal is found to threaten the environment, the public order, or the general interests of the principality.

Andorra has per capita income above the European average and above the level of its neighbors, Spain and France. The country has developed a sophisticated infrastructure including a one-of-a-kind micro-fiber-optic network for the entire country that provides universal access to all households and companies. Andorra’s retail tradition is well known around Europe, thanks to more than 1,400 shops and business, the quality of their products, and competitive prices. Products taken out of the Principality are tax-free up to certain limits; the purchaser has to declare those which exceed the allowance.

Table 1

Angola

Executive Summary

Angola is an upper middle income country located in southern Africa with a $96.2 billion GDP, a 27.4 million population and a per capita income of $3,514 according to IMF data (2016 Article IV consultation). It ranks as the third largest economy in Sub-Saharan Africa. Angola is a major oil producing country and OPEC member. It produces an average of 1.8 million barrels per day, the second highest volume in the Sub-Saharan region behind Nigeria. Angola also holds significant proven gas reserves as well as extensive mineral resources. Angola’s real GDP (in U.S. Dollars) declined 6.6 percent from $103 billion in 2015 to an estimated $96.2 billion in 2016 as a result of the decline in global oil prices and a significant devaluation in the local currency, the kwanza. Inflation increased to 45 percent in 2016 from the 2015 annual rate of 14.3 percent, due to currency devaluation, removal of government fuel subsidies, and scarcity of foreign exchange. The IMF projects 20 percent inflation by the end of 2017.

The oil price slide that started in mid-2014 has substantially reduced Angola’s fiscal revenue and export revenue and stagnated growth in 2016. The non-oil sector contracted by 50 percent in 2016 as industrial production, construction and services sectors suffered from shortages of imported inputs due to limited availability of foreign exchange. After zero growth in 2016, Angola’s economy is projected to grow 1.3 percent in 2017 according to the IMF.

The Government of the Republic of Angola (GRA) is focusing on economic diversification to reduce its reliance on oil as a source of income as well as to reduce its dependence on imports. While Angola has prioritized the development of agriculture and agro-industry, fisheries, and manufacturing as part of its diversification strategy, it will take several years to see real results. The government’s strategy also focuses on encouraging small and medium enterprises (SMEs), increasing investments in infrastructure to reduce transaction costs, and improving the country’s economic competitiveness. (2016 IMF Art. IV Consultation.)

Angola is one of the United States’ three strategic partners in sub-Saharan Africa, together with Nigeria and South Africa. The bilateral strategic partnership dialogue has focused on eight key areas: political-social/regional stability, trade/economic growth, health, energy, agriculture, regional security cooperation (focused on maritime security and peacekeeping), education, and consular affairs.

In 2015, the GRA enacted a new private investment law (no. 14/15) and created the National Agency for Promotion of Investment and Exportations of Angola (Agencia para a Promocao de Investimento e Exportacoes de Angola (APIEX). These measures aim to stimulate economic growth, diversify the economy, expand the private sector, and foster greater private-sector participation in Angola’s economic development. The investment law has received a mixed reaction across the business community as it raises taxes on early repatriation of profits and dividends for foreign companies and disadvantages foreign investors relative to domestic investors by imposing local partnership requirements for foreign investment in key sectors. One year after its launch, APIEX remains underfunded, lacks focus and strong leadership, and has not been instrumental in bringing any significant new foreign investments to, or in generating new exports from, Angola. In early 2017, the Angolan Minister of Commerce replaced the APIEX Board and its senior administrators

Building infrastructure capacity in the areas of electricity, water, and transportation is also a major government focus. The expansion of the Cambambe Dam and the construction of the Lauca Dam (slated for completion in mid-2017), will increase Angola’s electric power generation capacity five-fold. This investment in new infrastructure for the production of electric power was accompanied by the 2015 incorporation of new public companies operating in the electric energy sector: Rede Nacional de Transporte, E.P. (RNT), Empresa Publica de Producao de Electricidade, E.P. (PRODEL), and Empresa Nacional de Distribuicao de Electricidade (ENDE). Multilateral development banks hold an important role in Angola’s infrastructure revitalization with the African Development Bank financing electric sector reform and the World Bank concentrated on water sector expansion. The Angolan government expansion of railroad and ports benefited heavily from Chinese government financing.

Key issues to watch:

• Angola continues to suffer from a relatively poor investment climate due in large part due to lack of openness to competition from the private sector and the dominance of the state or state owned enterprises in the economy.
• Angola does benefit from a relatively stable and predictable political environment, especially when compared to its neighbors in the region.
• Angola is rich in natural resources including oil, minerals, land, and water.
• There is an abundant supply of unskilled labor, particularly in the capital Luanda. Skilled professionals are available, but often require additional training.
• Portuguese is commonly spoken, while English competency levels are relatively low.
• Under the current investment law, the Angolan government offers incentives to companies investing in the domestic economy.
• Real estate and living expenses remain prohibitively expensive, but have recently moderated due to the ongoing economic crisis. In 2016, Luanda was named the second most expensive city in the world for expatriates by Mercer, down from first in 2015 and 2014.
• Infrastructure is limited, roads are often in poor condition, power outages are common, and water availability can be unreliable.
• The investment climate is also heavily hampered by rampant corruption, and a complex, opaque regulatory environment, as reflected by rankings from globally recognized entities outlined in Table 1.
• The oil crisis continues to impact the Angolan economy, creating drastic losses in export revenue and a severe limitation in foreign exchange, forcing substantial cuts in government spending.
• Portfolio investment in Angola is negligible.

Table 1

Antigua and Barbuda

Executive Summary

Antigua and Barbuda is a member of the Organization of Eastern Caribbean States (OECS) and the Eastern Caribbean Currency Union (ECCU). According to Eastern Caribbean Central Bank (ECCB) statistics updated in January 2017, Antigua and Barbuda has an estimated Gross Domestic Product of USD $1.18 billion, with forecast growth of 3.21 percent in 2017. During the last fiscal year, the economy of Antigua and Barbuda continued to enjoy the positive effects of falling oil prices, increased tourist arrivals and revenue from the Citizenship by Investment program. The current government remains committed to creating an enhanced business climate to attract more foreign investment to the country.

Antigua and Barbuda is currently ranked 113^th out of 190 countries in the World Bank’s 2017 Doing Business report. The report highlighted positive changes in trading across borders and bankruptcy regulations but also noted some difficulties in starting a business and registering property.

The government strongly encourages foreign direct investment (FDI), particularly in industries that create jobs and earn foreign currency. Through the Antigua and Barbuda Investment Authority, the government facilitates and supports FDI in the country and maintains an open dialogue with current and potential investors. While the government welcomes all FDI interests, agriculture, diversified tourism, healthcare services, outsourcing and business support services, information and communication technologies and international financial services were identified by the government as priority investment areas.

There are no limits on foreign control in Antigua and Barbuda. Foreign investors may hold up to 100 percent of an investment, and a local or foreign entrepreneur needs about 40 days from start to finish to transfer the title on a piece of property.

Antigua and Barbuda bases its legal system on the British common law system. There is current an unresolved dispute regarding expropriation of an American-owned property. For this reason, the U.S. government recommends continued caution when investing in real estate in Antigua and Barbuda.

Antigua and Barbuda has signed bilateral investment treaties with Germany and the United Kingdom. The country has also signed free trade agreements with Costa Rica and the Dominican Republic, but the agreements did not enter into force. Antigua and Barbuda has double taxation agreements with Denmark, Norway, Sweden, Switzerland, and the United Kingdom.

In February 2017, the government signed an Intergovernmental Agreement in observance of the United States’ Foreign Account Tax Compliance Act (FATCA), making it mandatory for banks in Antigua and Barbuda to report the banking information of U.S. citizens.

Table 1

Argentina

Executive Summary

Argentina is the third largest country in Latin America and one of the wealthiest in the region, possessing abundant human and natural resources, highly diversified industries, and a population of 43 million people. The country has the second largest shale gas resources and fourth largest shale oil resources worldwide, and presents significant investment and trade opportunities, particularly in infrastructure, health, agriculture, information technology, energy, and mining.

Since entering office in December 2015, the Macri Administration has focused on rebuilding investor confidence and attracting investment as key to economic recovery. Macri and his economic team acted quickly to correct macroeconomic imbalances, including unifying the exchange rate, lifting currency controls, improving the accuracy and transparency of government statistics, reducing distortionary import and export restrictions, and resolving the long-standing bond holdouts dispute that allowed Argentina to exit default and reenter international capital markets after 15 years. The Macri Administration has improved government transparency, increased dialogue with stakeholders, including the private sector, unions, and political opposition, as well as strengthened coordination between the national and provincial governments. The government took steps to improve Argentina’s regulatory framework to facilitate business creation and trade particularly for small and medium-sized enterprises, and to increase competition in the communications, gas and energy, auto, and aviation sectors. It also took some measures to strengthen protection of intellectual property rights, but long-standing deficiencies remain.

The Macri government took steps to reintegrate Argentina into the international community, including reestablishing consultations with the International Monetary Fund (IMF), which lifted its censure of Argentina in November 2016; agreeing to chair the World Trade Organization Ministerial Conference in December 2017 and to assume the G20 Presidency in 2018; hosting the World Economic Forum in Latin America in April 2017; pursuing an EU-MERCOSUR trade agreement; expanding economic cooperation with numerous partners including Mexico, Chile, Brazil, Japan, South Korea, Spain, Canada, and the United States; becoming an observer in the Pacific Alliance; and increasing constructive engagement with the Organization for Economic Cooperation and Development (OECD) with an eye towards eventual membership. Argentina has notified its intention to ratify the World Trade Organization (WTO) Trade Facilitation Agreement, which is pending congressional approval.

To showcase Argentina as “open for business,” the country convened nearly 2,000 leading business and world leaders in September 2016 for the first Argentine Business and Investment Forum. Since the beginning of the Macri Administration, the private sector has announced planned investments for the 2016-2019 time period totaling approximately USD 45.6 billion. Moody’s in March 2017 upgraded the Government of Argentina’s rating from stable to positive, but maintained the issuer rating at B3 (speculative). Standard & Poor’s recently upgraded its sovereign rating for Argentina from B- to B.

Argentina and the United States continued to expand bilateral commercial and economic cooperation, specifically through the Trade and Investment Framework Agreement (TIFA), the Commercial Dialogue, and the Digital Economy Working Group, in order to improve and facilitate public-private ties and communication on trade and investment issues, including market access and intellectual property rights. Argentina and the United States continue to discuss pending trade disputes, including a 2012 WTO case stemming from Argentina’s import policies. More than 500 U.S. companies operate in Argentina, and the United States continues to be the top investor in Argentina with more than USD 13 billion of foreign direct investment as of 2015.

The policies laid out by the Macri Administration over the past year have led to slight improvements in Argentina’s macreconomic performance, with the latest private and official estimates projecting a mild economic recovery of 2.5-3.5 percent GDP growth for 2017. Inflation clocked in at 40 percent for 2016 but is on a downward trend. The IMF, World Bank, and private economic consultants have issued reports forecasting economic recovery and declining inflation to continue through 2018. Despite these improvements, key challenges remain, such as the need to further slow inflation, reduce the fiscal deficit, improve competitiveness, increase access to financing, further liberalize trade, and strengthen the country’s institutional framework.

Table 1

Armenia

Executive Summary

Located in the Caucasus region between Asia and Europe, Armenia has a highly educated workforce and the Government of Armenia (GOA) officially welcomes foreign investment. In 2015, Contour Global acquired the Vorotan Hydroelectric Cascade, a major U.S. investment in Armenia’s energy generation sector. In 2016, Lydian International benefited from the largest U.S. private equity investment in Armenia from Orion Mine Finance and Resource Capital Fund for its Amulsar gold project. However, Armenia’s investment climate poses several serious challenges through its small market (Armenia has a population of less than three million); relative geographic isolation due to closed borders with Turkey and Azerbaijan; per capita gross national income (GNI) of about USD 3,900; and high levels of corruption. It has been two years since Armenia formally entered the Eurasian Economic Union trading bloc, a single economic market of 176 million people between Armenia, Belarus, Kazakhstan, Kyrgyzstan, and Russia. In May 2015, Armenia signed a Trade and Investment Framework Agreement (TIFA) with the United States. The TIFA establishes a United States-Armenia Council on Trade and Investment to discuss bilateral trade and investment and related issues and examine ways to strengthen the trade and investment relationship between the two countries, though little progress has been registered so far.

Armenia does not limit the conversion and transfer of money or the repatriation of capital and earnings, including branch profits, dividends, interest, royalties, and management or technical service fees. However, there are now differences in dividend taxes between foreign and domestic entities (5% for Armenian nationals and 10% for non-nationals including U.S. citizens) under a provision of the new tax code. The provision entered into effect January 1, 2017 for non-nationals and will enter into effect January 1, 2018 for Armenian nationals. The banking system in Armenia is sound and well-regulated, but Armenia’s financial sector is not highly developed. Foreign individuals who do not hold special residence permits cannot own land, but may lease it; companies registered by foreigners in Armenia as Armenian businesses have the right to buy and own land. There are no restrictions on the rights of foreign nationals to acquire, establish or dispose of business interests in Armenia. The U.S.-Armenia Bilateral Investment Treaty (BIT) provides that if a dispute arises between an American investor and the Republic of Armenia, the investor may choose to seek remedy through binding international arbitration. Although Armenian legislation complies with the Trade Related Aspects of Intellectual Properties (TRIPS) Agreement and offers protection of intellectual property rights (IPR), enforcement efforts and recourse through the courts still require improvement.

The Armenian regulatory system lacks transparency. Major sectors of Armenia’s economy are controlled by well-connected businesspeople enjoying government-protected market dominance. Corruption remains a significant obstacle: although the government has introduced a number of reforms over the last few years, and the overall investment climate seems to be incrementally improving, corruption remains a problem in critical areas such as the judiciary, tax and customs operations, health, education, military and law enforcement. Tax and customs procedures, while having recently improved, still lack transparency. Although the use of reference prices during customs clearance has reduced, it is still not uncommon to see manipulation of the classification of goods that increases costs for economic operators. The court system lacks independence, making it an unreliable forum for resolution of disputes.

Table 1

Australia

Executive Summary

Australia is generally welcoming to foreign investment, widely considering it to be an essential contributor to Australia’s economic growth and productivity. The United States is the dominant source of foreign direct investment (FDI) in Australia. U.S. FDI totaled USD167.4 billion in 2015.

Australia runs an annual current account deficit and, therefore, is dependent on foreign investment, both FDI and portfolio investment. Historically, FDI has been concentrated in the mining and resource sector. In the past few years, there has been a decline in mining investment but an increase in FDI in financial services and real estate.

While welcoming toward FDI, Australia does apply a “national interest” test to qualifying types of investment through its Foreign Investment Review Board (FIRB) review process. In 2016, the Australian government made several changes to the FIRB process to address national security concerns. This was in response to several high-profile asset sales of infrastructure and agricultural land as many State governments privatized assets to raise money either to spend on additional infrastructure or to address budget deficits. The new rules were intended to close gaps in the review system that allowed certain asset sales to take place without FIRB review and to ensure that national security was considered in determining if the sale was in the national interest of Australia. Under the Australia-U.S. Free Trade Agreement, all U.S. greenfield investments are exempt from FIRB screening. U.S. investors require prior approval if acquiring a substantial interest in a primary production business valued above A$1.094 billion (USD791.6 million).

In response to federal budget deficits and public perceptions of a lack of fairness, the Australian government has tightened anti-tax avoidance legislation that mainly affects multi-national corporations with operations in multiple tax jurisdictions. While some laws have been complementary to international efforts to address tax avoidance schemes and the use of low-tax countries or tax havens, Australia has also moved in its own direction and has gone further in its efforts than the international community. This trend is likely to continue in 2017.

Table 1

Austria

Executive Summary

The Austrian government welcomes foreign direct investment, particularly those investments with the potential to create jobs in high technology fields, support capital-intensive industries, and enhance research and development activities.

Austria has a well-developed market economy, skilled labor force, and high standard of living, but also expensive public, social security, and health sectors. The country is closely tied to other EU economies, especially Germany’s. Its economy features a large service sector, a sound industrial sector, and a small, but highly developed agricultural sector.

Following years of relatively weak economic growth, Austria’s GDP registered a solid 1.5 percent growth rate in 2016, with a similar growth rate expected for 2017. Austria’s 5.9 percent unemployment rate, while low by European standards, is at its highest rate since the end of World War II, as solid job creation is outpaced by the high growth rate of the labor force.

The country’s geopolitical location between Western European industrialized nations and the growth markets in Central, Eastern, and Southeastern Europe (CESEE) has led to a high degree of economic, social, and political integration with fellow European Union (EU) member states and the CESEE.

Some 320 U.S. companies have investments in Austria; many have expanded their original investment over time. Altogether, Austria offers a stable, advantageous, and attractive climate for foreign investors.

The government’s new economic reform package seeks to reduce non-wage labor costs and allow for an early write-down of 30 percent of investments made by companies with more than 20 employees, while Finance Minister Schelling is seeking to lower the corporate tax rate from currently 25 to 20 percent. Each of these measures has the aim of making Austria relatively more attractive to foreign companies, promoting further investment.

The Austrian government in March 2017 introduced a law that promises to introduce a specific visa category under the RWR model for founders of start-up enterprises to make Austria a more entrepreneur-friendly country. The draft law is expected to go into effect in 2017.

The most positive aspects of Austria’s investment climate include:

• Relatively high political stability and harmonious labor-management relations, low incidence of labor unrest;
• Skilled labor in many sectors;
• High degree of productivity and international competitiveness;
• Excellent quality of life, personal security, high-quality health, telecommunications, and energy infrastructure.

Negative aspects of Austria’s investment climate include:

• A high overall tax burden (despite an attractive corporate tax model and lower income taxes as of 2016);
• Low-to-moderate innovation dynamics;
• A large public sector and a complex regulatory system with extensive bureaucracy for new and established businesses.

Key sectors that have historically attracted significant investment in Austria:

• Automotive;
• Pharmaceuticals;
• Financial.

Table 1

Azerbaijan

Executive Summary

The overall investment climate in Azerbaijan continues to improve, although significant challenges remain. Over the past years, the Government of Azerbaijan has worked to integrate the country more fully into the global marketplace, attract foreign investment, diversify its economy, undertake further needed market economic reforms, and maintain growth. However, as a country that remains dependent on oil and gas output for roughly 90% of its export revenue, continued low world oil prices have hit Azerbaijan’s economy hard. Real GDP contracted 3.8% in 2016 with a 27.6% contraction in construction, one of the most important non-oil sectors of the economy, as public investment was cut. However, in 2017, the Fitch Ratings agency expects GDP to grow by 0.2%. Macroeconomic performance in 2016 was also hard hit by problems in the banking sector and a drop in public confidence.

In addition, weak economic performance in other countries in the region, currency devaluations in Azerbaijan’s main trading partners, and a contraction in hydrocarbon production further erased the large current account surplus that Azerbaijan enjoyed during the oil boom years. While the oil and gas sector has historically attracted the majority of foreign investment, the Azerbaijani government has targeted four non-oil sectors as key to diversifying the country’s economy and ensuring future prosperity: agriculture, transportation – including Azerbaijan’s place on the new Silk Road, tourism, and information/communication technology.

Economic diversification and attracting foreign investment to boost growth and employment remain the government’s key stated goals. Although significant challenges remain for U.S. companies and investment in the non-oil sector, including weak legal institutions, the Azerbaijani government has begun taking necessary steps to improve the business climate and reform the overall economy. Measures taken in recent years include suspending certain government inspections of businesses (although some businesses have stated these have not been completely suspended); doing away with certain redundant business license categories; empowering the popular “ASAN” government service centers with licensing authority and active steps to improve transparency, speed up specific government services, and fight corruption; simplifying customs procedures: and creating tax incentives for investors.

Most notably, President Aliyev signed the Strategic Roadmap of the National Economy Prospects December 2016. The strategy’s document includes 11 roadmaps, which lay out objectives for the years 2016-2025 for different sectors and an action plan with timelines for achieving them. There are roadmaps on the oil and gas industry, manufacturing and processing of agricultural products, stimulation of the small and medium-size business sector, and heavy industry and mechanical engineering. There are also roadmaps for developing a specialized tourism industry, logistics and trade, construction of affordable housing, development of vocational training and education, financial services, telecommunications and information technologies, and public services (supply of electrical and thermal energy, water and gas).

Under Azerbaijani law, foreign investors may engage in investment activities not prohibited by law. Private entities may freely establish, acquire and dispose of interests in business enterprises. Foreign citizens, organizations, and enterprises may lease, but not own land. Azerbaijan’s Law on the Protection of Foreign Investments protects foreign investors against nationalization and requisition, except under certain specified circumstances. The Government of Azerbaijan has not shown any pattern of discriminating against U.S. persons or entities by way of an illegal expropriation. The Bilateral Investment Treaty (BIT) between the United States and Azerbaijan provides U.S. investors with recourse to settle investment disputes using the International Center for the Settlement of Investment Disputes (ICSID). The average length of time it takes for international business disputes to be resolved, either through the use of domestic courts or alternative methods of dispute resolution like mediation and/or arbitration varies widely.

Azerbaijan considers travel to the region of Nagorno-Karabakh and the surrounding territories unlawful and could make a traveler ineligible to visit Azerbaijan in the future. These areas have been occupied by pro-Armenian forces as a result of a conflict that began in the late 1980s. Although not illegal by U.S. law, engaging in any commercial activities in Nagorno-Karabakh and the surrounding territories, whether directly or through business subsidiaries, can result in criminal prosecution and/or other legal action being taken against individuals and/or businesses in Azerbaijan; it may also affect the ability to travel to Azerbaijan in the future.

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Bahamas, The

Executive Summary

The Investment Climate Statement for The Bahamas covers the period through May 9, 2017; a new government in The Bahamas was elected on May 10, 2017.

The Bahamas maintains a stable environment for investment and demonstrates a long tradition of parliamentary democracy, respect for the rule of law and a well-developed legal system, and security of life and personal property. U.S. companies find that The Bahamas’ proximity to the United States, common English language, and the exposure to U.S. media and culture contribute to Bahamian consumers having general familiarity and positive attitudes towards U.S. goods and services. The Bahamian dollar is pegged to the U.S. dollar.

The Bahamian economy remains heavily dependent on tourism and financial services, although the government has made efforts to encourage diversification, particularly in agriculture and light manufacturing. The Bahamas conducts more than 85 percent of its international trade with the United States and relies primarily on imports from the United States to satisfy its food needs for local consumption and for the more than six million tourists who visit the country annually.

The Bahamas Investment Authority (BIA) actively promotes The Bahamas’ liberal tax environment and freedom from many types of taxes, including capital gains, inheritance, and corporate or personal income taxes. The country attracts significant foreign direct investment (FDI) from various parts of the world, primarily in the tourism sector, with investments ranging from multi-billion dollar resort developments to million dollar homes on the major islands of the archipelago. In addition, the national energy regulator published initial regulations for grid-tied, small-scale solar in December 2016, and the national utility is now issuing licenses for residential solar systems.

The major challenges to investment in the country include the high cost and uncertain reliability of electricity, high unemployment combined with a limited pool of skilled labor, high labor costs and low rates of productivity, cumbersome and sometimes opaque administrative requirements, and an escalating crime rate. In addition, the reservation of certain sectors of the economy for Bahamians only acts as a non-tariff trade barrier to certain foreign investments that do not fit clearly within the National Investment Policy. The Bahamas remains the only country in the Western Hemisphere that is not a member of the World Trade Organization (WTO).

Companies report that the approval process for FDI and work permits can be cumbersome and time-consuming and that, in some cases, applications have lingered for years. Large FDI projects require approval by the National Economic Council, which includes members of the Cabinet of The Bahamas. This provides opportunities for Bahamian businesses with competing interests to lobby Cabinet members to delay review or approval of FDI applications. The government of the Commonwealth of The Bahamas (GCOB or the Government) asserts, however, that the majority of foreign investment applications are processed quickly and without significant issues.

The Government maintains an online list of tender notices for projects; some companies, however, have complained that not all potential government contracts, particularly those not financed through international financing institutions, are put out for tender, and it is difficult to obtain information on the status of bids.

On January 1, 2015, the Government introduced a 7.5 percent Value Added Tax (VAT) on most goods and services, a measure designed to strengthen the fiscal balance sheet. In August 2016, Moody’s Investor Service downgraded The Bahamas’ bond and issuer ratings to Baa3 from Baa2 with a stable outlook and maintained these ratings in its February 2017 quarterly credit opinion. Standard and Poor’s(S&P) downgraded the country’s sovereign credit rating in its December 2016 report to BB+ (speculative grade) from BBB- (investment grade) citing slower pace of fiscal consolidation, along with lower than anticipated economic growth, high unemployment, elevated non-performing loans, and household indebtedness, but revised the outlook from negative to stable.

With over USD $2 billion in new resort development proposed and the potential for thousands of permanent jobs, the Bahamian government continues to assert that benefits from foreign investment-led activities are imminent.

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Bahrain

Executive Summary

The investment climate in Bahrain is generally good and has remained relatively stable in the last year, despite the sustained downturn in global oil prices. Bahrain has a liberal approach to foreign investment and actively seeks to attract foreign investors and businesses. In an economy largely dominated by state-owned enterprises, the Government of Bahrain (GOB) aims to foster a greater role for the private sector in economic growth. Government efforts focus on encouraging foreign direct investment in Bahrain, including in the manufacturing and logistics, information and communications technology (ICT), financial services and tourism sectors.

The U.S.-Bahrain Bilateral Investment Treaty (BIT) entered into force in 2001. The BIT provides benefits and protection to U.S. investors in Bahrain, such as most-favored nation treatment and national treatment, the right to make financial transfers freely and without delay, international law standards for expropriation and compensation cases, and access to international arbitration.

Bahrain permits 100 percent foreign-ownership of new industrial entities and the establishment of representative offices or branches of foreign companies without local sponsors. In July 2016, the GOB expanded the number of sectors in which foreigners were permitted to maintain 100 percent ownership stakes in companies, to include the following: tourism services, mining and quarrying, real estate activities, and water distribution.

The U.S.-Bahrain Free Trade Agreement (FTA) entered into force in 2006. Under the FTA, Bahrain committed to world-class Intellectual Property Rights (IPR) protection.

Despite the Government of Bahrain’s transparent, rules-based government procurement system, U.S. companies sometimes report operating at a perceived disadvantage compared with other firms in certain government procurements. Many ministries require firms to pre-qualify prior to bidding on a tender, often rendering firms with little or no prior experience in Bahrain ineligible to bid on major tenders.

Bahrain’s Ministry of Industry, Commerce and Tourism (MoICT) introduced the new business registration portal “sijilat” in 2016. The portal allows GCC companies and individuals to apply, track and get a “primary approval” for a new commercial registration online within two working days. American citizens and companies, however, are still required to appear in person at the Bahrain Investor’s Center (BIC) to file their applications.

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Bangladesh

Executive Summary

Bangladesh, the world’s eighth most populous country, offers promising opportunities for investment, especially in the oil and gas, power, pharmaceutical, information technology, telecommunications, and infrastructure sectors as well as in labor-intensive industries such as ready-made garments, household textiles, and leather processing. With over six percent annual growth sustained over the past two and a half decades, a large, young and hard-working workforce, strategic location, and vibrant private sector, Bangladesh is likely to attract increasing investment in coming years.

The Government of Bangladesh actively seeks foreign investment, particularly in the apparel industry, energy, power, and infrastructure projects. It offers a range of investment incentives under its industrial policy and export-oriented growth strategy with few formal distinctions between foreign and domestic private investors. According to the central bank of Bangladesh, the country received $2.0 billion in foreign direct investment (FDI) FY 2015-16, up from $1.8 billion in the previous year.

Bangladesh has made gradual progress in reducing some constraints on investment, including the progress with ensuring reliable electricity, but inadequate infrastructure, limited financing capabilities, bureaucratic delays, and corruption continue to hinder foreign investment. New government efforts to improve the business environment show promise but implementation has yet to be seen. Slow adoption of alternative dispute resolution mechanisms and sluggish judicial processes impede the enforcement of contracts and the resolution of business disputes.

On July 1, 2016, terrorists killed more than 20 people in a restaurant frequented by foreigners in Dhaka’s diplomatic enclave, including one U.S. citizen. Da’esh (also referred to as IS, ISIL, or ISIS) and Al Qaeda in the Indian Subcontinent (AQIS) have publicly claimed credit for multiple attacks since September 2015. In October 2016, Da’esh threatened to target “expats, tourists, diplomats, garment buyers, missionaries, and sports teams” in the most “secured zones” in Bangladesh.

International brands and the international community continue to press the Government of Bangladesh to meaningfully address worker rights and safety problems in Bangladesh. Labor unrest in December 2016 increased pressure on Bangladesh to show progress towards meeting the U.S. Government’s 16-point Generalized System of Preferences (GSP) Action Plan.

The government has limited resources for intellectual property rights (IPR) protection and Counterfeit goods are readily available in Bangladesh. Government policies in the information and telecommunications (ICT) sector are still under development. Current policies grant the government broad powers to intervene in the sector.

Capital markets in Bangladesh are still developing and the financial sector is still highly dependent on banks.

Table 1: Major Economic Statistics Summary

Barbados

Executive Summary

Barbados, the most easterly island in the Eastern Caribbean, is a member of the Caribbean Community (CARICOM). Established in 1972, the Central Bank of Barbados regulates the Barbados dollar. Barbados’ Gross Domestic Product (GDP) was USD $4.39 billion in 2015, according to Central Bank estimates. The Central Bank expects Barbados’ economy to grow by 2% in 2017. However, particular attention must be paid to Barbados’ economy over the next 12 to 18 months as the country continues to grapple with balance of payments concerns, consecutive international rating downgrades and less than stellar economic performance. Despite this, the economy continues to benefit from lower oil prices, increased tourist arrivals and increased exports. The government remains committed to attracting more foreign direct investment to Barbados.

Barbados is currently ranked 117^th out of 190 countries in the World Bank Doing Business report 2017 (April 2017 rankings). The report highlights positive changes in starting a business but notes difficulties in getting credit, getting electricity, dealing with construction permits and trading across borders.

The services sector holds the largest potential for growth, especially in the areas of international financial services, tourism, information technology, education, health, and cultural services. In agriculture, the gradual decline of the sugar industry opened up land for other agricultural uses, and investment opportunities exist in the areas of agro-processing, alternative and renewable energy, and hydroponics. In the financial services sector, the government improved its regulatory oversight and the industry is thriving under better regulatory standards designed to prevent money laundering and tax evasion.

The government offers special incentives for foreign investment in the hotel industry, manufacturing, and offshore business services. Foreign nationals receive the same legal protections as local citizens. Local enterprises generally welcome joint ventures with foreign investors to access technology, expertise, markets, and capital.

Barbados bases its legal system on the British common law system. It has no bilateral investment agreement with the United States but has a double taxation treaty and tax information exchange agreement.

Barbados is a member of the Caribbean Basin Initiative, which permits duty free entry of many products manufactured or assembled in Barbados into the United States. In 2015, Barbados signed an Intergovernmental Agreement in observance of the United States’ Foreign Account Tax Compliance Act (FATCA), making it mandatory for banks in Barbados to report the banking information of U.S. citizens.

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Belarus

Executive Summary

The Government of Belarus (GOB) officially welcomes foreign investment, which is seen as a source of new technology, job creation, and foreign currency growth. The Investment Code of the Republic of Belarus (passed on June 22, 2001) is the regulatory framework governing all forms of investment activities in Belarus. Several presidential edicts and decrees have been issued that also regulate investment activities.

Belarusian authorities stress the geographic location of Belarus, its inclusion in the Eurasian Economic Union (which also includes Russia, Kazakhstan, Armenia, and Kyrgyzstan), a robust infrastructure, a highly-skilled workforce, its six free economic zones and the “Great Stone” industrial park as major reasons to invest in Belarus.

According to a May 12, 2016 GOB resolution, a priority is placed on investments in pharmaceuticals; biotechnology; nanotechnologies and nanomaterials; metallurgy; mechanical engineering industry; production of machines, electrical equipment, home appliances and electronics; transport and related infrastructure; agriculture and food industry; information and communication technologies; creation and development of logistics systems; and tourism.

Regulations on investment provide for the following forms of investment activities in Belarus:

Green field: establishing a legal entity (joint ventures and foreign enterprises);

Brown field: property or property rights acquisition, i.e.: a share in charter capital, real estate, securities, intellectual property rights, concessions, equipment or other permanent assets.

The GOB has, for the most part, not undertaken large-scale privatization. Investments in sectors dominated by state-owned enterprises (SOEs) have, at times, come under threat from regulatory bodies. The government claims there are no specific requirements for foreigners wishing to establish a business in Belarus. Investors, whether Belarusian or foreign, allegedly benefit from equal legal treatment and have the same right to conduct business operations in Belarus. However, according to numerous informal sources in the local business community and independent media, the existing laws and practices can sometimes discriminate against the private sector, including foreign investors, regardless of their country of origin. It is also important to note that stemming from a June 2006 Executive Order, the United States maintains targeted sanctions against nine Belarusian SOEs and 16 individuals in relation to concerns about undermining Belarus’s democratic processes. The U.S. Department of Treasury, in consultation and coordination with the Department of State, has provided temporary sanctions relief in 6-month intervals since October 30, 2015. The current 6-month period of temporary sanctions relief ends on October 30, 2017. For additional information click here: https://www.treasury.gov/resource-center/sanctions/Programs/pages/belarus.aspx.

In April 2011, Belarus established the National Agency of Investments and Privatization (NAIP), which was tasked with facilitating and expediting foreign investment and privatization in the economy. NAIP has focused on organizing fact-finding missions to Belarus, attracting joint investment and business forums abroad, and packaging investment proposals for potential investors. In particular, NAIP provides information about the country’s investment opportunities, special regimes and benefits, state programs for support and development of industries, and the procedure of making investment decisions. NAIP assists in selecting investment objects (investment projects, land lots, buildings); collecting and analyzing the necessary information about investment projects; organizing meetings, including with market regulators, government agencies, local authorities, key market players and potential partners; and addressing issues arising during implementation of an investment project. NAIP also created and runs the Investment Proposal Database http://www.investinbelarus.by/en/invest/base/. Finally, NAIP can also provide post-project support, so called ‘aftercare.’

To maintain an ongoing dialog with investors, Belarus has the Foreign Investment Advisory Council (FIAC). Its activities include, but are not limited to:

– developing proposals to improve investment legislation;

– participating in examining corresponding regulatory and legal acts;

– approaching government agencies for the purpose of adopting, repealing or modifying the regulatory and legal acts which restrict the rights of investors.

The FIAC is chaired by the Prime Minister of Belarus and also includes the heads of government agencies and other state organizations subordinate to the GOB, heads of international organizations, foreign companies and corporations.

Despite GOB organizations which promote foreign direct investment (FDI), both the central and local governments’ policies often reflect an old-fashioned, Soviet-style distrust of private enterprise – whether local or foreign. Technically the legal regime for foreign investments should be no less advantageous than the domestic one, yet FDI in many key sectors and many of the most profitable Belarusian sectors is limited, in particular, in the petrochemical, agricultural and alcohol production industries. FDI is prohibited in the following areas:

– defense and security; and

– production and distribution of narcotic, dangerous and toxic substances.

Table 1

Belgium

Executive Summary

The Belgian economy is expected to grow 1.5 percent in 2017, primarily driven by investment and net exports. Private consumption growth has been slower than in surrounding countries, mainly attributed to higher inflation. Belgium’s unique position as a logistical hub and gateway to Europe has benefitted, in particular, from low energy prices and interest rates, and a favorable euro/dollar exchange rate which continues to stimulate economic growth and fuel exports. In 2016, Belgium posted a €4 billion current account surplus, the first surplus since 2007. However, the recovery remains fragile: any potential shift to a less open global environment would have negative repercussions on the export sector. Since June 2015, the Belgian government has undertaken a series of measures aiming to reduce the tax burden on labor and to increase Belgium’s economic competitiveness and attractiveness to foreign investment. Unfortunately, the postponement of corporate tax reform and the recent terrorist attacks on Brussels may have taken the country off its optimal growth path. In 2016, the Belgian government passed legislation to improve entrepreneurial financing through crowdfunding and more flexible capital venture rules.

Belgium boasts an open market well connected to the major economies of the world. As a logistical gateway to Europe, host to the EU institutions and a central location closely tied to the major European economies (Germany in particular), Belgium is an attractive market and location for U.S. investors. Foreign and domestic investors are expected to take advantage of improved credit opportunities and increased consumer and business confidence. Finally, Belgium is a highly developed, long-time economic partner of the United States and benefits from an extremely well-educated workforce, world-renowned research centers, and the infrastructure to support a broad range of economic activities.

Belgium’s international competitiveness has been hindered by a rigid labor market that makes Belgian employees relatively expensive compared to neighboring countries. Belgium’s nominal corporate tax rate, at 33.99 percent, is one of the highest in Europe and is only mitigated by a myriad of subsidies and tax deductions. A fundamental reform of the corporate tax system has been postponed until 2018, casting a shadow on short-term investment plans. A January 2016 EU ruling which voids 36 fiscal rulings retroactively to 2004, applied to multinational and domestic companies, has also created investor uncertainty and cast a shadow over Belgium’s attractiveness as a preferred foreign direct investment (FDI) location.

Belgium has a dynamic economy and continues to attract significant levels of investment in chemicals, petrochemicals, plastic and composites; environmental technologies; food processing and packaging; health technologies; information and communication; and textiles, apparel and sporting goods, among other sectors.

Table 1

Belize

Executive Summary

Belize has the smallest economy in Central America with a total gross domestic product (GDP) of USD 1.86 billion. Though geographically located in Central America, the former British colony has deep cultural ties to the Caribbean. Due to mounting fiscal pressures and a need to diversify and expand its economy, the Government of Belize (GOB) is very open to, and actively seeking, foreign direct investment (FDI). However, the small population of the country (around 370,000 people), high import duties, bureaucratic delays, allegations of corruption, and occasional political interference in private disputes constitute investment challenges.

In late 2016, according to the President of Belize Realtors, stakeholders in real estate transactions began to complain that the Lands Department started stricter enforcement of existing Central Bank regulations (regarding appraising property and acquiring permits to use foreign currency) which effectively delays the processing of land transfers and added another layer of bureaucracy.

Additionally, the banking system is undergoing some of its own challenges. While all Belizean banks currently have access to correspondent banking relations, the issue affected both the onshore and offshore financial sectors. There is still much uncertainty with regard to the longevity of correspondent relationships with less services being offered by the correspondent banks. Additionally, financial transactions, particularly in foreign currencies, are more difficult, lengthy and more costly. The Prime Minister publicly called the correspondent banking situation “stable but fragile.”

In December 2016, Belize acceded to the United Nations Convention Against Corruption (UNCAC) amid public pressure and demonstrations from the teachers unions. The GoB is working with the United Nations Development Program UNDP to develop a three-year plan to improve and enhance government accountability and meet UNCAC goals.

Generally, Belize has no restrictions on foreign ownership and control of companies. Nonetheless, foreign investors must adhere to regulatory requirements by the Central Bank of Belize relating to the inflow and outflows of investment. Small and Medium sized enterprises (SMEs) and tour operators wishing to benefit from certain incentives need to have 51 percent local ownership. The country continues to fare poorly in international surveys of openness and ease of opening a business.

Despite the challenges, Belize remains attractive for some investors because of the beauty of its natural resources, the relative affordability of land, proximity to the United States, and the cultural diversity and warmth of its people. Investors benefit from various incentive programs, as there is no capital gains tax and no inheritance tax. Over the past year, investments continued primarily in tourism related sectors, agriculture and agro processing.

The overall fiscal picture for Belize continues to face significant challenges. In March 2017, Prime Minister Dean Barrow completed negotiations for a third time on the country’s major external commercial debt—the so-called “Superbond 3.0”—totaling an estimated USD 554 million. Under the new arrangements, the government successfully renegotiated an overall decrease in interest payments to approximately 4.94 percent, avoiding a step up interest rate to 6.767 percent that would have begun in August, 2017. Additionally, amortization payments were back loaded in five equal annual payments of USD 106 million from 2030 to 2034. The previous arrangement would have consisted of 38 equal, semi-annual installments of USD 27.9 million beginning in 2019. While the government negotiated some much needed policy space, skeptics question whether that space will be used prudently. In April 2017, Moody’s upgraded the country’s sovereign rating from Caa2 to B3 primarily due to the Super bond debt restructuring.

In 2015, the GoB also negotiated compensation settlements relating to the nationalization of Belize Electricity Limited (BEL) and the nationalization of Belize Telemedia Limited (BTL). GoB is scheduled in 2017 to continue paying its compensation to BTL in accordance with the final decision of the Permanent Court of International Arbitration. Additionally, the U.S. Court of Appeals since 2015 upheld four arbitration judgments against the GoB including one related to the BTL nationalization. The GoB in 2016 appealed to the U.S. Supreme Court to reevaluate its lower court’s decision. It is expected that even if U.S. courts ultimately uphold the arbitration judgments, enforcement action would need to proceed through Belizean courts and would likely be appealed up to the Caribbean Court of Justice.

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Benin

Executive Summary

Benin is a stable democracy in Sub-Saharan Africa with strong institutions and regular, peaceful elections. Presidential elections in March 2016 witnessed a transfer of power to a new government led by former businessman Patrice Talon, a bitter rival of former President Yayi.. The country’s 2017 budget estimated at $3.35 billion prioritizes investment. The Government of Benin (GOB) has pinned significant hopes on mobilizing private sector funding for major infrastructure development projects over the next five years through public-private partnerships (PPPs). A new law to facilitate PPPs is in the works, which is expected to attract additional Foreign Direct Investment (FDI) and increase the country’s economic growth working toward the fulfillment of a 5-year Government Action Plan. The GOB is also working on updates to the country’s investment and public procurement code in compliance with the PPP law.

President Talon launched his signature initiative in December 2016, a very ambitious USD 15 billion five-year Government Action Plan (“Programme d’Action du Gouvernement” or PAG). The PAG lays out a development plan from 2016 to 2021 structured around 45 major projects, 95 sector-based projects, and 19 institutional reforms. With the goals of strengthening the administration of justice, fostering a structural transformation of the economy, and improving living conditions, the projects are concentrated in infrastructure development, agriculture and agribusiness, tourism, health, and education. The government claims that the PAG will create 500,000 jobs. Critics of the president have charged that Talon and his allies will use the PPP law and the PAG to sign sole source contracts for their own profit. The Talon administration’s revocations of certain high-dollar contracts signed under the previous administration in favor of new ones with Talon-allied companies have fed this perception.

Benin continues its efforts to attract private investment in support of economic growth – a link the Government of Benin (GOB) emphasizes is central to boosting Benin’s development prospects. In 2015, it set up an Investment and Exports Promotion Agency (APIEX) as a one-stop business startup, investment promotion, and foreign trade promotion center. Benin’s overall macroeconomic conditions were positive in 2016, despite GDP growth slowing in 2016 to 4.6 percent, largely due to economic recession in neighboring Nigeria on which Benin’s economy heavily depends. The cotton industry, the Port of Cotonou, telecommunications, energy, the cement industry, housing, and agribusiness are the main economic drivers and prospects for investment. The country’s GDP is roughly 71 percent services, 21 percent agriculture, and 8 percent manufacturing.

In September 2015, the United States Government and the Government of Benin signed a $403 million Millennium Challenge Corporation (MCC) compact focused on reforming the supply of electricity in Benin. It is Benin’s second MCC compact and will advance policy reforms to bolster financing for the energy sector, attract private capital into power generation, and strengthen regulation and utility management. Infrastructure to be funded by the compact includes 78 megawatts of power generation capacity and modernization of the distribution grid. The compact, which also includes a significant off-grid electrification project, is expected to enter into force in mid-2017. Benin’s 2006-2011 MCC compact modernized the country’s port and improved land administration, the justice sector, and access to credit.

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Bermuda

Executive Summary

Bermuda is a British Island territory located in the North Atlantic Ocean. The government of Bermuda (GOB) welcomes foreign direct investment (FDI). Bermuda’s economy is almost wholly dependent on FDI in the insurance, reinsurance, and financial services sectors – with a small contribution from the tourist sector. In 2015, the latest date for which data is available, these international businesses contributed the most to total GDP at 85 percent, compared to tourism’s roughly 5 percent.

Bermuda is coming out of more than seven straight years of economic recession. Bermuda’s real gross domestic product (GDP) decreased by 2.2 percent in Q3 2016. The primary driver was a $36.6 million decrease in the external balance of goods and services due to the combined effects of lower receipts for exports of services and higher payments for imports of services. Retail sales declined by 2.4 percent in December 2016, 2.4 percent below the $111.6 million recorded last year. Job losses continue to affect the overall economy.

Bermuda’s investment climate presents a series of advantages for potential investors. These include:

• a stable, democratic government;
• low personal and corporate taxes;
• a pool of skilled professionals;
• proximity to the United States, and extensive air and communication networks;
• a stable currency, the Bermuda dollar (BMD), pegged at par to the USD.

As a British Overseas Territory, Bermuda’s legal system is grounded in UK common law. Its legal, regulatory and accounting systems adhere to high ethical and transparency standards. It generally effectively and impartially enforces its laws to combat corruption and money laundering. There is no government interference in the court system that could affect foreign investors.

Bermuda law recognizes and enforces secured interests in real property. The GOB’s policies facilitate the free flow of financial resources in the product and factor markets, and the U.S. Securities and Exchange Commission recognizes the Bermuda Stock Exchange (BSX) as a Designated Offshore Securities Market. There is a general awareness of responsible business conduct among both producers and consumers.

Table 1

Bolivia

Executive Summary

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

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

Bolivia’s investment climate has remained relatively steady over the past five years. Lack of legal security, corruption, and unclear international arbitration measures are all significant impediments to investment in Bolivia. At the moment, there is no significant foreign direct investment from the United States in Bolivia, and there are no initiatives designed specifically to encourage U.S. investment. Although the Bolivian Government frequently mentions that it would like to attract new foreign direct investment, it has done little to do so. But Bolivia’s macroeconomic stability, abundant natural resources, and strategic location in the heart of South America make it a country to watch.

Table 1

The investment rate as percentage of GDP (21 percent) is in line with regional averages. The average rate in South America is 20 percent and is 22 percent in Colombia, Chile and Peru. There has also been a shift from private to public investment. In recent years private investment was particularly low because of the deterioration of the business environment since the beginning of the nationalization process in 2006. From 2006 to 2015, private investment, including local and foreign investment, averaged 8.2 percent of GDP. From 2006 to the present, public investment grew significantly, reaching an annual average of 12.5 percent of GDP in 2015. Prior to 2006 public investment averaged 6.5 percent of GDP.

FDI is highly concentrated in natural resources, especially hydrocarbons and mining, which account for nearly two-thirds of FDI. Since 2006 the net flow of FDI averaged 3 percent of GDP. Before 2006 it averaged around 8 percent of GDP.

Bosnia and Herzegovina

Executive Summary

Bosnia and Herzegovina’s (BiH) political environment and complex government structures create significant obstacles to economic development and foreign direct investment. Although open to foreign investment, investors continue to face a number of serious obstacles including corruption, complex legal and regulatory frameworks and government structures, non-transparent business procedures, insufficient protection of property rights, and a weak judicial system. The country’s complicated government structure and political environment has stalled many key economic reforms. BiH’s poor investment climate, lingering effects of the global economic downturn, and the country’s strong connection to still slow growing Europe has resulted in stagnant foreign direct investment inflow over the past five years. According to the World Bank’s Ease of Doing Business Report, BiH is the least competitive economy in Southeast Europe and is currently ranked 81 out of 190 global economies.

Historically, U.S. investment in BiH has been low, primarily due to the challenging business climate and the lack of opportunities for investment. Nonetheless, if fully implemented, the European Union Reform Agenda will gradually open up BiH to foreign investment by improving the labor environment, decreasing regulation, harmonizing economic regulation, and shifting the economy from public to private-led. BiH offers business opportunities to well-prepared and persistent exporters and investors. The country is open to foreign investment and offers a liberal trade regime. It is also richly endowed with natural resources, providing potential opportunities in energy (hydro and thermal power plants), agriculture, timber, and tourism. The best business opportunities for U.S. exporters to BiH include energy generation and transmission equipment, telecommunication and IT equipment and services, transport infrastructure and equipment, engineering and construction services, medical equipment, and raw materials and chemicals for industrial processing. In 2016, the U.S. exported $179 million in goods to BiH (source: BiH Statistics Agency).

Table 1

Botswana

Executive Summary

Botswana has a population of 2.2 million and is centrally located in Southern Africa, enabling it to serve as a gateway to the region. Botswana has historically enjoyed high economic growth rates and its export-driven economy is highly correlated with global economic trends. Development has been driven mainly by revenue from diamond mining, which has enabled Botswana to provide infrastructure and social services. Economic growth was lower than expected in 2015 because of a downturn in the diamond market, but improved in 2016 with the estimated GDP growth of 2.9 percent. In recent years inflation remained at the bottom end of the central bank’s 3 to 6 percent spectrum. According to the Government of Botswana (GOB), investments within Botswana totaled $5.2 billion in 2014. Botswana is classified as an upper middle income country by the World Bank based on its per capita income of $6,460.

Botswana is a stable, democratic country with an independent judiciary system. It maintains a sound macroeconomic environment, fiscal discipline, a well-capitalized banking system, and a crawling peg exchange rate system. Moody’s and S&P rate Botswana’s sovereign debt as A2 and A-, respectively. Botswana has minimal labor strife. It is a member state to both the ICSID convention and the 1958 New York convention. Corruption in Botswana remains less pervasive than in other parts of Africa; nevertheless, foreign and national companies have commented on increasing tender-related corruption. The World Bank ranked Botswana 71 out of 190 economies in the category of Ease of Doing Business in 2017. It rose in the 2016 World Economic Forum’s Global Competitiveness Index to 64 out of 138.

The GOB created the Botswana Investment and Trade Centre (BITC) to assist foreign investors, offer low tax rates, and abolish foreign exchange controls. Its topline economic goals are to diversify the economy, create employment, and transfer skills to Botswana citizens. GOB entities, including BITC, use these criteria in determining whether to provide assistance to foreign investors. The GOB is currently drafting an investment facilitation law with UNCTAD support. The GOB has committed to streamline business-related procedures, and remove bureaucratic impediments based on World Bank recommendations as part of a business reform roadmap. Under this framework it introduced some electronic tax and customs processes in 2016 and 2017. The GOB is also setting up a Special Economic Zones authority to streamline investment in sector-targeted geographic areas in the country.

Foreign and local business managers observe difficulties obtaining work permits for foreign skilled workers and managers. Permit issues combined with local skills deficits and relatively low labor productivity are the foremost business constraints in Botswana. Limitations on foreign participation in the market exist and institutionalized preferences of procuring goods and services from local sources are increasing in Botswana. These preferences arise from various GOB directives and implementing regulations, and are at times specified in tenders. By law 35 service sectors are restricted to Botswana citizens. The Ministry of Investment, Trade and Industry (MITI) generally granted exceptions for large foreign-owned chain stores but since 2016 has only granted approvals in cases where they reached a localization agreement with the applicant company.

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Brazil

Executive Summary

Brazil is the second largest economy in the hemisphere behind the United States, and the ninth largest economy in the world. The United Nations Conference on Trade and Development (UNCTAD) named Brazil the eighth largest destination for global Foreign Direct Investment (FDI) flows in 2015. In recent years Brazil received more than half of South America’s total incoming FDI and the United States is a major foreign investor in Brazil. The Brazilian Central Bank (BCB) indicated that the United States had the largest single-country stock of FDI (USD 112 billion) in Brazil in 2014, the latest year with available data. The Government of Brazil (GOB) made attracting private investment in infrastructure a top priority for 2017.

Brazil’s recession has been longer and deeper than most economists anticipated. The country’s Gross Domestic Product (GDP) contracted by 3.6 percent in 2016 and is projected to grow only 0.4 percent in 2017. Per capita GDP decreased 4.4 percent in 2016 for a combined drop of almost 10 percent over two years. While unemployment stood at just 6.5 percent as recently as 2014, it ended 2016 at 12 percent and is projected to end 2017 above 13 percent. Brazil was the world’s eighth largest destination for FDI in 2015, with inflows of USD 64.6 billion, according to UNCTAD. The nominal budget deficit stood at nine percent of GDP (USD 161.7 billion) in 2016 and is projected to end 2017 at around 10 percent of GDP (USD 180.1 billion). Brazil’s debt-to-GDP ratio reached 70 percent in 2016 and is projected to reach 77 percent this year. In part due to the slower than anticipated return to growth, annual inflation fell to 6.3 percent by the end of 2016 – inside the Brazilian Central Bank’s (BCB) target range of 4.5 percent +/- two percentage points – for the first time in two years. This allowed the BCB to cut its benchmark interest rate to 11.25 percent (from a high of 14.25 percent in 2016) in April 2017.

President Temer, who took over as president after the impeachment of former President Dilma Rousseff in May 2016, is pursuing corrective macroeconomic policies to stabilize the economy. Congress approved a landmark federal spending cap in December 2016 and is now debating a complementary reform to curb social security spending. If a robust social security reform is approved, financial analysts assert investor confidence in debt sustainability will strengthen. Additional reforms to increase labor market flexibility and to rationalize Brazil’s complex tax system are also on the agenda. International capital markets have recognized Temer administration efforts, lowering risk premiums significantly from 2015 peak levels and boosting the value of the real. 2016 and early 2017 foreign direct investment inflows have been strong. Both portfolio and direct investors, however, remain sensitive to political uncertainties linked to ongoing corruption scandal investigations (please see corruption section) and Brazilian risk premiums fluctuate accordingly.

Notwithstanding the current macroeconomic context, Brazil’s large economy and vast middle class continue to make the country a destination for long-term investment, particularly in consumer products, albeit not without challenges.

With a USD 1.8 trillion economy, a population of over 200 million, and a large middle-class consumer base, Brazil is a top 10 destination for global FDI. The GOB investment promotion strategy prioritizes the automobile, renewable energy, life sciences, oil and gas, and infrastructure sectors. Foreign investors in Brazil receive the same legal treatment as local investors in most economic sectors; however, foreign investment is restricted in the health, mass media, telecommunications, aerospace, rural property, maritime, and air transport sectors. The Brazilian Congress is currently considering legislation to liberalize restrictions on foreign ownership of rural property and airline companies.

In addition to current economic difficulties, since 2014, Brazil’s anti-corruption oversight bodies are investigating allegations of widespread corruption involving state-owned energy firm Petrobras and a number of private construction companies. Analysts contend that high transportation and labor costs, low domestic productivity, and ongoing political uncertainties hamper investment in Brazil. Foreign investors also cite concerns over poor existing infrastructure, rigid labor laws, and complex tax, local content, and regulatory requirements; the so-called “Custo Brasil” (Brazil Cost).

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Brunei

Executive Summary

Brunei is a small energy-rich Sultanate on the northern coast of Borneo in Southeast Asia. Brunei boasts a well-educated, largely English-speaking population, excellent infrastructure, and a government intent on attracting foreign investment and projects. In parallel with Brunei’s efforts to attract foreign investment and create an open and transparent investment regime, the country has improved its protections for Intellectual Property Rights (IPR).

Despite repeated calls for diversification, Brunei’s economy remains dependent on the income derived from sales of oil and gas, contributing about 60 percent to the country’s GDP. Substantial revenue from overseas investment supplements income from domestic hydrocarbon production. These two revenue streams provide a comfortable quality of life for Brunei’s population. Citizens are not required to pay taxes, have access to free education through the university level, free medical care, and frequently, subsidized housing and car fuel.

Brunei has a stable political climate and is generally sheltered from natural disasters. Brunei’s central location in Southeast Asia, with good telecommunications, numerous airline connections, business tax credits in specified sectors, and no income, sales, or export taxes, offers a welcoming climate for potential investors. Sectors offering U.S. business opportunities in Brunei include aerospace and defense, agribusiness, construction, petrochemicals, energy and mining, environmental technologies, food processing and packaging, franchising, health technologies, information and communication, Islamic finance, and services. In 2014 Brunei released an Energy White Paper outlining its vision of leveraging its oil wealth to diversify its economy, create local employment, increase foreign direct investment (FDI), and sharply increase the use of renewable energy by 2035. Thus far, the government has shown it is committed to the priorities outlined in the Energy White Paper.

In 2014, Brunei began supplementing its existing common law-based penal system with a penal code based on Islamic law, which carries Sharia punishments. The Sharia Penal Code is applicable across the board. The first phase became effective in May 2014 and remains in place today. It expands restrictions regarding alcohol consumption, eating in public during the fasting hours in the month of Ramadan, and indecent behavior. Two subsequent phases, the timing of which is not yet clear, are expected to introduce severe punishments such as stoning to death for certain sex-related offenses and the amputating of limbs. Brunei officials say the most severe punishments will rarely, if ever, be implemented given the very high standard of proof required under the Sharia Penal Code. While the law does not specifically address business-related matters, potential investors should be aware that there is controversy surrounding the Sharia Penal Code issue. Thus far there have been no recorded instances of U.S. citizens, or U.S. investments, being targeted by the Sharia law.

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Bulgaria

Executive Summary

Bulgaria experienced Gross Domestic Product (GDP) growth of in excess of three percent in 2016, outpacing many of its neighbors. Unemployment continues to decline, falling from 12.4 percent in 2014 to 7.6 percent in 2016.

Bulgaria is seen by many investors as having a favorable foreign investment regime that includes government incentives for new investment and low or flat corporate and income taxes. Bulgaria still offers some of the least expensive labor in the European Union (EU). Industry is experiencing a shortage of skilled labor in many sectors due to migration and an aging population. There is strong growth potential for U.S. industry in software development, business process outsourcing, and building services for technical maintenance. The IT and back office outsourcing sectors have attracted a number of U.S. and foreign companies to Bulgaria, and many have established global and regional service centers in the country. EU funds, including agricultural subsidies, amount to USD 16 billion (including direct farmer subsidies) over the current seven year period (2014-2020) and are a key source of capital for numerous projects to develop Bulgaria’s environment and water sectors, energy, technical and social infrastructure, public services, and agricultural infrastructure

There are no legal limits on foreign ownership or control of firms. With some exceptions, foreign entities are given the same treatment as national firms and their investments are not screened or otherwise restricted. However, foreign investors remain concerned about rule of law in Bulgaria. Corruption is endemic, particularly on large infrastructure projects and in the energy sector. They cite other problems impeding investment such as unpredictability due to frequent regulatory and legislative changes, slow judicial system processes, and limited enforcement of intellectual property rights (IPR). Political stability has been an issue, as Bulgaria has seen six changes of government in seven years.

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Burkina Faso

Executive Summary

Burkina Faso welcomes foreign investment and actively seeks to attract foreign partners to aid in its development. It has partially put in place the legal and regulatory framework necessary to ensure that foreign investors are treated fairly, including by setting up a venue for commercial disputes and streamlining the issuance of permits and company registration requirements. More progress is needed on diminishing the influence of state-owned firms in certain sectors and enforcing intellectual property protections. Burkina Faso scored 59.1 out of 100 in the 2016 Heritage Foundation Economic Freedom Index (up 0.5 point from 2015), and ranked 72 out of 168 countries in Transparency International’s 2016 Corruption Index.

The gold mining industry has boomed in the last seven years, and the bulk of foreign investment is in the mining sector, mostly from Canadian and U.K. firms. Moroccan, French and UAE companies control local subsidiaries in the telecommunications industry, while foreign investors are also active in the agriculture and transport sectors. In June 2015, a new mining code was approved with the intent to standardize contract terms and better regulate the sector. The Government of Burkina Faso (GoBF) offers a range of tax breaks and incentives to lure foreign investors, including exemptions from value-added tax on certain equipment. Effective tax rates as a result are lower than the regional average, though the tax system is complex and compliance can be burdensome. Opportunities for U.S. firms also exist in the energy sector, where the government has an ambitious plan for the installation of new power capacity in both traditional and renewable sources.

Despite significant progress on building democratic institutions, the recent political and security environment in Burkina Faso has been marked by a wave of terrorist attacks, especially in the Sahel region, deadly incidents during the 2016 municipal elections, and the rise of self-defense groups comparable to militias in rural areas.

Shortly after the new government took office, on January 15, 2016, Burkina Faso suffered a series of attacks—a terrorist attack on a café and hotel in downtown Ouagadougou, an attack on a gendarmerie convoy in northern Burkina Faso, and the kidnapping of two Australian nationals. Several other attacks by terrorist groups occurred in the following months, including one in Nassoumbou, in the Sahel region, in December 2016 that resulted in the deaths of twelve Burkinabe soldiers. The government is still struggling to balance security concerns with its economic priorities, and will continue to face the twin challenges of few resources and high public expectations.

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Burma

Executive Summary

After years of economic isolation and a remarkable political transformation, Burma has begun to implement significant reforms to spur economic development and attract foreign investment. Following the nation-wide elections in November 2015, and the inauguration of a democratically-elected government in 2016, the U.S. government ended the Burma Sanctions Program on October 7, 2016, removing all economic sanctions on Burma. In November 2016, the U.S. government reinstated Burma’s Generalized System of Preferences trade benefit in recognition of the progress that the government had made in protecting workers rights and improving labor standards. In November 2016, the United States and Burma launched the U.S.-Myanmar Partnership to strengthen the bilateral relationship and expand areas of cooperation. Burma is now faced with the challenge of developing and implementing the legal and regulatory environment to attract foreign investment in support of its goal of inclusive economic growth.

Over the past several years, the government has addressed some of the long-standing obstacles to economic growth, including eliminating multiple exchange rates, reducing trade restrictions, reforming tax policy and administration, passing a new arbitration law and labor legislation in line with international standards, and easing some of the administrative hurdles to doing business in Burma. Significant progress in financial sector strengthening and economic reform legislation has attracted foreign investment. According to the World Bank, Burma experienced a 6.5 percent growth rate in 2016 and growth is expected to reach 6.9 percent in FY 2017/18. The government passed its new Myanmar Investment Law in October 2016, combining and replacing the Foreign Investment Law of 2012 and the Myanmar Citizens Law of 2013. The government is in the process of a relatively inclusive, consultative process to establish the law’s rules and implementing regulations. This year the Directorate for Investment and Companies Administration (DICA) established an Americas Desk to better support U.S. direct investment in Burma. In their Doing Business 2017 report, the World Bank ranked Burma 170 out of 190 countries on the ease of doing business, an increase from the 2016 ranking of 171, driven in part by improvements in regulations, costs, and procedures related to establishing a new venture, and an improvement in the construction permitting process. Burma’s financial sector, while still underdeveloped, has improved sufficiently to result in the June 2016 removal of Burma from the United States’ Financial Action Task Force watch list. In its first year in office, Aung San Suu Kyi’s National League for Democracy (NLD)-led government countered corruption throughout the government, and called for greater transparency and greater foreign investment in the country. In 2016, Myanmar ranked 136 of 175 countries on Transparency International’s Corruption Perception Index, an improvement from the 2015 ranking of 147 of 167 countries.

In contrast to previous decades, when the majority of the investment that Burma received went into natural resource sectors, since 2011 foreign direct investment (FDI) has largely gone to the transportation and communication, manufacturing, real estate, and tourism sectors.

Burma still faces challenges in a number of key areas, including access to finance, title over land, energy supplies, and availability of skilled workers. Transportation costs remain high, and the domestic banking sector has limited connectivity with the global financial system. The 2017 World Bank Doing Business rankings show Myanmar still struggles with enforcement of contracts, protection of minority investors, access to credit, and resolving insolvency. Addressing these key constraints is critical to ensuring a fair and transparent business environment in which all enterprises can grow and create jobs.

Moving forward, observers expect the manufacturing, agriculture, and tourism sectors to grow and attract more FDI, with support from the democratically-elected government, as Burma continues to reconnect to the global economy. Foreign investors are exploring investment opportunities in transportation and communication, manufacturing, real estate, and energy/power. With Burma’s location, natural resources, and political and economic reforms, many observers are optimistic about growth and opportunities in the next several years.

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Cabo Verde

Executive Summary

The archipelago of Cabo Verde is composed of 10 volcanic islands and eight islets located in the central Atlantic Ocean, some 450 kilometers west of Senegal. It has a land area of 4,033 square kilometers, and a 700,000 square kilometer Economic Exclusive Zone (EEZ).

This small African nation has a population of approximately 550,000 people spread over nine inhabited islands with limited natural resources. The country’s climate is extremely arid, and prolonged drought frequently affects its economy. Cabo Verde’s low proportion of arable land, scant rainfall, lack of natural resources, territorial discontinuity and small population make it a high-cost economy lacking economies of scale. Cabo Verde’s economy is vulnerable to external shocks and depends on development aid, foreign investment, remittances, and tourism. Despite that Cabo Verde achieved middle-income country status at the end of 2007.

The country enjoys political stability and has a history of parliamentary democracy and economic freedom that is unusual in the region. 2016 elections were free and fair, and there was a smooth transition of power. Good governance, prudent macroeconomic management, including strong fiscal, monetary and exchange-rate policies, trade openness and increasing integration into the global economy, and the adoption of effective social development policies have produced relatively positive results throughout the archipelago. The new government is preaching more proactive investment reforms. Broad political stability is expected to prevail in Cabo Verde, underpinned by strong democratic institutions and decent protection of human rights and civic freedoms. The business and investment climate continues to improve although there are bureaucratic and cultural challenges to overcome.

Economic reforms were and are aimed at developing the private sector and attracting foreign investment to diversify the economy and mitigate high unemployment. However, the government’s elevated debt level is limiting its capacity to finance any shortfalls. The economy is service-oriented, with tourism, transport, commerce, and public services accounting for more than 60 percent of GDP. Tourism alone accounts for approximately 25 percent of GDP, and it is expected to continue its strong performance.

There are few regulatory barriers to foreign investment in Cabo Verde, and foreign investors receive the same treatment as the nationals regarding taxes, license approvals and registration, and access to foreign exchange. Foreign investment in Cabo Verde is concentrated in tourism and light manufacturing. In terms of transportation, Cabo Verde’s strategic and geographic location places the country in a position to become a regional and international shipping hub for both passengers and cargo. Nevertheless, the country remains underserved, with insufficient and inefficient maritime interisland transportation. The energy sector in Cabo Verde is undergoing important regulatory changes and attracting investment which may result in a clearer framework to promote investment opportunities in the sector. As a regional leader in renewable energy, Cabo Verde has wind farms built on four islands. Currently, about 27 percent of the energy consumed in Cabo Verde comes from renewable sources. The government’s goal is to increase this number to 50 percent by 2020, which presents additional investment opportunities for American companies in this sector.

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Cambodia

Executive Summary

Cambodia has experienced rapid economic growth over the last decade, with average annual gross domestic product (GDP) growth topping seven percent. GDP per capita stood at USD $1,300 at the end of 2016. The tourism, garment, construction and real estate, and agriculture sectors accounted for the bulk of the growth. According to the Asian Development Bank (ADB), the percentage of the population living in poverty decreased to 13.5 percent in 2016. The average annual inflation rate was estimated at 2.8 percent.

Cambodia has an open and liberal foreign investment regime with a relatively pro-investor legal and policy framework. Foreign direct investment (FDI) incentives available to foreign investors include 100 percent foreign ownership of companies, corporate tax holidays of up to eight years, a 20 percent corporate tax rate after the incentive period ends, duty-free import of capital goods, and no restrictions on capital repatriation.

Despite these incentives, Cambodia has historically not been able to attract significant U.S. capital due to various factors including pervasive corruption, a limited supply of skilled labor, inadequate infrastructure (including high energy costs), and a lack of transparency in government approval processes. Failure to consult the business community on new economic policies and regulations has created difficulties for domestic and foreign investors alike. Notwithstanding these challenges, American companies such as Tiffany & Co., which has a diamond polishing facility in Phnom Penh, and American Licorice, which manufactures hard candy, have maintained investments in the country. In December 2016, Coca-Cola officially opened its USD $100 million bottling plant.

The total stock of FDI for registered capital from 1994 to 2016 was USD $6 billion. The stock of fixed assets in Cambodia was USD $32.5 billion over the same period. According to the Council for the Development of Cambodia, FDI in terms of registered capital increased by 34 percent from 2015 to 2016 to USD $462 million. In 2016, U.S. FDI registered capital in Cambodia consisted of a garment factory and a hotel project, totaling USD 6.4 million. Asian countries top the list of the largest sources of FDI in Cambodia, with the Japan investing USD $118 million, Vietnam investing USD $96 million, and China investing USD $74 million during the course of 2016.

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Cameroon

Executive Summary

The global collapse of commodity prices – along with economic pressure caused by security threats in the Lake Chad Basin and border with Central African Republic, and recent civil domestic unrest in the Northwest and Southwest Anglophone regions – have negatively impacted Cameroon’s external and fiscal balances. Cameroon donors acknowledge the country’s economic resilience in how it weathered and absorbed these shocks. However, public finances have deteriorated. Cameroon responded by organizing a regional summit in Yaounde to lobby for a regional strategic response to the crisis. Subsequently, an International Monetary Fund (IMF) team visited Yaounde from February 20–March 6, 2017, to discuss a three-year economic and financial program for Cameroon. The team and authorities discussed measures to enhance the business environment to boost private sector investment and economic diversification.

Over the past year, Cameroon has been able to secure financing for some of the country’s strategic infrastructure projects, for example the extension of the deep sea port of Kribi and for construction of ultra-modern sports facilities, highways, and hydroelectric dams. The government introduced new measures in the 2017 Finance Law to reflect the changing economic environment. Cameroon is improving tax collection, expanding the taxable base and accelerating the completion of infrastructure projects started in prior years. The government hopes these measures will sustain growth and alleviate poverty.

Cameroon continues to attract foreign direct investment (FDI) despite the global economic downturn. Energy, oil and gas, transportation sector, and sports facilities (e.g. stadiums and infrastructure for the Africa Cup of Nations-AFCON 2019 tournament) attracted the largest share of investment in 2016. Cameroon has attractive investment opportunities in eleven key sectors of its economy. However, administrative obstructions, red tape, and systemic corruption are keeping some private sector investors away. The World Bank, the International Monetary Fund (IMF), the African Development Bank, and the European Union continue to support Cameroon on legal and public finance reforms and also decentralization. These international efforts are often undermined from within the civil service as government employees view reform as a threat to their careers, and their established collusions and networks for corruption.

The strength of the Cameroonian economy stems from its diversification, from important natural competitive advantages, its vast human capital, and also from unexploited natural resources. Cameroon boasts a unique and strategic geographical location in Sub Saharan Africa. The main weaknesses are created by the persistent dysfunctions within the civil service and in the legal system. In order to reduce the operational, legal and financial risks that can develop in this environment, foreign investors often engage a local partner or counsel to serve as an interface with officials or local suppliers.

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Canada

Executive Summary

Canada and the United States have one of the largest and most comprehensive investment relationships in the world. U.S. investors are attracted to Canada’s strong economic fundamentals, its proximity to the U.S. market, its highly skilled work force, and abundant resources. The United States accounts for over 50 percent of Canada’s total stock of foreign direct investment (FDI). U.S. stock of foreign direct investment in Canada reached USD 291 billion in 2015; while Canada’s foreign direct investment stock in the United States totaled USD 337 billion. The stock of global foreign direct investment in Canada stood at USD 578 billion at the end of 2015.

U.S. foreign direct investment in Canada is subject to the provisions of the Investment Canada Act (ICA), the World Trade Organization (WTO), and the 1994 North American Free Trade Agreement (NAFTA). Chapter 11 of NAFTA contains provisions such as “national treatment” designed to protect cross-border investors and facilitate the settlement of investment disputes. NAFTA does not exempt American investors from review under the ICA, which has guided foreign investment policy in Canada since its implementation in 1985. The ICA provides for review of large acquisitions by non-Canadian investors and includes the requirement that these investments be of “net benefit” to Canada. Fewer than 10 percent of foreign acquisitions are subject to ICA review, and the Canadian government has blocked investments on only three occasions.

Although foreign investment is a key component of Canada’s economic development, restrictions remain in key sectors. Under the Telecommunications Act, Canada maintains a 46.7 percent limit on foreign ownership of voting shares for a Canadian telecomm services provider. However, a 2012 amendment exempts foreign telecom carriers with less than 10 percent market share from ownership restrictions in an attempt to increase competition in the sector. While the government announced a plan in November 2016 to allow 49 percent foreign ownership of Canadian carriers, current law limits foreign ownership of Canadian air carriers to 25 percent of voting equity. Investment in cultural industries also carries restrictions, including a provision under the ICA that foreign investment in book publishing and distribution must be compatible with Canada’s national cultural policies and be of net benefit to Canada. Canada is open to investment in the financial sector, but barriers remain in retail banking.

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Chad

Executive Summary

Chad is one of Africa’s largest countries, with a land area of 1,284,000 square kilometers that encompasses three agro-climatic zones. Chad is a landlocked country bordering Libya to the north, Sudan to the east, Central African Republic (CAR) to the south, and Cameroon, Niger, and Nigeria on the west (with which it shares Lake Chad). The nearest port, Douala, Cameroon, is 1,700 km from the capital, N’Djamena. Chad is one of six countries that comprise the Central African Economic and Monetary Community (CEMAC), a common market.

Chad’s human development is low according to the Human Development Index (HDI), and poverty continues to afflict a large proportion of the population. Since oil production began in 2003, the petroleum sector has dominated economic activity and has been the largest target of foreign investment. However, agriculture and livestock breeding are important economic activities that employ the majority of the population, and the government has prioritized these sectors in an effort to diversify the economy and to maximize non-petroleum tax receipts in the wake of the drop in global oil prices.

The Government of Chad (GOC) has focused on improving internal economic and social conditions, although its efforts have been constrained by regional instability arising from the continued threat of terrorist attacks by Boko Haram, an influx of refugees along the Chad-Sudan-Central African Republic (CAR) border, and dramatic reductions in oil revenues, which make up 70 percent of government revenue, due to the fall in global oil prices. This triple threat has forced the GOC to adopt a tight 2017 budget that accounts for both the drop in oil revenues and government austerity measures implemented in the fall of 2016. The GOC is favorably disposed to foreign investment, with a particular goal of attracting North American companies. There are opportunities for foreign investment in agriculture, construction, building and heavy equipment, architecture, engineering, automotive, ground transportation, education, energy, mining, environmental technologies, food processing and packaging, health technologies, industrial equipment and supplies, information and communication, and services.

Chad’s business and investment climate remain challenging. Private sector development is hindered by poor transport infrastructure, lack of skilled labor, unreliable energy, weak contract enforcement, corruption, and high tax burdens on private enterprises.

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Chile

Executive Summary

Chile is an attractive destination in Latin America for investors who value its open market economy, well-developed institutions and strong rule of law. The government has a positive disposition toward foreign direct investment (FDI). Chile’s legal framework for attracting and protecting FDI is solid. The Foreign Investment Promotion Agency (APIE), created in 2015, provides services for FDI in four categories: attraction, pre-investment, landing and after-care. Very few restrictions upon FDI exist. Chile’s conversion and transfer policies are similar to those found in highly-developed countries like the United States Chile’s capital markets are well-developed and open to foreign portfolio investors, and the regulatory system in Chile is generally transparent. Resolving insolvency is easier by a new legal and institutional framework. Chile has 41 bilateral investment agreements in force, and 24 other investment agreements in force, including the investment chapter of the Free Trade Agreement (FTA) with the United States. A U.S.-Chile bilateral treaty to avoid double taxation was ratified by Chile, and is currently awaiting ratification in the U.S. Senate.

Private property rights, including foreign ownership and establishment, are generally respected in Chile. Mineral, hydrocarbon, and fossil fuel deposits within Chilean territory are restricted from foreign ownership, but may be licensed by the government. CODELCO, one of the predominant players in the copper mining industry, is one of only a few state-owned enterprises (SOEs), which generally operate on equal footing with private companies. Intellectual property (IP) rights are generally respected, but Chile is not fully compliant with the obligations concerning IP set forth in the U.S.-Chile FTA.

Corruption exists in Chile but on a much smaller scale than is the case with most Latin American countries. Chile has a favorable ranking of 24 out of 176 countries on Transparency International’s 2016 Corruption Perceptions Index. A presidential committee against corruption and conflicts of interest created in 2015 issued a report recommending an anticorruption agenda of 236 new measures, laws and regulations, nearly half of which have already been implemented.

In recent years, perceptions of Chile’s investment climate have deteriorated somewhat. Many large investments faced unexpected costs and delays due to permitting processes (especially environmental, but also municipal) that can be opaque, unpredictable, and subject to political pressures. Communities are increasingly hostile to large investment projects and adept at using the court system and mandatory indigenous consultation requirements to obstruct them. A shift in Chile’s politics away from the neoliberal model the government has pursued since the 1980s sometimes disadvantaged firms that are invested in the existing model. Reforms launched by the current center-left administration increased the complexity of and costs of compliance with corporate tax and labor regimes. New regulations are seldom opened to formal input from private stakeholders during the development stage.

As legal disputes can take several years to reach conclusion in the courts, arbitration and mediation are attractive alternatives for resolving business controversies. Chile is a signatory to the 1958 New York Arbitration Convention and a member state to the International Centre for Settlement of Investment Disputes (ICSID); disputes under the U.S.-Chile bilateral Free Trade Agreement (FTA) are resolved under the latter framework.

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China

Executive Summary

China has a more restrictive foreign investment climate than its major trading partners, including the United States. While China remains a top destination for foreign direct investment, many sectors of its economy are closed to foreign investors. China continues to rely on an investment catalogue to encourage foreign investment in some sectors of the economy while restricting or prohibiting investment in many others. China’s investment approval regime shields from competition inefficient and monopolistic Chinese enterprises – especially state-owned enterprises (SOEs) and other national champions. Foreign investors are hampered by discriminatory practices, selective regulatory enforcement, licensing barriers, and the lack of an independent judiciary. Other challenges include poor intellectual property rights (IPR) enforcement, forced technology transfer, and a systemic lack of rule of law. Moreover, many of China’s industrial policy goals, including the 13th Five Year Plan and Made in China 2025, inherently discriminate against foreign companies and brands by favoring local products in key high-tech and advanced manufacturing sectors.

U.S. companies and industry associations are increasingly vocal in their criticism of China’s discriminatory investment regime. A 2017 business climate survey by the American Chamber of Commerce in China found over 60 percent of U.S. businesses surveyed felt China would be unlikely in the next three years to carry out needed reforms to provide greater market access to foreign companies; 81 percent felt China’s business climate had deteriorated and become less friendly to U.S. investors in the last year.

In 2016, the Chinese leadership pledged to gradually improve the investment climate through:

• Intensification of U.S.-China Bilateral Investment Treaty (BIT) negotiations covering “pre-establishment” market access and using a “negative list” approach, with the aim of a high-standard agreement reflecting non-discrimination, transparency, and open and liberalized investment regimes on both sides.
• Implementation of staggered “negative lists” to govern investment throughout the country, including: a pilot market access negative list applicable to both domestic and foreign investors; an updated draft Catalogue for the Guidance of Foreign Investment in Industries, which proposes new liberalization in 20 investment sectors; and the announced expansion of the Free Trade Zone (FTZ) pilot foreign investment negative list to include seven new FTZs (for a total of eleven) that will go into effect in 2017.

Although Chinese officials continue to promise economic reforms that will provide greater market access and protection to foreign investors, announcements are met with skepticism due to lack of details and timelines. Investors also cite inconsistent regulations, growing labor costs, licensing and registration problems, shortages of qualified employees, insufficient intellectual property protections, and other forms of Chinese protectionism as contributing to China’s deteriorating business climate.

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Colombia

Executive Summary

With increased security, a market of 49 million people, an abundance of natural resources, and an educated and growing middle-class, Colombia continues to be an attractive destination for foreign investment in South America. While the Colombian government has taken significant steps to open the country to global trade and investment, the country’s rate of GDP growth declined to 2 percent in 2016, after an average GDP growth rate over 4 percent for the past decade. In the World Bank’s 2017 Ease of Doing Business Report, Colombia ranked 53 out of 190 countries and fourth in the region, behind Mexico, Chile, and Peru. Since 2014 Colombia has also struggled to adapt to the sustained dip in world oil prices, its largest export, and a significant devaluation of the peso.

Colombia’s legal and regulatory systems are generally transparent and consistent with international norms. The country has a comprehensive legal framework for business and foreign direct investment (FDI). The U.S.-Colombia Trade Promotion Agreement (CTPA), which took effect on May 15, 2012, has strengthened bilateral trade and investment. Through the CTPA and several international conventions and treaties, Colombia’s dispute settlement mechanisms and intellectual property rights protections have improved. However, the proliferation of piracy and counterfeit products are significant challenges, and among the primary reasons Colombia remains on the U.S. Trade Representative’s Special 301 Watch List.

The Colombian government has made a concerted effort to develop efficient capital markets, attract investment, and create jobs. In December 2016, President Santos approved a long awaited tax reform bill that entered into force on January 1, 2017. The increased revenue from the reform will help Colombia lower the country’s growing fiscal deficit and was key to maintaining Colombia’s BBB investment-grade credit rating for the time being. Restrictions on foreign ownership in specific sectors still exist. FDI increased 16 percent 2016 relative to 2015, largely due to increased investment in the agricultural, electricity, transport and financial services sectors, despite continued reduced investment in the extractives industry. Colombia’s average annual unemployment rate ended a seven year consecutive decline, rising to 9.2 percent in 2016. About 49 percent of the workforce is in the informal economy according to the National Administrative Department of Statistics (DANE). Colombia enjoys a skilled workforce throughout the country, as well as managerial-level employees who are often bilingual.

Security in Colombia has improved significantly in recent years, with kidnappings down 93 percent from 1999 to 2015. In 2016, Colombia experienced a significant decrease in terrorist activity, due in large part to a bilateral cease-fire between government forces and Colombia’s largest terrorist organization, the Revolutionary Armed Forces of Colombia (FARC). Congressional approval of a peace accord between the government and the FARC on November 30, 2016 put in motion a six-month disarmament, demobilization, and reintegration process. Colombian government figures show that the number of terrorist acts decreased 55 percent from 2015 to 2016. Worries remain that new criminal actors, instead of the government, could take over former FARC areas. Despite the National Liberation Army (ELN) conducting ongoing negotiations with the government in Quito, Ecuador, beginning in January 2017, the group continues a low-cost, high-impact asymmetric insurgency. ELN attacks, including continued attacks on energy infrastructure and bombings in Bogota in 2017, alongside powerful narco-criminal group operations, are posing a threat to commercial activity and investment, especially in rural zones where government control is weaker. Coca production has dramatically increased since 2015, increasing by 67 percent.

Several majority state-owned enterprises, including electric utility company ISA, are considered models of professional management, competition, and excellent corporate governance. However, corruption remains a significant challenge in Colombia, as illustrated by a recent regional scandal involving Brazilian construction giant Odebrecht, which paid significant bribes to secure infrastructure contracts. The World Economic Forum’s Global Competitiveness Index (2016-2017) placed Colombia at 61 out of 138 countries. The report cited security and corruption as among the biggest challenges for doing business in Colombia. The Colombian government continues to work on improving its business climate, but over the past year U.S. and other foreign investors have voiced complaints about non-tariff and bureaucratic barriers to trade and investment at the national, regional, and municipal levels.

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Congo, Democratic Republic of the

Executive Summary

The Democratic Republic of the Congo (DRC) is the second largest country in Africa and potentially one of the richest in the world in terms of natural resources. With 80 million hectares (197 million acres) of arable land and 1,100 minerals and precious metals, the DRC has the resources to achieve prosperity for its people, and serve as a catalyst for African economic growth. Despite its potential, however, the DRC is still striving to provide adequate social security, infrastructure and health care to its estimated 81 million inhabitants, some 75 percent of whom live on less than two dollars a day.

The DRC’s political and security situation remains fragile, and the economy experienced several shocks in 2016 which are expected to limit growth in 2017. The downturn in prices of DRC’s main commodity exports resulted in a trade balance shift from a $521 million surplus for the first half of 2015, to a $351 million deficit for the corresponding period in 2016. Moreover, the commodity price collapse cut government revenues, forcing a sizeable and growing deficit. Preliminary Government of DRC (GDRC) figures peg the 2016 growth rate at 2.4 percent, compared with 6.9 percent in 2015 and 9.5 percent in 2014. Although commodity prices rebounded slightly in early 2017, the benefits of this uptick are not expected to be felt until 2018. The GDRC is taking steps to mitigate the impact of low commodity prices on the broader economy through a push for diversification, targeting key sectors including agriculture, manufacturing, telecommunications, and energy.

The nation’s economy is highly dollarized, which has implications for monetary policy execution, financial development and systemic stability. Approximately 90 percent of bank deposits and loans are denominated in US dollars and the prices of many goods, services and financial activities are indexed to the dollar. This high dollarization weakens monetary policy execution and increases the systemic exposure to liquidity shocks since the minimum regulatory requirements of banks are defined in local currency.

Although the economy is dollarized, the domestic currency, the Congolese Franc (CDF), which had remained relatively stable for several years, depreciated significantly in 2016, falling nearly 40 percent against the dollar. Similarly, inflation, which was stable at roughly 1 percent from 2013 through 2015, reached double digits in 2016.

Although the GDRC has demonstrated a growing commitment to foster sound economic governance and to attract foreign direct investment (FDI), progress remains slow. The GDRC set up a “Competitiveness and Private Sector Development Project” which has reduced business start-up time by half and the number of all types of taxes by three-quarters since 2014. The GDRC adopted an investment code in 2002 aimed at increasing and promoting foreign investment in the country by granting tax breaks or tax holidays for investors, though many investors and businesses still complain that tax burdens remain heavy, and the system remains overly complex, duplicative, and opaque. Government agencies at all levels also exert significant administrative pressure on businesses with audits and inspections that often result in questionable legal fines.

Although the DRC has been a member of the Organization for the Harmonization of Business Laws in Africa (OHADA) since 2014, and GDRC investment reforms and investor protections make Public-Private Partnerships (PPPs) more secure and attractive for outside investors than they were previously, the GDRC has yet to implement several key OHADA goals. Reform of a non-transparent and often corrupt legal system is also a prerequisite for investors to benefit more fully from the DRC’s OHADA membership.

Rehabilitation of basic infrastructure remains a priority for the GDRC, and will be necessary for the country to realize its potential. Only one third of the 1,530 km (950 miles) of road in the east is in good condition, and although the Congo River has the potential to generate up to 100,000 megawatts of power, today less than 10 percent of DRC inhabitants have access to electricity. The country’s two largest dams, Inga I and II, generate less than half of their 2,500 megawatt capacity due to poor upkeep. The GDRC is seeking foreign investment partnerships on several hydropower projects, including a massive 40,000 MW Inga III project, as well as the construction of new transmission lines and geothermal power stations. Although the mining and extractive industries contribute more than 95 percent of export revenues, the country still has untapped potential. In February 2017, a revised hydrocarbon code was published in hopes of making the sector more structured and attractive for investors.

Overall, businesses in the DRC face numerous challenges, including fragility of functional infrastructure, endemic corruption at virtually all levels of government, predatory tax agencies, limited access to capital, a shortage of skilled labor, difficulties enforcing contracts, political uncertainty, a weak judicial system, ongoing armed conflict in eastern DRC, and the emergence of sporadic violence in other parts of the country. The Embassy strongly urges all prospective investors to visit www.travel.state.gov to read the latest country-specific information and travel warnings before traveling to the DRC.

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Congo, Republic of the

Executive Summary

The Republic of Congo (RoC) is a country of enormous potential wealth relative to its small population of 4.5 million. However, the RoC’s fiscal and external accounts have deteriorated due to the sustained crash of oil prices, owing to the country’s continued dependence on oil. The IMF estimates weak economic growth of 1.4 percent in 2016 and 5 percent in 2017. Oil remains a big driver of growth, but its contribution to government revenue has declined sharply in the wake of the 2014 global drop in oil prices. The non-oil sector is primarily focused on the logging industry, but growth is also occurring in the telecommunications, banking, construction, and agricultural sectors. The RoC is a country poised for economic diversification, with some of the largest iron ore and potash deposits in the world, a heavily-forested land mass, a deep-water International Ship and Port Facility Security (ISPS) Code-certified port, fertile land, and a small but heavily urbanized population. The RoC has been AGOA eligible since October 2000, providing an additional enticement for export-related investment. The RoC is a member of the Financial Community of Africa (FCA).

With 46 percent of the population living on less than $1.40 per day, poverty prevalence in the RoC is much higher than in peer oil-exporting countries. There is no sizeable middle class with respect to education, skills, and material living standards. The RoC suffers from low education standards and little social mobility. The majority of the population operates in the informal sector of the economy.

In addition to risks stemming from fluctuating oil prices and income inequality, the RoC also faces periodic internal political and security risks. The RoC is a post-conflict society, with the final peace accord of the 1997-1999 civil war signed in 2003. In late 2015 and early 2016, political unrest resulted in over 30 dead, hundreds injured, and thousands of temporarily displaced persons. Such tensions may occur around elections, and potential investors should always check www.travel.state.gov for the latest security information.

The Republic of Congo (RoC) has made significant investments in recent years to develop its weak infrastructure, including the completion of paved roads linking the commercial capital of Pointe-Noire and administrative capital Brazzaville and other departmental capitals. Significant challenges remain, in particular with the RoC’s nascent broadband internet and inconsistent electric and water supply, which present the biggest hurdles for most foreign direct investment. The country’s paved road system remains underdeveloped and its railroad system to connect inland iron ore and timber resources in the north and west of the country with the port of Pointe-Noire is still on the drawing board. However, infrastructure improvement projects are evident in the major cities of the RoC and the government continues to report spending decent amounts of capital on infrastructure improvements, though at a decreasing rate with the drop in oil revenues.

International landlines are non-existent, though mobile phone saturation in the RoC is strong. In 2015 there were 111.66 mobile-cellular telephone subscriptions per 100 inhabitants. However, supporting infrastructure, particularly for data communications, is lagging. Internet penetration is 7.6 percent and connections are extremely expensive, providing significant room for competition and growth in that sector. And, while overall low income keeps people from having their own personal computers and internet services, prevalence of cyber cafes and other Wi-Fi hotspots is increasing, indicating both a desire for internet services as well as a potential market for local internet advertisers. However, the government closely controls internet and telecommunication access. This was demonstrated during the referendum to change the constitution in October 2015 when the government suspended internet and text communication throughout the country for 10 days. In March 2016 during the presidential election, the government suspended internet, text, and voice services for four days.

Investors report that the commercial environment in RoC has not improved substantially in the last few years. Many feel that they have good working relations with government officials, but corruption, especially among “informal” tax collectors, is still widespread. In January 2013 the Congolese government created an Agency for the Promotion of Investments (API) to promote economic diversification through expanding the pool of external investors. Throughout 2013 the government continued to put in place regulatory reforms with the stated goal of improving the business environment. Nevertheless, businesses are not yet noticing positive impacts from the new regulations, and the RoC remains near the bottom (177 out of 190) in the World Bank’s “Ease of Doing Business” rankings, and 159 out of 176 in Transparency International’s “Corruption Perceptions Index 2016”. Established American businesses operating in the RoC – as well as companies interested in establishing a presence – continue to encounter obstacles linked to corruption and lack of transparency. Various companies have raised concerns to the U.S. Embassy related to land titles, tax law misapplication, and general difficulty initiating negotiations with RoC government officials.

The energy and mining sectors will continue to represent the most significant sectors of the economy in the coming years. The RoC government issued a new hydrocarbons law in December 2016 that includes measures to increase taxation, boost local content, and invigorate the gas industry, and plans to conclude an oil block licensing round in mid-2017. Mining is seen as a significant sector for the future, as the country boasts large deposits of phosphate, iron ore, and potash. The government is eager to support mining investment as a means of diversifying its economy. Additionally, agribusiness presents a growth opportunity given that the country cultivates only about 2 percent of its arable land, most agriculture is practiced at the subsistence level, and the country imports more than 80 percent of its food.

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Costa Rica

Executive Summary

Costa Rica is the oldest continuous democracy in Latin America with moderately strong economic growth rates (four percent in 2016) and low inflation (less than one percent in 2016) providing a stable investment climate. The country’s relatively well-educated labor force, focus on English-language instruction, relatively low levels of corruption, physical location, living conditions, dynamic investment promotion board, and attractive free trade zone incentives also offer strong appeal to investors. Costa Rica’s accession process to the Organization for Economic Co-operation and Development (OECD), begun in June 2015, further benefitted the investment climate through its broad review of government policy and actions and concrete proposals to improve perceived areas of deficit. Nevertheless, the Costa Rican investment climate is threatened by a high and persistent government fiscal deficit capable of squeezing domestic credit and forcing government budget cuts, a complex and often inefficient bureaucracy, and basic infrastructure – ports, roads, water systems – in need of major upgrading. Organized crime, drug trafficking, and money laundering are also growing challenges, despite strong government efforts to counter these forces.

Costa Rica’s continued popularity as an investment destination is well illustrated by strong yearly inflows of foreign direct investment (FDI) as recorded by the Costa Rican Central Bank, reaching USD 2.88 billion in 2014 (5.7 percent of GDP) and 2.85 billion in 2015 (5.1 percent of GDP). In recent decades, the Costa Rican government through its investment promotion agency CINDE focused on attracting relatively high-tech manufacturers, such as medical device makers, and service companies that demand skilled labor, introduce new technologies and often run robust corporate social responsibility (CSR) programs. In addition, the Costa Rican Tourism Board (ICT) attends to potential investors in the very dynamic tourism sector.

Costa Rica’s high-tech and tourism sectors are legitimate “clusters” of economic growth in which each new exporter, service provider, sector employee, or university course of study adds depth to the sector as a whole and makes it more attractive for new entrants. Costa Rica has had remarkable success in the last two decades in establishing and promoting an ecosystem of export-oriented technology companies, suppliers of input goods and services, associated public institutions and universities, and a trained and experienced workforce. A similar transformation took place in the tourism sector, now characterized by a plethora of smaller enterprises handling a steadily increasing flow of tourists eager to visit despite Costa Rica’s relatively high prices. Costa Rica is doubly fortunate in that these two sectors positively reinforce each other as they both require and encourage English language fluency, openness to the global community, and Costa Rican government efficiency and effectiveness.

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Cote d’Ivoire

Executive Summary

Côte d’Ivoire offers fertile soil for U.S. investment, and the Ivoirian Government is keen to deepen its economic cooperation with the United States. Following a credible and peaceful election in October 2015, in which President Ouattara was overwhelmingly reelected to a second term, a new constitution was adopted in November 2016 through a referendum that created a new executive position of Vice-President and a Senate. The country is consolidating its political stability and is focused intently on economic growth in order to become an “emerging” economy by 2020. The country continues its efforts to reestablish itself as an economic engine for West Africa by making its economy attractive to both domestic and foreign investors through sound macroeconomic and fiscal management, improvement in the ease of doing business, and plans to tackle corruption. Côte d’Ivoire’s economy has grown strongly since 2012, averaging nine percent per year. In 2017 the economy has faced headwinds with soldier mutinies, a drop in the price of cocoa, and public sector strikes. However, the IMF in its April 2017 mission predicted continued strong growth in the range of seven to eight percent. Additionally, in April 2017 the World Bank named Côte d’Ivoire one of the most resilient economies in Africa.

The main drivers of Côte d’Ivoire’s impressive sustained growth are the economy’s strengths in the agricultural, energy, and mining sectors. Public and private investments in infrastructure have contributed to the extension of Abidjan’s port and expansion of the transportation network. Improvements in the business environment include a one stop shop for registering businesses, the implementation of a single user identification number for business creation and tax payment, online submission of complaints to the Commercial Court of Abidjan, publication of rulings from the Commercial Court, and electronic land registration. The government’s impressive track record also includes the implementation of new codes on investment, electricity, and mining. The new mining code was a key factor for the country to accede to both the Kimberley Process and the Extractive Industries Transparency Initiative (EITI).

The most fruitful areas of investment for U.S. businesses are in oil and gas exploration and production; agriculture and value-added agribusiness processing; power generation; renewable energy; infrastructure; and mining.

Despite the country’s impressive economic track record over the past few years, investor challenges remain. Improvements in the national security situation over the past four years are evident, but the reform process is incomplete. Progress on national reconciliation and impartial justice has also gone slowly. Côte d’Ivoire suffered its first terrorist attack in March 2016 on the beaches of Grand Bassam, for which Al Qaeda in the Islamic Maghreb claimed responsibility. The Ivoirian forces responded very quickly, however, showing that their capacity has improved over the past few years. Soldier mutinies in January, February, and May 2017 renewed worries about stability, but the government managed to placate the soldiers by acceding to part of their demands and promised to refocus efforts to reform the military.

In business, investors continue to complain about the lack of transparency in government decision-making. In January 2017 however, the government made important changes to the composition and makeup of the cabinet in order to improve performance and governance. Efforts are underway to reform the commercial court system, which often is slow to make rulings. The Budget Ministry is in the process of establishing an online tax payment system to expand the tax base, decrease opportunities for corruption, and improve fiscal transparency.

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Croatia

Executive Summary

Despite continuing challenges, Croatia welcomes foreign investment. The government is willing to meet at senior levels with interested investors and to assist in resolving problems. Strengths in the Croatian economy include low inflation, a stable exchange rate, developed infrastructure, and membership in the European Union (EU). Historically, the most promising sectors for investment in Croatia have been tourism, telecommunications, pharmaceuticals, and banking.

Following a decade of growth from the end of the war in 1995, investment activity in Croatia has slowed substantially since 2008 and has remained under historic levels despite the economy’s emergence from recession at the end of 2015 and relatively robust growth in 2016. The banking system weathered the global financial crisis well, but has been saddled recently with financial costs related to the government-mandated conversion of Swiss Franc loans into euros in 2015. Croatia continues to maintain a large government bureaucracy, a state-owned sector with underperforming state enterprises, low regulatory transparency, and an inefficient judicial system. These factors contribute to poor economic performance and low levels of foreign investment. Croatia became a member of the EU in 2013, which has enhanced stability and should eventually provide new opportunities for trade and investment. Croatia, however, has yet to access a substantial amount of available EU funds, so not all direct economic benefits of EU entry have been felt. Like many newer EU member states, Croatia has struggled to put in place the necessary mechanisms and projects to efficiently absorb EU funds that would spur economic development.

The current government of Croatia came to power in October 2016 and has pledged to take legislative and administrative steps to reduce barriers to investment, streamline bureaucracy and public administration, and program EU funds more efficiently. The new Prime Minister, a former member of the European Parliament, has signaled his commitment to wide-ranging structural reforms in line with recommendations from the EU and global financial institutions. The Finance Minister is a business professional and well-regarded former Finance Ministry official. In addition to cutting the 2016 budget deficit to below EU-recommended levels, the new government enacted a comprehensive tax reform plan targeted at increasing consumer spending and reducing the tax burden for small and medium-sized enterprises. The new government is committed to further structural reforms including continuing the privatization of state assets, reforming public administration, and fully implementing the new law on public procurement.

The government is also committed to address persistent investor complaints about high “para-fiscal” fees, rigid labor laws, slow and complex permitting procedures, and a slow, sometimes unpredictable legal system. Promised reforms to date, however, have been halting in the face of opposition from vested interests and key groups.

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Cyprus

Executive Summary

The business and investment climate in Cyprus has improved since the financial crisis of 2013. Cyprus is now experiencing a solid economic recovery, driven by the tourism sector and domestic demand. The economy grew 2.8 percent in 2016 and the European Commission expects it to decelerate slightly to 2.5 percent in 2017 and 2.3 percent in 2018. However, local experts are more optimistic, expecting growth close to 3 percent in both 2017 and 2018. In March 2016, the island graduated from a three-year economic adjustment program, boosting investor confidence in the economy. Despite a major restructuring of the banking sector and improved capital positions, the stock of non-performing loans has declined slowly and remains very high at almost half of total loans. Poor contract enforcement, inefficiencies in the judicial system, and bottlenecks in the implementation of the foreclosure and insolvency legislation hamper private sector deleveraging and the reduction of non-performing loans. Reform momentum has weakened since 2016, slowing down progress in areas like reforming the civil service and privatizing state-owned enterprises (SOEs).

Strategically located at the crossroads of Europe, Asia, and Africa, Cyprus offers significant promise and opportunity to U.S. investors. Sectors offering the greatest potential for investment are in energy (including renewables), tourism infrastructure, shipping, services, and technology. Smaller, niche investment opportunities exist in food processing and franchises. Cyprus offers a low-tax business environment, skilled and English-speaking professionals, and excellent infrastructure for doing business in the eastern Mediterranean. U.S. citizens traveling with a U.S. passport may enter Cyprus without a visa for up to 90 days.

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Area Administered by Turkish Cypriots

Since 1974, the southern two-thirds of Cyprus has been under the control of the government of the Republic of Cyprus (ROC), while the remaining area in the north has been administered by Turkish Cypriots (TCs). In 1983, the TC-administered area declared itself the “Turkish Republic of Northern Cyprus” (“TRNC”), but this has not been recognized by any country other than Turkey. While the unresolved conflict has implications for all potential investment on the island, companies considering investments in the TC-administered area should be aware of complications that arise from the lack of international recognition and the absence of a comprehensive political settlement in Cyprus. TC businesses are interested in working with American companies in the fields of agriculture, renewable energy, and franchises. The accession of the ROC to the European Union (EU) in 2004 also had important consequences for the northern part of Cyprus. Although the EU suspended implementation of the acquis communautaire (AC) in the area administered by TCs, EU-funded technical programs are being used to bring TC goods and services into compliance with EU standards and norms.

Turkish aid and investment from Turkey continue to take place in the area administrated by TCs.

The single greatest catalyst for island-wide Cypriot economic growth and prosperity lies in the efforts of both communities to achieve a political settlement. According to some analysts, prospects for a settlement hold the promise of significantly increasing the island’s GDP.

Czech Republic

Executive Summary

The Czech Republic is a medium-sized, open, export-driven economy. Around 80 percent of its GDP is comprised of exports – mostly from the automotive and engineering industries. Its strong dependence on foreign demand, especially from the Eurozone, of which it is not a member, was highlighted in the global financial crisis of the late 2000s. However, the Czech banking sector remained relatively healthy. After two years of economic contraction, the Czech economy emerged from recession in early 2013 and has enjoyed some of the highest GDP growth rates of the European Union – 4.5 percent in 2015 and 2.3 percent in 2016, respectively. Experts predict approximately 2.5 percent growth in 2017.

Since November 2013, the Czech National Bank (CNB) has intervened in the foreign exchange markets to prevent appreciation of the Czech Crown (CZK) beyond 27/Euro. The formal justification for this action has been to prevent deflation, though it has also had the benefit of making Czech exports more cost-competitive. As of April 2017 the Crown trades at 24-25/dollar. The Czech crown is fully convertible and all international transfers of investment-related profits and royalties can be carried out freely without delay. While there has not been significant political momentum toward Euro accession in recent years, the current government under Prime Minister Sobotka has demonstrated a more positive approach to EU integration than any past government. The Czech government has met four of the five Maastricht criteria for adoption of the Euro, but decided in December 2016 not to seek to join the Exchange Rate Mechanism (ERM II) in 2017.

The Czech Republic is subject to EU law and Organization of Economic Cooperation and Development (OECD) standards for the equal treatment of foreign and domestic investors. Labor laws are comparable with those of most developed nations. Wages generally trail those in neighboring Western European countries but have been rising about five percent annually the past several years due to the economy having reached nearly full employment. The U.S.-Czech Bilateral Investment Treaty from 1992 provides for international arbitration of investor–State disputes. Great strides have been taken since the fall of communism to open the market to competition and privatization, but the prosecution of anti-trust violations is still less than adequate. Corruption remains a problem. Czech Intellectual Property Rights (IPR) protections are still not optimal, but the legal framework for IPR protection has been tested and proven successful in punishing infringers. Other western concepts such as entrepreneurship and corporate social responsibility (CSR) are growing trends in the Czech business and NGO communities.

There are no general restrictions on foreign investment, although limits exist within certain sectors. The Czech Republic attracts a great deal of FDI for its size, and has taken strides to diversify its traditional investments in engineering into new fields of research, development and innovative technology. EU structural funding has enabled the country to open a number of world-class scientific and high-tech centers. Companies from EU member states are the chief foreign investors in the Czech economy, but the government has signaled a desire to seek more export and investment opportunities from non-European regions, including the United States, China, and South Korea.

Table 1

Denmark

Executive Summary

For a summary of the investment climates of Greenland and the Faroe Islands, please see the end of this report.

Denmark is regarded by many independent observers as one the world’s most attractive business environments and is characterized by political, economic and regulatory stability. It is a member of the European Union (EU) and Danish legislation and regulations conform to EU standards on virtually all issues. Denmark regularly ranks first as the world’s least corrupt nation. It conducts a fixed exchange rate policy, with the Danish Krone linked closely to the Euro. Denmark is a social welfare state with a thoroughly modern market economy reliant on free trade in goods and services. It is a net exporter of food, fossil fuels and wind power, but depends on raw material imports for its manufacturing sector. Within the EU, Denmark is among the strongest supporters of liberal trade policy.

The Danish economy experienced a period of lackluster growth following the 2008 global financial crisis and subsequent economic recessions. Averaging 1 percent annually from 2012 to 2016, economic growth lagged behind its potential for the period, especially given that unemployment, inflation, and interest rates were low and public finances sustainable. A primary headwind in the economy in recent years – restrained private consumption – abated in 2015 and finished 2016 on a strong note, recording its highest quarterly growth rate since 2007. Contributing factors to the improvement were decreasing unemployment, weaker currency, declining oil prices and record low interest rates. The Danish economy is now well into a recovery and the government estimates acceleration in growth from 1.3 percent in 2016 to 1.7 percent for 2017 and 2018, and a 2 percent increase in employment. Following a period of low activity, exports rose by over 4 percent during the last three months of 2016, driven by higher exports of both goods and services, notably sea transport services.

Denmark is reliant on international trade, which accounts for about 50 percent of GDP, and developments in its major trading partners – Germany, Sweden, the UK and the United States – have substantial impact on Danish national accounts. “Gross unemployment”, a national definition, was 4.3 percent in March 2017, and is forecast to decrease slightly in coming years as the economy improves and structural reforms take effect. The OECD Harmonized Unemployment Rate was 6.2 percent in January 2016.

Denmark is a major international development assistance donor, contributing DKK 15,963 million ($2.4 billion) or 0.71 percent of GNI to development assistance in 2016, with 71.66 percent of Danish assistance being bilateral and 28.34 percent multilateral.

Underlying macroeconomic conditions in Denmark are sound and the investment climate is favorable. Denmark is situated strategically, linking continental Europe with the Nordic and Baltic countries. Transport and communications infrastructures are efficient. Denmark is among world leaders in industries such as information technology, life sciences, clean energy technologies, and shipping. Exchange rate conversions throughout this document are based on the 2016 average exchange Danish Kroner (DKK) 6,733= 1 USD ($).

Table 1

Djibouti

Executive Summary

Djibouti, a country with few resources, recognizes the crucial need for foreign investment to stimulate economic development. The country’s assets include a strategic geographic location, free zones, an open trade regime, and a stable currency. Djibouti has identified a number of priority sectors for investment, including transport and logistics, financial services, energy, and tourism. Djibouti’s investment climate has improved in recent years, which has led to a renewed interest by U.S. and other foreign firms. However, there are a number of reforms still needed to further promote investment.

The IMF has projected GDP growth at or above 6% annually for the next several years. In the nineties, Djibouti’s economy was weakened by a persistent drought, influx of refugees and migrants, a four-year civil war, and a substantial decrease of foreign aid. Recent years have seen a significant improvement driven by intensive expansion of the ports, changes in the tax and labor codes, and an influx of foreign direct investment (totaling 7.2% of Djibouti’s GDP in 2015). Real GDP growth has remained between 4% and 6% per year for the last five years, and inflation has remained below 8%.

Djibouti remains below regional and world averages in World Bank’s “Doing Business” reports, and fell from 169 in 2015 to 171 (of 189 countries) in the 2016 ranking. Some noteworthy improvements include making it easier to start a business by simplifying registration formalities and eliminating the minimum capital requirement for limited liability companies. In addition, Djibouti adopted a new commercial code, which broadens the range of movable assets that can be used as collateral to obtain credit. Another positive step was the opening in March 2017 of a “one-stop-shop,” which houses all the agencies with which a company must register.

Several large infrastructure projects are currently underway, with others in various stages of negotiation. Many of the ongoing and future projects are debt-financed with loans from China. An Independent Power Production law promulgated in 2015 has led to a surge of interest from U.S. and foreign firms, with multiple ongoing negotiations for energy generation projects, including green and hydrocarbon technologies.

The business environment in Djibouti would benefit from significant reforms to its legal and regulatory framework. Some of the needed reforms include simplifying the tax code, especially for small businesses, and streamlining the procedures for investment. In addition, the adoption of a new investment code based on international best practices is necessary as indicated by UNCTAD in its investment policy review of Djibouti:

(http://unctad.org/en/PublicationsLibrary/diaepcb2013d1summary_en.pdf).

Economic development is hindered by high electricity costs, high unemployment, an unskilled workforce, regional instability, and a need to diversify the economy.

Djibouti belongs to a number of regional organizations, including the Inter-Governmental Authority on Development (IGAD) and the Common Market for Eastern and Southern Africa (COMESA), which groups 19 countries into a common market of more than 300 million people. Djibouti is eligible to benefit from the African Growth and Opportunity Act (AGOA), and is also a member of the World Trade Organization (WTO). In addition, Djibouti is among the 34 least developed African countries with the option of entering the European Union Generalized System of Preferences.

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Dominica

Executive Summary

The Commonwealth of Dominica (Dominica) is a member of the Organization of Eastern Caribbean States (OECS) and the Eastern Caribbean Currency Union (ECCU). According to Eastern Caribbean Central Bank (ECCB) statistics updated in January 2017, Dominica had an estimated Gross Domestic Product of USD $454.3 million in 2016, with forecast growth of 3.1 percent for 2017. Dominica is still recovering from Tropical Storm Erika, which caused an estimated USD $483 million in damage when it struck the island in August 2015. The Government remains focused on reconstruction efforts, with many projects currently under way. It has also signaled its commitment to foster sustainable economic growth, which incorporates a revised macroeconomic framework that includes strengthening the nation’s fiscal framework. During the last fiscal year, Dominica’s economy remained buoyant due to revenue from the Citizenship by Investment program. The current government remains committed to creating an vibrant business climate to attract more foreign investment to the country.

Dominica is currently ranked 101^st out of 190 countries in the World Bank’s 2017 Doing Business report. The report highlighted no significant change in the country’s ranking for resolving insolvency, paying taxes, or enforcing contracts, but noted ongoing challenges in obtaining construction permits, electricity, and credit.

Dominica remains an emerging market in the Eastern Caribbean, with investment opportunities mainly within the services sector, particularly eco-tourism, information and communication technologies, and education. Other opportunities exist in alternative energy, namely geothermal, and capital works due to reconstruction and new tourism projects.

R Recently, the government instituted a number of investment incentives for businesses that would consider being based in Dominica, encouraging both domestic and foreign private investment. Foreign investors in Dominica can repatriate all profits and dividends and can import capital.

Dominica bases its legal system on British common law. Dominica has no bilateral investment treaty with the United States but has bilateral investment treaties with the United Kingdom and Germany.

In 2014, the Government of Dominica signed an Intergovernmental Agreement in observance of the United States’ Foreign Account Tax Compliance Act (FATCA), making it mandatory for banks in Dominica to report the banking information of U.S. citizens.

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Dominican Republic

Executive Summary

The Dominican Republic is an upper middle income country and the largest economy in the Caribbean region. In 2016, the Dominican economy grew an estimated 6.6 percent according to the Central Bank, making it the fastest-growing country in Latin America. Growth was led by public and private sector construction, financial services, mining, and tourism.

The Dominican Republic has adopted policies of greater openness to international trade and investment in the last decade. As a result, foreign direct investment (FDI) plays a prominent role in the country’s economic development. According to the U.S. Bureau of Economic Analysis, U.S. foreign direct investment (FDI) in the Dominican Republic was USD 1.4 billion in 2015, an increase of 11.9 percent over 2014. The Dominican Republic is among the main recipients of FDI in the Caribbean and Central America. The tourism, real estate, telecommunications, free zones, mining, and financing sectors are the largest recipients of foreign direct investment. Historically, the United States has been the largest investor, followed by Canada and Spain. The strength of the U.S.-Dominican trade relationship stems from close geographic proximity and the historical, cultural, and personal ties that many Dominicans have with the United States.

The Dominican Republic-Central America Free Trade Agreement with the United States (CAFTA-DR), in force now for ten years, has increased bilateral trade between the United States and the Dominican Republic from U.S. USD 9.9 billion the year before CAFTA-DR implementation to USD 12.5 billion in 2016. CAFTA-DR is also credited with increasing competition, improving the rule of law, and expanding the range of choices and access to quality products in the Dominican Republic. CAFTA-DR includes a number of protections for foreign investors, including mechanisms for dispute resolution.

Despite the stable macroeconomic situation, significant systemic problems remain in the Dominican Republic. Foreign investors cite a lack of clear, standardized rules by which to compete and a lack of enforcement of existing rules. Complaints include allegations of widespread corruption, requests for bribes, delays in government payments, weak intellectual property rights enforcement, bureaucratic hurdles, slow and sometimes biased judicial processes, non-standard procedures in customs valuation of imported goods, as well as product misclassification as a means of negating CAFTA-DR benefits and increasing customs revenues. Weak land tenure laws and government expropriations continue to be a problem, though less so than in previous years. The Dominican authorities have carried out some reform efforts aimed at improving transparency, especially fiscal transparency. Nevertheless, corruption and better implementation of existing laws are openly and widely discussed as key public grievances.

The Dominican government in 2016 was the subject of several corruption scandals, sparking public protests and calls for institutional change. The government’s response to these scandals and whether it makes a genuine effort to end impunity will likely have a significant impact on whether it continues to be seen as an attractive market for foreign direct investment. The investment climate in the coming years will largely depend on sustaining the political will to implement reforms necessary to promote competitiveness and transparency, rein in the public debt, and end widespread corruption.

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Ecuador

Executive Summary

In recent years, the Ecuadorian government took some steps in an attempt to attract foreign direct investment (FDI) such as passing a public-private partnership law and changing tax and regulatory policies for mining. Despite these efforts, FDI inflow to Ecuador has remained very low when compared to other countries in the region. In 2015, FDI inflow equaled about $1.3 billion, or about 1.3 percent of GDP. In 2014, FDI inflow was USD 772 million, or .76 percent of GDP. Ecuador’s FDI inflow was second lowest in the region in both of these years. Through the third quarter of 2016, the latest figures available, FDI inflow was USD 338 million, a 37 percent decline from the same period in 2015. The United States was the largest source of FDI in 2015 with $186 million; up from USD 10 million in 2014. Canada and China were the first and second largest sources of FDI in 2014 with USD 229 million and USD 79 million respectively.

Ecuador’s National Assembly voted on May 3 to terminate 12 of its bilateral investment treaties, including its agreement with the United States. The Government of Ecuador notified the U.S. government of its withdrawal from the BIT on May 18.

Corruption is a serious problem in Ecuador. Ecuador ranked in the bottom third of countries surveyed for Transparency International’s Corruption Perceptions Index. Two high-profile cases of alleged official corruption involving state-owned petroleum company PetroEcuador and Brazilian construction firm Odebrecht illustrate the challenges that confront Ecuador with regards to corruption.

Former-vice president Lenin Moreno won Ecuador’s April 2 presidential election and took office May 24. Moreno promised to continue the public sector-driven economic model of his predecessor including increased government spending on social welfare programs.

Economic, commercial, and investment policies are subject to frequent changes and can increase the risks and costs of doing business in Ecuador.

The 2008 Constitution established that the state reserves the right to manage strategic sectors through state-owned or controlled companies. The sectors identified are energy, telecommunications, non-renewable natural resources, transportation, hydrocarbon refining, water, biodiversity, and genetic patrimony. Foreign investors may remit 100 percent of net profits and capital, subject to a capital exit tax of 5 percent. Ecuadorian law requires private companies to distribute 15 percent of pre-tax profits to employees each year.

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Egypt

Executive Summary

The Egyptian government understands that attracting foreign investment is key to addressing many of the economic challenges it faces, including low economic growth, high unemployment, current account imbalances, and hard currency shortages. Despite significant structural improvements since the floating of the Egyptian Pound (EGP) and the start of a three-year International Monetary Fund (IMF)-backed economic reform program in November 2016, Egypt’s investment climate remains challenging.

The government continues to implement an economic reform agenda to address its fiscal and structural imbalances, which, in addition to floating the pound, has included the imposition of a new value added tax (VAT), fuel and electricity subsidy cuts, and a new civil service law. After establishing a more stable macroeconomic outlook, buttressed by IMF and other multilateral funds, a successful Eurobond issuance, and bilateral financing agreements, Egypt’s government will focus on structural reforms to improve productive capacity, increase exports, and grow the economy. The next phase in its reform program will most likely include a new investment law and revised bankruptcy law, which should improve the ease of doing business and further increase clarity for foreign investors. The government is also hoping to attract significant international investment in several “mega projects” including a large-scale industrial and logistics zone around the Suez Canal, the creation of a new national administrative capital, a 1.5 million feddan (acre) agricultural land reclamation and development project, and the development of mineral extraction opportunities in a special 10,000 square kilometer zone.

Higher investor confidence and the restarting of Egypt’s interbank foreign exchange (FX) market since November 2016 has resulted in increased foreign portfolio investment and foreign reserves. Although FX is more available than before the floatation and the parallel market has all but disappeared, hard currency, especially for uses other than the import of commodities, can be difficult to access. Despite progress in working through the backlog in demand among companies for foreign exchange, investors report there can be delays of weeks to months for transfers of foreign exchange to be executed.

Egypt honors its laws, treaties, and trade agreements. It is party to 100 bilateral investment treaties, including a 1992 treaty with the United States, and is a member of the World Trade Organization (WTO), the Common Market for Eastern and Southern Africa (COMESA), and the Greater Arab Free Trade Area (GAFTA). In many sectors, there is no legal difference between foreign and domestic investors. Special requirements exist for foreign investment in particular sectors, such as upstream oil and gas development, where joint ventures are required, as well as real estate.

Egypt is a signatory to international arbitration agreements, although Egyptian courts do not always recognize foreign judgments. Dispute resolution is slow, with the time to adjudicate a case to completion averaging three to five years. Other obstacles to investment include excessive bureaucracy, regulatory complexity, a mismatch between job skills and labor market demand, slow and cumbersome customs procedures, and non-tariff trade barriers.

Labor rules prevent companies from hiring more than 10 percent non-Egyptians (25 percent in Free Zones), and foreigners are not allowed to operate sole proprietorships or simple partnerships. A foreign company wishing to import for trading purposes must do so through a wholly Egyptian-owned importer. Inadequate protection of intellectual property rights (IPR) is a significant hurdle in certain sectors to direct investment in Egypt. Egypt remains on the U.S. Trade Representative’s Special 301 Watch List.

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El Salvador

Executive Summary

The government of El Salvador (GOES) has not been effective in improving its investment climate. In recent years, El Salvador has lagged behind the region in attracting foreign direct investment (FDI), in both absolute terms and as a proportion of GDP. The Salvadoran Central Reserve Bank (“Central Bank”) estimated FDI inflows of less than USD 345 million between January and September 2016, significantly less than the over USD1 billion average for other countries in the region during the same period. Political polarization, cumbersome bureaucracy and regulations, an ineffective judicial system, and widespread violence are barriers to investment in El Salvador.

On September 9, 2015, El Salvador’s second Millennium Challenge Corporation (MCC) Compact entered into force. With its “More Investment, Less Poverty” theme, the USD 277 million Compact (plus USD 88.2 million from El Salvador in counterpart funding) includes projects to improve the investment climate, logistical infrastructure and human capital over five years. The investment climate initiative includes the creation of a new entity that endeavors to streamline business and investment regulations (“Organismo de Mejora Regulatoria”), which works with the private sector to improve trade facilitation and permitting processes, among other things.

The Presidents of El Salvador, Guatemala, and Honduras announced the Northern Triangle Countries’ Alliance for Prosperity Plan in 2014. The goal of the Alliance is a more integrated region that is democratic, provides greater economic opportunities, effective public institutions, and improved security for its citizens. Its success depends greatly on the political will of the three governments. For Fiscal Year 2016, the U.S. Congress made available up to USD 750 million for the United States to implement its Strategy for Engagement in Central America, including support to the Alliance for Prosperity Plan and other regional priorities.

The U.S.-Central American-Dominican Republic Free Trade Agreement (CAFTA-DR), entered into force for the United States and El Salvador in 2006. El Salvador also has free trade agreements with Mexico, Chile, Panama, Colombia, and Taiwan. El Salvador, jointly with Costa Rica, Guatemala, Honduras, Nicaragua, and Panama, signed an Association Agreement with the European Union that includes a Free Trade Area. El Salvador is in the process of reaching trade agreements with Canada, Peru, and South Korea. A Partial Scope Agreement with Trinidad and Tobago and Ecuador, will soon enter into force, and El Salvador is negotiating a similar agreement with Belize and Bolivia, as well as re-negotiating one with Venezuela.

The GOES continues to take some measures to improve the business climate, with very limited results. In January 2015, in its five-year planning document (Plan Quinquenal), the government identified 44 geographic areas for prioritized economic development efforts. Also in 2015, the Legislative Assembly passed relevant legislation, such as better regulation and oversight of remittances, strengthened penalties against bulk cash smuggling, and increased financial inclusion by improving access to financial services and “e-money.” The Assembly also approved an electronic signature law and reformed the country’s fiscal incentive law in order to promote increased investment in renewable energy in 2015. The Ministry of Economy took steps to facilitate access to and improve both its physical and online “one-stop window” for investors. However, the government also introduced new taxes on telecommunications transactions and income over $500,000.

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Equatorial Guinea

Executive Summary

Equatorial Guinea is endowed with abundant oil and gas resources and hosts billions of dollars in direct U.S. investment. The general investment climate in the country, however, is undermined by corruption and a burdensome, inefficient bureaucracy. International watchdog organizations give Equatorial Guinea one of the world’s lowest rankings in various global indices, including those for corruption, transparency, and ease of doing business. These poor ratings underscore the challenging and opaque environment in which both local and foreign businesses must operate.

The Government of Equatorial Guinea is seeking investment in several sectors: agribusiness; fishing; energy and mining; chemicals, petrochemicals, plastics and composites; travel and tourism; and finance. Currently, many of these sectors are undeveloped. The Equatoguinean domestic market is small, with a population of approximately one million, although the country is a member of the Central African Monetary and Economic Union (CEMAC) sub-region, which is home to over 50 million people. The zone has a central bank and a common currency – the CFA franc.

Following rapid economic growth in the early 2000’s spurred by the discovery of oil a decade earlier; growth has slowed in recent years as operational oil fields have matured. With the drop in oil prices in 2015, Equatorial Guinea has extended the timelines for completing infrastructure projects to balance its budget. The country is nearing completion of the first phase of the Horizon 2020 social development plan, which emphasized infrastructure construction. Now Equatorial Guinea boasts some of the region’s best roads and other essential infrastructure including development of its ports. The government has announced plans to improve the ease of doing business by creating a one-stop-shop for investors and entrepreneurs, and creating a body to solve business disputes and a government co-investment fund of $1 billion. The fund is said to be in place, but the other measures have not yet been fully implemented.

Although certain tax exemptions have been instituted to attract investment, with the decrease in the price of oil, those exemptions are strictly scrutinized. Recent commercial disputes have involved delayed payment, or non-payment, by the Equatoguinean government to foreign firms for goods and services already delivered. The government has recently been attempting to change the terms of long standing contracts with major foreign firms and this dispute is ongoing. December 2015 saw a marked exodus of foreign businesses from the country as the government grappled with its finances and this trend continued throughout 2016.

The Equatoguinean judicial system is not independent, as the President is the Chief Magistrate. Corruption exists throughout the government, including the judiciary, making it difficult for U.S. businesses to protect their investments, and raising the risk of doing business in Equatorial Guinea. Occasionally, the passports of foreign managers are confiscated when an underlying dispute is raised. In such cases, the government has stated that movements are being restricted because the individual’s statements may be needed to resolve the dispute. This has occurred more than three times in the last 18 months, with one foreign executive having his travel restricted for nearly nine months.

U.S. citizens do not require visas to enter Equatorial Guinea, but visas can be very difficult to obtain for third-country nationals, and generally require a letter of invitation from the Equatoguinean government, which can take months to obtain. Residency permits can be similarly difficult to obtain or renew, and are expensive. Even the U.S. Embassy regularly experiences delays for residency permits of six months or more, with the host government occasionally misplacing original documents or losing them entirely. The local customs system suffers from similar delays and is plagued by corruption.

Despite the many challenges, U.S. businesses, which strictly comply with Foreign Corrupt Practices Act (FCPA) requirements, have had success in the hydrocarbons sector, and some U.S. businesses have found rewards in other sectors. U.S. businesses will likely continue to invest in the country in light opportunities in the market, however potential investors should be wary of the accompanying risks to operating in Equatorial Guinea.

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Eritrea

Executive Summary

The investment climate in Eritrea is not conducive to U.S. investment, because the policies maintained by the Government of the State of Eritrea (GSE) are not conducive to foreign investment. Specifically, the GSE has a history of making statements hostile towards the free market, privately owned enterprises and the influence of the U.S. Government on the Eritrean economy.

Eritrea, under President Isaias Afwerki, who heads a one-party government and rules the country by presidential decrees, follows a policy of national self-reliance. Despite its strategic location on the Horn of Africa, where it shares borders with Sudan, Ethiopia, and Djibouti, Eritrea is one of the most secretive and isolated states in the world. Most enterprises are state controlled or run by the sole political party, the Peoples Front for Democracy and Justice (PFDJ). The GSE is the largest employer in the country and most citizens must complete a national service obligation, often an indefinite term at very low wages in public sector positions. The national currency, Eritrean Nakfa, is not convertible and there are restrictions on the repatriation of profits. The national budget is not public and the judiciary is not independent and lacks transparency. There is no freedom of the press and the government maintains complete control of the media. The U.S. Embassy has been denied consular access to American citizens detained by Eritrean authorities, emblematic of the GSE’s uncooperative and reticent attitude.

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Estonia

Executive Summary

Estonia is a safe and dynamic country for investment, with a business climate very similar to the United States. As a member of the EU, the Government of Estonia (GOE) maintains liberal policies in order to attract investments and export-oriented companies. Creating favorable conditions for foreign direct investment (FDI) and openness to foreign trade has been the foundation of Estonia’s economic strategy. The overall freedom to conduct business in Estonia is well protected under a transparent regulatory environment.

Estonia is among the leading countries in Eastern and Central Europe regarding FDI per capita. At the end of 2016, Estonia had attracted in total USD 19.4 billion (stock) of investment, of which 27.5 percent was made into the financial sector, 18.2 percent into real estate, 13.7 percent into manufacturing and 12.7 percent into wholesale and retail trade.

Estonia’s government has not set limitations on foreign ownership and foreign investors are treated on an equal footing with local investors. There are no investment incentives available to foreign investors. While some corruption exists, it has not been a major problem faced by foreign investors.

The Estonian income tax system, with its flat rate of 21 percent, is considered one of the simplest tax regimes in the world. Deferral of corporate taxation payment shifts the time of taxation from the moment of earning the profits to that of their distribution. Undistributed profits are not subject to income taxation, regardless of whether these are reinvested or merely retained.

Estonia offers key opportunities for businesses in a number of economic sectors like information and communication technology (ICT), chemicals, wood processing, and biotechnology. Estonia has strong trade ties with Finland, Sweden and Germany.

Starting December 1, 2014, Estonia offered foreigners the option of e-residency. E-residents are issued a digital identity (smart ID-card) from the Republic of Estonia for a small fee. This does not entail full legal residency, citizenship or right of entry to Estonia, but gives secure access to some of Estonia’s digital services such as business registration and an opportunity to use digital signatures in an electronic environment. Such digital identification and signing is the legal equivalent to face-to-face identification and handwritten signatures in the European Union. More info: https://e-estonia.com/e-residents/about/

Estonia suffers a shortage of labor, both skilled and unskilled. The GOE has recently amended its immigration law to allow easier hiring of highly qualified foreign workers.

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Ethiopia

Executive Summary

Ethiopia has had one of the fastest growing economies in the world with GDP growth averaging 10.1 percent in 2010/11–2014/15, according to the World Bank. The drought caused by el-Niño slowed growth in 2015/16 to 6.5 percent. The IMF estimates growth will rebound to above 7 percent from 2017 to 2020. Ethiopia is the second most populous country in sub-Saharan Africa after Nigeria, with a population of roughly100 million.

The government of Ethiopia follows integrated five-year plans to guide its state-led industrial development. The second of these Growth and Transformation Plans (GTP II), covering 2016–2020, is now being implemented. GTP II targets an average growth rate of 11 percent in the next five years with the objective of achieving middle income status by 2025. To realize these ambitious goals, the government continues to pursue consistent and prudent macroeconomic policies and to invest heavily in large-scale social, infrastructural and energy projects. GTP II includes incentives for international investors such as: 1) facilitation of repatriation of investment and profit, 2) ease in hiring expatriate personnel, 3) temporary income tax exemptions for investments in selected sectors, and 4) duty-free imports of capital goods, components and raw materials for exporting industries and manufacturers in priority sectors.

However, while public sector infrastructure projects can provide significant investment opportunities, they also absorb the lion’s share of the available capital, creating a scarcity of capital for the private sector. The World Bank estimates that public infrastructure spending has accounted for approximately 19 percent of Ethiopia’s total GDP since fiscal year 2011-2012.

Priority sectors identified by GTP II include renewable energy, construction, healthcare, tourism, textile and apparel, leather products, telecommunications infrastructure and value-added services, and aviation support services and products. Low-cost labor, a strategic location on the African continent, an excellent national airline, the world’s cheapest energy and growing consumer markets are key elements attracting foreign direct investment (FDI).

The last abrupt devaluation occurred in September 2010; however, the government maintains a policy of slow but steady devaluation, which has resulted in a 97 percent depreciation of the birr (denoted as ETB) against the U.S. dollar over the past eight years. Chronic and often acute foreign exchange shortages are a far more serious challenge. In addition, companies often face long lead-times importing goods and dispatching exports due to logistical bottlenecks, high land-transportation costs, and bureaucratic delays. Ethiopia is not a signatory of major intellectual property rights treaties. Banking, insurance and accounting/assurance services, retail, telecommunications and transportation are closed to foreign investors.

All land in Ethiopia belongs to “the people” and is administered by the government. Private ownership does not exist, but “land-use rights” have been registered in most populated areas. The government retains the right to expropriate land for the “common good,” which it defines to include expropriation for commercial farms, industrial zones and infrastructure development. While the government claims to allocate only sparsely settled or “empty” land to investors, some people have been resettled. In particular, traditional grazing land has often been considered “empty” and expropriated; leading to resentment, protests and, in some cases, conflict. Confusion with respect to registration of urban land-use rights, particularly in Addis Ababa, is commonplace; allegations of corruption in the allocation of urban land to private investors by government agencies are a root cause of popular discontent. Successful investors in Ethiopia conduct thorough due diligence on land title at both state and federal levels, and undertake consultations with local communities regarding the proposed use of the land.

Since applying for WTO accession in 2003, Ethiopia has conducted three rounds of discussions with the WTO working group in 2009, 2011 and 2012, but no progress has been made since then. Nevertheless, the national WTO steering committee has been restructured and is in the process of reviewing the services offer. The revised services offer is scheduled to be presented to the WTO working group in December 2017.

In 2016, Ethiopia revised its proclamations on commercial registration and business licensing, tax administration, and income tax to improve its investment climate by adopting more efficient processes to reduce red tape.

On October 8, 2016, a state of emergency (SOE) was declared that severely curtailed basic liberties. In March 2017, the government lifted some of the restrictions under the SOE. Parliament approved a four-month extension of the state of emergency from April 2017.

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Fiji

Executive Summary

The Republic of Fiji is an economic, transportation and academic hub of the South Pacific islands, making it an attractive trade and investment option for businesses looking to establish a presence in the region. While the population is short of one million, Fiji is an upper middle-income country that boasts a well-developed tourism infrastructure attracting over 790,000 tourists in 2016. Fiji welcomes foreign investment and has undertaken economic reforms purported to improve the investment climate. In 2016, the government reported a total of 28 new investment applications from American foreign investors valued at USD 126.5 million. This is compared to 20 projects valued at USD 15.1 million in 2014.

The government’s investment promotion office Investment Fiji is responsible for the promotion, regulation, and control of foreign investment. Its online single window clearance system simplifies the registration process and enables online investment license application. Although the government has made some progress to improve the investment climate, transparency remains a concern, with foreign investors encountering lengthy and costly bureaucratic delays.

The land ownership situation in Fiji is complex. Fiji passed a Land Sales Act in December 2014 that restricts ownership of freehold land inside city or town council boundaries areas to Fijian citizens. Tax clearances from the Fiji Revenue and Customs Authority may hinder the remittances of profits and dividends.

Fiji’s Reserve Bank predicts that the increased tourist arrivals, post-cyclone Winston reconstruction and expanding retail activity will drive 3.6 percent GDP growth in 2017, up from two percent growth in 2016.

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Finland

Executive Summary

Finland is a Nordic country north of the Baltics and bordering Russia, possessing a stable and modern economy including a world-class investment climate. It is a member of the European Union and part of the euro area. The country has a highly-skilled, educated and multilingual labor force, with strong expertise in Information Communications Technology (ICT), ship building, and renewable energy. Key challenges for foreign investors include a rigid labor market and bureaucratic red tape in starting certain businesses, although in June 2016 the Government enacted a Competitiveness Pact that aims to reduce labor costs, increase hours worked, and introduce more flexibility into the wage bargaining system. Health and social services reforms are also currently being discussed. At the end of 2015, the total stock of FDI in Finland totaled EUR 74.2 billion, of which equity accounted for EUR 60.8 billion and the value of debt capital for EUR 13.4 billion.

The Government of Finland (GOF) has taken recent steps to attract additional foreign investment by cutting the corporate tax rate from 24.5 percent to 20 percent in 2014, simplifying the residence permit system for foreign experts, and creating a network called Team Finland that promotes the country’s image internationally. This one-stop shop brings together the services of a variety of state-funded agencies. Both foreign and domestic companies can benefit from GOF investment incentives, research and development support, and innovation systems. The U.S. Embassy in Helsinki, through the Foreign Commercial Service and Political/Economic Sections, is additionally a strong partner for U.S. businesses that wish to connect to the Finnish market. Finnish companies are very active in the fields of information technology, energy, biotech, and clean technology, sectors that the government has selected – along with Arctic expertise – as priorities in their innovation policy. With excellent transportation links to the Nordic-Baltic region and Russia, Finland can be a good hub for establishing regional operations.

The Finnish “MyData” initiative is a relatively new human-centric system that is designed so that access to personal data would remain under the control of the individual instead of organizations (such as businesses or the government, among others). This initiative may impact foreign digital service companies, depending on how it is ultimately developed and implemented.

Table 1

France and Monaco

Executive Summary

Please see the end of this report for a summary of the investment climate of Monaco.

France welcomes foreign investment and has a stable business climate that attracts investors from around the world. The French government devotes significant resources to attracting foreign investment through policy incentives, marketing, overseas trade promotion offices, and investor support mechanisms. France has an educated population, first-rate universities, and a talented workforce. It has a modern business culture, sophisticated financial markets, strong intellectual property protections, and innovative business leaders. The country is known for its world-class infrastructure, including high-speed passenger rail, maritime ports, extensive roadway networks and public transportation, and efficient intermodal connections. High speed (3G/4G) telephony is nearly ubiquitous.

Foreign firms account for one third of France’s manufacturing, 30% of goods and services exports, and have increased corporate R&D expenditures by 32%. France was the seventh largest global market for foreign direct investment (FDI) inflows in 2016. In total, there are more than 22,570 foreign-owned companies doing business in France. It is home to more than 30 of the world’s 500 largest companies. In 2016, France moved up one place to number 21 in the World Economic Forum’s ranking of global competitiveness. The investment regime in France is generally conducive to U.S. investment. Around 4,800 U.S. companies in France, of all sizes, employ over 460,000 French citizens, and indirectly support over 2 million jobs.

The 2016 American Chamber of Commerce in France – Bain Barometer Survey on the attitudes of U.S. investors in France indicates rising optimism about France’s investment climate: 81% of American tech investors surveyed by AmCham-Bain found the climate for development of digital technologies and other innovations to be attractive in France. The Paris region supports the largest concentration of technology engineers outside of Silicon Valley and the latest generation of engineers is turning toward entrepreneurship.

Despite increasing optimism, U.S. investors face some persistent challenges. As a whole, the French economy has been slow to rebound from the global financial crisis of 2008/2009. Unemployment, at 9.7% in 2016, remains higher than most other major global economies. The government projects a budget deficit of 2.7% for 2017, down from 3.4% in 2016. American companies continue to point to the need for reform of France’s complex and rigid labor laws and tax code, ranking France well below many other investment destinations in Europe in these areas. Despite major terror attacks in France and Europe in 2015/2016, 80% of American businesses in France reported to Bain that they were not changing their investment plans for this reason.

Key issues to watch in coming months include: 1) results of French presidential and parliamentary elections scheduled for spring 2017, which will determine the direction of France’s economic reform agenda, and 2) opportunities and challenges resulting from the launch of negotiations of British departure from the EU in 2019.

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Gabon

Executive Summary

Gabon is a historically stable country located in a volatile region of the world and has significant economic advantages: a small population (roughly 1.8 million) with many well-educated elites, an abundance of natural resources, and a strategic location along the Gulf of Guinea. After taking office in 2009, President Ali Bongo Ondimba introduced reforms to diversify Gabon’s economy away from oil and from traditional investment partners (mainly France), and to position Gabon as an emerging economy. In his “Emerging Gabon” strategic plan, he laid out a vision for sustainable development by 2025 through creating domestic industrial capacity to process primary materials and by becoming a regional leader in service industries, including financial services, ICT, education, and healthcare. Gabon is also promoting foreign investment across a range of sectors, particularly in the oil and gas, infrastructure, timber, ecotourism, and mining sectors. Despite these efforts, Gabon’s economy remains dependent on revenue generated by the exportation of hydrocarbons. Gabon’s commercial ties with France remain very strong, but the government continues to seek to diversify its sources by courting investors from the rest of the world.

Although Gabon is taking steps towards making the country a more attractive destination for foreign investment, it remains a difficult place to do business. Foreign firms are active in the country, particularly in the extractive industries, but the difficulty involved in establishing a new business and the time it takes many new entrants to finalize deals are impediments to increased U.S. private sector investment. Although the Gabonese government is taking a more active role to ensure transparency in extractive industries, investors are still waiting for key reforms to be established in law and in practice. Gabon enacted a new mining code in 2015 and is currently revising its 2014 hydrocarbon code. A Special Economic Zone (SEZ) located at Nkok became operational in 2014. Gabon is making progress towards rejoining the Extractive Industries Transparency Initiative (EITI) after it failed to submit reports required to continue along the path to membership in 2013. In 2015, Gabon approved an action plan to renew its membership and appointed a president of the new Gabon EITI committee that will implement the plan. Increased investment is constrained due to limited bureaucratic capacity, unclear lines of decision-making authority, a lack of a clearly-established and consistent process for companies to enter the market, lengthy bureaucratic delays, high production costs, a small domestic market, rigid labor laws, limited and poor infrastructure, a cumbersome judicial system, and inconsistent application of customs regulations.

Economic conditions in Gabon weakened throughout 2016 and into 2017, as the government adjusted its budget to account for protracted low oil prices. Many international companies, including U.S. firms, continue to have difficulties collecting timely payments from the Gabonese government, and some companies in the oil sector have closed down operations. Since January 2016, an estimated 900 jobs have been lost in the oil and gas sector. While opportunities exist, the investment climate in Gabon will remain difficult until the government resolves its budgetary problems.

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Gambia, The

Executive Summary

The Gambia has an active private sector with a new government that is very interested in encouraging local investment and foreign direct investment. The Gambia Investment and Export Promotion Agency is dedicated to attracting foreign investment, promotes exports, and provides guidelines and incentives to all investors whose portfolios qualify for a Special Investment Certificate. Adama Barrow was elected in December 2016, ending the 22-year autocratic reign of Yahya Jammeh who reportedly bankrupted the government with his lavish spending habits and stifled investment as a result of his penchant for siphoning profits from successful companies. A lack of transparency in regulatory and administrative procedures negatively impacted investment promotion throughout former President Jammeh’s presidency. Barrow’s election has paved the way for greater private-sector investment and accountability in the Government of The Gambia (GOTG).

The Barrow administration has demonstrated a willingness to listen to, and cooperate with, U.S. business and commercial interests. Within the Office of The President, a Permanent Secretary for Investment was appointed within the first 100 days of Barrow’s presidency. American companies seeking to invest in The Gambia must work through a local lawyer and be open and transparent in all their dealings. The new administration will focus on the following sectors: energy (oil exploration and exploitation, renewable energies, specifically solar); natural resources (heavy mineral sands); agriculture (rice and cereal production, but also processed foods); tourism (increasing the number of American tourists); and finally, infrastructure (roads, telecommunications systems, drainage systems, and bridges).

The Gambia is a member of the Economic Community of West African States (ECOWAS), a regional economic union of 15 countries located in West Africa. Foreign investors hail from the Middle East, North Africa, East Asia, Nigeria, and a limited number of European and American-owned businesses. Trade relations with China, India, and Turkey have also increased in recent years. There is no legal distinction between the treatment of foreign and domestic investors.

There are opportunities for investment in several sectors. The agriculture sector employs approximately 75 percent of Gambians and comprises 30 percent of the country’s GDP. The sub-regional body known as SeGaBi (Senegal, The Gambia, and Guinea Bissau) was included in the USDA Priority Countries in the 2017 Food for Progress program, with a focus on the cashews industry. The services sector, including tourism, comprises approximately 60 percent of GDP, while industry comprises 10 percent. The country has a functional banking system with 12 commercial banks.

Gambian law provides the legal framework for the protection of private ownership of property and for adequate and prompt compensation in the event of compulsory acquisition. Some outstanding land disputes remain from previous years that appear to be the result of disputes between the previous government and private landowners. Most remain unresolved, but the legal reforms the new government has initiated will provide a proper mechanism to resolve many of the cases.

As a result of the previous government’s poor human rights record, the economy suffered and on January 1, 2015 The Gambia lost its eligibility to participate as a trade beneficiary under the provisions of the African Growth and Opportunity Act (AGOA). AGOA enhances market access to the United States for qualifying Sub-Saharan African (SSA) countries. Qualification for AGOA eligibility is based on a set of conditions (e.g., each country must be working to improve its rule of law, human rights, and respect for core labor standards). President Adama Barrow’s administration seeks to regain AGOA eligibility and has taken steps with respect to human rights and rule of law that will help restore The Gambia’s eligibility for AGOA.

Similarly, the decision to rescind The Gambia’s Millennium Cooperation Challenge (MCC) eligibility in 2006 was based on evidence of human rights abuses and increased restrictions on political rights, civil liberties, and press freedom by the Jammeh government, as well as worsening economic policies and reduced anti-corruption efforts. In June 2006 The Gambia lost its MCC eligibility. Regaining access to the MCC will provide the GOTG with much needed assistance in infrastructure development, and in the agriculture and energy sectors. While the process to reinstate The Gambia’s AGOA eligibility can be achieved relatively quickly, the review for MCC eligibility is a lengthier process involving several organizations.

Table 1

Georgia

Executive Summary

Georgia is located at the crossroads of Western Asia and Eastern Europe. Since the Rose Revolution, Georgia has made sweeping economic reforms, moving from a near-failed state in 2003 to a relatively well-functioning market economy in 2016. Through dramatic police and institutional reforms, the government has mostly eradicated low-level corruption. According to a 2016 International Republican Institute (IRI) poll, 95 percent of respondents said they have not been asked to pay a bribe in the past year to receive a service or decision. Georgia ranks 16^th in the 2016 World Bank’s Ease of Doing Business index, 13^th in the 2017 Economic Freedom Index, and 59^th out of 128 global economies in the Global Competitiveness Report. Fiscal and monetary policy are focused on low deficits, low inflation, and a floating real exchange rate, although the latter has been affected by regional developments, including sanctions on Russia and other external factors such as a stronger dollar and weaker regional economies. Public debt and budget deficits remain under control.

In early 2014, the government published its medium-term economic strategy, Georgia 2020, which outlines Georgia’s economic policy priorities. It stresses the government’s commitment to business-friendly policies such as low taxes, but also pledges to invest in human capital and to strive for inclusive growth across the country, not just in Tbilisi. The strategy also emphasizes Georgia’s geographic potential as a trade and logistics hub along the New Silk Road linking Asia and Europe via the Caucasus. In 2016, Prime Minister Giorgi Kvirkashvili’s four-point plan for economic reform continued many of those themes, focusing reforms and government spending on judicial and education reform, infrastructure development, and tax reform.

Companies have reported occasional problems arising from a lack of judicial independence, inefficient decision making processes at the municipal level, occasional shortcomings in the enforcement of intellectual property rights, lack of effective anti-trust policies, selective enforcement of economic laws, and difficulties resolving disputes over property rights. Georgia’s government continues to work to address these issues and, despite these remaining challenges, Georgia stands far ahead of its post-Soviet peers as a good place to do business.

In June 2014, Georgia signed an Association Agreement (AA) and Deep and Comprehensive Free Trade Area (DCFTA) with the European Union. In 2012, the United States and Georgia established a High-Level Dialogue on Trade and Investment to identify ways of increasing bilateral trade and investment. The United States and Georgia also discussed economic cooperation within the bilateral Strategic Partnership Commission’s Economic Working Group. Both countries signed a Bilateral Investment Treaty in 1994, and Georgia is eligible to export many products duty-free to the United States under the Generalized System of Preferences (GSP) program.

Georgia suffered considerable instability in the immediate post-Soviet period. After independence in 1991, civil war and separatist conflicts flared up along the Russian border in the areas of Abkhazia and South Ossetia. The status of each region remains contested, and the central government does not have effective control over these areas. The United States supports the territorial integrity of Georgia within its internationally-recognized borders. In August 2008, tensions in the region of South Ossetia culminated in a brief war between Georgia and Russia. Russia invaded undisputed Georgian territory and continues to occupy South Ossetia and Abkhazia. Tensions still exist both inside the occupied regions and near the administrative boundary lines, but other parts of Georgia, including Tbilisi, are not directly affected.

Table 1

Germany

Executive Summary

As the largest market in Europe, Germany is a major destination for foreign direct investment; consequently, a vast FDI stock has accumulated over time. The United States is the leading source of non-EU inward investment to Germany. Germany is consistently ranked as one of the most attractive destinations for FDI, thanks to reliable infrastructure, a highly skilled workforce, a positive social climate, a stable legal environment, and world-class research and development. It is generally open to FDI, however, in February 2017, Germany, France and Italy requested the European Commission to review the possibility of EU member states being given the ability to block foreign investment on the grounds of reciprocity.

In the last ten years, FDI stocks in Germany doubled. While this FDI mainly originated from other European countries, the United States, and Japan, FDI from emerging economies, and in particular China, has grown substantially since 2005, even if from a low level.

The German legal, regulatory and accounting systems can be complex, but are transparent and consistent with international norms. Businesses enjoy considerable freedom within a well regulated environment. Foreign and domestic investors are treated equally when it comes to investment incentives, and the establishment and protection of real and intellectual property. Foreign investors can fully rely on the legal system, which is efficient and sophisticated. At the same time, this system requires investors to pay attention to their legal obligations. First-time investors will need to ensure that they have the necessary legal expertise, either in-house or outside consul, to meet all requirements.

Germany has effective capital markets and relies heavily on its modern banking system. Majority state-owned-enterprises are generally limited to public utilities: municipal water, energy, and national rail transportation. The primary objectives of government policy are to create jobs and foster economic growth. Labor unions play a constructive role in collective bargaining agreements, as well as on companies’ work councils.

Germany continues efforts to fight money laundering and corruption. Medium-sized companies are increasingly aware of the due-diligence approach to responsible business conduct.

Despite the fact that Germany has 129 investment protection agreements in force, the negotiations on the Transatlantic Trade and Investment Partnership (T-TIP), which were initiated in 2013, triggered an intense public debate on certain issues, including investor-State dispute settlement (ISDS) mechanisms.

Table 1

Ghana

Executive Summary

Previously one of the fastest growing economies in the world, Ghana’s GDP growth rate has slowed considerably over the last five years. In 2016, GDP growth was 3.6 percent. The country’s economy is highly dependent on the export of primary commodities such as gold, cocoa, and oil, and consequently remains vulnerable to potential slowdowns in the global economy and commodity price shocks. A new government was elected in December 2016 on a platform of promoting private sector-led growth, and has made attracting foreign direct investment (FDI) a priority, given the urgent need to restore the country’s economic momentum and overcome an annual infrastructure funding gap of at least $1.5 billion.

Increased inflation and devaluation of the Ghanaian cedi since late 2013 has dampened Ghana’s earlier macroeconomic success story. Ghana’s power sector, especially on the distribution side, remains one of the biggest factors negatively affecting the economy. In 2015, the government signed a three-year $918 million extended credit facility agreement with the International Monetary Fund (IMF) in an effort to stabilize Ghana’s struggling economy. Under the ongoing IMF program, inflation has declined but the economic situation remains difficult, with a fiscal deficit of at least nine percent and a debt-to-GDP ratio of 73 percent. Ghana will likely seek an extension of the IMF program as the new government works to renegotiate targets to ensure long-term economic success.

Among the challenges hindering foreign direct investment are: a burdensome bureaucracy, weak productivity, costly and difficult financial services, under-developed infrastructure, ambiguous property laws, an unreliable power and water supply, and an unskilled labor force. Enforcement of laws and policies is weak. Public procurements are often opaque and there are often issues of non-payment. There have also been troubling trends in investment policy, with the passage of local content regulations in the petroleum sector, and the increase in minimum required investment levels with the amendment of the Ghana Investment Promotion Center (GIPC) Act in 2013.

Despite these challenges, Ghana’s abundant raw materials (gold, cocoa, and oil/gas), good governance, political stability, and policy reforms make it stand out as one of the better locations for investment in sub-Saharan Africa. The investment climate in Ghana is relatively welcoming to foreign investment – with no discrimination against foreign-owned businesses, investment laws that protect investors against expropriation and nationalization, a free-floating exchange rate regime and guarantees that investors can transfer profits out of Ghana, and a lower degree of corruption than that of some regional counterparts. Among the most promising sectors are agribusiness, food processing, textiles and apparel, downstream oil, gas, and minerals processing, as well as the energy, especially renewable energy, and mining-related services subsectors.

With the change in government, there is optimism among the business community that steps will be taken to address some of the challenges and promote investment. The new government has acknowledged the need to foster an enabling environment to attract FDI, and has announced plans to overhaul the regulatory system and improve the ease of doing business, maintain fiscal discipline, combat corruption, and promote better transparency and accountability.

Table 1

Greece

Executive Summary

Greece continues to present a challenging climate for investment, both foreign and domestic. Greece’s leftist government, which came to power in January 2015 and whose term ends in September 2019, has overseen a general deterioration in the country’s overall economic and investment environment. At the end of Q2 2016, public debt reached a high of 179.2% of GDP. The economy contracted in two quarters of 2016 (Q1 and Q4) and ended the year with near 0% growth. Since 2008, Greek GDP has shrunk by 27.3%. A drop in consumer demand, wage, and pension cuts, and high unemployment have led to a considerable rise in the percentage of loans which are non-performing (NPLs), which now represent over 40 percent of domestic loans and have undermined the stability of the financial system.

Between January and July 2015, the government sought extensive renegotiation and easing of the terms of the country’s bailout agreement with the European Union (EU), European Central Bank (ECB), and International Monetary Fund (IMF). These efforts largely failed and the country’s finances worsened. In June and July 2015 the government missed sovereign loan repayments to the IMF and ECB. On June 29, 2015, the government imposed capital controls on financial institutions to restrict deposit flight and avert an imminent banking sector collapse. Economic activity slowed markedly. Capital controls – although eased considerably since then – are still in place and continue to deter growth in investment activity, both because of transactional difficulties for firms doing international business and broader negative signaling effects.

In August 2015, to prevent national bankruptcy and the country’s potential exit from the Eurozone, Greece and its EU creditors signed a third €86 billion bailout agreement under the auspices of the European Stability Mechanism (ESM). Since then, discussions have continued on whether the IMF will participate in the third bailout with new financing or if it will remain as a technical advisor. The government is presently unable to obtain financing through international bond markets because Greek bonds are not investment grade and yields on Greek medium and long-term debt remain prohibitively high.

The current three-year ESM program agreement details fiscal and structural reform obligations Greece must meet in exchange for the disbursement of financing assistance to enable the government to meet its debt obligations. These reforms include enhanced and accelerated privatization of state assets, enhanced tax collection, reduction in government bureaucracy, restructuring of the civil service, improvements to judicial procedures, and new fiscal measures to close the social security system’s deficit. If implemented fully, the agreement envisions Greece reaching a 3.5% primary budget surplus in 2018, the year the program concludes.

In November 2015, as part of the initial implementation of the August 2015 ESM agreement, Greece recapitalized its four major banks for the third time in five years. Large U.S. and foreign hedge funds participated in a recapitalization of the four major Greek banks. The banking system, saddled with an unsustainable share of non-performing loans, remains unable to finance the national economy. As a result, businesses of all sizes struggle to obtain bank loans to support their operations. In an effort to tackle the issue, and as a requirement of the agreement with the ESM, the government is in the process of establishing a secondary market for NPLs. To date, three companies have secured licenses to operate as a debt service provider: Sepal (an Alpha Bank-Aktua joint venture), FPS (a Eurobank subsidiary) and Pillarstone (a KKR subsidiary). At least ten more licensees are pending approval by the Bank of Greece.

In January 2016, Greece and its lenders began a first review of the country’s compliance with the terms of the August 2015 ESM agreement, which after several delays was completed at the May 24, 2016 Eurogroup meeting. The consultations for the second review of the program started on October 18, 2016, but as of April 3, 2017, the Greek government had not yet reached an agreement with its creditors on the review’s closure. The delays in the completion of the second review have had a further negative impact on the domestic economy and have led to renewed concerns about Greece’s economic stability. The IMF’s participation in the ESM program remained unresolved as of April 2017.

As part of Greece’s August 2015 bailout agreement, the government converted the Ministry of Finance’s Directorate-General for Public Revenue into a fully independent tax agency, effective January 2017, with a broad mandate to increase collection and develop further reforms to the tax code aimed at reducing evasion and increasing the coverage of the Greek tax regime. Greece’s public finances continue to remain dependent on the support of the European Stability Mechanism.

Continued concern over economic and political stability within Greece has essentially frozen most new investment and caused some existing investors to scale down or withdraw entirely from the Greek market. The progress in the privatization of Hellinikon, and Greece’s 14 regional airports, investment in the tourism sector, and the construction of the Trans Adriatic Pipeline (TAP) have been notable exceptions to this trend.

Additionally, in an effort to boost investment, Greek law 4146/2013 allows foreign nationals who buy property in Greece worth over €250,000 ($285,000) to obtain a five-year residence permit for themselves and their families. The “Golden Visa” program has been extended to buyers of Greek bonds with a value of at least €250,000. The permit can be extended for an additional five years and allows travel to other EU and Schengen countries without a visa.

Table 1

Grenada

Executive Summary

Grenada is a liberal, parliamentary democracy, has a functioning court system, low rates of crime, and is devoid of political violence. The country’s legal framework for business is strong. 2016 saw revisions to several bills, and the launch of a new Government investment incentives regime. This new regime positively impacts the investment climate, ensuring transparency, equitable practices; adherence to the rule of law, and an established standard for potential investors to Grenada.

The objective of the new regime is to streamline bureaucratic and legal processes which for years have been a huge challenge to the investment climate. While failed attempts were made at constitutional reform in 2016, the revisions made to key economic bills will serve to bolster the investment climate in Grenada. Some of these bills are: value added tax, property transfer tax, investment, excise tax, customs (service charge), and bankruptcy and insolvency bills.

Grenada’s ranking on the World Bank’s Doing Business Indicator slipped from 130 in 2015 to 135 in 2016. However, while there have been positive attempts to improve the country’s business climate, public statements and actions have cast doubt on the inviolability of contracts, particularly in the utility sector, and most recently within the hotel and tourism industry. This will require careful scrutiny throughout 2017 pending final decisions.

There were notable investments throughout 2017 within the tourist and construction industries, particularly through the Citizenship by Investment Program. The construction of several five star resorts is currently underway along with the refurbishing of several tourist attractions–some of which are scheduled for completion by 2019. The most recent addition to Grenada’s fleet of hotels is the all-inclusive Sandals Luxury Resort. This resort has attracted an affluent clientele of repeat guests, several of which are interested in doing business in Grenada.

The tourism sector attracts the most foreign direct investment followed by construction, retail and duty free outlets; and most recently agriculture. There have also been expressed interests to invest in Grenada’s energy sector by a number of private and Governmental agencies.

The availability of tax incentives, equitable treatment of national and foreign investors, political stability, good infrastructure, and a favorable location with untapped markets, makes Grenada an ideal and strategic destination for investments. To date, the main countries investing in Grenada are The United States, China, Great Britain and Trinidad and Tobago.

Table 1

Guatemala

Executive Summary

Guatemala has the largest economy in Central America, with a USD 68.8 billion gross domestic product (GDP) and an estimated 3.1 percent growth rate in 2016. Remittances, mostly from the United States, increased by 13.9 percent in 2016 and were equivalent to 10.4 percent of GDP. The United States is Guatemala’s most important economic partner. The Guatemalan government (GoG) continues to enhance competitiveness, promote investment opportunities, and work on legislative reforms aimed at supporting economic growth. More than 200 U.S. and other foreign firms have active investments in Guatemala, benefitting from the U.S. Dominican Republic-Central America Free Trade Agreement (CAFTA-DR). Foreign direct investment (FDI) stock was USD 14.57 billion in 2016, an 11 percent increase in relation to 2015. Some of the activities that attracted most of the FDI flows in the last three years were electricity, commerce, manufacturing, agriculture, and mining.

Despite positive steps to improve Guatemala’s investment climate, international companies choosing to invest in Guatemala face significant challenges. Complex and confusing laws and regulations, inconsistent judicial decisions, bureaucratic impediments, and corruption continue to constitute practical barriers to investment. Under CAFTA-DR obligations, the United States has raised concerns with the GoG regarding its enforcement of both its labor and environmental laws.

Since 2006, the UN-sponsored International Commission against Impunity in Guatemala (CICIG) undertook numerous high-profile official corruption investigations, leading to significant indictments. In 2015, CICIG uncovered several cases of high-level official corruption. A case revealing a customs corruption scheme led to the resignations of the president and vice president.

Guatemala held national elections in 2015 amid 19 weeks of anti-corruption protests that culminated in the establishment of an interim government in September. President Jimmy Morales (National Convergence Front, FCN) took office January 14, 2016, along with a new Congress of mostly freshman members and locally elected officials. These newly elected officials entered a changed geopolitical landscape in Guatemala, with a lower tolerance for corruption and lingering citizen demands for widespread government reform and improved efficiency. El Salvador, Guatemala, Honduras, and United States agreed to specific commitments in a joint statement to the support of the Alliance for Prosperity on February 24, 2016, including measures to ensure more accountable, transparent, and effective public institutions.

Table 1

Guinea

Executive Summary

Despite persistent corruption and fiscal mismanagement, the long-term economic prognosis of Guinea, buoyed by strong endowments of natural resources, energy opportunities, and arable land, remains promising. Constrained by an austere budget, Guinea has increasingly looked to foreign investment and the private sector to stimulate growth. China, Guinea’s largest trading partner, has dramatically increased its role through investment agreements in 2016.

Blessed with abundant mineral resources, Guinea has the potential to be an economic leader in extractive industry. Guinea is home to over half the world’s reserves of bauxite (aluminum ore). Bauxite is the most active mining sector in Guinea, accounting for over half of Guinea’s present exports. Guinea also possesses over four billion tons of untapped high-grade iron ore, significant gold and diamond reserves, undetermined amounts of uranium, as well as prospective off-shore oil reserves. Most of the country’s bauxite is exported by Compagnie des Bauxites de Guinee (CBG) via a designated port in Kamsar. CBG, a joint venture between the Government of Guinea, American company Alcoa and Anglo-Australian firm Rio Tinto, is the largest single producer of bauxite in the world. New investment in CBG in addition to new market entries are expected to significantly increase Guinea’s bauxite output over the next five to ten years. Medium to long term, Guinea’s greatest potential economic driver is the Simandou iron ore project. Simandou is slated to be the largest greenfield project ever developed in Africa. Chinalco (China Aluminum Corporation) recently bought out Rio Tinto’s shares in the project and the Guinean government is anxious to move forward with developing the iron ore concessions. The infrastructure costs for the project are projected to be $20 billion, which is enormous considering Guinea’s GDP is less than $7 billion/year. When fully operational, the project could double Guinea’s GDP.

Guinea’s abundant rainfall and natural geography bode well for hydroelectric and renewable energy production. The largest energy sector investment in Guinea is the 240MW Kaleta Dam project that began operating its first hydro turbine in May 2015. Built and financed ($526 million) by China, Kaleta more than doubled Guinea’s electricity supply and for the first time furnished Conakry with reliable, albeit seasonal electricity. The government is seeking backing for even larger hydroelectricity projects and investing in distribution infrastructure to become an energy supplier in West Africa. The government is also looking to invest in solar and other energy sources to compensate for lost hydroelectric production in Guinea’s dry season.

Agriculture and Fisheries are other areas for opportunities and growth in Guinea. Already an exporter of fruits, vegetables, and palm oil to its immediate neighbors, Guinea is climatically well-suited for large-scale agricultural production. However, the sector has suffered from decades of neglect and mismanagement and was the sector hit hardest by the 2014-2015 Ebola Crisis. Guinea also remains an importer of rice, its primary staple crop.

Guinea’s Macroeconomic and Financial situation is weak. Ebola stifled Guinea’s economic growth prospects in 2014 and 2015 leaving the government with few financial resources to support the Guinean economy. Decreased natural resource revenues stemming from a drop in world prices and ill-advised government loans have strained an already sparse government budget: however, improved macroeconomic discipline in 2016 stabilized exchange rates, rebuilt government reserves, and improved government revenue collection. Growth for 2016 was pegged at 5.3 percent, but little of that growth was felt by the largely impoverished population and the government is under pressure to deliver tangible development progress. The demand for credit, particularly for small and medium sized enterprises, exceeds available supply. The government is increasingly looking to international investment to increase growth, provide jobs, and kick-start the economy.

Guinea has recently updated its Investment Code and renewed efforts to attract international investors. Guinea’s investment promotion agency rolled out a new website (invest.gov.gn) in 2016 to increase transparency and streamline investment. However, Guinea’s capacity to enforce its more investor-friendly laws is compromised by a weak and unreliable legal system.

Table 1

Guyana

Executive Summary

Guyana is a country located on South America’s North Atlantic coast, bordering Venezuela, Suriname, and Brazil. In 2015, a Partnership for National Unity+Alliance for Change (APNU+AFC) coalition won the presidency and a one-seat majority in the National Assembly, ending 23 years of rule by the People’s Progressive Party/Civic (PPP/C). Preceding the election, the uncertainty slowed down investment, with the implementation of many governmental projects either put on hold or curtailed until after the elections. APNU+AFC reorganized several ministries and, after having been out of power for over 20 years, faced challenges in making the improvements promised during the 2015 campaign. Despite the difficulties, Guyana remains one of the better performing economies in the region, in spite of a slower growth in 2016 of2.6 percent. The World Bank expects growth will be closer to 4 percent in 2017 and mid-term prospects are very positive with the production of petroleum expected to begin in 2020.

The Government of Guyana (GoG) publicly encourages foreign direct investment (FDI). Guyana offers potential investors – foreign and domestic alike – a broad spectrum of investment choices, ranging from more traditional industries, such as mining, sugar, rice, and timber, to non-traditional export sectors, such as aquaculture, agro-processing, fresh fruits and vegetables, light manufacturing, and value-added forestry products, and even to services exports (such as tourism, call centers, and information technology enabled services). Many products receive duty-free or reduced-duty treatment in destination markets. The GoG continues to encourage foreign investment but with limited success outside of the extractive industries sectors.

Perceptions of corruption persist in Guyana. Transparency International (TI) in its 2016 report on the subject scored Guyana 108 out of 176 ranked economies – an improvement from 119^th place in 2015. Corruption, as well as GoG inaction, inadequate infrastructure, and crime remain barriers to attracting foreign investment.

Guyana continues to benefit from official development assistance from multiple donors with projects focused on health care, education, economic development, climate change adaptation, disaster mitigation, and citizen security. In 2016, the United Kingdom announced significant funding for infrastructure development in Guyana to be administered over the next five years through the Caribbean Development Bank.

Guyana’s long-term record in attracting private-sector investment, however, remains poor. According to the Bank of Guyana’s Mid-Year Report for 2016, Guyana saw lower foreign direct investment inflows, which fell from USD 78.3 million in the first half of 2015 to USD 29.2 million in the first half of 2016.

In March 2015, ExxonMobil began exploratory drilling off Guyana’s coast, initially investing roughly USD 300 million into the project. ExxonMobil has since reported significant findings of off-shore petroleum that, as of April 2017, estimated at around 1.75 billion barrels of oil-equivalent, with exploration continuing for the foreseeable future. This venture would generate billions in revenue for the country and would potentially transform the social, political, and economic landscape.

The Millennium Challenge Corporation, a U.S. Government entity charged with delivering development grants to countries that demonstrate a commitment to reform, produced scorecards for countries with a per capita gross national income (GNI) of USD 4,125 or less. Guyana was designated a “Threshold Country” in 2010. A list of countries/economies with MCC scorecards and links to those scorecards is available here: https://www.mcc.gov/who-we-fund/scorecards. Details on each of the MCC’s indicators and a guide to reading the scorecards are available here: https://www.mcc.gov/who-we-fund/indicators.

Guyana successfully exited the FATF International Cooperation Review Group in October 2016, having addressed all the deficiencies identified in the Core and Key Recommendations. Guyana has been removed from FATF’s watch list. During the first year of the APNU+AFC government, the coalition passed three sets of amendments to the Anti-Money Laundering and Countering Terrorist Financing (AML/CTF) legislation. The amendments were directly based on recommendations from the Americas Regional Review Group (ARRG). The government has also focused on fighting crime, particularly financial crime. According to the Minister of Finance, success in tackling crime slowed down the economy, as a large number of illicit funds were removed from Guyana’s very cash-based economy.

Political gridlock and infighting historically hampered the country’s development efforts on several fronts. For example, the Amaila Falls Hydropower Project (AFHP), which would have been the largest capital project in the country’s history, fell apart after a decade of planning when the U.S. developer and equity partner withdrew from the multinational development team in August 2013. The company expressed concerns over political risk following objections to the venture by the then-opposition party APNU. The Norwegian government subsequently conducted a new feasibility study on the AFHP and submitted the report to the government. The GoG has indicated publicly that the report recommended that a more suitable site should be sought for the project. However, a number of other hydro-electric and renewable energy projects are expected to be under consideration in line with the GoG’s efforts to pursue a green economy under the Green Development Strategy (GDS) announced in 2016 and to help lower Guyana’s electricity costs and reduce dependency on imports of hydrocarbons. If successful, any potential projects will go a long way in promoting greater investment because high electricity costs are one of the largest impediments to significant value-added investment.

Table 1

Haiti

Executive Summary

Haiti occupies the western third of the island of Hispaniola located in the Caribbean Basin. The Haitian economy, a private sector-led and free market system, is mainly driven by its traditional agricultural sector, construction, commerce, and the manufacturing industry. The Government of Haiti (GOH) initiated numerous measures to maintain macroeconomic stability and to establish a legal framework for long-term private sector led and market based economic growth. The ultimate objective is to transform Haiti into an emerging economy by 2030. The GOH also focused on reinforcing public financial management, strengthening the establishment of the Treasury Single Account, and improving the business environment for private sector development. The government is seeking to spur job creation and encourage economic development through foreign trade and investment. The Haitian Central Bank (BRH) continues to follow a contractionary monetary policy on containing inflation and tightening legal reserve requirements. Its main challenge, however, is to maintain monetary stability while public authorities urge it to uphold anti-inflationary measures in response to a chronic budget deficit, the economic implications of Hurricane Matthew, and increasing global commodity prices.

Foreign direct investment (FDI) inflow increased slightly to USD 104 million in 2016, making Haiti one of the smallest recipients of FDI in the region. Despite Haiti’s favorable policies toward FDI, Haiti’s rates of FDI inflow are indicative of a slow-growing economy and an unstable political environment. The GOH designated tourism, agriculture, construction, energy, and manufacturing as key investment sectors, and supports sector-focused investment promotion, public spending, and special economic zones. The GOH established the Center for Facilitation of Investment (CFI) to improve Haiti’s investment climate, and to assist investors interested in doing business in Haiti. The CFI introduced a series of measures, including pre-registered services, to expedite the processes involved in starting a business. To simplify the process even further, CFI also eliminated the step requiring the executive branch to review the incorporation draft before final publication. As a result of these measures, CFI reported an increase in foreign companies that expressed interest in exploring business opportunities in Haiti in 2016. According to CFI, most businesses that explored investment in Haiti in 2016 were interested in the garment sector and in business process outsourcing (BPO).

In 2016, Haiti’s economy grew by 1.4 percent, a deceleration compared to Fiscal Year (FY) 2015 when the economy grew at a rate of 1.8 percent. The 2016 growth rate is attributed to a volatile exchange rate, the continued reduction of external financial assistance, political instability, and severe drought conditions in FY 2015 that destabilized agricultural production. Annualized consumer price inflation moderated to 14.3 percent at the end of December 2016 because of weak domestic production, a chronic budget deficit, food price pressures and the depreciation of Haitian Gourde against the USD. As of March 2017, Haiti’s net international reserves stood at USD 845 million compared to USD 844 million in February 2017. The World Bank (WB) predicts that gross domestic product (GDP) will be between two and three percent in 2017, despite previous predictions, immediately following the hurricane, of a 0.6 percent contraction. Improving the investment outlook for Haiti in 2017 requires the GOH to enact reforms that improve Haiti’s business and political environment.

Table 1

Honduras

Executive Summary

The United States is Honduras’ most important economic partner, and the Honduran government continues to strive to improve the investment climate. Yet foreign companies choosing to invest in Honduras still face significant challenges. Honduras’ investment climate is hampered by high levels of crime, a weak judicial system, corruption, low educational levels, and poor transportation and other infrastructure. Over 200 U.S. companies operate in Honduras. Many of them have taken advantage of the opportunities and protections available as a result of Honduras’ participation in the Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR). The stock of U.S. foreign direct investment in Honduras was approximately USD 2.42 billion in 2015.

Honduras’ participation in CAFTA-DR has enhanced U.S. export opportunities and diversified the composition of bilateral trade. Substantial intra-industry trade now occurs in textiles and electrical machinery, alongside continued trade in traditional Honduran exports such as coffee and bananas. In addition to liberalizing trade in goods and services, CAFTA-DR includes important disciplines relating to investment, customs administration and trade facilitation, technical barriers to trade, government procurement, telecommunications, electronic commerce, intellectual property rights, transparency, and labor and environmental protection.

Honduras has made notable improvements in market openness since 2013 as measured by trade freedom, investment freedom, and financial freedom. However, the management of public spending, rule of law concerns, and a high incidence of corruption continue to pose challenges for prospective investors. The 2017 Heritage Economic Freedom Index gave Honduras a score of 58.8, an improvement of 1.06 points from 2016. The World Bank Doing Business 2017 report ranked Honduras 105 out of 190 countries, a fall from 101 in the previous report.

Table 1

Hong Kong

Executive Summary

Hong Kong became a Special Administrative Region (SAR) of the People’s Republic of China (PRC) on July 1, 1997. Hong Kong’s status since reverting to Chinese sovereignty is defined in the Sino-British Joint Declaration (1987) and the Basic Law. Under the concept of “one country, two systems” articulated in these documents, Hong Kong will retain its political, economic, and judicial systems for 50 years after reversion. Hong Kong pursues a free market philosophy with minimal government intervention. The Hong Kong Government (HKG) welcomes foreign investment, neither offering special incentives nor imposing disincentives for foreign investors.

Hong Kong’s well-established rule of law is applied consistently and without discrimination. There is no distinction in law or practice between investments by foreign-controlled companies and those controlled by local interests. Foreign firms and individuals are allowed freely to incorporate their operations in Hong Kong, register branches of foreign operations, and set up representative offices without encountering discrimination or undue regulation. There is no restriction on the ownership of such operations. Company directors are not required to be citizens of, or resident in, Hong Kong. Reporting requirements are straightforward and are not onerous.

Twenty years after its reversion to PRC sovereignty, Hong Kong remains an excellent destination for U.S. investment and trade. Despite a population of less than eight million, Hong Kong is America’s ninth-largest export market, sixth-largest for total agricultural products, and fourth-largest for high-value consumer food and beverage products. Hong Kong’s economy, with its world-class institutions and regulatory systems, is based on competitive financial and professional services, trading, logistics, and tourism. It is the world’s most services-oriented economy, with the service sector accounting for more than 90 percent of its nearly USD 319 billion GDP in 2016. Hong Kong hosts a large number of regional headquarters and regional offices. Close to 1,400 U.S. companies are based in Hong Kong, and more than half are regional in scope. Finance and related services companies, such as banks, law firms, and accountancies, dominate the pack. Seventy of the world’s 100 largest banks have operations here.

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Hungary

Executive Summary

With a population of 9.8 million, Hungary has an open economy and GDP of approximately $120 billion. Hungary has been a member of the European Union (EU) since 2004, and fellow member states are its most important trade and investment partners. Macroeconomic indicators are generally strong: the economy grew by 2% in 2016; growth is expected to increase to at least 3% in 2017, based on increasing domestic demand and exports and the resumption of disbursements of EU development funds; the government has kept the deficit below 2.5% of GDP since 2013, thereby avoiding the intrusive EU monitoring mechanism, and has lowered public debt from more than 80% in 2010 to 74% in 2016. All three major ratings agencies upgraded Hungary’s sovereign debt to investment grade in 2016.

Hungary’s central location and high-quality infrastructure have made it an attractive destination for Foreign Direct Investment (FDI). Between 1989 and 2016, Hungary received approximately $80 billion in FDI, mainly in the banking, automotive, software development, and life sciences sectors. The EU accounts for 79% of all in-bound FDI; the United States is the largest non-EU investor. The GOH actively encourages investments in manufacturing and high-value added sectors, including research and development centers, and service centers. The GOH industrial strategy targets biotechnology, information and communications technology, software development, the automotive and defense industries, and health tourism as priority sectors for growth. To promote investment, at the start of 2017 the GOH lowered corporate tax to 9% and labor tax to 22% in these sectors, among the lowest rates in the EU.

Despite these advantages, Hungary’s regional economic competitiveness has declined in recent years. Since early 2016, multinationals have identified shortages of qualified labor, specifically technicians and engineers, as the largest obstacle to investment in Hungary. In certain industries, such as media and retail, unpredictable, sector-specific tax and regulatory policies have favored national and government-linked companies. Additionally, persistent corruption and cronyism continue to plague the public sector. Since 2010, Hungary has dropped in Transparency International’s (TI) Corruption Perceptions Index, placing 24^th out of 28 EU member states in 2016. Also in 2016, the GOH withdrew from the Open Government Partnership (OGP), a transparency-focused international organization, after refusing to address the organization’s concerns about transparency and good governance. The EU has criticized bankruptcy proceedings for being unfriendly to remediation, leading to a very low average recovery rate of 40 cents on the dollar, compared to the OECD average of 72 cents per dollar. Additionally, some executives in Hungarian subsidiaries of U.S. multinationals have noted that the GOH’s strong anti-migrant rhetoric and actions have negatively affected board members’ views of Hungary, making it more difficult for the subsidiaries to obtain approval for new investments.

The 2015 implementation of the Advertising Tax and a similar new tax on tobacco products has raised concerns with some businesses that indirect expropriation may be possible through discriminatory taxation that disproportionately affects a given company with the intent to force a firm to accept a buy-out by a domestic firm. The EU investigation into the Advertising Tax and subsequent backtracking suggests that the EU is able to enforce marketplace non-discrimination and illegal state aid rules by implementing injunctions. In 2014 and 2015 the GOH introduced taxes which targeted multinational retail chains. In both instances, the EU found the new levies to be discriminatory and obligated the GOH to repeal them. In early 2017, press reported on draft GOH proposals which would again implement new restrictions and taxes on foreign retail chains.

In September 2016, PM Orban told an international audience of the Krynica Economic Forum in Poland that at least half of the banking, media, energy, and retail sectors should be in Hungarian hands. Through windfall taxes, the financial transaction tax, and rescue schemes designed to ease burdens of foreign currency mortgage holders, analysts say the GOH has pushed several foreign-owned banks to sell off their Hungarian business units. German-owned MKB , GE-owned Budapest Bank, and Citi’s retail banking operation have sold their operations to the GOH or other Hungarian investors.

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Iceland

Executive Summary

Iceland is an island country located between North America and Europe in the Atlantic Ocean, near the Arctic Circle. Until recently, U.S. investment in Iceland has mostly been centered in the aluminum sector, with Alcoa and Century Aluminum operating plants in Iceland. However, the U.S. company Silicor Materials is currently in the process of establishing a USD 850 million photovoltaic silicon plant. Several U.S. brands and franchises have entered the Icelandic market recently, including Costco, Hard Rock Café and Krispy Kreme, and more are testing the waters. The transatlantic location of Iceland, coupled with high level of education and proficiency in English among the Icelandic population and general interest in U.S. products, make Iceland an ideal market for U.S. companies.

The booming tourism industry has grown by double digits in each of the last seven years. There is a shortage of hotel rooms, with the projected number of tourists to exceed 2.2 million in 2017. U.S.-based Carpenter & Company is currently constructing the first 5-star hotel in Reykjavik, which will be operated by the Marriott chain. There are additional investment opportunities in sectors that cater to tourists, as well as in the restaurant sector. A new consumer market is emerging along with the fast growing tourism sector, as the number of tourists in Iceland far exceeds the local population of 330,000. The number of U.S. tourists in Iceland grew by almost 60% between 2014 and 2015, and Americans are now the largest tourist population in Iceland, generating more demand for U.S. products.

Information Technology (IT) has also been one of the fastest growing sectors of the Icelandic economy. The Icelandic energy grid derives 100% of its power from geothermal and hydro resources, making it 100% renewable and uniquely attractive for energy-dependent industries. No other country in the world offers as reliable a power infrastructure, ideal climate for free cooling, or competitively priced energy via long-term contracts and scalable locations. Iceland’s IT sector spans all areas of the digital economy. In the last decade it has spawned an impressive array of export-driven IT companies. Data management systems, workflow systems, communications solutions, wireless data systems, palmtop systems, Internet solutions, e-commerce content and solutions, gaming, healthcare solutions and of course fisheries technology systems are all exported to overseas markets. IT exports from Iceland have grown over 60-fold since early 1990s.

The economic environment of Iceland has been characterized by low inflation and a healthy economic growth rate over the last few years (1.2 percent in 2012; 4.4 percent in 2013; 1.9 percent in 2014; 4.1 percent in 2015; and 7.2 percent in 2016). GDP amounted to approximately USD 22 billion in 2016, and GDP per capita was USD 59,724, using the current exchange rate.

The Icelandic government has taken the final steps to resolve the estates of the three banks that failed in the 2008 global financial crisis and to lift the subsequently imposed capital controls.

On March 12, 2017, the cabinet and the Central Bank announced that effective March 14, they would lift capital controls involving “foreign exchange transactions, foreign investment, hedging, and lending activity”. Some permanent prudential protections against foreign exchange instability will remain. This liberalization should help attract further investment to Iceland, and allow Icelandic companies the foreign exchange necessary to invest or expand abroad.

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India

Executive Summary

India’s investment climate continues to send mixed signals, as the Bhartiya Janata Party (BJP), led by Prime Minister Narendra Modi, actively courts investment, but implementation of economic reforms to attract investors does not meet rhetoric. The economy as a whole performed well in 2016, growing over 7% with a stable rupee and political stability throughout the country. Non-performing assets continue to hold back banks’ profits and limit their lending. However, stable, relatively low inflation, weak credit demand, and strong management from India’s central bank, the Reserve Bank of India, have mitigated the negative impact on credit. Employment, while difficult to measure given the large informal economy, appears to lag growth, while a demographic boom means India must generate over ten million new jobs every year.

India has opened foreign direct investment (FDI) by particular sector, sometimes all at once and sometimes gradually reducing the FDI limitations. In 2016 the government opened FDI in private security and approved pharmaceutical projects to 74%, and increased investment in defense to 49% under the automatic route. With government clearance, defense and pharmaceutical investments can exceed the capped limit. It also allowed 100% FDI in food products, marketplace model e-commerce, broadcasting, airports on land already zoned for that use, and air transport services. In 2016, FDI into India jumped 18% to a record $46.4 billion, though Foreign Portfolio Investments (FPI) saw a net outflow of $2 billion. Multinational companies made large investment into the electronics, solar energy, automobile, defense, and railways sectors. Finance Minister Arun Jaitley, in his annual budget speech, formally proposed abolishing the Foreign Investment Promotion Board, which screens FDI, in an effort to ease investment.

On the legislative front, Parliament passed a constitutional amendment to replace the fractured, state-level tax code with a nationwide goods and services tax (GST). It also replaced myriad existing laws on the reorganization of companies, insolvency, and asset restructuring into one unified law via the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act. These steps should reduce the time taken to dissolve a company, and speed up the process of debt recovery for investors.

The Modi government undertook further reforms in 2016 to formalize the large informal economy, and digitize the economy. In addition to the GST overhaul, which will result in greater tax registration and digital tax reporting, the government demonetized its INR 500 and INR 1000 notes, worth 86% of the currency in circulation, causing a shock to the economy in November-December 2016. Through demonetization, the government aimed to better track undeclared earnings (known as “black money” in India) for tax purposes, and increase the usage of digital payments which lags other major emerging economies.

India announced its intention to abrogate all bilateral investment treaties (BITs) negotiated on the basis of its 1993 model BIT. Some BITs have already lapsed and the rest will do so in 2017. India intends to renegotiate them on the basis of its new December 2015 model BIT which requires that foreign investors exhaust all domestic judicial remedies for up to five years, before entering into international arbitration, unless the claim is not judicable by Indian courts. This shift is an attempt to see investment disputes are resolved in domestic courts, as India has lost a number of recent disputes in international arbitration. The United States currently does not have a BIT with India.

In 2017, the government expects to implement its GST on July 1, which will transform the tax code and could lead to significant structural changes in the economy. Investors will also monitor how the government screens FDI following the abolition of the Foreign Investment Promotion Board (FIPB). Investors will also pay close attention to further liberalization of FDI – the government has discussed expansions of the food and insurance investment policies, while industry awaits changes to FDI policy in multi-brand retail.

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Indonesia

Executive Summary

While Indonesia’s population of 245 million, growing middle class, and stable economy remain attractive to U.S. investors, investing in Indonesia remains challenging. Since October 2014, the Indonesian government under President Joko Widodo, widely referred to as ‘Jokowi,’ has prioritized boosting investment, including foreign investment, to support Indonesia’s economic growth goals, and has committed to reducing bureaucratic barriers to investment, including announcing the creation of a “one-stop-shop” for permits and licenses at the Investment Coordination Board. However, factors such as a decentralized decision-making process, legal uncertainty, economic nationalism, and powerful domestic vested interests, create a complex and difficult investment climate. The Government of Indonesia’s (GOI) requirements, both formal and informal, to partner with Indonesian companies, purchase goods and services locally, restrictions on some imports and exports, and pressure to make substantial, long-term investment commitments, also factor into foreign investors’ plans. The Indonesian Corruption Eradication Commission continues to investigate and prosecute high-profile corruption cases. Investors, however, still cite corruption as an obstacle to pursuing opportunities in Indonesia.

Other barriers include poor government coordination, the slow rate of land acquisition for infrastructure projects, poor enforcement of contracts, an uncertain regulatory environment, and lack of transparency in the development of laws and regulations. New regulations are at times difficult to decipher and often lack sufficient notice and socialization for those impacted. The lack of coordination among ministries creates redundant and slow processes, such as for securing business licenses and import permits, and at times, conflicting regulations.

Indonesia restricts foreign investment in some sectors through a Negative Investment List. The latest version, issued in 2016, details the sectors in which foreign investment is restricted and outlines the foreign equity limits in a number of sectors. The 2016 Negative Investment List allows greater foreign investments in some sectors, including e-commerce, film, tourism, and logistics. In health care, the 2016 list loosens restrictions on foreign investment in categories such as hospital management services and manufacturing of raw materials for medicines, but tightens restrictions in others such as mental rehabilitation, dental and specialty clinics, nursing services, and the manufacture and distribution of medical devices. Energy and mining still face significant foreign investment barriers.

Indonesia began to abrogate its more than 60 existing Bilateral Investment Treaties (BITs) in February 2014, allowing the agreements to expire. While the U.S. does not have a BIT with Indonesia, the Indonesian government’s action reminds foreign investors of the unpredictability of country’s investment climate.

Despite these challenges, Indonesia continues to attract foreign investment. Singapore, Malaysia, Japan, the Netherlands, and South Korea were the top sources of foreign investment in the country in 2015 (latest available full-year data) according to the Indonesia Investment Coordination Board, or BKPM. Private consumption is the backbone of the economy and the middle class is growing, making Indonesia a promising place for consumer product companies, and the fastest growing economy within the 10 member Association of Southeast Asian Nations (ASEAN). Indonesia has ambitious plans to improve its infrastructure with a focus on expanding access to energy, strengthening its maritime transport corridors, which includes building roads, ports, railways and airports, as well as improving agricultural production, telecommunications, and broadband networks throughout the country. Indonesia continues to attract U.S. franchises and consumer product manufacturers.

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Iraq

Executive Summary

The Government of Iraq (GOI) continues to face the dual challenges of fighting ISIS and the financial impact of declining world oil prices. The fall of oil prices drastically reduced Iraq’s revenues from oil exports, which account for more than 90 percent of the GOI’s revenue. The GOI is also confronting a humanitarian crisis as the conflict with ISIS has resulted in over 3 million internally displaced persons (IDPs) since the beginning of 2014. As a response to its fiscal challenges, in August 2015 Prime Minister Haider al-Abadi publicly committed to an economic plan that includes reforming Iraq’s failing state owned enterprises (SOEs), fighting corruption, reducing bureaucratic bottlenecks, and investing in necessary infrastructure. To date, however, the reforms have been only partially implemented as major political parties have challenged Abadi’s reform agenda, and Abadi’s cabinet has seen several prominent Ministers (Finance, Defense, and Trade) dismissed amid allegations of corruption or due to political infighting.

ISIS’s capture of Mosul and parts of northern and western Iraq in June 2014 cut key domestic and international trade routes and contributed to slowing economic growth. In the fall of 2016, the Iraqi Security Forces and the international Coalition to Defeat ISIS, led by the United States, launched a campaign to retake Mosul. The Iraqis have pushed ISIS out of significant areas of Ninewa province and retaken major parts of Mosul; military operations are ongoing. Security remains an impediment to investment in many parts of the country. However, the security situation varies throughout the country and is generally less problematic in Iraq’s southern provinces and the Iraqi Kurdistan Region (IKR).

Despite the current security and fiscal challenges, Iraq has long-term potential for U.S. investment. Iraq has the fifth largest proven oil reserves in the world and needs tremendous investment in reconstruction and infrastructure development. U.S. companies have opportunities to invest in security, energy, environment, construction, healthcare, tourism, agriculture, and infrastructure sectors. Iraq imports large volumes of agricultural commodities, machinery, consumer goods, and defense articles.

Government contracts and tenders – the source of many commercial opportunities in Iraq – are almost entirely financed by oil revenues and therefore will remain limited unless oil prices rebound. Increasingly, the GOI has asked investors to provide financing options and allow for deferred payments. Despite steady oil production and oil exports in 2016, revenues from oil sales have declined by around 30 percent in nominal terms due to lower oil prices. The 2017 budget passed by Parliament in December 2016 projects an $18.4 billion USD budget deficit, approximately 10 percent of GDP, based on Iraqi crude exports selling at $42 USD per barrel. In light of declining oil revenues, on July 7, 2016, the IMF Executive Board formally approved a $5.4 billion, three-year Stand-by Arrangement (SBA) with Iraq that, if fully implemented, will stabilize Iraq’s finances and encourage economic reform. Iraq issued $1 billion in bonds guaranteed by the U.S. Government on January 18, 2017.

Investors in Iraq continue to face extreme challenges resolving commercial disputes, receiving timely payments, and winning public tenders. Potential investors should prepare to face significant costs to ensure security, cumbersome and confusing procedures, and long payment delays on some GOI contracts. Difficulties with corruption, customs regulations, dysfunctional visa procedures, unreliable dispute resolution mechanisms, electricity shortages, and lack of access to financing remain common complaints from companies operating in Iraq. Shifting and unevenly enforced regulations create additional burdens for investors. The GOI currently operates 192 SOEs, a legacy from decades of statist economic policy.

Investors in the Iraqi Kurdistan Region (IKR) face many of the same challenges as investors elsewhere in Iraq, but a business friendly investment law and a traditionally more stable security situation make the region more attractive to foreign businesses. However, the 2014 ISIS offensive and drop in oil prices dampened foreign investment, and the region’s economy has struggled to recover.

The U.S. Government and the GOI are seeking to address impediments to trade and investment through bilateral economic dialogue mechanisms provided under the U.S.-Iraq Strategic Framework Agreement and the Trade and Investment Framework Agreement. The American Chamber of Commerce in Iraq (AmCham-Iraq), re-launched in October 2015, also provides a platform for commercial advocacy for the U.S. business community operating in Iraq. Efforts to start an American Chamber of Commerce in the IKR continue.

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Ireland

Executive Summary

The Irish government actively promotes foreign direct investment (FDI) and has had considerable success in attracting U.S. investment, in particular. Currently, there are approximately 700 U.S. subsidiaries in Ireland operating primarily in the following sectors: chemicals, bio-pharmaceuticals and medical devices, computer hardware and software, electronics, and financial services.

One of Ireland’s most attractive features as an FDI destination is its low corporate tax rate, which has remained at 12.5 percent since 2003. Other factors cited by foreign firms include: the quality and flexibility of the English-speaking workforce, availability of a multi-lingual labor force, cooperative labor relations, political stability, pro-business government policies and regulators, a transparent judicial system, transportation links, proximity to the United States and Europe, and the drawing power of existing companies operating successfully in Ireland (a so-called “clustering” effect).

The prospect of the United Kingdom’s exit from the European Union portends a dramatic change in Ireland’s attractiveness as a U.S. investment platform, in terms of its potentially becoming the only English-speaking EU member. Brexit will also have significant ramifications as to how cross-border commerce with Northern Ireland (as part of the UK) will be approached.

The government treats all firms incorporated there on an equal basis. Ireland’s judicial system is transparent and upholds the sanctity of contracts, as well as laws affecting foreign investment. Conversely, the following factors hurt Ireland’s ability to attract investment: high labor and operating (such as energy) costs, skilled-labor shortages, sometimes-deficient infrastructure (such as in transportation, energy and broadband Internet), uncertainty in European Union policies on some regulatory matters, and absolute price levels among the highest in Europe.

There is no formal screening process for foreign investment in Ireland, though investors looking to receive government grants or assistance through one of the four state agencies responsible for promoting foreign investment in Ireland are often required to meet certain employment and investment criteria.

In recent years, some U.S. business representatives have occasionally called into question the transparency of government tenders. According to some U.S. firms, lengthy procedural decisions often delay the procurement tender process. Unsuccessful bidders have claimed they have had difficulty receiving information on the rationale behind the tender outcome. Additionally, some successful bidders have experienced delays in finalizing contracts, commencing work on major projects, obtaining accurate project data, and receiving compensation for work completed, including through conciliation and arbitration processes. Successful bidders have also subsequently found that the original tenders may not accurately describe conditions on the ground.

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Israel

Executive Summary

Israel has an entrepreneurial spirit and a creative, highly-educated, skilled, and diverse workforce. Israel is a leader in innovation in a variety of sectors, and many Israeli start-ups find good partners in American companies. Israel, popularly known as the “start-up nation,” invests heavily in education and scientific research, and many leading multinational companies have established research and development (R&D) centers here. U.S. firms account for nearly two-thirds of the more than 300 foreign-invested research and development centers in Israel. Israeli firms represent the second-largest source of foreign listings on the NASDAQ. Various Israeli Government agencies, led by the newly established Israel Innovation Authority, fund incubators for early stage technology start-ups, and Israel provides extensive support for new ideas and technologies and also seeks to develop more traditional industries. Private venture capital funds have flourished in Israel in recent years.

The fundamentals of the Israeli economy are strong, and the economy proved flexible and adaptable through the worldwide financial crisis. With low inflation, relatively low unemployment, and fiscal deficits that have usually met targets, Israeli Government economic policies are considered by most analysts as generally sound and supportive of growth. Israel seeks to provide supportive conditions for companies looking to invest in Israel, through laws that encourage capital and industrial R&D investment. Incentives and benefits include grants, reduced tax rates, tax exemptions, and other tax-related benefits.

The U.S.-Israeli bilateral economic and commercial relationship is strong, anchored by two-way goods which reached $35 billion in 2016, according to the U.S. Census Bureau, and extensive commercial ties, particularly in high tech and research and development. Israel invested close to $24 billion in 2016 in the United States, nearly triple what it was a decade ago according to the U.S. Census Bureau. This year marks the 32nd anniversary of the U.S.-Israel Free Trade Agreement (FTA), the United States’ first ever FTA. Since the signing of the FTA, the Israeli economy has undergone a dramatic transformation, moving from a protected, low-end manufacturing and agriculture-led economy to one that is diverse, open, and led by a cutting edge high-technology sector.

The Government generally continues to take actions to remove trade barriers and encourage capital investment, including foreign investment. However, several constraints exist in the economy that have contributed significantly to growing public concerns over the high cost of living and the lack of competition in key sectors. With regards to trade, the Israeli government often adopts restrictive policies , usually in favor of domestic producers. These policies often limit competition, resulting in the concentration of market share to a handful of major companies in key sectors.

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Italy

Executive Summary

Italy’s economy, the eighth largest in the world, is fully diversified, and distinctively dominated by small and medium-sized firms (SMEs), which comprise 99.9 percent of Italian businesses. Italy continues to lag behind many industrialized nations as a recipient of foreign direct investment; Germany, France, the United States, Spain, Switzerland, and the United Kingdom are Italy’s most important investment partners, with China gaining ground. Tourism is an important source of external revenue, as are exports of pharmaceutical products, furniture, industrial machinery and machine tools, electrical appliances, automobiles and auto parts, food, and wine, and textiles/fashion. Italy is an original member of the 19-nation Eurozone.

Italy’s relatively affluent domestic market, access to the European Common Market, proximity to emerging economies in North Africa and the Middle East, and assorted centers of excellence in scientific and information technology research remain attractive to many investors. The government remains open to foreign investments in shares of Italian companies and continues to make information available online to prospective investors. The Italian government’s efforts to implement new investment promotion policies to position Italy as a desirable investment destination have been undermined in part by Italy’s ongoing economic weakness and lack of consistent progress on structural reforms to repair a range of shortcomings, including the lengthy and often inconsistent legal and regulatory systems, unpredictable tax structure, and layered bureaucracy. However, Italy’s economy has emerged from its longest recession in recent memory and the current government is making progress on improving Italy’s investment climate.

Italy has had very few investment disputes involving a U.S. person in the last 10 years. Post has identified less than five such active disputes; none of these have been terminated or resolved, but remain pending.

The GOI committed to privatize €16 billion in state-owned assets in 2016 and 2017, with plans to privatize a minority share of the national rail network (Ferrovie dello Stato – FS) and to sell another 30 percent of the national postal provider (Poste Italiane) in 2017. The GOI solicits and encourages foreign investors to participate in its privatizations. The privatizations are straight-forward, non-discriminatory, and transparent.

The 2015 Jobs Act is a package of structural reforms to Italy’s labor market, removing a key obstacle to hiring new employees in the form of employees’ unqualified right to seek reinstatement (known as “Article 18” of the Italian labor code). The new law provides greater legal certainty to employers by permitting employee reinstatement only in discrimination cases. The GOI introduced a hiring incentive in 2015 for employers to hire workers on indefinite contracts, granting them a three-year exemption from employers’ contributions to social security for each new permanent employee. In 2016, the exemption was reduced to two years and 40 percent of employers’ contributions. As of January 2017, the Jobs Act hiring incentives appear to have contributed to the Act’s stated goal of encouraging indefinite employment, mostly through a conversion of temporary contracts into open-ended contracts.

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Jamaica

Executive Summary

The Government of Jamaica (GOJ) considers foreign direct investment (FDI) a key driver for economic growth and is undertaking significant structural reforms to improve its investment climate. After suffering from a stagnant economy for more than two decades and accumulating one of the highest debt-to-GDP ratios in the world, the GOJ committed to ongoing macroeconomic reform, starting with an International Monetary Fund (IMF) program starting in May 2013. Under the IMF program, the GOJ replaced its discretionary investment incentives with legislation that simplifies the income tax regime and codifies tax benefits for all investors. Despite this and other measures, Jamaica fell two places on the World Bank’s Doing Business Indicators, from number 67 to 65 this year, and, due to red tape and bureaucracy, it can be challenging to register property, pay taxes, and enforce contracts.

Jamaica received almost USD800 million in FDI in 2015, up from the USD 218 million registered in 2011. Investment from the United States, China, Mexico, and Spain continued to drive FDI in 2016. Business process outsourcing (BPO), including call centers and other remote technical support, drew local and overseas investment -most prominently from the United States – and the government recently approved a five-year plan to encourage expansion. One drawback is Jamaica’s high cost of energy – about three times higher than in the United States – primarily due to a dependence on inefficient petroleum-based power plants and outdated electricity infrastructure, though electricity prices fell somewhat in recent years. Jamaica’s ongoing energy sector modernization became increasingly attractive to U.S. investors.

The primary investment barrier in Jamaica is crime, both as a risk and expense, due to the fact that security is required to protect the physical infrastructure of most properties; the country’s murder rate worsened in 2016 and remains one of the highest in the hemisphere. Additional challenges include an inefficient government bureaucracy, the stagnant and price-sensitive economy, and low labor productivity, although in response the GOJ has enacted legislation to permit flexible work arrangements as a means of improving productivity. In addition, public perception of corruption is high and remains a consideration for investors. Successive administrations attempted to address corruption by enacting legislation and signing various international conventions, but to date there were no high-level convictions. Jamaica’s ranking in the 2016 Transparency International Corruption Perception Index fell from 69 to 83 of the 175 countries surveyed.

A transition of government followed the Jamaica Labour Party’s (JLP) narrow victory over the People’s National Party in national elections on February 25, 2016. The new administration continued the economic reform program initiated under the 2013 IMF Extended Fund Facility and transitioned to a Stand By Agreement in 2016 to signal its commitment to policy continuity.

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Japan

Executive Summary

Japan is the world’s third largest economy, the United States’ fourth largest trading partner, and an important destination for U.S. foreign direct investment (FDI). The Japanese government actively welcomes and solicits foreign investment, and has set ambitious goals for increasing inbound FDI. Despite Japan’s wealth, high level of development, and general acceptance of foreign investment, inbound FDI stocks as a share of GDP are the lowest in the OECD.

Japan’s legal and regulatory climate is highly supportive of investors in many respects. Courts are independent, sophisticated, and ostensibly provide equal treatment to foreign investors. The country’s regulatory system has improved its level of transparency and looks to develop new regulations in line with international norms. Capital markets are deep and broadly available to foreign investors. Japan maintains strong protections for intellectual property rights with generally robust enforcement. The country remains a large, wealthy, and sophisticated market with world class corporations, research facilities and technologies. Nearly all foreign exchange transactions, including transfers of profits, dividends, royalties, repatriation of capital, and repayment of principal, are freely permitted.

On the other hand, foreign investors in the Japanese market continue to face numerous challenges. A traditional aversion towards mergers and acquisitions within corporate Japan has inhibited foreign investment, and weak corporate governance has led to low returns on equity and cash hoarding among Japanese firms, although business practices may be improving in both areas. Investors and business owners must also grapple with inflexible labor laws and a highly regimented labor recruitment system that can significantly increase the cost and difficulty of managing human resources. The Japanese government has recognized many of these challenges and is pursuing initiatives to improve investment conditions.

Levels of corruption in Japan are low, but deep relationships between firms and suppliers may limit competition in certain sectors and inhibit the entry of foreign firms into local markets.

Future changes in Japan’s investment climate are largely contingent on the success of structural reforms to the Japanese economy. Recent changes that aim to strengthen corporate governance and increase female labor force participation have the potential to improve Japan’s economic condition, but further reforms likely remain necessary to secure a return to robust economic growth.

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Jordan

Executive Summary

Jordan is a Middle Eastern country centrally located on desert plateaus in southwest Asia and strategically positioned to serve as a regional business platform. Since King Abdullah II’s 1999 ascension to the throne, Jordan has taken steps to encourage foreign investment and to develop an outward-oriented, market-based, and globally competitive economy. Jordan is also uniquely poised geopolitically to host investments focused on the reconstruction of Iraq, Syria, and projects in other regional markets.

In 2014, Jordan moved forward on a number of legislative reforms, including the new Income Tax Law, Public Private Partnership Law and Investment Law. The Investment Law grants equal treatment to local and foreign investors and grants specific incentives for local and foreign investment in industry, agriculture, tourism, hospitals, transportation, energy, and water distribution. The banking, information and communication technology, pharmaceuticals, and tourism sectors have all experienced key reforms in the past decade.

Jordan’s economy grew 2.1 percent in 2016, despite ongoing challenges both domestically and in the region. The government pursued economic reform measures as part of its International Monetary Fund (IMF) Extended Fund Facility program, which began in August 2016.

Jordan’s economic growth has been slow due to the regional security environment, the 2015 closure of Jordan’s borders with Iraq and Syria, and the influx of refugees, particularly from Syria. The government was able to reduce its near-term financing gap with savings from reform measures, loans, and foreign assistance. Notwithstanding the regional environment, the general investment outlook for Jordan remains favorable and, in several sectors, advantageous.

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Kazakhstan

Executive Summary

Kazakhstan has made significant progress toward creating a market economy since it gained independence in 1991, and has achieved considerable results in its efforts to attract foreign investment. As of September 30, 2016, the total stock of foreign investment in Kazakhstan reached $216.5 billion. Of that total, Foreign Direct Investment (FDI) constituted $139.7 billion, with portfolio and other investments comprising the remaining $76.8 billion. The majority of foreign investment is in the oil and gas sector, and the United States is a leading source of investment capital with around approximately $12.5 billion invested in Kazakhstan.

The country’s vast hydrocarbon and mineral reserves continue to form the backbone of the economy, and foreign investment continues to flow into these sectors. However, the government continues to make incremental progress toward its goal of diversifying the country’s economy away from an overdependence on extractive industries by improving the investment climate. Kazakhstan’s efforts to remove bureaucratic barriers have yielded some progress, and the World Bank in 2017 ranked the country 35 out of 190 in its annual “Doing Business” report.

The government maintains an active dialogue with international investors. President Nazarbayev chairs the Foreign Investors Council; the Prime Minister has regular meetings with foreign investors within the framework of the Council for Improvement of the Investment Climate; and the Investment Ombudsman facilitates complaints of foreign investors on a case by case basis. In 2015, President Nazarbayev signed into law a new Entrepreneurial Code and a new Labor Code, both aimed at improving the business environment. The Government established a “single window” for investors (special offices around the country where investors may receive a wide range of government services, such as business registration and work permits). Kazakhstan joined the WTO in 2015 and started to lift local content requirements that contradict the WTO TRIMs agreement.

Despite these positive institutional and legalization changes, concerns remain about corruption, bureaucracy, and arbitrary law enforcement, especially at regional and municipal levels. The government’s tendency to challenge contractual rights, to legislate preferences for domestic companies, and attempts to intervene in foreign companies’ operations continue to discomfort foreign investors. New rules for utilizing foreign labor, despite being partially recalled, could create excessive burdens on foreign investors. Foreign companies working in Kazakhstan cite the need for improved transport and logistics infrastructure, a more open and flexible trade policy, and a more favorable work-permit regime.

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Kenya

Executive Summary

Kenya has a generally positive investment climate that has made it attractive to international firms seeking a location for their regional or pan-African operations. Year-on-year the country continues to make improvements to its regulatory framework and improve its attractiveness as a destination for foreign direct investment. Kenya has a strong telecommunications infrastructure, a robust financial sector, and extensive aviation connections within Africa and to Europe and Asia. Mombasa Port is the major trade gateway for much of East Africa. Kenya’s membership in the East African Community (EAC), as well as other regional trade blocs, provides growing access to larger regional markets. The World Bank Group’s Doing Business 2017 report ranked Kenya as the third most reformed country with the country moving up 21 places to 92 of the 190 economies reviewed on business regulatory reforms, following a similar move up in the rankings the previous year. Kenya’s improvement was credited to reforms in the following five areas: starting a business; access to electricity; registering property; protecting minority investors; and resolving insolvency.

Kenya took some significant steps to improve the environment for foreign investment in 2016. Highlights include:

• Passage of the new Bribery Act (2016) which heightens penalties, mandates bribery prevention procedures, and imposes reporting obligations for private entities;
• Kenya now allows 100 percent foreign ownership of companies listed on Nairobi Stock Exchange;
• Passage of the Access to Information Act (2016), which provides procedures by which members of the public can request information held by the state or a private body and contains requirements that the information be furnished within 21 days;
• Continued progress by the Kenya Investment Authority (KenInvest) and the Business Environment Delivery Unit to reduce bureaucracy and simplify the business registration process;
• The operationalization of the Mining Act (2016) during the last year points to a more positive investment climate for the extractives industries; and
• Progress on draft legislation to promote financial sector reform, with the following measures in process: the Financial Services Authority Bill; Nairobi International Financial Centre (NIFC) Bill; and the Movable Property Securities Bill.

Kenya’s macroeconomic fundamentals are among the strongest in Africa, with GDP growth at 5-6 percent, shrinking current account deficits, improving infrastructure, and strong consumer demand from a growing middle class. In the short-term, however, some observers are concerned that drought leading to rising inflation, a credit squeeze due to recently established statutory interest rate caps, and business anxiety about election-related turbulence could be a drag on growth. At the same time, the medium-term economic outlook appears strong. There has been great interest on the part of American companies to establish or expand their business presence and engagement in Kenya. The sectors offering the most opportunities to investors are: financial services, energy, extractives, transportation, infrastructure, retail, restaurants, technology, health care, and mobile banking.

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Korea, Republic of

Executive Summary

The Republic of Korea (ROK) has made tremendous economic gains during the past six decades, transforming from a recipient of foreign assistance to a high-technology manufacturing powerhouse and middle-income donor country. The country experienced real GDP growth of 2.7 percent in 2016, up from 2.6 percent growth in 2015, yet short of the government’s target of 3.1 percent announced in December 2015. Economic growth in 2016 was mainly backed by increased consumer demand and construction investment, in addition to a foreign consumption hike following a fall in the exchange rate. The economy’s growth was constrained in the second half of 2016, however, by uncertainties caused by external and internal factors, including Brexit, the United States election campaign, and a political scandal that led to the impeachment of President Park Geun-hye, causing a contraction of consumption and investment. Exports fell 5.9 percent from 2015 due to slow global growth and reduced demand from the ROK’s top trading partner, China. Growth is expected to remain moderate in coming years due to the ROK’s relatively developed economy, an aging population, and inflexible labor market. Economic growth potential for 2015-2018 is between 3.0 percent and 3.2 percent, according to the Bank of Korea (BOK), although many private-sector assessments are lower. The Constitutional Court on March 10 upheld an impeachment motion against President Park, resulting in her removal from office. A presidential election will be held on May 9, and Prime Minister Hwang Kyo-ahn is serving as acting President in the interim. The election is not expected to directly affect the ROK investment climate.

The U.S.-Korea Free Trade Agreement (KORUS FTA), which entered into force on March 15, 2012, was a major step forward in enhancing the legal framework for U.S. investors in the ROK. All forms of investment are protected under the KORUS FTA, including equity, debt, concessions, and similar contracts, as well as provision of intellectual property rights. With very few exceptions, U.S. investors are treated the same as South Korean investors (or investors of any other country) in the establishment, acquisition, and operation of investments in the ROK. In addition, the equal treatment of domestic and foreign investors is backed by a transparent international arbitration mechanism, under which investors may, at their own initiative, bring claims against the government for an alleged investment breach. Submissions to investor-state arbitration tribunals, as well as their hearings, are to be made public. The U.S. government continues to work closely with the ROK government to ensure full implementation of the KORUS FTA.

Improvement in the consistency of the ROK government’s interpretation, transparency, and timeliness in applying foreign direct investment (FDI) regulations would enhance the ROK’s investment climate. Unclear and opaque regulatory decision-making remained a significant concern, including informal “window guidance.” Sector-specific improvements in regulatory transparency have been made, however. For example, financial sector reforms enacted January 2016 require regulators to provide all guidance in written form, and companies cannot be punished for not following oral guidelines.

The ROK boasts a hard-working, educated workforce and high levels of institutional labor protections. However, foreign investors cited volatility in labor-management relations and increasing labor costs as issues that can hamper FDI. The Park Administration unsuccessfully advocated for reforms to enhance labor market flexibility, while improving the benefits provided to part-time and contract workers.

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Kosovo

Executive Summary

The Republic of Kosovo is Europe’s youngest country – and one of its poorest – but it has managed to record positive economic growth rates, 2.8 percent on average since 2012. Kosovo declared independence on 17 February 2008 and has been recognized by more than 100 UN Member States. Since 1999 the United Nations Interim Administrative Mission in Kosovo (UNMIK) has continued to implement its mandate in a status-neutral manner, operating under Security Council resolution 1244 (1999).

Kosovo has a flat corporate tax of 10 percent. In 2016, Kosovo ratified a strategic investment law intended to ease market access for investors in key sectors, and partnered with international donors to launch the Credit Guarantee Fund, which improves access to credit. With USAID assistance, the Ministry of Trade and Industry has made strides on efforts to enhance its rankings in the World Bank’s Doing Business Index. All legal, regulatory, and accounting systems in Kosovo have been created in line with EU standards and international best practices. Publicly listed companies comply with international accounting standards. In an attempt to improve commercial legislation, the Assembly approved a new Law on Bankruptcy in July 2016.

Kosovo’s economy – while outperforming its neighbors – is characterized by: extremely limited regional or global economic integration; political instability; corruption; unreliable energy supply; a large informal economy estimated at 35 percent of GDP; and a tenuous rule of law, including a lack of contract enforcement. It continues to rely on significant international financial support.

Resolution of residential, agricultural, and commercial property claims remains a serious and contentious issue in Kosovo. Most property records were destroyed or removed to Serbia by the Serbian government during the 1998-1999 conflict, making determination of rightful ownership for the majority of properties complex. Cases of multiple ownership claims on a single property with each claimant presenting a variety of ownership documents as proof are common. The EU-facilitated Kosovo-Serbia dialogue process is helping address the cadastral records taken from Kosovo.

Despite the challenges, Kosovo’s relatively young population, low labor costs, and natural resources have attracted some foreign investment, with several international firms and franchises already present in the market. Additionally, its significant diaspora community in foreign labor markets provides a steady stream of remittances back to the economy. Subject to market conditions, GOK plans to launch diaspora bonds – a coupon based treasury bill specifically tailored to attract investment remittances – in late 2017.

In 2016, Foreign Direct Investment (FDI) in Kosovo was estimated at €234.8 million, down from €338 million in 2015. Portfolio investment in 2015 totaled €1.388 billion, with equity securities of €1.085 billion and debt securities of €302 million. These totals compared to €1.025 billion in equity securities and €250 million in debt securities in 2014. Real estate and leasing activities have received the most FDI, followed by financial services and construction. The food, IT, infrastructure, and energy sectors are growing and hold the most potential to attract new FDI.

Kosovo’s official unemployment rate was 32.9 percent in 2015, although some estimates are as high as 40 percent. Unemployment levels for youth and first-time job seekers are considerably higher than the official rate.

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Kuwait

Executive Summary

Kuwait continued to encourage foreign direct investment (FDI) with the implementation of Law No.116 of 2013 Regarding the Promotion of Direct Investment in the State of Kuwait (hereafter referred to as the FDI Law). With the decline in oil revenue and the need to diversify its economy, the government seeks increased foreign investments. The FDI Law established the Kuwait Direct Investment Promotion Authority (KDIPA) to solicit investment proposals, evaluate their potential, and assist in the licensing processes. In reviewing licensing requests, KDIPA places emphasis on creating jobs and training/education opportunities for Kuwaitis, technology transfer, diversification of national income sources, increasing exports, support for local SMEs, and utilization of Kuwaiti products and services. While the FDI Law allows 100% foreign ownership in several industries, KDIPA excludes foreign firms from investment in national security and state-owned sectors. Opportunities may increase as KDIPA takes over the existing free-trade zone at Shuwaikh and creates two new zones at Al-Abdali and Al-Nuwaiseeb.

KDIPA has granted foreign ownership licenses to 14 foreign firms, including U.S. companies IBM, GE, Berkeley Research Group, Malka Communications, and Maltbie. The FDI law’s incentives include tax benefits, customs duties relief, land and real estate allocations, and permission to recruit required foreign labor.

The government has been working with the World Bank to improve different aspects of business registration and operations. Nevertheless, challenges to foreign businesses operating in the country remain. Kuwait ranked 102 out of 190 in “Ease of Doing Business,” and lowest in the Gulf Cooperation Council (GCC), in the World Bank’s Doing Business 2017 report.

Despite the challenges, several U.S. companies have won lucrative contracts and operate successfully in the country. American engineering firms such as Fluor figure largely in the execution of infrastructure development projects, including the USD 16 billion Al-Zour Refinery Project. General Electric is a major vendor to power generation and desalination facilities. Citibank has a branch in Kuwait City, and numerous franchises of U.S. retail chains operate successfully. Dow Chemical Company participates in several joint ventures.

During recent years, the government has taken several measures to address human trafficking and to improve protections for domestic workers. However, the labor law is not consistently enforced and disputes over the payment of salaries and contract switching are common, especially among unskilled workers.

The Intellectual Property Rights (IPR) enforcement regime has notably improved in the past year with raids and seizures and a specialized IPR unit to combat counterfeit goods. However, the lack of coordination among various authorities with responsibilities for combating the importation of counterfeit goods remains an issue.

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Kyrgyz Republic

Executive Summary

The investment climate in the Kyrgyz Republic is best for those who are intrepid and have a high risk tolerance. Widespread corruption and uneven application of the rule of law continue to pose major obstacles for the business community. The judicial system is not fully independent, and every sector of government confronts capacity and resource shortages. The legal and regulatory framework, while largely sound on paper, is undermined by weak enforcement, especially with regard to intellectual property rights. Potential investors should be aware that more than an estimated 60 percent of economic activity in the country occurs in the unregulated gray economy.

Kyrgyz government officials speak positively and with hope of factors they say indicate an improving investment climate. The government has identified FDI as a key component to growing the economy in the coming years and has created a strategic roadmap for economic development designed to facilitate this growth. The government is taking steps to streamline the process of starting a business, as well as its tax regime. Still, many burdensome regulations strangle business development for foreigners and locals alike.

The Kyrgyz government’s relationship with Centerra Gold, a Toronto-based company that is the single largest source of FDI in the country, continues to serve as the bellwether for Western investment. In 2016, Kyrgyz law enforcement officials raided the Bishkek headquarters of Kumtor Gold, Centerra’s subsidiary which operates the Kyrgyz Republic’s largest gold mine, on suspicions of financial irregularities, and prevented expatriate officials from exiting the country. A local court issued an injunction that precludes the company from transferring profits to Centerra, and later fined Kumtor nearly $98 million for alleged environmental damages. Shortly afterward, Centerra elevated its dispute with state corporation KyrgyzAltyn over environmental, dividend, and land use claims to a court of international arbitration.

The Kyrgyz Republic struggles to meet basic infrastructure needs. The government has difficulty providing adequate power supply, especially outside of the capital, Bishkek. Power plants, roads, and canals are dilapidated and in need of major capital investment. Chinese infrastructure projects tend to improve market access predominantly for Chinese goods.

The Kyrgyz Republic is undergoing an economic transition to the Eurasian Economic Union (EAEU), whose current members also include Russia, Kazakhstan, Armenia, and Belarus. The accession process has altered economic conditions, as cheaper goods from competitive firms of EAEU member states have flooded the local market and squeezed Kyrgyz domestic industries. EAEU accession also has introduced new regulatory hurdles and led to an increase in non-tariff measures, to which the Kyrgyz government and businesses alike have struggled to adapt. Persistent reliance on Russia as a source of remittances, imports, and financial support subjects the economy to Russian influence.

Kyrgyz entrepreneurs increasingly are purchasing franchise licenses of major U.S.-based companies, particularly in the food service industry. The Kyrgyz Republic has also experienced a modest uptick in interest from U.S. corporations interested in bidding on infrastructure development projects funded by international financial institutions.

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Laos

Executive Summary

Laos, officially the Lao People’s Democratic Republic (Lao PDR), is a rapidly growing developing economy at the heart of Southeast Asia, bordered by Burma, Cambodia, China, Thailand, and Vietnam. Laos’ economic growth over the last decade averaged just below eight percent, placing Laos amongst the fastest growing economies in the world. Over the last thirty years, Laos has made slow but steady progress in implementing reforms and building the institutions necessary for a market economy, culminating in accession to the World Trade Organization (WTO) in February 2013. The Lao government’s commitment to WTO accession and the creation of the Association of Southeast Asian Nations (ASEAN) Economic Community (AEC) in 2015 prompted major reforms of economic policies and regulations aimed at improving the business and investment environment. The Lao government is increasingly tying its economic fortunes to the economic integration of ASEAN and export-led development.

The rapid economic growth over the last decade has been driven by the exploitation of natural resources and development of hydropower, with both sectors largely led by foreign investors. However, the government recognizes that growth opportunities in these industries are finite, and has prioritized the development of high-value agriculture, light manufacturing, and tourism while continuing development of a range of energy resources and improving electrical transmission capacity to neighboring countries.

The Lao government hopes to leverage its lengthy land borders with Burma, China, Thailand, and Vietnam, and to implement policies that will make Laos “land-linked” rather than landlocked, prioritizing easy access to larger, emerging neighbor economies. The government hopes to increase exports of agriculture, manufactured goods, and electricity to its more industrialized neighbors. Some businesses and international investors are beginning to use Lao production bases as an opportunity to reach the broader Mekong region, including southern China. Others are placing parts of their global value chains in Laos, often as a way to diversify from existing production bases in Thailand or Vietnam. New Special Economic Zones (SEZs) in Vientiane and Savannakhet have attracted major manufacturers from Europe, North America, and Japan.

Economic progress and trade expansion in Laos remain hampered by a shortage of workers with technical skills, weak education and health care systems, and poor—although improving—transportation infrastructure. Institutions, especially in the justice sector, remain highly underdeveloped and regulatory capacity is low. Investors report that corruption at all levels of the public sector and government administration remains a major concern.

Corruption, policy and regulatory ambiguity, and the uneven application of law are disincentives to further foreign investment in the country. The Lao government is making efforts to improve and its 2016-2020 five-year plan directs the government to formulate “policies that would attract investments” and to “begin to implement public investment and investment promotion laws.” Investors, however, report that practice and implementation has not yet caught up with the spirit of new laws. Furthermore, the multiple ministries and three separate methods for foreign investment into Laos lead to confusion, with many potential investors engaging either local partners or law firms to navigate the often confusing bureaucracy, or turning their efforts entirely toward other countries in the region.

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Latvia

Executive Summary

Located in the Baltic region of northeastern Europe, Latvia is a member of the European Union (EU), eurozone, North Atlantic Treaty Organization (NATO), Organization for Economic Cooperation and Development (OECD), and the World Trade Organization (WTO). The Latvian government recognizes that, as a small country, it must attract foreign investment in order to foster economic growth, and thus has pursued liberal economic policies and developed infrastructure to position itself as a regional transportation hub. According to the latest World Bank’s Doing Business Report, Latvia is ranked 14th out of 190 countries in terms of ease of doing business. On July 1, 2016, Latvia became a full member of the OECD. As an EU member, Latvia applies EU laws and regulations, and, according to current legislation, foreign investors possess the same rights and obligations as local investors with certain limited exclusions. Any foreign investor is entitled to establish and own a company in Latvia and has the opportunity to acquire a temporary residence permit.

There is a perceived lack of fairness and transparency in the public procurement process in Latvia. A number of companies, including foreign companies, have complained that bidding requirements are sometimes written with the assistance of potential contractors or couched in terms that exclude all but “preferred” contractors. Nonetheless, Latvia provides several advantages to potential investors, including:

Regional Hub: Latvia bridges West and East, providing strategic access to both the EU market and to Russia and Central Asia to the east. Latvia’s three ice-free ports are connected to the country’s rail and road networks and to the largest international airport in the Baltic region. Latvia’s road network is connected to both European and Central Asian road networks. The railroads connect Latvia with the other Baltic states, Russia, and Belarus, with further connections extending into Central Asia and China.

Workforce: Latvia’s workforce is highly educated and multilingual, and its culture promotes hard work and dependability. Labor costs in Latvia are the 4th lowest in the EU.

Low Taxes: Latvia has one of the lowest corporate income tax rates in the EU at a flat rate of 15 percent, and personal income tax rate of 23 percent. To further boost its competitiveness, the Latvian government has established special incentives for both foreign and domestic investment. There are five special economic zones (SEZs) in Latvia: Riga Free Port, Ventspils Free Port, Liepaja Special Economic Zone, Rezekne Special Economic Zone, and Latgale Special Economic Zone, which provide various tax benefits for investors. Latgale Special Economiz Zone covers a large part of Latgale, which is the most economically challenged region in Latvia, bordering Russia and Belarus.

In 2016, GDP growth in Latvia slowed down to 1.6 percent, which commentators attributed to the effects of the weak performance within the broader euro currency zone and a temporary delay in absorption of EU structural funds, as well as geopolitical tensions with Russia. The most competitive sectors in Latvia include woodworking, metalworking, transportation, IT, green tech, health care, life science, food processing, and finance. Recent reports suggest that some of the most significant challenges investors encounter in Latvia include shortage of labor, corruption, and non-transparent or non-responsive bureaucracy and judiciary.

The non-resident banking sector has come under increased regulatory scrutiny in recent years for inadequate compliance with anti-money laundering provisions. The government, the banking regulator, and key industry players have taken steps to improve compliance and to punish banks implicated in money-laundering schemes – e.g., Latvia’s Financial and Capital Markets Commission has cancelled one bank’s operating license and has levied heavy fines against others – and analysts are watching closely to assess whether improved compliance measures are effectively implemented.

The chart below shows Latvia’s ranking on several prominent international measures of interest to potential investors.

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Lebanon

Executive Summary

Lebanon is open to foreign direct investment and has many advantages that encourage foreign companies to set up offices in the country. These include a free-market economy, the absence of controls on the movement of capital and foreign exchange, a well-developed banking system with strong financial soundness indicators, a highly-educated labor force, good quality of life, and limited restrictions on investors. However, issues that continue to cause frustration among local and foreign businesses include corruption, political risk, bureaucratic over-regulation, arbitrary licensing, outdated legislation, an ineffectual judicial system, high taxes and fees, lack of transparency, and weak enforcement of intellectual property rights.

The election of President Aoun and subsequent formation of a cabinet in late 2016 ended more than two years of political deadlock and improved basic government function. The cabinet endorsed major decisions to attract foreign investment, including two oil and gas decrees in January 2017. The cabinet also endorsed the 2017 Budget Law and the Petroleum Taxation Law proposals and Parliament passed the Access to Information Law in the first quarter of 2017. Relative political stability led to improvement in investment initiatives. However, the perception of domestic political risk is still present as the government considers a third renewal of parliament’s term or a postponement of elections that were scheduled to take place in the Spring of 2017. External political risk perceptions also remain high, given the negative impact of the continuing turmoil in Syria and the region on the Lebanese economy. However, Central Bank stimulus packages since January 2013, totaling approximately USD 5.8 billion, will continue to partially underwrite economic growth in 2017. These stimulus packages and an increase in domestic consumption of goods and services (in part from the presence of over one million registered Syrians seeking refuge in Lebanon) helped Lebanon achieve GDP growth of two percent in 2016, according to Central Bank Governor.

Lebanon’s public deficit reached 9.5 percent of GDP in 2016 and remains an issue of concern for investors. However, the Government of Lebanon (GoL) should not face difficulties in financing its deficit and rolling over sovereign maturities coming due in 2017. Overseas remittances to Lebanon declined by 2.3 percent in 2016 to USD 7.3 billion, according to the World Bank. But the domestic banking sector remains strong and the continued growth in deposits in private banks (7.2 percent in 2016) is sufficient to finance the borrowing needs of the economy. The Central Bank continues to publicly assert that it will maintain monetary and financial stability – reassuring investors that there will be no debt defaults or currency depreciation.

The business climate remains sensitive to domestic and regional political and security developments. Spillover from the Syrian crisis will continue to impact growth, which is expected to remain below potential until the crisis abates. Vested political interests continue to block reforms to stimulate growth, encourage private sector development, and create jobs.

Lebanon seeks U.S. investment due to the latter’s state-of-art technology and competitiveness. Significant opportunities exist for U.S. companies in the energy sector, particularly for oil and gas exploration and power production. The government may award offshore oil and gas exploration licenses by the end of the year. Other opportunities include the fields of information and communication technology, healthcare, safety and security, environment and franchising.

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Lesotho

Executive Summary

The Government of Lesotho (GOL), through its National Strategic Development Plan, recognizes the critical role that domestic and foreign investment and the development of the private sector play in driving shared economic growth. The government actively encourages foreign direct investment (FDI) in all areas of the economy, with limited restrictions on foreign ownership of small businesses. Foreign investors enjoy the same rights and protections as Basotho investors. Lesotho’s standards of treatment and protection of foreign investors are good in practice, but the legal framework guaranteeing these norms remains weak. There is no foreign investment law, and there are limited bilateral investment treaties (BITs) to protect foreign investors and ensure their fair treatment.

Lesotho’s performance in attracting FDI has been credible by regional standards, particularly for a landlocked nation. In recent years, FDI inflows have been primarily driven by investments in the mining sector. Despite some political uncertainty, the investment climate is reasonably conducive to U.S. investment. Lesotho, a relatively small market of only 2 million people, is a member of the Southern African Customs Union (SACU) and the Southern African Development Community (SADC) market. These memberships allow foreign businesses to use Lesotho as a gateway to larger regional markets.

The commercial legal, regulatory, and accounting systems are transparent and consistent with international norms. The judicial system is an effective means for enforcing property and contractual rights, though case backlogs often result in slow processes. Lesotho has a written and consistently applied commercial law. A Commercial Court was established in 2010 with the support of a U.S. government-funded Millennium Challenge Corporation grant in an effort to improve the country’s capacity to resolve commercial cases. Foreign investors have equal treatment before the courts in disputes with national parties or the government. The government has little history of investment disputes involving U.S. or other foreign investors or contractors in Lesotho, though in the past three years two foreign companies with government contracts have lodged formal disputes with the government.

Though corruption remains a problem in Lesotho, U.S. firms have not identified corruption as a significant obstacle to FDI. Giving or accepting a bribe is a criminal act under the Prevention of Corruption and Economic Offences Act of 2006.

Lesotho is a member of the International Labor Organization (ILO) and has ratified 23 international labor conventions, including all eight fundamental human rights instruments. Lesotho’s Labor Code Order of 1992 and its subsequent amendments are the principal laws governing terms and conditions of employment in Lesotho. The law provides for freedom of association and the right to collective bargaining. The law stipulates that employers must allow union officials reasonable facilities for conferring with employees.

Lesotho has accomplished significant recent policy reforms, and the government plans to undertake further reforms. The Land Act of 2010 reformed the land tenure system, allowing foreign investors to hold land titles as long as 20 percent of the company is owned by local investors. The Land Act has also allowed the use of land as collateral, which has expanded access to credit. The Companies Act of 2011 reduced the time it takes to start a business from 40 days to five days and strengthened investor protections. In 2016, Lesotho launched a credit information bureau to improve credit market conditions and facilitate effective credit risk management by registered credit providers. As a result of these reforms, Lesotho’s rank in the World Bank’s Doing Business report improved from 153 in 2012 to 136 in 2014 to 100 in 2016.

On March 1, 2017, the government lost a vote of no-confidence for the first time in Lesotho’s history, prompting a snap election. The June 3, 2017 election will be Lesotho’s third election in five years.

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Liberia

Executive Summary

Located in West Africa, Liberia and has a population of nearly 4.5 million people. The economy is based on a free market system and the government encourages FDI. Liberia has a free-floating exchange regime with the Liberian and U.S. dollars as legal tenders. The World Bank reported Liberia’s gross domestic product (GDP) at $2.053 billion in 2015 (http://www.worldbank.org/en/country/liberia) with a per capita gross national income (GNI) of $380. In March 2017, the IMF estimated real GDP growth for 2016 at negative1.2 percent, with an inflation rate of 12.5 percent. The United States FDI in Liberia was $929 million in 2015 and Liberia’s FDI in the United States was $500 million (See table below). The Investment Act guarantees foreign investors the right to transfer profits out of Liberia. The law also protects foreign investments against expropriation, or unlawful seizure or nationalization. Although the government continues to improve the business environment by reducing the number of steps and time to start a business, the country lags in other important measures. According to the World Bank’s Doing Business Survey (2016), Liberia ranked 179 out of 189 countries. For concession agreements or long-term investment contracts, potential investors often engage in lengthy bidding and negotiation. The process of awarding contracts, concessions and public tenders is guided by the Investment Act, the Revenue Code, the Public Procurement and Concessions Act, and the National Competitive Bidding Regulations. A cabinet level Inter-Ministerial Concessions Committee (IMCC) chaired by the National Investment Commission (NIC) is responsible for negotiating concession agreements. Agreements must be ratified or approved by the legislature and signed by the president before they become law. There are a number of state-owned enterprises (SOEs) some of which perform regulatory functions for different sectors while others have become dysfunctional. The Public Financial Management Law outlines proper regulatory framework for the SOE sector to ensure it fosters the government’s development agenda.

While the government seeks to strengthen institutions and introduce business reforms to improve the investment climate, progress in ensuring an attractive business-friendly environment is hampered by weak regulatory environment, corruption, lack of transparency, poor physical infrastructure, and low private sector capacity. The process of negotiating and implementing concession agreements is flawed and some provisions of the laws intended to ensure transparency and accountability are inconsistently applied. Though Liberia has a limited domestic market, it offers investment opportunities across several sectors, particularly agriculture and forestry, fisheries, mining, telecommunications, services, manufacturing, warehousing and storage facilities. Sectors and industries that have historically attracted significant investment include iron ore, rubber, palm oil, timber, banking, and telecommunications. The United States, China, Europe, and other African countries are the main export destinations. Currently, the export sector relies heavily on rubber and iron ore, accounting for 64 percent of total exports in 2016.

The best prospects for U.S. investment in Liberia are agribusiness (processing and marketing of agriculture products), manufacturing (food processing, preservation, packaging and labelling), transportation (land, marine, and air transport), cold storage and warehousing facilities, energy (power generation, transmission and distribution), construction and real estate, services, and telecommunications. Key issues to be aware of include difficult and opaque procedures for obtaining clear title to property, lack of adequate legal protection, limited awareness of intellectual property rights, and poor physical infrastructure.

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Lithuania

Executive Summary

Lithuania is strategically situated at the crossroads of Europe and Eurasia. It offers investors a diversified economy, EU rules and norms, a well-educated multilingual workforce, advanced IT infrastructure, low inflation, and a stable democratic government. The Lithuanian economy is one of the fastest growing in the EU. The country joined the Eurozone in January 2015, and has started the accession process to join the Organization for Economic Cooperation and Development (OECD). Lithuania’s income levels still lag behind the rest of the EU, with per capita GDP (at purchasing power parity) of approximately 38.7 percent of the EU average. According to preliminary data from the Lithuanian Statistics Department, at the end of 2016, the United States was Lithuania’s 17th largest investor, with cumulative investments totaling USD 182 million (1.4 percent of total FDI).

Following its election at the end of 2016, the current Lithuanian government started to focus on lowering barriers to investment, partnering with the private sector, and offering financial incentives for investors. In 2013, the government passed legislation which streamlined land-use planning, saving investors both time and money.

The government provides equal treatment to foreign and domestic investors, and sets few limitations on their activities. Foreign investors have the right to repatriate or reinvest profits without restriction, and can bring disputes to the International Center for the Settlement of Investment Disputes. Lithuania offers special incentives, such as tax concessions, to both small companies and strategic investors. Incentives are also available in seven Special Economic Zones located throughout the country.

The business community in Lithuania advocates for greater flexibility in the labor code, including access to foreign labor. U.S. executives report burdensome procedures to obtain business and residence permits, as well as some instances of low-level corruption in government. Transportation barriers, especially insufficient air links with European cities, remain a hindrance to investment, as does the lack of access to open, transparent information on tax collections and government procurement. Energy costs in Lithuania are declining as a result of diversification projects and lower global oil prices.

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Luxembourg

Executive Summary

Luxembourg, the only Grand Duchy in the world, is a landlocked country in northwestern Europe bordered by Belgium, France, and Germany. Despite its small landmass and small population (560,000), Luxembourg is the second-wealthiest country in the world when measured on a Gross Domestic Product (GDP) per capita basis. Since 2002, the Luxembourg government has proactively implemented policies and programs to support economic diversification and to attract foreign direct investment (FDI). The government focused on key innovative industries that showed promise for supporting economic growth: logistics, information and communications technology (ICT), health technologies including biotechnology and biomedical research; clean energy technologies, and most recently, space technology and financial services technologies. The economy has evolved and flourished, posting again a strong GDP growth rate – projected at 4.5 percent in 2017-2018, far outpacing the European average of 1.8 percent. Luxembourg offers a diverse and stable platform and outsized growth potential for a wide variety of U.S. investments and trade within the EU and beyond.

Luxembourg remains a financial powerhouse thanks to the exponential growth of the investment fund sector through the launch and development of cross-border funds (UCITS) in the 1990s. Luxembourg is the world’s second-largest investment fund asset domicile, after the United States, with $4 trillion of assets in custody in financial institutions.

Luxembourg is consistently ranked as one of the world’s most open and transparent economies and has no restrictions on foreign-ownership. It is also consistently ranked as one of the world’s most competitive and least-corrupt economies. The country has also successfully combatted money-laundering, terrorist-financing, and tax evasion through major fiscal reforms over the past decade. These reforms have countered Luxembourg’s historic “tax haven” image.

The Government of Luxembourg is actively seeking logistics companies to expand the new logistics hub at Findel Airport. Luxembourg is home to Europe’s leading all-cargo airline, Cargolux, and is currently expanding its air passenger terminal to accommodate more flights and the accompanying increase in usage. Luxembourg is also seeking ICT companies to use the country’s existing high-security, state-of-the-art datacenters, affording high-speed internet connectivity to major international data hubs.

Luxembourg has positioned itself as “the gateway to Europe” to establish European company headquarter operations by virtue of its central European location and advanced road, railway, and air connectivity.

The government continues to look to the future, including working to attract and support innovation and entrepreneurs, and actively investing in space technologies including asteroid mining. In November 2016, Luxembourg released its “Third Industrial Revolution Strategy,” a vision to “transform the country into the first nation-state of the smart green Third Industrial Revolution era.” The strategy seeks to position Luxembourg to take advantage of upcoming trends including digitalization, automation, de-carbonization, and resource efficiency, as well as new economic models including the sharing and circular economies. For more information on this initiative see www.tirlux.lu.

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Macau

Executive Summary

Macau became a Special Administrative Region (SAR) of the People’s Republic of China (PRC) on December 20, 1999. Macau’s status since reverting to Chinese sovereignty is defined in the Sino-Portuguese Joint Declaration (1987) and the Basic Law. Under the concept of “one country, two systems” articulated in these documents, Macau enjoys a high degree of autonomy in economic matters, and its economic system is to remain unchanged for 50 years. The Government of Macau (GOM) maintains a transparent, non-discriminatory, and free-market economy. The GOM is committed to maintaining an investor-friendly environment.

In 2002, the GOM ended a long-standing gaming monopoly, awarding two gaming concessions to consortia with U.S. interests. This opening has encouraged substantial U.S. investment in casinos and hotels, and has spurred exceptionally rapid economic growth over the last few years.

Macau is today the undisputed gaming capital of the world, having surpassed Las Vegas in terms of gambling revenue. U.S. investment over the past decade is estimated to exceed USD 23.8 billion. In addition to gaming, Macau is positioning itself to be a regional center for incentive travel, conventions, and tourism. The American business community in Macau has continued to grow. In 2007, business leaders founded the American Chamber of Commerce of Macau.

Macau seeks to speed up its economic diversification to transform the city into a world center of tourism and leisure, as well as a “commercial and trade cooperation service platform” between the Mainland China and Portuguese-speaking countries. The GOM has started various policies to promote economic diversification and sustainable development and to create business opportunities for domestic and foreign investors.

In September 2016, the GOM announced its first Five-Year Development Plan (2016-2020). The highlights of the plan include establishing a trade cooperation service platform between China and the Portuguese-speaking countries, improving the structure of industries, raising life quality, protecting the environment, and strengthening the efficiency of government.

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Macedonia

Executive Summary

Macedonia formed a new, reform-oriented government on May 31, 2017, that committed to putting the country back on the path to EU and NATO integration. The country had been mired in a political crisis since 2015 after the release of excerpts from illegally intercepted communications suggesting high-level corruption and political interference in the judiciary, media, and economy by the now former ruling party. Although domestic private investment declined in 2016 due to political instability, foreign direct investment (FDI) increased to USD $395 million (USD $150 million or 60.9 percent more than in 2015). Anecdotal reports suggest much of that FDI came from companies already present in Macedonia while potential new investors postponed or cancelled investment decisions because of political uncertainty.

Macedonia’s government has actively sought FDI, offering generous incentives for projects that create jobs. Many new investors are foreign auto parts companies attracted by Macedonia’s competitive labor costs, proximity to European car manufacturers, and cooperative government assistance. The new government has said it will emphasize linking domestic companies to foreign investors’ supply chains.

Large foreign companies operating in Technological Industrial Development Zones (TIDZs) generally report positive experiences doing business in Macedonia and good relations with government officials. However, under the previous government small investors outside the TIDZs and domestic firms alleged that then ruling party VMRO-DPMNE awarded government tenders to companies linked to the ruling party, extorted funds from companies, pressured them to hire party members, retaliated against businesses believed to be supportive of opposition political parties, and attempted to take over independent firms through government harassment and selective withholding of payments for government contracts. The new government has vowed to end political interference in the private sector and free businesses from political pressure and repression.

Macedonia’s legal framework for foreign investors is generally in line with international standards. Foreign entities generally receive national treatment, i.e., Macedonia extends to foreign investors treatment that is at least as favorable as the treatment that it accords to national investors in like circumstances. However, under the former government domestic and foreign companies expressed concerns about a lack of legal stability, predictability, and rule of law. Laws governing business activity were frequently changed, often without consultation with the business community, and the legal changes retroactively applied. The judicial system was inefficient and subject to political interference and remains subject to the entrenched capture by the former ruling party. Corruption was widespread and largely went unpunished. The new government has pledged to reinstitute transparency and rule of law, though this will take time and they will need to overcome the deep-seated culture of state capture by each successive ruling party.

The 2017 World Bank’s Doing Business Report ranked Macedonia the 10^th best place in the world for doing business, up six spots from the year before. Fitch affirmed Macedonia’s BB credit rating with a negative outlook, and S&P affirmed its credit rating of the country at BB- with a stable outlook. Transparency International ranked Macedonia 90^th out of 176 countries in its Corruption Perception index, down 24 spots from the prior year.

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Madagascar

Executive Summary

Since assuming office in 2014, the government of President Hery Rajaonarimampianina has publicly emphasized the importance of combating corruption and improving the business and investment climate, citing private sector led growth as the engine for the future economic development of Madagascar. However, despite a number of programs to improve the country’s investment climate, including through reform of the existing regulatory framework, progress reigning in corruption has been largely absent.

Foreign direct investment has failed to reach its potential due to persistent corruption in government and in the private sector. Both foreign direct investment and domestic investment are held back by the lack of infrastructure (notably roads and electricity), the lack of transparency in the award and oversight of public works projects, generally inadequate audit and management of budgets, the government’s inability or unwillingness to properly enforce regulations and laws, and a weak financial system.

The best options for U.S. investment are the extractive industries, light manufacturing in the apparel sector, construction, energy, agribusiness, and tourism. The extractive industries, particularly the mining sector, have been the largest driver of economic growth over the past few years, though low commodity prices in recent years have added an additional obstacle for investors.

In its 2015-2020 five-year development plan, the government plans to seek public-private partnerships with private industry, in addition to traditional donor aid in order to rehabilitate and extend its dilapidated infrastructure. This may present opportunities for U.S. investment, particularly if the government succeeds in its efforts to reform the management of the state-owned water and electric utility JIRAMA. Following a major cabinet reshuffle in April 2016, the government announced a number of reform projects and efforts to improve the business and investment climate. However, these efforts, especially within JIRAMA, have not produced concrete results so far. The mining sector has, to date, been the primary recipient of foreign investment.

The IMF released the first $43.5 million tranche of a $304.7 million Extended Credit Facility for Madagascar in September 2016. Progress on IMF-monitored reforms is broadly satisfactory, with generally good performance on indicative targets and structural reforms. However, the poor financial health of the national utility, JIRAMA, and the national airline, Air Madagascar, remain major concerns that will require significant but unknown increases in government subsidies – threatening to undermine progress in all other areas. Resolution of these potential budgetary uncertainties depends on improvements in governance, including the fight against corruption.
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Malawi

Executive Summary

The Malawian government is eager to attract foreign direct investment. The Malawi Investment and Trade Center’s One Stop Center offers assistance on how to navigate relevant regulations and procedures. In general, there are adequate legal instruments to protect investors. Foreign investors are generally accorded national treatment.

Malawi has been largely free of political violence since gaining independence in 1964. Although divisions do exist, Malawi has no significant tribal, religious, regional, ethnic, or racial tensions that could be expected to lead to violent confrontation.

Agriculture accounts for one third of GDP and 80 percent of Malawi’s exports. Opportunities exist for investment in the agricultural sector, particularly for processing and value addition. As the United States government concludes a $350 million effort to upgrade electrical transmission lines and assist in policy reform to attract additional power sector investment, the power sector provides increased opportunities for investors.

Although the Government of Malawi has made some efforts to combat corruption, it remains a major obstacle to investment in Malawi. Scarcity of skilled and semi-skilled labor is another serious impediment to doing business in Malawi and is most acute in occupational categories that include accountants and financial management personnel, economists, engineers, lawyers, IT, and medical/health personnel.

There is an established mediation process to promote agreements between parties in disputes before court proceedings start. Both foreign and domestic investors have access to Malawi’s legal system, which functions fairly well and is generally unbiased but slow.

All investors have the right to establish, acquire, and dispose of interests in business enterprises. Foreigners require a business residence permit (BRP) to carry out any business activity in Malawi. All new land acquisitions are done under leases. Lease terms for foreigners may be limited to 50 years, compared to 99 years for Malawians.

Government continues to undertake various reforms to ensure that no tax, labor, environment, health and safety, or other laws distort or impede investment. However, procedural delays continue to impede the business and investment approval process.

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Malaysia

Executive Summary

The Malaysian government encourages foreign direct investment (FDI), although it maintains restrictions or limits on investment in some sectors. The government actively reaches out to targeted industries and negotiates incentive packages to attract FDI. Malaysia provides a number of incentives, particularly in export-oriented high-tech industries and “back office” service operations. Prime Minister Najib Razak has made generating new domestic and foreign investment a centerpiece of his economic policies. Inbound FDI has been steady in nominal terms, and Malaysia’s performance in attracting FDI relative to both earlier decades and the rest of the Association of Southeast Asian Nations (ASEAN) has slowed.

According to the 2013 Organization for Economic Cooperation and Development (OECD) Investment Policy Review of Malaysia, inbound foreign investment in Malaysia began to decline in 1992, and private investment overall started to slide in 1997 following the Asian financial crises. In the intervening years, domestic demand has increasingly been the source of Malaysia’s economic performance, with foreign investment receding as a driver of GDP growth. The OECD concluded in its Review that Malaysia’s FDI levels in recent years had reached record high levels in absolute terms, but were at low levels as a percentage of GDP.

As a destination for FDI, Malaysia’s attractiveness for lower-wage manufacturing has diminished as years of steady economic growth have boosted average wage levels, contributing to Malaysia’s status as an upper middle-income country. The government seeks to promote investment in higher value-added manufacturing and service sectors.

Prime Minister Najib’s 2009 Economic Transformation Program (ETP) encompassed policies and incentives for 12 key economic areas to accelerate growth: the Greater Kuala Lumpur/Klang Valley region; oil, gas and energy; palm oil and rubber; wholesale and retail operations; financial services; tourism; the electrical and electronics sector; business services; communications content and infrastructure; education; agriculture; and health care. The ETP also targeted investment into resource-based industries and some services sub-sectors, including logistics, though these are also subject to foreign investment conditions or restrictions. Another initiative, the Government Transformation Program (GTP), addressed governance and quality of life issues, and aims to reduce corruption and crime, to improve education, urban public transport and rural basic infrastructure, and to reduce the number of low-income households.

The overall economic climate is conducive to U.S. investment. The largest U.S. investments are in the oil and gas sector, manufacturing, and financial services. Firms with significant investment in Malaysia’s oil and gas and petrochemical sectors include: ExxonMobil, Caltex, ConocoPhillips, Murphy Oil, Hess Oil, Halliburton, Dow Chemical and Eastman Chemicals. Major semiconductor manufacturers, including ON Semiconductor, Texas Instruments, Intel, and others have substantial operations in Malaysia, as do electronics manufacturers Western Digital, Honeywell, St. Jude Medical Operations (medical devices), and Motorola. In recent years Malaysia has attracted significant investment in the production of solar panels, including from U.S. firms. Many of the major Japanese consumer electronics firms (Sony, Fuji, Panasonic, Matsushita, etc.) have facilities in Malaysia.

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Mali

Executive Summary

Despite some political progress and promising economic opportunities for U.S. firms, Mali faces significant obstacles including electricity access, infrastructure, and corruption, as well as drug trafficking and smuggling challenges, primarily in the northern conflict-affected portion of the country. Instability in the northern regions has permitted terrorist groups to conduct attacks against Westerners and Malian government forces. This instability is progressively extending to Mali’s center where terrorist groups are taking advantage of the minimal presence of Malian authorities and security forces. Frequent deadly clashes between livestock farmers and crop farmers are exacerbating the situation. Both Malian and foreign businesses face corruption in procurement, importation and export of products, tax payment, administrative processing, and land management.

After a tumultuous period in 2012 with slowing economic growth and heightened insecurity, Mali’s economy is currently on the upswing with over 5 percent growth each year since 2014. The government developed a new regulatory framework for public private partnerships and hopes to welcome investors in the infrastructure, telecommunication, service, mining, and agricultural sectors. As a nation with development challenges, Mali continues to depend upon multilateral financial institutions including the World Bank, International Monetary Fund, African Development Bank, and bilateral donors for funding various development projects, mainly in health, infrastructure, education, and agricultural sectors. Local banks have a conservative lending strategy, but are beginning to increase their lending portfolios. At the same time, the investment climate is benefiting from the financial and economic reform processes that accompany this institutional lending.

Thanks in part to the strong bilateral relationship between the United States and Mali, the Malian private sector considers U.S. products to be high quality reliable goods and openly searches for new business partnerships with U.S. firms. Mali’s strong economy (projected to grow at 5.3 percent in 2017) and eagerness to attract foreign investment have made Mali a rewarding investment destination for U.S. companies.

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Malta

Executive Summary

The Republic of Malta is a small, but strategically located island country 60 miles south of Sicily and 180 miles north of Libya, astride some of the world’s busiest shipping lanes. Malta, a politically stable parliamentary republic with a free press, is considered a safe, secure, and welcoming environment for foreign investors to do business.

Malta joined the European Union in 2004, the Schengen visa system in 2007, and the Eurozone in 2008. With a population of about 420,000 and a total area of only 122 square miles, it is the smallest country in the EU. The economy is based on services, primarily shipping, banking, professional, scientific, and technical activities, online gaming and tourism. Industry also has a small but important role. Maltese and English are the official languages.

Given its central location in one of the world’s busiest trading regions and its relatively small economy, Malta recognizes the important contribution that international trade and investment can provide to the generation of national wealth.

Malta’s economy is one of the best performers in the EU. Real gross domestic product (GDP) grew 5 percent in 2016, with only slight decreases predicted in 2017 and 2018. Malta’s unemployment rate stood at 4.2 percent in the fourth quarter of 2016, with 2017 estimates remaining at record lows under 5 percent.

The top three credit rating agencies rank Malta well; all note a stable or a positive outlook. The current sovereign credit ratings are:

• A-/A-2 with a stable outlook (S&P);
• A3 with a stable outlook (Moody’s); and
• A with a positive outlook (Fitch).

In 2013, the Government of Malta established the Individual Investor Program (IIP), which provides citizenship by naturalization to a person and his or her dependents who are contributors to an individual investor program and who pay a fee of EUR 650,000 (USD 719,000) (plus an additional EUR 25,000 (USD 27,650) for spouses or dependents under age 18 or EUR 50,000 (USD 55,300) for dependents over age 18). IIP conditions include a EUR 350,000 minimum for purchasing immovable property, or a EUR16,000 (USD 17,700) per year minimum for leasing immovable property (which must be retained for at least five years), and a EUR150,000 (USD 165,900) minimum for investment in stocks, bonds, or debentures.

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Marshall Islands

Executive Summary

With a total population of approximately 55,000 people (12,650 in the labor force) spread out over 1,200 small islands and islets across 750,000 square miles of ocean but just 70 square miles of total land mass, the Republic of the Marshall Islands (RMI) has a tiny economy with an annual GDP of around $179 million, per capita GDP of $3,800 and just a 1.6% real growth rate. The remoteness of the RMI from major markets (2,300 miles from Honolulu, 1,900 miles from Guam, and 2,800 miles from Tokyo) severely impacts the economy. The Marshallese economy combines a small subsistence sector in the outer islands with a modest urban sector in Majuro and Kwajalein. The RMI government is the country’s largest employer, employing approximately 46% of the salaried work force. The U.S. Army Garrison – Kwajalein Atoll (USAG-KA) is the second largest employer. A semi-modern service-oriented economy is located in Majuro and in Ebeye, on Kwajalein Atoll, and is largely sustained by government expenditures and by USAG-KA. Primary commercial industries include: wholesale/retail trade, business services, commercial fisheries, construction, and tourism. Fish, coconuts, breadfruit, bananas, taro, and pandanus cultivation constitute the subsistence sector. However, as the land in RMI is not very nutrient rich, the agricultural base is limited. The RMI has a narrow export base and limited production capacity and is therefore vulnerable to external shocks. Primary export products include: frozen fish (tuna), tropical aquarium fish, ornamental clams and corals, coconut oil and copra cake, and handicrafts. The RMI continues to rely heavily on imports and continues to run trade deficits ($80 million in 2014).

The Marshallese economy remains dependent on donor funding. The RMI is part of the former US-administered Trust Territory of the Pacific Islands that gained independence in 1986 and continues to use the U.S. dollar as its currency. Since independence it has operated under a Compact of Free Association with the United States. Since 2004, the U.S. has provided over $800 million in direct assistance, subsidies, and financial support to the Marshall Islands, equivalent to approximately 70% of the country’s total GDP during the same period. The Marshall Islands have received additional aid from Australia, Japan, Taiwan, the United Arab Emirates (UAE), Thailand, the European Union, and organizations such as the Asian Development Bank.

The U.S., China, South Korea, Japan, Germany, and the Philippines are the Marshall Islands’ major trading partners. Top U.S. exports to RMI include food products, prefabricated buildings, recreational boats, excavation machinery, aircraft parts, tobacco, and wood/paper products.

With the end of the Compact’s direct grant assistance approaching in 2023, the Government of the Marshall Islands is increasing its efforts to attract foreign investment and recognizes its important role in growing private sector development. Most local government officials encourage foreign investment, though attitudes may differ from island to island. The government particularly encourages foreign investment in fisheries, aquaculture, deep-sea mining, manufacturing, tourism, renewable energy, and agriculture and provides certain investment incentives for foreign investors.

Foreign investment in the Marshall Islands is complicated, however, by laws that prevent non-Marshallese from purchasing land. There is no public land in the country and no land registry; foreign businesses must lease land from private landowners in order to operate in the country. The high cost of doing business due to the country’s remoteness, its dependence on imported materials and services, and its limited infrastructure, especially transportation links, create additional challenges. Finally, due to RMI’s very low elevation, the potential threats of climate change and sea level rise make attracting FDI to the Marshall Islands even more difficult.

The major foreign direct investments are concentrated in the fisheries sector, including a tuna loining plant and a tuna processing plant along with several fishing purse seiners, the majority of which are owned by investors from China and Taiwan. There has been no significant foreign investment over the past year.

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Mauritania

Executive Summary

Mauritania, a northwestern African country, covers an area larger than New Mexico and Texas combined (approximately 398,000 square miles). Historically, Mauritania has been relatively open to foreign direct investment, especially in the mining, hydrocarbon, agriculture and fishing sectors. In June 2012, to encourage further investment, the government updated provisions in the Investment Code to enhance the security of investments and facilitate administrative procedures. The Code provides for free repatriation of foreign capital and wages for foreign employees. In 2014, the government of Mauritania amended the Hydrocarbon Code to provide more incentives that favor foreign investment in the hydrocarbon sector. In 2015, Mauritania adopted a new Fisheries Strategy to ensure transparency and sustainable fishing practices in the sector. The following year, Mauritania adopted the new Fisheries Transparency Initiative (FiTI).

The Mauritanian Civil and Commercial Codes include legislation that protects contracts, although court enforcement and dispute settlement are often challenging. The judicial system remains weak, unpredictable, and inefficient in its application of the law. Judges lack training and specialized experience in commercial and financial law. Familial, political, and tribal considerations too often trump commercial law in judicial decision-making. Despite Mauritania’s open policy towards foreign direct investment, certain jobs in key sectors, such as security and fisheries, must be filled by Mauritanian nationals by law.

The tax system remains opaque. Over the last two years the rate of tax collection has increased, although in a targeted manner. Tax rates on businesses start at 25 percent on profits and two percent on revenue; moreover, the procedures required to pay taxes lack transparency and are time-consuming. Some businesses have faced retaliatory tax bills when they sought, in good faith, to follow the law’s provisions. When commodity prices decrease, the government becomes more aggressive in tax collection efforts, seemingly to bail out government owned enterprises. For instance, we saw government collection efforts increase dramatically when iron ore hit a low at the end of 2015. As the iron ore price recovers, however, we expect the government’s aggressive attitude towards tax collection to mellow.

Labor laws and conditions of employment are complex, encouraging annual labor contracts over permanent employment. Terms of employment limit companies’ ability to hire and dismiss employees freely. Likewise, while environmental, health, and safety laws and policies exist on paper, they are costly to implement and are rarely or inconsistently enforced.

Although legally outlawed, de facto slavery continues to exist in Mauritania, particularly in domestic situations and in rural and agricultural settings. In 2015, Mauritania adopted an improved anti-slavery law that more clearly defines the practice and raises the penalties for those convicted.

Corruption remains a concern. During the July 2009 presidential election, President Mohamed Ould Abdel Aziz launched an anti-corruption campaign. In 2014 it was renewed and has resulted in the imprisonment of several officials and business leaders. Though corruption remains an issue, companies generally cite high taxes, insufficient access to credit, an underdeveloped infrastructure, and a lack of skilled labor as the main impediments when investing in Mauritania.

The overall investment climate in Mauritania remains challenging for U.S. and other foreign investors. The Mauritanian government continues to encourage foreign direct investment, but a weak judicial system, opaque tax laws, complicated labor laws, a fragile political system, an underdeveloped infrastructure, and a lack of skilled labor remain major challenges to foreign investors in Mauritania.

While we see Mauritania taking steps to improve the business environment, we note that greater governmental resources will be needed to bring about long term gains.

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Mauritius

Executive Summary

Mauritius is an island nation with a population of 1.26 million people. Its land area of only 2,040 square kilometers understates the country’s importance to the Indian Ocean region as it controls a vast maritime zone, claiming an Exclusive Economic Zone (EEZ) of approximately 2.3 million square kilometers, one of the largest in the world. Mauritius has a stable and competitive economy, with a GDP of USD 11.8 billion and per capita GDP over USD 9,400 in 2016. The economy grew by 3.8 percent in 2016 and IMF estimates it will continue to grow at a moderate rate of 3.8 to 4 percent in the medium term. The inflation rate decreased from 1.3 percent in 2015 to 1 percent in 2016 and is expected to rise to 2.5 percent in 2017, mainly due to the upward trend in oil prices. The unemployment rate decreased from 7.9 percent in 2015 to 7.3 percent in 2016, although it is higher among women and youth. According to the World Bank’s 2017 Ease of Doing Business Index, Mauritius ranks first in Africa and 49th worldwide (out of 190 countries).

Since achieving independence in 1968, Mauritius has made a remarkable economic transformation from a mono-crop economy based on sugarcane production to a diversified economy driven by export-oriented manufacturing (mainly textiles), tourism, and financial and business services, information and communication technology, seafood processing, real estate and education/training. With sluggish growth in the past several years, the government of Mauritius has tried to stimulate economic growth in four areas: serving as a gateway for investment into Africa, increasing the use of renewable energy, developing smart cities, and exploring activities related to the ocean economy.

Government policy in Mauritius is firmly centered on promoting foreign and domestic investment, having signed Double Taxation Avoidance Agreements with 50 countries and maintaining a legal and regulatory framework that keeps Mauritius highly-ranked on “Ease of Doing Business” and good governance indices. In recent years Mauritius has been especially intent on attracting foreign direct investment from emerging economies, as well as courting more traditional markets like the UK, France and the U.S. In support of this, the government highlights its democratic tradition and good governance.

Although corruption in Mauritius is low by regional standards, progress in improving transparency and accountability has been stagnating.

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Mexico

Executive Summary

Mexico is one of the United States’ top trade and investment partners. Bilateral trade grew 430 percent 1994-2015 and Mexico now ranks as the United States’ second largest export market and third largest trading partner. The new U.S. Administration announced January 2017 its priority to renegotiate the North America Free Trade Agreement. Investors in Mexico will be watching these negotiations closely. Uncertainty regarding the content of the discussions and timeline for implementation of the future “rules of the game” may impact Foreign Direct Investment (FDI) flows in 2017.

Mexico benefits from credible economic management that has allowed the country to weather a period of low oil prices and significant currency volatility. Gross domestic product (GDP) growth, at 2.5 and 2.3 percent in 2015 and 2016 respectively, is relatively strong compared to Mexico’s G-20 peers. Compared to other emerging markets, however, Mexican growth over the past decade has been lackluster. Although well-managed by the Bank of Mexico, inflation is forecast to rise to six percent in 2017 due to peso depreciation and a jump in retail fuel prices caused by government efforts to stimulate competition in that sector. With the goal of spurring greater medium-term growth, the government of Mexico (GoM) launched significant energy, fiscal, social security, education, anti-corruption, security, political, and telecommunications reforms in 2013.

The most significant changes in Mexico’s investment outlook have taken place in the energy and telecommunications sectors. Prior to constitutional reform, the state-controlled oil company, Pemex, had a monopoly on all hydrocarbon activity in the country. The reforms have opened this sector, allowing domestic and international private sector firms to bid on hydrocarbon projects and partner with state oil company Pemex, creating significant new investment opportunities for Mexican and foreign investors in up-, mid-, and downstream business lines. In telecommunications, reforms were intended to improve competition and reduce concentration in the sector through the creation of a new, autonomous regulator. This regulator is empowered to order divestitures, enforce regulations, and apply targeted sanctions to companies it sees as overly dominant in the market.

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Micronesia, Federated States of

Executive Summary

The Federated States of Micronesia (FSM) is a lower middle income island nation of 104,000 people on 607 islands with a total land area of 271 square miles and an exclusive economic zone (EEZ) of over one million square miles (2.6 million square km) in a remote area of the Western Pacific Ocean. The nation is composed of formerly unrelated cultures and languages organized into four states under a weak national government. The FSM is part of the former U.S.-administered Trust Territory of the Pacific Islands that gained independence in 1986 and continues to use the U.S. dollar as its currency. Since independence, it has operated under a Compact of Free Association (Compact) with the U.S., receiving more than USD $100 million per year in development funding administered mainly by the U.S. Department of the Interior (DOI). The World Bank estimates Gross Domestic Income (GDI 2015) to be $3,438 per person, showing no growth over the previous 10 years.

The FSM currently has no major exports or domestic industry. Its primary sources of income are the sale of fishing rights (approximately USD $65.2 million in 2015) and taxes on offshore corporate registrations for captive insurance (USD $4 million in 2015). It is largely a subsistence economy, except in larger towns where the economy is centered on government employment and a small commercial sector. The cash economy is primarily fueled by government salaries paid by Compact funds (66 percent of employed adults work in the public sector) and, to a much lesser degree, by family remittances. Compact funding will change in 2023 from the current grants to proceeds from a trust fund developed over 20 years, which is currently estimated to lower government revenues from the United States by 20-30 percent.

The FSM GDP for 2015 was USD $315 million, a 0.09 percent decrease from 2014 at constant prices. The economy recorded a trade deficit of USD $142 million in goods and services for the same year. The FSM government currently has low debt, but the lack of development of revenue to supplement Compact funding, the lowest tax-to-GDP ratio in the Pacific, and looming Compact funding reductions in 2023, mean that international development banks classify the country as a grant-only client, concerned with the country’s ability to repay loans.

Foreign investment is almost nonexistent due to prohibitions on foreign ownership of land and businesses, difficulties in registering business (the process requires approvals from the four state governments and at the national level), poor enforcement of contracts, poor protection of minority (foreign) investors, weak courts, and weak settlement of insolvency. Domestic capital formation is very low because the commercial banks are classified as foreign entities and are not allowed to provide mortgages or business financing. The cost of doing business in FSM is high due to the region’s remoteness and dependence on imported materials and services.

Most political power of the nation is delegated to the four states by the constitution, including regulation of foreign investment and restrictions on leases. This means that investors may have to navigate between five different sets of regulations and licenses. U.S. citizens are able to live and work in the FSM indefinitely without visas. National legislators (senators) are directly elected, and the president and vice-president are selected by the senators from among the four at-large senators. There are no political parties. At the state level, all offices are directly elected by the people.

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Note – U.S. FDI in partner country unavailable as it has been “suppressed to avoid disclosure of data of individual companies.” Last available figure is 2012 at USD $30 million.

Moldova

Executive Summary

Former Soviet republic Moldova has made some progress towards adopting the principles of a free-market democracy since gaining its independence in 1991, but still has significant shortcomings in its investment climate. After multiple government changes in 2015 and political demonstrations in early 2016, Moldova regained some stability in 2016 providing the new cabinet room for reform work that it has formally committed to. The government has to deal with the fallout from the massive bank fraud and wide-spread perceptions of pervasive corruption that has undermined trust in the state and political-economic institutions.

In June 2014, Moldova signed an Association Agreement (AA) with the European Union (EU), including a Deep and Comprehensive Free Trade Agreement (DCFTA), committing the government to a course of reforms to bring its governmental, regulatory, and business practices in line with EU standards. Moldova hopes that implementation of the DCFTA will integrate it further into the European common market and create more opportunities for investment in Moldova as a bridge between Western and Eastern European markets. The Government approved an Action Plan for the implementation of AA/DCFTA in 2017-2019.

After political volatility stalled reforms in 2015, a Democratic Party-led parliamentary majority installed a new government in early 2016, which declared its intent to pursue greater integration with the EU. The cabinet’s immediate efforts focused on judicial reforms, public administration restructuring, measures ensuring independence of financial and banking regulators, bank fraud investigations, and enhanced regulatory transparency. These measures helped restore donor support and secure a three-year IMF program worth about USD 180 million.

The business climate is challenging. Although the many underdeveloped sectors offer opportunities, investors should proceed with caution. While a number of large foreign companies have taken advantage of tax breaks in the country’s free economic zones, foreign direct investment remains low. Finance, automotive, light industry, agriculture, food processing, wine, and real estate have historically attracted foreign investment. The National Strategy for Investment Attraction and Export Promotion 2016-2020 identified seven priority sectors for investment and export promotion: agriculture and food, automotive, business services such as business process outsourcing (BPO), clothing and footwear, electronics, information and communication technologies (ICT), and machinery.

The Moldovan government has also identified seven priority areas for development and reform in its National Development Strategy “Moldova 2020”: education, access to financing, road infrastructure, business regulation, energy efficiency, justice sector reform, and social insurance. Based on that strategy, the government will set out a new 2016-2018 action plan for a business regulatory framework reform to facilitate day-to-day business activity.

The major investment climate concerns in 2017 include uncertainties related to opposing political agendas between the cabinet and the president, the lack of public trust in the government as well as public and private institutions, continuing fragility of the banking sector, and instability in the wider region.

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Mongolia

Executive Summary

Mongolia’s tremendous mineral reserves, agricultural endowments, and proximity to the vast Asia market continue to make it an attractive foreign direct investment (FDI) destination in the medium to long term. However, ongoing stagnation in global commodities markets, limited infrastructure, policy missteps, and the Government of Mongolia’s (GOM) lack of responsiveness to foreign investor concerns warrant caution in the short term. In addition to these factors, an economic downturn and fiscal crisis hamper the GOM’s ability to attract foreign investment, grow the economy, and address its many challenges.

Against this backdrop, the new majority government, elected in June 2016, which came to power on a wave of voter discontent with the previous government’s perceived mismanagement of the economy, has taken some encouraging steps. First, the U.S.-Mongolia Agreement on Transparency in Matters Related to International Trade and Investment, or Transparency Agreement, went into effect on March 20, 2017. Warmly welcomed by U.S. and foreign investors alike, it will establish clear processes for drafting and commenting on new legislation and regulations and require strict transparency related to laws involving trade and investment. A copy of the Transparency Agreement is available here.

Second, in 2017 the GOM and the International Monetary Fund (IMF) reached an agreement on a comprehensive USD $5.5 billion package that will not only stave off default on Mongolia’s large public debt, but also bring with it necessary discipline and budget reforms, as well as a detailed banking assessment. The IMF agreement has enabled the GOM to refinance on the international market bonds that came due in 2017, a more attractive and politically palatable alternative to relying exclusively on Chinese financing. Although investors recognize that the IMF program’s budget tightening will initially dampen economic growth, they praise the GOM’s commitment to reform its fiscal and borrowing practices, improve its banking sector, and complete long-delayed regulatory reforms. The IMF and the Mongolian government anticipate low, flat economic growth in 2017 and 2018, but expect higher sustainable growth to return in 2019.

The GOM’s commitment to taking these bold, pragmatic steps could help create and nurture a business-enabling environment, but U.S. and foreign investors continue to call for further efforts, including: (1) rooting out the pervasive corruption that threatens the foundational institutions of Mongolian democracy; (2) creating in reality the judicial independence the Mongolian constitution establishes in principle; (3) facilitating the emergence of private sector small- and medium-sized enterprises as the primary engine of economic diversification; (4) putting in place a more transparent, inclusive, and effective rule-making process for drafting and implementing commercial legislation; (5) modernizing traditional Mongolian business sectors such as agriculture and animal husbandry; and (6) improving Mongolia’s physical infrastructure.

Challenges notwithstanding, there is significant longer term upside to the Mongolian investment climate. Promising signs include recently implemented legislation and programs to support large-scale development of the domestic agriculture sector, the second largest contributor to GDP and employment after mining. Agriculture and animal husbandry, along with renewable energy, are sectors in which Mongolia has natural advantages and which provide promise for economic diversification while offering significant opportunities for U.S. exporters of goods, services, and technologies.

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Montenegro

Executive Summary

Since regaining its independence in 2006, Montenegro has adopted a legal framework that encourages privatization, employment, and exports. Implementation, however, lags well behind the legal structure, and the Montenegrin economy continues to flounder on a very narrow tax base and a band of three developing sectors: tourism, energy, and to a lesser extent, agriculture. Montenegro has one of the highest Public Debt to GDP ratios in the region, currently at 65.9 percent, with a forecast for increasing debt to cope with the repayment of €800 million (approximately USD 848million) in loans to China’s Ex/Im Bank for financing Montenegro’s first modern highway. Despite regulatory improvements, official corruption remains a major concern. Montenegro ranks 64^th out of 175 countries surveyed in Transparency International’s (TI) 2016 “Corruption Perception Index.” In 2016, Montenegro’s economy grew by 3.0 percent with an unemployment rate of 17.1 percent.

As a candidate country on its path to join the European Union (EU), Montenegro is making steady progress in opening negotiating chapters with the EU. To date it has opened 26 out of 35 chapters and has provisionally closed two chapters. Montenegro received an invitation to join NATO in December 2015, likely the most historic and significant event since its independence. The ratification process is ongoing and 26 countries have already ratified the accession protocol; it is expected that Montenegro will formally become the 29^thmember of the Alliance by mid-2017.

Montenegro’s economy is centered on three sectors, with the government largely focusing its efforts on developing those same sectors; tourism, energy, and agriculture.

Due in large part to its 300 km-long coastline and a spectacular mountainous region in the country’s north, the thriving tourism sector accounts for more than 20 percent of GDP. Government sales of formerly state-owned land have spurred a wave of foreign investment in large-scale tourism and hospitality centers. However, bureaucratic gridlock has left many of these projects on hold. No one country dominates foreign direct investment (FDI) in the tourism sector, with Russian, Azerbaijani, Chinese, Swiss (through a Swiss company based in Egypt), Arabian Gulf, U.S., and U.K. hospitality and tourism projects taking root.

In the energy sector, the government is building an underwater electric transmission cable to Italy which will export renewable energy to the continent starting in 2018. Additionally, there are several ongoing conventional energy projects around the country, including construction of a second block of the thermal plant in Pljevlja and a number of small-scale hydro projects. In late 2013, Montenegro invited international oil and gas companies to bid on licenses to explore its offshore coast, based on seismic data showing favorable conditions for hydrocarbon deposits off Montenegro’s deep-water coast. The Montenegrin government has signed the concession agreements with two consortiums: the Italian-Russian consortium Eni/Novatek for four blocks, and the Greek-British consortium Energean oil/Mediterranean oil and gas for one block. It is expected that the exploration will start in 2017 and several more licensing rounds are foreseen by 2020 for additional exploration blocks.

Montenegro’s temperate climate supports a nascent agro-production industry; however, the country continues to be dependent on imports of food products from neighboring countries owing to the economies of scale. The exception is the local wine industry, with the government-owned “Plantaze” being a leading regional producer and exporter to Europe, China, and the U.S.

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Morocco

Executive Summary

Due to its political stability, solid infrastructure, and strategic location, Morocco is emerging as a regional manufacturing and export base for international companies. Actively encouraging and facilitating foreign investment, particularly in export sectors, through macro-economic policies, trade liberalization, investment incentives, and structural reforms, Morocco’s overarching economic development plan seeks to leverage its unique status as a multilingual nation with a tri-regional focus (toward Sub-Saharan Africa, the Middle East, and Europe) to transform the country into a regional hub for shipping, logistics, finance, manufacturing, assembly, and sales. The Government of Morocco has implemented a series of strategies aimed at boosting employment, attracting foreign investment, and raising performance and output in key revenue-earning sectors, such as the automotive and aerospace industries.

An ambitious 2014 strategy set out to create 500,000 new jobs in manufacturing by 2020 by targeting higher levels of FDI and strengthening the linkages between the small business sector and Morocco’s industrial leaders. Morocco has also focused on positioning itself as a financial hub for Africa, and offers incentives for firms that locate their regional headquarters in the Casablanca Finance City (CFC), Morocco’s flagship financial and business hub launched in 2010 by King Mohammed VI. Despite the significant improvements in its business environment, Morocco continues to face challenges posed by its lack of skilled labor, weak intellectual property rights protection, inefficient government bureaucracy, and a challenging regulatory environment.

Morocco has ratified 68 bilateral investment treaties for the promotion and protection of investments and 60 agreements that aim to eliminate the double taxation of income or gains, including with the United States and most EU nations. Its Investment Charter has put in place a convertibility system for foreign investors and gives investors the freedom to transfer profits. Morocco’s Free Trade Agreement (FTA) with the United States entered into force in 2006, immediately eliminating tariffs on more than 95 percent of qualifying consumer and industrial goods. For a limited number of products, tariffs will be phased out through 2024. Since the U.S.-Morocco FTA came into effect, overall bilateral trade has increased by more than 300 percent, and the United States is now Morocco’s third largest trading partner. The U.S. and Moroccan governments work closely to increase trade and investment through high-level consultations, bilateral dialogue, and the annual U.S.-Morocco Business Development Conference, which provides a platform to strengthen business-to-business ties.

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Mozambique

Executive Summary

The once-promising Mozambican economy, which had seen steady 8% growth for many years and seemed to be a Foreign Direct Investment magnet for the foreseeable future, skidded into economic crisis after the April 2016 discovery of $1.4 billion in government-backed loans made to two state-owned defense and security companies without parliamentary approval or national budget inclusion. Following the revelation of this massive hidden debt, which surfaced only after an investigation into a similarly questionable $800 million government-backed loan to a state-owned fishing company in 2013 that turned out to have a large undisclosed military component, donors froze over $250 million in direct budget support and the IMF cancelled a second tranche of its stand-by credit facility (SCF). Economic indicators worsened throughout the year, with growth rates falling to 3.5%, the metical devaluing over 40% against the U.S. dollar, and inflation rates climbing well above 20%. Meanwhile the Government of Mozambique’s (GRM) debt to GDP ratio reached nearly 130% of GDP by the end of 2016.

In an attempt to restore confidence in the Mozambican economy, the newly appointed Central Bank Governor took decisive action to right the banking sector, taking administrative control over one bank and liquidating another. He also steeply raised interest rates and reserve requirements in an attempt to safeguard the banking sector and stop the fall of the local currency, the metical. In December 2016, a special Parliamentary Inquiry Commission investigating the GRM’s role in signing off on the $2 billion in state-backed loans found that the provision of state guarantees without authorization by the National Assembly broke the budget law and violated Mozambique’s constitution. As a confidence building measure, the GRM agreed to have an independent, international forensic audit into the debts.

Though undoubtedly experiencing a downturn, Mozambique remains a country full of potential. Despite Mozambique’s economic malaise, companies are moving closer to Final Investment Decisions (FID) for the development of substantial natural gas deposits in the Rovuma Basin, off Mozambique’s northern shores. Texas-based Anadarko Petroleum, the largest U.S. investor in Mozambique, is leading an international consortium to invest $25-30 billion in a liquefied natural gas (LNG) development in the far north of the country. This will be the largest single infrastructure project in Africa to date. And, in March 2017, ExxonMobil signed an agreement to purchase a 25% stake in Italian-company Eni’s LNG concession for $2.8 billion.

Mozambique offers the experienced investor the potential for high returns, but remains a challenging place to do business. Investors must factor in corruption, an underdeveloped financial system, poor infrastructure, and high on-the-ground costs. Transportation inside the country is slow and expensive, while bureaucracy, port inefficiencies, and corruption complicate imports. Political conflict in much of 2016 along the single north-south road hampered intra-country trade and tourism and complicated companies’ ability to import and export products. For the moment, however, this situation appears to have been resolved. Local labor laws remain an impediment to hiring foreign workers, even when domestic labor lacks the requisite skills. The financial crisis also impacted the GRM’s ability to secure financing for even the most critical infrastructure projects. And local Mozambican partners selling imported products in the local currency had trouble making payments in U.S. dollars to suppliers.

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Namibia

Executive Summary

Namibia is a stable, democratic country, and the Government of the Republic of Namibia is committed to stimulating economic growth and employment through foreign investment. The Ministry of Industrialization, Trade and SME Development is the governmental authority primarily responsible for carrying out the provisions of the Foreign Investment Act of 1990 (FIA). The government emphasizes the need for investors to partner with Namibian-owned companies and/or have a majority of local employees in order to operate in the country. Namibia’s judiciary is widely regarded as independent. In early 2017, the Namibian government implemented a new procurement act that is more in line with international standards and aims to ensure greater transparency. Regulations for the act came into force on April 1, 2017.

The FIA calls for equal treatment of foreign investors and Namibian firms, including the possibility of fair compensation in the event of expropriation, international arbitration of disputes between investors and the government, the right to remit profits, and access to foreign exchange.

There are large Chinese foreign investments in Namibia, particularly in the uranium mining sector. Australia and the United Kingdom (U.K.) are other important investors in uranium mining. South Africa has considerable investments in the diamond mining and banking sectors, while the U.K. has additional investment in zinc and copper mines. Foreign investors from Brazil, Spain, the U.K, Netherlands, the United States, and other countries have expressed interest in oil exploration off the Namibian coast, although the interest has dwindled with the worldwide drop in petroleum prices. European and Chinese companies are investing in the fisheries sector.

Namibia has a relatively small domestic market, high transport costs, relatively high energy prices, and a limited skilled labor pool. These disadvantages are offset by the main factors facilitating Namibia’s inward Foreign Direct Investment (FDI): political stability, a favorable macroeconomic environment, an independent judicial system, protection of property and contractual rights, good quality of infrastructure, and easy access to South Africa. Namibia also has access to the Southern African Customs Union (SACU), the Southern African Development Community’s (SADC) Free Trade Area, and markets in Europe. The investment climate is generally positive.

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Nepal

Executive Summary

With an annual Gross Domestic Product (GDP) of about $21 billion, and total trade of $7.27 billion in 2015 (including $129 million in U.S.-Nepal bilateral trade), Nepal is a small contributor to the global economy. However, its location between India and China – two of the world’s fastest growing economies – may make Nepal attractive to some foreign investors.

Nepal’s natural resources have significant commercial potential.

Hydroelectric power – of which Nepal has an estimated 40,000 MW of commercially viable potential – could be a major source of income and help meet South Asia’s growing energy needs.

Other sectors offering potential investment opportunities include agriculture, tourism, and infrastructure.

The Government of Nepal (GON) is taking steps to improve the investment climate through new legislation that could make investment opportunities more attractive. These new laws include the Industrial Enterprise Act, a Special Economic Zone Act, an amendment to the Companies Act, and a new Intellectual Property Rights policy. Parliament is also reviewing a new Foreign Investment bill and a revised Labor bill that could be approved in 2017. While this new legislation is a welcome development, the GON will have to ensure that the new laws are fully implemented in order for the investment climate to improve.

Nepal offers opportunities for investors willing to accept inherent risks and the unpredictability of doing business in the country. While Nepal has established some investment-friendly laws and regulations, significant investment barriers remain.

Corruption, laws limiting the operation of foreign banks, limitations on the repatriation of profits, limited currency exchange facilities, and the government’s monopoly over certain sectors of the economy, such as electricity transmission and petroleum distribution, undermine foreign investment in Nepal.

Millions of Nepalis look for employment overseas, creating a drain on an already poorly trained workforce.

The proliferation of politicized trade unions, typically affiliated with one or more political parties, and unpredictable general strikes also limit investment.

Immigration laws and visa policies for foreign investors can be cumbersome and obstructive, which are exacerbated by an inefficient government bureaucracy and a relatively high turnover rate of officials.

Political uncertainty is another challenge for foreign investors in Nepal. The country has made considerable strides since the end of a ten-year Maoist insurgency in 2006. Nepal has held free and fair Constituent Assembly elections in 2008 and 2013, completed the integration of former combatants into the Nepalese Army, and promulgated a constitution in 2015. However, widespread dissatisfaction with some constitutional provisions led to prolonged protests across much of Nepal’s southern Terai belt, as well as a prolonged blockage of Nepal’s border with India. A series of elections – local, provincial, and national – constitutionally-mandated to take place before January 2018 could spark further unrest.

Nepal’s geography also presents challenges. The country’s mountainous terrain and poor infrastructure increase the cost of transportation of raw materials as well as finished goods. The nearest seaport is in Kolkata, India, about 900 kilometers from Kathmandu.

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*Data after 2012 is not available.

Netherlands

Executive Summary

The Netherlands consistently ranks among the world’s most competitive industrialized economies. It offers an attractive business and investment climate and remains a welcoming location for business investment from the United States and elsewhere.

Distinguishing strengths of the Dutch economy include the Netherlands’ stable political and macroeconomic climate, a highly-developed financial sector, strategic location, well-educated and productive labor force, and high-quality physical and communications infrastructures. Investors in the Netherlands take advantage of its highly competitive logistics industry, anchored by the largest seaport and fourth-largest airport in Europe. In telecommunications, the Netherlands has among the highest internet coverage (96%) in the European Union (EU) and hosts the largest data transport hub in the world.

The Netherlands is among the largest recipients and sources of foreign direct investment (FDI) in the world and the largest historical recipient of FDI from the United States. This reflects the Netherlands’ competitive economy, tax climate, and a hub of investment treaties containing strong investor protections that many corporations looking to invest in third countries find favorable. The Dutch economy is characterized by a high degree of foreign investment, in a wide range of sectors including logistics, information technology, and manufacturing.

In the wake of the financial crisis, the Dutch government implemented significant reforms in key policy areas, including the labor market, the housing sector, the energy market, the pension system, and health care. Dutch reform policies were crafted following close consultations with key stakeholders, including business associations, labor unions, and civil society groups.

Following a protracted recession that ended in late 2013, following three years of uneven recovery, the macroeconomic outlook in the Netherlands is much improved. The Dutch economy is currently considered to be experiencing stable growth with government-projected economic growth of 2.1 percent of GDP in 2017 and 1.8 percent in 2018. Projected drivers of growth include increased exports and business investments, as well as invigorated domestic consumption.

The Netherlands is the top destination of U.S. foreign direct investment (FDI) abroad, just over $858 billion out of a total of $5 trillion U.S. FDI worldwide. This amounts to over 17% of U.S. FDI.

Dutch investors contribute $283 billion FDI to the United States. Nine percent of the $3.1 trillion of inward FDI to the United States originates from the Netherlands.

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New Zealand

Executive Summary

New Zealand has an open, transparent economy where businesses and investors can generally make commercial transactions with ease. Major political parties are committed to an open trading regime and sound rule of law practices, and the country enjoys minimal corruption. This is regularly reflected in high global rankings in the World Bank’s Ease of Doing Business report and Transparency International’s Perceptions of Corruption. In the aftermath of the GFC, the government made changes to the financial system to shore up investor confidence. Significant legislative changes included: the establishment of a regulatory body, the Financial Markets Authority under the Financial Markets Authority Act, introduction of the Financial Markets Conduct Act, the Financial Reporting Act, and the Anti-Money Laundering and Countering Financing of Terrorism Act.

More recently the government has introduced initiatives under its Business Growth Agenda that promote New Zealand as a destination for overseas investment. In 2015 the Government introduced an Investment Attraction Strategy to attract more “high quality” foreign direct investment; attract multinationals to undertake research and development in New Zealand; and attract individual investors and entrepreneurs to migrate and reside in New Zealand.

In its strategy, the New Zealand Government aims to leverage existing offshore networks of the Ministry of Foreign Affairs and Trade (MFAT), New Zealand Trade and Enterprise (NZTE), Immigration New Zealand (Immigration NZ), and Kea New Zealand (a New Zealand government business networking initiative) to generate investment leads.

There has been strong activity in New Zealand’s early-stage capital markets. Growth in angel investment activity sourced domestically and internationally over the last few years has been largely driven by the rise of investment in software companies, technology, and food and beverage companies. In its Regional Investment Attraction program, the Government has identified sectors by region that are working to attract foreign investment, including forestry in Northland and energy in Taranaki. Other sectors to be targeted include those in which New Zealand has a competitive advantage, or those that are considered high quality, niche, and/or value-added such as premium food and beverage, specialized manufacturing, agricultural expertise and technology, ICT/digital, and shared services.

Half of New Zealand’s foreign direct investment comes from Australia, with the United States ranking second, constituting about eight percent. Similarly, over half of New Zealand’s outward direct investment goes to Australia, with the United States ranked second at about 17 percent.

In 2016 the Government issued new guidelines and increased resources for the entity that reviews certain foreign investment, the Overseas Investment Office, in response to investors’ concerns that waiting times for decisions were too long, and that the screening for certain investment types was unclear.

New Zealand will hold its general election in September 2017, and a new government could decide to review and possibly alter the foreign investment framework, or how it promotes New Zealand as destination for foreign investment.

The 2017 Investment Climate Statement for New Zealand uses the exchange rate of NZD 1 = USD 0.71.

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Nicaragua

Executive Summary

The Government of Nicaragua is actively seeking to increase economic growth by supporting and promoting foreign investment. The government emphasizes its pragmatic management of the economy through a model of consensus and dialogue with private sector and labor representatives. A key draw for investors is Nicaragua’s relatively low-cost and young labor force, with approximately 75 percent of the country under 39 years old. Additionally, the country’s relative physical safety compares favorably with other countries in Central America. Nicaragua is a party to the Central America-Dominican Republic Free Trade Agreement (CAFTA-DR) and enjoys a strong trade relationship with the United States.

To attract investors, Nicaragua offers significant tax incentives in many industries, including mining and tourism. These include exemptions from import duties, property tax incentives, and income tax relief. The country has a well-established free trade zone regime with major foreign investments in textiles, auto harnesses, medical equipment, call centers, and back office services. The construction sector has also attracted significant investment, buoyed by major infrastructure and housing projects, as well as the telecommunications sector, which resulted in enhanced mobile phone and broadband coverage. The country’s investment promotion agency, ProNicaragua, is a well-regarded and effective facilitator for foreign investors. In October 2016, the Government of Nicaragua passed a Public-Private Partnership Law to facilitate infrastructure development.

Weak governmental institutions, deficiencies in the rule of law, and extensive executive control can create significant challenges for those doing business in Nicaragua, particularly smaller foreign investors. Many individuals and entities raise concerns about customs and tax operations in particular. The Embassy continues to hear accounts from U.S. citizens seeking redress for property rights violations and has raised concerns to the Government of Nicaragua about the infringement of private property rights affecting U.S. citizens.

Presidential elections held in 2016 further concentrated power, with an authoritarian executive branch exercising significant control over the legislative, judicial, and electoral functions. A bill was introduced in the U.S. Congress in April 2017 (H.R. 1918) which would prohibit the United States from supporting international financial institution loans to Nicaragua due to these shortcomings. Large-scale investors and firms with positive relations with the ruling party are advantaged in their dealings with government bureaucracy. There is a widespread perception that the judicial sector and police forces are politicized and are subject to external influence. Additionally, the important presence of state-owned enterprises and firms owned or controlled by government officials and members of the ruling party reduces transparency and can put foreign companies at a disadvantage.

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Niger

Executive Summary

Niger is eager to attract foreign investment and has taken steps to improve its business climate, including making reforms to liberalize the economy, encourage privatization, and increase imports and exports.

In March 2016, President Issoufou was elected for a second five-year term. During his inauguration speech, he laid out his “Renaissance II” vision for Niger’s development, highlighting plans to further develop the nation’s mining, petroleum, and industrial sectors, while scaling up the country’s transport infrastructure. He further promised a sustained 7 percent annual GDP growth throughout his term in office. Issoufou’s vision incorporates the need for external investment and the Government of Niger (GON) continues to seek foreign investment – American or otherwise. During a visit to New York in September 2016, on the margins of the 71^st UN General Assembly, President Issoufou met with U. S. investors to convey the message that Niger is open for business and would welcome U.S. investment. The GON’s Chamber of Commerce has a special unit dedicated to assisting both foreign and Nigerien investors, and the GON highlights the benefits of doing business in Niger: political stability, economic freedom, an active Chamber of Commerce, and a waiting time of no more than three days to start a business. GON focus areas for investment include the mining sector, infrastructure and construction, transportation, and agribusiness.

Unfortunately, U.S. investment in the country is very small; many U.S. firms see risk due to the country’s limited transport and energy infrastructure, the perception of political instability and terrorist threats, and a climate that is dry and very hot. Foreign investment dominates key sectors: the mining, transportation and telecommunications sectors are dominated by French firms, while Chinese investment is paramount for the oil and large-scale construction sectors. Much of the country’s retail stores, particularly those related to food, dry goods and clothing are operated by Lebanese and Moroccan entrepreneurs. There are currently no major U.S. firms operating in Niger.

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Nigeria

Executive Summary

Nigeria is the largest economy and most populous country in Africa with an estimated population of more than 180 million and a gross domestic product of 481 billion USD in 2015 (World Bank data). The Nigerian economy grew briskly for much of the past decade before beginning to slow down in 2014, owing in large part to the decline in the global oil market. Its economy fell into recession in 2016 with the IMF estimating GDP to have contracted 1.7 percent in 2016. Gains from economic growth have also been uneven, as more than 60 percent of the population lives in poverty and unemployment is widespread. A very young country with nearly two-thirds of its population under the age of 25, Nigeria has long been Africa’s largest oil producer, but falling output owing in part to insurgent attacks on production facilities in the Niger River Delta caused Nigeria temporarily to fall behind Angola in 2016. Nigeria offers abundant natural resources and a low-cost labor pool, and enjoys mostly duty-free trade with other member countries of the Economic Community of West African States (ECOWAS). However, much of Nigeria’s market potential remains unrealized because of significant impediments such as pervasive corruption, inadequate power and transportation infrastructure, high energy costs, an inconsistent regulatory and legal environment, insecurity, a slow and ineffective bureaucracy and judicial system, inadequate intellectual property rights protections and enforcement, and an inefficient property registration system.

Nigeria depends on exports of crude oil for the majority of government revenue and over 90 percent of foreign exchange earnings, so lower oil prices and reduced oil production due to militant activities in the Niger Delta region in 2016 have posed foreign exchange challenges for the Central Bank of Nigeria (CBN) and a fiscal challenge for the government. After a year of pegging the naira at 196-199N/$1, which created dollar shortages and gave rise to a parallel market exchange rate ranging from 350-400N/$1, in June 2016 the Central Bank allowed the naira to depreciate. The result was not a floating of the naira but a new peg to the dollar reset in the 310-320N/$1 range. The naira subsequently depreciated even further on the parallel market, falling to 460-480N/$1 by the end of 2016 and squeezing margins for traders and manufacturers, who pay for imports in dollars but earn revenue in Naira (most manufacturers in Nigeria rely heavily on imported inputs). To preserve foreign exchange reserves and promote import substitution, in 2015 the CBN published a list of 41 categories of items for which official foreign exchange would not be provided, effectively restricting access to dollars for many businesses. Many companies and economists believe the CBN’s policy to defend the naira is unsustainable, and concerns about foreign exchange restrictions and about monetary policy in general continued to contribute to economic uncertainty throughout 2016 and early 2017.

Nigeria’s underdeveloped power sector remains a significant bottleneck to broad-based economic development. Current production is around 4,000 megawatts of power, forcing the businesses to generate most of their own electricity. The World Bank currently ranks Nigeria 180th out of 189 countries for ease of obtaining electricity for business. Reform of Nigeria’s power sector is ongoing, but investor confidence has been shaken by tariff and regulatory uncertainty. The privatization of distribution and generation companies in 2013 was based on projected levels of transmission and progress toward a fully cost reflective tariff to sustain operations and investment. However, tariff increases were reversed in 2015, and revenues were severely impacted due to decreased transmission levels as well as high commercial, collections, and technical losses, resulting in a severe liquidity crisis throughout the power sector value chain. The Nigerian Government, in partnership with the World Bank, published a Power Sector Recovery Plan (approved by the Federal Executive Council) in March 2017. It is an ambitious plan that addresses the critical constraints and challenges and will require political will, external investment to address the accumulated deficit, and discipline in implementing plans to mitigate future shortfalls. It is, nevertheless, a step in the right direction, and recognizes explicitly that the Nigerian economy is losing on average approximately$29 billion annually due to lack of adequate power.

Nigeria’s trade regime remains protectionist in key areas. High tariffs, restricted forex availability for 41 categories of imports, and prohibitions on many other import items aim to spur domestic agricultural and manufacturing sector growth. Nigeria’s imports declined in 2016, largely as a result of the country’s economic recession. U.S. goods exports to Nigeria in 2016 were USD 1.9 billion, down 44 percent from the previous year, while U.S. imports from Nigeria were USD 4.2 billion, an increase of 121 percent. U.S. exports to Nigeria are primarily refined petroleum products, used vehicles, cereals, and machinery. Crude oil and petroleum products continued to account for over 95 percent of Nigerian exports to the United States in 2016. The stock of U.S. foreign direct investment (FDI) in Nigeria was USD 5.5 billion in 2015 (latest data available), a slight increase from USD 5.2 billion in 2014. U.S. FDI in Nigeria continues to be led by the oil and gas sector. There is also investment from the United States and other countries in Nigeria’s power, telecommunications, real estate (commercial and residential), and agricultural sectors.

Given the corruption risk associated with the Nigerian business environment, potential investors often develop anti-bribery compliance programs. The United States and other parties to the OECD Anti-Bribery Convention aggressively enforce anti-bribery laws, including the U.S. Foreign Corrupt Practices Act (FCPA). A high-profile FCPA case in Nigeria’s oil and gas sector resulted in 2010 U.S. Securities Exchange Commission (SEC) and U.S. Department of Justice rulings that included record fines for a U.S. multinational and its subsidiaries that had paid bribes to Nigerian officials. Since then, the SEC has charged an additional four international companies with bribing Nigerian government officials to obtain contracts, permits, and resolve customs disputes. See SEC enforcement actions at https://www.sec.gov/spotlight/fcpa/fcpa-cases.shtml.

Security remains a concern to investors in Nigeria due to high rates of violent crime, kidnappings for ransom, and terrorism. The ongoing Boko Haram insurgency has included attacks against civilian and military targets in the northeast of the country, causing general insecurity and a major humanitarian crisis there. Seven bombings of high-profile targets with multiple deaths have occurred in the federal capital Abuja since October 2010. Other bombings and assassinations, the majority linked to Boko Haram, have occurred in the cities of Kaduna, Maiduguri, Damaturu, Bauchi, Jos, Kano, and Suleja. In the Niger Delta region, militant attacks on oil and gas infrastructure in 2016 restricted oil production and export in 2016, but a restored amnesty program and more federal government engagement in the Delta region have brought a reprieve in violence during the second half of the year and allowed limited restoration of shut-in oil and gas production. The longer-term impact of the government’s Delta peace efforts, however, remains unclear and criminal activity in the Delta – in particular, rampant oil theft – remains a serious concern. Maritime criminality in Nigerian waters, including incidents of piracy and crew kidnap for ransom, has increased in recent years and law enforcement efforts have been limited or ineffectual. Onshore, international inspectors have voiced concerns over the adequacy of security measures at some Nigerian port facilities. Businesses report that bribery of customs and port officials remains common and necessary to avoid delays, and smuggled goods routinely enter Nigeria’s seaports and cross its land borders.

Freedom of expression and of the press remains broadly observed, with the media often engaging in open, lively discussions of challenges facing Nigeria. Some journalists, however, occasionally practice self-censorship on sensitive issues.

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Norway

Executive Summary

Norway is a modern, highly developed country with a small but very strong economy. Per capita GDP is among the highest in the world, boosted by success in the oil and gas sector and other world-class industries like shipping, shipbuilding and aquaculture. The major industries are supported by a strong and growing professional services industry (finance, ICT, legal), and there are emerging opportunities in clean-tech, med-tech and biotechnology. Strong collaboration between industry and research institutions attracts international R&D activity and funding. The decline in oil prices since the summer of 2014 has led to a slowdown in the offshore and related industries and contributed to a rise in unemployment from under 4 percent to 4.4 percent (January 2017). The depreciation of the Norwegian Krone (NOK) against most major foreign currencies has led to record high exports for some industries.

Norway is a safe and easy place to do business, ranked 6 out of 190 countries in the World Bank’s Doing Business Report, and 6 out of 175 on Transparency International’s Corruption Perceptions Index. Norway is politically stable, with strong property rights protection and an effective legal system. Productivity is significantly higher than the EU average.

Norway welcomes foreign investment as a matter of policy and generally grants national treatment to foreign investors. Some restrictions exist on foreign ownership and use of natural resources and infrastructure. The government remains a major owner in the Norwegian economy and retains monopolies on a few activities, such as the retail sale of alcohol.

While not a member of the European Union (EU), as a member of the European Economic Area (EEA; including Iceland and Liechtenstein, with access to the EU single market’s movement of persons, goods, services and capital), Norway continues to liberalize its foreign investment legislation to conform more closely to EU standards and has cut red tape over the last decade to make investment easier. Foreign direct investment in Norway stood at USD 145 billion at the end of 2016 and has more than doubled over the last decade. In 2013, the Government established “Invest in Norway,” Norway’s official investment promotion agency, to help attract and assist foreign investors. There are about 5,500 foreign-owned companies in Norway, and over 300 U.S. companies have a presence in the country.

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Oman

Executive Summary

Overall, Oman’s investment climate is conducive to U.S. investment. Omani officials and businesspeople generally value U.S. technology, skills, and expertise in a wide range of fields, count on U.S. firms’ reputation for reliable, transparent business practices, and are keen to leverage U.S. business models, corporate values, and entrepreneurial culture in order to take fuller advantage of the United States-Oman Free Trade Agreement (FTA). U.S. firms enjoy special privileges due to the FTA, namely duty exemptions, national treatment, and non-discrimination in government procurement. Some legacy issues still exist, however, such as lack of compliance on the part of Omani Customs to FTA Article 4 regarding duty exemption for eligible U.S. goods transshipped via Dubai. Additionally, Oman continues to impose an “In-Country Value” program to promote local sourcing. To work through these issues, the Ministry of Commerce and Industry and Royal Oman Police-Customs have worked with the U.S. Embassy to address and resolve individual cases. Omanization mandates, compelling companies to hire Omani employees, and scarcity of gas for new manufacturing projects posed challenges for U.S. investors.

Advantages of investing in Oman include:

• The United States-Oman Free Trade Agreement; a modern business law framework; respect for free markets, contract sanctity and property rights; relatively low taxes; and a one-stop-shop at the Ministry of Commerce and Industry for business registration;
• The educated and largely bilingual Omani work force;
• The excellent quality of life: Oman is a modern, friendly, and scenic country, with outstanding international schools, widely-available consumer goods, modern infrastructure, and a convenient and growing transportation network;
• Oman’s geographic location, just outside the Persian Gulf and the Strait of Hormuz, along busy shipping lanes carrying a significant share of the world’s maritime commercial traffic, with convenient access and connections to the Gulf, Africa, and the subcontinent;
• The steady and ambitious investment by the Government of Oman (GoO) in the country’s infrastructure, including manufacturing free zones, seaports, airports, rail, and roads, as well as in its health care and educational systems and facilities.

Foreign investment is increasing in Oman as international firms recognize the growing opportunities related to the Sultanate’s massive infrastructure investment program as well as increased efforts to diversify away from oil and gas, particularly with low world oil prices in late 2014 to 2016. Non-oil-based economic growth stood at 1.3 percent in 2015, reflecting the low oil prices which affected the GoO’s capital expenditures and investments. According to Oman’s National Centre for Statistics and Information, nominal GDP contracted by 14.6 percent in 2015 and by 11.1 percent in 2016 (calculated using data through September 2016 on a year-on-year basis), largely driven by low oil prices The government’s diversification ambitions, which focus on the manufacturing, logistics, tourism, finance, fisheries, and mining sectors, have generally not yet had a significant impact on the economy as a whole. Despite the continued effects of low oil prices on fiscal revenues, the Omani government remains committed to continuing spending on existing infrastructure projects.

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Pakistan

Executive Summary

Despite a relatively open foreign investment regime, Pakistan remains a challenging environment for foreign investors. An improving but unpredictable security situation, chronic energy shortages, and a difficult business climate – including lengthy dispute resolution processes, poor intellectual property rights (IPR) enforcement, and inconsistent taxation policies – have contributed to a drop in Foreign Direct Investment (FDI) in recent years. Pakistan ranked 144 out of 190 countries in the World Bank’s Doing Business 2017 rankings, improving two places from the previous year.

The Pakistan Muslim League-Nawaz (PML-N) government was elected in May 2013 on pledges to improve Pakistan’s economy, enhance trade and investment, and resolve the chronic energy shortages. In September 2013, the Government of Pakistan and the International Monetary Fund (IMF) entered a three-year $6.8 billion Extended Fund Facility (EFF) arrangement which included a series of reform benchmarks. The government successfully completed the EFF program in September 2016, and with the help of the IMF, implemented some macroeconomic reforms. Progress on other key areas, however, including privatization, has been slow, impeded by strong domestic political pressures.

The United States has consistently been one of the largest sources of FDI in Pakistan and one of its most significant trading partners. Two-way trade in goods between the United States and Pakistan exceeded $5.5 billion in 2016, including a 14 percent increase in U.S. exports to Pakistan over 2015. The Karachi-based American Business Council, an affiliate of the U.S. Chamber of Commerce, has a membership of 68 U.S. companies, most of which are Fortune 500 companies, operating in Pakistan across a range of industries. The Lahore-based American Business Forum also provides assistance to U.S. investors. American companies have profitable investments across a range of sectors, notably, but not limited to, fast-moving consumer goods and financial services. Other sectors attracting U.S. interest have been: franchising, information and communications technology (ICT), thermal and renewable energy, and healthcare services.

In 2003, the United States and Pakistan signed a Trade and Investment Framework Agreement (TIFA) to serve as a key forum for bilateral trade and investment discussion. The TIFA seeks to address impediments to greater trade and investment flows and increase economic linkages between our respective business interests. TIFA meetings are held annually, the most recent of which was led by USTR Michael Froman in October 2016 in Islamabad.

The Millennium Challenge Corporation, a U.S. Government entity charged with delivering development grants to countries that have demonstrated a commitment to reform, produced scorecards for countries with a per capita gross national income (GNI) of $4,125 or less. A list of countries/economies with MCC scorecards and links to those scorecards is available here: http://www.mcc.gov/pages/selection/scorecards. Details on each of the MCC’s indicators and a guide to reading the scorecards are available here: https://www.mcc.gov/who-we-fund/how-to-read-a-scorecard.

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Panama

Executive Summary

As the home of the Panama Canal, the world’s second largest free trade zone, and sophisticated logistics and finance operations, Panama attracts relatively high levels of foreign direct investment from the region and from around the world. Panama boasts one of the Western Hemisphere’s fastest growing economies, good credit, a strategic location, and a stable, democratically elected government.

Panama’s Ministry of Economy and Finance predicts the economy will grow by 5.8 percent in 2017, up from an estimated 4.9 percent in 2016, and in line with 5.8 percent growth in 2015. Panama’s sovereign debt rating is investment grade, with ratings of Baa2 (Moody’s), and BBB (Fitch; Standard & Poor’s). The Panama Canal Authority inaugurated a USD 5.4 billion expansion of the Panama Canal in June 2016. It will promote increased investment in port systems operations, storage facilities, and logistics. Panamanian President, Juan Carlos Varela has sought to improve Panama’s image and investment climate profile. Panama received a record USD 5.21 billion in Foreign Direct Investment (FDI) in 2016 – up 16 percent from 2015, and it retains one of the highest “FDI to GDP” ratios in Latin America.

Panama has challenges, including a poor educational system, high labor costs, a lack of skilled workers, and reports of corruption, fraud, and a perceived lack of judicial transparency. Foreign investors in Panama have also complained about a lack of transparency in government procurements. Some U.S. firms have reported inconsistent, unfair, and biased treatment from Panamanian courts.

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Papua New Guinea

Executive Summary

Papua New Guinea (PNG), located in Oceania in the southwestern Pacific Ocean, is rich in natural resources such as, gold, oil, gas, copper, silver, timber, and fishery reserves. The Government of Papua New Guinea (GPNG) welcomes foreign investment and appears to have a liberal investment approach, but in practice this stance is more complex. The GPNG has placed a higher priority on the downstream processing of these resources in order to drive sustainable economic growth. Slumping global commodity prices caused a significant slowdown in economic growth 2016 that is expected to continue in 2017.

Large investments have been limited to the mining and petroleum sectors. The most notable investment has been ExxonMobil’s USD 19 billion liquefied natural gas (LNG) project. ExxonMobil’s project was completed on time and only slightly over budget. The first LNG cargo departed PNG in May 2014 with regular deliveries since then. French oil company Total is currently in the final stages of analysis before a final investment decision on a similarly large investment in its Papua LNG project. Tourism is seen by the GPNG as a sector with huge untapped potential. GPNG is very hopeful that it will be able to market the country to a global audience when it hosts the Asia-Pacific Economic Cooperation (APEC) in 2018, a first for PNG. GPNG also views its APEC host-year as a time to drive policy change and structural reforms; however, the policy specifics are yet to be worked out.

Over the course of 2016, and in the face of lower global commodity prices, the GPNG has focused on small and medium enterprises (SMEs) as a driver of future economic growth. In launching a new SME policy, GPNG set an ambitious target of creating 500,000 new SMEs by 2030.

While a sovereign wealth fund has been legally established, low commodity prices and the creation of Kumul Consolidated Holdings (KCH) as the state owned enterprise (SOE) holding company, have put the fund’s operations on hold until KCH is able to restructure the revenue management stream for SOEs in key sectors.

Over the past few years, GPNG has taken steps towards increasing transparency in the management of the country’s natural resources. In 2013, GPNG submitted their membership application to the Extractive Industries Transparency Initiative (EITI), which was later approved in March 2014. EITI is a global standard to promote open and accountable management by strengthening government and company systems. In March 2016, GPNG published its first report on natural resource contracts and revenues in the country. The report was an important first step but revealed various challenges and limitations in getting relevant data from SOEs, which is characteristic of a lack of transparency in the management of SOEs in PNG.

Among the challenges to investment, foreign investors cite weak enforcement of contracts, inconsistent government policies, corruption, crime, inadequate infrastructure, lack of access to constant utilities, underdeveloped private markets, and extremely high commodity and telecommunications costs. Most recently, a lack of foreign exchange has hampered international investment in PNG.

In addition, U.S. companies have shared concerns about the GPNG procurement process, stating cases where competition has been narrowly tailored in order to limit participants – resulting in U.S. companies being unable to compete.

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Paraguay

Executive Summary

Paraguay has a small but rapidly growing open economy with a strong macroeconomic position and the potential for continued growth over the next decade. Major drivers of economic growth in Paraguay are the agriculture, retail, and construction sectors. The Government of Paraguay (GOP) encourages private foreign investment. Paraguayan law grants investors tax breaks, permits full repatriation of capital and profits, supports maquila operations, and guarantees national treatment for foreign investors. Standard & Poor’s, Fitch, and Moody’s all upgraded Paraguay’s credit ratings over the past three years.

Paraguay scores at the mid-range or lower in most competitiveness indicators, judicial insecurity hinders the investment climate, and trademark infringement and counterfeiting are major concerns. Additionally, the Cartes administration’s efforts to push a constitutional amendment through congress that would allow him to run for re-election resulted in uncharacteristically violent protests in 2017, raising questions on political stability. Previously, the Government of Paraguay took measures to improve the investment climate, including the passage of laws addressing competition, public sector payroll disclosures, and access to information. The Cartes administration also escalated intellectual property enforcement.

Paraguay’s export and investment promotion bureau, REDIEX, prepares comprehensive information about business opportunities in Paraguay.

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Peru

Executive Summary

Peru was one of the fastest growing Latin American economies between 2004 and 2013, growing at an average rate of 6 percent per year. Though growth slowed in 2014 and 2015, Peru’s 3.9 percent growth in 2016 remained higher than the -0.8 percent regional average. The government’s counter-cyclical stimulus spending, consumption, and private investment are the driving forces of this growth. Private investment totaled USD 36 billion in 2016. As the economy has grown, poverty in Peru has steadily decreased, falling from 56 percent in 2005 to 21.8 percent in 2015. President Kuczynski aims to increase private investment by streamlining administrative processes and reducing bureaucracy, while addressing corruption and social conflict.

The Government of Peru (GOP) has encouraged integration with the global economy by signing a number of free trade agreements, including the United States-Peru Trade Promotion Agreement (PTPA), which entered into force in February 2009. In 2016, trade of goods between the United States and Peru totaled USD 14.3 billion up from USD 9.1 billion in 2009, the year the PTPA entered into force. From 2009 to 2016, Peruvian exports of goods to the United States jumped from USD 4.2 billion to USD 6.3 billion (a 48 percent increase) while U.S. exports of goods to Peru jumped from USD 4.9 billion to USD 8.0 billion (a 63 percent increase). The United States also enjoys a favorable trade balance in services; exports of services in 2015 to Peru amounted to USD 3.9 billion and contributed to a USD 991 million services surplus the same year.

Corruption and civil unrest around extractive projects continue to negatively affect Peru’s investment climate. Transparency International ranked Peru 101st out of 176 countries in its 2016 Corruption Perceptions Index. In December 2016, Brazilian company Odebrecht admitted it had paid USD 29 million in bribes in Peru, leading to investigations involving high level officials of the last three Peruvian administrations and halting progress on major infrastructure projects. According to the Ombudsman, there were 155 active social conflicts in Peru as of February 2017, of which 78 befell mining projects.

Extractive industries are a key draw of foreign investment. According to Peru’s Private Investment Promotion Agency (ProInversion), 23 percent of foreign direct investment in 2016 went to the mining sector, 20 percent to the communications sector, and 17 percent to the financial sector. Other destinations for investment included energy (14 percent) and industry (13 percent).

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Philippines

Executive Summary

The Philippines is becoming a more attractive destination for foreign direct investment (FDI). The country’s middle class is growing, and Filipinos quickly spend disposable income in a fairly stable political environment, helping gross domestic product soar to an average growth of 6.1 percent over the last six years. According to central bank data, FDI inflows reached a record growth of U.S. $7.9 billion in 2016, a 40.7 percent increase from 2015. The majority of investments went into finance and insurance; arts, entertainment and recreation; manufacturing, real estate, and construction. The Business Process Outsourcing (BPO) and tourism sectors have experienced growth in recent years.

The Philippines has improved its overall investment climate. The Philippines’ sovereign credit ratings remain investment grade, due to the country’s robust economic performance, continued fiscal and debt consolidation, and improved governance. Still, improvement is needed. The Philippines lags behind most of the ten Association of Southeast Asian Nations (ASEAN) in attracting FDI (the Philippines was ranked 9 of 10 ASEAN countries on FDI as a percentage of GDP in 2015). Foreign ownership limitations in many sectors of the economy pose a significant constraint. Poor infrastructure, including high power costs and slow broadband connections, regulatory inconsistency, and corruption are major disincentives to investors. The Philippines’ complex, slow, and sometimes corrupt judicial system inhibits the timely and fair resolution of commercial disputes. Investors describe the business registration process as slow and burdensome, although there are signs of improvement. Traffic in major cities and port congestion remain a regular cost of business.

Investors report the Philippine bureaucracy can be difficult and opaque. However the business environment is notably better within the special economic zones, particularly those available for export businesses operated by the Philippine Economic Zone Authority (PEZA), known for its regulatory transparency, no red-tape policy, and “one-stop shop” services for investors. The Duterte Administration’s 10-Point Socioeconomic Agenda seeks to address these constraints by increasing the country’s competitiveness and ease of doing business. The administration also wants to relax constitutional restrictions on foreign ownership to attract foreign direct investment. Many investors are hopeful President Rodrigo Duterte’s relatively large political capital can help effect these changes.

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Poland

Executive Summary

In the twenty-seven years since Poland discarded communism and the thirteen years since it joined the European Union (EU), Poland’s investment climate has improved and is highly conducive to U.S. investment. Poland’s economy has experienced a long period of uninterrupted economic expansion since 1992. In 2016, Poland’s growth lost some momentum as a gap in spending EU funds curtailed public investment. Additionally, controversial economic legislation dampened optimism in some sectors. Poland’s prospects for future growth are mainly driven by domestic demand and inflows of EU funds from the 2014-2020 financial framework. These will likely continue to attract investors seeking access to its dynamic market of over 38 million people, and to the broader EU market of nearly 500 million.

Foreign investors cite Poland’s well-educated, skilled, and competitively-priced work force as a major reason to invest, as well as its proximity to major markets. U.S. firms represent one of the largest groups of foreign investors in Poland. While official U.S. statistics show the stock of U.S. FDI in Poland at USD 11 billion, the volume amounts to closer to USD 40 billion if taking into account the amounts routed through U.S. subsidiaries in other countries. In its strategy for Responsible Development the government prioritizes streamlining regulation and bureaucratic processes to make doing business easier.

The government seeks to expand the economy by supporting productivity and foreign trade, encouraging and facilitating entrepreneurship, scientific research, technological development, and innovation through the use of domestic and EU funding. Recent legislation increased tax breaks for entrepreneurs, and decreased corporate income tax rate on small and medium enterprises.

There are opportunities for foreign direct investment (FDI) in a number of Polish sectors. Historically FDI was largest in the automotive and food processing industries, followed by machinery and other metal products and petrochemicals. Business process outsourcing of accounting, legal, and information technology services, as well as research and development, are Poland’s fastest-growing sectors, and will continue to attract FDI. Defense is another promising sector, as Poland will spend between USD 35-45 billion through 2022 on military modernization. The government seeks to promote domestic production and technology transfer opportunities in awarding military tenders. There are investment and export opportunities in the energy sector (nuclear and natural gas) as Poland seeks to diversify its energy mix and reduce air pollution. Information technology and infrastructure also show promise, as Poland’s municipalities focus on smart city networks and the government implements its plan to connect all Polish households to the internet by 2020. The government’s plans to revitalize the shipbuilding sector may also provide opportunities for U.S. manufacturers and exporters of maritime equipment and technologies.

While the overall economic outlook is positive, recently proposed policies and newly passed legislation have tempered investor confidence. For example the Polish tax system, particularly transfer pricing, and tax enforcement procedures underwent many changes in 2016 with the aim of increasing budget revenues. Some organizations claimed changes were introduced quickly and without broad consultation, increasing uncertainty about the stability and credibility of the Polish tax system. Recently introduced or announced measures (e.g. an increase of the minimum wage, lowering of the retirement age, and a new universal child benefit) may decrease labor force participation and increase cost of labor in light of existing demographic contraction and emigration. Legal, regulatory, and environmental uncertainty in the energy, healthcare, retail and banking sectors have recently also been areas of concern for investors.

On September 30, 2015 the Act on the Control of Certain Investments entered into force, which provides for the screening of acquisitions in energy generation and distribution, petroleum production, processing and distribution; telecommunications; as well as the manufacturing and trade of explosives, weapons and ammunition.

U.S. energy and investment firms have expressed concern about the recently passed “Law on Investments in Wind Power.” The law specifies a wind turbine site must be placed at a distance of ten times the total height of the installation as measured from ground level to the highest point, which, on average, will be a minimum distance of two kilometers from residences and environmentally protected areas, precluding most site development in Poland.

U.S. companies invested in the pharmacy and healthcare sectors have expressed concern about multiple proposed regulatory and legislative changes which would limit competition and access to these markets.

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Portugal

Executive Summary

Portugal emerged from an extended economic crisis and successfully completed its European Union-IMF bailout program in 2014, registering moderate growth, and decreasing, though still high, unemployment in 2014-2016. The structural reforms implemented since 2011 have created an economic and regulatory climate that is favorable to foreign investment. Corporate taxes and unit labor costs have decreased, while new investment incentives have been established. The government has also taken important steps toward improving the efficiency of its judicial system, creating two specialized courts for intellectual property and competition and streamlining court districts and the Code of Civil Procedure.

Portugal’s economy is fully integrated into the European Union (EU). Fellow EU member states remain Portugal’s biggest trading partners and its largest investors. Portugal complies with EU law for equal treatment of foreign and domestic investors. Beyond Europe, Portugal maintains significant links with former colonies including Brazil, Angola, and Mozambique.

Portugal is one of 19 Eurozone members; the European Central Bank (ECB) acts as central bank for the euro (€) and determines monetary policy. Portugal’s banking sector has faced a number of challenges in recent years, including the costly central bank-led resolution of Banco Espirito Santo (succeeded by Novo Banco) in 2014 and Banif in 2015. Nonetheless, the sector’s future seems brighter as the biggest private banks are undergoing restructuring and recapitalizations. In 2016 Portugal’s second largest bank, Millennium BCP, increased its capital by €1.33 billion and fully repaid an outstanding €750 million owed to the government since 2012. In the same year, BPI, the country’s fourth largest bank was fully acquired by Spain’s Caixa Bank. With the sale of Novo Banco to Texas-based Lone Star Capital – anticipated to conclude by mid-2017 – and the recapitalization of state-owned Caixa Geral de Depositos – Portugal’s largest bank – the banking sector is on much sounder footing than in recent years.

On March 9, 2017, the Portuguese Finance Minister announced that the government intends to create a new supervisory institution for overseeing bank bailouts and ensuring the overall stability of the banking system. The envisioned entity would be independent, and be tasked with reinforcing coordination among the central bank (Bank of Portugal), the securities market regulator (CMVM) and the insurance and pension funds supervisor (ASF). Creation of the new body would require the approval of both the Portuguese Parliament and European authorities, following a public consultation period. It remains to be seen how this body would affect the existing authority of European-level supervisory bodies like the ECB.

The EU-U.S. Privacy Shield, announced in February 2016, will replace the previous Safe Harbor framework for data transfers between the United States and member states of the EU. In addition, Portugal will be subject to new rules stipulated in the EU’s General Data Protection Regulation which the Directive enters into force on 5 May 2016 and EU Member States have to transpose it into their national law by 6 May 2018: http://ec.europa.eu/justice/data-protection/reform/index_en.htm

As of 2013, between 10 and 20 percent of land in Portugal has no clear title. In 2016, the government approved a new measure stating that all land not registered within the next two years would be transferred to a State-managed “Land Bank” for a period of 15 years. If the land has not been claimed within that 15 year period, the land in question will revert to the State. To facilitate this process, the government has created the “Single Land Office” within the Land Registry Office. Further information on the registration process can be found at:

• http://www.irn.mj.pt/sections/irn/a_registral/registo-predialand
• http://www.irn.mj.pt/IRN/sections/irn/a_registral/registo-predial/docs-predial/faq-s-de-registo-predial/

Following national legislative elections in November 2015, the center-left Socialist Party formed a minority government that got off to a somewhat shaky start as it sought to undo certain privatizations and public transport contracts. However, the government has since publicly promoted the importance of foreign investment and fostered both economic stability and growth, enabling Portugal to surpass EU growth predictions. In 2016, Portugal registered its lowest budget deficit since the restoration of democracy in 1974, and the country is expected to completely exit the EU’s Excessive Deficit Procedure in the first half of 2017.

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Qatar

Executive Summary

The State of Qatar is the world’s leading exporter of liquefied natural gas (LNG) and has the highest per capita income in the world. In recent years, Qatar has had one of the fastest growing economies in the world, though lower energy prices have produced a relative decline in growth. The World Bank estimates a gross domestic product (GDP) growth of 3.6 percent in 2017. Due to lower hydrocarbon prices, Qatar is expecting its second budget deficit in fifteen years in 2017, partly due to the Government of Qatar’s decision to maintain high levels of government spending in pursuit of its 2030 National Vision. To offset the deficit, the government raised debt internationally and sold $9 billion of Eurobonds in 2016. In contrast to other oil/gas-dependent economies, Qatar’s LNG supply contracts and relatively low production costs have largely shielded Qatar from the impact of depressed energy prices.

The government remains the dominant actor in Qatar’s economy, though it encourages private investment in many sectors and continues to take steps to encourage more foreign investment. In 2016, the government streamlined its procurement processes and created an online portal for all government tenders in an effort to improve transparency. The government also created a regulatory regime to curb corruption and anti-competitive practices. It is also in the process of introducing reforms to its foreign investment laws to allow 100 percent foreign ownership of businesses in more economic sectors. These measures promise an attractive environment for foreign investors. In adherence to the country’s 2030 National Vision, Qatar aims to modernize infrastructure and establish an advanced knowledge-based and diversified economy which will no longer be reliant on the hydrocarbon sector.

As Qatar plans to spend $200 billion in the lead up to the 2022 FIFA World Cup and in implementation of its long term National Vision, there are significant opportunities for foreign investment in infrastructure, healthcare, education, tourism, and financial services, and other sectors. Qatar’s 2017 budgetary spending is focused, in particular, on infrastructure, health, and education. By value of inward foreign direct investment (FDI) stock, oil and gas downstream manufacturing, transportation and marketing remain the primary sectors that attract most foreign investment to Qatar.

Qatar provides various incentives to local and foreign investors. Qatar was ranked first globally by the World Bank’s 2017 Doing Business Report for its taxation regime. The corporate tax rate is 10 percent and there is no personal income tax. A value-added tax (VAT) will be introduced for the first time in 2018, as part of a GCC-wide initiative, and taxes on luxury items and products harmful to human health and the environment – such as tobacco, alcohol, soft drinks, and energy drinks – will be applied starting in mid-2017.

In recent years, Qatar has begun to invest heavily in the United States through its sovereign wealth fund, the Qatar Investment Authority (QIA), and its subsidiaries, notably Qatari Diar. QIA’s current strategy for the United States includes at least $45 billion in intended investments in various sectors over five years. QIA opened an office in New York City in September 2015 to help facilitate these investments.

The U.S. and Qatar launched the Economic and Investment Dialogue (EID) in October 2015 in Washington, DC to further strengthen the bilateral economic relationship and help address obstacles to investment and trade. The second EID took place in Doha in December 2016, and the third round of talks will take place in Washington, D.C. in the fall of 2017.

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Romania

Executive Summary

Romania welcomes all forms of foreign investment. The government provides national treatment for foreign investors, meaning that the government does not differentiate treatment due to source of capital. Romania’s strategic location, membership in the European Union, relatively well-educated workforce, competitive wages, and abundant natural resources make it a desirable location for firms seeking to access European, Central Asian, and Near East markets. U.S. investors have found opportunities in the information technology, telecommunication, energy, services, manufacturing, and consumer products sectors.

The investment climate in Romania is a mixed picture, and potential investors should undertake due diligence when considering any investment. The Romanian government has taken steps in recent years to improve tax administration and collection, enhance transparency, and support a legal framework conducive to foreign investment. Romania is also a regional leader in judicial efforts to combat high and medium-level corruption. However, the current government’s attempt in late January 2017 to weaken criminal legislation has shaken confidence in the government’s commitment to rule of law and anti-corruption efforts, and triggered prolonged protests in Bucharest and other cities. Some government leaders accused “multinational companies” of sponsoring the protests, adding to occasional political rhetoric scapegoating foreign corporate entities for domestic companies’ alleged dire circumstances. The Romanian government has exposed its state owned enterprises (SOEs) to heightened standards of corporate governance through initial and secondary public offerings and attracted additional international investors, bolstering Romania’s capital markets. The Romanian government’s sale of minority stakes in several SOEs in key sectors, such as energy generation and exploitation, has stalled since 2014. The development and enforcement of corporate governance codes for SOEs remains incomplete.

Consultations with stakeholders and impact assessments are required before enactment of legislation. However, this requirement has been unevenly followed, and public entities generally do not have the capacity to conduct thorough impact assessments. The arbitrary passage of ill-conceived economic legislation serves as a disincentive to U.S. and multinational investment. Romania has made significant strides to combat corruption, particularly at the national level, but corruption remains an ongoing challenge. Inconsistent enforcement of existing laws, including those related to the protection of intellectual property rights, also serves as a disincentive to investment. Continuing to attract and retain additional foreign direct investment will require further progress on transparency, stability, and predictability in economic decision-making, and the reduction of non-transparent bureaucratic procedures.

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Russia

Executive Summary

While the Russian Federation made substantial advances in 2016 to decrease the regulatory burden on businesses at the regional level, fundamental structural problems in governance of the economy continue to stifle foreign direct investment throughout the country. In particular, Russia’s judicial system remains heavily biased in favor of the state, leaving investors often with little recourse in the event of a legal dispute with the government. High levels of corruption among government officials compound this risk. The Russia government frequently adopts rules with little to no transparency or without incorporating public comments, creating significant business uncertainty. Moreover, Russia’s import substitution program often gives local producers a sizeable advantage over foreign competitors that do not meet Russia’s localization requirements. Additionally, Russia’s actions in eastern Ukraine and Crimea have led to the imposition of sanctions on targeted Russian entities by the United States and European Union – increasing the cost of legal compliance for U.S. companies and placing restrictions on the types of business activities permitted in Russia.

U.S. investors in Russia must ensure they are in full compliance with U.S. sanctions stemming from Russia’s annexation of Crimea in March 2014. These measures include a prohibition on the refinancing of debt beyond 30 days for sanctioned entities, restrictions on the export to Russia of certain kinds of equipment for the energy sector, and a complete ban on dealings with those entities or individuals identified by the U.S. Treasury Department as “specially designated nationals.” Further information on the U.S. sanctions program is available at the U.S. Treasury’s website: https://www.treasury.gov/resource-center/sanctions/Programs/pages/ukraine.aspx.

The Agency for Strategic Initiatives has played an important role in improving Russia’s investment climate. Its system of ranking Russian regions, available at https://asi.ru/investclimate/rating/, has spurred many local authorities to improve the investment climate in their regions relative to others. As different regions compete for foreign investment, local authorities have substantially reduced local regulations, which account for the bulk of foreign investors’ regulatory burden.

A new law on public-private-partnerships (224-FZ) took effect January 1, 2016. The legislation allows an investor to acquire ownership rights over a property; in previous approaches to public-private-partnerships, the public authority retained ownership rights

Russia’s Special Investment Contract program, launched in 2015, aims to increase investment in Russia by offering tax incentives and simplified procedures for dealings with the government. These contracts, generally negotiated with and signed by the Ministry of Industry and Trade, ostensibly allow for the inclusion of foreign companies in Russia’s import substitution programs by providing access to certain subsidies for foreign producers if local production is established. In principle, these contracts may also aid in expediting customs procedures. In practice, however, reports suggest even companies that sign such contacts find their business hampered by policies biased in favor of local producers.

Russia’s Strategic Sectors Law (SSL) establishes a list of 45 “strategic” sectors or activities in which purchases of controlling interests by foreign investors must be pre-approved by Russia’s Commission on Control of Foreign Investment. In 2014, the Russian government expanded the list to include companies, investments, and transactions.

In 2015 Russian law was amended to give the Russian Constitutional Court authority to disregard verdicts by international bodies, including investment arbitration bodies, if it determines the ruling contradicts the Russian constitution.

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