An official website of the United States Government Here's how you know

Official websites use .gov

A .gov website belongs to an official government organization in the United States.

Secure .gov websites use HTTPS

A lock ( ) or https:// means you’ve safely connected to the .gov website. Share sensitive information only on official, secure websites.

Fiji

2. Bilateral Investment Agreements and Taxation Treaties

Fiji has double taxation agreements with Australia, Japan, Malaysia, New Zealand, Papua New Guinea, the Republic of Korea, Singapore, United Arab Emirates, and the United Kingdom.  Fiji has not entered into a bilateral investment treaty or a double taxation agreement with the United States.

3. Legal Regime

Transparency of the Regulatory System

The lack of consultation with the private sector and other stakeholders on proposed laws and regulations remains an area of concern.  The business community has complained that the government enacts new regulations with little prior notice or publicity. There is a perception among foreign investors of a lack of transparency in government procurement and approval processes.  Some foreign investors considering investment in Fiji have encountered lengthy and costly bureaucratic delays, shuffling of permits among government ministries, inconsistent and changing procedures, lack of technical capacity, costly penalties due to the interpretation of tax regulations by the Fiji Revenue and Customs Service (FRCS), and slow decision-making.  The Biosecurity Authority of Fiji (BAF) regulates all food and animal products entering Fiji and has stringent and costly point-of-origin inspection and quarantine requirements for foreign goods. Some importers have had import permits denied for categories of food or animal products which were previously allowed, with little or no explanation for the change.

Fiji’s constitution provides for public access to government information and for the correction or deletion of false or misleading information.  Although the constitution requires that a freedom of information law be enacted, there is no such law yet. The parliamentary website (http://www.parliament.gov.fj/  ) is a centralized online location that publishes laws and regulations passed in parliament.

International Regulatory Considerations

Fiji has been a member of the WTO since January 1996.  According to Fiji’s trade profile on the WTO website, there are no records of disputes.  Fiji ratified the WTO’s Trade Facilitation Agreement in 2017.

Legal System and Judicial Independence

The legal system in Fiji developed from British law.  Fiji maintains a judiciary consisting of a Supreme Court, a Court of Appeal, a High Court, and magistrate courts.  The Supreme Court is the final court of appeal.

Both companies and individuals have recourse to legal treatment through the system of local and superior courts.  A foreign investor theoretically has the right of recourse to the courts and tribunals of Fiji with respect to the settlement of disputes, but government decrees have been used to block foreign investors from legal recourse in investment takeovers, tax increases, or write-offs of interest to the government.

Laws and Regulations on Foreign Direct Investment

The Foreign Investment Act (FIA) and the 2009 Foreign Investment Regulation regulate foreign investment in Fiji. All businesses with a foreign-investment component in their ownership are required to register and obtain a Foreign Investment Registration Certificate (FIRC) from Investment Fiji.  Information on the registration procedures, regulations, and registration requirements for foreign investment is available at the Investment Fiji website: http://www.investmentfiji.org.fj. Amendments to the FIA also require that foreign investors seek approval prior to any changes in the ownership structure of the business, with penalties incurred for non-compliance.

Investment Fiji’s online Single Window Clearance System enables online business registration, application for a FIRC, and application fee payment.  Information on the registration procedures, regulations, and registration requirements for foreign investment is available at the Investment Fiji website: http://www.investmentfiji.org.fj.  However, the most up to date reporting requirements may not be available on the website.

Competition and Anti-Trust Laws

The Fiji Commerce Commission (FCC), established under the 2010 Commerce Commission Decree, regulates monopolies, promotes competition, and controls prices of selected hardware, basic food items, and utilities, in order to ensure a fair, competitive, and equitable market.

Expropriation and Compensation

Expropriation has not historically been a common phenomenon in Fiji.  A foreign investor theoretically has the same right of recourse as a Fijian enterprise to the courts and other tribunals of Fiji to settle disputes.  In practice, the government has acted to assert its interests with laws affecting foreign investors.

In 2013, the government amended the Foreign Investment Decree with provisions to permit the forfeiture of foreign investments as well as significant fines for breaches of compliance with foreign investment registration conditions.

Dispute Settlement

ICSID Convention and New York Convention

Fiji acceded to the New York Convention in September 2010.  Fiji has been a member of the ICSID since September 1977. However, there are no legislative or other measures adopted to make the convention effective.

Investor-State Dispute Settlement

The government has sometimes opted to penalize foreign investors in lieu of dispute settlement by deportation but there have been no new cases since 2016.  .

Past investment disputes have often focused on land issues, particularly in the mining, timber and tourism sectors.  Such disputes have been resolved through labor-management dialogue, government intervention, referral to compulsory arbitration, or through the courts.  In some instances, the investors have withdrawn from Fiji when a resolution could not be found. Fiji is a party to the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States.

The World Bank Doing Business 2019 survey ranked Fiji 97 out of 190 on the efficiency of the judicial system to resolve a commercial dispute.  According to the survey, Fiji took 397 calendar days to complete procedures at a cost of 42.6percent of the value of the claim.

International Commercial Arbitration and Foreign Courts

Fiji is a party to the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States.  Fiji acceded to the New York Convention in September 2010. In 2017, Fiji enacted the International Arbitration Act to improve the framework governing international commercial arbitration.  With the support from the United Nations Commission on International Trade Law (UNICTRAL), Fiji has adopted a version of the UNICTRAL model law on arbitration. In 2016, Fiji setup the Fiji Mediation Center (FMC), an alternative dispute resolution mechanism, with local and international mediators accredited by the Center in collaboration with Singapore.  The FMC services include family, commercial, and small case mediation, and as of March 2019, has mediated over 190 cases, with 67 percent of the mediated cases settled, and 84 percent of cases settled within one working day.

Bankruptcy Regulations

Fiji’s Companies Act 2015 has provisions relating to solvency and negative solvency.  According to the 2019 World Bank Doing Business survey, in terms of resolving insolvency, Fiji was ranked 96 out of 190.  The survey estimated that it took 1.8 years at a cost of ten percent of the estate to complete the process, with an estimated recovery rate of 46.5 percent of value.

8. Responsible Business Conduct

Responsible Business Conduct (RBC) is increasingly promoted, with both multi-national companies and large local companies practicing RBC through charitable foundations.  Major companies’ advertising often promotes the company’s social benefits or charity sponsorships. There is no official favoring of RBC-friendly businesses, and consumers tend to seek value for money.  The government has included a social responsibility component for SOEs that provide essential utilities.

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

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

Host Country Statistical Source* USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) ($M USD) 2017 $5,061.2 2016 $4,671.3 www.worldbank.org/en/country   
Foreign Direct Investment Host Country Statistical Source* USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) 2017 N/A 2017 $148 BEA data available at https://www.bea.gov/international/direct-investment-and-multinational-enterprises-comprehensive-data  
Host country’s FDI in the United States ($M USD, stock positions) 2017 N/A 2017 N/A BEA data available at https://www.bea.gov/international/direct-investment-and-multinational-enterprises-comprehensive-data  
Total inbound stock of FDI as % host GDP 2017 N/A 2017 92.0 UNCTAD data available at https://unctad.org/en/Pages/DIAE/World%20Investment%20Report/Country-Fact-Sheets.aspx  

* Source for Host Country DataU.S. Bureau of Economic Analysis, United Nations Conference on Trade Development

Marshall Islands

2. Bilateral Investment Agreements and Taxation Treaties

The Marshall Islands does not have a bilateral investment treaty with any country.

3. Legal Regime

Transparency of the Regulatory System

Regulatory and accounting systems are generally transparent and consistent with international norms. Bureaucratic procedures are generally transparent, although nepotism and customary hierarchal relationships can play a role in government actions.  There are frequent accusations of official corruption across the RMI government. Proposed laws and regulations are available in draft form for public comment pursuant to the Administrative Procedures Act, Title 6 of the Marshall Islands Revised Code.  Generally, tax, labor, environment, health and safety, and other laws and policies do not impede investment. There are no informal regulatory processes managed by nongovernmental organizations or private sector associations.

International Regulatory Considerations

The Marshall Islands is a member of the Pacific Islands Forum (PIF) which has a model regulatory and policy framework focused on competition, access and pricing, fair trading, and consumer protections.  The RMI seeks to implement PIF-agreed standards domestically; however, the capacity for enforcement is weak.

Legal System and Judicial Independence

The Republic of the Marshall Islands has a responsive judiciary that consistently upholds the sanctity of contracts. The legal system in the Marshall Islands is patterned on common law proceedings as they exist in the United States. The country has a judicial branch composed of a Supreme Court, a High Court, a Traditional Rights Court, District Courts, and Community Courts. The Supreme Court is made up of one Chief Justice and two Associate Justices.  The High Court consists of the Chief Justice and one Associate Justice. The Chief Justices are both U.S. Citizens serving 10-year terms. There are also three Traditional Rights Court judges, two District Court judges, and several Community Court judges serving the Marshall Islands. On certain occasions, as necessary, the Marshall Islands Judicial Service Commission recruits qualified judges on contract from the United States to serve with the Chief Justice on the Supreme Court and to temporarily fill vacancies on the High Court as there are few qualified and independent Marshallese who can fill these positions.  The Traditional Rights Court deals with customary law and land disputes.

The Marshall Islands Courts are generally considered fair, without undue influence or interference.  Marshall Islands Court rulings, legal codes, and public law can be found on their website: http://www.rmicourts.org/ .

Laws and Regulations on Foreign Direct Investment

All non-citizens wishing to invest in the Marshall Islands must obtain a Foreign Investment Business License (FIBL). The FIBL is obtained from the Registrar of Foreign Investment in the Ministry of Finance. In coordination with the Investment Promotion Unit at the Ministry of Resources and Development, the Ministry of Finance reviews the application and ensures that the business does not fall under the categories of the National Reserved List listed above. The application process usually takes 7-10 working days. The FIBL grants non-citizens the right to invest in the Marshall Islands, provided the investment remains within the scope of business activity for which the FIBL was granted.

The 2015 amendment to the Foreign Investment Business License Act requires all holders of FIBLs to maintain reliable and complete accounting records and records of ownership, and that all business records must be kept in such a way that they can be converted into written form at the request of an authorized inspector.  These records must be retained for a period of five years.

Competition and Anti-Trust Laws

The Marshall Islands does not currently have any anti-trust legislation or agency which reviews transactions for competition-related concerns.

Expropriation and Compensation

All land is privately owned by Marshallese citizens through complex family lineages. Although the Government of the Republic of the Marshall Islands may legally expropriate property under the country’s constitution, the government has only exercised this right on one occasion and only for a temporary period of time. Given the importance of private land ownership in customary law and practice, it is very unlikely that the government will exercise this right in the foreseeable future.

If a business activity is subsequently added to the reserved List, the Registrar of Foreign Investment may not cancel or revoke an existing Foreign Investment Business License if the investment has already commenced.

Dispute Settlement

ICSID Convention and New York Convention

The Marshall Islands has been a signatory to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the 1958 New York Convention) since 2006, but is not a member of the International Center for Settlement of Investment Disputes (ICSID), nor does it have plans to become a member at this time.

Investor-State Dispute Settlement

There are no ongoing investment disputes involving the Government of the Republic of the Marshall Islands and foreign investors.   There is a very limited record of foreign investment disputes in the Marshall Islands due to the small size of foreign investment in the country. The most common type of business disputes are with landowners over land use, and land rights issues, and as there is currently no official dispute resolution procedure, these are frequently resolved informally or only after protracted court proceedings.  Domestic civil society has traditionally not been actively engaged in dispute resolution. The Marshall Islands Courts are generally considered fair, without undue influence or interference. There is no history of extrajudicial action against foreign investors.

International Commercial Arbitration and Foreign Courts

The Republic of the Marshall Islands does not have any alternative dispute resolution (ADR) mechanisms or domestic arbitration bodies available as a means for setting disputes between two private parties.  There is no known history of the RMI enforcing foreign commercial arbitral decisions.

Bankruptcy Regulations

There is no legal provision for bankruptcy in the Marshall Islands.  There is a provision by which companies can elect to close themselves down, but there is no law through which creditors can apply to the court for liquidation and sale of assets of companies that are unable to pay their debts.   It ranks 167 out of 190 for resolving insolvency in World Bank’s 2018 Doing Business Report.

8. Responsible Business Conduct

The Marshall Islands has some basic worker protection laws, including a minimum wage and protections for foreign workers.  With the exception of a few retail businesses, the banking sector, and the ship registry, there is little general awareness of corporate social responsibility or responsible business conduct among producers or consumers.  Firms that pursue these objectives are viewed neither favorably nor unfavorably.

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

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

Host Country Statistical Source* USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) ($M USD) 2017 $196 2017 $199.4 www.worldbank.org/en/country 
Foreign Direct Investment Host Country Statistical Source* USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) NA NA 2017 $3,264 BEA data available at http://bea.gov/international/direct_investment_multinational_companies_comprehensive_data.htm 
Host country’s FDI in the United States ($M USD, stock positions) NA NA 2017 $9 BEA data available at http://bea.gov/international/direct_investment_multinational_companies_comprehensive_data.htm 
Total inbound stock of FDI as % host GDP 2016 2.6% 2017 9.2% UNCTAD data available at
https://unctad.org/en/Pages/DIAE/World%20Investment%20Report/Country-Fact-Sheets.aspx 

*Local GDP statistics from the Economic Policy, Planning and Statistics Office (EPPSO) which serves as an economic advisor to the Government of the Republic of the Marshall Islands. It is responsible for Policy & Strategy Development, Statistics & Analysis, and Performance Monitoring, Evaluation & Aid Co-ordination. EPPSO is directly responsible to the Office of the President.


Table 3: Sources and Destination of FDI

No detailed information is available on the IMF’s Coordinated Portfolio Investment Survey (CPIS) website and no information is available on outward direct investment from the RMI.


Table 4: Sources of Portfolio Investment

Data not available.

Micronesia, Federated States of

2. Bilateral Investment Agreements and Taxation Treaties

No bilateral investment or taxation agreement existed between the U.S. and the FSM. The 2003 Amended Compact of Free Association was the only applicable guidance, with additional information available online. Under this treaty, articles imported from the U.S. into the FSM were guaranteed to receive treatment that was no less favorable than any other foreign country.  Articles exported from the FSM to the U.S. were duty exempt, with a few exceptions as listed in Article IV, Section 242 of the Compact.

3. Legal Regime

Transparency of the Regulatory System

The FSM was not a signatory to any convention on transparency in international investment. Transparency of government actions was typically based more on personalities than on the law. Regulatory bodies sometimes involve themselves in issues beyond their jurisdiction. Conversely, other regulations were not uniformly enforced.  It was often difficult to obtain public records, although some states and government organizations do require open meetings. Text or summaries of proposed regulations were published before enactment but they were not printed in an official journal or publication, and there was no appeal or administrative review process. In addition, government audits and statistical reports were not prepared promptly and current data is often unavailable.

One of the two websites that provided relatively recent (if not comprehensive) data and economic reporting were taken offline after government reorganization.  The website for the National Public Auditor (http://www.fsmopa.fm) remained active and updated.

International Regulatory Considerations

The FSM was a signatory to the Pacific Island Countries Trade Agreement (PICTA) but FSM did not ratify the agreement. PICTA was a free trade agreement on trade in goods among 14 members of the Pacific Islands Forum. (Australia and New Zealand are excluded.) It was signed in 2001. Eleven countries — Cook Islands, Fiji, Kiribati, Nauru, Niue, Papua New Guinea, Samoa, Solomon Islands, Tonga, Tuvalu and Vanuatu — have so far ratified PICTA. The FSM was not a member of any regional economic block, nor was it a member of the WTO.

Legal System and Judicial Independence

The FSM followed the U.S. common law system, and used U.S. cases as precedent.  There were no specialized courts with the exception of a Land Courts in Pohnpei and Kosrae.  All States have Supreme Courts and State Courts. The judicial system remained independent of the executive branch, but was reported to be slow, weak, and lacked the ability to properly enforce judgments.  Regulations or enforcement actions were appealable. It was not necessary to have appeals adjudicated at the National court; appeals could be made at either the State or National courts.

Laws and Regulations on Foreign Direct Investment

In September 2018, Pohnpei State Legislature overrode the Governor’s veto of a bill on Foreign Investment regulations.  The bill became State Law over the objection of several local business leaders. The new law placed all decision making power into the hands of one person, the Registrar of Corporations.

 A constitutional amendment allowing dual citizenship was voted on in March 2017 and again failed to pass. (Note:  Dual U.S./FSM citizenship is not allowed under the FSM Constitution.) The individual states directly regulated all foreign investment, except in the areas of deep ocean fishing, banking, insurance, air travel, and international shipping, which were regulated at the federal level.  FSM national and state governments used a “traffic light” system to regulate businesses, with red for prohibited, amber for restricted, and green for unrestricted. Industry classifications in this system vary from state-to-state. Thus, a prospective investor who planned to operate in more than one state must obtain separate permits in each state, and often follow different regulations as well.

The following are the regulations pertaining to restrictions by sector in each of the states:

FSM National

  • Red: Arms manufacture, minting of currency, nuclear power, radioactive goods.
  • Amber: Increased scrutiny before approval for non-traditional banking services and insurance.
  • Green: Banking, fishing, air transport, international shipping.

Kosrae State

  • Red: manufacture of toxic, biohazard materials, gambling, casinos, fishing using sodium/cyanide or compressed air.  (Note: There is also currently a ban on all business transactions on Sundays in the capital town.)
  • Amber: Real estate brokerage, non-ecology-based tourism, trade in reef fish, coral harvesting
  • Green: Eco-tourism, export of local goods, professional services.

Pohnpei State

  • Red: None presently defined, determined by board from amber candidates.
  • Amber: Everything not classified as green.
  • Green: Businesses with greater than 60 percent FSM ownership, initial capitalization of USD250,000 or more, professional services with capitalization of USD50,000 or more, and Special Investment Sector businesses with 51 percent FSM ownership in retail, trade, exploration, development, and extraction of land or marine based mineral resources or timber.

Chuuk State

  • Red: Determined by the Director, none codified in law.
  • Amber: Casinos, lotteries, industries that pollute the environment, destroy local culture and tradition, or deplete natural resources.
  • Green: Eco-tourism, professional services, intra-state airline services, exports of local goods.

Yap State

  • Red: Manufacture of toxic materials, weapons, ammunition, commercial export of reef fish, activities injurious to the health and welfare of the citizens of Yap.
  • Amber: None at present.
  • Green: All others.

Competition and Anti-Trust Laws

There is no law or agency governing competition in the FSM.

Expropriation and Compensation

The FSM Foreign Investment Act of 1997 guaranteed no compulsory acquisition or expropriation of property of any foreign investment for which a Foreign Investment Permit was issued, except for violation of laws and regulations and in certain extraordinary circumstances. Those extraordinary circumstances included cases in which such action would be consistent with existing FSM eminent domain law, when such action was necessary to serve overriding national interests, or when either the FSM Congress or the FSM Secretary of Resources and Development has initiated expropriation.  There was no history of expropriation involving foreign investors or U.S. companies.

Dispute Settlement

ICSID Convention and New York Convention

Since 1993, the FSM was a member of the Convention on Settlement of Investment Disputes between States and Nationals of Other States (ICSID), but was not a party to the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards.  To date, there were no ICSID cases.

Investor-State Dispute Settlement

The FSM was not a signatory to a treaty or investment agreement in which binding international arbitration of investment disputes is recognized. Disputes take years to resolve and still may not produce concrete results.  Some cases were on the docket, with no or little movement, for thirty years or more.

International Commercial Arbitration and Foreign Courts

There were no provisions under FSM Federal law for alternative dispute resolution.  This was also true of the states, with the exception of Kosrae, where an alternative dispute resolution system has taken the place of a small claims court.  Judgments from foreign jurisdictions were not enforceable in FSM courts.

Bankruptcy Regulations

A bankruptcy law was in existence since 2005, but was used only three times, generally to avoid taxes.

8. Responsible Business Conduct

There was little awareness or definition of responsible business conduct (RBC) in the FSM.  However, most local businesses were small and generally responsive to the community in which they operate.  The two U.S.-based companies in the FSM generally follow RBC principles. The host government did not promote RBC or factor it in evaluations for public contracts, nor did the country adhere to the convention on OECD guidelines for multinational enterprises.

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

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

Host Country Statistical Source* USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) ($M USD) N/A N/A 2017 $3.2 www.worldbank.org/en/country   
Foreign Direct Investment Host Country Statistical Source* USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) N/A N/A N/A N/A BEA data available at https://www.bea.gov/international/direct-investment-and-multinational-enterprises-comprehensive-data  
Host country’s FDI in the United States ($M USD, stock positions) N/A N/A N/A N/A BEA data available at https://www.bea.gov/international/direct-investment-and-multinational-enterprises-comprehensive-data  
Total inbound stock of FDI as % host GDP N/A N/A N/A N/A UNCTAD data available at https://unctad.org/en/Pages/DIAE/World%20Investment%20Report/Country-Fact-Sheets.aspx  


Table 3: Sources and Destination of FDI

There is no data available from the IMF’s Coordinated Portfolio Investment Survey regarding sources and destination of FDI in Micronesia

 

Table 4: Sources of Portfolio Investment

There is no data available from the IMF’s Coordinated Portfolio Investment Survey regarding sources of Portfolio Investment in Micronesia

Papua New Guinea

2. Bilateral Investment Agreements and Taxation Treaties

PNG has Bilateral Investment Treaties (BITs) with Australia, China, Germany, Japan, Malaysia, and the United Kingdom.  PNG has a free trade agreement (FTA) with the countries of the Melanesian Spearhead Group: Solomon Islands, Vanuatu, and Fiji.

PNG does not have a bilateral taxation treaty with the U.S. It currently has “double tax treaties” with the following countries: Australia, Canada, China, Fiji, Germany, Indonesia, South Korea, Malaysia, New Zealand, Singapore, and the United Kingdom.  PNG also has a tax information exchange agreement with Australia.

3. Legal Regime

Transparency of the Regulatory System

The Independent Consumer and Competition Commission (ICCC) is charged with fostering competition. While there are transparent policies in place, the competition regime works more towards the regulation of existing monopolies and does little to foster competition. Tax, labor, environment, health, and safety and other laws do not distort or impede investment. However, the lack of implementation of existing laws by some government entities frustrates some investors. For example, there are long bureaucratic delays in the processing of work permits and frequent complaints about corruption and bribery in government departments.

The IPA and the Government are moving, with the assistance of the International Finance Corporation, towards a more streamlined regulatory framework to encourage foreign investment. One example of this trend is the IPA’s move to an online registration process for businesses.

There are informal regulatory processes managed by nongovernmental organizations and private sector associations. There are impediments to the licensing of skilled foreign labor that are imposed by local professional associations, such as the Papua New Guinea Institute of Engineers and the Law Society (both of which have their own regulatory processes), that foreigners must go through before they can work/practice in the country.

There are no private sector and/or government efforts to restrict foreign participation in industry standards-setting consortia or organizations.

Proposed laws and regulations are made available for public comment, but comments are not always taken into consideration or acted on by lawmakers or regulators.

Legal, regulatory, and accounting systems are transparent and consistent with international norms, but there are delays in the dispute resolution system due to a lack of human resources in the judiciary.

When possible, proposed laws are made available for public comment, but comments are not always taken into consideration or acted on by lawmakers.  Frequently, important Parliamentary decisions, such as the annual budget, are taken with no hearings and little or no debate before voting.

Many PNG government functions and documents are available online, but not all, and they are not centralized.

Regulatory decisions can sometimes be capricious and opaque, but they do not specifically target foreign-owned businesses.  Most regulatory decisions can be appealed to courts with jurisdiction. There are no regulatory reforms currently planned.

Regulatory decisions can sometimes be capricious and opaque, but they do not specifically target foreign-owned businesses.  Most regulatory decisions can be appealed to courts with jurisdiction. There are no regulatory reforms currently planned.

The overall fiscal transparency practices in PNG lack coordination and consistency.

The Government through the Department of Finance has ongoing legislative and procedural reforms to strengthen the country’s public finance management capacity and systems. The government indicated strong outcomes with the implementation of its 2018 Public Money Management Regularization Act PMMR Act, aimed at centralizing all financial activities of the government bodies to stop unauthorized financial transactions outside of the official budgetary process.

However, the government needs greater coordination amongst reporting agencies to deliver their mandated functions and responsibilities effectively. This includes all government agencies consistently and fully reporting all required financial activities, with proper financial statements to the supreme audit institution. The lack of full and timely reporting practices continues to undermine public finance management systems, and publicly available budget information.

In addition, the content structure of budget documents remain unclear for many ordinary citizens due to low financial literacy levels, and the lack of proper public /civic awareness programs on the budget.

International Regulatory Considerations

PNG is a party to the Melanesian Free Trade Agreement.  The agreement came into effect in 2017 and does address the need for competent regulatory authorities in each country (PNG, Solomon Islands, Vanuatu, and Fiji).  However, the regulatory chapter is small and is designed to be strengthened and improved going forward.

When international standards are applied in PNG, the government most often references Australian models due to their bilateral history and continuing close economic ties.

The government notified the WTO Committee on Technical Barriers to Trade once for regulations issued in 2006 that covered food safety issues.

Legal System and Judicial Independence

The legal system is based on English common law.

Contract law in Papua New Guinea is very similar to, and applies in much the same way, as contract law in other common law countries such as Great Britain, Australia, Canada, and New Zealand. There is, however, considerably less statutory regulation of the application and operation of contracts in Papua New Guinea than in those other countries.

The Supreme Court is the nation’s highest judicial authority and final court of appeal. Other courts are the National Court; district courts, which deal with summary and non-indictable offenses; and local courts, established to deal with minor offenses, including matters regulated by local customs.

In addition to the courts mentioned above, the Constitution and the Village Courts Act established the Village Court system.  Matters involving customary law claims are likely to arise at the Village Court level. There is no jury system in Papua New Guinea. Lawyers operating in Papua New Guinea are governed by the Papua New Guinea Law Society, and only lawyers registered with the Society should be used.

While often slow, the judiciary system is widely viewed as independent from government interference.

The Supreme Court is the ultimate appeals court in Papua New Guinea. It has original jurisdiction in matters of constitutional interpretation and enforcement and has appellate jurisdiction in appeals from the National Court, certain decisions of the Land Titles Commission, and those of other regulatory entities as prescribed in their own Acts. The National Court also has original jurisdiction for certain constitutional matters and has unlimited original jurisdiction for criminal and civil matters. The National Court has jurisdiction under the Land Act in proceedings involving land in Papua New Guinea other than customary land.

Laws and Regulations on Foreign Direct Investment

Foreign investors can either be incorporated in PNG as a subsidiary of an overseas company or incorporated under the laws of another country and therefore registered as an overseas company under the Companies Act 1997.

The 1997 Companies Act and 1998 Companies Regulation oversee matters regarding private and public companies, both foreign and domestic. All foreign business entities must have IPA approval and must be certified and registered with the government before commencing operations in PNG. While government departments have their own procedures for approving foreign investment in their respective economic sectors, the IPA provides investors with the relevant information and contacts. The regulations governing foreign investments in PNG include:

  • Free Trade Zone Act 2000;
  • Investment Promotion Act 1992;
  • Papua New Guinea Companies Act 1997;
  • Forestry Act 1991;
  • Mining Act 1992;
  • Fisheries Act 1994; and
  • Oil and Gas Act 1998.

In 2014, the government amended the 1997 Companies Act to improve corporate governance and ease regulatory burdens. This amendment allowed IPA to begin using its online company registry. The main changes to the act are as follows:

  1. Increased protection and benefits for shareholders;
  2. Clarification of duties imposed upon directors;
  3. A more transparent and streamlined process of issuing shares;
  4. Increased protection of creditors, including a more disciplined liquidation process;
  5. A clearer process for filing annual returns; and
  6. Streamlined filing requirements in anticipation of implementing an online registration.

A summary of the changes to the Act can be found on the IPA website: http://www.ipa.gov.pg/wp-content/uploads/Changes-to-the-company-Act.pdf .

In 2013, the government amended the Takeovers Code to include a test for foreign companies wishing to buy into the ownership of local companies. The new regulation states that the Securities Commission of Papua New Guinea (SCPNG) shall issue an order preventing a party from acquiring any shares, whether partial or otherwise, if the commission views that such acquisition or takeover is not in the national interest of PNG. This applies to any company, domestic or foreign, registered under the PNG Companies Act, publicly traded, with more than 5 million PGK (USD 1.53 million) in assets, with a minimum of 25 shareholders, and more than 100 employees.

In recent years, this law has not been used to prevent ExxonMobil’s acquisition of InterOil or Chinese company Zijin Mining’s purchase of 50 percent of the Porgera Joint Venture gold mine.

Yes.The IPA website: https://www.ipa.gov.pg/   is the official online information platform to engage with the public on matters relating to the IPA’s mandated roles and function.

Competition and Anti-Trust Laws

The 2002 Independent Consumer and Competition Commission Act is the law that governs competition. It also established the Independent Consumer & Competition Commission (ICCC), the country’s premier economic regulatory body and consumer watchdog; introduced a new regime for the regulation of utilities, in particular in relation to prices and service standards; and allowed the ICCC to take over the price control tasks previously undertaken by the Prices Controller as well as the consumer protection tasks previously undertaken by the Consumer Affairs Council.

The Act’s competition laws, contained in Part VI of the Act, prohibit:

  • Entering into, or giving effect to contracts, arrangements or understandings having the purpose, effect or likely effect of substantially lessening competition (Section 50);
  • Arrangements between competitors that contain exclusionary provisions, which have the purpose of preventing, restricting or limiting dealings with any particular person or class of persons who are in competition with one or more of the parties to the arrangement;
  • Price fixing agreements between competitors (but fixing prices of joint venture products, recommended prices and joint buying and promotion arrangements, are not absolutely prohibited, although they may still be subject to the prohibition on contracts, arrangements, and understandings that substantially lessen competition) (Sections 53-56);
  • A person with a substantial degree of market power from taking advantage of that power for the purpose of restricting the entry of a new competitor into a market, preventing or deterring a competitor from engaging in competitive conduct, or eliminating a competitor from that market (Section 58);
  • The practice of resale price maintenance, which occurs where a supplier tries to specify a price below which a reseller may not sell the supplier’s product. This prohibition also applies to third parties seeking to insist that products not be resold below a specified price (Sections 59-64); and
  • Mergers or acquisitions that would have the effect or likely effect of substantially lessening competition in a market (Section 69).

The ICCC’s website is http://www.iccc.gov.pg  .

Interested parties may also want to go to the ICCC’s Facebook page for information on changes in policies and regulations: https://www.facebook.com/pngiccc/timeline  .

There have been no significant actions taken by ICCC in the last 12 months that have affected international investors.

Expropriation and Compensation

The judicial system upholds the sanctity of contracts, and the Investment Promotion Act of 1992 expressly prohibits expropriation of foreign assets.

After years of growing concern over environmental issues, in September 2013, the Government of Papua New Guinea nationalized the country’s largest taxpaying company, Ok Tedi Mining Limited.  The nationalization raised concerns about the government’s policy. Some observers saw this event as a special case, given that much of the company’s profits are held in trust for the people of PNG, and its effective ownership by a company – the PNG Sustainable Development Program’s (PNGSDP) – would transfer benefits from the mine back to the people. By a unanimous vote in Parliament, the government annulled PNGSDP’s share in the mine and issued new shares to the state.  This vote also removed BHP Billiton’s immunity from environmental liability and gave the state the right to restructure PNGSDP. As there have been no other expropriating acts since late 2013, the Ok Tedi Mining Limited nationalization does appear to have been a one-off.

The OK Tedi nationalization was an Act of Parliament, considered and voted on in the regular order of business.  There was no recourse or due process beyond the Parliament.

Dispute Settlement

ICSID Convention and New York Convention

Since 1978, Papua New Guinea has been a member of the International Centre for Settlement of Investment Disputes (ICSID Convention). In agreements with foreign investors, GPNG traditionally adopts the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL model law).

Papua New Guinea is one of the few UN Member states that has not signed the New York Convention (formerly known as the United Nations Convention on the Recognition and Enforcement of Foreign Arbitration Awards).

Investor-State Dispute Settlement

Investment disputes may be settled through diplomatic channels or through the use of local remedies before having such matters adjudicated at the International Centre for the Settlement of Investment Disputes or through another appropriate tribunal of which Papua New Guinea is a member. The Investment Promotion Act 1992 that is administered by the IPA also protects against expropriation, cancellation of contracts, and discrimination through the granting of most favored nation treatment to investors.  PNG does not have a Bilateral Investment Treaty (BIT) with the United States, and no claims have been made under such an agreement. There is not a recent history of international judgments against GoPNG nor is there a recent history of extrajudicial action against foreign investors.

International Commercial Arbitration and Foreign Courts

According to the Port Moresby Chamber of Commerce & Industry, the usual way for local and foreign parties to settle a dispute in Papua New Guinea is through the local court system.  Litigation in PNG is perceived to be an expensive and drawn-out process, with years for a decision to be handed down.

There are no such mechanisms outside of the courts and contract enforcement.

A 2015 international arbitration decision in favor of Interoil (which has since been acquired by ExxonMobil) and against Oil Search was respected in PNG.

There have been no such cases.

Bankruptcy Regulations

Papua New Guinea’s bankruptcy laws are included in chapter 253 of the Insolvency Act of 1951 and sections 254 through 362 of the Companies Act of 1997, which covers receivership and liquidation. Bankruptcy and litigation searches can only be conducted in person at the National Court in Port Moresby.

According to the World Bank’s Doing Business Report, resolving insolvency in Papua New Guinea takes an average of three years, and typically costs 23 percent of the debtor’s estate. The average recovery rate is 25.2 cents on the dollar. Globally, Papua New Guinea stands at 141 out of 189 economies on the Ease of Resolving Insolvency.

8. Responsible Business Conduct

PNG does not have a national action plan for responsible business conduct (RBC).  However, most multinational companies in PNG do operate with a set of standards. The concept of a social license to operate is pervasive in the extractive industries and guides interactions with all stakeholders.

Due to limited resources and capacity, many human rights, labor rights, consumer protection, environmental protections, and other such laws to protect individuals from adverse business impacts go largely unenforced.  While there are occasional cases of government action in these situations, that action is the exception, not the norm.

The government has not put in place corporate governance, accounting, and executive compensation standards to protect shareholders

There are currently no non-governmental organizations specifically monitoring RBC in PNG.

While PNG does not have specific policies, most large international companies use international best practices as standards.

PNG is a member of Extractive Industries Transparency Initiative (EITI).  PNG EITI’s efforts have thus far been hampered by a lack of cooperation from relevant government ministries and a severe lack of data.

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

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

Host Country Statistical Source USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) ($M USD) N/A N/A 2017 $20.536 Billion www.worldbank.org/en/country  
Foreign Direct Investment Host Country Statistical Source USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) N/A N/A 2016 $234 BEA data available at https://www.bea.gov/international/direct-investment-and-multinational-enterprises-comprehensive-data  
Host country’s FDI in the United States ($M USD, stock positions) N/A N/A 2017 $1.0 BEA data available at https://www.bea.gov/international/direct-investment-and-multinational-enterprises-comprehensive-data  
Total inbound stock of FDI as % host GDP N/A N/A 2017 20.9 UNCTAD data available at https://unctad.org/en/Pages/DIAE/World%20Investment%20Report/Country-Fact-Sheets.aspx  


Table 3: Sources and Destination of FDI

PNG is not a reporting country for CDIS data.


Table 4: Sources of Portfolio Investment

PNG is not a reporting country for CPIS data.

Samoa

2. Bilateral Investment Agreements and Taxation Treaties

Samoa is not party to any bilateral investment or bilateral taxation treaties.

Since 2001 there has been in place an umbrella agreement, Pacific Agreement on Closer Economic Relations (PACER), which provides a framework for future development and trade between Pacific Island nations and Australia and New Zealand.

The South Pacific Regional Trade and Economic Co-operation Agreement (SPARTECA) entered into force in 1981. SPARTECA is a non-reciprocal trade agreement under which New Zealand and Australia offer duty-free and unrestricted access to virtually all products originating from developing Forum Island Countries (FICs) subject to Rules of Origin (ROO).

The Pacific Island Countries Trade Agreement (PICTA) entered into force in April 2003.  PICTA is a free trade agreement amongst the 14 Forum Island Countries (FICs) excluding Australia and New Zealand.  The aim is to remove tariffs on most goods by 2021, excluding alcohol and tobacco related products. At present, eligible Samoan exports that meet the Rules of Origin (ROO) criteria are accorded preferential duties in Fiji, Cook Islands, Vanuatu, Solomon Islands, Niue and Tuvalu. The remaining FICs continue to progress their implementation of PICTA and have yet to announce their readiness to trade under PICTA.

PACER Plus, which builds on the existing SPARTECA and PACER agreements, concluded negotiations in April 2017 and was signed in June 2017.  This multilateral agreement, intended to increase trade and economic integration between Australia, New Zealand and the participating Pacific Island countries, has been in negotiations since 2009.  Fiji and Papua New Guinea did not sign the agreement noting they feel they can achieve a more favorable agreement bilaterally versus multilaterally.

The African, Caribbean and Pacific Group of States (ACP) – European Union (EU) Economic Partnership Agreements (EPA) has been in negations since 2004.  PACP Ministers agreed that the EPA would be negotiated as a region with the goal of achieving a comprehensive and development-enhancing EPA that would bring benefits to all PACPS.

Please visit Samoa’s Ministry of Foreign Affairs and Trade website for more information.  http://www.mfat.gov.ws/trade/trade-agreements/ 

3. Legal Regime

Transparency of the Regulatory System

The government uses transparent policies and effective laws to establish “clear rules of the game.”  Accounting, legal and regulatory procedures are all consistent with international norms. According to the Samoa Institute of Accountants, businesses adhere to International Financial Reporting Standards (IFRS) and International Standards on Auditing and Quality Assurance.

Draft bills are made available through the parliamentary website, http://www.palemene.ws/new/parliament-business/bills/ , but are not made available for formal public comment.  Those who wish to make a comment on the bill are given the opportunity to do so before a Parliamentary Committee.  Public notices are televised and printed in local newspapers for the awareness of the public that there is an avenue to voice their opinions on drafted government policies.

The Office of the Regulator (OOTR) was established in 2006 under the Telecommunications Act 2005 to provide regulatory services for the telecommunications sector in Samoa.  However, the Broadcasting and Postal Services Acts 2010 were recently approved by Parliament, which also provide a regulatory framework for broadcasting and postal sectors in Samoa.  These Acts require the Regulator to establish a fair, unbiased, and ethical regime for implementing the objects of these Acts including licensing of telecommunications, broadcasting and postal services, promotion of new services and investment, consumer protection, prevention of anti-competitive activities by service providers, and management of the radio spectrum and national number plans.  OOTR also approves the Electric Power Corporation’s Power Purchase Agreements with Independent Power Providers and reviews EPC’s Power Extension Plan.

Finances and expenditures of the government are published twice on an annual basis, and available through the parliament website.  Debt obligations are published on a quarterly basis by the Samoa Bureau of Statistics through its quarterly reports.

International Regulatory Considerations

Samoa is a member of the Pacific Islands Forum (PIF), which is an 18-member inter-governmental organization that aims to enhance cooperation between the independent countries of the Pacific Ocean.

Samoa’s system of government is based on the Westminster Parliamentary system.  Samoa’s Companies Act 2001 contains a modern regulatory regime based on New Zealand company law.

Legal System and Judicial Independence

The Samoan legal system has its foundations in English and Commonwealth statutory and common law. Various business structures utilized in common law are recognized: sole traders, partnerships, limited liability companies, joint ventures and trusts (including unit trusts).  These structures are regulated by legislation including the Companies Act 2001, Partnership Act 1975, Trustee Act 1975 and Unit Trusts Act 2008. Samoa’s Companies Act 2001 contains a modern regulatory regime based on New Zealand company law.  It allows the incorporation of a sole person company (i.e. one person being both shareholder and director) and directors need not be resident in Samoa.

A Samoa-incorporated private company is a separate legal entity and a corporation under Samoan law.  It must file an annual return with the Registrar of Companies specifying details of directors, shareholders, registered office, etc.  There is no requirement for private companies to file annual financial reports with the Companies Registry nor are there any minimum capital requirements.

The judicial system is largely independent from the executive branch. The current executive branch wields a great deal of influence in all matters of the country.

Laws and Regulations on Foreign Direct Investment

The Ministry of Commerce, Industry and Labor administers Samoa’s foreign investment policy and regulations under the Foreign Investment Act 2000.  All businesses with any foreign ownership require foreign investment approval by MCIL: https://www.mcil.gov.ws/ .

Competition and Anti-Trust Laws

The Ministry of Commerce, Industry, and Labor’s Fair Trading and Codex Alimentarius Division (FTCD) handles competition-related concerns.  The main pieces of legislation regarding competition are Fair Trading Act 1998, Consumer Information Act 1989, and Measures Ordinance 1960.

Expropriation and Compensation

Expropriation cases in Samoa are not common; however, there was one significant case that occurred in 2009 over land designated for a new six-story government complex.  A business signed a 20-year lease with the government in 2005 but was then asked to move in 2008 to make way for the new building. The business moved, but won a settlement in the Court of Appeals against the government for a much larger sum than the government initially offered the business for vacating the land.

Dispute Settlement

The Alternative Dispute Resolution Act of 2007 (amended 2013) outlines ADR procedures for both criminal and civil proceedings.  Samoa has an Accredited Mediators of Samoa Association that was put in place to help resolve (largely commercial) disputes.

ICSID Convention and New York Convention

Samoa has been party to the ICSID since 1978.  Samoa is not party to the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards.

Investor-State Dispute Settlement

The provisions of the Labour and Employment Relations Act 2013 have full effect in relation to disputes that involve foreign investors in Samoa. Foreign investors are subject to this Act.

The Alternative Dispute Resolution Act 2007 also provides alternative dispute resolution procedures where civil or criminal cases may arise.

International Commercial Arbitration and Foreign Courts

The provisions of the Arbitration Act 1976 shall have full effect in relation to disputes that involve foreign investors in Samoa.  Subject to this Act and to any other law in Samoa, the Convention Settlement of Investment Disputes signed in Washington on 3rd February 1978 and ratified by Samoa on the 25th April 1978, shall have the force of law in Samoa.  The Alternative Dispute Resolution Act 2007 also provides alternative dispute resolution procedures where civil or criminal cases may arise.

Bankruptcy Regulations

The Bankruptcy Act 1908 is in effect in Samoa.  According to World Bank Doing Business 2016 survey, in terms of resolving insolvency, Samoa was ranked at 137 out of 190.  The survey estimated that it took two years at a cost of 38 percent of the estate to complete the process, with an estimated recovery rate of 18.5 percent of value.

8. Responsible Business Conduct

There is a general awareness of responsible business conduct (RBC) among both producers and consumers, and foreign and local enterprises to follow generally accepted RBC principles such as the OECD Guidelines for Multinational Enterprises.  Firms that pursue RBC are viewed favorably but consumers generally prioritize value for money ahead of RBC claims.

The government fairly enforces domestic laws and protects human rights.  The government encourages local enterprises to follow generally accepted RBC principals.  A national contact point is not known.

There are no extractive industries in Samoa.

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

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

Host Country Statistical Source* USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) ($M USD) 2018 $862.4 2018 $861.49 www.worldbank.org/en/country 
Foreign Direct Investment Host Country Statistical Source* USG or International  Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) N/A N/A N/A N/A BEA data available at https://www.bea.gov/international/direct-investment-and-multinational-enterprises-comprehensive-data 
Host country’s FDI in the United States ($M USD, stock positions) N/A N/A N/A N/A BEA data available at https://www.bea.gov/international/direct-investment-and-multinational-enterprises-comprehensive-data 
Total inbound stock of FDI as % host GDP N/A N/A 2017 8.9% UNCTAD data available at https://unctad.org/en/Pages/DIAE/World%20Investment%20Report/Country-Fact-Sheets.aspx 

* From the Samoa Bureau of Statistics GDP December 2018 Quarterly bulletin using an exchange rate of 1USD=2.5WST.


Table 3: Sources and Destination of FDI

Data not available.

Table 4: Sources of Portfolio Investment

Data not available.

Timor-Leste

2. Bilateral Investment Agreements and Taxation Treaties

Timor-Leste and Portugal have signed an Agreement on Mutual Protection and Promotion of Investment.  Timor-Leste signed a Bilateral Investment Treaty (BIT) with Germany in 2005 and with Qatar in 2012, but they have not entered into force. Timor-Leste does not have a BIT or a bilateral taxation treaty with the United States.

3. Legal Regime

Transparency of the Regulatory System

Timor-Leste’s regulatory system is still in its formative stages, according to U.S. companies.  The existing tax, labor, environment, health and safety, and other laws and policies do not present obvious impediments to investment.  Property rights, however, remain an issue that foreign investors and businesses have identified as concerning. A comprehensive land law was promulgated in 2017, but requires an additional decree law before it can be implemented.

In 2011 and 2012, the government issued a number of tax assessments on private firms (both foreign and domestic) stretching back several years, with compounded interest plus penalties.  Several of the affected firms have contested these assessments. In February 2016, the government reached a negotiated settlement with one private firm on most of the outstanding assessments.

The Ministry of Finance launched an online Procurement Portal in 2011, intended to increase transparency by providing equal access to information on government tenders and procurement contracts.  However, updates are inconsistent and not all tenders appear to be included in the site. In 2012, the government hired an internationally recognized firm to serve as its procurement agent for major projects but concerns about nontransparent and unfair procurement practices remain.  The Audit Chamber, under the Court of Appeals, is responsible for reviewing government procurements above USD 5 million. In 2016, the Audit Chamber rejected the government’s proposed USD 720 million contract with a large Korean company for a development on the south coast claiming it was non-compliant with fundamental norms currently in place in Timor-Leste.  The government appealed the decision, and the company withdrew from the process in June 2016 before a decision on the appeal.

In 2018 and 2019, the Ministry of Finance launched the ASYCUDA system in Aportil, the organization managing international port customs, and International Airport of Nicolao Lobato as part of the fiscal reform process with the aim of improving efficiency, customer service, and transparency.  The government hopes to facilitate trade by implementing a modern and reliable system to track and manage imports and exports.

In June 2013, with assistance from the International Finance Corporation, the government established the Business Registration and Verification Service (SERVE) as a one-stop business registration center for both foreign and domestic investors.  SERVE is the government’s attempt to streamline the business registration process to less than five days from start to finish. Prior to the opening of SERVE, business operators had to visit three different government ministries to complete a process that could take upwards of one year.  SERVE has registered over 20,000 businesses, approximately half of which are construction-related enterprises.

In addition to registering businesses, SERVE can also issue business licenses for what it determines to be low-risk undertakings.  The Ministry of Commerce, Industry, and the Environment must issue business licenses for high-risk endeavors. Currently, both business registration and licensing are free.  However, there are proposals to institute a small fee for business license renewals. The initial business license is valid for 12 months, with renewals also generally valid for 12 months.

Parliament and parliamentary committees regularly hold hearings and debates on proposed laws.  For certain major legislation, the government holds limited public consultations or solicits public comment.

There are no known informal regulatory processes outside of the government.  Regulations are adopted and implemented at the national level, and most oversight occurs in the capital, although some agencies have staff at the district level that monitor compliance.  Regulations are published in the national journal in advance of their entry into force, although applicable information may be difficult to find for those entering the market.

International Regulatory Considerations

Timor-Leste has a pending application for full membership into the Association of Southeast Asian Nations (ASEAN) and served as President of the Community of Portuguese Speaking Countries from 2014-2016 and also part of Macau Economic Forum (between China and CPLP).  Some report the government views building these international ties as part of its effort to increase investment opportunities within the country. Timor-Leste is also pursuing trilateral economic cooperation with Indonesia and Australia to boost cross-country investment and exploring membership in the Commonwealth.

Reforms currently underway in Timor-Leste’s fiscal and economic systems aim to bring the country into compliance with ASEAN standards.  The Timor-Leste ASEAN Mobilization Plan (TLAMP) aims to bring all the relevant line ministries into compliance with ASEAN economic best practices.

Timor-Leste was accepted as an observer to the WTO in 2016, and its Working Party for accession was established in December 2016.

Legal System and Judicial Independence

The Portuguese law system heavily influences Timor-Leste’s civil law system.  Timor-Leste applies Indonesian law, which was in force until August 1999, as a subsidiary source of law for issues not yet addressed in Timorese legislation, including the commercial code.  The justice system – police, prosecutors, and courts – are still evolving and short-staffed. Until October 2014, when Timor-Leste’s Parliament voted to dismiss all foreign judges, prosecutors, and advisors from the judiciary, the government relied upon significant numbers of foreign experts and advisors to augment local resources.  In the immediate wake of the dismissals, companies have reported that a significant backlog in cases grew. Observers note the backlog has since lessened, but waiting times to bring a case before a judge remain long.

The Office of the Prosecutor General continues to accumulate experience and capacity to establish and implement case management and other essential systems.  Timor-Leste has courts of first instance and a court of appeal. However, courts operate in only four of the thirteen districts, and customary law governs most cases at the local level.  Additional courts outlined in the Constitution and legislation, such as specialized tax courts, have not yet been established. The U.S. Embassy is not aware of any major court cases testing the sanctity of contracts or enforcement of contracts processed to conclusion; however, one U.S. oil company successfully argued tax cases against the government in Dili District Court.  The company came to a confidential negotiated settlement with the government in the remaining pending cases.

In January 2019, the Council of Ministers approved judicial reform to create a new mechanism for resolving conflicts – Conciliation and Arbitration – with the objective of reducing pending court cases.  This reform would create specialized sections in district courts that would include commercial law and contracts sections among others.

Laws and Regulations on Foreign Direct Investment

The Timorese legal system is based on a mix of Indonesian laws and regulations, acts passed by the United Nations Transitional Administration, and post-independence Timorese legislation, which is modeled on Portuguese civil law.  The country is working on a review of its legislation to harmonize the system, but has yet to undergo a comprehensive overhaul of the overlapping yet disparate systems. Timor-Leste has two official languages, Tetun and Portuguese, and two working languages, Indonesian and English; all new legislation is enacted in Portuguese and is based on the civil law tradition.

In January 2019, President Lu-Olo promulgated an amended version of the 2005 Petroleum Activities Law.  The amended law states that decisions regarding the state’s participation in petroleum operations will be approved by the Council of Ministers, which can delegate this competency to the Prime Minister.  The law also removes the 20 percent limit on state participation in oil projects.  The law states the Petroleum Fund can directly finance (rather than via the state budget) petroleum operations – domestic or international.  Finally, the law removes the requirement of a preliminary review by the Audit Court.

The Private Investment Law (Law No.14/2011) specifies the conditions and incentives for both domestic and foreign investment and guarantees full equality before the law for international investors.  Other major laws affecting incoming foreign investment include the Companies Code of 2004, the Commercial Registration Code, and the Taxation Act of 2008. In accordance with article 30 of the Private Investment Law, the Government of Timor-Leste announced the establishment of a Specialized Investment Agency, a one-stop-shop for investment and export promotion on January 5, 2015.  The agency became TradeInvest Timor-Leste in November 2015. The agency has the responsibility to promote Timorese exports and investment opportunities in the country and to encourage domestic entrepreneurship. A new private investment policy, tax codes, and customs agencies are part of the ongoing fiscal reform effort that is designed to align Timorese legislation and regulation with best practices in ASEAN (under the ASEAN Comprehensive Investment Agreement) and under UNCTAD (United Nations Conference on Trade and Development).

Competition and Anti-Trust Laws

Timor-Leste does not have a competition or anti-trust law.

Expropriation and Compensation

Timor-Leste does not yet have a separate expropriation law.  However, both Article 54 of the Constitution and the Private Investment Law permit the expropriation or requisition of private property in the public interest only if just proper compensation is paid to the investor.  The Private Investment Law calls for the equal treatment of foreign and national investors in expropriation cases and prohibits nationalization policies or land policies that deliberately target the property of investors.

Before expropriation occurs, the affected occupants or claimants, if non-occupying, are given 30 days to leave the property and 10 days for filing cases at the local courts.  If no claims are filed during the 10 days, the occupants should clear the property before being evicted. During the last five years, expropriation primarily affected urban squatters occupying state property.  The government relocated significant numbers of residents for large development projects in Oecusse and Suai. Two known private investments in Dili have negotiated with the government to remove residents as part of the investment agreement.

Dispute Settlement

ICSID Convention and New York Convention

Timor-Leste is a member state to the International Centre for Settlement of Investment Disputes (ICSID Convention).  It is not a signatory party to the convention of the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention).  Timor-Leste’s Court of Appeals must first recognize a foreign judgment or arbitral award in order for it to be enforced in the country.

Investor-State Dispute Settlement

The domestic court system handles civil disputes, but is not properly equipped for the demands currently placed upon it.  The Timorese justice system suffers from a shortage of qualified judges and attorneys, incomplete and piecemeal national legislation, and insufficient geographical coverage.  New legislation is enacted in Portuguese, while many legislators, prosecutors, judges, attorneys, police officers, plaintiffs, and defendants do not speak the language. Legal professionals lack specialized technical expertise to address complicated commercial or tax cases.  The country’s sole Legal Training Center focuses on developing competency in Portuguese language at the expense of technical legal expertise.

The government pursued international arbitration against at least one private company in a tax dispute.  There were four cases filed against the company in Singapore in arbitration in 2014. After more than a year of process, both sides signed a negotiated agreement in February 2016 that resolved most of the pending cases. 

International Commercial Arbitration and Foreign Courts

Alternative dispute resolution is consistent with Timorese traditional justice systems, but there is no formal system yet in place.  The Council of Ministers approved the Arbitration, Mediation, and Conciliation Law in December 2016 as part of the fiscal reform efforts, but the law has not yet received parliamentary approval.

Certain foreign investors have reported that the domestic court system is not properly equipped to handle commercial or tax disputes, and that most legal professionals lack specialized expertise or training in these types of cases.

Bankruptcy Regulations

The Council of Ministers approved an insolvency law in March 2017, but parliament did not act on the law.  In 2019, the World Bank ranked the country 168 of 190 in resolving insolvency.

8. Responsible Business Conduct

Businesses are generally aware of expectations and standards for responsible business conduct, although regulation of those standards is inconsistent.  The government monitors business compliance with labor and environmental regulations, although the capacity to do so is insufficient. The government does not appear to factor responsible business conduct policies into procurement decisions.

There have been no high-profile business-related instances of corporate impact on human rights.  Civil society and other organizations are generally able to monitor and promote human rights, both related to corporate actions and otherwise, without undue interference from the government.

Timor-Leste is not an adherent to the OECD Guidelines for Multinational Enterprises.  In July 2010, it became the third country in the world and the first in Asia to be certified as compliant with the Extractive Industries Transparency Initiative (EITI), but it was suspended in March 2017 for failing to submit its required 2014 report, although the EITI statement on the suspension recognized Timor-Leste’s consistent commitment to transparency.  The criteria and procedures by which the national government awards natural resource contracts or licenses are specified in the 2005 Petroleum Act. The process actually used to award contracts is broadly consistent with the procedural requirements set by law or regulation. Once a contract or license is awarded, the government makes public the basic terms of the awards.  The government publishes quarterly reports on its Petroleum Fund on the Central Bank website.

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

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

Host Country Statistical Source USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) ($M USD) 2015 $3,104 2017 $2,955 www.worldbank.org/en/country  

Host country: Ministry of Finance, Statistics Directorate

Foreign Direct Investment Host Country Statistical Source USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) N/A N/A 2017 $0 BEA data available at https://www.bea.gov/international/direct-investment-and-multinational-enterprises-comprehensive-data  

No host country source available.

Host country’s FDI in the United States ($M USD, stock positions) N/A N/A 2017 -$4 BEA data available at https://www.bea.gov/international/direct-investment-and-multinational-enterprises-comprehensive-data  

No host country source available.

Total inbound stock of FDI as % host GDP N/A N/A N/A 11.11% UNCTAD data available at

https://unctad.org/en/Pages/DIAE/World%20Investment%20Report/Country-Fact-Sheets.aspx  


Table 3: Sources and Destination of FDI

Data not available.


Table 4: Sources of Portfolio Investment

Data not available.

Investment Climate Statements
Edit Your Custom Report

01 / Select A Year

02 / Select Sections

03 / Select Countries You can add more than one country or area.

U.S. Department of State

The Lessons of 1989: Freedom and Our Future