Policies Towards Foreign Direct Investment

Morocco actively encourages foreign investment through macro-economic policies, trade liberalization, structural reforms, infrastructure improvements, and incentives for investors.  Law 18-95 of October 1995, constituting the Investment Charter , is the foundational Moroccan text governing investment and applies to both domestic and foreign investment (direct and portfolio).  Morocco’s 2014 Industrial Acceleration Plan (PAI), a new approach to industrial development based on establishing “ecosystems” that integrate value chains and supplier relationships between large companies and small and medium-sized enterprises (SMEs), has guided Ministry of Industry policy for the last six years.  The Ministry of Industry announced a second PAI to run from 2021-2025.  Moroccan legislation governing FDI applies equally to Moroccan and foreign legal entities, with the exception of certain protected sectors.

Morocco’s Investment and Export Development Agency (AMDIE) is the national agency responsible for the development and promotion of investments and exports.  Following reform to the governance of the country’s Regional Investment Centers (CRIs) in 2019, each of the 12 regions is empowered to lead their own investment promotion efforts.  The CRI websites aggregate relevant information for interested investors and include investment maps, procedures for creating a business, production costs, applicable laws and regulations, and general business climate information, among other investment services.  The websites vary by region, with some functioning better than others. AMDIE and the 12 CRIs work together throughout the phases of investment at the national and regional level.  For example, AMDIE and the CRIs coordinate contact between investors and partners.  Regional investment commissions examine investment applications and send recommendations to AMDIE.

Further information about Morocco’s investment laws and procedures is available on AMDIE ’s website or through the individual websites of each of the CRIs.  For information on agricultural investments, visit the Agricultural Development Agency (ADA) website  or the National Agency for the Development of Aquaculture (ANDA) website .

When Morocco acceded to the OECD Declaration on International Investment and Multinational Enterprises in November 2009, Morocco guaranteed national treatment of foreign investors (i.e., according equal treatment for both foreign and national investors in like circumstances).  The only exception to this national treatment of foreign investors is in those sectors closed to foreign investment (noted below), which Morocco delineated upon accession to the Declaration.  Per a Moroccan notice published in 2014, the lead agency on adherence to the Declaration is AMDIE.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign and domestic private entities may establish and own business enterprises, barring certain restrictions by sector.  While the U.S. Mission is unaware of economy-wide limits on foreign ownership, Morocco places a 49 percent cap on foreign investment in air and maritime transport companies and maritime fisheries.  Morocco prohibits foreigners from owning agricultural land, though they can lease it for up to 99 years.  The Moroccan government holds a monopoly on phosphate extraction through the 95 percent state-owned Office Cherifien des Phosphates (OCP).  The Moroccan state also has a discretionary right to limit all foreign majority stakes in the capital of large national banks but apparently has never exercised that right.  In the oil and gas sector, the National Agency for Hydrocarbons and Mines (ONHYM) retains a compulsory share of 25 percent of any exploration license or development permit.  The Moroccan Central Bank (Bank Al-Maghrib) may use regulatory discretion in issuing authorizations for the establishment of domestic and foreign-owned banks.  As established in the 1995 Investment Charter, there is no requirement for prior approval of FDI, and formalities related to investing in Morocco do not pose a meaningful barrier to investment.  The U.S. Mission is not aware of instances in which the Moroccan government refused foreign investors for national security, economic, or other national policy reasons.  The U.S. Mission is unaware of any U.S. investors disadvantaged or singled out by ownership or control mechanisms, sector restrictions, or investment screening mechanisms, relative to other foreign investors.

Other Investment Policy Reviews

The last third-party investment policy review  of Morocco was the World Trade Organization (WTO) 2016 Trade Policy Review  (TPR), which found that the trade reforms implemented since the prior TPR in 2009 contributed to the economy’s continued growth by stimulating competition in domestic markets, encouraging innovation, creating new jobs, and contributing to growth diversification.

Business Facilitation

In the World Bank’s 2020 Doing Business Report , Morocco ranks 53 out of 190 economies, rising seven places since the 2019 report.  Since 2012, Morocco has implemented reforms that facilitate business registration, such as eliminating the need to file a declaration of business incorporation with the Ministry of Labor, reducing company registration fees, and eliminating minimum capital requirements for limited liability companies.  Morocco maintains a business registration website that is accessible through the various Regional Investment Centers (CRI – Centre Regional d’Investissement ).  The business registration process is generally streamlined and fully digital.

Foreign companies may utilize the online business registration mechanism.  Foreign companies, with the exception of French companies, are required to provide an apostilled Arabic translated copy of their articles of association and an extract of the registry of commerce in its country of origin.  Moreover, foreign companies must report the incorporation of the subsidiary a posteriori to the Foreign Exchange Office (Office de Changes) to facilitate repatriation of funds abroad such as profits and dividends.  According to the World Bank, the process of registering a business in Morocco takes an average of nine days, significantly less than the Middle East and North Africa regional average of 20 days.  Morocco does not require that the business owner deposit any paid-in minimum capital.

On January 21, 2019, law 88-17 on the electronic creation of businesses was published, but the implementation texts have not yet been adopted and published, meaning the new process is not yet operational.  The new system will eventually allow for the creation of businesses online via an electronic platform managed by the Moroccan Office of Industrial and Commercial Property (OMPIC).  Once launched, all procedures related to the creation, registration, and publication of company data will be carried out via this platform.  A separate (yet-to-be-issued) decree will determine the list of documents required during the electronic business creation process.  A new national commission will monitor the implementation of the procedures.

The business facilitation mechanisms provide for equitable treatment of women and underrepresented minorities in the economy.  Notably, according to the World Bank, the length of time and cost to register a new business is equal for men and women in Morocco.  The U.S. Mission is unaware of any official assistance provided to women and underrepresented minorities through the business registration mechanisms.  In cooperation with the Moroccan government, civil society, and the private sector, there have been several initiatives aimed at improving gender quality in the workplace and access to the workplace for foreign migrants, particularly those from sub-Saharan Africa.

Outward Investment

The Government of Morocco prioritizes investment in Africa. The African Development Bank ranks Morocco as the second biggest African investor in Sub-Saharan Africa, after South Africa, with up to 85 percent of Moroccan FDI going to the region.  Morocco is the largest African investor in West Africa.  The U.S. Mission is not aware of a standalone outward investment promotion agency, though AMDIE’s mission includes supporting Moroccan exporters and investors seeking to invest outside of Morocco. Nor is the U.S. Mission aware of any restrictions for domestic investors attempting to invest abroad.   However, under the Moroccan investment code, repatriation of funds is limited to “convertible” Moroccan Dirham accounts.  Morocco’s Foreign Exchange Office (“Office des Changes,” OC) implemented several changes for 2020 that slightly liberalize the country’s foreign exchange regulations.  Moroccans going abroad for tourism can now exchange up to $4,700 in foreign currency per year, with the possibility to attain further allowances indexed to their income tax filings.  Business travelers can also obtain larger amounts of foreign currency, provided their company has properly filed and paid corporate income taxes.  Another new provision permits banks to use foreign currency accounts to finance investments in Morocco’s Industrial Acceleration Zones.

Morocco has signed bilateral investment treaties (BITs) with 71 countries , of which 50 are in force.  Morocco’s most recent BIT, signed in January of 2020, is with Japan.

Morocco has also signed a quadrilateral FTA with Tunisia, Egypt, Lebanon, and Jordan, an FTA with Turkey, an FTA with the United Arab Emirates, the European FTA with Iceland, Liechtenstein, and Norway, and the Greater Arab Free Trade Area agreement (which eliminates certain tariffs among 15 Middle East and North African countries).  The Association Agreement (AA) between the EU and Morocco came into force in 2000, creating a free trade zone in 2012 that liberalized two-way trade in goods.  The EU and Morocco developed the AA further through an agreement on trade in agricultural, agro-food, and fisheries products, and a protocol establishing a bilateral dispute settlement mechanism, all of which entered into force in 2012.  However, the legal standing of the agreement’s rules of origin, particularly for fisheries, has come into question in recent years with both sides seeking to resolve the issue.  Following an initial stay on the EU-Morocco agricultural agreement issued by the European Court of Justice in 2016, the European Parliament formally adopted an amended agreement in January 2019.  In 2008, Morocco was the first country in the southern Mediterranean region to be granted “advanced status” by the EU, which promotes closer economic integration by reducing non-tariff barriers, liberalizing the trade in services, ensuring the protection of investments, and standardizing regulations in several commercial and economic areas.

On March 3, 2018, Morocco signed an agreement, along with 43 other African states, forming the African Continental Free Trade Area (CFTA) establishing a market of over 1.2 billion people, with a combined gross product of over $3 trillion.  The CFTA is a flagship project of Agenda 2063, the African Union’s (AU) long-term vision for an integrated, prosperous, and peaceful Africa.  The agreement entered into force in May 2019 following ratification by 22 member states.  While continent-wide trade under the agreement is expected to begin in July 2020, as of February 2020, Morocco has not deposited its instruments of ratification to the AU.

The United States signed an income tax treaty  with Morocco in 1977.

Transparency of the Regulatory System

Morocco is a constitutional monarchy with an elected parliament and a mixed legal system of civil law based primarily on French law, with some influences from Islamic law.  Legislative acts are subject to judicial review by the Constitutional Court excluding royal decrees (Dahirs) issued by the King, which have the force of law.  Legislative power in Morocco is vested in both the government and the two chambers of Parliament, the Chamber of Representatives (Majlis Al-Nuwab) and the Chamber of Councilors (Majlis Al Mustashareen).  The principal sources of commercial legislation in Morocco are the Code of Obligations and Contracts of 1913 and Law No. 15-95 establishing the Commercial Code.  The Competition Council and the National Authority for Detecting, Preventing, and Fighting Corruption (INPPLC) have responsibility for improving public governance and advocating for further market liberalization.  All levels of regulations exist (local, state, national, and supra-national).  The most relevant regulations for foreign businesses depend on the sector in question.  Ministries develop their own regulations and draft laws, including those related to investment, through their administrative departments, with approval by the respective minister.  Each regulation and draft law is made available for public comment.  Key regulatory actions are published in their entirety in Arabic and usually French in the official bulletin on the website  of the General Secretariat of the Government.  Once published, the law is final.  Public enterprises and establishments can adopt their own specific regulations provided they comply with regulations regarding competition and transparency.

Morocco’s regulatory enforcement mechanisms depend on the sector in question, and enforcement is legally reviewable.  The National Telecommunications Regulatory Agency (ANRT), for example, created in February 1998 under Law No. 24-96, is the public body responsible for the control and regulation of the telecommunications sector.  The agency regulates telecommunications by participating in the development of the legislative and regulatory framework.  Morocco does not have specific regulatory impact assessment guidelines, nor are impact assessments required by law.  Morocco does not have a specialized government body tasked with reviewing and monitoring regulatory impact assessments conducted by other individual agencies or government bodies.

The U.S. Mission is not aware of any informal regulatory processes managed by nongovernmental organizations or private sector associations. The Moroccan Ministry of Finance posts quarterly statistics  (compiled in accordance with IMF recommendations) on public finance and debt on their website.  A report on public debt is published on the Ministry of Economy and Finance’s website and is used as part of the budget bill formulation and voting processes. Fiscal year 2020 debt report was published October 11, 2019.

International Regulatory Considerations

Morocco joined the WTO in January 1995 and reports technical regulations that could affect trade with other member countries to the WTO.  Morocco is a signatory to the Trade Facilitation Agreement  and has a 91.2 percent implementation rate of TFA requirements.  European standards are widely referenced in Morocco’s regulatory system.  In some cases, U.S. or international standards, guidelines, and recommendations are also accepted.

Legal System and Judicial Independence

The Moroccan legal system is a hybrid of civil law (French system) and some Islamic law, regulated by the Decree of Obligations and Contracts of 1913 as amended, the 1996 Code of Commerce, and Law No. 53-95 on Commercial Courts.  These courts also have sole competence to entertain industrial property disputes, as provided for in Law No. 17-97 on the Protection of Industrial Property, irrespective of the legal status of the parties.  According to the European Bank for Reconstruction and Development’s 2015 Morocco Commercial Law Assessment Report , Royal Decree No. 1-97-65 (1997) established commercial court jurisdiction over commercial cases including insolvency.  Although this led to some improvement in the handling of commercial disputes, the lack of training for judges on general commercial matters remains a key challenge to effective commercial dispute resolution in the country.  In general, litigation procedures are time consuming and resource-intensive, and there is no legal requirement with respect to case publishing.  Disputes may be brought before one of eight Commercial Courts (located in Rabat, Casablanca, Fes, Tangier, Marrakech, Agadir, Oujda, and Meknes), and one of three Commercial Courts of Appeal (located in Casablanca, Fes, and Marrakech).  There are other special courts such as the Military and Administrative Courts.  Title VII of the Constitution provides that the judiciary shall be independent from the legislative and executive branches of government.  The 2011 Constitution also authorized the creation of the Supreme Judicial Council, headed by the King, which has the authority to hire, dismiss, and promote judges.  Enforcement actions are appealable at the Courts of Appeal, which hear appeals against decisions from the court of first instance.

Laws and Regulations on Foreign Direct Investment

The principal sources of commercial legislation in Morocco are the 1913 Royal Decree of Obligations and Contracts, as amended; Law No. 18-95 that established the 1995 Investment Charter; the 1996 Code of Commerce; and Law No. 53-95 on Commercial Courts.  These courts have sole competence to hear industrial property disputes, as provided for in Law No. 17-97 on the Protection of Industrial Property, irrespective of the legal status of the parties.  Morocco’s CRIs and AMDIE   provide users with various investment related information on key sectors, procedural information, calls for tenders, and resources for business creation.  Their websites are infrequently updated.

Competition and Anti-Trust Laws

Morocco’s Competition Law No. 06-99 on Free Pricing and Competition (June 2000) outlines the authority of the Competition Council  as an independent executive body with investigatory powers.  Together with the INPPLC, the Competition Council is one of the main actors charged with improving public governance and advocating for further market liberalization.  Law No. 20-13, adopted on August 7, 2014, amended the powers of the Competition Council to bring them in line with the 2011 Constitution.  The Competition Council’s responsibilities include making decisions on anti-competition practices and controlling concentrations, with powers of investigation and sanction; providing opinions in official consultations by government authorities; and publishing reviews and studies on the state of competition.  After four years of delays, the Moroccan Government nominated and approved all members of the Competition Council in December of 2018.

The Competition Council is investigating years of alleged collusion by oil distribution companies, releasing an incriminating preliminary report in 2019.  The case includes investigations into two foreign-owned firms:  Vivo Energy, an affiliate of the British-Dutch company Royal Dutch Shell, and Total Maroc, a subsidiary of the French multinational Total. Also in 2019, the council released a report outlining barriers to entry that protect established fuel distribution companies like Vivo and Total Maroc, to the detriment of consumers.

In February 2020, the Moroccan telecommunications regulator, National Telecommunications Regulatory Agency (ANRT), issued a $340 million fine against Maroc Telecom for abusing its dominant position in the market.  Maroc Telecom is majority owned by Etisalat, based in the United Arab Emirates (UAE), and is minority owned by the Moroccan government.  ANRT ruled in favor of rival telecoms operator INWI, which is majority-owned by Morocco’s royal holding company, and is minority-owned by Kuwait’s sovereign wealth fund and a private Kuwaiti company, which had filed the complaint with ANRT.

Expropriation and Compensation

Expropriation may only occur in the public interest for public use by a state entity, although in the past, private entities that are public service “concessionaires” mixed economy companies, or general interest companies have also been granted expropriation rights.  Article 3 of Law No. 7-81 (May 1982) on expropriation, the associated Royal Decree of May 6, 1982, and Decree No. 2-82-328 of April 16, 1983 regulate government authority to expropriate property.  The process of expropriation has two phases: in the administrative phase, the State declares public interest in expropriating specific land and verifies ownership, titles, and appraised value of the land.  If the State and owner are able to come to agreement on the value, the expropriation is complete.  If the owner appeals, the judicial phase begins, whereby the property is taken, a judge oversees the transfer of the property, and payment compensation is made to the owner based on the judgment.  The U.S. Mission is not aware of any recent, confirmed instances of private property being expropriated for other than public purposes (eminent domain), or in a manner that is discriminatory or not in accordance with established principles of international law.

Dispute Settlement

ICSID Convention and New York Convention

Morocco is a member of the International Center for Settlement of Investment Disputes (ICSID) and signed its convention in June 1967.  Morocco is a party to the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards.  Law No. 08-05 provides for enforcement of awards made under these conventions.

Investor-State Dispute Settlement

Morocco is signatory to over 60 bilateral treaties recognizing binding international arbitration of trade disputes, including one with the United States.  Law No. 08-05 established a system of conventional arbitration and mediation, while allowing parties to apply the Code of Civil Procedure in their dispute resolution.  Foreign investors commonly rely on international arbitration to resolve contractual disputes.  Commercial courts recognize and enforce foreign arbitration awards.  Generally, investor rights are backed by a transparent, impartial procedure for dispute settlement.  There have been no claims brought by foreign investors under the investment chapter of the U.S.-Morocco Free Trade Agreement since it came into effect in 2006.  The U.S. Mission is not aware of any investment disputes over the last year involving U.S. investors.

Morocco officially recognizes foreign arbitration awards issued against the government.  Domestic arbitration awards are also enforceable subject to an enforcement order issued by the President of the Commercial Court, who verifies that no elements of the award violate public order or the defense rights of the parties.  As Morocco is a member of the New York Convention, international awards are also enforceable in accordance with the provisions of the convention.  Morocco is also a member of the Washington Convention for the International Centre for Settlement of Investment Disputes (ICSID), and as such agrees to enforce and uphold ICSID arbitral awards.  The U.S. Mission is not aware of extrajudicial action against foreign investors.

International Commercial Arbitration and Foreign Courts

Morocco has a national commission on Alternative Dispute Resolution (ADR) with a mandate to regulate mediation training centers and develop mediator certification systems.  Morocco seeks to position itself as a regional center for arbitration in Africa, but the capacity of local courts remains a limiting factor.  The Moroccan government established the Center of Arbitration and Mediation in Rabat and the Casablanca International Mediation and Arbitration Center (CIMAC).  The U.S. Mission is not aware of any investment disputes involving state owned enterprises (SOEs).

Bankruptcy Regulations

Morocco’s bankruptcy law is based on French law.  Commercial courts have jurisdiction over all cases related to insolvency, as set forth in Royal Decree No. 1-97-65 (1997).  The Commercial Court in the debtor’s place of business holds jurisdiction in insolvency cases.  The law gives secured debtors priority claim on assets and proceeds over unsecured debtors, who in turn have priority over equity shareholders.  Bankruptcy is not criminalized.  The World Bank’s 2020 Doing Business report ranked Morocco 73 out of 190 economies in “Resolving Insolvency”.  The GOM revised the national insolvency code in March of 2018.

Investment Incentives

As set out in the Investment Code (Section 2.4), Morocco offers incentives designed to encourage foreign and local investment.  Morocco’s Investment Charter gives the same benefits to all investors regardless of the industry in which they operate (except agriculture and phosphates, which remain outside the scope of the Charter).  With respect to agricultural incentives, Morocco launched the Plan Maroc Vert  (Green Morocco Plan) in 2008 to improve the competitiveness of the agribusiness industry.  This plan offers technical and financial support to federations in the citrus and olive sectors to boost agribusiness value chains.

Morocco has several free zones offering companies incentives such as tax breaks, subsidies, and reduced customs duties. Free zones aim to attract investment by companies seeking to export

products from Morocco.  As part of a government-wide strategy to strengthen its position as an African financial hub, Morocco offers incentives for firms that locate their regional headquarters in Morocco at Casablanca Finance City (CFC), Morocco’s flagship financial and business hub launched in 2010.  For details on CFC eligibility, see CFC’s website . Morocco is on the European Union’s tax “grey list ” for pursuing a harmful tax policy based on the tax advantages offered to export companies, companies operating in free zones, and CFC.  In response to EU pressure and the desire to avoid negative consequences for investment, Morocco’s 2020 budget law transforms the country’s free zones into “Industrial Acceleration Zones” with a 15 percent corporate tax rate following an initial five years of exemption, compared to a previous corporate tax rate of 8.75 percent over 20 years.  Similarly, companies holding CFC status will be taxed 15 percent both on their local and export activities as of 2021, after a five-year tax exoneration.  The new measures adopted pertain to both Moroccan and foreign companies already established in these zones.

The Moroccan government launched its “investment reform plan” in 2016 to create a favorable environment for the private sector to drive growth.  The plan includes the adoption of investment incentives to support the industrial ecosystem, tax and customs advantages to support investors and new investment projects, import duty exemptions, and a value added tax (VAT) exemption.  AMDIE’s website  has more details on investment incentives, but generally these incentives are based on sectoral priorities (i.e. aerospace).  Morocco does not issue guarantees or jointly finance FDI projects, except for some public-private partnerships in fields such as utilities.

The Moroccan Government offers several guarantee funds and sources of financing for investment projects to both Moroccan and foreign investors. For example, the Caisse Centrale de Garantie  (CCG), a public finance institution offers co-financing, equity financing, and guarantees.

Beyond tax exemptions granted under ordinary law, Moroccan regulations provide specific advantages for investors with investment agreements or contracts with the Moroccan Government provided that they meet the required criteria. These advantages include: subsidies for certain expenses related to investment through the Industrial Development and Investment Fund, subsidies of certain expenses for the promotion of investment in specific industrial sectors and the development of new technologies through the Hassan II Fund for Economic and Social Development, exemption from customs duties within the framework of Article 7.I of the Finance Law n°12/98, and exemption from the Value Added Tax (VAT) on imports and domestic sales.

More information on specific incentives can be found at the Invest in Morocco website .

Foreign Trade Zones/Free Ports/Trade Facilitation

The government maintains several “free zones” in which companies enjoy lower tax rates in exchange for an obligation to export at least 85 percent of their production.  In some cases, the government provides generous incentives for companies to locate production facilities in the country.  The Moroccan government also offers a VAT exemption for investors using and importing equipment goods, materials, and tools needed to achieve investment projects whose value is at least $20 million.  This incentive lasts for a period of 36 months from the start of the business.  Due in part to an ongoing dispute with the European Union, the 2020 budget law will transform the country’s free zones into “Industrial Acceleration Zones” with a corporate tax of 15 percent after an initial five years of tax exemption.  Previously, companies in free zones paid a corporate tax rate of 8.75 percent.

Performance and Data Localization Requirements

The Moroccan government views foreign investment as an important vehicle for creating local employment.  Visa issuance for foreign employees is contingent upon a company’s inability to find a qualified local employee for a specific position and can only be issued after the company has verified the unavailability of such an employee with the National Agency for the Promotion of Employment and Competency (ANAPEC).  If these conditions are met, the Moroccan government allows the hiring of foreign employees, including for senior management.  The process for obtaining and renewing visas and work permits can be onerous and may take up to six months, except for CFC members, where the processing time is reportedly one week.

The government does not require the use of domestic content in goods or technologies.  The WTO Trade Related Investment Measures’ (TRIMs) database does not indicate any reported Moroccan measures that are inconsistent with TRIMs requirements.  Though not required, tenders in some industries, including solar energy, are written with targets for local content percentages.  Both performance requirements and investment incentives are uniformly applied to both domestic and foreign investors depending on the size of the investment.

The Moroccan Data Protection Act (Act 09-08) stipulates that data controllers may only transfer data if a foreign nation ensures an adequate level of protection of privacy and fundamental rights and freedoms of individuals with regard to the treatment of their personal data.  Morocco’s National Data Protection Commission (CNDP) defines the exceptions according to Moroccan law.  Local regulation requires the release of source code for certain telecommunications hardware products.  However, the U.S. Mission is not aware of any Moroccan government requirement that foreign IT companies should provide surveillance or backdoor access to their source-code or systems.

Real Property

Morocco permits foreign individuals and foreign companies own land, except agricultural land.  Foreigners may acquire agricultural land in order to carry out an investment or other economic project that is not agricultural in nature, subject to first obtaining a certificate of non-agricultural use from the authorities.  Morocco has a formal registration system maintained by the National Agency for Real Estate Conservation, Property Registries, and Cartography (ANCFCC), which issues titles of land ownership.  Approximately 30 percent of land is registered in the formal system, and almost all of that is in urban areas.  In addition to the formal registration system, there are customary documents called moulkiya issued by traditional notaries called adouls.  While not providing the same level of certainty as a title, a moulkiya can provide some level of security of ownership.  Morocco also recognizes prescriptive rights whereby an occupant of a land under the moulkiya system (not lands duly registered with ANCFCC) can establish ownership of that land upon fulfillment of all the legal requirements, including occupation of the land for a certain period of time (10 years if the occupant and the landlord are not related and 40 years if the occupant is a family member).  There are other specific legal regimes applicable to some types of lands, among which:

• Collective lands: lands which are owned collectively by some tribes, whose members only benefit from rights of usufruct;
• Public lands: lands which are owned by the Moroccan State;
• Guich lands: lands which are owned by the Moroccan State, but whose usufruct rights are vested upon some tribes;
• Habous lands: lands which are owned by a party (the State, a certain family, a religious or charity organization, etc.) subsequent to a donation, and the usufruct rights of which are vested upon such party (usually with the obligation to allocate the proceeds to a specific use or to use the property in a certain way).

Morocco’s rating for “Registering Property” regressed over the past year, with a ranking of 81 out of 190 countries worldwide in the World Bank’s Doing Business 2020 report.  Despite reducing the time it takes to obtain a non-encumbrance certificate, Morocco made property registration less transparent by not publishing statistics on the number of property transactions and land disputes for the previous calendar year, resulting in a lower score than in 2019.

Intellectual Property Rights

The Ministry of Industry, Trade, Investment, and the Digital Economy oversees the Moroccan Office of Industrial and Commercial Property (OMPIC), which serves as a registry for patents and trademarks in the industrial and commercial sectors.  The Ministry of Communications oversees the Moroccan Copyright Office (BMDA), which registers copyrights for literary and artistic works (including software), enforces copyright protection, and coordinates with Moroccan and international partners to combat piracy.

In fall 2020, OMPIC will launch its second strategic plan, Strategic Vision 2025, following the conclusion of its 2016-2020 strategic plan.  The new 2025 plan has three pillars: the creation of an environment conducive to entrepreneurship, creativity, and innovation; the establishment of an effective system for the protection and defense of intellectual property rights; and the implementation of economic and regional actions to enhance intangible assets and market-oriented research and development.  From 2015-2019, OMPIC recorded a 168 percent increase in the number of patent applications filed and a 35 percent increase in the number of trademark registration requests.

In 2016, the Ministry of Communication and World Intellectual Property Organization (WIPO) signed an MOU to expand cooperation to ensure the protection of intellectual property rights in Morocco.  The memorandum committed both parties to improving the judicial and operational dimensions of Morocco’s copyright enforcement.  Following this MOU, in November 2016, BMDA launched WIPOCOS, a database for collective royalty management organizations or societies, developed by WIPO.  In spite of these positive changes, BMDA’s current focus on redefining its legal mandate and relationship with other copyright offices worldwide has appeared to lessen its enforcement capacity.

Law No. 23-13 on Intellectual Property Rights increased penalties for violation of those rights and better defines civil and criminal jurisdiction and legal remedies.  It also set in motion an accreditation system for patent attorneys in order to better systematize and regulate the practice of patent law.  Law No. 34-05, amending and supplementing Law No. 2-00 on Copyright and Related Rights, includes 15 items (Articles 61 to 65) devoted to punitive measures against piracy and other copyright offenses.  These range from civil and criminal penalties to the seizure and destruction of seized copies.  Judges’ authority in sentencing and criminal procedures is proscribed, with little power to issue harsher sentences that would serve as stronger deterrents.

Moroccan authorities express a commitment to cracking down on all types of counterfeiting, but due to resource constraints, must focus enforcement efforts on the most problematic areas, specifically those with public safety and/or significant economic impacts.  In 2017, BMDA brought approximately a dozen court cases against copyright infringers and collected $6.1 million in copyright collections.  In 2018, Morocco’s customs authorities seized $62.7 million worth of counterfeit items.  In 2018, Morocco also created a National Customs Brigade charged with countering the illicit trafficking of counterfeit goods and narcotics.

In 2015, Morocco and the European Union concluded an agreement on the protection of Geographic Indications (GIs), which is currently pending ratification by both the Moroccan and European parliaments.  Should it enter into force, the agreement would grant Moroccan GIs sui generis. The U.S. government continues to urge Morocco to undergo a transparent and substantive assessment process for the EU GIs in a manner consistent with Morocco’s existing obligations, including those under the U.S.-Morocco Free Trade Agreement.

Morocco is not listed in USTR’s most recent Special 301 Report or notorious markets reports.

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles .  For assistance, please refer to the U.S. Embassy local lawyers’ list, as well as to the regional U.S. IP Attaché .

Capital Markets and Portfolio Investment

Morocco encourages foreign portfolio investment and Moroccan legislation applies equally to Moroccan and foreign legal entities and to both domestic and foreign portfolio investment.  The Casablanca Stock Exchange (CSE), founded in 1929 and re-launched as a private institution in 1993, is one of the few exchanges in the region with no restrictions on foreign participation.  The CSE is regulated by the Moroccan Capital Markets Authority.  Local and foreign investors have identical tax exposure on dividends (10 percent) and pay no capital gains tax.  With a market capitalization of around $60 billion and 76 listed companies, CSE is the second largest exchange in Africa (after the Johannesburg Stock Exchange). Despite its position as the second largest exchange in Africa, the CSE saw only 13 new listings between 2010-2018.  There were no new initial public offerings (IPOs) in 2019.  Short selling, which could provide liquidity to the market, is not permitted.  The Moroccan government initiated the Futures Market Act (Act 42-12) in October 2015 to define the institutional framework of the futures market in Morocco and the role of the regulatory and supervisory authorities. As of February of 2020, futures trading was still pending full implementation.

The Casablanca Stock Exchange demutualized in November of 2015.  This change allowed the CSE greater flexibility, more access to global markets, and better positioned it as an integrated financial hub for the region.  Morocco has accepted the obligations of IMF Article VIII, sections 2(a), 3, and 4, and its exchange system is free of restrictions on making payments and transfers on current international transactions.  Credit is allocated on market terms, and foreign investors are able to obtain credit on the local market.

Money and Banking System

Morocco has a well-developed banking sector, where penetration is rising rapidly and recent improvements in macroeconomic fundamentals have helped resolve previous liquidity shortages.  Morocco has some of Africa’s largest banks, and several are major players on the continent and continue to expand their footprint.  The sector has several large, homegrown institutions with international footprints, as well as several subsidiaries of foreign banks.  According to the IMF’s 2016 Financial System Stability Assessment on Morocco , Moroccan banks comprise about half of the financial system with total assets of 140 percent of GDP – up from 111 percent in 2008.  According to Bank Al-Maghrib (the Moroccan central bank) there are 24 banks operating in Morocco (five of these are Islamic “participatory” banks), six offshore institutions, 28 finance companies, 13 micro-credit associations, and thirteen intermediary companies operating in funds transfer.  Among the 19 traditional banks, the top five banks comprise 79 percent of the system’s assets (including both on and off-balance sheet items.)  Attijariwafa, Morocco’s largest bank, is the sixth largest bank in Africa by total assets (approximately $54 billion in June 2019).  The Moroccan royal family is the largest shareholder.  Foreign (mainly French) financial institutions are majority stakeholders in seven banks and nine finance companies.  Moroccan banks have built up their presence overseas mainly through the acquisition of local banks, thus local deposits largely fund their subsidiaries.

The overall strength of the banking sector has grown significantly in recent years.  Since financial liberalization, credit is allocated freely and Bank Al-Maghrib has used indirect methods to control the interest rate and volume of credit.  The banking penetration rate is approximately 56 percent, with significant opportunities remaining for firms pursuing rural and less affluent segments of the market.  At the start of 2017, Bank Al-Maghrib approved five requests to open Islamic banks in the country.  By mid-2018, over 80 branches specializing in Islamic banking services were operating in Morocco.  The first Islamic bonds (sukuk) were issued in October 2018.  In 2019, Islamic banks in Morocco granted $930 million in financing. The GOM passed a law authorizing Islamic insurance products (takaful) in 2019, but the implementation regulations are still pending, and the products are not yet active.

Following an upward trend beginning in 2012, the ratio of non-performing loans (NPL) to bank credit stabilized at 7.5 percent in 2017 at $6.5 billion.  According to the most recent data from the IMF, NPL rates in July 2019 were 7.7 percent.

Morocco’s accounting, legal, and regulatory procedures are transparent and consistent with international norms.  Morocco is a member of UNCTAD’s international network of transparent investment procedures .  Bank Al-Maghrib is responsible for issuing accounting standards for banks and financial institutions.  Circular 56/G/2007 issued by Bank Al Maghrib requires that all entities under its supervision use International Financial Reporting Standards (IFRS).  The Securities Commission is responsible for issuing financial reporting and accounting standards for public companies.  Circular No. 06/05 of 2007 reaffirmed the Moroccan Stock Exchange Law (Law No. 52-01), which stipulated that all companies listed on the Casablanca Stock Exchange (CSE), other than banks and similar financial institutions, can choose between IFRS and Moroccan Generally Accepted Accounting Principles (GAAP).  In practice, most public companies use IFRS.

Legal provisions regulating the banking sector include Law No. 76-03 on the Charter of Bank Al-Maghrib, which created an independent board of directors and prohibits the Ministry of Finance and Economy from borrowing from the Central Bank except under exceptional circumstances.  Law No. 34-03 (2006) reinforced the supervisory authority of Bank Al-Maghrib over the activities of credit institutions.  Foreign banks and branches are allowed to establish operations in Morocco and are subject to provisions regulating the banking sector.  At present, the U.S. Mission is not aware of Morocco losing correspondent banking relationships.

There are no restrictions on foreigners’ abilities to establish bank accounts.  However, foreigners who wish to establish a bank account are required to open a “convertible” account with foreign currency.  The account holder may only deposit foreign currency into that account; at no time can they deposit dirhams. One issue, reported anecdotally, is that Moroccan banks have closed accounts without giving appropriate warning and that it has been difficult for some foreigners to open bank accounts in Morocco.

Morocco prohibits the use of cryptocurrencies, noting that they carry significant risks that may lead to penalties.

Foreign Exchange and Remittances

Foreign Exchange

Foreign investments financed in foreign currency can be transferred tax-free, without amount or duration limits.  This income can be dividends, attendance fees, rental income, benefits, and interest.  Capital contributions made in convertible currency, contributions made by debit of forward convertible accounts, and net transfer capital gains may also be repatriated.  For the transfer of dividends, bonuses, or benefit shares, the investor must provide balance sheets and profit and loss statements, annexed documents relating to the fiscal year in which the transfer is requested, as well as the statement of extra-accounting adjustments made in order to obtain the taxable income.

A currency-convertibility regime is available to foreign investors, including Moroccans living abroad, who invest in Morocco.  This regime facilitates their investments in Morocco, repatriation of income, and profits on investments.  Morocco guarantees full currency convertibility for capital transactions, free transfer of profits, and free repatriation of invested capital, when such investment is governed by the convertibility arrangement.  Generally, the investors must notify the government of the investment transaction, providing the necessary legal and financial documentation.  With respect to the cross-border transfer of investment proceeds to foreign investors, the rules vary depending on the type of investment.  Investors may import freely without any value limits to traveler’s checks, bank or postal checks, letters of credit, payment cards or any other means of payment denominated in foreign currency.  For cash and/or negotiable instruments in bearer form with a value equal to or greater than $10,000, importers must file a declaration with Moroccan Customs at the port of entry.  Declarations are available at all border crossings, ports, and airports.

Morocco has achieved relatively stable macroeconomic and financial conditions under an exchange rate peg (60/40 Euro/Dollar split), which has helped achieve price stability and insulated the economy from nominal shocks. In March of 2020, the Moroccan Ministry of Economy, Finance, and Administrative Reform, in consultation with the Central Bank, adopted a new exchange regime in which the Moroccan dirham may now fluctuate within a band of ± 5 percent compared to the Bank’s central rate (peg).  The change loosened the fluctuation band from its previous ± 2.5 percent. The change is designed to strengthen the capacity of the Moroccan economy to absorb external shocks, support its competitiveness, and contribute to improving growth.

Remittance Policies

Amounts received from abroad must pass through a convertible dirham account.  This type of account facilitates investment transactions in Morocco and guarantees the transfer of proceeds for the investment, as well as the repatriation of the proceeds and the capital gains from any resale.  AMDIE recommends that investors open a convertible account in dirhams on arrival in Morocco in order to quickly access the funds necessary for notarial transactions.

Sovereign Wealth Funds

Ithmar Capital is Morocco’s investment fund and financial vehicle, which aims to support the national sectorial strategies.  Ithmar Capital is a full member of the International Forum of Sovereign Wealth Funds and follows the Santiago Principles.  Established in November 2011 by the Moroccan government and supported by the royal Hassan II Fund for Economic and Social Development, the fund initially supported the government’s long-term Vision 2020 strategic plan for tourism.  The fund is currently part of the long-term development plan initiated by the government in multiple economic sectors.  Its portfolio of assets is valued at $1.8 billion.

Boards of directors (in single-tier boards) or supervisory boards (in dual-tier boards) oversee Moroccan SOEs.  The Financial Control Act and the Limited Liability Companies Act govern these bodies.  The Ministry of Economy and Finance’s Department of Public Enterprises and Privatization monitors SOE governance.  Pursuant to Law No. 69-00, SOE annual accounts are publicly available.  Under Law No. 62-99, or the Financial Jurisdictions Code, the Court of Accounts and the Regional Courts of Accounts audit the management of a number of public enterprises.  A list of SOEs is available on the Ministry of Finance’s website .

As of March 2020, the Moroccan Treasury held a direct share in 225 state-owned enterprises (SOEs) and 43 companies.  Several sectors remain under public monopoly, managed either directly by public institutions (rail transport, some postal services, and airport services) or by municipalities (wholesale distribution of fruit and vegetables, fish, and slaughterhouses).  The Office Cherifien des Phosphates (OCP), a public limited company that is 95 percent held by the Moroccan government, is a world-leading exporter of phosphate and derived products.  Morocco has opened several traditional government activities using delegated-management or concession arrangements to private domestic or foreign operators, which are generally subject to tendering procedures.  Examples include water and electricity distribution, construction and operation of motorways, and the management of non-hazardous wastes.  In some cases, SOEs continue to control the infrastructure while allowing private-sector competition through concessions.  SOEs benefit from budgetary transfers from the state treasury for investment expenditures.

Morocco established the Moroccan National Commission on Corporate Governance in 2007.  It prepared the first Moroccan Code of Good Corporate Governance Practices in 2008.  In 2011, the Commission drafted a code dedicated to SOEs, drawing on the OECD Guidelines on Corporate Governance of SOEs.  The code, which came into effect in 2012, aims to enhance SOEs’ overall performance.  It requires greater use of standardized public procurement and accounting rules, outside audits, the inclusion of independent directors, board evaluations, greater transparency, and better disclosure.  The Moroccan government prioritizes a number of governance-related initiatives including an initiative to help SOEs contribute to the emergence of regional development clusters.  The government is also attempting to improve the use of multi-year contracts with major SOEs as a tool to enhance performance and transparency.

Privatization Program

The government relaunched Morocco’s privatization program in the 2019 budget.  Parliament enacted the updated annex to Law 38-89 (which authorizes the transfer of publicly held shares to the private sector) in February 2019 through publication in the official bulletin, including the list of entities to be privatized. The state still holds significant shares in the main telecommunications companies, banks, and insurance companies, as well as railway and air transport companies.

Responsible business conduct (RBC) has gained strength in the broader business community in tandem with Morocco’s economic expansion and stability.  The Moroccan government does not have any regulations requiring companies to practice RBC nor does it give any preference to such companies.  However, companies generally inform Moroccan authorities of their planned RBC involvement.  Morocco joined the UN Global Compact network in 2006.  The Compact provides support to companies that affirm their commitment to social responsibility.  In 2016, the Ministry of Employment and Social Affairs launched an annual gender equality prize to highlight Moroccan companies that promote women in the workforce.  While there is no legislation mandating specific levels of RBC, foreign firms and some local enterprises follow generally accepted principles, such as the OECD RBC guidelines for multinational companies.  NGOs and Morocco’s active civil society are also taking an increasingly active role in monitoring corporations’ RBC performance.  Morocco does not currently participate in the Extractive Industries Transparency Initiative (EITI) or the Voluntary Principles on Security and Human Rights, though it has held some consultations aimed at eventually joining EITI.  No domestic transparency measures exist that require disclosure of payments made to governments.  There have not been any cases of high-profile instances of private sector impact on human rights in the recent past.

In the 2019 Corruption Perceptions Index  published by Transparency International (TI), Morocco declined one point from the previous year (from 40 to 41) and moved down seven spots in the rankings (from 73^rd to 80^th out of 180 countries).  According to the State Department’s 2019 Country Report on Human Rights Practices, Moroccan law provides criminal penalties for corruption by officials, but the government generally did not implement the law effectively.  Officials sometimes engaged in corrupt practices with impunity.  There were reports of government corruption in the executive, judicial, and legislative branches during the year.

According to the Global Corruption Barometer Africa 2019 report published in July 2019, 53 percent of Moroccans surveyed think corruption increased in the previous 12 months, 31 percent of public services users paid a bribe in the previous 12 months, and 74 percent believe the government is doing a bad job in tackling corruption.

The 2011 constitution mandated the creation of a national anti-corruption entity.  Morocco formally adopted the National Authority for Probity, Prevention, and Fighting Corruption (INPLCC) through a law published in 2015.  The INPLCC did not come into operation until late 2018 when its board was appointed by King Mohammed VI, although a weaker predecessor organization continued in existence until that time.  The INPLCC is tasked with initiating, coordinating, and overseeing the implementation of policies for the prevention and fight against corruption, as well as gathering and disseminating information on the issue. Additionally, Morocco’s anti-corruption efforts include enhancing the transparency of public tenders and implementation of a requirement that senior government officials submit financial disclosure statements at the start and end of their government service, although their family members are not required to make such disclosures. Few public officials submitted such disclosures, and there are no effective penalties for failing to comply. Morocco does not have conflict of interest legislation. In 2018, thanks to the passage of an Access to Information (AI) law, Morocco joined the Open Government Partnership, a multilateral effort to make governments more transparent.

Although the Moroccan government does not require that private companies establish internal codes of conduct, the Moroccan Institute of Directors (IMA) was established in June 2009 with the goal of bringing together individuals, companies, and institutions willing to promote corporate governance and conduct.  IMA published the four Moroccan Codes of Good Corporate Governance Practices.  Some private companies use internal controls, ethics, and compliance programs to detect and prevent bribery of government officials.  Morocco signed the UN Convention against Corruption in 2007 and hosted the States Parties to the Convention’s Fourth Session in 2011.  However, Morocco does not provide any formal protections to NGOs involved in investigating corruption.  Although the U.S. Mission is not aware of cases involving corruption with regard to customs or taxation issues, American businesses report encountering unexpected delays and requests for documentation that is not required under the FTA or standardized shipping norms.

Resources to Report Corruption

Organization: National Authority for Probity, Prevention, and Fighting Corruption

Address: Avenue Annakhil, Immeuble High Tech, Hall B, 3eme etage, Hay Ryad-Rabat
Telephone number: +212-5 37 57 86 60
Email address: contact@icpc.ma
Fax: +2125 37 71 16 73

Organization: Transparency International National Chapter
Address: 24 Boulevard de Khouribga, Casablanca 20250
Email Address: transparency@menara.ma
Telephone number: +212-22-542 699
http://www.transparencymaroc.ma/index.php 

Morocco does not have a significant history of politically motivated violence or civil disturbance.  There has not been any damage to projects and/or installations, which has had a continuing impact on the investment environment.  Demonstrations occur in Morocco and usually center on political, social, or labor issues.  They can attract thousands of people in major city centers, but most have been peaceful and orderly.

In the Moroccan labor market, many Moroccan university graduates cannot find jobs commensurate with their education and training, and employers report insufficient skilled candidates. The educational system does not prioritize STEM literacy and industrial skills and many graduates are unprepared to meet contemporary job market demands. In 2011, the Moroccan government restructured its employment promotion agency, the National Agency for Promotion of Employment and Skills (ANAPEC), in order to assist new university graduates prepare for and find work in the private sector that requires specialized skills. The Bureau of Professional Training and Job Promotion (OFPPT), Morocco’s main public provider for professional training, also launched the Specialized Institute for Aeronautics and Airport Logistics (ISMALA) in Casablanca in 2013 to offer technical training in aeronautical maintenance. According to official figures released by the government planning agency, unemployment was 10 percent in 2019, with youth (ages 15-24) unemployment hovering around 40 percent in some urban areas. The World Bank and other international institutions estimate that actual unemployment – and underemployment – rates may be higher.

The Government of Morocco pursues a strategy to increase the number of students in vocational and professional training programs. The government opened 27 such training centers between 2015 and 2018 and nearly doubled the number of students receiving scholarships for training between 2017 and 2018. The government announced that the number of scholarships granted to vocational trainees increased by 177 percent between 2018 and 2019. In 2018, the Government of Morocco launched a National Plan for Job Promotion, created after three years of collaboration with government partners involved in employment policy, to support job creation, strengthen the job market, and consolidate regional resources devoted to job promotion. This plan promotes entrepreneurship – especially in the context of regionalization outside the Casablanca-Rabat corridor – to boost youth employment.

Pursuing a forward-leaning migration policy, the Moroccan government has regularized the status of over 50,000 sub-Saharans migrants since 2014.  Regularization provides these migrants with legal access to employment, employment services, and education and vocation training.  The majority of sub-Saharan migrants who benefitted from the regularization program work in call centers and education institutes, if they have strong French or English skills, or domestic work and construction.

According to section VI of the labor law, employers in the commercial, industrial, agricultural, and forestry sectors with ten or more employees must communicate a dismissal decision to the employee’s union representatives, where applicable, at least one month prior to dismissal.  The employer must also provide grounds for dismissal, the number of employees concerned, and the amount of time intended to undertake termination.  With regards to severance pay (article 52 of the labor law), the employee bound by an indefinite employment contract is entitled to compensation in case of dismissal after six months of work in the same company regardless of the mode of remuneration and frequency of payment and wages.  The labor law differentiates between layoffs for economic reasons and firing.  In case of serious misconduct, the employee may be dismissed without notice or compensation or payment of damages.  The employee must file an application with the National Social Security Funds (CNSS) agency of his or her choice, within a period not exceeding 60 days from the date of loss of employment. During this period, the employee shall be entitled to medical benefits, family allowances, and possibly pension entitlements.  Labor law is applicable in all sectors of employment; there are no specific labor laws to foreign trade zones or other sectors. More information is available from the Moroccan Ministry of Foreign Affairs Economic Diplomacy unit.

Morocco has roughly 20 collective bargaining agreements in the following sectors: Telecommunications, automotive industry, refining industry, road transport, fish canning industry, aircraft cable factories, collection of domestic waste, ceramics, naval construction and repair, paper industry, communication and information technology, land transport, and banks. The sectoral agreements that exist to date are in the banking, energy, printing, chemicals, ports, and agricultural sectors.  According to the State Department’s Country Report on Human Rights Practices, the Moroccan constitution grants workers the right to form and join unions, strike, and bargain collectively, with some restrictions (S 396-429 Labor Code Act 1999, No. 65/99).  The law prohibits certain categories of government employees, including members of the armed forces, police, and some members of the judiciary, from forming and joining unions and from conducting strikes.  The law allows several independent unions to exist but requires 35 percent of the total employee base to be associated with a union for the union to be representative and engage in collective bargaining.  The government generally respected freedom of association and the right to collective bargaining.  Employers limited the scope of collective bargaining, frequently setting wages unilaterally for the majority of unionized and nonunionized workers. Domestic NGOs reported that employers often used temporary contracts to discourage employees from affiliating with or organizing unions.  Legally, unions can negotiate with the government on national-level labor issues.

Labor disputes (S 549-581 Labor Code Act 1999, No. 65/99) are common, and in some cases, they result in employers failing to implement collective bargaining agreements and withholding wages.  Trade unions complain that the government sometimes uses Article 288 of the penal code to prosecute workers for striking and to suppress strikes.  Labor inspectors are tasked with mediation of labor disputes.  In general, strikes occur in heavily unionized sectors such as education and government services, and such strikes can lead to disruptions in government services but usually remain peaceful.  In July 2016, the Moroccan government passed the Domestic Worker Law and the long-debated pension reform bill; the former entered into force in 2018.  The new pension reform legislation is expected to keep Morocco’s largest pension fund, the Caisse Marocaine de Retraites (CMR), solvent until 2028, with an increase in the retirement age from 60 to 63 by 2024, and adjustments in contributions and future allocations.

Chapter 16 of the U.S.-Morocco Free Trade Agreement (FTA) addresses labor issues and commits both parties to respecting international labor standards.

OPIC had a long history of supporting projects in Morocco and has provided finance or insurance support to 22 deals over the past four decades.  Morocco signed an agreement with OPIC in 1961.  The agreement was updated in 1995 and ratified by the Moroccan parliament in June 2004.  The agreement can be found on OPIC’s website .  In August 2013, OPIC provided its consent for a new $40 million, eight-year term loan facility with Attijariwafa Bank to support loans to small and medium-sized enterprises (SMEs) in Morocco under a risk-sharing agreement between OPIC and Citi Maghreb.  In August 2014, OPIC signed an additional agreement with Attijariwafa and Wells Fargo to provide additional support to SMEs.  With DFC’s wider financing latitudes as a result of the BUILD Act, more projects in Morocco could be eligible for DFC products.

* Source for Host Country Data: Moroccan GDP data from Bank Al-Maghrib, all other statistics from the Moroccan Exchange Office .  Conflicts in host country and international statistics are likely due to methodological differences

Table 4: Sources of Portfolio Investment
Data not available.

Foreign Commercial Service
U.S. Consulate General Casablanca, Morocco
+212522642082
Office.casablanca@trade.gov

Policies Toward Foreign Direct Investment

The Government of Senegal welcomes foreign investment. The investment code provides for equitable treatment of foreign and local firms. There is no restriction on ownership of businesses by foreign investors in most sectors. Foreign firms generally can invest in Senegal free from systematic discrimination in favor of local firms. Nevertheless, some U.S. and other foreign firms have noted that, in practice, Senegal’s investment environment favors incumbents and insiders – often other foreign firms – at the expense of new market entrants. Common complaints include excessive and inconsistently applied bureaucratic processes, nontransparent judicial processes, and an opaque decision-making process for public tenders and contracts. Financial and capital markets are open, attracting domestic, regional, and international capital.

The government conducts ongoing dialogue with the private sector through the Conseil Presidentiel de l’Investissement (Presidential Council on Investment, or “CPI”). Among other activities, the CPI sponsors an annual forum at which investors comment on the government’s policies and actions. Details are available at cpi-senegal.com. Another important venue for dialog is the annual Assises de l’Entreprises sponsored by the Conseil National du Patronat, the national employers’ association. More information can be found at www.cnp.sn. Senegal does not have a business ombudsman or other official charged with coordinating complaints about the business climate. In practice, investors must often engage directly at the minister level to resolve business climate concerns.

Limits on Foreign Control and Right to Private Ownership and Establishment

There are no barriers to ownership of businesses by foreign investors in most sectors. There are some exceptions for strategic sectors such as water, electricity distribution, and port services where the government and state-owned companies maintain responsibility for most physical infrastructure but allow private companies to provide services. Senegal allows foreign investors equal access to ownership of property and does not impose any general limits on foreign control of investments. Senegal’s Investment Code includes guarantees for equal treatment of foreign investors including the right to acquire and dispose of property.

The Government of Senegal does some screening of proposed investments, primarily to verify compatibility with the country’s overall development goals and compliance with environmental regulations. The Ministry of Finance and Budget reviews project financing arrangements for projects implicating public funds to ensure compatibility with budget and debt policies. Senegal’s Investment Promotion Agency (APIX) can facilitate government review of investment proposals and the project approval process.

Other Investment Policy Reviews

On January 10, 2020, the Executive Board of the International Monetary Fund (IMF) approved a new three-year Policy Coordination Instrument (PCI) for Senegal. For more information, see: https://www.imf.org/en/News/Articles/2020/01/10/pr206-senegal-imf-executive-board-approves-three-year-policy-coordination-instrument 

Business Facilitation

The point of entry for business registration is Senegal’s Investment Promotion Agency (APIX), www.investinsenegal.com , which provides a range of administrative services to foreign investors. Since 2007, APIX has significantly reduced the average number of days it takes to start a business. While the government claims the average for starting a business is two days, the World Bank Doing Business 2020 estimates it takes six days to register a firm. In addition to other bureaucratic and documentary requirements, registering a business requires certification of certain documents by a public notary registered in Senegal. Senegalese law provides special preferences to facilitate investment and business operations by medium and small enterprises including reduced interest rates for Senegalese-owned companies. The government continues to expand its “single window” system offering one-stop government services for businesses, opening a new service centers in various locations and projecting to have at least one service center in each of the country’s 45 regional departments by 2021. Property owners can apply for construction permits online.  In 2019, the GOS made tax information and some payment options available online. With the support of UNCTAD and the government of Luxembourg, APIX recently launched an online portal, https://senegal.eregulations.org/ , containing extensive information regarding regulations applicable to businesses and investments in Senegal.

Despite these efforts, business climate challenges remain. Because the informal sector dominates Senegal’s economy, legitimate companies bear a relatively heavy tax burden.  Some U.S. companies complain about delays in the project development process due to excessive red tape and uncertainty over rules and processes.

Senegal’s Agency for the Development and Supervision of Small and Medium-sized Enterprises (ADEPME) has launched initiatives to support small and medium-sized enterprises (defined in Senegal as companies with fewer than 50 employees and annual revenues of less than 5 billion CFA (about $9 million). These include tax incentives, grants for capacity building and for feasibility studies, and technical assistance to help firms operating in the informal sector formalize and register. ADEPME has also launched a program to certify the creditworthiness of SMEs, making them eligible for loans at preferential rates.

Outward Investment

The government neither promotes nor restricts outward investment.

Transparency of the Regulatory System

Senegal has made some progress towards developing independent regulatory institutions, including regulators for the energy, telecommunications, and financial sectors. While Senegal lacks established procedures for a public comment process for proposed laws and regulations, the government frequently holds public hearings and workshops to discuss proposed initiatives. Proposed regulations are not always made available to the public in a timely way, however. Although Senegalese law requires proposed legislation to be published in advance in the government’s official gazette, the government does not consistently update the gazette’s website.

Authority to make rules and regulate rests with the relevant government ministry unless there is a separate regulatory authority for a particular industry. However, in some instances, a ministry or the president will exert authority over regulatory matters—e.g., determining electricity tariffs. Local government bodies do not have a decisive role in regulatory decisions.

The Commission de Regulation du Secteur de l’Electricite (CRSE) was established in 1998 to regulates the electricity sector and set electricity tariffs.  Although the CRSE is, by law, an independent agency, observers note that the government frequently exercises influence over its decisions. Under the Millennium Challenge Corporation (MCC) Compact focused on the power sector, the government has committed to reforms in the sector, including enacting a new electricity code and strengthening the CRSE’s capacity and independence. As part of these efforts, the MCC Compact, will fund technical assistance and capacity building for CRSE and other key stakeholders who govern the power sector.

The Autorite de Regulation des Telecommunications et des Postes is responsible for licensing and regulating telecommunications and postal services in Senegal. The Dakar-based regional Central Bank of West African States (known by its French acronym BCEAO) regulates the banking sector.

There is no legal requirement to conduct impact assessments of proposed regulations, and regulatory agencies rarely do so. There is no specialized government body tasked with reviewing and monitoring regulatory impacts. Legal, regulatory, and accounting systems closely follow French models. Financial statements must be prepared in accordance with the SYSCOA system, based on Generally Accepted Accounting Principles in France.

Senegal’s budget and information on debt obligations are widely and easily accessible to the public, including online.  The budget was substantially complete and considered generally reliable.  Senegal’s supreme audit institution reviewed the government’s accounts and has published its audit reports for Senegal’s budgets through 2017 online. Senegal is the first Francophone country in sub-Saharan Africa to submit to a fiscal transparency evaluation (FTE) by the IMF. In its January 30, 2019 FTE, the IMF rated Senegal “average” overall for countries of similar income and institutional capacity. Senegal was rated “advanced” or “good” on fiscal forecasting, budgeting, and fiscal reporting. It was rated “basic” on monitoring risks triggered by subnational governments. Senegal’s fiscal transparency would be improved by the supreme audit authority making its reports on the budget available in a timely manner.

The process for allocating licenses and contracts for natural resource extraction was outlined in law and appeared to be followed in practice.  In 2019, Senegal approved a new Petroleum Code, clarifying investment terms and local content requirements for foreign investment in the sector.  Senegal is currently offering new offshore exploration blocks through an open tender conducted in accordance with international standards. In February 2020, Senegal finalized a new Gas Code to govern development of a mid-stream gas distribution network that will be the subject of a competitive tender. Basic information on natural resource extraction awards was publicly available, and the government participated actively in the Extractive Industries Transparency Initiative (EITI).

International Regulatory Considerations

As a member of the Economic Community of West African States (ECOWAS), Senegal generally adheres to regional requirements concerning the movement of people and goods. Similarly, fiscal policy directives of WAEMU are enforced in Senegal, as are regulations issued by the BCEAO. Senegal is a member of the World Trade Organization (WTO) and generally notifies draft regulations to the WTO Committee on Technical Barriers to Trade. However, since 2005 Senegal has banned imports of uncooked poultry and poultry products without notifying the WTO.

Legal System and Judicial Independence

Senegal has well-developed commercial and investment laws. Although settlement of commercial disputes has historically been cumbersome and slow, in February 2018 Senegal launched a new commercial court system with jurisdiction over commercial matters and a mandate to resolve cases within three months.  The business community has welcomed the move, and in the past two years, the court has heard 11,054 cases involving disputes with a combined total value of nearly $500 million.  Companies may nevertheless encounter challenges in executing court decisions and enforcing their contractual rights.

While Senegal’s constitution mandates that the judiciary operate independently of the legislature and executive, the executive frequently exerts influence, particularly in high-profile criminal cases. This type of influence is rare in strictly commercial matters. Some foreign investors, however, report discriminatory treatment by local courts. Investors may consider including provisions for binding arbitration in their contracts to avoid prolonged and unpredictable entanglements in Senegalese courts.

Companies may seek judicial redress against regulatory decisions. Regulatory appeals are heard in administrative tribunals that specialize in adjudicating claims against the state.

Senegal is a member of the World Intellectual Property Organization and the Bern Copyright Convention, and in June 2019 hosted a regional workshop on protecting intellectual property in the pharmaceutical and pesticide industries that gathered prosecutors, customs, and law enforcement officers. Nevertheless, the country has insufficient capacity to reliably protect intellectual property rights.

Laws and Regulations on Foreign Direct Investment

Senegal’s 2004 Investment Code provides basic guarantees for equal treatment of foreign investors and repatriation of profit and capital. It also specifies tax and customs exemptions according to the investment volume, company size and location, with investments outside of Dakar eligible for longer tax exemptions. A law to enhance transparency in public procurement and public tenders entered into force in 2008, establishing a public procurement regulatory body, the Autorité de Régulation des Marchés Publics (ARMP), which publishes annual reviews of public procurement. Procedures for challenging tender awards are available. The government enacted a law on public-private partnerships in 2014 to facilitate expedited approval of projects that include a minimum share of domestic investment. As of July 2020, the GOS was in the process of revising the public-private partnership law.

Regulations of the Central Bank of West African States (known by its French acronym BCEAO) proscribe the use of offshore accounts in project finance transactions within the WAEMU except where approved by the Ministry of Finance and Budget, with the express consent (“avis conforme”) of the BCEAO. According to the BCEAO, these restrictions allow visibility over international transactions, deter money laundering, and help the BCEAO maintain adequate foreign currency reserves. The BCEAO emphasizes the importance of these rules in enabling it to fulfill its mandate of maintaining the stability of the franc CFA’s peg to the euro.

Since 2018, the BCEAO and Senegalese Ministry of Finance Budget have tightened their approach to the approvals of offshore accounts. Although there is no strict “maximum” number of accounts that will be permitted, informal guidelines suggest that transactions using one to three such accounts have the greatest chance of being approved. According the BCEAO, the intent is to encourage the minimum number of such accounts necessary to legitimately conduct the transaction. Project managers and lenders should raise the subject of offshore accounts with the Ministry of Finance as early in the process as possible and should be prepared to submit a functional justification for each requested account. All offshore accounts must be “reauthorized” on an annual basis.

More information on Senegal’s legal and regulatory environment, including texts of the Investment Code, the Mining Code, a new Petroleum Code finalized in February 2019, can be found at the following:

• Investment Code:
• Mining Code:
• Petroleum Code:

Competition and Anti-Trust Laws

Senegal’s national competition commission, the Commission Nationale de la Concurrence, is responsible for reviewing transactions for competition-related concerns.

Expropriation and Compensation

Senegal’s Investment Code includes protection against expropriation or nationalization of private property with exceptions for “reasons of public utility” that would involve “just compensation” in advance. In general, Senegal has no history of expropriation or creeping expropriation against private companies. The government may sometimes use eminent domain justifications to procure land for public infrastructure projects with compensation provided to landowners. Senegal’s Bilateral Investment Treaty with the U.S. also specifies that international legal standards are applicable to any cases of expropriation of investment and the payment of compensation.

Dispute Settlement

ICSID Convention and New York Convention

Senegal is a member of the International Convention for the Settlement of Investment Disputes (ICSID) and a signatory of the Convention on the Recognition and Enforcement of Arbitral Awards (the New York Convention). Senegalese law recognizes the Cour d’Appel (Appeals Court) as the competent authority for the recognition and enforcement of awards rendered pursuant to ICSID. Senegal is also a signatory to the Organization for the Harmonization of Corporate Law in Africa Treaty (OHADA). This agreement supports enforcement of awards under the New York Convention. The Autorité de Régulation des Marchés Publics (ARMP) manages a dispute resolution mechanism for public tenders.

Investor-State Dispute Settlement

Senegal has growing experience in using international arbitration for resolution of investment disputes with foreign companies, including some cases involving tax disputes with U.S. firms. The government has also prevailed in some arbitration cases, including a 2013 arbitration decision in a high-profile case with a multinational company over an integrated mining/railway/port project, fostering greater confidence within the government to the arbitration process. Senegal’s bilateral investment treaty with the United States includes provisions to facilitate the referral of investment disputes to binding arbitration.

International firms have pursued a variety of investment disputes during the last decade, including at least two U.S. firms involved in tax and customs disputes. Other foreign companies in the mining and telecommunications sectors have pursued commercial disputes over licensing. These disputes have often been resolved through arbitration or an amicable settlement.

Senegal has no history of extrajudicial action against foreign investors.

International Commercial Arbitration and Foreign Courts

The government has initiated several programs to establish commercial courts and use alternative dispute resolution mechanisms to reduce the time required for resolving business disputes. Under the OHADA treaty, Senegal recognizes the corporate law and arbitration procedures common to the 16 member states in western and central Africa. Senegalese courts routinely recognize arbitration clauses in contracts and agreements. It is not unusual for courts to rule against state-owned enterprises in disputes involving private enterprises.

Bankruptcy Regulations

Senegal has commercial and bankruptcy laws that address liquidation of business liabilities. Foreign creditors receive equal treatment under Senegalese bankruptcy law in making claims against liquidated assets. Monetary judgments are normally in local currency. As a member of OHADA, Senegal permits three different types of bankruptcy liquidation through a negotiated settlement, company restructuring, or complete liquidation of assets. Senegal ranked 96th out of 190 countries on the “Resolving Insolvency” indicator in the 2020 World Bank Doing Business Index. According to the index, it takes an average of 36 months to complete liquidation proceedings in Senegal. Secured creditors recover an average of 30 cents per every dollar owed in such proceedings, compared to an average of 20.5 for sub-Saharan Africa and 70.2 for OECD high income countries.

Investment Incentives

Senegal’s Investment Code provides for investment incentives, including temporary exemption from customs duties and income taxes, for investment projects. Eligibility for investment incentives depends upon a firm’s size and the type of activity, amount of the potential investment, and location of the project. To qualify for significant investment incentives, firms must invest above CFA 100 million (approximately $165,000) or in activities that lead to an increase of 25 percent or more in productive capacity. Investors may also deduct up to 40 percent of retained investment over five years. However, for companies engaged strictly in “trading activities,” investment incentives may not be available.

Eligible sectors for investment incentives include agriculture and agro-processing, fishing, livestock and related industries, manufacturing, tourism, mineral exploration and mining, banking, and others. All qualifying investments benefit from the “Common Regime,” which includes two years of exoneration from duties on imports of goods not produced locally for small and medium sized firms, and three years for all others. Also included is exoneration from direct and indirect taxes for the same period.

Exoneration from the Minimum Personal Income Tax and from the Business License Tax can be granted to investors who use local resources for at least 65 percent of their total inputs within a fiscal year. Enterprises that locate in less industrialized areas of Senegal may benefit from exemption of the lump-sum payroll tax of three percent, with the exoneration running from five to 12 years, depending on the location of the investment. The investment code provides for exemption from income tax, duties, and other taxes, phased out progressively over the last three years of the exoneration period. Most incentives are automatically granted to investment projects meeting the above criteria. The new tax code was published December 31, 2012 (law # 2012-31 of December 2012 published in journal # 6706 of 31/12/2012).

An existing firm requesting an extension of such incentives must be at least 20 percent self-financed. To qualify for these benefits, firms are required to create at least 150 full-time positions for Senegalese nationals, to contribute the hard currency equivalent of at least 100 million CFA ($165,000 USD), and keep regular accounts that conform to Senegalese (European accounting system) standards. In addition, firms must provide APIX with details on company products, production, employment, and consumption of raw materials.

Foreign Trade Zones/Free Ports/Trade Facilitation

In 2017, Senegal passed legislation to create Special Economic Zones (SEZ) regime. Enterprises approved under the SEZ regime may be granted tax and customs concessions for up to 25 years. Benefits may include: exemptions from duties and taxes on imports of goods, raw materials and equipment (except for community levies); application of a reduced 15 percent corporate tax rate; and exemption from certain taxes and charges such as the business tax and property taxes. To qualify for these benefits, companies must represent a minimum investment of CFA 100 million ($165,000), create at least 150 direct jobs during their first year of operation, and generate at least 60 percent of their revenue from exports. In November 2018, President Sall inaugurated the country’s first SEZ, the Integrated Industrial Platform of Diamniadio, a suburb of Dakar. The platform is now operational with seven companies established. It is expected to create approximately 20,000 jobs by 2023. The government has launched two additional SEZ, one in Sandiara, 80 kilometers from the capital city Dakar, and the other in Ndiass, in the vicinity of Dakar’s International Airport. With growing interest in economic zones, there is a need for more clarity and coherence in the incentives offered by the government.

Performance and Data Localization Requirements

Except in the petroleum sector (discussed below), the government does not currently impose, by statute, specific requirements for including local content, input, or employment in investment activities. However, the government has announced that it favors local content, and the current administration is pursing legislation that would require some level of local content in new investment projects. The government also negotiates with potential investors on a case-by-case basis to support local employment or ensure incentives for investors to meet their contractual commitments. The U.S. Bilateral Investment Treaty with Senegal includes provisions for companies to engage freely professional, technical, and managerial assistance necessary for planning and operation of investments. Nevertheless, foreign firms often find that voluntarily including local content in their projects makes their proposals more competitive.

Senegal approved a new Petroleum Code in February 2019. The new law updated Senegal’s oil and gas legal framework, which was initially adopted two decades ago when the country sought to attract initial investments for largely untested resources.  Senegal’s recent string of major offshore petroleum discoveries, however, has attracted major international players and led the government to adjust the legislation to preserve a greater share of the profits for Senegal. The revised law guarantees more favorable terms to the national oil company Petrosen, including a minimum of 10 percent interest in projects in the exploration phase and up to 30 percent interest when projects reach the development and exploitation stages.  Although oil and gas blocks will still be awarded through open international tenders, the new law will require foreign oil companies to source a portion of labor and materials locally and contribute to a training fund for local workers.

Acquiring work permits for expatriate staff is typically straightforward. Citizens from WAEMU member countries may work freely in Senegal.

Real Property

The Senegalese Civil Code provides a framework, based on French law, for enforcing private property rights. The code provides for equality of treatment and non-discrimination against foreign-owned businesses. Senegal maintains a property title and a land registration system, but application is uneven outside of urban areas. Establishing ownership rights to real estate can be difficult. Once established, however, ownership is protected by law.

The government has undertaken several reforms to make it easier for investors to acquire and register property. It has streamlined procedures and reduced associated costs for property registration. The government has developed new land tenure models intended to facilitate land acquisition by resolving conflicts between traditional and government land ownership. If the new models are widely adopted, the government and donors expect they will facilitate land acquisition and investment in the agricultural sector while providing benefits to traditional landowners in local communities.

The government generally pays compensation when it takes private property through eminent domain actions. Senegal’s housing finance market is under-developed and few long-term mortgage-financing vehicles exist. There is no secondary market for mortgages or other bundled revenue streams. The judiciary is inconsistent when adjudicating property disputes. Senegal ranked 116 out of 190 countries in the 2020 Doing Business Index for Registering Property. According to the World Bank methodology, it requires an average of 41 days to register property against an average of 51.6 days in sub-Saharan Africa and 23.6 days in OECD high-income countries. Five separate procedures are required for property registration.

Intellectual Property Rights

Senegal maintains an adequate legal framework for protection of intellectual property rights (IPR), but the country has limited institutional capacity to implement this framework and enforce IPR protections. Senegal has been a member of the World Intellectual Property Organization (WIPO) since its inception. Senegal is also a member of the African Organization of Intellectual Property (OAPI), a grouping of 15 francophone African countries with a common system for obtaining and maintaining protection for patents, trademarks, and industrial designs. Local statutes recognize reciprocal protection for authors or artists who are nationals of countries adhering to the 1991 Paris Convention on Intellectual Property Rights. Patents may be registered with the Agence sénégalaise pour la Propriété industrielle et l’Innovation technologique (ASPIT) and are protected for 20 years. An annual charge is levied during this period. Registered trademarks are protected for a period of 20 years. Trademarks may be renewed indefinitely by subsequent registrations. Senegal is a signatory to the Berne Convention for the Protection of Literary and Artistic Works. The Senegalese Copyright Office, part of the Ministry of Culture, protects copyrights. Bootlegging of music CDs is common and concerns the local music industry. The Copyright Office has taken actions to combat media piracy, including seizure of counterfeit cassettes and CD/DVDs. In 2008, the government established a special police unit to better enforce the country’s anti-piracy and counterfeit laws. In general, however, the government has limited capacity to combat IPR violations or to seize counterfeit goods. Customs screening for counterfeit goods production is weak, and confiscated goods occasionally re-appear in the market. Nevertheless, the government has made efforts to raise awareness of the impact of counterfeit products on the Senegalese marketplace, especially regarding pharmaceuticals, and officers have participated in trainings offered by manufacturers to identify counterfeit products.

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

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

Capital Markets and Portfolio Investment

Senegalese authorities take a generally positive view of portfolio investment. Assisted by the debt management office of the BCEAO and thanks to a well-functioning regional debt market, Senegal has historically issued regular debt instruments in local currency to manage its finances. Beginning in 2011, the government began accessing international debt markets, issuing U.S. dollar-denominated Eurobonds in 2011, 2014, 2017, and 2018. Some observers, including the IMF, have expressed concern over the recent rise in Senegal’s external debt, which reached 62 percent of GDP in 2019, compared to 52 percent in 2018. Due to borrowing needed to fund its COVID-19 response, Senegal’s debt-to-GDP ratio is expected to rise further, to 68 percent in 2020.

A handful of Senegalese companies are listed on the West African Regional Stock Exchange (BRVM), headquartered in Abidjan, Cote d’Ivoire. The BVRM also has local offices in each of the WAEMU member countries, offering additional opportunities to attract foreign capital and access diversified sources of financing.

In 2018, the BCEAO launched the region’s first certification program for dealers in securities and other financial instruments. Modeled on accreditation programs offered by the Chartered Institute for Securities and Investment (CISI), the new program was supported by the U.S. Treasury’s Office of Technical Assistance.

Money and Banking System

While Senegal’s banking system is generally sound, the financial sector is under-developed. Senegal’s approximately twenty commercial banks, primarily based in France, Nigeria, Morocco, and Togo, follow generally conservative lending guidelines, with collateral requirements that most potential borrowers cannot meet. Few firms are eligible for long-term loans, and small- and medium-sized enterprises have little access to credit. According to a 2014 government survey, less than 5 percent of enterprises receive financing from commercial banks. Senegal’s banking sector is regulated by the BCEAO, the regional central bank, and the WAEMU regional banking commission. Increasingly available mobile money services offer Senegalese consumers alternatives to traditional banking and credit services.

Foreign Exchange and Remittances

Foreign Exchange

As one of the eight WAEMU countries, Senegal uses the CFA franc – issued by the BCEAO – as its currency. The CFA franc is pegged to the Euro. Senegal’s Investment Code includes guarantees of access to foreign exchange and repatriation of capital and earnings, although repatriation transactions are subject to procedural requirements of financial regulators, including limitations imposed by the BCEAO on the use of offshore accounts. Local financial institutions routinely carry out commercial transfers in a timely fashion. The government limits the amount of foreign exchange that individual travelers may take outside Senegal. Departing travelers may carry a maximum of 6 million CFA francs (approximately $10,000) in foreign currency and travelers checks upon presentation of a valid airline ticket. Senegal’s bilateral investment treaty with the United States includes commitments to ensuring free transfer of funds associated with investments.

Remittance Policies

Remittances from Senegal’s large diaspora represent about 10 percent of GDP and are one of the main resources for the country. According to the last IMF review of Senegal’s economy, remittances remains a significant component of the current account but are expected to decline as a percent of GDP over the medium term. Remittances fell sharply in 2020 as a result of the global COVID-19 crisis.

Sovereign Wealth Funds

In 2012, Senegal established a sovereign wealth fund (Fonds Souverain d’Investissements Strategiques, or FONSIS) with a mandate to leverage public assets to support equity investments in commercial projects supporting economic development objectives, FONSIS invests primarily in strategic sectors defined in the Plan Senegal Emergent (PSE), including agriculture, fishing, infrastructure, energy, mining, tourism, and services.

Senegal maintains several taxes and funds allocated for specific purposes such as expanding access to transportation, energy, and telecommunications, including the autonomous road maintenance fund and the energy support fund. For these funds, some information is included in budget annexes; these funds are subject to the same auditing and oversight mechanisms as ordinary budgetary spending. FONSIS reports that it abides by the Santiago Principles for sovereign wealth funds.

Senegal has generally reduced government involvement in state-owned enterprises (SOEs) during the last three decades. However, the government still owns full or majority interests in approximately 20 such companies, including the national electricity company (Senelec), Dakar’s public bus service, the Port of Dakar, the national postal company (National Post), the national rail company, and the national water utility. The state-owned electricity company, Senelec, retains control over power transmission and distribution, but it relies increasingly on independent power producers to generate power. The government has also retained control of the national oil company, Petrosen, which is involved in hydrocarbon exploration in partnership with foreign oil companies and operates a small refinery dependent on government subsidies. The government has modest and declining ownership of agricultural enterprises, including a state-owned company involved in rice production. In 2018, the government re-launched a wholly state-owned airline, Air Senegal. The government owns a minority share in Sonatel-Orange Senegal, the country’s largest internet and mobile communications provider.

The Direction du Secteur Parapublic, an agency within the Ministry of Finance, manages the government’s ownership rights in enterprises. The government’s budget includes financial allocations to these enterprises, including subsidies to Senelec. SOE revenues are not projected in budget documents, but actual revenues are included in quarterly reports published by the Ministry of Finance. Senegal’s supreme audit institution (the Cour des Comptes) conducts audits of the public sector and SOEs. Its reports are made publicly available at www.coursdescomptes.sn and www.ige.sn, but not always in a timely fashion.

Privatization Program

The government has no program for privatizing the remaining SOEs.

Following the lead of foreign companies, some Senegalese firms have begun adopting corporate social responsibility programs and responsible business conduct standards. However, this movement is not yet widespread.

The criteria and procedures by which the government awards natural resource extraction contracts or licenses are specified in Senegal’s 2016 Mining Code. The new code requires mining companies to participate in transparency reporting, following the guidelines of the Extractive Industries Transparency Initiative (EITI). The government appeared to follow the Mining Code and its implementing regulations in practice, although unregulated artisanal mining is common in some areas. Basic information on awards was publicly available online through the government’s official journal, and included details regarding geographic areas, resources under development, companies involved, and the duration of contracts. In January 2019, the government adopted a new Petroleum Code, in response to major offshore hydrocarbon discoveries since 2014. The new code clarifies mechanisms for reserving revenues from oil and gas projects to the government. Senegal has been an active member of the Extractive Industries Transparency Initiative (EITI) since 2013. In May 2018, the EITI Board declared Senegal the first country in Africa to have made “satisfactory progress” in implementing EITI standards. In October, Senegal hosted the 41st quarterly meeting of the EITI Board, along with a conference on EITI implementation in Africa. The government’s EITI committee reports directly to the president.

Senegalese law provides criminal penalties for corruption. The National Anti-Corruption Commission (OFNAC) has a mandate to enforce anti-corruption laws. In January 2020, OFNAC released long overdue reports on its activities for 2017 and 2018 and swore in six new executive-level officials, bringing its managing board to a full complement for the first time in several years. A 2014 law requires the president, cabinet ministers, speaker and chief financial officer of the National Assembly, and managers of public funds in excess of one billion CFA francs (approximately $1.8 million) to disclose their assets to OFNAC.

The government has made some limited progress in improving its anti-corruption efforts. The current administration has mounted corruption investigations against several public officials (primarily the president’s political rivals) and has secured several convictions. In July 2020, President Sall launched an initiative to enforce a requirement that cabinet members and other high-level officials disclose their assets, and issued a report disclosing his own personal assets. The government of Senegal has also taken steps to increase budget transparency in line with regional standards. Senegal ranked 66 out of 180 countries, in Transparency International’s 2019 Corruption Perception Index (CPI), representing a substantial improvement over Senegal’s ranking of 94 in 2012.

Notwithstanding Senegal’s positive reputation for corruption relative to regional peers, the government often did not enforce the law effectively, and officials continued to engage in corrupt practices with impunity. Reports of corruption ranged from rent-seeking by bureaucrats involved in public approvals, to opaque public procurement, to corruption in the police and judiciary. Some high-level officials in President Sall’s administration are rumored to be involved in corrupt dealings.

Senegal’s financial intelligence unit, Cellule Nationale de Traitement des Informations Financières (CENTIF) is responsible for investigating money laundering and terrorist financing. CENTIF has broad authority to investigate suspicious financial transactions, including those of government officials. In February 2019, the regional FATF body, GIABA, issued a Mutual Evaluation Report of Senegal’s anti-money laundering and countering terrorist financing (AML/CTF) performance, measured by FATF standards. Although GIABA found the GOS’s understanding of AML/CTF standards and risks adequate, it gave Senegal non-compliant or partially compliant ratings on 26 of FATF’s 40 recommendations concerning the AML/CTF legal framework (“technical compliance”). Senegal also received ten low ratings and one moderate rating on the FATF’s 11 indicators measuring Senegal’s practical efforts to combat money laundering, terrorist financing, and weapons of mass destruction proliferation financing. Key weaknesses included: failure to domesticate relevant BCEAO AML/CTF directives; inadequate monitoring of nonprofits and non-bank professions, such as lawyers and accountants, who engage in financial transactions; inadequate inspections and sanctions of financial institutions; weak interagency cooperation; and low levels of AML/CTF capacity among judicial and customs authorities.

It is important for U.S. companies to assess corruption risks and develop an effective compliance program or measures to prevent and detect corruption, including foreign bribery. U.S. firms operating in Senegal can underscore to interlocutors in Senegal that they are subject to the Foreign Corrupt Practices Act (FCPA) in the U.S. and may consider seeking legal counsel to ensure compliance with anti-corruption laws in the U.S. and Senegal. The U.S. Government seeks to level the global playing field for U.S. businesses by encouraging other countries to take steps to criminalize all acts of corruption, including bribery of foreign public officials, and requiring them to uphold their obligations under relevant international conventions. A U.S. firm that believes a competitor is seeking to use bribery of a foreign public official to secure a contract may bring this to the attention of appropriate U.S. agencies.

Senegal is a signatory of the United Nations Convention Against Corruption but it is not a signatory of the OECD Convention on Combatting Bribery.

Resources to Report Corruption

Mrs. Seynabou Ndiaye Diakhaté, President
Office National de Lutte Contre La Fraude et la Corruption (OFNAC)
Lot 72-73, Cité Keur Gorgui à Mermoz-Pyrotechnie
Telephone: 800 000 900 / +221 33 889 98 38
www.ofnac.sn

Birahim Seck
President
Forum Civil
40 Avenue Malick Sy (1er étage) – B.P. 28 554 – Dakar
Telephone: +221 33 842 40 44
forumcivil@orange.sn / http://www.forumcivil.sn/ 

Senegal has long been regarded as an anchor of stability in the West Africa region that is vulnerable to political unrest. It is the only mainland West African country that has never had a coup d’état since gaining independence in 1960. Senegal experienced sporadic incidents of political violence during the lead up to national elections in March 2012 due to strong opposition to former President Wade’s decision to seek reelection for a third term. However, the 2012 presidential election reinforced Senegal’s reputation as the strongest democracy in West Africa. International observers assessed the February 2019 presidential election, in which President Sall easily won a second term, as free and fair, despite some isolated systemic issues and a few instances of campaign violence. Public protests occasionally spawn isolated incidents of violence when unions, opposition parties, merchants, or students demand better salaries, working conditions or other benefits. Sporadic incidents of violence as result of petty banditry continue in the Casamance region, which has suffered from a three-decade-old conflict ignited by a local rebel movement seeking independence for the region, but the level of violence has declined in recent years as the government and rebel groups have engaged in negotiations to resolve the conflict.

Security is a top priority for the government, which increased its defense and security budget by 92 percent between 2012 and 2017.

Senegal has an abundant supply of unskilled and semi-skilled labor, with a more limited supply of skilled workers in engineering and technical fields. While Senegal has one of the best higher educational systems in West Africa and produces a substantial pool of educated workers, limited job opportunities in Senegal lead many to look outside of the country for employment.

Relations between employees and employers are governed by the Labor Code, industry-wide collective bargaining agreements, company regulations, and individual employment contracts. Senegalese law provides legal protection for women and children and prohibits forced or compulsory labor. The law also establishes minimum standards for working age, working hours, and working conditions, and bars children from performing many dangerous jobs. Senegal ratified International Labor Organization Convention 182 on the worst forms of child labor in 2000. The labor code recognizes the right of workers to form and join trade unions. Any group of workers in a similar trade or profession may create a union, although formal approval by the Ministry of the Interior is required. The right to strike is recognized but sometimes restricted. The GOS has the authority to dissolve trade unions and requisition workers from private enterprises.

Two powerful industry associations represent management’s interests: the National Council of Employers (CNP) and the National Employers’ Association (CNES). The principal labor unions are the National Confederation of Senegalese Workers (CNTS) and the National Association of Senegalese Union Workers (UNSAS), a federation of independent labor unions. Collective bargaining agreements cover an estimated 44 percent of formal sector workers. Most workers, however, work in the informal sector, where labor rules are not enforced.

Child labor remains a problem, particularly in the informal sector, mining, construction, transportation, domestic work, agriculture, and fishing, where labor regulations are rarely enforced. Despite some progress, Senegal still has work to do to address the problem of forced child begging. Tens of thousands of religious students (talibés) are enrolled in Koranic schools (daaras) where some are forced to beg to enrich teachers who corrupt the daara tradition. The GOS has made some progress in combatting these practices, but more progress is needed.

The COVID-19 pandemic and the GOS’s initially stringent lockdown measures resulted in significant job losses, primarily in Senegal’s dominant informal sector. The head of Senegal’s leading employers’ association noted that the tourism sector (accounting for 7 percent of GDP) lost 45,000 jobs in April 2020 alone. A May 2020 survey of 800 Senegalese businesses by the National Agency for Small and Medium-Sized Enterprises found that 65 percent had suffered a significant negative impact from COVID-19 and 40 percent had ceased operations. At the same time, a GOS measure prohibiting layoffs raised fears of insolvency among larger formal sector firms.

The U.S. International Development Finance Corporation (DFC, formerly OPIC) offers financing and investment insurance to support U.S. investment projects in Senegal and is actively seeking to strengthen its portfolio in the country. DFC is currently supporting several investment projects in Senegal including two energy projects, one microfinance project and an agribusiness project. Additional projects in the energy and tourism sectors are under consideration. Senegal is a member of the Multilateral Investment Guarantee Agency (MIGA), an arm of the World Bank.

“0” reflects amounts rounded to +/- USD 500,000.

Table 4: Sources of Portfolio Investment
Data not available.

Heath Bailey
Economic Section Chief
U.S. Embassy, Route des Almadies, B.P. 49, Dakar, Senegal
+221 33 879 4794
BaileyDH@state.gov

Policies Towards Foreign Direct Investment

The United Republic of Tanzania, according to Government officials, welcomes foreign direct investment (FDI) as it pursues its industrialization and development agenda. However, in practice, government policies and actions do not effectively keep and attract investment. The 2019 World Investment Report indicates that FDI flows to Tanzania increased from USD 938 million in 2017 to USD 1.1 billion in 2018, although they have not recovered to pre-2015 levels. (The Bank of Tanzania reports 2018 FDI as USD 2.82 billion, down from USD 5.07 billion in 2017.). Investors and potential investors note the biggest challenges to investment include difficulty in hiring foreign workers, reduced profits due to unfriendly and opaque tax policies, increased local content requirements, regulatory/policy instability, lack of trust between the GoT and the private sector, and mandatory initial public offerings (IPOs) in key industries.

The United Republic of Tanzania has framework agreements on investment, and offers various incentives and the services of investment promotion agencies. Investment is mainly a non-Union matter, thus there are different laws, policies, and practices for the Mainland and Zanzibar. Zanzibar updated its investment policy in 2019, while the Mainland/Union policy dates from 1996. Efforts to update the Mainland Investment Policy and Investment Act were underway, but incomplete as of the date of this publication.. International agreements on investment are covered as Union matters and therefore apply to both regions.

The Tanzania Investment Center (TIC) is intended to be a one-stop center for investors, providing services such as permits, licenses, visas, and land. The Zanzibar Investment Promotion Authority (ZIPA) provides the same function in Zanzibar.

The Government of Tanzania has an ongoing dialogue with the private sector via the Tanzania National Business Council (TNBC). TNBC meetings are chaired by the President of the United Republic of Tanzania and co-chaired by the head of the Tanzania Private Sector Foundation (TPSF). Unfortunately, the TNBC has only met twice in the past five years. There is also a Zanzibar Business Council (ZBC), as well as Regional Business Councils (RBCs), and District Business Councils (DBCs).

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign investors generally receive treatment equivalent to domestic investors but limits still persist in a number of sectors. Tanzania conforms to best practice in several cases. There are no geographical restrictions on private establishments with foreign participation or ownership, no limitations on number of foreign entities that can operate in a given sector, and no sectors in which approval is required for foreign investment greenfield FDI but not for domestic investment.

However, Tanzania discourages foreign investment in several sectors through limitations on foreign equity ownership or other activities, including aerospace, agribusiness (fishing), construction and heavy equipment, travel and tourism, energy and environmental industries, information and communication, and publishing, media, and entertainment.

Specific examples include the following: The Tourism Act of 2008 bars foreign companies from engaging in mountain guiding activities, and states that only Tanzanian citizens can operate travel agencies, car rental services, or engage in tour guide activities (with limited exceptions). Per the Merchant Shipping Act of 2003, only citizen-owned ships are authorized to engage in local trade, a requirement that can be waived at the Minister’s discretion. Furthermore, the Tanzania Shipping Agencies Act of November 2017 gives exclusive monopoly power to the Tanzania Shipping Agency Corporation (TASAC) to conduct business as shipping agents, shipping regulator, and licensor of other private shipping agencies. The Act also gives TASAC an exclusive mandate to provide clearing and forwarding functions relating to imports and exports of minerals, mineral concentrates, machinery and equipment for the mining and petroleum sector, products and/or extracts related to minerals and petroleum arms and ammunition, live animals, government trophies and any other goods that the Minister responsible for maritime transport may specify.

• The Tourism Act of 2008 bars foreign companies from engaging in mountain guiding activities, and states that only Tanzanian citizens can operate travel agencies, car rental services, or engage in tour guide activities (with limited exceptions). Per the Merchant Shipping Act of 2003, only citizen-owned ships are authorized to engage in local trade, a requirement that can be waived at the Minister’s discretion. Furthermore, the Tanzania Shipping Agencies Act of November 2017 gives exclusive monopoly power to the Tanzania Shipping Agency Corporation (TASAC) to conduct business as shipping agents, shipping regulator, and licensor of other private shipping agencies. The Act also gives TASAC an exclusive mandate to provide clearing and forwarding functions relating to imports and exports of minerals, mineral concentrates, machinery and equipment for the mining and petroleum sector, products and/or extracts related to minerals and petroleum arms and ammunition, live animals, government trophies and any other goods that the Minister responsible for maritime transport may specify.
• A 2009 amendment to the Fisheries Regulations imposes onerous conditions for foreign citizens to engage in commercial fishing and the export of fishery products, sets separate licensing costs for foreign citizens and Tanzanians, and limits the types of fishery products that foreign citizens may work with.
• Foreign construction contractors can only obtain temporary licenses, per the Contractors Registration Act of 1997, and contractors must commit in writing to leave Tanzania upon completion of the set project. 2004 amendments to the Contractors Registration By-Laws limit foreign contractor participation to specified, more complex classes of work.
• Foreign capital participation in the telecommunications sector is limited to a maximum of 75 percent.
• All insurers require one-third controlling interest by Tanzania citizens, per the Insurance Act.
• The Electronic and Postal Communications (Licensing) Regulations 2011 limits foreign ownership of Tanzanian TV stations to 49 percent and prohibits foreign capital participation in national newspapers.
• Mining projects must be at least partially owned by the GoT and “indigenous” companies, and hire, or at least favor, local suppliers, service providers, and employees. (See Chapter 4: Laws and Regulations on FDI for details.). Gemstone mining is limited to Tanzanian citizens with waivers of the limitation at ministerial discretion. In February 2019, responding to low growth and investment in the sector, the government revised the 2018 Mining Regulations to reduce local ownership requirements from 51 percent to 20 percent.

Currently, foreigners can invest in stock traded on the Dar es Salaam Stock Exchange (DSE), but only East African residents can invest in government bonds. East Africans, excluding Tanzanian residents, however, are not allowed to sell government bonds bought in the primary market for at least one year following purchase.

Other Investment Policy Reviews

There have not been any third-party investment policy reviews (IPRs) on Tanzania in the past three years, the most recent OECD report is for 2013. The World Trade Organization (WTO) published a Trade Policy Review in 2019 on all the East African Community states, including Tanzania.

WTO – Trade Policy Review: East African Community (2019)https://www.wto.org/english/tratop_e/tpr_e/tp484_e.htm 

OECD – Tanzania Investment Policy Review (2013)http://www.oecd.org/daf/inv/investment-policy/tanzania-investment-policy-review.htm 

WTO – Secretariat Report of Tanzaniahttps://www.wto.org/english/tratop_e/tpr_e/s384-04_e.pdf 

UNCTAD – Trade and Gender Implications (2018)https://unctad.org/en/PublicationsLibrary/ditc2017d2_en.pdf 

Business Facilitation

The World Bank’s Doing Business 2020 Indicators rank Tanzania 141 out of 190 overall for ease of doing business, and 162nd for ease of starting a business. There are 10 procedures to open a business, higher than the sub-Saharan Africa average of 7.4. The Business Registration and Licensing Agency (BRELA) issues certificates of compliance for foreign companies, certificates of incorporation for private and public companies, and business name registration for sole proprietor and corporate bodies. After registering with BRELA, the company must: obtain a taxpayer identification number (TIN) certificate, apply for a business license, apply for a VAT certificate, register for workmen’s compensation insurance, register with the Occupational Safety and Health Authority (OSHA), receive inspection from the Occupational Safety and Health Authority (OSHA), and obtain a Social Security registration number.

The TIC provides simultaneous registration with BRELA, TRA, and social security (http://tiw.tic.co.tz/ ) for enterprises whose minimum capital investment is not less than USD 500,000 if foreign owned or USD 100,000 if locally owned.

In May 2018, the government adopted the Blueprint for Regulatory Reforms to improve the business environment and attract more investors. The reforms, which were developed as a collaborative effort between the Ministry of Industry, Trade and Investment and the private sector, seek to improve the country’s ease of doing business through regulatory reforms and to increase efficiency in dealing with the government and its regulatory authorities. The official implementation of the Business Environment Improvement Blueprint started on July 1, 2019, though there have been little tangible changes or advancements. A new Business Facilitation Act aimed at implementing key actions from the Blueprint is pending adoption by Parliament.

Outward Investment

Tanzania does not promote or incentivize outward investment. There are restrictions on Tanzanian residents’ participation in foreign capital markets and ability to purchase foreign securities. Under the Foreign Exchange (Amendment) Regulations 2014 (FEAR), however, there are circumstances where Tanzanian residents may trade securities within the East African Community (EAC). In addition, FEAR provides some opportunities for residents to engage in foreign direct investment and acquire real assets outside of the EAC.

Transparency of the Regulatory System

According to the World Bank’s Global Indicators of Regulatory Governance (http://rulemaking.worldbank.org/ ), Tanzania scores low in regulatory governance with 1.5 out of 5 total in transparency of regulatory governance (neighboring Kenya and Uganda, by contrast, both score 3.25)

Tanzania has formal processes for drafting and implementing rules and regulations. Generally, after an Act is passed by Parliament, the creation of regulations is delegated to a designated ministry. In theory, stakeholders are legally entitled to comment on regulations before they are implemented. However, ministries and regulatory agencies frequently fail to provide adequate opportunity for meaningful input as there is no minimum period of time for public comment set forth in law. Stakeholders often report that they are either not consulted or given too little time to provide meaningful input. Ministries or regulatory agencies do not have the legal obligation to publish the text of proposed regulations before their enactment. Sometimes, it is difficult to obtain the final, adopted version of a bill in a timely manner nor is it always public information if and when the President signed the bill. Moreover, the government has increasingly used presidential decree powers to bypass regulatory and legal structures.

In 2016, the President signed the Access to Information Act into law. In theory, the Act gives citizens more rights to information; however, some claim that the Act gives too much discretion to the GoT to withhold disclosure. Although information, including rules and regulations, is available on the GoT’s “Government Portal” (https://www.tanzania.go.tz/documents ), the website is generally not current and incomplete. Alternatively, rules and regulations can be obtained on the relevant ministry’s website, but many offer insufficient information.

Nominally, independent regulators are mandated with impartially following the regulations. The process, however, has sometimes been criticized as being subject to political influence, depriving the regulator of the independence it is granted under the law.

Tanzania does not meet the minimum standards for transparency of public finances and debt obligations.

International Regulatory Considerations

Tanzania is also part of both the EAC and the Southern African Development Community (SADC) and subject to their respective regulations. However, according to the 2016 East African Market Scorecard (most recent), Tanzania is not compliant with several EAC regulations.

Tanzania is a member of the International Organization for Standardization (ISO). The national standards body, the Tanzania Bureau of Standards, was established in 1975. It has been most active in promoting standards and quality in process technology, including agro-processing, chemicals and textiles, and engineering, including mining and construction.

Tanzania is a member of the World Trade Organization (WTO) and its National Enquiry Point (NEP) is the Tanzania Bureau of Standards (TBS). As the WTO NEP, TBS handles information on adopted or proposed technical regulations, as well as on standards and conformity assessment procedures. Tanzania does not notify all draft technical regulations to the WTO Committee on Technical Barriers to Trade (TBT).

Legal System and Judicial Independence

Tanzania’s legal system is based on the English Common Law system. The first source of law is the 1977 Constitution, followed by statutes or acts of Parliament; and case law, which are reported or unreported cases from the High Courts and Courts of Appeal and are used as precedents to guide lower courts. The Court of Appeal, which handles appeals from Mainland Tanzania and Zanzibar, is the highest court, followed by the High Court, which handles civil, criminal and commercial cases. There are four specialized divisions within the High Courts: Labor, Land, Commercial, and Corruption and Economic Crimes. The Labor, Land, and Corruption and Economic Crimes divisions have exclusive jurisdiction over their respective matters, while the Commercial division does not claim exclusive jurisdiction. The High Court and the District and Resident Magistrate Courts also have original jurisdiction in commercial cases subject to specified financial limitations.

Apart from the formal court system, there are quasi-judicial bodies, including the Tax Revenue Appeals Tribunal and the Fair Competition Tribunal, as well as alternate dispute resolution procedures in the form of arbitration proceedings. Judgments originating from countries whose courts are recognized under the Reciprocal Enforcement of Foreign Judgments Act (REFJA) are enforceable in Tanzania. To enforce such judgments, the judgment holder must make an application to the High Court of Tanzania to have the judgment registered. Countries currently listed in the REFJA include Botswana, Lesotho, Mauritius, Zambia, Seychelles, Somalia, Zimbabwe, Swaziland, the United Kingdom, and Sri Lanka.

The Tanzanian constitution guarantees judicial independence. However, the degree of judicial independence has varied significantly in the past few years, and many perceive that political interference in justice has increased over the past five years.

Regulations and enforcement actions are appealable and they are adjudicated in the national court system.

Laws and Regulations on Foreign Direct Investment

In 2017, new laws and regulations were enacted that may impact the risk-return profile on foreign investments, especially those in the extractives and natural resources industries. The laws/regulations include the Natural Wealth and Resources (Permanent Sovereignty) Act 2017, Natural Wealth and Resources Contracts (Review and Renegotiation of Unconscionable Terms) Act 2017, Written Laws (Miscellaneous Act) 2017, and Mining (Local Content) Regulations 2018. The three new acts were introduced by the executive branch under a certificate of urgency, meaning that standard advance publication requirements were waived to expedite passage. As a result, there was minimal stakeholder engagement.

Investors, especially those in natural resources and mining, have expressed concern about the effects of these new laws. Two of the new laws apply to “natural wealth and resources,” which are broadly defined and not only include oil and gas, but in theory, could include wind, sun, and air space. Investors are encouraged to seek legal counsel to determine the effect these laws may have on existing or potential investments. For natural resource contracts, the laws remove rights to international arbitration and subject contracts, past and present, to Parliamentary review. More specifically, the law states “Where [Parliament] considers that certain terms …or the entire arrangement… are prejudicial to the interests of the People and the United Republic by reason of unconscionable terms it may, by resolution, direct the Government to initiate renegotiation with a view to rectifying the terms.”  Further, if the GoT’s proposed renegotiation is not accepted, the offending terms are automatically expunged. “Unconscionable” is defined broadly, including catch-all definitions for clauses that are, for example, “inequitable or onerous to the state.” Under the law, the judicial branch does not play a role in determining whether a clause is “unconscionable.”

The Mining (Local Content) Regulations 2018 require that indigenous Tanzanian companies are given first preference for mining licenses. An ‘indigenous Tanzanian company’ is one incorporated under the Companies Act with at least 51 percent of its equity owned by and 100 percent of its non-managerial positions held by Tanzanians. Furthermore, foreign mining companies must have at least 5 percent equity participation from an indigenous Tanzanian company and must grant the GoT a 16 percent carried interest. Lastly, foreign companies that supply goods or services to the mining industry must incorporate a joint venture company in which an indigenous Tanzanian company must hold equity participation of at least 20 percent.

The Mining (Local Content) Regulations 2018 also set the timeframe for local content percentages to be raised over the next 10 years which vary by type of good or service provided. There are immediate requirements to use 100 percent local content for financial, insurance, legal, catering, cleaning, laundry, and security services. All contractors must submit a local content plan to the GoT, which includes provisions to favor local content and meets required local content percentages. The plan must include five sub-plans on employment and training; research and development; technology transfer; legal services; and financial services. The regulations also require contractors to implement bidding procedures to acquire goods and services and to award contracts to indigenous Tanzanian companies if they do not exceed the lowest bidder by more than 10 percent. There are also regular contractor reporting requirements. Violating these regulations can lead to a fine of up to TZS 500 million or five years imprisonment.

The Tanzania Investment Center contains many relevant laws, rules, procedures, and reporting requirements for investors on its portal at http://tanzania.eregulations.org , but it is not comprehensive.

Competition and Anti-Trust Laws

The Fair Competition Commission (FCC) is an independent government body mandated to intervene, as necessary, to prevent significant market dominance, price fixing, extortion of monopoly rent to the detriment of the consumer, and market instability. The FCC has the authority to restrict mergers and acquisitions if the outcome is likely to create market dominance or lead to uncompetitive behavior.

Expropriation and Compensation

The constitution and investment acts require government to refrain from nationalization. However, the GoT may expropriate property after due process for the purpose of national interest. The Tanzanian Investment Act guarantees payment of fair, adequate, and prompt compensation; access to the court or arbitration for the determination of adequate compensation; and prompt repatriation in convertible currency where applicable. For protection under the Tanzania Investment Act, foreign investors require USD 500,000 minimum capital and Tanzanian investors require USD 100,000.

GoT authorities do not discriminate against U.S. investments, companies, or representatives in expropriation. There have been cases of government revocation of hunting concessions that grant land rights to foreign investors, including a U.S.-based company with strategic investor status in 2016. In late 2018, the GoT expropriated several dormant cashew-processing factories. In early 2019, the GoT reportedly repossessed 16 previously-privatized factories that were not in operation. At the same time, the government issued a notice to more than 30 businesses, including hotels and other factories, warning them that if they did not present a plan for revitalizing their businesses, the GoT would repossess them. The ownership structures of these businesses are unconfirmed; however, there are reports that some have foreign ownership. At least one factory with substantial U.S. investment reports that the GoT has blocked the sale of its assets.

There are numerous examples of indirect expropriation, such as confiscatory tax regimes or regulatory actions that deprive investors of substantial economic benefits from their investments.

Dispute Settlement

ICSID Convention and New York Convention

Tanzania is a member of both the International Centre for Settlement of Investment Disputes (ICSID) and the Multilateral Investment Guarantee Agency (MIGA). Tanzania is a signatory to the New York Convention on the Recognition and Enforcement of Arbitration Awards.

A new Arbitration Act adopted in February 2020 replaces the 1931 Arbitration Act and is generally a replica of the English Arbitration Act, 1996. The act slightly amends the Public Private Partnership (PPP) (Amendment) Act, No. 9 of 2018 (the PPP Amendment Act) which stated that PPP agreements are subject to local arbitration under the arbitration laws of Tanzania and must take place on Tanzanian soil. With the change, however, the arbitrator body may be international. There was a similar semantic change to the Natural Wealth and Resources (Permanent Sovereignty) Act, 2017 and the Natural Wealth and Resources (Review and Re-Negotiation of Unconscionable Terms) Act, 2017 (collectively the Natural Wealth Laws) to again allow for international arbitration as long as they are governed by Tanzanian law and the venue is in Tanzania. However, it is important to note that interpretations of this act vary among legal practitioners and thus far, there has been no foreign arbitral body to travel to Tanzania

Investor-State Dispute Settlement

Investment-related disputes in Tanzania can be protracted. The Commercial Court of Tanzania operates two sub-registries located in the cities of Arusha and Mwanza. The sub-registries, however, do not have resident judges. A judge from Dar es Salaam conducts a monthly one-week session at each of the sub-registries. The government said it intends to establish more branches in other regions including Mbeya, Tanga, and Dodoma, though progress has stalled. Court-annexed mediation is also a common feature of the country’s commercial dispute resolution system.

Despite legal mechanisms in place, foreign investors have claimed that the GoT sometimes does not honor its agreements. Additionally, investors continue to face challenges receiving payment for services rendered for GoT projects. One high profile example of such a dispute is that of a U.S.-based energy company, which in 2017 filed an application for ICSID arbitration seeking USD 561 million for alleged breach of contract of a purchase power agreement. The dispute is ongoing.

Bankruptcy Regulations

Tanzania has a bankruptcy law which allows for companies to declare insolvency. The insolvency process includes the appointment of receiver managers, administrative receivers, or liquidators. In practice the process is very long and expensive. Preferential debts such as government taxes and rents, outstanding wages and salaries, and other employee compensation take priority over other claims, including those from creditors. Insolvent or illiquid companies may also seek the protection of the courts by seeking a compromise or arrangement as proposed between a company and its creditors, a certain class of creditors, or its shareholders.

According to the 2020 World Bank’s Ease of Doing Business report, it takes an average of three years to conclude bankruptcy proceedings in Tanzania. The recovery rate for creditors on insolvent firms was reported at 20.4 U.S. cents on the dollar, with judgments typically made in local currency.

Investment Incentives

The Tanzania Investment Center (TIC) offers a package of investment benefits and incentives to both domestic and foreign investors without performance requirements. A minimum capital investment of USD 500,000 if foreign owned or USD 100,000 if locally owned is required.

These incentives include the following:

• Discounts on customs duties, corporate taxes, and VAT paid on capital goods for investments in mining, infrastructure, road construction, bridges, railways, airports, electricity generation, agribusiness, telecommunications, and water services.
• 100 percent capital allowance deduction in the years of income for the above-mentioned types of investments – though there is ambiguity as to how this is accomplished.
• No remittance restrictions. The GoT does not restrict the right of foreign investors to repatriate returns from an investment.
• Guarantees against nationalization and expropriation. Any dispute arising between the GoT and investors may be settled through negotiations or submitted for arbitration.
• Allowing interest deduction on capital loans and removal of the five-year limit for carrying forward losses of investors.

Investors may apply for “Strategic Status” or “Special Strategic Status” to receive further incentives. The criteria used to determine whether an investor may receive these designations are available on TIC’s website (www.tic.co.tz/strategicInvestor ).

The government habitually introduces waivers through the Public Finance Act with the aim of attracting investment in certain targeted sectors. In Financial Year 2019/2020, the government introduced a VAT exemption for the following items in order to encourage investment: import of grain drying equipment; supply of aircraft lubricants to a local operator of air transportation; and imports refrigerated by a person in horticulture for exclusive use in Tanzania Mainland.  The GoT also introduced a reduction of corporate income tax for new investors involved in the production of sanitary pads from 30% to 25% for two years, subject to the investor signing a performance agreement with the government.

The Export Processing Zones Authority (EPZA) oversees Tanzania’s Export Processing Zones (EPZs) and Special Economic Zones (SEZs). EPZA’s core objective is to build and promote export-led economic development by offering investment incentives and facilitation services. Minimum capital requirements for EPZ and SEZ investors are USD 500,000 for foreign investors and USD 100,000 for local investors. Investment incentives offered for EPZs include the following.

• An exemption from corporate taxes for ten years.
• An exemption from duties and taxes on capital goods and raw materials.
• An exemption on VAT for utility services and on construction materials.
• An exemption from withholding taxes on rent, dividends, and interests.
• Exemption from pre-shipment or destination inspection requirements.
• SEZs offer similar incentives, excluding the ten-year exemption from corporate taxes.

The Zanzibar Investment Promotion Agency (ZIPA) and the Zanzibar Free Economic Zones Authority (ZAFREZA) offer following incentives:

CATEGORY “A” FREE ECONOMIC ZONE DEVELOPERS: DEVELOPMENT OF INFRASTRUCTURE

1. The developer of a Free Economic Zone shall benefit to the following incentives:

• exemption from payment of taxes and duties for machinery, equipment, heavy duty vehicles, building and construction materials, and any other goods of capital nature to be used for purposes of development of the Free Economic Zone infrastructure;
• exemption from payment of corporate tax for an initial period of ten years and thereafter a corporate tax, shall be charged at the rate specified in the Income Tax Act;
• exemption from payment of withholding tax on rent, dividends ‘and interest for the first ten years;
• exemption from payment of property tax for the first ten years;
• remission of customs duty, value added tax and any other tax payable in respect of importation of one administrative vehicle, ambulances, firefighting equipment and firefighting vehicles and up to two buses for employees’ transportation to and from the Free Economic Zone;
• exemption from payment of stamp duty on any instrument executed in or outside the Free Economic Zone relating to transfer, lease or hypothecation of any movable or immovable property situated within the Free Economic Zone or any document, certificate, instrument, report or record relating to any activity, action, operation, project, undertaking or venture in the Free Economic Zone;
• treatment of goods destined into Free Economic Zones as transit goods; and
• on site customs inspection of goods within Free Economic Zones.

CATEGORY “B” FREE ECONOMIC ZONES OPERATORS: APPROVED INVESTORS PRODUCING FOR SALE INTO THE CUSTOMS TERRITORY

1. Approved Investors whose primary markets are within the customs territory shall be entitled to the:

• remission of customs duty, value added tax and any other tax charged on raw materials and goods of capital nature related to the production in the Free Economic Zones;
• exemption from payment of withholding tax on interest on foreign sourced loan;
• remission of customs duty, value added tax and any other tax payable in respect of importation of one administrative vehicle, one ambulances, firefighting equipment and firefighting vehicles and up to two buses for employees’ transportation into and from the Free Economic Zones;
• exemption from pre-shipment or destination inspection requirements;
• on site customs inspection of goods within Free Economic Zones;
• access to competitive, modern and reliable services available within the Free Economic Zones; and
• subject to compliance with applicable conditions and procedures for foreign exchange and payment of tax whenever appropriate, unconditional transfer through any authorized dealer bank in freely convertible currency of;

(i) net profits or dividends attributable to the investment;       (ii) payments in respect of loan servicing where a foreign loan has been obtained;

(ii) payments in respect of loan servicing where a foreign loan has been obtained;       (iii) royalties, fees and charges for any technology transfer agreement;

(iii) royalties, fees and charges for any technology transfer agreement;       (iv) the remittance of proceeds in the event of sale or liquidation of the licensed business or any interest attributable to the licensed business; and

(iv) the remittance of proceeds in the event of sale or liquidation of the licensed business or any interest attributable to the licensed business; and       (v) payments of emoluments and other benefits to foreign personnel employed in Tanzania in connection with the licensed business.

(v) payments of emoluments and other benefits to foreign personnel employed in Tanzania in connection with the licensed business.

CATEGORY “C” FREE ECONOMIC ZONE OPERATORS: APPROVED INVESTORS PRODUCING FOR EXPORT MARKETS

1. Approved Investors producing for export markets m non-manufacturing or processing sectors shall be entitled to the:

• subject to compliance with applicable conditions and procedures, accessing the export credit guarantee scheme;
• remission of customs duty, value added and any other tax charged on raw materials and goods of capital nature related to the production in the Free Economic Zones;
• exemption from payment of corporate tax for an initial period of ten years and thereafter, a corporate tax shall be charged at the rate specified in the Income Tax Act;
• exemption from payment of withholding tax on rent, dividends and interests for the first ten years;
• exemption from payment of all taxes and levies imposed by the Local Government Authorities for products produced in the Free Economic Zones for a period of ten years;
• exemption from pre-shipment or destination inspection requirements;
• on site customs inspection of goods in the Free Economic Zones;
• remission of customs duty, value added tax and any other tax payable in respect of importation of one administrative vehicle, ambulances, firefighting equipment and vehicles and up to two buses for employees’ transportation to and from the Free Economic Zones;
• treatment of goods destined into Free Economic Zones as transit goods;
• access to competitive, modern and reliable services available within the Free Economic Zones; and
• subject to compliance with applicable conditions and procedures for foreign exchange and payment of tax whenever appropriate unconditional transfer through any authorized dealer bank in freely convertible currency of:

(i) net profits or dividends attributable to the investment;

(ii) payments in respect of loan servicing where a foreign loan has been obtained;

(iii) royalties, fees and charges ifor any technology transfer agreement;

(iv) the remittance of proceeds in the event of sale or liquidation of the business enterprises or any interest attributable to the investment;

(v) payments of emoluments and other benefits to foreign personnel employed in Tanzania in connection with the business enterprise; twenty percent of total turnover is allowed to be sold to the local market and is subject to the payment of all taxes;

• twenty percent of total turnover is allowed to be sold to the local market and is subject to the payment of all taxes;
• hundred percent foreign ownership is allowed ; and
• no limit to the duration that goods may be stored in the Freeport Zones.

2. For purposes of this section investors licensed primarily for export markets are investors whose exports are more than eighty percent of total annual production.

Incentives and allowances outside Free Economic Zones

1. Approved investor investing outside Free Economic Zones, may be granted the:

• exemption from payment of import duty, excise duty Value Added Tax and other similar taxes on machinery, equipment, spare parts, vehicles and other input necessary and exclusively required by that enterprise during construction period indicated in the Investment Certificate;
• exemption from payment of business license fee for the first three months of trial operation;
• corporate tax exemption for up to five years;
• hundred percent foreign ownership;
• hundred percent retention of all profits after tax;
• hundred percent allowance Research and Development; and
• hundred percent allowance for free repatriation of profit after tax.

2. Without prejudice to the provisions of paragraph 1 of this Part, approved investor investing in manufacturing sector may further be granted the:

• exemption from payment of any tax on all goods produced for exports;
• exemption from payment of trade levy for raw materials and industrial inputs procured from Tanzania Mainland;
• exemption from payment of import duty, Value Added Tax and other similar taxes on raw and packaging materials during project operations;
• exemption of Income Tax on interest on registered borrowed capital; and
• hundred percent allowance investment deduction on capital expenditure within five years;

3. Without prejudice to the provisions of paragraph 1 of this Part, Approved Investor investing in real estate business may also be granted the:

• exemption of income tax on interest on borrowed capital;
• stamp duty exemption;
• hundred percent allowance investment deduction on capital expenditure within five years; and
• capital gains tax on properties sold or purchased.

Foreign Trade Zones/Free Ports/Trade Facilitation

Tanzania’s export processing zones (EPZs) and special economic zones (SEZs) are assigned geographical areas or industries designated to undertake specific economic activities with special regulations and infrastructure requirements. EPZ status can also be extended to stand-alone factories at any geographical location. EPZ status requires the export of 80 percent or more of the goods produced. SEZ status has no export requirement, allowing manufacturers to sell their goods locally. As of March 2018, there were 14 designated EPZ/SEZ industrial parks, 10 of which are in development, and 75 stand-alone EPZ factories.

Performance and Data Localization Requirements

The Non-Citizens (Employment Regulation) Act (see Section 12 Labor Policies and Practices below) requires employers to attempt to fill positions with Tanzanian citizens before seeking work permits for foreign employees, and to develop plans to transition all positions held by foreign employees to local employees over time.

Because the local content (LC) initiative cuts across all economic sectors, the government decided that oversight of LC development should take a multi-sector approach, rather than being confined to a single ministry or sector. In 2015, the government directed the National Economic Empowerment Council (NEEC) to oversee implementation of local empowerment initiatives. The objective of the local content policy is to put local products and services – delivered by businesses owned and operated by Tanzanians – in an advantageous position to exploit opportunities emanating from inbound foreign direct investments. In 2015, the GoT enacted The Petroleum Act and, subsequently, issued The Petroleum (Local Content) Regulations 2017. Similarly, in 2017, the GoT amended mining laws, issuing The Mining (Local Content) Regulations 2018. (See Chapter 4: Laws and Regulations on Foreign Direct Investment for more on recent local content laws.)

As of November 2019, Bank of Tanzania (BoT) regulations require banks to physically house their primary data centers in Tanzania or face steep penalties. The Tanzanian Bankers Association is appealing the requirement as it is cumbersome, expensive, and contrary to industry best practices.

In 2016, the GoT launched a USD 94 million national data center (NDC), which is operated by the GoT’s Telecommunications Corporation (TTC). Under the Tanzania Telecommunications Corporation (TTC) Act 2017, the TTC plans, builds, operates and maintains the “strategic telecommunications infrastructure,” which is defined as transport core infrastructure, data center and other infrastructure that the GoT proclaims “strategic” via official public notice.

Real Property

All land is owned by the government and procedures for obtaining a lease or certificate of occupancy may be complex and lengthy. Less than 15 percent of land has been surveyed, and registration of title deeds is handled manually, mainly at the local level. Foreign investors may occupy land for investment purposes through a government-granted right of occupancy (“derivative rights” facilitated by TIC), or through sub-leases from a granted right of occupancy. Foreign investors may also partner with Tanzanian leaseholders to gain land access.

Land may be leased for up to 99 years, but the law does not allow individual Tanzanians to sell land to foreigners. There are opportunities for foreigners to lease land, including through TIC, which has designated specific plots of land (a land bank) to be made available to foreign investors. Foreign investors may also enter into joint ventures with Tanzanians, in which case the Tanzanian provides the use of the land (but retains ownership, i.e., the leasehold).

Secured interests in property are recognized and enforced. Though TIC maintains a land bank, restrictions on foreign ownership may significantly delay investments. Land not in the land bank must go through a lengthy approval process by local-level authorities, the Ministry of Lands, Housing, Human Settlements Development (MoLHHSD), and the President’s Office to be designated as “general land,” which may be titled for investment and sale.

The MoLHHSD handles registration of mortgages and rights of occupancies and the Office of the Registrar of Titles issues titles and registers mortgage deeds. Title deeds are recognized as collateral for securing loans from banks. In January 2018, the GoT amended the land law, requiring that loan proceeds secured by mortgaging underdeveloped land be used solely to develop the specific piece of land used as collateral. The changes apply to general land managed by the MoLHHSD’s Commissioner for Lands, who must receive a report from the lender showing how loan proceeds will be used to develop the land. The law does not apply to village land allocated by village councils, which cannot be mortgaged to a financial institution.

Tanzania’s Registering Property rank in the World Bank’s 2020 Ease of Doing Business report deteriorated from 142 in 2018 to 146 in 2019 and 2020. According to the report, it takes eight procedures and 67 days to register property compared the Sub-Saharan Africa average of 51.6 days.

Intellectual Property Rights

The GoT’s Copyright Society of Tanzania (COSOTA) is responsible for registration and enforcement of copyrighted materials, while the Business Registrations and Licensing Agency (BRELA) within the Ministry of Trade administers trademark and patent registration. o It is the responsibility of the rights holders to enforce their rights where relevant, retaining their own counsel and advisors. The Fair Competition Commission (FCC) promotes competition, protects consumers against unfair market conduct, and has quasi-judicial powers to determine trademark and patent infringement cases. The FCC is also tasked with combating the sale of counterfeit merchandise. However, the Tanzania Medicines and Medical Devices Authority (TMDA) handles counterfeit human medicines, cosmetics, and packaged food materials. and its mandate is stipulated in the Tanzania Food, Drugs, and Cosmetics Act (TFDCA) as per the amendment of 2019. Despite its efforts, limited resources make it difficult for the GoT to adequately combat counterfeiting.

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

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

Capital Markets and Portfolio Investment

Tanzania’s Dar es Salaam Stock Exchange (DSE) is a self-listed publicly-owned company. In 2013, the DSE launched a second tier market, the Enterprise Growth Market (EGM) with lower listing requirements designed to attract small and medium sized companies with high growth potential. As of December 2017, DSE’s total market capitalization reached USD 10.5 billion, a 20.6 percent increase over the previous year’s figure. The Capital Markets and Securities Authority (CMSA) Act facilitates the free flow of capital and financial resources to support the capital market and securities industry. Tanzania, however, restricts the free flow of investment in and out of the country, and Tanzanians cannot sell or issue securities abroad unless approved by the CMSA.

Under the Capital Markets and Securities (Foreign Investors) Regulation 2014, there is no aggregate value limitation on foreign ownership of listed non-government securities. Despite progress, the country’s capital account is not fully liberalized and only foreign individuals or companies from other EAC nations are permitted to participate in the government securities market. Even with this recent development allowing EAC participation, ownership of government securities is still limited to 40 percent of each security issued.

Tanzania’s Electronic and Postal Communications Act 2010 amended in 2016 by the Finance Act 2016 requires telecom companies to list 25 percent of their shares via an initial public offering (IPO) on the DSE. Of the seven telecom companies that filed IPO applications with the CMSA, only Vodacom’s application received approval. TiGo’s IPO is reportedly close to approval.

As part of the Mining (Minimum Shareholding and Public Offering) Regulations 2016, large scale mining operators were required to float a 30 percent stake on the DSE by October 7, 2018. In February 2017 the GoT moved the date to August 23, 2017. To date, no mining companies have listed on the DSE.

Money and Banking System

Tanzania’s financial inclusion rate increased significantly over the past decade thanks to mobile phones and mobile banking. However, participation in the formal banking sector remains low. Low private sector credit growth and high non-performing loan (NPL) rates are persistent problems.

According to the IMF’s most recent Financial System Stability Assessment, Tanzania’s bank-dominated financial sector is small, concentrated, and at a relatively nascent stage of development. Financial services provision is dominated by commercial banks, with the ten largest institutions being preeminent in terms of mobilizing savings and intermediating credit. The report found that nearly half of Tanzania’s 45 banks are vulnerable to adverse shocks and risk insolvency in the event of a global financial crisis. (Source: https://www.imf.org/en/Publications/CR/Issues/2018/12/04/United-Republic-of-Tanzania-Financial-Sector-Assessment-Program-Press-Release-Staff-Report-46418 )

The two largest banks are CRDB Bank and National Microfinance Bank (NMB), which represent almost 30 percent of the market. The only U.S. bank is Citibank Tanzania Limited. Private sector companies have access to commercial credit instruments including documentary credits (letters of credit), overdrafts, term loans, and guarantees. Foreign investors may open accounts and earn tax-free interest in Tanzanian commercial banks.

The Banking and Financial Institution Act 2006 established a framework for credit reference bureaus, permits the release of information to licensed reference bureaus, and allows credit reference bureaus to provide to any person, upon a legitimate business request, a credit report. Currently, there are two private credit bureaus operating in Tanzania – Credit Info Tanzania Limited and Dun & Bradstreet Credit Bureau Tanzania Limited.

Foreign Exchange and Remittances

Foreign Exchange

Tanzanian regulations permit unconditional transfers through any authorized bank in freely convertible currency of net profits, repayment of foreign loans, royalties, fees charged for foreign technology, and remittance of proceeds. The only official limit on transfers of foreign currency is on cash carried by individuals traveling abroad, which cannot exceed USD 10,000 over a period of 40 days. Investors rarely use convertible instruments.

The Bank of Tanzania’s new Bureau de Change regulations with stringent requirements came into force in June 2019. The regulations include a minimum capital requirement of TZS 1 billion (Approx. USD 431,000) and a non-interest bearing deposit of USD 100,000 with the Bank of Tanzania (the regulator). Regulations also require the business premises to be fitted with CCTV cameras, and new stringent procedures and policies for detecting and reporting money laundering and terrorism finance. Bank of Tanzania closed more than ninety percent of all forex shops in the country, stating that they did not pass inspection for compliance with these requirements. In response, commercial banks and Tanzania Posts Corporation were licensed to provide forex services.

The value of the Tanzanian currency, the shilling, is determined by a free-floating exchange rate system based on supply and demand in international foreign exchange markets. However, Interbank Foreign Exchange Market (IFEM) and the rates quoted by commercial banks and exchange bureaus often vary considerably. There are reports that the Bank of Tanzania has stepped in several times over the past few years to stabilize the exchange rate.

Remittance Policies

There are no recent changes or plans to change investment remittance policies that either tighten or relax access to foreign exchange for investment remittances.

Sovereign Wealth Funds

Tanzania does not have a sovereign wealth fund.

Public enterprises do not compete under the same terms and conditions as private enterprises because they have access to government subsidies and other benefits. SOEs are active in the power, communications, rail, telecommunications, insurance, aviation, and port sectors. SOEs generally report to ministries and are led by a board. Typically, a presidential appointee chairs the board, which usually includes private sector representatives. SOEs are not subjected to hard budget constraints. SOEs do not discriminate against or unfairly burden foreigners, though they do have access to sovereign credit guarantees.

As of June 2019, the GoT’s Treasury Registrar reported shares and interests in 266 public parastatals, companies and statutory corporations. (See  http://www.tro.go.tz/index.php/en/latest-news/382-treasury-registrar-sets-record-with-552pc-increase-in-annual-dividend )

Relevant ministry officials usually appoint SOEs’ board of directors to serve preset terms under what is intended to be a competitive process. As in a private company, senior management report to the board of directors.

Privatization Program

The government retains a strong presence in energy, mining, telecommunication services, and transportation. The government is increasingly empowering the state-owned Tanzania Telecommunications Corporation Limited (TTCL) with the objective of safeguarding the national security, promoting socio-economic development, and managing strategic communications infrastructure. The government also acquired 51 percent of Airtel Telecommunication Company Limited and became the majority shareholder. In the past, the GoT has sought foreign investors to manage formerly state-run companies in public-private partnerships, but successful privatizations have been rare. Though there have been attempts to privatize certain companies, the process is not always clear and transparent.

Responsible business conduct (RBC) includes respecting human rights, environmental protection, labor relations and financial accountability, and it is practiced by a number of large foreign firms. Tanzania has laws covering labor and environmental issues. The Employment and Labor Relations Act (ELRA) establishes labor standards, rights and duties, while the Labor Institutions Act (LIA) specifies the government entities charged with administering labor laws.

The GoT’s National Environment Management Council (NEMC) undertakes enforcement, compliance, review and monitoring of environmental impact assessments; performs research; facilitates public participation in environmental decision-making; raises environmental awareness; and collects and disseminates environmental information. Stakeholders, however, have expressed concerns over whether the NEMC has sufficient funding and capacity to handle its broad mandate.

There are no legal requirements for public disclosure of RBC, and the GoT has not yet addressed executive compensation standards. Dar es Salaam Stock Exchange (DSE) listed companies, however, must release legally required information to shareholders and the general public. In addition, the DSE signed a voluntary commitment with the United Nations Sustainable Stock Exchanges Initiative in June 2016, to promote long-term sustainable investments and improve environmental, social and corporate governance. Tanzania has accounting standards compatible with international accounting bodies.

The Tanzanian government does not usually factor RBC into procurement decisions. The GoT is responsible for enforcing local laws, however, the media regularly reports on corruption cases where offenders allegedly avoid sanctions. There have also been reports of corporate entities collaborating with local governments to carry out controversial undertakings that may not be in the best interest of the local population.

Some foreign companies have engaged NGOs that monitor and promote RBC to avoid adversarial confrontations. In addition, some of the multinational companies who are signatories to the Voluntary Principles on Security and Human Rights (VPs) have taken the lead and appointed NGOs to conduct programs to mitigate conflicts between the mining companies, surrounding communities, local government officials and the police.

Tanzania is a member of the Extractive Industries Transparency Initiative (EITI) and in 2015 Tanzania enacted the Extractive Industries Transparency and Accountability Act, which demands that all new concessions, contracts and licenses are made available to the public. The government produces EITI reports that disclose revenues from the extraction of its natural resources.

Tanzania has laws and institutions designed to combat corruption and illicit practices. It is a party to the UN Convention against Corruption, but it is not a signatory to the OECD Convention on Combating Bribery. Although corruption is still viewed as a major problem, President Magufuli’s focus on anti-corruption has translated into an increased judiciary budget, new corruption cases, and a decline in perceived corruption, especially low-level corruption. This improvement is partly attributed to instituting electronic services which reduce the opportunity for corruption through human interactions at agencies such as the Tanzania Revenue Authority (TRA), the Business Registration and Licensing Authority (BRELA), and the Port Authority.

Tanzania has three institutions specifically focused on anti-corruption. The Prevention and Combating of Corruption Bureau (PCCB) prevents corruption, educates the public, and enforces the law against corruption. The Ethics Secretariat and its associated Ethics Tribunal under the President’s office enforces compliance with ethical standards defined in the Public Leadership Codes of Ethics Act 1995.

Companies and individuals seeking government tenders are required to submit a written commitment to uphold anti-bribery policies and abide by a compliance program. These steps are designed to ensure that company management complies with anti-bribery polices.

The GoT is currently implementing its National Anti-Corruption Strategy and Action Plan Phase III (2017-2022) (NACSAP III) which is a decentralized approach focused on broad government participation. NACSAP III has been prepared to involve a broader domain of key stakeholders including GoT local officials, development partners, civil society organization (CSOs), and the private sector. The strategy puts more emphasis on areas that historically have been more prone to corruption in Tanzania such as oil, gas, and other natural resources. Despite the outlined role of the GoT, CSOs, NGOs and media find it increasingly difficult to investigate corruption in the current political environment.

President Magufuli’s current anti-corruption campaign has affected public discourse about the prevailing climate of impunity, and some officials are reluctant to engage openly in corruption. Transparency International (TI), which ranks perception of corruption in public sector, gave Tanzania a score of 37 points out of 100 for 2019 and 36 points for 2018. The Afrobarometer report estimates that between 2016 and 2018 the corruption increase in the previous 12 months was only 10% in Tanzania, the lowest in Africa. While for the same period, 23% of the respondents voted that Tanzania is doing a bad job of fighting corruption, again the lowest in Africa.

Some critics, however, question how effective the initiative will be in tackling deeper structural issues that have allowed corruption to thrive. Despite President Magufuli’s focus on anti-corruption, there has been little effort to institutionalize what often appear to be ad hoc measures, a lack of corruption convictions, and persistent underfunding of the country’s main anti-corruption bodies.

Resources to Report Corruption

The Director General
Prevention and Combating of Corruption Bureau
P.O.  Box 4865, Dar es Salaam, Tanzania
Tel: +255 22 2150043   Email: dgeneral@pccb.go.tz

Executive Director
Legal and Human Rights Centre
P.O.  Box 75254, Dar es Salaam, Tanzania
Tel: +255 22 2773038/48   Email: lhrc@humanrights.or.tz

Since gaining independence, Tanzania has enjoyed a relatively high degree of peace and stability compared to its neighbors in the region.  Tanzania has held five national multi-party elections since 1995, the most recent in 2015. The next national elections are scheduled for October 2020. Mainland Tanzania government elections have been generally free of political violence.  Elections on the semi-autonomous archipelago of Zanzibar, however, have been marred by political violence several times since 1995, including in 2015.

October 2015 general elections were conducted in a largely open and transparent atmosphere; however, simultaneous elections in Zanzibar were controversially annulled after an opposition candidate declared victory.  A heavily criticized re-run election was held on March 20, 2016 despite an opposition boycott. Since the 2015 election, the GoT has placed several restrictions on political activity, including severely limiting the ability of opposition political parties and civil society organizations to debate issues publicly, or assemble peacefully.  Elections in 2018 and 2019 were marred by allegations of irregularities and suppression of opposition candidates and voters. National elections, including Presidential elections on the Mainland and Zanzibar are scheduled for October 2020.

In addition to monitoring the political climate, foreign investors remain concerned about land tenure issues. Although the government owns all land in Tanzania and oversees the issuance of land leases of up to 99 years, many Tanzanian citizens judge that foreign investors exploit Tanzanian resources, sometimes resulting in conflict between investors and nearby residents. In Arusha and Mtwara, among other areas, conflicts have led to violence, prompting the GoT to emphasize its commitment to supporting foreign investment while also ensuring the intended benefit of the investments to Tanzanian citizens.

There are also concerns about insecurity spilling over from neighboring countries, particularly along the Tanzania-Mozambique border, as well as from conflicts in the Democratic Republic of the Congo and Burundi.

The GoT’s Five Year Development Plan 2016-2021 (FYDP II), which is in its fourth year of implementation, acknowledges Tanzania’s shortage of skilled labor and the importance of professional training to support industrialization. The Integrated Labor Force Survey Analytical Report of 2014 (most recent) found that only 3.6 percent of Tanzania’s 20-million-person labor force is highly skilled. On the regional front, Tanzania, Uganda, Rwanda and Kenya have committed to the EAC’s 2012 Mutual Recognition Agreement of engineers, making for a more regionally competitive engineering market.

In Tanzania, labor and immigration regulations permit foreign investors to recruit up to five expatriates with the possibility of additional work permits granted under specific conditions.

The Non-Citizens (Employment Regulation) Act 2015 introduced stricter rules for hiring foreign workers. Under the Act, the Labor Commissioner must determine if “all possible efforts have been explored to obtain a local expert” before approving a non-citizen work permit. In addition, employers must submit “succession plans” for foreign employees, detailing how knowledge and skills will be transferred to local employees.

Non-citizens may be granted two-year work permits, renewable up to five years, while foreign investors may be granted ten-year work permits which may be extended if the investor is deemed to be contributing to the economy and well-being of Tanzanians. Some stakeholders fear that this provision creates an opening for corruption and arbitrarily prejudicial decisions against foreign investors. Since the passage of the Act, GoT officials have been conducting aggressive “special permit inspections” to verify the validity of work permits. The process for obtaining work permits remains immensely bureaucratic, opaque at times, and slow.

Mainland Tanzania’s minimum wage, which has not changed since July 2013, is set by categories covering 12 employment sectors. The minimum wage ranges from TZS 100,000 (USD 45) per month for agricultural laborers to TZS 400,000 (USD 180) per month for laborers employed in the mining sector. Zanzibar’s minimum wage is TZS 300,000 (USD 135), after being increased from TZS 150,000 (USD 68) in April 2017.

Mainland Tanzania and Zanzibar governments maintain separate labor laws. Workers on the Mainland have the right to join trade unions. Any company with a recognized trade union possessing bargaining rights can negotiate in a Collective Bargaining Agreement. In the public sector, the government sets wages administratively, including for employees of state-owned enterprises.

Mainland workers have the legal right to strike and employers have the right to a lockout. The law restricts the right to strike when doing so may endanger the health of the population. Workers in certain sectors are restricted from striking or subject to limitations. In 2017, the GoT issued regulations that strengthened child labor laws, created minimum one-year terms for certain contracts, expanded the scope of what is considered discrimination, and changed contract requirements for outsourcing agreements. In 2019, the government adopted a new National Strategy Against Child Labor, though it has not officially been implemented.

The labor law in Zanzibar applies to both public and private sector workers. Zanzibar government workers have the right to strike as long as they follow procedures outlined in the Employment Act of 2005, but they are not allowed to join Mainland-based labor unions. Zanzibar requires a union with 50 or more members to be registered and sets literacy standards for trade union officers. An estimated 40 percent of Zanzibar’s workforce is unionized. (See Chapter 4: Laws and Regulations on Foreign Direct Investment for more on recent local content laws.)

In 1996, the U.S. Overseas Private Investment Corporation (OPIC), the predecessor agency to U.S. International Development Finance Corporation (DFC), signed an incentive agreement with the GoT. The Ministry of Foreign Affairs has in principle agreed that the existing OPIC agreement will allow for the International Development Finance Corporation (DFC) to operate in Tanzania. The current portfolio includes projects in agriculture, energy, micro-finance, and logistics. In addition, the DFC inherits USAID’s Development Credit Authority (DCA)’s active portfolio including guarantees to several banks to encourage lending to small and medium sized enterprises.

Tanzania is also a member of the World Bank’s Multilateral Investment Guarantee Agency (MIGA), which offers political risk insurance and technical assistance to attract FDI.

* Source for Host Country Data:
National Bureau of Statistics (NBS): 2018 GDP: TZS 129.4 trillion (www.nbs.go.tz)
Bank of Tanzania (BoT): 2018 Investment Report (www.bot.go.tz )

Table 3: Sources and Destination of FDI
The IMF’s The Bank of Tanzania reports the top source countries for inward direct investment to Mainland Tanzania and Zanzibar separately. Data on outward direct investment is not available.

According to the Bank of Tanzania, the top sources for inward foreign investment into Mainland Tanzania in 2017 were: United Kingdom, South Africa, Norway, Netherlands, Nigeria, Mauritius, and Kenya.

According to the Bank of Tanzania, the top sources for inward foreign investment into Zanzibar in 2017 were: United Kingdom, Italy, Kenya, Luxembourg, South Africa, Spain, and the United States.

Table 4: Sources of Portfolio Investment
Data not available.

Economic Officer
U.S.  Embassy Dar es Salaam
686 Old Bagamoyo Road
Msasani, Dar es Salaam
Tel: 255-22-229-4000
drseconomic@state.gov