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

Official websites use .gov

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

Secure .gov websites use HTTPS

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

Belarus

Executive Summary

The Government of Belarus (GOB) officially welcomes foreign investment, which is seen as a source of new production technologies, jobs, and hard currency.  Belarusian authorities stress the country’s geographic location, its inclusion in the Eurasian Economic Union (which also includes Russia, Kazakhstan, Armenia, and Kyrgyzstan), extensive transport infrastructure, and a highly-skilled workforce as structural advantages for investment.  Belarus also highlights the preferential tax benefits and special investor incentives it provides for its six export-oriented and regionally-located free economic zones, the IT sector-centric High Tech Park (HTP), and the joint Belarus-China Great Stone Industrial Park.

Various laws and decrees provide the legal and regulatory framework governing investment activities in Belarus that allows for investment agreements and the following forms of investment activities in Belarus:

  • Greenfield:  establishing a legal entity (joint ventures and foreign enterprises);
  • Brownfield: property or property rights acquisition, i.e., a share in charter capital, real estate, securities, intellectual property rights, concessions, public-private partnerships, equipment, or other permanent assets.

Belarus places a priority on investments in pharmaceuticals; biotechnology; nanotechnologies and nanomaterials; metallurgy; mechanical engineering industry; production of machines, electrical equipment, home appliances and electronics; transport and related infrastructure; agriculture and food industry; information and communication technologies; creation and development of logistics systems; and tourism.

Despite its official openness to foreign investment, Belarus has not undertaken large-scale privatization of the large majority of its state-owned enterprises (SOEs) or state-owned properties.  Investments in sectors dominated by SOEs have been known to come under threat from regulatory bodies. Investors, whether Belarusian or foreign, purportedly benefit from equal legal treatment and have the same right to conduct business operations or establish new business in Belarus.  However, according to numerous sources in the local business community and independent media, the enforcement of existing laws and unwritten practices can discriminate against the private sector, including foreign investors, regardless of their country of origin. Serious concerns remain about the independence of the judicial system and its ability to objectively adjudicate cases rather than favor the powerful central government.

When considering investing in Belarus, it is also important to note that pursuant to a June 2006 Executive Order, the United States maintains targeted sanctions against nine Belarusian SOEs and 16 individuals in relation to concerns about undermining Belarus’ democratic processes.  Since October 2015, however, the U.S. Department of Treasury, in consultation and coordination with the Department of State, has provided temporary sanctions relief for the nine SOEs in consecutive six-month intervals, and in October 2018, expanded the length of temporary sanctions relief to 12 months.  The current 12-month period of temporary sanctions relief ends on October 25, 2019. For additional information click here: https://www.treasury.gov/resource-center/sanctions/Programs/pages/belarus.aspx.

Despite GOB organizations that promote foreign direct investment (FDI), both the central and local governments’ policies often reflect an old-fashioned, Soviet-style distrust of private enterprise – whether local or foreign.  Technically the legal regime for foreign investments should be no less advantageous than the domestic one, yet FDI in many key sectors is limited, particularly in the petrochemical, agricultural, and alcohol production industries.  FDI is prohibited in defense and security as well as production and distribution of narcotics, dangerous and toxic substances. FDI can also be restricted, as is the case in the following areas:

  • Investments in businesses that have a dominant position in the commodity markets of Belarus may not be allowed unless such investments are approved by the Ministry of Trade and Antimonopoly Regulation. 
  • Investments in activities and operations prohibited by law in the interests of national security (including environmental protection, historical, and cultural values), public order, morality protection, public health, and rights and freedoms of individuals.

Table 1

Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 20178 70 of 180 https://www.transparency.org/cpi2018
World Bank’s Doing Business Report “Ease of Doing Business” 20198 37 of 190 www.doingbusiness.org/data/exploreeconomies/belarus/ 
Global Innovation Index 20187 86 of 127126 https://www.globalinnovationindex.org/gii-2018-report#
U.S. FDI in partner country ($M USD, stock positions) 2017 N/A https://apps.bea.gov/international/factsheet/factsheet.cfm?Area=336
World Bank GNI per capita capita 2017 $5,2980 https://data.worldbank.org/country/belarus?view=chart

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

The GOB states attracting FDI is one of the priorities of the country’s foreign policy, and net inflows of FDI have been included in the list of government performance targets since December 2015.  The GOB also does not have any specific requirements for foreigners wishing to establish a business in Belarus. Investors, whether Belarusian or foreign, reportedly benefit from equal legal treatment and have the same right to conduct business operations in Belarus by incorporating separate legal entities.  However, the existing laws and practices often discriminate against the private sector, including foreign investors, regardless of the country of their origin.

Limits on Foreign Control and Right to Private Ownership and Establishment

The GOB asserts foreign and domestic private entities have the right to establish and own business enterprises and engage in all forms of remunerative activity.  The GOB also states there are no general limits (statutory, de facto, or otherwise) on foreign ownership or control. In reality, however, the GOB establishes such limits on a case-by-case basis.  The limits on foreign equity participation in Belarus are above the average for the 20 countries covered by the World Bank Group’s Investing Across Borders indicators for Eastern Europe and the Central Asia region.  Belarus, in particular, limits foreign equity ownership in service industries. Sectors such as fixed-line telecommunications services, electricity transmission and distribution, and railway freight transportation are closed to foreign equity ownership.  In addition, a comparatively large number of sectors are dominated by government monopolies, including, but not limited to, those mentioned above. Those monopolies, together with the perceived difficulty of obtaining required operating licenses, make it difficult for foreign companies to invest in Belarus.  Another example is that under local law, foreign ownership cannot exceed 30 percent in charter funds of Belarusian insurance companies. Finally, the government may restrict investments in the interests of national security (including environmental protection, historical and cultural values), public order, morality protection, and public health, as well as rights and freedoms of people.

Although the GOB claims that it does not screen, review, or approve FDI, the above practices suggest the opposite.  Belarus retains elements of a Soviet-style command economy, with the President and his administration prescreening and approving all significant (multi-million dollar) foreign investment.

Belarus’ Ministry of Antimonopoly Regulation and Trade is responsible for reviewing transactions for competition-related concerns (whether domestic or international).

Other Investment Policy Reviews

The UN Conference on Trade and Development reviewed Belarus’ investment policy in 2009 and made recommendations regarding the improvement of its investment climate. http://unctad.org/en/Docs/diaepcb200910_en.pdf 

Business Facilitation

Individuals and legal persons can apply for business registration via the web portal of the Single State Register (http://egr.gov.by/egrn/index.jsp?language=en  ) – a resource that includes all relevant information on establishing a business.

Belarus has a regime allowing for a simplified taxation system for small and medium-sized and foreign-owned businesses.

Belarus defines enterprises as follows:

  • Micro enterprises – fewer than 15 employees;
  • Small enterprises – from 16 to 100 employees;
  • Medium-sized enterprises – from 101 to 250 employees.

Belarus’ investment promotion agency is the National Agency of Investments and Privatization (NAIP).  NAIP is tasked with representing the interests of Belarus as it seeks to attract FDI into the country.  The Agency states it is a one-stop shop with services available to all investors, including: organizing fact-finding missions to Belarus, assisting with visa formalities; providing information on investment opportunities, special regimes and benefits, state programs, and procedures necessary for making investment decisions; selecting investment projects; and providing solutions and post-project support, i.e., aftercare.

To maintain an ongoing dialogue with investors, Belarus also has the Foreign Investment Advisory Council (FIAC).  Its activities include, but are not limited to: developing proposals to improve investment legislation; participating in examining corresponding regulatory and legal acts; and approaching government agencies for the purpose of adopting, repealing or modifying the regulatory and legal acts that restrict the rights of investors.  The FIAC is chaired by the Prime Minister of Belarus and includes the heads of government agencies and other state organizations subordinate to the GOB, as well as heads of international organizations and foreign companies and corporations.

Outward Investment

The government does not promote or incentivize outward investment, nor does it restrict domestic investors from investing abroad.  According to government statistics, Belarusian businesses’ outward investments in 2018 totaled USD 5.67 billion.

3. Legal Regime

Transparency of the Regulatory System

The government states that its policies are transparent and the implementation of laws is consistent with international norms to foster competition and establish clear rules of the game.  However, independent economic experts note that private sector businesses are often discriminated against in relation to public sector businesses. In particular, SOEs often receive government subsidies, benefits and exemptions, including cheaper loans and debt forgiveness.  Such beneficial treatment is generally unavailable to private sector companies.

According to Belarusian legislation, drafts of laws and regulations pertaining to investment and doing business are subject to public discussion.  Draft legislation is published on government agencies’ websites.

International Financial Reporting Standards (IFRS) have been a part of Belarus’ legislative framework since 2016.  Public-interest entities, which include banks, insurance companies, and public corporations with subsidiary companies are required to publish their financial statements, which comply with IFRS.  Such statements are subject to statutory audit.

IFRS in Belarus can be accessed through the Ministry of Finance at the following links:

Belarus has no informal regulatory processes managed by nongovernmental organizations or private sector associations.

International Regulatory Considerations

Belarus is not a WTO member but announced in April 2016 it will step up efforts to join the organization by June 2020.  The Working Party on Belarus’ Accession to the WTO group meets regularly in Geneva and as of January 2019, still needs to hold talks on trade in services with the European Union, the United States, Canada, and Ukraine.  After the completion of bilateral market access talks with WTO member states, Belarus will still have to integrate these agreements into national regulations.

Belarus is a member of the Eurasia Economic Union (EAEU), a political and economic union driven by Russian leadership and modeled after the European Union.  The EAEU’s goal is to ensure the free movement of goods, capital, services, and people across the territories of its five members – Armenia, Belarus, Kazakhstan, Kyrgyzstan, and Russia.  The EAEU envisages common economic policies on customs, foreign trade and investment, technical regulation, competition and antitrust regulation. The Eurasian Economic Commission is the EAEU executive body.  The EAEU has completed free trade agreements with Vietnam, China, and Iran and is in negotiations with Serbia, Singapore, India, Israel, and Egypt.

Legal System and Judicial Independence

The Belarusian legal system is a civil law system with a legal separation of branches and institutions and with the main source of law being legal act, not precedent.  For example, Article 44 of Belarus’ Constitution guarantees the inviolability of property. Article 11 of the Civil Code safeguards property rights. Presidential edicts and decrees, however, typically carry more force than legal acts adopted by the legislature, which risks weakening investor protections and incentives previously passed into law.  There is sometimes a public comment process during drafting of legislation or presidential decrees, but the process is often not transparent or sufficiently inclusive of investors’ concerns. Belarus has a written and consistently applied commercial law, which is broadly codified but contains inconsistencies and is not always considered to be business friendly.

Each of Belarus’ six regions and the capital city of Minsk have economic courts to address commercial and economic issues.  In addition, the Supreme Court has a judicial panel on economic issues. In 2000, Belarus established a judicial panel on intellectual property rights (IPR) protection.  Under the Labor Code, any claims of unfair labor practices are heard by regular civil courts or commissions on labor issues. However, the judiciary’s lack of independence from the executive branch impedes its role as a reliable and impartial mechanism for resolving disputes, whether labor, economic, commercial, or otherwise. According to Freedom House’s 2018 Nations in Transit report, executive authorities can directly influence a judge’s decision-making if their political or economic interests are involved, and such influence usually takes the form of direct instructions from officials.

Laws and Regulations on Foreign Direct Investment

Foreign investment in Belarus is governed by the 2013 laws “On Investments” and “On Concessions,” the 2009 Presidential Decree No. 10 “On the Creation of Additional Conditions for Investment Activity in Belarus,” and other legislation as well as international and investment agreements signed and ratified by Belarus.

The GOB regularly updates the following websites with the latest in laws, rules, procedures and reporting requirements for foreign investors:

http://www.investinbelarus.by/en/  

http://www.economy.gov.by/  

http://president.gov.by/en/official_documents_en/  

Competition and Anti-Trust Laws

The June 3, 2016, presidential edict number 188 authorized the Ministry of Antimonopoly Regulation and Trade to counteract monopolistic activities and promote competition in Belarus’ markets.

Expropriation and Compensation

According to Article 12 of the Investment Code, neither party may expropriate or nationalize investments both directly and indirectly by means of measures similar to expropriation or nationalization, for other purposes than for the public benefit and on a nondiscriminatory basis; according to the appropriate legal procedure; and on conditions of compensation payment.  Belarus has signed 66 bilateral agreements on the mutual protection and encouragement of investments.

In 2018, there was one nationally-reported case of nationalization, however the Belarusian government compensated the Ukrainian owner market value for shares of the Motor Sich aircraft repair factory in Orsha.  In the past five years, there have been no instances of confiscation of business property as a penalty for violations of law.

Post has not received any expropriation claims from U.S. companies, and is not aware of any particularly high-risk sectors prone to expropriation actions.

Dispute Settlement

There were no known investment disputes with American investors in 2018.

ICSID Convention and New York Convention

Belarus is a party to both the International Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID) and the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards.  The GOB states that local courts recognize and enforce foreign arbitral awards in compliance with the above conventions, national laws, and regulations. The enforcement of arbitral awards in Belarus is governed by Chapter 28 of the Code of Commercial Procedure.

Most of the BITs concluded by Belarus include a provision on international investment arbitration as a mechanism for settling investor-state disputes and recognize the binding force of the awards issued in investment arbitrations.  Under Belarusian law, if an international treaty signed by Belarus establishes rules other than those established by local law, the rules of the international treaty shall prevail.

Investor-State Dispute Settlement

Local economic court proceedings normally do not exceed two months.  The term of such proceedings with the participation of foreign persons is normally no longer than seven months, unless established otherwise by an international agreement signed by Belarus.

International Commercial Arbitration and Foreign Courts

Judgments of foreign courts are accepted and enforced if there is a relevant international agreement signed by Belarus.  Courts recognize and enforce foreign arbitral awards. International arbitration is accepted as a means for settling investment disputes between private parties.  In principle, the GOB accepts binding international arbitration of investment disputes between foreign investors and the state, although the Embassy is not aware of any cases where this has been put to the test.  As of 2018, there were three known cases against Belarus pending at the ICSID: two from Russian investors in joint ventures in transport and infrastructure sectors, and one from a Dutch holding company in the banking sector.  The Belarusian Chamber of Commerce and Industry has an International Arbitration Court. The 2013 “Law on Mediation,” as well as codes of civil and economic procedures, established various alternative ways of addressing investment disputes.

Bankruptcy Regulations

Belarus’ 2012 bankruptcy law, related presidential edicts, and government resolutions are not always consistently applied.  Additional legal acts, such as the Civil Code and Code of Economic Procedures, also include certain regulations on bankruptcy-related issues.  Under the bankruptcy law, foreign creditors have the same rights as Belarusian creditors. Belarusian law criminalizes false and intentional insolvency as well as concealing insolvency.  According to the World Bank’s 2019 Doing Business Report, Belarus was ranked 72 in Resolving Insolvency, down from 68 in 2018 and 69 in 2017 (rankings available at http://www.doingbusiness.org/data/exploreeconomies/belarus  )

6. Financial Sector

Capital Markets and Portfolio Investment

The Belarusian government welcomes portfolio investment and has taken steps to safeguard such investment and ensure a free flow of financial instruments.  The Belarusian Currency and Stock Exchange is open to foreign investors, but it is still largely undeveloped because the government only allows companies to trade stocks if they meet certain but often burdensome criteria.  Private companies must be profitable and have net assets of at least EUR 1 million. In addition, any income from resulting operations is taxed at 24 percent. Finally, the state owns more than 70 percent of all stocks in the country, and the government appears hesitant and unwilling to trade in them freely.  Bonds are the predominant financial instrument on Belarus’ corporate securities market.

In 2001, Belarus joined Article VIII of the IMF’s Articles of Agreement, undertaking to refrain from restrictions on payments and transfers under current international transactions.  Loans are allocated on market terms and foreign investors are able to get them. However, the discount rate of 10 percent (as of March 2019) makes credit too expensive for many private businesses, which, unlike many SOEs, do not receive subsidized or reduced-interest loans.

Since 2016, businesses to buy and sell foreign exchange at the Belarusian Currency and Stock Exchange through their banks.  Belarus used to require businesses to sell 10-20 percent of foreign currency revenues through the Belarusian Currency and Stock Exchange, however in late 2018 the National Bank abolished the mandatory sale rule.

Money and Banking System

Belarus has a central banking system.  The country’s main bank, the National Bank of the Republic of Belarus, represents the interest of the state and is the main regulator of the country’s banking system.  The President of Belarus appoints the Chairperson and Members of the Board of the National Bank, designates auditing organizations to examine its activities, and approves its annual report.

As of March 2019, the banking system of Belarus included 24 commercial banks and three non-banking credit and finance organizations.  According to the National Bank, the share of troubled loans in the banking sector was 12.9 percent in 2018. The country’s five largest commercial banks, all of which have some government share, account for 77 percent of the total assets of the country’s banking sector, totaling the equivalent of some USD 26 billion.  To the best of the Embassy’s knowledge, rules on hostile take-overs are clear, and applied on a non-discriminatory basis.

Foreign Exchange and Remittances

Foreign Exchange Policies

According to the GOB, Belarus’ foreign exchange regulations do not include any restrictions or limitations regarding converting, transferring, or repatriating funds associated with investment.  Foreign exchange transactions related to FDI, portfolio investments, real estate purchasing, and opening bank accounts are carried out without any restrictions. Foreign exchange is freely traded in the domestic foreign exchange market.  Foreign investors can purchase foreign exchange from their Belarusian accounts in Belarusian banks for repaying investments and transferring it outside Belarus without any restrictions.

Since 2015, the Belarusian Currency and Stock Exchange has traded the U.S. dollar, the euro, and the Russian ruble in a continuous double auction regime.  Local banks submit their bids for buying and selling foreign currency into the trading system during the entire period of the trading session. During the trades the bids are honored if and when the specified exchange rates are met.  The average weighted exchange rate of the U.S. dollar, the euro, and the Russian ruble set during the trading session is used by the National Bank as the official exchange rate of the Belarusian ruble versus the above-mentioned currencies from the day on which the trades are made.  The cross rates versus other foreign currencies are calculated based on the data provided by other countries’ central banks or information from Reuters and Bloomberg.  The stated quotation becomes effective on the next calendar day and is valid till the new official exchange rate of the Belarusian ruble versus these foreign currencies comes into force.  The IMF has listed Belarus’ exchange rate regime in the floating exchange rate category.

Remittance Policies

There have not been reports of problems exchanging currency and/or remitting revenues earned abroad.

Sovereign Wealth Funds

Belarus has the State Budget Fund of National Development, which is used for implementing major economic and social projects in the country.

7. State-Owned Enterprises

Although SOEs are outnumbered by private businesses, SOEs dominate the economy in terms of assets.  According to independent economic experts, the share of Belarus’ GDP derived from SOEs is at least 75 percent.  Belarus does not consider joint stock companies, even those with 100 percent government ownership of the stocks, to be state-owned and generally refers to them as part of the non-state sector, rendering official government statistics regarding the role of SOEs in the economy as misleading.

According to independent economic media reports, SOEs receive preferential access to government contracts, subsidized credits, and debt forgiveness.  While SOEs are generally subject to the same tax burden and tax rebate policies as their private sector competitors, private enterprises do not have the same preferential access to land and raw materials.  Since Belarus is not a WTO member, it is not a party to the Government Procurement Agreement (GPA).

Privatization Program

Belarus’ privatization program is in practice extremely limited.  There was no privatization of state-controlled companies in 2018, one SOE was bought by private investors in 2017, and there were zero companies or shares privatizatized in 2016.  In early 2019, Belarus’ State Property Committee approved a list of 23 joint stock companies for full or partially privatization in 2019.  The GOB is allowing sale of the government share in these companies on the condition that the purchasing investors preserve existing jobs and production lines. For a list of open-joint stock companies whose shares which are available for privatization, as well as a description of the asset and conditions for privatization, visit: http://www.gki.gov.by/ru/auction-auinf-auishares/  .

Investors interested in assets on the published privatization list are encouraged to forward a brief letter of interest to the State Property Committee.  A special commission reviews offers and makes a recommendation to the President on the process of privatization – via tender, auction, or direct sale. Investors may also send a letter of interest regarding assets that are not on the State Property Committee list and the government will examine such offers.

Additionally, the State Property Committee occasionally organizes and holds privatization auctions.  Many of the auctions organized by the State Property Committee have low demand as the government conditions privatizations with strict requirements, including preserving or creating jobs, continuing in the same line of work or production, or launching a successful business project within a limited period of time, etc.

In 2016, Belarusian joint stocks were allowed trans-border placement of their stocks via issuing depositary receipts.  However, to the Embassy’s knowledge, this instrument of attracting investments has not been put to test in Belarus.

9. Corruption

Belarus has effective and non-discriminatory anti-corruption legislation, which includes certain provisions of the Criminal Code and Administrative Code as well as the Law on Public Service and the Law on Combating Corruption.  The latter is the country’s main anti-corruption document and was adopted in 2015. Government organizations directly engaged in anti-corruption efforts are prosecutors’ offices, internal affairs, state security and state control agencies.  However, as noted a pervious section, the country’s judicial system is not independent from the executive branch and is not transparent.

Belarusian anti-corruption law covers family members of government officials and political figures.  The country’s regulations require addressing any potential conflict of interests of parties seeking to win a government procurement contract.  The list of such regulations include the July 13, 2012, law “On public procurement of goods (works, services),” the December 31, 2013, presidential decree “On conducting procurement procedures,” and the March 15, 2012, Council of Ministers resolution on the procurement of goods (works, services).  Some of the same concerns with the independence of the judiciary also apply in the context of corruption. The lack of an independent judiciary means investors have little recourse to deal with corruption concerns.

Bribery is considered a form of corruption and is punishable with a maximum punishment of 10 years in jail and confiscation of property.  Belarus is a party to a number of international anti-corruption conventions and agreements. The Republic of Belarus has consistently ratified and complied with requirements of main international anti-corruption acts, such as the Convention of the Council of Europe 173 On criminal liability for corruption (S 173) (concluded in Strasbourg on 27 January, 1999); the United Nations Convention Against Transnational Organized Crime, signed by Belarus in Palermo on 24 December, 2000, and the United Nations Convention Against Corruption (concluded in New York on 31 October, 2003); and the Civil Law Convention on Corruption (concluded in Strasbourg on 4 November, 1999) (ratified in 2005).  Belarus also signed a number of the intergovernmental agreements to address this problem. In 2004, Belarus signed and ratified the United Nations Convention against Corruption. Belarus is considering joining the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

In 2019 the Council of Europe’s (COE) Group of States against Corruption (GRECO) publicly declared Belarus non-compliant with GRECO’s anti-corruption standards.  This was GRECO’s first ever declaration of non-compliance.  According to the COE, Belarus failed to address 20 out of 24 recommendations made in 2012; had not authorized the publication of the 2012 report or related compliance reports; and was non-responsive since 2017 to requests from GRECO to organize a high-level mission to Belarus.  The majority of GRECO’s recommendations related to fundamental anti-corruption requirements, such as strengthening the independence of the judiciary and of the prosecution office, as well as increasing the operational autonomy of the law enforcement and limiting immunity protection of certain categories of persons.  However, the COE contends that limited reporting indicates that corruption is particularly alarming higher up in the government hierarchy and in procurement for state-run enterprises.

According to Transparency International’s 2018 Corruption Perception Index, Belarus fell from 68th to 70th of 180 countries in the rankings, tied with Jamaica and the Solomon Islands.  In Belarus’ region, Poland ranked 36th, Lithuania 38th, Latvia 41st, Ukraine 120th, and Russia 138th.

Belgium

Executive Summary

The Belgian economy is expected to grow 1.3 percent in 2019, primarily driven by domestic demand and net exports. Private consumption growth was slower than in surrounding countries, mainly caused by higher inflation. Low energy prices and interest rates, and a favorable euro/dollar exchange rate continue to stimulate economic growth and fuel exports, especially given Belgium’s unique position as a logistical hub and gateway to Europe.  Since June 2015, the Belgian government has undertaken a series of measures to reduce the tax burden on labor and to increase Belgium’s economic competitiveness and attractiveness to foreign investment. The July 2017 decision to lower the corporate tax rate from 35 to 25 percent is expected to make a further improve the investment climate.

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

To fully realize Belgium’s employment potential, it will be critical to address the fragmentation of the labor market. Jobs growth accelerated in 2017 and 2018, driven by the cyclical recovery and the positive impact of past reforms. Older workers account for much of the employment increase, whereas progress has been more limited in integrating vulnerable groups—especially immigrants born outside the EU, the young, and the low-skilled. Moreover, large regional disparities in unemployment rates persist, and there is a significant skills mismatch in several key sectors.

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

Table 1: Key Metrics and Rankings

Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2018 17 of 180 https://www.transparency.org/country/BEL
World Bank’s Doing Business Report 2018 45 of 190 http://www.doingbusiness.org/en/rankings
Global Innovation Index 2018 25 of 126 https://www.globalinnovationindex.org/analysis-indicator 
U.S. FDI in partner country ($M USD, stock positions) 2017 $54,954 http://www.bea.gov/international/factsheet/ 
World Bank GNI per capita 2017 USD 41.790 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD 

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

Belgium has traditionally maintained an open economy that is highly dependent on international trade.  Since WWII, foreign investment has played a vital role in the Belgian economy, providing technology and employment.  It is a key economic policy of the government to make Belgium a more attractive destination to foreign investment. Though the federal government regulates important elements of foreign direct investment such as salaries and labor conditions, it is primarily the responsibility of the regions to attract FDI.  Flanders Investment and Trade (FIT), Wallonia Foreign Trade and Investment Agency (AWEX), and Brussels Invest and Export are the three investment promotion agencies who seek to attract FDI to Flanders, Wallonia and the Brussels Capital Region, respectively.

The regional investment promotion agencies have focused their industrial strategy on key sectors including aerospace and defense; agribusiness, automotive and ground transportation; architecture and engineering; chemicals, petrochemicals, plastics and composites; environmental technologies; food processing and packaging; health technologies; information and communication; and services.

Foreign corporations account for about one-third of the top 3,000 corporations in Belgium.  According to Graydon, a Belgian company specializing in commercial and marketing information, there are currently more than one million companies registered in Belgium. The federal government and the regions do not have specific policies that prioritize investment retention or maintain an ongoing dialogue with investors.

Limits on Foreign Control and Right to Private Ownership and Establishment

There are currently no limits on foreign ownership or control in Belgium.  There are no distinctions between Belgian and foreign companies when establishing or owning a business or setting up a remunerative activity.

Other Investment Policy Reviews

Over the past 3 years, the country has not been the subject of third-party investment policy reviews (IPRs) through a multilateral organization such as the OECD, WTO, or UNCTAD.

Business Facilitation

In order to set up a business in Belgium, one must:

  1. Deposit at least 20 percent of the initial capital with a Belgian credit institution and obtain a standard certification confirming that the amount is held in a blocked capital account;
  2. Deposit a financial plan with a notary, sign the deed of incorporation and the by-laws in the presence of a notary, who authenticates the documents and registers the deed of incorporation.  The authentication act must be drawn up in either French, Dutch or German (Belgium’s three official languages);
  3. Register with one of the Registers of legal entities, VAT and social security at a centralized company docket and obtain a company number.

In most cases, the business registration process can be completed within one week.

https://www.business.belgium.be/en/managing_your_business/setting_up_your_business  

http://procedures.business.belgium.be/en/procedures-iframe/?_ga=2.174982369.210217559.1555582522-1537979373.1536327711  

Based on the number of employees, the projected annual turnover and the shareholder class, a company will qualify as a small or medium-sized enterprise (SME) according to the meaning of the Promotion of Independent Enterprise Act of February 10, 1998.  For a small or medium-sized enterprise, registration will only be possible once a certificate of competence has been obtained. The person in charge of the daily management of the company must prove his or her knowledge of business management, with diplomas and/or practical experience. In the Global Enterprise Register, Belgium currently scores 7 out of 10 for ease of setting up a limited liability company.

Business facilitation agencies provide for equitable treatment of women and underrepresented minorities in the economy.

The three Belgian regions each have their own investment promotion agency, whose services are available to all foreign investors.

Outward Investment

The Belgian governments do not promote outward investment as such.  There are also no restrictions to certain countries or sectors, other than those where Belgium applies UN resolutions.

3. Legal Regime

Transparency of the Regulatory System

The Belgian government has adopted a generally transparent competition policy.  The government has implemented tax, labor, health, safety, and other laws and policies to avoid distortions or impediments to the efficient mobilization and allocation of investment, comparable to those in other EU member states.  Draft bills are never made available for public comment, but have to go through an independent court for vetting and consistency. Nevertheless, foreign and domestic investors in some sectors face stringent regulations designed to protect small- and medium-sized enterprises.  Many companies in Belgium also try to limit their number of employees to 49, the threshold above which certain employee committees must be set up, such as for safety and trade union interests.

Recognizing the need to streamline administrative procedures in many areas, in 2015 the federal government set up a special task force to simplify official procedures.  It also agreed to streamline laws regarding the telecommunications sector into one comprehensive volume after new entrants in this sector had complained about a lack of transparency.  Additionally the government beefed up its Competition Policy Authority with a number of academic experts and additional resources. Traditionally, scientific studies or quantitative analysis conducted on the impact of regulations are made publicly available for comment. However, not all public comments received by regulators are made public.

Accounting standards are regulated by the Belgian law of January 30, 2001, and balance sheet and profit and loss statements are identical with international accounting norms. Cash flow positions and reporting changes in non-borrowed capital formation are not required.  However, contrary to IAS/IFRS standards, Belgian accounting rules do require an extensive annual policy report.

Belgium publishes all its relevant legislation and administrative guidelines in an official Gazette, called Le Moniteur Belge (www.moniteur.be  ). The American Chamber of Commerce has called attention to the adverse impact of cumbersome procedures and unnecessary red tape on foreign investors, although foreign companies do not appear to be impacted more than Belgian firms.

International Regulatory Considerations

Belgium is a founding member of the EU, whose directives are enforced.  On May 25, 2018 Belgium implemented the General Data Protection Regulation (GDPR) (EU) 2016/679, an EU regulation on data protection and privacy for all individuals within the European Union.

Through the European Union, Belgium is a member of the WTO, and notifies all draft technical regulations to the WTO Committee on Technical Barriers to Trade (TBT).

Legal System and Judicial Independence

Belgium’s (civil) legal system is independent of the government and is a means for resolving commercial disputes or protecting property rights.  Belgium has a wide-ranging codified law system since 1830. There are specialized commercial courts which apply the existing commercial and contractual laws. As in many countries, the Belgian courts labor under a growing caseload, and backlogs cause delays. There are several levels of appeal.

Laws and Regulations on Foreign Direct Investment

Payments and transfers within Belgium and with foreign countries require no prior authorization. Transactions may be executed in euros as well as in other currencies.

Belgium has no debt-to-equity requirements.  Dividends may be remitted freely except in cases in which distribution would reduce net assets to less than paid-up capital.  No further withholding tax or other tax is due on repatriation of the original investment or on the profits of a branch, either during active operations or upon the closing of the branch.

Since there are three different regional Investment Authorities, the links to their respective websites are given below.

Competition and Anti-Trust Laws

The contact address for competition-related concerns:

Federal Competition Authority
City Atrium, 6th floor
Vooruitgangsstraat 50
1210 Brussels
tel: +32 2 277 5272
fax: +32 2 277 5323
email: info@bma-abc.be
We
bsite: www.bma-abc.be

Expropriation and Compensation

There are no outstanding expropriation or nationalization cases in Belgium with U.S. investors. There is no pattern of discrimination against foreign investment in Belgium.

When the Belgian government uses its eminent domain powers to acquire property compulsorily for a public purpose, adequate compensation is paid to the property owners. Recourse to the courts is available if necessary.  The only expropriations that occurred during the last decade were related to infrastructure projects such as port expansion, roads, and railroads.

Dispute Settlement

ICSID Convention and New York Convention

Belgium is a member of the International Center for the Settlement of Investment Disputes (ICSID) and regularly includes provision for ICSID arbitration in investment agreements.

Investor-State Dispute Settlement

The government accepts binding international arbitration of disputes between foreign investors and the state. There have been no investment disputes involving a U.S. person within the past 10 years.  Local courts are expected to enforce foreign arbitral awards issued against the government. To date, there has been no evidence of extrajudicial action against foreign investors.

International Commercial Arbitration and Foreign Courts

  1. Alternative Dispute Resolution is not mandatory by law and is therefore not commonly used in disputes, except for matters where the determination by an expert is sought, whether appointed by the parties in agreement or in accordance with a contractual clause or appointed by the court in the context of dispute resolution.
  2. Belgium has no domestic arbitration bodies.
  3. Local courts recognize and enforce foreign arbitral awards. Judgments of foreign courts are recognized and enforceable under the local courts.
  4. There are no reports or complaints targeting Court proceedings involving SOEs or alleged favoritism for them.

Bankruptcy Regulations

Belgian bankruptcy law is governed by the Bankruptcy Act of 1997 and is under the jurisdiction of the commercial courts.  The commercial court appoints a judge-auditor to preside over the bankruptcy proceeding and whose primary task is to supervise the management and liquidation of the bankrupt estate, in particular with respect to the claims of the employees.  Belgian bankruptcy law recognizes several classes of preferred or secured creditors. A person who has been declared bankrupt may subsequently start a new business unless the person is found guilty of certain criminal offences that are directly related to the bankruptcy.  The Business Continuity Act of 2009 provides the possibility for companies in financial difficulty to enter into a judicial reorganization. These proceedings are to some extent similar to Chapter 11 as the aim is to facilitate business recovery. In the World Bank’s Doing Business Report, Belgium ranks number 8 (out of 198) for the ease of resolving insolvency.

6. Financial Sector

Capital Markets and Portfolio Investment

Belgium has policies in place to facilitate the free flow of financial resources. Credit is allocated at market rates and is available to foreign and domestic investors without discrimination. Belgium is fully served by the international banking community and is implementing all relevant EU financial directives.  At the same time, Belgium currently ranks 60th out of 190 for “getting credit” on the World Bank’s “Doing Business” rankings, and in the bottom quintile among OECD high income countries.

Bruges established the world’s first stock market almost 600 years ago, and the Belgian bourse is well-established today.  On Euronext, a company may increase its capital either by capitalizing reserves or by issuing new shares. An increase in capital requires a legal registration procedure, and new shares may be offered either to the public or to existing shareholders.  A public notice is not required if the offer is to existing shareholders, who may subscribe to the new shares directly. An issue of bonds to the public is subject to the same requirements as a public issue of shares: the company’s capital must be entirely paid up, and existing shareholders must be given preferential subscription rights.

In 2016, the Belgian government passed legislation to improve entrepreneurial financing through crowdfunding and more flexible capital venture rules.

Money and Banking System

Because the Belgian economy is directed toward international trade, more than half of its banking activities involve foreign countries.  Belgium’s major banks are represented in the financial and commercial centers of dozens of countries by subsidiaries, branch offices, and representative offices.  The country does have a central bank, the National Bank of Belgium (NBB), whose governor is also a board member of the European Central Bank (ECB).

Belgium is one of the countries with the highest number of banks per capita in the world. The banking system is considered sound but was hard hit by the financial crisis that began in the fall of 2008, when federal and regional governments had to step in with lending and guarantees for the three largest banks. Following a review of the 2008 financial crisis, the Belgian government decided in 2012 to shift the authority of bank supervision from the Financial Market Supervision Authority (FMSA) to the NBB. In 2017, supervision of systemically important Belgian banks shifted to the ECB.  The country has not lost any correspondent banking relationships in the past 3 years, nor are there any correspondent banking relationships currently in jeopardy.

The developments since September 2008 have also resulted in a major de-risking of the Belgian banks’ balance sheets, on the back of a rising share of exposure to the public sector – albeit more concentrated on Belgium – and a gradual further expansion of the domestic mortgage loan portfolio. Since the introduction of the Single Supervisory Mechanism (SSM), the vast majority of the Belgian banking sector’s assets are held by banks that come under SSM supervision, including the “significant institutions” KBC Bank, Belfius Bank, Argenta, AXA Bank Europe, Bank of New-York Mellon and Bank Degroof/Petercam. Other banks governed by Belgian law – such as BNP Paribas Fortis and ING Belgium – are also subject to SSM supervision as they are subsidiaries of non-Belgian “significant institutions.”

In 2018, the banking sector conducted its business in a context of gradual economic recovery and persistently low interest rates. That situation had two effects: it put pressure on the sector’s profitability and caused a credit default problem in some European banks. The National Bank of Belgium designated eight Belgian banks as domestic systemically important institutions, and divided them into two groups according to their level of importance. A 1.5 % capital surcharge was imposed on the first group (BNP Paribas Fortis, KBC Group and Belfius Bank).  The second group (AXA Bank Europe, Argenta, Euroclear and The Bank of New York Mellon) is required to hold a supplementary capital buffer of 0.75 %. These surcharges will be phased in over a three-year period.

Under pressure from the European Union, bank debt has decreased in volume overall, from close to 1.6 trillion euros in 2007 to just over 1 trillion euros in 2018, according to the National Bank of Belgium, particularly in the risky derivative markets.

Belgian banks use modern, automated systems for domestic and international transactions. The Society for Worldwide Interbank Financial Telecommunications (SWIFT) has its headquarters in Brussels. Euroclear, a clearing entity for transactions in stocks and other securities, is also located in Brussels.

Opening a bank account in the country is linked to residency status.  FATCA (Foreign Account Tax Compliance Act) requires Belgian banks to report information on U.S. account holders directly to the Belgian tax authorities, who then release the information to the IRS.

Some Belgian banks have already made great progress with blockchain technology: for instance, one Belgian bank offers a product called MyCar, a digital ecosystem that connects all the players in a car purchase with blockchain technology, creating a single, trusted source of confidence and a centralized workflow that takes the hassle out of buying a car.

With regard to cryptocurrencies, the National Bank of Belgium has no central authority overseeing the network.

Unlike most other EU countries, there are no cryptocurrency ATMs, and the NBB has repeatedly warned about the potential consequences of the use of cryptocurrencies for financial stability.

Foreign Exchange and Remittances

Foreign Exchange

Payments and transfers within Belgium and with foreign countries require no prior authorization. Transactions may be executed in euros as well as in other currencies.

Remittance Policies

Dividends may be remitted freely except in cases in which distribution would reduce net assets to less than paid-up capital. No further withholding tax or other tax is due on repatriation of the original investment or on the profits of a branch, either during active operations or upon the closing of the branch.

Sovereign Wealth Funds

Belgium has a sovereign wealth fund (SWF) in the form of the Federal Holding and Investment Company, a quasi-independent entity created in 2004 and now mainly used as a vehicle to manage the banking assets which were taken on board during the 2008 banking crisis.  The SWF has a board whose members reflect the composition of the governing coalition and are regularly audited by the “Cour des Comptes” or national auditor. At the end of 2017, its total assets amounted to € 2.2 billion. Due to the origins of the fund, the majority of the funds are invested domestically. Its role is to allow public entities to recoup their investments and support Belgian banks.  The SWF is required by law to publish an annual report and is subject to the same domestic and international accounting standards and rules. The SWF routinely fulfills all legal obligations. However, it is not a member of the International Forum of Sovereign Wealth Funds, and as such not a subscriber to the Santiago Principles.

7. State-Owned Enterprises

Belgium does not have any State Owned Enterprises (SOEs) that exercise delegated government powers.  Private enterprises are allowed to compete with public enterprises under the same terms and conditions, but since the EU started to liberalize network industries such as electricity, gas, water, telecoms and railways, there have been regular complaints in Belgium about unfair competition from the former state monopolists.  Complaints have ranged from lower salaries (railways) to lower VAT rates (gas and electricity) to regulators with a conflict of interest (telecom). Although these complaints have now largely subsided, many of these former monopolies are now market leaders in their sector, due mainly to their ability to charge high access costs to networks fully amortized years ago. However, former telecom monopolist Proximus still features on the EU’s list of companies receiving state aid.  Belgium has about 80,000 employees working in SOEs, mainly in the railways, telecoms and general utility sectors. There are also several regional-owned enterprises where the regions often have a controlling majority: for a full listing on the companies located in Wallonia, see www.actionnariatwallon.be  .  There is no equivalent website for companies located in Flanders or in Brussels. Details on the shareholders of the Bel20 (benchmark stock market index of Euronext Brussels) can be found on http://www.gresea.be/Qui-sont-les-actionnaires-du-BEL-20  .

Privatization Program

Belgium currently has no ongoing privatization programs.  There are ongoing discussions about the possible privatization of the state-owned bank Belfius and the government share in telecom operator Proximus, in which the government needs to weigh of the benefits of a one-time sale against the recurring stream of dividends generated by these holdings.  There are no indications that foreign investors would be excluded from these eventual privatizations.

9. Corruption

Belgian anti-bribery legislation was revised completely in March 1999, when the competence of Belgian courts was extended to extraterritorial bribery.  Bribing foreign officials is a criminal offense in Belgium. Belgium has been a signatory to the OECD Anti-Bribery Convention since 1999, and is a participating member of the OECD Working Group on Bribery.  In the Working Group’s Phase 3 review of Belgium in 2013 it called on Belgium to address the lack of resources available for fighting foreign bribery.

Under Article 3 of the Belgian criminal code, jurisdiction is established over offenses committed within Belgian territory by Belgian or foreign nationals. Act 99/808 added Article 10 related to the code of criminal procedure. This Article provides for jurisdiction in certain cases over persons (foreign as well as Belgian nationals) who commit bribery offenses outside the territory of Belgium. Various limitations apply, however.  For example, if the bribe recipient exercises a public function in an EU member state, Belgian prosecution may not proceed without the formal consent of the other state.

Under the 1999 Belgian law, the definition of corruption was extended considerably.  It is considered passive bribery if a government official or employer requests or accepts a benefit for him or herself or for somebody else in exchange for behaving in a certain way.  Active bribery is defined as the proposal of a promise or benefit in exchange for undertaking a specific action. Until 1999, Belgian anti-corruption law did not cover attempts at passive bribery.  The most controversial innovation of the 1999 law was the introduction of the concept of “private corruption,” or corruption among private individuals.

Corruption by public officials carries heavy fines and/or imprisonment between 5 and 10 years. Private individuals face similar fines and slightly shorter prison terms (between six months and two years).  The current law not only holds individuals accountable, but also the company for which they work. Contrary to earlier legislation, the 1999 law stipulates that payment of bribes to secure or maintain public procurement or administrative authorization through bribery in foreign countries is no longer tax deductible.  Recent court cases in Belgium suggest that corruption is most serious in government procurement and public works contracting. American companies have not, however, identified corruption as a barrier to investment.

The responsibility for enforcing corruption laws is shared by the Ministry of Justice through investigating magistrates of the courts, and the Ministry of the Interior through the Belgian federal police, which has jurisdiction in all criminal cases.  A special unit, the Central Service for Combating Corruption, has been created for enforcement purposes but continues to lack the necessary staff. Belgium is also an active participant in the Global Forum on Asset Recovery.

The Belgian Employers Federation encourages its members to establish internal codes of conduct aimed at prohibiting bribery.  To date, U.S. firms have not identified corruption as an obstacle to FDI.

UN Anticorruption Convention, OECD Convention on Combatting Bribery

Belgium has signed and ratified the UN Anticorruption Convention of 1998, and is also party to the OECD Convention on Combatting Bribery of Foreign Public Officials in International Business Transactions.

Resources to Report Corruption

Office of the Federal Prosecutor of Belgium
Transparency International Belgium
Wolstraat 66-1 – 1000 Brussels
T 02 55 777 64
F 02 55 777 94

Transparency Belgium
Nijverheidsstraat 10, 1000 Brussels
tel: +32 (0)2 893 2584
email: infoa@transparencybelgium.be

Belize

Executive Summary

Belize has the smallest economy in Central America with total gross domestic product (GDP) of USD 1.9 billion due primarily to continued increases in tourism.  Though geographically located in Central America, the former British colony has deep cultural ties to the Caribbean. Due to mounting fiscal pressures and a need to diversify and expand its economy, the Government is open to, and actively seeks, foreign direct investment (FDI).  However, the small population of the country (approximately 390,000 persons), high import duties, bureaucratic delays, corruption, and occasional political interference in private disputes constitute investment challenges.

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

Key legislative reforms in 2018 advanced the intellectual property regime governing copyrights and industrial designs; strengthened the financial sector with regard to anti-money laundering and counterterrorism financing; sought to secure compliance with global regulations relating to taxation, and amended the operations of the offshore sector and export processing zones.

Overall, the economic and fiscal outlook will continue to face significant challenges. The country remains highly indebted with debt to GDP at approximately 94 percent.  The government managed to gain some relief in the short term with the 2017 renegotiation of the country’s major external commercial debt—the so-called “Superbond 3.0”—totaling an estimated USD 554 million.  Macroeconomic and fiscal vulnerabilities are expected to continue to relate to fiscal tightening, controlling the public sector wage bill, dealing with arbitration judgments, and advancing measures to stimulate private sector growth and economic development.

The financial system can be characterized as stable but fragile.  While the domestic financial system continues to recover and improve performance ratios relating to non-performing loans and capital adequacy, correspondent banking relationships remain tenuous and tend to offer fewer services at higher costs.  In the international banking sector, the Central Bank of Belize revoked the license of one international bank in June 2018 and another requested support in March 2019 to wind up voluntarily.

Despite the challenges, Belize remains attractive for some investors because of the beauty of its natural resources, the relative affordability of land, proximity to the United States, English language, and the cultural diversity and warmth of its people.  Investors benefit from various incentive programs in key investment sectors including agriculture, agro-processing, aquaculture and fisheries, logistics and light manufacturing, offshore outsourcing, sustainable energy, and tourism and tourism-related industries.

Table 1: Key Metrics and Rankings

Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2018 N/A http://www.transparency.org/research/cpi/overview 
World Bank’s Doing Business Report 2019 125 of 190 http://www.doingbusiness.org/en/rankings
Global Innovation Index 2018 N/A https://www.globalinnovationindex.org/analysis-indicator 
U.S. FDI in partner country ($M USD, stock positions) 2017 $74 million http://www.bea.gov/international/factsheet/ 
World Bank GNI per capita 2018 $4,060 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD 

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

While the Government of Belize is interested in attracting foreign direct investment, certain regulatory requirements serve to impede growth and transparency.  There are no laws that explicitly discriminate against foreign investors. In practice, however, investors complain that they do not always receive the full extent of the incentives available, that land titles are not always secure, and that bureaucratic delays or corruption can hinder starting a business in Belize.

According to the International Monetary Fund (IMF), improving the business climate, reducing crime and facilitating access to credit would increase growth by one percentage point on a yearly basis.  They also note that lowering the debt burden and greater climate resilience would support growth by another percentage point per year.

The Belize Trade and Investment Development Service (BELTRAIDE; www.belizeinvest.org.bz  ), a statutory body, is the investment and export promotion agency.  It promotes FDI through various types of incentive packages and identified priority sectors for investment as agriculture, agro-processing, fisheries and aquaculture, logistics and light manufacturing, tourism and tourism-related industries, offshore outsourcing (BPOs), and sustainable energy.

The Government created the Economic Development Council to increase the national dialogue on private sector development and better inform policies for growth and development.  The Cabinet has also created a Sub–Committee on Investment composed of Ministers whose portfolios are directly involved in considering and approving investment proposals.

Limits on Foreign Control and Right to Private Ownership and Establishment

Generally, Belize has no restrictions on foreign ownership and control of companies; however, foreign investments must be registered at the Central Bank of Belize.  In addition, foreigners need to apply with a Belizean partner or someone with a permanent residence to register a business name.

Some investment incentives show preference to Belizean-owned companies.  For example, to qualify for a tour operator license, a business must be majority owned by Belizeans or permanent residents of Belize (http://www.belizetourismboard.org  ).  This qualification is negotiable particularly where a tour operation would expand into a new sector of the market and does not result in competition with local operators.

Foreign investments must be registered and obtain an “Approved Status” from the Central Bank in order to facilitate inflows and outflows of foreign currency.  “Approved Status” investments will ordinarily be granted approval for repatriation of funds from profits, dividends, loan payments and interest. The Central Bank also reserves the right to request evidence-supporting applications for repatriation.

Additionally, persons seeking to open a bank account must also comply with Central Bank regulations.  These may differ based on residency status and whether the individual is seeking to establish a local or foreign currency account.

The Government’s Cabinet Sub-Committee on Investment considers investment projects which do not fall within Belize’s incentive regime or which may require special considerations.  For example, an investment may require legislative changes, a customized memorandum of understanding or agreement from the government, or a public–private partnership. Proposals are generally assessed based on size, scope, and the incentives requested.  In addition, proposals are assessed on a five-point system that analyses socio-economic acceptability of the project, revenues to the government, employment, foreign exchange earnings and environmental considerations. The Cabinet Sub-Committee is composed of five Cabinet Minsiters, including the minister with responsibility for Investment, Trade and Commerce as Chairperson.  The other members include the ministers with responsibility for Tourism and Culture; the Environment and Sustainable Development; and Natural Resources and Immigration, along with the Attorney General. There is no set timeframe for considering projects as it largely depends on the nature and complexity of the project.

When considering investment, foreign investors undertaking large capital investments must be aware of environmental laws and regulations.  There is a requirement to prepare an Environmental Impact Assessment (EIA) when a project meets certain land area, location, and/or industry criteria.  When purchasing land or planning to develop in or near an ecologically sensitive zone, it is recommended that the EIA fully address any measures by the investor to mitigate environmental risks.  Environmental clearance must be obtained prior to the start of site development. The Department of Environment website, http://www.doe.gov.bz   has more information on the Environmental Protection Act and other regulations, applications and guidelines.

Other Investment Policy Reviews

In the past three years, there has been no investment policy review of Belize by the Organization for Economic Cooperation and Development (OECD) or the United Nations Conference on Trade and Development (UNCTAD).  Belize concluded its third Trade Policy Review in the World Trade Organization (WTO) in April 2017.

Business Facilitation

Belize does not operate a single window registration process.  BELTRAIDE (http://www.belizeinvest.org.bz), a statutory body of the Government of Belize, operates as the country’s investment and export promotion agency.  Its investment facilitation services are open to all investors. While there are support measures to advance greater inclusion of women and minorities in entrepreneurial initiatives and training, the business facilitation measures do not distinguish by gender or economic status.

The Belize Companies Corporate Affairs Registry (tel: (501) 822 0421; email: belizecompaniesregistry@yahoo.com; website: www.belizecompaniesregistry.gov.bz) is responsible for the registration process of all local business and companies.

Businesses must register with the tax department to pay business and general sales tax. They must also register with their local city council or town board to obtain a trade license to operate a business.  An employer should also register employees for social security. The 2019 Doing Business report (http://www.doingbusiness.org   ) estimates it takes on average 43 days to start up a company in Belize.  The same report ranks Belize at 162 of 190 economies on the ease of starting a business.

Outward Investment

The government does not promote or incentivize outward investments.  Domestic investors are not restricted from investing abroad. However, the Central Bank places currency controls that limit foreign currency outflows unless given prior approval.

3. Legal Regime

Transparency of the Regulatory System

Regulatory authority exists both at the local and national levels with national laws and regulations being most relevant to foreign businesses.  Despite these measures, some investors complain that the regime for incentives did not always meet their needs, that land titles are not always reliable and secure, and that bureaucratic delays or corruption can be hindrances to doing business in Belize.

There are quasi-governmental organizations mandated by law to manage specified regulatory processes on behalf of the Government of Belize, e.g. the Belize Tourism Board, BELTRAIDE, and the Belize Agricultural Health Authority.  There are no reports that these processes significantly distort or discriminate against foreign investors.

The cabinet dictates government policies that are enacted by the legislature and implemented by the various government ministries.  Regulations exist at the local level, primarily relating to property taxes and registering for trade licenses to operate businesses in the municipality.

Accounting, legal, and regulatory systems are consistent with international norms. Publicly owned companies are generally audited annually and the reports are prepared in accordance with International Financial Reporting Standards and International Standards on Auditing.

The mechanism for drafting bills, regulations and enacting legislation generally apply across the board and apply to investment laws and regulations.  The government publishes in the Gazette, proposed as well as enacted laws and regulations that are publicly available for a minimal fee.

Draft bills are generally open to public comment.  Once introduced in the House of Representatives, they are sent to Standing Committees of the House of Representatives, which then meet and invite the public and interested persons to review, recommend changes, or object to draft laws prior to further debate.  Public comments on draft legislation are not generally posted online nor made publicly available. It would be the prerogative of an interested party to attend public consultations, committee meetings, or to request the public comments from the National Assembly or relevant Ministry.  Additionally, laws are sometimes passed quickly without meaningful publication, public review or public debate; as was the case with the Central Bank of Belize (International Immunities Act) and the Crown Proceedings (Amendment Act) of 2017.

Government ministries also make available policies, laws, and regulations pertinent to their portfolio available on their respective ministry websites.  Since 2016, enacted laws have been published on the website of the National Assembly. There is however, a delay in updating the website.

Regulations and enforcement actions are appealable with regulatory decisions subject to judicial review.  There have been no regulatory systems including enforcement reforms announced in the last year.

Information on the public finance, the government’s budget and debt obligations (including explicit and contingent liabilities) are widely accessible to the general public, with most documents available online.

International Regulatory Considerations

As a full member of the Caribbean Community (CARICOM), Belize’s foreign, economic and trade policies vis-a-vis non-members are coordinated regionally.  The country’s import tariffs are largely defined by CARICOM’s Common External Tariff.

Belize is also a member of several other treaties because of its CARICOM membership.  A primary example is the Economic Partnership Agreement (EPA) between CARIFORUM and the European Union (EU).  In the wake of Brexit, these countries also signed a CARIFORUM – United Kingdom Economic Partnership Agreement in March 2019.  The latter agreement is expected to come into effect by January 2021or soon after the UK leaves the EU.

Outside of CARICOM, Belize is a member of the Central American Integration System (SICA) at a political level, but is not a part of the Secretariat of Central American Economic Integration (SIECA) that supports economic integration of Central America.

Belize is also a member of the WTO and adheres to the organization’s agreements and reporting system.  The Belize Bureau of Standards (BBS) is the national standards body responsible for preparing, promoting and implementing standards for goods, services, and processes.  The BBS operates in in accordance with the WTO Agreement on Technical Barriers to Trade and the CARICOM Regional Organization for Standards and Quality. The BBS is also a member of the International Electrotechnical Commission (IEC), the International Organization for Standardization (ISO), and Codex Alimentarius.

Legal System and Judicial Independence

The Belize Constitution, is the supreme law and is founded on the principle of separation of powers with independence of the judiciary from the executive and legislative branches of government.  As a former British colony, Belize follows the English Common Law legal system, which is based on established case law. Belize has a written Contract Act, supported by precedents from the national courts as well as from the wider English speaking and Commonwealth case law.  Contracts are enforced through the courts.

General information relating to Belize’s judicial and legal system, including links to Belize’s Constitution, Laws and judicial decisions are available at the Judiciary of Belize website www.belizejudiciary.org  .  There are specialized courts that deal with family related matters including divorce and child custody, but no specialized courts to deal with commercial disputes or cases.

The current judicial process continues to face challenges including frequent adjournments, delays, and a backlog of cases.  Several measures are being implemented to improve the country’s judiciary. The training of mediators and the introduction of court-connected mediation support alternative methods to dispute settlement.  This effort along with better case management procedures is expected to decrease the court’s caseload, time delays, and cost particularly for smaller claim civil cases.

Regulations and enforcement actions are appealable.  Regulatory decisions are also subject to judicial review.  Judgments by the Belize Supreme Court and the Court of Appeal are available at http://www.belizejudiciary.org  .  In 2010, Belize adopted the Caribbean Court of Justice (CCJ) as its final appellate court on civil and criminal matters, replacing the Judicial Committee of the Privy Council of the United Kingdom.  Judgments by the Caribbean Court of Justice, are available at http://www.caribbeancourtofjustice.org  .

Laws and Regulations on Foreign Direct Investment

The country has an English Common Law legal system supplemented by local legislation and regulations.  Enacted laws are generally available in the National Assembly’s website at www.nationalassembly.gov.bz  .  Examples of key legislation passed in 2018 include:

  • Designated Processing Areas Act, 2018
  • Income and Business Tax (Amendment) Act, 2018
  • Stamp Duties (Amendment) Act, 2018
  • International Business Companies (Amendment) Act, 2018
  • Bill of Sales (Amendment) Act, 2018
  • General Sales Tax (Amendment) Act, 2018
  • Customs Excise Duties (Amendment), 2018
  • International Financial Services Commission, 2018

The laws, rules, procedures, and reporting requirements related to investors differ depending on the nature of the investment.  BELTRAIDE provides advisory services for foreign investors relating to procedures for doing business in Belize and incentives available to qualifying investors.  Further information is available at the BELTRAIDE website: http://www.belizeinvest.org.bz  

Competition and Anti-Trust Laws

Belize does not have any laws governing competition, but there are attempts to limit outside competition in certain industries (such as food and agriculture) by levying high import duties.

Expropriation and Compensation

The Government has used the right of eminent domain in several cases to appropriate private property, including land belonging to foreign investors.  There were no new expropriation cases in 2018. However, there are allegations that several previous expropriations were done for personal or political gain.  Belizean law requires that the government assess and compensate according to fair market value. Such expropriation cases can take several years to settle and there are a few cases where compensation is still pending.  In the cases of expropriations, the claimants assert that the Government failed to adhere to agreements entered into by a previous administration.

The process to acquire land titles is open to abuse with numerous cases of land title manipulation involving foreigners and Belizeans.  The government continues efforts at improving the land title system and in addressing delays in processing land transactions.

Dispute Settlement

ICSID Convention and New York Convention

The Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) was extended to Belize by an act of the United Kingdom when Belize was a colony.  After independence, Belize did not ratify the Convention nor is it listed as a contracting state. Nevertheless, the Arbitration Act governs arbitration and expressly incorporates three international conventions into domestic law.  These conventions include the 1923 Geneva Protocol on Arbitration Clauses; the Convention on the Execution of Foreign Arbitral Awards; and the New York Convention. A 2013 Caribbean Court of Justice judgment also upheld the Arbitration Act giving effect to the New York Convention in domestic law.

Belize signed but has not ratified the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID convention).  For more information visit http://sice.oas.org/dispute/comarb/icsid/w_conv1.asp  

Investor-State Dispute Settlement

Belize is signatory to various investment agreements which make provisions for the settlement of investor-state disputes.  Belize is also a member of the CARICOM Single Market and Economy, as well as a party to two regional Economic Partnership Agreements (EPA): 1) between CARIFORUM and the EU; and 2) CARIFORUM and the United Kingdom.  These regional arrangements make provisions for the settlement of investor-state disputes.

Since Belize is not a party to any Bilateral Investment Treaty (BIT) or Free Trade Agreement (FTA) with the United States, investment disputes involving U.S. persons are taken either before the courts or before international arbitration panels.

Local courts are empowered to recognize and enforce foreign arbitral awards against the government but these are generally challenged up to the CCJ.  In January 2017, the Crown Proceedings (Amendment) Act and the Central Bank of Belize (International Immunities) Act were passed, which also affect the enforcement of foreign arbitral awards against the government.  Essentially, the Crown Proceedings Amendment Act provides that if a foreign judgment is entered against the government and later declared as “unlawful, void or otherwise invalid” by a court in Belize, the foreign judgement would not be enforced in or outside Belize.  The Act also provides for hefty penalties of fines and/or imprisonment on a person, individual or legal, seeking to enforce the foreign judgment. The Central Bank (International Immunities) Act restates the immunity of the Central Bank of Belize assets “from legal proceedings in other states.”  This Act similarly provides for penalties of fines and/or imprisonment on a person, individual or legal, which initiates any such proceedings. Despite these legislative acts, there has not been a history of extrajudicial actions against foreign investors.

Over the past decade, the Government of Belize has been involved in numerous investment disputes with one involving a U.S. company.  Most cases were initially entered in arbitration panels, but were eventually appealed either before the U.S. District Court of Colombia or the CCJ.  The majority of the judgements went against the Government, which has settled some and continues to settle other cases.

International Commercial Arbitration and Foreign Courts

Belize’s Arbitration Act allows the Supreme Court of Belize to support and supervise dispute settlement between private parties by arbitration.  In 2013, the Supreme Court also introduced the process of court-connected mediation as an alternative method to dispute settlement between private parties and as a means of reducing costs and duration of litigation.

Local courts are empowered to recognize and enforce foreign arbitral but these are generally challenged up to the CCJ, Belize’s highest appellate court.

There are numerous instances of cases involving State Owned Enterprises (SOEs) which went before domestic courts with rulings both in favor and against the SOE.

Bankruptcy Regulations

Chapter 244 of the Laws of Belize (Bankruptcy Act) provides and allows for bankruptcy filings. The Act provides for the establishment of receivership, trustees, adjudication and seizures of the property of the bankrupt.  The court may order the arrest of the debtor as well as the seizure of assets and documents in the event the debtor may flee or avoid payment to creditors. The Act also provides for imprisonment on conviction of certain specified offenses.  The Director of Public Prosecutions may also institute proceedings for offenses related to the bankruptcy proceedings.

6. Financial Sector

Capital Markets and Portfolio Investment

Belize’s financial system is small with limited to non-existent foreign portfolio investment transactions. It does not have its own stock market and capital market operations are rudimentary.  Private sector participation as both suppliers and buyers of securities in the financial market is generally not significant.

Foreign investments must be registered at the Central Bank, but the government does not restrict payments for international transactions.  Additionally, credit is made available on market terms with interest rates largely set by local market conditions prevailing within the commercial banks.

The Development Finance Corporation (DFC), a state owned development bank, offers loan financing services in various sectors. To qualify for a loan from DFC, an individual must be a Belizean resident or citizen, while a company must be majority 51 percent Belizean owned.  The National Bank of Belize is a state owned bank that provides concessionary credit primarily to public officers, teachers, and low income Belizeans.

Money and Banking System

The Central Bank of Belize (CBB) (https://www.centralbank.org.bz) is responsible for formulating and implementing monetary policy focusing on the stability of the exchange rate and economic growth.  Belize’s financial system remains underdeveloped with a banking sector may be characterized as stable but fragile.

Non-performing loans stood at 2.7 percent of total loans at the end of 2018, significantly below the 5.0 percent threshold.  Additionally, the aggregate capital adequacy ratio of domestic banks improved to 24.6 percent, well above the 9.0 percent regulatory requirement. The CBB also registered a new credit union, which commenced operations in August 2018.  In the international banking sector, the Central Bank revoked the license of one bank in June 2018 and another requested support in March 2019 to wind up voluntarily. 

Persons seeking to open a bank account must comply with Central Bank regulations, which differ based on residency status and whether the individual is seeking to establish a local bank account or a foreign currency account.  Like many countries with fixed currency rates, the Belize banking sector is split into two branches: onshore (domestic banks that cater only to residents) and offshore (international banks intended for non-residents of Belize to freely move foreign exchange in and out of the country).  The Government asserts this design is to prevent disruptions of the local economy, to maintain the peg to the US dollar and avoid large foreign exchange fluctuations.

Foreign banks and branches are allowed to operate in the country with all banks subject to Central Bank measures and regulations.  While all banks have current correspondent banking relations, there is still uncertainty with regard to the longevity of those relationships, delay in transactions, and fewer services offered at higher costs.

In the last few years, Belize has enacted a number of reforms to strengthen the anti-money laundering and counterterrorism-financing regime, including amendments to the Money Laundering and Terrorism (Prevention) Amendment Act and the International Business Companies (Amendment) Act.  In addition, the National Anti-Money Laundering Committee (NAMLC) is headed by the Financial Intelligence Unit with inter-agency support from key financial and law enforcement authorities.

Foreign Exchange and Remittances

Foreign Exchange

There are currency controls in Belize and foreign investors seeking to convert, transfer, or repatriate funds must comply with Central Bank regulations.  Foreign investments must be registered at the Central Bank to facilitate inflows and outflows of foreign currency transactions. Foreign investors must register their inflow of funds to obtain an “Approved Status” for their investment and generally are approved for repatriation of funds thereafter.  The Central Bank does, however, reserve the right to request evidence supporting applications for repatriation.

The Belize dollar has been pegged to the United States Dollar since May 1976 at a fixed exchange rate of BZ USD2.00 to the USD1.00.  There are reports of shortages and delays in obtaining foreign exchange.

Remittance Policies

There are no changes to investment remittance policies.  As mentioned above, foreign investors should obtain an “Approved Status” for their investment and register their inflow and outflow of funds with the Central Bank.

Sovereign Wealth Funds

Belize does not have a sovereign wealth fund.

7. State-Owned Enterprises

State Owned Enterprises (SOEs) are active in the utilities sectors.  The Government is the majority shareholder in the Belize Water Services Limited, the country’s sole provider of water services, the Belize Electricity Limited, the sole distributor electricity, and the Belize Telemedia Limited, the largest telecommunications provider in the country.

SOEs usually engage senior government officials, and at times include members of local business bureaus and chambers of commerce, labor organizations, and quasi-governmental agencies, as a part of their management and board of directors.  The board guides the direction, policies, and decisions of the SOE that ostensibly is independent, but in practice has included high-ranking government officials as well as close relatives of government officials. Current and previous administrations are accused of nepotism in staffing as well as conflicts of interest when board members or directors are also represented in organizations that do business with the SOEs.

There is no published list of SOEs.  The following are the major SOEs operating in the country. Information relating to their operations are available on their website, including their audited financial reports:

There are no third party market analysis sources that evaluate whether SOEs receive non-market advantages by the government.  The Belize Electricity Limited and the Belize Water Services Limited are the only service providers in their respective sectors.  The Belize Telemedia Services, on the other hand, competes with one other provider for mobile connectivity and there are multiple players that provide internet and data services.  The Public Utilities Commission regulates all utilities.

Privatization Program

The Government does not currently have a privatization program.

9. Corruption

Belize has anti-corruption laws that are seldom enforced.  Under the Prevention of Corruption in Public Life Act, public officials are required to make annual financial disclosures.  The Act also criminalizes acts of corruption by public officials and includes measures on the use of office for private gain, code of conduct breaches, the use of public funds, and bribery.  Section 24 of the Act covers punishment for breach, which may include a fine of up to USD5,000, severe reprimand, forfeiture of property acquired by corruption, and removal from office. This Act also established an Integrity Commission mandated to monitor, prevent, and combat corruption by examining declarations of physical assets and financial positions filed by public officers.  The Commission is able to investigate allegations of corrupt activities, including by members of the National Assembly, Mayors and Councilors of all cities, and Town Boards. In 2018, a new chair was appointed to the Commission and published 42 names of persons in public life in accordance with the Act.

The Money Laundering and Terrorism (Prevention) Act identifies “politically exposed persons” to include family members or close associates of the politically exposed person.  The policies and procedures for government procurement are outlined in Belize Stores Orders and Financial Orders issued by the Ministry of Finance. There is a Manual for the Control of Public Finances that provides the framework for the registration and use of public funds to procure goods and services.

Despite these legislative and regulatory measures, many businesspeople complain that both major political parties can and do practice partisanship bias that affects businesses in terms of receiving needed licenses, winning government contracts for procurement of goods and services, and the granting of government land to private owners.  Some middle-class citizens and business owners throughout the country have complained of government officials, including police and others, soliciting bribes. Additionally, there are allegations of prominent members from the two main political parties engaging in corrupt practices to acquire land. A Select Senate Committee on Immigration deliberated for most of 2017 on such allegations.  It concluded its inquiry in December 2017, but has yet to publish its findings.

Private companies are not required to establish internal codes of conduct.  There are few non-governmental institutions that monitor government activities; two of them are Citizens Organized for Liberty through Action (COLA) and the National Trade Union Congress of Belize (NTUCB).  The first is comprised of concerned private citizens; the latter is an umbrella organization comprised of the various Belizean workers’ unions. Environmental NGOs and the Belize Chamber of Commerce and Industry often make statements regarding government policy as it affects their respective spheres of activity.

Private companies do not use internal controls, ethics or compliance programs to detect and prevent bribery of government officials.

In June 2001, the Government of Belize signed the Organization of American States (OAS) Inter-American Convention on Corruption, which undergoes periodic review as provided for under the Convention.

In December 2016, Belize acceded to the United Nations Convention Against Corruption (UNCAC) amid public pressure and demonstrations from the teachers’ unions but full implementation remains ongoing.

Bribery is officially considered a criminal act in Belize, but laws against bribery are rarely enforced.  There are complaints of government corruption particularly related to customs, land, and immigration transactions.

Resources to Report Corruption

Contact for the government agency or agencies responsible for combating corruption:

Office of the Ombudsman
91 Freetown Road
Belize City, Belize
T: +501-223-3594
E: ombudsman@btl.net
W: www.ombudsman.gov.bz  

For specific complaints within the police force:

Professional Standards Branch
1902 Constitutions Drive
Belmopan, Belize
T: +501-822-2218 or 822-2674

Benin

Executive Summary

Benin has been a democracy since 1990, enjoying until recently a reputation for regular, peaceful elections.  In 2018, the National Assembly adopted and the government implemented stringent rules for political parties to qualify to participate in legislative elections.  In February 2019, the independent election commission announced that no opposition party had met the new rules, leaving only two, pro-government parties on the April 2019 legislative election ballot.  The 2019 legislative elections were neither fully competitive nor inclusive.

Months after taking office in 2016, President (and former businessman) Patrice Talon launched an ambitious USD 15 billion five-year Government Action Plan (“Programme d’Actions du Gouvernement” or PAG).  The PAG lays out a development plan structured around 45 major projects, 95 sector-based projects, and 19 institutional reforms.  With the goals of strengthening the administration of justice, fostering a structural transformation of the economy, and improving living conditions, the projects are concentrated in infrastructure, agriculture and agribusiness, tourism, health, and education.  The government claims the PAG will create 500,000 jobs, though the President’s critics see plenty of room in the PAG for sole-source contracts profiting administration insiders.  The Talon administration’s revocations of certain high-dollar contracts signed under the previous administration in favor of new ones with Talon-allied companies have fed this latter perception.

Benin’s overall macroeconomic conditions were positive in 2017 and 2018, with an increase in GDP growth in 2018 due to a well performing agricultural sector led by cotton production, while economic recovery in neighboring Nigeria, on which Benin’s economy heavily depends, also contributed to growth.  The cotton industry, the Port of Cotonou, telecommunications, agriculture, energy, the cement industry, and housing are the main economic drivers or prospects for investment. The country’s GDP is roughly 71 percent services, 21 percent agriculture, and 8 percent manufacturing.

Benin continues its efforts to attract private investment in support of economic growth – a link the government sees as central to boosting Benin’s development prospects.  Since 2015, it has had a one-stop business startup, investment promotion, and foreign trade promotion center, the Investment and Exports Promotion Agency (APIEX). The Talon government has pinned significant hopes on mobilizing private sector funding for major infrastructure development projects through public-private partnerships (PPPs).  A new law to facilitate PPPs was enacted in 2017 with an eye toward attracting additional Foreign Direct Investment (FDI). The government updated the country’s investment and public procurement codes in 2018 in compliance with the PPP law.

In June 2017, a five-year, USD 375 million Millennium Challenge Corporation (MCC) compact with Benin entered into force.  The Benin Power Compact is advancing policy reforms to bolster financing for the electricity sector, attract private capital into power generation, and strengthen regulation and utility management.  Infrastructure funded by the compact includes 46 megawatts of power generation capacity, modernization of the Cotonou and regional distribution grid, and expansion of minigrids. As two thirds of Benin’s population does not have access to electricity, the compact also includes a significant off-grid electrification project via its clean energy grant facility.  This follows Benin’s 2006-2011 compact, which modernized the country’s port – the principal source of government revenue – and improved land administration, the justice sector, and access to credit.

Table 1

Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2018 85 of 180 http://www.transparency.org/research/cpi/overview
World Bank’s Doing Business Report “Ease of Doing Business” 2018 153 of 190 https://www.doingbusiness.org/rankings 
Global Innovation Index 2018 121 of 127 https://www.globalinnovationindex.org/content/page/data-analysis 
U.S. FDI in partner country ($M USD, stock positions) 2017 $2.0  http://www.bea.gov/international/factsheet/ 
World Bank GNI per capita 2017 $800 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD 

1. Openness To, and Restrictions Upon, Foreign Investment

Policies toward Foreign Direct Investment

The Government of Benin actively encourages foreign investment.  The creation of APIEX in 2015 resulted in a dialogue between the Government and investors to implement reforms and improve Benin’s business environment.  The APIEX mission is to reduce and, where possible, eliminate administrative barriers to doing business and to attracting additional foreign direct investment.  The agency has significantly reduced processing times for registration of new companies (from 15 days to one day) and construction permits (from 90 to 30 days). In July 2016, Benin passed a law establishing a commercial tribunal of first instance and a commercial appellate court, a move that is expected to expedite the settlement of business-related disputes.  The full-service office that expedites customs clearances, reduces the cost of clearances, and minimizes processing barriers to clearing cargo at the Port of Cotonou makes it possible to obtain cargo clearance within 48 hours of the date of its off-loading at the Port of Cotonou, though in practice this tends to take somewhat longer. The reinstitution of the cargo inspection and scanning program known as PVI (le programme de vérification des importations), first tried in 2012 resumed operations at the Port of Cotonou in 2017.  Under the PVI program, private company Benin Control scans 10 percent of all imports, with containers selected randomly for scanning. Benin Control bills all containers exiting the Port of Cotonou – regardless of whether they are selected for scanning – at the rate of 35,000 FCFA (USD 68) for a 20-foot container, and 45,000 FCFA (USD 78) for a 40-foot container.

Limits on Foreign Control and Right to Private Ownership and Establishment

Beninese law guarantees the right to own and transfer private property.  The court system enforces contracts, but the judicial process is often inefficient and plagued by corruption.  Enforcement of rulings is problematic. Most firms entering the market work with an established local partner and retain a competent Beninese attorney.  A list of English-speaking lawyers and legal counselors is available on the Embassy’s website https://bj.usembassy.gov/u-s-citizen-services/attorneys/.

Other Investment Policy Reviews

In 2015, the Beninese government conducted an investment policy review (IPR) jointly through the Organization for Economic Cooperation and Development (OECD), the World Trade Organization (WTO), and the United Nations Conference on Trade and Development (UNCTAD).  Further to a 2016 fact-finding mission, the UNCTAD Report on the Implementation of the IPR of Benin assesses progress in implementing the original recommendations of the IPR, and highlights a few more policy issues to be addressed in the investment climate. The full report may be found at http://investmentpolicyhub.unctad.org/Upload/BeninIR2016.pdf .

Business Facilitation

In an effort to attract Foreign Direct Investment (FDI) and tourism revenue, Benin has instituted a visa-free system for African nationals.  Those traveling on non-African passports can obtain e-visas through an online process for short stays at https://evisa.gouv.bj/en  /.  The country is also planning to open four new trade offices abroad to enhance Benin’s international business opportunities.  One is already underway in Shenzhen, China; others will be located in Europe, the United States, and the Middle East.

Benin made property registration simpler and less expensive in order to boost the real estate market and improve access to credit.  The measures apply to real personal property, estate and mortgage taxes, and property purchase receipts, with the aim of reducing corruption in the property registration process.  In order to register property, individuals and businesses must present a taxpayer identification number (registration for which is now free). Land registration and property purchase certifications are free, but there is a fee for obtaining a property title.  In a related measure, the government issued 2,513 titles free of charge in 2016 for owners of land that had been registered with the financial and technical assistance of the Millennium Challenge Corporation’s first compact with Benin.

It should take roughly 24 hours to register a business, and there is no need for a notary’s assistance.  APIEX serves as the single investment promotion center and conduit of information between the foreign investor and the Beninese government.

Benin defines:

  • Micro-enterprises as having less than five employees;
  • Small and medium size enterprises (SMEs) as having between five and 99 employees.  SMEs may be a subsidiary of an international firm.

A full-service office – run by a private company under the supervision of the Ministry of Infrastructure and Transport – is charged with expediting customs clearances and minimizes processing barriers to clearing cargo at the Port of Cotonou.  This office makes it possible to obtain cargo clearance within as little as 48 hours after its off-loading at the Port of Cotonou, though in practice this tends to take somewhat longer.

Outward Investment

The Beninese government has no policies or incentives in place to encourage the country’s businessmen to invest abroad.  The Beninese government does not restrict domestic investors from investing abroad.

3. Legal Regime

Transparency of the Regulatory System

Benin is a member of UNCTAD’s international network of transparent investment procedures.  Foreign and domestic investors can find detailed information on administrative procedures applicable to investment and income generating operations at http://benin.eregulations.org/  , including the number of steps, name and contact details of the entities and persons in charge of procedures, required documents and conditions, costs, processing time, and legal bases justifying the procedures.  There is no rule to prevent a monopoly over a particular business sector. The Benin Private Investment Council (CIPB) is the only business-related think-tank or body that advocates for investors, http://www.cipb.bj/  .  Generally, draft bills are not available for public comment.  However, individuals (including non-citizens) have the option to file appeals about or challenge passed or enacted bills with the country’s Constitutional Court.

International Regulatory Considerations

Benin is a member of the Organization for the Harmonization of African Business Law, known by its French acronym OHADA, and has adopted OHADA’s Universal Commercial Code (codified law) to manage commercial disputes and bankruptcies within French-speaking African member countries.  Benin is also a member of OHADA’s Common Court of Justice and Arbitration and the International Center for the Settlement of Investment Disputes (ICSID). OHADA provisions govern bankruptcy. Debtors may file for reorganization only, and the creditor may file for liquidation only.

Legal System and Judicial Independence

The preamble of the Beninese Constitution, adopted on December 11, 1990, highlights the attachment of the Beninese people “to principles of democracy and human rights as they have been defined by the Charter of the United Nations of 1945 and the Universal Declaration of Human Rights of 1948, the African Charter on Human and Peoples’ Rights adopted in 1981 by the Organization of African Unity and ratified by Benin on 20 January 1986 and whose provisions form an integral part of this present Constitution and of Beninese law and have a value superior to the internal law.”

Benin’s domestic law includes various legislative and regulatory texts covering family law, land law, labor law, criminal law, criminal procedure, and civil, commercial, social, and administrative proceedings.  The commercial court, created in 2017, enforces commercial related issues. Benin created an anti-terrorism, drugs, and economic crimes court (CRIET) in 2018. The CRIET has made several controversial decisions, including in cases of corruption charges against individuals who are among President Talon’s detractors.  In general, court cases tend to proceed slowly and there may be challenges in the enforcement of court decisions. Magistrates and judges, though appointed by the Executive, are by law independent. Benin’s courts enforce rulings of foreign courts and international arbitration.

Laws and Regulations on Foreign Direct Investment

The APIEX one-stop-shop website, http://benin.eregulations.org/  , provides information on regulations and procedures for investment in Benin.  Benin is a member of OHADA’s Common Court of Justice and Arbitration (CCJA) and the International Center for the Settlement of Investment Disputes (ICSID).  Investors may include arbitration provisions in their contracts in order to avoid prolonged entanglements in the Beninese courts. The United Nations’ investment guide for Benin (https://www.theiguides.org/public-docs/guides/benin/  ) details investment procedures in Benin.

Competition and Anti-Trust Laws

There is no existing agency that reviews transactions for competition-related concerns.  Only the local court or international arbitration courts may address these concerns filed with them.  There are no recent or existing competition cases to highlight.

Expropriation and Compensation

Based on a 1992 privatization law, the Government is forbidden from nationalizing private enterprises operating in Benin.

In conformity with World Bank structural reform commitments, the government opened the cotton sector and its related components (namely ginning and inputs) to the private sector in the 1990s, and in 2008 divested the ginning industry part of its agricultural parastatal SONAPRA (Société Nationale pour la Promotion Agricole) moving the ginning assets and regulatory control functions to SODECO (Societe de Developpement du Coton).  SODECO is a public-private joint venture: 35 percent government, 45 percent private (controlled by Societe Commune de Participation-SCP of now-President Patrice Talon), and the remainder split between stock market, local communities, cotton growers, and staff members but run by SCP. According to the founding convention, the GOB was to cede by 2013 its share to SCP.  With no publicly available on current SODECO ownership nobody would argue that SCP fully controls it.  In October 2012, prompted by concerns over performance and mismanagement, the government reassumed control of cotton production and ginning holdings under SONAPRA.  In 2014, OHADA’s CCJA judged that the Beninese government had illegally seized SODECO’s ginning assets, and similarly had illegally revoked the Port of Cotonou cargo inspection contract with the private company Benin Control.  The CCJA ordered payment of USD 267 million in compensation to the two companies owned or largely controlled by then-cotton tycoon, and current Head of State, Patrice Talon (see http://www.ohada.org/index.php/fr/ohada-au-quotidien/role-des-audiences-publiques-de-la-cour-ccja  ).  Under President Talon’s administration, in 2016 SODECO took back control of its ginning facilities and SONAPRA was dissolved.

In 2006, the government took over the management of previously privatized oil company SONACOP on the grounds that the company was in financial disarray, lacked funds for its operations, and was unable to supply gas stations throughout the country.  SONACOP is still a state-owned enterprise charged with import and distribution of petroleum products.

In February 2017, the Council of Ministers announced that the government was terminating concessions for the management of four state-owned hotels (two in Cotonou and two in northern Benin), and instructed the Minister of Justice to file reparations claims against the concessionaires on the grounds that they had not fulfilled their concession agreements.

In 2012, the government took control of the private bank Banque Internationale du Benin (BIBE) stating that poor management risked leading the bank to bankruptcy and possible systemic risk to the banking sector.  BIBE is still in government hands.

Dispute Settlement

ICSID Convention and New York Convention

Benin is a member of the International Center for the Settlement of Investment Disputes (ICSID) and New York Convention.

Investor-State Dispute Settlement

Post has no reports of government interference in judicial handling of investment disputes.

All three known past investment disputes between U.S. investors and the Beninese government were resolved in favor of the U.S. investors.  However, in 2016, the government revoked the contract of U.S.-based company SECURIPORT for the provision of civil aviation and immigration security services in the favor of Morpho-Dys, a company based in Cote d’Ivoire; this dispute remains unresolved.  The local courts recognize and enforce foreign arbitral awards issued against the government. In 2010, Benin’s civil society challenged a contract awarded by the government in the communications sector and the award decision was reversed.

There is an investment incentive agreement between the Government of the United States of America and the Government of Benin.

International Commercial Arbitration and Foreign Courts

Benin is a member of the Organization for the Harmonization of African Business Law, known by its French acronym OHADA, and has adopted OHADA’s Universal Commercial Code (codified law) to manage commercial disputes and bankruptcies.  Benin is also a member of OHADA’s Common Court of Justice and Arbitration and the International Center for the Settlement of Investment Disputes (ICSID) and as such enforces foreign arbitral awards as well as foreign court rulings. Post is unaware of any investment dispute resolution made in favor of a state-owned enterprise by domestic courts.

Bankruptcy Regulations

OHADA provisions govern bankruptcy.  Debtors may file for reorganization only, and creditors may file for liquidation only.

Benin ranked 110 in the “Resolving Insolvency” category of the World Bank Group’s 2019 Doing Business report.  While this may seem a downgrade from 2018’s score of 105, it actually reflects a very modest improvement even as its relative score to other countries places it lower on the list.

6. Financial Sector

Capital Markets and Portfolio Investment

Government policy supports free financial markets, subject to oversight by the Ministry of Finance and Economy and the Central Bank of West African States (BCEAO).  Thirteen commercial banks operate in Benin, where the access rate to banking services is estimated at 12 percent. Foreign investors may seek credit from Benin’s private financial institutions and the West Africa Economic and Monetary Union (WAEMU) Regional Stock Exchange (Bureau Regional des Valeurs Mobilieres – BRVM) headquartered in Abidjan, Cote d’Ivoire with local branches in each WAEMU member country.

There are no restrictions for foreign investors to establish a bank account in Benin and get loans on the local market.  However, proof of residency or evidence of company registration is required to open a bank account.

Money and Banking System

The banking sector has been generally reliable.  Thirteen private commercial banks operate in Benin in addition to the regional central bank (BCEAO) and a planned subsidiary of the African Development Bank.  Only 12 percent of the Beninese population uses banking services. If microfinance institutions are taken into account, banking access may be as high as 18 percent.  In recent years, non-performing loans have been growing; fifteen percent of total banking sector assets are estimated to be non-performing. Benin is part of WAEMU. The BCEAO regulates the banks in Benin and is present in all member states including Benin.

Foreign banks are required to obtain a banking license before operating branches in Benin.  They are subject to the same prudential regulations as local or regional banks. Benin has lost no correspondent banking relationships during the last three years.  There is no known current correspondent banking relationship in jeopardy. Foreigners are required to present proof of residency to open bank accounts.

Foreign Exchange and Remittances

Foreign Exchange

All funds entering the country from abroad for investment purposes require reporting and registration with the Ministry of Economy and Finance at the time of arrival of funds.  Evidence of registration is required to justify remittances of investment capital, earnings, loan/lease repayments, or royalties. Such remittances are allowed without restrictions.

Funds entering the country from abroad for investment purposes must be converted into local currency.  For the purposes of repatriating such funds, either the invested funds or the interest/earnings or royalties can be converted into any world currency.

The currency of Benin is BCEAO-CFA Franc (international code: XOF).  XOF has a fixed parity with the Euro and fluctuates against all other currencies based on this parity.  This parity was established at the time of the Euro’s creation (January 1, 1999) and has not changed since then.  The parity stands at XOF 655.957= €1.00, guaranteed by the French government under an arrangement between the Treasury of France and the European Union.

Remittance Policies

There have been no recent plans to change investment remittance policies.  Banks require documents to justify remittances related to investments. The waiting time to remit investment returns does not exceed 60 days in practice.

Sovereign Wealth Funds

Benin has no Sovereign Wealth Fund.

7. State-Owned Enterprises

There are several wholly owned SOEs operating in the country, including mainly public utilities (electricity and water), fixed and mobile telecommunications, postal services, port and airport management, gas distribution, pension funds, agricultural production, and hotel and convention center management.  There are also a number of partially owned SOEs in Benin. Some of these receive subsidies and assistance from the government. There are no available statistics regarding the number of individuals employed by SOEs.

With the exception of public utilities (including electricity and water), pension funds, and landline telephone service for which the public telephone company retains a monopoly, many private enterprises compete with public enterprises on equal terms.

SOE senior management may report directly to a government ministry, a parent agency, or a board of directors comprised of senior government officials along with representatives of civil society and other parastatal constituencies.  SOEs are required by law to publish annual reports and hold regular meetings of their boards of directors. Financial statements of SOEs are reviewed by certified accountants, private auditors, and the government’s Bureau of Analysis and Investigation (BAI).  Though the government audit institution has the authority to conduct a review of SOE financial statements, it has yet to do so.

SOEs are established pursuant to presidential decrees, which define their mission and responsibilities.  The government appoints senior management and members of the Board of Directors. SOEs are generally run like private entities and are subject to the same tax policies as the private sector.  The courts independently process disputes between SOEs and private companies or organizations without government interference.

Benin is not a member of OECD.

Privatization Program

The government has elected to support targeted divestiture programs rather than total privatization of State-Owned Enterprises.  The state-owned telecommunications company, Benin Telecom Infrastructure, is targeted for either a divestiture program or dissolution by 2021.  The state-owned electricity utility, Société Béninoise d’Energie Electrique (SBEE) will soon be managed privately through a management contract, even though the government will retain full ownership.  Through the second MCC compact on power there will be increased opportunities for Independent Power Producers (IPP) to participate in solar power generation.

Foreign investors may participate in privatization programs.  In March 2015, the governments of Benin and Niger jointly signed a document that would dissolve the Benin-Niger Railway Organization (OCBN) parastatal and assign its concession to foreign private investors.

In December 2017, the government authorized the Minister of Infrastructure and Transport to sign a three-year renewable management contract for the Port of Cotonou with the Belgian firm Port of Antwerp International (PAI).  PAI accordingly took over management of the port in May 2018.  The move is intended in part to attract foreign investors to fund updates to and expansion of the port.

The government procurement process is specified by the Beninese procurement code (Code des Marchés Publiques:  http://www.finances.bj/spip.php?article804  ).  Tenders from the central government are announced in major publications, newspapers, and posted on the website of the Ministry of Finance and Economy at www.finances.bj  However, in practice the government frequently uses sole sourcing for PAG implementation, and in these cases does not publish procurement requests before selecting a vendor.  Published tenders often include local investor participation requirements.

Beninese procurement law allows for open and closed bid processes.  Contracts are often awarded based on government solicitations to short-listed companies with industry-specific expertise, often identified based on companies’ commercial activities conducted in other overseas markets.  The public procurement process is not always deemed non-discriminatory. Foreign companies have expressed concerns about unfair treatment, biased consideration, and improper practices specific to the process of selecting short-listed companies.

9. Corruption

Benin has laws aimed at combatting corruption.  The government has demonstrated the political will to reduce corruption and has imposed administrative sanctions and removals from office against high profile, allegedly corrupt officials.  In early- and mid-2018, the government requested, and the National Assembly approved, the lifting of parliamentary immunity of a small number of opposition parliamentarians accused of corruption or embezzlement during former government roles.  No current or former high-level government official has yet faced prosecution in Beninese courts, leaving the effectiveness of anti-corruption efforts unproven. Corruption remains a recurring problem in areas including public administration, government procurement, customs and taxation, and the judiciary.

Bribery is illegal and subject to up to ten years’ imprisonment, but enforcement of this is subject to the same capacity constraints that hamper many rule of law issues in Benin.  Private companies establish their own code of conduct to avoid conflicts of interest in line with the country’s laws. The government has identified the fight against corruption as a national priority.  Efforts reflecting government focus on fighting corruption include the 2013 creation of the National Anti-Corruption Authority (ANLC) in charge of referring corruption cases to court. By law, the ANLC has the ability to combat money laundering, electoral fraud, economic fraud, and corruption in the public and private sectors.  Benin’s State Audit Office is also responsible for identifying and acting against corruption in the public sector. A new court, the CRIET, was set up in 2018 and was conceived in part to help the administration fight corruption.

Benin is a signatory of UN Anticorruption Convention and the OECD Convention on Combatting Bribery of Foreign Public Officials in International Business Transactions.

Resources to Report Corruption

Contact at government agency or agencies responsible for combating corruption:

Jean-Baptiste Elias
President
ANLC
01 BP 7060 Cotonou, Benin
+229 21 308 686
anlc.benin@yahoo.fr

Ms. Blanche Sonon
President
Social Watch
02 BP 937, Cotonou, Benin
+229 21042012 – 229 95961644
swbenin@socialwatch-benin.org

Investment Climate Statements
Edit Your Custom Report

01 / Select A Year

02 / Select Sections

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

U.S. Department of State

The Lessons of 1989: Freedom and Our Future