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Albania

Executive Summary

Albania is an upper middle-income country with a gross domestic product (GDP) per capita of USD 5,373 (2019 IMF estimate) and a population of approximately 2.9 million people. An estimated 45 percent of the population live in rural areas.  The IMF estimates Albania’s real GDP increased by 2.2 percent in 2019, and that GDP will contract by 5 percent in 2020 because of the November 2019 earthquake and the COVID-19 crisis. The IMF projects the economy will grow by 8 percent in 2021, provided COVID-19 restrictions ease by summer 2020. The rebound is expected to be fueled mostly by increased consumption and a large post-earthquake reconstruction program. During the post-earthquake International Donors Conference in February, international donors pledged close to USD 330 million in grants and approximately USD 940 million in soft loans.

Albania received EU candidate status in June 2014 and, in March 2020, the European Council endorsed the recommendation of the European Commission to open accession talks with Albania.  Prior to the first Intergovernmental Conference, which marks the start of accession negotiations, Albania must implement a number of reforms in the justice sector, adopt changes to its electoral code, advance efforts to support minority rights, reduce unfounded asylum claims in EU member states, and show tangible progress in its fight against organized crime and corruption.

The Albanian legal system ostensibly does not discriminate against foreign investors.  The U.S.-Albanian Bilateral Investment Treaty, which entered into force in 1998, ensures that U.S. investors receive national treatment and most-favored-nation treatment.  The Law on Foreign Investment outlines specific protections for foreign investors and allows 100 percent foreign ownership of companies in all but a few sectors. Albania has been able to attract increasing levels of foreign direct investment (FDI) in the last decade.

According to the Bank of Albania data, flow of FDI has averaged USD 1.1 billion in the last six years, and stock FDI reached USD 9.5 billion at the end of 2019. Investments are concentrated in the energy sector, extractive industries, banking and insurance, telecommunications, and real estate. Switzerland, The Netherlands, Canada, Turkey, Austria, and Greece are the largest sources of FDI.

To attract FDI and promote domestic investment, Albania approved a Law on Strategic Investments in 2015.  The law outlines investment incentives and offers fast-track administrative procedures to strategic foreign and domestic investors through December 31, 2020, depending on the size of the investment and number of jobs created. In 2015, to promote FDI, the government also passed legislation creating Technical Economic Development Areas (TEDAs), like free trade zones. (The government is a member of and an advocate for the Western Balkan Initiative, a regional zone intended to increase connectivity and commercial activity.) The development of the first TEDA has yet to begin after several failed tender attempts.

The government made significant advancements in its Digital Revolution Agenda during 2019. As of January 2020, 61 percent of all public services to citizens and businesses were available online through the E-Albania Portal, up from 15 percent in 2019. The reform is ongoing, and the government states that by December 2020, 91 percent of all public services will be available online. This should help curb corruption by limiting direct contacts with public administration officials.

Despite a sound legal framework and progress on e-reform, foreign investors perceive Albania as a difficult place to do business. They cite corruption, particularly in the judiciary, a lack of transparency in public procurement, and poor enforcement of contracts as continuing problems in Albania. Reports of corruption in government procurement are commonplace. The increasing use of public private partnership (3P) contracts has reduced opportunities for competition, including by foreign investors, in infrastructure and other sectors.  Poor cost-benefit analyses and a lack of technical expertise in drafting and monitoring 3P contracts are ongoing concerns. U.S. investors are challenged by corruption and the perpetuation of informal business practices. Several U.S. investors have faced contentious commercial disputes with both public and private entities, including some that went to international arbitration. In 2019 and 2020, a U.S. company’s attempted investment was allegedly thwarted by several judicial decisions and questionable actions of stakeholders involved in a dispute over the investment.

Property rights continue to be a challenge in Albania because clear title is difficult to obtain.  There have been instances of individuals allegedly manipulating the court system to obtain illegal land titles.  Overlapping property titles is a serious and common issue. The compensation process for land confiscated by the former communist regime continues to be cumbersome, inefficient, and inadequate. Nevertheless, parliament passed a law on registering property claims on April 16, which will provide some relief for title holders.

Transparency International’s 2019 Corruption Perceptions Index ranked Albania 106th of 180 countries, a drop of seven places from 2018.  Consequently, Albania and North Macedonia are now perceived as the most corrupt countries in the Western Balkans. Albania also fell 19 spots in the World Bank’s 2020 Doing Business survey, ranking 82nd from 63rd in 2019. Although this change can be partially attributed to the implementation of a new methodology, the country continues to score poorly in the areas of granting construction permits, paying taxes, enforcing contracts, registering property, obtaining electricity, and protecting minority investors.

To address endemic corruption, the Government of Albania (GoA) passed sweeping constitutional amendments to reform the country’s judicial system and improve the rule of law in 2016. The implementation of judicial reform is underway, including the vetting of judges and prosecutors for unexplained wealth.  More than half the judges and prosecutors who have undergone vetting have been dismissed for unexplained wealth or organized crime ties. The EU expects Albania to show progress on prosecuting judges and prosecutors whose vetting revealed possible criminal conduct. The implementation of judicial reform is ongoing, and its completion is expected to improve the investment climate in the country.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2019 106 of 180 http://www.transparency.org/
research/cpi/overview
World Bank’s Doing Business Report 2020 82 of 190 http://www.doingbusiness.org/
en/rankings
Global Innovation Index 2019 83 of 129 https://www.globalinnovationindex.org/
analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2018 N/A http://apps.bea.gov/international/
factsheet/
World Bank GNI per capita 2018 USD 4,860 http://data.worldbank.org/indicator/
NY.GNP.PCAP.CD

3. Legal Regime

Transparency of the Regulatory System

Albania’s legal, regulatory, and accounting systems have improved in recent years, but there are still many serious challenges. Endemic corruption, uneven enforcement of legislation, cumbersome bureaucracy, and a lack of transparency all hinder the business community.

Albanian legislation includes rules on disclosure requirements, formation, maintenance, and alteration of firms’ capitalization structures, mergers and divisions, takeover bids, shareholders’ rights, and corporate governance principles. The Competition Authority (http://caa.gov.al ) is an independent agency tasked with ensuring fair and efficient competition in the market.

The Law on Accounting and Financial Statements includes reporting provisions related to international financial reporting standards (IFRS) for large companies, and national financial reporting standards for small and medium enterprises. Albania meets minimum standards on fiscal transparency, and debt obligations are published by the Ministry of Finance and Economy. Albania’s budgets are publicly available, substantially complete, and reliable.

The rulemaking process in Albania meets the minimum requirements of transparency. Ministries and regulatory agencies develop forward regulatory plans that include changes or proposals intended to be adopted within a set timeframe. The law on notification and public consultation requires the GoA to publish draft laws and regulations for public consultation or notification and set clear timeframes for these processes. Such draft laws and regulations are published at the following page: http://www.konsultimipublik.gov.al/  . The business community frequently complains that final versions of laws and regulations fail to address their comments and concerns and that comment periods are not always respected.

Business groups have raised concerns about unfair competition and monopolies, rating the issue as one of the most concerning items damaging the business climate.

All laws, by-laws, regulations, decisions by the Council of Ministers (the government), decrees, and any other regulatory acts are published at the National Publication Center at the following site: https://qbz.gov.al/. 

Independent agencies and bodies, including but not limited to, the Energy Regulatory Entity (ERE), Agency for Electronic and Postal Communication (AKEP), Financial Supervising Authority (FSA), Competition Authority (CA), National Agency of Natural Resources (NARN), and Extractive Industries Transparency Initiative (EITI), oversee transparency and competition in specific sectors.

International Regulatory Considerations

Albania acceded to the WTO in 2000 and the country notifies the WTO Committee on Technical Barriers to Trade of all draft technical regulations.

Albania signed a Stabilization and Association Agreement (SAA) with the EU in 2006; the EU agreed to open accession talks on March 25, 2020. Albania was granted EU candidate status in 2014; it has long been involved in the gradual process of legislation approximation with the EU acquis. This process is expected to accelerate with the opening of accession negotiations.

Legal System and Judicial Independence

The Albanian legal system is a civil law system. The Albanian constitution provides for the separation of legislative, executive, and judicial branches, thereby supporting the independence of the judiciary. The Civil Procedure Code, enacted in 1996, governs civil procedures in Albania. The civil court system consists of district courts, appellate courts, and the High Court (the supreme court), which currently lacks quorum. The district courts are organized in specialized sections according to the subject of the claim, including civil, family, and commercial disputes.

The administrative courts of first instance, the Administrative Court of Appeal, and the Administrative College of the High Court adjudicate administrative disputes. The Constitutional Court, which currently lacks quorum, reviews whether laws or subsidiary legislation comply with the Constitution and, in limited cases, protects and enforces the constitutional rights of citizens and legal entities.

Parties may appeal the judgment of the first-instance courts within 15 days of a decision, while appellate court judgments must be appealed to the High Court within 30 days. A lawsuit against an administrative action is submitted to the administrative court within 45 days from notification and the law stipulates short procedural timeframes, enabling faster adjudication of administrative disputes.

Investors in Albania are entitled to judicial protection of legal rights related to their investments. Foreign investors have the right to submit disputes to an Albanian court. In addition, parties to a dispute may agree to arbitration. Many foreign investors complain that endemic judicial corruption and inefficient court procedures undermine judicial protection in Albania and seek international arbitration to resolve disputes. It is beneficial to U.S. investors to include binding international arbitration clauses in any agreements with Albanian counterparts. Albania is a signatory to the New York Arbitration Convention and foreign arbitration awards are typically recognized by Albania. However, the government initially refused to recognize an injunction from a foreign arbitration court in one high-profile case in 2016. The Albanian Civil Procedure Code outlines provisions regarding domestic and international commercial arbitration.

Albania does not have a specific commercial code but has a series of relevant commercial laws, including the Entrepreneurs and Commercial Companies Law, Bankruptcy Law, Public Private Partnership and Concession Law, Competition Law, Foreign Investment Law, Environmental Law, Law on Corporate and Municipal Bonds, Transport Law, Maritime Code, Secured Transactions Law, Employment Law, Taxation Procedures Law, Banking Law, Insurance and Reinsurance Law, Concessions Law, Mining Law, Energy Law, Water Resources Law, Waste Management Law, Excise Law, Oil and Gas Law, Gambling Law, Telecommunications Law, and Value-Added Law.

Laws and Regulations on Foreign Direct Investment

The Law on Foreign Investments seeks to create a hospitable legal climate for foreign investors and stipulates the following:

  • No prior government authorization is needed for an initial investment;
  • Foreign investments may not be expropriated or nationalized directly or indirectly, except for designated special cases, in the interest of public use and as defined by law;
  • Foreign investors enjoy the right to expatriate all funds and contributions in kind from their investments; and
  • Foreign investors receive most favored nation treatment according to international agreements and Albanian law.

There are limited exceptions to this liberal investment regime, most of which apply to the purchase of real estate. Agricultural land cannot be purchased by foreigners and foreign entities but may be leased for up to 99 years. Investors can buy agricultural land if registered as a commercial entity in Albania. Commercial property may be purchased, but only if the proposed investment is worth three times the price of the land. There are no restrictions on the purchase of private residential property.

To boost investments in strategic sectors, the government approved a new law on strategic investments in May 2015. Under the new law, a “strategic investment” may benefit from either “assisted procedure” or “special procedure” assistance from the government to help navigate the permitting and regulatory process. To date, no major foreign investors have taken advantage of the law. Several projects proposed by domestic companies or consortiums of local and foreign partners have been designated as strategic investments, mostly in the tourism sector.

Major laws pertaining to foreign investments include:

  • Law on Strategic Investments: Defines procedures and rules to be observed by government authorities when reviewing, approving, and supporting strategic domestic and foreign investments in Albania;
  • Law on Concessions and Public Private Partnerships, amended in 2019;
  • Law on Foreigners, amended in February 2020;
  • Law on the Foreign Investments, amended by the Law;
  • Law on Entrepreneurs and Commercial Companies: Outlines general rules and regulations on the merger of commercial companies;
  • Law on Cross-Border Mergers: Determines rules on mergers when one of the companies involved in the process is a foreign company
  • Law on Protection of Competition: Stipulates provisions for the protection of competition, and the concentration of commercial companies; and
  • Law on Collective Investment Undertakings: Regulates conditions and criteria for the establishment, constitution, and operation of collective investment undertakings and of management companies.

Authorities responsible for mergers, change of control, and transfer of shares include the Albanian Competition Authority (ACA: http://www.caa.gov.al/laws/list/category/1/page/1 ), which monitors the implementation of the competition law and approves mergers and acquisitions when required by the law; and the Albanian Financial Supervisory Authority (FSA: http://www.amf.gov.al/ligje.asp ), which regulates and supervises the securities market and approves the transfer of shares and change of control of companies operating in this sector.

Albania’s tax system does not distinguish between foreign and domestic investors. Informality in the economy, which may be as large as 40 percent of the total economy, presents challenges for tax administration.

Visa requirements to obtain residence or work permits are straightforward and do not pose an undue burden on potential investors. The government amended the Law on Foreigners in February 2020. The amendments remove restrictions on foreign employees and streamline the visa and work permit processes for foreigners and foreign workers by introducing online visa application process, simplifying and accelerating the working permit process, and providing the same access to the labor market for citizens of Western Balkan countries as the United States, EU, and Schengen-country citizens have.

The Law on Entrepreneurs and Commercial Companies sets guidelines on the activities of companies and the legal structure under which they may operate. The government adopted the law in 2008 to conform Albanian legislation to the EU’s Acquis Communitaire. The most common type of organization for foreign investors is a limited liability company.

The Law on Public Private Partnerships and Concessions establishes the framework for promoting and facilitating the implementation of privately financed concessionary projects. According to the law, concession projects may be identified by central or local governments or through third party unsolicited proposals. To limit opportunities for corruption, the 2019 amendments prohibited unsolicited bids, beginning in July 2019, on all sectors except for works or services in ports, airports, generation and distribution of electricity, energy for heating, and production and distribution of natural gas. In addition, the 2019 amendments removed the zero to 10 percent bonus points for unsolicited proposals, which gave companies submitting unsolicited bids a competitive advantage over other contenders. Instead, if the party submitting the unsolicited proposal does not win the bid, it will be compensated by the winning company for the cost of the feasibility study, which in no case shall exceed 1 percent of the total cost of the project.

There is no one-stop-shop that lists all legislation, rules, procedures, and reporting requirements for investors. However, foreign investors should visit the Albania Investment Development Agency webpage (www.aida.gov.al ), which offers information for foreign investors.

Competition and Anti-Trust Laws

The Albanian Competition Authority (http://www.caa.gov.al/?lng=en ) is the agency that reviews transactions for competition-related concerns. The Law on Protection of Competition governs incoming foreign investment whether through mergers, acquisitions, takeovers, or green-field investments, irrespective of industry or sector. In the case of share transfers in insurance and banking industries, the Financial Supervisory Authority (http://amf.gov.al/ ) and the Bank of Albania (https://www.bankofalbania.org/ ) may require additional regulatory approvals. Transactions between parties outside Albania, including foreign-to-foreign transactions, are covered by the competition law, which states that its provisions apply to all activities, domestic or foreign, that directly or indirectly affect the Albanian market.

Expropriation and Compensation

The constitution guarantees the right of private property. According to Article 41, expropriation or limitation on the exercise of a property right can occur only if it serves the public interest and with fair compensation. During the post-communist period, expropriation has been limited to land for public interest, mainly infrastructure projects such as roads, energy infrastructure, water works, airports, and other facilities. Compensation has generally been reported as being below market value and owners have complained that the compensation process is corrupt, slow, and unfair. Civil courts are responsible for resolving such complaints.

Changes in government can also affect foreign investments. Following the 2013 elections and peaceful transition of power, the new government revoked or renegotiated numerous concession agreements, licenses, and contracts signed by the previous government with both domestic and international investors. This practice has occurred in other years as well.

There are many ongoing disputes regarding property confiscated during the communist regime. Identifying ownership is a longstanding problem in Albania that makes restitution for expropriated properties difficult. The restitution and compensation process started in 1993 but has been slow and marred by corruption. Many U.S. citizens of Albanian origin have been in engaged inlong-running restitution disputes. Court cases go on for years without a final decision, causing many to refer their case to the European Court of Human Rights (ECHR) in Strasbourg, France. A significant number of applications are pending for consideration before the ECHR. Even after settlement in Strasbourg, enforcement remains slow.

To address the situation, the GoA approved new property compensation legislation in 2015 that aims to resolve pending claims for restitution and compensation. The 2018 law reduces the burden on the state budget by changing the cash compensation formula. The legislation presents three methods of compensation for confiscation claims: restitution; compensation of property with similarly valued land in a different location; or financial compensation. It also set a ten-year timeframe for completion of the process. In February 2020, the Albanian parliament approved a law “On the Finalization of the Transitory Process of Property Deeds in the Republic of Albania,” which aims to finalize land allocation and privatization processes contained in 14 various laws issued between 1991 and 2018.

The GoA has generally not engaged in expropriation actions against U.S. investments, companies, or representatives. There have been limited cases in which the government has revoked licenses, specifically in the mining and energy sectors, based on contract violation claims.

The Law on Strategic Investments, approved in 2015, empowers the government to expropriate private property for the development of private projects deemed special strategic projects. Despite the provision that the government would act when parties fail to reach an agreement, the clause is a source of controversy because it entitles the government to expropriate private property in the interest of another private party. The expropriation procedures are consistent with the law on the expropriation, and the cost for expropriation would be incurred by the strategic investor. The provision has yet to be exercised.

Dispute Settlement

ICSID Convention and New York Convention

For an international arbitration award to be recognized locally, the claimant must bring the award before the Court of Appeals. The Appeals Court will not adjudicate the merits of the case and can strike down the award only for the reasons listed in Article V of the New York Convention.

Investor-State Dispute Settlement

Albania signed a Bilateral Investment Treaty with United States in 1995, and it entered into force in 1998. It has also ratified the New York Convention, ICSID Convention, and Geneva Convention. According to the Albanian Constitution, these conventions take precedence over domestic legislation. Foreign investors opt to include international arbitration clauses in their contracts with Albanian parties because the court system is not responsive, and the judiciary marked by endemic corruption.

For an international arbitration award to be recognized locally, the claimant must enforce the award before the Court of Appeals. The possibility of bringing an action before the local court to avoid arbitration proceedings is remote. According to provisions in the Albanian Code of Civil Procedure, if a party brings actions before local courts despite the parties’ agreement to arbitrate, the court would, upon motion of the other party, dismiss the case without entertaining its merits. The decision of the court to dismiss the case can be appealed to the Supreme Court, which has 30 days to consider the appeal.

The Albanian Code of Civil Procedure requires the courts to reach a judgment in a reasonable amount of time but does not provide a specific timeline for adjudicating commercial disputes. Reaching a final judgment in commercial litigation can take several years.

Over the past ten years, there have been three investment disputes between the GoA and U.S. companies, two of which resulted in international arbitration. Despite the GoA’s stated desire to attract and support foreign investors, U.S. investors in disputes with the GoA reported a lack of productive dialogue with government officials, who frequently displayed a reluctance to settle the disputes before they were escalated to the level of international arbitration, or before the international community exerted pressure on the government to resolve the issue. U.S. investors in Albania should strongly consider including binding arbitration clauses in any agreements with Albanian counterparts.

International Commercial Arbitration and Foreign Courts

An alternative to dispute settlement via the courts is private arbitration or mediation. Parties can engage in arbitration when they have agreed to such a provision in the original agreement, when there is a separate arbitration agreement, or by agreement at any time when a dispute arises.

Albania does not have a separate law on domestic arbitration. In 2017, Albania repealed all domestic arbitration provisions of the Civil Procedure Code, leaving the country without provisions to govern domestic arbitration. However, parties may engage in domestic arbitration because the Code of Civil Procedure guarantees the enforcement of domestic arbitral awards. Mediation is also available for resolving all civil, commercial, and family disputes and is regulated by the law On Dispute Resolution through Mediation. Arbitral awards are final and enforceable and can be appealed only in cases foreseen in the Code of Civil Procedure. Mediation is final and enforceable in the same way.

The provisions for international arbitration procedures and the recognition and enforcement of foreign awards are stipulated in the Albanian Code of Civil Procedure. Albania does not have a separate law on international arbitration. Although the arbitration chapter of the Code of Civil Procedure stipulates only the rules for domestic arbitration, the country is signatory to the 1958 New York Convention and therefore recognizes the validity of written arbitration agreements and arbitral awards in a contracting state.

Bankruptcy Regulations

Albania maintains adequate bankruptcy legislation, though corrupt and inefficient bankruptcy court proceedings make it difficult for companies to reorganize or discharge debts through bankruptcy.

A law on bankruptcy that entered into force in May 2017 aimed to close loopholes in the insolvency regime, decrease unnecessary market exit procedures, reduce fraud, and ease collateral recovery procedures. The Bankruptcy Law governs the reorganization or liquidation of insolvent businesses. It sets out non-discriminatory and mandatory rules for the repayment of the obligations by a debtor in a bankruptcy procedure. The law establishes statutory time limits for insolvency procedures, professional qualifications for insolvency administrators, and an Agency of Insolvency Supervision to regulate the profession of insolvency administrators.

Debtors and creditors can initiate a bankruptcy procedure and can file for either liquidation or reorganization. Bankruptcy proceedings may be invoked when the debtor is unable to pay the obligations at the maturity date or the value of its liabilities exceeds the value of the assets.

According to the provisions of the Bankruptcy Law, the initiation of bankruptcy proceedings suspends the enforcement of claims by all creditors against the debtor subject to bankruptcy. Creditors of all categories must submit their claims to the bankruptcy administrator. The Bankruptcy Law provides specific treatment for different categories, including secured creditors, preferred creditors, unsecured creditors, and final creditors whose claims would be paid after all other creditors were satisfied. The claims of the secured creditors are to be satisfied by the assets of the debtor, which secure such claims under security agreements. The claims of the unsecured creditors are to be paid out of the bankruptcy estate, excluding the assets used for payment of the secured creditors, following the priority ranking as outlined in the Albanian Civil Code.

Pursuant to the provisions of the Bankruptcy Law, creditors have the right to establish a creditors committee. The creditors committee is appointed by the Commercial Section Courts before the first meeting of the creditor assembly. The creditors committee represents the secured creditors, preferred creditors, and the unsecured creditors. The committee has the right (a) to support and supervise the activities of the insolvency administrator; (b) to request and receive information about the insolvency proceedings; c) to inspect the books and records; and d) to order an examination of the revenues and cash balances.

If the creditors and administrator agree that reorganization is the company’s best option, the bankruptcy administrator prepares a reorganization plan and submits it to the court for authorizing implementation.

According to the insolvency procedures, only creditors whose rights are affected by the proposed reorganization plan enjoy the right to vote, and the dissenting creditors in reorganization receive at least as much as what they would have obtained in a liquidation. Creditors are divided into classes for the purposes of voting on the reorganization plan and each class votes separately. Creditors of the same class are treated equally.

The insolvency framework allows for the continuation of contracts supplying essential goods and services to the debtor, the rejection by the debtor of overly burdensome contracts, the avoidance of preferential or undervalued transactions, and the possibility of the debtor obtaining credit after commencement of insolvency proceedings. No priority is assigned to post-commencement over secured creditors. Post-commencement credit is assigned over ordinary unsecured creditors.

The creditor has the right to object to decisions accepting or rejecting creditors’ claims and to request information from the insolvency representative. The selection and appointment of insolvency representative does not require the approval of the creditor. In addition, the sale of substantial assets of the debtor does not required the approval of the creditor.

According to the law on bankruptcy, foreign creditors have the same rights as domestic creditors with respect to the commencement of, and participation in, a bankruptcy proceeding. The claim is valued as of the date the insolvency proceeding is opened. Claims expressed in foreign currency are converted into Albanian currency according to the official exchange rate applicable to the place of payment at the time of the opening of the proceeding.

The Albanian Criminal Code contains several criminal offenses in bankruptcy, including (i) whether the bankruptcy was provoked intentionally; (ii) concealment of bankruptcy status; (iii) concealment of assets after bankruptcy; and (iv) failure to comply with the obligations arising under bankruptcy proceeding.

According to the World Bank’s 2020 Doing Business Report, Albania ranked 39th out of 190 countries in the insolvency index. A referenced analysis of resolving insolvency can be found at the following link: http://documents.worldbank.org/curated/en/255991574747242507/Doing-Business-2020-Comparing-Business-Regulation-in-190-Economies-Economy-Profile-of-Albania 

4. Industrial Policies

Investment Incentives

The Albanian Investment Development Agency (AIDA; www.aida.gov.al) is the best source to find incentives offered across a variety of sectors. Aside from the incentives listed below, individual parties may negotiate additional incentives directly with AIDA, the Ministry of Finance and Economy, or other ministries, depending on the sector.

To boost investments in strategic sectors, the GoA approved a new Law on Strategic Investments in May 2015 that outlines the criteria, rules, and procedures that state authorities employ when approving a strategic investment. The GoA has extended the deadline to apply to qualify as a strategic investment to December 2020. A strategic investment is defined as an investment of public interest based on several criteria, including the size of the investment, implementation time, productivity and value added, creation of jobs, sectoral economic priorities, and regional and local economic development. The law does not discriminate between foreign and domestic investors.

The following sectors are defined as strategic sectors: mining and energy, transport, electronic communication infrastructure, urban waste industry, tourism, agriculture (large farms) and fishing, economic zones, and development priority areas. Investments in strategic sectors may obtain assisted procedure and special procedure, based on the level of investment, which varies from EUR one million to EUR 100 million, depending on the sector and other criteria stipulated in the law.

In the assisted procedure, public administration agencies coordinate, assist, and supervise the entire administrative process for investment approval and makes state-owned property needed for the investment available to the investor. Under the special procedure, the investor also enjoys state support for the expropriation of private property and the ratification of the contract by parliament.

The law and bylaws that entered into force on January 1, 2016, established the Strategic Investments Committee (SIC), a commission in charge of approving strategic investments. The Committee is headed by the prime minister and members include ministers covering the respective strategic sectors, the state advocate, and relevant ministers whose portfolios are affected by the strategic investment. AIDA serves as the Secretariat of SIC and oversees providing administrative support to investors. The SIC grants the status of assisted procedure and special procedure for strategic investments and investors based on the size of investments and other criteria defined in the law.

Major Incentives Albania Offers:

Energy and Mining, Transport, Electronic Communication Infrastructure, and Urban Waste Industry: Investments greater than EUR 30 million enjoy the status of assisted procedure, while investments of EUR 50 million or more enjoy special procedure status.

The government offers power purchasing agreements (PPA) for 15 years for electricity produced from hydroelectric plants with an installed capacity of less than 15 megawatts. The government also offers feed-in-premium tariff for solar installations with installed capacity of less than two megawatts and for wind installation of less than three megawatts. Exemption from custom duties and VAT is available for the manufacturing or the mounting of solar panel systems for hot water production.

Certain machinery and equipment imported for the construction of hydropower plants are VAT exempt. The government supports the construction of small wind and photovoltaic parks with an installed capacity of less than three megawatts and two megawatts, respectively, by offering feed-in-premium tariffs for 15 years. The Energy Regulatory Authority (ERE; http://www.ere.gov.al/) conducts an annual review of the feed-in-premium tariffs for wind and photovoltaic parks. The ERE also conducts an annual review of the feed-in-tariffs for small hydroelectric plants with an installed capacity of less than 15 megawatts. Imports of machinery and equipment for investments of greater than EUR 400,000 for small wind and solar parks with an installed capacity of less than three megawatts and two megawatts, respectively, enjoy a VAT exemption. Imports of hot water solar panels for household and industrial use are also VAT exempt.

Tourism and Agritourism: Investments of EUR five million or more enjoy the status of assisted procedure, while investments greater than EUR 50 million enjoy the status of special procedure. In 2018, the GoA introduced new incentives to promote the tourism sector. International hotel brands that invest at least USD eight million for a four-star hotel and USD 15 million for a five-star hotel are exempt from property taxes for 10 years, pay no profit taxes, and pay a VAT of 6 percent for any service on their hotels or resorts. For all other hotels and resorts, the GoA reduced the VAT on accommodation from 20 percent to 6 percent. Profit taxes for agritourism ventures were reduced to 5 percent from 15 percent previously, while VAT for accommodation is now 6 percent, down from 20 percent. Agritourism facilities are exempt from the infrastructure impact tax.

Agriculture (Large Agricultural Farms) and Fishing: Investments greater than EUR three million that create at least 50 new jobs enjoy the status of assisted procedure, while investments greater than EUR 50 million enjoy the status of special procedure.

In addition, the GoA offers a wide range of incentives and subsidies for investments in the agriculture sector. The funds are a direct contribution from the state budget and the EU Instrument of Pre-Accession for Rural Development Fund (IPARD.) IPARD funds allocated for the period 2018-2020 total EUR 71 million. The program is managed by the Agricultural and Rural Development Agency (http://azhbr.gov.al/). Agricultural inputs, agricultural machinery, and veterinary services are exempt from VAT. The government offers other subsidies to agricultural farms and wholesale trade companies that export agricultural products.

Development Priority Areas: Investments greater than EUR one million that create at least 150 new jobs enjoy the status of assisted procedure. Investments greater than EUR 10 million that create at least 600 new jobs enjoy the status of special procedure.

Foreign Tax Credit: Albania applies foreign tax credit rights even in cases where no double taxation treaty exists with the country in which the tax is paid. If a double taxation treaty is in force, double taxation is avoided either through an exemption or by granting tax credits up to the amount of the applicable Albanian corporate income tax rate (currently 15 percent).

In 2019, the GoA reduced the dividend tax from 15 percent to 8 percent.

Corporate Income Tax Exemption: Film studios and cinematographic productions, licensed and funded by the National Cinematographic Center, are exempt from corporate income tax.

Loss Carry Forward for Corporate Income Tax Purposes: Fiscal losses can be carried forward for three consecutive years (the first losses are used first). However, the losses may not be carried forward if more than 50 percent of direct or indirect ownership of the share capital or voting rights of the taxpayer is transferred (changed) during the tax year.

Lease of Public Property: The GoA can lease public property of more than 500 square meters or grant a concession for the symbolic price of one euro if the properties will be used for manufacturing activities with an investment exceeding EUR 10 million, or for inward processing activities. The GoA can also lease public property or grant a concession for the symbolic price of one euro for investments of more than EUR two million for activities that address certain social and economic issues, as well as activities related to sports, culture, tourism, and cultural heritage. Criteria and terms are decided on an individual basis by the Council of Ministers.

Incentives for the Manufacturing Sector: The GoA reduced the profit tax from 15 percent to 5 percent for software development companies and the automotive industry.

Manufacturing activities are exempt from 20 percent VAT on imports of machinery and equipment. The government offers a one-euro symbolic rent for government-owned property (land and buildings) for investments exceeding USD 2.7 million that create a minimum of 50 jobs. No VAT is charged for products processed for re-exports. Employers are exempt from paying social security tax for one year for all new employees.

The GOA pays the first four months of salaries for new employees and offers various financing incentives for job training.

The manufacturing sector obtains VAT refunds immediately in the case of zero risk exporters, within 30 days if the taxpayer is an exporter, and within 60 days in the case of other taxpayers.

Apparel and footwear producers are exempt from 20 percent VAT on raw materials if the finished product is exported. In 2011, the GoA also removed customs tariffs for imported apparel and raw materials in the textile and shoe industries (e.g., leather used for clothes, cotton, viscose, velvet, sewing accessories, and similar items).

Technological and Development Areas (TEDA): The Law on Economic Development Areas provides fiscal and administrative incentives for companies that invest in this sector and for firms that establish a presence in these areas. Major incentives include: Developers and users benefit from a 50 percent deduction of profit tax for five years, exemption from the infrastructure impact tax, and exemption from real estate tax for five years. A full list of incentives can be found at: http://aida.gov.al/en/teda/ .

Foreign Trade Zones/Free Ports/Trade Facilitation

Albania has no functional duty-free import zones, although legislation exists for their creation. The May 2015 amendments to the Law on the Establishment and Operation of TEDAs created the legal framework to establish TEDAs, defining the incentives for developers investing in the development of these zones and companies operating within the zones.

The Ministry of Finance and Economy has announced two investment opportunities that seek private sector developers to obtain, develop, and operate fully serviced areas located in Koplik (61 hectares) and Spitalle (200 hectares). Interested investors and developers can find more information for the development of TEDAs at the following link: http://aida.gov.al/en/teda/ .

Performance and Data Localization Requirements

There are no performance requirements for foreign investors or minimum requirements for domestic content in goods or technology. Investment incentives are equally available to foreign and domestic investors. Investments in certain sectors require a license or authorization and procedures are similar for foreign and domestic investors.

Visa, residence, and work permit requirements are straightforward and do not pose an undue burden on potential investors. The February 2020 amendments to the Law on Foreigners abolished the requirement for foreign investors to prove that foreign employees constituted less than 10 percent of the investor’s total workforce before a work permit was granted. U.S. citizens do not need a visa to enter and can stay in the country for up to one year without a residency permit. For longer stays they must apply for a residency permit, which can be valid for up to five years. To work in Albania, foreigners must apply for a work permit or work registration certificate, except for U.S. citizens and citizens from EU member countries, the Schengen area, and the Western Balkans, who are exempted from such requirement and enjoy the same employment rights and benefits as Albanian citizens. The February 2020 amendments exempt from work permit requirements foreign workers needed in jobs necessary to address the damages caused by natural disasters, partly to facilitate recovery from the November 2019 earthquake. The Council of Ministers approves the annual quota of foreign workers following a needs assessment by sector and profession. However, work permits for staff that occupy key positions, among other categories, can be issued outside the annual quota.

Albanian legislation regulating the functioning of the National Agency of Information (AKSHI) requires that every company contracted by the government to develop a computer system provide the source code and all related technical documents of the system. In addition, every government system and its data must be hosted at the government datacenter maintained by AKSHI.

There are no legal restrictions to transferring business-related data abroad, except for a few cases that need prior consent. There are more stringent requirements for personal data. Albania has comprehensive legislation for the protection of personal data: the Law On the Protection of Personal Data, including by-laws, as well as the 1981 Convention for the Protection of Individuals with regard to Automatic Processing of Personal Data, and the Additional Protocol to the Convention regarding Supervisory Authorities and Trans-border Flows of Personal Data, ratified by Albania in 2004. The authority in charge of the protection of personal data is the Information and Data Protection Commissioner (https://www.idp.al/?lang=en .)

Based on Albanian legislation, international transfers of personal data in countries deemed to have an adequate level of protection are not restricted. However, companies must notify the Commissioner in advance of any processing of personal data and any intention to transfer data to third countries. This applies to companies in foreign jurisdictions that operate in Albania using any means located within the country. To transfer data to third countries that do not have an adequate protection level, companies need prior authorization from the Commissioner. There are exemptions to this policy for certain data categories defined by the Commissioner as well as when certain conditions are met. Countries with an adequate protection level include EU member states, European Economic Area countries, members of the 1981 Convention and related protocol, and all countries approved by the European Commission.

Many foreign companies operating in Albania that process sensitive data opt to keep their data in Albania.

5. Protection of Property Rights

Real Property

Individuals and investors face significant challenges with protection and enforcement of property rights. Despite recent improvements, procedures are cumbersome, and registrants have complained of corruption during the process.  Over the last three decades, the GoA has drafted and passed much, though not all, of its property legislation in a piecemeal and uncoordinated way. According to the EU’s 2019 Progress Report, significant progress has yet to be made toward improving the legal framework for registration, expropriation, and compensation of property. Reform of the sector has yet to incorporate consolidation of property rights or the elimination of legal uncertainties. However, on February 12, 2020, the Albanian parliament approved the Law on the Finalization of the Transitory Process of Property Deeds in the Republic of Albania, which aims to finalize land allocation and privatization processes contained in 14 various laws issued between 1991 and 2018.

The property registration system has improved thanks to international donor assistance, but the process has stalled as Albania still needs to complete the initial registration of property titles in the country. Approximately 10 percent of the properties are registered in digital form, almost entirely in Tirana, in urban and peripheral areas that experience a high turnover a lot of transactions. Another 80 percent of properties have been registered as part of the initial registration process but the plot records for these properties are still only in paper form and often in poor and outdated condition. The remaining 10 percent have still to be registered for the first time, which includes the southern coastal area. The poor state of the data is a risk for title security and a constraint to investment and an effective land market.

Albania has an estimated 440,000 illegal structures, built without permits, and illicit construction continues to be a major impediment to securing property titles. A process that aims to legalize or eliminate such structures started in 2008 but is still not complete.  The situation has led to clashes between squatters and owners of allegedly illegal buildings and the Albanian State Police during the demolition of these structures to make way for public infrastructure projects.

To streamline the property management process, the GoA established in April 2019 the State Cadaster Agency (ASHK), which united several major agencies responsible for property registration, compensation, and legalization, including the Immovable Property Registration Office (IPRO), the Agency of Inventory and Transfer of Public Properties (AITPP), and the Agency for the Legalization and Urbanization of Informal Areas (ALUIZNI).

According to the 2020 World Bank’s “Doing Business Report,” Albania performed poorly in the property registration category, ranking 98th out of 190 countries.  It took an average of 19 days and five procedures to register property, and the associated costs could reach 8.9 percent of the total property value. The civil court system manages property rights disputes, but verdicts can take years, authorities often fail to enforce court decisions, and corruption concerns persist within the judiciary.

Intellectual Property Rights

Albania is not included on the U. S. Trade Representative’s (USTR) Special 301 Report or Notorious Markets List.  That said, intellectual property rights (IPR) infringement and theft are common due to weak legal structures and poor enforcement.  Counterfeit goods, while decreasing, are present in some local markets, including software, garments, machines, and cigarettes. Albanian law protects copyrights, patents, trademarks, industrial designs, and geographical indications, but enforcement of these laws is wanting.  Regulators are ineffective at collecting fines and prosecutors rarely press charges for IPR theft. U.S. companies should consult an experienced IPR attorney and avoid potential risks by establishing solid commercial relationships and drafting strong contracts. According to the International Property Right Index  (IPRI) published by Property Right Alliance, Albania ranks 106th out of 129 countries evaluated. It ranked 79th in the subcategory of copyright piracy.

A revised 2016 IPR law aimed to strengthen enforcement and address shortcomings so as to harmonize domestic legislation with that of the EU.   In 2019, the Criminal Code was amended to include harsher punishments of up to three years in prison for IPR infringement.

The main institutions responsible for IPR enforcement include the State Inspectorate for Market Surveillance (SIMS), the Albanian Copyright Office (ACO), the Audiovisual Media Authority (AMA), the General Directorate of Patents and Trademarks (GDPT), the General Directorate for Customs, the Tax Inspectorate, the Prosecutor’s Office, the State Police, and the courts.  In 2018, the National Council of Copyrights was established as a specialized body responsible for monitoring the implementation of the law and certifying the methodology for establishing the tariffs. Two other important bodies in the protection and administration of IPR are the agencies for the Collective Administration (AAK) and the Copyrights Department within the Ministry of Culture. Four different AAKs have merged in 2017 to provide service into a sole window for the administration of IPR.

The SIMS, established in 2016, is responsible for inspecting, controlling, and enforcing copyright and other related rights.   Despite some improvements, actual law enforcement on copyrights continues to be problematic and copyright violations are persistent.  The number of copyright violation cases brought to court remains low.

While official figures are not available, Customs does report the quantity of counterfeit goods destroyed annually.  In cases of seizures, the rights holder has the burden of proof and so must first inspect the goods to determine if they are infringing.  The rights holder is also responsible for the storage and destruction of the counterfeit goods. Cigarettes were the most common product seized by Customsin 2019.

The GDPT is responsible for registering and administering patents, commercial trademarks and service marks, industrial designs, and geographical indications.  The 2008 law on industrial property was amended in 2014 to more closely align with that of the EU . In 2019, the GDPT received 1,157 applications for national trademarks, 2,664 applications for the international extension of trademark registration according to the Madrid system, and 913 applications for patents.

Albania is party to the World Intellectual Property Organization (WIPO) Patent Law Treaty, the Patent Cooperation Treaty, the Berne Convention, the Paris Convention, and is a member of the European Patent Organization.  The government became party to the London Agreement on the implementation of Article 65 of the European Convention for Patents in 2013. In 2018, Parliament approved the Law 34/2018 on Albania’s adherence to the Vienna Agreement for the International Classification of the Figurative Elements of Marks. In June 2019, Albania joined the Geneva Act of WIPO’s Lisbon Agreement on Appellations of Origin and Geographical Indications.

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

Resources for Rights Holders

Contact at Embassy Tirana on IP issues:
Alex MacFarlane
Economic Officer
Phone: + 355 (0) 4229 3115
E-mail: USALBusiness@state.gov

Country resources:

American Chamber of Commerce
Address: Rr. Deshmoret e shkurtit, Sky Tower, kati 11 Ap 3 Tirana, Albania
Email: info@amcham.com.al
Phone: +355 (0) 4225 9779
Fax: +355 (0) 4223 5350
http://www.amcham.com.al/ 

List of local lawyers: http://tirana.usembassy.gov/list_of_attorneys.html

6. Financial Sector

Capital Markets and Portfolio Investment

The government has adopted policies to promote the free flow of financial resources and foreign investment in Albania. The Law on “Foreign Investments” is based on the principles of equal treatment, non-discrimination, and protection of foreign investments. Foreign investors have the right to expatriate all funds and contributions of their investment.  In accordance with IMF Article VIII, the government and Central Bank do not impose any restrictions on payments and transfers for international transactions. Despite Albania’s shallow foreign exchange market, banks enjoy enough liquidity to support sizeable positions.  Portfolio investments continue to be a challenge because they remain limited mostly to company shares, government bonds, and real estate.

In the recent years, the high percentage of non-performing loans and the economic slowdown forced commercial banks to tighten lending standards.  However, following a decrease in non-performing loans (NPL) in 2018 the, lending increased by 7 percent year-over-year in 2019.  The credit market is competitive, but interest rates in domestic currency can be high, ranging from 6 percent to 7 percent. Most mortgage and commercial loans are denominated in euros because rate differentials between local and foreign currency average 2.5 percent.  Commercial banks operating in Albania have improved the quality and quantity of services they provide, including a large variety of credit instruments, traditional lines of credit, and bank drafts etc.

Money and Banking System

In the absence of an effective stock market, the country’s banking sector is the main channel for business financing.  The sector is sound, profitable, and well capitalized. The high rate of non-performing loans (NPL)s had been a concern for several years but has declined recently.  The Bank of Albania’s legal measures to address the problem have generated positive results. The banking sector is 100 percent fully privatized.  It has undergone consolidation over the last couple of years, as the number of banks decreased from 16 in 2018 to 12 in 2020. As of December 2019, the Turkish -owned National Commercial Bank remained the largest bank in the market, with 27 percent of the market share, followed by Austrian Raiffeisen Bank, with 15 percent, and Albanian Credins Bank, with 14.8 percent.  The American Investment Bank is the only bank with U.S. shareholders, and it ranks seventh with 5.2 %percent of the banking sector’s total assets, which in 2019 reached $13.5 billion.

Albania’s banking sector weathered the financial crisis better than many of its neighbors, due largely to a limited exposure to international capital markets and lack of a domestic housing bubble.  In December 2019, Albania had 446 bank outlets, down from 474 a year ago and the peak of 552 in 2016. Capital adequacy, at 18.3 percent, remains above Basel requirements and indicates sufficient assets.  At the end of 2019, the return on assets was 1.5 percent. The number of NPLs continued to fall, reaching 8.4 percent at the end of the 2019, down from 11.1 percent in 2018, and significantly below the 2014 level when NPLs peaked at 25 percent. As part of its strategy to stimulate business activity, the Bank of Albania has adopted a plan to ease monetary policy by continuing to persistently keep low interest rates. The most recent reduction was in March 2020, when the interest rate was reduced to the historic low of 0.5 percent, down from a rate of 1 percent in place since June 2018.

Most of the banks operating in Albania are subsidiaries of foreign banks. Only three banks have an ownership structure whose majority shareholders are Albanian.  However, the share of total assets of the banks with majority Albanian shareholders has increased because of the sector’s ongoing consolidation. There are no restrictions for foreigners who wish to establish a bank account. They are not required to prove residency status.  However, U.S. citizens must complete a form allowing for the disclosure of their banking data to the IRS as required under the U.S. Foreign Account Tax Compliance Act.

Foreign Exchange and Remittances

Foreign Exchange

The Central Bank of Albania (BoA) formulates, adopts, and implements foreign exchange policies and maintains a supervisory role in foreign exchange activities in accordance with the Law on the Bank of Albania No. 8269 and the Banking Law No. 9662.  Foreign exchange is regulated by the 2009 Regulation on Foreign Exchange Activities no. 70 (FX Regulation).

BoA maintains a free -float exchange rate regime for the domestic currency, the Lek. Albanian authorities do not engage in currency arbitrage, nor do they view it as an efficient instrument to achieve competitive advantage.  BoA does not intervene to manipulate the exchange rate unless required to control domestic inflation, in accordance with the Bank’s official mandate of inflation targeting.

Foreign exchange is readily available at banks and exchange bureaus. Preliminary notification is necessary if the currency exchange is several million dollars or more – the law does not specify an amount but provides factors for determining the threshold for large exchanges – as the exchange market in Albania is shallow.  A 2018 campaign launched by the BoA to reduce the domestic use of the euro to improve the effectiveness of domestic economic policies has produced tangible results. The share of foreign currency loans in total loans fell from 60 percent in 2015 to 50 percent in 2019. Foreign currency deposits, which to some extent reflect relatively high remittances, rose to 54.6 percent of total deposits.

Remittance Policies

The Banking Law does not impose restrictions on the purchase, sale, holding, or transfer of monetary foreign exchange.  However, local law authorizes the BoA to temporarily restrict the purchase, sale, holding, or transfer of foreign exchange to preserve the foreign exchange rate or official reserves.  In practice, BoA rarely employs such measures. The last episode was in 2009, when the Bank temporarily tightened supervision rules over liquidity transfers by domestic correspondent banks to foreign banks due to insufficient liquidity in international financial markets.  It also asked banks to halt distribution of dividends and use dividends to increase shareholders’ capital, instead. BoA lifted these restrictions in 2010.

The Law on Foreign Investment guarantees the right to transfer and repatriate funds associated with an investment in Albania into a freely usable currency at a market-clearing rate.  Only licensed entities (banks) may conduct foreign exchange transfers and waiting periods depend on office procedures adopted by the banks. Both Albanian and foreign citizens entering or leaving the country must declare assets in excess of 1,000,000 lek (USD 9,000) in hard currency and/or precious items.  Failure to declare such assets is considered a criminal act, punishable by confiscation of the assets and possible imprisonment.

Although the Foreign Exchange (FX) Regulation provides that residents and non-residents may transfer capital within and into Albania without restriction, capital transfers out of Albania are subject to certain documentation requirements.  Persons must submit a request indicating the reasons for the capital transfer, a certificate of registration from the National Registration Center, and the address to which the capital will be transferred. Such persons must also submit a declaration on the source of the funds to be transferred.  In January 2015, The FX Regulation was amended and the requirement to present the documentation showing the preliminary payment of taxes related to the transaction was removed.

Albania is a member of the Council of Europe Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL), a Financial Action Task Force-style regional body.  In February 2020, Albania was included in the category of jurisdictions under increased monitoring, also referred to as the Grey List. Albania had previously been on this list and was taken off in 2015. The 2020 International Narcotics Control Strategy Report (INCSR) placed Albania in the “Major Money Laundering Jurisdictions” category following its inclusion for the first time in 2017. The category implies that financial institutions of the country engage in currency transactions involving significant amounts of proceeds from international narcotics trafficking.

Sovereign Wealth Funds

Parliament approved a law in October 2019 to establish the Albanian Investment Corporation (AIC). The law entered in force in January 2020. The AIC would develop, manage, and administer state-owned property and assets, invest across all sectors by mobilizing state owned and private domestic and foreign capital, and promote economic and social development by investing in line with government-approved development policies.

The GoA plans to transfer state-owned assets, including state-owned land, to the AIC and provide initial capital to launch the corporation. The IMF Staff Concluding Statement  of November 26, 2019, warned that the law would allow the government to direct individual investment decisions, which could make the AIC an off-budget spending tool that risks eroding fiscal discipline and circumventing public investment management processes.

7. State-Owned Enterprises

State-owned enterprises (SOEs) are defined as legal entities that are entirely state-owned or state-controlled and operate as commercial companies in compliance with the Law on Entrepreneurs and Commercial Companies. SOEs operate mostly in the generation, distribution, and transmission of electricity, oil and gas, railways, postal services, ports, and water supply. There is no published list of SOEs.

The law does not discriminate between public and private companies operating in the same sector. The government requires SOEs to submit annual reports and undergo independent audits. SOEs are subject to the same tax levels and procedures and the same domestic accounting and international financial reporting standards as other commercial companies. The High State Audit audits SOE activities. SOEs are also subject to public procurement law.

Albania is yet to become party to the Government Procurement Agreement (GPA) of the WTO but has obtained observer status and is negotiating full accession (see https://www.wto.org/english/tratop_e/gproc_e/memobs_e.htm).  Private companies can compete openly and under the same terms and conditions with respect to market share, products and services, and incentives.

SOE operation in Albania is regulated by the Law on Entrepreneurs and Commercial Companies, the Law on State Owned Enterprises, and the Law on the Transformation of State-Owned Enterprises into Commercial Companies. The Ministry of Economy and Finance and other relevant ministries, depending on the sector, represent the state as the owner of the SOEs. SOEs are not obligated by law to adhere to Organization for Economic Cooperation and Development (OECD) guidelines explicitly. However, basic principles of corporate governance are stipulated in the relevant laws and generally accord with OECD guidelines. The corporate governance structure of SOEs includes the supervisory board and the general director (administrator) in the case of joint stock companies. The supervisory board comprises three to nine members, who are not employed by the SOE. Two-thirds of board members are appointed by the representative of the Ministry of Economy and Finance, and one-third by the line ministry, local government unit, or institution to which the company reports. The Supervisory Board is the highest decision-making authority and appoints and dismisses the administrator of the SOE through a two-thirds vote.

Privatization Program

The privatization process in Albania is nearing conclusion, with just a few major privatizations remaining. Entities to be privatized include OSHEE, the state-run electricity distributor; 16 percent of ALBtelecom, the fixed- line telephone company; and state-owned oil company Albpetrol. Other sectors might provide opportunities for privatization in the future.

The bidding process for privatizations is public, and relevant information is published by the Public Procurement Agency at www.app.gov.al . Foreign investors may participate in the privatization program. The Agency has not published timelines for future privatizations.

8. Responsible Business Conduct

Public awareness of corporate social responsibility (CSR) in Albania is low, and CSR remains a new concept for much of the business community. The small level of CSR engagement in Albania comes primarily from the energy, telecommunications, heavy industry, and banking sectors, and tends to focus on philanthropy and environmental issues. International organizations have recently improved efforts to promote CSR. Thanks to efforts by the international community and large international companies, the first Albanian CSR network was founded in March 2013 as a business-led, non-profit organization. The American Chamber of Commerce in Albania also formed a subcommittee in 2015 to promote CSR among its members.

Legislation governing CSR, labor, and employment rights, consumer protection, and environmental protection is robust, but enforcement and implementation are inconsistent. The Law on Commercial Companies and Entrepreneurs outlines generic corporate governance and accounting standards. According to that law and the Law on the National Business Registration Center, companies must disclose publicly when they change administrators and shareholders and to disclose financial statements. The Corporate Governance Code for unlisted joint stock companies incorporates the OECD definitions and principles on corporate governance but is not legally binding. The code provides guidance for Albanian companies and aims to provide best-practices while assisting Albanian companies to develop a governance framework.

Albania has been a member of the Extractive Industries Transparency Initiative (EITI) since 2013.

9. Corruption

Endemic corruption continues to undermine the rule of law and jeopardize economic development. Foreign investors cite corruption, particularly in the judiciary, a lack of transparency in public procurement, and poor enforcement of contracts as some of the biggest problems in Albania.

Corruption perceptions continue to deteriorate, with Albania falling an additional seven positions in Transparency International’s 2019 Corruption Perceptions Index (CPI), now ranking 106th out of 180 countries, tied with North Macedonia as the lowest in the Balkans. Despite some improvement in in Albania’s score from 2013 to 2016, progress in tackling corruption has been slow and unsteady. Albania is still one of the most corrupt countries in Europe, according to the CPI and other observers.

The country has a sound legal framework to prevent conflict of interest and to fight corruption of public officials and politicians, including their family members. However, law enforcement is jeopardized by a heavily corrupt judicial system.

The passage of constitutional amendments in July 2016 to reform the judicial system was a major step forward, and reform, once fully implemented, is expected to position the country as a more attractive destination for international investors. Judicial reform has been described as the most significant development in Albania since the end of communism, and nearly one-third of the constitution was rewritten as part of the effort. The reform also entails the passage of laws to ensure implementation of the constitutional amendments. Judicial reform’s vetting process will ensure that prosecutors and judges with unexplained wealth or insufficient training, or those who have issued questionable verdicts, are removed from the system. As of publication, more than half of the judges and prosecutors who have faced vetting have either failed or resigned. The establishment of the Special Prosecution Office Against Corruption and Organized Crime and of the National Investigation Bureau, two new judicial bodies, will step up the fight against corruption and organized crime. Once fully implemented, judicial reform will discourage corruption, promote foreign and domestic investment, and allow Albania to compete more successfully in the global economy.

UN Anticorruption Convention, OECD Convention on Combatting Bribery

The government has ratified several corruption-related international treaties and conventions and is a member of major international organizations and programs dealing with corruption and organized crime. Albania has ratified the Civil Law Convention on Corruption (Council of Europe), the Criminal Law Convention on Corruption (Council of Europe), the Additional Protocol to Criminal Law Convention on Corruption (Council of Europe), and the United Nations Convention against Corruption (UNCAC). Albania has also ratified several key conventions in the broader field of economic crime, including the Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime (2001) and the Convention on Cybercrime (2002). Albania has been a member of the Group of States against Corruption (GRECO) since the ratification of the Criminal Law Convention on Corruption in 2001 and is a member of the Stability Pact Anti-Corruption Initiative (SPAI). Albania is not a member of the OECD Convention on Combating Bribery of Foreign Public Officials in international Business Transactions. Albania has also adopted legislation for the protection of whistleblowers.

Resources to Report Corruption

To curb corruption, the government announced a new platform in 2017, “Shqiperia qe Duam”(“The Albania We Want”), which invites citizens to submit complaints and allegations of corruption and misuse of office by government officials. The platform has a dedicated link for businesses. The Integrated Services Delivery Agency (ADISA), a government entity, provides a second online portal to report corruption.

10. Political and Security Environment

While political violence is rare, political protests in 2019 included instances of civil disobedience, low-level violence and damage to property, and the use of tear gas by police. Albania’s June 2017 elections and transition to a new government were peaceful, as were its June 2019 local elections. On January 21, 2011, security forces shot and killed four protesters during a violent political demonstration. In its external relations, Albania has usually encouraged stability in the region and maintains generally friendly relations with neighboring countries.

11. Labor Policies and Practices

Albania’s labor force numbers around 1.22 million people, according to official data.  After peaking at 18.2 percent in the first quarter of 2014, the official estimated unemployment rate has decreased in recent years, falling to 11.2 percent at the end of 2019 compared to 12.3 percent in December 2018.  However, unemployment among people aged 15-29 remains high, at 21.4 percent. The effect of the 6.4-magnitude earthquake in November 2019 and the COVID-19 pandemic on Albanian unemployment will take time to unfold. Around 40 percent of the population is self-employed in the agriculture sector. Informality continues to be widespread in the Albanian labor market.  According to the International Labor Organization (ILO), almost 30 percent of all employment in the non-agriculture sector is informal.

The institutions that oversee the labor market include the Ministry of Finance, Economy and Labor, the Ministry of Health and Social Protection; the National Employment Service; the State Labor Inspectorate; and private entities such as employment agencies and vocational training centers.  Albania has adopted a wide variety of regulations to monitor labor abuses, but enforcement is weak due to persistent informality in the work force.

Outward labor migration remains an ongoing problem affecting the Albanian labor market. There is a growing concern about labor shortage for both the skilled and unskilled workforces.  Over the last several years, media outlets have reported that a significant number of doctors and nurses have emigrated to Europe, mostly to Germany. There are also claims that the textile industry, which hires unskilled labor, is facing difficulties replacing workers s resulting from growing due to emigration of Albanian citizens.  In December 2019, the average public administration salary was approximately 63,826 lek (approximately USD 575) per month.  The GoA increased the national minimum wage in January 2019 to 26,000 lek per month (approximately USD 225), but it is still the lowest in the region.

While some in the labor force are highly skilled, many work in low-skill industries or have outdated skills.  The government provides financial incentives for labor force training for the inward processing industry (in which goods are brough into the country for additional manufacturing, repairing, or restoring), which in Albania includes the footwear and textile sectors.  In March 2019, parliament approved a new law on employment promotion, which defined public policies on employment and support programs. Albania has a tradition of a strong secondary educational system, while vocational schools are viewed as less prestigious and attract fewer students.  However, the government has more recently focused attention on vocational education. In the 2018-2019 academic year, about 21,300, or 18 percent, of high school pupils were enrolled in vocational schools, compared with 17.1 percent in the previous year.

The Law on Foreigners and various decisions of the Council of Ministers regulate the employment regime in Albania.  Employment can also be regulated through special laws in the case of specific projects, or to attract foreign investment.  The Law on TEDA-s also provides financial incentives for labor taxes on investments in the zone. In February 2020, parliament approved some amendments to the Law on Foreigners, extending the same employment and self-employment rights Albanian citizens have to the citizens of five Western Balkan countries. The new law extends to these citizens the same benefits that the original law provided to the citizens of EU and the Schengen countries. The recent amendments also allow hiring of foreign citizens in different sectors in the framework of to work in the reconstruction process efforts due to the November 2019 earthquake.

The Labor Code includes rules regarding contract termination procedures that distinguish layoffs from terminations.  Employment contracts can be limited or unlimited in duration, but typically cover an unlimited period if not specified in the contract.  Employees can collect up to 12 months of salary in the event of an unexpected interruption of the contract. Unemployment compensation makes up around 50 percent of the minimum wage.

Pursuant to the Labor Code and the recently amended “Law on the Status of the Civil Employee,” both individual and collective employment contracts regulate labor relations between employees and management.  While there are no official data recording the number of collective bargaining agreements used throughout the economy, they are widely used in the public sector, including by SOEs. Albania has a labor dispute resolution mechanism as specified in the Labor Code, article 170, but the mechanism is considered inefficient. Strikes are rare in Albania, mostly due to the limited power of the trade unions and they have not posed any risk to investments.

Albania has been a member of the International Labor Organization since 1991 and has ratified 54 out of 189 ILO conventions, including the 8eight Fundamental Conventions, the four Governance Conventions and 42 Technical Conventions. The implementation of labor relations and standards continues to be a challenge, according to the ILO. Furthermore, labor dialogue has suffered from the 2017 division of the Ministry of Labor and Social Protection into two different institutions.

See the U.S. Department of State Human Rights Report:
https://www.state.gov/reports-bureau-of-democracy-human-rights-and-labor/country-reports-on-human-rights-practices/;
and the U.S. Department of Labor Child Labor Report:
http://www.dol.gov/ilab/reports/child-labor .

12. U.S. International Development Finance Corporation (DFC) and Other Investment Insurance Programs

The DFC is the successor of the Overseas Private Investment Corporation (OPIC). OPIC signed an agreement with Albania in 1991, which is still in force.

DFC is America’s development bank and partners with the private sector to finance solutions to the most critical challenges facing the developing world. DFC provides equity financing, debt financing, political risk insurance, and technical development assistance. It focuses its work on less developed countries, classified by the World Bank as low-income, lower-middle-income, and upper-middle-income countries. DFC prioritizes its work in low-income and lower-middle-income countries and operates with restrictions in upper middle-income countries. Albania classifies as an upper middle-income country.

Albania has also ratified the World Bank’s Multilateral Investment Guarantees Agency (MIGA) Convention. MIGA provides investment guarantees against certain non-commercial risks (i.e., political-risk insurance) to eligible foreign investors for qualified investments in developing member countries. MIGA’s coverage covers the following risks: currency transfer restriction, expropriation, breach of contract, war, terrorism, civil disturbance, and failure to honor sovereign financial obligations.

For more information on MIGA, please see: http://www.miga.org/ .

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source* USG or international statistical source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) ($M USD) 2018 $15,103 2018 $15,103 www.worldbank.org/en/country 
Foreign Direct Investment Host Country Statistical source* USG or international statistical source USG or international Source of data:
BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) 2018 $121 2018 N/A BEA data available at
https://www.bea.gov/international/
direct-investment-and-multinational-
enterprises-comprehensive-data
 
Host country’s FDI in the United States ($M USD, stock positions) 2018 N/A 2018 $0 BEA data available at
https://www.bea.gov/international/
direct-investment-and-multinational-
enterprises-comprehensive-data
 
Total inbound stock of FDI as % host GDP 2018 59% 2018 52% UNCTAD data available at
https://unctad.org/en/Pages/
DIAE/World%20Investment%20Report/
Country-Fact-Sheets.aspx
 

*Source for Host Country Data: Bank of Albania (http://www.bankofalbania.org/), Albanian Institute of Statistics (http://www.instat.gov.al/), Albanian Ministry of Finances (http://www.financa.gov.al/)

Table 3: Sources and Destination of FDI
Direct Investment from/in Counterpart Economy Data (2018)
From Top Five Sources/To Top Five Destinations (US Dollars, Millions)
Inward Direct Investment Outward Direct Investment
Total Inward 7,833 100% Total Outward 563 100%
Switzerland 1,505 19% Kosovo 335 59.5%
Canada 1,139 14.5% Italy 165 29.3%
The Netherlands 1,105 14% United States 21 3.7%
Greece 903 11.5% North Macedonia 13 2.3%
Italy 617 7.9% Greece 8 1.4%
“0” reflects amounts rounded to +/- USD 500,000.
Table 4: Sources of Portfolio Investment
Portfolio Investment Assets
Top Five Partners (Millions, current US Dollars) December 2018
Total Equity Securities Total Debt Securities
All Countries 846 100% All Countries 36 100% All Countries 810 100%
Turkey 187 22% Turkey 17 47% Turkey 170 21%
Germany 117 13.8% Canada 8 22% Germany 117 14%
Czech 99 11.7% The Netherlands 8 22% Czech 99 12%
France 72 8.5% The Bahamas 2 5.5% France 72 8.9X%
Italy 47 5.5% Country #5 Italy 47 5.8%

14. Contact for More Information

Alex MacFarlane
Economic and Commercial Officer
U.S. Embassy Tirana, Albania
Rruga Elbasanit, Nr. 103
Tirana, Albania +355 4 224 7285
USALBusiness@state.gov

Algeria

Executive Summary

Algeria’s state enterprise-dominated economy is challenging for U.S. businesses, but multiple sectors offer opportunities for long-term growth.  The government is prioritizing investment in agriculture, information and communications technology, mining, hydrocarbons (both upstream and downstream), renewable energy, and healthcare.

The election of President Abdelmadjid Tebboune in December 2019 eliminated some of the uncertainty that marked the eight-month interim government which led the country following the April 2019 resignation of President Abdelaziz Bouteflika.  In response to continuing demands for political reform, Tebboune issued a draft of a new constitution in May 2020, and has proposed legislative elections before the end of the year.

In 2019, the government eliminated the so-called “51/49” restriction that required majority Algerian ownership of all new businesses.  The requirement will be retained for “strategic sectors,” identified as hydrocarbons, mining, defense, and pharmaceuticals manufacturing.  The government also passed a new hydrocarbons law, improving fiscal terms and contract flexibility in order to attract new international investors.  Following the enactment of this legislation, major international oil companies have signed memorandums of understanding with national hydrocarbons company Sonatrach.

Algeria’s economy is driven by hydrocarbons production.  Hydrocarbons account for 93 percent of export revenues and are the largest source of government income.  With the drop in oil prices in March 2020, the government calculated revenues would drop to roughly half of what the 2020 budget originally anticipated.  The government reduced investment by fifty percent in the energy sector, and investment in other sectors is likely to suffer large decreases and may only proceed if the historically debt-resistant government obtains foreign financing.  The government’s 2020 budget indicated such debt was possible, but officials have equivocated in public statements.  The government hopes to attract foreign direct investment (FDI) to boost employment and replace imports with local production.  Traditionally, Algeria has pursued protectionist policies to encourage the development of local industries.  The import substitution policies it employs tend to generate regulatory uncertainty, supply shortages, increased prices, and limited selection.

The government has taken measures to minimize the economic impact of the COVID-19 outbreak, including delaying tax payments for small businesses, extending credit and restructuring loan payments, and decreasing banks’ reserve requirements.

Economic operators deal with a range of challenges, including complicated customs procedures, cumbersome bureaucracy, difficulties in monetary transfers, and price competition from international rivals, particularly from China, Turkey, and France.  International firms that operate in Algeria complain that laws and regulations are constantly shifting and applied unevenly, raising commercial risk for foreign investors.  An ongoing anti-corruption campaign has increased wariness regarding large-scale investment projects.  Business contracts are subject to changing interpretation and revision of regulations, which has proved challenging to U.S. and international firms.  Other drawbacks include limited regional integration.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2019 106 of 180 http://www.transparency.org/
research/cpi/overview
World Bank’s Doing Business Report 2019 157 of 190 http://www.doingbusiness.org/
en/rankings
Global Innovation Index 2019 113 of 129 https://www.globalinnovationindex.org/
analysis-indicator
U.S. FDI in partner country ($M USD, stock positions) 2019 $2,749 https://apps.bea.gov/international/
factsheet//
World Bank GNI per capita 2019 USD 3,970 http://data.worldbank.org/indicator/
NY.GNP.PCAP.CD

2. Bilateral Investment Agreements and Taxation Treaties

Algeria has signed bilateral investment treaties with Argentina, Austria, Bahrain, BLEU (Belgium-Luxembourg Economic Union), Bulgaria, China, Cuba, Denmark, Egypt, Ethiopia, Finland, France, Germany, Greece, Indonesia, Iran, Italy, Jordan, Kuwait, Libya, Malaysia, Mali, Mauritania, Mozambique, Netherlands, Niger, Nigeria, Oman, Portugal, Qatar, Romania, Russian Federation, Serbia, South Africa, South Korea, Spain, Sudan, Sweden, Switzerland, Syria, Tajikistan, Tunisia, Turkey, Ukraine, United Arab Emirates, Vietnam, and Yemen.

In 2001, Algeria and the U.S. signed a Trade and Investment Framework Agreement (TIFA), and its council met most recently in Washington, D.C. in October 2018.

Algeria has trade agreements with the European Union, the Arab League, and is a signatory party to the African Free Trade Area agreement, although none has been fully implemented.  Recently instituted import barriers violate the terms of both the EU and Arab League agreements.  The Algerian government concluded two years of “renegotiation” talks with the European Union in March 2017.  None of the trade terms of the 2005 EU-Algeria Association Agreement were modified, but the European Union committed to approximately USD 43 million of technical assistance for various Algerian ministries.  In February 2020, the Algerian government announced a commission would assess the trade agreements in force and recommend to the government whether Algeria will continue to adhere.

Algeria does not have a bilateral taxation treaty with the United States.  Algeria has bilateral taxation treaties with the Arab Maghreb Union (Libya, Mauritania, Morocco, and Tunisia), Austria, Bahrain, Belgium, Bosnia and Herzegovina, Bulgaria, Canada, China, Egypt, France, Germany, Indonesia, Iran, Italy, Lebanon, Portugal, Qatar, Romania, South Africa, South Korea, Spain, Switzerland, Turkey, and United Arab Emirates.

3. Legal Regime

Transparency of the Regulatory System

The national government manages all regulatory processes.  Legal and regulatory procedures, as written, are considered consistent with international norms, although the decision-making process is at times opaque.

Algeria implemented the Financial Accounting System (FAS) in 2010.  Though legislation does not make explicit references, FAS appears to be based on International Accounting Standards Board and International Financial Reporting Standards (IFRS).  Operators generally find accounting standards follow international norms, though they note that some particularly complex processes in IFRS have detailed explanations and instructions but are explained relatively briefly in FAS.

There is no mechanism for public comment on draft laws, regulations or regulatory procedures.  Copies of draft laws are not made publicly accessible before enactment.  Government officials often give testimony to Parliament on draft legislation, and that testimony typically receives press coverage.  Occasionally, copies of bills are leaked to the media.   All laws and some regulations are published in the Official Gazette (www.joradp.dz ) in Arabic and French, but the database has only limited online search features and no summaries are published.  Secondary legislation and/or administrative acts (known as ‘circulaires’ or ‘directives’) often provide important details on how to implement laws and procedures.  Administrative acts are generally written at the ministry level and not made public, though may be available if requested in person at a particular agency or ministry.  Public tenders are often accompanied by a book of specifications only provided upon payment.

In some cases, authority over a matter may rest among multiple ministries, which may impose additional bureaucratic steps and the likelihood of either inaction or the issuance of conflicting regulations.  The development of regulations occurs largely away from public view; internal discussions at or between ministries are not usually made public.  In some instances, the only public interaction on regulations development is a press release from the official state press service at the conclusion of the process; in other cases, a press release is issued earlier.  Regulatory enforcement mechanisms and agencies exist at some ministries, but they are usually understaffed and enforcement remains weak.

The National Economic and Social Council (CNES) studies the effects of Algerian government policies and regulations in economic and social spheres.  The CNES provides feedback on proposed legislation, but neither the feedback nor legislation are necessarily made public.

Information on external debt obligations up to fiscal year 2018 was publicly available via the Central Bank’s quarterly statistical bulletin online .  The statistical bulletin describes external debt and not public debt, but the Ministry of Finance’s budget execution summaries reflect amalgamated debt totals.  The Ministry of Finance is planning to create an electronic, consolidated database of internal and external debt information, and in 2019 published additional public debt information on its website.  A 2017 amendment to the 2003 law on currency and credit covering non-conventional financing authorizes the Central Bank to purchase bonds directly from the Treasury for a period of up to five years.   The Ministry of Finance indicated this would include purchasing debt from state enterprises, allowing the Central Bank to transfer money to the treasury, which would then provide the cash to, for example, state owned enterprises in exchange for their debt.  In September 2019, the Prime Minister announced Algeria would no longer use non-conventional financing, although the Ministry of Finance stressed the program remains available until 2022.

International Regulatory Considerations

Algeria is not a member of any regional economic bloc or of the WTO.  The structure of Algerian regulations largely follows European – specifically French – standards.

Legal System and Judicial Independence

Algeria’s legal system is based on the French civil law tradition.  The commercial law was established in 1975 and most recently updated in 2007 (www.joradp.dz/TRV/FCom.pdf ).  The judiciary is nominally independent from the executive branch, but U.S. companies have reported allegations of political pressure exerted on the courts by the executive.  Organizations representing lawyers and judges have protested during the past year against alleged executive branch interference in judicial independence.  Regulation enforcement actions are adjudicated in the national courts system and are appealable.  Algeria has a system of administrative tribunals for adjudicating disputes with the government, distinct from the courts that handle civil disputes and criminal cases.  Decisions made under treaties or conventions to which Algeria is a signatory are binding and enforceable under Algerian law.

Laws and Regulations on Foreign Direct Investment

The 51/49 investment rule requires a majority Algerian ownership for all investments, though pending guidance from the Algerian government will limit the rule to “strategic sectors” as prescribed in the 2020 Finance Law (see section 2).  There are few other laws restricting foreign investment.  In practice, the many regulatory and bureaucratic requirements for business operations provide officials avenues to advance informally political or protectionist policies.  The investments law enacted in 2016 charged ANDI with creating four new branches to assist with business establishment and the management of investment incentives.  ANDI’s website (www.andi.dz/index.php/en/investir-en-algerie ) lists the relevant laws, rules, procedures, and reporting requirements for investors.  Much of the information lacks detail – particularly for the new incentives elaborated in the 2016 investments law – and refers prospective investors to ANDI’s physical “one-stop shops” located throughout the country.

There is an ongoing effort by the customs service, under the Ministry of Finance, to establish a new digital platform featuring one-stop shops for importers and exports to streamline bureaucratic processes.

Competition and Anti-Trust Laws

The National Competition Council (www.conseil-concurrence.dz/ ) is responsible for reviewing both domestic and foreign competition-related concerns.  Established in late 2013, it is housed under the Ministry of Commerce.  Once the economic concentration of an enterprise exceeds 40 percent of a market’s sales or purchases, the Competition Council is authorized to investigate, though a 2008 directive from the Ministry of Commerce exempted economic operators working for national economic progress from this review.

Expropriation and Compensation

The Algerian state can expropriate property under limited circumstances, with the state required to pay “just and equitable” compensation to the property owners.  Expropriation of property is extremely rare, with no cases within the last 10 years.  In late 2018, however, a government measure required farmers to comply with a new regulation altering the concession contracts of their land in a way that would cede more control to the government.  Those who refused to switch contract type by December 31, 2018 lost their right to their land.

Dispute Settlement

ICSID Convention and New York Convention

Algeria is a signatory to the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (The New York Convention) and the Convention on the International Center for the Settlement of Investment Disputes (ICSID Convention).  The Algerian code of civil procedure allows both private and public sector companies full recourse to international arbitration.  Algeria permits the inclusion of international arbitration clauses in contracts.

Investor-State Dispute Settlement

Investment disputes sometimes occur, especially on major projects.  Investment disputes can be settled informally through negotiations between the parties or via the domestic court system.  For disputes with foreign investors, cases can be decided through international arbitration.  The most common disputes in the last several years have involved state-owned oil and gas company Sonatrach and its foreign partners concerning the retroactive application since 2006 of a windfall profits tax on hydrocarbons production.  Sonatrach won a case in October 2016 against a Spanish oil company and two Korean firms.  An international firm won one of their cases against Sonatrach in 2016.  In 2018, Sonatrach announced it had settled all outstanding international disputes.

The most recent investment dispute involving a U.S. company dates to 2012.  The company, which had encountered bureaucratic barriers to the expatriation of dividends from a 2005 investment, did not resort to arbitration.  The dispute was resolved in 2017, with the government permitting the company to expatriate the dividends.

There is no U.S.-Algeria Bilateral Investment Treaty or Free Trade Agreement.

International Commercial Arbitration and Foreign Courts

The Algerian Chamber of Commerce and Industry (CACI), the nationwide, state-supported chamber of commerce, has the authority to arbitrate investment disputes as an agent of the court.  The bureaucratic nature of Algeria’s economic and legal system, as well as its opaque decision-making process, means that disputes can drag on for years before a resolution is reached.  Businesses have reported cases in the court system are subject to political influence and generally tend to favor the government’s position.

Local courts recognize and have the authority to enforce foreign arbitral awards.  Nearly all contracts between foreign and Algerian partners include clauses for international arbitration.  The Ministry of Justice is in charge of enforcing arbitral awards against SOEs.

Alternative dispute resolution mechanisms are not widely used.

Bankruptcy Regulations

Algeria’s bankruptcy system is underdeveloped.  While bankruptcy per se is not criminalized, management decisions (such as company spending, investment decisions, and even procedural mistakes) are subject to criminal penalties including fines and incarceration, so decisions that lead to bankruptcy could be punishable under Algerian criminal law.  However, bankruptcy cases rarely proceed to a full dissolution of assets.  The Algerian government generally props up public companies on the verge of bankruptcy via cash infusions from the public banking system.  According to the World Bank’s Doing Business report, debtors and creditors may file for both liquidation and reorganization.

In the past year, the court gave the government authority to put several companies in receivership and appointed temporary heads to direct them following the arrests of their CEOs as part of a broad anti-corruption drive.  The status and viability of several of those companies is unclear.

4. Industrial Policies

Investment Incentives

While the government previously required 51 percent Algerian ownership of all investments, the 2020 budget law restricted this requirement to  the hydrocarbons, mining, defense, and pharmaceuticals manufacturing sectors.

Any incentive offered by the Algerian government is generally available to any company, though there are multiple tiers of “common, additional, and exceptional” incentives under the 2016 investments law (www.joradp.dz/FTP/jo-francais/2016/F2016046.pdf ).  “Common” incentives available to all investors include exemption from customs duties for all imported production inputs, exemption from value-added tax (VAT) for all imported goods and services that enter directly into the implementation of the investment project, a 90 percent reduction of tenancy fees during construction, and a 10-year exemption on real estate taxes.  Investors also benefit from a three-year exemption on corporate and professional activity taxes and a 50 percent reduction for three years on tenancy fees after construction is completed.  Additional incentives are available for investments made outside of Algeria’s coastal regions, to include the reduction of tenancy fees to a symbolic one dinar (USD.01) per square meter of land for 10 years in the High Plateau region and 15 years in the south of Algeria, plus a 50 percent reduction thereafter.  The law also charges the state to cover, in part or in full, the necessary infrastructure works for the realization of the investment.  “Exceptional” incentives apply for investments “of special interest to the national economy,” including the extension of the common tax incentives to 10 years.  The sectors of “special interest” have not yet been publicly specified.  An investment must receive the approval of the National Investments Council in order to qualify for the exceptional incentives.

Regulations passed in a March 2017 executive decree exclude approximately 150 economic activities from eligibility for the incentives (www.joradp.dz/FTP/jo-francais/2017/F2017016.pdf ).  The list of excluded investments is concentrated on the services sector but also includes manufacturing for some products.  All investments in sales, whether retail or wholesale, and imports business are ineligible.

The 2016 investments law also provided state guarantees for the transfer of incoming investment capital and outgoing profits.  Pre-existing incentives established by other laws and regulations also include favorable loan rates well below inflation from public banks for qualified investments.

The government does not issue guarantees for private investments, or jointly financed foreign direct investment projects.  In practice, however, the government is disinclined to let companies that employ significant numbers of Algerians – whether private or public – to fail, and may take on fiscal responsibilities to ensure continued employment for workers.  President Tebboune’s administration also indicated more flexibility in considering alternative financing methods for future projects, which might include joint financing.

Foreign Trade Zones/Free Ports/Trade Facilitation

Algeria does not have any foreign trade zones or free ports.

Performance and Data Localization Requirements

The Algerian government does not officially mandate local employment, but companies usually must provide extensive justification to various levels of the government as to why an expatriate worker is needed.  Any person or legal entity employing a foreign citizen is required to notify the Ministry of Labor.  Some businesses have reported instances of the government pressuring foreign companies operating in Algeria, particularly in the hydrocarbons sector, to limit the number of expatriate middle and senior managers so that Algerians can be hired for these positions.  Contacts at multinational companies have alleged this pressure is applied via visa applications for expatriate workers.  U.S. companies in the hydrocarbons industry have reported that, when granted, expatriate work permits are usually valid for no longer than six months and are delivered up to three months late, requiring firms to apply perpetually for renewals.

In 2017, the Algerian government began instituting forced localization in the auto sector.  Regulations issued in December 2017 require companies producing or assembling cars in the country to achieve a local integration rate of at least 15 percent within three years of operation.  The threshold rises to between 40 and 60 percent after a company’s fifth year of operation.  In 2020, the Algerian government announced its intention to increase the baseline local integration for automotive assembly from 15 percent to 35 percent.  Since 2014, the government has required car dealers to invest in industrial or “semi-industrial” activities as a condition for doing business in Algeria.  Dealers seeking to import new vehicles must obtain an import license from the Ministry of Commerce.  Since January 2017, the Ministry has not issued any licenses.  As the Algerian government further restricts imports, localization requirements are expected to broaden to other manufacturing industries over the next several years.  For example, a tender launched in 2018 for 150 megawatts of photovoltaic solar energy power plants mandated that bidders be Algerian legal entities.

Information technology providers are not required to turn over source codes or encryption keys, but all hardware and software imported to Algeria must be approved by the Agency for Regulation of Post and Electronic Communications (ARPCE), under the Ministry of Post and Telecommunications.  In practice, the Algerian government requires public sector entities to store data on servers within the country.

5. Protection of Property Rights

Real Property

Secured interests in property are generally recognized and enforceable, but court proceedings can be lengthy and results unpredictable.  All property not clearly titled to private owners remains under government ownership.  As a result, the government controls most real property in Algeria, and instances of unclear titling have resulted in conflicting claims of ownership, which has made purchasing and financing real estate difficult.  Several business contacts have reported significant difficulty in obtaining land from the government to develop new industrial activities; the state prefers to lease land for 33-year terms, renewable twice, rather than sell outright.  The procedures and criteria for awarding land contracts are opaque.

Property sales are subject to registration at the tax inspection and publication office at the Mortgage Register Center and are part of the public record of that agency.  All property contracts must go through a notary.

According to the World Bank Doing Business report, Algeria ranks 165 out of 190 countries for ease of registering property.

Intellectual Property Rights

Patent and trademark protection in Algeria remains covered by a series of ordinances dating from 2003 and 2005, and representatives of U.S. companies operating in Algeria reported that these laws were satisfactory in terms of both the scope of what they cover and the penalties they mandate for violations.  A 2015 government decree increased coordination between the National Office of Copyrights and Related Rights (ONDA), the National Institute for Industrial Property (INAPI), and law enforcement to pursue patent and trademark infringements.

ONDA, under the Ministry of Culture, and INAPI, under the Ministry of Industry and Mines, are the two entities within the Algerian government that protect IPR.  ONDA covers literary and artistic copyrights as well as digital software rights, while INAPI oversees the registration and protection of industrial trademarks and patents.  Despite strengthened efforts at ONDA, INAPI, and the General Directorate for Customs (under the Ministry of Finance), which have seen local production of pirated or counterfeit goods nearly disappear since 2011, imported counterfeit goods are prevalent and easily obtained.  Algerian law enforcement agencies annually confiscate several hundred items, including clothing, cosmetics, sports items, foodstuffs, automotive spare parts, and home appliances.  ONDA destroyed more than 100,000 copies of pirated media to commemorate World Intellectual Property Day in 2017, but software firms estimate that more than 85 percent of the software used in Algeria, and a similar percentage of titles used by government institutions and state-owned companies, is not licensed.

Algeria has remained on the Priority Watch List of USTR’s Special 301 Report (https://ustr.gov/issue-areas/intellectual-property/Special-301) since 2009.

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

6. Financial Sector

Capital Markets and Portfolio Investment

The Algiers Stock Exchange has five stocks listed – each at no more than 35 percent equity.  There is a small and medium enterprise exchange with one listed company.  The exchange has a total market capitalization representing less than 0.1 percent of Algeria’s GDP.  Daily trading volume on the exchange averages around USD 2,000.  Despite its small size, the market functions well and is adequately regulated by an independent oversight commission that enforces compliance requirements on listed companies and traders.

Government officials aim to reach a capitalization of USD 7.8 billion in the next five years and enlist up to 50 new companies.  Attempts to list additional companies have been stymied by a lack both of public awareness and appetite for portfolio investment, as well as by private and public companies’ unpreparedness to satisfy due diligence requirements that would attract investors.  Proposed privatizations of state-owned companies have also been opposed by the public.  Algerian society generally prefers material investment vehicles for savings, namely cash.  Public banks, which dominate the banking sector (see below), are required to purchase government securities when offered, meaning they have little leftover liquidity to make other investments.  Foreign portfolio investment is prohibited – the purchase of any investment product in Algeria, whether a government or corporate bond or equity stock, is limited to Algerian residents only.

Money and Banking System

The banking sector is roughly 85 percent public and 15 percent private as measured by value of assets held, and is regulated by an independent central bank.  Publicly available data from private institutions and U.S. Federal Reserve Economic Data show estimated total assets in the commercial banking sector in 2017 were roughly 13.9 trillion dinars (USD 116.7 billion) against 9.2 trillion dinars (USD 77.2 billion) in liabilities.  The central bank had mandated a 12 percent reserve requirement until mid-2016, when in response to a drop in liquidity the bank lowered the threshold to eight percent.  In August 2017, the ratio was further reduced to 4% in an effort to inject further liquidity into the banking system.  The decrease in liquidity was a result of all public banks buying government bonds in the first public bond issuance in more than 10 years; buying at least five percent of the offered bonds is required for banks to participate as primary dealers in the government securities market.  The bond issuance essentially returned funds to the state that it had deposited at local banks during years of high hydrocarbons profits.  In January 2018, the bank increased the retention ratio from 4 percent to 8 percent, followed by a further increase in February 2019 to a 12 percent ratio  in anticipation of a rise in bank liquidity due to the government’s non-conventional financing policy, which allows the Treasury to borrow directly from the central bank to pay state debts.  In response to liquidity concerns caused by the oil price decline in March 2020, the bank decreased the reserve requirement to 8 percent.

The IMF and Bank of Algeria have noted moderate growth in non-performing assets, currently estimated between 10-12 percent of total assets.  The quality of service in public banks is generally considered low as generations of public banking executives and workers trained to operate in a statist economy lack familiarity with modern banking practices.  Most transactions are materialized (non-electronic).  Many areas of the country suffer from a dearth of branches, leaving large amounts of the population without access to banking services.  ATMs are not widespread, especially outside the major cities, and few accept foreign bankcards.  Outside of major hotels with international clientele, hardly any retail establishments accept credit cards.  Algerian banks do issue debit cards, but the system is distinct from any international payment system.  In addition, approximately 4.6 trillion dinars ( USD 40 billion), or one-third, of the money supply is estimated to circulate in the informal economy.

Foreigners can open foreign currency accounts without restriction, but proof of a work permit or residency is required to open an account in Algerian dinars.  Foreign banks are permitted to establish operations in the country, but they must be legally distinct entities from their overseas home offices.

In 2015, the Financial Action Task Force (FATF) removed Algeria from its Public Statement, and in 2016 it removed Algeria from the “gray list.”  The FATF recognized Algeria’s significant progress and the improvement in its anti-money laundering/counter terrorist financing (AML/CFT) regime.  The FATF also indicated Algeria has substantially addressed its action plan since strategic deficiencies were identified in 2011.

Foreign Exchange and Remittances

Foreign Exchange

There are few statutory restrictions on foreign investors converting, transferring, or repatriating funds, according to banking executives.  Monies cannot be expatriated to pay royalties or to pay for services provided by resident foreign companies.  The difficultly with conversions and transfers results mostly from the procedures of the transfers rather than the statutory limitations: the process is bureaucratic and requires almost 30 different steps from start to finish.  Missteps at any stage can slow down or completely halt the process.  Transfers should take roughly one month to complete, but often take three to six months.  Also, the Algerian government has been known to delay the process as leverage in commercial and financial disputes with foreign companies.

Expatriated funds can be converted to any world currency.  The IMF classifies the exchange rate regime as an “other managed arrangement,” with the central bank pegging the value of the Algerian dinar (DZD) to a “basket” composed of 64 percent of the value of the U.S. dollar and 36 percent of the value of the euro.  The currency’s value is not controlled by any market mechanism and is set solely by the central bank.  As the Central Bank controls the official exchange rate of the dinar, any change in its value could be considered currency manipulation.  When dollar-denominated hydrocarbons profits fell starting in mid-2014, the central bank allowed a slow depreciation of the dinar against the dollar over 24 months, culminating in about a 30 percent fall in its value before stabilizing around 110 dinars to the U.S. dollar in late 2016.  However, the dinar lost only about 10 percent of its value against the euro in the same time frame.  The 2020 Finance Law forecast a 10 percent depreciation of the dinar against the dollar over three years.  Between March 8 and March 30 2020, the government allowed the dinar to depreciate five percent against the dollar.  Imbalances in foreign exchange supply and demand caused by the COVID-19 outbreak in March 2020 led to a steep decline in the value of the euro and dollar on the foreign exchange black market.

Remittance Policies

There have been no recent changes to remittance policies.  Algerian exchange control law remains strict and complex. There are no specific time limitations, although the bureaucracy involved in remittances can often slow the process to as long as six months.  Personal transfers of foreign currency into the country must be justified and declared as not for business purpose.  There is no legal parallel market through which investors can remit; however, there is a substantial black market for foreign currency, where the dollar and euro trade at a significant premium above official rates, although economic disruptions related to the outbreak of COVID-19 in March 2020 led to interruptions in the functioning of the black market.  With the more favorable informal rates, local sources report that most remittances occur via foreign currency hand-carried into the country.  Under central bank regulations revised in September 2016, travelers to Algeria are permitted to enter the country with up to 1,000 euros or equivalent without declaring the funds to customs.  However, any non-resident can only exchange dinars back to a foreign currency with proof of initial conversion from the foreign currency.  The same regulations prohibit the transfer of more than 3,000 dinars (USD 26) outside Algeria.

Private citizens may convert up to 15,000 dinars (USD 127) per year for travel abroad.  To do the conversion, they must demonstrate proof of their intention to travel abroad through plane tickets or other official documents.

In April 2019, the Finance Ministry announced the creation of a vigilance committee to monitor and control financial transactions to foreign countries.  It divided operations into three categories relating to 1) imports, 2) investments abroad, and 3) transfer abroad of profits.

Sovereign Wealth Funds

Algeria’s sovereign wealth fund (SWF) is the “Fonds de Regulation des Recettes (FRR).”  The Finance Ministry’s website shows the fund decreased from 4408.2 billion dinars (USD 37.36 billion) in 2014 to 784.5 billion dinars (USD 6.65 billion) in 2016.  Algerian media reported the FRR was spent down to zero as of February 2017.  Algeria is not known to have participated in the IMF-hosted International Working Group on SWF’s.

7. State-Owned Enterprises

State-owned enterprises (SOEs) comprise more than half of the formal Algerian economy.  SOEs are amalgamated into a single line of the state budget and are listed in the official business registry.  To be defined as an SOE, a company must be at least 51 percent owned by the state.

Algerian SOEs are bureaucratic and may be subject to political influence.  There are competing lines of authority at the mid-levels, and contacts report mid- and upper-level managers are reluctant to make decisions because internal accusations of favoritism or corruption are often used to settle political and personal scores.  Senior management teams at SOEs report to their relevant ministry; CEOs of the larger companies such as national hydrocarbons company Sonatrach, national electric utility Sonelgaz, and airline Air Algerie report directly to ministers.  Boards of directors are appointed by the state, and the allocation of these seats is considered political.  SOEs are not known to adhere to the OECD Guidelines on Corporate Governance.

Legally, public and private companies compete under the same terms with respect to market share, products and services, and incentives.  In reality, private enterprises assert that public companies sometimes receive more favorable treatment.  Private enterprises have the same access to financing as SOEs, but they work with private banks and they are less bureaucratic than their public counterparts.  Public companies refrained from doing business with private banks and a 2008 government directive ordered public companies to work only with public banks.  The directive was later officially rescinded, but public companies continued the practice.  However, the heads of Algeria’s two largest state enterprises, Sonatrach and Sonelgaz, both indicated in 2020 that given current budget pressures they are investigating recourse to foreign financing, including from private banks.  SOEs are subject to the same tax burden and tax rebate policies as their private sector competitors, but business contacts report that the government favors SOEs over private sector companies in terms of access to land.

SOEs are subject to budget constraints.  Audits of public companies can be conducted by the Court of Auditors, a financially autonomous institution.  The constitution explicitly charges it with “ex post inspection of the finances of the state, collectivities, public services, and commercial capital of the state,” as well as preparing and submitting an annual report to the President, heads of both chambers of Parliament, and Prime Minister.  The Court makes its audits public on its website, for free, but with a time delay, which does not conform to international norms.

The Court conducts audits simultaneously but independently from the Ministry of Finance’s year-end reports.  The Court makes its reports available online once finalized and delivered to the Parliament, whereas the Ministry withholds publishing year-end reports until after the Parliament and President have approved them.  The Court’s audit reports cover the entire implemented national budget by fiscal year and examine each annual planning budget that is passed by Parliament.

The General Inspectorate of Finance (IGF), the public auditing body under the supervision of the Ministry of Finance, can conduct “no-notice” audits of public companies.  The results of these audits are sent directly to the Minister of Finance, and the offices of the President and Prime Minister.  They are not made available publicly.  The Court of Auditors and IGF previously had joint responsibility for auditing certain accounts, but they are in the process of eliminating this redundancy.  Further legislation clarifying whether the delineation of responsibility for particular accounts which could rest with the Court of Auditors or the Ministry of Finance’s General Inspection of Finance (IGF) unit has yet to be issued.

Privatization Program

There has been limited privatization of certain projects previously managed by SOEs, and so far restricted to the water sector and possibly a few other sectors.  However, the privatization of SOEs remains publicly sensitive and has been largely halted.

8. Responsible Business Conduct

Multinational, and particularly U.S., firms operating in Algeria are spreading the concept of responsible business conduct (RBC), which has traditionally been less common among domestic firms.  Companies such as Anadarko, Cisco, Microsoft, Boeing, Dow, and Berlitz have supported programs aimed at youth employment, education, and entrepreneurship.  RBC activities are gaining acceptance as a way for companies to contribute to local communities while often addressing business needs, such as a better-educated workforce.  The national oil and gas company, Sonatrach, funds some social services for its employees and supports desert communities near production sites.  Still, many Algerian companies view social programs as the government’s responsibility.  While state entities welcome foreign companies’ RBC activities, the government does not factor them into procurement decisions, nor does it require companies to disclose their RBC activities.  Algerian laws for consumer and environmental protections exist but are weakly enforced.

Algeria does not adhere to the OECD or UN Guiding Principles and does not participate in the Extractive Industries Transparency Initiative.  Algeria ranks 73 out of 89 countries for resource governance and does not comply with rules set for disclosing environmental impact assessments and mitigation management plans, according to the most recent report by National Resource Governance Index.

9. Corruption

The current anti-corruption law dates to 2006.  In 2013, the Algerian government created the Central Office for the Suppression of Corruption (OCRC) to investigate and prosecute any form of bribery in Algeria.  The number of cases currently being investigated by the OCRC is not available.  In 2010, the government created the National Organization for the Prevention and Fight Against Corruption (ONPLC) as stipulated in the 2006 anti-corruption law.  The Chairman and members of this commission are appointed by a presidential decree.  The commission studies financial holdings of public officials, though not their relatives, and carries out studies.  Since 2013, the Financial Intelligence Unit has been strengthened by new regulations that have given the unit more authority to address illegal monetary transactions and terrorism funding.  In 2016, the government updated its anti-money laundering and counter-terrorist finance legislation to bolster the authority of the financial intelligence unit to monitor suspicious financial transactions and refer violations of the law to prosecutorial magistrates.  Algeria signed the UN Convention Against Corruption in 2003.

The Algerian government does not require private companies to establish internal codes of conduct that prohibit bribery of public officials.  The use of internal controls against bribery of government officials varies by company, with some upholding those standards and others rumored to offer bribes.  Algeria is not a participant in regional or international anti-corruption initiatives.  Algeria does not provide protections to NGOs involved in investigating corruption.  While whistleblower protections for Algerian citizens who report corruption exist, members of Algeria’s anti-corruption bodies believe they need to be strengthened to be effective.

International and Algerian economic operators have identified corruption as a challenge for FDI.  They indicate that foreign companies with strict compliance standards cannot effectively compete against companies which can offer special incentives to those making decisions about contract awards.  Economic operators have also indicated that complex bureaucratic procedures are sometimes manipulated by political actors to ensure economic benefits accrue to favored individuals in a non-transparent way.  Anti-corruption efforts have so far focused more on prosecuting previous acts of corruption rather than on institutional reforms to reduce the incentives and opportunities for corruption.  In October 2019, the government adopted legislation which allowed police to launch anti-corruption investigations without first receiving a formal complaint against the entity in question.  Proponents argued the measure is necessary given Algeria’s weak whistle blower protections.

Currently the government is working with international partners to update legal mechanisms to deal with corruption issues.  The government also created a new institution to target and deter the practice of overbilling on invoices, which has been used to unlawfully transfer foreign currency out of the country.

The government imprisoned numerous prominent economic and political figures in 2019 and 2020 as part of an anti-corruption campaign.  Some operators report that fear of being accused of corruption has made some officials less willing to make decisions, delaying some investment approvals.  Corruption cases that have reached trial deal largely with state investment in the automotive and public works sectors, though other cases are reportedly under investigation.

Resources to Report Corruption

Official government agencies:

Central Office for the Suppression of Corruption (OCRC)
Mokhtar Lakhdari, General Director
Placette el Qods, Hydra, Algiers
+213 21 68 63 12
www.facebook.com/263685900503591/ 
no email address publicly available

National Organization for the Prevention and Fight Against Corruption (ONPLC)
Tarek Kour, President
14 Rue Souidani Boudjemaa, El Mouradia, Algiers
+213 21 23 94 76
www.onplc.org.dz/index.php/ 
contact@onplc.org.dz

Watchdog organization:

Djilali Hadjadj
President
Algerian Association Against Corruption (AACC)
www.facebook.com/215181501888412/ 
+213 07 71 43 97 08
aaccalgerie@yahoo.fr

10. Political and Security Environment

Following nearly two months of massive protests, known as the hirak, former President Abdelaziz Bouteflika resigned on April 2, 2019, after 20 years in power.  His resignation launched an eight-month transition, resulting in the election of Abdelmadjid Tebboune as president in December 2019.  Voter turnout was approximately 40% and the new administration has focused on restoring government authority and legitimacy.

Prior to the hirak, demonstrations in Algeria tended to concern housing and other social programs and were generally smaller than a few hundred participants.  While most protests were peaceful, there were occasional outbreaks of violence that resulted in injuries, sometimes resulting from efforts of security forces to disperse the protests.

Government reactions to public unrest typically include tighter security control on movement between and within cities to prevent further clashes and promises of either greater public expenditures on local infrastructure or increased local hiring for state-owned companies.  During the first few months of 2015, there were a series of protests in several cities in southern Algeria against the government’s program to drill test wells for shale gas.  These protests were largely peaceful but sometimes resulted in clashes, injury, and rarely, property damage.  Government pronouncements in 2017 that shale gas exploration would recommence did not generate protests.

On April 27, 2020, an Algerian court sentenced an expatriate manager and an Algerian employee of a large hotel to six months in prison on charges of “undermining the integrity of the national territory” for allegedly sharing publicly available security information with corporate headquarters outside of Algeria.

The Algerian government requires all foreign employees of foreign companies or organizations based in Algeria to contact the Foreigners Office of the Ministry of the Interior before traveling in the country’s interior so that the government can evaluate security conditions.  The Algerian government also requires U.S. Embassy employees to request permission and a police escort to visit the Casbah in Algiers and to coordinate travel with the government on any trip outside of the Algiers wilaya (province).  In response to the COVID-19 outbreak, the Algerian government imposed lockdowns or curfews throughout the country, cancelled events and gatherings, suspended public transportation and domestic and international flights, and required 50 percent of all non-essential employees to stay at home.  These restrictions may impact where and when certain U.S. consular services can be provided.

The government’s efforts to reduce terrorism have focused on proactive security services and social reconciliation and reintegration.  Isolated terrorist incidents still occasionally occur.  There have been two major attacks on oil and gas installations in the last 10 years.  In March 2016, terrorists launched a homemade rocket attack on a gas facility in central Algeria that caused limited damage but no casualties.  In January 2013, there was a major attack at a remote oil and gas facility near the town of In Amenas in southeast Algeria (approximately 1,500 kilometers from Algiers) in which nearly 40 people – mostly western energy sector workers, including three Americans – were killed.

Terrorist attacks usually target Algerian government interests and security forces and generally occur outside of major cities, particularly in mountainous or remote southern areas.  On November 18, 2019, Algerian forces killed two alleged ISIS members during an operation along the southern border with Mali.  In February 2020, ISIS claimed responsibility for a suicide bomber who attacked a military barracks in southern Algeria, killing a soldier.  Other terrorist attacks claimed by ISIS include an August 2017 suicide attack in Tiaret that killed two police officers, and a February 2017 attack that injured two police officers in Constantine.

Each of these attacks prompted a swift counterterrorism response by Algerian security services against the militants responsible for the attacks, and the military continues regular counterterrorism operations.

U.S. citizens living or traveling in Algeria are encouraged to enroll in the Smart Traveler Enrollment Program (STEP) via the State Department’s travel registration website, https://step.state.gov/step, to receive security messages and make it easier to be located in an emergency.

11. Labor Policies and Practices

There is a shortage of skilled labor in Algeria in all sectors.  Business contacts report difficulty in finding sufficiently skilled plumbers, electricians, carpenters, and other construction/vocational related areas.  Oil companies report they have difficultly retaining trained Algerian engineers and field workers because these workers often leave Algeria for higher wages in the Gulf.  Some white-collar employers also report a lack of skilled project managers, supply chain engineers, and sufficient numbers of office workers with requisite computer and soft skills.

Official unemployment figures are measured by the number of persons seeking work through the National Employment Agency (ANEM).  Unemployment in 2019 dropped slightly to 11.4 percent.  Unemployment is significantly higher among certain demographics, including 29 percent  of young people (ages 16-24).  The rate of unemployed young men decreased in 2019, from 9.9 to 9.1 percent.  The percentage of unemployed young women increased from 2018 from 19.4 percent to 20.4 percent.  Roughly 70 percent of the population is under 30.

An important factor in the increased unemployment rate in 2019 is the government’s continued austerity policy since 2015, which has resulted in the cancellation of several investment projects, the freezing of recruitment in the public sector, and the decision not to replace government positions lost to normal attrition.  Additionally, the subsidy allotted to finance vocational integration (le dispositif d’insertion professionnelle) decreased from 135 billion dinars in 2013 to 44.1 billion in 2019.  In general, finding a job is regulated by the government and bureaucratically complex.  Prospective employees must register with the labor office, submit paper resumes door to door, attend career fairs, and comb online job offerings.  According to the Office of National Statistics, 81 percent of university graduates say that they favor “family relationships” or “the family network” as the best way to look for a job.

The private sector accounts for 62.2 percent of total employment with 7.014 million people, with 37.8 percent in the public sector, employing 4.267 million people.  Additionally, the International Labor Organization (ILO) estimates that more than one-third of all employment in Algeria takes place in the informal economy.  The Ministry of Vocational Training sponsors programs that offer training to at least 300,000 Algerians annually, including those who did not complete high school, in various professional programs.

Companies must submit extensive justification to hire foreign employees, and report pressure to hire more locals (even if jobs could be replaced through mechanization) under the implied risk that the government will not approve visas for expatriate staff.  There are no special economic zones or foreign trade zones in Algeria.

The constitution provides workers with the right to join and form unions of their choice provided they are Algerian citizens.  The country has ratified the ILO’s conventions on freedom of association and collective bargaining, but failed to enact legislation needed to implement these principles fully.  The General Union of Algerian Workers (UGTA) is the largest union in Algeria and represents a broad spectrum of employees in the public sectors.  The UGTA, an affiliate of the International Trade Union Conference, is an official member of the Algerian “tripartite,” a council of labor, government, and business officials that meets annually to collaborate on economic and labor policy.  The Algerian government liaises almost exclusively with the UGTA, however unions in the education, health, and administration sectors do meet and negotiate with government counterparts, especially when there is a possibility of a strike.  Collective bargaining is legally permitted but is not mandatory.

Algerian law provides mechanisms for monitoring labor abuses and health and safety standards, and international labor rights are recognized under domestic law, but are only effectively regulated in the formal economy.  The government has shown an increasing interest in understanding and monitoring the informal economy, evidenced by its 2018 partnerships with the ILO and current cooperation with the World Bank on several projects aimed at better quantifying the informal sector.

Sector-specific strikes occur often in Algeria, though general strikes are less common.  The law provides for the right to strike, and workers exercise this right, subject to conditions.  Striking requires a secret ballot of the whole workforce, and the decision to strike must be approved by a majority vote of the workers at a general meeting.  The government may restrict strikes on a number of grounds, including economic crisis, obstruction of public services, or the possibility of subversive actions.  Furthermore, all public demonstrations, including protests and strikes, must receive prior government authorization.  By law, workers may strike only after 14 days of mandatory conciliation or mediation.  The government occasionally offers to mediate disputes.  The law states that decisions agreed to in mediation are binding on both parties.  If mediation does not lead to an accord, workers may strike legally after they vote by secret ballot.  The law requires that a minimum level of essential public services must be maintained, and the government has broad legal authority to requisition public employees.  The list of essential services includes banking, radio, and television.  Penalties for unlawful work stoppages range from eight days to two months imprisonment.

In 2019, there were strikes at the end of the year, largely in the public health and public education sectors.  Medical residents went on strike demanding higher pay, better working conditions, and male residents sought an exemption from mandatory military service requirements.  After weeks of strikes, the Ministry of Health made some concessions in terms of additional benefits for doctors, and the residents resumed work.  Teachers also went on strike for higher pay and complained of perceived inequalities in the pay scale.  After weeks of strikes and a closed-door meeting, the Ministry of Education and unions came to an agreement, but to date no changes have been implemented and periodic teacher strikes continue.

Stringent labor-market regulations likely inhibit an increase in full-time, open-ended work.  Regulations do not allow for flexibility in hiring and firing in times of economic downturn.  For example, employers are generally required to pay severance when laying off or firing workers.  Unemployment insurance eligibility requirements may discourage job seekers from collecting benefits due to them, and the level of support claimants receive is minimal.  Employers must have contributed up to 80 percent of the final year salary into the unemployment insurance scheme in order for the employees to qualify for unemployment benefits.

The law contains occupational health and safety standards but enforcement of these standards is uneven.  There were no known reports of workers dismissed for removing themselves from hazardous working conditions.  If workers face hazardous conditions, they may file a complaint with the Ministry of Labor, which is required to send out labor inspectors to investigate the claim.  Nevertheless, the high demand for unemployment in Algeria gives an advantage to employers seeking to exploit employees.

Because Algerian law does not provide for temporary legal status for migrants, labor standards do not protect economic migrants from sub-Saharan Africa and elsewhere working in the country without legal immigration status.  However, migrant children are protected by law from working.

The Ministry of Labor enforces labor standards, including compliance with the minimum wage regulation and safety standards.  Companies that employ migrant workers or violate child labor laws are subject to fines and potentially prosecution.

The law prohibits participation by minors in dangerous, unhealthy, or harmful work or in work considered inappropriate because of social and religious considerations.  The minimum legal age for employment is 16, but younger children may work as apprentices with permission from their parents or legal guardian.  The law prohibits workers under age 19 from working at night.  While there is currently no list of hazardous occupations prohibited to minors, the government reports it is drafting a list which will be issued by presidential decree.  Although specific data was unavailable, children reportedly worked mostly in the informal sector, largely in sales, often in family businesses.  They are also involved in begging and agricultural work.  There were isolated reports that children were subjected to commercial sexual exploitation.

The Ministry of Labor is responsible for enforcing child labor laws.  There is no single office charged with this task, but all labor inspectors are responsible for enforcing laws regarding child labor.  In 2018, the Ministry of Labor focused one month specifically on investigating child labor violations, and in some cases prosecuted individuals for employing minors or breaking other child-related labor laws.  While the government claims to monitor both the formal and informal sectors, contacts note that their efforts largely focus on the formal economy.

The National Authority of the Protection and Promotion of Children (ONPPE) is an inter-agency organization, created in 2016, which coordinates the protection and promotion of children’s rights.  As a part of its efforts, in 2018 ONPPE held educational sessions for officials from relevant ministries, civil society organizations, and journalists on issues related to children, including child labor and human trafficking.

12. U.S. International Development Finance Corporation (DFC) and Other Investment Insurance Programs

An Overseas Private Investment Corporation (OPIC) agreement between the U.S and Algeria was signed in June 1990.  In 2005, the Algerian Energy Company entered a deal with Ionics Inc. of Watertown, Massachusetts, in which Ionics agreed to build a water desalination plant and the state water authority took a minority stake in the plant and agreed to purchase the bulk of the clean water produced.  OPIC provided a USD 200 million loan to Ionics, a desalination equipment manufacturer that was later acquired by General Electric.  In 2017, GE sold its stake in the Algiers water desalination plant, OPIC’s first and only project in Algeria to date.

An investment fund which used OPIC financing is in the process of selling assets in Algeria.

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source* USG or international statistical source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount  
Host Country Gross Domestic Product (GDP) ($M USD) 2019 $157.9 billion 2019 $170 billion World Bank:
https://data.worldbank.org/indicator/
NY.GDP.MKTP.CD
 
Algerian Office of National Statistics:
http://www.ons.dz/Au-deuxieme-
trimestre-2018-les.html
 
http://www.ons.dz/IMG/pdf/
comptesn4t2019.pdf
 
Foreign Direct Investment Host Country Statistical source USG or international statistical source USG or international Source of data:
BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) N/A N/A 2019 $2.74 billion BEA data available at
https://www.bea.gov/international/
direct-investment-and-multinational-
enterprises-comprehensive-data
 
Host country’s FDI in the United States ($M USD, stock positions) N/A N/A 2017 Algeria not listed BEA data available at
https://www.bea.gov/international/
direct-investment-and-multinational-
enterprises-comprehensive-data
 
Total inbound stock of FDI as % host GDP N/A N/A 2019  18.3% of GDP Algerian Source: National Agency for Investment Development.

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

* Source for Host Country Data: Algerian Office of National Statistics.

Data on inbound stock of FDI from UNCTAD is cumulative for 2005-2018, while the local Algerian source provides data only for 2018, hence the large discrepancy in size.

Table 3: Sources and Destination of FDI
Direct Investment from/in Counterpart Economy Data 2018
From Top Five Sources/To Top Five Destinations (US Dollars, Millions)
Inward Direct Investment Outward Direct Investment
Total Inward 26,693 100% Total Outward 2,302 100%
United States #1 6,962 26.08% Italy #1 1,010 43.87%
Italy #2 3,208 12.02% Peru #2 243 10.56%
France #3 2,939 11.01% Switzerland #3 234 10.17%
Spain #4 2,102 7.87% Spain #4 180 7.82%
United Kingdom#5 1,770 6.63% Libya #5 131 5.69%
“0” reflects amounts rounded to +/- USD 500,000.

The latest data available for Algeria is from 2018.

Table 4: Sources of Portfolio Investment
Data not available.

14. Contact for More Information

U.S Embassy Algiers
Political and Economic Section
5 Chemin Cheikh Bachir El-Ibrahimi, El Biar Algiers, Algeria
(+213) 0770 082 153
Algiers_polecon@state.gov

Côte d’Ivoire

Executive Summary

Côte d’Ivoire offers a fertile environment for U.S. investment, and the Ivoirian government is keen to deepen its commercial cooperation with the United States.  The Ivoirian and foreign business community in Côte d’Ivoire considers the 2018 investment code generous with incentives and few restrictions on foreign investors.  Côte d’Ivoire continues structural reforms to improve the business climate, including by executing major projects under the 2016-2020 National Development Plan (NDP) and the 2019-2020 social program (PSGouv).  But the ongoing COVID-19 pandemic will affect current and future investments, causing delays and postponements, cost increases, and logistics issues.

U.S. businesses operate successfully in the following Ivoirian sectors:  oil and gas exploration and production; agriculture and value-added agribusiness processing; power generation and renewable energy; IT services; digital economy; banking; insurance; and infrastructure.  In 2019, Côte d’Ivoire improved in the World Bank’s Doing Business ranking of 190 countries, moving from 122 to 110.  Improvements in the business environment included the implementation of a single taxpayer identification number system for business creation, introduction of an online case management system to process cash refunds of Value Added Tax, and making contract enforcement easier by publishing reports on commercial court performance and progress of cases.

Economically, Côte d’Ivoire is among Africa’s fastest growing economies and is the largest economy in francophone Africa.  Also home to the headquarters of the African Development Bank, Côte d’Ivoire attracts regional migrant labor and a significant expatriate professional community.  The IMF initially projected GDP growth to continue at 7.3 percent in 2020, led by growth in the industrial and service sectors. With the negative effects of COVID-19 on the country’s economic output, however, the IMF revised its projection to 2.7 percent, though still positive.

Despite improvements, doing business with the government remains a significant challenge.  The government has awarded a number of sole source contracts without competition and at times disregarded objective evaluations on competitive tenders.  An overly complicated tax system and a slow, opaque government decision-making process hinder investment.  Other challenges include weak access to credit for small businesses, corruption, and the need to broaden the tax base to relieve some of the tax-paying burden on businesses.

Following a credible and peaceful election in 2015 in which President Ouattara was overwhelmingly re-elected to a second term, the country adopted a new constitution in 2016 and established an upper legislative house (Senate) in April 2018.  Fraud and violence in certain locations marred legislative and municipal elections in 2018.  The lack of consensus in the composition of the Independent Electoral Commission, controversial reforms to the electoral code and amendments to the constitution, and the judicial exclusion of major opposition candidates from the 2020 presidential race, have aggravated the country’s internal political divisions.  On the other hand, President Ouattara’s announcement that he will not seek a third term – which, he argued, he could have done because of the new constitution – could contribute to institutionalizing democracy.

Côte d’Ivoire suffered a terrorist attack in March 2016 in the popular tourist town of Grand Bassam.  Al-Qaeda in the Islamic Maghreb claimed responsibility for this attack and continues to pose a major terrorism threat on the northern borders.  Côte d’Ivoire has since improved its domestic and international coordination efforts to combat the increasing the terrorist/violent extremist threat from the Sahel, and contributes to the United Nations peacekeeping mission in Mali.

Ivoirian women are not legally prohibited from starting businesses, acquiring credit, or buying property.  They nonetheless have historically faced discrimination, including lack of access to credit, that has hindered women’s business ownership.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2019 106 of 180 http://www.transparency.org/
research/cpi/overview
World Bank’s Doing Business Report 2019 110 of 190 http://www.doingbusiness.org/
en/rankings
Global Innovation Index 2019 103 of  129 https://www.globalinnovationindex.org/
analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2018 -$261 https://apps.bea.gov/international/
factsheet/
World Bank GNI per capita 2018 $1,600 http://data.worldbank.org/indicator/
NY.GNP.PCAP.CD

3. Legal Regime

Transparency of the Regulatory System

The government has taken steps to encourage a more transparent and competitive economic environment.  The IMF, World Bank, EU, and other large donors continue to urge the government to make further reforms.  The government aims for transparency in law and policy to foster competition and provide clear rules of the game and a level playing field for domestic and foreign investors.  Transparency of the Ivoirian regulatory system, however, is a concern as both foreign and Ivoirian companies complain that new regulations are issued with little warning and without a period for public comment.

There are no informal regulatory processes managed by non-governmental organizations or private sector associations.

Regulatory authority and decision-making exist only at the national level.  Sub-national jurisdictions do not regulate business.  For most industries or sectors, regulations are developed through the ministry responsible for that sector.  In the telecommunications, electricity, cocoa, coffee, cotton, and cashew sectors, the government has established control boards or independent agencies to regulate the sector and pricing.  Companies have complained that rules for buying prices determined by the agriculture commodity regulatory agencies tend to be opaque and prices are arbitrarily set without reference to world prices.

Côte d’Ivoire’s accounting, legal, and regulatory procedures are consistent with international norms, though both foreign and Ivoirian businesses often complain about the system’s lack of clarity and the government’s poor communication.  Côte d’Ivoire is a member of the Organization for the Harmonization of African Business Law (OHADA), which is common to 16 countries and adheres to the WAEMU accounting system.  In accounting, companies use the WAEMU system, which complies with international norms and is a source of economic and financial data.

Draft legislation and regulations are not published or made available for public comment.  The government, however, often holds public seminars and workshops to discuss proposed plans with trade and industry associations.

Regulatory actions are published in the Journal Officiel de la Republique de Côte d’Ivoire (Official Journal of the Republic of Côte d’Ivoire), which is available for purchase at newsstands, and by subscription on the Journal’s website http://www.sgg.gouv.ci/jo.php  and at https://abidjan.net/ .

The Autorité Nationale de Régulation des Marchés Publics (National Regulatory Authority for Public Procurement; ANRMP), polices transparency in public procurement and private sector compliance with public procurement rules.  Consumers, trade associations, private companies, and individuals have the right to file complaints with ANRMP to hold the government to its own administrative processes.

The U.S. government does not have any knowledge of recent regulatory system reforms, including enforcement reforms, that have been announced since the last ICS report.  The government has fully implemented regulatory reforms announced in prior years, with the goal to create an enabling business environment, foster competition, and build investor confidence in the economy.

Public and private institutions tasked with controlling and regulating various sectors make regulatory enforcement mechanisms available to the public.

Regulatory bodies regularly publish and promote access to their data for the business community and development partners, , allowing for scientific and data-driven reviews and assessments.  Quantitative analysis and public comments are made available.

The Ivoirian government promotes transparency of public finances and debt obligations (including explicit and contingent liabilities) with the publication of this information through the following websites:

http://budget.gouv.ci/main/index 

https://www.tresor.gouv.ci/tres/fr_FR/rapport-de-la-dette-publique/ 

International Regulatory Considerations

The Ivoirian government incorporates WAEMU directives into its public procurement bidding policy, processes, and auditing.  Recent changes include separating auditing and regulating functions, transitioning from a national to a regional system of procurement for intellectual services, and increasing advance payment for the initial procurement of goods and services from 25 to 30 percent.  The ANRMP regulates public procurement with a view to improving governance and transparency.  It has the authority to sanction entities that do not comply with public procurement regulations.

Ivoirian laws, codes, professional association standards, and regional body membership obligations are incorporated in the country’s regulatory system.  The private sector often follows European norms, to take advantage of the Ivoirian trade agreement with the EU, one of Côte d’Ivoire’s largest markets.

Côte d’Ivoire has been a WTO member since 1995 but has not notified all draft technical regulations to the WTO Committee on Technical Barriers to Trade.  Côte d’Ivoire signed the Trade Facilitation Agreement (TFA) in December 2013 and ratified it in December 2015.  The government has made efforts to implement the TFA requirements.  The government established the National TFA Committee (NTFC) to coordinate TFA implementation.  The USAID trade facilitation program has strengthened the capacity of the NTFC.

Legal System and Judicial Independence

The Ivoirian legal system is based on the French civil law model.  The law guarantees to all the right to own and transfer private property.  Rural land, however, is governed by a separate set of laws which make ownership and transfer very difficult.  The court system enforces contracts.

Côte d’Ivoire is a signatory to OHADA, which provides common corporate law and arbitration procedures for the 16 member states.  The Commercial Court of Abidjan adjudicates corporate law cases and contract disputes.  Mediation is also available through the Ivoirian legal framework in addition to the Commercial Court and the Arbitration Tribunal.  Following the recommendations of business associations and commercial law experts, in August 2017, the government established the Court of Appeals of the Commercial Court of Abidjan.  The IMF recommended the creation of other commercial juridical bodies in the interior of the country, though these have not yet been established and the Commercial Court of Abidjan retains jurisdiction for the entire country.

The Ivoirian judicial system is ostensibly independent, but magistrates are sometimes subject to political or financial influence.  Judges sometimes fail to prove that their decisions are based on the legal or contractual merits of a case and are often seen to rule against foreign investors in favor of entrenched interests.  The greatest complaint from investors is the slow dispute resolution process.  Cases are often postponed and appealed without a reasonable explanation, moving from court to court for years or even decades.  Regulations or enforcement actions are appealable and adjudicated through the national court system.

Laws and Regulations on Foreign Direct Investment

The 2018 Investment Code is the primary law governing investment conduct.  The code does not restrict foreign investment or the repatriation of funds.  The code offers a mix of fiscal incentives, combining tax exoneration and tax credits to encourage investment.  The government also offers incentives to promote small businesses and entrepreneurship, low-cost housing construction, factories, and infrastructure development, which the government considers key to the country’s economic development.  Some sectors have additional laws which govern investment activity in those sectors.  In mining, for example, the Mining Code allows a period for holding permits for ten years with a possibility to extend for two more years on a limited permit area of 400 square kilometers.

The CEPICI provides a one-stop shop website to assist investors.  More information on Côte d’Ivoire’s laws, rules, procedures, and reporting requirements can be found at:

www.apex-ci.org/

www.cepici.gouv.ci/

Competition and Anti-Trust Laws

The Ministry of Commerce, Industry and Small Business Promotion, through the Commission on Anti-Competition Practices, is responsible for reviewing competition–related concerns under the 1991 competition law, which was updated in 2013.  ANRMP is responsible for reviewing the awarding of contracts.

No significant competition cases were reported over the past year.

Expropriation and Compensation

Private expropriation to force settlement of contractual or investment disputes continues to be a problem.  Local individuals or local companies, using what appear to be spurious court decisions, have challenged the ownership of some foreign companies in recent years.  On occasion, the government has blocked the bank accounts of U.S. and other foreign companies because of ownership and tax disputes.

There is no history of public expropriations.

In cases of illegal expropriations, Ivoirian law affords claimants due process.  Even so, perceived corruption and lack of capacity in the judicial and security services have resulted in poor enforcement of private property rights, particularly when the entity in question is foreign and the plaintiff is Ivoirian or a long-established foreign resident.

Dispute Settlement

ICSID Convention and New York Convention

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

In cases where the firm does not meet the nationality conditions stipulated by Article 25 of the Convention, the code stipulates that the dispute be resolved within the provisions of the supplementary mechanisms approved by the ICSID.

Investor-State Dispute Settlement

Côte d’Ivoire is a signatory to investment agreements subject to binding international arbitration of investment disputes.  Côte d’Ivoire recognizes and has been known to enforce foreign arbitral awards, but enforcement is inconsistent.

Côte d’Ivoire does not have a Bilateral Investment Treaty (BIT) or a Free Trade Agreement (FTA) with the United States.

In the past 10 years, foreign investors have had investment disputes, which often have been resolved through arbitration or amicable settlement.  There have been no reported disputes involving U.S. firms in the past 10 years.  As Côte d’Ivoire is a signatory to the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards, local courts are obliged to enforce foreign arbitral awards.

The U.S. government is not aware of any history of extrajudicial action against foreign investors, including U.S. firms.

International Commercial Arbitration and Foreign Courts

The Abidjan-based regional Joint Court of Justice and Arbitration (CCJA) provides a means of solving contractual disputes.  The arbitration tribunal has the ability to enforce awards more quickly, but the use of the tribunal in lieu of the court system has been limited.

Côte d’Ivoire is a member of OHADA, whose provisions adopted in 1999 have replaced domestic law on arbitration.  The unified law is based on the UNICITRAL model law.

Judgments of foreign courts are recognized but difficult to enforce in local courts.  To avoid working through the Ivoirian legal system, some investors stipulate in contracts that disputes must be settled through international commercial arbitration.  Yet, even if stipulated in the contract, decisions reached through OHADA are sometimes not honored by local courts.

The U.S. government is not aware of cases in which Côte d’Ivoire’s domestic courts have shown preferential treatment for state-owned enterprises involved in investment disputes.

Bankruptcy Regulations

As a member of OHADA, Côte d’Ivoire has both commercial and bankruptcy laws that address the liquidation of business liabilities.  OHADA is a regional system of uniform laws on bankruptcy, debt collection, and rules governing business transactions.  OHADA permits three different types of bankruptcy liquidation:  an ordered suspension of payment to permit a negotiated settlement; an ordered suspension of payment to permit restructuring of the company, similar to Chapter 11; and the complete liquidation of assets, similar to Chapter 7.  Creditors’ rights, irrespective of nationality, are protected equally by the Act.  Bankruptcy is not criminalized.  Court-ordered monetary settlements resulting from declarations of bankruptcy are usually paid out in local currency.  Côte d’Ivoire is ranked 85 out of 190 countries for ease of resolving insolvency, according to the World Bank’s Doing Business Report.

The joint venture Credit Info – Volo West Africa manages regional credit bureaus in the WAEMU.

4. Industrial Policies

Investment Incentives

The 2018 Investment Code offers a mix of fiscal incentives, combining tax exoneration and tax credits focusing on agriculture, agro-business, tourism, health, and education.  These include a full exoneration of customs duties or suspended VAT, and tax exemptions to business operations in some remote areas, with incentives based on the type of investment, phase of operation, local content, and participation.  There are also incentives to promote small businesses and entrepreneurship, low-cost housing construction, factories, and infrastructure development, which the government considers key to the country’s economic development.  The Investment Code, the Petroleum Code, and the Mining Code delineate incentives available to new investors in Côte d’Ivoire.

The government occasionally guarantees loans or jointly finances foreign direct investment projects.  This is not a common practice.

Foreign Trade Zones/Free Ports/Trade Facilitation

Created in 2008, the Ivoirian free trade zone (FTZ) for information technology and biotechnology (VITIB) is located in the town of Grand Bassam.  In 2014, VITIB established the Mahatma Gandhi Technology Park at Grand Bassam.  Bonded warehouses do exist, and bonded zones within factories are allowed.  High port costs and maritime freight rates have inhibited the development of in-bond manufacturing or processing, and there are consequently no general foreign trade zones.

An FTZ also exists at the Port of Abidjan specifically for fish processing.  In force since December 2005, this FTZ is reserved for companies which earn at least 90% of their turnover from exports.  Eligible companies are exempt from all duties and taxes, including on imported and exported goods and services.  They also enjoy preferential rates for water, electricity, telephone, and fuel supplied by public or semi-public establishments.   A fee applies to FTZ companies, the amount of which is fixed by decree.

Performance and Data Localization Requirements

The government strongly encourages investors and firms to hire Ivoirian employees, but this is not a requirement.

The 2018 Investment Code guarantees the freedom to designate senior management and board members.

Citizens of Economic Community of West African States (ECOWAS) countries can legally work in Côte d’Ivoire without additional permissions and do not need a residency permit.  For other nationalities, visas, work, and residency permits are required.  The investment promotion agency CEPICI facilitates the visa and permit process.  The process is not onerous and does not inhibit the ability of foreign investors and their employees to enter and exit the country.

There are no government-imposed conditions on permission to invest, including tariff and non-tariff barriers.

The government does occasionally place conditions on location, local content, equity ownership, import substitution, export requirements, host country employment, and technology.  For example, the Ivoirian government required that one U.S. fast food franchise use locally-sourced key ingredients, which it is able to do.  The government also makes use of a number of tax exemptions and customs exonerations to incentivize companies to do more value-added processing in Côte d’Ivoire.

There are no performance requirements for investments.

Cellular telephone companies must meet technology performance requirements to maintain their licenses.  The U.S. government does not know of any requirements that Côte d’Ivoire imposes on foreign information technology firms to give the government source code or provide access to encryption.

There are no requirements that prevent or unduly impede companies from freely transmitting customer or other business related data.  Data transmission or transfer is subject to prior authorization of the telecom regulatory board Autorité de Régulation des Télécommunications (Telecommunications Regulatory Authority of Côte d’Ivoire; ART-CI).

Côte d’Ivoire’s law on data protection requests prior declaration or authorization by ART-CI for any data processing.  ART-CI is responsible for the oversight of local data storage.

5. Protection of Property Rights

Real Property

The Ivoirian civil code provides for the enforcement of private property rights, and the government has undertaken reform efforts to secure property rights.  Mortgages and liens exist.  Secured interests in property are enforced by the Land Registry Office of the Ministry of Economy and Finance.  In the World Bank’s Doing Business 2020 report, Côte d’Ivoire is ranked 112 out of 190 countries for registering property.

Foreign and/or nonresident investors who wish to lease land must obtain a permit for the development of the site, as well as a prefectural or sub-prefectural order recognizing occupation of the site.

The Audace Institute, an independent Ivoirian think tank, estimates that 96 percent of land does not have a clear title.  The government has committed to titling all private land by 2026.  The government has made efforts to raise awareness on land titling throughout the country and to streamline procedures for obtaining land titles.  In 2018, the World Bank approved a program to build institutional capacity needed to support the implementation of the national rural land tenure security program, and register customary land rights in selected rural areas.  The Ministry of Agriculture and Rural Development requires that all land to be titled be professionally surveyed.  The surveying, which must be performed by one of the few companies authorized by the Ministry of Agriculture and Rural Development to execute land surveys in Côte d’Ivoire, can cost more than the value of the land.  The status of the land from which thousands of Ivoirians fled during the 2011 post-election conflict has not been resolved.  Much of that land is now occupied by persons who do not hold title, many of whom are immigrants or descendants of immigrants from neighboring countries to the north of Côte d’Ivoire.  A lack of title and a conflict between modern land tenure law and traditional practice hinders resolution of land tenure disputes.

It is not necessary to occupy legally purchased property in order to retain title.

Intellectual Property Rights

The Ivoirian Civil Code includes measures to protect intellectual property rights (IPR), but the government has limited resources for their enforcement.  The government’s Office of Industrial Property is charged with ensuring the protection of patents, trademarks, industrial designs, and commercial names.  Patents are valid for 10 years, with the possibility of two extensions of five years each.  Trademarks are valid for 10 years and are renewable indefinitely. Copyrights are valid for 50 years.  The Ivoirian Copyright Office has a labeling system in place to prevent counterfeiting and to protect audio, video, literary, and artistic property rights in music and computer programs.  While Ivoirian IPR law is in conformity with standards established by the World Trade Organization (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), the country lacks customs checks at its porous borders, limiting the law’s impact.

The government has not adopted any IPR-related laws or regulations in the past year.

By law, the government must protect intellectual property on both exported and imported goods. Customs has the power to seize imported products that violate IPR laws even if installed with other equipment, including equipment detained, marketed, or illegally supplied.  Such seizures, generally of counterfeit consumer goods (increasingly medicines), are routinely publicized on government websites and media outlets, although statistics on seizures are unavailable.  The intellectual property office’s police unit has sometimes conducted raids on retail outlets and street vendors to confiscate pirated CDs and DVDs and instituted legal proceedings against counterfeiters.  IPR violations are prosecuted, and penalties vary from imprisonment of three months to two years and fines from 100,000 to 5,000,000 CFA (USD 166 to 8,333 based on an average exchange rate of 600 CFA to one U.S. dollar).

Côte d’Ivoire is not listed in the United States Trade Representative (USTR)Special 301 Report or the Notorious Markets List.

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

6. Financial Sector

Capital Markets and Portfolio Investment

Government policies generally encourage foreign portfolio investment.

The Regional Stock Exchange (BRVM) is located in Abidjan and the BRVM lists companies from the eight countries of the WAEMU.  The existing regulatory system effectively facilitates portfolio investment through the West African Central Bank (BCEAO) and the Regional Council for Savings Investments (CREPMF).  There is sufficient liquidity in the markets to enter and exit sizeable positions.

Government policies allow the free flow of financial resources into the product and factor markets.

The BCEAO respects IMF Article VIII on payment and transfers for current international transactions.

Credit allocation is based on market terms and has increased to support the private sector and economic growth, specifically for large businesses.  Foreign investors can acquire credit on the local market.

Money and Banking System

As of May 2020, there were 27 commercial banks and two credit institutions in Côte d’Ivoire.  Banks are expanding their national networks, especially in the secondary cities outside Abidjan, as domestic investment has increased up-country.  The total number of bank branches has more than doubled from 324 in 2010 to 694 branches in 2018 (latest data available).  Alternative financial services available include mobile money and microfinance for bill payments and transfers.  Many Ivoirians prefer mobile money over banking, but mobile money does not yet offer the same breadth of financial services as banks.

Most Ivoirian banks are compliant with the BCEAO’s minimum capital requirements.  Some public banks have large numbers of nonperforming loans.  The government is restructuring and privatizing the commercial banking sector in order to remove low performers from government accounts.

The estimated total assets of the five largest banks are around USD 10 billion and account for 49 percent of bank assets.

The BCEAO is common to the eight member states of the WAEMU and manages banking regulations.

Foreign banks are allowed to operate in Côte d’Ivoire; at least one has been in Côte d’Ivoire for decades.  They are subject to the WAEMU Banking Commission’s prudential measures and regulations.  Côte d’Ivoire did not lose any correspondent banking relationships in the past three years.  No known correspondent banking relationships are in jeopardy.

Foreign Exchange and Remittances

Foreign Exchange

There are no restrictions on the transfer or repatriation of capital and income earned, or on investments financed with convertible foreign currency.  Once an investment is established and documented, the government regularly approves the remittances of dividends and/or repatriation of capital.  The same holds true for requests for other sorts of transactions (e.g. imports, licenses, and royalty fees).

Funds associated with investments funded with convertible currency are freely convertible into any world currency.

Côte d’Ivoire is a member of the WAEMU, which uses the West African Franc (XOF), also called the CFA.  The French Treasury holds the international reserves of WAEMU member states and supports the fixed exchange rate of 655.956 CFA to the Euro.  In December 2019, the Ivoirian President as chairman of WAEMU announced the forthcoming transition from the CFA to another common regional currency to be called the Eco; details about the timeline or modalities of the change have not yet been published.

Remittance Policies

There are no recent changes or plans to change investment remittance policies.

There are no time limitations on remittances.  Total personal remittances received by Ivoirians were about USD 335 million in 2019 or 0.7 percent of GDP.

Sovereign Wealth Funds

Côte d’Ivoire does not have a sovereign wealth fund.

7. State-Owned Enterprises

Companies owned or controlled by the state are subject to national laws and the tax code.  The Ivoirian government still holds substantial interests in many firms, including the refinery SIR (49 percent), the public transport firm (60 percent), the national television station RTI (98 percent), the national lottery (80 percent), the national airline Air Côte d’Ivoire (58 percent), and the land management agency Agence de Gestion Fonciere AGEF (35 percent).  Total assets of State-Owned Enterprises (SOEs) were USD 796 million and total net income of SOEs was USD 116 million in 2018 (latest figures).  Of the 82 SOEs, 28 are wholly government owned, 12 are majority owned, seven are with a blocking minority, and 35 are minority shares.  Each SOE has an independent board.  The government has begun the process of divestiture for some SOEs (see next section).  The Ivoirian government is an active participant in the banking, agri-business, mining, and telecom industries.

The published list of SOEs is available at https://dgpe.gouv.ci/index.php?p=portefeuille_etat 

SOEs competing in the domestic market do not receive non-market based advantages from the government.  They are subject to the same tax burdens and policies as private companies.

Côte d’Ivoire does not adhere to OECD guidelines for SOE corporate governance (it is not a member of OECD).

Privatization Program

The government began a program in 2013 – not yet completed – to privatize a quarter of public enterprises, including: approximately 15 public or semi-public enterprises, banks, and USD 232 million of investments the government holds in Industrial Promotion Services (IPS)-Aga Khan Foundation projects.  The government has completed privatization of the Societe Ivoirienne de Banque (now Attijariwafa-bank), the sugar company Sucrivoire, and the cotton firm Compagnie Ivoirienne de pour le Developpement du Textile (Ivoirian Company for Textile Development).  At the urging of the IMF, the government is privatizing Versus Bank, NSIA Bank, and the housing finance bank BHCI.

Contracts for participation in this program are competed through a French-language public tendering process, for which foreign investors are encouraged to submit bids.  No website on privatizations exists.

8. Responsible Business Conduct

The private sector, the government, NGOs, and local communities are becoming progressively aware of the importance of Responsible Business Conduct (RBC) with regard to environmental, social, and governance issues in Côte d’Ivoire.

Investors seeking to implement projects in energy, infrastructure, agriculture, forestry, waste management, and extractive industries are required by decree to provide an environmental impact study prior to approval.  Foreign businesses, particularly in mining, energy, and agriculture, often provide social infrastructure, including schools and health care clinics, to communities close to their sites of operation, often at the request of the government.  Some companies complain that these requests can be quite numerous.  Companies are not required under Ivoirian law to disclose information relating to RBC, although many companies, especially in the cocoa sector, publicize their work.  Cocoa companies publicize efforts to improve sustainability and combat the worst forms of child labor.  As a part of public procurement reform, the Ministry of Budget plans to include social needs in public procurement contracts to support job creation, fair trade, decent working conditions, social inclusion and compliance with social standards.  On the environment, suggested reforms include the selection of goods and services that have a smaller impact on the environment.

There have not been high profile instances of a private sector impact on human rights or the resolution of such cases in the past year.

The government, through the Ministry of Employment and Social Protection, sets workplace health and safety standards and is responsible for enforcing labor laws.

The OHADA outlines corporate governance standards that protect shareholders.

There are government-funded agencies in charge of monitoring business conduct.  Human rights, environmental protection, and consumer NGOs report misconduct and violations of good governance practices.

While international firms are aware of OECD guidelines and international best practices in RBC, most local firms have limited familiarity with international standards.

Côte d’Ivoire participates in the Extractive Industries Transparency Initiative (EITI) and discloses revenues and payments in the oil, gas, and mineral sectors.  More information can be found at: www.cnitie.ci/ .

9. Corruption

Corruption is a concern for businesses.  In 2013, the Ivoirian government issued Executive Order number 2013-660 related to the prevention and the fight against corruption.  The High Authority for Good Governance covers corruption issues and requires that all public officials submit asset declarations at the beginning and end of their tenures in office.  The country’s financial intelligence office, CENTIF, has broad authority to investigate suspicious financial transactions, including those of government officials.  Despite the establishment of these bodies and credible allegations of widespread corruption, there have been few charges filed, and few prosecutions and judgments against prominent people for corruption.  The former Prime Minister Guillaume Soro, now an opposition presidential candidate, was convicted of embezzlement and sentenced to 20 years in prison on April 28, 2020.  The domestic business community generally assesses that these watchdog agencies lack the power and/or will to actively combat corruption.

Anti-corruption laws extend to family members of officials and to political parties.

The country’s Code of Public Procurement No. 259 and the associated WAEMU directives cover conflicts-of-interest in awarding contracts or government procurement.

Under the Ivoirian Penal Code, a bribe by a local company to a foreign official is a criminal act.

Some private companies use compliance programs or measures to prevent bribery of government officials.  U.S. firms underscore to their Ivoirian counterparts that they are subject to the Foreign Corrupt Practices Act (FCPA).

Côte d’Ivoire ratified the UN Anti-Corruption Convention, but the country is not a signatory to the OECD Anti-Bribery Convention (which is open to non-OECD members).  In 2016, Côte d’Ivoire joined the Partnership on Illicit Finance, which obliges it to develop an action plan to combat corruption.

There are no special protections for NGOs involved in investigating corruption.

Corruption in many forms is deeply ingrained in public and private sector practices and remains a serious impediment to investment and economic growth in Côte d’Ivoire.  Many companies cite corruption as the most significant obstacle to investment in Côte d’Ivoire.  It has the greatest impact on judicial proceedings, contract awards, customs, and tax issues.  Lack of transparency and failure to follow the government’s own tender procedures in the awarding of contracts lead businesses to conclude bribery was involved.  Businesses have reported encountering corruption at every level of the civil service, with some judges appearing to base their decisions on bribes.  Clearance of goods at the ports often requires substantial “commissions,” and the Embassy has heard anecdotal accounts of customs agents rescinding valuations that were declared by other customs colleagues in an effort to extract bribes from customers.  The demand for bribes can mean that containers stay at the Port of Abidjan for months, incurring substantial demurrage charges, despite having the paperwork in order.

No local industry or non-profit groups offer services for vetting potential local investment partners.

Resources to Report Corruption

These contacts at agencies are responsible for combating corruption:

Inspector General of Finance
(Brigade de Lutte Contre la Corruption)
Lassina Sylla
Inspector General
TELEPHONE: +225 20212000/2252 9797
FAX: +225 20211082/2252 9798
HOTLINE: +225 8000 0380
http://www.igf.finances.gouv.ci/ 
info@igf.finances.gouv.ci

High Authority for Good Governance
(Haute Autorite pour la Bonne Gouvernance)
N’Golo Coulibaly
President
TELEPHONE: +225 22479 5000
FAX: +225 2247 8261

Police Anti-Racketeering Unit
(Unite de Lutte Contre le Racket –ULCR)
Alain Oura
Unit Commander
TELEPHONE: +225 2244 9256
info@ulcr.ci

10. Political and Security Environment

President Alassane Ouattara was elected to a second term in 2015.  In 2016, the country adopted a new constitution, creating the position of Vice-President, and a Senate, which first convened in April 2018.  During and/or after recent elections, such as in 2010 and 2018, demonstrations and protests by political parties were common and occasionally led to vandalism and clashes with security forces.  Unions also engage in protests that sometimes become violent.  The lack of consensus on the composition of the country’s independent electoral commission, the contentious reform of its electoral code, and the exclusion of key opposition figures from the presidential race have aggravated political divides within the country.

Côte d’Ivoire’s security situation has significantly improved since its 2010-2011 post-electoral violence.  In early 2017, some Ivoirian soldiers mutinied, demanding payment of bonuses.  The government responded by largely acceding to their demands and pledging to improve living and working conditions for armed and security forces, which it has steadily done over the ensuing years.  Côte d’Ivoire suffered a terrorist attack in March 2016 in the popular tourist town of Grand Bassam.  Al-Qaeda in the Islamic Maghreb claimed responsibility for the attack and continues to pose a major terrorism risk to the region.  Côte d’Ivoire continues to improve its domestic security approach and international cooperation to combat the increasing terrorism/extremist threat emanating from the Sahel over the past years.

11. Labor Policies and Practices

The official unemployment rate is 2.8 percent, with higher unemployment in urban areas.  The unemployment rate among those aged 14-24 is 3.9 percent.  Forty seven percent of the non-agricultural workforce is employed in the informal economy.  Official statistics fail to fully account for the large informal economy throughout the country, and do not accurately portray the general dearth of well-paying employment opportunities.  Foreign workers from neighboring countries constitute a significant part of the work force, especially in agriculture.  Despite the government’s efforts, child labor remained a widespread problem in rural and urban areas, particularly on cocoa and coffee plantations, as well as in artisanal gold mining areas, and in domestic work.

There are significant shortages of skilled labor in higher education fields including information technology, engineering, finance, management, health, and science.  The Ivoirian government is working with the Millennium Challenge Corporation (MCC) to build and develop four technical and vocational training centers.

Labor laws favor the employment of Ivoirians in private enterprises, and state that any vacant position must be advertised for two months.  If after two months no qualified Ivoirian is found, the employer may recruit a foreigner provided it plans to recruit an Ivoirian to fill the position in the next two years.  The foreign employee must be given a labor contract.

There are no restrictions on employers adjusting employment in response to fluctuating market conditions.  Employees terminated for reasons other than theft or flagrant neglect of duty have the right to termination benefits.  Unemployment insurance and other social safety programs exist for employees laid off for economic reasons, but for the 85 percent of workers employed in the informal sector, this is not an option.

Labor laws are not waived to attract or retain investment.

Collective bargaining agreements are in effect in many major business enterprises and sectors of the civil service.  A prolonged teachers’ strike in 2019 was submitted for settlement but due to the fractured nature of the teachers’ unions, not all parties agreed to the decision.

Labor disputes are submitted to the labor inspector for amicable settlement before engaging in any legal proceedings.  If this attempt to settle the dispute fails, then the labor court can be engaged to resolve the dispute.

No strike has posed an investment risk during the last year.

There are no gaps with international labor standards in law or practice that pose a reputational risk to investors.

The government did not adopt any new labor related laws or regulations in 2019.  In 2017, the government passed a law forbidding most forms of child labor for children under 12 and restricting it for minors aged 13 to 17.  The law’s passage put Ivoirian law on par with ILO standards for child labor.

12. U.S. International Development Finance Corporation (DFC) and Other Investment Insurance Programs

There are currently no DFC projects in Côte d’Ivoire, but DFC continues to look for opportunities, particularly in energy and infrastructure.

In 2017, the Ivoirian government ratified its investment incentive agreement with OPIC (DFC’s predecessor).

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source* USG or international statistical source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount  
Host Country Gross Domestic Product (GDP) ($M USD) N/A N/A 2018 $43 billion www.worldbank.org/en/country 
Foreign Direct Investment Host Country Statistical source* USG or international statistical source USG or international Source of data:
BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) N/A N/A 2019 -$495 BEA data available at
https://www.bea.gov/international/
direct-investment-and-multinational-
enterprises-comprehensive-data
 
Host country’s FDI in the United States ($M USD, stock positions) N/A N/A N/A BEA data available at
https://www.bea.gov/international/
direct-investment-and-multinational-
enterprises-comprehensive-data
 
Total inbound stock of FDI as % host GDP N/A N/A 2018 23.8% UNCTAD data available at
https://unctad.org/en/Pages/DIAE/
World%20Investment%20Report/
Country-Fact-Sheets.aspx
 
  
Table 3: Sources and Destination of FDI
Direct Investment from/in Counterpart Economy Data
From Top Five Sources/To Top Five Destinations (US Dollars, Millions)
Inward Direct Investment Outward Direct Investment
Total Inward Amount 100% Total Outward Amount 100%
France $8,428 22% Burkina Faso $1,904 19%
Canada $1,830 12% Cayman Islands $217 19%
Morocco $790 9% Liberia $205 11%
Mauritius $460 5% Mali $154 8%
United Kingdom $452 5% Senegal $152 8%
“0” reflects amounts rounded to +/- USD 500,000.

Table 4: Sources of Portfolio Investment
Data not available.

14. Contact for More Information

U.S. Embassy Abidjan
Political/Economic Section
Cocody Riviera Golf
BP 730 Abidjan Cidex 03
Republic of Cote d’Ivoire
Phone: (+225) 22-49-40-00

Equatorial Guinea

Executive Summary

The Republic of Equatorial Guinea is endowed with oil and gas resources that attracted billions of dollars in direct U.S. investment instrumental to extracting those resources. Discovery of oil in the 1990s resulted in rapid economic growth by the late 2000s. According to certain businesses, however, corruption, perceptions of a biased judiciary and a burdensome, inefficient bureaucracy undermine the general investment climate in the country. Growth has slowed as several operational oil fields have matured and are now in decline. International watchdog organizations give Equatorial Guinea one of the world’s lowest rankings in various global indices, including those for corruption, transparency, and ease of doing business. Companies have reported that these ratings underscore the challenging and opaque environment in which both local and foreign businesses must operate. The government of the Republic of Equatorial Guinea is seeking investment in several sectors: agribusiness; fishing; energy and mining; petrochemicals, plastics and composites; travel and tourism; and finance. Most of these sectors are undeveloped. The Equatoguinean domestic market is small, with an estimated population of one million, although the country is a member of the Central African Monetary and Economic Union (CEMAC) sub-region, comprising more than 50 million people. The zone has a central bank and a common currency – the CFA franc, which is pegged to the euro. Equatorial Guinea graduated from “Least Developed Country” (LCD) status in 2017 and recently reactivated its efforts to accede to the World Trade Organization. Equatorial Guinea became a full member of Organization of the Petroleum Exporting Countries (OPEC) in 2017 and is a member of the Gas Exporting Countries Forum (GECF).

The Government of the Republic of Equatorial Guinea has worked with international partners, including the World Bank (WB) and the International Monetary Fund (IMF), since March 2014 to analyze ways to improve the business climate. The government implemented some recommendations, launched a one-stop shop for investors and entrepreneurs in January 2019 and instituted certain tax exemptions and other incentives to attract investment.

Equatorial Guinea has made significant advances on the country’s Horizon 2020 social development plan, specifically in construction of infrastructure, electrification, and access to water, healthcare, and education. Equatorial Guinea expresses pride in having some of the region’s best roads and other essential infrastructure, including development of its ports and pending completion of a new airport terminal. After oil prices started dropping in 2014, the government began extending timelines for completing infrastructure projects and put many on hold as the country slumped into a recession that continued through 2019. The steep drop in oil prices in early 2020 combined with the coronavirus pandemic is expected to shrink the economy by nearly 9 percent. Investors have reported that past commercial disputes have involved delayed payment, or non-payment, by the Government of the Republic of Equatorial Guinea to foreign firms for delivered goods and services; and that certain companies exited the country with millions in unpaid bills. Some claim that much work remains, especially on diversifying the economy and improving healthcare and education.

Equatorial Guinea does not require visas for U.S. citizens. Visas may be difficult to obtain for third-country nationals, although the government created new visa categories in 2019 in an effort to speed the process. Residency and work permits can be similarly difficult to obtain or renew. In March 2018, to ease the conditions of entry and residence in the country, the government reduced the cost of permits by half. Residency and work permits were not issued regularly between 2017 and 2019, requiring expatriates to leave the country every 90 days.

Despite various challenges, U.S. businesses have mainly had success in the hydrocarbons sector. Some U.S. businesses have profited in other sectors such as technology and computer services. Various international companies continued to enter the market in 2019 and 2020 in response to new licensing rounds in the hydrocarbons and mining sectors. U.S. businesses may invest in new sectors such as telecommunications, infrastructure, agriculture, mining, and transportation.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2019 173 of 198 http://www.transparency.org/
research/cpi/overview
World Bank’s Doing Business Report 2020 178 of 190 https://www.doingbusiness.org/en/data/
exploreeconomies/equatorial-guinea
Global Innovation Index 2019 N/A https://www.globalinnovationindex.org/
analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2018 $908 https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2018 $6,650 http://data.worldbank.org/
indicator/NY.GNP.PCAP.CD

3. Legal Regime

Transparency of the Regulatory System

The Government of the Republic of Equatorial Guinea publicly publishes labor laws; however, officials do not consistently apply laws or regulations. Officials expect foreign companies to follow every detail of the labor law or face penalties. Some companies report less strict enforcement of compliance with the labor laws by national companies. U.S. businesses have complained that bureaucratic procedures are neither streamlined nor transparent and can be extremely slow for those without the proper political or familial connections. Many regulations are created within ministries, while others are the result of laws passed by the legislature. Although most regulations are created at the national level, some decisions may be taken at the municipal level (such as decisions about permits for construction).

Proposed laws and regulations are not published in draft form for public comment, but there have been reports of informal sharing with representatives of specific industries for comment. Regulations and laws are generally not published online but are available in hardcopy for a fee.

Private industry representatives report that accounting, legal, and regulatory procedures are generally neither transparent nor consistent with international norms.

According to the 2019 Fiscal Transparency Report, Equatorial Guinea does not meet the minimum requirements of fiscal transparency. More information is available at: https://www.state.gov/2019-fiscal-transparency-report/

The government recently made some progress on transparency of its public finances and debt obligations. Although not available to the public several months until after the start of the fiscal year, the 2018 budget included information on debt obligations for the first time in several years, including both public and private debt obligations. The 2019 budget also included debt obligations. The government has been working on fiscal transparency as part of its International Monetary Fund (IMF) program and another program with the African Development Bank that began in 2019. The Ministry of Economy, Finance, and Planning announced plans to move customs to an electronic system to improve transparency and prevent corruption. The Automated Customs System (Sistema Aduanero Automatizado or SIDUNEAWorld) was implemented on April 30, 2020, upon the Ministry’s announcement. By late May 2020, it had already registered 49 shipping manifests via http://siduneage.com .

In April 2020, the Ministry of Economy, Finance, and Planning issued an official communication on restructuring internal arrears. An internal arrears audit was conducted to evaluate the government’s obligations to construction companies. The African Legal Support Facility financed the process of regulating those arrears, which was carried out by McKinsey law firm. As stated in the memorandum of understanding, adopted by Decree No 136/2019, the next step includes the process of securitization to be conducted by an international financial agency.

International Regulatory Considerations

Equatorial Guinea is a member of the Central African Monetary and Economic Union (CEMAC), which includes a regional central bank (the Bank of Central African States, or BEAC) and various regulations including lower tariffs on intra-regional trade.

Equatorial Guinea is not a member of the World Trade Organization (WTO) and is listed as an observer government. The General Council of the WTO established a Working Party to examine the country’s application to join in February 2008, but the country never submitted a Memorandum on the Foreign Trade Regime (MFTR). The government is working on its application. According to the WTO’s 2019 Report, published February 20, 2020, Equatorial Guinea’s accession process is likely to become active, with the first meeting of its working party in 2020. At the request of the Government of Equatorial Guinea, the WTO Secretariat undertook a technical assistance mission to Malabo in March 2019 to assist in preparing the MFTR and to enhance the negotiating team’s understanding of the WTO Agreements, with a strong focus on the accession process. Equatorial Guinea participated in regional WTO dialogues as recently as February 2020.

Equatorial Guinea is not a signatory to the Trade Facilitation Agreement (TFA).

Legal System and Judicial Independence

Equatorial Guinea’s legal system is a mix of civil and customary law. Law No. 7/1992 states that disputes that cannot be resolved through direct negotiation by the involved parties shall be referred to Equatoguinean courts. Either party can also submit the dispute to international arbitration. Foreign investors are asked to declare their desired international arbitration venue in their initial application to invest in the country. Arbitration must take place in a neutral location and Spanish will be the official language of the arbitration.

Equatorial Guinea was ranked 105 of 190 in the World Bank’s Doing Business Report 2020 for “enforcing contracts.”

Labor law is meant to protect workers, including a requirement for written contracts and regulation of labor by minors. Labor courts exist for matters related to employment. Several companies have complained that cases are rarely decided on the merits and penalties are excessive. Appeals generally proceed to the supreme or constitutional court. The court system and staff are generally considered under-resourced and unprepared, according to companies and public statements by President Teodoro Nguema Obiang Mbasogo. Both the Labor Law and the Penal Code were set to be updated in 2020, with drafts submitted to the Legislature, which was suspended amid the COVID-19 pandemic.

The judicial system is not independent of the executive branch as the president is officially the head of the court system, with the power to appoint or remove judges at will.

Laws and Regulations on Foreign Direct Investment

Most investment is focused in the extractive industries and infrastructure development. Laws No. 7/1992 and 2/1994 and Decrees No. 54/1994 and 127/2004 regulate foreign investment. Certain industries have additional regulations. The enforcement of laws and judicial decisions has not been reliable nor consistent, according to investors. The executive branch heavily influences the judicial branch, as the president is also the chief magistrate of the Republic of Equatorial Guinea. While the government has made efforts to streamline foreign investment procedures and simplify business registration processes, these processes have not all been implemented. Decree No. 72/2018 of April 2018 revised No. 127/2014 of September 2014 and eliminated mandatory 35 percent national participation in foreign companies, except for in the hydrocarbons sector. The implementation of the “one-stop shop” for business registration in January 2019 simplified the registration process and reportedly reduced the time to complete it to seven business days, according to the government. The centralized one-stop shop clarifies the rates to be paid and the procedures to follow. The Ministries of Economy, Finance, and Planning and Commerce plan to evaluate the system in 2020 to determine its effectiveness. There is a webpage with information (https://www.ventanillaempresarialge.com/en/welcome/ ) but businesses cannot yet register online. Investors work with the relevant government ministries to negotiate contracts.

The government published Decree 45/2020 in April 2020, reducing the minimum capital needed to register a limited-liability company from 1 million XAF (USD 1713) to 100,000 XAF (USD 171).

Competition and Anti-Trust Laws

Equatorial Guinea does not have an agency that actively enforces any competition laws. Equatorial Guinea became a member of the Organization for the Harmonization of Business Laws in Africa (OHADA) in 1999, and any OHADA competition laws should apply in Equatorial Guinea.

Expropriation and Compensation

Law No. 7/1992 states that the government will not expropriate foreign investments except when acting in the public interest with fair, just, and proper compensation. The Government of the Republic of Equatorial Guinea does not generally nationalize or expropriate foreign investments, although a Spanish investor had his property confiscated in 2013. The Government of the Republic of Equatorial Guinea does have an extensive record of expropriating locally owned property, frequently offering little or no compensation. The government has also withdrawn blocks for hydrocarbons exploration when companies failed to invest within an allotted period, though this generally appears to follow the terms of published tenders.

Dispute Settlement

ICSID Convention and New York Convention

Equatorial Guinea is not a party to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention — also known as the Washington Convention), although Law No. 7/1992 states that international arbitration may utilize ICSID as the basis of procedure. Equatorial Guinea is not a party to the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards.

Investor-State Dispute Settlement

In October 2018, Equatorial Guinea announced the resolution of litigation begun in 2014 over Orange Group’s ownership stake in the incumbent fixed line and mobile operator Guinea Ecuatorial de Telecomunicaciones Sociedad Anonima (Getesa). Agence Ecofin cited a statement from the Embassy of Equatorial Guinea in France, confirming that on September 26, 2018, the government signed an agreement with Orange Middle East & Africa under which it paid EUR 50 million (USD 57.5 million) to the French-based telecoms giant in return for relinquishing Getesa shares. The final payment followed Equatorial Guinea’s initial share payment to Orange of EUR 45 million in October 2016, thereby settling the balance of an agreed EUR 95 million-redemption price for Orange’s 40 percent stake. TeleGeography’s GlobalComms Database says that Equatorial Guinea’s government lost a Paris Court of Appeal case against a fine imposed in July 2014 by the International Court of Arbitration for reneging on a 2011 agreement to buy Orange’s Getesa stake in the event of a new entrant launching (a clause it failed to honor after the 2012 launch of majority state-owned cellular company GECOMSA). In October 2016, the government agreed to pay EUR 150 million, including interest, to Orange.

A Spanish businessperson signed a joint venture agreement with President Obiang in 2009 to build 36,000 homes in Equatorial Guinea. President Obiang allegedly pulled support for the project at the last minute, leaving the Spanish citizen bankrupted. In March 2012, the Spanish businessperson submitted a claim before the International Centre for Investment Dispute Settlements (ICSID), which ruled in favor of Equatorial Guinea in 2015. In August 2017, Madrid’s provincial court ordained a magistrate to revise the claim, acknowledging the Spanish competency to rule the case because of the bilateral investment treaty between the countries. The case was ongoing at the start of 2020, but it is unclear if it will continue as the claimant died of COVID-19 in April 2020.

In at least one case in late 2018, a company that had not been paid by a state-owned enterprise for over a year was able to make an alternate arrangement to receive payment. This required an amendment to the contract rather than a judicial solution.

International Commercial Arbitration and Foreign Courts

The Organization for the Harmonization of Corporate Law in Africa (OHADA) Uniform Act on Arbitration rules would apply where the Court has its seat in Abidjan, but it may sit in any one of the seventeen Member States of the Organization. The Court has already held hearings in several OHADA member states in recent years. As of March 2019, the Common Court of Justice and Arbitration of the OHADA included an Equatoguinean lawyer on the list of arbitrators of its Arbitration Center of the Common Court of Justice and Arbitration. This lawyer is the first Equatoguinean added to the OHADA list.

Law No. 7/1992 states that disputes that cannot be resolved through direct negotiation by the involved parties shall be referred to Equatoguinean courts. Either party can also submit the dispute to international arbitration. In their initial application to invest in the country, foreigners must declare their desired international arbitration venue. Arbitration must take place in a neutral location with Spanish as the official language.

Firms have alleged that court actions are sometimes discriminatory, not transparent, tending to favor local parties rather than foreigners or foreign companies.

In 2015, the government closed a microfinance institution founded by a member of an opposition party. He reportedly appealed to the CEMAC court, which recommended arbitration. We have no information on the outcome.

Bankruptcy Regulations

The Government of the Republic of Equatorial Guinea adopted the business laws of the Organization for the Harmonization of Business Laws of Africa (OHADA), including that pertaining to bankruptcy.

The Republic of Equatorial Guinea is tied for last place in the World Banks’s 2020 Doing Business Report’s ranking of “Resolving Insolvency.” The Republic of Equatorial Guinea received the World Bank’s “no practice mark” due to the lack of cases over the past five years involving judicial reorganization, judicial liquidation, or debt enforcement. This suggests that creditors are unlikely to recover their money through a formal legal process.

4. Industrial Policies

Investment Incentives

Law No. 2/1994 of June 6, 1994 offers investment incentives in the form of deductions from taxable income: 50 percent of the amount paid to Equatoguinean staff in wages and 200 percent of the cost of training Equatoguinean staff. It also extends/maintains previous license exemptions for imports and exports, allows conversion of sales into foreign currency, and permits transfers abroad of company profits. Decree No. 67/2017 of September 2017 created the “one-stop shop” business portal to promote investment and economic activity by significantly reducing the time needed to register a new company. According to the government, registering a company through the one-stop shop – launched in January 2019 — takes approximately seven (7) days. Decree n° 72/2018 of April 2018 revised decree 127/2014 of September 2014 to foster foreign direct investments. The revised investment law eliminated the need to have a local business partner in foreign companies, except for the hydrocarbons sector. The government sometimes jointly finances foreign direct investment projects, such as construction of social housing.

Foreign Trade Zones/Free Ports/Trade Facilitation

There are currently no known laws, policies, or practices for any areas designated as Free Trade or Duty Free Zones. Three entities have tax-free status: Luba Freeport, the Port of Bata, and the K5 Freeport Oil Centre.

Performance and Data Localization Requirements

The Government of the Republic of Equatorial Guinea used to require a minimum percentage of employees and subcontractors to be Equatoguinean, ranging from 70 to 90 percent. Presidential Decree 72/2018 of April 18, 2018 revised Presidential Decree 127/2014 of September 14, 2014, eliminating this requirement, except for the hydrocarbons sector. The decree requires that Equatoguineans hold certain management positions in the hydrocarbons sector. Foreign investors in the hydrocarbons sector are required to have a significant percentage of domestic content in goods and technology. Companies are supposed to send vacancies to the Ministry of Labor, Employment Promotion, and Social Security. If the Ministry is unable to find a qualified candidate within 30 days, the company may hire an ex-patriate worker.

Equatorial Guinea does not require U.S. citizens to obtain visas, which can be difficult for third-country nationals to obtain and generally requires a government-approved letter of invitation, which can take months to obtain. Residency and work permits can be similarly difficult to obtain and renew. In March 2018, as part of an overall effort to improve transparency and ease the conditions of entry and residence in the country, the cost of a residency permits from USD 700 to USD 343 per year. In December 2019, the government agreed to lower the cost of residency permits to conform with the cost of a business visa (H1B) to the United States (USD 160). Some companies have reported delays in the residency permit process. Work permits, often a pre-requisite for a residency permit, are also difficult and time consuming to obtain. Some businesses report that they have been unable to obtain the annual permits for over five years. There are some reports that certain officials have asked for “expediting” fees that are beyond established government fees and occasionally ask for bribes directly. This is especially problematic at the airport and at customs, according to various accounts.

The Ministries of Mines and Hydrocarbons and of Labor, Employment Promotion, and Social Security, among others, make regular inspections of companies and may apply fines. The Ministry of Mines and Hydrocarbons has fined, suspended, and expelled companies that it perceived did not comply with regulations or laws, especially on local content.

The Government of the Republic of Equatorial Guinea requires internet service providers, whether local or foreign, to turn over source code or provide access to surveillance. According to article 15 of the Telecommunication law (Law 7, dated November 7, 2015), Equatoguinean government offices are supposed to report to the Regulating Organ of Telecommunications (ORTEL) any information concerning official communications lines and networks. The Government of the Republic of Equatorial Guinea has no requirements pertaining to maintaining data storage within the country. The Ministry of Transports, Telecommunications, and Mail reduced the cost of internet in 2019 and 2020 as part of a strategy towards openness and increased access, and both the Telecommunications Regulator (ORTEL) and the Telecommunications Infrastructure Administrator (GITGE) are promoting implementation of the new strategy. The government had announced that internet would be available in all public places, such as airports, banks, and cultural centers, by 2020, though this will likely be delayed by the COVID-19 pandemic. It is already available in some locations, such as the new boardwalk (Paseo Maritimo) in Malabo. Although the government claims that 95 percent of municipalities have access to a fiber optic network, according to the International Telecommunication Union, only 26.2 percent of the population used the internet in 2017.

5. Protection of Property Rights

Real Property

The Government of the Republic of Equatorial Guinea selectively enforces property rights. While the government has laws on the books regarding the rights of property owners, the government can use the judicial system to seize land in the interest of the country with little to no due process. Mortgages exist under a “Social Housing Program” in which payments are made to the government via the commercial CCEI Bank. The mortgage length varies and can be more than 20 years. Interest rates are high, ranging from 12 to 18 percent. Non-payment for six months results in the foreclosure of the property. According the World Bank’s Doing Business 2020 report, registering property in Equatorial Guinea required six procedures and usually took 23 days. Equatorial Guinea was ranked 163 of 190 in the World Bank’s Doing Business Report 2020 for “registering property.”

Intellectual Property Rights

Equatorial Guinea is a member of the African Intellectual Property Organization (AIPO) and joined the World Intellectual Property Organization (WIPO) in 1997. Intellectual property rights (IPR) protections fall under the Council of Scientific and Technological Research of Equatorial Guinea. Equatorial Guinea does not report on seizures of counterfeit goods. Legal structures are weak, and IPR protection and enforcement are rare to non-existent. The government does not maintain publicly available statistics on law enforcement or judicial actions. Equatorial Guinea is not included in the United States Trade Representative (USTR) Special 301 Report or the Notorious Markets List.

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

6. Financial Sector

Capital Markets and Portfolio Investment

The banking sector provides limited financing to businesses. The government reports that two microfinance institutions operate in country and the government has started a microcredit program for SMEs. The country does not have its own stock market. According to investors, capital markets are non-existent. Credit is available but interest rates are high, ranging from 12 to 18 percent for mortgages and about 15 percent for personal loans. Business loans generally require significant collateral, limiting opportunities for entrepreneurs, and may have rates of 20 percent or greater. It is unclear if foreigners could obtain credit on the local market.

Money and Banking System

While there are banks throughout the country, they are concentrated in urban centers. There is little information available about assets and the health of the banking system. The Equatorial Guinea National Bank (BANGE) has 29 branches throughout the country. According to a November 2017 article, BANGE had over 80,000 clients, approximately 10 percent of the population. CCEI/CCIW Bank de Guinea Ecuatorial has four branches in the largest cities and is a subsidiary of First Bank Afriland (Cameroon). BGFI Bank Guinée Equatoriale operates as a subsidiary of BGFI Holding Corporation (Gabon). Pan-African EcoBank (Togo) and Societe Générale (France) also operate in Equatorial Guinea. According to the United Nations, in 2016 approximately 20 percent of the population had deposits in commercial banks. If a bank does not have a branch in the location where an individual wants to do business, they would not have access their funds there. ATMs are in limited locations.

The Government of the Republic of Equatorial Guinea is a member of the Economic and Monetary Community of Central African States (CEMAC) and shares a regional Central Bank with other CEMAC members. Members have ceded regulatory authority over their banks to CEMAC, but also are entitled to national BEAC Branches. Evinayong, Bata and Malabo each have a branch. The government of the Republic of Equatorial Guinea is also a member of the Banking Commission of Central African States within CEMAC.

Foreigners must provide proof of residency to establish a bank account.

The country’s economy is an almost entirely cash based, with credit cards available but not widely used in the general population. Primarily visitors or wealthy citizens use credit cards at international hotels, international airlines, and major supermarkets. In April 2020, partly in response to the COVID-19 pandemic, the government encouraged banks to increase electronic payment mechanisms. The Ministry of Economy, Finance, and Planning also continued to expand electronic payments for government employees. In May 2020, the Government of the Republic of Equatorial Guinea endorsed the guiding principles of the United Nations’ “Better than Cash” Alliance, a partnership of governments, companies and international organizations to accelerate the transition from cash to digital payments as part of the United Nation’s Sustainable Development Goals. The Alliance has 75 members committed to digitizing payments to boost efficiency, transparency, and women’s economic participation and financial inclusion to make economies more digital and inclusive.

The banking sector is affected by relatively lengthy bureaucratic procedures and a lack of computerized record keeping. Customers have reported that currency is not always available on demand, and delays making transfers or exchanging local currency into foreign exchange have increased since the BEAC instituted new banking and foreign currency regulations in 2019.

Foreign Exchange and Remittances

Foreign Exchange

Decree No. 54/1994 provides the right to freely transfer convertible currency abroad at the end of each fiscal year, but in practice many businesses report that limited financial services create barriers to successfully executing international transfers. On April 1, 2019, the CEMAC Central Bank published a regulation to enforce an existing requirement to maintain bank accounts in Central African francs (CFA) rather than foreign exchange, with a six-month moratorium until October 1, 2019. Account holders are theoretically able to convert funds to foreign exchange through an administrative process, but it is unclear if this applies to all accounts in the region. The moratorium was extended through 2020 for the extractives sector (hydrocarbons and mining). Many other businesses and individuals have reported lengthy delays to convert currency and make international bank transfers under the new rules.

Foreign currency is not widely available in the Central African Franc zone but can be relatively easily obtained in the Republic of Equatorial Guinea in small quantities.

Equatorial Guinea does not engage in currency manipulation as the CFA franc currently has a fixed exchange rate to the euro: 100 CFA francs = 1 former French (nouveau) franc = 0.152449 euro or 1 euro = 655.957 CFA francs exactly. Thus, the exchange rate of the currency fluctuates according to the value of the euro.

Remittance Policies

On April 1, 2019, the CEMAC Central Bank published a regulation to enforce an existing requirement to maintain bank accounts in CFA rather than foreign exchange, with a six-month moratorium until October 1, 2019. Account holders are theoretically able to convert funds to foreign exchange through an administrative process. It is unclear if this applies to all accounts in the region. Companies in the hydrocarbons sector received an exemption on implementation through 2020.

Sovereign Wealth Funds

The Government of the Republic of Equatorial Guinea established a sovereign wealth fund, the Fund for Future Generations, in 2002. According to investors, the fund has little transparency regarding its management or value. A 2017 press report estimated the fund to have USD 413 million, or 1.6 percent of Equatorial Guinea’s GDP. The Sovereign Wealth Fund Institute estimates assets under management of USD 165.5 million. There is no publicly available information on its allocations.

7. State-Owned Enterprises

The Republic of Guinea Equatorial has at least eight State-Owned Enterprises (SOEs) in the energy, housing, fishing, aerospace and defense, and information and communication sectors. Sonagas is the national natural gas company and GEPetrol is the national oil company. The energy SOEs report to the Ministry of Mines and Hydrocarbons and hold monopolies in their respective sectors. SEGESA is the national electricity company. GECOMSA and GETESA are the national telecommunication service providers. SONAPESCA focusses on the promotion of fishing and reports to the Minister of Fisheries and Water Resources. ENPIGE is the SOE that oversees the government’s affordable housing program. Ceiba Intercontinental is the main airline and a joint venture between the government and Ethiopian Airlines. The budget includes allocations to and earnings from SOEs. Large SOEs lacked publicly available audits. According to some companies, there is little evidence of oversight of SOEs. A requirement of the IMF’s 2018 staff monitored program, however, is that the government contract an internationally reputable firm to audit the accounts of the state-owned oil (GEPetrol) and gas (Sonagas) companies, which the government hired at the start of 2019. (The audits were still ongoing in early 2020.) All oil and gas projects must include a partnership with state-owned companies GEPetrol or Sonagas.

Equatorial Guinea’s oil and gas sector scored 22 of 100 points in the 2017 Resource Governance Index (RGI), ranking 85th among 89 assessments. Its overall failing performance can be attributed to the enabling environment component, which scores 17 of 100 points and ranks 79th among 89 assessments, along with an equally low score for revenue management. For more information, see https://resourcegovernance.org/.

Privatization Program

The Ministry of Economy, Finance, and Planning discussed plans to involve the private sector in the management of state-owned assets, including through privatization. The initiative was a recommendation from the Third National Economic Conference (April-May 2019), which included discussion of options to improve management of state assets. The government envisages three paths: (i) restructuring autonomous agencies and state-owned enterprises; (ii) concession of assets to the private sector; and (iii) sale of public assets to private operators (privatization). The authorities also plan to open to competition sectors where public enterprises operate, with the aim of limiting monopolistic practices and passing on efficiency gains to the rest of the economy. The Ministry will present a substantive list of state assets to be privatized, as well as a list of entities that will be restructured or placed under a concession regime with the private sector for the approval of the Council of Ministers (structural benchmark, end of June 2020). Once the Council of Ministers approves this plan, the authorities will present an action program for privatization (planned for the second half of 2020). To generate revenue, they plan to prioritize privatization, with the proceeds going to pay down validated domestic arrears and rebuild EG’s foreign currency reserves at the BEAC. Sales and concessions will be carried out through open, international tenders. The sale of the listed assets may be delayed so that their prices are not negatively affected by the current global slowdown. Information is likely to be announced on the Ministry’s website: https://www.minhacienda.gob.gq/. 

8. Responsible Business Conduct

Many U.S. firms operating in Equatorial Guinea have well-developed corporate social responsibility (CSR) programs. The Ministry of Mines and Hydrocarbons has established industry-specific regulations that mandate minimum rates of CSR contributions. The Government of the Republic of Equatorial Guinea is considering a regulation that would increase those rates. U.S. and UK oil and gas companies tend to exceed those rates. Most firms from other countries have limited CSR programs. The government has expressed their appreciation for the U.S. companies’ efforts and recognized the positive role of U.S. firms. CSR projects have included support for various initiatives, including conservation, education, health, and awareness campaigns on sensitive subjects like trafficking in persons. The government approves all CSR programs, offering explicit support, and occasionally also provides additional in kind or financial support. There are several non-governmental organizations operating in the country that work in fields in which CSR takes place, often as partners with the companies, but they do not fulfill a monitoring role.

Equatorial Guinea submitted an application in 2019 to join the Extractive Industries Transparency Initiative (EITI), after being delisted in 2010 for missing its validation deadline during its first attempt to join. This was a condition of the IMF staff monitored program. A decision was still pending from the EITI Board in June 2020.

9. Corruption

There is no publicly designated contact at a government agency responsible for combating corruption. Various ministries, including the office of the Prime Minister, nominally have responsibility for combatting corruption either within their own ministry or in the government at large. A commission to combat corruption was formed in 2019 but there has not been a public announcement of its results or projects. There are no “watchdog” organizations operating in country.

The Government of the Republic of Equatorial Guinea has laws and regulations against corruption, but many businesses have complained that they are not often enforced, and as a result, corruption is very common. There are no specific laws about conflict of interest or nepotism. Numerous foreign investigations continued into high-level official corruption. For example, on September 14, 2018, Brazilian authorities seized two suitcases with USD 1.4 million in cash and another suitcase containing approximately 20 watches valued at USD 15 million from Vice President Teodoro Obiang Nguema Mbasogo upon landing in Sao Paulo on an unofficial visit. The press reported on October 10, 2018, that Brazilian officials launched an investigation because they believed the undeclared cash and luxury watches, along with apartments and cars owned by the vice president in Brazil, might have been part of an effort to launder money embezzled from Equatorial Guinea’s government. Separately, one government official within the Ministry of Transport, Telecommunications, and Mail was fired and reportedly arrested in April 2019, and was expected to be charged with corruption. A military court sentenced a former Army Chief of Staff to 18 years in prison in October 2019 for embezzlement of public funds. He was also ordered to reimburse the 38 million CFA francs (USD 65,000).

U.S. companies operating in Equatorial Guinea are required to adhere to the rules of the Foreign Corrupt Practices Act. Some U.S. firms report that they are concerned about corruption related to government procurement, award of licenses and concessions, customs, and dispute settlement. Major U.S. firms have internal controls, ethics, and compliance programs to detect and prevent bribery of government officials. It is unclear what controls exist at smaller companies and other foreign and domestic firms.

The country’s greatest concerns in terms of money laundering and terrorism financing are cross-border currency transactions and the illegal international transfer of money by companies or corrupt individuals. Some report that widespread corruption, at times involving members of the government, is a primary catalyst for money laundering and other financial crimes. Certain businesses have noted that diversion of public funds and corruption are widespread in both commerce and government, particularly as regards the use of proceeds from the extractive industries, including oil, gas, and timber, and infrastructure projects.

Equatorial Guinea became a signatory to the United Nations Convention against Corruption on May 30, 2018. Equatorial Guinea is a member of the Task Force against Money Laundering in Central Africa, an entity in the process of becoming a Financial Action Task Force-style regional body. The country is not a party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

Resources to Report Corruption

N/A

10. Political and Security Environment

There is not a history of civil unrest in Equatorial Guinea. Some report this is due to a severe limitation of political opposition and civil society, including freedom of assembly and expression. There have been, however, examples of politically-motivated violence. On October 27, 2018, four individuals detained and beat civil society leader and human rights activist of the CEIDGE. Initial reports suggested that security force members might have carried out the attack, mistaking the activist for his brother, a leader of an opposition party.

President Teodoro Obiang Nguema Mbasogo has been in power since 1979. Equatorial Guinea does not have an established record of democratic transfer of power. In the week leading up to President Obiang’s re-election on April 24, 2016, there were reports that government security forces forcibly entered the headquarters of political opposition party Citizens for Innovation (CI) and seriously injured several opposition party members. Political activists who were arrested prior to the election have been subsequently released, although some remained in jail for over a year. Opposition members continue to report arrest, torture, and harassment, despite President Obiang securing another seven years in office.

In 2017, Equatoguinean authorities detained a large group of over one hundred CI opposition party members in the cities of Bata, Akonibe, and Malabo during the campaign period for municipal and legislative elections; thirty-one of them were sentenced to 41 years in prison in February 2018. They were subsequently released by a Presidential pardon in October 2018. A well-known Equatoguinean cartoonist and political activist was also detained in Malabo for six months until he was released from prison on March 8, 2018, after being acquitted of counterfeiting and money laundering due to false testimony by a police officer. An alleged foiled coup plot led to a campaign of massive arrests from December 2017 to March 2018 in the country and a trial of 117 individuals in the mainland city Bata between March and May 2019. The ruling Democratic Party of Equatorial Guinea (PDGE) announced on November 3, 2018, that it had expelled 42 members for alleged involvement in the coup. Security forces often used excessive force when implementing government restrictions designed to combat COVID-19 in 2020.

Government officials and members of the private sector have noted an increase in crime, including drug use and violent robberies, as the country’s recession continues. Piracy in the Gulf of Guinea also increased from 2018-2020, including within Equatorial Guinea’s territorial waters.

11. Labor Policies and Practices

Equatorial Guinea has a consistent shortage of skilled labor. Unskilled labor is readily available. Youth unemployment is considered widespread but statistics are scarce. According to the government’s 2015 census, which was released in 2018, about 40 percent of the population were not formally working and about 16 percent were unemployed. Officials estimate that close to 50 percent of the country’s workforce participates in the informal economy. Foreign laborers make up an important segment of all sectors of the economy, but generally dominate skilled labor positions, including engineers, pilots, and doctors. Labor laws apply to both foreign and domestic laborers, though in practice rulings tend to favor locals over foreigners when resolving disputes.

The oil and gas industry claims to have a shortage of trained individuals. Companies in the oil and gas sector sponsor training programs, and the government sponsors a limited number of students for short- and long-term international training and academic programs. The industry and the government also run a National Technological Institute of Hydrocarbons, which has 50 students per cohort in a three-year program. The government and companies inaugurated a new building in Mongomo in 2019, after various years in Malabo and Bata.

The agriculture and fishing sectors have shrunk in past decades as the rural population declined 42 percent from 2001 to 2015, according to the government census, and some businesses claim to have a shortage of laborers. Cattle ranchers have brought in migrant workers from the Sahel region of Africa to work with imported cattle.

Despite challenges in finding skilled labor, various laws require hiring nationals. The National Content Law of Equatorial Guinea requires that oil companies hire seventy percent of nationals. Officials of the Ministry of Labor explained that according to the Labor Law (last updated in 2012 and under review for an update), the final target of the government is that 90 percent of workers should be nationals. They also underlined that for companies to fill a position there is a process through the Ministry. If no suitable domestic applicant is found in 30 days, then the company is free to hire a foreigner. Employers must make extensive severance payments even when employment demands fluctuate due to market conditions. Currently there is neither unemployment insurance nor other social safety net programs for workers laid off for economic reasons, though this has been a goal of the government for several years.

Compared to the United States, labor laws in the Republic of Equatorial Guinea are generally favorable toward the employee. Labor disputes may be heard by the congress or in the courts, and the decisions typically favor the employee. Aside from a union of small farmers and the taxi association, the Government of the Republic of Equatorial Guinea does not recognize any labor unions. Small collectives and associations are allowed to register with the government but do not carry out labor advocacy efforts. Collective bargaining is not common. There have not been any strikes during the last year that posed an investment risk and the government typically restricts the occurrence of strikes or protests.

Labor laws include provisions such as regulating industries in which minors may work, as well as requiring written contracts. Short-term contracts are limited to 24 months. Local government enforcement of labor laws is mostly focused on preventing companies from employing and exploiting unauthorized migrants. The Government of the Republic of Equatorial Guinea has regulations to monitor health and safety standards and an inspection force, but some have criticized the effectiveness of their enforcement.

Labor laws differentiate between layoffs and firing (with severance). Unemployment insurance or other social safety net programs do not exist for workers laid off for economic reasons.

There are gaps in compliance in both law and practice with international labor standards. Although the Republic of Equatorial Guinea does not actively enforce internationally recognized labor rights, employees are generally not subjected to abusive work conditions. The government has been ranked Tier 3 in the annual Trafficking in Persons (TIP) Report from 2011-2019, however, and has struggled to identify and combat forced and child labor. The government increased efforts to combat TIP in 2018 and 2019, including the creation of a national action plan and an online portal and hotline for people to anonymously report abuses. Despite this, businesses have noted that the government does not have an adequate labor inspectorate system to identify and remediate labor violations and hold violators accountable, investigate and prosecute unfair labor practices, such as harassment and/or dismissal of union members; nor to investigate and prosecute instances of forced and/or child labor. Reports indicate that violators are rarely held accountable, with both corruption and political patronage used to prevent enforcement of laws and regulations. The law prohibits certain kinds of discrimination, but many gaps are still recorded. The International Labor Organization (ILO) noted in 2018 “with deep concern that, for the last 12 years, the reports due on ratified Conventions have not been received” from the Government of the Republic of Equatorial Guinea. The ILO also offered technical assistance to complete the reports and respond to comments.

In 2020, a new labor law was being drafted, but there was no public information as of May 2020.

12. U.S. International Development Finance Corporation (DFC) and Other Investment Insurance Programs

There currently are no Overseas Private Investment Corporation (OPIC) or Development Finance Corporation (DFC) programs in Equatorial Guinea. There is an OPIC agreement between Equatorial Guinea and the United States. OPIC financed a hundred million dollars for a liquefied natural gas (LNG) plant in 2000. There could be potential for DFC programs to support investments in infrastructure (including water and power), petrochemicals, and other industries.

There is significant investment financing or insurance for firms from China, and possibly Egypt and Morocco.

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source* USG or international statistical source USG or International Source of Data: BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) ($M USD) N/A N/A 2018 $13,278 https://data.worldbank.org/
country/equatorial-guinea
 
Foreign Direct Investment Host Country Statistical source* USG or international statistical source USG or international Source of data: BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) N/A N/A 2018 $908 BEA data available at
https://www.bea.gov/international/
direct-investment-and-multinational-
enterprises-comprehensive-data
 
Host country’s FDI in the United States ($M USD, stock positions) N/A N/A 2018 -$3 BEA data available at
https://www.bea.gov/international/
direct-investment-and-multinational-
enterprises-comprehensive-data
 
Total inbound stock of FDI as % host GDP N/A N/A 2018 102.7% UNCTAD data available at
https://unctad.org/en/Pages/DIAE/
World%20Investment%20Report/
Country-Fact-Sheets.aspx
 

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

Table 4: Sources of Portfolio Investment
Data not available.

14. Contact for More Information

Samuel Rotenberg
EconomicCommercial Officer
U.S. Embassy Malabo
+240333095741 or 13019858750
RotenbergSJ@state.gov

Guinea

Executive Summary

Despite persistent corruption and fiscal mismanagement, the long-term economic prognosis for Guinea, buoyed by sizeable endowments of natural resources, energy opportunities, and arable land, remains promising. Constrained by an austere budget, Guinea has increasingly looked to foreign investment and the private sector to prop up its economy. China, Guinea’s largest trading partner, has dramatically increased its role in the past few years with a variety of infrastructure investments. Investors should proceed with caution, realizing that the potential for high profits comes with significant risk.

Endowed with abundant mineral resources, Guinea has the potential to be an economic leader in the extractives industry. Guinea is home to a third of the world’s reserves of bauxite (aluminum ore), and bauxite accounts for over half of Guinea’s present exports. Most of the country’s bauxite is exported by the Compagnie des Bauxites de Guinee (CBG) [a joint venture between the Government of Guinea, U.S.-based Alcoa, the Anglo-Australian firm Rio Tinto, and Dadco Investments of the Channel Islands], via a designated port in Kamsar. Societe Miniere de Boke (SMB), a Franco-Sino-Singaporean conglomerate, has recently surpassed CBG as the largest single producer of bauxite in the world. New investment by SMB and CBG, in addition to new market entries, are expected to significantly increase Guinea’s bauxite output over the next five to ten years. Guinea also possesses over four billion tons of untapped high-grade iron ore, significant gold and diamond reserves, undetermined amounts of uranium, as well as prospective offshore oil reserves. Artisanal and medium-sized industrial gold mining in the Siguiri region is a significant contributor to the Guinean economy, but some suspect much of the gold leaves the country clandestinely, without generating any government revenue. In the long term, the Government of Guinea projects that its greatest potential economic driver will be the Simandou iron ore project, which is slated to be the largest greenfield project ever developed in Africa. In 2017, the governments of Guinea and China signed a USD 20 billion framework agreement giving Guinea potentially USD 1 billion per year in infrastructure projects in exchange for increased access to mineral wealth.

Guinea’s abundant rainfall and natural geography bode well for hydroelectric and renewable energy production. The largest energy sector investment in Guinea is the 450MW Souapiti dam project (valued at USD 2.1 billion), began in late 2015 with Chinese investment, which likewise completed the 240MW Kaleta Dam (valued at USD 526 million) in May 2015. Kaleta more than doubled Guinea’s electricity supply, and for the first-time furnished Conakry with more reliable, albeit seasonal, electricity (May-November). Souapiti is expected to begin to producing electricity in late 2020. A third hydroelectric dam on the same river, dubbed Amaria, began construction in January 2019 and is expected to be operational in 2024 – Chinese mining firm TBEA is providing financing for the Amaria power plant (300 MW, USD 1.2 billion investment). If corresponding distribution infrastructure is built, these projects could make Guinea an energy exporter in West Africa. In addition, U.S.-based Endeavor planned to finish work on Project Te, a 50MW thermal plant on the outskirts of the capital by the end of May 2020 but project completion is delayed due to the COVID-19 pandemic. The government is also looking to invest in solar and other energy sources to compensate for hydroelectric deficits during Guinea’s dry season. Toward that end, the government has entered into several Memoranda of Understanding with the private sector to develop solar projects. Agriculture and fisheries hold other areas of opportunity and growth in Guinea. Already an exporter of fruits, vegetables, and palm oil to its immediate neighbors, Guinea is climatically well suited for large-scale agricultural production. However, the sector has suffered from decades of neglect and mismanagement, and lack of transportation infrastructure. Guinea is also an importer of rice, its primary staple crop. President Alpha Conde has expressed his personal desire to see Guinea’s long-term economy based on agriculture and renewables rather than extractives.

Guinea’s macroeconomic and financial situation is weak. The Ebola crisis left the government with few financial resources to invest in social services and infrastructure. Lower natural resource revenues stemming from a drop in world commodities prices and ill-advised government loans have strained an already tight budget. However, improved macroeconomic discipline in 2016-2017 stabilized exchange rates, refilled government coffers, and increased government revenues. Much of this stabilization lasted until late 2017. In 2018 the government borrowed excessively from the Central Bank (BCRG), which threatened the first review of Guinea’s current International Monetary Fund (IMF) program. Lower than forecast natural resource revenues in late 2019 due to heavy rains and political violence again threatened the fourth review, which Guinea finally passed in April 2020. There is a shortage of credit, particularly for small- and medium-sized enterprises, and the government is increasingly looking to international investment to increase growth, provide jobs, and kick-start the economy.

Guinea has passed and implemented an anti-corruption law, updated its Investment Code, and renewed efforts to attract international investors, including a new investment promotion website put in place in 2016 by Guinea’s investment promotion agency to increase transparency and streamline processes for new investors. However, Guinea’s capacity to enforce its more investor-friendly laws is compromised by a weak and unreliable legal system. President Alpha Conde inaugurated the first Trade Court of Guinea on March 20, 2018.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2019 130 of 183 http://www.transparency.org/
research/cpi/overview
World Bank’s Doing Business Report 2019 156 of 190 http://www.doingbusiness.org/
en/rankings
Global Innovation Index 2019 125 of 129 https://www.globalinnovationindex.org/
analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2018 USD 74 https://apps.bea.gov/international/
factsheet/
World Bank GNI per capita 2019 USD 850 https://data.worldbank.org/
country/guinea

3. Legal Regime

Transparency of the Regulatory System

In the past eight years, Guinea has made its laws and regulations more transparent, but draft bills are not always made available for public comment. Ministries do not develop forward-looking regulatory plans and publish neither summaries nor proposed legislation. Laws in Guinea are proposed by either the President or members of the National Assembly and are not always presented for public comment. Once ratified, laws are not enforceable until they are published in the government’s official gazette. All laws relevant to international investors are posted (in French) on invest.gov.gn. When investing, it is important to engage with all levels of government to ensure each authority is aware of expectations and responsibilities on both sides. Guinea has had an independent Supreme Audit Institution since 2016. The institution is charged with making available information on public finances. The institution presented its first activities report in January 2018.

Since 2010, the Guinean government has initiated more than 80 reforms to update and make more transparent government codes related to mines, administration, investment, and customs.

Guinea’s 2013 amended Mining Code commits the country to increasing transparency in the mining sector. In the code, the government commits to awarding mining contracts by competitive tender and to publish all past, current, and future mining contracts for public scrutiny. Members of mining sector governing bodies and employees of the Ministry of Mines are prohibited from owning shares in mining companies active in Guinea or their subcontractors. Each mining company must sign a code of good conduct and develop and implement a corruption-monitoring plan. There is a public database of mining contracts designed by the Natural Resource Governance Institute (http://www.contratsminiersguinee.org/ ).

The Extractive Industries Transparency Initiative (EITI) ensures greater transparency in the governance of Guinea’s natural resources and full disclosure of government revenues from its extractives sector. The EITI standard aims to provide a global set of conditions that ensures greater transparency of the management of a country’s oil, gas, and mineral resources. EITI reiterates the need to augment support for countries and governments that are making genuine efforts to address corruption but lack the capacity and systems necessary to manage effectively the businesses, revenues, and royalties derived from extractive industries.

Guinea was accepted as EITI compliant for the first time by the international EITI Board at its meeting in Mexico City on July 2, 2014. As an EITI country, Guinea must disclose the government’s revenues from natural resources. Guinea completed its most recent report in August 2018 for the 2016 reporting period. The report is located at : https://eiti.org/files/documents/rapport-itie-02-guinee-2017-version-signee-3.pdf .

While Guinea’s laws promote free enterprise and competition, there is often a lack of transparency in the government’s application of the law. Business owners openly assert that application procedures are sufficiently opaque to allow for corruption, and regulatory activity is often instigated due to personal interests.

Every year Guinea publishes budget documents and debt obligations. The yearly enacted budgets are published online https://mbudget.gov.gn/ .

International Regulatory Considerations

Guinea is a member of ECOWAS, but not a member of the West African Economic and Monetary Union (UEMOA) and as such has its own currency. At the beginning of 2017, Guinea adopted ECOWAS’s Common Exterior Tariff (TEC), which harmonizes Guinea’s import taxes with other West African states and eliminates the need for assessing import duties at Guinea’s land border crossings, however, sometimes it is difficult to get the required certificates to export under these ECOWAS exemptions. Guinea is a member of the WTO and is not party to any trade disputes.

Legal System and Judicial Independence

Guinea’s legal system is codified and largely based upon French civil law. However, the judicial system is reported to be generally understaffed, corrupt, and opaque. Accounting practices and bookkeeping in Guinean courts are frequently unreliable. U.S. businesspersons should exercise extreme caution when negotiating contract arrangements, and do so with proper local legal representation. Although the constitution and law provide for an independent judiciary, in practice the judicial system lacks independence, is underfunded, inefficient, and is portrayed in the press as corrupt. Budget shortfalls, a shortage of qualified lawyers and magistrates, nepotism, and ethnic bias contribute to the judiciary’s challenges. President Conde’s administration has successfully implemented some judicial reforms and has increased the salaries of judges by 400 percent in order to discourage corruption. There are few international investment lawyers accredited in Guinea and it is a best practice to include international arbitration clauses in all major contracts. U.S. companies have identified the absence of a dependable legal system as a major barrier to investment.

Despite dispute settlement procedures set forth in Guinean law, business executives complain of the glacial pace of the adjudication of business disputes. Most legal cases take years and significant legal fees to resolve. In speaking with local business leaders, the general sentiment is that any resolution occurring within three to five years might be considered quick.

In many cases, the government does not meet payment obligations to private suppliers of goods and services, either foreign or Guinean, in a timely fashion. Arrears to the private sector is a major issue that is often ignored. Guinea is currently looking for ways to finance past arrears to the private sector — possibly through issuing a public debt instrument. There is no independent enforcement mechanism for collecting debts from the government, although some contracts have international arbitration clauses. The government, while bound by law to honor judgments made by the arbitration court, often actively influences the decision itself.

Although the situation has improved recently, Guinean and foreign business executives have publicly expressed concern over the rule of law in the country. In 2014, high-ranking members of the military harassed foreign managers of a telecommunications company because they did not renew a contract. In 2017-2018, American businesses experienced long delays in getting the required signatures and approvals through government ministries. Some businesses have been subject to sporadic harassment and demands for donations from military and police personnel.

Laws and Regulations on Foreign Direct Investment

The National Assembly ratified an Investment Code regulating FDI in May 2015. Developed in cooperation with the Work Bank and IMF, the code harmonizes Guinea’s FDI regulations with other countries in the region and broadens the definition of FDI. The code also allows for direct agreements between investors and the State. Other important legislation related to FDI includes the Procurement Code, the BOT (Build Operate Transfer, now Public Private Partnership or PPP) Law and the Customs Code.

The government of Guinea states it will let the legal system deal with domestic cases involving foreign investors. However, the legal system is weak, in the process of implementing much needed reforms, and is subject to interference. Although the constitution provides for an independent judiciary, in practice the judicial system lacks independence and is underfunded, inefficient, and is perceived by many to be corrupt. APIP launched a website in 2016 that lists information related to laws, rules, procedures, and registration requirements for foreign investors, as well as strategy documents for specific sectors. (http://invest.gov.gn ). Further information on APIP’s services is available at http:// https://apip.gov.gn/ . APIP has a largely bilingual (English and French) staff and is designed to be a clearinghouse of information for investors.

Competition and Anti-Trust Laws

There are no agencies that review transactions for competition-related concerns.

Expropriation and Compensation

Guinea’s Investment Code states that the Guinean government will not take any steps to expropriate or nationalize investments made by individuals and companies, except for reasons of public interest. It also promises fair compensation for expropriated property.

In 2011, the government claimed full ownership of several languishing industrial facilities in which it had previously held partial shares as part of several joint ventures—including a canned food factory and processing plants for peanuts, tea, mangoes, and tobacco—with no compensation to the private sector partner. Each of these facilities was privatized under opaque circumstances in the late 1980s and early 1990s. By expropriating these businesses, which the government deemed to be corrupt and/or ineffective, and putting them to public auction, Guinea hoped to correct past mistakes and put the assets in more productive hands. During the 1990s, a U.S. investor acquired a 67 percent stake in an explosives and munitions factory from a Canadian entity. The Guinean government owned the remaining 33 percent. From 2000 to 2008, the government halted manufacturing at the factory. In 2010, the Guinean government nationalized the factory.

While there have not been recent large-scale expropriation cases, some mining concession contracts have had their initial award revoked and were sold to another bidder. In 2008, the previous regime of Lansana Conde stripped Rio Tinto of 50 percent of its concession of the Simandou mine and sold it to another company.

The government has had difficulties managing SMEs and would prefer that the private sector take the lead in managing this sector. The investment climate is welcoming to foreign and American firms, and the government is working to reduce corruption and increase transparency. The current government is cognizant of its international image and does not want to risk losing possible foreign investment.

Dispute Settlement

ICSID Convention and New York Convention

Guinea is a member of the International Center for the Settlement of Investment Disputes (ICSID), an autonomous institution established under the Convention on the Settlement of Investment Disputes between States and Nationals of other States (https://icsid.worldbank.org/en/Pages/about/default.aspx ). Guinea is also a member of the New York Convention, which applies to the recognition and enforcement of foreign arbitral awards and the referral by a court to arbitration. Guinea has no specific domestic legislation providing for enforcement of awards under the 1958 New York Convention and/or under the ICSID Convention. (http://www.newyorkconvention.org ).

Investor-State Dispute Settlement

The Investment Code states that the competent Guinean judicial authorities shall settle disputes arising from interpretation of the Code in accordance with the law and regulations, and provides several avenues by which to seek arbitration. In practice, however, fair settlements may be difficult to obtain. The current Guinean constitution mandates an independent judiciary, although many business owners and high-level government officials frequently claim that poorly trained magistrates, high levels of corruption, and nepotism plague the administration of justice. Guinea established an arbitration court in 1999, independent of the Ministry of Justice, to settle business disputes in a less costly and more expedient manner. The Arbitration Court is based upon the French system, in which arbitrators are selected from among the Guinean business sector, rather than from among lawyers or judges, and are supervised by the Chamber of Commerce. All parties must agree in order for their case to be settled in the arbitration court. In general, Guinea’s arbitration court has a better reputation than the judicial court system for settling business disputes.

International Commercial Arbitration and Foreign Courts

Guinea is a member of the Organisation pour l’Harmonisation du Droit des Affaires en Afrique (Organization for the Harmonization of Commercial Law in Africa), known by its French initials, OHADA, which allows investors to appeal legal decisions on commercial and financial matters to a regional body based in Abidjan. The organization also seeks to harmonize commercial law, debt collection, bankruptcy, and secured transactions throughout the OHADA region. The treaty superseded the Code of Economic Activities and other national commercial laws when it was ratified in 2000, though many of the substantive changes to Guinean law have yet to be implemented. U.S. companies seeking to do business in Guinea should be aware that under OHADA, managers may be held personally liable for corporate wrongdoing. See the OHADA website for specific OHADA rules and regulations (http://www.ohada.com ).

Bankruptcy Regulations

Guinea, as a member of OHADA, has the same bankruptcy laws as most West African francophone countries. OHADA’s Uniform Act on the Organization of Securities enforces collective proceedings for writing off debts and defines bankruptcy in articles 227 to 233. The Uniform Act also distinguishes fraudulent from non-fraudulent bankruptcies. There is no distinction between foreign and domestic investors. The only distinction made is a privilege ranking that defines which claims must be paid first from the bankrupt company’s assets. Articles 180 to 190 of OHADA’s Uniform Act define which creditors are entitled to priority compensation. Bankruptcy is only criminalized when it occurs due to fraudulent actions, and leaves criminal penalties to national authorities. Non-fraudulent bankruptcy is adjudicated though the Uniform Act.

In the World Bank’s 2020 Ease of Doing Business Report on Resolving Insolvency, Guinea placed 118 out of 190 countries ranked. According to the report, resolving insolvency takes an average of 3.8 years and costs 10.0 percent of the debtor’s estate, with the most likely outcome being that the company will be sold piecemeal. The average recovery rate is 19.4 cents on the dollar.

4. Industrial Policies

Investment Incentives

The Investment Code provides preferential tax treatment for investments meeting certain criteria (See Screening of FDI). Some mining companies currently benefit from preferential tax treatment. Other exemptions can be agreed to during contract negotiations with the government. The government’s priority investments categories are: promotion of small- and medium-sized Guinean businesses, development of non-traditional exports, processing of local natural resources and local raw materials, and establishment of activities in economically less developed regions. Priority activities include agricultural promotion, especially of food, and rural development; commercial farming involving processing and packaging; livestock, especially when coupled with veterinary services; fisheries; fertilizer production, chemical or mechanical preparation and processing industries for vegetable, animal, or mineral products; health and education-related businesses; tourism facilities and hotel operations; socially beneficial real estate development; and investment banks or any credit institutions settled outside specified population centers. Detailed information on each of these opportunities is available at http://invest.gov.gn 

Foreign Trade Zones/Free Ports/Trade Facilitation

Guinea currently has no foreign trade zones or free ports. In 2017, a presidential decree created a special economic zone in the Boke corridor of western Guinea.

Performance and Data Localization Requirements

Under the 2011 Mining Code, mining companies are required to have Guinean citizens as a certain percentage of their staff , to eventually transition to a Guinean country director, and to award a certain percentage of contracts to Guinean-owned firms. The percentage varies based on employment category and the chronological phase of the project. The Mining Code requires that 20 percent of senior managers be Guinean; however, the Code does not define what constitutes senior management. The Code also aims to liberalize mining development and promote investment. In 2013, the Code called for the creation of a Mining Promotion and Development Center, a One Stop Shop for mining administrative processes for investors. The Development Center opened in May 2016. Guinea has no forced localization policy related to the use of domestic content in goods or technology, and there are no requirements for foreign IT providers to turn over source code or provide access to surveillance or to store data within Guinea.

In 2019, the government launched an e-visa platform allowing for online visa applications at http://www.paf.gov.gn . Fees vary depending on citizenship.

5. Protection of Property Rights

Real Property

The Land Tenure Code of 1996 provides a legal base for documentation of property ownership. Mortgages are non-existent in Guinea. As with ownership of business enterprises, both foreign and Guinean individuals have the right to own property. However, enforcement of these rights depends upon an inefficient Guinean legal and administrative system. It is not uncommon for the same piece of land to have several overlapping deeds. Furthermore, land sales and business contracts generally lack transparency. Only about 2.5 percent of the population has title to real property. The Ministry of Urban Affairs is developing an online platform that will facilitate the registration of land titles and reduce waiting times to about five days. According to the 2020 World Bank’s Doing Business Report, Guinea ranks 122 out of 190 countries for the ease of registering property. (http://www.doingbusiness.org/data/exploreeconomies/guinea/ ).

Intellectual Property Rights

Guinea is a member of the African Intellectual Property Organization (OAPI) and the World Intellectual Property Organization (WIPO). OAPI is a signatory to the Paris Convention for the Protection of Industrial Property, the Berne Convention for the Protection of Literary and Artistic Works, the Patent Cooperation Treaty, the World Trade Organization (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), and several other intellectual property treaties. Guinea modified its intellectual property rights (IPR) laws in 2000 to bring them into line with established international standards. There have been no formal complaints filed on behalf of American companies concerning IPR infringement in Guinea. However, it is not certain that an affirmative IPR judgment would be enforceable, given the general lack of law enforcement capability. The Property Rights office in Guinea is severely understaffed and underfunded. Guinea is not included in the United States Trade Representative (USTR) Special 301 Report or the Notorious Markets List. For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .

6. Financial Sector

Capital Markets and Portfolio Investment

Commercial credit for private and public enterprises is difficult and expensive to obtain in Guinea. The FY 2020 Millennium Challenge Corporation score for Access to Credit in Guinea dropped from a 23 percent score in 2019, to 21 percent, and was at 50 percent in FY 2017.

The legislature passed a Build, Operate, and Transfer (BOT) convention law in 1998 (changed to the Public-Private Partnership, or PPP, in 2018), which provides rules and guidelines for PPP and related infrastructure development projects. The law lays out the obligations and responsibilities of the government and investors and stipulates the guarantees provided by the government for such projects. The Investment Code allows income derived from investment in Guinea, the proceeds of liquidating that investment, and the compensation paid in the event of nationalization, to be transferred to any country in convertible currency. The legal and regulatory procedures, based on French civil law, are not always applied uniformly or transparently.

Individuals or legal entities making foreign investments in Guinea are guaranteed the freedom to transfer the original foreign capital, profits resulting from investment, capital gains on disposal of investment, and fair compensation paid in the case of nationalization or expropriation of the investment to any country of their choice. The Guinean franc is subject to a managed floating exchange rate. The few commercial banks in Guinea are dependent on the BCRG for foreign exchange liquidity, making large transfers of foreign currency difficult.

Laws governing takeovers, mergers, acquisitions, and cross-shareholding are limited to rules for documenting financial transactions and filing any change of status documents with the economic register. There are no laws or regulations that specifically authorize private firms to adopt articles of incorporation that limit or prohibit investment.

Money and Banking System

Guinea’s financial system is small and dominated by the banking sector. It comprises 16 active banks, 13 insurance companies and 26 microfinance institutions. Guinea’s banking sector is overseen by the BCRG, which also serves as the agent of the government treasury for overseeing banking and credit operations in Guinea and abroad. The BCRG manages foreign exchange reserves on behalf of the State. The Office of Technical Assistance of the Department of the Treasury assesses that Guinea does not properly manage debt and that its treasury is too involved in the process, although improvements made in 2017-2018 point to a better future. Further information on the BCRG can be found in French at http://www.bcrg-guinee.org .

Due to the difficulty of accessing funding from commercial banks, small commercial and agricultural enterprises have increasingly turned to microfinance, which has been growing rapidly with a net increase in deposits and loans. The quality of products in the microfinance sector remains mediocre, with bad debt accounting for five percent of loans with approximately 17 percent of gross loans outstanding.

Guinea plans to broaden the country’s SME base through investment climate reform, improved access to finance, and the establishment of SME growth corridors. Severely limited access to finance (especially for SMEs), inadequate infrastructure, deficiencies in logistics and trade facilitation, corruption and the diminished capacity of the government, inflation, and poor education of the workforce has seriously undermined investor confidence in Guinean institutions. Guinea’s weak enabling environment for business, its history of poor governance, erratic policy, and inconsistent regulatory enforcement exacerbate the country’s poor reputation as an investment destination. As a result, private participation in the economy remains low and firms’ productivity measured by value added is one of the lowest in Africa. Firms’ links with the financial sector are weak: only 3.9 percent of firms surveyed in the 2016 World Bank Enterprise survey had a bank loan. http://www.enterprisesurveys.org/data/exploreeconomies/2016/guinea#finance 

Credit to the private sector is low, at around 8.9 percent of GDP in 2018, a decrease from 14 percent in 2015. Commercial banks are reluctant to extend loans due to the lack of credit history reporting for potential borrowers. The Guinean government, through the central bank, is in the process of establishing a credit information bureau to overcome this asymmetry of credit information.

Guinea is a cash-based society driven by trade, agriculture, and the informal sector, which all function outside the banking sector. The banking sector is highly concentrated in Conakry, and technologically behind. Banks in Guinea tend to favor short-term lending at high interest rates. In collaboration with the U.S. Treasury’s Office of Technical Assistance, the central bank is implementing a bank deposit insurance scheme. The deposit coverage limit has not been set yet, but the central bank began to collect premiums from commercial banks in 2019.

While the microfinance sector grew strongly from a small base, microfinance institutions were hit hard during the Ebola crisis; they are not profitable and need capacity and technology upgrades. Furthermore, many of these microfinance institutions struggle to meet the higher minimum capital requirements imposed by the central bank since 2019. This heightened financial hurdle will likely lead to a consolidation of the microfinance sector. Finally, the efficiency and the use of payment services by all potential users needs to be improved, with an emphasis on greater financial inclusion.

The penetration of digital cellphone fund transfers is increasing. Two foreign e-money (or mobile banking) institutions lead the effort to digitize payments and improve access to financial services in the underserved and rural segments of the population. However, the vast majority of operations processed by these e-money institutions remain cash-in cash-out transactions within their own network. In an effort to modernize payment methods, the government is implementing a national switch, a nationwide platform that will interface all electronic payment systems and facilitate payment processing between service providers.

Generally, there are no restrictions on foreigners’ ability to establish bank accounts in Guinea. EcoBank is the preferred bank for most U.S. dealings with Foreign Account Tax Compliant Act (FACTA) reporting requirements. In collaboration with the U.S. Treasury’s Office of Technical Assistance, the central bank is implementing a bank deposit insurance scheme. The deposit coverage limit has not been set yet, but the central bank began to collect premiums from commercial banks in 2019.

In collaboration with the U.S. Treasury’s Office of Technical Assistance, the central bank is implementing a bank deposit insurance scheme. The deposit coverage limit has not been set yet, but the central bank began to collect premiums from commercial banks in 2019.

Foreign Exchange and Remittances

Foreign Exchange

There are no restrictions or limitations placed on foreign investors for converting, transferring, or repatriating funds associated with an investment. Although there have been no recent changes to remittance policies, it is difficult to obtain foreign exchange in Guinea. Guinea has experienced significantly weakened liquidity levels over the last several years due to government mismanagement, populist policies, corruption, and a decrease in mining revenue due to lower global commodity prices. Commercial banks’ liquidity levels are affected by tight reserve requirements (22 percent of deposits) that are in line with IMF performance criteria.

Until December 2015, the exchange rate was managed by the BCRG and held to a four percent variance from the unofficial rate. The exchange rate has remained relatively stable since 2013 and has only recently depreciated versus the U.S. dollar. Between 2013 and 2015, the Guinean franc maintained a value of between 7,000 and 7,500 GNF/USD. In late 2015, the unofficial rate reached a value 10 percent higher than the official rate, during which Guinea had nearly exhausted its foreign currency reserves. The IMF recommended the BCRG float the GNF and the official rate jumped to just over 9,000 GNF/USD by March 2016. The Annual Report on Exchange Arrangements and Exchange Restrictions, published by the IMF, describes the foreign exchange regimes of every IMF member. https://www.imf.org/en/Publications/Annual-Report-on-Exchange-Arrangements-and-Exchange-Restrictions/Issues/2017/01/25/Annual-Report-on-Exchange-Arrangements-and-Exchange-Restrictions-2016-43741 

Remittance Policies

Guinea has no limitations on the conversion and transfer of money or the repatriation of capital and earnings, including branch profits, dividends, interest, royalties, or management or technical service fees. The BCRG needs to be informed of any major transfers, and the wait time to remit investment returns is less than 60 days. Guinea is a member of the Inter-Governmental Action Group against Money Laundering in West Africa, but is not included on the Financial Action Task Force. Guinea does not have a country report in the 2020 International Narcotics Control Strategy Report.

There are no limits on the conversion of U.S. dollars to Guinean francs. The official exchange rate retains the capacity for volatility, but is currently holding at approximately 9,400 GNF/USD (as of April 2020). A weakened economy largely resulting from low commodity prices caused the GNF to depreciate from an average of 7,000 GNF/USD in early 2015. Since mid-2016, the official exchange rate has been keeping pace with the rate in the parallel black market.

Sovereign Wealth Funds

Guinea does not have a sovereign wealth fund.

7. State-Owned Enterprises

While all Guinea’s public utilities (water and electricity) are state-owned enterprises (SOEs), the Conde administration is moving toward allowing private enterprises to operate in this sphere. In 2015, the French firm Veolia was contracted to manage the state-owned electric utility Electricité de Guinée (EDG) – a contract which ended in October 2019. Several private projects aimed at harnessing Guinea’s solar energy potential and gas-powered thermal plants are being implemented with the goal of producing and selling energy throughout Guinea and possibly to neighboring countries. Other SOEs can be found in the telecommunications, road construction, lottery, and transport sectors. There are several other mixed companies where the state owns a significant share, that are related to the extractives industry.

The hydroelectricity sector could support Guinea’s modernization and possibly even supply regional markets. Guinea’s hydropower potential is estimated at over 6,000MW, making it a potential exporter of power to neighboring countries. In 2015, Guinea built the 240MW Kaleta Dam, doubling the country’s electricity generating capacity and providing Conakry with a more reliable source of power for most of the year. The government is now pushing forward with the more ambitious 450MW Souapiti Dam and other power generation plans, for which EDG would be the primary off-taker. The country uses and produces about 450MW, so the Souapiti project could create reserves for export. Plans for improving the distribution network to enable electricity export are in process with the development of the Gambia River Basin Development (OMVG) (Organization pour la Mise en Oeuvre de Fleuve Gambie, in French) transmission project connecting Guinea, Senegal, Guinea Bissau, and The Gambia. The OMVG project involves the construction of 1,677 kilometers of 225-volt transmission network capable of handling 800MW to provide electricity for over two million people. At the same time, Guinea is moving forward with the Côte d’Ivoire, Liberia, and Sierra Leone, (CLSG) transmission interconnector project, which will integrate Guinea into the West African Power Pool (WAPP) and allow for energy import-export across the region. While the government does not publish significant information concerning the financial stability of its SOEs, EDG’s balance sheet is understood to be in the red. The IMF reported that as recently as 2017, up to 28 percent of the Guinean budget has gone toward subsidizing electricity, and the IMF is demanding that EDG improve tariff collection as large numbers of users do not pay for power.

The amount of research and development (R&D) expenditures is not known, but it would be highly unlikely that any of Guinea’s SOEs would devote significant funding to R&D. Guinean SOEs are entitled to subsidized fuel, which EDG uses to run thermal generator stations in the capital. Guinea is not party to the Government Procurement Agreement.

Corporate governance of SOEs is determined by the government. Guinean SOEs do not adhere to the OECD guidelines. SOEs are supposed to report to the Office of the President, however, typically they report to a ministry. Seats on the board of governance for SOEs are usually allocated by presidential decree.

Privatization Program

The Guinean government is actively working on privatization in the energy sector. In April 2015, the government tendered a management contract to run the state owned electrical utility EDG. French company Veolia won the tender and attempted to manage and rehabilitate the insolvent utility until the end of 2019. As of February 2020, EDG became a public limited company with its own board of directors, the new directors being appointed by the President through a decree. Bidding processes are clearly spelled out for potential bidders, however, Guinea gives weight to competence in the French language and experience working on similar projects in West Africa. In spring 2015, a U.S. company lost a fiber optics tender largely due to its lack of native French speakers on the project and lack of regional experience.

8. Responsible Business Conduct

The 2013 Mining Code includes Guinea’s first legal framework outlining corporate social responsibility. Under the provisions of the code, mining companies must submit social and environmental impact plans for approval before operations can begin and sign a code of good conduct, agreeing to refrain from corrupt activities and to follow the precepts of the Extractive Industry Transparency Initiative (EITI). However, lack of capacity in the various ministries involved makes government monitoring and enforcement of corporate social responsibility requirements difficult, a gap that some non-governmental organizations (NGOs) are filling. In February 2019, Guinea was found to have achieved meaningful progress in implementing EITI standards. The EITI Board outlined eight corrective actions, including disclosing more information on infrastructure agreements, direct subnational payments, and quasi-fiscal expenditures. The Board noted that the EITI should play a role in overseeing the new Local Economic Development Fund (FODEL). Mining companies continue to note a lack of transparency in the expenditure of revenues by the National Agency for Mining Infrastructure (ANAIM).

The 2019 Environmental Code also has specific provisions regarding environmental and social due diligence on any development projects. The Code requires each development project conduct an environmental impact study which includes a list of mitigation measures for any negative impact.

The Guinean government has put in place laws that protect the population from adverse business impacts however, these laws are not effectively enforced. In the last few years, there were several cases of private enterprise having an adverse impact on human rights, especially in the mining and energy sectors. The government is often reluctant to fully enforce legislation regarding responsible conduct and the mitigation of these impacts. There are several local and international organizations that are promoting and monitoring the implementation of RBCs.

9. Corruption

In its 2019 Ease of Doing Business index, the World Bank ranked Guinea 156th of 190 countries worldwide, down four places from 2018. However, according to Transparency International’s 2019 Corruption Perception Index, Guinea moved up eight places to 130 out of 180 countries listed. Guinea passed an Anti-Corruption Law in 2017. In April 2019, a former director of the Guinean Office of Advertising was sentenced to 5 years in prison for embezzlement of GNF39 billion, approximately USD four million, however, in June 2019 he was acquitted by the Appeals Court, and was elected as a member of the National Assembly during the March 2020 legislative elections. It is not clear whether the Anti-Corruption Law was used to prosecute the case. According to the World Bank Enterprise Survey of 2016, Guinea fares better in the incidence of bribery that most sub-Saharan African countries, but this may be a matter of perception. For example, of 150 firms surveyed, 48.7 percent reported that they were expected to give gifts to public officials to get things done, but only 7.9 percent reported having paid a bribe. http://www.enterprisesurveys.org/data/exploreeconomies/2016/guinea#corruption 

The business and political culture, coupled with low salaries, have historically combined to promote and encourage corruption. Requests for bribes are a common occurrence. Though it is illegal to pay bribes in Guinea, there is little enforcement of these laws. In practice, it is difficult and time-consuming to conduct business without giving “gifts” in Guinea, leaving U.S. companies, who must comply with the Foreign Corrupt Practices Act, at a disadvantage.

Although the law provides criminal penalties for corruption by officials, the law does not extend to family members. It does include provisions for political parties. According to the World Bank’s 2018 Worldwide Governance Indicators, corruption continues to remain a severe problem, and Guinea is in the 13th percentile, down from being in the 15th percentile in 2012. Public funds have been diverted for private use or for illegitimate public uses, such as buying vehicles for government workers. Land sales and business contracts generally lack transparency. http://info.worldbank.org/governance/wgi/#reports 

Guinea’s Anti-Corruption Agency (ANLC) is an autonomous agency established by presidential decree in 2004. The ANLC reports directly to the President and is currently the only state agency focused solely on fighting corruption. However, it has been largely ineffective in its role, with no successful convictions. The ANLC’s Bureau of Complaint Reception fields anonymous tips forwarded to the ANLC. Investigations and cases must then be prosecuted through criminal courts. According to the ANLC, during the past year there were no prosecutions as a result of tips. The agency is underfunded, understaffed, and lacks computers and vehicles. The ANLC is comprised of 52 employees in seven field offices, with a budget of USD 1.1 million in 2018.

The Conde administration has named corruption in both the governmental and commercial spheres as one of its top agenda items. In November 2019, Ibrahim Magu, the acting Chairman of the Economic and Financial Crimes Commission of Nigeria, and President Alpha Conde reached an agreement through which the Commission will assist Guinea to establish a anti-corruption agency, however, it is not clear if that means reforming the existing anti-corruption agency or establishing a new anti-corruption agency.

A 2016 survey by the ANLC, the Open Society Initiative-West Africa (OSIWA), and Transparency International found that among private households, 61 percent of the respondents stated they were asked to pay a bribe for national services and 24 percent for local services. Furthermore, 24 percent claimed to have paid traffic-related bribes to police, 24 percent for better medical treatment, 19 percent for better water or electricity services, and 8 percent for better judicial treatment.

Guinea is a party to the UN Anticorruption Convention. http://www.unodc.org/unodc/en/treaties/CAC/signatories.html 

Guinea is not a party to the OECD Convention on Combatting Bribery. http://www.oecd.org/daf/anti-bribery/countryreportsontheimplementationoftheoecdanti-briberyconvention.htm 

Since 2012, Guinea has had a Code for Public Procurement (Code de Marches Publics et Delegations de Service Public) that provides regulations for countering conflicts of interest in awarding contracts or in government procurements. In 2016, the government issued a Transparency and Ethics chart for public procurement that provides the main do’s and don’ts in public procurement, highlighting avoidance of conflict of interest as a priority. The chart also includes a template letter that companies have to sign when bidding for public contracts stating that they will comply with local legislation and public procurement provisions, including practices to prevent corruption.

Resources to Report Corruption

Contact at government agency or agencies are responsible for combating corruption:

Seko Mohamed Sylla
Deputy Executive Director
Agence Nationale de Lutte Contre la Corruption (ANLC – National Agency Against Corruption)
Cite des Nations, Conakry, Guinea +224- 669 22 82 51
EMAIL ADDRESS: tourealnc@gmail.com

Transparency International
Dakar, Senegal +221-33-842-40-44
+221-33-842-40-44
forumcivil@orange.sn

10. Political and Security Environment

Guinea has had a long history of political violence. The country suffered under authoritarian rule from independence in 1958 until its first democratic presidential election in 2010. It has seen political violence during its transition to democracy, although the level of political violence had been decreasing with each subsequent election since 2010. In October 2019, President Conde announced plans to hold a referendum on modifying the constitution – consequently, political violence escalated significantly. The referendum, which was held along with National Assembly elections in March 2020 culminated in political violence across the country. Over 55 people died in the protest and election violence occurring between October 2019 and March 2020. Guinea is scheduled to hold presidential elections at the end of 2020.

The state had persecuted political dissidents and opposition parties for decades. The Sekou Toure regime (1958-1984) and the Lansana Conte regime (1984-2008) were marked by political violence and human rights abuses.

Following the death of President Lansana Conte on December 22, 2008, a military junta calling themselves the National Council for Democracy and Development (CNDD) took power in a bloodless coup. Immediately following the coup, the U.S. government suspended all but humanitarian and election assistance to Guinea. The African Union (AU) and ECOWAS suspended Guinea’s membership pending democratic elections and a relinquishment of power by the military junta. In September 2009, junta security forces attacked a political rally in a stadium in Conakry, killing 150 people, and raping many women.

Guinea experienced violent incidents in 2011 and thereafter. On July 19, 2011, the President’s personal residence was attacked with small arms fire and rocket propelled grenades. Following the attack, the government arrested and charged 33 people, mostly military personnel, with attempted murder and treason.

The small mining town of Zogota, located in Guinea’s Forest Region, saw the deaths of five villagers, including the village chief, during August 2012 clashes with security forces over hiring practices at the Brazilian iron-mining company Vale. The villagers alleged that Vale was not hiring enough local employees and was instead bringing workers from other regions of Guinea. The ensuing instability led to Vale evacuating all expatriate personnel from the town. Also in November 2012, the Ministry of Economy and Finance official and anticorruption activist Aissatou Boiro was shot and killed in her car, allegedly for her anticorruption efforts. Twenty suspects were arrested and prosecuted. The trial began in late 2017 and closed on February 4, 2019. The Dixinn District Court sentenced seven of the defendants, including the accused assassin, Mohamed Sankon to life in prison with a minimum period of 30 years. Ten were sentenced to 20 years and two others were given ten-year jail terms. The court issued arrest warrants for six further fugitives, while one other accused died in prison.

Other instances of violence occurred in 2014 and 2015 during the Ebola epidemic when local citizens attacked the vehicles and facilities of aid workers. The Red Cross, MSF (Doctors Without Borders) and the World Health Organization (WHO) also reported cases of property damage (destroyed vehicles, ransacked warehouses, etc.). On September 16, 2014, in the Forest Region village of Womei, eight people were killed by a mob when they visited the village as part of an Ebola education campaign. The casualties included radio journalists, local officials, and Guinean health care workers.

Presidential elections in 2015 sparked violent protests in Conakry, but clashes between police and demonstrators were largely contained. In addition to political violence, sporadic and generally peaceful protests over fuel prices, lack of electricity, labor disputes, and other issues have occurred in the capital and sometimes beyond since 2013. In February 2017, seven civilians died in confrontations with security services during large protests against education reforms. After two days of violent protests in March 2018, teachers’ unions and the government agreed to a raise of 40 percent. These protests over teacher union pay became intermingled with political protests over voting irregularities in the February 4 local elections. The political opposition claims the government is responsible for the deaths of over 90 people during political protests over the past eight years.

The local populace in Boke, Bel-Air, and Sangaredi disrupted road and/or railroad traffic on at least three occasions in 2017 and at least twice in 2018, in response to grievances over employment, lack of services, and other issues. Although none of these events targeted American or foreign investors, they were disruptive to business in general and eroded confidence in the security situation under which investors must operate in Guinea. Street violence is difficult to predict or avoid, but generally does not target westerners.

11. Labor Policies and Practices

Guinea has a young population and a high unemployment rate. Potential employees often lack specialized skills. The country has a poor educational system and lacks professionals in all sectors of the economy. Guinea generally lacks the specialized skills needed for large-scale projects of any kind.

According to a 2019 World Bank report on “Employment, productivity and inclusion of youth”, in 2017 Guinea’s economy was based on services (49 percent of GDP), mining and industry (37 percent) and agriculture (10 percent). The tendencies show that employment in Guinea is similar to other countries in the region, with a high level of employment in the informal sector. According to the 2018 World Bank Development Indicators, approximately 65 percent of Guineans above 15 years old, (56 percent males and 44 percent females) were employed in the formal or informal sectors. Of those employed, 52 percent were working in agricultural sector, 34 percent in commerce, and 14 percent in industry and manufacturing.

Guinea’s National Assembly adopted a new labor code in February 2014 which protects the rights of employees and is enforced by the Ministry of Technical Education, Vocational Training, Employment and Labor. The Labor Code sets forth guidelines in various sectors, the most stringent being the mining sector. Guidelines cover wages, holidays, work schedules, overtime pay, vacation, and sick leave. The Labor Code also outlaws all discrimination in hiring, including on the basis of sex, disability, and ethnicity. It also prohibits all forms of workplace harassment, including sexual harassment. However, the law does not provide antidiscrimination protections for persons based on sexual orientation and/or gender identity.

Although the law provides for the rights of workers to organize and join independent unions, engage in strikes, and bargain collectively, the law also places restrictions on the free exercise of these rights. The Labor Code requires unions to obtain the support of 20 percent of the workers in a company, region, or trade that the union claims to represent. The code mandates that unions provide ten days’ notice to the labor ministry before striking, but the code does allow work slowdowns. Strikes are only permitted for professional claims. The Labor Code does not apply to government workers or members of the armed forces. While the Labor Code protects union officials from anti-union discrimination, it does not extend that same protection to other workers.

The law prohibits child labor in the formal sector and sets forth penalties of three to ten years imprisonment and confiscation of resulting profits. The law does not protect children in the informal sector. The minimum age for employment is 16. Exceptions allow children to work at age twelve as apprentices for light work in such sectors as domestic service and agriculture, and at 14 for other work. A new child code was adopted at the National Assembly in December 2019 and is waiting enactment by the President. The new child code provides more severe sentences for violations related to child labor.

The Labor Code allows the government to set a minimum monthly wage through the Consultative Commission for Labor and Social Laws. The minimum wage for all sectors was established in 2013 at 440,000 GNF (approximately USD50). There is no known official poverty income level established by the government.

The law mandates that regular work should not exceed ten-hour days or 48-hour weeks, and it mandates a period of at least 24 consecutive hours of rest each week, usually on Sunday. Every salaried worker has the legal right to an annual paid vacation, accumulated at the rate of at least two workdays per month of work. There also are provisions in the law for overtime and night wages, which are a fixed percentage of the regular wage. The law stipulates a maximum of 100 hours of compulsory overtime a year.

The law contains general provisions regarding occupational safety and health, but the government has not established a set of practical workplace health and safety standards. Moreover, it has not issued any orders laying out the specific safety requirements for certain occupations or for certain methods of work called for in the Labor Code. All workers, foreign and migrant included, have the right to refuse to work in unsafe conditions without penalty.

Authorities rarely monitored work practices or enforced the workweek standards and the overtime rules. Teachers’ wages are low, and teachers sometimes went for months without pay. Salary arrears were not paid, and some teachers lived in abject poverty. From 2016-2018, teachers conducted regular strikes and as a result, and were promised a 40 percent increase in pay. Initially they received only ten percent, but in March 2018, the government began to pay the remaining 30 percent. In February 2019, the teachers union accepted the government proposal at the time and returned to work. In January 2020, the teachers started an indefinite strike demanding higher wages and the re-running of a census of currently employed teachers. As of end of March 2020, the teachers’ strike was put on hold due to the COVID-19 pandemic.

Despite legal protection against working in unsafe conditions, many workers feared retaliation and did not exercise their right to refuse to work under unsafe conditions. Accidents in unsafe working conditions remain common. The government banned artisanal mining during the rainy season to prevent deaths from mudslides, but the practice continues.

Pursuant to the Labor Code, any person is considered a worker, regardless of gender or nationality, who is engaged in any occupational activity in return for remuneration, under the direction and authority of another individual or entity, whether public or private, secular or religious. In accordance with this code, forced or compulsory labor means any work or services extracted from an individual under threat of a penalty and for which the individual concerned has not offered himself willingly.

A contract of employment is a contract under which a person agrees to be at the disposal and under the direction of another person in return for remuneration. The contract may be agreed upon for an indefinite or a fixed term and may only be agreed upon by individuals of at least 16 years of age, although minors under the age of 16 may be contracted only with the authorization of the minor’s parent or guardian. An unjustified dismissal provides the employee the right to receive compensation from the employer in an amount equal to at least six months’ salary with the last gross wage paid to the employee being used as the basis for calculating the compensation due.

The Investment Code obliges new companies to prioritize hiring local employees and provide capacity training and promotion opportunities for Guineans.

12. U.S. International Development Finance Corporation (DFC) and Other Investment Insurance Programs

Guinea and the United States have had an agreement on private investment guarantees in effect since 1962, making investors eligible for U.S. International Development Finance Corporation (DFC) insurance programs. Guinea has great potential for DFC programs, especially in the areas of banking, agriculture, IT, energy, and infrastructure. The DFC, through its predecessor the Overseas Private Investment Corporation (OPIC), has been active recently in Guinea, guaranteeing the USD 250 million expansion project of Guinea’s largest bauxite exporter, and Endeavor’s USD121 million Project Te, a 50MW thermal energy project. U.S. private sector firms are interested in utilizing the DFC for infrastructure related projects in the mining and energy sectors. USAID has had a full-time transaction advisor in Guinea since March 2019. The advisor works on Power Africa’s potential role in improving the Guinean energy sector. In addition, DFC inspects the CBG expansion project semi-annually.

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source USG or international statistical source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) ($M USD) N/A N/A 2018 $10.907 www.worldbank.org/en/country 
Foreign Direct Investment Host Country Statistical source USG or international statistical source USG or international Source of data:
BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) N/A N/A 2018 $74 BEA data available at https://www.bea.gov/
international/direct-investment-and-multinational-
enterprises-comprehensive-data
 
Host country’s FDI in the United States ($M USD, stock positions) N/A N/A N/A N/A BEA data available at https://www.bea.gov/
international/direct-investment-and-multinational-
enterprises-comprehensive-data
 
Total inbound stock of FDI as % host GDP N/A N/A 2018 40.9% UNCTAD data available at
https://unctad.org/en/Pages/DIAE/
World%20Investment%20Report/
Country-Fact-Sheets.aspx
 

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

Table 4: Sources of Portfolio Investment
Data not available.

14. Contact for More Information

Rowan Canter
Economic and Commercial Officer
U.S. Embassy Conakry +224 657 10 4060
CanterRA@state.gov

Liberia

Executive Summary

Liberia offers opportunities for investment in mining, agriculture, forestry (timber), and financial services.  A commodities-based economy, Liberia relies on imports for more than half of its cereal needs, including rice, Liberia’s most important staple food. The COVID-19 pandemic has negatively affected all sectors of the economy, and the International Monetary Fund projects negative two and a half percent growth for 2020.

Liberia would require considerable foreign direct investment (FDI) to fulfill its development goals and potential.  However, low human development indicators and poor roads and lack of reliable internet access throughout most of the country constrain investment and development.

Most of Liberia lacks power supply, though efforts to expand access to electricity are ongoing through development of a grid from the Mount Coffee Hydropower Plant, the West Africa Power Pool’s cross border electrification projects, and other internationally supported energy projects.

The 2020 World Bank Doing Business Report ranked Liberia as 184th out of 190 economies in trading across borders, 184th in dealing with construction permits, and 180th in registering property.  Corruption is endemic in Liberia. The 2019 Transparency International Corruption Perceptions Index ranks Liberia at 137th out of 180, down from 120th in 2018. More promisingly, the Doing Business Report ranked Liberia as 75th in starting a business and 76th in paying taxes.

The Government of Liberia formed a Business Climate Working Group (BCWG) in 2018 to improve the investment climate.  The BCWG held several fora, including one in May 2019 entitled “Resolving Constraints to Trading Across Borders.” With the implementation of an IMF-supported program to improve fiscal and monetary policies, Liberia may soon experience a more favorable environment for private investment.  The business climate could also improve with increased collaboration between business chambers, industry associations and the Liberian government, as well as through continued and persistent efforts of international donors.

Following frequently lengthy negotiations with the government, investors developing long term concessions for agricultural or extractive businesses report facing resistance from local communities, which claim the government has not consulted with them about land use.  Further, communities and employees expect concessionaires and other private investors to provide significant support including education, healthcare, and housing.

Liberia is a country rich in natural resources, agricultural land, and abundant rainfall. Agribusiness and extractive industries investors in particular may find that Liberia merits careful consideration.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2019 137 of 180 http://www.transparency.org/research/cpi/overview
World Bank’s Doing Business Report 2020 175 of 190 http://www.doingbusiness.org/en/rankings
Global Innovation Index 2019 NA https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in Liberia ($M USD, historical stock positions) 2018 USD 236 https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2019 USD 580 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD

3. Legal Regime

Transparency of the Regulatory System

Companies are required to adhere to the International Financial Reporting Standards (IFRS) consistent with international norms. In many instances, however, authorities do not consistently enforce or apply national laws and international standards. Further, no systemic oversight or enforcement mechanisms exist to ensure that government authorities follow administrative processes. Some government ministries and agencies often have overlapping responsibilities, resulting in inconsistent application of the laws.

Although ministries and agencies usually publish finalized regulations, no prior public comment period is required.  No central clearinghouse exists to access proposed regulations. Government revenues and debts, while partially captured in national budgets, are not transparent.  Some budget documents are accessible online. For more information on regulatory transparency, see https://rulemaking.worldbank.org/en/data/explorecountries/liberia .

International Regulatory Considerations

Liberia is a member of two regional economic blocks, the Mano River Union (MRU) and the Economic Community of West African States (ECOWAS).  The Liberia Revenue Agency (LRA) continues to standardize and harmonize the country’s customs and tariff systems to incorporate Liberia’s tax regime into the ECOWAS External Tariff. Under its tax system modernization program, the LRA has undertaken new efficiency measures including adopting a Mobile Tax Payment option for citizens to pay taxes and fees via their mobile phones.

As a WTO member, the government has acceded to the terms and conditions of the WTO arrangements including technical barriers to trade (TBT) and sanitary and phytosanitary (SPS) measures.

Legal System and Judicial Independence

Liberia’s legal system uses common and regulatory law as well as local customary law.  The common law based court system operates in parallel with local customary law, which incorporates unwritten, indigenous practices, culture, and traditions. The 2001 Revised Rules and Regulation Governing the Hinterland of Liberia govern the traditional court system. See https://www.documents.clientearth.org/library/download-info/regulation-2001-revised-rules-and-regulations-governing-the-hinterland-of-liberia/ . Adjudication of law under these two systems often results in conflicting decisions between Monrovia-based entities, local communities outside of Monrovia, and within individual communities.

The Commercial Court hears commercial and contractual issues, including debt disputes of 15,000 USD and above. A commission under the Ministry of Labor hears claims of unfair labor practices. In theory, the Commercial Court presides over all financial, contractual, and commercial disputes, serving as an additional avenue to expedite commercial and contractual cases. The Supreme Court is the final arbiter of all cases and it hears all appeals, which places a significant burden on its panel of five judges. The judicial branch remains functionally independent of the executive, but there have been reports of executive branch interference in judicial matters. There have also been reports of extensive delays and procedural and other errors, casting doubt on the fairness and reliability of judicial decisions. Regulations or enforcement actions are appealable, and appeals are adjudicated in the Supreme Court.

Laws and Regulations on Foreign Direct Investment

No judicial decisions pertaining to foreign direct investment have come out in the past year.

The government does not maintain a “one-stop-shop” website for investment laws, rules, procedures, or reporting requirements.  The NIC provides sector-specific investment counseling and/or advisory services upon request. The LCC also maintains a helpdesk to explain relevant information on AGOA regulatory processes and procedures.  It assists importers in processing documents to comply with AGOA procedures and Liberian customs regulations.

Competition and Anti-Trust Laws

The Liberia Intellectual Property Office (LIPO), under the Ministry of Commerce and Industry (MOCI), administers, investigates, and enforces competition-related issues in line with the Competition Law. This law incorporates WTO requirements to encourage a free market economy by promoting fair competition.  Liberia does not have anti-trust laws.

Expropriation and Compensation

The 2010 Investment Act protects foreign enterprises against expropriation or nationalization by the government “unless the expropriation is in the national interest for a public purpose, is the least burdensome available means to satisfy that overriding public purpose, and is made on a non-discriminatory basis in accordance with due process of law.”  Liberia is a signatory to the Multilateral Investment Guarantee Agency (MIGA) Convention.

Dispute Settlement

ICSID Convention and New York Convention

Liberia is a member of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID) – also known as the Washington Convention – and the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards – also known as the New York Arbitration Convention.  The Commercial Code provides for enforcement of awards under either convention. The Investment Act provides that “the courts of Liberia shall have jurisdiction over the resolution of business disputes, parties to an investment disputes may however specify any arbitration or other dispute resolution procedure upon which they may agree.”

Investor-State Dispute Settlement

Liberia is a member of the ICSID Convention and a signatory to the Multilateral Investment Guarantee Agency (MIGA) Convention that guarantee the protection of foreign investment.  The Civil Procedure Law governs both domestic and international arbitrations, but there is not a stand-alone arbitration law.  Enforcing foreign or domestic arbitration awards may require several years, from filing an application to the court of first instance to obtaining a writ of execution, with provision for an appeal.

Under the ICSID and the New York Arbitration Conventions, Liberian courts are bound to recognize and enforce foreign arbitral awards issued against the government. Liberia is also a signatory to the ECOWAS Treaty, which contains investor-state dispute settlement (ISDS) provisions.

There have been no recent extrajudicial actions against foreign investors. 

International Commercial Arbitration and Foreign Courts

The Investment Act provides for trade dispute settlement between two private parties through either the judicial system or alternative dispute resolution (ADR). Other codes, statutes, and legislative provisions, including the Liberian Civil Procedure Law, govern commercial arbitration and recognize arbitration as a means of resolution between private parties in commercial transactions, based on the model of the United Nations Commission on International Trade Law (UNCITRAL model law).

Investment contracts between private entities and the government frequently include arbitration clauses specifying dispute settlement outside of Liberia.

Given the general weakness of the judiciary, judicial processes are not always procedurally competent and reliable.

Bankruptcy Regulations

Liberia does not have a bankruptcy law. The Commercial Court has limited experience protecting the rights of creditors, equity holders, and holders of other financial contracts.

4. Industrial Policies

Investment Incentives

The government provides tax deductions for equipment, machinery, cost of buildings and fixtures used in manufacturing, as well as import duties, and goods and services tax exemptions as investment incentives for the following sectors: tourism, manufacturing, energy, hospitals and medical, housing, transportation, information technology, banking, poultry, horticulture, exportation, agricultural (food crop cultivation and processing), and rubber and oil palm cultivation and processing.

The government does not issue guarantees or jointly finance foreign direct investment projects.

Foreign Trade Zones/Free Ports/Trade Facilitation

In 2019, the government established a Special Economic Zone (SEZ) Steering Committee, “to create, drive, guide, enhance, coordinate, and manage single, multiple and mixed-use [SEZs] in Liberia.” The government identified the port city of Buchanan in Grand Bassa County for the first special economic zone (Buchanan Special Economic Zone); feasibility studies are underway.

Performance and Data Localization Requirements

The Decent Work Act gives preference to employing Liberians; the act states that the Ministry of Labor “shall not issue a permit to work in Liberia unless it is satisfied that no suitably qualified Liberian is available to carry out the work required by the employer and the applicant satisfies the requirements for foreign residence in Liberia.” However, these requirements are not always strictly enforced.

Visa, residence, and work permit procedures do not generally inhibit mobility of foreign investors and their employees.

5. Protection of Property Rights

Real Property

Liberian law protects property rights and interests, but with weak enforcement mechanisms.  “Long term” mortgages or construction loans of up to 10 years are only available through the Liberia Bank for Development and Investment .  Only Liberians may own land, with the limited exception provided in Article 22(c) of the Constitution that non-citizen missionary, educational, and other benevolent institutions shall have the right to own property, as long as that property is used for the purposes for which acquired; property no longer so used shall revert to the Republic.

Other foreigners and non-resident investors may acquire leases, which ordinarily run for 25-50 years.  Liberian law provides for no official waiver mechanisms to limitations on foreign land ownership.

Although the Liberia Land Authority  (LLA) encourages property owners to identify and register land titles, it does not have systemic enforcement programs.  The LLA estimates that less than 20 percent of the country’s total land is formally registered. Conflicting land ownership records are common. Investors sometimes experience costly and complex land dispute issues, even after concluding agreements with the government. In the interest of minimizing lost productivity and in the absence of government adjudication, companies often make additional community level payments or agreements to resolve competing land claims, although such settlements may still not resolve future disputes. See Limits on Foreign Control and Right to Private Ownership and Establishment, above, for further information, including implementation of the Land Rights Act. Also, see https://www.doingbusiness.org/en/data/exploreeconomies/liberia#DB_rp  .

Foreign companies seeking to lease land may lease privately- or publicly-held land. Frequently, foreign companies seeking to acquire land leases do so through direct negotiations with the relevant landlords/owners.  In September 2018, Liberia enacted the long-awaited Land Rights Act, designed to resolve historical land problems that have caused conflicts and communal strife in the past. With implementation still underway, the Act categorizes land ownership as:

  • Public land, which is owned, but currently not used by the government
  • Government land, which is used by government agencies (for office buildings or other purposes)
  • Customary land, on which the livelihoods of most rural communities depend
  • Private land, owned by private citizens.

Intellectual Property Rights

The Liberia Intellectual Property Act covers domain names, traditional knowledge, transfer of technology, and patents/copyrights; enforcement is weak.  The Liberia Intellectual Property Office (LIPO) operates as a semi-autonomous agency functioning under the administrative oversight of MOCI. It lacks the technical skill to address IPR infringements.  However, in November 2019, MOCI and LIPO established the Copyright Society of Liberia (COSOL) to develop legal and international frameworks agreements to guide the collection and distribution of royalties. The government also committed to fast-tracking the ratification of outstanding international IP treaties and legal instruments in line with WTO standards.

There is not a system to track and report on seizures of counterfeit goods. The government does not prosecute IPR violations.  Many Liberians are unfamiliar with IPR, and IP and industrial property rights infringement is prevalent, including unauthorized duplication of movies, music, and books. Counterfeit drugs, apparel, cosmetics, mobile phones, computer software, and hardware are sold openly.

Liberia is not listed in USTR’s Special 301 Report or the notorious market report (see the 2019 Report: https://ustr.gov/about-us/policy-offices/press-office/press-releases/2019/april/ustr-releases-annual-special-301 ).

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

6. Financial Sector

Capital Markets and Portfolio Investment

The Liberian government welcomes foreign investment, although Liberia does not have a well-developed domestic capital market. Private sector investors have limited credit and investment options. In 2019, the Central Bank of Liberia (CBL) issued T-bills, but there were few subscribers. The CBL respects IMF Article VIII and does not implement restrictions on payments and transfers for current international transactions. Many foreign investors prefer to obtain credit from and retain profits in foreign banking institutions.

Money and Banking System

Nine commercial banks, branch outlets including payment windows/annexes, a development finance company, and a deposit taking microfinance institution provide banking services within Liberia.  Eight of the commercial banks are foreign banks. Numerous licensed foreign exchange bureaus, microfinance institutions, credit unions, rural community finance institutions, and village savings and loan associations (“susus”) also provide financial services.  However, the health of the financial sector is concerning. According to a 2019 report by the Central Bank of Liberia (CBL), most of the commercial banks’ assets were held in instruments such as Liberian government bonds and T-bills which cannot easily be converted into liquid assets (cash), which has resulted in cash availability issues. Starting in 2018, commercial banks and businesses have reported considerable difficulty in accessing Liberian dollars, including withdrawals from saving accounts of private individuals at commercial banks and by commercial banks at the CBL.  In addition, since 2019, commercial banks, businesses, and private individuals have had difficulties accessing U.S. dollars.

The issue of non-performing loans (NPLs) remains a major challenge in the banking sector and continues to negatively affect profitability.  Commercial banks face persistent challenges in profit generation and loan repayment.

Foreign banks or branches can establish operations in Liberia, subject to regulations set out by the CBL.

Foreign Exchange and Remittances

Foreign Exchange

Foreign investors may convert, transfer, and repatriate funds associated with an investment (e.g., remittances of investment capital, earnings, loans, lease payments, and royalties).  Liberian law allows for the transfer of dividends and net profits after tax to investors’ home countries.

Liberia has a floating exchange rate system. Both the Liberian Dollar (LD) and U.S. Dollar (USD) are legal tender. Market supply and demand dictates the exchange rate. The CBL displays and requires commercial banks and licensed money exchange bureaus to display daily LD to USD market exchange rates.  In addition to commercial banks, licensed foreign exchange bureaus, petrol stations, supermarkets, and other stores provide exchange services. Many unregistered or unlicensed money exchangers exchange money throughout the country.

Remittance Policies

Liberia permits 100 percent repatriation of funds and does not have currency exchange restrictions.

Remittances may be sent to Liberia through Western Union, MoneyGram, RIA Money Transfer, and wire transfer.

Sovereign Wealth Funds

The government does not maintain a Sovereign Wealth Fund (SWF) or similar entity.

7. State-Owned Enterprises

The President of Liberia appoints Boards of Directors to govern wholly-government-owned, semi-autonomous state-owned enterprises (SOEs).  The Public Financial Management (PFM) Act requires SOEs to submit periodic financial statements to their boards.

SOEs employ more than 10,000 people in sea and airport services, electricity supply, oil and gas, water and sewage, agriculture, forestry, maritime, petroleum importation and storage, and information and communication technology services. Not all SOEs are profitable. Liberia does not publish a list of SOEs. Some SOEs maintain their own websites.

Privatization Program

Liberia does not have a privatization program or policy.

8. Responsible Business Conduct

Liberian authorities do not clearly define responsible business conduct (RBC) and have not established policies or a national action plan to promote or encourage them.  The government does not factor RBC concepts into its procurement decisions, nor does it effectively and fairly enforce domestic laws regarding human rights, labor rights, consumer protection, or environmental protections intended to protect individuals from adverse business impacts.  Foreign companies are encouraged, but not required, to publicly disclose their policies, procedures, and practices to highlight their RBC practices.  Some non-governmental organizations (NGOs), civil society organizations (CSOs), and workers organizations/unions promote or monitor foreign company RBC policies and practices. However, NGOs and CSOs monitoring or advocating for RBC do not conduct their activities in a structured and coordinated manner, nor do they tend to monitor locally-owned companies.

Most Liberians are generally unaware of RBC standards.  Generally, the government expects foreign investors to offer social services to local communities and contribute to a development fund for the area in which the enterprise conducts its business. Some communities complain that these contributions to social development funds do not reach them.  The government frequently includes clauses in concession agreements that oblige investors to provide social services such as educational facilities, health care, and other essential services. There have been reports that local communities expect foreign investors to provide additional benefits to those outlined in formal concession agreements.

Liberia is a member of the Extractive Industries Transparency Initiative (EITI). The National Bureau of Concessions  monitors and evaluates concession company compliance with concession agreements, but it does not design policies to promote and encourage RBC.

9. Corruption

Liberia suffers from corruption in both the public and private sectors. Some officials engage in corrupt practices with impunity. Liberia has laws against economic sabotage, mismanagement of funds, bribery, and other corruption-related acts, including conflicts of interest. In 2019, Transparency International lowered Liberia’s rank from 120 to 137 out of 180 countries in its corruption perception index. See https://www.transparency.org/country/LBR  .

The Liberia Anti-Corruption Commission  (LACC) cannot directly prosecute corruption cases. It must first submit/refer cases to the Ministry of Justice  (MOJ) for prosecution. If the MOJ does not prosecute within 90 days, the LACC may then take those cases to court. The LACC continues to seek public support for the establishment of a specialized court to exclusively try corruption cases.

Foreign investors generally report that corruption is most pervasive in government procurement, contract and concession awards, customs and taxation systems, regulatory systems, performance requirements, and government payments systems.  Multinational firms often report paying fees not stipulated in investment agreements. No laws explicitly protect NGOs that investigate corruption.

Liberia is signatory to the Economic Community of West African States (ECOWAS) Protocol on the Fight against Corruption, the African Union Convention on Preventing and Combating Corruption (AUCPCC), and the UN Convention against Corruption (UNCAC).

Resources to Report Corruption

Contact at government agencies responsible for combating corruption:

Baba Borkai, Chief Investigator
Liberia Anti-Corruption Commission (LACC), Monrovia, http://lacc.gov.lr/ 
bborkai@lacc.gov.lr

Toll free: (+231) 777-313131
Email: bborkai@lacc.gov.lr

Contact at a “watchdog” organization (local or nongovernmental organization operating in Liberia that monitors corruption):

Anderson Miamen, Executive Director
Center for Transparency and Accountability in Liberia (CENTAL)
Tel: (+231) 886-818855
Email: admiamen@gmail.com

10. Political and Security Environment

President George Manneh Weah’s inauguration in January 2018 marked the first peaceful transfer of power from one democratically elected president to another since 1944.  Increasing freedom of speech for Liberians as well as the relatively free media landscape in the country has led to vigorous pursuit of civil liberties, resulting in active, often acrimonious political debates and organized, non-violent demonstrations.  In 2019, the government signed into law the Kamara Abdullah Kamara Act of Press Freedom to strengthen its commitment to several legal instruments it previously signed, such as the Freedom of Information Act and the Table Mountain Declaration.  Numerous radio stations and newspapers distribute news throughout the country. The government has identified land disputes and high rates of youth and urban unemployment as potential threats to security, peace, and political stability.

The Government of Liberia has shouldered national security responsibility since the United Nations Mission in Liberia (UNMIL) officially withdrew from the country in March 2018.  Protests and demonstrations may occur with little warning. The United States and other international donors continue to assist in the education and training of the Armed Forces of Liberia and law enforcement agencies.

11. Labor Policies and Practices

With a literacy rate of just under 50 percent, much of the Liberian labor force is unskilled.  Most Liberians, particularly those in rural areas, lack basic vocational or computer skills.  Liberia has no reliable or official data on labor force statistics, such as unemployment rates.  Government workers comprise the majority of formally-employed Liberians.

An estimated four out of five Liberian workers (80 percent) engage in “vulnerable” and/or “informal” employment. Many in the informal and vulnerable employment sectors suffer from inadequate earnings as well as difficult and/or dangerous conditions that undermine workers’ basic rights.  The Ministry of Labor (MOL) largely attributes high levels of vulnerable and informal employment to the private sector’s inability to create employment.  An acute shortage of specialized labor skills, particularly in medicine, information and communication technology, and science, technology, engineering, and mathematics remains a challenge.

Migrant workers are employed throughout the country, particularly in the services sector and at artisanal diamond and gold mines.

Liberia’s labor law, the 2015 Decent Work Act, gives preference to employing Liberian citizens and most investment contracts require companies to employ a defined percentage of Liberians, including in top management positions.  Foreign companies often report difficulty finding local skilled labor as one of their most significant operational hindrances. Child labor remains a problem, particularly in the extractive industries.

The Decent Work Act guarantees freedom of association, and employees have the right to establish and become members of organizations of their own choosing without prior authorization, apart from civil servants and employees of state owned enterprises.  The Act allows workers’ unions to conduct activities without interference by employers. The law also prohibits employers from discriminating against employees because of membership in a labor organization. Unions are independent from the government and political parties.  Employees, through their associations or unions, often demand and sometimes strike for compensation. When company ownership changes, workers sometimes seek payment of obligations owed by previous owners or employers.

The Decent Work Act provides that labor organizations, including trade or employees’ associations, have the right to draw up constitutions and rules regarding electing representatives, organizing activities, and formulating programs.

There were no major labor union-related negotiations affecting workers or the labor market during 2019, though public teachers and health workers went briefly on strike.  There have not been any major labor negotiations or collective bargaining agreements in 2020.  In 2019, Firestone Liberia, the country’s largest private sector employer, worked closely with the Ministry of Labor and the Agricultural Agro-Processing and the Industrial Workers Union of Liberia (AAIWUL) to ensure that a 13 percent reduction of force was done in accordance with Liberian labor laws, company policies, and the company’s collective bargaining agreement with AAIWUL.  However, as global rubber prices declined during the COVID-19 pandemic in 2020, it became even more critical for Firestone to cut its losses through further reduction of its workforce and the use of contract tapping firms, a strategy which met strong resistance from Liberia’s legislature.  Workers, except civil servants, have the right to strike provided that the MOL is notified of their intent to do so.

While the law prohibits anti-union discrimination and provides for the reinstatement of workers dismissed because of union activities, it allows for dismissal without cause provided the company pays statutory severance packages. The law sets out fundamental rights of workers and contains provisions on employment and termination of employment, minimum conditions of work, occupational safety and health, workers’ compensation, industrial relations, and employment agencies.  It also provides for periodic reviews of the labor market as well as adjustments in wages as the labor conditions dictate.

The MOL does not have an adequate or effective inspection system to identify and remedy labor violations and hold violators accountable. It lacks the capacity to effectively investigate and prosecute unfair labor practices, such as harassment and/or dismissal of union members or instances of forced labor, child labor, and human trafficking. The MOL is charged with coordinating the government’s efforts on trafficking in persons and it made some progress in 2019 in coordinating efforts across the Government of Liberia, in particular for case tracking, service provision, and referring hotline cases to the Liberia National Police.  No new labor-related laws or regulations were enacted during the last year.

12. U.S. International Development Finance Corporation (DFC) and Other Investment Insurance Programs

Liberia qualifies for U.S. International Development Finance Corporation (DFC) project financing. As of July 2020, the DFC was conducting due diligence to fund a banking sector project. In July 2019, Overseas Private Investment Corporation (OPIC), DFC’s predecessor agency, approved a new facility of USD 20 million for the Liberian Enterprise Development Finance Corporation (LEDFC), OPIC’s local partner, in addition to USD 16 million in loans from other sources to increase the LEDFC’s total lending facility to USD 36 million. The facility supports short to medium term lending to the Liberian private sector.

Generally, the Government of Liberia finances large scale projects through international bilateral and multilateral donors, including the United States, EU, World Bank, African Development Bank, and IMF.  Eligible American businesses, investors, lenders, contractors, and exporters may seek DFC support for commercially attractive opportunities in Liberia.

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source* USG or international statistical source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Liberia Gross Domestic Product (GDP) ($M USD) 2018 $3.24 billion 2019 $3.07 billion https://data.worldbank.org/
country/LR
 
Foreign Direct Investment Host Country Statistical source* USG or international statistical source USG or international Source of data:
BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in Liberia ($M USD, stock positions) N/A N/A 2019 $-94 BEA data available at
https://www.bea.gov/international/
direct-investment-and-multinational-
enterprises-comprehensive-data
 
Liberia’s FDI in the United States ($M USD, stock positions) N/A N/A 2019 $ 461 BEA data available at
https://www.bea.gov/international/
direct-investment-and-multinational-
enterprises-comprehensive-data
 
Total inbound stock of FDI as % host GDP 2017 7.54% 2018 3.96% WB data available at
https://data.worldbank.org/indicator/
BX.KLT.DINV.WD.GD.ZS?locations=LR
 

* Source for Host Country Data – https://www.cbl.org.lr/  – Central Bank of Liberia 2018 Annual Report

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

Table 4: Sources of Portfolio Investment
Data not available.

14. Contact for More Information

U.S. Commercial Service Contact Information
Email: Monrovia-Commerce@state.gov
Phone: (+231) 77-677-7000

Mali

Executive Summary

Despite promising opportunities for U.S. firms and enthusiasm for U.S. investment, there are significant obstacles to investment in Mali, including poor infrastructure, corruption, and ongoing insecurity in many parts of the country.  Terrorism, drug trafficking, and smuggling, primarily in the northern and central conflict-affected portions of the country, inhibit investment.  In addition, business contacts report that both Malian and foreign businesses face corruption in procurement, customs procedures, tax payment, and land administration.  Mali’s low ranking (148th out of 190 countries) in the World Bank’s 2020 Doing Business Report reflects the myriad challenges foreign investors can face.

Insecurity and political instability stemming from Mali’s 2012 coup d’état are ongoing and exacerbate the already difficult investment climate.  The U.S. Department of State maintains a “Level 4: Do Not Travel” travel advisory for Mali due to crime, terrorism, and kidnapping.

Continued instability in northern and central Mali and the minimal presence of the Malian government in many areas have permitted terrorist groups to conduct attacks against Western targets and Malian security forces.  Intercommunal violence stemming from conflict between livestock herders and crop farmers in central Mali further contributes to instability.

Mali has experienced strong annual economic growth (near or exceeding five percent) since 2014 despite ongoing insecurity.  The Malian government projected in an April 2020 report, however, that the COVID-19 pandemic would have significant negative effects on the country’s economic situation.  While the Government of Mali had projected a five percent economic growth rate for 2020, it revised projected economic growth to 0.9 percent due to the economic impact of COVID-19.  The Government of Mali also projected that inflation could reach 4.9 percent in 2020 in response to challenges importing goods due to COVID-19-related restrictions.

Mali continues to depend on bilateral donors and multilateral financial institutions, including the World Bank, International Monetary Fund (IMF), and African Development Bank, to fund major development projects, particularly in health, infrastructure, education, and agriculture.  The investment climate benefits from the financial and economic reform processes, such as efforts to improve fiscal transparency and address corruption, that accompany this institutional lending.

The United States and Mali enjoy a strong bilateral relationship.  Malian businesses generally view U.S. products favorably and openly search for new partnerships with U.S. firms, particularly in the infrastructure, energy, mining, and agricultural sectors.  The Government of Mali remains committed to reforming the economy, including through improving public financial management practices, increasing tax revenues, and the ongoing privatization of several state-owned enterprises.  Efforts to strengthen revenue collection agencies (particularly customs) are ongoing, following significant revenue shortfalls in 2018 that the IMF attributed to corruption, weak taxpayer compliance, and fraud.

Investors may consult the website of Mali’s Investment Promotion Agency (API-Mali) at https://apimali.gov.ml/ for information on opportunities, incentives, and procedures for foreign investment.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2019 130 of 180 http://www.transparency.org/
research/cpi/overview
World Bank’s Doing Business Report 2020 148 of 190 http://www.doingbusiness.org/
en/rankings
Global Innovation Index 2019 112 of 129 https://www.globalinnovationindex.org/
analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2018 N/A https://apps.bea.gov/international/
factsheet/factsheet.cfm
World Bank GNI per capita 2018 USD 749 http://data.worldbank.org/indicator/
NY.GNP.PCAP.CD

3. Legal Regime

Transparency of the Regulatory System

As reflected in agreements with the IMF and World Bank, the Government of Mali has adopted a generally transparent regulatory policy and laws to foster competition.  Mali’s laws related to commerce, labor, and competition are designed to meet the requirements of fair competition, ease bureaucratic procedures, and facilitate the hiring and firing of employees.  In practice, however, many international firms complain of lack of transparency in the regulatory system and challenges in enforcing regulatory requirements to the detriment of business prospects.  There is no public comment period or other opportunity for citizens or businesses to comment upon proposed laws.

Mali is a member of UNCTAD’s international network of transparent investment procedures.  Mali is also a member of the African Organization for the Harmonization of Business Law (OHADA) and implements the Accounting System of West African States (SYSCOA), which harmonizes business practices among several African countries consistent with international norms.  There are no informal regulatory processes managed by nongovernmental organizations or associations.

Mali’s Public Procurement Regulatory Authority (Autorité de régulation des marchés publics or ARMDS) is tasked with ensuring transparency in public procurement projects and may receive complaints from businesses on public procurement-related issues.  ARMDS publishes information about its decisions in disputes as well as key laws relating to public procurement on its website at http://www.armds.ml/ .

The Government of Mali regularly reviews regulations in order to adapt them to the current national context or to international standards or commitments.  A new mining code that will apply to future mining projects was announced in 2019 but has yet to be formally adopted as law.  Reforms to the tax code, the investment code, and petroleum product pricing are ongoing.

Mali makes public finance documents, including the budgets for all government ministries and offices, available on the Ministry of Economy and Finances’ website at https://www.finances.gouv.ml/lois-des-finances .  Mali’s national budget provides details on the expenditures of government entities (including the Presidency and Prime Minister’s office) and the revenues of tax collection authorities, including customs, the public debt directorate, the land administration directorate, and the treasury and public accounting directorate.  The budget also includes information on public debt, as well as government subsidies to petroleum products and to the state-owned utility company (Energie du Mali or EDM).  The Government of Mali also publishes a simplified version of the budget known as the citizen’s budget.

The Government of Mali has multiple audit institutions tasked with monitoring public spending.  The Accounts Section of the Supreme Court is responsible for reviewing and approving the financial statements of all Government of Mali departments.  The Office of the Auditor General (Bureau du Verificateur General or BVG) is authorized to audit the accounts of all government entities as well as private companies or other entities that receive public funds.  Its reports are made public and can be accessed at http://www.bvg-mali.org/ .  The Government of Mali has other auditing institutions, including the Office to Fight against Illicit Enrichment (Office central de Lutte contre l’Enrichissement illicite or OCLEI), the General Comptroller of Public Services (Contrôle Général des Services Publics or CGSP), and the Support Unit for Administrative Auditing Bodies (Cellule d’Appui aux Structures de Contrôle de l’Administration or CASCA).  Despite the existence of multiple audit institutions, management of public funds remains opaque and subject to corrupt practices, particularly in public procurements.  In 2019, the Department of State determined that Mali did not meet the minimum requirements of fiscal transparency.

International Regulatory Considerations

As a member of WAEMU and ECOWAS, Mali applies WAEMU and ECOWAS directives.

Mali is a member of the WTO.  Mali has not notified the WTO of any measures concerning investments related to trade in goods that are inconsistent with the requirements of Trade Related Investment Measures.  Information on other notifications from Mali to the WTO can be found at https://www.wto.org/english/thewto_e/countries_e/mali_e.htm  under the “Notifications from Mali” section.

Legal System and Judicial Independence

Mali’s legal system is based on French civil law.  Mali uses its investment code, mining code, commerce code, labor code, and code on competition and price to govern disputes.  Disputes occasionally arise between the government or state-owned enterprises and foreign companies.  Some investors report that certain cases involve wrongdoing on the part of corrupt government officials.

Although Mali’s judicial system is independent, many companies have noted that it is subject to political influence.  Numerous business complaints are awaiting an outcome in the courts.  The Minister of Justice wields influence over the career paths of judges and prosecutors, which may compromise their independence.  Corruption in the judicial system is common, leading to what foreign investors have characterized as flawed decisions.

An independent commercial court was established in 1991 with the encouragement of the U.S. government to expedite the handling of business litigation.  Commercial courts, located in Bamako, Kayes, and Mopti, can hear intellectual property rights cases.  In areas where there is no commercial court, the local Courts of First Instance have the jurisdiction to hear business disputes.  The Courts of First Instance’s decisions are appealable in the Court of Appeal and/or in the Supreme Court.  Since its inception, the commercial court has handled cases involving foreign companies.  The court is staffed by magistrates and is assisted by elected Malian Chamber of Commerce and Industry representatives.  Teams composed of one magistrate and two Chamber of Commerce and Industry representatives conduct hearings.  The magistrate’s role is to ensure that the court renders decisions in accordance with applicable commercial laws, including internationally recognized bankruptcy laws, and that court decisions are enforced under Malian law.

Laws and Regulations on Foreign Direct Investment

Mali’s investment code gives the same incentives to both domestic and foreign companies for licensing, procurement, tax and customs duty deferrals, export and import policies, and export zone status if the firm exports at least 80 percent of production.  Incentives include exemptions from duties on imported equipment and machinery.  Investors may also receive tax exemptions on the use of local raw materials.  In addition, foreign companies can negotiate specific incentives on a case-by-case basis.  The Government of Mali has reduced or eliminated many export taxes and import duties as part of ongoing economic reforms; however, export taxes remain for gold and cotton, Mali’s two primary exports.  The government applies price controls to petroleum products and cotton, and occasionally to other commodities (such as rice) on a case-by-case basis.

In most cases, foreign investors may own 100 percent of any business they create, except in the mining and media sectors.  Foreign investors may also purchase shares in parastatal companies.  Foreign companies may also start joint-venture operations with Malian enterprises.  The repatriation of capital and profit is guaranteed.

Despite having a generally favorable investment regime on paper, foreign investors have complained of facing challenges in practice, including limited access to financing, high levels of corruption, poor infrastructure (including inconsistent electricity access), a non-transparent judicial system, and the lack of an educated workforce.

The following websites provide additional information relating to investments in Mali:

Investment Promotion Agency:  https://apimali.gov.ml/  and http://mali.eregulations.org/ 
Mali Trade Portal:  https://tradeportal.ml/ 
National Council of Employers:  http://www.cnpmali.org/index.php/lois-et-reglements/codes 
Niger River Authority (Officer du Niger):  https://www.on-mali.org/on/ 
Chamber of Commerce and Industry:  http://www.cci.ml 
Ministry of Economy and Finances:  http://www.finances.gouv.ml 
Public Procurement Regulatory Authority:  http://www.armds.ml/ 

Competition and Anti-Trust Laws

The Ministry of Commerce and Industry is responsible for reviewing free competition in the Malian market place.  Mali’s national competition law (Order 2007, Decree 2008) and the WAEMU 2002 anti-trust rules are the primary judicial documents that govern competition in Mali.  The commercial court (Tribunal of Commerce) and ARMDS are the primary judicial bodies that oversee competition-related concerns.

Mali’s Organization of Industrial Entrepreneurs (Organisation Patronal des Industriels or OPI) has criticized corruption and smuggling as significant hurdles to fair competition.  Contacts report that Mali struggles to limit illegal imports of products such as sodas, juices, tobacco, medicines, and textiles (including fabrics).  The General Directorate of Customs, the National Directorate for Commerce and Competition, and the Agency for the Sanitary Security of Foods occasionally intervene to address the import and commercialization of smuggled goods but have limited capacity to effectively address the problem.

Expropriation and Compensation

Expropriation of private property other than land for public purposes is rare.  The Malian government has not unfairly targeted U.S. firms for expropriation.  By Malian law, the expropriation process should be public and transparent and follow the principles of international law.  Compensation based on market value is awarded by court decision.

The government may exercise eminent domain in various situations, including when undertaking large-scale public projects, in cases of bankrupt companies that had a government guarantee for their financing, or when a company has not complied with the requirements of an investment agreement with the government.

In cases of illegal expropriations, Malian law affords claimants due process in principle.  However, given reported corruption in the land administration sector, impartial adjudication of court cases involving land disputes is rare.

Dispute Settlement

ICSID Convention and New York Convention

Mali is a member of the International Center for the Settlement of Investment Disputes (ICSID).  Malian law (Decree No. 09/P-CMLN promulgating Order No. 77-63/CMLN of November 11, 1977 and Order No. 77-63/CMLN) authorizes implementation of the ICSID Convention.  Mali is also a signatory of the Convention on the Recognition and Enforcement of Arbitral Awards (the New York Convention).

Investor-State Dispute Settlement

Investors engaged in disputes with the state are supposed to undertake amicable negotiations before engaging Mali’s Public Procurement Regulatory Authority (ARMDS) or the courts.  Failure to reach an out-of-court agreement will lead to the case being transferred to the Court of First Instance, the commercial court, or international arbitration.  The decisions of foreign courts are enforced as long as specified and recognized by Malian law.

Mali’s investment code allows a foreign company that has a signed agreement with the government to refer to international arbitration any case that the local courts are unable to resolve.  Mali’s 2019 mining code (which has yet to be fully adopted as law) specifies that if there is a disagreement between the Malian government and a mining company related to application of the mining code, the disagreement may be referred to Malian courts, regional courts, and international courts.

Investors have reported that the dispute resolution process is often unfair, cumbersome, and time-consuming.  Dispute resolution can take multiple years and is reportedly often fraught with corruption, political influence, and demands for payments to facilitate the legal process.

International Commercial Arbitration and Foreign Courts

Mali is a member of the African Organization for the Harmonization of Business Law (OHADA) and has ratified the 1993 treaty creating the Common Court of Justice and Arbitration.  OHADA has a provision allowing litigation between foreign companies and domestic companies or with the government to be tried in an appellate court outside of Mali.

Bankruptcy Regulations

Mali’s bankruptcy law is found in its commerce code, which does not criminalize bankruptcy.   According to the World Bank’s 2020 Doing Business Report, resolving insolvency takes 3.6 years on average and costs 18 percent of the debtor’s estate.  Generally, a bankrupt company will be sold piecemeal.  The average recovery rate is 28.3 cents on the dollar.

4. Industrial Policies

Investment Incentives

Mali’s investment, mining, commerce, and labor codes aim to encourage investment and attract foreign investors.  By law, there is no discrimination between foreign-owned firms and Malian entities with regard to investment opportunities.  The investment code offers incentives to companies that reinvest profits to expand existing businesses or diversify into another relevant sector.  The code also encourages the use of locally sourced inputs, which can offer tax exemptions.  Companies that use at least 60 percent locally produced raw materials in their products are eligible for certain tax exemptions.  Companies that invest at least five percent of their turnover in supporting local research and development are eligible for a reduction of payroll taxes for Malian employees.

Companies (domestic or foreign) that export at least 80 percent of their production are entitled to tax-free status.  As such, they benefit from duty free-status on all equipment and other inputs needed for their operations.  The Government of Mali encourages investment in the cultural sector by reducing taxes on imports of cultural goods.  In March 2020, the Government of Mali adopted an order exempting renewable energy equipment from VAT and import taxes.  The Government of Mali may also provide short-term tax exemptions on certain essential products (such as rice, cooking oil, milk, and sugar) when the prices of those goods are unusually high.

Most businesses are located in the capital city of Bamako.  The investment code encourages the establishment of new businesses in other areas through incentives such as income tax exemptions for five- to eight-year periods, reduced energy prices, and the installation of water, electric power, and telecommunication lines in areas lacking public utilities.

The Government of Mali has identified several priority sectors for furthering economic development.  Special incentives are offered for investment in the following areas:  agribusiness, fishing and fish processing, livestock and forestry, mining and metallurgical industries, water and energy, tourism and hospitality industries, communications, housing development, transportation, human and animal health, vocational and technical training, and cultural promotion.

Foreign Trade Zones/Free Ports/Trade Facilitation

To date, there are no dedicated free trade zones in Mali.  Mali, Cote d’Ivoire, and Burkina Faso have planned to establish a special economic zone involving the agricultural areas of Sikasso in Mali, Korogho in Cote d’Ivoire, and Bobo-Dioulasso in Burkina Faso, but the zone is not yet operational.  The Government of Mali is currently drafting a law to create special economic zones in the regions of Sikasso, Segou, and Mopti, as well as an inland port in Kayes.  The investment code states that companies operating in special economic zones will benefit from reductions of taxes on profits and of corporate taxes to 25 percent over a period of seven years.

Performance and Data Localization Requirements

The 2019 mining code requires large mining companies (for which there is no precise definition in the mining code) to recruit Malian nationals who possess the requisite skills and experience.  Mining companies must also progressively replace foreign employees with Malian nationals who possess the requisite skills and experience.  Feasibility studies for large mines must incorporate a plan to replace foreign employees with Malian employees.  There is no requirement that foreign investment or foreign equity in a mine be reduced over time.

5. Protection of Property Rights

Real Property

Property rights are protected under Malian law.  Ownership of property is defined by the use, the profitability, and the ability of the owner to sell or donate the property.  According to the World Bank’s 2020 Doing Business Report, registering property in Mali requires five steps, takes 29 days, and costs 11.1 percent of the property value on average.  Mali scored 8 (against 8.8 for other Sub-Saharan African countries and 23 for OECD countries) on the quality of land administration index (with 0 being the worst score and 30 the best).

The Government of Mali established the Malian Center for the Promotion of Industrial Property to implement property rights protection laws, including the WTO TRIPS agreements.  The Malian Center for the Promotion of Industrial Property is a member of the African Property Rights Organization and works with international agencies recognized by the United Nations Industrial Development Organization.  Patents, copyrights, and trademarks are covered under property rights protection laws.  These structures notwithstanding, property rights are not always adequately protected in practice.

Mali’s National Land Agency (Direction Nationale des Domaines et du Cadastre or DNDC) defines three types of land property classifications in Mali:  1. a land title (le titre foncier), which gives full property ownership to an individual; 2. an occupancy permit (permis d’occuper) that can be obtained by paying a fee and does not grant full ownership; and 3. farming rights granted to rural agricultural communities.  All non-registered land belongs to the state.  Various government officials, including prefects, mayors, governors, and officials from the Ministry of Lands, are able to grant land ownership status.

Mali currently lacks a nationwide land registry, and different government structures at the local, regional, and national level are involved in land administration.  As a result, there are often competing claims for land.  In March 2020, as part of efforts to improve land management, the Government of Mali began the process of adopting a new law to create a one-stop shop for land registration, eliminate rural land titles (concession rurale), reinforce traditional land rights (droit coutumier), and enable the Minister of Lands to cancel the attribution or confiscation of public properties.

Intellectual Property Rights

Mali is a member of the World Intellectual Property Organization (WIPO).  Mali has ratified a number of international treaties related to intellectual property rights (IPR).  There are two primary agencies involved with the protection of IPR in Mali:  the Malian Office of the Rights of the Author (Bureau Malien du Droit d’Auteur or BUMDA) and the Malian Center for the Promotion of Intellectual Property (Centre Malien de Promotion de la Propriété Intellectuelle or CEMAPI).  CEMAPI is the primary agency for patents and for industrial property rights violation claims, while BUMDA covers artistic and cultural works.  In addition to registering copyrights, BUMDA conducts random searches during which it seizes and destroys counterfeit products.  Mali’s Agency for the Sanitary Security of Foods, the National Directorate of Agriculture, and the National Directorate for Commerce and Competition are also charged with enforcing laws related to fair trade, fair competition, and IPR.

In general, however, the government has limited capacity to combat IPR violations or to seize counterfeit goods.  There is a significant number of reported IPR violations in the artistic sector as well as in the pharmaceutical sector.  According to the Malian National Pharmaceutical Association, nearly 50 percent of pharmaceuticals sold in Mali are counterfeit.  Many CDs, movies, and books are reported to be pirated.  Several companies have noted that children are often involved in selling counterfeit products such as clothes, CDs, and books.  In the past, counterfeit products were typically imported from foreign cities, including Guangzhou and Dubai.  However, BUMDA has reported that counterfeit products increasingly originate in Mali and Nigeria.

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

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

6. Financial Sector

Capital Markets and Portfolio Investment

Portfolio investment is not a current practice in Mali.  In 1994, the government instituted a system of treasury bonds available for purchase by individuals or companies.  The payment of dividends or the repurchase of bonds may be done through a compensation procedure offsetting corporate income taxes or other sums due to the government.

The WAEMU stock exchange program based in Abidjan has a branch in each WAEMU country, including Mali.  One Malian company is quoted in the stock exchange.  The planned privatization of Mali’s state-run electricity company (EDM), telecommunications entity (Societé des Telecommunications du Mali or SOTELMA), cotton ginning company (Compagnie malienne pour le développement du textile or CMDT), and Bamako-Senou Airport offer prospects for some companies to be listed on the WAEMU stock exchange.

Money and Banking System

WAEMU statutes and the BCEAO govern the banking system and monetary policy in Mali.  Commercial banks in Mali enjoy considerable liquidity.  The majority of banks’ loanable funds, however, do not come from deposits, but rather from other liabilities, such as lines of credit from the BCEAO and North African and European banks.  Despite having sufficient loanable funds, commercial banks in Mali tend to have highly conservative lending practices.  Bank loans generally support short-term activities, such as letters of credit to support export-import activities and short-term lines of credit and bridge loans for established businesses.  Small- and medium-sized businesses have reportedly had difficulty obtaining access to credit.  The Government of Mali created a National Directorate of Small and Medium Enterprises (SMEs) in 2020 in part to address the challenges SMEs face in accessing financing.

In order to improve the business environment and soundness of the financial system, the BCEAO adopted a uniform law regarding credit reference bureaus.   The Government of Mali aligned its legislation with this regional requirement by authorizing a credit reference bureau in Mali to collect and process information from financial institutions, public sources, water and electricity companies, and other entities to create credit records for clients.  The credit rating system aims to increase the solvency of borrowers and improve access to credit.

Mali’s microfinance sector has grown rapidly.  Despite this growth, microfinance institutions suffer from poor governance and management of resources and have not put in place all government regulations or regional best practices to ensure sufficient financial controls and transparency.

Money laundering and terrorist financing are concerns in Mali.  Although Mali’s anti-money laundering law designates a number of reporting entities, companies have noted that very few comply with their legal obligations.  While businesses are technically required to report cash transactions over approximately USD 10,000, most reportedly do not.  Despite the operation of a number of al-Qaeda-linked terrorist and armed groups in northern and central Mali, the country’s financial intelligence unit, the National Financial Information Processing Unit (CENTIF), receives relatively few suspicious transaction reports concerning possible cases of terrorist financing.  With the exception of casinos, designated non-financial businesses and professions are not subject to customer due diligence requirements.

Mali is a member of the Inter-Governmental Action Group Against Money Laundering in West Africa (GIABA), a Financial Action Task Force (FATF)-style regional body.  Mali’s most recent mutual evaluation report completed November 2019 can be found at http://www.giaba.org/reports/mutual-evaluation/Mali.html .

Foreign Exchange and Remittances

Foreign Exchange

As one of the eight WAEMU countries, Mali uses the CFA franc—issued by the BCEAO—as its currency.  The CFA franc is pegged to the euro and supported by the French treasury, which ensures a fixed rate of exchange.  The Malian investment code allows the foreign transfer and conversion of funds associated with investments, including profits.  Local currency exchanges are available at Malian banks.

There are no limits on the inflow or outflow of funds for repatriation of profits, debt service, capital, or capital gains.  In the CFA franc zone, there is no limit on the export of capital provided that an exporter has adequate documentation to support a transaction and the exporter meets the domiciliation requirement.  Most commercial banks have direct investments in western capital markets.

Article 12 of Mali’s 2012 investment code states that foreign investors may transfer abroad, without prior authorization, all payments relating to business operations in Mali (including net profits, interest, dividends, income, allowances, savings of expatriated salaried employees).  Capital and financial transactions (such as buying and selling stocks, assets, and compensation from expropriation) are free to transfer abroad but are subject to declaration requirements to the Ministry of Economy and Finances.  These transfers must be done through authorized intermediaries such as banks or financial institutions.

Remittance Policies

The Government of Mali does not have a specific policy for remittances.  According to the World Bank, personal remittances from Mali’s diaspora represented around six percent of GDP in 2018.

Sovereign Wealth Funds

Mali does not have a sovereign wealth fund.

7. State-Owned Enterprises

Mali has privatized or reduced government involvement in a number of state-owned enterprises (SOEs).  However, there are still 48 state-owned or partially state-owned companies in Mali, including 12 mining companies, the national electricity company (EDM), a telecommunications entity (SOTELMA), a cotton ginning company (CMDT), a cigarette company (SONATAM), sugar companies (SUKALA and N-SUKALA), and the Bamako-Senou Airport.  The government no longer has shares in two banks, BSIC-Mali and Coris Bank International-Mali, in which it had respectively 25 and 10 percent shares as of December 2017.  The government also reduced its shares in the Malian Development Bank (BDM) and Malian Solidarity Bank (BMS).

More details on SOEs are available at https://www.finances.gouv.ml/documents/situation-des-participations-de-l%C3%A9tat-dans-les-soci%C3%A9t%C3%A9s-%C3%A0-la-date-du-31-d%C3%A9cembre-2019 .

Private and public enterprises compete under the same terms and conditions.  No preferential treatment is given to SOEs, although they can be at a competitive disadvantage due to the limited flexibility they have in their management decision-making process.  Malian law guarantees equal treatment for financing, land access, tax burden, tax rebate, and access to raw materials for private firms and SOEs.

The Government of Mali is active in the agricultural sector.  The parastatal Niger River Authority (Office du Niger) controls much of the irrigated rice fields and vegetable production in the Niger River inland delta, although some private operators have been granted plots of land to develop.  The Office du Niger encourages both national and foreign private investment to develop the farmlands it manages.  Under an MCC-funded irrigation project, Mali granted titles to small private farmers, including women; an adjacent tranche developed with MCC was to have been open to large-scale private investment through a public tender process.  However, all MCC projects were suspended as a result of the coup d’état of March 2012 and discontinued when the projects reached the end of their implementation deadline.  The national cotton production company, CMDT, which is yet to be privatized, provides financing for fertilizers and inputs to cotton farmers, sets cotton prices, purchases cotton from producers, and exports cotton fiber via ports in neighboring countries.

The Government of Mali is still active in the banking sector.  The state owns shares in five of the 14 banks in Mali:  BDM (19.5 percent share), BIM (10.5 percent), BNDA (36.5 percent), BMS (13.8 percent), and BCS (3.3 percent).  While the government no longer has a majority stake in BDM, it has significant influence over its management, including the privilege to appoint the head of the Board of Directors.

Senior government officials from different ministries make up the boards of SOEs.  Major procurement decisions or equity raising decisions are referred to the Council of Ministers.  Government powers remain in the hands of ministries or government agencies reporting to the ministries.  No SOE has delegated powers from the government.

SOEs are required by law to publish an annual report.  They hold a mandatory annual board of directors meeting to discuss financial statements prepared by a certified accountant and certified by an outside auditor in accordance with domestic standards (which are comparable to international financial reporting standards).  Mali’s independent Auditor General conducts an annual review of public spending, which may result in the prosecution of cases of corruption.  Audits of several state-owned mining companies have revealed significant irregularities.

Privatization Program

The government’s privatization program for state enterprises provides investment opportunities through a process of open international bidding.  Foreign companies have responded successfully to calls for bids in several cases.  The government publishes announcements for bids in the government-owned daily newspaper, L’Essor.  The process is non-discriminatory in principle; however, there have been many allegations of corruption in public procurement.

8. Responsible Business Conduct

There is no general awareness or defined standard of responsible business conduct in Mali among producers or consumers.  Despite the creation of the Malian Agency for Normalization and Quality Promotion (Agence Malienne de Normalisation et de Promotion de la Qualité or AMANORM) and the National Agency for the Sanitary Security of Foods (Agence Nationale pour la Securité Sanitaire des Aliments or ANSSA), some report that Mali continues to produce, import, and export dangerous products and products of poor quality.  Allegations of violations of hygiene and quality standards are common in the food-processing industry and investors have reported there is no general awareness about the dangers of unsafe and toxic chemical products in food production.

Labor rights are not generally respected given Mali’s large and unregulated informal sector.  Even formal businesses often hire workers informally, such that employees do not always receive social security, retirement, or other related benefits.  The Government of Mali has various laws intended to prevent child and forced labor as well as business practices harmful to the environment and local communities.  Despite these laws, there are frequent reported cases of child labor and forced labor in the mining, agricultural, service, and industrial sectors.  The mining code requires owners of mining and exploitation permits to present local development plans to mitigate the health, security, hygiene, environment, and cultural heritage impacts of their mining activities.  Conflicts between local artisanal mining communities and foreign mining companies over land ownership rights are frequent.  Local communities have also voiced concern with the significant environmental impacts of mine closures because of the lack of government-enforced measures to restore and rehabilitate the environment.  Foreign mining and oil exploration companies sometimes provide schools and health clinics to communities in proximity of their activities as a form of corporate social responsibility.  These activities are not done in accordance with the OECD Guidelines for Multinational Enterprises, but are rather the result of individual negotiations between the company and the leaders of neighboring communities.

Mali is an active member of the Extractive Industries Transparency Initiative (EITI) and since 2011 has been designated as a “compliant country.”  The latest EITI decision available at https://eiti.org/board-decision/2019-47  notes that Mali made “meaningful progress with considerable improvements in implementing the 2016 EITI Standard.”

9. Corruption

Many companies claim that corruption is the greatest obstacle for foreign investment and economic development in Mali.  While corruption is a crime punishable under the penal code, bribery is frequently reported in many large contracts and investment projects.  Some investors report that government officials often solicit bribes in order to complete otherwise routine procedures.  The Government of Mali passed a law against illicit enrichment in 2014.  The law, however, does not force members of parliament or the executive to declare their assets.  The government has pledged to update the law.  In 2019, Transparency International’s global corruption ranking for Mali deteriorated to 130th of 180 ranked countries (from 120th of 180 in 2018).  Mali’s perceived public corruption score from Transparency International was 29 out of 100 in 2019 (with 0 being “highly corrupt” and 100 being “very clean”).  Relative to other developing countries, Mali was rated at the 67th percentile for control of corruption on the FY2020 MCC Scorecard (based on World Bank and Brookings Worldwide Governance Indicators reports).

Corruption is reportedly common in government procurement and dispute settlement.  The government has addressed this issue by requiring procurement contracts to be inspected by the Directorate General for Public Procurement, which determines whether the procedure meets fairness, price competitiveness, and quality standards.  However, there are allegations of significant political interference in procurement.  In addition, both foreign and domestic companies complain about harassment and requests for bribes from officials involved in tax collection.  Mali’s international donor community has been working with the government to reduce corruption.

Investors have found the judicial sector to be neither independent nor transparent.  Questionable judgments in commercial cases have occasionally been successfully overturned at the Supreme Court’s Court of Appeal.  However, there is a general perception among the populace that while prosecution of minor economic crimes is routine, official corruption, particularly at the higher levels, goes largely unpunished.

The President of Mali created the Office of the Auditor General (Bureau du Verificateur General or BVG) in 2004 as an independent agency tasked with auditing public spending.  Since its inception, the BVG has uncovered several significant cases of corruption, including in the customs directorate.  However, few findings of corruption have resulted in prosecutions.

Growing pressure from international donors for more transparency in public resource management led to changing the appointment process of the Directors of Finance and Equipment.  As a result, in March 2017, the Minister of Economy and Finances dismissed 15 Directors of Finance and Equipment.  Eighteen others were moved to other ministries.  The Government of Mali opened a new office in 2017, the Office to Combat Illicit Enrichment (Office central de Lutte contre l’Enrichissement illicite or OCLEI), to combat illicit enrichment by government officials.  The OCLEI has the authority to collect asset declarations from public servants, to conduct investigations of government officials suspected of corruption, and to refer cases for prosecution if sufficient evidence is gathered against the defendant.  However, the OCLEI’s operations were temporarily suspended following civil servants’ union protests against asset declaration requirements.  Negotiations between the unions, the Government of Mali, and donors eventually yielded a satisfactory solution that enabled the office to resume operations, and the office has begun registering asset declarations for certain categories of civil servants.  According to its 2017-2018 report, the OCLEI received asset declarations from approximately 1,000 civil servants (nearly 70 percent of all civil servants in Mali) over 2017-2018 and referred three suspected cases of corruption to the justice system.

Following a cabinet reshuffle in 2019, the newly appointed Minister of Justice took measures to address corruption by appointing a new prosecutor in the Economic and Financial Specialized Judicial Office of Bamako, a court in charge of prosecution of corruption.  Since these changes, many high-profile businesspeople and political leaders have been arrested due to corruption allegations.  Mali’s Auditor General also increased the pace of its reporting in 2019 and 2020, releasing 11 financial audits reports, four performance audits reports, four reports of conformity, and seven reports on the level of implementation of recommendations it made in previous audits reports.  The Auditor General refers cases of fraud or other unlawful practices to the Economic and Financial Specialized Judicial Office of Bamako.

Resources to Report Corruption

Mamoudou Kassogue
Head Prosecutor
Economic and Financial Specialized Judicial Office (Pole Economique et Financier de Bamako)
Tel. (+223) 20 29 71 34

Samba Alhamdou Baby
Chief Auditor
Office of the Auditor General (Bureau du Verificateur General)
Tel. (+223) 20 29 70 25

Mama Sininta
Chief Prosecutor
Accounts Chamber of the Supreme Court (Section des Comptes de la Cour Supreme)
Tel. (+223) 20 22 15 02

Konate Salimata Diakite
Comptroller
Comptroller of Public Services (Controleur General des Services Publics)
Tel. (+223) 20 22 58 15

10. Political and Security Environment

The U.S. Department of State’s Fact Sheet on Mali is available at https://www.state.gov/u-s-relations-with-mali/.  The current Travel Advisory for Mali is available at https://travel.state.gov/content/travel/en/traveladvisories/traveladvisories/mali-travel-advisory.html.

Throughout nearly three decades of multi-party democracy, Mali has consistently encouraged private enterprise and investment.  However, the destabilizing effects of Mali’s 2012 coup d’état led to a deterioration of the economic situation and uncertainty in the investment climate.  Mali continues to face significant political and security challenges amidst slow implementation of a peace agreement signed in 2015 that aims to resolve the ongoing conflict in northern Mali.  A disparate group of politically-motivated armed groups, militias, bandits, and extremist groups continue to exert influence in wide swathes of Mali’s largely ungoverned northern areas as well as central Mali.  Furthermore, terrorist groups have increased the frequency and range of their attacks—particularly against the base camps of the UN peacekeeping mission (MINUSMA) and the Malian Armed Forces in northern and central Mali—in an effort to destabilize the country.  The situation in central Mali—namely in the Segou and Mopti regions—is increasingly unstable due to intercommunal conflict, localized political violence, and the incursion of extremist groups into the region.

Terrorist groups with varying degrees of allegiance to al-Qaeda and the Islamic State of Iraq and the Levant (ISIS) operate in Mali, and often pursue local agendas complementary to these global extremist movements.  Groups linked with al-Qaeda in the Islamic Maghreb (AQIM), which have merged under the banner of Jama’at Nusrat al-Islam wal-Muslimin (JNIM), continued to conduct terrorist attacks throughout 2019, primarily targeting international and Malian military forces.  These groups have claimed responsibility for recent gun and improvised explosives attacks, kidnappings, and other violent actions in northern and central Mali.

In addition to MINUSMA’s peacekeeping presence, French troops are deployed in the country and conduct offensive counterterrorism operations in collaboration with Malian security forces that target extremist elements.  However, their presence is not sufficient to counter every threat.  Extremist groups have attacked UN peacekeepers’ northern base camps in Timbuktu, Gao, and Kidal.  Attacks by violent extremist groups have moved beyond the traditional conflict zone in the North to central and southern Mali.  The area along the border with Burkina Faso, and some remote parts of southern Mali, are increasingly under threat of attack.

While the Malian government, backed by MINUSMA and French forces, has taken steps to reassert control over most of the major cities, much of the North and Center remain unstable.  AQIM, long entrenched in northeastern Mali, remains a threat.  AQIM has demonstrated a pattern of kidnapping hostages for ransom and launching operations against neighboring Algeria, Mauritania, Burkina Faso, and Niger.  AQIM and its local affiliates have been involved in various terrorist attacks in Mali, including at a restaurant in Bamako in March 2015; at a hotel frequented by foreigners in Sevare in August 2015; against the Radisson Blu Hotel in Bamako in November 2015; and against the Campement de Kangaba hotel in June 2017.

While previous extremist attacks spared foreign companies except hotels and restaurants, some attacks have targeted infrastructure projects involving foreign companies.  In October 2017, extremists attacked a foreign company in charge of the construction of a road in Timbuktu and destroyed several vehicles.  In March 2018, terrorists attacked and destroyed a USD 66 million dam construction project in Djenne.  In addition, in April 2020, extremist groups carried out attacks in the southwestern region of Kayes, Mali’s goldmining region.

U.S. citizens living or traveling in Mali are encouraged to enroll in the Smart Traveler Enrollment Program (STEP) at https://step.state.gov/step to receive security messages and make it easier to be located in an emergency.

11. Labor Policies and Practices

Labor is widely available in Mali, but companies have reported that skilled labor is in short supply.  Reliable unemployment data is difficult to obtain.  While a 2017 Government of Mali survey found an unemployment rate of 9.1 percent, the actual figure is likely much higher.  The rate is generally higher for youth between the ages of 15-24, coming in at 21.9 percent according to the government’s 2017 survey.  Workers have the right to unionize.  Relations between labor and management are often contentious and strikes are common.  The government has ratified all International Labor Organization (ILO) conventions protecting the rights of workers.

Since June 2014, the Government of Mali has faced several strikes led by different unions, including the national union of workers (UNTM), the union of university and basic education professors, the union of workers from the tax office, the union of workers of the national radio and television company, the confederation of unions (CSTM), the union of judges, and the union of health workers.  The private sector also participates in strikes, as seen in 2015 and 2017 banking and financial sector strikes.  While employers and workers are often able to reach a resolution, strikes can significantly disrupt economic activities, particularly when they involve key sectors like transportation or the financial sector.

The labor code adopted in 1992 (amended in December 2011 and in June 2017) streamlined hiring and firing procedures.  Conflicts often arise when employers terminate contracts and fire employees.  Large Malian and international employers have had difficulty enforcing their rights in court, given that powerful and independent labor unions play an important role in supporting their members and in other national affairs.  Compensation plan negotiations and firing procedures are time-consuming and closely scrutinized by the Ministry of Labor and the judiciary.  Labor laws differentiate between layoffs and firing.  Employees who are laid off are not entitled to unemployment compensation but are entitled to other benefits, including one-month gross salary and compensation for untaken leave.  Employers are required to provide advance notice and a certificate to laid off employees.  Although not a requirement, it is advisable to have regular contacts with labor inspectors, especially when concluding new hiring contracts or considering terminations or reductions in force.

Child labor and trafficking in persons continue to be serious problems in Mali.  The ILO reports that over 46 percent of children in Mali engage in child labor, including the worst forms of child labor such as child soldiering and hazardous activities in the agriculture and gold mining sectors.  Cotton, artisanal gold, and rice are included on the U.S. government’s List of Goods Produced by Child Labor or Forced Labor.  Additionally, rice is included on the U.S. government’s Executive Order 13126 List of Goods Produced by Forced and Indentured Child Labor.  The government has action plans for monitoring child labor and unsafe working conditions.  Labor inspection entities, however, are underfunded and unable to regularly conduct inspections or provide support for victims of violations.  In June 2017, the Government of Mali amended the labor code to align Malian law on the minimum age of employment with the ILO standard, increasing the minimum age of employment from 14 up to 15.  The amended labor law bans discrimination based on religion, race, or gender.  It also requires equality in terms of remuneration and forbids forced and compulsory labor.

12. U.S. International Development Finance Corporation (DFC) and Other Investment Insurance Programs

As a low-income country, Mali is eligible for U.S. International Development Finance Corporation (DFC) programs.  In 1964, the United States and Mali signed a private investment guaranty agreement.  Mali has been a member of the World Bank’s Multilateral Investment Guarantee Agency (MIGA) since 1990.

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source* USG or international statistical source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount  
Host Country Gross Domestic Product (GDP) ($M USD) 2018 $16,221 2018 $17,163 www.data.worldbank.org/country/mali 
Foreign Direct Investment Host Country Statistical source* USG or international statistical source USG or international Source of data:
BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) N/A N/A 2018 $0 BEA data available at
https://www.bea.gov/international/
direct-investment-and-multinational-
enterprises-comprehensive-data
 
Host country’s FDI in the United States ($M USD, stock positions) N/A N/A 2018 $-1 BEA data available at
https://www.bea.gov/international/
direct-investment-and-multinational-
enterprises-comprehensive-data
 
Total inbound stock of FDI as % host GDP N/A N/A 2018 26.0 % UNCTAD data available at
https://unctad.org/en/Pages/DIAE/
World%20Investment%20Report/
Country-Fact-Sheets.aspx
 
  

*Source for Host Country Data:  BCEAO (rate: USD $1 = 589 FCFA)

Table 3: Sources and Destination of FDI
Direct Investment from/in Counterpart Economy Data
From Top Five Sources/To Top Five Destinations (US Dollars, Millions)
Inward Direct Investment Outward Direct Investment
Total Inward 3,930 100% Total Outward 14 100%
United Kingdom 1,451 37% France 12 85.7%
British Virgin Islands 836 21.3% Togo 1 7.1%
Australia 793 20.2% Cote d’Ivoire 0 0%
Senegal 151 3.8%
South Africa 128 3.2%
“0” reflects amounts rounded to +/- USD 500,000.

Table 4: Sources of Portfolio Investment
Data not available.

14. Contact for More Information

Economic and Commercial Office
U.S. Embassy Bamako, Mali
ACI 2000, Rue 243, Porte 297
+223 20 70 23 00
BamakoEcon@state.gov

Mauritania

Executive Summary

In August 2019, Mauritanians elected a new reform-minded government that took steps to increase foreign investment inflow, improve business climate and fight corruption.  On October 17, 2019 the Court of Accounts published a ten-year audit report covering fiscal years 2007 through 2017. The report highlighted lack of transparency in government tenders, weakness in public finances management and provided credible recommendations.  Based on the audit report findings, a parliamentarian committee was set up to further investigate four major government infrastructure and fisheries projects that were awarded to Chinese companies.  The government also established an inter-ministerial investment committee presided by the Prime Minister to review the requirement for entry visas to Mauritania.  The committee is expected to reduce requirements for countries where foreign investments are more likely to come from.

In December 2019, Mauritania signed and ratified the African Continental Free Trade Area agreement and implemented Commune Tariffs Agreement with Economic Community of West African States (ECOWAS).

To fight against corruption and meet international standards, the Central Bank ordered 691 money transfer offices to close for failure to comply with the 2005 Law related to the Fight Against Money Laundering and Financing of Terrorism.

Despite a strong commitment to right the wrongs of the previous administration, the new government is struggling to overcome years of neglect and lack of attention on corrupt practices.  The new government inherited USD 527 million in debt, with USD 300 million in debt service payments due in FY2020.  In order to fully benefit from the newly discovered offshore hydrocarbons, a significant investment in infrastructure (particularly power generation) is required. There are several major infrastructure projects with feasibility studies under way, but no funding for any of the projects has been identified.

The new government benefitted from USD 30 million in increased revenue in its first six months, thanks to strong growth in the hydrocarbon, mining, fisheries and tourism sectors.  However, that financial buffer is quickly being drained due to COVID 19 response measures.

U.S. investment in Mauritania is primarily in the hydrocarbon and mining sectors, including heavy machinery. However, other sectors (i.e. tourism, agriculture, telecommunication and infrastructure projects) provide opportunities for U.S. investment.  Mauritania is currently our 172nd largest goods trading partner with USD 189 million in total (two-way) goods trade during 2019.  The total U.S. exports to Mauritania in 2019 were USD 127 million and imports from Mauritania were USD 61 million, resulting in a U.S. trade surplus with Mauritania of USD 66 million.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2019 137 of 180 http://www.transparency.org/research/cpi/overview
World Bank’s Doing Business Report 2019 152 of 190 http://www.doingbusiness.org/en/rankings
Global Innovation Index N/A N/A https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) N/A N/A http://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2018 $1,160 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD

2. Bilateral Investment Agreements and Taxation Treaties

Mauritania has bilateral investment agreements with the Arab Maghreb Union (Algeria, Libya, Morocco, and Tunisia) as well as with Saudi Arabia, France, Belgium, and Romania.  Agreements also exist with Burkina Faso, Cameroon, The Gambia, Ghana, Mauritius, Italy, Lebanon, Qatar, Yemen, Korea, and Egypt.

Mauritania is a signatory to the Cotonou Agreement between the European Union (EU) and the group of African, Caribbean and Pacific (ACP) countries, and thus enjoys free access to the EU market.  Due to its least-developed country status, Mauritania also benefits from duty-free access to the European market under the Everything-But-Arms initiative.

Mauritania does not have a bilateral investment agreement or bilateral taxation treaty with the United States.

Mauritania is not eligible for benefits under the U.S. African Growth and Opportunity Act (AGOA) due to insufficient progress toward combating forced labor.  However, Mauritania remains eligible to the Generalized System of Preferences (GSP), which allows marketable goods produced in Mauritania to enter the U.S. market duty-free.

In 2018, Mauritania was among the countries that first countries to sign and ratify the African Continental Free Trade Area agreement. In 2019, Mauritania implemented the Commune Tariffs Agreement ECOWAS countries.  Mauritania is a member of the Arab Maghreb Union (Algeria, Libya, Morocco, and Tunisia) economic trade block.  Mauritania has been a member of the World Trade Organization (WTO) since May 31, 1995.  The country, however, is in a transitional stage regarding its commitments, and it is currently engaging the WTO to ensure it makes progress towards complete compliance with required commitments.

3. Legal Regime

Transparency of the Regulatory System

The government continues to adopt laws and regulations to improve transparency.  During the review period, the government made accounting budget bills widely and easily accessible to the general public, including online.  The accounting documents provided a substantially complete picture of the government’s planned expenditures and revenue streams, including natural resource revenues.  Budget documents were prepared generally according to internationally accepted principles.  The government holds full authority in allocating natural resources licenses and manages bulk of its revenues.  The criteria and procedures by which the government awards natural resource extraction contracts or licenses are specified in Mauritania’s investment code, mining code, and a new hydrocarbon law.  Basic information on tenders are publicly available on government websites. There is no law or policy impeding foreign investment in Mauritania.

The government is moving to streamline bureaucratic procedures for investment. In 2019, the government began to make meaningful progress in implementing the EITI standard.

However, there is a complex and often-overlapping system of permits and licenses required to do business.  There continues to be a lack of transparency in implementation of the legal, regulatory policies.

Post is not aware of any informal regulatory processes managed by nongovernmental organizations or private sector associations, and laws and regulations do not discriminate against foreign investment.

International Regulatory Considerations

See section 2 – Bilateral Investment and Taxation Treaties.

Legal System and Judicial Independence

The Mauritanian judicial system combines French and Islamic (Malikite rite) judicial systems. The constitution guarantees the independence of the judiciary (Article 89), and an organic law also protects judges from undue influence. Civil and Commercial Codes exist and are designed to protect contracts, although court enforcement and dispute settlement can be difficult. The judicial system remains weak and unpredictable in its application of the law, due in part to the training judges receive in two separate and distinct legal systems: Shari’a law and laws modeled after the French legal system. Judges remain undercompensated and susceptible to tribal pressures and bribery. Specialized commercial law courts exist, but sometimes judges lack training and experience in commercial and financial law. Some judges may only have formal training in the Shari’a legal system, while others are only familiar with the French civil law system. A lack of standardization of applicable legal knowledge in the judiciary leads to inefficiency in the execution of judgments in a timely and efficient manner.  Laws and decrees related to commercial and financial sectors exit. However, they are not always publicly available.

Most judgments are not issued within prescribed time limits and records are not always well kept. Judgments of foreign courts are recognized by local courts, but enforcement is limited. During the last few years, the government has taken steps to provide training to judges and lawyers as an attempt to professionalize the system to reduce the backlog and work through cases in a more efficient manner. In 2017, the Government passed a new small claims law that covers cases valued at less than USD 11,000.  In January 2020, the government opened a new international center for mediation and arbitration. The center provides an alternative legal office for settlement of investment disputes and allows arbitration and mediation from international courts

Laws and Regulations on Foreign Direct Investment

There are no new major investment laws or judicial decisions ratified last year. However, to streamline procedure the government launched a new ministry in charge of investment last year. The investment Code, last updated in June 2012, was designed to encourage direct investment by enhancing the security of investments and facilitating administrative procedures.  The code provides for free repatriation of foreign capital and wages for foreign employees.  The code also created free points of importation and export incentives.  Small and medium enterprises (SME), which register through OPPS (“Guichet Uniquie” one-stop-shop), do not pay corporate taxes or customs duties.

Competition and Anti-Trust Laws

The Ministry of Economy’s office of “Commission de Passation des Marches des Secteurs de l’Economie et Finance” (Procurement Commission of the Economic and Finance Sectors, www.cmsef.mr ) is the government agency that reviews tender bids in accordance with the law and regulations.  Suppliers for large government contracts are selected through a tender process initiated at the ministry level.  Invitations for tenders are publicly announced in local newspapers and on government websites.  After issuing an invitation for tenders, the Ministry of Economy’s commission in charge of reviewing tenders selects the offer that best fulfills government requirements.  If two offers, i.e., one from a foreign company and one from a Mauritanian company, are otherwise considered equal, statutes require that the government award the tender to the Mauritanian company.  In practice, this has resulted in tenders awarded to companies that have strong ties to government officials and tribal leaders, regardless of the merits of an individual offer.  Preferential treatment remains common in government procurement, despite the government’s recent efforts to promote transparency in the public sector.

Expropriation and Compensation

The revised Investment Code provides more property guarantees and protection to business owners.  The Code protects private companies against nationalization, expropriation, and requisition.  However, if a foreign enterprise is facing difficulties, the government can propose an expropriation plan to avoid bankruptcy and to protect jobs of local employees, with fair and equitable compensation.

The only known case of expropriation since Mauritania’s independence was the nationalization of the French mining MIFERMA in November 1974. In that case, the two parties agreed on a compensation plan.

Dispute Settlement

ICSID Convention and New York Convention

In 1966, Mauritania ratified the Convention on the settlement of investment disputes between States and nationals of other States.  In 1997, Mauritania became a signatory to the convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention). However, there is no specific legislation to ensure enforcement.

Investor-State Dispute Settlement

The most recent investment dispute between the Mauritanian government and a foreign investor occurred in 2006 over production-sharing contracts (PSC) signed in 2003 with former President Taya’s government.  A successor government lodged a dispute over four amendments to the original PSC involving oil revenues and environmental issues. An international arbiter was brought in and ruled in the government’s favor.

International Commercial Arbitration and Foreign Courts

Judgments of foreign courts are not consistently applied.  The government accepts international arbitration of investment disputes between foreign investors and government authorities.  Judgments of foreign courts are accepted by the local courts, but enforcement is limited.  In the past, issues were referred to the International Center for Settlement of Investment Disputes (ICSID), of which Mauritania became a member in 1965.

Settling disputes through the courts remains a long and complicated process.  Inadequate laws and poor administration remain the key source of legal disputes encountered in the country. The duration of investment disputes are subject to numerous appeals before reaching a final verdict.  Though the government is looking for ways to streamline the system by providing training to judges and lawyers, the court procedures are currently long and complicated.

Though there are no recent reports on disputes involving State-Owned Enterprises (SOE), it is likely that domestic courts would favor SOEs during a dispute.

The Mauritanian government guarantees companies that the tax, customs, and legal regulations in force at the time of issuance of an Investment Certificate will remain applicable to them for a period of 20 years.  Likewise, any favorable changes to the corporate tax or customs laws during that guaranteed period will be applicable to the investor.

Bankruptcy Regulations

The country has bankruptcy laws which carry the potential for criminal penalties.  Mauritania’s bankruptcy laws were last updated in 2001.  The bankruptcy law allows for the reorganization or restructuring of a business.  There are very few reported cases of these laws being applied.

4. Industrial Policies

Investment Incentives

Investment incentives such as free land, deferred and reduced taxes, and tax-free importation of materials and equipment are available to encourage foreign investors.  The Ministry of

Economy offers tax benefits, including exemptions in some instances, to enterprises in Special Economic Zones and some companies in priority sectors throughout the country.  The Investment Code outlines standard investment incentives, but foreign investors may negotiate other incentives directly with the government. In 2018, the government adopted the Public-Private Partnerships (PPPs) law. The law supports the 2017 budget diversification agenda through increased private sector participation in non-extractives sectors. The law provides legal and regulatory framework for PPPs participation in the national economy. It also addresses land tenure and property rights issues to facilitate credit access.  According to World Bank and IMF analysis, the PPP law will enable the country to reduce reliance on commodities and raises long-term growth prospects in a more sustained and inclusive manner.

Foreign Trade Zones/Free Ports/Trade Facilitation

The Investment Code creates Special Economic Zones (Free Export Zone or Cluster of Development in the Interior) by decree.  SEZ are subject to continuous monitoring by the Customs Service in a manner specified in the decree.  Nouadhibou, the commercial capital of Mauritania, is designated as a Free Trade Zone by the government.  The Nouadhibou Free Trade Zone has its own regulatory structure.  As of January 2020, the Nouadhibou Free Trade Zone has granted 750 authorizations for companies, primarily in the tourism, services, and fisheries sectors.

The Investment Code provides three main preferential tax regimes: Small and Medium Enterprises Regimes, which apply to any investment between USD 167,000 and USD 667,000; Free Export Zones/Clusters of Development; and Targeted Industries, which includes agriculture, artisanal fishing, tourism, renewable energy, and raw material processing.  Land concessions allocated to companies located in Free Economic Zones will follow a rental rate determined by joint decision of the relevant Minister and the Minister of Economy, which sets land allocation prices.  As for tax advantages, companies will be exempt from taxes, excluding personnel taxes such as for retirement and social security, if they have invested at least USD 1.6 million and generated at least 50 permanent jobs, and show a potential to export at least 80 percent of their goods or services.

Additionally, under the provisions in the revised Investment Code, companies will not be taxed on patents, licenses, property, or land, but rather assessed a single municipal tax that cannot exceed an annual amount of USD 16,000.  Companies established in free zones are exempt from taxes on profits for the first five years.  Additionally, companies established in free zones benefit from a total exemption of customs duties and taxes on the importation and export.

Performance and Data Localization Requirements

The government mandates that companies may employ expatriate staff in no more than 10 percent of key managerial staff positions, in accordance with the Labor Code and are required to have a plan in place to “Mauritanize” expatriate staff positions.  Expatriate staff may be hired in excess of 10 percent with authorization from the appropriate industry authority by establishing that no competent Mauritanian national is available for the vacancy.  Foreign companies are required to transfer skills to local employees by providing training for lower-skilled jobs.  However, this does not apply to companies operating within the Nouadhibou Free Trade Zone Authority.

Current immigration laws do not discriminate nor are they considered to apply excessively onerous visa, residence, or work permit requirements inhibiting foreign investors’ mobility.  However, some U.S. companies have expressed frustration with the difficulty in obtaining or renewing work and residency permits for their employees that are not Mauritanians.

The government imposes performance requirements as a condition for establishing, maintaining, or expanding an investment, or for access to tax and investment incentives.  Foreign investors consistently report that government-sponsored requests for tenders lack coherence and transparency.  The revised Investment Code requires investors to purchase from local sources if the good or service is available locally and is of the same quality and price as could be purchased abroad.  There is no requirement for investors to export a certain percentage of output or have access to foreign exchange only in relation to their exports.  If imported “dumped” goods are deemed to be competing unfairly with a priority enterprise, the government will respond to industry requests for tariff surcharges, thus providing some potential protection from competition.

Expatriate staff members working for companies in accordance with the Labor Code are eligible to import, free of customs duties and taxes, their personal belongings and one passenger vehicle per household, under the regime of exceptional temporary admission (Admission Temporaire Exceptionelle, or ATE).  All sales, transfers, or withdrawals are subject to permission of customs officials.

The Mauritanian government does not have any requirements or a mechanism that impedes companies from transmitting data freely outside the country.  There are no laws in place enforced on local data storage.

5. Protection of Property Rights

Real Property

Property rights are protected under the Mauritanian Civil Code, which is modeled on the French code.  In practice, however, it can be difficult to gain redress for grievances through the courts.  Mortgages exist and are extended by commercial banks.  There is a well-developed property registration system for land and real estate in most areas of the country, but land tenure issues in southern Mauritania, particularly the area along the Senegal River, are the subject of much controversy.  For example, in January 2014, rural communities around Boghe (300 kilometers southeast of Nouakchott) denounced as expropriation the signing of an agreement with the Saudi Arabian Al Rajhi Bank that granted permission for the Bank to cultivate 31,000 hectares in Brakna and Trarza provinces.  Investors should be fully aware of the history of the lands they are purchasing or renting and should verify that the local partner has the proper authority to sell/rent large tracts of land—particularly in this region—before agreeing to any deals.

The Ministry of Habitat and Urbanism continues to computerize the land licenses to provide more transparent land allocation.  All information regarding the property titles is available at the Land Registry Agency housed at the Ministry of Habitat, including information related to mortgages and other tax related matters.  The Land Registry Agency performs due diligence prior to making the final title transfer.  To register a property, owners need to have their notarized sale agreement along with the title certificate Property rights are protected under the Mauritanian Civil Code, which is modeled on the French code.  In practice, however, it can be difficult to gain redress for grievances through the courts. There remains a large percentage (over 10 percent) land without clear title. Even If property is legally purchased there is always a threat the property being occupied by squatters

Intellectual Property Rights

The legal protection of intellectual property rights (IPR) is still a relatively new concept in Mauritania.= Those seeking legal redress for IPR infringements will find very little historical record of cases or legal structures in place to support such claims.  There is no separate judicial circuit that specializes in IPR.

Mauritania is a member of the Multilateral Investment Guarantee Agency (MIGA) and the African Organization of Intellectual Property (OAPI).  In joining the latter, member states agree to honor IPR principles and to establish uniform procedures of implementation for the following international agreements: the Paris Convention for the Protection of Industrial Property, the Berne Convention for the Protection of Literary and Artistic Works, the Hague Convention for the Registration of Designs and Industrial Models, the Lisbon Convention for the Protection and International Registration of Original Trade Names, the Washington Treaty on Patents, and the Vienna Treaty on the Registration of Trade Names.  Mauritania signed and ratified the World Trade Organization (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) in 1994 but has yet to implement it.  The government also signed and ratified the World Intellectual Property Organization (WIPO) Convention in 1976, but it has not signed or ratified the WIPO Internet treaties.  The government is in the process of launching reforms related to property, product certification, and accreditation bodies to protect IPR.  The Agency for Consumer Protection, housed at the Ministry of Commerce, is in charge of quality control and the prevention of sales of counterfeit goods in local markets, but its capabilities to track and enforce its regulations are very constrained.

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

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

6. Financial Sector

Capital Markets and Portfolio Investment

Portfolio investment

The government is favorable to portfolio investment. Private entities, whether foreign or national, have the right to freely establish, acquire, own, and/or dispose of interests in business enterprises and receive legal remuneration.  Privatization and liberalization programs have also helped put private enterprises on an equal footing with respect to access to markets and credit.  In principle, government policies encourage the free flow of financial resources and do not place restrictions on access by foreign investors.  Most foreign investors, however, prefer external financing due to the high interest rates and procedural complexities that prevail locally.  Credit is often difficult to obtain due to a lax legal system to enforce regulations that build trust and guarantee credit return.  There are no legal or policy restrictions on converting or transferring funds associated with investments.  Investors are guaranteed the free transfer of convertible currencies at the legal market rate, subject to the availability.  Similarly, foreigners working in Mauritania are guaranteed the prompt transfer of their professional salaries.

Commercial bank loans are virtually the only type of credit instrument.  There is no stock market or other public trading of shares in Mauritanian companies.  Currently, individual proprietors, family groups, and partnerships generally hold companies, and portfolio investments.

Money and Banking System

The IMF has assisted Mauritania with the stabilization of the banking sector and as a result, access to domestic credit has become easier and cheaper.  A proliferation of banks has fostered competition that has contributed to the decline in interest rates from 30 percent in 2000 to 10 percent in 2009, not including origination costs and other fees.  Interest rates have remained stable since 2009, ranging between 10 to 17 percent as of April 2020.

Nevertheless, this banking system remains fragile due to liquidity constraints in the financial markets. The country’s five largest banks are estimated to have USD 100 million in combined reserves; however, these figures cannot be independently verified, making an evaluation of the banking system’s strength impossible.  As of April 2020, 25 banks, national and foreign, currently operate in Mauritania, despite the fact that only 15 percent of the population holds bank accounts.

The Central Bank of Mauritania is in charge of regulating the Mauritanian banking industry, and the Central Bank has made reforms to streamline the financial sector’s compliance with international standards.  The Central Bank performs yearly audits of Mauritanian banks. There are no restrictions enforced on foreigners who wish to obtain an individual or business banking account.

In 2017, the Central Bank significantly reduced direct foreign currency sales to the private sector to better enforce foreign exchange regulations as part of its drive to allow for a more flexible determination of the exchange rate.

In 2018, the Central Bank of Mauritania lost all correspondent banking relationships with banks in the United States due to de-risking policies enforced by U.S. banks.  The Central Bank subsequently was able to reestablish a correspondent banking relationship in 2019, however there are still no Mauritanian banks that have been able to do so. Local branches of international banks (such as Societe Generale or Attijari) do maintain correspondent banking relationships with U.S. banks and are able to clear transactions in USD.

Foreign Exchange and Remittances

Foreign Exchange

There are no legal or policy restrictions on converting or transferring funds associated with investments. Investors are guaranteed the free transfer of convertible currencies at the legal market rate, subject to the availability of such currencies. Similarly, foreigners working in Mauritania are guaranteed the prompt transfer of their professional salaries.  To transfer funds, investors are required to open a foreign exchange bank account in Mauritania.  There are no maximum legal transaction limits for investors transferring money into or out of Mauritania, although regulations to withdraw money may be complicated in practice.

Businesses transfer money through the traditional Hawala system—they deposit their money in a Hawala store and designate a beneficiary for pick up.  The Hawala system has become a reliable substitute to the high interest rate, long wait period and transaction fees imposed by local banks.  However, the Central Bank closed 691 illegal money transfer points to restructure the financial sector.  Currently, only nine agencies have a provisional authorization for transfer of funds.  Individuals and companies may obtain hard currency through the informal market and commercial banks for the payment of purchases or the repatriation of dividends.  If the bank has hard currency available, there is no delay in effect for remitting investment returns.  However, if the bank does not have enough reserves, the hard currency must be obtained from the Central Bank in order to conduct the transfer.  The Central Bank is required to prioritize government transfers, which could present further delays.  Delays of one to three weeks, although relatively uncommon, can occur.

In January 2018, the government of Mauritania introduced a new currency.  The new currency drops a zero from the country’s previous currency; the value and the name of the currency remained the same, although the currency code changed from MRO to MRU.  Local banks had to adapt their software, change their checkbooks, and reconfigured their ATMs to bring them into compliance with the new currency.

Remittance Policies

There is no limit on the inflow or outflow of funds for remittances of profits, debt service, capital or capital gains.  The local currency, the ouguiya, is freely convertible within Mauritania, but its exportation is not legally authorized.  Hard currencies can be obtained from the central bank and local commercial banks or parallel financial market in the informal sector.  The Central Bank holds regular foreign exchange auctions, allowing market forces to fix the value of the ouguiya.

Sovereign Wealth Funds

The Central Bank administers the National Fund for Hydrocarbon Reserves, a sovereign wealth fund (SWF), which was established in 2006.  The SWF is funded from the revenues received from the extraction of oil, any royalties and corporate taxes from oil companies, and from the profits made through the fund’s investment activities.  The fund’s mandate is to create macroeconomic stability by setting aside oil revenues for developmental projects.  However, the fund’s management is considered to lack transparency and the projected revenue streams remain unrealized.

7. State-Owned Enterprises

SOEs and the parastatal sector in Mauritania represent an important portion of the economy.  They have an impact on employment, service delivery, and most importantly fiscal reserves given their size in the economy and state budget.  In recent years, parastatal companies and SOEs have experienced significant business and financial problems in terms of increasing levels of debt, operational losses, and payment delays.  This increase in fiscal reserve risk has led the government to provide subsidies to SOEs.

Hard budget constraints for SOEs are written into the Public Procurement Code but are not enforced.  SOMELEC, the state-owned electricity company, has been operating in a precarious financial situation for many years.  The company relies on government financial support to remain operational.

Most state-owned enterprises in Mauritania have independent boards of directors.  The directors are usually appointed based on political affiliations.

There are about 120 SOEs and parastatal companies active in a wide range of sectors including energy, network utilities, mining, petroleum, telecommunications, transportation, commerce, and fisheries.  Parastatal and wholly owned SOEs remain the major employer in the country.  This includes the National Mining Company, SNIM, which is by far the largest Mauritanian enterprise and the second largest employer in the country after public administration.

The publicly available financial information on parastatal and wholly owned SOEs is incomplete and outdated, with the exception of budget transfers.  There is no publication of the expenditures SOEs allocate to research and development.  In addition, they execute the largest portion of government contracts, receiving preference over the private sector.  According to the Public Procurement Code, there are no formal barriers to competition with SOEs.  However, informal barriers such as denial of access to credit and/or land exist.

Privatization Program

We not aware of any privatization programs during the reporting period.

8. Responsible Business Conduct

Historically, there has been little local awareness of corporate social responsibility in Mauritania, either on the part of producers or consumers.  However, awareness is growing, particularly as more foreign-owned companies enter the Mauritanian market.  Certain state-run industries have been active in providing basic educational and training opportunities for the children of their employees and scholarships for their employees to study abroad, but this is usually the extent of social responsibility initiatives.  Companies in the mining and hydrocarbon industries send young Mauritanians overseas to complete their studies on scholarship programs; many of the scholarship recipients have family ties to powerful individuals in the companies.  The larger fishing companies have recently started to provide more opportunities for qualified youth to study at the fishing and naval training school in Nouadhibou to prepare them for careers in the fishing industry.  Current projects by foreign-owned companies include providing free water to local communities; building vocational training centers, health clinics, and roadways; and providing healthcare equipment and medicines to towns near company operations.

Since 2011, three of Mauritania’s largest mining companies—Kinross, Mauritanian Copper Mines (MCM), and SNIM—funded a School of Mining with the goal of increasing the number of qualified Mauritanians to serve in the mining industry.  The school has a partnership with the Ecole Polytechnique in Montreal and with the mining companies.  The school is considered a public entity under the Ministry of Oil, Energy, and Mines.  In 2017, Kosmos Energy provided financial support to Diawling National Park in the southern part of country, and in 2018 Kosmos launched the Kosmos Innovation Center in Mauritania.  ExxonMobil, BP and the other international oil companies now operating in Mauritania are likewise increasing corporate social responsibility programs.

9. Corruption

Since taking office in August 2019, President Ghazouani has made fighting corruption one of the cornerstones of his administration. In October 2019, the Court of Accounts published a ten-year audit report covering fiscal years 2007 through 2017. The report highlighted lack of transparency in government tenders, weakness in public finances management and provided credible recommendations.  Based on the audit report findings, a parliamentarian committee was set up to further investigate four major government infrastructure and fisheries projects that were awarded to Chinese companies.

Despite the ongoing push to fight corruption, however, wealthy business groups and government officials reportedly receive frequent favors from authorities, such as exemption from taxes, special grants of land, and favorable treatment during bidding on government projects.  Mauritanian and non-Mauritanian employees at every level and in every organization are believed to flout Mauritanian tax laws and filing requirements.  The only exceptions are civil servants, whose income taxes are automatically deducted from their pay.  Such widespread tax evasion and corruption has deprived the government of a significant source of revenue, weakening its capacity to provide necessary services.  In 2009, the government passed a law requiring all high-ranking government employees to publicly declare their assets, although this law is not enforced.

Corruption is an obstacle to foreign direct investment in Mauritania, but firms generally rate access to credit, an underdeveloped infrastructure, and a lack of skilled labor as even greater impediments.  Corruption is most pervasive in government procurement, bank loans, fishing license attribution, land distribution, access to port facilities and tax payments.  Giving or accepting a bribe is a criminal act punishable by two to 10 years imprisonment and fines up to USD 700, but there is little application of this law.  Firms commonly pay bribes to obtain telephone, electricity, and water connections, and construction permits more quickly.

There are several organizations that track corruption within Mauritania.  Transparency International has a representative who reports on local corruption policies and events.

In practice annual auditing of government, accounts are not enforced and therefore rarely conducted.  However, the government rectified previously misreported financial data in an effort to be more transparent, such as publishing quarterly financial statements on a government treasury website:  www.tresor.mr .

In April 2016, a new anti-corruption bill was introduced to address the provisions of the UN Convention against Corruption and to provide protection to NGOs involved in investigating corruptions cases.  Corruption is most pervasive in government procurement, bank loans, fishing license attribution, land distribution, tax payments, and mining licenses.

Resources to Report Corruption

Contact at government agency or agencies are responsible for combating corruption:

Cour Des Comptes Mauritanie
Email ccomptes@cc.gov.mr
Telephone: +222 4525 34 04
Fax: +222 4525 49 64

Contact at “watchdog” organization:

“Publiez ce que vous payez” (Publish What You Pay)
Executive Office
+222 4525-0455
+222 4641-7702

10. Political and Security Environment

The August 2019 inauguration of President Mohamed Cheikh El Ghazouani marked the first democratic transition of power from one elected leader to another in the country’s history and ushered in a broad sense of optimism.  Although the country struggles with human right issues, the country doesn’t have a history of politically motivated violence.  Mauritania has not suffered a terrorist attack on its soil since 2011. The government is beginning to take concrete steps to address the legacy of hereditary slavery and pervasive social inequality.

11. Labor Policies and Practices

The Mauritanian economy is highly informal (especially in agriculture, artisanal fisheries/ mining and animal husbandry) and unemployment rate is estimated to be 12 percent.  While labor is abundant, there is a shortage of skilled workers and well-trained technical and managerial personnel in most sectors of the economy.  As a result, there are few sectors of the economy that use advanced technologies because the skilled labor required to operate them is not readily available.  The mining sector is led by the national company SNIM; the subsidiary of a Canadian gold mining company, Kinross-Tasiast; and the subsidiary of a Canadian company, MCM.  These companies provide advanced training for their employees.

The “Mauritanization law” requires that employers give priority to nationals over foreign workers, unless the skills required for the position cannot be filled by the national labor force.  Employers must develop a “Mauritanization” to transfer skillsets to local workers within a period of two years.

There are no restrictions on employers reducing their workforce in periods of unfavorable market conditions.  However, the law requires that compensations be granted to laid-off employees.

The ILO reported in 2018 that a significant pay gap between staff in the labor inspectorate and staff in other government inspection departments who receive better remuneration (such as tax inspectors or education inspectors) led to attrition.  The ILO also reported that the labor inspectorate was subject to undue influence by employers and the government, thereby reducing the effectiveness of inspection activity. The law provides that men and women should receive equal pay for equal work.  The two largest employers, the civil service and the state mining company, observed this law; most employers in the private sector reportedly did not.  In the modern wage sector, women also received family benefits, including three months of paid maternity leave.  Women faced employment discrimination, because employers usually preferred to hire men, and women were overrepresented in low-paying positions.

12. U.S. International Development Finance Corporation (DFC) and Other Investment Insurance Programs

The World Bank’s Logistics Performance Index (LPI), ranks Mauritania 112 out of 160 countries for the quality of infrastructure.  This LPI sub-factor covers the quality and performance of ports, roads, railroads and information technology.  In addition, the World Economic Forum’s infrastructure quality rating for Mauritania’s is 2.6 out of 7, and 46 percent of companies in the country identify transportation inefficiencies as a major constraint on business. So, the potential of a DFC program in the country is likely.

In 2019, a joint-venture between Arise and Meridiam to support the modernization of the Nouakchott Port via a specific public-private partnership (long-term concession of 30 years) was signed.  Meridiam SAS requested USD 24,840,000 in OPIC financing and political risk insurance.  The project is not expected to have a negative impact on the U.S. economy. There is no U.S. procurement associated with this project, and, therefore, the project is expected to have a neutral impact on U.S. employment.  But the project is expected to have a significant economic impact by expanding Mauritania’s port infrastructure capacity.

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source* USG or international statistical source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount  
Host Country Gross Domestic Product (GDP) ($M USD) N/A N/A 2019 $7,594 www.worldbank.org/en/country 
Foreign Direct Investment Host Country Statistical source* USG or international statistical source USG or international Source of data:
BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) N/A N/A 2018 $46 BEA data available at https://www.bea.gov/international/
direct-investment-and-multinational-enterprises-comprehensive-data
 
Host country’s FDI in the United States ($M USD, stock positions) N/A N/A 2008 $-1 BEA data available at
https://www.bea.gov/international/
direct-investment-and-multinational-
enterprises-comprehensive-data
 
Total inbound stock of FDI as % host GDP N/A N/A 2018 142% UNCTAD data available at
https://unctad.org/en/Pages/DIAE/
World%20Investment%20Report/
Country-Fact-Sheets.aspx
 
  

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

Table 4: Sources of Portfolio Investment
Data not available.

14. Contact for More Information

Samba Diallo
Economic Specialist
+222 4525-2660
NouakchottEconComm@state.gov

Niger

Executive Summary

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

In March 2016, President Issoufou was elected for a second five-year term. During his inauguration speech, he laid out his Renaissance II vision for Niger’s development, highlighting plans to further develop the nation’s mining, petroleum, and industrial sectors, while scaling up the country’s transport infrastructure. He further promised a sustained 7 percent annual GDP growth rate throughout his term in office, with it actually hovering around 5 percent.  Going into 2020,  Issoufou’s vision incorporates the need for external investment and the Government of Niger (GoN) continues to seek foreign investment – with recent investments coming primarily from China and Turkey.  Although the GoN seeks investment from everyone, there is prioritization for those that can invest quickly.  During official visits to New York, Paris, Beijing and elsewhere since 2016, President Issoufou regularly reiterates the need for FDI. In addition to the Chamber of Commerce, which supports all investors, the GoN created the High Council for Investment (HCIN) in 2017.  The HCIN is tasked with supporting and promoting foreign direct investments in Niger.  The Permanent Secretary of the High Council reports directly to the President. GoN focus areas for investment include the mining sector, infrastructure and construction (which included a new airport and luxury hotel completed in 2019, transportation, and agribusiness).

U.S. investment in the country is very small; many U.S. firms perceive risks due to the country’s limited transport and energy infrastructure, the perception of political instability and terrorist threats, low levels of education, including low levels of French and English capacity, and a climate that is dry and very hot.  Foreign investment dominates key sectors: the mining, transportation and telecommunications sectors are dominated by French firms, while Chinese investment is paramount and expanding in the oil and large-scale construction sectors.  Niger is African Growth and Opportunity Act eligible, but it has a negligible impact in Niger.  One major project that had its groundbreaking in March 2019 is the 130MV Kandadji Dam, which will rely on international assistance to fund construction.  Much of the country’s retail stores, particularly those related to food, dry goods and clothing are operated by Lebanese and Moroccan entrepreneurs. There are currently no major U.S. firms permanently operating in Niger.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2019 120 of 180 http://www.transparency.org/
research/cpi/overview
World Bank’s Doing Business Report 2019 132 of 190 http://www.doingbusiness.org/
en/rankings
Global Innovation Index 2019 127 of 129 https://www.globalinnovationindex.org/
analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2018 N/A https://apps.bea.gov/international/
factsheet/
World Bank GNI per capita 2018 USD 390.00 http://data.worldbank.org/indicator/
NY.GNP.PCAP.CD

3. Legal Regime

Transparency of the Regulatory System

The GoN possesses transparent policies and requisite laws to foster competition on a non-discriminatory basis, but does not enforce them equally, in large part due to corruption and weak governmental systems.  Legal, regulatory, and accounting systems are generally transparent and consistent with international norms.  The Legal Regime – related to the Investment Code, Labor Code and Commercial Acts – applies the provisions of the Organization for the Harmonization of Business Law in Africa (OHADA).  It also offers free access to public procurement and with moderate transparency in the procedures for awarding contract.

Niger does not have any regulatory processes managed by nongovernmental organizations or private sector associations.  A company in Niger must be entered in the Register of Companies, must obtain a Tax Identification Number (TIN), be registered with the National Social Security Fund (CNSS), and with the National Employment Promotion Agency (ANPE).

There, however, is a large informal sector that does not submit to any of the legal provisions and is not formally regulated.

In general, the National Assembly drafts regulatory guidance which is approved by the executive branch.  For day-to-day operations each ministry or economic sector has separate regulatory agencies.  For example, rule-making and regulatory authorities exist in telecommunication, public procurement and energy, all of which are relevant for foreign businesses, and are exercised at the national level. The law No 2015-58 established the Energy Sector Regulatory Agency, an independent administrative authority, to regulate the energy sector at the national level, but is effective only in major cities. The December 2012 law No 2012-70 created the Telecommunications and Post Office Regulatory Authority (ARTP).  ARTP regulates all aspects of telecommunications operators.  Legal, regulatory, and accounting systems are generally transparent and consistent with international norms. The Legal Regime – related to the Investment Code, Mining Code, Petroleum Code, Labor Code and Commercial Acts – applies the provisions of the Organization for the Harmonization of Business Law in Africa OHADA. It also offers free access to public procurement and transparency in the procedures for awarding contracts.

GoN officials have confirmed their intent to comply with international norms in its legal, regulatory, and accounting systems, but frequently fall short.  Clear procedures are frequently not available.

Draft bills are not always available for public comment, although some organizations, such as the Chamber of Commerce, are invited to offer suggestions during the drafting process.

Niger does not have a centralized online location where key regulatory actions are published but does have a Directorate of National Archives where key regulatory actions are kept in print.  The Directorate is under the Ministry Secretary of Government.

Foreign and national investors, however, can find detailed information on administrative procedures applicable to investment at the following site: http://niger.eregulations.org/ .  The site includes information on income generating operations 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 basis justifying the procedures.

A General Inspectorate of Administrative Governance and the Regional Directorates of Archives are in place to oversee administrative processes.  Their efforts are reinforced by incentives for state employees, unannounced inspections in public administrations, and an introduction of a sign-in system and exchange meetings. No major regulatory system and/or enforcement reforms were announced in 2019.

Regulations are developed via a system of ministerial collaborations and discussions, consultation with the State Council, drafting of the text and passed by the Council of Ministers.  This is followed by discussions in Parliament, approval by the Constitutional Council and finally approved by the President for publication and distribution to interested stakeholders.

Based on the Constitution of 2011, regulatory power belongs to the President of the Republic and the Prime Minister who can issue regulations for the whole of the national territory.  Other administrative authorities also have regulatory power, such as ministers, governors, or prefects and mayors, who have the power of enforcement at the local level.

Ministries or regulatory agencies do not conduct impact assessments of proposed regulations.  However, ministries or regulatory agencies solicit comments on proposed regulations from the general public through public meetings and targeted outreach to stakeholders, such as business associations or other groups.  Public comments are generally not published.

Public finances and debt obligations are not transparent enough; however, the International Monetary Fund and the European Union are funding projects to improve finances and debt transparency in which there is annual review and Niger was assessed to be making progress.

International Regulatory Considerations

Niger is a part of the Economic Community of West African States (ECOWAS), a 15-member West African trade block.  National policy generally adheres to ECOWAS guidelines concerning business regulations.

Niger is part of the African Continental Free Trade Agreement, which came into affect in July 2019.  Negotiations on Made in Africa and other aspects of the agreement were ongoing at the end of 2019.

Niger is a member of the U.N. Conference on Trade and Development’s international network of transparent investment procedures: http://niger.eregulations.org/  (French language only).

Niger is a member of the WTO, but as a lower income member, is exempt from Trade-Related Investment Measures (TRIMs) obligations.  The GoN does not notify all draft technical regulations to the WTO Committee on Technical Barriers to Trade (TBT).  Niger ratified a Trade Facilitation Agreement (TFA) in August 2015.  The GoN has reported some progress on implementing the TFA requirements.

Legal System and Judicial Independence

Niger’s legal system is a legacy of the French colonial system.  The legal infrastructure is insufficient, making it difficult to use the courts to enforce ownership of property or contracts. While Niger’s laws protect property and commercial rights, the administration of justice can be slow and unequal.

Niger has a written commercial law that is heavily based on the Organization for the Harmonization of Business Law in Africa (OHADA).  Niger has been a member of OHADA since 1995.  OHADA aims to harmonize business laws in 16 African countries by adopting common rules adapted to their economies, setting up appropriate judicial procedures, and encouraging arbitration for the settlement of contractual disputes.  OHADA regulations on business and commercial law include definition and classification of legal persons engaged in trade, procedures for credit and recovery of debts, means of enforcement, bankruptcy, receivership, and arbitration.  Niger established Commercial Court in Niamey in 2015.  No statistics are available on the activities of the Commercial Court.

Article 116 of the constitution clearly states that the judicial system is independent of the executive and legislative branches.  However, the personnel management process for assignments and promotions is through politically appointed personnel in the Ministry of Justice, seriously weakening the independence of the judiciary and raising questions about the fairness and reliability of the judicial process.

Regulations or enforcement actions are appealable and adjudicated in the court system.  However, it is extremely rare for individuals or corporations to challenge government regulations or enforcement actions in court due to costs and administrative obstacles.

For example, in 2018, the government initiated tax cases against the telecommunication companies of Orange, Airtel, Moov and Nigertelecom (the state-owned entreprise). Moov, Nigertelecom and Airtel negotiated a settlement.  Orange, a French owned multi-national corporation that provided cell phone and Internet service in Niger challenged the government order through the commerce tribunal and later in the constitutional court.  To begin the process, Orange had to submit 75 percent of the claimed tax discrepancy.  Orange claimed that the charge made it prohibitive for the company to access the courts.  The Constitutional Court determined that if an appeal is successful the government must repay the funds, thus the 75 percent charge is not an obstacle.

Laws and Regulations on Foreign Direct Investment

Niger offers guarantees to foreign direct investors pertaining to security of capital and investment, compensation for expropriation, and equality of treatment.  Foreign investors may be permitted to transfer income derived from invested capital and from liquidated investments, provided the original investment is made in convertible currencies.

Other than the decisions against Orange, previously described, there were no major laws/regulations or decisions in 2019.  Judicial decisions that have come out in the past years can be found on the Commerce Tribunal of Niamey website: http://www.tribunalcommerceniamey.org/index.php .

Niger does not have a dedicated one-stop shop website for investment, but the Chamber of Commerce and Industry houses a specialized institution, known as the Investment Promotion Center (CPI) which supports domestic and foreign investors in terms of business “creation, extension, and rehabilitation.”  The HCIN and ANPIPS (Agence Nigerienne pour la Promotion des Investissements et Projets Strategiques), which are within the Prime Minister Office, are fully authorized by the GoN to support possible foreign investors.  These two structures may assist investors in using or adhering to Niger’s codes and regulations such as the investment code, the Public-Private-Partnership agreement, the electricity code, and the petroleum code.

Competition and Anti-Trust Laws

There were no new developments in 2019 related to competition concerns.  Under the auspices of the Ministry of Trade, the GoN in 2015 validated a new Competition and Consumer Protection Law, replacing a 1992 law that was never fully operational.  Niger also adheres to the Community Competition Law of the West African Economic and Monetary Union (WAEMU).

Expropriation and Compensation

The Investment Code guarantees that no business will be subject to nationalization or expropriation except when deemed “in the public interest” as prescribed by the law.  The code requires that the government compensate any expropriated business with just and equitable payment.  There have been a number of expropriations of commercial and personal property, most of which were not conducted in a manner consistent with Nigerien law requiring “just and prior compensation.”  It is in fact rare for property owners to be compensated by the government after expropriations of property.

There is no record of expropriations of property of international investors.

With the planned construction of the Kandaji Dam beginning in 2019, and in adherence to requirements for donor funding, the government offered to resettle 38,000 individuals and their livestock to new sites.  The government created an agency to conduct all resettlement related activities upstream and downstream of the dam construction.  The agency conducted a census to determine who would be impacted and held public consultations to meet the populations and collect complaints at each step of the process. The process is ongoing, with some individuals expressing concern about the value of compensation and the ability to farm in their new location.

In cases of expropriation carried out by the GoN, claimants and community leaders have alleged a lack of due process.  These complaints are currently limited to community forums and press coverage.  Many of the families impacted, usually those whose land is expropriated for construction projects, lack the knowledge and ability to exercise their rights under the law.  High rates of illiteracy, complexity of the legal system, and lack of resources to retain competent legal counsel present insurmountable barriers to legal remedies for most Nigerien business owners who have had their property expropriated, legal challenges to expropriation are not lodged.

Dispute Settlement

ICSID Convention and New York Convention

Niger is a contracting state of both the ICSID Convention and the New York Convention of 1958.  There is no domestic legislation providing for enforcement of awards under the 1958 New York Convention and/or under the ICSID Convention.

Investor-State Dispute Settlement

The Investment Code offers the possibility for foreign nationals to seek remedy through the International Center for the Settlement of Investment Disputes.  Niger does not have a BIT or FTA with the United States that would provide dispute settlement processes.  Over the past 10 years, there were no investment disputes that involved a U.S. person.  Local courts are generally reluctant to recognize foreign arbitral awards issued against the GoN.  Niger does not have a record of extrajudicial actions against foreign investors.

International Commercial Arbitration and Foreign Courts

Niger has an operational center for mediation and arbitration of business disputes. The center’s stated aim is to maintain investor confidence by eliminating long and expensive procedures traditionally involved in the resolution of business disputes.

The Investment Code provides for settlement of disputes by arbitration or by recourse to the World Bank’s International Center for Settlement of Disputes on Investment. However, investment dispute mechanisms in contracts are not always respected.

There was no publicly available information in 2019 on foreign arbitral award enforcement in Niger.  Procedures are in place but are often not adhered to because of a lack of resources and corruption in the judicial system.

Bankruptcy Regulations

Niger has laws related to insolvency and/or bankruptcy. Creditors have the right to object to decisions accepting or rejecting a creditor’s claims and may vote on debtors’ bankruptcy reorganization plans.  However, the creditors’ rights are limited: creditors do not have the right to receive from a reorganized firm as much as they may have received from one that had been liquidated.  Likewise, the law does not require that creditors be consulted on matters pertaining to an insolvency framework following the declaration of bankruptcy. Bankruptcy is not criminalized.

According to data collected by the World Bank’s Doing Business survey, resolving insolvency takes five years on average and costs 18 percent of the debtor’s total assets.  Globally, Niger stands at 114 in the 2020 ranking of 190 economies on the ease of resolving insolvency.  Niger strength of insolvency framework index (0–16) is 9.

4. Industrial Policies

Investment Incentives

Niger offers incentives that are dependent on the size of the investment and number of jobs that will be created. The Investment Code offers VAT-inclusive tax exemptions depending on the size of the business.  Potential tax exemptions include start-up costs, property, industrial and commercial profits, services and materials required for production, and energy use.  Exemption periods range from ten to fifteen years and include waivers of duties and license fees.  There are no restrictions on foreign companies opening a local office in Niger, though they must obtain a business certificate from the Ministry of Trade.

The Investment Code has established three different tiers of incentives for investors, based on minimum investment amounts, listed below:

  • Tier 1: Promotional tier, for investments of 25 million CFA francs (about USD40,000) or above.
  • Tier 2: Priority tier, for investments of 50 million CFA francs (about USD81,000) or above.
  • Tier 3: Conventional tier, for large businesses with investments of at least 2 billion CFA (about USD3.25 million)

In practice, tier three investors can negotiate possible additional concessions directly with the government if warranted.

During the investment phase, the approved investments are exempt from import duties and taxes on material and equipment needed for the project that are not available locally.  The advantages provided during the operational phase include exemption from profit tax (35 percent).  Apart from these regimes, two additional incentive schemes are part of the investment code.  These apply to companies operating in remote regions, energy, agro-industry, and low-cost housing sectors.

The Government of Niger has a practice of jointly financing foreign direct investment projects through the Public-Private Partnership law. This enacted law n° 2018-40 of 05 June 2018 regulating contracts public-private partnership stated for example in the Article 59:  in the design and/or development phase implementation, public-private partnership type projects benefit for their operations of a total exemption from duties and taxes collected by the State with the exception of VAT on the services.

Foreign Trade Zones/Free Ports/Trade Facilitation

In 2016, the GON approved a new Customs Code to replace the one which had been in place for 55 years. The new code is supposed to reflect the aspirations of actors within the international supply chain and is in conformity with the requirements of Community Customs Codes of the West African Economic and Monetary Union (WAEMU) and the Economic Community of West African States (ECOWAS).

In 2017, the GON modernized the customs procedures with the electronic payment tax which is efficient in Niamey and was still expanding to other regions of Niger through 2019.  In 2016, internal customs procedures migrated to SYDONIAWORLD, a system designed to improve efficiency and permit centralized oversight and control. In 2015, Niger was the first Least Developed Country (LDC) to ratify the World Trade Organization’s Trade Facilitation Agreement (TFA). The country seeks to implement the trade policy of the West African Economic and Monetary Union (WAEMU) and has joined the Generalized System of Preferences (GSP) of the European Union.

Niger is landlocked and relies on the ports of Cotonou in Benin and Lomé in Togo as its primary seaports.  Importers also use the ports of Tema, in Ghana and sometimes Lagos, Nigeria.  Delivery can take months due to delays at borders and internal control points along the route.  The relatively low number of commercial flights to Niger means that transport costs are high.  The country’s main trade partners are Nigeria, the European Union, the United States, China, Cote d’Ivoire, and Algeria.  In July 2019, Niger created a free industrial export zone.  Although work in the zone had not commenced, the GoN anticipates that future infrastructure will permit Niger to have a demarcated space in which the State confers tax advantages on companies operating there. The creation of this free zone is dedicated to export focused companies.  In July 2019, the government also created in a second industrial zone of Niamey located on the Bougoum plateau.  This project’s stated aim is to reduce difficulties linked to the quality of infrastructure and production factors, which promoters of industrial projects cite as investment impediments.  The complaints include the high cost of construction, lack of urbanized areas, roads and various networks and the lack of space in the current industrial area of Niamey.

In July 2019, the African Continental Free Trade Area (ZLECAF) draft flagship of AU Agenda 2063 entered into force and its implementation was scheduled to start in July 2020.  Niger is active proponent and member of the treaty.

Performance and Data Localization Requirements

While Niger requires that companies attempt to hire a Nigerien before applying for a work visa for a foreign national, in practice the rule is not enforced.  In addition, it allows for a company to appeal to the Ministry of Labor, if a foreigner is refused a work visa.

There are no localization requirements for senior management or boards of directors.  There are no excessively onerous visa, residence, work permit, or similar requirements inhibiting mobility of foreign investors and their employees.  In principal, there are no government/authority imposed conditions restricting investments beyond limited sectors for national security as cited in the section on “Limits on Foreign Control.”

There are no forced localization policies requiring investors to use domestic goods in content.  Performance requirements are not imposed as a condition for establishing, maintaining, or expanding foreign direct investments.  There are no performance requirements or investment incentives for investors.

Niger does not require foreign IT providers to turn over source code and/or provide access to surveillance.  There are no measures that prevent companies from freely transmitting customer or other business-related data outside of Niger.

5. Protection of Property Rights

Real Property

Interests in property are enforced when the landholder is known, but property disputes are common, particularly involving community-owned land or land in rural areas where customary land titles are still common.  Even in urban centers, such as Niamey, offices responsible  for overseeing construction permits are unable to identify ownership for large swaths of land.  Mortgages are relatively new instruments; Bank Atlantique introduced the first mortgages in 2014.  The bank retains the title to the property until the loan is repaid.

Foreign ownership of land is permitted but requires authorization from the Ministry of Planning.  The 2018 Finance Law changed tax policies on foreign ownership, but was not yet in force at year’s end.  It is unknown how much land does not have clear title and the government does not have a defined effort to register lands at the national level.

Traditional use rights are at the core of land disputes between Nigerien farmers and traditional nomadic herders.  According to data collected by the World Bank’s 2020 Doing Business survey conducted in 2019, registering property in Niger requires four procedures, takes 13 days and costs 7.4 percent of the property value.  Globally, Niger stands at 115 in the ranking of 190 economies on the ease of registering property.  In 2014, Niger made transferring property easier by reducing registration fees.

Intellectual Property Rights

As a signatory to the 1983 Paris Convention for the Protection of Industrial Property, Niger provides national protection under Nigerien patent and trademark laws to foreign businesses. Niger is also a member of the World Intellectual Property Organization (WIPO) and a signatory to the Universal Copyright Convention.

No new  intellectual property rights, laws or regulations have been enacted in the past year.  Niger does not regularly track and report on seizures of counterfeit goods. There is no specific information about working conditions in the production or sale of counterfeit goods. While there have been some  seizures, government statistics are not available.

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

6. Financial Sector

Capital Markets and Portfolio Investment

Niger’s government welcomes foreign portfolio investment.

Niger’s capital markets are extremely underdeveloped, and the country does not have its own stock market. However, the country shares a regional stock market The Bourse Régionale des Valeurs Mobilières (BRVM) with the eight (8) Member States in the West African Economic and Monetary Union (WAEMU), namely: Benin, Burkina Faso, Côte d’Ivoire, Guinea-Bissau, Mali, Niger, Senegal and Togo. This is the only stock market in the world shared by several countries, run totally in digital format and integrated in a perfect manner.

Although an effective regulatory system exists, and policies encourage portfolio investment, there is little market liquidity and hence little opportunity for such investment. The agency UMOA-Titres (AUT), a regional agency to support public securities issuance and management in the WAEMU (bonds market), is dedicated to helping member states use capital markets to raise the resources they need to fund their economic development policies at reasonable cost.

There are no limits on the free flow of financial resources.

The government works closely with the IMF to ensure that payments and transfers overseas occur without undue restrictions. Credit is allocated on market terms and foreigners do not face discrimination.

Credit is allocated on market terms through large corporations. Although foreign investors are generally able to get credit on the local market, limited domestic availability tends to drive investors to international markets. To access a variety of credit instruments, the private sector often looks to multinational institutions in Niger or international sources for credit. Private actors in the agriculture, livestock, forestry, and fisheries sectors (which account for more than 40 percent of GDP) receive less than one percent of total bank credit.

Money and Banking System

Less than three percent of Nigeriens have a bank account and the debt rate of the financial sector, measured by the ratio money supply, is at 24.1 percent in 2012 (the average for the sub-region is 32 percent).

The banking sector is generally healthy and well capitalized.

Not applicable, as the banking sector is generally healthy.

As of December 31, 2017, the resources mobilized by the banking system amounted to 1096.5 billion CFA (1.9 billion USD), an increase of 63.1 billion cfaf (112.5 million USD) or 6.1 percent compared to the same period of 2016. This evolution mainly explained by the increase in net capital of banks by 34.9 billion cfaf (62.3 million USD) or 27.3 percent and the increase of borrowing deposits by 16.3 billion CFA (29 million USD) or 2.0 percent. Demand deposits represent more than half of the total resources of the sector throughout the period under review. Foreign banks control about 80 percent of the sector’s assets, with SONIBANK, BIA Niger, Ecobank and Bank of Africa (BOA) being the largest banks operating in the country.

The Central Bank of West African States governs Niger’s banking institutions and sets minimum reserve requirements through its national Central Bank representation.

Foreign banks are permitted to establish operations in Niger and regulations are in place.  Niger has not lost any correspondent banking in the last three years.

There are no restrictions on a foreigner’s ability to establish a bank account, and foreign banks and their subsidiaries operate within the economy without undue restrictions. Niger is a part of the West African Economic and Monetary Union (WAEMU), which utilizes the CFA, pegged to the Euro at 655.61 CFA per euro.

Foreign Exchange and Remittances

Foreign Exchange

There are no restrictions or limitations placed on foreign investors in converting, transferring, or repatriating funds associated with an investment, including remittances.  Funds are freely convertible into any world currency. However, the government must approve currency conversions above 2 million CFA (approximately 3,413 USD).  The exchange rate is determined via the euro’s fluctuations on the international currency market. The CFA is pegged to the euro.

Remittance Policies

Niger’s Investment Code offers the possibility to transfer income of any kind, including capital investment and the proceeds of investment liquidation, regardless of the destination.  There are no limitations or waiting periods on remittances, though the Ministry of Finance must approve currency conversions above 2 million CFA (approximately 3,250 USD).

Sovereign Wealth Funds

Niger does not maintain a Sovereign Wealth Fund (SWF), and does not subscribe to the Santiago Principles. The government has plans for a build-up of reserves at the Central Bank of West African States (BCEAO) using oil revenues.

7. State-Owned Enterprises

State-Owned Enterprises (SOEs) in Niger are defined as companies in which the GoN is the majority stakeholder. They play a major role in Niger’s economy and dominate or heavily influence a number of key sectors, including energy (NIGELEC), telecommunications (Niger Telecom), and water resources (SEEN and SPEN), construction and retail markets (SOCOGEM); petroleum products distribution (SONIDEP); mining (SOPAMIN, SOMAIR, COMINAK, SONICHAR); oil refinery (SORAZ), textile (SOTEX) and hotels (SPEG).

SOEs do not receive non-market based advantages from the host government. According to the 2016 Public Expenditures and Financial Accountability (PEFA) draft document, there are eight wholly-owned SOEs, and six SOEs majority-owned by the state. State-Owned enterprises are answerable to their supervisory ministry and send certified accounting records to the supervisory ministries and to the Public Enterprises and State Portfolio Directorate (DEP/ PE). SOE record-keeping is expected to comply with SYSCOHADA accounting system standards.

There are no laws or rules that offer preferential treatment to SOEs. They are subject to the same tax rules and burdens (although many remain in tax arrears) as the private sector, and are subject to budget constraints. Niger is not a member of the OECD and does not adhere to its guidelines.

Privatization Program

Most sectors of the economy, except for specified SOEs, have been privatized.  The state-owned oil-distribution company (SONIDEP) no longer has a monopoly over oil exportation; exportation authority is now equally shared between SONIDEP and the Chinese National Petroleum Corporation (CNPC).  Likewise, although the national electricity company (NIGELEC) continues to hold a virtual monopoly on electricity distribution, steps were taken in 2016 to allow third party access to the country’s electricity grid.  Competition in the mobile telecommunication sector forced the GoN to combine state-owned fixed line telecommunications provider SONITEL with the state-owned mobile provider Sahelcom to form a new parastatal, known as Niger Telecom. Although the state continues to hold a monopoly on fixed-line telephony, mobile communications is open to competition.

Foreign investors are welcome to participate in the country’s privatization program. Privatization operations are conducted under the technical direction of the ministry that currently controls the company.  After a detailed analysis of business operations conducted by an internationally known independent audit firm, the government issues a call for bids.

When privatization occurs, there is a process for public bidding. Depending on the ministry responsible, there may be no electronic bidding. Rather tenders may be announced only in local media.

8. Responsible Business Conduct

There is a general awareness of expectations regarding RBC, as well as business’ obligations to proactively conduct due diligence and do no harm.

Ordinance No. 97-001 of 10 January 1997 on the Institutionalization of Environmental Impact Assessments, Article 4 of which states: “Activities, projects or programs of development which, by the importance of their size or their impact on the natural and human environments, may affect the latter are subject to prior authorization from the Minister of the Environment. This authorization is granted on the basis of an assessment of the consequences of the project activities or the program updated by an environmental impact study prepared by the promoter.”

In the extractive industries sector, the GoN has focused on ensuring existing obligations are met and that communities benefit from investments. Nigerien law states that 15 percent of revenues derived from extractive industries must be returned to the municipality affected by the project. However, such payments are difficult to track and the GoN is not active or engaged in follow-up.

Niger rejoined the Extractive Industry Transparency Initiative (EITI) in March 2020 and has funded a domestic EITI office to guide domestic efforts to meet all requirements.

There have been no high-profile instances of private sector impact on human rights in the recent past.  The GoN attempts to enforce domestic laws related to human rights, labor rights, consumer protection, and environmental protections. However, a lack of resources makes such enforcement difficult and only somewhat effective.

The government has not put in place corporate governance, accounting, and executive compensation standards.  There is limited NGO focus on responsible business practices. Those looking at transparency in contracts and business practices are generally able to work freely regarding engagement with businesses.

Niger is not a member of the OECD and does not adhere to OECD guidelines, including those related to supply chains of minerals from conflict-affected and high-risk areas. There are no Nigerien-owned companies that deal exclusively with minerals, including those that may originate from conflict-affected areas.

The GoN was a member of EITI since 2007, but the country withdrew following the Board’s decision in October 2017 to suspend Niger on the basis of inadequate progress. In 2018, the government began a process to rejoin EITI and reformulated its EITI offices to meet the organization’s standards.  Niger rejoined in March 2020.  The constitution mandates full disclosure of all payments from foreign government stemming from mining operations, as well as publication of all new exploration and exploitation contracts in the mining sector.  However, in practice, payments from foreign countries to GoN officials have at times been controversial due to non-reporting of such payments.

9. Corruption

The constitution, adopted in 2010, contains provisions for greater transparency in government reporting of revenues from the extractive industries, as well as the declaration of personal assets by government officials, including the President  Since his re-election in February 2016, President Issoufou has made combatting corruption within the GON one of the stated focus points of his presidency.

The High Authority for the Fight against Corruption and Related Offenses (HALCIA) has the authority to investigate corruption charges within all government agencies.  HALCIA is limited by a lack of resources and a regulatory process that is still developing.  Despite the limitations, HALCIA was able to conduct a number of successful investigations during 2019.

Laws related to anti-corruption measures are in place and apply to government officials, their family members, and all political parties.  Legislation on Prevention and Repression of Corruption was passed into law in January 2018; a strategy for implementation was still pending at year’s end.

Niger has laws in place designed to counter conflict of interest in awarding contracts and/or government procurements. Bribery of public officials by private companies is officially illegal, but occurs regularly despite GON denunciations of such conduct.

Law number 2017-10 of March 31, 2017, prohibits bribery of public officials, international administrators, and foreign agents, bribes within the private sector, illicit enrichment and abuse of function by public authorities. The High Authority Against Corruption and Relating Crimes (HALCIA) is further tasked with working with private companies on internal anti-corruption efforts.

Bribery of public officials occurs on a regular basis. Though most companies officially discourage such behavior, internal controls are rare except among the largest (mostly foreign) enterprises.

The government/authority encourages or requires private companies to establish internal codes of conduct that, among other things, prohibit bribery of public officials. Some private companies use internal controls, ethics, and compliance programs to detect and prevent bribery of government officials.

The government does not provide any additional protections to NGOs involved in investigating corruption.

The government/authority encourages or requires private companies to establish internal codes of conduct that, among other things, prohibit bribery of public officials. Some private companies use internal controls, ethics, and compliance programs to detect and prevent bribery of government officials.

Niger has joined several international and regional anti-corruption initiatives including the UN Convention against Corruption in 2008, the African Union Convention on Preventing and Combating Corruption in 2005, and the Protocol on Combating Corruption of the economic community of the states of West Africa (ECOWAS) in 2006. Niger is also member state of the GIABA, which is an institution of the Economic Community of West African States (ECOWAS) responsible for facilitating the adoption and implementation of Anti-Money Laundering (AML) and Counter-Financing of Terrorism (CFT) in West Africa.

As of April 2019, there are no U.S. firms invested in Niger, for reasons which include – but are not limited to – the perception of corruption. Cases of suspected corruption occasionally appear in media reports concerning GON procurement, the award of licenses and concessions and customs.

Resources to Report Corruption

Gousmane Abdourahamane
President
High Authority to Combat Corruption and Related Infractions (HALCIA)
BP 550 Niamey – Niger
(+227) 20 35 20 96
issoufbour@gmail.com

Wada Maman
President
Transparency International Niger (TI-N)
BP 10423, Niamey – Niger
(+227) 20 32 00 96 / 96 28 79 69
anlcti@yahoo.fr

10. Political and Security Environment

Niger has been politically stable since 2010, when the most recent of Niger’s coup d’états (there have been four since 1990) concluded within less than a year returning the country to  democratic governance. The most recent general elections were held in in February 2016, with a presidential run-off in March 2016.  President Issoufou Mahamadou was re-elected for a second mandate by a considerable majority.  Tensions over the preparation of the elections and election logistics widened divisions between opposition activists and supporters of the incumbent president and his ruling Nigerien Party for Democracy and Socialism (PNDS) and coalition.  However, the election proceeded without violence.

Although Niger’s politics are often contentious and antagonistic, political violence is rare.  Most parties agree that national security and peaceful cohabitation among Niger’s ethnicities are the government’s principal priority.  However, protests and strikes about non-payment of salaries for public employees, lack of funding for education, and general dissatisfaction with social conditions remain a concern.

Public protest over issues like poverty, corruption, and unemployment can also sometimes turn violent.  In October 2017, police arrested several protesters engaged in burning tires and vandalizing property in protest of a proposed finance law.  After the passage of the law, protests continued on a bi-weekly and then weekly basis through at least April 2018.  In March and April 2018, police began to intervene, and several people were arrested, including important civil society leaders.  By the end of 2018, the number of protests dropped significantly and remained peaceful throughout the remaining of the reporting period.

Nigerien students regularly participate in peaceful protests, and on occasion, these become violent.  In April 2017, one student in Niamey was killed at a protest, hit in the head by a teargas canister.

Nigeriens are generally welcoming to foreigners and foreign investment is welcomed by all elements of society. One rare exception to acceptance of foreigners occurred in January 2015 after President Issoufou was perceived to be too forgiving of anti-Muslim satire that had been published on the cover of the French magazine, Charlie Hebdo. In three days of riots throughout the country, at least ten people killed and dozens of Christian churches, market stalls, French-owned businesses, some political-party linked buildings, two private homes, and a Christian school were attacked.

Niger experiences security threats on three distinct border areas.  Niger is a founding member of the G5 Sahel fighting terrorism in the Sahel while integrating a poverty reduction dimension to mitigate the effects of youth underemployment and violent extremism. The collapse of the Libyan state to the north has resulted in a flow of weapons and extremists throughout the Sahel region. Boko Haram and ISIS-West Africa terrorists regularly launch attacks in the Diffa Region in Niger’s southeast, leading to numerous civilian and security forces deaths. Jama’at al Nusrat al-Islam wa al-Muslimin (JNIM), which is a loose affiliation of al-Qaeda in the Islamic Maghreb (AQIM), the Macina Liberation Front (MLF), Ansar Dine, and al-Mourabitoun; along with ISIS-Greater Sahara (ISIS-GS), threaten Niger’s northern and northwestern borders. Terrorists regularly crossed the Mali and Burkina Faso border to attack civilian and security sites in the Tillaberi and Tahoua regions. A German aid worker was kidnapped in Tillaberi in April 2018, an American aid worker was kidnapped in Tahoua in October 2016, and an Italian Pastor was kidnapped in Torodi in September 2018.  So far, more than 15 out of the 266 communes in Niger are in a state of emergency. The State Department’s Travel Advisory for Niger from April 2017 advises travels to be aware that violent crimes including robbery are common and terrorism is a threat.

Niger has scheduled national elections, including presidential, in December 2020.  President Issoufou has repeatedly stated he will step down at the end of his second term.  Since independence, however, Niger has not had a successful peaceful transition of power.  Many observers anticipate increased protests as elections near.

11. Labor Policies and Practices

Niger has an abundance of available labor, primarily unskilled. One of the most pressing concerns within the Ministry of Labor is the lack of jobs available to recent high school and university graduates, who often face long spells of unemployment or underemployment. There is very high unemployment among young workers, many of whom are uneducated and illiterate. Migration from the rural areas to the cities is a problem, as the majority of recently-arrived workers are unskilled.  Such workers most often turn up in the informal economy.  While informal activities are generally not reported, Ministry of Finance estimates from 2012 stated that between 80 and 90 percent of the non-agricultural workforce is in the informal economy. Niger, as part of the Economic Community of West African States (ECOWAS) must accept laborers from neighboring ECOWAS states. While such laborers do exist within the Nigerien economy, this phenomenon is not common enough to cause friction and/or widespread resentment among local laborers. Fluency in English is negligible.

Given both the need for foreign direct investment and the abundance of available labor within the country, labor laws are mostly modified, rather than waived to accommodate foreign firms. Many large foreign firms, including Orano (previously Areva), Orange and CNPC, are allowed to bring workers into the country provided that Nigerien laborers make up a substantial percentage of the overall workforce.  As a member of ECOWAS, Niger routinely accepts labor, as obligated, from other member states.

According to Article 9 of Niger’s 2010 Labor Code, firms must hire Nigerien nationals via direct recruitment or through public or private hiring agencies.

There are no restrictions on employers regarding hiring or laying off employees to respond to fluctuating market conditions.  However, before making the decision, the employer must consult with the Inspector of Labor.  An employee laid off for economic reasons receives, in addition to severance pay, a non-taxable allowance paid by the employer equal to one month’s gross salary.

Given both the need for foreign direct investment and the abundance of available labor within the country, labor laws are mostly modified, rather than waived to accommodate foreign firms. Currently there are no special economic zones in Niger.

Freedom of association and the right to collective bargaining are generally respected and workers routinely exercise them. Unions have exercised the right to bargain collectively for wages above the legal minimum in the formal sectors and to improve working conditions.

Niger’s labor code, adopted in September 2012 and its decree N° 2017-682/PRN/MET/PS of august 10, 2017, regulates employment, vocational training, remuneration, collective bargaining, labor representation, and labor disputes. The code also establishes the Consultative Commission for Labor and Employment, the Labor Court and regulates the Technical Consultative

Committee for Occupational Safety and Health.  The Labor Code lays out clear procedures for dispute resolution mechanisms in its Title VII on labor disputes. Labor hearings are public except at the reconciliation stage.

Although strikes are routine and common, most stem from non-payment of salaries and unsatisfactory working conditions existing within the public sector.  Such strikes do not pose an investment risk.

Although Niger has ratified the International Labor Organization (ILO) Convention 182 on the Worst Forms of Child Labor and the ILO Convention 138 on the minimum age for employment, traditional caste-based servitude is still practiced in some parts of the country. In addition, child labor remains a problem particularly in the agricultural sector and the commercial and artisanal mining sectors. Gender discrimination is quite common within all workplaces.

There were no labor related laws or regulation enacted during the last year. The Labor Code adopted in September 2012 and its decree N° 2017-682/PRN/MET/PS of august 10, 2017 with regulatory part of the Labor Code remains the most recent legislation related to labor.

12. U.S. International Development Finance Corporation (DFC) and Other Investment Insurance Programs

Interest for DFC programs exist in a broad swath of possible investments including, pipeline construction, airport reconstruction, mining sector, agro-food and livestock processing plants, clothing and shoe industries, and production plant for electric cables and batteries.

Niger is eligible for DFC support and signed a bilateral agreement with the United States on investment guaranties, which entered in force on April 26, 1962, but to date, DFC has not been involved in any bilateral investments in Niger.

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source USG or international statistical source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount  
Host Country Gross Domestic Product (GDP) ($M USD) N/A N/A 2018 $9,291 www.worldbank.org/en/country 
Foreign Direct Investment Host Country Statistical source USG or international statistical source USG or international Source of data:
BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) N/A N/A N/A N/A BEA data available at
https://www.bea.gov/international/
direct-investment-and-multinational-
enterprises-comprehensive-data
 
Host country’s FDI in the United States ($M USD, stock positions) N/A N/A N/A N/A BEA data available at
https://www.bea.gov/international/
direct-investment-and-multinational-
enterprises-comprehensive-data
 
Total inbound stock of FDI as % host GDP N/A N/A 2018 70.8% UNCTAD data available at
https://unctad.org/en/Pages/DIAE/
World%20Investment%20Report/
Country-Fact-Sheets.aspx
 
 

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

Table 4: Sources of Portfolio Investment
Data not available.

14. Contact for More Information

Carl-Heinz Jason Wemhoener-Cuite
Economic Officer
US Embassy, Niamey
+227 20-72-26-61/2/3 extension 4229
+227 99-49-90-40
Wemhoener-CuiteCJ@State.gov

Boubacar Gaoh Mohamed
Economic and Commercial Assistant
BP 11201, Niamey, Niger
+227-20-72-26-61 extension 4443
+227 99-49-90-76
BoubacarGaohM@State.gov

Nigeria

Executive Summary

Nigeria’s economy – Africa’s largest – exited recession in 2017, assisted by the Central Bank of Nigeria’s more rationalized foreign exchange regime.  No growth is expected in the near term and although 2019 ended with a real growth rate of 2.3 percent this is still below Nigeria’s population growth rate of 2.6 percent.  With the largest population in Africa (estimated at nearly 200 million), Nigeria continues to represent a large consumer market for investors and traders.  Nigeria has a very young population with nearly two-thirds under the age of 25.  It offers abundant natural resources and a low-cost labor pool and enjoys mostly duty-free trade with other member countries of the Economic Community of West African States (ECOWAS).  Nigeria’s full market potential remains unrealized because of pervasive corruption, inadequate power and transportation infrastructure, high energy costs, an inconsistent regulatory and legal environment, insecurity, a slow and ineffective bureaucracy and judicial system, and inadequate intellectual property rights protections and enforcement.  The Nigerian government has undertaken reforms to help improve the business environment, including making starting a business faster by allowing electronic stamping of registration documents, and making it easier to obtain construction permits, register property, get credit, and pay taxes.  Reforms undertaken since 2017 have helped boost Nigeria’s ranking on the World Bank’s annual Doing Business rankings to 131 out of 190.

Nigeria’s underdeveloped power sector remains a bottleneck to broad-based economic development.  Power on the national grid currently averages 4,000 megawatts, forcing most businesses to generate much of their own electricity.  The World Bank currently ranks Nigeria 169 out of 190 countries for ease of obtaining electricity for business.  Reform of Nigeria’s power sector is ongoing, but investor confidence continues to be shaken by tariff and regulatory uncertainty.  The Nigerian Government, in partnership with the World Bank, published a Power Sector Recovery Plan (PSRP) in 2017.  However, three years after its launch, differing perspectives on various PSRP interventions have delayed implementation.  The Ministry of Finance is driving the implementation effort and has convened three Federal Government of Nigeria committees charged with moving the process forward in the areas of regulation, policy, and finances.  Discussions between the government and the World Bank are continuing, but some sector players report skepticism that the World Bank’s USD 1 billion loan will be enacted, though FGN may proceed without it.  The plan is ambitious and will require political will from the administration, external investment to address the accumulated deficit, and discipline in implementing plans to mitigate future shortfalls.  It is, nevertheless, a step in the right direction, and recognizes explicitly that the Nigerian economy is losing on average approximately USD 29 billion annually due to lack of adequate power.

Nigeria’s trade regime remains protectionist in key areas.  High tariffs, restricted forex availability for 44 categories of imports, and prohibitions on many other import items have the aim of spurring domestic agricultural and manufacturing sector growth.  Nigeria’s imports rose in 2019, largely as a result of the country’s continued recovery from the 2016 economic recession.  U.S. goods exports to Nigeria in 2018 were valued at USD 2.7 billion, up nearly 23 percent from the previous year, while U.S. imports from Nigeria totaled USD 5.6 billion, a decrease of 20.3 percent.  U.S. exports to Nigeria are primarily refined petroleum products, used vehicles, cereals, and machinery.  Crude oil and petroleum products continued to account for over 95 percent of Nigerian exports to the United States in 2018 (latest data available).  The stock of U.S. foreign direct investment (FDI) in Nigeria was USD 5.6 billion in 2018, a substantial increase from USD 3.8 billion in 2016, but only a modest increase from 2015’s USD 5.5 billion in FDI.  U.S. FDI in Nigeria continues to be led by the oil and gas sector.

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

Security remains a concern to investors in Nigeria due to high rates of violent crime, kidnappings for ransom, and terrorism.  The ongoing Boko Haram and Islamic State in West Africa (ISIS-WA) insurgencies have included attacks against civilian and military targets in the northeast of the country, causing general insecurity and a major humanitarian crisis there.  Militant attacks on oil and gas infrastructure in the Niger Delta region restricted oil production and export in 2016, but a restored amnesty program and more federal government engagement in the Delta region have brought a reprieve in violence and allowed restoration of oil and gas production.  The longer-term impact of the government’s Delta peace efforts, however, remains unclear and criminal activity in the Delta – in particular, rampant oil theft – remains a serious concern.  Maritime criminality in Nigerian waters, including incidents of piracy and crew kidnapping for ransom, has increased in recent years, and law enforcement efforts have been ineffectual.  International inspectors have voiced concerns over the adequacy of security measures at some Nigerian port facilities onshore.  Businesses report that bribery of customs and port officials remains common to avoid delays, and smuggled goods routinely enter Nigeria’s seaports.

Although the constitution and laws provide for freedom of speech and press, the government frequently restricts these rights. A large and vibrant private, domestic press frequently criticizes the government, but critics report being subjected to threats, intimidation, and sometimes violence as a result.  Security services increasingly detain and harass journalists, including for reporting on sensitive topics such as corruption and security.  As a result, some journalists practice self-censorship on sensitive issues.  Journalists and local NGOs claim security services intimidate journalists, including editors and owners, into censoring reports perceived to be critical of the government.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2019 146 of 180 http://www.transparency.org/
research/cpi/overview
World Bank’s Doing Business Report 2019 131 of 190 http://www.doingbusiness.org/
en/rankings
Global Innovation Index 2019 114 of 129 https://www.globalinnovationindex.org/
analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2018 USD

5.6 billion

https://apps.bea.gov/international/
factsheet/
World Bank GNI per capita 2018 USD 1,960 http://data.worldbank.org/indicator/
NY.GNP.PCAP.CD

3. Legal Regime

Transparency of the Regulatory System

Nigeria’s legal, accounting, and regulatory systems comply with international norms, but application and enforcement remain uneven.  Opportunities for public comment and input into proposed regulations sometimes occur.  Professional organizations set standards for the provision of professional services, such as accounting, law, medicine, engineering, and advertising.  These standards usually comply with international norms.  No legal barriers prevent entry into these sectors.

Ministries and regulatory agencies develop and make public anticipated regulatory changes or proposals and publish proposed regulations before their application.  The general public has opportunity to comment through targeted outreach, including business groups and stakeholders, and during the public hearing process before a bill becomes law.  There is no specialized agency tasked with publicizing proposed changes and the time period for comment may vary.  Ministries and agencies do conduct impact assessments, including environmental, but assessment methodologies may vary.  The National Bureau of Statistics reviews regulatory impact assessments conducted by other agencies.  Laws and regulations are publicly available.

Fiscal management occurs at all three tiers of government: federal, 36 state governments and Federal Capital Territory (FCT) Abuja, and 774 local government areas (LGAs).  Revenues from oil and non-oil sources are collected into the federation account and then shared among the different tiers of government by the Federal Account Allocation Committee (FAAC) in line with a statutory sharing formula.  All state governments can collect internally generated revenues, which vary from state to state.  The fiscal federalism structure does not compel states to be accountable to the federal government or transparent about revenues generated or received from the federation account.  The federal government’s finances are more transparent as budgets are made public and the financial data are published by the Central Bank of Nigeria (CBN), Debt Management Office (DMO), the Budget Office of the Federation, and the National Bureau of Statistics.  The state-owned oil company’s (Nigerian National Petroleum Corporation) financial data is very opaque.

The DMO puts Nigeria’s total debt stock at USD 84 billion as of December 2019 – USD 27.7 billion or nearly 33 percent of which is external.  The total debt figures presented by the DMO usually do not include off-balance-sheet financing such as sovereign guarantees.

International Regulatory Considerations

Foreign companies operate successfully in Nigeria’s service sectors, including telecommunications, accounting, insurance, banking, and advertising.  The Investment and Securities Act of 2007 forbids monopolies, insider trading, and unfair practices in securities dealings.  Nigeria is not a party to the WTO’s Government Procurement Agreement (GPA).  Nigeria generally regulates investment in line with the WTO’s Trade-Related Investment Measures (TRIMS) Agreement, but the government’s local content requirements in the oil and gas sector and the Information and Communication Technology (ICT) sector may conflict with Nigeria’s commitments under TRIMS.

In 2013, the National Information Technology Development Agency (NITDA), under the auspices of the Ministry of Communication, issued the Guidelines for Nigerian Content Development in the ICT sector.  The Guidelines require original ICT equipment manufacturers, within three years from the effective date of the guidelines, to use 50 percent local manufactured content and to use Nigerian companies to provide 80 percent of value added on networks.  The Guidelines also require multinational companies operating in Nigeria to source all hardware products locally; all government agencies to procure all computer hardware only from NITDA-approved original equipment manufacturers; and ICT companies to host all consumer and subscriber data locally, use only locally manufactured SIM cards for telephone services and data, and to use indigenous companies to build cell towers and base stations.  Enforcement of the Guidelines is largely inconsistent.  The Nigerian government generally lacks capacity and resources to monitor labor practices, technology compliancy, and digital data flows.  There are reports that individual Nigerian companies periodically lobby the National Assembly and/or NITDA to address allegations (warranted or not) against foreign firms that they are in non-compliance with the Guidelines.

The goal is to promote development of domestic production of ICT products and services for the Nigerian and global markets, but the guidelines pose risks to foreign investment and U.S. companies by interrupting their global supply chain, increasing costs, disrupting global flow of data, and stifling innovative products and services.  Industry representatives remain concerned about whether the guidelines would be implemented in a fair and transparent way toward all Nigerian and foreign companies.  All ICT companies, including Nigerian companies, use foreign manufactured equipment as Nigeria does not have the capacity to supply ICT hardware that meets international standards.

Nigeria is a member of the Economic Community of West African States (ECOWAS), which implemented a Common External Tariff (CET) beginning in 2015 with a five-year phase in period.  An internal CET implementation committee headed by the Fiscal Policy/Budget Monitoring and Evaluation Department of the NCS was set up to develop the implementation work plans that were consistent with national and ECOWAS regulations.  The CET was slated to be fully harmonized by 2020, but in practice some ECOWAS Member States have maintained deviations from the CET beyond the January 1, 2020, deadline.  The country has put in place a CET monitoring committee domiciled at the Ministry of Finance, consisting of several ministries, departments, and agencies (MDAs) related to the CET.  Nigeria applies five tariff bands under the CET:  zero duty on capital goods, machinery, and essential drugs not produced locally; 5 percent duty on imported raw materials; 10 percent duty on intermediate goods; 20 percent  duty on finished goods; and 35 percent duty on goods in certain sectors such as palm oil, meat products, dairy, and poultry that the Nigerian government seeks to protect.  The CET permits ECOWAS member governments to calculate import duties higher than the maximum allowed in the tariff bands (but not to exceed a total effective duty of 70 percent) for up to 3 percent of the 5,899 tariff lines included in the ECOWAS CET.

Legal System and Judicial Independence

Nigeria has a complex, three-tiered legal system comprised of English common law, Islamic law, and Nigerian customary law.  Most business transactions are governed by common law modified by statutes to meet local demands and conditions.  The Supreme Court is the pinnacle of the judicial system and has original and appellate jurisdiction in specific constitutional, civil, and criminal matters as prescribed by Nigeria’s constitution.  The Federal High Court has jurisdiction over revenue matters, admiralty law, banking, foreign exchange, other currency and monetary or fiscal matters, and lawsuits to which the federal government or any of its agencies are party.  The Nigerian court system is slow and inefficient, lacks adequate court facilities and computerized document-processing systems, and poorly remunerates judges and other court officials, all of which encourages corruption and undermines enforcement.  Judges frequently fail to appear for trials and court officials lack proper equipment and training.

The constitution and law provide for an independent judiciary; however, the judicial branch remains susceptible to pressure from the executive and legislative branches.  Political leaders have influenced the judiciary, particularly at the state and local levels.

The World Bank’s publication, Doing Business 2020, ranked Nigeria 73 out of 190 on enforcement of contracts, a significant improvement from previous years.  The Doing Business report credited business reforms for improving contract enforcement by issuing new rules of civil procedure for small claims courts which limit adjournments to unforeseen and exceptional circumstances but noted that there can be variation in performance indicators between cities in Nigeria (as in other developing countries).  For example, resolving a commercial dispute takes 476 days in Kano but 376 days in Lagos.  In the case of Lagos, the 376 days includes 40 days for filing and service, 194 days for trial and judgment, and 142 days for enforcement of the judgment with total costs averaging 42 percent of the claim.  In Kano, however, filing and service only takes 21 days with enforcement of judgement only taking 90 days, but trial and judgment accounts for 365 days with total costs averaging lower at 28 percent of the claim.  In comparison, in OECD countries the corresponding figures are an average of 589.6 days and averaging 21.5 percent of the claim and in sub-Saharan countries an average of 654.9 days and averaging 41.6 percent of the claim.

Laws and Regulations on Foreign Direct Investment

The NIPC Act of 1995 allows 100 percent foreign ownership of firms, except in the oil and gas sector where investment remains limited to joint ventures or production-sharing agreements.  Laws restrict industries to domestic investors if they are considered crucial to national security, such as firearms, ammunition, and military and paramilitary apparel.  Foreign investors must register with the NIPC after incorporation under the Companies and Allied Matters Decree of 1990.  The NIPC Act prohibits the nationalization or expropriation of foreign enterprises except in case of national interest, but the Embassy is unaware of specific instances of such interference by the government.

Competition and Anti-Trust Laws

After years of debate, the Nigerian government enacted the Federal Competition and Consumer Protection (FCCPC) Act in February 2019.  The act repealed the Consumer Protection Act of 2004 and replaced the previous Consumer Protection Council with a Federal Competition and Consumer Protection Commission while also creating a Competition and Consumer Protection Tribunal to handle issues and disputes arising from the operations of the Act.  Under the terms of the Act, businesses will be able to lodge anti-competitive practices complaints against other firms in the Tribunal.  The act prohibits agreements made to restrain competition, such as price fixing, price rigging, collusive tendering, etc. (with specific exemptions for collective bargaining agreements and employment, among other items).  The act empowers the President of Nigeria to regulate prices of certain goods and services on the recommendation of the Commission.

The law prescribes stringent fines for non-compliance.  The law mandates a fine of up to 10 percent of the company’s annual turnover in the preceding business year for offences.  The law harmonizes oversight for consumer protection, consolidating it under the FCCPC.

Expropriation and Compensation

The FGN has not expropriated or nationalized foreign assets since the late 1970s, and the NIPC Act of 1995 forbids nationalization of a business or assets unless the acquisition is in the national interest or for a public purpose.  In such cases, investors are entitled to fair compensation and legal redress.  A U.S.-owned waste management investment expropriated by Abia State in 2008 is the only known U.S. expropriation case in Nigeria.

Dispute Settlement

ICSID Convention and New York Convention

Nigeria is a member of the International Center for Settlement of Investment Disputes and the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards (also called the “New York Convention”).  The Arbitration and Conciliation Act of 1988 provides for a unified and straightforward legal framework for the fair and efficient settlement of commercial disputes by arbitration and conciliation.  The Act created internationally-competitive arbitration mechanisms, established proceeding schedules, provided for the application of the United Nations Commission on International Trade Law (UNCITRAL) arbitration rules or any other international arbitration rule acceptable to the parties, and made the New York Convention applicable to contract enforcement, based on reciprocity.  The Act allows parties to challenge arbitrators, provides that an arbitration tribunal shall ensure that the parties receive equal treatment, and ensures that each party has full opportunity to present its case.  Some U.S. firms have written provisions mandating International Chamber of Commerce (ICC) arbitration into their contracts with Nigerian partners.  Several other arbitration organizations also operate in Nigeria.

Investor-State Dispute Settlement

Nigeria’s civil courts have jurisdiction over disputes between foreign investors and the Nigerian government as well as between foreign investors and Nigerian businesses.  The courts occasionally rule against the government.  Nigerian law allows the enforcement of foreign judgments after proper hearings in Nigerian courts.  Plaintiffs receive monetary judgments in the currency specified in their claims.

Section 26 of the NIPC Act of 1995 provides for the resolution of investment disputes through arbitration as follows:

  • Where a dispute arises between an investor and any Government of the Federation in respect of an enterprise, all efforts shall be made through mutual discussion to reach an amicable settlement.
  • Any dispute between an investor and any Government of the Federation in respect of an enterprise to which this Act applies which is not amicably settled through mutual discussions, may be submitted at the option of the aggrieved party to arbitration as follows:
    1. in the case of a Nigerian investor, in accordance with the rules of procedure for arbitration as specified in the Arbitration and Conciliation Act; or
    2. in the case of a foreign investor, within the framework of any bilateral or multilateral agreement on investment protection to which the Federal Government and the country of which the investor is a national are parties; or
    3. in accordance with any other national or international machinery for the settlement of investment disputes agreed on by the parties.
  • Where in respect of any dispute, there is disagreement between the investor and the Federal Government as to the method of dispute settlement to be adopted, the International Centre for Settlement of Investment Dispute Rules shall apply.

Nigeria is a signatory to the 1958 Convention on Recognition and Enforcement of Foreign Arbitral Awards.  Nigerian Courts have generally recognized contractual provisions that call for international arbitration.  Nigeria does not have a Bilateral Investment Treaty or Free Trade Agreement with the United States.

Bankruptcy Regulations

Reflecting Nigeria’s business culture, entrepreneurs generally do not seek bankruptcy protection.  Claims often go unpaid, even in cases where creditors obtain judgments against defendants.  Under Nigerian law, the term bankruptcy generally refers to individuals whereas corporate bankruptcy is referred to as insolvency.  The former is regulated by the Bankruptcy Act of 1990, as amended by Bankruptcy Decree 109 of 1992.  The latter is regulated by Part XV of the Companies and Allied Matters Act Cap 59 1990 which replaced the Companies Act, 1968.  The Embassy is not aware of U.S. companies that have had to avail themselves of the insolvency provisions under Nigerian law.

4. Industrial Policies

Investment Incentives

The Nigerian government maintains different and overlapping incentive programs.  The Industrial Development/Income Tax Relief Act, Cap 17, Laws of the Federation of Nigeria, 2004 provides incentives to pioneer industries deemed beneficial to Nigeria’s economic development and to labor-intensive industries, such as apparel.  There are currently 99 industries and products that qualify for the pioneer status incentive through the NIPC, following the addition of 27 industries and products added to the list in 2017.  The government has added a stipulation calling for a review of the qualifying industries and products to occur every two years.  Companies that receive pioneer status may benefit from a tax holiday from payment of company income tax for an initial period of three years, extendable for one or two additional years.  A pioneer industry sited in an economically disadvantaged area is entitled to a 100 percent tax holiday for seven years and an additional five percent depreciation allowance over and above the initial capital depreciation allowance.  Additional tax incentives are available for investments in domestic research and development, for companies that invest in LGAs deemed disadvantaged, for local value-added processing, for investments in solid minerals and oil and gas, and for several other investment scenarios.  For a full list of incentives, refer to the NIPC website at https://www.nipc.gov.ng/investment-incentives/ .

The NEPC administers an EEG scheme to improve non-oil export performance.  The program was suspended in 2014 due to concerns about corruption on the part of companies that collected grants but did not actually export.  It was revised and relaunched in 2018.  The federal government set aside 5.12 billion naira (roughly USD 14.2 million) in the 2019 budget for the EEG scheme.  The NEXIM Bank provides commercial bank guarantees and direct lending to facilitate export sector growth, although these services are underused.  NEXIM’s Foreign Input Facility provides normal commercial terms for the importation of machinery and raw materials used for generating exports.  Repayment terms are typically up to seven years, including a moratorium period of up to two years depending on the loan amount and the project being finance.  Agencies created to promote industrial exports remain burdened by uneven management, vaguely defined policy guidelines, and corruption.

The NIPC states that up to 120 percent of expenses on research and development (R&D) are tax deductible, provided that such R&D activities are carried out in Nigeria and relate to the business from which income or profits are derived.  Also, for the purpose of R&D on local raw materials, 140 percent of expenses are allowed.  Long-term research will be regarded as a capital expenditure and written off against profit.

Foreign Trade Zones/Free Ports/Trade Facilitation

The Nigerian Export Processing Zone Authority (NEPZA) allows duty-free import of all equipment and raw materials into its export processing zones.  Up to 100 percent of production in an export processing zone may be sold domestically based on valid permits and upon payment of applicable duties.  Investors in the zones are exempt from foreign exchange regulations and taxes and may freely repatriate capital.  The Nigerian government also encourages private sector participation and partnership with state and local governments under the free trade zones (FTZ) program, resulting in the establishment of the Lekki FTZ (owned by Lagos State), and the Olokola FTZ (which straddles Ogun and Ondo States and is owned by those two states, the federal government, and private oil companies).  Workers in FTZs may unionize but may not strike for an initial ten-year period.

Nigeria ratified the WTO Trade Facilitation Agreement (TFA) in 2016 and the Agreement entered into force in 2017.  Nigeria already implements items in Category A under the TFA and has identified, but not yet implemented, its Category B and C commitments.  In 2016, Nigeria requested additional technical assistance to implement and enforce its Category C commitments.  (See https://www.wto.org/english/tratop_e/tradfa_e/tradfa_e.htm )

Performance and Data Localization Requirements

Foreign investors must register with the NIPC, incorporate as a limited liability company (private or public) with the CAC, procure appropriate business permits, and register with the Securities and Exchange Commission (when applicable) to conduct business in Nigeria.  Manufacturing companies sometimes must meet local content requirements.  Long-term expatriate personnel do not require work permits but are subject to needs quotas requiring them to obtain residence permits that allow salary remittances abroad.  Expatriates looking to work in Nigeria on a short-term basis can either request a temporary work permit, which is usually granted for a two-month period and extendable to six months, or a business visa, if only traveling to Nigeria for the purpose of meetings, conferences, seminars, trainings, or other brief business activities.  Authorities permit larger quotas for professions deemed in short supply, such as deep-water oilfield divers.  U.S. companies often report problems in obtaining quota permits.  The Nigerian government’s Immigration Regulations 2017 introduced additional means by which foreigners can obtain residence in Nigeria.  Foreign nationals who have imported an annual minimum threshold of capital over a certain period may be issued a permanent residence permit, if the investment is not withdrawn.  The Nigerian Oil and Gas Content Development Act, 2010 restricts the number of expatriate managers to five percent of the total number of personnel for companies in the oil and gas sector.

The National Office of Industrial Property Act of 1979 established the National Office for Technology Acquisition and Promotion (NOTAP) to regulate the international acquisition of technology while creating an environment conducive to developing local technology.  NOTAP recommends local technical partners to Nigerian users in a bid to reduce the level of imported technology, which currently accounts for over 90 percent of technology in use in Nigeria.  NOTAP reviews the Technology Transfer Agreements (TTAs) required to import technology into Nigeria and for companies operating in Nigeria to access foreign currency.  NOTAP reviews three major aspects prior to approval of TTAs and subsequent issuance of a certificate:

  • Legal – ensuring that the clauses in the agreement are in accordance with Nigerian laws and legal frameworks within which NOTAP operates;
  • Economic – ensuring prices are fair for the technology offered; and
  • Technical – ensuring transfer of technical knowledge.

U.S. firms complain that the approval process for TTAs is lengthy and can routinely take three months or more.  NOTAP took steps to automate the TTA process to reduce processing time to one month or less; however, from the date of filing the application to the issuance of confirmation of reasonableness, TTA processing still requires 60 business days.  https://notap.gov.ng/sites/default/files/stages_involved.pdf .

The Nigerian Oil and Gas Content Development Act of 2010 has technology-transfer requirements that may violate a company’s intellectual property rights.

The Guidelines for Nigerian Content Development in the ICT sector issued by the NITDA in 2013, require ICT companies to host all consumer and subscriber data locally to ensure the security of government data and promote development of the ICT sector by mandating all government ministries, departments, and agencies to source and procure software from only local and indigenous software development companies.  Enforcement of the guidelines is largely absent as the Nigerian government lacks capacity and resources to monitor digital data flows.  Federal government data is hosted locally in data centers that meet international standards.  In 2019, NITDA updated the 2013 Guidelines for Data Protection (https://nitda.gov.ng/wp-content/uploads/2019/01/Nigeria%20Data%20Protection%20Regulation.pdf ) and rolled out the regulatory framework for providers of public internet access services such that only registered, verified and vetted providers can provide public internet access service in Nigeria.

The NCS and the Nigerian Ports Authority (NPA) exercise exclusive jurisdiction over customs services and port operations respectively.  Nigerian law allows importers to clear goods on their own, but most importers employ clearing and forwarding agents to minimize tariffs and lower landed costs.  Others ship their goods to ports in neighboring countries, primarily Benin, after which they transport overland legally or smuggle into the country.  The Nigerian government began closing land borders to trade in August 2019, reportedly to stem the tide of smuggled goods entering from neighboring countries and has not reopened borders as this year’s report.  The Nigerian government implements a destination inspection scheme whereby all inspections occur upon arrival into Nigeria, rather than at the ports of origin.  In 2013, the NCS regained the authority to conduct destination inspections, which had previously been contracted to private companies.  NCS also introduced the Nigeria Integrated Customs Information System (NICIS) platform and an online system for filing customs documentation via a Pre-Arrival Assessment Report (PAAR) process.  The NCS still carries out 100 percent cargo examinations, and shipments take more than 20 days to clear through the process.

Shippers report that efforts to modernize and professionalize the NCS and the NPA have largely been unsuccessful – port congestion persists and clearance times are long.  A  presidential directive in 2017 for the Apapa Port, which handles over 40 percent of Nigeria’s legal trade, to run a 24-hour operation and achieve 48-hour cargo clearance is not effective.  The port is congested, inefficient and the proliferation of customs units incentivizes corruption from official and unofficial middlemen who complicate and extend the clearance process.  Freight forwarders usually resort to bribery of customs agents and port officials to avoid long delays clearing imported goods through the NPA and NCS.  Other ports face logistical and security challenges leaving most operating well below capacity.  Nigeria does not currently have a true deep-sea port although one is under construction near Lagos but not expected to be finished before 2021.  Smuggled goods routinely enter Nigeria’s seaports and cross its land borders.

Investors sometimes encounter difficulties acquiring entry visas and residency permits. Foreigners must obtain entry visas from Nigerian embassies or consulates abroad, seek expatriate position authorization from the NIPC, and request residency permits from the Nigerian Immigration Service.  In 2018, Nigeria instituted a visa-on-arrival system, which works relatively well, but still requires lengthy processing at an embassy or consulate abroad before an authorization is issued.  Some U.S. businesses have reported being solicited for bribes in the visa-on-arrival program.  Visa-on-arrival is not valid for employment or residence.  Investors report that the residency permit process is cumbersome and can take from two to 24 months and cost USD 1,000 to USD 3,000 in facilitation fees.  The Nigerian government announced a visa rule in 2011 to encourage foreign investment, under which legitimate investors can obtain multiple-entry visas at points of entry.  Obtaining a visa prior to traveling to Nigeria is strongly encouraged.

5. Protection of Property Rights

Real Property

The Nigerian government recognizes secured interests in property, such as mortgages.  The recording of security instruments and their enforcement remain subject to the same inefficiencies as those in the judicial system.  In the World Bank Doing Business 2020 Report, Nigeria ranked 183 out of the 190 countries surveyed for registering property, a decline of one point over its 2019 ranking.  Property registration in Lagos required an average of 12 steps over 105 days at a cost of 11.1 percent of the property value while in Kano registering property averages 11 steps over 47 days at a cost of 11.8 percent of the property value.

Fee simple property rights remain rare.  Owners transfer most property through long-term leases, with certificates of occupancy acting as title deeds.  Property transfers are complex and must usually go through state governors’ offices, as state governments have jurisdiction over land ownership.  Authorities have often compelled owners to demolish buildings, including government buildings, commercial buildings, residences, and churches, even in the face of court injunctions.  Acquiring and maintaining rights to real property can be problematic.

Clarity of title and registration of land ownership remain significant challenges throughout rural Nigeria, where many smallholder farmers have only ancestral or traditional use claims to their land.  Nigeria’s land reforms have attempted to address this barrier to development but with limited success.

Intellectual Property Rights

Nigeria’s legal and institutional infrastructure for protecting intellectual property rights (IPR) remains in need of further development and more funding, even though there are laws on the books for enforcing most IPR. The areas in which the legislation is deficient include online piracy, geographical indications, and plant and animal breeders’ rights.  A bill to establish the industrial property commission to take over the functions of registration of trademarks, patents, designs, plant varieties, animal breeders and farmers’ rights, and supervise the new registries created under the industrial property act has been in the works since 2016.  No new IPR legislation has been enacted.

Copyright protection in Nigeria is governed by the Copyright Act of 1988, as amended in 1992 and 1999, which provides an adequate basis for enforcing copyright and combating piracy.  The Nigerian Copyright Commission, a division of the Ministry of Justice, administers the Act.  The International Anti-Counterfeiting Coalition (IACC) has long noted that the Copyright Act should be amended to provide stiffer penalties for violators. Nigeria is a member of the World Intellectual Property Organization (WIPO) and in 2017 passed legislation to ratify two WIPO treaties that it signed in 1997:  the Copyright Treaty and the Performances and Phonograms Treaty.  These treaties address important digital communication and broadcast issues that have become increasingly relevant in the 18 years since Nigeria signed them.  The  Draft Copyright Bill in 2016 was revised to bring it into compliance with these two treaties and sent to the National Assembly in 2017, but it was never enacted.

In 2013, he Ministry of Communication Technology (MCT) issued local content guidelines (Guidelines for Nigerian Content Development in Information and Communications Technology) that  raised IPR concerns. Among other issues,  there is concern about the future ability of the Nigerian government to protect data and trade secrets because of the localization processes requiring the disclosure of source code and other sensitive design elements as a condition of doing business.  The ICT industry in Nigeria has pushed back strongly against several of the measures in those guidelines, which remain in effect but have not been fully enforced.  While the NITDA does not currently require in-country product manufacturing due to the difficult business environment in Nigeria, it has noted that it would continue to press for local ICT capacity building programs.

Violations of Nigerian IPR laws continue to be widespread largely due to a culture of inadequate enforcement.  That culture stems from several factors, including insufficient resources among enforcement agencies, lack of political will and focus on IPR, porous borders, entrenched trafficking systems that make enforcement difficult (and sometimes dangerous), and corruption.  The Nigerian Copyright Commission (NCC) has primary responsibility for copyright enforcement but is widely viewed as understaffed and underfunded relative to the magnitude of the IPR challenge in Nigeria.  Nevertheless, the NCC continues to carry out enforcement actions on a regular basis.  According to its report for 2018, the NCC conducted  five anti-piracy operations and seized 288 copyrighted works, including DVDs, books, MP3s, and software.  Anti-piracy operations in 2018 led to  seven arrests.

The NCS has general authority to seize and destroy contraband.  Under current law, copyrighted works require a notice issued by the rights owner to Customs to treat such works as infringing, but implementing procedures have not been developed and this procedure is handled on a case- by-case basis between the NCS and the NCC.  Once seizures are made, the NCS invites the NCC to inspect and subsequently take delivery of the consignment of fake goods for purposes of further investigation because the NCC has the statutory responsibility to investigate and prosecute copyright violations.  The NCC bears the costs of moving and storing infringing goods.   If, after investigations, any persons are identified with the infringing materials, a decision to prosecute may be made. Where no persons are identified or could be traced, the NCC may obtain an order of court to enable it to destroy such works.  The NCC works in cooperation with rights owners’ associations and stakeholders in the copyright industries on such matters.

Nigeria is not listed in the United States Trade Representative (USTR) Special 301Report or the Notorious Markets List. For additional information about treaty obligations and points of contact at local IP offices, please see the WIPO country profiles at http://www.wipo.int/directory/en/ .

6. Financial Sector

Capital Markets and Portfolio Investment

The NIPC Act of 1995 liberalized Nigeria’s foreign investment regime, which has facilitated access to credit from domestic financial institutions.  Foreign investors who have incorporated their companies in Nigeria have equal access to all financial instruments.  Some investors consider the capital market, specifically the Nigerian Stock Exchange, a financing option, given commercial banks’ high interest rates and the short maturities of local debt instruments.

The Nigeria Stock Exchange (NSE) was reflective of the sluggishness in the larger economy in 2019 as it posted a negative return of -14.6 percent to close the year with its All Share Index at 26,842.07.   The poor performance was mostly attributed to government regulatory uncertainty and the 2019 presidential elections.   However, the equity market capitalization increased by 11 percent to USD 36.0 billion from USD 32.5 billion in 2018, largely due to the notable listings of telecom companies MTN Nigeria Communications Plc and Airtel Africa which had been long awaited.   As of December 2019 the NSE had 164 listed companies.  The total number of securities listed increased by 26 percent to 361 from 286 securities in 2018, largely due to a growth in government bonds.  The Nigerian government has considered requiring companies in certain sectors such as telecoms, oil and gas, or over a certain size to list on the NSE as a means to encourage greater corporate participation and sectoral balance in the Nigerian Stock Exchange, but those proposals have not been enacted to date.

The Government employs debt instruments, issuing bonds of various maturities ranging from two to 20 years.  Nigeria has issued bonds to restructure the government’s domestic debt portfolio from short- to medium- and long-term instruments.  Some state governments have issued bonds to finance development projects, while some domestic banks have used the bond market to raise additional capital.  The Nigerian Securities and Exchange Commission has issued stringent guidelines for states wishing to raise funds on capital markets, such as requiring credit assessments conducted by recognized credit rating agencies.

Money and Banking System

The CBN currently licenses 22 deposit-taking commercial banks in Nigeria.  Following a 2009 banking crisis, CBN officials intervened in eight of 24 commercial banks (roughly one-third of the system by assets) due to insolvency or serious undercapitalization.  At the same time, it established the government-owned Asset Management Company of Nigeria (AMCON) to address bank balance sheet disequilibria via discounted purchases of non-performing loans.  The Nigerian banking sector emerged stronger from the crisis thanks to AMCON and a number of other reforms undertaken by the CBN, including the adoption of uniform year-end International Financial Reporting Standards (IFRS) to increase transparency, a stronger emphasis on risk management and corporate governance, and the nationalization of three distressed banks.

In 2013, the CBN introduced a stricter supervision framework for the country’s top banks, identified as “Systemically Important Banks” (SIBs) as they account for more than 70 percent of the industry’s total assets, loans and deposits, and their failure or collapse could disrupt the entire financial system and the country’s real economy.  These banks are:  First Bank of Nigeria, United Bank for Africa, Zenith Bank, Access Bank, Ecobank Nigeria, Guaranty Trust Bank, and Polaris Bank.  Under the new supervision framework, the operations of SIBs are closely monitored with regulatory authorities conducting stress tests on the SIBs’ capital and liquidity adequacy.  Moreover, SIBs are required to maintain a higher minimum capital adequacy ratio of 15 percent.  In September 2018, the CBN revoked the operating license of one of the SIBs, due to the deterioration of its share capital and its board’s failure to recapitalize the bank, making it the fourth bank to be nationalized.

The CBN reported that total deposits increased by N2.34tn or 10.7 percent and aggregate credit grew by N2.2tn or 14.5 percent by December 2019.  Non-performing loans (NPLs) declined to 6.1 percent in December, 2019 from 14.2 percent in 2018.  However, NPLs are expected to rise following the CBN’s directive to banks to increase their loan to deposit ratio to 6 percent or be penalized.  This has forced several banks to grant more credits, many of which may result in default.  Nigerian government and private sector analysts assess that the volume of NPLs may be higher than these figures, owing in part to banks not reporting non-performing insider loans made to banks’ owners and directors.

The CBN supports non-interest banking.  Several banks have established Islamic banking operations in Nigeria including Jaiz Bank International Plc, Nigeria’s first full-fledged non-interest bank, which commenced operations in 2012.  A second non-interest bank, Taj Bank, started operations in December 2019.   There are five licensed merchant banks: Coronation Merchant Bank Limited, FBN Merchant Bank, FSDH Merchant Bank Ltd, NOVA Merchant Bank, and Rand Merchant Bank Nigeria Limited.

The CBN has issued regulations for foreign banks regarding mergers with or acquisitions of existing local banks in the country.  Foreign institutions’ aggregate investment must not be more than 10 percent of the latter’s total capital.

Foreign Exchange and Remittances

Foreign Exchange

Foreign currency for most transactions is procured through local banks in the inter-bank market.  Low value foreign exchange may also be procured at a premium from foreign exchange bureaus, called Bureaus de Change.  Domestic and foreign businesses have frequently expressed strong concern about the CBN’s foreign exchange restrictions, which they report prevent them from importing needed equipment and goods and from repatriating naira earnings.  Foreign exchange demand remains high because of the dependence on foreign inputs for manufacturing and refined petroleum products.

In 2015, the CBN published a list of 41 product categories which could no longer be imported using official foreign exchange channels; the number of categories has since been increased to 44.  Affected businesses (American and Nigerian) have complained publicly and privately that the policy in effect bans the import of some 700 individual items and severely hampers their ability to source inputs and raw materials.  In February 2019, the Governor of the Central Bank commented that the Bank is currently considering adding more items to the list and bringing the number as high as 50 items.

https://www.cbn.gov.ng/out/2015/ted/ted.fem.fpc.gen.01.011.pdf 

In 2017, the CBN began providing more foreign exchange to the interbank market via wholesale and retail forward contract auctions in order to meet some of the demand that had been forced to the parallel market.    The CBN also established the “investors and exporters” window in 2017, which allows trade to occur at prevailing market rates (around 360 naira to the dollar in December 2019).  In March 2020, the CBN announced it had collapsed its multiple exchange rate policy following a currency adjustment such that the investor and exporters window rate was increased to 380 naira to the dollar, and government transactions are now contracted at approximately 360 naira to the dollar.

Remittance Policies

The NIPC guarantees investors unrestricted transfer of dividends abroad (net a 10 percent withholding tax).  Companies must provide evidence of income earned and taxes paid before repatriating dividends from Nigeria.  Money transfers usually take no more than 48 hours.  In 2015, the CBN implemented restrictions on foreign exchange remittances.  All such transfers must occur through banks.  Such remittances may take several weeks depending on the size of the transfer and the availability of foreign exchange at the remitting bank.  Transfers of currency are protected by Article VII of the International Monetary Fund Articles of Agreement (http://www.imf.org/External/Pubs/FT/AA/index.htm#art7 ).

Sovereign Wealth Funds

The Nigeria Sovereign Investment Authority (NSIA) manages Nigeria’s sovereign wealth fund.  It was created by the NSIA Act in 2011 and began operations in October 2012 with USD 1 billion seed capital and received an additional USD 500 million in 2017.  In its most recent annual report, the total assets being managed by NSIA, increased to N617.7 billion (USD 2.0 billion) in 2018, an increase of 15.7 percent from 2017.  The NSIA also posted total comprehensive income of N44.3 billion (USD 144.9 million) in 2018, a 58.8 percent growth over the 2017 figure of N27.9 billion (USD 91.2 million).  http://www.nsia.com.ng/~nsia/sites/default/files/annual-reports/NSIA%20Annual%20Report%202018.pdf   It was created to receive, manage, and grow a diversified portfolio that will eventually replace government revenue currently drawn from non-renewable resources, primarily hydrocarbons.

The NSIA is a public agency that subscribes to the Santiago Principles, which are a set of 24 guidelines that assign “best practices” for the operations of Sovereign Wealth Funds globally. The NSIA invests through three funds:  the Future Generations Fund for diversified portfolio of long term growth, the Nigeria Infrastructure Fund for domestic infrastructure development, and the Stabilization Fund to act as a buffer against short-term economic instability.  The NSIA does not take an active role in management of companies.  The Embassy has not received any report or indication that NSIA activities limit private competition.

7. State-Owned Enterprises

The Nigerian government does not have an established practice consistent with the OECD Guidelines on Corporate Governance for state-owned enterprises (SOEs), but SOEs do have enabling legislation that governs their ownership.  To legalize the existence of state-owned enterprises, provisions have been made in the Nigerian constitution under socio-economic development in section 16 (1) of the 1979 and 1999 Constitutions respectively.  The government has privatized many former SOEs to encourage more efficient operations, such as state-owned telecommunications company Nigerian Telecommunications and mobile subsidiary Mobile Telecommunications in 2014.

Nigeria does not operate a centralized ownership system for its state-owned enterprises.  The enabling legislation for each SOE stipulates its ownership and governance structure.  The Boards of Directors are usually appointed by the President on the recommendation of the relevant Minister.  The Boards operate and are appointed in line with the enabling legislation which usually stipulates the criteria for appointing Board members.  Directors are appointed by the Board within the relevant sector.  In a few cases, however, appointments have been viewed as a reward to political affiliates.

The Nigerian National Petroleum Corporation (NNPC) is Nigeria’s most prominent state-owned enterprise.  NNPC Board appointments are made by the presidency, but day-to-day management is overseen by the Group Managing Director (GMD).  The GMD reports to the Minister of Petroleum.  In the current administration the President has retained that ministerial role for himself, and the appointed Minister of State for Petroleum acts as the de facto Minister of Petroleum in the President’s stead.  The National Assembly passed a Petroleum Industry Governance Bill in March 2018, but the President sent it back to the National Assembly requesting amendments.  The bill would clarify regulatory, policy, and operational roles in the petroleum sector and pave the way for partial privatization of NNPC.

NNPC is Nigeria’s biggest and arguably most important state-owned enterprise and is responsible for exploration, refining, petrochemicals, products transportation, and marketing.  It owns and operates Nigeria’s four refineries (one each in Warri and Kaduna and two in Port Harcourt), all of which operate far below capacity, if at all.  Nigeria’s tax agency receives taxes on petroleum profits and other hydrocarbon-related levies, while the Department of Petroleum Resources under the Ministry of Petroleum Resources collects rents, royalties, license fees, bonuses, and other payments.  In an effort to provide greater transparency in the collection of revenues that accrue to the government, the Buhari administration requires these revenues, including some from the NNPC, to be deposited in the Treasury Single Account.

Another key state-owned enterprise is the Transmission Company of Nigeria (TCN), responsible for the operation of Nigeria’s national electrical grid.  Private power generation and distribution companies have accused the TCN grid of significant inefficiency and inadequate technology which greatly hinder the nation’s electricity output and supply.  TCN emerged from the defunct National Electric Power Authority as an incorporated entity in 2005.  It is the only major component of Nigeria’s electric power sector, which was not privatized in 2013.

Privatization Program

The Privatization and Commercialization Act of 1999 established the National Council on Privatization, the policy-making body overseeing the privatization of state-owned enterprises, and the Bureau of Public Enterprises (BPE), the implementing agency for designated privatizations.  The BPE has focused on the privatization of key sectors, including telecommunications and power, and calls for core investors to acquire controlling shares in formerly state-owned enterprises.

The BPE has privatized and concessioned more than 140 enterprises since 1999, including an aluminum complex, a steel complex, cement manufacturing firms, hotels, a petrochemical plant, aviation cargo handling companies, vehicle assembly plants, and electricity generation and distribution companies.  The electricity transmission company remains state-owned.  Foreign investors can and do participate in BPE’s privatization process.  The BPE also retains partial ownership in some of the privatized companies.  (It holds a 40 percent stake in the power distribution companies.)

The National Assembly has questioned the propriety of some of these privatizations, with one ongoing case related to an aluminum complex privatization the subject of a Supreme Court ruling on ownership.  In addition, the failure of the 2013 power sector privatization to restore financial viability to the sector has raised criticism of the privatized power generation and distribution companies.  Nevertheless, the government’s long-delayed sale in 2014 of state-owned Nigerian Telecommunications and Mobile Telecommunications shows a continued commitment to the privatization model.

8. Responsible Business Conduct

There is no specific Responsible Business Conduct law in Nigeria.  Several legislative acts incorporate within their provisions certain expectations that directly or indirectly regulate the observance or practice of corporate social responsibility.  In order to reinforce responsible behavior, various laws have been put in place for the protection of the environment.  These laws stipulate criminal sanctions for non-compliance.  There are also regulating agencies which exist to protect the rights of consumers.  While the Nigerian government has no specific action plan regarding OECD Responsible Business Conduct guidelines, most government procurements are done transparently and in line with the Public Procurement Act which stipulates advertisement and a transparent bidding process.

Nigeria participates in the Extractive Industries Transparency Initiative (EITI) and is an EITI compliant country.  Specifically, in February 2019 the EITI Board determined that Nigeria had made satisfactory progress overall with implementing the EITI Standard after having fully addressed the corrective actions from the country’s first Validation in 2017.  The next EITI Validation study of Nigeria will occur in 2022.

The Department of Petroleum Resources (DPR), an arm of the Ministry of Petroleum Resources, also ensures comprehensive standards and guidelines to direct the execution of projects with proper consideration for the environment.  The DPR Environmental Guidelines and Standards of 1991 for the petroleum industry is a comprehensive working document with serious consideration for the preservation and protection of the Niger Delta.

The Nigerian government provides oversight of competition, consumer rights, and environmental protection issues.  The Federal Competition and Consumer Protection Commission (FCCPC), the National Agency for Food and Drug Administration and Control, the Standards Organization of Nigeria, and other entities have the authority to impose fines and ensure the destruction of harmful substances that otherwise may have sold to the general public.  The main regulators and enforcers of corporate governance are the Securities and Exchange Commission and the Corporate Affairs Commission (which register all incorporated companies).  Nigeria has adopted multiple reforms on corporate governance.  Environmental pollution by multinational oil companies has resulted in fines being imposed locally while some cases have been pursued in foreign jurisdictions resulting in judgments being granted in favor of the oil producing communities.

The Companies Allied Matter Act 1990 and the Investment Securities Act provide basic guidelines on company listing.  More detailed regulations are covered in the Nigeria Stock Exchange Listing rules.  Publicly listed companies are expected to disclose indicate their level of compliance with the Code of Corporate Governance in their Annual Financial Reports.

9. Corruption

Foreign companies, whether incorporated in Nigeria or not, may bid on government projects and generally receive national treatment in government procurement, but may also be subject to a local content vehicle (e.g., partnership with a local partner firm or the inclusion of one in a consortium) or other prerequisites which are likely to vary from tender to tender.  Corruption and lack of transparency in tender processes has been a far greater concern to U.S. companies than discriminatory policies based on foreign status.  Government tenders are published in local newspapers, a “tenders” journal sold at local newspaper outlets, and occasionally in foreign journals and magazines.  The Nigerian government has made modest progress on its pledge to conduct open and competitive bidding processes for government procurement with the introduction of the Nigeria Open Contracting Portal in 2017 under the Bureau of Public Procurement.

The Public Procurement Law of 2007 established the Bureau of Public Procurement as the successor agency to the Budget Monitoring and Price Intelligence Unit.  It acts as a clearinghouse for government contracts and procurement and monitors the implementation of projects to ensure compliance with contract terms and budgetary restrictions.  Procurements above 100 million naira (about USD 277,550) reportedly undergo full “due process,” but government agencies routinely flout public procurement requirements.  Some of the 36 states of the federation have also passed public procurement legislation.

The reforms have also improved transparency in procurement by the state-owned NNPC.  Although U.S. companies have won contracts in numerous sectors, difficulties in receiving payment are not uncommon and can deter firms from bidding.  Supplier or foreign government subsidized financing arrangements appear in some cases to be a crucial factor in the award of government procurements.  Nigeria is not a signatory to the WTO Agreement on Government Procurement.

In 2016, Nigeria announced its participation in the Open Government Partnership, a potentially significant step forward on public financial management and fiscal transparency.  The Ministry of Justice presented Nigeria’s National Action Plan for the Open Government Partnership.  Implementation of its 14 commitments has made some progress, particularly on the issues such as tax transparency, ease of doing business, and asset recovery.  The National Action Plan, which ran through 2019, covered five major themes:  ensuring citizens’ participation in the budget cycle, implementing open contracting and adoption of open contracting data standards, increasing transparency in the extractive sectors, adopting common reporting standards like the Addis Tax initiative, and improving the ease of doing business.  Full implementation of the National Action Plan would be a significant step forward for Nigeria’s fiscal transparency, although Nigeria has not fully completed any commitment to date.

Businesses report that bribery of customs and port officials remains common and often necessary to avoid extended delays in the port clearance process, and that smuggled goods routinely enter Nigeria’s seaports and cross its land borders.

Domestic and foreign observers identify corruption as a serious obstacle to economic growth and poverty reduction.  Nigeria scored 26 out of 100 in Transparency International’s 2019 Corruption Perception Index, with an overall ranking of 146 out of the 180 countries, a two-point drop since 2018.  The Economic and Financial Crimes Commission (EFCC) Establishment Act of 2004 established the EFCC to prosecute individuals involved in financial crimes and other acts of economic “sabotage.”  Traditionally, the EFCC has achieved the most success in prosecuting low-level Internet scam operators.  A relative few high-profile convictions have taken place, such as a former governor of Adamawa State, a former governor of Bayelsa State, a former Inspector General of Police, and a former Chair of the Board of the Nigerian Port Authority.  However, in the case of the convicted governor of Bayelsa State, the President of Nigeria pardoned him in 2013.  The case of the former governor of Adamawa, who was convicted in 2017, is under appeal, and he is currently free on bail.

Since taking office in 2015, President Buhari has focused on implementing a campaign pledge to address corruption, though his critics contend his anti-corruption efforts often target political rivals.  Since then, the EFCC arrested a former National Security Advisor (NSA), a former Minister of State for Finance, a former NSA Director of Finance and Administration, and others on charges related to diversion of funds intended for government arms procurement.

The Corrupt Practices and Other Related Offences Act of 2001 established an Independent Corrupt Practices and Other Related Offences Commission (ICPC) to prosecute individuals, government officials, and businesses for corruption.  The Corrupt Practices Act punishes over 19 offenses, including accepting or giving bribes, fraudulent acquisition of property, and concealment of fraud.  Nigerian law stipulates that giving and receiving bribes constitute criminal offences and, as such, are not tax deductible.  Since its inauguration, the ICPC has secured convictions in 71 cases (through 2015, latest data available) with nearly 300 cases still open and pending as of July 2018.  In 2014, a presidential committee set up to review Nigeria’s ministries, departments, and agencies recommended that the EFCC, the ICPC, and the Code of Conduct Bureau (CCB) be merged into one organization.  The federal government, however, rejected this proposal to consolidate the work of these three anti-graft agencies.

Nigeria gained admittance into the Egmont Group of Financial Intelligence Units in 2007.  In July 2017 the Egmont Group suspended Nigeria due to concerns about the Nigeria Financial Intelligence Unit’s operational autonomy and ability to protect classified information. It lifted the suspension in September 2018 due to the Nigerian government’s efforts to address the Egmont Group’s concerns, through the passage of the Nigerian Financial Intelligence Agency Act in July 2018.

The Paris-based Financial Action Task Force (FATF) removed Nigeria from its list of Non-Cooperative Countries and Territories in 2006.  In 2013, the FATF decided that Nigeria had substantially addressed the technical requirements of its FATF Action Plan and agreed to remove Nigeria from its monitoring process conducted by FATF’s International Cooperation Review Group.  Nigeria, as a member of the Inter-governmental Action Group Against Money Laundering in West Africa, is an associated member of FATF.

The Nigeria Extractive Industries Transparency Initiative (NEITI) Act of 2007 provided for the establishment of the NEITI organization, charged with developing a framework for transparency and accountability in the reporting and disclosure by all extractive industry companies of revenue due to or paid to the Nigerian government.  NEITI serves as a member of the international Extractive Industries Transparency Initiative, which provides a global standard for revenue transparency for extractive industries like oil and gas and mining.  Nigeria is party to the United Nations Convention Against Corruption.  Nigeria is not a member of the OECD and not party to the OECD Convention on Combating Bribery.

Resources to Report Corruption

Economic and Financial Crimes Commission
Headquarters:  No. 5, Fomella Street, Off Adetokunbo Ademola Crescent, Wuse II, Abuja, Nigeria.
Branch offices in Ikoyi, Lagos State; Port Harcourt, Rivers State; Independence Layout, Enugu State; Kano, Kano State; Gombe, Gombe State.
Hotline: +234 9 9044752 or +234 9 9044753

Independent Corrupt Practices and Other Related Offences Commission:
Abuja Office – Headquarters
Plot 802 Constitution Avenue, Central District, PMB 535, Garki Abuja
Phone/Fax: 234 9 523 8810   Email: info@icpc.gov.ng

10. Political and Security Environment

Political, religious, and ethnic violence continue to affect Nigeria.  The Islamist group Jama’atu Ahl as-Sunnah li-Da’awati wal-Jihad, popularly known as Boko Haram, and the ISIS-WA have waged a violent campaign to destabilize the Nigerian government, killing tens of thousands of people, forcing over two million to flee to other areas of Nigeria or into neighboring countries, and leaving more than seven million people in need of humanitarian assistance in the country’s northeast.  Boko Haram has targeted markets, churches, mosques, government installations, educational institutions, and leisure sites with improvised explosive devices (IEDs) and suicide vehicle-borne IEDs across nine northern states and in Abuja.  In 2017, Boko Haram employed hundreds of suicide bombings against the local population.  Women and children were forced to carry out many of the attacks.  There were multiple reports of Boko Haram killing entire villages suspected of cooperating with the government.  ISIS-WA targeted civilians with attacks or kidnappings less frequently than Boko Haram.  ISIS-WA employed targeted acts of violence and intimidation against civilians in order to expand its area of influence and gain control over critical economic resources.  As part of a violent and deliberate campaign, ISIS-WA also targeted government figures, traditional leaders, and contractors.

President Buhari has focused on matters of insecurity in Nigeria and in neighboring countries.   While the two insurgencies maintain the ability to stage forces in rural areas and launch attacks against civilian and military targets across the northeast, Nigeria is also facing rural violence in the Nigeria’s north-central states caused by criminal actors and by conflicts between migratory pastoralist and farming communities, often over scarce resources.  Another major trend is the rise in kidnappings for ransom and attacks on villages by armed gangs.

Due to challenging security dynamics throughout the country, the U.S. Mission to Nigeria has significantly limited official travel in the northeast and travel to other parts of Nigeria requires security precautions.

Decades of neglect, persistent poverty, and environmental damage caused by oil spills have left Nigeria’s oil rich Niger Delta region vulnerable to renewed violence.  Though each oil-producing state receives a 13 percent derivation of the oil revenue produced within its borders, and several government agencies, including the Niger Delta Development Corporation (NDDC) and the Ministry of Niger Delta Affairs, are tasked with implementing development projects, bureaucratic mismanagement and corruption have prevented these investments from yielding meaningful economic and social development in the region.  Niger Delta militants have demonstrated their ability to attack and severely damage oil instillations at will as seen when they cut Nigeria’s production by more than half in 2016.  Attacks on oil installations have since decreased due to a revamped amnesty program and continuous high-level engagement with the region.

Other security challenges facing Nigeria include thousands of refugees fleeing to Nigeria from Cameroon’s English-speaking region due to tensions there and kidnappings for ransom.

11. Labor Policies and Practices

Nigeria’s skilled labor pool has declined over the past decade due to inadequate educational systems, limited employment opportunities, and the migration of educated Nigerians to other countries, including the United Kingdom, the United States, Canada, and South Africa.  The low employment capacity of Nigeria’s formal sector means that almost three-quarters of all Nigerians work in the informal and agricultural sectors or are unemployed.  Companies involved in formal sector businesses, such as banking and insurance, possess an adequately skilled workforce.  Manufacturing and construction sector workers often require on-the-job training.  The result is that while individual wages are low, individual productivity is also low, which means overall labor costs can be high.  The Buhari Administration is pushing reforms in the education sector to improve the supply of skilled workers but this and other efforts run by state governments are in their initial stages.

Labor organizations in Nigeria remain politically active and are prone to call for strikes on a regular basis against the national and state governments.  While most labor actions are peaceful, difficult economic conditions fuel the risk that these actions could become violent.

Nigeria’s constitution guarantees the rights of free assembly and association, and protects workers’ rights to form or belong to trade unions.  Several statutory laws, nonetheless, restrict the rights of workers to associate or disassociate with labor organizations.  Nigerian unions belong to one of three trade union federations:  the Nigeria Labor Congress (NLC), which tends to represent junior (i.e., blue collar) workers; the United Labor Congress of Nigeria (ULC), which represents a group of unions that separated from the NLC in 2015; and the Trade Union Congress of Nigeria (TUC), which represents the “senior” (i.e., white collar) workers.  According to figures provided by the Ministry of Labor and Employment, total union membership stands at roughly 7 million.  A majority of these union members work in the public sector, although unions exist across the private sector.  The Trade Union Amendment Act of 2005 allowed non-management senior staff to join unions.

Collective bargaining occurred throughout the public sector and the organized private sector in 2019.  However, public sector employees have become increasingly concerned about the Nigerian governments’ and state governments’ failure to honor previous agreements from the collective bargaining process.

Collective bargaining in the oil and gas industry is relatively efficient compared to other sectors. Issues pertaining to salaries, benefits, health and safety, and working conditions tend to be resolved quickly through negotiations.  Workers under collective bargaining agreements cannot participate in strikes unless their unions comply with the requirements of the law, which includes provisions for mandatory mediation and referral of disputes to the Nigerian government.  Despite these restrictions on staging strikes, unions occasionally conduct strikes in the private and public sectors without warning.  Localized strikes occurred in the education, government, energy, power, and healthcare sectors in 2019.  The law forbids employers from granting general wage increases to workers without prior government approval, but the law is not often enforced.

Despite widespread opposition from state governors, in April 2019, President Buhari signed into law a new minimum wage, increasing it from 18,000 naira (USD 50) to 30,000 naira (USD 83) per month.  After months of negotiations, the government finally reached an agreement with organized labor in October 2019 on the consequential adjustments in civil servants’ salaries that must be implemented across the board to apply the new minimum wage.  While the VAT rate was recently raised from 5.5 to 7.5 percent to help fund the increased minimum wage, it will not be enough to offset the cost of the adjustments.  This, in turn, means that the government will need to borrow more money, which will not only increase the debt burden but open it to criticism that that money should be used for critical infrastructure projects rather than civil servant salaries.

The Nigerian Minister of Labor and Employment may refer unresolved disputes to the Industrial Arbitration Panel (IAP) and the National Industrial Court (NIC).  In 2015, the NIC launched an Alternative Dispute Resolution Center.  Union officials question the effectiveness and independence of the NIC, believing it unable to resolve disputes stemming from Nigerian government failure to fulfill contract provisions for public sector employees.  Union leaders criticize the arbitration system’s dependence on the Minister of Labor and Employment’s referrals to the IAP.

Nigeria’s laws regarding minimum age for child labor and hazardous work are inconsistent. Article 59 of the Labor Act of 1974 sets the minimum age of employment at 12, and it is in force in all 36 states of Nigeria.  The Act also permits children of any age to do light work alongside a family member in agriculture, horticulture, or domestic service.

The Federal 2003 Child Rights Act (CRA) codifies the rights of children in Nigeria and must be ratified by each State to become law in its territory.  To date, 25 states and the FCT have ratified the CRA, with all 11 of the remaining states located in northern Nigeria.

The CRA states that the provisions related to young people in the Labor Act apply to children under the CRA, but also that the CRA supersedes any other legislation related to children.  The CRA restricts children under the age of 18 from any work aside from light work for family members; however, Article 59 of the Labor Act applies these restrictions only to children under the age of 12.  This language makes it unclear what minimum ages apply for certain types of work in the country.

While the Labor Act forbids the employment of youth under age 18 in work that is dangerous to their health, safety, or morals, it allows children to participate in certain types of work that may be dangerous by setting different age thresholds for various activities.  For example, the Labor Act allows children age 16 and older to work at night in gold mining and the manufacturing of iron, steel, paper, raw sugar, and glass.  Furthermore, the Labor Act does not extend to children employed in domestic service.  Thus, children are vulnerable to dangerous work in industrial undertakings, underground, with machines, and in domestic service.  In addition, the prohibitions established by the Labor Act and CRA are not comprehensive or specific enough to facilitate enforcement.  In 2013, the National Steering Committee (NSC) for the Elimination of the Worst Forms of Child Labor in Nigeria validated the Report on the Identification of Hazardous Child Labor in Nigeria.  The report has languished with the Ministry of Labor and Employment and still awaits the promulgation of guidelines for operationalizing the report.

The Nigerian government adopted the Trafficking in Persons (Prohibition), Enforcement, and Administration Act of 2015.  While not specifically directed against child labor, many sections of the  law support anti-child labor efforts.  The Violence against Persons Prohibition Act was signed into law in May 2015 and again while not specifically focused on child labor, it covers related elements such as “depriving a person of his/her liberty,” “forced financial dependence/economic abuse,” and “forced isolation/separation from family and friends” and is applicable to minors.

Nigeria’s Labor Act provides for a 40-hour work week, two to four weeks of annual leave, and overtime and holiday pay for all workers except agricultural and domestic workers.  No law prohibits compulsory overtime.  The Act establishes general health and safety provisions, some of which specifically apply to young or female workers, and requires the Ministry of Labor and Employment to inspect factories for compliance with health and safety standards.  Under-funding and limited resources undermine the Ministry’s oversight capacity, and construction sites and other non-factory work sites are often ignored.  Nigeria’s labor law requires employers to compensate injured workers and dependent survivors of workers killed in industrial accidents.

Draft legislation, such as a new Labor Standards Act which includes provisions on child labor, and an Occupational Safety and Health Act that would regulate hazardous work, have remained under consideration in the National Assembly since 2006.

Admission of foreign workers is overseen by the Federal Ministry of the Interior.  Employers must seek the consent of the Ministry in order to employ foreign workers by applying for an “expatriate quota.”  The quota allows a company to employ foreign nationals in specifically approved job designations as well as specifying the validity period of the designations provided on the quota.

There are two types of visas which may be granted, depending on the length of stay.  For short-term assignments, an employer must apply for and receive a temporary work permit, allowing the employee to carry out some specific tasks.  The temporary work permit is a single-entry visa, and expires after three months.  There are no numerical limitations on short-term visas, and foreign nationals who meet the conditions for grant of a visa may apply for as many short-term visas as required.

12. U.S. International Development Finance Corporation (DFC) and Other Investment Insurance Programs

Nigeria does not have current programs under the DFC but has Overseas Private Investment Corporation (OPIC) programs in food manufacturing, banking, construction, and power sectors.

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source USG or international statistical source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount  
Host Country Gross Domestic Product (GDP) ($M USD) N/A N/A 2019 $448 billion www.worldbank.org/en/country 
Foreign Direct Investment Host Country Statistical source USG or international statistical source USG or international Source of data:
BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) N/A N/A 2018 $5,630 BEA data available at
https://www.bea.gov/international/
direct-investment-and-multinational-
enterprises-comprehensive-data
 
Host country’s FDI in the United States ($M USD, stock positions) N/A N/A 2018 $75 BEA data available at
https://www.bea.gov/international/
direct-investment-and-multinational-
enterprises-comprehensive-data
 
Total inbound stock of FDI as % host GDP N/A N/A 2018 25.1% UNCTAD data available at
https://unctad.org/en/Pages/DIAE/
World%20Investment%20Report/
Country-Fact-Sheets.aspx
 
  
Table 3: Sources and Destination of FDI
Direct Investment from/in Counterpart Economy Data
From Top Five Sources/To Top Five Destinations (US Dollars, Millions)
Inward Direct Investment Outward Direct Investment
Total Inward Amount 100% Total Outward Amount 100%
Bermuda 15,684 17% Data Not Available
The Netherlands 14,185 15%
United Kingdom 11,714 13%
France 10,913 12%
United States 9,058 10%
“0” reflects amounts rounded to +/- USD 500,000.

Table 4: Sources of Portfolio Investment
Data not available.

14. Contact for More Information

Trade and Investment Officer
Plot 1075 Diplomatic Drive
Abuja, Nigeria
Telephone: +234 (0)9 461 4000
Email: EconNigeria@state.gov

Senegal

Executive Summary

Senegal’s stable political environment, favorable geographic position, strong and sustained growth, and generally open economy offer attractive opportunities for foreign investment. The Government of Senegal welcomes foreign investment and has prioritized efforts to improve the business climate, although significant challenges remain. Senegal’s macroeconomic environment is stable. The currency – the CFA franc used in eight West African countries – is pegged to the euro. Repatriation of capital and income is relatively straightforward, although the regional central bank has recently tightened restrictions on the use of “offshore accounts” in project finance transactions. Investors cite cumbersome and unpredictable tax administration, bureaucratic hurdles, opaque public procurement, a weak and inefficient judicial system, inadequate access to financing, and a rigid labor market as obstacles. High real estate and energy costs, as well as high factor costs driven by tariffs, undermine Senegal’s competitiveness. The government is working to address these barriers.

Since 2012, Senegal has pursued an ambitious development program, the Plan Senegal Emergent (Emerging Senegal Plan, or “PSE”), to improve infrastructure, achieve economic reforms, increase investment in strategic sectors, and strengthen the competitiveness of the private sector. Under the PSE, Senegal has enjoyed sustained economic growth rates, averaging 6.5 percent from 2014 through 2019. With good air transportation links, a modern and functional international airport, planned port expansion projects, and improving ground transportation, Senegal also aims to become a regional center for logistics, services, and industry. Special Economic Zones offer investors tax exemptions and other benefits that have led to increased foreign investment in the manufacturing sector over the past several years.

The GOS continues to improve Senegal’s investment climate. Since 2007, Senegal has dramatically reduced the average number of days it takes to start a business. The government continues to expand its “single window” system offering one-stop government services for businesses, opening a new service centers in various locations and projecting to have at least one service center in each of the country’s 45 regional departments by 2021. Property owners can apply for construction permits online.  In 2019, the GOS made tax information and some payment options available online. Senegal’s state information agency ADIE has an ambitious SMART Senegal plan to increase access to WiFi and digitize more services onto a national hub. Senegal’s ranking in the World Bank’s Doing Business index improved from 141 in 2018 to 123 in 2019, spurred by improvements in the ease of paying taxes and access to credit information.

The government made progress in operationalizing the new Commercial Court, prioritizing the resolution of business disputes. Although companies continue to report problems with corruption and opacity, Senegal compares favorably with many countries in the region in corruption indicators. The Millennium Challenge Corporation (MCC) compact, signed in December 2018 and currently in pre-implementation prior to entry-into-force in 2021, aims to decrease energy costs by modernizing the power sector, increasing access to electricity in rural Senegal, strengthening the electrical transmission network in Dakar, and improving governance of the power sector.

Despite these improvements, business climate challenges remain. Because the informal sector dominates Senegal’s economy, legitimate companies bear a heavy tax burden, although Senegal is making progress in broadening the tax base.  Some U.S. companies complain about delays and uncertainty in the project development process.

A U.S.-Senegal Bilateral Investment Treaty has been in effect since 1990. According to UNCTAD data, Senegal’s stock of foreign direct investment (FDI) increased from $3.4 billion in 2015 to $6.4 billion in 2019. France is historically Senegal’s largest source of foreign direct investment, but the government wants more diversity in its sources of investment. U.S. investment in Senegal has expanded since 2014, including investments in power generation, industry, and the offshore oil and gas sector. Although the IMF reports (see table below) U.S. FDI stock in Senegal was approximately $91 million in 2018 (up from $25 million reported in 2017), anecdotal information suggests the amount is significantly more. China has also become a significant foreign investment partner. Other important investment partners include the United Kingdom, Mauritius, Indonesia, Morocco, Turkey, and the Gulf States. In addition to the developing petroleum industry, other sectors that have attracted substantial investment are agribusiness, mining, tourism, manufacturing, and fisheries.

Investors may consult the website of Senegal’s investment promotion agency (APIX) at www.investinsenegal.com for information on opportunities, incentives and procedures for foreign investment, including a copy of Senegal’s investment code.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2019 66 of 180 http://www.transparency.org/
research/cpi/overview
World Bank’s Doing Business Report 2020 123 of 190 http://www.doingbusiness.org/en/rankings
Global Innovation Index 2019 96 of 126 https://www.globalinnovationindex.org/
analysis-indicator
U.S. FDI in partner country ($M USD, stock positions) 2018 $91.0 million http://data.imf.org/
?sk=40313609-F037-48C1-84B1-E1F1CE54D6D5&sId=1390030341854
World Bank GNI per capita 2018 $1,410 http://data.worldbank.org/
indicator/NY.GNP.PCAP.CD

Note on Impact of COVID-19

The 2020 COVID-19 epidemic heavily impacted Senegal’s economy. According to June 2020 government estimates, GDP growth for 2020, initially projected to reach 6.8 percent, will fall to 1.1 percent or less. Major oil and gas projects may be delayed at least a year. Although economy-wide employment figures are unreliable, it is clear the slowdown, combined with the GOS’s initial stringent outbreak containment measures, led to significant job losses, primarily in Senegal’s dominant informal sector. A May 2020 survey of 800 Senegalese businesses found that 65 percent had suffered a significant negative impact from COVID-19 and 40 percent had ceased operations. Diaspora remittances, representing 10 percent of GDP, have fallen sharply due to the pandemic’s effects on the world economy.

In the wake of the COVID-19 crisis, the GOS enacted one of the region’s most ambitious fiscal stimulus and social assistance packages. Dubbed “Force COVID-19,” the initiative sought to inject $1.7 billion – about 6 percent of GDP – into the economy. The GOS acknowledged the program will result in an increase in Senegal’s fiscal deficit, which is expected to grow from just above 3 percent (nearing the country’s target under ECOWAS convergence criteria) to more than 6 percent. According to the African Development Bank, Senegal’s public debt will rise from 65 percent to 68 percent of GDP, pushing the limits of the 70 percent threshold established by the Economic Community of West African States (ECOWAS). Nevertheless, in June 2020, the IMF assessed Senegal’s risk of debt distress as “moderate,” and the government continued to access regional credit markets at competitive rates.

Although the government won praise for its aggressive fiscal response, some have expressed concern over its intervention in labor markets, including a decree prohibiting employers from laying off or reducing salaries of workers during the COVID-19 crisis. The government’s efforts to implement the stimulus plan have drawn mixed reviews. While the government successfully increased funding to shore up its health care system, the rollout of social assistance programs was plagued by allegations of inefficiency, insider dealing, and corruption. Long delays plagued the implementation of programs to assist businesses and preserve employment, with many firms reporting they had still not received promised grants and loans months after the program launch. As of July 2020, the outbreak was still progressing in Senegal, with cases, deaths, and positivity rates still rising. Long-term effects of COVID-19 on Senegal’s economy and investment environment will depend on how long the outbreak lasts and how deeply the regional and world economies are affected.

3. Legal Regime

Transparency of the Regulatory System

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

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

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

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

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

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

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

International Regulatory Considerations

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

Legal System and Judicial Independence

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

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

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

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

Laws and Regulations on Foreign Direct Investment

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

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

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

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

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

Competition and Anti-Trust Laws

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

Expropriation and Compensation

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

Dispute Settlement

ICSID Convention and New York Convention

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

Investor-State Dispute Settlement

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

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

Senegal has no history of extrajudicial action against foreign investors.

International Commercial Arbitration and Foreign Courts

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

Bankruptcy Regulations

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

4. Industrial Policies

Investment Incentives

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

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

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

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

Foreign Trade Zones/Free Ports/Trade Facilitation

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

Performance and Data Localization Requirements

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

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

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

5. Protection of Property Rights

Real Property

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

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

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

Intellectual Property Rights

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

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

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

6. Financial Sector

Capital Markets and Portfolio Investment

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

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

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

Money and Banking System

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

Foreign Exchange and Remittances

Foreign Exchange

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

Remittance Policies

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

Sovereign Wealth Funds

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

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

7. State-Owned Enterprises

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

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

Privatization Program

The government has no program for privatizing the remaining SOEs.

8. Responsible Business Conduct

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

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

9. Corruption

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

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

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

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

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

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

Resources to Report Corruption

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

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

10. Political and Security Environment

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

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

11. Labor Policies and Practices

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

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

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

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

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

12. U.S. International Development Finance Corporation (DFC) and Other Investment Insurance Programs

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

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source USG or international statistical source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) ($M USD) N/A N/A 2019 $23,500 https://www.imf.org/~/media/Files/
Publications/CR/2019/cr1927-Senegal-A4.ashx
 
Foreign Direct Investment Host Country Statistical source USG or international statistical source USG or international Source of data:
BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) N/A N/A 2018 $91 http://data.imf.org/?sk=40313609-F037-48C1-84B1-E1F1CE54D6D5&sId=1390030341854 
Host country’s FDI in the United States ($M USD, stock positions) N/A N/A 2019 $0 https://www.bea.gov/
international/di1fdiop
 
Total inbound stock of FDI as % host GDP N/A N/A 2019 14.4% https://unctad.org/en/Pages/DIAE/
World%20Investment%20Report/
Country-Fact-Sheets.aspx
 

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

Table 3: Sources and Destination of FDI
Direct Investment from/in Counterpart Economy Data
From Top Five Sources/To Top Five Destinations (US Dollars, Millions) in 2018
Inward Direct Investment Outward Direct Investment
Total Inward 4,572 100% Total Outward 755 100%
France #1 1,186 26% Burkina Faso #1 273 36.1%
UK #2 363 8% Seychelles #2 164 21.7%
Mauritania #3 179 4% Cape Verde #3 112 14.8%
Indonesia #4 154 3.4% Malawi #4 67 8.9%
Morocco #5 122 2.7% Cote d’Ivoire #5 54 7.1%

Table 4: Sources of Portfolio Investment
Data not available.

14. Contact for More Information

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

Sierra Leone

Executive Summary

Sierra Leone, with an estimated population of over 7.9 million people (World Population Review), is located on the coast of West Africa between the Republic of Guinea in the north and northeast, the Republic of Liberia in the south and southeast, and the Atlantic Ocean on the west, and a land area of 71,740 square kilometers. Since the civil war ended in 2002, the country has been largely politically stable with significant religious tolerance among its people. Sierra Leone presents opportunities for investment and engagement. The current President, Brigadier Retired Julius Maada Bio, who ruled briefly as head of a military regime in 1996, took office in April 2018. His “New Direction” administration promised a comprehensive reform agenda to revamp the economy and overturn imbalances on the current account, currency depreciation, high inflationary pressure, untenable debt distress and high unemployment.

The 2014-15 Ebola outbreak and global slump in commodity prices severely impacted Sierra Leone’s economy. As the country continued to seek significant budget support from foreign donors, the International Monetary Fund (IMF) in June 2017 approved a three-year Extended Credit Facility (ECF) to help address macroeconomic weaknesses including low revenue, elevated inflation, high public debt and inadequate foreign exchange reserves.  However, the ECF was suspended in December 2017, as development partners withheld budgetary support in advance of the 2018 national elections.  In November 2018, The IMF approved a 43-month ECF totaling approximately USD 172.1 million.

President Bio’s administration launched the medium-term National Development Plan 2019–2023, with four goals aligned with global and regional agendas and investments in education, governance and infrastructure. The plan, focused on human capital development and supported by economic diversification and competitiveness in agriculture, fisheries, and tourism, seeks to facilitate Sierra Leone’s transition to a stable and prosperous democracy. According to the government, this initial five years is part of a 20-year long-term national development commitment aimed at achieving middle-income status by 2039.

The investment climate in Sierra Leone presents challenges. In 2020, the World Bank ranked Sierra Leone 163 among 190 countries for the ease of doing business, a drop from 140 in 2015. The World Bank highlighted challenges in access to credit, resolving insolvency, access to electricity, and construction permits but noted improved performance in payment of taxes and cross-border trade, with significantly improved performance in starting a business. The current administration is publicly tackling corruption: for the first time in five years, the country progressed 10 places up in the global Transparency International Corruption ranking, from 129 out of 180 in 2018 to 119 out of 180 in 2019.  Sierra Leone passed the Millennium Challenge Corporation’s (MCC) Control of Corruption indicator in 2018 and 2019, after failing in 2017.

Sierra Leone, endowed with substantial natural resources, has long relied on its mineral industry, dominated by numerous miners of iron ore, diamonds, rutile and bauxite. Minerals account for more than 80 percent of exports and contribute 2.7 percent of the GDP. President Bio’s government has reviewed mining contracts signed during the previous administration, and is considering changes aimed to derive more public revenue from natural resources, a promise he made during his campaign. The government canceled the mining licenses of two major iron ore companies—one Chinese-owned   and oneU.S.-owned —reportedly over payment irregularities; the dispute involving a U.S. company remains before an international tribunal. Meanwhile, in 2020, local police arrested five and detained one expatriate staff of the U.S. company; though police later released most of them on bail, charges have yet to be filed. There are also reports of commercial disputes with other foreign investors within the mining, finance, security, and energy sectors. In some cases the government has failed to abide by international arbitral rulings. Investments outside of the capital city, Freetown, require special attention to local dynamics and community needs, particularly due to the influence and significant authority of traditional leaders, such as village elders and the Paramount Chiefs.

Sierra Leone benefits from duty-free access to the Mano River Union market, and the African Continental Free Trade Agreement, the European Union’s Everything But Arms initiative, and the United States’ African Growth and Opportunity Act (AGOA). Achieving sustained economic growth will depend on Sierra Leone’s ability to diversify its economy, promote sectors including agriculture, tourism, and fisheries, and manage the country’s natural resources responsibly.

Table 1
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2019 119 of 180 http://www.transparency.org/
research/cpi/overview
World Bank’s Doing Business Report 2020 163 of 190 http://www.doingbusiness.org/en/rankings
Global Innovation Index 2019 Not rated of 129 https://www.globalinnovationindex.org/
analysis-indicator
U.S. FDI in partner country ($M USD, stock positions) 2018 13 Million USD https://ustr.gov/countries-regions/
africa/sierra-leone
World Bank GNI per capita 2018 490 USD http://data.worldbank.org/
indicator/NY.GNP.PCAP.CD

2. Bilateral Investment Agreements and Taxation Treaties

Sierra Leone has bilateral investment treaties with Germany, in force since 1966, the United Kingdom, revised in 2001, and with China, signed in 2001, though the agreement has not yet entered into force. As a member of the Economic Community of West African States (ECOWAS), Sierra Leone also benefits from the Trade and Investment Framework Agreement signed in 2014 with the United States. Sierra Leone does not have a bilateral taxation treaty with the United States.

3. Legal Regime

Transparency of the Regulatory System

Sierra Leone’s regulatory system is not fully consistent with international norms. The Government of Sierra Leone develops laws and regulations at the national level, but the public and business community have few opportunities to provide input into proposed laws and regulations. The Constitution requires publication of proposed laws and regulations in a government journal, the Gazette, for a period of 21 days. However, stakeholders report that they often do not receive notice of relevant regulatory changes, and proposed regulations may automatically take effect unless overturned by Parliament. The Sierra Leone Chamber of Commerce, Industry and Agriculture represents the business community, but the private sector and civil society have limited roles in pushing for regulatory changes.

In recent years, Sierra Leone has taken various steps to promote and improve regulatory transparency. The Right to Access Information Act 2013 makes government records and information available to the public.  However, since its establishment in 2014, the Right to Access Information Commission has been largely ineffective due to funding constraints. In 2018, the Bio administration appointed a new head of Commission in an effort to improve its services, while the World Bank launched the Proactive Disclosure Scheme for information to be released before it is requested.

Sierra Leone joined the Open Government Partnership (OGP) in 2014. Over the last decade, the Office of the Auditor General produced comprehensive and credible annual audits. Although the audits identified numerous serious deficiencies and challenges, most of the Auditor General’s recommendations have remained unimplemented by the responsible MDAs. Parliament has not penalized MDAs for failure to implement the audit recommendations. Sierra Leone joined the Extractive Industries Transparency Initiative (EITI) in 2008, became EITI compliant in 2014, and having made meaningful progress in implementing the 2016 EITI Standards, is to review the legal framework and prepare recommendations for Beneficial Ownership Disclosure reform.  The enactment of the Public Financial Management Act in 2016 reformed the budget process and improved transparency in the expenditure of public funds, and the Fiscal Management and Control Act of 2017 directed government MDAs to transfer revenues and all other monies they receive into the Consolidated Revenue Fund. One of the first executive orders of President Bio in April 2018 was to order all MDAs to transfer their residual funds into the Treasury Single Account (TSA), a key IMF condition to improve governmental budgetary oversight and controls.

International Regulatory Considerations

Sierra Leone joined the General Agreement of Tariff and Trade (GATT) in May 1961 and the World Trade Organization (WTO) in July 1995. Sierra Leone has never been a party to a dispute case before the WTO, and it has not notified the WTO of any measures that are inconsistent with the WTO’s Trade Related Investment Measures (TRIMs) obligations. As a member of the World

Customs Organization (WCO) since November 1975, Sierra Leone acceded to the International Convention on the Simplification and Harmonization of Customs Procedures in June 2015. Otherwise referred to the Revised Kyoto Convention, Sierra Leone successfully completed the WCO Time Release Study in support of the country’s commitments to the WTO Agreement on Trade Facilitation in 2016, and finally notified the WTO of acceptance of the WTO amendment of the Agreement on Trade facilitation in May 2017.

Legal System and Judicial Independence

The legal system is derived from the English common law system, but outside of the capital, Freetown, local courts apply customary law to many disputes. The courts provide a venue to enforce property and contract rights. The country does not have a consolidated written commercial or contractual law, and numerous, disparate pieces of legislation sometimes lead to uneven treatment of commercial disputes.

The Superior Court of Judicature consists of the Supreme Court, the Court of Appeal, and the High Court. Commercial disputes brought before the High Court are generally heard by the Commercial and Admiralty Division. In 2010, Sierra Leone created a Fast Track Commercial Court with the aim of reducing the duration of commercial cases from two-three years to about six months. To date, the court has had minimal effectiveness due to resource limitations. In 2017, Sierra Leone hosted a commercial law summit to address gaps in the justice system, resulting in concrete recommendations in key areas, including arbitration, anti-corruption and bribery, public-private partnerships, and reform of the court process. There is now a draft Arbitration Bill which when passed into law will bring arbitration proceedings in Sierra Leone up to international standards. Though it is generally purported to be independent, there are indications the executive wields influence over the judiciary. Although foreign investors have equal access to the judicial system, in practice the system is slow and often subject to financial and political influences.

Laws and Regulations on Foreign Direct Investment

Sierra Leonean law generally ensures that foreign investors may compete on the same terms as domestic firms. The Investment Promotion Act 2004 protects foreign entities from discriminatory treatment. The law creates incentives, customs exemptions, provides for investors to freely repatriate proceeds and remittances, and protects against expropriation without prompt and adequate compensation. The law establishes a dispute settlement framework that allows investors to submit disputes to arbitration in accordance with the rules of procedure of the UN Commission on International Trade Laws (UNCITRAL). Export licenses are required only for certain goods and materials. While the export of gold and diamonds must comply with internationally accepted standards such as Kimberley Process certification, the permits required to export goods such as cocoa and coffee are issued automatically, and legally, at no cost.

Foreign companies may own or invest in Sierra Leonean entities, with limited exceptions. Small mining investments require a minority partnership with a Sierra Leonean company. The Sierra Leone National Carrier Ratification Agreement of 2012, and amended in 2014, provides preferential treatment in shipping to the Sierra Leone National Shipping Company. The Petroleum Exploration and Production Act 2001 restricts licenses for petroleum exploration and production to companies registered or incorporated in Sierra Leone. The Government of Sierra Leone has also identified certain restrictions on foreign investment in its Schedule of Specific Commitments to the General Agreement on Trade in Services, from August 1995, which established limited restrictions on business services, financial services, and the maritime and airport sectors. Businesses providing such services must establish local partnerships or joint ventures. The Local Content Policy, adopted in 2012, promotes the utilization of locally produced goods and locally provided services, and the employment of Sierra Leonean nationals. While failure to follow the policy previously resulted only in a denial of investment incentives, the Sierra Leone Local Content Agency Act 2016 requires compliance. More information is available below in the “Performance and Data Localization Requirements” section.

Sierra Leonean authorities do not screen, review, or approve foreign direct investments. Companies must register to do business in Sierra Leone, and there are no reports that the registration process has block investments or discriminate against investors. In the case of investment guarantees, the government established certain procedures with the U.S. government in agreements signed on December 28, 1962 and November 13, 1963, whereby Sierra Leone authorities grant approval for external investment guarantees in Sierra Leone. Additional information about the laws and regulations applicable to foreign investments is available on the website of SLIEPA at http://sliepa.org/ .

Competition and Anti-Trust Laws

Sierra Leone does not have a competition law. The European Union (EU) and the United Nations Conference on Trade and Development (UNCTAD) have supported the Ministry of Trade and Industry’s attempt to develop a competition policy, but the parliament has not yet adopted the relevant legislation.

Expropriation and Compensation

There is currently no history of expropriation in Sierra Leone, though the government has threatened such action against a foreign investor following a dispute under arbitration in an international tribunal. The Constitution authorizes the government to expropriate property only when it is necessary in the interests of national defense, public safety, order, morality, town and country planning, or the public benefit or welfare. In such cases, the Constitution guarantees the prompt payment of adequate compensation, with a right of access to a court or another independent authority to consider legality, determine the amount of compensation, and ensure prompt payment.

Dispute Settlement

ICSID and New York Convention

Sierra Leone has been a party to the International Convention on the Settlement of Investment Dispute (ICSID) since 1966, but not a party to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention). Sierra Leone was not an independent state but a colony of the Britain when the convention was negotiated and adopted in June 1958. Though Parliament in November 2018 approved a motion authorizing Sierra Leone as a state to accede to the convention, Sierra Leone is yet to domesticate the provisions of the New York Convention in its legal system. Section 13 of the Arbitration Act 1960 allows foreign arbitral awards to be registered in Sierra Leonean courts and enforced in the same manner as a domestic judgment or court order. However, registration of foreign arbitral awards is not automatic but instead left to the discretion of the presiding judge.

Investor-State Dispute Settlement

Investment disputes in Sierra Leone can take a long time to resolve, given heavily centralized decision-making, the slow pace of bureaucracy, and substantial court backlogs. In 2016, the Embassy received multiple reports of cases where U.S. companies experienced challenges in asserting their investment interests. One company reported that the previous government denied regulatory approval for the firm’s acquisition of a Sierra Leonean entity in part because preference should be given to Sierra Leonean buyers. However, in 2018, the new administration overturned the decision and granted regulatory approval for the U.S. company to take over.  The recent cancellation of two iron ore mining company licenses over disputed royalty payments and non-compliance with mining laws has resulted in referral of the government to international arbitration.

International Commercial Arbitration and Foreign Courts

The Arbitration Act 1960 allows investors to arbitrate disputes, but the procedures set forth in the law are outdated and not in compliance with international standards. The country does not have a central arbitral institution, and instead arbitration is conducted on an ad hoc basis, including through pre-trial settlement conferences and alternative dispute resolution mechanisms before the Commercial and Admiralty Division of the High Court. The Investment Promotion Act 2004 allows investment disputes to be referred to arbitration in accordance with UNCITRAL procedures or the framework of any applicable bilateral or multilateral investment agreement. Judgments of foreign courts can be enforced under the Foreign Judgments (Reciprocal Enforcement) Act 1960, provided the country has a bilateral or reciprocal enforcement treaty with Sierra Leone. The Public Private Partnership Act, 2014 also provides for international arbitration in Sierra Leone.

Bankruptcy Regulations 

The Bankruptcy Act 2009 establishes a process of bankruptcy for individuals and companies. Bankruptcy is a civil matter, but it may disqualify an individual from holding certain elected and public offices and from practicing certain professions. The Bankruptcy Act 2009 also encourages and facilitates reorganization as an alternative to liquidation. The World Bank ranked Sierra Leone 162, with a score of 24.7, in the ease of resolving insolvency in 2020. While the country’s regulatory framework for bankruptcy is relatively strong, on average secured creditors receive only 11 cents on the dollar (compared to 20 cents average throughout sub-Saharan Africa) and the proceedings cost approximately 42 percent of the estate’s value.

Following the passing of a Credit Reference Act in 2011, Sierra Leone established a Credit Reference Bureau within the Bank of Sierra Leone, mandating all financial institutions to pass all information regarding loan applications for credit history checks. The credit history checks will detail all outstanding loans, when and where a loan was taken, and the repayment history guiding financial institutions in their loan decision. The Bureau now operates a digital identification system to control credit information and ensure citizens have secure and complete ownership of their personal data and information thereby transforming the financial inclusion landscape.

4. Industrial Policies

Investment Incentives

The Investment Promotion Act 2004 creates various incentives for foreign and domestic investors, and SLIEPA compiles information about the benefits and incentives available in various sectors. In particular, these are investment and employment, research and development, value-added manufacturing and training expenses incentives; incentives provided for businesses engaged in agriculture, airlines, fish farming, infrastructure, liquefied petroleum gas and cookers, mineral and petroleum, petroleum refinery, pharmaceuticals, photovoltaic systems, poultry, tourism; and income tax deductions for disabled persons, women and youth employments and skills development, and social services like schools and hospitals etc. SLIEPA provides details of these investment incentives at http://sliepa.org/investment/why-sierra-leone/investment-incentives/. However, in April 2018, the government suspended all duty and tax waivers to organizations, agencies, companies and contractors except for organizations that fall under the relevant Vienna Convention on Diplomatic Relations, as President Bio called for a complete review of all investment incentives, yet to be published. In May 2019, the National Revenue Authority provided details on tax incentives at  https://www.nra.gov.sl/sites/default/files/Final%20Magazine%20MRP%2029-5-19.pdf.

Foreign Trade Zones/Free Ports/Trade Facilitation

In conjunction with First Step, a subsidiary of U.S.-based development organization World Hope International, the government established a Special Economic Zone (SEZ) in 2011 on 50 acres near Freetown.  According to the Sierra Leone SEZ policy of 2013, businesses operating in this zone  enjoy tax holidays for ten years in the first instance, renewable for another five years at the discretion of the Sierra Leone SEZ Authority. The government further provides these businesses with import duty exemptions and expedited government services including customs, immigration, and registration.

Performance and Data Localization Requirements

The Sierra Leone Local Content Agency Act 2016 promotes foreign investors’ utilization of the domestic private sector. The act applies in the mining, petroleum, manufacturing, agriculture, transportation, maritime, aviation, tourism, public works, fisheries, health and energy sectors.

The local content policy targets several issues:

  • Employment of nationals: Sierra Leoneans should be given “first consideration” for employment and training. The policy establishes a minimum of 50 percent staffing for Sierra Leonean nationals among an enterprise’s managerial and intermediate employees and limits the employment of expatriates as junior employees.
  • Use of local goods and services: Firms should give preference to Sierra Leonean goods when they are of equal or comparable value. Companies must use certain amounts of local materials in key sectors (including 10 percent of domestically produced units in manufacturing, 10 percent of domestically available granite in cement, and specific percentages of locally produced fabric and furniture in tourism). In the event there is inadequate local capacity to meet the law’s target, the Ministry of Trade and Industry may issue a waiver.
  • National preferences in contracts: The policy gives first consideration to Sierra Leonean companies for mining and petroleum awards and licenses, as well as public works contracts. The policy also gives domestic firms a preferential margin in government and private procurements.

The local content policy is enforced by the Local Content Agency. Companies are required to submit local content plans to demonstrate compliance, and violations are subject to fines, the loss of investment incentives, and civil forfeiture. Post is unaware of any Government of Sierra Leone requirement for companies to turnover source code, provide access to surveillance information, or maintain data storage within the country.

5. Protection of Property Rights

Real Property

There are two systems of land tenure in Sierra Leone. The Western Area, the former British colony of Sierra Leone which includes Freetown, operates under a freehold system. Outside the Western Area, in the provincial areas, land is governed under a leasehold system where local communities retain ultimate control. Foreigners cannot own land under either system, but can lease land for terms of up to 99 years. In leasehold areas, local Paramount Chiefs control the land, and may enter joint ventures with investors to develop or use the land in ways that serve the interests of the indigenous and local communities.

The Constitution protects property rights, but the rule of law is fragile and uneven across the country. In the absence of an effectively functioning legal framework, property rights and contracts are not adequately secure. Mortgages and liens are possible but rare, and generally
involve high interest rates and short loan periods. There is no land titling system, and traditional tribal justice systems still serve as a supplement to the national government’s judiciary, especially in rural areas. In 2020, the World Bank Doing Business Report ranked Sierra Leone 169 in the world for ease of registering property, as the process takes approximately 56 days with seven procedures and costs about 11 percent of the property’s value.

The Government of Sierra Leone’s 2019–23 medium term National Development Plan recognizes land ownership rights and obligations are determined is necessary to attract foreign investment. The World Bank has aided in this area, and proposed reforms include a comprehensive land use policy that modernizes the land registry, revises urban planning policies, and ensures that women have equal access.  In 2017, cabinet approved a comprehensive national land policy meant to improve upon and strengthen land laws and administration within the differentiated land tenure systems in the Western Area and the provinces. The policy, which awaits parliamentary action, is intended
to enhance the abilities of institutions to be able to acquire land for responsible investment and promote sustainable socio-economic development.

Currently, the Land Administration system inhibits effective and successful problem resolution, as the National Land Policy is not implemented, many existing laws and regulations are outdated, property unit formation and survey system is manual, land survey technologies are outdated and inaccurate, the number of specialists is insufficient and the existing specialists do not meet the required qualifications, and there is no unified or reliable system for Land data registration and storage. Property management procedures are long, unreliable (many decisions are verbal), expensive and do not guarantee the protection of the rights of the property user and/or owner. The new National Lands Policy of Sierra Leone aspires to gradually formalize land transactions while respecting the customary systems. Mandatory land transaction recording and registration could be an effective step towards the implementation of land related policy.

Intellectual Property Rights

Sierra Leone has been a member of the World Intellectual Property Organization (WIPO) since 1986 and a member of the African Regional Intellectual Property Organization (ARIPO), the common intellectual property body for English-speaking African countries, since 1980. As a member of the WTO, Sierra Leone is bound by the Agreement on Trade-Related Aspects of
Intellectual Property Rights (TRIPS). Sierra Leone has not ratified the WIPO Copyright Treaty or the Berne Convention for the Protection of Literary and Artistic Rights. Despite its recognition of international standards, Sierra Leone’s protection of intellectual property is limited. Because of laws dating back to the colonial era, t patents and trademarks registered in the United Kingdom can be extended to Sierra Leone. Efforts to update the country’s legal framework have thus far included the Copyright Act 2011, the Patents and Industrial Design Act 2012, and the Trademark Act 2014. Nonetheless, legal protections remain outdated and incomplete, and government enforcement is minimal due to resource and capacity limitations. Customs screening for counterfeit goods is weak., The government publishes no known statistics about seizures of counterfeit goods.

For companies who may wish to seek advice from local attorneys who are experts in Sierra Leonean law, go to http://photos.state.gov/libraries/adana/5/Consular/Lawyer_sList-2016.pdf  for
a list of local lawyers.

Sierra Leone is notlisted in the U.S. Trade Representative (USTR) Special 301 Report or the  Notorious Markets List.For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles
at http://www.wipo.int/directory/en/.

6. Financial Sector

Capital Markets and Portfolio Investment

Limited capital market and portfolio investment opportunities exist in Sierra Leone. The country established a stock exchange in 2009 to provide a venue for enterprise formation and a market for the trading of stocks and bonds, but the exchange initially listed only one stock, a state-controlled bank. In early 2017, the exchange had three listings that expressed willingness to trade their shares at the exchange.

Sierra Leone acceded to the IMF Article VIII in January 1996, which removed all restrictions on payments and transfers for current international transactions. The regulatory system does not interfere with the free flow of financial resources. Nonetheless, foreign and domestic businesses alike have difficulty obtaining commercial credit. Foreign interests may access credit under the same market conditions as Sierra Leoneans, but banks loan small amounts at high interest rates. Foreign investors typically bring capital in from outside the country.

Money and Banking System

Sierra Leone’s banking sector consists of 13 commercial banks, 56 foreign exchange bureau, 17 community banks, 15 credit-only microfinance, three deposit-taking microfinance, two discount houses, a mortgage finance company, a leasing company, 59 financial service associations, an Apex bank, three mobile financial services providers, and a stock exchange. More than 100 bank branches exist throughout the country, with activity concentrated in Freetown. The banking system currently has seven correspondent banks. The commercial banking sector is characterized by poor performance and has significant financial vulnerability. While the country’s banks are profitable, the government restructured two state-owned banks impacted by non-performing loans.

Foreign individuals and companies are permitted to establish bank accounts. The usage of mobile money is taking a central place in money transfers. Other electronic payments and ATM usage are available in urban areas but limited in rural settings, while the Bank of Sierra Leone is set to roll out a “national payment switch” to facilitate connectivity among different banks’ electronic systems. Telecommunications companies are upgrading to specifically enhance mobile money services and ecommerce.

As part of structural reforms in the banking sector under the ECF, the Bank of Sierra Leone pledged to establish a special resolution framework for troubled financial institutions, establish a deposit insurance system, strengthen its capacity to supervise and oversee the non-bank financial institution sector, and facilitate the adoption of International Financial Reporting Standards (IFRS) both internally and across the financial sector.

Inadequate supervisory oversight of financial institutions, weak regulations, and corruption have made Sierra Leone vulnerable to money laundering. While the country’s anti-money laundering (AML) controls remain underdeveloped and underfunded, the Financial Intelligence Unit (FIU) completed a national risk assessment in 2017 and is currently working with the Economic Crime Team of the Office of Technical Assistance, U.S. Department of the Treasury to enhance its capacity with a series of technical visits in 2018 and 2019, and others scheduled for 2020 with the FIU. The GIABA (a French acronym for Groupe Intergouvernemental d’Action contre la Blanchiment d’Argent en Afriqe de l’Ouest, which in English is, ‘The Inter-Government Action against Money Laundering in West Africa’) and the EU also funded a workshop on designated non-financial business and professions on Anti-Money Laundering and Combating Financing Terrorism (AML/CFT) preventive measures.

There is no history of hostile takeovers in Sierra Leone.

Foreign Exchange and Remittances

Sierra Leone has a floating exchange rate regime and the currency, the Leone, has depreciated slowly over the years mainly due to the increasing demand to finance current consumption and a decreasing inflow of foreign currency resulting from decreased exports and remittances.

Foreign Exchange

In August 2019, the government mandated the exclusive use of the Leones for all contracts and payments in Sierra Leone. The directive also prohibited individuals, business entities and organizations from holding more than USD 10,000 or its equivalent in any foreign currencies. Traveling individuals or organizations must declare foreign currencies of more than USD 10,000 or its equivalent. Any contravention of these directives is punishable by law as stipulated in the Bank of Sierra Leone Act of 2019.

The Investment Promotion Act 2004 guarantees foreign investors and expatriate employees the right to repatriate earnings and the proceeds of the sale of assets. There are no restrictions placed on converting or transferring funds associated with investments, including remittances, earnings, loan repayments, or lease payments for as long as these transactions are done through the banking system.

With the approval of the Bank of Sierra Leone, investors can withdraw any amount from commercial banks and transfer the funds into any freely convertible currency at market rates. Availability of foreign currencies is often limited in practice, and foreign-controlled businesses outside of Freetown have reported challenges in dealing with local banks. The exchange rate is market determined, as the national currency fluctuates based on the forces of demand and supply in the market. Nonetheless, the Bank of Sierra Leone sometimes conducts weekly foreign exchange auctions of U.S. dollars. Only commercial banks registered in Sierra Leone may participate. Sierra Leone is a party to the ECOWAS Common Currency, the ECO, and efforts to introduce this common currency is now being given serious consideration, though it has repeatedly been delayed.

Remittance Policies

The law provides that investors may freely repatriate proceeds and remittances. The Embassy is not aware of any recent complaints from investors regarding the remittance of investment returns, or of any planned policy changes on this issue.

Sovereign Wealth Funds

Sierra Leone does not maintain a sovereign wealth fund.

7. State-Owned Enterprises

Sierra Leone has more than 20 state-owned enterprises (SOEs). These entities are active in the utilities, transport and financial sectors. There is no official or comprehensive government-maintained list of SOEs. However, notable examples include the Guma Valley Water Company, the Sierra Leone Telecommunication Company (Sierratel), the Electricity Distribution and Supply Authority (EDSA), the Electricity Generation and Transmission Company (EGTC), the Sierra Leone Broadcasting Corporation, Rokel Commercial Bank, the Sierra Leone Commercial Bank, the Sierra Leone Housing Corporation, and the Sierra Leone Produce Marketing Company.

Sierra Leone is not a party to the Government Procurement Agreement within the WTO Framework. SOEs may engage in commerce with the private sector, but they do not compete on the same terms as private enterprises, and they often have access to government subsidies and other benefits. SOEs in Sierra Leone do not play a significant role in funding or sponsoring research and development.

Privatization

 

The National Commission for Privatization was established in 2002 to facilitate the privatization of various SOEs. With support from the World Bank, the commission has focused on privatization of the country’s port operations, and currently seeks investments in public private partnerships (PPPs) for port security, telecommunications, and other infrastructure projects. Privatization processes are open to foreign investors, and could be integrated into plans for better capitalizing the stock exchange in Freetown via new equity listings.

8. Responsible Business Conduct

The government encourages companies to engage in responsible business conduct, and the SLIEPA seeks investors who will undertake corporate social responsibility (CSR) projects. Sierra Leone does not have a set of standards or policies for CSR, but the law provides various incentives. For example, the Finance Act 2011 created a tax deduction for expenditures on social services that are outside the scope of the investment, such as the construction of schools and hospitals for community use. Community leaders generally expect businesses operating in areas outside of Freetown and the Western Area, where local Paramount Chiefs control the land, to engage in projects to support the communities’ social and economic well-being, human capital development, and physical infrastructure. Throughout the country, there is limited awareness of the impacts that corporate activities might have on human rights and environmental protection.

9. Corruption

Corruption poses a major challenge in Sierra Leone. The country ranked 119 out of 198 countries with a score of 33/100 on Transparency International’s 2019 Corruption Perceptions Index. Corruption is endemic in government procurement, the award of licenses and concessions, regulatory enforcement, customs clearance, and dispute resolution. Sierra Leone signed the UN Convention against Corruption in 2003 and ratified it in 2004. The country is not a party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. The Anti-Corruption Commission (ACC), established in 2000, has the authority to investigate and prosecute acts of corruption by individuals and companies. The Anti-Corruption Act of 2008 makes it criminal to offer, solicit, or receive a bribe, and this law applies to all appointed and elected officials, close family members, and all companies whether foreign or domestic. The Commission launched a “Pay No Bribe” campaign in 2016, which encouraged citizens to report corruption in the public sector.

President Bio established a 12-member Governance Transition Team (GTT) to conduct an immediate stocktaking of government MDAs in April 2018. The report documented a high level of fiscal indiscipline and alleged extensive corruption by the former government of President Ernest Koroma. The report recommended a commission of inquiry of all MDAs to establish how the former government utilized public assets and funds, and for the supreme audit authority to carry out forensic audits of specific sectors. These sectors included agencies relating to energy, telecommunications, the National Social Security and Insurance Trust (NASSIT), and roads.

The Anti-Corruption Amendment Act of 2019 increased the powers of the ACC in the fight against graft, increased penalties for offences under the Act and strengthened the witness protection regime. Since then the ACC has steadily pursued arrests, repayments, and convictions in both the private and public sectors. As of April 2020, the ACC had recovered millions of dollars in misappropriated funds, and prosecuted corruption cases leading to convictions of present and former public officials and private citizens. The Chief Justice established a Special Court to adjudicate corruption cases while the ACC has signed several information sharing agreements with key government institutions, including the Audit Service Sierra Leone and the FIU.

MCC approved a USD 44 million four-year threshold program for Sierra Leone signed in November 2015. The country passed the “Control of Corruption” indicator on MCC’s annual scorecards in 2019 and 2018, after failing in 2017.

Resources to Report Corruption:

Francis Ben Kelfala, Commissioner
Anti-Corruption Commission
Cathedral House
3 Gloucester Street, Freetown
+232 76 394 111, +232 77 985 985
report@anticorruption.gov.sl
http://anticorruption.gov.sl/report_corruption.php 

Lavina Banduah
Executive Director
Transparency International Sierra Leone
20 Dundas Street, Freetown
+232 79 060 985, +232 76 618 348
lbanduah@tisierraleone.org & tisl@tisierraleone.org
http://www.tisierraleone.org/ 

10. Political and Security Environment

Sierra Leone is a constitutional republic with a directly elected president and a unicameral legislature.  In March 2018, the opposition Sierra Leone People’s Party (SLPP) presidential candidate, Julius Maada Bio, won the presidential elections. The Sierra Leone Police (SLP), which reports to the Ministry of Internal Affairs, is responsible for law enforcement and maintaining security within the country, but it is poorly equipped and lacked sufficient investigative and forensic capabilities.  The Republic of Sierra Leone Armed Forces (RSLAF) is responsible for external security but also has some domestic security responsibilities to assist police upon request in extraordinary circumstances. The RSLAF reports to the Ministry of Defense and the Office of National Security. Civilian authorities maintained effective control over the security forces.

There is tension between social, political, and cultural institutions over power and resources. Policies and positions are sometimes sought for the purposes of control over public finances. Sierra Leone’s relations with the neighboring countries of Guinea and Liberia are peaceful. There have been isolated incidents of politically motivated violence during and after the 2018 national and local elections.

11. Labor Policies and Practices

Sierra Leone’s labor force is informal, unregulated, and lacking in specialized skills. Approximately 90 percent of laborers work in the informal sector, predominantly in subsistence or other small-scale agriculture. Sierra Leone’s labor force was devastated by the country’s civil war of 1991-2002, and the formal employment sector has yet to recover to pre-war levels. The war led to significant migration out of the country and destroyed the nation’s education system. In a country where educational institutions once earned the moniker “the Athens of Africa,” adult literacy is estimated at 48.1 percent (2015 est.), and businesses identify significant shortfalls in skilled professionals due to limited vocational training. While the government is developing Technical and Vocational Education and Training (TVET) programs, foreign investors find it difficult to recruit and train sufficient numbers of laborers. Youth unemployment is persistently high and will continue to grow due to high birth rates and changing demography.

The national minimum wage was reviewed upward by the Minister of Finance in November 2019 from Le500,000 to Le600,000 Leones (approximately USD 60) per month, and applies to all workers, including in the informal sector. The law requires paid leave and overtime wages, but enforcement is ineffective and there is no prohibition on excessive compulsory overtime. Employers can dismiss workers with limited notice and severance. Foreign employees must obtain work permits from the Ministry of Labor and Social Security, and most countries’ nationals must have visas. Additional information is available from the Embassy of Sierra Leone in the United States and at http://travel.state.gov. Government policies regarding the hiring of Sierra Leonean nationals are described above in the “Performance and Data Localization Requirements” section.

The law allows workers to join independent unions of their choice without prior authorization, to conduct legal strikes, and to bargain collectively. The Ministry of Labor and Social Security estimates that approximately 35-40 percent of workers in the formal economy are unionized, including agricultural workers, mineworkers, and health workers. The law allows unions to conduct their activities without interference, and the government generally respects this right. However, in some private industries, employers have reportedly intimidated workers to prevent them from joining a union, and there is no legal protection against employers’ discriminating against union members. Unions have the right to strike, although the government can require 21-day prior notice. Collective bargaining is widespread in the formal sector and most enterprises are covered by collective bargaining agreements on wages and working conditions.

Labor issues are governed by the Employers and Employees Act 1960, the Regulation of Wages and Industrial Relations Act 1971, and regulations adopted by the Ministry of Labor and the Ministry of Health and Sanitation. Legal requirements are outdated and poorly enforced. In particular, child labor remains a widespread problem. The law limits child labor, allowing light work at age 13, full-time nonhazardous work at age 15, and all work at age 18. The law against child labor is not effectively enforced. The Ministry of Labor and Social Security attributes the ineffective enforcement to a lack of funding and the inherent difficulties of monitoring child labor in the informal sector. In addition, the International Labor Organization has identified discrepancies between provisions in the Child Rights Act 2007 and provisions of the Employers and Employer Act 1960.

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical Source USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) (M USD) N/A N/A 2018 $4.085 Billion https://data.worldbank.org/
country/sierra-leone?view=chart
 
or https://www.theglobaleconomy.com/
Sierra-Leone/
 
Foreign Direct Investment Host Country Statistical Source USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country (M USD, stock positions) N/A N/A 2018 $13 Million https://ustr.gov/countries-regions/africa/west-africa/sierra-leone 
Host country’s FDI in the United States (M USD, stock positions) N/A N/A 2018 N/A https://ustr.gov/countries-regions/africa/west-africa/sierra-leone   
Total inbound stock of FDI as % host GDP N/A N/A 2017 14.83% https://www.theglobaleconomy.com/
Sierra-Leone/
 
Table 3: Sources and Destination of FDI
IMF Coordinated Portfolio Investment Survey data are not available for Sierra Leone.
Table 4: Sources of Portfolio Investment
IMF Coordinated Portfolio Investment Survey data are not available for Sierra Leone.

14. Contact for More Information

Economic and Commercial Section
U.S. Mission Sierra Leone
Southridge, Hill Station
Freetown, Sierra Leone
+232 99 105 500
freetown-econ@state.gov