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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

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

The Algerian economy is both challenging and potentially highly rewarding.  While the Algerian government publicly welcomes FDI, a difficult business climate, an inconsistent regulatory environment, and sometimes contradictory government policies complicate foreign investment.  There are business opportunities in nearly every sector, including energy, power, water, healthcare, telecommunications, transportation, recycling, agribusiness, and consumer goods.

Algeria’s urgency to diversify its economy away from reliance on hydrocarbons has increased amid low and fluctuating oil prices since mid-2014.  The government has sought to reduce the country’s trade deficit through import substitution policies and import tariffs.  Despite higher oil prices in 2018 that reduced the trade deficit, Algeria’s decreasing hydrocarbons exports have kept government rhetoric focused diversification.  On January 29, 2019, the government implemented tariffs between 30-200 percent on over one-thousand goods it assessed were destined for direct sale to consumers.  Companies that set up local manufacturing operations can receive permission to import materials the government would not otherwise approve for import if the importer can show materials will be used in local production.  Certain regulations explicitly favor local firms at the expense of foreign competitors, most prominently in the pharmaceutical sector, where an import ban the government implemented in 2009 remains in place on more than 360 medicines and medical devices.  Frequent, unpredictable changes to business regulations have added to the uncertainty in the market.

Algeria  eliminated state enterprises’  “right of first refusal” on most transfers of foreign holdings to foreign shareholders, with the exception of identified “strategic” sectors..

There are two main agencies responsible for attracting foreign investment, the National Agency of Investment Development (ANDI) and the National Agency for the Valorization of Hydrocarbons (ALNAFT).

ANDI is the primary Algerian government agency tasked with recruiting and retaining foreign investment.  ANDI runs branches in each of Algeria’s 48 governorates (“wilayas”) which are tasked with facilitating business registration, tax payments, and other administrative procedures for both domestic and foreign investors.  U.S. companies report that the agency is understaffed and ineffective.  Its “one-stop shops” only operate out of physical offices and do not maintain dialogue with investors after they have initiated an investment.  The agency’s effectiveness is undercut by its lack of decision-making authority, particularly for industrial projects, which is exercised by the Ministry of Industry and Mines, the Minister of Industry and Mines himself, and in many cases the Prime Minister.

ALNAFT is charged with attracting foreign investment to Algeria’s upstream oil and gas sector.  In addition to organizing events marketing upstream opportunities to potential investors, the agency maintains a paid-access digital database with extensive technical information about Algeria’s hydrocarbons resources.

Limits on Foreign Control and Right to Private Ownership and Establishment

Establishing a presence in Algeria can take any of three basic forms:  1) a liaison office with no local partner requirement and no authority to perform commercial operations, 2) a branch office to execute a specific contract, with no obligation to have a local partner, allowing the parent company to conduct commercial activity (considered a resident Algerian entity without full legal authority), or 3) a local company with 51 percent of capital held by a local company or shareholders.  A business can be incorporated as a joint stock company (JSC), a limited liability company (LLC), a limited partnership (LP), a limited partnership with shares (LPS), or an undeclared partnership.  Groups and consortia are also used by foreign companies when partnering with other foreign companies or with local firms.

Foreign and domestic private entities have the right to establish and own business enterprises and engage in all forms of remunerative activity.  However, the 51/49 rule requires majority Algerian ownership in all projects involving foreign investments.  The rule was removed from the 2016 investment law, but remains in force by virtue of its inclusion in the 2016 annual finance law, which requires foreign investment activities be subject to the incorporation of an Algerian company in which at least 51 percent of capital stock is held by resident national shareholders.

On December 30, 2019, the Algerian government’s Official Journal published its 2020 finance law, which limited the 51/49 rule to “strategic sectors,” identified as hydrocarbons, mining, defense, and pharmaceuticals.

The 51/49 investment rule poses challenges for various types of investors.  For example, the requirement hampers market access for foreign small and medium-sized enterprises (SMEs), as they often do not have the human resources or financial capital to navigate complex legal and regulatory requirements.  Large companies can find creative ways to work within the law, sometimes with the cooperation of local authorities who are more flexible with large investments that promise of significant job creation and technology and equipment transfers.  SMEs usually do not receive this same consideration.  There are also allegations that Algerian partners sometimes refuse to invest the required funds in the company’s business, require non-contract funds to win contracts, and send unqualified workers to job sites.  Manufacturers are also concerned about intellectual property rights (IPR), as foreign companies do not want to surrender control of their designs and patents.  Several U.S. companies have reported they have policies that preclude them from investing overseas without maintaining a majority share, out of concerns for both IPR and financial control of the local venture, which thus prevent them from establishing businesses in Algeria.

Algerian government officials defended the 51/49 requirement as necessary to prevent capital flight, protect Algerian businesses, and provide foreign businesses with local expertise.  For sectors where the requirement will remain, officials contend a range of tailored measures can mitigate the effect of the 51/49 rule and allow the minority foreign shareholder to exercise other means of control.  Some foreign investors use multiple local partners in the same venture, effectively reducing ownership of each individual local partner to enable the foreign partner to own the largest share.

The Algerian government does not officially screen FDI, though Algerian state enterprises have a “right of first refusal” on transfers of foreign holdings to foreign shareholders in identified strategic industries.  Companies must notify the Council for State Participation (CPE) of these transfers.  In addition, initial foreign investments remain subject to approvals from a host of ministries that cover the proposed project, most often the Ministries of Commerce, Health, Energy, Telecommunications and Post, and Industry and Mines.  U.S. companies have reported that certain high-profile industrial proposals, such as for automotive assembly, are subject to informal approval by the Prime Minister.  In 2017, the government instituted an Investments Review Council chaired by the Prime Minister for the purpose of “following up” on investments; in practice, the establishment of the council means FDI proposals are subject to additional government scrutiny.  According to the 2016 Investment Law, projects registered through the ANDI deemed to have special interest for the national economy or high employment generating potential may be eligible for extensive investment advantages.  For any project over 5 billion dinars (approximately USD 44 million) to benefit from these advantages, it must be approved by the Prime Minister-chaired National Investments Council (CNI).  The CNI meets regularly, though it is not clear how the agenda of projects considered at each meeting is determined.  Critics allege the CNI is non-transparent mechanism which could be subject to capture by vested interests.

Other Investment Policy Reviews

Algeria has not conducted an investment policy review through the Organization for Economic Cooperation and Development (OECD) or the World Trade Organization (WTO).  The last investment policy review by a third party was conducted by the United Nations Conference on Trade and Development (UNCTAD) in 2003 and published in 2004.

Business Facilitation

Algeria’s online information portal dedicated to business creation www.jecreemonentreprise.dz and the business registration website www.cnrc.org.dz are under maintenance and have been so for more than a year.  The websites provide information about several business registration steps applicable for registering certain kinds of businesses.  Entrepreneurs report that additional information about requirements or regulation updates for business registration are available only in person at the various offices involved in the creation and registration process.

In the World Bank’s 2020 Doing Business report, Algeria’s ranking for starting a business was unchanged at 157 out of 190 countries (http://www.doingbusiness.org/en/data/exploreeconomies/algeria).  This year’s improvements were modest and concerned only a third of the ten indicator categories.  The World Bank report lists 12 procedures that cumulatively take an average of 18 days to complete to register a new business.  New business owners seeking to establish their enterprises have sometimes reported the process takes longer, noting that the most updated version of regulations and required forms are only available in person at multiple offices, therefore requiring multiple visits.

Outward Investment

Algeria does not restrict domestic investors from investing overseas, provided they can access foreign currency for such investments.  The exchange of Algerian dinars outside of Algerian territory is illegal, as is the carrying abroad of more than 3,000 dinars in cash at a time (approximately USD 26; see section 7 for more details on currency exchange restrictions).

Algeria’s National Agency to Promote External Trade (ALGEX), housed in the Ministry of Commerce, is the agency responsible for supporting Algerian businesses outside the hydrocarbons sector that want to export abroad.  ALGEX controls a special promotion fund to promote exports but the funds can only be accessed for limited purposes.  For example, funds might be provided to pay for construction of a booth at a trade fair, but travel costs associated with getting to the fair – which can be expensive for overseas shows – would not be covered.  The Algerian Company of Insurance and Guarantees to Exporters (CAGEX), also housed under the Ministry of Commerce, provides insurance to exporters.  In 2003, Algeria established a National Consultative Council for Promotion of Exports (CCNCPE) that is supposed to meet annually.  Algerian exporters claim difficulties working with ALGEX including long delays in obtaining support funds, and the lack of ALGEX offices overseas despite a 2003 law for their creation.  The Bank of Algeria’s 2002 Money and Credit law allows Algerians to request the conversion of dinars to foreign currency in order to finance their export activities, but exporters must repatriate an equivalent amount to any funds spent abroad, for example money spent on marketing or other business costs incurred.

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

Libya

Executive Summary

Libya presents a challenging investment climate.  Reconstruction needs, severely underserved consumer demand, and abundant natural resources provide many opportunities for domestic and foreign investors, and the Government of National Accord (GNA) has repeatedly expressed interest in receiving greater foreign investment.  Nonetheless, the country’s prospects for foreign investment continue to be hampered by:  1) persistent political instability and security risks posed by the ongoing civil conflict and by the presence of non-state militias and extremist and terrorist groups; 2) non-state actors’ seizure of key economic infrastructure, including major oil and gas terminals since January 2020; and 3) opaque bureaucracy, onerous regulations, and widespread rent-seeking activity in public administration.  The Libyan government has a long history of not honoring contracts and payments, and several U.S. firms continue to be owed back payments for work done before and after the 2011 revolution. The sectors that have historically attracted the most significant investment into Libya are:  oil and gas, electricity, and infrastructure.

Libya’s civil conflict reignited in April 2019 when Khalifa Haftar’s Libyan National Army (LNA), based in the east of Libya, launched a military offensive to seize Tripoli.  LNA-aligned forces have repeatedly attacked civilian infrastructure in greater Tripoli, and attacks against Tripoli’s Migita Airport have forced its closure on multiple occasions.  The LNA and its political allies have undermined key national institutions, including the Central Bank and the National Oil Corporation (NOC), by standing up parallel structures and attempting to use such entities to finance its activities.

Libya holds Africa’s largest (and the world’s ninth largest) proven oil reserves and Africa’s fifth largest gas reserves.  Most government revenues derive from the sale of crude oil.  Prior to the January 2020 LNA-orchestrated oil shutdown of five oil terminals and two oilfields in the southwest, Libya’s oil production had been making a gradual recovery from repeated attacks on oil infrastructure by ISIS-Libya and other armed groups in 2016, reaching an estimated high of 1.3 million barrels per day (bpd).  Technocrats heading the NOC, an independent, apolitical institution, continue to lay the groundwork for long-term development and stabilization of the energy sector.

The Privatization and Investment Board (PIB), supervised by the Ministry of Economy, is the primary governmental body for encouraging private foreign investment in Libya.

The Investment Law of 2010 provides the primary legal framework for foreign investment promotion. Passed prior to the 2011 revolution that toppled the Qadhafi regime, the law lifted many FDI restrictions and provided a series of incentives to encourage private investment.  No significant laws related to investment have been passed since the revolution.

Perceived corruption is deeply embedded in Libya and is widespread at all levels of public administration.  The lack of transparency or accountability mechanisms in the management of oil reserves and revenues, the issuance of government contracts, and the enforcement of often ambiguous regulations continue to provide the government with substantial opportunities for rent-seeking activities.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2019 168 of 180 http://www.transparency.org/
research/cpi/overview
World Bank’s Doing Business Report 2019 186 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) 2019 $908 https://apps.bea.gov/
international/factsheet/
World Bank GNI per capita 2019 $7,640 http://data.worldbank.org/
indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

The Libyan government’s efforts to attract FDI, primarily through the PIB and NOC, are relatively recent.  Until the 1990s FDI was only permitted in the oil sector through sovereign contracts to which the state was a party.  A number of foreign investment laws were passed in subsequent years to encourage and regulate FDI, culminating in “Law No. 9 of the year 1378 PD (2010) Regarding Investment Promotion” (known as the 2010 Investment Law).  Though promulgated prior to Libya’s 2011 revolution, the law remains in effect.  This new law lifted many FDI restrictions and provided a series of incentives to qualifying investments, such as tax and customs exemptions on equipment, a five-year income tax exemption, a tax exemption on reinvested profits and exemptions on production tax expert fees for goods produced for export markets.  It also allowed for investors to transfer net profits overseas, defer losses to future years, import necessary goods, and hire foreign labor if local labor was unavailable.  Foreign workers may acquire residency permits and entry reentry visas for five years and transfer earnings overseas.

The law regulates the establishment of foreign-owned companies and the setting up of branches in representative offices.  Branches are allowed to be opened in a large number of sectors, including:  construction for contracts over LYD 50 million; electricity works; oil exploration; drilling and installation projects; telecommunications construction and installation; industry; surveying and planning; installation and maintenance of medical machines and equipment; and hospital management.  However, the investment law restricts full foreign ownership of investment projects to projects worth over LYD 5 million, except in the case of limited liability companies, and requires 30 percent of workers to be Libya nationals and to receive training. Foreign investors are prevented from owning land or property in Libya and are allowed only the temporary leasing of real estate.  Investment in “strategic industries” – in particular, Libya’s upstream oil and gas sector, which is controlled by the NOC – requires a foreign entity to enter into a joint venture with a Libyan firm that will retain a majority stake in the enterprise.  It is not clearly defined which industries other than upstream oil and gas may be considered strategic.

The most important investment promotion institution Libya is the PIB, established in 2009 to assume responsibility for the Libyan privatization program and oversee and regulate FDI activities.  The PIB’s screening process for incoming FDI to Libya is not clearly defined; the bidding criteria and process for investment are not published or transparent, and it is therefore not clear whether foreign investors have faced discrimination.  The PIB states that it reviews bids or proposals for general consistency with Libya’s national security, sovereignty, and economic interest.  The Minister of Economy must give final approval to all FDI projects, at the recommendation of the PIB.  There is no information available on the timeline of the approval process or any potential outcomes of the process other than an affirmative or negative decision by the PIB or Minister of Economy.  The PIB maintains that it keeps all company information confidential.  U.S. firms have repeatedly expressed frustration about the slow pace by which the Libyan government makes business-related decisions.  Despite these complaints, some U.S. firms have successfully invested in Libya, particularly in the country’s oil and gas sector.

Limits on Foreign Control and Right to Private Ownership and Establishment

The ownership of real estate in Libya is restricted to Libyan nationals and wholly-owned Libyan companies.  The 2010 Investment Law permits the ownership of real estate in Libya by locally established project vehicles of foreign investors.  However, such ownership is limited to leasehold ownership only.  Foreign investors are allowed lease property from public holdings and private Libyan citizens, according to Article 17 of the 2010 Investment Law.  There is considerable ambiguity in both the public and private rental markets; many aspects of these arrangements are left to local officials.

Other Investment Policy Reviews

Libya has not undergone any recent investment policy reviews by the OECD, UNCTAD, WTO, or any other international body.

Business Facilitation

Business registration procedures in Libya are lengthy and complex.  The Ministry of Economy is the main institution for processing business registration requirements.  The Libyan government does not maintain an online information portal on regulations for new business registration or online registration functionality for registering a new business.  There are multiple corporate structures based on the type of business undertaken (e.g. limited liability, joint venture, branch office) and each has specific registration requirements.  Some requirements apply to all businesses, including:  obtaining a Commercial Register certificate, registering with the Chamber of Commerce and the tax and labor departments, and obtaining a working license.  If a company will be importing items, a statistical code will be required.  If the company will be obtaining letters of credit in Libya, a Central Bank code will be required.  A specialized agent must complete these tasks on behalf of the registering company.  For the simplest corporate structure (limited liability with no Central Bank code) the process can take two to three months if the registration agent is familiar with the procedures.

Outward Investment

Libya is a member of the Islamic Corporation for the Insurance of Investment and Export Credit, which provides investment and export credit insurance for entities in member states.   FDI outflows in 2018 were USD 315 million, compared to USD 2.7 billion in 2010.  The Libyan government does not formally promote or incentivize outward investment.  Stress in the banking sector has reduced liquidity, and this has negatively affected the ability of Libyan citizens to acquire the hard currency to invest abroad.

2. Bilateral Investment Agreements and Taxation Treaties

Libya has signed bilateral investment protection agreements with Algeria, Austria, Belarus, Belgium, Bulgaria, China, Croatia, Egypt, Ethiopia, France, Gambia, Germany, India, Iran, Italy, Kenya, Luxembourg, Malta, Morocco, Portugal, Qatar, Russia, San Marino, Serbia, Singapore, Slovakia, South Africa, South Korea, Spain, Switzerland, Syria, Tunisia, and Turkey.  Some of these have yet to formally enter into force.  Libya is part of the Greater Arab Free Trade Area (GAFTA), a Free Trade Agreement joining Algeria, Bahrain, Egypt, Iraq, Jordan, Kuwait, Lebanon, Morocco, Oman, the Palestinian Authority, Qatar, Saudi Arabia, Sudan, Syria, Tunisia, the United Arab Emirates, and Yemen.  Libya is also a member of the Arab Maghreb Union (AMU) Free Trade Agreement with Morocco, Algeria, Tunisia, and Mauritania.

Libya does not have a bilateral investment treaty, a Free Trade Agreement, or a bilateral taxation treaty with the United States, but signed a Trade and Investment Framework Agreement (TIFA) with the United States in December 2013 that the Libyan government ratified in February 2019.

3. Legal Regime

Transparency of the Regulatory System

The Libyan regulatory system lacks transparency, and there is a general lack of clarity regarding the function and responsibilities of Libyan government institutions.  Transparency International placed Libya 168 out of 180 countries (“1” indicates least corrupt) in its 2019 Corruption Perceptions Index, and Libya ranks 186 out of 190 on the World Bank’s “Doing Business” Index.  Libya’s bureaucracy is one of the most opaque and amorphous in the Middle East region; its legal and policy frameworks are similarly difficult to navigate.  The issuance of licenses and permits is often delayed for significant periods for unspecified reasons, and the adjudication of these applications is most often done in a subjective and non-transparent fashion.  This has created an environment ripe for graft and rent-seeking behavior.

Neither ministries nor regulatory agencies publish the text or summary of proposed regulations before their enactment.  Accurate, current information about key commercial regulations is difficult to obtain, and this situation serves as a deterrent to foreign investment.

International Regulatory Considerations

Libya is not a member of the WTO.  The WTO received Libya’s application on June 10, 2004. The General Council established a Working Party on July 27, 2004, but no formal progress on Libya’s application has been made.

Legal System and Judicial Independence

The 2011 Constitutional Declaration functions as the interim constitution.  It states Islam is the state religion and sharia is the principal source of legislation. The Libyan civil code begins with a preliminary title containing general dispositions regarding law, sources of law, application of the law, and general dispositions regarding the legal definition of persons as well as the classification of things and property.  Thereafter, the code is divided into two parts and four books.  The first part addresses obligations or personal rights and contains similarly named subdivisions:  Book I (Obligations in General) and Book II (Specific Contracts).  The second part of both codes is entitled “Real Rights” and contains Books III (Principal Real Rights) and Book IV (Accessory Real Rights).  In the absence of a legal provision, the Libyan civil code requires courts to adjudicate matters “in accordance with the principles of Islamic law.”  In the absence of an Islamic rule on a particular matter, the Libyan civil code requires courts to look to “prevailing custom,” and in the absence of any custom, “to the principles of natural law and the rules of equity.”

Article 89 of the Libyan Civil Code states that “a contract is created, subject to any special formalities that may be required by law for its conclusion, from the moment that two persons have exchanged concordant intentions.”  The Libyan court system consists of three levels:  the courts of first instance; the courts of appeals; and the Supreme Court, which is the final appellate level.  Libya’s justice system has remained weak throughout the post-revolutionary period, and enforcement of laws remains a challenge for the GNA.

Laws and Regulations on Foreign Direct Investment

Laws and regulations on investment and property ownership allow domestic and foreign entities to establish business enterprises and engage in remunerative activities.  Investment law and commercial law differ in their foreign ownership restrictions for business enterprises.  Article 7 of the 2010 Investment Law specifies, in general accordance with standard international practice, conditions a project must fulfill in part or in full in order to qualify as an investment rather than a commercial vehicle.  Investment projects that meet the conditions set out in the 2010 Investment Law enjoy a number of benefits, such as relief from income taxes for a set number of years. Further, a foreign investor may wholly own the enterprise if the foreign investment exceeds LYD 5 million. This is reduced to LYD 2 million if a Libyan partner holds at least half of the investment.  For investment projects that do not meet the conditions set out in the 2010 Investment Law, these benefits do not apply and Libya’s Commercial Code stipulates no more than 49 percent foreign ownership unless the enterprise is a branch of a foreign company, which the foreign company can then fully own.

Competition and Anti-Trust Laws

Chapter 11 of the Libyan Commercial Code deals with the issue of competition and prohibits market abuse.  The Commercial Code provides for the establishment of a Competition Committee to be responsible for reviewing complaints and investigating them and, in cases where the law has been violated, referring the cases to public prosecution.  There is not an active Competition Committee at the moment, and since these issues are regulated by law and considered violations, interested/damaged parties can pursue legal action directly.

Expropriation and Compensation

Article 23 of the 2010 Investment Law provides an express guarantee against the nationalization, expropriation, forcible seizure, confiscation, imposition of receivership, freeze or subjection of procedures of similar effect, except by virtue of a law or court ruling and fair and equitable indemnity, and provides such procedures be applied indiscriminately.  Article 43 of executive regulation No. 449 of 2010 implementing the law reinforces those provisions.  The Libyan government’s history of state expropriation of private property, including the assets of foreign companies, most prevalent during the 1980s, had already been in decline before the law’s passage.  There have been no nationalizations or expropriations under the current investment law.

Dispute Settlement

ICSID Convention and New York Convention

Libya is not a signatory to either the International Center for Settlement of Investment Disputes or the U.N. Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the ‘New York Convention’) and has not taken steps to accede to either.  In the case of commercial disputes, most foreign entities currently opt to try cases before the International Chamber of Commerce, whose judgments Libya has a history of respecting.  Libya is a member of the 1983 Riyadh Convention on Judicial Cooperation, which facilitates recognition and enforcement of judgments and arbitral awards among the Arab member states.

Investor-State Dispute Settlement

Libya is not a signatory to a treaty or investment agreement in which binding international arbitration of investment disputes is recognized.  Article 24 of the 2010 Investment Law mandates disputes initiated by a foreign investor or the state be settled by competent Libyan courts, unless there is an agreement between Libya and the state to which the investor is subject that includes provisions for alternative arbitration procedures.

International Commercial Arbitration and Foreign Courts

The Libyan Civil Code provides for the enforcement of foreign decisions or arbitral awards if they meet the following requirements:  the decision must be issued from a competent authority, according to the laws of the country of origin of the decision; the parties must have been duly summoned to appear before the court that handed down the decision and must have been duly represented (the laws of the foreign country also apply in terms of summons to and presence before the court);  the decision must not contradict decisions already issued by Libyan courts; and the decision must not include anything that conflicts with the principles of public order in Libya.  Libya’s justice system remains weak, making enforcement of foreign judgments and arbitral awards through the Libyan courts challenging and lengthy.

Bankruptcy Regulations

Libya does not have a separate bankruptcy law, but bankruptcy issues are covered under articles 1012 and 1013 of the 2010 Commercial Code. According to this legislation, bankruptcy proceeds in two phases. The first is preventative reconciliation, during which the debtor attempts to rectify the financial situation of the business through an agreement with creditors under court supervision. The second phase commences in the event of the agreement’s failure, whereby the court intercedes to protect the rights of the creditors through liquidation.

4. Industrial Policies

Investment Incentives

Investments set up according to the 2010 Investment Law benefit from the following incentives: tax and customs exemptions on equipment, a five-year income tax exemption, a tax exemption on reinvested profits and exemptions on production tax expert fees for goods produced for export markets.  It also allowed for investors to transfer net profits overseas, defer losses to future years, import necessary goods, and hire foreign labor if local labor is unavailable.

Foreign Trade Zones/Free Ports/Trade Facilitation

Libyan Law Number 215 of 2006 established the Zuwara Free Trade Zone (ZFTZ), and Law Number 495 of 2000 (amended by Law Number 32 of 2006) created the Misrata Free Trade Zone (MFTZ).  Both the ZFTZ and the MFTZ are overseen by the Libya Free Trade Zone Board, created by Law Number 168 of 2006.  By law, the ZFTZ and MFTZ are financially and administratively independent, and are free to legislate “within the boundaries of Libyan law.”

Performance and Data Localization Requirements

The host government does not follow forced localization.  The 2010 Investment Law mandates that 30 percent of a foreign-owned company’s workforce consist of Libyans.  Exemptions are available if the required skills for a position are not available on the local labor market.

U.S. citizens traveling to Libya on business visas require an invitation from/sponsorship by a company operating in Libya.  Obtaining a Libyan business visa regularly requires several weeks or months.  Libyan Embassies in third countries have followed varying rules and procedures regarding the issuance of visas, but all visa applications require approval by the Libyan Ministry of Foreign Affairs.  Libyan law prohibits using a tourist visa to travel to Libya for business purposes.  The Government of Libya does not allow persons with passports bearing an Israeli visa or entry/exit stamps from Israel to enter Libya.  Further information can be found in the Consular Information Sheet for Libya at the State Department website travel.state.gov.  The 2010 Investment Law grants investors the right to a residence permit for a period of five years, subject to renewal if the project continues.

5. Protection of Property Rights

Real Property

Libyan property rights are complicated by past government policy actions and a weak regulatory environment.  The Libyan government eliminated all private property rights in March 1978 and eliminated most private businesses later in the same year.  The renting of property was illegal, and ownership of property was limited to a single dwelling per family, with all other properties being redistributed.  Reduced rate “mortgages” were paid directly to the Libyan government, but many Libyans were exempted from these payments based on family income.  This process, and destruction of official documents that followed several years later, has served to greatly complicate any subsequent effort to prove clear title to property throughout Libya.  Post-revolutionary governments have made little progress on improving the situation.  As a consequence of the ambiguity of property ownership, banks are reluctant to take property as collateral for loans until property disputes are resolved.

Intellectual Property Rights

Libya does not have an intellectual property law.  Article 1286 of the 2010 Commercial Code covers a set of rules which seek to protect intellectual innovations and the non-material aspects of industrial and commercial projects.  It prohibits infringement of trademarks and transgression on registered trade names and logos; bans all acts of forgery, trademark or local counterfeiting, and all forms of intellectual property violations; and outlines the nature of financial and criminal procedures against those violations.  The law provides for enforcement of the rules regulating registered industrial designs and models as well as information systems.  Some additional laws providing protection of intellectual property rights (IPR) have been passed, such as Law No. 7 of 1984 and Law No. 8 of 1959 on patents, commercial designs, and models.  The trademark office in the Ministry of Economy is responsible for enforcing the law of consumer and intellectual property protection, but trademark violations are widespread, especially in the retail sector, and enforcement generally requires a specific legal claim.  U.S. brands remain vulnerable to such activity.

While Libya is in the process of applying for entry to the WTO, it is not currently a member, and thus is not a party to TRIPS (Agreement on Trade-Related Aspects of Intellectual Property Rights).  The IMF has asked Libya to bring its IPR regime in line with international best practice.

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 Libyan government passed a law in 2007 to establish a stock market, primarily to support privatization of SMEs, but it is not well-capitalized, has few listings, and does not have a high volume of trading.  Capital markets in Libya are underdeveloped, and the absence of a venture capital industry limits opportunities for SMEs with growth potential and innovative start-ups to access risk financing for their ventures.

Money and Banking System

Libya has been attempting to modernize its banking sector since before the revolution, including through a privatization program that has opened state-owned banks to private shareholders.  The Central Bank of Libya (CBL) owns the Libyan Foreign Bank, which operates as an offshore bank, with responsibility for satisfying Libya’s international banking needs (apart from foreign investment).  The banking system is governed by Law No. 1 of 2005, as amended by Law No. 46 of 2012 on Islamic banking.  In accordance with that amendment, Law No. 1 of 2013 prohibits interest in all civil and commercial transactions.  The banking modernization program has also been seeking, among other components, to establish electronic payment systems and expand private foreign exchange facilities.

The eastern branch of the Central Bank declared itself the legitimate Central Bank in 2014, though it is not recognized internationally as such, and since then the institution has been split between the legitimate CBL in Tripoli and the parallel CBL based in the eastern city of Al Bayda.  As Libya’s only legitimate Central Bank, the CBL in Tripoli is responsible for the receipt of all of Libya’s oil revenues, prints Libyan dinars, and controls the country’s foreign exchange reserves.  As a result, the split has reduced liquidity to eastern Libya, including to the LNA, eastern parallel institutions, and commercial banks.  In recent years, eastern authorities have imported counterfeit Libyan dinars from Russia in an attempt to stem the liquidity shortage. To access hard currency, eastern authorities have in the past issued junk bonds that it forced commercial banks to buy, used counterfeit dinars to buy hard currency on the black market, and illegally exported certain commodities, like scrap metal.  All the while, the parallel CBL has accrued vast debt which the legitimate CBL has no visibility on and which will need to be reconciled when the two banks eventually unify.

The CBL in Tripoli controls access to all foreign currency in Libya, and it provides Libyans access to hard currency by issuing letters of credit (LCs).  Access to LCs in Libya has historically been an issue, but with the 2018 implementation of a foreign exchange fee described in the next section, importers’ access to LCs had greatly increased.  However, since the shutdown in the oil and gas sector in January 2020, the CBL has restricted the issuance of LCs, as described in the next section.

The availability of financing on the local market is weak.  Libyan banks can only offer limited financial products, loans are often made on the basis of personal connections (rather than business plans), and public bank managers lack clear incentives to expand their portfolios.  Lack of financing acts as a brake on Libya’s development, hampering both the completion of existing projects and the start of new ones.  This has been particularly damaging in the housing sector, where small-scale projects often languish for lack of steady funding streams.  The World Bank ranked Libya 186 out of 190 economies on the ease of getting credit in 2019.

Foreign Exchange and Remittances

Foreign Exchange

The 2010 Investment Law provides investors the right to open an account in a convertible currency in a Libyan commercial bank and to obtain local and foreign financing.  The Libyan Banking Law (Law No. 1 of 2005) allows any Libyan person or entity to retain foreign exchange and conduct exchanges in that currency.  Libyan commercial banks are allowed to open accounts in foreign exchange and conduct cash payments and transfers (including abroad) in foreign currency.  Commercial banks operating in Libya may grant credit in foreign exchange and transact in foreign exchange among themselves.

The Central Bank charges a foreign exchange fee of 163 percent on sales of Libyan dinars for hard currency.  Government entities do not have to pay this fee, which has effectively created two exchange rates:  the official rate, to which the Libyan government has access, and a second rate – the official rate with the 163 percent fee – for all other buyers.  There is also a significant black market for hard currency that typically exchanges Libyan dinars for foreign exchange at three times the official rate or higher.  Entities engaging in foreign exchange must be licensed by the Central Bank.  Foreign exchange facilities are available at most large hotels and airports, and ATMs are becoming more widely available.  The importation of currency must be declared at time of entry.  The Central Bank’s Decree No. 1 of 2013 regulates foreign exchange, including by specifying authorities for the execution of foreign transfers, and by prescribing limits on the transfer of currency abroad for different public and private entities.

Most firms seeking to receive payment for services/products in Libya operate using letters of credit facilitated through foreign banks (often based in Europe).  Foreign energy companies remitting large sums often make arrangements for direct transfers to accounts offshore.  While the introduction of the foreign exchange fee in September 2018 greatly facilitated the Central Bank’s issuance of LCs, in response to the January 2020 oil shutdown the Central Bank has generally limited LCs to a minimum of $100,000 with a three-month limit to complete transactions.

Remittance Policies

The 2010 Investment Law allows for the remittance of net annual profits generated by an investment and of foreign invested capital in case of liquidation, expiration of the project period, or insurmountable impediments to the investment within the first six months.  As noted, the Central Bank charges a foreign exchange fee of 163 percent on sales of Libyan dinars for hard currency.

Sovereign Wealth Funds

Libya maintains a sovereign wealth fund called the Libya Investment Authority (LIA).  UN Security Council Resolution 1970 (2011) froze many of the LIA’s assets outside Libya.  The freeze on the LIA’s assets is intended to preserve Libya’s assets through its post-revolutionary transition for the benefit of all Libyans.  The most recent evaluation of the LIA’s assets in 2012 put their value at USD 67 billion.  The international community has provided technical assistance to the LIA to help it improve its governance, including adherence to the Santiago Principles, a set of 24 widely accepted best practices for the operation of sovereign wealth funds.  The LIA has agreed to make tangible progress on its draft governance guidelines and adherence with the Santiago Principles, including preparation of an annual report that contains an identification of assets and audited financials.

7. State-Owned Enterprises

The PIB Is responsible for matters related to privatization of state-owned enterprises (SOEs).  All enterprises in Libya were previously state-owned.  Except for the upstream oil and gas sector, no state-owned enterprise is considered to be efficient.  The state is deeply involved in utilities, oil and gas, agriculture, construction, real estate development and manufacturing, and the corporate economy.

Privatization Program

Libya has gone through three previous phases of privatization, the latest between 2003 and 2008 during which 360 SOEs ranging from small to large in various sectors were either fully or partially privatized or brought in private partners through public-private partnerships.  However, restrictions to individual shares and foreign ownership – individual investors’ share of the capital was restricted to 15 percent and local ownership had to be 30 percent – limited interest in the privatization program.  Accusations of fraud further discouraged investments.  Nonetheless, the food industry, healthcare, construction materials, downstream oil and gas, and education sectors are now partially or fully privatized.  Fragile governments and lack of security since 2011 have impeded implementation of further privatization programs.

8. Responsible Business Conduct

There is not a general awareness of, expectation of, or standards for responsible business conduct (RBC) in Libya, nor of businesses’ obligation to proactively conduct due diligence to ensure they are doing no harm (including with regards to environmental, social, and governance issues).  The Libyan government has not taken measures to define or encourage RBC, such as promoting the OECD or UN Guiding Principles on Business and Human Rights or establishing a national contact point or ombudsman for stakeholders to get information or raise concerns about RBC.  As far as domestic laws exist in relation to human rights, labor rights, consumer protection, environmental protections, and other laws/regulations intended to protect individuals from adverse business impacts, the capacity of the government to enforce these laws is very limited.

9. Corruption

Foreign firms have identified corruption as an obstacle to FDI; corruption is pervasive in virtually all sectors of the economy, especially in government procurement.   Officials frequently engage with impunity in corrupt practices such as graft, bribery, nepotism, money laundering, human smuggling, and other criminal activities.  Although Libyan law provides some criminal penalties for corruption by officials, the government does not enforce the law effectively.  Internal conflict and the weakness of public institutions further undermine enforcement.  No financial disclosure laws, regulations, or codes of conduct require income and asset disclosure by appointed or elected officials.

The Libyan Audit Bureau (AB), the highest financial regulatory authority in the country, has made minimal efforts to improve transparency.  The Audit Bureau has investigated mismanagement at the General Electricity Company of Libya that had lowered production and led to acute power cuts.  Other economic institutions such as the Ministry of Finance and the Central Bank  published some economic data during the year.

On 10 July 2018, GNA Prime Minister al-Sarraj requested international support to conduct an audit of the two branches of the Central Bank ,and this request was endorsed by the UN Security Council (UNSC) on 13 September 2018 (UNSC Resolution 2434).  The audit of the two CBL branches, if implemented by Libyan authorities, is a means to restore the integrity, transparency and confidence in the Libyan financial system and create the conditions for the long-awaited unification of Libyan financial institutions.  However, as of May 2020, the Audit Bureau has obstructed payment to the international auditing firm that won the bid to conduct the audit because the AB claims that Libyan law provides it sole authority for conducing financial audits of Libyan government institutions.

Libya has signed and ratified the UN Anticorruption Convention.  It is not party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

Resources to Report Corruption

Libya has several anti-corruption agencies and bodies, including, most notably, the National Anti-Corruption Commission, the Office of the Attorney General, the Administrative Control Authority, the Accountancy Bureau and the Financial Information Unit.

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

Akram Bannur
General Secretary
National Anti-Corruption Commission of Libya
+218 91 335 8583
Bannurakram@outlook.com

Contact at a “watchdog” organization (international, regional, local or nongovernmental organization operating in the country/economy that monitors corruption, such as Transparency International):

Ibrahim Ali
Chairman
Libyan Transparency International
+218916344442
info@transparency-libya.org

10. Political and Security Environment

There is a significant recent history of politically-motivated damage and seizure by force of economic infrastructure and installations, particularly in the oil and gas industry.  Most recently, forces allied with Libyan National Army Commander Haftar forced the near-total shutdown of Libya’s energy sector in January 2020.  Civil disturbances are a daily occurrence, with rival militias jockeying for control over the GNA’s political institutions and economic resources, and an ongoing civil conflict between the GNA and LNA.  These events significantly affect foreign firms’ willingness and ability to invest in Libya.

11. Labor Policies and Practices

Libya’s labor market is characterized by a dominant public sector that employs 85 percent of the active labor force in the Libyan economy, according to the World Bank.  Just four percent of the labor force works for private firms.  The Libyan labor market has many skilled workers with high levels of education, but high public sector wages and benefits result in outsized expectations among job seekers, particularly among the highly-skilled.  The World Bank has estimated Libya’s unemployment rate to be around 20 percent, and youth unemployment to be around 50 percent – numbers that, given the already bloated public sector, indicate a lack of private sector jobs for skilled and unskilled Libyans.  The World Bank also noted significant “mismatches” between the skills Libyan degree holders possess and those demanded by foreign and domestic employers in Libya.  The 2010 Investment Law permits investors to hire foreign workers when national substitutes are not available.

The law does not provide the right for workers to form and join independent unions.  Formal sector workers are automatically members of the General Trade Union Federation of Workers, but can opt out on request.  Foreign workers are not permitted to organize.  Workers are permitted to bargain collectively, but the law stipulates that cooperative agreements must conform to the “national economic interest,” thus significantly limiting collective bargaining. The government has the right to set and cut salaries without consulting workers.  According to Freedom House, some trade unions formed after the 2011 revolution, but they remain in their infancy, and collective-bargaining activity was severely limited due to the ongoing hostilities and weak rule of law.  There is no data available about the prevalence of collective bargaining, or about the effectiveness of labor dispute or arbitration services.

Workers may call strikes only after exhausting all conciliation and arbitration procedures.  Over the past year, employees organized spontaneous strikes, boycotts, and sit-ins in a number of workplaces.  The government or one of the parties has the right to demand compulsory arbitration, though state penalties for noncompliance were not sufficient to deter violations.

The law prohibits forced or compulsory labor, but the government did not effectively enforce the laws. There were numerous anecdotal reports of foreign workers subjected to conditions indicative of forced labor.  The law prohibits children younger than 18 from being employed except in a form of apprenticeship.  It was unclear whether child labor occurred, and no information was available concerning whether the law limits working hours or sets occupational health and safety restrictions for children.  It was not clear whether the government had the capacity to enforce compulsory or child labor laws, nor was it clear whether non-enforcement of these laws posed a commercial risk to investors.

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

The DFC does not operate in Libya, and there is no OPIC agreement between Libya and the United States.

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2 uses BEA data when available, which measures the stock of FDI by the market value of the investment in the year the investment was made (often referred to as historical value).  This approach tends to undervalue the present value of FDI stock because it does not account for inflation.

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 $52.076B www.worldbank.org/en/country 
Foreign Direct Investment Host Country Statistical source* USG or international statistical source USG or international Source of data:  BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) N/A N/A 2019 $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 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 46.3% 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

Daniel Liss
Economic & Commercial Officer
Libya External Office – U.S. Embassy Tunis
+216 58 542 066
LissDM@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

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

Mauritania is increasingly open to foreign direct investment (FDI).  In 2019, the government created a ministerial-level committee charged with overseeing improvements in the business climate.  Government officials regularly highlight the need to improve the business climate in order to attract more FDI, particularly from the United States.  Local, reputable businesses in the private sector frequently express interest in representing U.S. companies, and the number doing so is growing.  There is no law prohibiting or limiting foreign investment, which can target any sector of the economy.  There are no laws or regulations specifically authorizing private firms to adopt articles of incorporation or association, which limit or prohibit foreign investment, participation, or control.  There are no other practices by private firms to restrict foreign investment.  The government continues to prioritize foreign investment in all sectors of the economy.  It is working closely with the International Monetary Fund (IMF), the World Bank, and the international donor community to improve basic infrastructure and to update laws and regulations.

The IMF 2019 review on the Extended Credit Facility (ECF) in Mauritania shows improvement in balance of payments and reserves recovery following the 2014 shock to the Mauritanian economy caused by the drop in price of iron ore.

In 2012, the government adopted a revised Investment Code and created the Office of Promotion of the Private Sector (OPPS) to promote and monitor investment.  Currently, prospective investors are required to obtain an Investment Certificate by presenting their proposal and all required documents to the OPPS.  The government maintains an on ongoing dialogue with investors through formal business conferences and meetings.

Limits on Foreign Control and Right to Private Ownership and Establishment

All domestic or foreign entities can engage in all forms of remunerative activities, except activities involving selling pork or alcohol.  There are no limits of transfer of profit or repatriation of capital, royalties, or service fees, provided the investments were authorized and made through official channels. The Government of Mauritania practices mandatory screening of foreign investments.  These screening mechanisms are routine and non-discriminatory.  The “Guichet Unique” (a single location to take care of all administrative needs related to registering a company) provides the review for all sectors, except the petroleum and mining sectors, which require approval from a cabinet meeting led by the president.

Other Investment Policy Reviews

The latest investment policy review occurred in February 2008.  The United Nations Conference on Trade and Development (UNCTAD) review is available online, in French, at: http://unctad.org/en/Docs/iteipc20085_fr.pdf .  The report recommended that the Government of Mauritania diversify the economy, improve its investment potential through increasing revenue generated by the exploitation of natural resources, accelerate required reforms, and enhance the business and investment climate.

In 2011, Mauritania underwent a World Trade Organization (WTO) trade policy review.  The report is available online at http://www.wto.org/english/tratop_e/tpr_e/tp350_e.htm .  The report states that, since 2002, the government had undertaken few reforms in the areas of customs, trade, or investment regulations.  The report also highlighted a lack of transparency as a deficiency.  These policy reviews led to the release of the revised Investment Code in June 2012 to improve transparency in the government procurement process.

Business Facilitation

The government continues to amend its laws and regulations to facilitate business registration. The first cabinet reshuffle of the new government divided the former Ministry of Economy and Finance into two separate ministries:  the Ministry of Economy and Industry and the Ministry of Finance.  In February 2020, the government created an inter-ministerial committee charged with improving the business climate and driving investment.  The committee is chaired by the Prime Minister.

Normal business registration process takes up to five business days. The Nouadhibou Free Trade Zone Authority (http://www.ndbfreezone.mr/  )  and “Guichet Unique” facilitate business registration and encourage FDI.

Outward Investment

Government incentives toward promoting outward investment remain limited.  Mauritania’s major exports are iron ore (46 percent), non-fillet frozen fish (16 percent), and gold (11 percent). China, France, Spain, Japan, and the United Arab Emirates are the main trade partners.  There are no investment restrictions on domestic investors from investing abroad.

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

Morocco

Executive Summary

Morocco enjoys political stability, a geographically strategic location, and robust infrastructure, which have contributed to its emergence as a regional manufacturing and export base for international companies.  Morocco actively encourages and facilitates foreign investment, particularly in export sectors like manufacturing – through dynamic macro-economic policies, trade liberalization, investment incentives, and structural reforms.  Morocco’s overarching economic development plan seeks to transform the country into a regional business hub by leveraging its unique status as a multilingual, cosmopolitan nation situated at the tri-regional focal point of Sub-Saharan Africa, the Middle East, and Europe.  The Government of Morocco implements strategies aimed at boosting employment, attracting foreign investment, and raising performance and output in key revenue-earning sectors, such as the automotive and aerospace industries.  Morocco is increasingly investing in energy, boasting the world’s largest concentrated solar power facility with storage near Ouarzazate.

According to the United Nations Conference on Trade and Development’s (UNCTAD) 2019 World Investment Report, Morocco attracts the fourth-most foreign direct investment (FDI) in Africa, rising from $2.7 billion in 2017 to $3.6 billion in 2018.  Morocco continues to orient itself as the “gateway to Africa” for international investors following Morocco’s return to the African Union in January 2017 and the launch of the African Continental Free Trade Area (CFTA) in March 2018.  In June 2019, Morocco opened an extension of the Tangier-Med commercial shipping port, making it the largest in the Mediterranean and the largest in Africa.  Tangier is connected to Morocco’s political capital in Rabat and commercial hub in Casablanca by Africa’s first high-speed train service.  Morocco continues to climb in the World Bank’s Doing Business index, rising to 53rd place in 2020.  Despite the significant improvements in its business environment and infrastructure, high rates of unemployment (particularly for youth), weak intellectual property rights (IPR) protections, inefficient government bureaucracy, and the slow pace of regulatory reform remain challenges.

Morocco has ratified 71 bilateral investment treaties for the promotion and protection of investments and 60 economic agreements– including with the United States and most EU nations– that aim to eliminate the double taxation of income or gains.  Morocco is the only country on the African continent with a Free Trade Agreement (FTA) with the United States, eliminating tariffs on more than 95 percent of qualifying consumer and industrial goods. The Government of Morocco plans to phase out tariffs for some products through 2030.  The FTA supports Morocco’s goals to develop as a regional financial and trade hub, providing opportunities for the localization of services and the finishing and re-export of goods to markets in Africa, Europe, and the Middle East.  Since the U.S.-Morocco FTA came into effect bilateral trade in goods has grown nearly five-fold.  The U.S. and Moroccan governments work closely to increase trade and investment through high-level consultations, bilateral dialogue, and the annual U.S.-Morocco Trade and Investment Forum, which provides a platform to strengthen business-to-business ties.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2019 80 of 180 http://www.transparency.org/
research/cpi/overview
World Bank’s Doing Business Report 2019 53 of 190 http://www.doingbusiness.org/en/rankings
Global Innovation Index 2019 74 of 126 https://www.globalinnovationindex.org/
analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2017 $412 http://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2018 $3090 http://data.worldbank.org/
indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

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

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

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

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

Limits on Foreign Control and Right to Private Ownership and Establishment

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

Other Investment Policy Reviews

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

Business Facilitation

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

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

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

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

Outward Investment

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

2. Bilateral Investment Agreements and Taxation Treaties

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

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

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

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

3. Legal Regime

Transparency of the Regulatory System

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

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

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

International Regulatory Considerations

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

Legal System and Judicial Independence

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

Laws and Regulations on Foreign Direct Investment

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

Competition and Anti-Trust Laws

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

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

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

Expropriation and Compensation

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

Dispute Settlement

ICSID Convention and New York Convention

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

Investor-State Dispute Settlement

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

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

International Commercial Arbitration and Foreign Courts

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

Bankruptcy Regulations

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

4. Industrial Policies

Investment Incentives

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

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

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

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

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

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

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

Foreign Trade Zones/Free Ports/Trade Facilitation

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

Performance and Data Localization Requirements

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

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

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

5. Protection of Property Rights

Real Property

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

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

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

Intellectual Property Rights

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

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

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

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

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

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

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

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

6. Financial Sector

Capital Markets and Portfolio Investment

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

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

Money and Banking System

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

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

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

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

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

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

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

Foreign Exchange and Remittances

Foreign Exchange

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

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

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

Remittance Policies

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

Sovereign Wealth Funds

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

7. State-Owned Enterprises

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

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

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

Privatization Program

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

8. Responsible Business Conduct

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

9. Corruption

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

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

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

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

Resources to Report Corruption

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

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

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

10. Political and Security Environment

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

11. Labor Policies and Practices

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

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

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

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

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

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

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

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

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

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 $115,321 2018 $117,921 World Bank 
Foreign Direct Investment Host Country Statistical source* USG or international statistical source USG or international source of data:  BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) 2017 $567.3 2018 $408 BEA
Host country’s FDI in the United States ($M USD, stock positions) 2017 $5.5 2018 $-21 BEA
Total inbound stock of FDI as % host GDP 2017 55.47% 2018 54.3% UNCTAD

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

Table 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 30,353 100% Total Outward 4,501 100%
United Arab Emirates 10,524 35% France 892 20%
France 10,077 33% Ivory Coast 754 17%
Switzerland 1,856 6% Luxembourg 338 8%
Spain 1,175 4% Switzerland 254 6%
Kuwait 948 3% Mauritius 235 5%
“0” reflects amounts rounded to +/- USD 500,000.

Table 4: Sources of Portfolio Investment
Data not available.

14. Contact for More Information

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

Tunisia

Executive Summary

Tunisia continued to make progress on its democratic transition and successfully held its second round of parliamentary and presidential elections since the 2011 revolution in September and October 2019, which led to the formation of a new government on February 27, 2020.  In 2019, Tunisia’s economy experienced a GDP growth of 1 percent.  The country still faces high unemployment, high inflation, and rising levels of public debt.

In recent years, successive governments have advanced much-needed structural reforms to improve Tunisia’s business climate, including an improved bankruptcy law, an investment code and initial “negative list,” a law enabling public-private partnerships, and a supplemental law designed to improve the investment climate.  The Government of Tunisia (GOT) has also encouraged entrepreneurship through the passage of the Start-Up Act.  The GOT also passed the “organic budget law” to ensure greater budgetary transparency and make the public aware of government investment projects over a three-year period.  These reforms will help Tunisia attract both foreign and domestic investment.

Tunisia’s strengths include its proximity to Europe, sub-Saharan Africa, and the Middle East, free-trade agreements with the EU and much of Africa, an educated workforce, and a strong interest in attracting foreign direct investment (FDI).  Sectors such as agribusiness, aerospace, renewable energy, telecommunication technologies, and services are increasingly promising.  The decline in the value of the dinar over recent years has strengthened investment and export activity in the electronic component manufacturing and textile sectors.

Nevertheless, substantial bureaucratic barriers to investment remain.  State-owned enterprises play a large role in Tunisia’s economy, and some sectors are not open to foreign investment.  The informal sector, estimated at 40 to 60 percent of the overall economy, remains problematic, as legitimate businesses are forced to compete with smuggled goods.

The United States has provided more than USD 500 million in economic growth-related assistance since 2011, in addition to loan guarantees in 2012, 2014, and 2016 that enabled the GOT to borrow nearly USD 1.5 billion at low interest.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2019 74 of 180 http://www.transparency.org/
research/cpi/overview
World Bank’s Doing Business Report 2019 78 of 190 http://www.doingbusiness.org/en/rankings
Global Innovation Index 2019 70 of 129 https://www.globalinnovationindex.org/
analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2019 USD 320 million https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2019 USD 3,360 http://data.worldbank.org/
indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

The GOT is working to improve the business climate and attract FDI.  The GOT prioritizes attracting and retaining investment, particularly in the underdeveloped interior regions, and reducing unemployment.  More than 3,350 foreign companies currently operate in Tunisia, and the government has historically encouraged export-oriented FDI in key sectors such as call centers, electronics, aerospace and aeronautics, automotive parts, textile and apparel, leather and shoes, agro-food, and other light manufacturing.  In 2019, the sectors that attracted the most FDI were energy (37 percent), services (12 percent), the electrical and electronic industry (20.6 percent), the mechanical industry (8.5 percent), and agro-food products (4 percent).  Inadequate infrastructure in the interior regions results in the concentration of foreign investment in the capital city of Tunis and its suburbs (40.4 percent), the northern coastal region (20.5 percent), and the eastern coastal region (26.1 percent).  Internal western and southern regions attracted only 13 percent of foreign investment despite special tax incentives for those regions.

The Tunisian Parliament passed an Investment Law (#2016-71) in September 2016 that went into effect April 1, 2017 to encourage the responsible regulation of investments.  The law provided for the creation of three major institutions:

  • The High Investment Council, whose mission is to implement legislative reforms set out in the investment law and decide on incentives for projects of national importance (defined as investment projects of more than 50 million dinars and 500 jobs).
  • The Tunisian Investment Authority, whose mission is to manage investment projects of more than 15 million dinars and up to 50 million dinars. Investment projects of less than 15 million dinars are managed by the Foreign Investment Promotion Agency (FIPA).
  • The Tunisian Investment Fund, which will fund foreign investment incentive packages.

These institutions were all launched in 2017.  However, the Foreign Investment Promotion Agency (FIPA) continues to be Tunisia’s principal agency to promote foreign investment.  FIPA is a one-stop shop for foreign investors.  It provides information on investment opportunities, advice on the appropriate conditions for success, assistance and support during the creation and implementation of the project, and contact facilitation and advocacy with other government authorities.

Under the 2016 Investment Law (article 7), foreign investors have the same rights and obligations as Tunisian investors.  Tunisia encourages dialogue with investors through FIPA offices throughout the country.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign investment is classified into two categories:

  • “Offshore” investment is defined as commercial entities in which foreign capital accounts for at least 66 percent of equity, and at least 70 percent of the production is destined for the export market.  However, investments in some sectors can be classified as “offshore” with lower foreign equity shares.  Foreign equity in the agricultural sector, for example, cannot exceed 66 percent and foreign investors cannot directly own agricultural land, but agricultural investments can still be classified as “offshore” if they meet the export threshold.
  • “Onshore” investment caps foreign equity participation at a maximum of 49 percent in most non-industrial projects.  “Onshore” industrial investment may have 100 percent foreign equity, subject to government approval.

Pursuant to the 2016 Investment Law (article 4), a list of sectors outlining which investment categories are subject to government authorization (the “negative list”) was set by decree on May 11, 2018.  The sectors include natural resources; construction materials; land, sea and air transport; banking, finance, and insurance; hazardous and polluting industries; health; education; and telecommunications.  Per the decree, if the relevant government decision-making body does not respond to an investment request within a specified period, typically 60 days, the authorization is automatically granted to the applicant.  The decree went into effect on July 1, 2018.

Other Investment Policy Reviews

The WTO completed a Trade Policy Review for Tunisia in July 2016.  The report is available here:  https://www.wto.org/english/tratop_e/tpr_e/tp441_e.htm .

The OECD completed an Investment Policy Review for Tunisia in November 2012.  The report is available here:  http://www.oecd.org/daf/inv/investment-policy/tunisia-investmentpolicyreview-oecd.htm .

Business Facilitation

In May 2019, the Tunisian Parliament adopted law 2019-47, a cross-cutting law that impacts legislation across all sectors.  The law is designed to improve the country’s business climate and further improve its ranking in the World Bank’s Doing Business Report.  Moreover, the law simplified the process of creating a business, permitted new methods of finance, improved regulations for corporate governance, and provided the private sector the right to operate a project under the framework of a public-private partnership (PPP).

This legislation and previous investment laws are all referenced on the United Nations Conference on Trade and Development (UNCTAD) website: https://investmentpolicy.unctad.org/country-navigator/221/tunisia .

The World Bank Doing Business 2020 report ranks Tunisia 19  in terms of ease of starting a business.  In the Middle East and North Africa, Tunisia ranked second after the UAE, and first in North Africa ahead of Morocco (53), Egypt (114), Algeria (157), and Libya (186):  https://www.doingbusiness.org/en/data/exploreeconomies/tunisia#DB_sb .

The Agency for Promotion of Industry and Innovation (APII) and the Tunisia Investment Authority (TIA) are the focal point for business registration.  Online project declaration for industry or service sector projects for both domestic and foreign investment is available at:  www.tunisieindustrie.nat.tn/en/doc.asp?mcat=16&mrub=122 .

The new online TIA platform allows potential investors to electronically declare the creation, extension, and renewal of all types of investment projects.  The platform also allows investors to incorporate new businesses, request special permits, and apply for investment and tax incentives. https://www.tia.gov.tn/ .

APII has attempted to simplify the business registration process by creating a one-stop shop that offers registration of legal papers with the tax office, court clerk, official Tunisian gazette, and customs.  This one-stop shop also houses consultants from the Investment Promotion Agency, Ministry of Employment, National Social Security Authority (CNSS), postal service, Ministry of Interior, and the Ministry of Trade.  Registration may face delays as some agencies may have longer internal processes.  Prior to registration business must first initiate an online declaration of intent, to which APII provides a notification of receipt within 24 hours.

The World Bank’s Doing Business 2020 report indicates that business registration takes an average of 9 days and costs about USD 90 (253 Tunisian dinars):   http://www.doingbusiness.org/en/data/exploreeconomies/tunisia#DB_sb .

For agriculture and fisheries, business registration information can be found at:  www.apia.com.tn .

In the tourism industry, companies must register with the National Office for Tourism at: http://www.tourisme.gov.tn/en/investing/administrative-services.html .

The central point of contact for established foreign investors and companies is the Foreign Investment Promotion Agency (FIPA):  http://www.investintunisia.tn .

Outward Investment

The GOT does not incentivize outward investment, and capital transfer abroad is tightly controlled by the Central Bank.

2. Bilateral Investment Agreements and Taxation Treaties

Tunisia has signed 55 bilateral investment treaties, of which 39 are in force: http://investmentpolicyhub.unctad.org/IIA/CountryBits/213#iiaInnerMenu .

The 2002 Trade and Investment Framework Agreement (TIFA) between Tunisia and the United States remains active.  A meeting of the Bilateral Trade and Investment Council in May 2019 helped promote engagement and cooperative reform efforts.  A Bilateral Investment Treaty (BIT) between Tunisia and the United States entered into force in 1993, and a bilateral agreement on avoidance of double taxation has been effective since January 1990.

In December 2019, Tunisia’s Ministry of Finance issued general public note no. 27/2019 to assist foreign companies, including those from the U.S., to use bilateral taxation treaties to avoid double taxation, penalties, or extra taxes imposed on companies residing in privileged tax territories, such as the State of Delaware, for example

Tunisia and the United States signed an Intergovernmental Agreement on the Foreign Account Tax Compliance Act (FATCA), which went into force in September 2019.  FATCA requires foreign financial institutions to report to the IRS information about financial accounts held by U.S. taxpayers, or by foreign entities in which U.S. taxpayers hold a substantial ownership interest.

Tunisia has multilateral and bilateral trade agreements with approximately 127 countries, including its neighbors, Libya and Algeria.  Tunisia acceded to the Common Market for Eastern and Southern Africa (COMESA) in July 2018,  and is seeking membership into the Economic Community of West African States (ECOWAS), and is a signatory of the African Continental Free Trade Area (AfCFTA).  In January 2008, Tunisia’s Association Agreement with the EU went into effect, eliminating tariffs on industrial goods.  Tunisia and the EU are negotiating a full-fledged free-trade agreement, but it has not yet been concluded.  In addition, Tunisia is a signatory to the World Bank’s Multilateral Investment Guarantee Agency (MIGA), which offers private sector political risk insurance.  Tunisia is a member of the World Trade Organization and maintains bilateral agreements with Turkey and the member states of the European Free Trade Association (EFTA), as well as a multilateral agreements with other Arab League states.

In 2013, the Tunisian Parliament adopted the OECD Multilateral Convention on Mutual Administrative Assistance in Tax Matters.

In April 2020, the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes rated Tunisia “Largely Compliant” on the standard of exchange of information on request (EOIR).  https://www.oecd-ilibrary.org/fr/taxation/global-forum-on-transparency-and-exchange-of-information-for-tax-purposes-tunisia-2020-second-round_fdeb6766-en 

3. Legal Regime

Transparency of the Regulatory System

As stipulated in the 2014 constitution, Tunisia has adopted a semi-parliamentary political system whereby power is shared among the Parliament, the Presidency of the Republic, and the Government, which is composed of a ministerial cabinet led by a Prime Minister (Head of Government).  The Presidency and the Government fulfill executive roles. The Government creates the majority of laws and regulations; however, the Presidency of the Republic and Parliament also develop and propose laws.

The Parliament debates and votes on the adoption of legislation.  Draft legislation is accessible to the public via the Parliament’s website.

Ministerial decrees and other regulations are debated at the level of the Government and adopted by a Ministerial Council headed by the Prime Minister.

After adoption, all laws, decrees, and regulations are published on the website of the Official Gazette and enforced by the Government at the national level.

The Government takes few proactive steps to raise public awareness of the public consultation period for new draft laws and decrees.  Civil society, NGOs, and political parties are all pushing for increased transparency and inclusiveness in rule-making.  Many draft bills, such as the budget law, were reviewed before submission for a final vote under pressure from civil society.  Business associations, chambers of commerce, unions, and political parties reviewed the 2016 Investment Law prior to final adoption.

In January 2019, the Tunisian Parliament passed the Organic Budget Law, which is a foundational law defining the parameters for the government’s annual budgeting process.  The law aimed to bring the budget process in line with principles expressed in the 2014 constitution by enlarging Parliament’s role in the budgetary process and strengthening the financial autonomy of the legislative and judiciary branches.  The law required the government to organize its budget by policy objective, detail budget projections over a three-year timeframe, and revise its accounting system to ensure greater transparency.

Not all accounting, legal, and regulatory procedures are in line with international standards.  Publicly listed companies adhere to national accounting norms.

The Parliament has oversight authority over the GOT but cannot ensure that all administrative processes are followed.

The World Bank Global Indicators of Regulatory Governance  for Tunisia are available here: http://rulemaking.worldbank.org/en/data/explorecountries/tunisia .

Tunisia is a member of the Open Government Partnership, a multilateral initiative that aims to secure concrete commitments from governments to promote transparency, empower citizens, fight corruption, and harness new technologies to strengthen governance:  http://www.opengovpartnership.org/country/tunisia .

Most of Tunisia’s public finances and debt obligations are debated and voted on by the Parliament.

International Regulatory Considerations

As part of its negotiations toward a comprehensive free-trade agreement with the EU, the GOT is considering incorporating a number of EU standards in its domestic regulations.

Tunisia became a member of the WTO in 1995 and is required to notify the WTO regarding draft technical regulations on Technical Barriers to Trade (TBT).  However, in October 2018 the Ministry of Commerce released a circular that temporarily restricted the import of certain goods without going through the WTO notification process, which negatively impacted some business operations without forewarning.

Tunisia has yet to ratify the WTO Trade Facilitation Agreement (TFA) that would improve processes at the port of entry.  However, Tunisia submitted a “Category A” notification in September 2014 and a “Category C” notification in September 2019, which should have required the GOT to implement TFA measures by February 2017.

Legal System and Judicial Independence

The Tunisian legal system is secular and based on the French Napoleonic code and meets EU standards.  While the 2014 Tunisian constitution guarantees the independence of the judiciary, constitutionally mandated reforms of courts and broader judiciary reforms are still ongoing.

Tunisia has a written commercial law but does not have specialized commercial courts.

Regulations or enforcement actions can be appealed at the Court of Appeals.

Laws and Regulations on Foreign Direct Investment

The 2016 Investment Law directs tax incentives towards regional development promotion, technology and high value-added products, research and development (R&D), innovation, small and medium-sized enterprises (SMEs), and the education, transport, health, culture, and environmental protection sectors.  Foreign investors can apply for government incentives online through the Tunisian Investment Authority (TIA) website:  https://www.tia.gov.tn/en .

The primary one-stop-shop webpage for investors looking for relevant laws and regulations is hosted at the Investment and Innovation Promotion Agency website, http://www.tunisieindustrie.nat.tn/en/doc.asp?mcat=12&mrub=209 .  The 2016 Investment Law (article 15) calls for the creation of an Investor’s Unique Point of Contact within the Ministry of Development, Investment, and International Cooperation to assist new and existing investors to launch and expand their projects.

In addition, the Parliament has adopted a number of economic reforms since 2015, including laws concerning renewable energy, competition, public-private partnerships, bankruptcy, and the independence of the Central Bank of Tunisia, as well as a Start-Up Act to promote the creation of new businesses and entrepreneurship.

Competition and Anti-Trust Laws

The 2015 Competition Law established a government appointed Competition Council to reduce government intervention in the economy and promote competition based on supply and demand.

This law voided previous agreements that fixed prices, limited free competition, or restricted the entry of new companies as well as those that controlled production, distribution, investment, technical progress, or supply centers.  While the law ensures free pricing of most products and services, there are a few protected items, such as bread and electricity, for which the GOT can still intervene in pricing.  Moreover, in exceptional cases of large increases or collapses in prices, the Ministry of Commerce reserves the right to regulate prices for a period of up to six months.  The Ministry of Commerce also reserves the right to intervene in sectors to ensure free and fair competition.  However, the Competition Council can make exceptions to its anti-trust policies if it deems it necessary for overall technical or economic progress.

The Competition Council also has the power to investigate competition-inhibiting cases and make recommendations to the Ministry of Commerce upon the Ministry’s request.

Expropriation and Compensation

There are no outstanding expropriation cases involving U.S. interests.  The 2016 Investment Law (article 8) stipulates that investors’ property may not be expropriated except in cases of public interest.  Expropriation, if carried out, must comply with legal procedures, be executed without discrimination on the basis of nationality, and provide fair and equitable compensation.

U.S. investments in Tunisia are protected by international law as stipulated in the U.S.-Tunisia Bilateral Investment Treaty (BIT).  According to Article III of the BIT, the GOT reserves the right to expropriate or nationalize investments for the public good, in a non-discriminatory manner, and upon advance compensation of the full value of the expropriated investment.  The treaty grants the right to prompt review by the relevant Tunisian authorities of conformity with the principles of international law.  When compensation is granted to Tunisian or foreign companies whose investments suffer losses owing to events such as war, armed conflict, revolution, state of national emergency, civil disturbance, etc., U.S. companies are accorded “the most favorable treatment in regards to any measures adopted in relation to such losses.”

Dispute Settlement

ICSID Convention and New York Convention

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

Investor-State Dispute Settlement

U.S. investments in Tunisia are protected by international law as stipulated in the U.S.-Tunisia Bilateral Investment Treaty (BIT).  The BIT stipulates that procedures shall allow an investor to take a dispute with a party directly to binding third-party arbitration.

Disputes involving U.S. persons are relatively rare.  Over the past 10 years, there were three dispute cases involving U.S. investors; two were settled and one is still ongoing.  U.S. firms have generally been successful in seeking redress through the Tunisian judicial system.

The Tunisian Code of Civil and Commercial Procedures allows for the enforcement of foreign court decisions under certain circumstances, such as arbitration.

There is no pattern of significant investment disputes or discrimination involving U.S. or other foreign investors.

International Commercial Arbitration and Foreign Courts

The Tunisian Arbitration Code brought into effect by Law 93-42 of April 26, 1993, governs arbitration in Tunisia.  Certain provisions within the code are based on the United Nations Commission on International Trade Law (UNCITRAL) model law.  Tunisia has several domestic dispute resolution venues.  The best known is the Tunis Center for Conciliation and Arbitration.  When an arbitral tribunal does not adhere to the rules governing the process, either party can apply to the national courts for relief.  Unless the parties have agreed otherwise, an arbitral tribunal may, on the request of one of the parties, order any interim measure that it deems appropriate.

Bankruptcy Regulations

Parliament adopted in April 2016 a new bankruptcy law that replaced Chapter IV of the Commerce Law and the Recovery of Companies in Economic Difficulties Law.  These two laws had duplicative and cumbersome processes for business rescue and exit and gave creditors a marginal role.  The new law increases incentives for failed companies to undergo liquidation by limiting state collection privileges.  The improved bankruptcy procedures are intended to decrease the number of non-performing loans and facilitate access of new firms to bank lending.

According to the World Bank Doing Business 2020 report, Tunisia’s recovery rate (how much creditors recover from an insolvent firm at the end of insolvency proceedings) is about 51.3 cents on the dollar, compared to 27.3 cents for MENA and 70.2 cents for OECD high-income countries.

4. Industrial Policies

Investment Incentives

Preferential status is usually linked to the percentage of foreign corporate ownership, percentage of production for the export market, and investment location.  The 2016 Investment Law provides investors with a broad range of incentives linked to increased added value, performance and competitiveness, use of new technologies, regional development, environmental protection, and high employability.

To incentivize the employment of new university graduates, the GOT assumes the employer’s portion of social security costs (16 percent of salary) for the first seven years of the investment, with an extension of up to 10 years in the interior regions.  Investments with high job-creation potential may benefit from the purchase of state-owned land at the price of one Tunisian dinar per square meter.  Investors who purchase companies in financial distress may also benefit from tax breaks and social security assistance.  These advantages are determined on a case-by-case basis.

Further benefits are available for offshore investments, such as tax exemptions on profits and reinvested revenues, duty-free import of capital goods with no local equivalents, and full tax and duty exemption on raw materials, semi-finished goods, and services necessary for operation.

On March 9, 2017, the GOT adopted decree no. 2017-389 on financial incentives to investment in priority sectors, economic performance areas, and regional development.  Investors have to declare their projects through the regional FIPA and APII offices to receive incentives.  Investors can also request incentives online through the Tunisian Investment Authority (TIA) website:  https://www.tia.gov.tn/en .

According to the World Bank’s Doing Business 2020 report, Tunisia’s overall ranking improved to 78 out of 190 countries, from 80 the previous year.

Foreign Trade Zones/Free Ports/Trade Facilitation

Tunisia has free-trade zones, officially known as “Parcs d’Activités Economiques,” in Bizerte and Zarzis.  While the land is state-owned, a private company manages the free-trade zones.  They enjoy adequate public utilities and fiber-optic connectivity.  Companies established in the free-trade zones are exempt from taxes and customs duties and benefit from unrestricted foreign exchange transactions, as well as limited duty-free entry into Tunisia of inputs for transformation and re-export.  Factories operate as bonded warehouses and have their own assigned customs personnel.

For example, companies in Bizerte’s free-trade zone may rent space for three Euros per square meter annually –  a level unchanged since 1996 – plus a low service fee.  Long-term renewable leases, up to 25 years, are subject to a negotiable 3 percent escalation clause.  Expatriate personnel are allowed duty-free entry of personal vehicles.  During the first year of operations, companies within the zone must export 100 percent of their production.  Each following year, the company may sell domestically up to 30 percent of the previous year’s total volume of production, subject to local customs duties and taxes.  Lease termination has not been a problem, and all companies that desired to depart the zone reportedly did so successfully.

Performance and Data Localization Requirements

Foreign resident companies face restrictions related to the employment and compensation of expatriate employees.  The 2016 Investment Law limits the percentage of expatriate employees per company to 30 percent of the total work force (excluding oil and gas companies) for the first three years and to 10 percent starting in the fourth year.  There are somewhat lengthy renewal procedures for annual work and residence permits, and the GOT has announced its intention to ease them in the future.  Although rarely enforced, legislation limits the validity of expatriate work permits to two years.

Central Bank regulations impose administrative burdens on companies seeking to pay for temporary expatriate technical assistance from local revenue.  For example, before it receives authorization to transfer payment from its operations in Tunisia, a foreign resident company that utilizes a foreign accountant must document that the service is necessary, fairly valued, and unavailable in Tunisia.  This regulation hinders a foreign resident company’s ability to pay for services performed abroad.

The host government does not follow “forced localization,” but encourages the use of domestic content.

There are no requirements for foreign information technology (IT) providers to turn over source code that is protected by the intellectual property law; however, they are required to inform the Ministry of Communication Technologies and Digital Economy about encrypted equipment.

Public companies and institutions are prohibited by the Ministry of Communication Technologies and Digital Economy from freely transmitting and storing personal data outside of the country.

Private and public institutions must comply with the recommendations of the National Authority for Personal Data Protection (INPDP) when handling personal data, even if it is business-related.  The National Institute of Office Automation and Micro-computing (INBMI) enforces the rules on local data storage.

Until recently, performance requirements were generally limited to investment in the petroleum sector.  Now, such requirements are in force in sectors such as telecommunications and for private sector infrastructure projects on a case-by-case basis.  These requirements tend to be specific to the concession or operating agreement (e.g., drilling a certain number of wells, or producing a certain amount of electricity).

5. Protection of Property Rights

Real Property

Secured interests in property are enforced in Tunisia.  Mortgages and liens are in common use, and the recording system is reliable.

Foreign and/or non-resident investors are allowed to lease any type of land, but can only acquire non-agricultural land.

A large portion of privately held land, especially agriculture land, has no clear title, and the government is investing a great deal of effort to encourage people to clear and register their properties.  For the past ten years, it has been estimated that privately held land accounts for approximately 45 percent.

Properties legally purchased must be duly registered to ensure they remain the property of their actual owners, even if they have been unoccupied for a long time.

According to the World Bank’s Doing Business 2020 report, registering a property in Tunisia is done in five steps, takes 35 days, and costs around 6.1 percent of the total property cost. In North Africa, Tunisia ranks second after Morocco but is ahead of Egypt, Algeria, and Libya.

Intellectual Property Rights

Tunisia is a member of the World Intellectual Property Organization (WIPO) and signatory to the United Nations Agreement on the Protection of Patents and Trademarks.  The agency responsible for patents and trademarks is the National Institute for Standardization and Industrial Property (INNORPI — Institut National de la Normalisation et de la Propriété Industrielle).  Tunisia also is party to the Madrid Protocol for the International Registration of Marks.  Foreign patents and trademarks should be registered with INNORPI.

Tunisia’s patent and trademark laws are designed to protect owners duly registered in Tunisia.  In the area of patents, foreign businesses are guaranteed treatment equal to that afforded to Tunisian nationals.  Tunisia updated its legislation to meet the requirements of the WTO agreement on Trade-Related Aspects of Intellectual Property (TRIPS).

Copyright protection is the responsibility of the Tunisian Copyright Protection Organization (OTDAV — Office Tunisien des Droits d´Auteurs et des Droits Voisins), which also represents foreign copyright organizations.

The 2009 Intellectual Property law greatly expanded the current scope of protections.  The minimum fine for counterfeiting is 10,000 Tunisian dinars (approximately USD 3,800), and copyright protection is valid for the holder’s lifetime.  Customs agents have the authority to seize suspected counterfeit goods immediately.  Tunisia’s 2014 constitution enshrined intellectual property protection in article 41.

If customs officials suspect a copyright violation, they are permitted to inspect and seize suspected goods.  For products utilizing foreign trademarks registered at INNORPI, the Customs Code empowers customs agents to enforce intellectual property rights (IPR) throughout the country.  Tunisian copyright law applies to literary works, art, scientific works, new technologies, and digital works.  Its application and enforcement, however, have not always been consistent with foreign commercial expectations.  Print, audio, and video media are particularly susceptible to copyright infringement in Tunisia.  Smuggling of illegal items takes place through Tunisia’s porous borders.

In 2015, the GOT issued a decree defining registration and arbitration procedures for trade and service marks, and establishing a national trademark registry.  The new decree contained provisions governing the registration of trademarks under the Madrid Protocol and included improvements such as the extension of the deadline for opposition to the registration of trademarks, as well as the electronic filing of applications for trademarks registration.

In March 2020, the Tunisian Parliament approved the government’s request for Tunisia to host the headquarters of the Pan-African Intellectual Property Body (PAIPO).  Tunisia is waiting for at least 14 African countries to ratify the formation of PAIPO in order for it to enter into force.

The registration of pharmaceutical drugs in Tunisia requires that the product is both registered and marketed in the country of origin.  In 2005, Tunisia removed its restriction on pharmaceutical imports where there are similar generic products manufactured locally.

Resources for Rights Holders 

Peter Mehravari
Intellectual Property Attaché for the Middle East and North Africa
U.S. Embassy Kuwait City, Kuwait
U.S. Department of Commerce Global Markets
U.S. Patent and Trademark Office
Tel: +965 2259 1455
peter.mehravari@trade.gov

AmCham Tunisia:  http://www.amchamtunisia.org.tn/ 

Attorneys list: https://tn.usembassy.gov/u-s-citizen-services/local-resources-of-u-s-citizens/attorneys/

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

6. Financial Sector

Capital Markets and Portfolio Investment 

Tunisia’s financial system is dominated by its banking sector, with banks accounting for roughly 85 percent of financing in Tunisia.  Overreliance on bank financing impedes economic growth and stronger job creation.  Equity capitalization is relatively small; Tunisia’s stock market provided 13.2 percent of corporate financing in 2017 according to the Financial Market Council annual report.  Other mechanisms, such as bonds and microfinance, contribute marginally to the overall economy.

Created in 1969, the Bourse de Tunis (Tunis stock exchange) listed 82 companies as of December 2019.  The total market capitalization of these companies was USD 8.41 billion, equivalent to 23.1% of the GDP.  During the last five years, the exchange’s regulatory and accounting systems have been brought more in line with international standards, including compliance and investor protections.  The exchange is supervised and regulated by the state-run Capital Market Board.  Most major global accounting firms are represented in Tunisia.  Firms listed on the stock exchange must publish semiannual corporate reports audited by a certified public accountant.  Accompanying accounting requirements exceed what many Tunisian firms can, or are willing to, undertake.  GOT tax incentives attempt to encourage companies to list on the stock exchange.  Newly listed companies that offer a 30 percent capital share to the public receive a five-year tax reduction on profits.  In addition, individual investors receive tax deductions for equity investment in the market.  Capital gains are tax-free when held by the investor for two years.

Foreign investors are permitted to purchase shares in resident (onshore) firms only through authorized Tunisian brokers or through established mutual funds.  To trade, non-resident (offshore) brokers require a Tunisian intermediary and may only service non-Tunisian customers.  Tunisian brokerage firms may have foreign participation, as long as that participation is less than 50 percent.  Foreign investment of up to 50 percent of a listed firm’s capital does not require authorization.

Money and Banking System

According to the Central Bank of Tunisia (CBT) annual report on banking supervision published in January 2020, Tunisia hosts 30 banks, of which 23 are onshore and seven are offshore.  Onshore banks include three Islamic banks, two microcredit and SME financing banks, and 18 commercial universal banks.

Domestic credit to the private sector provided by banks stood at 68 percent of GDP in 2018.   According to the World Bank, this level is higher than the MENA region average of 56.7 percent.  In the World Bank’s Doing Business 2020 survey, Tunisia’s ranking in terms of ease of access to credit went down from 99 in 2019 to 104 in 2020.  Tunisia’s banking system penetration has grown by four percent annually for the past five years.  87 percent of banks are located in the coastal regions, with about 41 percent in the greater Tunis area alone.  Tunisia’s banking system activity is mainly within the 23 onshore banks, which accounted for 92 percent of assets, 93 percent of loans, and 97 percent of deposits in 2018.  They offer identical services targeting Tunisia’s larger corporations.  Meanwhile, SMEs and individuals often have difficulty accessing bank capital due to high collateral requirements.

Foreign banks are permitted to open branches and establish operations in Tunisia under the offshore regime and are subject to the supervision of the Central Bank.

Government regulations control lending rates.  This prevents banks from pricing their loan portfolios appropriately and incentivizes bankers to restrict the provision of credit.  Competition among Tunisia’s many banks has the effect of lowering observed interest rates; however, banks often place conditions on loans that impose far higher costs on borrowers than interest rates alone.  These non-interest costs may include collateral requirements that come in the form of liens on real estate.  Often, collateral must equal or exceed the value of the loan principal.  Collateral requirements are high because banks face regulatory difficulties in collecting collateral, thereby adding to costs.  According to the CBT banking supervision report, nonperforming loans (NPLs) were at 13.4 percent of all bank loans in 2018, mostly in the agriculture (27.1 percent) and tourism (46 percent) sectors.

Beyond the banks and stock exchange, few effective financing mechanisms are available in the Tunisian economy.  A true bond market does not exist, and government debt sold to financial institutions is not re-traded on a formal, transparent secondary market.  Private equity remains a niche element in the Tunisian financial system.  Firms experience difficulty raising sufficient capital, sourcing their transactions, and selling their stakes in successful investments once they mature.  The microfinance market remains underexploited, with non-governmental organization Enda Inter-Arabe the dominant lender in the field.

The GOT recognizes two categories of financial service activity:  banking (e.g., deposits, loans, payments and exchange operations, and acquisition of operating capital) and investment services (reception, transmission, order execution, and portfolio management).  Non-resident financial service providers must present initial minimum capital (fully paid up at subscription) of 25 million Tunisian dinars (USD 8.5 million) for a bank, 10 million dinars (USD 3.4 million) for a non-bank financial institution, 7.5 million dinars (USD 2.6 million) for an investment company, and 250,000 dinars (USD 85,200) for a portfolio management company.

Foreign Exchange and Remittances

Foreign Exchange 

The Tunisian Dinar can only be traded within Tunisia, and it is illegal to move dinars out of the country.  The dinar is convertible for current account transactions (export-import operations, remittances of investment capital, earnings, loan or lease payments, royalties, etc.).  Central Bank authorization is required for some foreign exchange operations.  For imports, Tunisian law prohibits the release of hard currency from Tunisia as payment prior to the presentation of documents establishing that the merchandise has been shipped to Tunisia.

In 2019, the dinar depreciated 10 percent against the dollar and 5 percent against the Euro.

Non-residents are exempt from most exchange regulations.  Under foreign currency regulations, non-resident companies are defined as having:

  • Non-resident individuals who own at least 66 percent of the company’s capital, and
  • Capital fully financed by imported foreign currency.

Foreign investors may transfer funds at any time and without prior authorization.  This applies to principal as well as dividends or interest capital.  The procedures for repatriation are complex, however, and within the discretion of the Central Bank.  The difficulty in the repatriation of capital and dividends is one of the most frequent complaints of foreign investors in Tunisia.

There are no limits to the amount of foreign currency that visitors can bring to Tunisia to exchange into local currency.  However, amounts exceeding the equivalent of 25,000 dinars (USD 8,500) must be declared to customs at the port of entry.  Non-residents must also report foreign currency imports if they wish to re-export or deposit more than 5,000 dinars (USD 1,700).  Tunisian customs authorities may require currency exchange receipts on exit from the country.

Remittance Policies

Tunisia’s 2016 Investment Law enshrines the right of foreign investors to transfer abroad funds in foreign currency with minimal interference from the Central Bank.  Ministerial decree no. 417 of May 2018 stipulates that the Central Bank of Tunisia must decide on foreign currency remittance requests within 90 days.   In case of no response, the investor may contact the Higher Investment Authority, which will give final approval within 30 days.

Sovereign Wealth Funds

By decree no.85-2011, the GOT established a sovereign wealth fund, “Caisse des Depots et des Consignations” (CDC), to boost private sector investment and promote small and medium enterprise (SME) development.  It is a state-owned investment entity responsible for independently managing a portion of the state’s financial assets.  The CDC was set up with support from the French CDC and the Moroccan CDG (Caisse de Depots et de Gestion) and became operational in early 2012.  The original impetus for the creation of the CDC was to manage assets confiscated from the former ruling family as independently as possible in order to serve the public interest.  More information is available about the CDC at www.cdc.tn .  As of June 2019, CDC had 7.7 billion dinars (USD 2.6 billion) in assets and 317 million dinars (USD 110 million) in capital.

All CDC investments are made locally, with the objective of boosting investments in the interior regions and promoting SME development.

The CDC is governed by a supervisory committee composed of representatives from different ministries and chaired by the Minister of Finance.

7. State-Owned Enterprises

State-owned enterprises (SOEs) are still prominent throughout the economy.  Many compete with the private sector, in industries such as telecommunications, banking, and insurance, while others hold monopolies in sectors considered sensitive by the government, such as railroad transportation, water and electricity distribution, and port logistics.  Importation of basic food staples and strategic items such as cereals, rice, sugar, and edible oil also remains under SOE control.

The GOT appoints senior management officials to SOEs, who report directly to the ministries responsible for the companies’ sector of operation.  SOE boards of directors include representatives from various ministries and personnel from the company itself.  Similar to private companies, the law requires SOEs to publish independently audited annual reports, regardless of whether corporate capital is publicly traded on the stock market.

The GOT encourages SOEs to adhere to OECD Guidelines on Corporate Governance, but adherence is not enforced.  Investment banks and credit agencies tend to associate SOEs with the government and consider them as having the same risk profile for lending purposes.

Privatization Program

The GOT allows foreign participation in its privatization program.  A significant share of Tunisia’s FDI in recent years has come from the privatization of state-owned or state-controlled enterprises.  Privatization has occurred in many sectors, such as telecommunications, banking, insurance, manufacturing, and fuel distribution, among others.

In 2011, the GOT confiscated the assets of the former regime.  The list of assets involved every major economic sector.  According to the Commission to Investigate Corruption and Malfeasance, a court order is required to determine the ultimate handling of frozen assets.

Because court actions frequently take years –and with the government facing immediate budgetary needs – the GOT allowed privatization bids for shares in Ooredoo (a foreign telecommunications company of which 30 percent of shares were confiscated from the previous regime), Ennakl (car distribution), Carthage Cement (cement), City Cars (car distribution), and Banque de Tunisie and Zitouna Bank (banking).  The government is expected to sell some of its stakes in state-owned banks; however, no clear plan has been adopted or communicated so far due to fierce opposition by labor unions.

8. Responsible Business Conduct

Tunisia adopted law no. 35 in June 2018 to encourage Corporate Social Responsibility (CSR).  The law requires companies to allocate a portion of their budgets to finance CSR projects such as those in sustainable development, green economy, and youth employment.  According to the law, an organization in charge of monitoring CSR projects will be created to ensure that the projects comply with the principles of good governance and sustainable development.  Tunisia is an adherent to the OECD Guidelines for Multinational Enterprises.

Since 1989, the public sector has been subject to a government procurement law that requires labor, environmental, and other impact studies for large procurement projects.  All public institutions are subject to audits by the Court of Auditors (Cour des Comptes).

The Tunisian Central Bank issued a circular in 2011 setting guidelines for sound and prudent business management and guaranteeing and safeguarding the interests of shareholders, creditors, depositors and staff.  The circular also established policies on recruitment, appointment, and remuneration, as well as dissemination of information to shareholders, depositors, market counterparts, regulators, and the general public.

In May 2019, the Parliament adopted law no. 2019-47, which introduced in Chapter 5 a set of articles designed to improve corporate governance and increase transparency.  For example, the new legislation required that all companies listed on Tunisia’s stock exchange have on  their board of directors at least two independent members, and separate individuals serving as the chairman of the board and the chief executive officer.

The national point of contact for OECD for Multinational Enterprises guidelines is:

Ministry of Development, Investment, and International Cooperation
Avenue Mohamed V
1002 Tunis
Tel: +216 7184 9596
Fax: +216 7179 9069

Tunisia has not yet joined the Extractive Industries Transparency Initiative (EITI).  However, Tunisia participated in the eighth world conference of the EITI in Paris, France, in 2019.

Per Tunisia’s 2014 constitution, projects related to commercial development of oil, natural gas, or minerals are subject to Parliamentary approval.

9. Corruption

Most U.S. firms involved in the Tunisian market do not identify corruption as a primary obstacle to foreign direct investment.  However, some have reported that routine procedures for doing business (customs, transportation, and some bureaucratic paperwork) are sometimes tainted by corrupt practices.  Transparency International’s Corruption Perceptions Index 2019 gave Tunisia a score of 43 out of 100 and a rank of 74 among 180 countries which was the same as in 2018.  Regionally, Tunisia is ranked 7 for transparency among MENA countries and first in North Africa, ahead of Morocco, Algeria, Egypt, and Libya.  Transparency International expressed concern that Tunisia’s score has not improved in recent years despite advances in anti-corruption legislation, including laws to protect whistleblowers, improve access to information, and encourage asset declarations by public officials or individuals with public trust roles.

Recent government efforts to combat corruption include:  the seizure and privatization of assets belonging to Ben Ali’s family members; assurances that price controls on food products, and gasoline are respected; enhancement of commercial competition in the domestic market; establishment of a Minister in Charge of Public Service, Good Governance, Anti-corruption; arrests of corrupt businessmen and officials; and harmonization of Tunisian corruption laws with those of the European Union.

The constitution requires those holding high government offices to declare assets “as provided by law.”  In 2018 parliament adopted the Assets Declaration Law, identifying 35 categories of public officials required to declare their assets upon being elected or appointed and upon leaving office.  By law the National Authority for the Combat Against Corruption (INLUCC) is then responsible for publishing the lists of assets of these individuals on its website.  In addition the law requires other individuals in specified professions that have a public role to declare their assets to INLUCC, although this information would not be made public.  This provision applies to journalists, media figures, civil society leaders, political party leaders, and union officials.  The law also enumerates a “gift” policy, defines measures to avoid conflicts of interest, and stipulates the sanctions that apply in cases of illicit enrichment.  In 2019, Tunisia’s newly elected government officials declared their assets, including the 217 Members of Parliament.

In February 2017, Parliament passed law no. 2017-10 on corruption reporting and whistleblower protection.  The legislation was a significant step in the fight against corruption, as it establishes the mechanisms, conditions, and procedures for denouncing corruption.  Article 17 of the law provides protection for whistleblowers, and any act of reprisal against them is considered a punishable crime.  For public servants, the law also guarantees the protection of whistleblowers against possible retaliation from their superiors.  In September 2017, the GOT established the Independent Access to Information Commission.  This authority was prescribed in the 2016 Access to Information Law to proactively encourage government agencies to comply with the new law and to adjudicate complaints against the government for failing to comply with the law.  Following the passage of the access to information and whistleblower protection laws, the government initiated an anti-corruption campaign led by then prime minister Youssef Chahed.  A series of arrests and investigations targeted well-known businesspersons, politicians, journalists, police officers, and customs officials.  Preliminary charges included embezzlement, fraud, and taking bribes.

Tunisia’s penal code devotes 11 articles to defining and classifying corruption and assigns corresponding penalties (including fines and imprisonment).  Several other regulations also address broader concepts of corruption.  Detailed information on the application of these laws and their effectiveness in combating corruption is not publicly available, and there are no GOT statistics specific to corruption. The Independent Commission to Investigate Corruption, created in 2011, handled corruption complaints from 1987 to 2011.  The commission referred 5 percent of cases to the Ministry of Justice.  In 2012, the commission was replaced by the National Authority to Combat Corruption (INLUCC), which has the authority to forward corruption cases to the Ministry of Justice, give opinions on legislative and regulatory anti-corruption efforts, propose policies and collect data on corruption, and facilitate contact between anti-corruption efforts in the government and civil society.

During a March 16, 2019 press conference, INLUCC president Chawki Tabib said that it takes seven to 10 years on average for corruption cases to be processed in the judicial system.  In 2018 the Tunisian Financial Analysis Committee, which operates under the auspices of the Central Bank as a financial intelligence unit, announced that it froze approximately 200 million dinars ($70 million) linked to suspected money-laundering transactions.  The committee received approximately 600 reports of suspicious transactions related to corruption and illicit financial flows during the year.

Since 1989, a comprehensive law designed to regulate each phase of public procurement has governed the public sector.  The GOT also established the Higher Commission on Public Procurement (HAICOP) to supervise the tender and award process for major government contracts.  The government publicly supports a policy of transparency.  Public tenders require bidders to provide a sworn statement that they have not and will not, either by themselves or through a third party, make any promises or give gifts with a view to influencing the outcome of the tender and realization of the project.  Starting September 2018, the government imposed by decree that all public procurement operations be conducted electronically via a bidding platform called Tunisia Online E-Procurement System (TUNEPS).  Despite the law, competition on government tenders appears susceptible to corrupt behavior.  Pursuant to the Foreign Corrupt Practices Act (FCPA), the U.S. Government requires that American companies requesting U.S. Government advocacy certify that they do not participate in corrupt practices.

Resources to Report Corruption

Contacts at agencies responsible for combating corruption:

Chawki Tabib
President
The National Anti-Corruption Authority (Instance Nationale de Lutte Contre la Corruption – INLUCC)
http://www.inlucc.tn 
71 Avenue Taieb Mhiri, 1002 Tunis Belvédère – Tunisia
+216 71 840 401 / Toll Free: 80 10 22 22
contact@inlucc.tn

“Watchdog” organization

Achraf Aouadi
President
I WATCH Tunisia
14 Rue d’Irak 1002 Lafayette, Tunisia
+ 216 71 844 226
contact@iwatch.tn

10. Political and Security Environment

In September and October 2019, Tunisia held presidential and parliamentary elections, the country’s first since its post-revolution constitution was ratified in 2014, which were widely regarded as well-executed and credible.  The transition of power was smooth and without incident, following a clear procedure outlined by the 2014 constitution.  Newly elected President Kais Saied designated former Minister of Finance Elyes Fakhfakh to form a new coalition government, which he did on February 27.  In the nine years since the revolution, Tunisia has made significant progress in the areas of civil society and rights-based reforms, but economic indicators continue to lag and have been a major driver of frequent protests.  Public opinion polls indicated that corruption, poor economic conditions, and persistently high unemployment fuel public discontent with the political class.  While ideological differences with respect to religion dominate much of the political discord, differing economic ideologies – whether Tunisia will follow a statist economic model or a liberal one – have more tangible effects on policy.  The country’s first municipal elections, held in May 2018, were a critical first step in the decentralization process, which should help alleviate some of the economic disparity between the relatively wealthy coastal areas and the relatively poor interior of the country.

Two major terrorist attacks targeting the tourism sector occurred in 2015, killing dozens of foreign tourists at the Bardo National Museum in Tunis and a beach hotel in Sousse.  Security conditions have markedly improved since then.  Travelers are urged to visit www.travel.state.gov  for the latest travel alerts and warnings regarding Tunisia.

11. Labor Policies and Practices

Tunisia has a labor force of approximately 5.4 million.  The official 2019 unemployment rate was 15.5 percent.  However, the registered unemployment for the fourth quarter of 2019 was 14.9 percent.  Approximately 28.2 percent of the unemployed are university graduates, of which three quarters are women.  Official statistics do not count underemployment or provide disaggregated data by geography.  As Tunisia works on creating a sustainable economy for its new democracy, professionals, such as IT engineers, doctors, and professors, continue to seek employment abroad.  Tunisian interlocuters maintain that around 70 percent of Tunisian young professionals seek employment in other countries after graduation.  Additionally, a World Bank study estimated that 41.5 percent of the Tunisian workforce is employed in the parallel economy.  Official statistics do not count underemployment.

Over the past two decades, the structure of the workforce remained relatively stable, and as of the last quarter of 2019, it stood at 13.8 percent in agriculture and fishing, 33.9 percent in industry, and 51.8 percent in commerce and services.  Tunisia has developed its industrial sector and created low-skilled employment, although several manufacturers struggle to find qualified technical workers.   Tunisian law provides workers with the right to organize, form and join unions, and bargain collectively.  The law prohibits anti-union discrimination by employers and retribution against strikers.  The government generally enforces applicable laws.  Currently, four national labor confederations operate in Tunisia.  The oldest and largest is the General Union of Tunisian Workers (UGTT — Union Générale des Travailleurs Tunisiens).  The others are the General Confederation of Tunisian Workers (CGTT — Confederation Générale des Travailleurs Tunisiens), the Tunisian Labor Union (UTT — Union Tunisienne du Travail), created in May 2011, and the Tunisian Labor Organization (OTT — Organisation Tunisienne du Travail), created in August 2013.  UGTT claims about one third of the salaried labor force as members, although more are covered under UGTT-negotiated contracts.  Wages and working conditions are established through triennial collective bargaining agreements between the UGTT, the national employers’ association (UTICA — Union Tunisienne de l’Industrie, du Commerce, et de l’Artisanat), and the GOT.  These tripartite agreements set industry standards and generally apply to about 80 percent of the private sector labor force, regardless of whether individual companies are unionized.  The regional tripartite commissions also arbitrate labor disputes.

Public Wage Increase:  On February 7, 2019, the GOT and UGTT reached an agreement to increase salaries for civil servants commensurate with the October 20, 2018 increase for SOE employees.  Depending on grades and positions, increases ranged from 66 to 90 dinars per month, retroactively covering calendar years 2017 and 2018.  In July and August 2019, the GOT and UGTT negotiated a general pay increase for civil servants, to include a special increase for skilled professionals, covering the 2019 calendar year.  Negotiated increases ranged from 70 to 90 dinars a month depending on the grade and position.

Minimum Wage Increase:  On July 14, 2018, former Prime Minister Youssef Chahed decided to raise the minimum wage (SMIG) by 6 percent retroactively, starting from May 2018, for the 48- and 40-hour work week regimes.  For the 48-hour regime, the minimum wage is 378.56 dinars per month.  For the 40-hour regime, it is 323.43 dinars per month.  In May 2019, Chahed approved an increase in the monthly minimum wage for industrial and agricultural workers to 403 dinars.  The minimum wage exceeds the poverty income level of 180 dinars per month.

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

The Development Finance Corporation (DFC), a new U.S. government agency, provides financing for private development projects.  Created by the Better Utilization of Investments Leading to Development (BUILD) Act of 2018, the DFC consolidated and modernized the former Overseas Private Investment Corporation (OPIC) and Development Credit Authority (DCA) of the United States Agency for International Development (USAID).  In addition to the existing capabilities of OPIC and DCA, the DFC has an investment cap of USD 60 billion, more than double that of OPIC, and new financial tools.  These tools include equity financing; technical assistance; feasibility studies; the ability to use local currency loans and first-loss guarantees to reduce risks; a “preference” for U.S. investors, rather than a requirement, thereby expanding partnership opportunities with foreign investors; and, a prioritization of low- and lower-middle income countries.

Outside of energy infrastructure projects in Europe and Eurasia, high income countries (as defined by the World Bank) generally do not qualify for DFC support.  OPIC was active in Tunisia since 1963 and executed a number of investments and debt transactions.  From the prior OPIC portfolio in Tunisia, the DFC currently has an active $50-million credit-guarantee facility with local banks to increase access to finance for small and medium-sized enterprises.

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source* USG or international statistical source USG or International Source of Data:  BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount  
Host Country Gross Domestic Product (GDP) ($M USD) 2018 $39,772 2019 $38,798 www.worldbank.org/en/country 
Foreign Direct Investment Host Country Statistical source* USG or international statistical source USG or international Source of data:  BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) 2018 $274.2 2019 $320 BEA data available at https://www.bea.gov/international/direct-investment-and-multinational-enterprises-comprehensive-data 
Host country’s FDI in the United States ($M USD, stock positions) N/A N/A 2019 $ 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 2018 35% 2019 76.1% UNCTAD data available at
https://unctad.org/en/Pages/DIAE/
World%20Investment%20Report/
Country-Fact-Sheets.aspx
 

*Source: Tunisia’s Foreign Investment Promotion Agency (FIPA) yearend December 2018 published in June 2019.
FIPA, which is the host country statistical source for FDI stock, does not track the stock of foreign investment in energy and uses statistics that are constant 2010.

Table 3: Sources and Destination of FDI
Foreign Direct Investment Flows (excluding energy) in Tunisia in 2019
From Top Five Sources (US Dollars, Millions)
Inward Foreign Direct Investment Outward Foreign Direct Investment
Total Inward 535.17 100% Total Outward 47.18 100%
France 184 34.4% N/A
Germany 61.55 11.5%
Italy 59.4 11.1%
Qatar 51.9 9.7%
Austria 49.8 9.3%
“0” reflects amounts rounded to +/- USD 500,000.

*Sources: Tunisia’s Foreign Investment Promotion Agency (FIPA) yearend December 2019 published in February 2020.  Central Bank of Tunisia (CBT) yearend December 2019 published in February 2020.

Table 4: Sources of Portfolio Investment
Portfolio Investment Assets in Tunisia in 2019
 (Millions, current US Dollars)
Total Equity Securities Total Debt Securities
All Countries 57.65 100% All Countries N/A All Countries N/A
N/A N/A N/A

*Source: Tunisia’s Foreign Investment Promotion Agency (FIPA) yearend December 2019 published in February 2020.
Central Bank of Tunisia
*Tunisia was not covered by the IMF’s Coordinated Portfolio Investment Survey (CPIS).

14. Contact for More Information

Embassy Tunis Commercial Section
Commercial Officer
U.S. Embassy Tunis, Les Berges du Lac, 1053, Tunisia
+216 71 107 000
TunisCommercial@state.gov