2ae873453c - United States Department of State (2024)

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

The Government of Argentina has identified its top economic priorities for 2021 as resolving its debt situation with the IMF, controlling inflation, responding to the COVID-19 pandemic by providing financial aid to the most vulnerable sectors of society. When the Fernandez administration took office in late 2019, the Ministry of Foreign Affairs, International Trade, and Worship became the lead governmental entity for investment promotion. The Fernandez administration does not have a formal business roundtable or other dialogue established with international investors, although it does engage with domestic and international companies.

Market regulations such as capital controls, trade restrictions, and price controls enhance economic distortion that hinders the investment climate in the country.

Foreign and domestic investors generally compete under the same conditions in Argentina. The amount of foreign investment is restricted in specific sectors such as aviation and media. Foreign ownership of rural productive lands, bodies of water, and areas along borders is also restricted.

Argentina has a National Investment and Trade Promotion Agency that provides information and consultation services to investors and traders on economic and financial conditions, investment opportunities, and Argentine laws and regulations. The agency also provides matchmaking services and organizes roadshows and trade delegations. Upon the change of administration, the government placed the Agency under the directionof the Ministry of Foreign Affairs (MFA) to improvecoordination between the Agency and Argentina´s foreign policy. The Under Secretary for Trade and Investment Promotion of the MFA worksas a liaison between the Agency and provincial governments and regional organizations. The new administration also created the National Directorate for Investment Promotion under the Under Secretary for Trade and Investment Promotion, making the Directorate responsible for promoting Argentina as an investment destination. The Directorate´s mission also includes determining priority sectors and projects and helping Argentine companies expand internationally and/or attract international investment.

The agency’s web portal provides information on available services ( https://www.inversionycomercio.org.ar/). The 23 provinces and the City of Buenos Aires also have their own provincial investment and trade promotion offices.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign and domestic commercial entities in Argentina are regulated by the Commercial Partnerships Law (Law 19,550), the Argentina Civil and Commercial Code, and rules issued by the regulatory agencies. Foreign private entities can establish and own business enterprises and engage in all forms of remunerative activity in nearly all sectors.

Full foreign equity ownership of Argentine businesses is not restricted, for the most part, with exception in the air transportation and media industries. The share of foreign capital in companies that provide commercial passenger transportation within the Argentine territory is limited to 49 percent per the Aeronautic Code Law 17,285. The company must be incorporated according to Argentine law and domiciled in Buenos Aires. In the media sector, Law 25,750 establishes a limit on foreign ownership in television, radio, newspapers, journals, magazines, and publishing companies to 30 percent.

Law 26,737 (Regime for Protection of National Domain over Ownership, Possession or Tenure of Rural Land) establishes that a foreigner cannot own land that allows for the extension of existing bodies of water or that are located near a Border Security Zone. In February 2012, the government issued Decree 274/2012 further restricting foreign ownership to a maximum of 30 percent of national land and 15 percent of productive land. Foreign individuals or foreign company ownership is limited to 1,000 hectares (2,470 acres) in the most productive farming areas. In June 2016, the Government of Argentina issued Decree 820 easing the requirements for foreign land ownership by changing the percentage that defines foreign ownership of a person or company, raising it from 25 percent to 51 percent of the social capital of a legal entity. Waivers are not available.

Argentina does not maintain an investment screening mechanism for inbound foreign investment. U.S. investors are not at a disadvantage to other foreign investors or singled out for discriminatory treatment.

Other Investment Policy Reviews

Argentina was last subject to an investment policy review by the OECD in 1997 and a trade policy review by the WTO in 2013. The United Nations Conference on Trade and Development (UNCTAD) has not done an investment policy review of Argentina.

Business Facilitation

In 2019, stemming from the country’s deteriorating financial and economic situation,the Argentine government re-imposed capital controls on business and consumers, limiting their access to foreign exchange. Strict capital controls and increases in taxes on exports and imports the Argentine government instituted at the end of 2019 have generated uncertainty in the business climate.

With the stated aim of keeping inflation under control and avoiding production shortages during the COVID-19 pandemic, the government increased market interventions in 2020, creating further market distortions that may deter investment. Argentina currently has two consumer goods price control programs, “Precios Cuidados,” a voluntary program established in 2014, and “Precios Máximos,” an emergency program established in March 2020. The Argentine Congress also passed the Shelves Law (No. 27,545), which regulates the supply, display, and distribution of products on supermarket shelves and virtual stores. Key articles of the Law are still pending implementing regulations. Private companies expressed concern over the final regulatory framework of the Law, which could affect their production, distribution, and marketing business model.

In August 2020, the government issued an edict freezing prices for telecommunication services (mobile and land), cable and satellite TV, and internet services until December 2020, later extending the measure into 2021. In Argentina’s high inflation environment, companies sought a 20 to 25 percent increase, however, the regulator allowed the telecom sector a five percent rate increase as of January 2021. The health sector was also subject to limits on price increases. In February 2021, the Secretary of Trade took administrative action againstmajor consumer firms and food producers forpurportedlycausing supermarket shortages bywithholding production and limiting distribution. Companies are currently contesting this decision. In March 2021, the Secretary of Domestic Trade issued Resolution 237/2021 establishing a national registry to monitor the production levels, distribution, and sales of private companies. If companies fail to comply, they could be subject to fines or closure. Tighter import controls imposed by the Fernandez administration have affected the business plans of private companies that need imported inputs for production. The private sector noted increased discretion on the part of trade authorities responsible for approving import licenses.

The Ministry of Production eased bureaucratic hurdles for foreign trade through the creation of a Single Window for Foreign Trade (“VUCE” for its Spanish acronym) in 2016. The VUCE centralizes the administration of all required paperwork for the import, export, and transit of goods (e.g., certificates, permits, licenses, and other authorizations and documents). The Argentine government has not fully implemented the VUCE for use across the country. Argentina subjects imports to automatic or non-automatic licenses that are managed through the Comprehensive Import Monitoring System (SIMI, or Sistema Integral de Monitoreo de Importaciones), established in December 2015 by the National Tax Agency (AFIP by its Spanish acronym) through Resolutions 5/2015 and 3823/2015. The SIMI system requires importers to submit detailed information electronically about goods to be imported into Argentina. Once the information is submitted, the relevant Argentine government agencies can review the application through the VUCE and make any observations or request additional information. The list of products subject to non-automatic licensing has been modified several times since the beginning of the SIMI system. Due to the Covid-19 pandemic, the government reclassified goods needed to combat the health emergency previously subject to non-automatic import licenses to automatic import licenses. Approximately1,500 tariff lines are currently subject to non-automatic licenses.

The Argentine Congress approved an Entrepreneurs’ Law in March 2017, which allows for the creation of a simplified joint-stock company (SAS, or Sociedad por Acciones Simplificada) online within 24 hours of registration. However, in March 2020, the Fernandez administration annulled the 24-hour registration system. Industry groups said this hindered the entrepreneurship ecosystem by revoking one of the pillars of the Entrepreneurs´ Law.

In December 2020, the government issued the regulatory framework for the Knowledge Based-Economy Law, which was passed in October 2020. The Law establishes tax benefits for entrepreneurs until December 2029. The complete list of activities included in the tax benefit can be found at: http://servicios.infoleg.gob.ar/infolegInternet/verNorma.do;jsessionid=56625A2FC5152F34ECE583158D581896?id=346218.

Foreign investors seeking to set up business operations in Argentina follow the same procedures as domestic entities without prior approval and under the same conditions as local investors. To open a local branch of a foreign company in Argentina, the parent company must be legally registered in Argentina. Argentine law requires at least two equity holders, with the minority equity holder maintaining at least a five percent interest. In addition to the procedures required of a domestic company, a foreign company establishing itself in Argentina must legalize the parent company’s documents, register the incoming foreign capital with the Argentine Central Bank, and obtain a trading license.

A company must register its name with the Office of Corporations (IGJ, or Inspección General de Justicia). The IGJ website describes the registration process and some portions can be completed online ( https://www.argentina.gob.ar/justicia/igj/guia-de-tramites). Once the IGJ registers the company, the company must request that the College of Public Notaries submit the company’s accounting books to be certified with the IGJ. The company’s legal representative must obtain a tax identification number from AFIP, register for social security, and obtain blank receipts from another agency. Companies can register with AFIP online at www.afip.gob.ar or by submitting the sworn affidavit form No. 885 to AFIP.

Details on how to register a company can be found at the Ministry of Productive Development’s website: https://www.argentina.gob.ar/produccion/crear-una-empresa. Instructions on how to obtain a tax identification code can be found at: https://www.argentina.gob.ar/obtener-el-cuit-por-internet.

The enterprise must also provide workers’ compensation insurance for its employees through the Workers’ Compensation Agency (ART, or Aseguradora de Riesgos del Trabajo). The company must register and certify its accounting of wages and salaries with the Secretariat of Labor, within the Ministry of Labor, Employment, and Social Security.

In April 2016, the Small Business Administration of the United States and the Ministry of Production of Argentina signed a Memorandum of Understanding (MOU) to set up small and medium sized business development centers (SBDCs) in Argentina. Under the MOU, in June 2017, Argentina set up a SBDC in the province of Neuquén to provide small businesses with tools to improve their productivity and increase their growth.

The Ministry of Productive Development offers attendance-based courses and online training for businesses. The training menu can be viewed at: https://www.argentina.gob.ar/produccion/capacitacion.

Outward Investment

The National Directorate for Investment Promotion under the Under Secretary for Trade and Investment Promotion at the MFA assists Argentine companies in expanding their business overseas, in coordination with the National Investment and Trade Promotion Agency. Argentina does not have any restrictions regarding domestic entities investing overseas, nor does it incentivize outward investment.

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

Australia is generally welcoming to foreign direct investment (FDI), with foreign investment widely considered to be an essential contributor to Australia’s economic growth. Other than certain required review and approval procedures for designated types of foreign investment described below, there are no laws that discriminate against foreign investors.

A number of investment promotion agencies operate in Australia. The Australian Trade Commission (often referred to as Austrade) is the Commonwealth Government’s national “gateway” agency to support investment into Australia. Austrade provides coordinated government assistance to promote, attract, and facilitate FDI, supports Australian companies to grow their business in international markets, and delivers advice to the Australian Government on its trade, tourism, international education and training, and investment policy agendas. Austrade operates through a number of international offices, with U.S. offices primarily focused on attracting foreign direct investment into Australia and promoting the Australian education sector in the United States. Austrade in the United States operates from offices in Boston, Chicago, Houston, New York, San Francisco, and Washington, DC. In addition, state and territory investment promotion agencies also support international investment at the state level and in key sectors.

Limits on Foreign Control and Right to Private Ownership and Establishment

Within Australia, foreign and domestic private entities may establish and own business enterprises and may engage in all forms of remunerative activity in accordance with national legislative and regulatory practices. See Section 4: Legal Regime – Laws and Regulations on Foreign Direct Investment below for information on Australia’s investment screening mechanism for inbound foreign investment.

Other than the screening process described in Section 4, there are few limits or restrictions on foreign investment in Australia. Foreign purchases of agricultural land greater than AUD 15 million (USD 11 million) are subject to screening. This threshold applies to the cumulative value of agricultural land owned by the foreign investor, including the proposed purchase. However, the agricultural land screening threshold does not affect investments made under the Australia-United States Free Trade Agreement (AUSFTA). The current threshold remains AUD 1.216 billion (USD 940 million) for U.S. non-government investors. Investments made by U.S. non-government investors are subject to inclusion on the foreign ownership register of agricultural land and to Australian Tax Office (ATO) information gathering activities on new foreign investment.

The Foreign Investment Review Board (FIRB), which advises Australia’s Treasurer, may impose conditions when approving foreign investments. These conditions can be diverse and may include: retention of a minimum proportion of Australian directors; certain requirements on business activities, such as the requirement not to divest certain assets; and certain taxation requirements. Such conditions are in keeping with Australia’s policy of ensuring foreign investments are in the national interest.

Other Investment Policy Reviews

Australia has not conducted an investment policy review in the last three years through either the OECD or UNCTAD system. The WTO reviewed Australia’s trade policies and practices in 2019, and the final report can be found at: https://www.wto.org/english/tratop_e/tpr_e/tp496_e.htm.

The Australian Trade Commission compiles an annual “Why Australia Benchmark Report” that presents comparative data on investing in Australia in the areas of Growth, Innovation, Talent, Location, and Business. The report also compares Australia’s investment credentials with other countries and provides a general snapshot on Australia’s investment climate. See: http://www.austrade.gov.au/International/Invest/Resources/Benchmark-Report.

Business Facilitation

Business registration in Australia is relatively straightforward and is facilitated through a number of government websites. The government’s business.gov.au website provides an online resource and is intended as a “whole-of-government” service providing essential information on planning, starting, and growing a business. Foreign entities intending to conduct business in Australia as a foreign company must be registered with the Australian Securities and Investments Commission (ASIC). As Australia’s corporate, markets, and financial services regulator, ASIC’s website provides information and guides on starting and managing a business or company in the country.

In registering a business, individuals and entities are required to register as a company with ASIC, which then gives the company an Australian Company Number, registers the company, and issues a Certificate of Registration. According to the World Bank “Starting a Business” indicator, registering a business in Australia takes two days, and Australia ranks 7th globally on this indicator.

Outward Investment

Australia generally looks positively towards outward investment as a way to grow its economy. There are no restrictions on investing abroad. Austrade, Export Finance Australia (EFA), and various other government agencies offer assistance to Australian businesses looking to invest abroad, and some sector-specific export and investment programs exist. The United States is the top destination, by far, for Australian investment overseas.

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

Brazil was the world’s sixth-largest destination for Foreign Direct Investment (FDI) in 2019, with inflows of $72 billion, according to UNCTAD. The GoB actively encourages FDI – particularly in the automobile, renewable energy, life sciences, oil and gas, and transportation infrastructure sectors – to introduce greater innovation into Brazil’s economy and to generate economic growth. GoB investment incentives include tax exemptions and low-cost financing with no distinction made between domestic and foreign investors. Foreign investment is restricted in the health, mass media, telecommunications, aerospace, rural property, maritime, and insurance sectors.

The Brazilian Trade and Investment Promotion Agency (Apex-Brasil) plays a leading role in attracting FDI to Brazil by working to identify business opportunities, promoting strategic events, and lending support to foreign investors willing to allocate resources to Brazil. Apex-Brasil is not a “one-stop shop” for foreign investors, but the agency can assist in all steps of the investor’s decision-making process, to include identifying and contacting potential industry segments, sector and market analyses, and general guidelines on legal and fiscal issues. Their services are free of charge. The website for Apex-Brasil is: http://www.apexbrasil.com.br/en

In 2019, the Ministry of Economy created the Ombudsman’s office to provide foreign investors with a single point of contact for concerns related to FDI. The plan seeks to eventually streamline foreign investments in Brazil by providing investors, foreign and domestic, with a simpler process for the creation of new businesses and additional investments in current companies. Currently, the Ombudsman’s office is not operating as a single window for services, but rather as an advisory resource for FDI.

Limits on Foreign Control and Right to Private Ownership and Establishment

A 1995 constitutional amendment (EC 6/1995) eliminated distinctions between foreign and local capital, ending favorable treatment (e.g. tax incentives, preference for winning bids) for companies using only local capital. However, constitutional law restricts foreign investment in healthcare (Law 8080/1990, altered by 13097/2015), mass media (Law 10610/2002), telecommunications (Law 12485/2011), aerospace (Law 7565/1986 a, Decree 6834/2009, updated by Law 12970/2014, Law 13133/2015, and Law 13319/2016), rural property (Law 5709/1971), maritime (Law 9432/1997, Decree 2256/1997), and insurance (Law 11371/2006).

Screening of FDI

Foreigners investing in Brazil must electronically register their investment with the Central Bank of Brazil (BCB) within 30 days of the inflow of resources to Brazil. In cases of investments involving royalties and technology transfer, investors must register with Brazil’s patent office, the National Institute of Industrial Property (INPI). Investors must also have a local representative in Brazil. Portfolio investors must have a Brazilian financial administrator and register with the Brazilian Securities Exchange Commission (CVM).

To enter Brazil’s insurance and reinsurance market, U.S. companies must establish a subsidiary, enter into a joint venture, acquire a local firm, or enter into a partnership with a local company. The BCB reviews banking license applications on a case-by-case basis. Foreign interests own or control 20 of the top 50 banks in Brazil, but Santander is the only major wholly foreign-owned retail bank.

Since June 2019, foreign investors may own 100 percent of capital in Brazilian airline companies.

While 2015 and 2017 legislative and regulatory changes relaxed some restrictions on insurance and reinsurance, rules on preferential offers to local reinsurers remain unchanged. Foreign reinsurance firms must have a representation office in Brazil to qualify as an admitted reinsurer. Insurance and reinsurance companies must maintain an active registration with Brazil’s insurance regulator, the Superintendence of Private Insurance (SUSEP) and maintain a minimum solvency classification issued by a risk classification agency equal to Standard & Poor’s or Fitch ratings of at least BBB-.

Foreign ownership of cable TV companies is allowed, and telecom companies may offer television packages with their service. Content quotas require every channel to air at least three and a half hours per week of Brazilian programming during primetime. Additionally, one-third of all channels included in any TV package must be Brazilian.

The National Land Reform and Settlement Institute administers the purchase and lease of Brazilian agricultural land by foreigners. Under the applicable rules, the area of agricultural land bought or leased by foreigners cannot account for more than 25 percent of the overall land area in a given municipal district. Additionally, no more than 10 percent of agricultural land in any given municipal district may be owned or leased by foreign nationals from the same country. The law also states that prior consent is needed for purchase of land in areas considered indispensable to national security and for land along the border. The rules also make it necessary to obtain congressional approval before large plots of agricultural land can be purchased by foreign nationals, foreign companies, or Brazilian companies with majority foreign shareholding. In December 2020, the Senate approved a bill (PL 2963/2019; source: https://www25.senado.leg.br/web/atividade/materias/-/materia/136853) to ease restrictions on foreign land ownership; however, the Chamber of Deputies has yet to consider the bill. Brazil is not yet a signatory to the World Trade Organization (WTO) Agreement on Government Procurement (GPA), but submitted its application for accession in May 2020. In February 2021, Brazil formalized its initial offer to start negotiations. The submission establishes a series of thresholds above which foreign sellers will be allowed to bid for procurements. Such thresholds differ for different procuring entities and types of procurements. The proposal also includes procurements bysome states and municipalities (with restrictions) as well as state-owned enterprises,butitexcludes certain sensitive categories, such as financial services, strategic health products, and specific information technologies. Brazil’s submission still must be negotiated with GPA members.

By statute, a Brazilian state enterprise may subcontract services to a foreign firm only if domestic expertise is unavailable. Additionally, U.S. and other foreign firms may only bid to provide technical services where there are no qualified Brazilian firms. U.S. companies need to enter into partnerships with local firms or have operations in Brazil in order to be eligible for “margins of preference” offered to domestic firms participating in Brazil’s public sector procurement to help these firms win government tenders. Nevertheless, foreign companies are often successful in obtaining subcontracting opportunities with large Brazilian firms that win government contracts and, since October 2020, foreign companies are allowed to participate in bids without the need for an in-country corporate presence (although establishing such a presence is mandatory if the bid is successful). A revised Government Procurement Protocol of the trade bloc Mercosul (Mercosur in Spanish), signed in 2017, would entitle member nations Brazil, Argentina, Paraguay, and Uruguay to non-discriminatory treatment of government-procured goods, services, and public works originating from each other’s suppliers and providers. However, none of the bloc’s members have yet ratified it, so it has not entered into force.

Other Investment Policy Reviews

The Organization for Economic Co-operation and Development’s (OECD) December 2020 Economic Forecast Summary of Brazil summarized that, despite new COVID-19 infections and fatalities remaining high, the economy started to recover across a wide range of sectors by the end of 2020. Since the publication, Brazil’s economy is faltering due to the continuing pandemic’s financial impact. The strong fiscal and monetary policy response managed to prevent a sharper economic contraction, cushioning the impact on household incomes and poverty. Nonetheless, fiscal vulnerabilities have been exacerbated by these necessary policy responses and public debt has risen. Failure to continue structural reform progress could hold back investment and future growth. As of March 2021, forecasts are for economic recovery in 2021 and high unemployment. The OECD report recommended reallocating some expenditures and raising spending efficiency to improve social protections, and resuming the fiscal adjustments under way before the pandemic. The report also recommended structural reforms to enhance domestic and external competition and improve the investment climate.

The IMF’s 2020 Country Report No. 20/311 on Brazil highlighted the severe impact of the pandemic in Brazil’s economic recovery but praised the government’s response, which averted a deeper economic downturn, stabilized financial markets, and cushioned income loss for the poorest. The IMF assessed that the lingering effects of the crisis will restrain consumption while investment will be hampered by idle capacity and high uncertainty. The IMF projected inflation to stay below target until 2023, given significant slack in the economy, but with the sharp increase in the primary fiscal deficit, gross public debt is expected to rise to 100 percent of GDP and remain high over the medium-term. The IMF noted that Brazil’s record low interest rate (Selic) helped the government reduce borrowing costs, but the steepening of the local currency yield curve highlighted market concerns over fiscal risks. The WTO’s 2017 Trade Policy Review of Brazil noted the country’s open stance towards foreign investment, but also pointed to the many sector-specific limitations (see above). All three reports highlighted the uncertainty regarding reform plans as the most significant political risk to the economy. These reports are located at the following links:

Business Facilitation

A company must register with the National Revenue Service (Receita Federal) to obtain a business license and be placed on the National Registry of Legal Entities (CNPJ). Brazil’s Export Promotion and Investment Agency (APEX) has a mandate to facilitate foreign investment. The agency’s services are available to all investors, foreign and domestic. Foreign companies interested in investing in Brazil have access to many benefits and tax incentives granted by the Brazilian government at the municipal, state, and federal levels. Most incentives target specific sectors, amounts invested, and job generation. Brazil’s business registration website can be found at: http://receita.economia.gov.br/orientacao/tributaria/cadastros/cadastro-nacional-de-pessoas-juridicas-cnpj .

Overall, Brazil dropped in the World Bank’s Doing Business Report from 2019 to 2020; however, it improved in the following areas: registering property; starting a business; and resolving insolvency. According to Doing Business, some Brazilian states (São Paulo and Rio de Janeiro) made starting a business easier by allowing expedited business registration and by decreasing the cost of the digital certificate. On March 2021, the GoB enacted a Provisional Measure (MP) to simplify the opening of companies, the protection of minority investors, the facilitation of foreign trade in goods and services, and the streamlining of low-risk construction projects. The Ministry of Economy expects the MP, together with previous actions by the government, to raise Brazil by 18 to 20 positions in the ranking. Adopted in September 2019, the Economic Freedom Law 13.874 established the Economic Freedom Declaration of Rights and provided for free market guarantees. The law includes several provisions to simplify regulations and establishes norms for the protection of free enterprise and free exercise of economic activity.

Through the digital transformation initiative in Brazil, foreign companies can open branches via the internet. Since 2019, it has been easier for foreign businesspeople to request authorization from the Brazilian federal government. After filling out the registration, creating an account, and sending the necessary documentation, they can make the request on the Brazilian government’s Portal through a legal representative. The electronic documents will then be analyzed by the DREI (Brazilian National Department of Business Registration and Integration) team. DREI will inform the applicant of any missing documentation via the portal and e-mail and give a 60-day period to meet the requirements. The legal representative of the foreign company, or another third party who holds a power of attorney, may request registration through this link: https://acesso.gov.br/acesso/#/primeiro-acesso?clientDetails=eyJjbGllbnRVcmkiOiJodHRwczpcL1wvYWNlc3NvLmdvdi5iciIsImNsaWVudE5hbWUiOiJQb3J0YWwgZ292LmJyIiwiY2xpZW50VmVyaWZpZWRVc2VyIjp0cnVlfQ%3D%3D

Regulation of foreign companies opening businesses in Brazil is governed by article 1,134 of the Brazilian Civil Code and article 1 of DREI Normative Instruction 77/2020 . English language general guidelines to open a foreign company in Brazil are not yet available, but the Portuguese version is available at the following link: https://www.gov.br/economia/pt-br/assuntos/drei/empresas-estrangeiras .

For foreign companies that will be a partner or shareholder of a Brazilian national company, the governing regulation is DREI Normative Instruction 81/2020 DREI Normative Instruction 81/2020. The contact information of the DREI is drei@economia.gov.br and +55 (61) 2020-2302.

References:

https://investmentpolicy.unctad.org/country-navigator provides investment measures, laws and treaties enacted by selected countries.
http://www.doingbusiness.org/data/ provides indicators from economies on the ease of starting a limited liability company.
GER.co provides links to business registration sites worldwide.

Outward Investment

Brazil does not restrict domestic investors from investing abroad and Apex-Brasil supports Brazilian companies’ efforts to invest abroad under its “internationalization program”: http://www.apexbrasil.com.br/como-a-apex-brasil-pode-ajudar-na-internacionalizacao-de-sua-empresa . Apex-Brasil frequently highlights the United States as an excellent destination for outbound investment. Apex-Brasil and SelectUSA (the U.S. Government’s investment promotion office at the U.S. Department of Commerce) signed a memorandum of cooperation to promote bilateral investment in February 2014.

Brazil incentivizes outward investment. Apex-Brasil organizes several initiatives aimed at promoting Brazilian investments abroad. The Agency´s efforts comprised trade missions, business round tables, support for the participation of Brazilian companies in major international trade fairs, arranging technical visits of foreign buyers and opinion makers to learn about the Brazilian productive structure, and other select activities designed to strengthen the country’s branding abroad.

The main sectors of Brazilian investments abroad are financial services and assets (totaling 50.5 percent); holdings (11.6 percent); and oil and gas extraction (10.9 percent). Including all sectors, $416.6 billion was invested abroad in 2019. The regions with the largest share of Brazilian outward investments are the Caribbean (47 percent) and Europe (37.7 percent), specifically the Netherlands and Luxembourg.

Regulation on investments abroad are contained in BCB Ordinance 3,689/2013 (foreign capital in Brazil and Brazilian capital abroad): https://www.bcb.gov.br/pre/normativos/busca/downloadNormativo.asp?arquivo=/Lists/Normativos/Attachments/48812/Circ_3689_v1_O.pdf

Sale of cross-border mutual funds are only allowed to certain categories of investors, not to the general public. International financial services companies active in Brazil submitted to Brazilian regulators in late 2020 a proposal to allow opening these mutual funds to the general public, and hope this will be approved in mid 2021.

1. Openness To, and Restrictions Upon Foreign Investment

Policies Towards Foreign Direct Investment

Canada actively encourages FDI and maintains a sound enabling environment (23 out of 190 countries on the World Bank’s 2020 Doing Business Report). Investors are attracted to Canada’s proximity to the United States, highly skilled workforce, strong legal protections, and abundant natural resources. Once established, foreign-owned investments are treated equally to domestic investments. As of 2019, the United States had a stock of USD 402 billion of foreign direct investment in Canada. U.S. FDI stock in Canada represents 47 percent of Canada’s total investment. Canada’s FDI stock in the United States totaled USD 496 billion.

The USMCA modernizes the previous NAFTA investment protection rules and investor-state dispute settlement provisions. Parties to the USMCA agree to treat investors and investments of the other Parties in accordance with the highest international standards, and consistent with U.S. law and practice, while safeguarding each Party’s sovereignty and promoting domestic investment.

Invest in Canada is Canada’s investment attraction and promotion agency. It provides information and advice on doing business in Canada, strategic market intelligence on specific industries, site visits, and introductions to provincial, territorial, and municipal investment promotion agencies. Still, non-tariff barriers to trade across provinces and territories contribute to structural issues that have held back the productivity and competitiveness of Canada’s business sector.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign investment in Canada is regulated under the provisions of the Investment Canada Act (ICA). U.S. FDI in Canada is also subject to the provisions of the World Trade Organization (WTO), the USMCA, and the NAFTA. The ICA mandates the review of significant foreign investments to ensure they provide an economic net benefit and do not harm national security.

Canada is not a party to the USMCA’s chapter on investor-state dispute settlement (ISDS). Ongoing NAFTA arbitrations are not affected by the USMCA, and investors can file new NAFTA claims by July 1, 2023, provided the investment(s) were “established or acquired” when NAFTA was still in force and remained “in existence” on the date the USMCA entered into force. An ISDS mechanism between the United States and Canada will cease following a three-year window for NAFTA-protected legacy investments.

The Canadian government announced revised ICA foreign investment screening guidelines on March 24, 2021. The revised guidelines include additional national security considerations such as sensitive technology areas, critical minerals, and sensitive personal data. The new guidelines are aligned with Innovation, Science, and Economic Development Canada’s April 2020 update on greater scrutiny for foreign investments by state-owned investors, as well as investments involving the supply of critical goods and services.

Foreign ownership limits apply to Canadian telecommunication, airline, banking, and cultural sectors. Telecommunication carriers, including internet service providers, that own and operate transmission facilities are subject to foreign investment restrictions if they hold a 10 percent or greater share of total Canadian communication annual market revenues as mandated by The Telecommunications Act. These investments require Canadian ownership of 80 percent of voting shares, Canadians holding 80 percent of director positions, and no indirect control by non-Canadians. If the company is a subsidiary, the parent corporation must be incorporated in Canada and Canadians must hold a minimum of 66.6 percent of the parent’s voting shares. Foreign ownership of Canadian airlines is limited to 49 percent with no individual non-Canadian able to control more than 25 percent by mandate of the 2018 Transportation Modernization Act. Foreign banks can establish operations in Canada but are generally prohibited from accepting deposits of less than USD 112,000. Foreign banks must receive Department of Finance and the Office of the Superintendent of Financial Institutions (OSFI) approval to enter the Canadian market. Investment in cultural industries also carries restrictions, including a provision under the ICA that foreign investment in book publishing and distribution must be compatible with Canada’s national cultural policies and be of net benefit to Canada.

Other Investment Policy Reviews

The World Trade Organization conducted a trade policy review of Canada in 2019. The report is available at: https://www.wto.org/english/tratop_e/tpr_e/tp489_e.htm . The Organization of Economic Development completed an Economic Forecast Summary and released the results in March 2021. The report is available at: http://www.oecd.org/economy/canada-economic-snapshot/

Business Facilitation

Canada ranks 3 out of 190 countries on starting a business in the 2020 World Bank’s Ease of Doing Business rankings. The Canadian government provides information necessary for starting a business at: https://www.canada.ca/en/services/business/start.html. Business registration requires federal or provincial government-based incorporation, the application of a federal business number and corporation income tax account from the Canada Revenue Agency, the registration as an extra-provincial or extra-territorial corporation in all other Canadian jurisdictions of business operations, and the application of relevant permits and licenses. In some cases, registration for these accounts is streamlined (a business can receive its business number, tax accounts, and provincial registrations as part of the incorporation process); however, this is not true for all provinces and territories.

Outward Investment

Canada prioritizes export promotion and inward investment. Outward investment has been identified as a tool to enhance future Canadian competitiveness and productivity. Canada does not restrict domestic investors from investing abroad except when recipient countries or businesses are designated under the government’s sanctions regime.

1. Openness To, and Restrictions Upon, Foreign Investment

FDI has historically played an essential role in China’s economic development. Chinese government officials have prioritized promoting relatively friendly FDI policies promising market access expansion and non-discriminatory, “national treatment” for foreign enterprises through general improvements to the business environment.They also have made efforts to strengthen China’s regulatory framework to enhance broader market-based competition.

In 2020, China issued an updated nationwide “negative list” that made some modest openings to foreign investment, most notably in the financial sector, and promised future improvements to the investment climate through the implementation of China’s newFIL.MOFCOM reported FDI flows grew by 4.5 percent year-on-year, reaching USD144 billion. In 2020, U.S. businesses expressed concern over China’s COVID-19 restrictive travel restrictions, excessive cyber security and personal data-related requirements, increased emphasis on the role of CCP cells in foreign enterprises, and an unreliable legal system.See the following: HYPERLINK “https://www.amchamchina.org/white_paper/2020-american-business-in-china-white-paper/” t “_blank” American Chamber of Commerce China 2020 American Business in China White Paper

American Chamber of Commerce China 2020 American Business in China White Paper
American Chamber of Commerce China 2020 Business Climate Survey

Limits on Foreign Control and Right to Private Ownership and Establishment

Entry into the Chinese market is regulated by the country’s “negative lists,” which identify the sectors in which foreign investment is restricted or prohibited, and a catalogue for encouraged foreign investment, which identifies the sectors in which the government encourages investment.

(the “FTZ Negative List”) used in China’s 20 FTZs and one free trade port.
(̈the “Nationwide Negative List”) came into effect on June 23, 2020.
released on December 27, 2020.The PRC uses this list to encourage FDI inflows to key sectors, in particular semiconductors and other high-tech industries, to help China achieve MIC 2025 objectives.
The “Encouraged list” is subdivided into a cross-sector nationwide catalogue and a separate catalogue for western and central regions, China’s least developed regions.

MOFCOM and NDRC also released on September 16 the annual Market Access Negative Listto guide FDI. This negative list – unlike the previous lists that apply only to foreign investors – defines prohibitions and restrictions for all investors, foreign and domestic. Launched in 2016, this list highlights what economic sectors are only open to state-owned investors. In restricted industries, foreign investors face equity caps or joint venture requirements to ensure control is maintained by a Chinese national and enterprise. Due to these requirements, foreign investors often feel compelled to enter into partnerships that require transfer of technology in order to participate in China’s market. Foreign investors report fearing government retaliation if they publicly raise instances of technology coercion.

Below are a few examples of industries where these sorts of investment restrictions apply:

Preschool to higher education institutes require a Chinese partner with a dominant role.
Establishment of medical institutions require a Chinese JV partner.

Examples of foreign investment sectors requiring Chinese control include:

Selective breeding and seed production for new varieties of wheat and corn.
Basic telecommunication services and radio/television market research.

The 2020 negative lists made minor modifications to some industries, reducing the number of restrictions and prohibitions from 40 to 33 in thenationwide negative list, and from 37 to 30 in China’s pilot FTZs. Notable changes included openings in the services sector, yet most of these openings had previously been announced in 2019. In the service sector, the lists codified the removal of equity caps in financial services, eliminated requirements for investing in water and sewage systems for any city of half a million residents or fewer, and scrapped the ban on foreign investment in air traffic control. While U.S. businesses welcomed market openings, foreign investors remained underwhelmed and disappointed by Chinese government’s lack of ambition and refusal to provide more significant liberalization. Foreign investors noted these announced measures occurred mainly in industries that domestic Chinese companies already dominate.

Other Investment Policy Reviews

China is not a member of the Organization for Economic Co-Operation and Development (OECD), but the OECD Council established a country program of dialogue and co-operation with China in October 1995. The OECD completed its most recent investment policy review for China in 2008 and published an update in 2013.

China’s 2001 accession to the World Trade Organization (WTO) boosted China’s economic growth and advanced its legal and governmental reforms.  The WTO completed its most recent investment trade review for China in 2018, highlighting that China remains a major destination for FDI inflows and a key market for multinational companies.

In 2020, China improved its rating in the World Bank’sEase of Doing Business Surveyto 31st place out of 190 economies.  This was partly due to regulatory reforms that helped streamline some business processes. This ranking does not account, however, for major challenges U.S. businesses face in China like IPR violations and market access.  Moreover, China’s ranking is based on data limited only to the business environments in Beijing and Shanghai.   HYPERLINK “https://www.doingbusiness.org/en/rankings?region=east-asia-and-pacific” t “_blank” World Bank Ease of Doing Business

World Bank Ease of Doing Business

Created in 2018, the State Administration for Market Regulation (SAMR) is now responsible for business registration processes.Under SAMR’s registration system, investors in sectors outside of the Foreign Negative List are required to report when they (1) establish a Foreign Invested Enterprise (FIE); (2) establish a representative office in China; (3) acquire stocks, shares, assets or other similar equity of a domestic Chinese company; (4) re-invest and establish subsidiaries in China; and (5) invest in new projects. While an improvement relative to previous requirements for similar activities to require regulatory approval, foreign companies still complain about continued challenges when setting up a business relativeto their Chinese competitors. Many companies offer consulting, legal, and accounting services for establishing operations in China. Investors should review their options carefully with an experienced advisor before investing.

Outward Investment

Since 2001, China has pursued a “going-out” investment policy. At first, the PRC mainly encouraged SOEs to invest overseas but in recent years, China’s overseas investments have diversified with both state and private enterprises investing in nearly all industries and economic sectors. While China remains a major global investor, total outbound direct investment (ODI) flows fell 4.3 percent year-on-year in 2019 to USD136.9 billion, according to 2019 Statistical Bulletin of China’s Outward Foreign Director Investment.

The Chinese government also created “encouraged,” “restricted,” and “prohibited” outbound investment categories to suppress significant capital outflow pressure in 2016 and to guide Chinese investors into “more” strategic sectors. While the Sensitive Industrial-Specified Catalogue of 2018 restricted Chinese outbound investment in sectors like property, cinemas, sports teams and non-entity investment platforms, they encouraged outbound investment in sectors that supported China’s industrial policy by acquiring advanced manufacturing and high-tech assets. Chinese firms involved inMIC 2025 sectorsoften receive preferential government financing and subsidies for outbound investment. The guidance also encourages investments that promoted China’s Belt and Road Initiative (BRI), which seeks to create cooperation agreements with other countries via infrastructure investment, construction projects, etc.

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

The Colombian government actively encourages foreign direct investment (FDI). The economic liberalization reforms of the early 1990s provided for national treatment of foreign investors, lifted controls on remittance of profits and capital, and allowed foreign investment in most sectors. Colombia imposes the same investment restrictions on foreign investors that it does on national investors. Generally, foreign investors may participate in the privatization of state-owned enterprises without restrictions. All FDI involving the establishment of a commercial presence in Colombia requires registration with the Superintendence of Corporations and the local chamber of commerce. All conditions being equal during tender processes, national offers are preferred over foreign offers. Assuming equal conditions among foreign bidders, those with major Colombian national workforce resources, significant national capital, and/or better conditions to facilitate technology transfers are preferred.

ProColombia is the Colombian government entity that promotes international tourism, foreign investment, and non-traditional exports. ProColombia assists foreign companies that wish to enter the Colombian market by addressing specific needs, such as identifying contacts in the public and private sectors, organizing visit agendas, and accompanying companies during visits to Colombia. All services are free of charge and confidential. Priority sectors include business process outsourcing, software and IT services, cosmetics, health services, automotive manufacturing, textiles, graphic communications, and electric energy. ProColombia’s “Invest in Colombia” web portal offers detailed information about opportunities in agribusiness, manufacturing, and services in Colombia (www.investincolombia.com.co/sectors). The Duque administration – including senior leaders at the Presidency, ProColombia, and the Ministry of Commerce, Industry, and Trade – continue to stress Colombia’s openness to foreign investors and aggressively market Colombia as an investment destination.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign investment in the financial, hydrocarbon, and mining sectors is subject to special regimes, such as investment registration and concession agreements with the Colombian government, but is not restricted in the amount of foreign capital. The following sectors require that foreign investors have a legal local representative and/or commercial presence in Colombia: travel and tourism agency services; money order operators; customs brokerage; postal and courier services; merchandise warehousing; merchandise transportation under customs control; international cargo agents; public service companies, including sewage and water works, waste disposal, electricity, gas and fuel distribution, and public telephone services; insurance firms; legal services; and special air services, including aerial fire-fighting, sightseeing, and surveying.

According to the Colombian constitution and foreign investment regulations, foreign investment in Colombia receives the same treatment as an investment made by Colombian nationals. Foreign investment is permitted in all sectors, except in activities related to defense, national security, and toxic waste handling and disposal. There are no performance requirements explicitly applicable to the entry and establishment of foreign investment in Colombia.

Foreign investors face specific exceptions and restrictions in the following sectors:

Media: Only Colombian nationals or legally constituted entities may provide radio or subscription-based television services. For National Open Television and Nationwide Private Television Operators, only Colombian nationals or legal entities may be granted concessions to provide television services. Foreign investment in national television is limited to a maximum of 40 percent ownership of an operator.

Accounting, Auditing, and Data Processing: To practice in Colombia, providers of accounting services must register with the Central Accountants Board and have uninterrupted domicile in Colombia for at least three years prior to registry. A legal commercial presence is required to provide data processing and information services in Colombia.

Banking: Foreign investors may own 100 percent of financial institutions in Colombia, but are required to obtain approval from the Financial Superintendent before making a direct investment of ten percent or more in any one entity. Foreign banks must establish a local commercial presence and comply with the same capital and other requirements as local financial institutions. Every investment of foreign capital in portfolios must be through a Colombian administrator company, including brokerage firms, trust companies, and investment management companies.

Fishing: A foreign vessel may engage in fishing activities in Colombian territorial waters only through association with a Colombian company holding a valid fishing permit. If a ship’s flag corresponds to a country with which Colombia has a complementary bilateral agreement, this agreement shall determine whether the association requirement applies for the process required to obtain a fishing license. The costs of fishing permits are greater for foreign flag vessels.

Private Security and Surveillance Companies: Companies constituted with foreign capital prior to February 11, 1994 cannot increase the share of foreign capital. Those constituted after that date can only have Colombian nationals as shareholders.

Transportation: Foreign companies can only provide multimodal freight services within or from Colombian territory if they have a domiciled agent or representative legally responsible for its activities in Colombia. International cabotage companies can provide cabotage services (i.e. between two points within Colombia) “only when there is no national capacity to provide the service.” Colombia prohibits foreign ownership of commercial ships licensed in Colombia. The owners of a concession providing port services must be legally constituted in Colombia, and only Colombian ships may provide port services within Colombian maritime jurisdiction, unless there are no capable Colombian-flag vessels.

Other Investment Policy Reviews

The WTO most recently reviewed Colombia’s trade policy in June 2018. https://www.wto.org/english/tratop_e/tpr_e/tp472_e.htm

Business Facilitation

New businesses must register with the chamber of commerce of the city in which the company will reside. Applicants also register using the Colombian tax authority’s (DIAN) portal at: www.dian.gov.co to obtain a taxpayer ID (RUT). Business founders must visit DIAN offices to obtain an electronic signature for company legal representatives, and obtain – in-person or online – an authorization for company invoices from DIAN. In 2019, Colombia made starting a business a step easier by lifting a requirement of opening a local bank account to obtain invoice authorization. Companies must submit a unified electronic form to self-assess and pay social security and payroll contributions to the Governmental Learning Service (Servicio Nacional de Aprendizaje, or SENA), the Colombian Family Welfare Institute (Instituto Colombiano de Bienestar Familiar, or ICBF), and the Family Compensation Fund (Caja de Compensación Familiar). After that, companies must register employees for public health coverage, affiliate the company to a public or private pension fund, affiliate the company and employees to an administrator of professional risks, and affiliate employees with a severance fund.

According to the World Bank’s “Doing Business 2020” report, recent reforms simplified starting a business, trading across borders, and resolving insolvency. According to the report, starting a company in Colombia requires seven procedures and takes an average of 10 days. Information on starting a company can be found at http://www.ccb.org.co/en/Creating-a-company/Company-start-up/Step-by-step-company-creation; https://investincolombia.com.co/how-to-invest.html; and http://www.dian.gov.co.

Outward Investment

Colombia does not incentivize outward investment nor does it restrict domestic investors from investing abroad.

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

The Dominican Republic presents both opportunities and challenges for foreign investment. The government strongly promotes inward FDI and has prioritized creating a sound enabling environment for foreign investors. While the government has established formal programs to attract FDI, a lack of clear rules and uneven enforcement of existing rules can lead to difficulties.

The Dominican Republic provides tax incentives for investment in tourism, renewable energy, film production, Haiti-Dominican Republic border development, and the industrial sector. The country is also a signatory of CAFTA-DR, which mandates non-discriminatory treatment, free transferability of funds, protection against expropriation, and procedures for the resolution of investment disputes. However, some foreign investors indicate that the uneven enforcement of regulations and laws, or political interference in legal processes, creates difficulties for investment.

There are two main government agencies responsible for attracting foreign investment, the Export and Investment Center of the Dominican Republic (CEI-RD) and the National Council of Free Trade Zones for Export (CNZFE). CEI-RD promotes foreign investment and aids prospective foreign investors with business registration, matching services, and identification of investment opportunities. It publishes an annual “Investment Guide of the Dominican Republic,” highlighting many of the tools, incentives, and opportunities available for prospective investors. The CEI-RD also oversees “ProDominicana,” a branding and marketing program for the country launched in 2017 that promotes the DR as an investment destination and exporter. CNZFE aids foreign companies looking to establish operations in the country’s 75 free trade zones for export outside Dominican territory.

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

Ecuador is open to FDI in most sectors. The 2008 Constitution established that the state reserves the right to manage strategic sectors through state-owned or -controlled companies. The sectors identified are energy, telecommunications, non-renewable natural resources, transportation, hydrocarbon refining, water, biodiversity, and genetic patrimony (i.e. flora, fauna and ancestral knowledge). Although in recent years Ecuador took steps to attract FDI, its overall investment climate remains challenging as economic, commercial, and investment policies are subject to frequent change. From January to September 2020 (latest information available), FDI flows to Ecuador amounted to USD 897 million, 45 percent more than 2019 levels (USD 619 million) but still 36 percent lower than 2018 levels (USD 1.4 billion). FDI continues to be lower compared to other countries in the region.

There are no laws or practices that discriminate against foreign investors, but the legal complexity resulting from the inconsistent application and interpretation of existing laws and regulations increases the risks and costs of doing business in Ecuador. Under the prior Correa administration, disputes involving U.S. companies were politicized, especially in sensitive areas such as the energy sector. This resulted in several high-profile international investment dispute cases, with companies awarded damages in international arbitral rulings against Ecuador in the last few years. In addition, several cases are pending final arbitral rulings.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign and domestic private entities are allowed to establish and own business enterprises and engage in all forms of remunerative activity, with limitations in strategic sectors as enumerated in the Constitution. There are no investment screening mechanisms for inbound investment, and the Ecuadorian government actively seeks international investors. One hundred percent foreign equity ownership is allowed.

For license and franchise transactions, no limits exist on royalties that may be remitted, although financial outflows are subject to a five percent capital exit tax. All license and franchise agreements must be registered with the National Service for Intellectual Property Rights (SENADI). In addition to registering with the Superintendence of Companies, Securities, and Insurance, foreign investors must register investments with Ecuador’s Central Bank for statistical purposes.

Other Investment Policy Reviews

Ecuador conducted a trade policy review with the World Trade Organization in March 2019; information can be found at https://www.wto.org/english/tratop_e/tpr_e/tp483_e.htm.

In the past three years, Ecuador has not conducted an investment policy review with the Organization for Economic Cooperation and Development (OECD) or the United Nations Conference on Trade and Development (UNCTAD).

Business Facilitation

In 2018, Ecuador folded ProEcuador (https://www.proecuador.gob.ec/), the entity that is responsible for promoting economic development through exports, imports, and investment in Ecuador, into the Ministry of Production, Foreign Trade, Investments and Fisheries (MPCIEP). ProEcuador is now a Vice Ministry within MPCIEP and has 27 offices in 23 countries, including three in the United States. Ecuador is ranked 129th out of 190 countries in the World Bank’s Ease of Doing Business report for 2020, with particularly low rankings for Starting a Business (177), Resolving Insolvency (160), and Paying Taxes (147).

A newly created company will at a minimum be required to register with the Superintendence of Companies, Securities, and Insurance (http://www.supercias.gob.ec/), the municipal government, the Internal Revenue Service, and the Social Security Institute. The registry with the Superintendence of Companies is a completely online process as of April 2019. The incorporation of companies in Ecuador grew almost eight percent in 2020 (10,800 new companies), propelled by the introduction of the simplified joint-stock company (SAS). The SAS came into effect in May 2020 following the enactment of the Organic Law on Entrepreneurship and Innovation.

Outward Investment

Ecuador does not restrict domestic investors from investing abroad. ProEcuador (see above) is responsible for promotion of outward investment from Ecuador. Foreign investments are subject to a currency exit tax of five percent.

In February 2017, voters passed a government-backed referendum prohibiting elected officials and public servants from having financial dealings in tax havens and other suspect jurisdictions. The list includes several U.S. states and territories that do not have state income taxes. The prohibition entered into force in September 2017.

The United States and Ecuador signed the Protocol on Trade Rules and Transparency in December 2020 under the Ecuador-U.S. Trade and Investment Council Agreement (TIC). The agreement updates the TIC with new annexes in four areas: Trade Facilitation and Customs Administration, Good Regulatory Practices, Anti-Corruption, and SMEs. The Protocol awaits legislative ratification (as of April 2021).

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

Hong Kong is the world’s second-largest recipient of foreign direct investment (FDI), according to the United Nations Conference on Trade and Development’s (UNCTAD) World Investment Report 2020, with a significant amount bound for mainland China. The HKG’s InvestHK encourages inward investment, offering free advice and services to support companies from the planning stage through to the launch and expansion of their business. U.S. and other foreign firms can participate in government financed and subsidized research and development programs on a national treatment basis. Hong Kong does not discriminate against foreign investors by prohibiting, limiting, or conditioning foreign investment in a sector of the economy.

Capital gains are not taxed, nor are there withholding taxes on dividends and royalties. Profits can be freely converted and remitted. Foreign-owned and Hong Kong-owned company profits are taxed at the same rate – 16.5 percent. The tax rate on the first USD 255,000 profit for all companies is currently 8.25 percent. No preferential or discriminatory export and import policies affect foreign investors. Domestic industries receive no direct subsidies. Foreign investments face no disincentives, such as quotas, bonds, deposits, or other similar regulations.

According to HKG statistics, 3,983 overseas companies had regional operations registered in Hong Kong in 2020. The United States has the largest number with 690. Hong Kong is working to attract more start-ups as it works to develop its technology sector, and about 26 percent of start-ups in Hong Kong come from overseas.

Hong Kong’s Business Facilitation Advisory Committee is a platform for the HKG to consult the private sector on regulatory proposals and implementation of new or proposed regulations.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign investors can invest in any business and own up to 100 percent of equity. Like domestic private entities, foreign investors have the right to engage in all forms of remunerative activity.

The HKG owns virtually all land in Hong Kong, which the HKG administers by granting long-term leases without transferring title. Foreign residents claim that a 15 percent Buyer’s Stamp Duty on all non-permanent-resident and corporate buyers discriminates against them.

The main exceptions to the HKG’s open foreign investment policy are:

Broadcasting – Voting control of free-to-air television stations by non-residents is limited to 49 percent. There are also residency requirements for the directors of broadcasting companies.

Legal Services – Foreign lawyers at foreign law firms may only practice the law of their jurisdiction. Foreign law firms may become “local” firms after satisfying certain residency and other requirements. Localized firms may thereafter hire local attorneys but must do so on a 1:1 basis with foreign lawyers. Foreign law firms can also form associations with local law firms.

Other Investment Policy Reviews

Hong Kong last conducted the Trade Policy Review in 2018 through the World Trade Organization (WTO). https://www.wto.org/english/tratop_e/tpr_e/g380_e.pdf

Business Facilitation

The Efficiency Office under the Innovation and Technology Bureau is responsible for business facilitation initiatives aimed at improving the business regulatory environment of Hong Kong.

The e-Registry (https://www.eregistry.gov.hk/icris-ext/apps/por01a/index) is a convenient and integrated online platform provided by the Companies Registry and the Inland Revenue Department for applying for company incorporation and business registration. Applicants, for incorporation of local companies or for registration of non-Hong Kong companies, must first register for a free user account, presenting an original identification document or a certified true copy of the identification document. The Companies Registry normally issues the Business Registration Certificate and the Certificate of Incorporation on the same day for applications for company incorporation. For applications for registration of a non-Hong Kong company, it issues the Business Registration Certificate and the Certificate of Registration two weeks after submission.

Outward Investment

As a free market economy, Hong Kong does not promote or incentivize outward investment, nor restrict domestic investors from investing abroad. Mainland China and British Virgin Islands were the top two destinations for Hong Kong’s outward investments in 2019 (based on most recent data available).

1. Openness To, and Restrictions Upon, Foreign Investment

Policies toward Foreign Direct Investment

Changes in India’s foreign investment rules are notified in two different ways: (1) Press Notes issued by the Department for Promotion of Industry and Internal Trade (DPIIT) for most sectors, and (2) legislative action for insurance, pension funds, and state-owned enterprises in the coal sector. FDI proposals in sensitive sectors, however, require the additional approval of the Home Ministry.

DPIIT, under the Ministry of Commerce and Industry, is India’s chief investment regulator and policy maker. It compiles all policies related to India’s FDI regime into a single document to make it easier for investors to understand, and this consolidated policy is updated every year. The updated policy can be accessed at: http://dipp.nic.in/foreign-direct–investment/foreign–direct–investment-policy. DPIIT, through the Foreign Investment Implementation Authority (FIIA), plays an active role in resolving foreign investors’ project implementation problems and disseminates information about the Indian investment climate to promote investments. The Department establishes bilateral economic cooperation agreements in the region and encourages and facilitates foreign technology collaborations with Indian companies and DPIIT oftentimes consults with lead ministries and stakeholders. There however have been multiple incidents where relevant stakeholders reported being left out of consultations.

Limits on Foreign Control and Right to Private Ownership and Establishment

In most sectors, foreign and domestic private entities can establish and own businesses and engage in remunerative activities. Several sectors of the economy continue to retain equity limits for foreign capital as well as management and control restrictions, which deter investment. For example, the 2015 Insurance Act raised FDI caps from 26 percent to 49 percent, but also mandated that insurance companies retain “Indian management and control.” In the parliament’s 2021 budget session, the Indian government approved increasing the FDI caps in the insurance sector to 74 percent from 49 percent. However, the legislation retained the “Indian management and control” rider. In the August 2020 session of parliament, the government approved reforms that opened the agriculture sector to FDI, as well as allowed direct sales of products and contract farming, though implementation of these changes was temporarily suspended in the wake of widespread protests. In 2016, India allowed up to 100 percent FDI in domestic airlines; however, the issue of substantial ownership and effective control (SOEC) rules that mandate majority control by Indian nationals have not yet been clarified. A list of investment caps is accessible at: http://dipp.nic.in/foreign-direct–investment/foreign-direct–investment-policy.

Screening of FDI

All FDI must be reviewed under either an “Automatic Route” or “Government Route” process. The Automatic Route simply requires a foreign investor to notify the Reserve Bank of India of the investment and applies in most sectors. In contrast, investments requiring review under the Government Route must obtain the approval of the ministry with jurisdiction over the appropriate sector along with the concurrence of DPIIT. The government route includes sectors deemed as strategic including defense, telecommunications, media, pharmaceuticals, and insurance. In August 2019, the government announced a new package of liberalization measures and brought a number of sectors including coal mining and contract manufacturing under the automatic route.

FDI inflows were mostly directed towards the largest metropolitan areas – Delhi, Mumbai, Bangalore, Hyderabad, Chennai – and the state of Gujarat. The services sector garnered the largest percentage of FDI. Further FDI statistics are available at: http://dipp.nic.in/publications/fdi–statistics.

Other Investment Policy Reviews

OECD’s Indian Economic Snapshot: http://www.oecd.org/economy/india-economic-snapshot/

WTO Trade Policy Review: https://www.wto.org/english/tratop_e/tpr_e/tp503_e.htm

2015-2020 Government of India Foreign Trade Policy: http://dgft.gov.in/ForeignTradePolicy

Business Facilitation

DPIIT is responsible for formulation and implementation of promotional and developmental measures for growth of the industrial sector, keeping in view national priorities and socio- economic objectives. While individual lead ministries look after the production, distribution, development and planning aspects of specific industries allocated to them, DPIIT is responsible for overall industrial policy. It is also responsible for facilitating and increasing the FDI flows to the country.

Invest India is the official investment promotion and facilitation agency of the Government of India, which is managed in partnership with DPIIT, state governments, and business chambers. Invest India specialists work with investors through their investment lifecycle to provide support with market entry strategies, industry analysis, partner search, and policy advocacy as required. Businesses can register online through the Ministry of Corporate Affairs website: http://www.mca.gov.in/. After the registration, all new investments require industrial approvals and clearances from relevant authorities, including regulatory bodies and local governments. To fast-track the approval process, especially in the case of major projects, Prime Minister Modi started the Pro-Active Governance and Timely Implementation (PRAGATI initiative) – a digital, multi-modal platform to speed the government’s approval process. As of January 2020, a total of 275 project proposals worth around $173 billion across ten states were cleared through PRAGATI. Prime Minister Modi personally monitors the process to ensure compliance in meeting PRAGATI project deadlines. The government also launched an Inter-Ministerial Committee in late 2014, led by the DPIIT, to help track investment proposals that require inter-ministerial approvals. Business and government sources report this committee meets informally and on an ad hoc basis as they receive reports of stalled projects from business chambers and affected companies.

Outward Investment

The Ministry of Commerce’s India Brand Equity Foundation (IBEF) claimed in March 2020 that outbound investment from India had undergone a considerable change in recent years in terms of magnitude, geographical spread, and sectorial composition. Indian firms invest in foreign markets primarily through mergers and acquisition (M&A). According to a Care Ratings study, corporate India invested around $12.25 billion in overseas markets between April and December 2020. The investment was mostly into wholly owned subsidiaries of companies. In terms of country distribution, the dominant destinations were the Unites States ($2.36 billion), Singapore ($2.07 billion), Netherlands ($1.50 billion), British Virgin Islands ($1.37 billion), and Mauritius ($1.30 million).

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

Indonesia is an attractive destination for foreign direct investment (FDI) due to its young population, strong domestic demand, stable political situation, abundant natural resources, and well-regarded macroeconomic policy. Indonesian government officials often state that they welcome increased FDI, aiming to create jobs, spur economic growth, and court foreign investors, notably focusing on infrastructure development and export-oriented manufacturing. During the first term of President Jokowi’s administration, the government launched sixteen economic policy packages providing tax incentives in certain sectors, cutting red tape, reducing logistics costs, and creating a single submission system for business licensing applications. Foreign investors, however, have complained about vague and conflicting regulations, bureaucratic inefficiencies, ambiguous legislation in regards to tax enforcement, poor existing infrastructure, rigid labor laws, sanctity of contract issues, and corruption. To further improve the investment climate, the government drafted and parliament approved the Omnibus Law on Job Creation (Law No. 1/2020) in October 2020 to amend dozens of prevailing laws deemed to hamper investment. It introduced a risk-based approach for business licensing, simplified environmental requirements and building certificates, tax reforms to ease doing business, more flexible labor regulations, and the establishment of the priority investment list. It also streamlined the business licensing process at the regional level

The Indonesia Investment Coordinating Board, or BKPM, serves as an investment promotion agency, a regulatory body, and the agency in charge of approving planned investments in Indonesia. As such, it is the first point of contact for foreign investors, particularly in manufacturing, industrial, and non-financial services sectors. BKPM’s OSS system streamlines almost all business licensing and permitting processes, based on the issuance of Government Regulation No. 24/2018 on Electronic Integrated Business Licensing Services. While the OSS system is operational, overlapping authority for permit issuance across ministries and government institutions, both at the national and subnational level, remains challenging. The Omnibus Law on Job Creation requires local governments to integrate their license systems into the OSS. The law allows the central government to take over local governments’ authority if local governments are not performing. The government has provided investment incentives particularly for “pioneer” sectors (please see the section on Industrial Policies).

Limits on Foreign Control and Right to Private Ownership and Establishment

As part ofthe implementation of the Omnibus Law on Job Creation, the Indonesian government enacted Presidential Regulation No. 10/2021 to introduce a significant liberalization of foreign investment in Indonesia, repealing the 2016 Negative List of Investment (DNI). In contrast to the previous regulation, the new investment list sets a default principle that all business sectors are open for investment unless stipulated otherwise. It details the seven sectors that are closed to investment, explains that public services and defense are reserved for the central government, and outlines four categories of sectors that are open to investment: priority investment sectors that are eligible for incentives; sectors that are reserved for micro, small, and medium enterprises (MSMEs) and cooperatives or open to foreign investors who cooperate with them; sectors that are open with certain requirements (i.e., with caps on foreign ownership or special permit requirements); and sectors that are fully open for foreign investment. Although hundreds of sectors that were previously closed or subject to foreign ownership caps are in theory open to 100 percent foreign investment, in practice technical and sectoral regulations may stipulate different or conflicting requirements that still need to be resolved.

In total, 245 business fields listed in the newInvestment Priorities List, or DPI, are eligible for fiscal and non-fiscal incentives, notably pioneer industries, export-oriented manufacturing, capital intensive industries, national infrastructure projects, digital economy, labor-intensive industries, as well as research and development activities. Restrictions on foreign ownership in telecommunications and information technology (e.g., internet providers, fixed telecommunication providers, mobile network providers), construction services, oil and gas support services, electricity, distribution, plantations, and transportation were removed. Healthcare services including hospitals/clinics, wholesale of pharmaceutical raw materials, and finished drug manufacturing are fully open for foreign investment, which was previously capped in certain percentages. The regulation also reduced the number of business fields that are subject to certain requirements to only 46 sectors. Domestic sea transportation and postal services are open up to 49 percent of foreign ownership, while press, including magazines and newspapers, and broadcasting sectors are open up to 49 percent and 20 percent, respectively, but only for business expansion or capital increases. Small plantations, industry related to special cultural heritage, and low technology industries or industries with capital less than IDR10 billion (USD 700,000) are reserved for MSMEs and cooperatives. Foreign investors in partnership with MSMEs and cooperatives can invest in certain designated areas. The new investment list shortened the number of restricted sectors from 20 to 7 categories including cannabis, gambling, fishing of endangered species, coral extraction, alcohol, industries using ozone-depleting materials, and chemical weapons. In addition, while education investment is still subject to the Education Law, Government Regulation No. 40/2021 permits education and health investment as business activities in special economic zones.

In 2016, Bank Indonesia (BI) issued Regulation No. 18/2016 on the implementation of payment transaction processing. The regulation governs all companies providing the following services: principal, issuer, acquirer, clearing, final settlement operator, and operator of funds transfer. The BI regulation capped foreign ownership of payments companies at 20 percent, though it contained a grandfathering provision. BI’s Regulation No. 19/2017 on the National Payment Gateway (NPG) subsequently imposed a 20 percent foreign equity cap on all companies engaging in domestic debit switching transactions. Firms wishing to continue executing domestic debit transactions are obligated to sign partnership agreements with one of Indonesia’s four NPG switching companies. In December 2020, BI issued umbrella Regulation No. 22/23/2020 on the Payment System, which implements BI’s 2025 Payment System Blueprint and introduces a risk-based categorization and licensing system. The regulation will enter into force on July 1, 2021. It allows 85 percent foreign ownership of non-bank payment services providers, although at least 51 percent of shares with voting rights must be owned by Indonesians. The 20 percent foreign equity cap remains in place for payment system infrastructure operators who handle clearing and settlement services, and a grandfathering provision remains in effect for existing licensed payment companies.

Foreigners may purchase equity in state-owned firms through initial public offerings and the secondary market. Capital investments in publicly listed companies through the stock exchange are generally not subject to the limitation of foreign ownership as stipulated in Presidential Regulation No. 10/2021.

Indonesia’s vast natural resources have attracted significant foreign investment and continue to offer significant prospects. However, some companies report that a variety of government regulations have made doing business in the resources sector increasingly difficult, and Indonesia now ranks 64th of 76 jurisdictions in the Fraser Institute’s 2019 Mining Policy Perception Index. In 2012, Indonesia banned the export of raw minerals, dramatically increased the divestment requirements for foreign mining companies, and required major mining companies to renegotiate their contracts of work with the government. The full export ban did not come into effect until January 2017, when the government also issued new regulations allowing exports of copper concentrate and other specified minerals, while imposing onerous requirements. Of note for foreign investors, provisions of the regulations require that in order to export mineral ores, companies with contracts of work must convert to mining business licenses – and thus be subject to prevailing regulations – and must commit to build smelters within the next five years. Also, foreign-owned mining companies must gradually divest 51 percent of shares to Indonesian interests over ten years, with the price of divested shares determined based on a “fair market value” determination that does not take into account existing reserves. In January 2020, the government banned the export ofnickel ore for all mining companies, foreign and domestic, in the hopes of encouraging construction of domestic nickel smelters. In March 2021, the Ministry of Energy and Natural Resources issued a Ministerial Decision to allow mining business licenses holders who have not reached smelter development targets to continue exporting raw mineral ores under certain conditions. The 2020 Mining Law returned the authority to issue mining licenses to the central government. Local governments retain only authority to issue small scale mining permits

Other Investment Policy Reviews

The latest World Trade Organization (WTO) Investment Policy Review of Indonesia was conducted in December 2020 and can be found on the WTO website: https://www.wto.org/english/tratop_e/tpr_e/tp501_e.htm

The last OECD Investment Policy Review of Indonesia, conducted in 2020, can be found on the OECD website:

https://www.oecd.org/investment/oecd-investment-policy-reviews-indonesia-2020-b56512da-en.htm

The 2019 UNCTAD Report on ASEAN Investment can be found here: https://unctad.org/en/pages/PublicationWebflyer.aspx?publicationid=2568

Business Facilitation

In order to conduct business in Indonesia, foreign investors must be incorporated as a foreign-owned limited liability company (PMA) through the Ministry of Law and Human Rights. Once incorporated, a PMA must fulfill business licensing requirements through the OSS system. In February 2021, the Indonesian government issued Government Regulation No. 5/2021 introducing a risk-based approach and streamlined business licensing process for almost all sectors. The regulation classifies business activities into categories of low, medium, and high risk which will further determine business licensing requirements for each investment. Low-risk business activities only require a business identity number (NIB) to start commercial and production activities. An NIB will also serve as import identification number, customs access identifier, halal guarantee statement (for low risk), and environmental management and monitoring capability statement letter (for low risk). Medium-risk sectors must obtain an NIB and a standard certification. Under the regulation, a standard certificate for medium-low risk is a self-declared statement of the fulfillment of certain business standards, while a standard certificate for medium-high risk must be verified by the relevant government agency. High-risk sectors must apply for a full business license, including an environmental impact assessment (AMDAL). A business license remains valid as long as the business operates in compliance with Indonesian laws and regulations. A grandfather clause applies for existing businesses that have obtained a business license.

Foreign investors are generally prohibited from investing in MSMEs in Indonesia, although the Presidential Regulation No. 10/2021 opened some opportunities for partnerships in farming, two- and three-wheeled vehicles, automotive spare parts, medical devices, ship repair, health laboratories, and jewelry/precious metals.

According to Presidential Instruction 7/2019, BKPM is responsible for issuing “investment licenses” (the term used to encompass both NIB and other business licenses) that have been delegated from all relevant ministries and government institutions to foreign entities through the OSS system, an online portal which allows foreign investors to apply for and track the status of licenses and other services online. BKPM has also been tasked to review policies deemed unfavorable for investors. While the OSS’s goal is to help streamline investment approvals, investments in the mining, oil and gas, and financial sectors still require licenses from related ministries and authorities. Certain tax and land permits, among others, typically must be obtained from local government authorities. Though Indonesian companies are only required to obtain one approval at the local level, businesses report that foreign companies often must seek additional approvals in order to establish a business. Government Regulation No. 6/2021 requires local governments to integrate their business licenses system into the OSS system and standardizes services through a service-level agreement between the central and local governments.

Outward Investment

Indonesia’s outward investment is limited, as domestic investors tend to focus on the large domestic market. BKPM has responsibility for promoting and facilitating outward investment, to include providing information about investment opportunities in other countries. BKPM also uses its investment and trade promotion centers abroad to match Indonesian companies with potential investment opportunities. The government neither restricts nor provides incentives for outward private sector investment. The Ministry of State-Owned Enterprises (SOEs) encourages Indonesian SOEs through the SOE Go Global Program to increase their investment abroad, aiming to improve Indonesia’s supply chain and establish demand for Indonesian exports in strategic markets. Indonesian SOEs reportedly accounted for around USD17.5 billion in outward investment in 2019.

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

Italy welcomes foreign direct investment (FDI). As a European Union (EU) member state, Italy is bound by the EU’s treaties and laws. Under EU treaties with the United States, as well as OECD commitments, Italy is generally obliged to provide national treatment to U.S. investors established in Italy or in another EU member state.

EU and Italian antitrust laws provide Italian authorities with the right to review mergers and acquisitions for market dominance. In addition, the Italian government may block mergers and acquisitions involving foreign firms under its investment screening authority (known as “Golden Power”) if the proposed transactions raise national security concerns. Enacted in 2012 and further implemented through decrees or follow-on legislation in 2015, 2017, 2019 and 2020, the Golden Power law allows the Government of Italy (GOI) to block foreign acquisition of companies operating in strategic sectors: defense/national security, energy, transportation, telecommunications, critical infrastructure, sensitive technology, and nuclear and space technology. In March 2019, the GOI expanded the Golden Power authority to cover the purchase of goods and services related to the planning, realization, maintenance, and management of broadband communications networks using 5G technology. Under the April 6, 2020 Liquidity Decree the Prime Minister’s Office issued, the government strengthened Italy’s investment screening authority to cover all sectors outlined in the EU’s March 2019 foreign direct investment screening directive. The decree also extends (at least until June 30, 2021) Golden Power review to certain transactions by EU-based investors and gives the government new authorities to investigate non-notified transactions.

The Italian Trade Agency (ITA) is responsible for foreign investment attraction as well as promoting foreign trade and Italian exports. According to the latest figures available from the ITA, foreign investors own significant shares of 12,768 Italian companies. As of 2019, these companies had overall sales of €573.6 billion and employed 1,211,872 workers. ITA operates under the coordination of the Italian Ministry of Economic Development and the Ministry of Foreign Affairs. As of April 2021, ITA operates through a network of 79 offices in 65 countries. ITA promotes foreign investment in Italy through Invest in Italy program: http://www.investinitaly.com/en/. The Foreign Direct Investment Unit is the dedicated unit of ITA for facilitating the establishment and development of foreign companies in Italy.

While not directly responsible for investment attraction, SACE, Italy’s export credit agency, has additional responsibility for guaranteeing certain domestic investments. Foreign investors – particularly in energy and infrastructure projects – may see SACE’s project guarantees and insurance as further incentive to invest in Italy.

Additionally, Invitalia is the national agency for inward investment and economic development operating under the Italian Ministry of Economy and Finance. The agency focuses on strategic sectors for development and employment. Invitalia finances projects both large and small, targeting entrepreneurs with concrete development plans, especially in innovative and high-value-added sectors. For more information, see https://www.invitalia.it/eng. The Ministry of Economic Development (https://www.mise.gov.it/index.php/en/) within its Directorate for Incentives to Businesses also has an office with some responsibilities relating to attraction of foreign investment.

Italy’s main business association (Confindustria) also helps companies in Italy: https://www.confindustria.it/en.

Limits on Foreign Control and Right to Private Ownership and Establishment

Under EU treaties and OECD obligations, Italy is generally obliged to provide national treatment to U.S. investors established in Italy or in another EU member state. EU and Italian antitrust laws provide national authorities with the right to review mergers and acquisitions over a certain financial threshold. The Italian government may block mergers and acquisitions involving foreign firms to protect the national strategic interest or in retaliation if the government of the country where the foreign firm is from applies discriminatory measures against Italian firms. Foreign investors in the defense and aircraft manufacturing sectors are more likely to encounter resistance from the many ministries involved in reviewing foreign acquisitions than are foreign investors in other sectors.

Italy maintains a formal national security screening process for inbound foreign investment in the sectors of defense/national security, transportation, energy, telecommunications, critical infrastructure, sensitive technology, and nuclear and space technology through its “Golden Power” legislation. Italy expanded its Golden Power authority in March 2019 to include the purchase of goods and services related to the planning, realization, maintenance, and management of broadband communications networks using 5G technology. On April 6, 2020 the GOI passed a Liquidity Decree in which the Prime Minister’s office made three main changes to its Golden Power authority to prevent the hostile takeover of Italian firms as they weather the financial impact of the COVID-19 crisis. First, under the decree Golden Power authority now encompasses the financial sector (including insurance and credit) and all the sectors listed under the EU’s March 19, 2019 regulations establishing a framework for the screening of foreign direct investment. The Italian government previously had adopted only some of the sectors in the EU regulations when it passed its National Cybersecurity Perimeter legislation in November 2019. The EU regulations cover: (1) critical infrastructure, physical or virtual, including energy, transport, water, health, communications, media, data processing or storage, aerospace, defense, electoral or financial infrastructure, and sensitive facilities, as well as land and real estate; (2) critical technologies and dual use items, including artificial intelligence, robotics, semiconductors, cybersecurity, aerospace, defense, energy storage, quantum and nuclear technologies, and nanotechnologies and biotechnologies; (3) supply of critical inputs, including food security, energy, and raw materials; (4) access to sensitive information; and (5) freedom of the media.

Second, until the end of the COVID-19 pandemic, EU-based investors must notify Italy’s investment screening authority if they seek to acquire, purchase significant shares in, or change the core activities of an Italian company in one of the covered sectors. Previously EU-based investors had to notify the government only of transactions deemed strategic to national interests, such as in the defense sector. Third, the government now has the power to investigate non-notified transactions and require that both public and private entities cooperate with the investigation. In addition to being able to fine companies for non-notified transactions, the government can impose risk mitigation measures for non-notified transactions. An interagency group led by the Prime Minister’s office reviews acquisition applications and makes recommendations for Council of Ministers’ decisions.

Other Investment Policy Reviews

The OECD published its Economic Survey for Italy in April 2019. See https://www.oecd.org/economy/surveys/Italy-2019-OECD-economic-survey-overview.pdf.

Business Facilitation

Italy has a business registration website, available in Italian and English, administered through the Union of Italian Chambers of Commerce: http://www.registroimprese.it. The online business registration process is clear and complete, and available to foreign companies. Before registering a company online, applicants must obtain a certified e-mail address and digital signature, a process that may take up to five days. A notary is required to certify the documentation. The precise steps required for the registration process depend on the type of business being registered. The minimum capital requirement also varies by type of business. Generally, companies must obtain a value-added tax account number (partita IVA) from the Italian Revenue Agency; register with the social security agency (Istituto Nazionale della Previdenza Sociale– INPS); verify adequate capital and insurance coverage with the Italian workers’ compensation agency (Istituto Nazionale per L’Assicurazione contro gli Infortuni sul Lavoro – INAIL); and notify the regional office of the Ministry of Labor. According to the World Bank Doing Business Index 2020, Italy’s ranking decreased from 67 to 98 out of 190 countries in terms of the ease of starting a business: it takes seven procedures and 11 days to start a business in Italy. Additional licenses may be required, depending on the type of business to be conducted.

Invitalia and the Italian Trade Agency’s Foreign Direct Investment Unit assist those wanting to set up a new business in Italy. Many Italian localities also have one-stop shops to serve as a single point of contact for, and provide advice to, potential investors on applying for necessary licenses and authorizations at both the local and national level. These services are available to all investors.

Outward Investment

Italy neither promotes, restricts, nor incentivizes outward investment, nor restricts domestic investors from investing abroad.

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

Historically, the Malaysian government has welcomed FDI as an integral component of its economic development. Over the last decade, the gradual liberalization of the economy and influx of FDI has led to the creation of new jobs and businesses and fueled Malaysia’s export-oriented growth strategy. The Malaysian economy is highly dependent on trade. According to World Bank data, the value of Malaysia’s imports and exports of goods and services as a share of GDP held steady at roughly 130 percent in 2018, more than double the global average.

In October 2019, the government introduced measures in its 2020 budget designed to streamline and further incentivize foreign investment, with special emphasis on investments being redirected from China as a result of shifting global supply chains. The Malaysian government established the China Special Channel for the purpose of attracting these investments, an initiative being managed by InvestKL, an investment promotion agency under the Ministry of International Trade and Industry. The government also established the National Committee on Investment, an investment approval body jointly chaired by the Minister of Finance and the Minister of International Trade and Industry, to expedite the regulatory process with respect to approving new investments.

In its 2021 budget, the government proposed a slew of tax incentives which include extensions of existing relocation incentives for the manufacturing sector (including a 0 percent tax rate for new companies or a 100 percent investment tax allowance for five years) and extensions of existing tax incentives for certain industrial sectors. In light of the pandemic, manufacturers of pharmaceutical products, particularly those involved with COVID-19 vaccine supply chains, investing in Malaysia will be given income tax rates of zero percent to 10 percent for the first 10 years; with 10 percent rates for the subsequent 10 years.

Malaysia has various national, regional, and municipal investment promotion agencies, including the Malaysian Investment Development Authority (MIDA) and InvestKL. These agencies can assist with business strategy consultations, area familiarization, talent management programs, networking, and other post-investment services.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign and domestic private entities can establish and own business enterprises and engage in all forms of remunerative activity, with some exceptions. Although Malaysia has taken steps to liberalize policies concerning foreign investment, there continue to exist requirements for local equity participation within specific sectors. In 2009, Malaysia repealed Foreign Investment Committee (FIC) guidelines that limited transactions for acquisitions of interests, mergers, and takeovers of local companies by foreign parties. However, certain business sectors, including logistics, industrial training, and distributive trade, are required to limit foreign equity participation when applying for operating licenses, permits and approvals. Due to residual economic policies, this limitation most commonly manifests as a 70-30 equity split between foreign investors (maximum 70 percent) and Bumiputera (i.e., ethnic Malays and indigenous peoples) entities (minimum 30 percent).

Foreign investment in services, whether in sectors with no foreign equity caps or controlled sub-sectors, remain subject to review and approval by ministries and agencies with jurisdiction over the relevant sectors. A key function of this review and approval process is to determine whether proposed investments meet the government’s qualifications for the various incentives in place to promote economic development goals. The Ministerial Functions Act grants relevant ministries broad discretionary powers over the approval of investment projects. Investors in industries targeted by the Malaysian government can often negotiate favorable terms with the ministries or agencies responsible for regulating that industry. This can include assistance in navigating a complex web of regulations and policies, some of which can be waived on a case-by-case basis. Foreign investors in non-targeted industries tend to receive less government assistance in obtaining the necessary approvals from various regulatory bodies and therefore can face greater bureaucratic obstacles.

Finance

Malaysia’s 2011-2020 Financial Sector Blueprint has produced partial liberalization within the financial services sector; however, it does not contain specific market-opening commitments or timelines. For example, the services liberalization program that started in 2009 raised the limit of foreign ownership in insurance companies to 70 percent. However, Bank Negara Malaysia (BNM), Malaysia’s central bank, would allow a greater foreign ownership stake if the investment is determined to facilitate the consolidation of the industry. The latest Blueprint helped to codify this case-by-case approach. Under the Financial Services Act passed in late 2012, issuance of new licenses will be guided by prudential criteria and the “best interests of Malaysia,” which may include consideration of the financial strength, business record, experience, character and integrity of the prospective foreign investor, soundness and feasibility of the business plan for the institution in Malaysia, transparency and complexity of the group structure, and the extent of supervision of the foreign investor in its home country. In determining the “best interests of Malaysia,” BNM may consider the contribution of the investment in promoting new high value-added economic activities, addressing demand for financial services where there are gaps, enhancing trade and investment linkages, and providing high-skilled employment opportunities. BNM, however, has never defined criteria for the “best interests of Malaysia” test, and no firms have qualified.

While there has been no policy change in terms of the 70 percent foreign ownership cap for insurance companies, the government did agree to let one foreign owned insurer maintain a 100 percent equity stake after that firm made a contribution to a health insurance scheme aimed at providing health coverage to lower-income Malaysians.

BNM currently allows foreign banks to open four additional branches throughout Malaysia, subject to restrictions, which include designating where the branches can be set up (i.e., in market centers, semi-urban areas and non-urban areas). The policies do not allow foreign banks to set up new branches within 1.5 km of an existing local bank. BNM also has conditioned foreign banks’ ability to offer certain services on commitments to undertake certain back-office activities in Malaysia.

Information & Communication

In 2012, Malaysia authorized up to 100 percent foreign equity participation among application service providers, network service providers, and network facilities providers. An exception to this is national telecommunications firm Telekom Malaysia, which has an aggregate foreign share cap of 30 percent, or five percent for individual investors.

Manufacturing Industries

Malaysia permits up to 100 percent foreign equity participation for new manufacturing investments by licensed manufacturers. However, foreign companies can face difficulties obtaining a manufacturing license and often resort to incorporating a local subsidiary for this purpose.

Oil and Gas

Under the terms of the Petroleum Development Act of 1974, the upstream oil and gas industry is controlled by Petroleum Nasional Berhad (PETRONAS), a wholly state-owned company and the sole entity with legal title to Malaysian crude oil and gas deposits. Foreign participation tends to take the form of production sharing contracts (PSCs). PETRONAS regularly requires its PSC partners to work with Malaysian firms for many tenders. Non-Malaysian firms are permitted to participate in oil services in partnership with local firms and are restricted to a 49 percent equity stake if the foreign party is the principal shareholder. PETRONAS sets the terms of upstream projects with foreign participation on a case-by-case basis.

Other Investment Policy Reviews

Malaysia’s most recent Organization for Economic Cooperation and Development (OECD) investment review occurred in 2013. Although the review underscored the generally positive direction of economic reforms and efforts at liberalization, the recommendations emphasized the need for greater service sector liberalization, stronger intellectual property protections, enhanced guidance and support from Malaysia’s Investment Development Authority (MIDA), and continued corporate governance reforms.

Malaysia also conducted a WTO Trade Policy Review in February 2018, which incorporated a general overview of the country’s investment policies. The WTO’s review noted the Malaysian government’s action to institute incentives to encourage investment as well as a number of agencies to guide prospective investors. Beyond attracting investment, Malaysia had made measurable progress on reforms to facilitate increased commercial activity. Among the new trade and investment-related laws that entered into force during the review period were: the Companies Act, which introduced provisions to simplify the procedures to start a company, to reduce the cost of doing business, as well as to reform corporate insolvency mechanisms; the introduction of the goods and services tax (GST) to replace the sales tax; the Malaysian Aviation Commission Act, pursuant to which the Malaysian Aviation Commission was established; and various amendments to the Food Regulations. Since the WTO Trade Policy Review, however, the new government has already eliminated the GST, and has revived the Sales and Services Tax, which was implemented on September 1, 2018.

Business Facilitation

The principal law governing foreign investors’ entry and practice in the Malaysian economy is the Companies Act of 2016 (CA), which entered into force on January 31, 2017 and replaced the Companies Act of 1965. Incorporation requirements under the new CA have been further simplified and are the same for domestic and foreign sole proprietorships, partnerships, as well as privately held and publicly traded corporations. According to the World Bank’s Doing Business Report 2019, Malaysia streamlined the process of obtaining a building permit and made it faster to obtain construction permits; eliminated the site visit requirement for new commercial electricity connections, making getting electricity easier for businesses; implemented an online single window platform to carry out property searches and simplified the property transfer process; and introduced electronic forms and enhanced risk-based inspection system for cross-border trade and improved the infrastructure and port operation system at Port Klang, the largest port in Malaysia, thereby facilitating international trade; and made resolving insolvency easier by introducing the reorganization procedure. These changes led to a significant improvement of Malaysia’s ranking per the Doing Business Report, from 24 to 15 in one year.

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

Mexico is open to foreign direct investment (FDI) in the vast majority of economic sectors and has consistently been one of the largest emerging market recipients of FDI. Mexico’s proximity to the United States and preferential access to the U.S. market, macroeconomic stability, large domestic market, growing consumer base, and increasingly skilled yet cheap labor combine to attract foreign investors. The COVID-19 economic crisis showed how linked North American supply chains are and highlighted new opportunities for partnership and investment. Still, recent policy and regulatory changes have created doubts about the investment climate, particularly in the energy and the formal employment pensions management sectors.

Historically, the United States has been one of the largest sources of FDI in Mexico. According to Mexico’s Secretariat of Economy, FDI flows for 2020 totaled USD 29.1 billion, a decrease of 11.7 percent compared to the preliminary information for 2019 (USD 32.9 billion), and a 14.7 percent decline compared to revised numbers. The Secretariat cited COVID’s impact on global economic activity as the main reason for the decline. From January to December 2020, 22 percent of FDI came from new investment. New investment in 2020 (USD 6.4 billion) was only approximately half of the new investments received in 2019 (USD 12.8 billion), and 55.4 percent came from capital reinvestment while 24.9 percent from parent company accounts. The automotive, aerospace, telecommunications, financial services, and electronics sectors typically receive large amounts of FDI.

Most foreign investment flows to northern states near the U.S. border, where most maquiladoras (export-oriented manufacturing and assembly plants) are located, or to Mexico City and the nearby “El Bajio” (e.g. Guanajuato, Queretaro, etc.) region. In the past, foreign investors have overlooked Mexico’s southern states, although the administration is focused on attracting investment to the region, including through large infrastructure projects such as the Maya Train, the Dos Bocas refinery, and the trans-isthmus rail project.

The 1993 Foreign Investment Law, last updated in March 2017, governs foreign investment in Mexico, including which business sectors are open to foreign investors and to what extent. It provides national treatment, eliminates performance requirements for most foreign investment projects, and liberalizes criteria for automatic approval of foreign investment. Mexico is also a party to several Organization for Economic Cooperation and Development (OECD) agreements covering foreign investment, notably the Codes of Liberalization of Capital Movements and the National Treatment Instrument.

The administration has integrated components of the government’s investment agency into other ministries and offices.

Limits on Foreign Control and Right to Private Ownership and Establishment

Mexico reserves certain sectors, in whole or in part, for the State, including: petroleum and other hydrocarbons; control of the national electric system, radioactive materials, telegraphic and postal services; nuclear energy generation; coinage and printing of money; and control, supervision, and surveillance of ports of entry. Certain professional and technical services, development banks, and the land transportation of passengers, tourists, and cargo (not including courier and parcel services) are reserved entirely for Mexican nationals. See section six for restrictions on foreign ownership of certain real estate.

Reforms in the energy, power generation, telecommunications, and retail fuel sales sectors have liberalized access for foreign investors. While reforms have not led to the privatization of state-owned enterprises such as Pemex or the Federal Electricity Commission (CFE), they have allowed private firms to participate. Still, the Lopez Obrador administration has made significant regulatory and policy changes that favor Pemex and CFE over private participants. The changes have led private companies to file lawsuits in Mexican courts and several are considering international arbitration.

Hydrocarbons: Private companies participate in hydrocarbon exploration and extraction activities through contracts with the government under four categories: competitive contracts, joint ventures, profit sharing agreements, and license contracts. All contracts must include a clause stating subsoil hydrocarbons are owned by the State. The government has held nine auctions allowing private companies to bid on exploration and development rights to oil and gas resources in blocks around the country. Between 2015 and 2018, Mexico auctioned more than 100 land, shallow, and deep-water blocks with significant interest from international oil companies. The administration has since postponed further auctions but committed to respecting the existing contracts awarded under the previous administration. Still, foreign players were discouraged when Pemex sought to take operatorship of a major shallow water oil discovery made by a U.S. company-led consortium. The private consortium had invested more than USD 200 million in making the discovery and the outcome of this dispute has yet to be decided.

Telecommunications: Mexican law states telecommunications and broadcasting activities are public services and the government will at all times maintain ownership of the radio spectrum. In January 2021, President Lopez Obrador proposed incorporating the independent Federal Telecommunication Institute (IFT) into the Secretariat of Communications and Transportation (SCT), in an attempt to save government funds and avoid duplication. Non-governmental organizations and private sector companies said such a move would potentially violate the USMCA, which mandates signatories to maintain independent telecommunications regulators. As of March 2021, the proposal remains pending. Mexico’s Secretary of Economy Tatiana Clouthier underscored in public statements that President López Obrador is committed to respecting Mexico’s obligations under the USMCA, including maintaining an autonomous telecommunications regulator.

Aviation: The Foreign Investment Law limited foreign ownership of national air transportation to 25 percent until March 2017, when the limit was increased to 49 percent.

The USMCA, which entered into force July 1, 2020, maintained several NAFTA provisions, granting U.S. and Canadian investors national and most-favored-nation treatment in setting up operations or acquiring firms in Mexico. Exceptions exist for investments restricted under the USMCA. Currently, the United States, Canada, and Mexico have the right to settle any legacy disputes or claims under NAFTA through international arbitration for a sunset period of three years following the end of NAFTA. Only the United States and Mexico are party to an international arbitration agreement under the USMCA, though access is restricted as the USMCA distinguishes between investors with covered government contracts and those without. Most U.S. companies investing in Mexico will have access to fewer remedies under the USMCA than under NAFTA, as they will have to meet certain criteria to qualify for arbitration. Local Mexican governments must also accord national treatment to investors from USMCA countries.

Approximately 95 percent of all foreign investment transactions do not require government approval. Foreign investments that require government authorization and do not exceed USD 165 million are automatically approved, unless the proposed investment is in a legally reserved sector.

The National Foreign Investment Commission under the Secretariat of the Economy is the government authority that determines whether an investment in restricted sectors may move forward. The Commission has 45 business days after submission of an investment request to make a decision. Criteria for approval include employment and training considerations, and contributions to technology, productivity, and competitiveness. The Commission may reject applications to acquire Mexican companies for national security reasons. The Secretariat of Foreign Relations (SRE) must issue a permit for foreigners to establish or change the nature of Mexican companies.

Other Investment Policy Reviews

There has not been an update to the World Trade Organization’s (WTO) trade policy review of Mexico since June 2017 covering the period to year-end 2016.

Business Facilitation

According to the World Bank, on average registering a foreign-owned company in Mexico requires 11 procedures and 31 days. Mexico ranked 60 out of 190 countries in the World Bank’s ease of doing business report in 2020. In 2016, then-President Pena Nieto signed a law creating a new category of simplified businesses called Sociedad for Acciones Simplificadas (SAS). Owners of SASs are supposed to be able to register a new company online in 24 hours. Still, it can take between 66 and 90 days to start a new business in Mexico, according to the World Bank. The Government of Mexico maintains a business registration website: www.tuempresa.gob.mx. Companies operating in Mexico must register with the tax authority (Servicio de Administration y Tributaria or SAT), the Secretariat of the Economy, and the Public Registry. Additionally, companies engaging in international trade must register with the Registry of Importers, while foreign-owned companies must register with the National Registry of Foreign Investments.

Since October 2019, SAT has launched dozens of tax auditsagainst major international and domestic corporations, resulting in hundreds of millions of dollars in new tax assessments, penalties, and late fees. Multinational and Mexican firms have reported audits based on diverse aspects of the taxcode, including adjustments on tax payments made, waivers received, and deductions reported during the Enrique Peña Nieto administration.

Changes to ten-digit tariff lines conducted by the Secretariat of Economy in 2020 created trade disruptions with many shipments held at the border, stemming from lack of clear communication between government agencies that resulted in different interpretation by SAT.

Outward Investment

Various offices at the Secretariat of Economy and the Secretariat of Foreign Affairs handle promoting Mexican outward investment and assistance to Mexican firms acquiring or establishing joint ventures with foreign firms. Mexico does not restrict domestic investors from investing abroad.

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

The Netherlands is the seventeenth largest economy in the world and the fifth largest in the European Union, with a gross domestic product (GDP) in 2019 of over USD 950 billion (810 billion euros). According to the International Monetary Fund (IMF), the Netherlands is consistently among the three largest source and recipient economies for foreign direct investment (FDI) in the world, although the Netherlands is not the ultimate destination for the majority of this investment. Similarly, in its 2020 investment report, the UN Conference on Trade and Development (UNCTAD) identified the Netherlands as the world’s fourth largest destination of global FDI inflows and the third largest source of FDI outflows.

The government of the Netherlands maintains liberal policies toward FDI, has established itself as a platform for third-country investment with some 145 investment agreements in force, and adheres to the Organization for Economic Cooperation and Development (OECD) Codes of Liberalization and Declaration on International Investment, including a National Treatment commitment and adherence to relevant guidelines.

The Netherlands is the recipient of eight percent of all FDI inflow into the EU. The Netherlands has become a key export platform and pan-regional distribution hub for U.S. firms. Roughly 60 percent of total U.S. foreign-affiliate sales in the Netherlands are exports, with the bulk of them going to other EU members. The nearly 3,000 U.S. owned corporations represent more than 20% of all foreign owned firms in the Netherlands and they create more than 200,000 jobs. Foreign owned firms operate predominantly in business services, wholesale, and retail sectors.

Although policy makers feared that Brexit would have an extremely negative impact on the Dutch economy, the Netherlands is benefitting from companies exiting the United Kingdom in search of an anchor location inside the EU Single Market. The European Medicines Agency (EMA) also relocated from London to Amsterdam. According to the Netherlands Foreign Investment Agency (NFIA), the number of companies interested in moving to or opening branches in the Netherlands because of Brexit increased from 80 in 2017 to 150 in 2018 to 250 in 2019. Approximately150 UK-based corporations are currently considering establishing a Dutch foothold in the European Union. The companies are mainly from the health, creative industry, financial services, and logistics sectors. The Dutch Authority for the Financial Markets (AFM) expects Amsterdam to emerge as a main post-Brexit financial trading center in Europe for automated trading platforms and other ‘fintech’ firms, as more of these companies cross the Channel to keep their European trading within the confines of the EU regulatory oversight.

Dutch tax authorities provide a high degree of customer service to foreign investors, seeking to provide transparent, precise tax guidance that makes long-term tax obligations more predictable. Advance Tax Rulings (ATR) and Advance Pricing Agreements (APA) are guarantees given by local tax inspectors regarding long-term tax commitments for a particular acquisition or greenfield investment. Dutch tax policy continues to evolve as the EU seeks to harmonize tax measures across member states. A more detailed description of Dutch tax policy for foreign investors can be found at https://investinholland.com/why-invest/incentives-taxes/.

Dutch corporations and branches of foreign corporations are currently subject to a corporate tax rate of 25 percent on taxable profits, which puts the Netherlands in the middle third among EU countries’ corporate tax rates and below the tax rates of its larger neighbors. Profits up to USD 290,000 (245,000 euros) are taxed at a rate of 15 percent, this threshold will be raised to USD 470,000 (Euro 395,000) in 2022.

Dutch corporate taxation generally allows for exemption of dividends and capital gains derived from a foreign subsidiary. Surveys of the corporate tax structure of EU member states note that both the corporate tax rate and the effective corporate tax rate in the Netherlands are around the EU average. Nevertheless, the Dutch corporate tax structure ranks among the most competitive in Europe considering other beneficial measures such as the possibility for the tax authorities to provide corporations with clarity on future treatment of taxes via “advance” rulings and agreements such as ATR and/or APA. The Netherlands also has no branch profit tax and does not levy a withholding tax on interest and royalties.

Maintaining an investment-friendly reputation is a high priority for the Dutch government, which provides public information and institutional assistance to prospective investors through the Netherlands Foreign Investment Agency (NFIA) ( https://investinholland.com/). Historically, over a third of all “greenfield” FDI projects that NFIA attracts to the Netherlands originate from U.S. companies. Additionally, the Netherlands business gateway at https://business.gov.nl/ – maintained by the Dutch government – provides information on regulations, taxes, and investment incentives that apply to foreign investors in the Netherlands and clear guidance on establishing a business in the Netherlands. The NFIA maintains five regional offices in the United States (Washington, DC; Atlanta; Chicago; New York City; and San Francisco). The American Chamber of Commerce in the Netherlands ( https://www.amcham.nl/) also promotes U.S. and Dutch business interests in the Netherlands.

Limits on Foreign Control and Right to Private Ownership and Establishment

With few exceptions, the Netherlands does not discriminate between national and foreign individuals in the establishment and operation of private companies. The government has divested its complete ownership of many public utilities, but in a number of strategic sectors, private investment – including foreign investment – may be subject to limitations or conditions. These include transportation, energy, defense and security, finance, postal services, public broadcasting, and the media.

Air transport is governed by EU regulation and subject to the U.S.-EU Air Transport Agreement. U.S. nationals can invest in Dutch/European carriers as long as the airline remains majority-owned by EU governments or nationals from EU member states. Additionally, the EU and its member states reserve the right to limit U.S. investment in the voting equity of an EU airline on a reciprocal basis that the United States allows for foreign nationals in U.S. carriers.

In concert with the European Union, the Dutch government is considering how to best protect its economic security but also continue as one of the world’s most open economies. The Netherlands has foreign investment and procurement screening mechanisms in place for certain vital sectors that could present national security vulnerabilities. The first such laws (one on investment screening per EU directive and one on unwanted outside influence in the telecommunications sector) passed in 2020. The government is in the process of expanding screening measures to cover sensitive technologies more broadly, and a formal policy, which will apply retroactively as well, should be presented to Parliament for approval before summer 2021. Among policymakers, foreign investment and procurement screening is considered a non-partisan issue with support across the political spectrum. There is no requirement for Dutch nationals to have an equity stake in a Dutch registered company.

Other Investment Policy Reviews

The Netherlands has not recently undergone an investment policy review by the OECD, World Trade Organization (WTO), or UNCTAD.

Business Facilitation

All companies must register with the Netherlands’ Chamber of Commerce and apply for a fiscal number with the tax administration, which allows expedited registration for small- and medium-sized enterprises (SMEs) with fewer than 50 employees: https://www.kvk.nl/english/registration/foreign-company-registration/

The World Bank’s 2020 Ease of Doing Business Index ranks the Netherlands as number 24 in starting a business. The Netherlands ranks better than the OECD average on registration time, the number of procedures, and required minimum capital. The reports ranks the Netherlands first in terms of trading across borders, with zero costs and a small number of hours associated with border and documentary compliance, respectively.

The Netherlands business gateway at https://business.gov.nl/ – maintained by the Dutch government – provides a general checklist for starting a business in the Netherlands: https://business.gov.nl/starting-your-business/checklists-for-starting-a-business/how-to-start-a-business-in-the-netherlands-a-checklist/.

The Dutch American Friendship Treaty (DAFT) from 1956 gives U.S. citizens preferential treatment to operate a business in the Netherlands, providing ease of establishment that most other non-EU nationals do not enjoy. U.S. entrepreneurs applying under the DAFT do not need to satisfy a strict, points-based test and do not have to meet pre-conditions related to providing an innovative product. U.S. entrepreneurs setting up a sole proprietorship only have to register with the Chamber of Commerce and demonstrate a minimum investment of 4,500 euros. DAFT entrepreneurs receive a two-year residence permit, with the possibility of renewal for five subsequent years.

Outward Investment

In order to sustain the top ten ranking of the Netherlands among the world’s largest exporting nations, the Ministry for International Trade and Development coordinates with the government and private sector trade promotion agencies in setting an annual ‘overseas trade mission’ agenda. The Netherlands Enterprise Agency ( https://english.rvo.nl/ ) has the lead in organizing a custom-tailored and topical format of trade missions to accompany State visits and other official delegations abroad. Participation in these missions is open to any enterprise established in the Netherlands.

1.Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

Panama depends heavily on foreign investment and has worked to make the investment process attractive and simple. With few exceptions, the Government of Panama makes no distinction between domestic and foreign companies for investment purposes. Panama benefits from stable and consistent economic policies, a dollarized economy, and a government that consistently supports trade and open markets and encourages foreign direct investment.

Prior to the pandemic, Panama had the highest level of Foreign Direct investment (FDI) in Central America. Through the Multinational Headquarters Law (SEM), the Multinational Manufacturing Services Law (EMMA), and a Private Public Partnership framework, Panama offers tax breaks and other incentives to attract investment. The Ministry of Commerce and Industry (MICI) is responsible for overseeing foreign investment, prepares an annual foreign investment promotion strategy, and provides services required by investors to expedite investments and project development. MICI, in cooperation with the Minister Counselor for Investment, facilitates the initial investment process and provides integration assistance once a company is established in Panama.

Panama’s Attraction of Investment and Promotion of Exports (PROPANAMÁ) program, which operates under the auspices of the Ministry of Foreign Affairs (MFA), provides investors with information, expedites specific projects, leads investment-seeking missions abroad, and supports foreign investment missions to Panama. In some cases, other government offices work with investors to ensure that regulations and requirements for land use, employment, special investment incentives, business licensing, and other conditions are met. The Government of Panama (GoP) proposed a bill in February 2021 to make PROPANAMÁ an independent agency with its own budget (http://propanama.mire.gob.pa/sobre-propanama).

In 2020, the United States ran a $5.1 billion trade surplus in goods with Panama. Both countries have signed a Trade Promotion Agreement (TPA) that entered into force in October 2012. The U.S.-Panama TPA has significantly liberalized trade in goods and services, including financial services. The TPA also includes sections on customs administration and trade facilitation, sanitary and phytosanitary measures, technical barriers to trade, government procurement, investment, telecommunications, electronic commerce, intellectual property rights, and labor and environmental protections.

Panama is one of the few economies in Latin American that is predominantly services-based. Services represent nearly 80 percent of Panama’s GDP. The TPA has improved U.S. firms’ access to Panama’s services sector and gives U.S. investors better access than other WTO members under the General Agreement on Trade in Services. All services sectors are covered under the TPA, except where Panama has made specific exceptions. Under the agreement, Panama has provided improved access to sectors like express delivery and granted new access in certain areas that had previously been reserved for Panamanian nationals. In addition, Panama is a full participant in the WTO Information Technology Agreement.

Panama passed a Private Public Partnership (PPP) law in 2019 and published regulations for the program in 2020, as an incentive for private investment, social development, and job creation. The law is a first-level legal framework that orders and formalizes how the private sector can invest in public projects, thereby expanding the State’s options to meet social needs. Panama’s 2021 budget included funding to implement PPP projects.

Limits on Foreign Control and Right to Private Ownership and Establishment

The Panamanian government imposes some limitations on foreign ownership in the retail and media sectors, in which, in most cases, owners must be Panamanian. However, foreign investors can continue to use franchise arrangements to own retail within the confines of Panamanian law (under the TPA, direct U.S. ownership of consumer retail is allowed in limited circ*mstances). There are also limits on the number of foreign workers in some foreign investment structures.

In addition to limitations on ownership, more than 200 professions are reserved for Panamanian nationals. Medical practitioners, lawyers, engineers, accountants, and customs brokers must be Panamanian citizens. Furthermore, the Panamanian government instituted a regulation that ride share platforms must use drivers who possess commercial licenses, which are available only to Panamanians.

With the exceptions of retail trade, the media, and many professions, foreign and domestic entities have the right to establish, own, and dispose of business interests in virtually all forms of remunerative activity, and the Panamanian government does not screen inbound investment. Foreigners do not need to be legally resident or physically present in Panama to establish corporations or obtain local operating licenses for a foreign corporation. Business visas (and even citizenship) are readily obtainable for significant investors.

Other Investment Policy Reviews

Panama has not undergone any third-party investment policy reviews (IPRs) through a multilateral organization in the past three years. Panama does not have a formal investment screening mechanism, but the government monitors large foreign investments, especially in the energy sector.

Business Facilitation

Procedures regarding how to register foreign and domestic businesses, as well as how to obtain a notice of operation, can be found on the Ministry of Commerce and Industry’s website (https://www.panamaemprende.gob.pa/), where one may register a foreign company, create a branch of a registered business, or register as an individual trader from any part of the world. Corporate applicants must submit notarized documents to the Mercantile Division of the Public Registry, the Ministry of Commerce and Industry, and the Social Security Institute. Panamanian government statistics show that applications from foreign businesses typically take between one to six days to process.

The process for online business registration is clear and available to foreign companies. Panama is ranked 51 out of 190 countries for ease of starting a business and 88 out of 190 for protecting minority investors, according to the 2019 World Bank’s Doing Business Report: https://www.doingbusiness.org/en/data/exploretopics/starting-a-business#close

Other agencies where companies typically register are:

Tax administration: https://dgi.mef.gob.pa/
Corporations, property, mortgage: https://www.rp.gob.pa
Social security: http://www.css.gob.pa|
Municipalities: https://mupa.gob.pa

Outward Investment

Panama does not promote or incentivize outward investment, but neither does it restrict domestic investors from investing abroad.

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

Peru seeks to attract investment – both foreign and domestic – in nearly all sectors.. Peru reported $2 billion in Foreign Direct Investment (FDI) in 2020 and seeks increased investment for 2021. It has prioritized $6 billion in public-private partnership projects in transportation infrastructure, electricity, education, broadband expansion, gas distribution, health, and sanitation.

Peru’s Constitution of 1993grants national treatment for foreign investors and permits foreign investment in almost all economic sectors. Under the Peruvian Constitution, foreign investors have the same rights as national investors to benefit from investment incentives, such as tax exemptions. In addition to the Constitution of 1993, Peru has several laws governing FDI including the Foreign Investment Promotion Law (Legislative Decree (DL) 662 of September 1991) and the Framework Law for Private Investment Growth (DL 757 of November 1991). Other important laws include the Private Investment in State-Owned Enterprises Promotion Law (DL 674) and the Private Investment in Public Services Infrastructure Promotion Law (DL 758). Article 6 of Supreme Decree No. 162-92-EF (the implementing regulations of DLs 662 and 757) authorized private investment in all industries except within natural protected areas and weapons manufacturing.

Peru and the United States benefit from the United States-Peru Free Trade Agreement (PTPA), which entered into force on February 1, 2009. The PTPA established a secure, predictable legal framework for U.S. investors in Peru. The PTPA protects all forms of investment. U.S. investors enjoy the right to establish, acquire, and operate investments in Peru on an equal footing with local investors in almost all circ*mstances. https://ustr.gov/trade-agreements/free-trade-agreements/peru-tpa

The GOP created the investment promotion agency ProInversion in 2002 to manage privatizations and concessions of state-owned enterprises and natural resource-based industries. The agency currently manages private concession processes in the energy, education, transportation, health, sanitation, and telecommunication sectors, and organizes international roadshow events to attract investors. Major recent and upcoming concessions include ports, water treatment plants, power generation facilities, mining projects, electrical transmission lines, oil and gas distribution, and telecommunications. Project opportunities are available on ProInversion’s website: https://www.proyectosapp.pe/default.aspx?ARE=1&PFL=0&sec=30. Companies are required to register all foreign investments with ProInversion.

The National Competitiveness Plan 2019 – 2030 outlines Peru’s economic growth strategy for the next decade and seeks to close the country’s $110 billion infrastructure gap. The plan was supplemented by a National Infrastructure Plan in July 2019, which identified 52 infrastructure projects keyed to critical sectors. Priority projects include two Lima metro lines, an expansion of Jorge Chavez International Airport, and multiple energy projects including electricity transmission lines. Peru reported in February 2021 that the energy projects had advanced significantly while many transport and agricultural projects suffered significant delays. Of note, the Ministry of Transportation prioritized the Fourth Metro Line and Central Highway, each multi-billion dollar projects, which were not included in the National Infrastructure Plan. Peru maintains an investment research portal to promote these infrastructure investment opportunities: https://www.mef.gob.pe/es/aplicativos-invierte-pe?id=5455

Although Peruvian administrations since the 1990s have supported private investments, Peru occasionally passes measures that some observers regard as a contravention of its open, free market orientation. In December 2011, Peru signed into law a 10-year moratorium on the entry of live genetically modified organisms (GMOs) for cultivation. In December 2020, the moratorium was extended an additional 15 years and will now remain enforced until 2035. Peru also implemented two sets of rules for importing pesticides, one for commercial importers, which requires importers to file a full dossier with technical information, and another for end-user farmers, which only requires a written affidavit.

Peru reformed its agricultural labor laws in 2020 impacting labor costs and tax incentives that could adversely affect investors in Peru’s agricultural sector. The U.S. Department of Agriculture estimated U.S. direct investment in the agriculture sector to reach $1.3 billion in 2021.

Limits on Foreign Control and Right to Private Ownership and Establishment

Peru’s Constitution (Article 6 under Supreme Decree No. 162-92-EF) authorizes foreign investors to carry out economic activity provided that investors comply with all constitutional precepts, laws, and treaties. Exceptions exist, including exclusion of foreign investment activities in natural protected reserves and military weapons manufacturing. Peruvian law requires majority Peruvian ownership in media; air, land and maritime transportation infrastructure; and private security surveillance services. Foreign interests cannot “acquire or possess under any title, mines, lands, forests, waters, or fuel or energy sources” within 50 kilometers of Peru’s international borders. However, foreigners can obtain concessions in these areas and in certain cases the GOP may grant a waiver. The GOP does not screen, review, or approve foreign direct investment outside of those sectors that require a governmental waiver.

Other Investment Policy Reviews

The World Trade Organization (WTO) published a Trade Policy Review (HYPERLINK “https://www.wto.org/english/tratop_e/tpr_e/tp493_e.htm” https://www.wto.org/english/tratop_e/tpr_e/tp493_e.htm) on Peru in October 2019. The WTO commented that foreign investors received the same legal treatment as local investors in general, although Peru restricted foreign investment on property at the country’s borders, and in air transport and broadcasting. The report highlighted the government’s ongoing efforts to promote public-private partnerships (PPPs) and strengthen the PPP legal framework with Organization for Economic Cooperation and Development (OECD) principles. The report noted that Peru maintained a regime open to domestic and foreign investment that fostered competition and equal treatment.

Peru aspires to become a member of the OECD and launched an OECD Country Program in 2014, comprising policy reviews and capacity building projects. The OECD published the Initial Assessment of its Multi-Dimensional Review in 2015 (https://www.oecd.org/countries/peru/multi-dimensional-review-of-peru-9789264243279-en.htm), finding that, in spite of economic growth, Peru “still faces structural challenges to escape the middle-income trap and consolidate its emerging middle class.” In every year since this study was published, Peru has enacted and implemented dozens of reforms to modernize its governance practices in line with OECD recommendations. Recent OECD studies on Peru include: Investing in Youth (April 2019), Digital Government (June 2019), Pension Systems (September 2019), Transport Regulation (February 2020), and Tax Transparency (April 2020). Peru has adhered to 45 of OECD’s 248 existing legal instruments, but its accession roadmap remains unclear.

Peru has not had a third-party investment policy review through the OECD or UNCTAD in the past three years.

Business Facilitation

The GOP does not have a regulatory system to facilitate business operations but the Institute for the Protection of Intellectual Property, Consumer Protection, and Competition (INDECOPI) reviews the enactment of new regulations by government entities that can place burdens on business operations. INDECOPI has the authority to block any new business regulation. INDECOPI also has a Commission for Elimination of Bureaucratic Barriers: https://www.indecopi.gob.pe/web/eliminacion-de-barreras-burocraticas/presentacion.

Peru allows foreign business ownership, provided that a company has at least two shareholders and that its legal representative is a Peruvian resident. Businesses must reserve a company name through the national registry, SUNARP, and prepare a deed of incorporation through a Citizen and Business Services Portal (https://www.serviciosalciudadano.gob.pe/). After a deed is signed, businesses must file with a public notary, pay notary fees of up to one percent of a company’s capital, and submit the deed to the Public Registry. The company’s legal representative must obtain a certificate of registration and tax identification number from the national tax authority SUNAT (www.sunat.gob.pe). Finally, the company must obtain a license from the municipality of the jurisdiction in which it is located. Depending on the core business, companies might need to obtain further government approvals such as: sanitary, environmental, or educational authorizations.

Outward Investment

The GOP promotes outward investment by Peruvian entities through the Ministry of Foreign Trade and Tourism (MINCETUR). Trade Commission Offices of Peru (OCEX), under the supervision of Peru’s export promotion agency (PromPeru), are located in numerous countries, including the United States, and promote the export of Peruvian goods and services and inward foreign investment. The GOP does not restrict domestic investors from investing abroad.

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

Singapore maintains a heavily trade-dependent economy characterized by an open investment regime, with some licensing restrictions in the financial services, professional services, and media sectors. The government was committed to maintaining a free market, but also actively plans Singapore’s economic development, including through a network of state wholly-owned and majority-owned enterprises (SOEs). As of March 31, 2021, the top three Singapore-listed SOEs accounted for 12.3 percent of total capitalization of the Singapore Exchange (SGX). Some observers have criticized the dominant role of SOEs in the domestic economy, arguing that they have displaced or suppressed private sector entrepreneurship and investment.

Singapore’s legal framework and public policies are generally favorable toward foreign investors. Foreign investors are not required to enter joint ventures or cede management control to local interests, and local and foreign investors are subject to the same basic laws. Apart from regulatory requirements in some sectors (See also: Limits on National Treatment and Other Restrictions), eligibility for various incentive schemes depends on investment proposals meeting the criteria set by relevant government agencies. Singapore places no restrictions on reinvestment or repatriation of earnings or capital. The judicial system, which includes international arbitration and mediation centers and a commercial court, upholds the sanctity of contracts, and decisions are generally considered to be transparent and effectively enforced.

The Economic Development Board (EDB) is the lead promotion agency that facilitates foreign investment into Singapore ( https:www.edb.gov.sg). EDB undertakes investment promotion and industry development and works with foreign and local businesses by providing information and facilitating introductions and access to government incentives for local and international investments. The government maintains close engagement with investors through the EDB, which provides feedback to other government agencies to ensure that infrastructure and public services remain efficient and cost-competitive. The EDB maintains 18 international offices, including Chicago, Houston, New York, San Francisco, and Washington D.C.

Exceptions to Singapore’s general openness to foreign investment exist in sectors considered critical to national security, including telecommunications, broadcasting, domestic news media, financial services, legal and accounting services, ports, airports, and property ownership. Under Singaporean law, articles of incorporation may include shareholding limits that restrict ownership in such entities by foreign persons.

Telecommunications

Since 2000, the Singapore telecommunications market has been fully liberalized. This move has allowed foreign and domestic companies seeking to provide facilities-based (e.g., fixed line or mobile networks) or services-based (e.g., local and international calls and data services over leased networks) telecommunications services to apply for licenses to operate and deploy telecommunication systems and services. Singapore Telecommunications (Singtel) – majority owned by Temasek, a state-owned investment company with the Minister for Finance as its sole shareholder – faces competition in all market segments. However, its main competitors, M1 andStarHub, are alsoSOEs. In April 2019, Australian company TPG Telecombegan rolling out telecommunications services.Approximately 30mobile virtual network operator services (MVNOs) have also entered the market. The four Singapore telecommunications companies compete primarily on MVNO partnerships and voice and data plans.

As ofApril 2021, Singapore has76facilities-based operators offering telecommunications services. Since 2007, Singtel has been exempted from dominant licensee obligations for the residential and commercial portions of the retail international telephone services. Singtel is also exempted from dominant licensee obligations for wholesale international telephone services, international managed data, international intellectual property transit, leased satellite bandwidth (including VSAT, DVB-IP, satellite TV Downlink, and Satellite IPLC), terrestrial international private leased circuit, and backhaul services. TheInfocomm Media Development Authority (IMDA) granted Singtel’s exemption after assessing the market for these services had effective competition. IMDA operates as both the regulatory agency and the investment promotion agency for the country’s telecommunications sector. IMDA conducts public consultations on major policy reviews and provides decisions on policy changes to relevant companies.

To facilitate the 5th generation mobile network (5G) technology and service trials, IMDA waived frequency fees for companies interested in conducting 5G trials for equipment testing, research, and assessment of commercial potential. In April 2020, IMDA granted rights to build nationwide 5G networks to Singtel and a joint venture between StarHub and M1. IMDA announced a goal of full 5G coverage by the end of 2025. These three companies, along with TPG Telecom, are also now permitted to launch smaller, specialized 5G networks to support specialized applications, such as manufacturing and port operations. Singapore’s governmentdid not hold a traditional spectrum auction, instead charging a moderate, flat fee to operate the networks and evaluating proposals from the MVNOs based on their ability to provide effective coverage, meet regulatory requirements, invest significant financial resources, and address cybersecurity and network resilience concerns. The announcement emphasized the importance of the winning MVNOs using multiple vendors, to ensure security and resilience. Singapore has committed to being one of the first countries to make 5G services broadly available,and its tightly managed 5G-rollout process continues apace, despite COVID-19. The government views this as a necessity for a country that prides itself on innovation, even as these private firms worry that the commercial potential does not yet justify the extensive upfront investment necessary to develop new networks.

Media

The local free-to-air broadcasting, cable, and newspaper sectors are effectively closed to foreign firms. Section 44 of the Broadcasting Act restricts foreign equity ownership of companies broadcasting in Singapore to 49 percent or less, although the act does allow for exceptions. Individuals cannot hold shares that would make up more than five percent of the total votes in a broadcasting company without the government’s prior approval. The Newspaper and Printing Presses Act restricts equity ownership (local or foreign) of newspaper companies to less than five percent per shareholder and requires that directors be Singapore citizens. Newspaper companies must issue two classes of shares, ordinary and management, with the latter available only to Singapore citizens or corporations approved by the government. Holders of management shares have an effective veto over selected board decisions.

Singapore regulates content across all major media outlets through IMDA. The government controls the distribution, importation, and sale of media sources and has curtailed or banned the circulation of some foreign publications. Singapore’s leaders have also brought defamation suits against foreign publishers and local government critics, which have resulted in the foreign publishers issuing apologies and paying damages. Several dozen publications remain prohibited under the Undesirable Publications Act, which restricts the import, sale, and circulation of publications that the government considers contrary to public interest. Examples include p*rnographic magazines, publications by banned religious groups, and publications containing extremist religious views. Following a routine review in 2015, theIMDA predecessor,Media Development Authority, lifted a ban on 240 publications, ranging from decades-old anti-colonial and communist material to adult interest content.

Singaporeans generally face few restrictions on the internet, which is readily accessible. The government, however, subjected all internet content to similar rules and standards as traditional media, as defined by the IMDA’s Internet Code of Practice. Internet service providers are required to ensure that content complies with the code. The IMDA licenses the internet service providers through which local users are required to route their internet connections. However, the IMDA has blocked various websites containing objectionable material, such as p*rnography and racist and religious-hatred sites. Online news websites that report regularly on Singapore and have a significant reach are individually licensed, which requiresadherenceto requirements to remove prohibited content within 24 hours of notification from IMDA. Some view this regulation as a way to censor online critics of the government.

In April 2019, the government introduced legislation in Parliament to counter “deliberate online falsehoods.” The legislation, called the Protection from OnlineFalsehoods and ManipulationAct (POFMA) entered into force on October 2, 2019,requiresonline platforms to publish correction notifications or remove online information that government ministers classify as factually false or misleading, and which they deem likely to threaten national security, diminish public confidence in the government, incite feelings of ill will between people, or influencean election. Non-compliance is punishable by fines and/or imprisonment and the government can use stricter measures such as disabling access to end-users in Singapore and forcing online platforms to disallow persons in question from using its services in Singapore. Opposition politicians, bloggers, and alternative news websites have been the target ofthe majority of POFMA cases thus far and many of them used U.S. social media platforms. Besides those individuals, U.S. social media companies were issued most POFMA correction orders and complied with them. U.S. media and social media sites continue to operate in Singapore, but a few major players have ceased running political ads after the government announced that itwould impose penalties on sites or individuals that spread “misinformation,” as determined by the government.

Pay-Television

MediacorpTV is the only free-to-air TV broadcaster and is 100 percent owned by the government via Temasek Holdings (Temasek). Mediacorp reported that its free-to-air channels are viewed weekly by 80 percent of residents. Local pay-TVproviders areStarHuband Singtel, which are both partially owned by Temasek or its subsidiaries. Local free-to-air radio broadcasters areMediacorpRadio Singapore, which is also owned by Temasek Holdings, SPH Radio, owned by the publicly held Singapore Press Holdings, and So Drama! Entertainment, owned by the Singapore Ministry of Defense. BBC World Services is the only foreign free-to-air radio broadcaster in Singapore.

To rectify the high degree of content fragmentation in the Singaporepay-TVmarket and shift the focus of competition from an exclusivity-centric strategy to other aspects such as service differentiation and competitive packaging, the IMDA implemented cross-carriage measures in 2011, requiringpay-TVcompanies designated by IMDA to be Receiving Qualified Licensees (RQL) – currently Singtel andStarHub– to cross-carry content subject to exclusive carriage provisions. Correspondingly, Supplying Qualified Licensees (SQLs) with an exclusive contract for a channel are required to carry that content on other RQLpay-TVcompanies. In February 2019, the IMDA proposed to continue the current cross-carriage measures. The Motion Picture Association (MPA) has expressed concern this measure restricts copyright exclusivity. Content providers consider the measures an unnecessary interference in a competitive market that denies content holders the ability to negotiate freely in the marketplace, and an interference with their ability to manage and protect their intellectual property. More common content is now available across the differentpay-TVplatforms, and the operators are beginning to differentiate themselves by originating their own content, offering subscribed content online via personal and tablet computers, and delivering content via fiber networks.

Streaming services have entered the market, which MPA has found leads to a significant reduction in intellectual property infringements.StarHuband Singtel have both partnered with multiple content providers, including U.S. companies, to provide streaming content in Singapore and around the region.

Banking and Finance

The Monetary Authority of Singapore (MAS) regulates all banking activities as provided for under the Banking Act. Singapore maintains legal distinctions between foreign and local banks and the type of license (i.e., full service, wholesale, and offshore banks) held by foreign commercial banks. As ofApril 2021,30foreign full-service licensees and 90wholesale banks operated in Singapore. An additional 24merchant banks are licensed to conduct corporate finance, investment banking, and other fee-based activities. Offshore and wholesale banks are not allowed to operate Singapore dollar retail banking activities. Only full banks and “Qualifying Full Banks” (QFBs) can operate Singapore dollar retail banking activities but are subject to restrictions on their number of places of business, ATMs, and ATM networks. Additional QFB licenses may be granted to a subset of full banks, which provide greater branching privileges and greater access to the retail market than other full banks. As ofApril 2021, there are10banks operating QFB licenses. China Construction Bank received the most recent QFB award in December 2020.

Following a series of public consultations conducted by MAS over a three year period, the Banking Act 2020 came into operation on February 14, 2020. The amendments include, among other things, the removal of the Domestic Banking Unit (DBU) and Asian Currency Unit (ACU) divide, consolidation of the regulatory framework of merchant banks, expansion of the grounds for revoking bank licenses and strengthening oversight of banks’ outsourcing arrangements. Newly granted digital banking licenses under foreign ownership apply only to wholesale transactions.

The government initiated a banking liberalization program in 1999 to ease restrictions on foreign banks and has supplemented this with phased-in provisions under the USSFTA, including removal of a 40 percent ceiling on foreign ownership of local banks and a 20 percent aggregate foreign shareholding limit on finance companies. The minister in charge of MAS must approve the merger or takeover of a local bank or financial holding company, as well as the acquisition of voting shares in such institutions above specific thresholds of5, 12, or 20 percent of shareholdings.

Although Singapore’s government has lifted the formal ceilings on foreign ownership of local banks and finance companies, the approval for controllers of local banks ensures that this control rests with individuals or groups whose interests are aligned with the long-term interests of the Singapore economy and Singapore’s national interests. Of the30full-service licenses granted to foreign banks, three have gone to U.S. banks. U.S. financial institutions enjoy phased-in benefits under the USSFTA. Since 2006, only one U.S.-licensed full-service banks has obtained QFB status. U.S. and foreign full-service banks with QFB status can freely relocate existing branches and share ATMs among themselves. They can also provide electronic funds transfer and point-of-sale debit services and accept services related to Singapore’s compulsory pension fund. In 2007, Singapore lifted the quota on new licenses for U.S. wholesale banks.

Locally and non-locally incorporated subsidiaries of U.S. full-service banks with QFB status can apply for access to local ATM networks. However, no U.S. bank has come to a commercial agreement to gain such access. Despite liberalization, U.S. and other foreign banks in the domestic retail-banking sector still face barriers. Under the enhanced QFB program launched in 2012, MAS requires QFBs it deems systemically significant to incorporate locally. If those locally incorporated entities are deemed “significantly rooted” in Singapore, with a majority of Singaporean or permanent resident members, Singapore may grant approval for an additional 25 places of business, of which up to ten may be branches. Local retail banks do not face similar constraints on customer service locations or access to the local ATM network. As noted above, U.S. banks are not subject to quotas on service locations under the terms of the USSFTA.

Credit card holders from U.S. banks incorporated in Singapore cannot access their accounts through the local ATM networks. They are also unable to access their accounts for cash withdrawals, transfers, or bill payments at ATMs operated by banks other than those operated by their own bank or at foreign banks’ shared ATM network. Nevertheless, full-service foreign banks have made significant inroads in other retail banking areas, with substantial market share in products like credit cards and personal and housing loans.

In January 2019, MAS announced the passage of the Payment Services Bill after soliciting public feedback. The bill requires more payment services such as digital payment tokens, dealing in virtual currency, and merchant acquisition, to be licensed and regulated by MAS. In order to reduce the risk of misuse for illicit purposes, the new law also limits the amount offunds that can be held in or transferred out of apersonalpayment account(e.g., mobile wallets)in a year. Regulations are tailored to the type of activity preformed and addresses issues related to terrorism financing, money laundering, and cyber risks. In December 2020,MAS granted four digital bank licenses: two to Sea Limited and a Grab/Singtel consortium for full retail banking and two to Ant Group and the Greenland consortium (a China-based conglomerate).

Singapore has no trading restrictions on foreign-owned stockbrokers. There is no cap on the aggregate investment by foreigners regarding the paid-up capital of dealers that are members of the SGX. Direct registration of foreign mutual funds is allowed provided MAS approves the prospectus and the fund. The USSFTA relaxed conditions foreign asset managers must meet in order to offer products under the government-managed compulsory pension fund (Central Provident Fund Investment Scheme).

Legal Services

The Legal Services Regulatory Authority (LSRA) under the Ministry of Law oversees the regulation, licensing, and compliance of all law practice entities and the registration of foreign lawyers in Singapore. Foreign law firms with a licensed Foreign Law Practice (FLP) may offer the full range of legal services in foreign law and international law, but cannot practice Singapore law except in the context of international commercial arbitration. U.S. and foreign attorneys are allowed to represent parties in arbitration without the need for a Singapore attorney to be present. To offer Singapore law, FLPs require either a Qualifying Foreign Law Practice (QFLP) license, a Joint Law Venture (JLV) with a Singapore Law Practice (SLP), or a Formal Law Alliance (FLA) with a SLP. The vast majority of Singapore’s 130foreign law firms operate FLPs, while QFLPs and JLVs each number in the single digits.

The QFLP licenses allow foreign law firms to practice in permitted areas of Singapore law, which excludes constitutional and administrative law, conveyancing, criminal law, family law, succession law, and trust law. As ofDecember 2020,there are nine QFLPs in Singapore, including five U.S. firms. In January 2019, the Ministry of Law announced the deferral to 2020 of the decision to renew the licenses of five QFLPs, which were set to expire in 2019, so the government can better assess their contribution to Singapore along with the other four firms whose licenses were also extended to 2020. Decisions on the renewal considers the firms’ quantitative and qualitative performance such as the value of work that the Singapore office will generate, the extent to which the Singapore office will function as the firm’s headquarter for the region, the firm’s contributions to Singapore, and the firm’s proposal for the new license period.

AJLVis a collaboration between a Foreign Law Practice and Singapore Law Practice, which may be constituted as a partnership or company. The director of legal services in theLSRAwill consider all the relevant circ*mstances including the proposed structure and its overall suitability to achieve the objectives for which Joint Law Ventures are permitted to be established. There is no clear indication on the percentage of shares that each JLV partner may hold in the JLV.

Law degrees from designated U.S., British, Australian, and New Zealand universities are recognized for purposes of admission to practice law in Singapore. Under the USSFTA, Singapore recognizes law degrees from Harvard University, Columbia University, New York University, and the University of Michigan. Singapore will admit to the Singapore Bar law school graduates of those designated universities who areSingapore citizens or permanent residents, andranked among the top 70 percent of their graduating class or have obtained lower-second class honors (under the British system).

Engineering and Architectural Services

Engineering and architectural firms can be 100 percent foreign-owned. Engineers and architects are required to register with the Professional Engineers Board and the Board of Architects, respectively, to practice in Singapore. All applicants (both local and foreign) must have at least four years of practical experience in engineering, of which two are acquired in Singapore. Alternatively, students can attendtwo years of practical training in architectural works and pass written and/ororal examinations set by the respective board.

Accounting and Tax Services

Many major international accounting firms operate in Singapore. Registration as a public accountant under the Accountants Act is required to provide public accountancy services (i.e., the audit and reporting on financial statements and other acts that are required by any written law to be done by a public accountant) in Singapore, although registration as a public accountant is not required to provide other accountancy services, such as accounting, tax, and corporate advisory work. All accounting entities that provide public accountancy services must be approved under the Accountants Act and their supply of public accountancy services in Singapore must be under the control and management of partners or directors who are public accountants ordinarily resident in Singapore. In addition, if the accounting entity firm has two partners or directors, at least one of them must be a public accountant. If the business entity has more than twoaccountingpartners or directors, two-thirds of the partners or directors must be public accountants.

Energy

Singapore further liberalized its gas market with the amendment of the Gas Act and implementation of a Gas Network Code in 2008, which were designed to give gas retailers and importers direct access to the onshore gas pipeline infrastructure. However, key parts of the local gas market, such as town gas retailing and gas transportation through pipelines remain controlled by incumbent Singaporean firms. Singapore has sought to grow its supply of liquefied natural gas (LNG), and BG Singapore Gas Marketing Pte Ltd (acquired by Royal Dutch Shell in February 2016) was appointed in 2008 as the first aggregator with an exclusive franchise to import LNG to be sold in its re-gasified form in Singapore. In October 2017, ShellEastern Trading Pte Ltd and PavilionGasePte Ltd were awarded import licenses to market up to 1 milliontonsper annum or for three years, whichever occurs first. This also marked the conclusion of the first exclusive franchise awarded to BG Singapore Gas Marketing Pte Ltd.

Beginning in November 2018 and concluding in May 2019, Singapore launched an open electricity market (OEM). Previously, Singapore Power was the only electricity retailer. As of October 2019, 40 percent of resident consumers had switched to a new electricity retailer and were saving between 20 and 30 percent on their monthly bills. During the second half of 2020, the government significantly reduced tariffs for household consumption and encouraged consumer OEM adoption. To participate in OEM, licensed retailers must satisfy additional credit, technical, and financial requirements set by Energy Market Authority in order to sell electricity to households and small businesses. There are two types of electricity retailers: Market Participant Retailers (MPRs) and Non-Market Participant Retailers (NMPRs). MPRs have to be registered with the Energy Market Company (EMC) to purchase electricity from the National Electricity Market of Singapore (NEMS) to sell to contestable consumers. NMPRs need not register with EMC to participate in the NEMS since they will purchase electricity indirectly from the NEMS through the Market Support Services Licensee (MSSL). As of April 2020, there were 12 retailers in the market, including foreign and localentities.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign and local entities may readily establish, operate, and dispose of their own enterprises in Singapore subject to certain requirements. A foreigner who wants to incorporate a company in Singapore is required to appoint a local resident director; foreigners may continue to reside outside of Singapore. Foreigners who wish to incorporate a company and be present in Singapore to manage its operations are strongly advised to seek approval from the Ministry of Manpower (MOM) before incorporation. Except for representative offices (where foreign firms maintain a local representative but do not conduct commercial transactions in Singapore) there are no restrictions on carrying out remunerative activities. As of October 2017, foreign companies may seek to transfer their place of registration and be registered as companies limited by shares in Singapore under Part XA (Transfer of Registration) of the Companies Act ( https://sso.agc.gov.sg/Act/CoA1967). Such transferred foreign companies are subject to the same requirements as locally incorporated companies.

All businesses in Singapore must be registered with the Accounting and Corporate Regulatory Authority (ACRA). Foreign investors can operate their businesses in one of the following forms: sole proprietorship, partnership, limited partnership, limited liability partnership, incorporated company, foreign company branch or representative office. Stricter disclosure requirements were passed in March 2017 requiring foreign company branches registered in Singapore to maintain public registers of their members. All companies incorporated in Singapore, foreign companies, and limited liability partnerships registered in Singapore are also required to maintain beneficial ownership in the form of a register of controllers (generally individuals or legal entities with more than 25 percent interest or control of the companies and foreign companies) aimed at preventing money laundering.

While there is currently no cross-sectional screening process for foreign investments, investors are required to seek approval from specific sector regulators for investments in certain firms. These sectors include energy, telecommunications, broadcasting, the domestic news media, financial services, legal services, public accounting services, ports and airports, and property ownership. Under Singapore law, Articles of Incorporation may include shareholding limits that restrict ownership in corporations by foreign persons.

Singapore does not maintain a formalized investment screening mechanism for inbound foreign investment. There are no reports of U.S. investors being especially disadvantaged or singled out relative to other foreign investors.

Other Investment Policy Reviews

Singapore underwent a trade policy review with the World Trade Organization (WTO) in July 2016, after which no major policy recommendations were raised. (https://www.wto.org/english/thewto_e/countries_e/singapore_e.htm)

The OECD and United Nations Industrial Development Organization (UNIDO) released a joint report in February 2019 on the ASEAN-OECD Investment Program. The program aims to foster dialogue and experience sharing between OECD countries and Southeast Asian economies on issues relating to the business and investment climate. The program is implemented through regional policy dialogue, country investment policy reviews, and training seminars. (http://www.oecd.org/investment/countryreviews.htm)

The OECD released a Transfer Pricing Country Profile for Singapore in June 2018. The country profiles focus on countries’ domestic legislation regarding key transfer pricing principles, including the arm’s length principle, transfer pricing methods, comparability analysis, intangible property, intra-group services, cost contribution agreements, transfer pricing documentation, administrative approaches to avoiding and resolving disputes, safe harbors and other implementation measures. (https://www.oecd.org/tax/transfer-pricing/transfer-pricing-country-profile-singapore.pdf)

The OECD released a peer review report in March 2018 on Singapore’s implementation of internationally agreed tax standards under Action Plan 14 of the base erosion and profit shifting (BEPS) project. Action 14 strengthens the effectiveness and efficiency of the mutual agreement procedure, a cross-border tax dispute resolution mechanism. (http://www.oecd.org/corruption-integrity/reports/singapore-2018-peer-review-report-transparency-exchange-information-aci.html)

As of April 2021, the United Nations Conference on Trade and Development (UNCTAD) has not conducted a policy review of Singapore’s intellectual property rights regime. (http://unctad.org/en/Pages/DIAE/Investment%20Policy%20Reviews/Investment-Policy-Reviews.aspx)

Business Facilitation

Singapore’s online business registration process is clear and efficient and allows foreign companies to register branches. All businesses must be registered with ACRA through Bizfile, its online registration and information retrieval portal ( https://www.bizfile.gov.sg/), including any individual, firm or corporation that carries out business for a foreign company. Applications are typically processed immediately after the application fee is paid, but could take between 14 to 60 days, if the application is referred to another agency for approval or review. The process of establishing a foreign-owned limited liability company in Singapore is among the fastest in the world.

ACRA ( www.acra.gov.sg) provides a single window for business registration. Additional regulatory approvals (e.g., licensing or visa requirements) are obtained via individual applications to the respective ministries or statutory boards. Further information and business support on registering a branch of a foreign company is available through the EDB ( https://www.edb.gov.sg/en/how-we-help/setting-up.html) and GuideMeSingapore, a corporate services firm Hawskford ( https://www.guidemesingapore.com/).

Foreign companies may lease or buy privately or publicly held land in Singapore, though there are some restrictions on foreign property ownership. Foreign companies are free to open and maintain bank accounts in foreign currency. There is no minimum paid-in capital requirement, but at least one subscriber share must be issued for valid consideration at incorporation.

Business facilitation processes provide for fair and equal treatment of women and minorities, and there are no mechanisms that provide special assistance to women and minorities.

Outward Investment

Singapore places no restrictions on domestic investors investing abroad. The government promotes outward investment through Enterprise Singapore, a statutory board under the Ministry of Trade and Industry. It provides market information, business contacts, and financial assistance and grants for internationalizing companies. While it has a global reach and runs overseas centers in major cities across the world, a large share of its overseas centers are located in major trading and investment partners and regional markets like China, India, the United States, and ASEAN.

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

Promoting inward FDI has been an important policy goal for the Taiwan authorities because of Taiwan’s self-imposed public debt ceiling limiting public spending and its low levels of private investment. Despite the global economic recession caused by the COVID-19 pandemic, Taiwan’s domestic private investment continued to rise by 5.0 percent in 2020 due to increased reshoring investment by overseas Taiwan companies since late 2018. Taiwan has pursued various measures to attract FDI from both foreign companies and Taiwan firms operating overseas. A network of science and industrial parks, technology industrial zones, and free trade zones aim to expand trade and investment opportunities by granting tax incentives, tariff exemptions, low-interest loans, and other favorable terms. Incentives tend to be more prevalent for investment in the manufacturing sector.

In January 2019, Taiwan launched a reshoring incentive program to attract Taiwan firms operating in the PRC to return to Taiwan and has received favorable responses from Information Communication Technology (ICT) manufacturers. The Ministry of Economic Affairs (MOEA) Department of Investment Services (DOIS) Invest in Taiwan Center serves as Taiwan’s investment promotion agency and provides streamlined procedures for foreign investors, including single-window services and employee recruitment. For investments over New Taiwan Dollar (NTD) 500 million (USD 17.6 million), authorities will assign a dedicated project manager to the investment process. DOIS services are available to all foreign investors. The Centre’s website contains an online investment aid system (https://investtaiwan.nat.gov.tw/smartIndexPage?lang=eng) to help investors retrieve all the required application forms based on various investment criteria and types. Taiwan also passed the Foreign Talent Retention Act to attract foreign professionals with a relaxed visa and work permit issuance process and tax incentives. In the past two years, over 2000 foreigners have received the Taiwan Employment Gold Card, which is a government initiative to attract highly skilled foreign talent to Taiwan (https://goldcard.nat.gov.tw/en/). The MOEA is drafting a proposed amendment to the Statute for Investment by Foreign Nationals, which would replace the existing pre-approval investment review process with an ex-post reporting mechanism and strengthen screening of investment in industries of national security concerns.

Taiwan maintains a negative list of industries closed to foreign investment because the authorities assert relate to national security and environmental protection, including public utilities, power distribution, natural gas, postal service, telecommunications, mass media, and air and sea transportation. These sectors constitute less than one percent of the production value of Taiwan’s manufacturing sector and less than five percent of the services sector. Railway transport, freight transport by small trucks, pesticide manufactures, real estate development, brokerage, leasing, and trading are open to foreign investment. The negative list of investment sectors, last updated in February 2018, is available at http://www.moeaic.gov.tw/download-file.jsp?do=BP&id=ZYi4SMROrBA=.

The Taiwan authorities have been actively promoting the “5+2 Innovative Industries” and six strategic industries development program to accelerate industrial transformation that would boost domestic demand and external market expansion. Target industries include smart machinery, biomedicine, IoT, green energy, national defense, advanced agriculture, circular economy, and semiconductors, among other key sectors. Taiwan authorities also offer subsidies for the research and development expenses for Taiwan-foreign partnership projects. The central authorities take a cautious approach to approving foreign investment in innovative industries that utilize new and potentially disruptive business models, such as the sharing economy.

The American Chamber of Commerce in Taiwan (AmCham Taiwan) meets regularly with Taiwan agencies such as the National Development Council (NDC) to promote the resolution of concerns highlighted in the AmCham Taiwan’s annual White Paper. The authorities also regularly meet with other foreign business groups. Some U.S. investors have expressed concerns about a lack of transparency, consistency, and predictability in the investment review process, particularly regarding private equity investment transactions. Current guidelines on foreign investment state that those private equity investors seeking to acquire companies in “important industries” must provide, for example, a detailed description of the investor’s long-term operational commitment, relisting choices, and the investment’s impact on competition within the sector. U.S. investors have claimed to experience lengthy review periods for private equity transactions and redundant inquiries from the MOEA Investment Commission and its constituent agencies. Some report that public hearings convened by Taiwan regulatory agencies about specific private equity transactions have appeared to advance opposition to private equity rather than foster transparent dialogue. Private equity transactions and other previously approved investments have, in the past, attracted Legislative Yuan scrutiny, including committee-level resolutions opposing specific transactions.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign entities are entitled to establish and own business enterprises and engage in all forms of remunerative activity as local firms unless otherwise specified in relevant regulations. Taiwan sets foreign ownership limits in certain industries, such as a 60 percent limit on foreign ownership of wireless and fixed-line telecommunications firms, including a direct foreign investment limit of 49 percent in that sector. State-controlled Chunghwa Telecom, which controls 97 percent of the fixed-line telecom market, maintains a 49 percent limit on direct foreign investment and a 55 percent limit on overall foreign investment, including indirect ownership. There is a 20 percent limit on foreign direct investment in cable television broadcasting services, and foreign ownership of up to 60 percent is allowed through indirect investment via a Taiwan entity. In practice, however, this kind of investment is subject to heightened regulatory and political scrutiny. In addition, there is a foreign ownership limit of 49.99 percent for satellite television broadcasting services and piped distribution of natural gas and a 49 percent limit for high-speed rail services. The foreign ownership cap on airport ground services firms, air-catering companies, aviation transportation businesses (airlines), and general aviation businesses (commercial helicopters and business jet planes) is less than 50 percent, with a separate limit of 25 percent for any single foreign investor. Foreign investment in Taiwan-flagged merchant shipping services is limited to 50 percent for Taiwan shipping companies operating international routes.

Taiwan has opened more than two-thirds of its aggregate industrial categories to PRC investors, with 97 percent of manufacturing sub-sectors and 51 percent of construction and services sub-sectors open to PRC capital. PRC nationals are prohibited from serving as chief executive officer in a Taiwan company, although a PRC board member may retain management control rights. The Taiwan authorities regard PRC investment in media or advanced technology sectors, such as semiconductors, as a national security concern. The Cross-Strait Agreement on Trade in Services and the Cross-Strait Agreement on Avoidance of Double Taxation and Enhancement of Tax Cooperation were signed in 2013 and 2015, respectively, but have not taken effect. Negotiations on the Agreement on Trade in Goods halted in 2016.

The Investment Commission screens applications for FDI, mergers, and acquisitions. Taiwan authorities claim that 95 percent of investments not subject to the negative list and, with capital less than NTD 500 million (USD 17.6 million), obtain approval at the Investment Commission staff level within two to four days. Investments between NTD 500 million (USD 17.6 million) and NTD 1.5 billion (USD 53 million) in capital take three to five days to screen. The approval authority for these types of transactions rests with the Investment Commission’s executive secretary. For investment in restricted industries, in cases where the investment amount or capital increase exceeds NTD 1.5 billion, or for mergers, acquisitions, and spin-offs, screening takes 10 to 20 days and includes review by relevant supervisory ministries. Final approval rests with the Investment Commission’s executive secretary. Screening for foreign investments involving cross-border mergers and acquisitions or other special situations takes 20-30 days, as these transactions require interagency review and deliberation at the Investment Commission’s monthly meeting.

The screening process provides Taiwan’s regulatory agencies opportunities to attach conditions to investments to mitigate concerns about ownership, structure, or other factors. Screening may also include an assessment of the impact of proposed investments on a sector’s competitive landscape and protection of the rights of local shareholders and employees. Screening is also used to detect investments with unclear funding sources, especially PRC-sourced capital. To ensure monitoring of PRC-sourced investment in line with Taiwan law and public sentiment, Taiwan’s National Security Bureau has participated in every PRC-related investment review meeting regardless of the size of the investment. Blocked deals in recent years have reflected the authorities’ increased focus on national security concerns beyond the negative-list industries. The proposed revisions to the principal investment statute would, if passed, allow the authorities to apply political, social, and cultural sensitivity considerations in their investment review process.

Foreign investors must submit an application form containing the funding plan, business operation plan, entity registration, and documents certifying the inward remittance of investment funds. Applicants and their agents must provide a signed declaration certifying that any PRC investors in a proposed transaction do not hold more than a 30 percent ownership stake and do not retain managerial control of the company. When an investment fails review, an investor may re-apply when the reason for the denial no longer exists. Foreign investors may also petition the regulatory agency that denied approval or may appeal to the Administrative Court.

Other Investment Policy Reviews

Taiwan has been a member of the World Trade Organization (WTO) since 2002. In September 2018, the WTO conducted the fourth review of the trade policies and practices of Taiwan. Related reports and documents are available at: https://www.wto.org/english/tratop_e/tpr_e/tp477_crc_e.htm

Business Facilitation

MOEA has taken steps to improve the business registration process and has been finalizing amendments to the Company Act to make business registration more efficient. Since 2014, the application review period for company registration has been shortened to two days. Applications for a taxpayer identification number, labor insurance (for companies with five or more employees), national health insurance, and pension plans can be processed at the same time and granted decisions within five to seven business days. Since January 1, 2017, foreign investors’ company registration applications are processed by the MOEA’s Central Region Office.

In recent years, the Taiwan authorities revised rules to improve the business climate for startups. To develop Taiwan into a startup hub in Asia, Taiwan authorities launched an entrepreneur visa program allowing foreign entrepreneurs to remain in Taiwan if they meet one of the following requirements: raise at least NTD 2 million (USD 70,400) in funding; hold patent rights or a professional skills certificate; operate in an incubator or innovation park in Taiwan; win prominent startup or design competitions; or receive grants from Taiwan authorities. Starting from 2019, startup entrepreneurs can use intellectual property (IP) as collateral to obtain bank loans, which applies to foreign investors. In September 2020, the Taiwan authorities proposed a new draft amendment to relax the criteria to attract more foreign professionals working in Taiwan.

By the end of 2020, nearly 2,000 people had obtained the Employment Gold Card, which includes a residency permit for the applicant and his/her immediate relatives (parents, spouse, children), a work permit for three years, an alien resident certificate, and a re-entry permit. More than 30 percent of the recipients were Americans. The Employment Gold Card policy helped alleviate recruiting companies’ liability in work permit applications and associated administrative expenditures.

Further details about business registration process can be found in Invest Taiwan Center’s business one-stop service request website at http://onestop.nat.gov.tw/oss/web/Show/engWorkFlow.do

The Investment Commission website lists the rules, regulations, and required forms for seeking foreign investment approval: https://www.moeaic.gov.tw/businessPub.view?lang=en&op_id_one=1

Approval from the Investment Commission is required for foreign investors before proceeding with business registration. After receiving an approval letter from the Investment Commission, an investor can apply for capital verification and then file an application for a corporate name and proceed with business registration. The new company must register with the Bureau of Labor Insurance and the Bureau of National Health Insurance before recruiting and hiring employees.

For the manufacturing, construction, and mining industries, the MOEA defines small and medium-sized enterprises (SMEs) as companies with less than NTD 80 million (USD 2.8 million) of paid-in capital and fewer than 200 employees. For all other industries, SMEs are defined as having less than NTD 100 million (USD 3.5 million) of paid-in capital and fewer than 100 employees. Taiwan runs a Small and Medium Enterprise Credit Guarantee Fund to help SMEs obtain financing from local banks. Firms established by foreigners in Taiwan may receive a guarantee from the Fund. Taiwan’s National Development Fund has set aside NTD 10 billion (USD 350 million) to invest in SMEs.

Outward Investment

The PRC used to be the top destination for Taiwan companies’ overseas investment given the low cost of factors of production there, such as wages and land. With rising trade tensions between the United States and the PRC starting in 2018, the Taiwan authorities have intensified their efforts to assist Taiwan firms to diversify production by either relocating back home or to other markets, including in Southeast Asia. The Tsai administration launched the New Southbound Policy to enhance Taiwan’s economic connection with 18 countries in Southeast Asia, South Asia, and the Pacific. In 2020, Taiwan companies’ investment in the 18 countries totaled USD 2.8 billion. The Taiwan authorities seek investment agreements with these countries to incentivize Taiwan firms’ investment in those markets. Invest in Taiwan provides consultation and loan guarantee services to Taiwan firms operating overseas. Taiwan’s financial regulators have urged Taiwan banks to expand their presence in Southeast Asian economies either by setting up branches or acquiring subsidiaries.

According to the Act Governing Relations between the People of the Taiwan Area and the Mainland Area, all Taiwan individuals, juridical persons, organizations, or other institutions must obtain approval from the Investment Commission to invest in or have any technology-oriented cooperation with the PRC. The Taiwan authorities maintain a negative list for Taiwan firms’ investment and have special rules governing technology cooperation in the PRC. The Taiwan authorities, Taiwan companies, and foreign investors in Taiwan are increasingly vigilant about the threat of IP theft and illegal talent poaching in key strategic industries, such as the semiconductor industry.

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

Americans planning to invest in Thailand are advised to obtain qualified legal advice. Thai business regulations are governed predominantly by criminal, not civil, law. Foreigners are rarely jailed for improper business activities, yet violations of business regulations can carry heavy criminal penalties. Thailand has an independent judiciary and government authorities are generally not permitted to interfere in the court system once a case is in process.

Thailand continues to generally welcome investment from all countries and seeks to avoid dependence on any one country as a source of investment. However, the FBA prescribes a wide range of business that may not be conducted by foreigners without additional licenses or exemptions. The term “foreigner” includes Thai-registered companies in which half or more of the capital is held by non-Thai individuals and foreign-registered companies. Although the FBA prohibits majority foreign ownership in many sectors, U.S. investors registered under the United States-Thailand Treaty of Amity and Economic Relations (AER) are exempt. Nevertheless, the AER’s privileges do not extend to U.S. investments in the following areas: communications; transportation; fiduciary functions; banking involving depository functions; the exploitation of land or other natural resources; domestic trade in indigenous agricultural products; and the practice of professions reserved for Thai nationals.

The Board of Investment (BOI) assists Thai and foreign investors to establish and conduct businesses in targeted economic sectors by offering both tax and non-tax incentives. In recent years Thailand has taken steps to reform its business regulations and has improved processes and reduced time required to start a business from 29 days to 6 days. Thailand has steadily improved its ranking in the World Bank’s Doing Business Report in the last several years and now occupies the 21st position out of 190 countries in the 2019 ranking, trailing only Singapore (2) and Malaysia (12) in the ASEAN bloc. Thai officials routinely make themselves available to investors through discussions with foreign chambers of commerce.

Limits on Foreign Control and Right to Private Ownership and Establishment

Various Thai laws set forth foreign-ownership restrictions in certain sectors. These restrictions primarily concern services such as banking, insurance, and telecommunications. The FBA details the types of business activities reserved for Thai nationals. Foreign investment in those businesses must comprise less than 50 percent of share capital, unless specially permitted or otherwise exempt.

The following three lists detail FBA-restricted businesses for foreigners.

List 1. This contains activities non-nationals are prohibited from engaging in, including: newspaper and radio broadcasting stations and businesses; agricultural businesses; forestry and timber processing from a natural forest; fishery in Thai territorial waters and specific economic zones; extraction of Thai medicinal herbs; trading and auctioning of antique objects or objects of historical value from Thailand; making or casting of Buddha images and monk alms bowls; and land trading.

List 2.This contains activities related to national safety or security, arts and culture, traditional industries, folk handicrafts, natural resources, and the environment. Restrictions apply to the production, distribution and maintenance of firearms and armaments; domestic transportation by land, water, and air; trading of Thai antiques or art objects; mining, including rock blasting and rock crushing; and timber processing for production of furniture and utensils. A foreign majority-owned company can engage in List 2 activities if Thai nationals or legal persons hold not less than 40 percent of the total shares and the number of Thai directors is not less than two-fifths of the total number of directors. Foreign companies also require prior approval and a license from the Council of Ministers (Cabinet).

List 3.Restricted businesses in this list include accounting, legal, architectural, and engineering services; retail and wholesale; advertising businesses; hotels; guided touring; selling food and beverages; and other service-sector businesses. A foreign company can engage in List 3 activities if a majority of the limited company’s shares are held by Thai nationals. Any company with a majority of foreign shareholders (more than 50 percent) cannot engage in List 3 activities unless it receives an exception from the Ministry of Commerce under its Foreign Business License (FBL) application.

Aside from these general categories, Thailand does not maintain a national security screening mechanism for investment, and investors can receive additional incentives/privileges if they invest in priority areas, such as high-technology industries. Investors should contact the Board of Investment [https://www.boi.go.th/index.php?page=index] for the latest information on specific investment incentives.

The U.S.-Thai Treaty of Amity and Economic Relations allows approved businesses to engage in FBA restricted businesses detailed above in Lists 1, 2, and 3. However, the Treaty does not exempt U.S. investments from restrictions applicable to: owning land; fiduciary functions; banking involving depository functions; inland communications & transportation; exploitation of land and other natural resources; and domestic trade in agricultural products.

To operate restricted businesses as defined by the FBA’s List 2 and 3, non-Thai entities must obtain a foreign business license. These licenses are approved by the Council of Ministers (Cabinet) and/or Director-General of the MOC’s Department of Business Development, depending on the business category.

Every year, the MOC reviews business categories on the three FBA lists. Businesses no longer subject to restrictions include regional office services and contractual services provided to government bodies and state-owned enterprises. In an effort to further reduce obstacles to foreign investment, four business types under List 3, otherwise supervised by specific acts, were removed from the restricted list in 2019 and 2020. Those businesses include telecommunication services for license type 1 (telecommunication business operator without its own network for services); financial centers; aviation/aircraft maintenance; and software development.

American investors who wish to take majority shares or wholly own businesses under FBA’s Annex 3 list may apply for benefits under the U.S.-Thai Treaty of Amity. https://2016.export.gov/thailand/treaty/index.asp#P5_233

The U.S. Commercial Service, U.S. Embassy Bangkok is responsible for issuing a certification letter to confirm that a U.S. company is qualified to apply for benefits under the Treaty of Amity. The applicant must first obtain documents verifying that the company has been registered in compliance with Thai law. Upon receipt of the required documents, the U.S. Commercial Service office will then certify to the Foreign Administration Division, Department of Business Development, Ministry of Commerce (MOC) that the applicant is seeking to register an American-owned and managed company or that the applicant is an American citizen and is therefore entitled to national treatment under the provisions of the Treaty. For more information on how to apply for benefits under the Treaty of Amity, please e-mail ktantisa@trade.gov.

Other Investment Policy Reviews

The World Trade Organization conducted a Trade Policy Review of Thailand in November 2020 (https://www.wto.org/english/tratop_e/tpr_e/tp500_e.htm). The Organization for Economic Cooperation and Development (OECD) concluded its Investment Policy Review for Thailand in January 2021 (https://www.oecd-ilibrary.org/sites/c4eeee1c-en/index.html?itemId=/content/publication/c4eeee1c-en).

Business Facilitation

The MOC’s Department of Business Development (DBD) is generally responsible for business registration. Registration can be performed online or manually. Registration documentation must be submitted in the Thai language. Many foreign entities hire a local law firm or consulting firm to handle their applications. Firms engaging in production activities also must register with the Ministry of Industry and the Ministry of Labor and Social Development.

A company is required to have registered capital of two million Thai baht per foreign employee in order to obtain work permits. Additionally, foreign companies may have no more than 20% foreign employees on staff. Companies that have obtained special BOI investment incentives may be exempted from this requirement. Foreign employees must enter the country on a non-immigrant visa and then submit work permit applications directly to the Department of Labor. Application processing takes approximately one week. For more information on Thailand visas, please refer to http://www.mfa.go.th/main/en/services/4908/15388-Non-Immigrant-Visa- percent22B percent22-for-Business-and.html.

In February 2018, the Thai government launched a Smart Visa program for investors in targeted industries and foreigners with expertise in specialized technologies. Under this program, foreigners can be granted a maximum four-year visa to work in Thailand without having to obtain a work permit or re-entry permit. Other relaxed immigration rules include having visa holders report to the Bureau of Immigration just once per year (instead of every 90 days) and providing the visa holder’s spouse and children many of the same privileges as the primary visa holder. More information is available online at https://smart-visa.boi.go.th/home_detail/general_information.php and by telephone at +662-209-1100 ext. 1109-1110.

Outward Investment

In 2020, Thai companies continued to expand and invest overseas despite the pandemic. These investments primarily target neighboring ASEAN countries, China, the United States, and Europe. A relatively strong domestic currency, rising cash holdings, and subdued domestic growth prospects are helping to drive outward investment. The baht depreciated over 4 percent against the dollar in Q1 2021. Faced with the effects of the pandemic, the government may prioritize domestic investment to stimulate the economy.

Previously, food, ago-industry, energy, and chemical sectors accounted for the main share of outward flows. Purchasing shares, developing partnerships, and making acquisitions help Thai investors acquire technologies for parent companies and expand supply chains in international markets. Thai corporate laws allow outbound investments to be made by an independent affiliate (foreign company), a branch of a Thai legal entity, or by any Thai company in the case of financial investments abroad. BOI and the MOC’s Department of International Trade Promotion (DITP) share responsibility for promoting outward investment. BOI focuses on outward investment in ASEAN (especially Cambodia, Laos, Myanmar, and Vietnam) and emerging economies. DITP covers smaller markets.

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

Market entry for U.S. firms is facilitated by a common language, legal heritage, and similar business institutions and practices. The UK is well supported by sophisticated financial and professional services industries and has a transparent tax system in which local and foreign-owned companies are taxed alike. The poundsterlingis a free-floating currency with no restrictions on its transfer or conversion.There are no exchange controls restricting the transfer of funds associated with an investment into or out of the UK.

UK legal, regulatory, and accounting systems are transparent and consistent with international standards. The UK legal system provides a high level of investor protections. Private ownership is protected by law and monitored for competition-restricting behavior. U.S. exporters and investors generally will find little difference between the United States and the UK in the conduct of business, and common law prevails as the basis for commercial transactions in the UK.

The UKactivelyencouragesinwardFDI. The Department for International Trade, including through its newlycreated Office for Investment,actively promotesinward investmentand prepares market information for a variety of industries. U.S. companies establishing British subsidiaries generally encounter no special nationality requirements on directors or shareholders.Once established in the UK, foreign-owned companies are treated no differently from UK firms. TheUK governmentis a strong defender of the rights of any British-registered company, irrespective of its nationality of ownership.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign ownership is limited in only a few private sector companies for national security reasons, such as Rolls Royce (aerospace) and BAE Systems (aircraft and defense). No individual foreign shareholder may own more than 15 percent of these companies. Theoretically, the government can block the acquisition of manufacturing assets from abroad by invoking the Industry Act of 1975, but it has never done so. Investments in energy and power generation require environmental approvals. Certain service activities (like radio and land-based television broadcasting) are subject to licensing.

The UK requires that at least one director of any company registered in the UK be ordinarily resident in thecountry.

TheUK’sNational Security and InvestmentAct, whichcame into effectinMay 2021,significantly strengthenedthe UK’sexisting investment screeningpowers. Investmentsresulting in foreign controlgenerally exceeding15 percent of companiesin17sectorspertaining to national securityrequiremandatory notifications tothe UK government’s Investment Security Unit(seehttps://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/965784/nsi-scope-of-mandatory-regime-gov-response.pdffor details). The regime operatesseparately from competition law.The billprovidesauthority to a newlycreatedInvestment Security Unitto review investmentsretroactively for a period of five years.

Other Investment Policy Reviews

The Economist Intelligence Unit, World Bank Group’s “Doing Business2020,” and the OECD’s Economic Forecast Summary (December 2020) have current investment policy reports for the United Kingdom:

http://country.eiu.com/united-kingdom

http://www.doingbusiness.org/data/exploreeconomies/united-kingdom/

https://www.oecd.org/economy/united-kingdom-economic-snapshot/

Business Facilitation

The UK government has promoted administrative efficiency to facilitate business creation and operation. The online business registration process is clearly defined, though some types of companiescannot register as an overseas firm in the UK, including partnerships and unincorporated bodies. Registration as an overseas company is only required when the company has some degree of physical presence in the UK. After registering their business with the UK governmental body Companies House, overseas firms must separately register to pay corporation tax within three months. On average, the process of setting up a business in the UK requires13days, compared to the European average of 32 days, putting the UK in first place in Europe and sixth in the world.

As of April 2016, companies have to declare all “persons of significant control.”This policy recognizes that individuals other than named directors can have significant influence on a company’s activity and that this information should be transparent.More information is available at this link:https://www.gov.uk/government/publications/guidance-to-the-people-with-significant-control-requirements-for-companies-and-limited-liability-partnerships.Companies House maintains a free, publicly searchable directory, available athttps://www.gov.uk/get-information-about-a-company.

The UK offers a welcoming environment to foreign investors, with foreign equity ownership restrictions in only a limited number of sectors covered by the World Bank’s Investing Across Sectors indicators.

https://www.gov.uk/government/organisations/department-for-international-trade

https://www.gov.uk/set-up-business

https://www.gov.uk/topic/company-registration-filing/starting-company

http://www.doingbusiness.org/data/exploreeconomies/united-kingdom/starting-a-business

Special Section on the British Overseas Territories and Crown Dependencies

The British Overseas Territories (BOTs) comprise Anguilla, British Antarctic Territory, Bermuda, British Indian Ocean Territory, British Virgin Islands, Cayman Islands, Falkland Islands, Gibraltar, Montserrat, Pitcairn Islands, St. Helena, Ascension and Tristan da Cunha, Turks and Caicos Islands, South Georgia and South Sandwich Islands, and Sovereign Base Areas on Cyprus. The BOTs retain a substantial measure of authority for their own affairs. Local self-government is usually provided by an Executive Council and elected legislature. Governors or Commissioners are appointed by the Crown on the advice of the British Foreign Secretary, and retain responsibility for external affairs, defense, and internal security.

Many of the territories are now broadly self-sufficient.The UK’sForeign, Commonwealth and Development Department (FCDO), however,maintains development assistance programs in St. Helena, Montserrat, and Pitcairn.This includes budgetary aid to meet the islands’ essential needs and development assistance to help encourage economic growth and social development in order to promote economic self-sustainability. In addition, all other BOTs receive small levels of assistance through “cross-territory” programs for issues such as environmental protection, disaster prevention, HIV/AIDS,and child protection.

Seven of the BOTs have financial centers: Anguilla, Bermuda, British Virgin Islands, Cayman Islands, Gibraltar, Montserrat, and the Turks and Caicos Islands. Theseterritorieshave committed to the OECD’s Common Reporting Standard (CRS) for the automatic exchange of taxpayer financial account information.They have long exchanged information with the UK, and began exchanging informationwith other jurisdictionsunder the CRS from September 2017.

Of theBOTs, Anguilla is the onlyone to receive a“non-compliant” rating by the Global Forum for Exchange of Information on Request, putting it on the EU list of non-cooperative tax jurisdictions. The Global Forum has rated the other six territories as “largely compliant.” Anguilla, Bermuda, British Virgin Islands, Cayman Islands, Gibraltar,and the Turks and Caicos Islands have committed in reciprocal bilateral arrangements with the UK to hold beneficial ownership information in central registers or similarly effective systems, and to provide UK law enforcement authorities with near real-time access to this information.

Anguilla: Anguilla has no income, capital gains, estate, profit or other forms of direct taxation on either individuals or corporations, for residents or non-residents of the jurisdiction. The territory has no exchange rate controls. Non-Anguillan nationals may purchase property, but the transfer of land to an alien includesa 12.5 percent taxon the assessed value of the property or the sales proceeds, whichever is greater.

British Virgin Islands: The government of the British Virgin Islands offers a series of tax incentive packages aimed at reducing the cost of doing business on the islands. This includes relief from corporation tax payments over specific periods,but companies must pay an initial registration fee and an annual license fee to the BVI Financial Services Commission. Crown land grants are not available to non-British Virgin Islanders, but private land can be leased or purchased following the approval of an Alien Land Holding License. Stamp duty is imposed on transfersof real estate and the transfer of shares in a BVI company owning real estate in the BVI at a rate offourpercent forbelongers(i.e., residents who have proven they meet a legal standard of close ties to the territory) and 12 percent for non-belongers. There is no corporate income tax, capital gains tax, branch tax, or withholding tax for companies incorporated under the BVI Business Companies Act. Payroll tax is imposed on every employer and self-employed person who conducts business in BVI. The tax is paid at a graduated rate depending upon the size of the employer. The current rates are 10 percent for small employers (those which have a payroll of less than $150,000, a turnover of less than $300,000 and fewer thansevenemployees) and 14 percent for larger employers. Eight percent of the total remuneration is deducted from the employee, the remainder of the liability is met by the employer. The first $10,000 of remuneration is free from payroll tax.

Cayman Islands: There are no direct taxes in the Cayman Islands. In most districts, the government charges stamp duty of 7.5 percent on the value of real estate at sale, butcertain districts, including Seven Mile Beach, are subject to a rate of nine percent. There is a one percent fee payable on mortgages of less than KYD 300,000, and one and a half percent on mortgages of KYD 300,000 or higher. There are no controls on the foreign ownership of property and land. Investors can receive import duty waivers on equipment, building materials, machinery, manufacturing materials, and other tools.

Falkland Islands: Companies located in the Falkland Islands are charged corporation tax at 21 percent on the first£1million($1.4 million)and 26 percent for all amounts in excess of£1million($1.4 million). The individual income tax rate is 21 percent for earnings below£12,000($16,800) and 26 percent above this level.

Gibraltar: With BREXIT, Gibraltar isnotcurrently a part of the EU, butunder the terms of an agreementin principlereached between the UK and Spain on December 31, 2020,itis set tobecome a part ofthe EU’spassport-freeSchengentravel area. TheUK andEU are setto begin negotiationsona treaty onthemovementof peopleandgoods between Gibraltar and the bloc. Gibraltar has a buoyant economy with a stable currency and few restrictions on moving capital or repatriating dividends. The corporate income tax rate is 20 percent for utility, energy, and fuel supply companies, and 10 percent for all other companies. There are no capital or sales taxes.

Montserrat: Foreign investors are permitted to acquire real estate, subject to the acquisition of an Alien Land Holding license,which carries a fee of five percent of the purchase price. The government also imposes stamp and transfer fees of 2.6 percent of the property value on all real estate transactions. Foreign investment in Montserrat is subject to the same taxation rules as local investment and is eligible for tax holidays and other incentives. Montserrat has preferential trade agreements with the United States, Canada, and Australia. The government allows 100 percent foreign ownership of businesses,but the administration of public utilities remains wholly in the public sector.

St. Helena: The government offers tax-based incentives,which are considered on the merits of each project – particularly tourism projects. All applications are processed by Enterprise St. Helena, the business development agency.

Pitcairn Islands: The Pitcairn Islands have approximately 50 residents, with a workforce of approximately 29 employed in 10 full-time equivalent roles. The territory does not have an airstrip or a commercially viable harbor. Residents exist on fishing, subsistence farming, and handcrafts.

The Turks and Caicos Islands: Through an “open arms” investment policy, the government commits to a streamlined business licensing system, a responsive immigration policy to give investment security, access to government-owned land under long-term leases, and a variety of duty concessions to qualified investors. The islands have a “no tax” policy, but property purchasers must pay a stamp duty on purchases over $25,000. Depending on the island, the stamp duty rate may be up to 6.5 percent for purchases up to $250,000, eight percent for purchases $250,001 to $500,000, and 10 percent for purchases over $500,000.

The Crown Dependencies: The Crown Dependencies are the Bailiwick of Jersey, the Bailiwick of Guernsey,and the Isle of Man. The Crown Dependencies are not part of the UK but are self-governing dependencies of the Crown. This means they have their own directly elected legislative assemblies, administrative, fiscal and legal systems,and their own courts of law. The Crown Dependencies are not represented in the UK Parliament. The following tax data are current as ofApril 2021:

Jersey’s standard rate of corporate tax iszeropercent. The exceptions to this standard rate are financial service companies, which are taxed at 10 percent;utility companies, which are taxed at 20 percent;and income specifically derived from Jersey property rentals or Jersey property development, taxed at 20 percent.A five percentVAT is applicable in Jersey.

Guernsey has a zero percent rate of corporate tax. Exceptions include some specific banking activities, taxed at 10 percent;utility companies, which are taxed at 20 percent;Guernsey residents’ assessable income is taxed at 20 percent;and income derived from land and buildings is taxed at 20 percent.

The Isle of Man’s corporate standard tax iszeropercent. The exceptions to this standard rate are income received from banking business, which is taxed at 10 percent,and income received from land and property in the Isle of Man,which is taxed at 20 percent. In addition, a 10 percent tax rate also applies to companies whichcarry on a retail business in the Isle of Man and have taxable income in excess of £500,000($695,000)from that business.A20percent rate ofVAT is applicable in the Isle of Man.

Outward Investment

The UK is one of the largest outward investors in the world, undergirded by numerousbilateral investment treaties(BITs) . The UK’s international investment position abroad (outward investment) increased from£1,453billion($1,938)in 2018 to£1,498($1,912) by the end of 2019. The main destination for UK outward FDI is the United States, which accounted for approximately25percent of UK outward FDI stocks at the end of 2019. Other key destinations include the Netherlands, Luxembourg, France, and Spain which, together with the United States, account for a little under half of the UK’s outward FDI stock.Europe and the Americas remain the dominant areas for UK international investment positions abroad, accounting foreightof the top 10 destinations for total UK outward FDI.

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Toward Foreign Direct Investment

Since Vietnam embarked on economic reforms in 1986 to transition to a market-based economy, the government has welcomed FDI, recognizing it as a key component of Vietnam’s high rate of economic growth over the last two decades. Foreign investments continue to play a crucial role in the economy: according to Vietnam’s General Statistics Office (GSO), Vietnam exported USD 281 billion in goods in 2020, of which 72 percent came from projects utilizing FDI.

The Politburo issued Resolution 55 in 2019 to increase Vietnam’s attractiveness to foreign investment. This Resolution aims to attract USD 50 billion in new foreign investment by 2030. In 2020, the government revised laws on investment and enterprise, in addition to passing the Public Private Partnership Law, to further the goals of this Resolution. The revisions encourage high-quality investments, use and development of advanced technologies, and environmental protection mechanisms.

While Vietnam’s revised Investment Law says the government must treat foreign and domestic investors equally, foreign investors have complained about having to cross extra hurdles to get ordinary government approvals. The government continues to have foreign ownership limits (FOLs) in industries Vietnam considers important to national security. In January 2020, the government removed FOLs on companies in the eWallet sector and reformed electronic payments procedures for foreign firms. Some U.S. investors report that these changes have provided more regulatory certainty, which has, in turn, instilled greater confidence as they consider long-term investments in Vietnam.U.S. investors continue to cite concerns about confusing tax regulations and retroactive changes to laws – including tax rates, tax policies, and preferential treatment of state-owned enterprises (SOEs). In 2020, members of the American Chamber of Commerce (AmCham) in Hanoi noted that fair, transparent, stable, and effective legal frameworks would help Vietnam better attract U.S. investment.

The Ministry of Planning and Investment (MPI) is the country’s national agency charged with promoting and facilitating foreign investment; most provinces and cities also have local equivalents. MPI and local investment promotion offices provide information and explain regulations and policies to foreign investors. They also inform the Prime Minister and National Assembly on trends in foreign investment. However, U.S. investors should still consult lawyers and/or other experts regarding issues on regulations that are unclear.

The Prime Minister, along with other senior leaders, has stated that Vietnam prioritizes both investment retention and ongoing dialogue with foreign investors. Vietnam’s senior leaders often meet with foreign governments and private-sector representatives to emphasize Vietnam’s attractiveness as an FDI destination. The semiannual Vietnam Business Forum includes meetings between foreign investors and Vietnamese government officials; the U.S.-ASEAN Business Council (USABC), AmCham, and other U.S. associations also host multiple yearly missions for their U.S. company members, which allow direct engagement with senior government officials. Foreign investors in Vietnam have reported that these meetings and dialogues have helped address obstacles.

Limits on Foreign Control and Right to Private Ownership and Establishment

Both foreign and domestic private entities have the right to establish and own business enterprises in Vietnam and engage in most forms of legal remunerative activity in non-regulated sectors.

Vietnam has some statutory restrictions on foreign investment, including FOLs or requirements for joint partnerships, projects in banking, network infrastructure services, non-infrastructure telecommunication services, transportation, energy, and defense. By law, the Prime Minister can waive these FOLs on a case-by-case basis. In practice, however, when the government has removed or eased FOLs, it has done so for the whole industry sector rather than for a specific investment.

MPI plays a key role with respect to investment screening. All FDI projects require approval by the provincial People’s Committee in which the project would be located. By law, large-scale FDI projects must also obtain the approval of the National Assembly before investment can proceed. MPI’s approval process includes an assessment of the investor’s legal status and financial strength; the project’s compatibility with the government’s long- and short-term goals for economic development and government revenue; the investor’s technological expertise; environmental protection; and plans for land use and land clearance compensation, if applicable. The government can, and sometimes does, stop certain foreign investments if it deems the investment harmful to Vietnam’s national security.

The following FDI projects also require the Prime Minister’s approval: airports; grade 1 seaports (seaports the government classifies as strategic); casinos; oil and gas exploration, production, and refining; telecommunications/network infrastructure; forestry projects; publishing; and projects that need approval from more than one province. In the period between this year’s Investment Climate Statement and last year’s, the government removed the requirement that the Prime Minister needs to approve investments over USD 271 million or investments in the tobacco industry.

Other Investment Policy Reviews

Recent third-party investment policy reviews include the World Bank’s Review from 2020: https://openknowledge.worldbank.org/handle/10986/33598

https://openknowledge.worldbank.org/handle/10986/33598

And OECD’s 2018 Review: https://www.oecd.org/countries/vietnam/oecd-investment-policy-reviews-viet-nam-2017-9789264282957-en.htm

https://www.oecd.org/countries/vietnam/oecd-investment-policy-reviews-viet-nam-2017-9789264282957-en.htm

UNCTAD released a report in 2009: https://unctad.org/webflyer/investment-policy-review-viet-nam

https://unctad.org/webflyer/investment-policy-review-viet-nam

Business Facilitation

The World Bank’s 2020 Ease of Doing Business Index ranked Vietnam 70 of 190 economies. The World Bank reported that in some factors Vietnam lags behind other Southeast Asian countries. For example, it takes businesses 384 hours to pay taxes in Vietnam compared with 64 in Singapore, 174 in Malaysia, and 191 in Indonesia.

In May 2021, USAID and the Vietnam Chamber of Commerce and Industry (VCCI) released the Provincial Competitiveness Index (PCI) 2020 Report, which examined trends in economic governance: http://eng.pcivietnam.org/. This annual report provides an independent, unbiased view on the provincial business environment by surveying over 8,500 domestic private firms on a variety of business issues. Overall, Vietnam’s median PCI score improved, reflecting the government’s efforts to improve economic governance and the quality of infrastructure, as well as a decline in the prevalence of corruption (bribes).

Outward Investment

The government does not have a clear mechanism to promote or incentivize outward investment, nor does it have regulations restricting domestic investors from investing abroad. Vietnam does not release periodical statistics on outward investment, but reported that by the end of 2019 total outward FDI investment from Vietnam was USD 21 billion in more than 1,300 projects in 78 countries. Laos received the most outward FDI, with USD 5 billion, followed by Russia and Cambodia with USD 2.8 billion and USD 2.7 billion, respectively. SOEs like PetroVietnam, Viettel, and SOCB are Vietnam’s largest sources of outward FDI, and have invested more than USD 13 billion in outward FDI, per media reports.