c1023f9f80 - United States Department of State (2024)

Policies Towards Foreign Direct Investment

The Government of Bahrain (GOB) has a liberal approach to foreign investment and actively seeks to attract foreign investors and businesses. Increasing foreign direct investment (FDI) is one of the government’s top priorities. The GOB permits 100 percent foreign ownership of a business or branch office, without the need for a local partner. The GOB does not tax corporate income, personal income, wealth, capital gains, withholding or death/inheritance. There are no restrictions on repatriation of capital, profits or dividends, aside from income generated by companies in the oil and gas sector, where profits are taxable at the rate of 46 percent. The Bahrain Economic Development Board (EDB), charged with promoting FDI in Bahrain, places particular emphasis on attracting FDI to the manufacturing, logistics, information and communications technology (ICT), financial services and tourism and leisure sectors. As a reflection of the Kingdom’s openness to FDI, the EDB won the 2019 United Nations Top Investment Promotion Agency in the Middle East award for its role in attracting large-scale investments.

To date, U.S. investors have not alleged any legal or practical discrimination against them based on nationality.

Limits on Foreign Control and Right to Private Ownership and Establishment

The GOB permits foreign and domestic private entities to establish and own business enterprises and engage in all forms of remunerative activity. The GOB imposes only minimal limits on foreign control, and the right of ownership and establishment of a business. The Ministry of Industry, Commerce and Tourism (MoICT) maintains a small list of business activities that are restricted to Bahraini ownership, including press and publications, Islamic pilgrimage, clearance offices, and workforce agencies. The U.S.-Bahrain Free Trade Agreement (FTA) outlines all activities in which the two countries restrict foreign ownership.

U.S citizens may own and operate companies in Bahrain, though many such individuals choose to integrate influential local partners into the ownership structure to facilitate quicker resolution of bureaucratic issues such as labor permits, issuance of foreign visas, and access to industrial zones. The most common challenges faced by U.S firms are those related to bureaucratic government processes, lack of market information, and customs clearance.

Other Investment Policy Reviews

The World Trade Organization (WTO) has conducted a formal Trade Policy Review of Bahrain every seven years. Its last formal review was in 2014 (see link below). https://docs.wto.org/dol2fe/Pages/FE_Search/FE_S_S006.aspx?Query=(@Symbol=%20wt/tpr/g/*)%20and%20((%20@Title=%20bahrain%20)%20or%20(@CountryConcerned=%20bahrain))&Language=ENGLISH&Context=FomerScriptedSearch&languageUIChanged=true#

https://docs.wto.org/dol2fe/Pages/FE_Search/FE_S_S006.aspx?Query=(@Symbol=%20wt/tpr/g/*)%20and%20((%20@Title=%20bahrain%20)%20or%20(@CountryConcerned=%20bahrain))&Language=ENGLISH&Context=FomerScriptedSearch&languageUIChanged=true#

Business Facilitation

Bahrain ranked 43rd out of 190 countries on the World Bank’s overall Ease of Doing Business Indicator in 2019.

The Central Bank of Bahrain’s regulatory sandbox allows local and international FinTech firms and digitally focused financial institutions to test innovative solutions in a regulated environment, allowing successful firms to obtain licensing upon successful product application.

The MoICT operates an online commercial registration portal, “Sijilat” (www.sijilat.bh) to facilitate the commercial registration process. Through Sijilat, businesspeople can obtain a business license and requisite approvals from relevant ministries. The business registration process normally takes two to three weeks but can take longer if a business requires specialized approvals. In practice, some businesspeople retain an attorney or clearing agent to assist them through the commercial registration process.

In addition to obtaining primary approval to register a company, most business owners must also obtain licenses from the following entities to operate their businesses:

• MoICT
• Ministry of Electricity and Water
• The Municipality in which their business will be located
• Labour Market Regulatory Authority
• General Organization for Social Insurance
• The National Bureau for Revenue (Mandatory if the business revenue expected to exceed BD 37,500)

The GOB provides industrial lands at reduced rental rates for short periods of time to incentivize foreign investment in Bahrain’s targeted investment zones.

Outward Investment

The GOB neither promotes nor incentivizes outward investment. The GOB does not restrict domestic investors from investing abroad.

Transparency of the Regulatory System

In 2018, the GOB issued a competition law, a personal data protection law, a bankruptcy law, and a health insurance law to enhance the country’s investment eco-system. The so-called Law of Commerce (Legislative Decree No. 7, passed in 1987) addresses the concept of unfair competition and prohibits acts that would have a damaging effect on competition. Companies also are forbidden from undertaking practices detrimental to their competitors or from attracting the customers of their competitors. There is no official competition authority in Bahrain and the country has yet to institute comprehensive anti-monopoly laws or an independent anti-corruption agency.

Bahrain’s industrial sector exhibits dominance by state-controlled companies such as Aluminum Bahrain (ALBA) and Gulf Petrochemical Industries Company (GPIC). De facto monopolies also exist in some industries led by individuals or family-run businesses.

The GOB uses International Financial Reporting Standards (IFRS) as part of its implementation of Generally Accepted Accounting Principles (GAAP). IFRS are used by domestic listed and unlisted companies in their consolidated financial statements for external financial reporting.

Bahrain adopted International Accounting Standard 1 (IAS 1) in 1994 in the absence of other local standards. Non-listed banks and other business enterprises use IASs in the preparation of financial statements.

The 2001 Bahrain Commercial Companies Law requires each registered entity to produce a balance sheet, a profit-and-loss account and the director’s report for each financial year. All branches of foreign companies, limited liability companies, and corporations must submit annual audited financial statements to the Directorate of Commerce and Company Affairs at the MoICT, along with the company’s articles and /or articles of association.

Depending on the company’s business, financial statements may be subject to other regulatory agencies such as the Bahrain Monetary Agency (BMA) and the Bahrain Stock Exchange (banks and listed companies).

Bahrain encourages firms to adhere to both the International Financial Reporting Standards (IFRS) and Bahrain’s Code of Corporate Governance. Bahrain-based companies mostly remain in compliance with IAS-1 disclosure requirements.

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

According to the World Bank, the GOB does not have the legal obligation to publish the text of proposed regulations before their enactment and there is no period of time set by law for the text of the proposed regulations to be publicly available. Bahrain, therefore, ranks among the countries with low rule-making transparency. http://rulemaking.worldbank.org/en/data/explorecountries/bahrain

http://rulemaking.worldbank.org/en/data/explorecountries/bahrain

Bahrain – Laws can be drafted or proposed by the Cabinet or originate in the Parliament, comprised of an elected Council of Representatives (COR) and an appointed Shura Council. The independent Legislation and Legal Opinion Commission drafts legislation based on the proposals. King Hamad’s signature is required to ratify any laws following parliamentary approval; laws are in force once published in the official gazette. King Hamad may also make royal decrees (known as Decree Laws), that are immediately effective once issued, unless otherwise stated; some royal decrees are later redrafted as legislation. GOB ministers and heads of agencies are authorized to issue regulations that pertain to the administration of their respective bodies. Bahrain is a member of the Gulf Cooperation Council (GCC), which created a Unified Economic Agreement to expedite trade and the movement of people and goods within GCC borders. It has also adopted a number of unified GCC model laws, such as the GCC Trademark Law. Bahrain is a signatory to the Apostille Convention and is a member of the Permanent Court of Arbitration. It is a dualist state, therefore international treaties are not directly incorporated into its law and must be approved by the Parliament and ratified by King Hamad.

Commercial regulations can be proposed by the EDB, MoICT, the Cabinet, or the COR. Draft regulationsare debated within the COR’s Finance and Economic Committee. The Bahrain Chamber of Commerce board of directors may raise concerns over draft legislation at committee meetings or send written comments for review by Members of Parliament, but the bills are otherwise not available for public comment. The Cabinet issues final approval of regulations.

The e-Government portal and the Legislation and Legal Opinion Commission website list laws by category and date of issuance. Some laws are translated into English. The National Audit Office publishes results of its annual audits of government ministries and parastatals.

International Regulatory Considerations

As a GCC member, Bahrain has agreed to enforce GCC standards and regulations where they exist, and not to create any domestic rules that contradict established GCC-wide standards and regulations. In certain cases, the GOB applies international standards where domestic or GCC standards have not been developed. For example, the GOB mandates that imported vehicles meet either the U.S. Federal Motor Vehicle Safety Standards or the so-called “1958 Agreement” standards developed by the United Nations Economic Commission for Europe. Bahrain is a member of the WTO and notifies all draft technical regulations to the WTO Committee on Technical Barriers to Trade. Bahrain ratified the Trade Facilitation Agreement (TFA) in September 2016 through Law No. 17 of 2016. Bahrain Customs and MoICT have begun working toward implementing the TFA’s requirements.

Legal System and Judicial Independence

Bahrain’s Constitution defines the Kingdom as a sovereign, independent, Arab Muslim State. Although Article 2 of the Constitution states that Islamic Sharia (Islamic) law is the main source of legislation, general matters and private transactions are governed mainly by laws derived from international legislation. Three types of courts are present in Bahrain – civil, criminal, and family (Sharia) courts. The civil court system consists of lower courts, courts of appeal, and the Court of Cassation — the highest appellate court in the Kingdom, hearing a variety of civil, criminal and family cases. Civil courts deal with all administrative, commercial, and civil cases, as well as disputes related to the personal status of non-Muslims. Family courts deal primarily with personal status matters, such as marriage, divorce, custody, and inheritance.

Many of the high-ranking judges in Bahrain come from theruling family, prominent families,or are non-Bahrainis (mainly Egyptians). Bahraini law borrows a great deal from other Arab states, particularly Egyptian codes.

Bahrain has a long-established framework of commercial law. English is widely used, and a number of well-known international (including U.S.) law firms, working in association with local partners, are authorized to practice law in Bahrain and provide expert legal services both nationally and regionally. Fees are charged according to internationally accepted practices. Non-Bahraini lawyers can represent clients in Bahraini courts. In April 2007, the government permitted international law firms to be established in Bahrain. These firms provide services such as commercial and financial consultancy in legal matters.

Entrenched local business interests with government influence can sometimes cause problems for foreign companies. Interpretation and application of the law sometimes varies by Ministry and may be dependent on the stature and connections of an investor’s local partner. These departures from the consistent, transparent application of regulations and the law are not common, and investors report general satisfaction with government cooperation and support.

The GOB is eager to develop its legal framework further. The U.S. Department of Commerce’s Commercial Law Development Program (CLDP) has conducted training and capacity-building programs in Bahrain for several years, in cooperation with the Ministry of Justice and Islamic Affairs, the Higher Supreme Council for Judges, and the Judicial and Legal Studies Institute.

Judgments of foreign courts are recognized and enforceable under local courts. Article nine of the U.S.-Bahrain Bilateral Investment Treaty outlines how problems with U.S. investments should be handled within the Bahraini legal system. The most common source of investment-related problems in Bahrain is slow or incomplete application of the law. In general, the judicial process is fair and cases are appealable.

Laws and Regulations on Foreign Direct Investment

The U.S.-Bahrain BIT provides benefits and protection to U.S. investors in Bahrain, such as most-favored nation and national treatment, the right to make financial transfers freely and immediately, the application of international legal standards for expropriation and compensation cases, and access to international arbitration. The BIT guarantees national treatment for U.S. investments across most sectors, with exceptions of a limited list of activities, including ownership of television, radio or other media, fisheries, real estate brokerages, and land transportation. Bahrain provides most-favored nation or national treatment status to U.S. investments in air transportation, the purchase or ownership of land, and the purchase or ownership of shares traded on the Bahrain Bourse.

The national treatment clause in the BIT ensures American firms interested in selling products exclusively in Bahrain are no longer required to appoint a commercial agent, though they may opt to do so. A commercial agent is any Bahraini party appointed by a foreign party to represent the foreign party’s product or service in Bahrain.

With few exceptions, Bahrain permits 100 percent foreign-ownership of new industrial entities and the establishment of representative offices or branches of foreign companies without local sponsors. Wholly foreign-owned companies may be set up for regional distribution services and may operate within the domestic market as long as they do not exclusively pursue domestic commercial sales. Private investment (foreign or Bahraini) in petroleum extraction is permitted.

Expatriates may own land in designated areas in Bahrain. Non-GCC nationals, including Americans, may own high-rise commercial and residential properties, as well as properties used for tourism, banking, financial and health projects, and training centers.

Bahrain issued Bankruptcy Law No. 22 in May 2018 governing corporate reorganization and insolvency. The law is based on U.S. Chapter 11 insolvency legislation and provides companies in financial difficulty with an opportunity to restructure under court supervision.

Below is a link to a site designed to assist foreign investors to navigate the laws, rules, and procedures related to investing in Bahrain: http://cbb.complinet.com/cbb/microsite/laws.html

http://cbb.complinet.com/cbb/microsite/laws.html

Competition and Anti-Trust Laws

The GOB issued Competition Law No. 31 in July 2018 to prevent the formation of monopolies or the practice of anti-competitive behavior. This law makes it easier for new businesses to enter existing markets and compete with significant players.

Expropriation and Compensation

There have been no expropriations in recent years, and there are no cases in contention. The U.S.-Bahrain BIT protects U.S. investments by banning all expropriations (including “creeping” and “measures tantamount to”) except those for a public purpose. Such transactions must be carried out in a non-discriminatory manner, with due process, and prompt, adequate, effective compensation.

Dispute Settlement

ICSID Convention and New York Convention

Bahrain uses multiple international and regional conventions to enhance its commercial arbitration legal framework. Bahrain is a party to the UNCITRAL Model Law on International Commercial Arbitration, the New York Convention, the International Centre for the Settlement of Investment Disputes (ICSID), and the GCC Convention for Execution of Judgments, among others. These conventions and international agreements established the foundation for the GCC Arbitration Centre, and the Bahrain Chamber for Disputes & Resolution (BCDR). Bahrain’s Constitution stipulates international conventions and treaties have the power of law.

Investor-State Dispute Settlement

The U.S.-Bahrain BIT provides for three dispute settlement options:

1. Submitting the dispute to a local court;

2. Invoking dispute-resolution procedures previously agreed upon by the foreign investor or company and the host country government; or,

3. Submitting the dispute for binding arbitration to the International Center for Settlement of Investment Disputes (ICSID) or any other arbitral institution agreed upon by both parties.

In 2010, the Ministry of Justice established the Bahrain Chamber for Dispute Resolution (BCDR). In partnership with the American Arbitration Association (AAA), the BCDR specializes in alternative dispute resolution services. The jurisdiction of the BCDR-AAA is twofold: Jurisdiction by Law (Section 1 cases), and Jurisdiction by Party Agreement (arbitration, also referred to as Section 2 cases).

Jurisdiction by Law (Section 1 Cases)

Disputes exceeding BD 500,000 (approximately USD 1.3 million) that involve either an international commercial dispute or a party licensed by the Central Bank of Bahrain (CBB) are referred to the BCDR-AAA. Prior to the creation of the BCDR, these cases fell within the jurisdiction of the courts of Bahrain.

From the establishment of the BCDR-AAA through December 2019, 270 cases were filed under Section 1, with claims totaling over USD 5.3 billion. Of these cases, 25.9 percent were decided or settled within 6 months; 40 percent were decided/settled within 6-12 months; 11.1 percent were decided or settled within 12-18 months; 5.9 percent were decided or settled within 18-24 months; 3.0 percent were decided or settled after 24 months; and 14.1 percent were ongoing.

Arbitration (Section 2 Cases)

As of April 2019, twelve cases have been filed: one in 2013, one in 2015, three in 2016, five in 2017, and two in 2019. Of these cases only three are ongoing – one filed in 2017, two filed in 2019 – and the rest were awarded or settled.

Bahrain Chamber for Dispute Resolution
Suite 301, Park Plaza
Bldg. 247, Road 1704
P.O. Box 20006
Manama, Kingdom of Bahrain
Tel: + (973) 17-511-311
Website: www.bcdr-aaa.org

The United Nations Conference on Trade and Development (UNCTAD) reported that Bahrain faced its first known Investor-State Dispute Settlement (ISDS) claim in 2017. The case involves investor claims over the Central Bank of Bahrain’s 2016 move to close the Manama branch of Future Bank, a commercial bank whose shareholders include Iranian banks. Bahrain and Iran are party to a BIT.

International Commercial Arbitration and Foreign Courts

Arbitration procedures are largely a contractual matter in Bahrain. Disputes historically have been referred to an arbitration body as specified in the contract, or to the local courts. In dealings with both local and foreign firms, Bahraini companies have increasingly included arbitration procedures in their contracts. Most commercial disputes are resolved privately without recourse to the courts or formal arbitration. Resolution under Bahraini law is generally specified in all contracts for the settlement of disputes that reach the stage of formal resolution but is optional in those designating the BCDR. Bahrain’s court system has adequately handled occasional lawsuits against individuals or companies for nonpayment of debts.

Bahrain Law No. 9 of 2015 promulgating the Arbitration Law (the “New Arbitration Law”) came into effect on August 9, 2015. The law provides that the UNCITRAL 1985 Model Law with its 2006 amendments on international commercial arbitration (the “UNCITRAL Law”) will apply to any arbitration, taking place in Bahrain or abroad, if the parties to the dispute agreed to be subject to the UNCITRAL Law.

The GCC Commercial Arbitration Center, established in 1995, serves as a regional specialized body providing arbitration services. It assists in resolving disputes among GCC countries or between other parties and GCC countries. The Center implements rules and regulations in line with accepted international practice. Thus far, few cases have been brought to arbitration. The Center conducts seminars, symposia, and workshops to help educate and update its members on any new arbitration-related matters.

GCC Commercial Arbitration Center
P.O. Box 2338
Manama, Kingdom of Bahrain
Arbitration Boards’ Secretariat
Tel: + (973) 17278000
Email: case@gcccac.org
Website: http://www.gcccac.org/en/

Bankruptcy Regulations

The GOB enacted its original bankruptcy and insolvency law as Decree by Law No. 11 in 1987. On May 30, 2018, the GOB issued and ratified Law No. 22 /2018, updating the original legislation. Modeled on U.S. Chapter 11 legislation, the law introduces reorganization whereby a company’s management may continue business operations during the administration of a case. The Bankruptcy Law also includes provisions for cross-border insolvency, and special insolvency provisions for small and medium-sized enterprises. The Bahrain credit reference bureau, known as “BENEFIT,” is licensed by the Central Bank of Bahrain (CBB) and operates as the credit monitoring authority in Bahrain.

Investment Incentives

The GOB offers a variety of incentives to attract FDI. The Bahrain Logistics Zone, Bahrain Economic Development Board (EDB), Bahrain Development Bank (BDB), Bahrain International Investment Park (BIIP), and Tamkeen all offer incentives to encourage FDI. Some examples of incentives include assistance in registering and opening business operations, financial grants, exemption from import duties on raw materials and equipment, and duty-free access to other GCC markets for products manufactured in Bahrain.

Foreign Trade Zones/Free Ports/Trade Facilitation

Khalifa bin Salman Port, Bahrain’s primary commercial seaport provides a free transit zone to facilitate the duty-free import of equipment and machinery. The Government of Bahrain has developed two main industrial zones, one to the north of Sitra and the other in Hidd. The Hidd location, known as the Bahrain International Investment Park (BIIP), is adjacent to a logistics zone, known as the Bahrain Logistics Zone. Foreign-owned firms have the same investment opportunities in these zones as Bahraini companies.

Bahrain’s Ministry of Industry, Commerce and Tourism (MoICT) operates the BIIP, a 2.5 million square-meter, tax-free zone located minutes from Bahrain’s main Khalifa bin Salman port. Many U.S. companies operate out of this park. BIIP is most suited to manufacturing and services companies interested in exporting from Bahrain. The park offers manufacturing companies the ability to ship their products duty free to countries in the Greater Arab Free Trade Area. BIIP has space available for potential investors, including some plots of vacant land designated for new construction, and some warehouse facilities for rental.

A 1999 law requires that investors in industrial or industry-related zones launch a project within one year from the date of receiving the land, and development must conform to the specifications, terms, and drawings submitted with the application. Changes are not permitted without approval from the MoICT.

Performance and Data Localization Requirements

Companies in Bahrain are obliged to comply with so-called “Bahrainization” employment targets, under which the Labour Market Regulatory Authority (LMRA) mandates that a certain percentage of each company’s employees are Bahraini nationals. Companies may contact LMRA to determine their Bahrainization rate, which differs based on the sector of the economy in which they work, or use a calculator available at http://lmra.bh/portal/en/page/show/193. The applicable Bahrainization rates are mandatory across the board in the company structure, applying equally to senior management and line workers. Per Cabinet Resolution Number 27 of 2016, LMRA announced that companies that are unable to comply with the Bahrainization rates would only be eligible to apply for new work permits and sponsorship transfers by paying an additional annual fee of BD 500 (roughly USD 1,329) per non-Bahraini worker. LMRA may apply fines to companies that do not comply with Bahrainization requirements.

The GOB issued Law 1/2019 in March 2019 amending Article 14 of the Private Health Establishments Law, which gives priority to recruiting qualified Bahraini physicians, technicians, and nursing staff in private health establishments.

There is no excessively onerous visa, residence, work permit, or similar requirement inhibiting the mobility of foreign investors or their employees in Bahrain. Americans and citizens of many other countries can obtain a two-week visa with relative ease upon arrival in Bahrain or online. Bahrain also offers a multiple-entry visa that lasts for five years, if required.

Bahrain has a liberal approach to foreign investment and actively seeks to attract foreign investors and businesses; no product localization is forced and foreign investors are not obliged to use domestic content in goods or technology. There are no government-imposed conditions on permission to invest, including tariff and non-tariff barriers, on American investments.

There are no special performance requirements imposed on foreign investors. The U.S.-Bahrain Bilateral Investment Treaty (BIT) forbids mandated performance requirements as a condition for the establishment, acquisition, expansion, management, conduct, or operation of a covered investment. Foreign and Bahraini-owned companies must meet the same requirements and comply with the same environmental, safety, health, and labor requirements. Officials at the Ministry of Labour and Social Development, LMRA and the MoICT supervise companies operating in Bahrain on a non-discriminatory basis.

The Central Bank of Bahrain regulates financial institutions and foreign exchange offices. Foreign and locally owned companies must comply with the same rules, policies, and regulations.

There are no requirements for foreign IT providers to turn over source code and/or to provide access to surveillance.

Bahrain enacted Law No. 30 of 2018 with respect to Personal Data Protection on July 12, 2018. The nationwide Data Protection Law, which went into force on August 1, 2019, promotes the efficient and secure processing of big data for commercial use and provides guidelines for the effective transfer of data across borders.

Real Property

The Government of Bahrain enforces property rights protections for land and homeowners. Most land has a clear title. Ownership of land is highly concentrated among a few royal family members, and certain areas are off-limits for Bahraini nationals and expatriates alike. Foreign firms and GCC nationals may own land in certain areas in Bahrain. Non-GCC nationals may own high-rise commercial and residential properties in certain areas. Foreign investors may own property to operate businesses in various fields of business, including but not limited to manufacturing, tourism, banking and financial services, education and training, design, and advertising.

Foreign investors may own commercial property in the following geographic areas of Bahrain: -Ahmed Al-Fateh (Juffair) district

• Ahmed AlFateh (Juffair) district
• Hoora district
• Bu Ghazal district
• Seef district
• Northern Manama, including the Diplomatic Area, where the main international corporations are located.

Foreign investors may own residential property in the following tourist areas: -Durrat Al Bahrain

• Durrat Al Bahrain
• Riffa Views
• Amwaj Islands
• Bahrain Financial Harbor
• Bahrain Bay
• Reef Island
• Diyyar Al Muharraq
• Some areas in Saar

Most of the new development projects in Bahrain permit expatriates and international investors to own houses, buildings, outlets, or freehold apartments.

Legally purchased property cannot revert to other owners, even if such property is unoccupied.

Intellectual Property Rights

Under the U.S.-Bahrain Free Trade Agreement, the GOB committed to enforce intellectual property rights (IPR) protections. Bahrain signed the Berne Convention for the Protection of Literary and Artistic Works and the Paris Convention for the Protection of Industrial Property in 1996. The GOB ratified revised legislation in 2006 to implement Bahrain’s obligations under the World Trade Organization (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). The GOB has passed laws related to IPR to bring Bahrain’s local laws into compliance with its current Paris Convention commitment and in anticipation of acceding to the Nice Agreement, Vienna Agreement, Patent Cooperation Treaty, Trademark Law Treaty, Madrid Agreement, Budapest Treaty, and the Rome Convention. Bahrain has acceded to the World Intellectual Property Organization (WIPO) Copyright Treaty and the WIPO Performances and Phonograms Treaty.

The government has made progress in reducing copyright piracy and there are few reports of significant violations of U.S. patents and trademarks in Bahrain. The government’s copyright enforcement campaign began in late 1997 and was based on inspections, closures, and improved public awareness. The campaign targeted the video, audio and software industries with impressive results. Commercially pirated video and audio markets have been mostly eliminated. However, audio, video, and software piracy by end-users remain problematic. There are no technology transfer requirements that force firms to share or divulge technology through compulsory licensing to a domestic partner, nor are firms required to undertake research and development activities in Bahrain.

In May 2016, the GOB issued the Implementing Regulations for the Trademark Law of the Gulf Cooperation Council (GCC), which had originally been approved by Law No. 6 of 2014. Law No. 6 provided a unified trademark regime for all six GCC countries.

Bahrain is not included in the United States Trade Representative (USTR) Special 301 Report or the Notorious Markets List. Bahrain does not track or report on seizures of counterfeit goods. For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/. The Embassy’s webpage also offers a link to local lawyers, some of whom specialize in IPR and/or patent law: https://bh.usembassy.gov/u-s-citizen-services/local-resources-of-u-s-citizens/attorneys/

Resources for Rights Holders:

Peter Mehravari
Intellectual Property Attaché for the Middle East & North Africa
U.S. Embassy Kuwait City, Kuwait
U.S. Patent & Trademark Office
Tel: +965 2259 1455 Peter.Mehravari@trade.gov

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

Capital Markets and Portfolio Investment

Consistent with the GOB’s liberal approach to foreign investment, government policies facilitate the free flow of financial transactions and portfolio investments. Expatriates and Bahrainis alike have ready access to credit on market terms. Generally, credit terms are variable, but often are limited to 10 years for loans under USD 50 million. For major infrastructure investments, banks often offer to assume a part of the risk, and Bahrain’s wholesale and retail banks have shown extensive cooperation in syndicating loans for larger risks. Commercialcredit is availableto private organizations in Bahrain but has been increasingly crowded out by thegovernment’s local bond issuances.

In 2016, the GOB launched a new fund designed to inject greater liquidity in the Bahrain Bourse, worth USD 100 million. The Bahrain Liquidity Fund is supported by a number of market participants and will act as a market maker, providing two-way quotes on most of the listed stocks with a reasonable spread to allow investors to actively trade their stocks. Despite these efforts, the market remains relatively small compared to others in the region.

Additionally, in October 2019 the GOB established a BD 130 million Liquidity Fund to assist distressed companies in restructuring financial obligations, which was expanded to BD 200 million during the Covid-19 crisis in March 2020.

The GOB and the Central Bank of Bahrain are members of the IMF and fully compliant with Article VIII.

Money and Banking System

The Central Bank of Bahrain (CBB) is the single regulator of the entire financial sector, with an integrated regulatory framework covering all financial services provided by conventional and Islamic financial institutions. Bahrain’s banking sector remains quite healthy despite sustained lower global oil prices. Bahrain’s banks remain well capitalized, and there is sufficient liquidity to ensure a healthy rate of investment. Bahrain remains a financial center for the GCC region, though many financial firms have moved their regional headquarters to Dubai over the last decade. The GOB continues to be a driver of innovation and expansion in the Islamic finance sector. In 2018, Bahrain ranked as the GCC’s leading Islamic finance market and placed second out of 92 countries worldwide, according to the ICD-Thomson Reuters Islamic Finance Development Indicator.

Bahrain has an effective regulatory system that encourages portfolio investment, and the CBB has fully implemented Basel II standards, while attempting to bring Bahraini banks into compliance with Basel III standards. Bahrain’s banking sector includes 94 retail banks, of which 63 are wholesale banks, 17 are branches of foreign banks, and 14 are locally incorporated. Of these, eight are representative offices, and twenty are Islamic banks.

There are no restrictions on foreigners opening bank accounts or corporate accounts. Bahrain is home to many prominent financial institutions, among them Citi, American Express, and JP Morgan.

Ahli United Bank is Bahrain’s largest bank with total assets estimated at USD 40.3 billion in December 2019, and is expected to complete a merger with Kuwait Financial House in 2020.

Bahrain implemented the Real-Time Gross Settlement (RTGS) System and the Scripless Securities Settlement (SSS) System in 2007 to enable banks to carry out their payment and securities-related transactions securely on a real time basis. In 2018, the CBB was in the process of introducing a private network as an alternative communication network for the RTGS-SSS Systems.

In 2017, Bahrain became the first in the GCC to introduce Financial Technology “sandbox” regulations that enabled the launch of cryptocurrency and blockchain startups. The same year, theCBB released additional regulations for conventional and Sharia-compliant, financing-based crowdfunding businesses.Any firm operating electronic financing/lending platforms must be licensed in Bahrain under the CBB Rulebook Volume 5 – Financing Based Crowdfunding Platform Operator. In February 2019, the CBB also issued cryptocurrencyregulations.

Foreign Exchange and Remittances

Foreign Exchange

Bahrain has no restrictions on the repatriation of profits or capital and no exchange controls. Bahrain’s currency, the Bahraini Dinar (BD), is fully and freely convertible at the fixed rate of USD 1.00 = BD 0.377 (1 BD = USD 2.659). There is no black market or parallel exchange rate.

There are no restrictions on converting or transferring funds, whether or not associated with an investment.

Remittance Policies

The Central Bank of Bahrain is responsible for regulating remittances, and its regulations are based on the Central Bank Law ratified in 2006. Foreign workers comprise the majority of the workforce in the Kingdom of Bahrain, many of whom remit large amounts of money to their countries of origin. Commercial banks and currency exchange houses are licensed to provide remittances services.

Commercial banks and currency exchange houses require two forms of identification before processing a routine remittance request, and any transaction exceeding USD 10,000 must include a documented source of the income.

Bahrain enables foreign investors to remit funds through a legal parallel market, with no limitations on the inflow or outflow of funds for remittances of profits or revenue. The GOB does not engage in currency manipulation tactics.

Bahrain is a member of the Gulf Cooperation Council (GCC), and the GCC is a member of the Financial Action Task Force (FATF). Additionally, Bahrain is a member of the Middle East and North Africa Financial Action Task Force (MENAFATF), whose headquarters are located in Bahrain. Participating countries commit to combat the financing of terrorist groups and activities in all its forms and to implement FATF recommendations. The Government of Bahrain hosted the MENAFATF’s 26th Plenary Meeting Manama in 2017 and was due to host the now-postponed MENAFATF Plenary Meeting in April 2020.

the MENAFATF’s 26th Plenary Meeting Manama in 2017 and was due to host the now-postponed MENAFATF Plenary Meeting in April 2020.

Sovereign Wealth Funds

The Kingdom of Bahrain established Mumtalakat, its sovereign wealth fund, in 2006. Mumtalakat, which maintains an investment portfolio valued at roughly USD 16.8 billion as of 2018, conducts its business transparently, including by issuing an annual report online. The annual report follows international financial reporting standards and is audited by external, internationally recognized auditing firms. By law, state-owned enterprises (SOEs) under Mumtalakat are audited and monitored by the National Audit Office. In 2019, Mumtalakat received the highest-possible ranking in the Linaburg-Maduell Transparency Index for the fifth consecutive year, which specializes in ranking the transparency of sovereign wealth funds. However, Bahrain’s sovereign wealth fund does not follow the Santiago Principles.

The sovereign wealth fund holds majority stakes in several firms. Mumtalakat invests 63 percent of its funds in the Middle East, 29 percent in Europe, and eight percent in the United States. The fund is diversified across a variety of business sectors including real estate and tourism, financial services, food & agriculture, and industrial manufacturing.

Mumtalakat often acts more as an active asset management company than a sovereign wealth fund, including by taking an active role in managing SOEs. Most notably, Mumtalakat has been instrumental in helping Gulf Air, Bahrain’s flagship air carrier, restructure and contain losses. A significant portion of Mumtalakat’s portfolio is invested in 33 Bahrain-based SOEs.

Through 2016, Mumtalakat had not been directly contributing to the National Budget. Beginning in September 2017, however, Mumtalakat began distributing profits of BD 20 million to the National Budget each year.

Bahrain’s major state-owned enterprises (SOEs) include the Bahrain Petroleum Company (BAPCO), Aluminum Bahrain (ALBA), Gulf Petrochemical Industries Company (GPIC), Gulf Air, Bahrain Telecommunications Company (BATELCO), the National Bank of Bahrain (NBB) Bahrain Flour Mills, Tatweer Petroleum, and the Arab Shipbuilding & Repair Yard (ASRY). While the GOB maintains full ownership of oil production, refineries, and heavy industries, it allows investment in ALBA, BATELCO, and ASRY, and encourages private sector competition in the banking, manufacturing, telecommunications, shipyard repair, and real estate sectors.

The SOEs are managed by two government-run holding companies: the National Oil and Gas Authority (NOGA) Holding Company, which owns nine energy sector companies, and Mumtalakat, which owns 38 domestic companies in all other sectors. The full portfolio of the NOGA Holding Company can be viewed at www.nogaholding.com/portfolio/, while the full portfolio of Mumtalakat companies can be viewed at www.bmhc.bh.

Bahrain is not a party to the WTO Government Procurement Agreement (GPA), however, in 2008 Bahrain was granted “observer” status in the GPA committee.

Private enterprises can, in theory, compete with SOEs under the same terms and conditions with respect to market share, products/services, and incentives. In practice, however, given the relatively small size of Bahrain’s economy, large SOEs such as ALBA, BAPCO, GPIC and ASRY have an outsized influence in the market.

In 2002 the GOB instituted guidelines to ensure its SOEs were in line with OECD policies on corporate governance. SOEs produce quarterly reports. The National Audit Office monitors all SOEs and annually reports any irregularities, mismanagement, and corruption.

Both funds are managed by government-appointed boards: Mumtalakat’s board is chaired by the Deputy Prime Minister, Sh. Khalid bin Abdulla AlKhalifa, and NOGA Holding’s board is chaired by the Minister of Oil, Sh. Mohammed bin Khalifa AlKhalifa.

All Bahraini SOEs have an independent board of trustees with well-structured management. The Mumtalakat Holding Company is represented by a Board of Trustees appointed by the Crown Prince, while NOGA Holding’s Board of Trustees is appointed by a Royal Decree. Each holding company then appoints the Board of Trustees for the SOEs under its authority. In some cases, the appointment of the Board of Trustees is politically driven.

Privatization Program

The GOB has been supportive of privatization as part of its Vision 2030 economic development plan, and advocates for increased foreign investment as a means of driving private sector growth. The GOB’s decision to privatize the telecommunications sector in the early 2000s is an example of incentivizing private sector growth in Bahrain. In 2018, the GOB began to privatize some medical services, such as pre-employment screenings that it previously had conducted. It has also begun the process of privatizing certain support services at GOB medical facilities, such as transportation, cleaning, laundry, textiles, maintenance, and security.

In May 2019 the GOB loosened foreign ownership restrictions in the oil and gas sector, allowing 100-percent foreign ownership in oil and gas extraction projects, under certain production-sharing agreements.

The Ministry of Social Development in 2011 authorized the creation of the Bahrain Corporate Social Responsibility Society (BCSRS) as a social and cultural entity. Though there are no measures in Bahrain to compel businesses to follow codes of responsible business conduct, the BCSRS has sought to raise awareness of corporate social responsibility in the business community, and in 2019 held its third Bahrain International Corporate Responsibility Award ceremony. The Society is a founding member of the Arab Association for Social Responsibility, which includes representatives of most Arab countries.

In 2006, Bahrain established a National Steering Committee on Corporate Governance to improve corporate governance practices. The GOB then drafted a Corporate Governance Code to establish a set of best practices for corporate governance in the kingdom, and to provide protection for investors and other company stakeholders through compliance with those principles. The GOB enforces the code through a combined monitoring system comprising the board, the shareholders and others including the MoICT, CBB, Bahrain Stock Exchange (BSE), Bahrain Courts and Professionals firms including auditors, lawyers and investment advisers. The code does not create new penalties for non-complying companies, but it does state that the MoICT (working closely with the CBB and the BSE) will be able to exercise the penalty powers already granted to it under the Commercial Companies Law 2001.

The GOB, represented by the LMRA, has put in place advanced regulations and laws protecting labor rights, the most vulnerable category comprising migrant workers from Southeast Asia. Labor courts have not been effective in settling labor disputes between employers and employees. However, there have been some reports of cases that were settled in favor of employees in Bahraini labor courts.

Law Number 35 of 2012, the Consumer Protection Law, ensures quality control, combats unfair business practices, and imposes sanctions for breaches of the law’s provisions. MoICT is highly effective in implementing the law.

Bahrain’s amended Corporate Governance Law enhances transparency and ethical business conduct standards. Among the changes, the GOB urged companies to submit audited ratified accounts to the MoICT.

The GOB does not maintain a National Contact Point (NCP) for the Organization for Economic Co-operation and Development (OECD) guidelines nor does it participate in the Extractive Industries Transparency Initiative (EITI).

The King and Crown Prince have advocated publicly in favor of reducing corruption and some ministries have initiated clean-up efforts. Legislation regulating corruption is outlined in Bahrain’s “Economic Vision 2030” plan, and in the National Anti-Corruption Strategy. Bahrain joined the United Nations Convention Against Corruption (UNCAC) in 2003. Accordingly, Bahrain ratified its penal code on combatting bribery in the public and private sectors in 2008, mandating criminal penalties for official corruption. Under law, government employees at all levels are subject to prosecution and punishments of up to 10 years imprisonment if they use their positions to engage in embezzlement or bribery, either directly or indirectly. The law does not require government officials to make financial disclosures. In 2010, Bahrain ratified the UNCAC and the Arab Convention Against Corruption, and in 2016, it joined the International Anti-Corruption Academy. In 2019, the Public Prosecution initiated proceedings on 178 economic corruption cases. In 23 cases, offenders have been sentenced to prison; one was cleared; and 13 are pending investigation. The remaining 129 cases have been classified as administrative contraventions and closed.

Giving or accepting a bribe is illegal. The government, however, has not fully implemented the law, and some officials reportedly continue to engage in corrupt practices with impunity. Officials have at times been dismissed for what is widely believed to be blatant corruption, but the grounds for dismissal rarely have been tied to corruption.

The National Audit Office, established in 2002, is mandated to publish annual reports that highlight fiscal irregularities within government ministries and other public-sector entities. The reports enable legislators to exercise oversight and call for investigations of fiscal discrepancies in government accounts. In 2013, the Crown Prince established an Investigation Committee to oversee cases highlighted within the National Audit Office’s annual report.

The Minister of Follow-Up Affairs at the Royal Court was designated in 2015 to execute recommendations made in that year’s National Audit Report. At the same time, the Crown Prince urged all government entities and the Council of Representatives to work closely to implement the recommendations made in the report. Bahrain’s National Audit Office issues annual reports that list violations committed by various Bahraini state bodies and agencies.

As a result of the 2011 National Dialogue process, the Ministry of Interior established an anti-corruption directorate. In 2011, the Ministry of Interior signed a Memorandum of Understanding with the United Nations Development Programme to enhance the anti-corruption directorate’s capabilities.

Bahrain has conflict-of-interest laws in place, however, in practice, their application in awarding contacts is not fully enforced.

Local NGOs generally do not focus their efforts on corruption-related issues, and human rights activists and members of the political opposition who have spoken out about corruption have at times been detained, prosecuted, and banned from travel for reasons related to their broader political activism. All civil society groups are required to register with the Ministry of Labour and Social Development, which has the discretion to reject registration if it determines the organization’s services unnecessary, already provided by another society, or contrary to state security.

Few cases have been registered by U.S. companies reporting corruption as an obstacle to their investments in Bahrain.

Bahrain signed and ratified the UN Anticorruption Convention in 2005 and 2010, respectively. Bahrain, however, is not a signatory to the OECD Convention on Combating Bribery. In 2018, Bahrain joined the OECD’s Inclusive Framework on Base Erosion and Profit Shifting (BEPS).

Resources to Report Corruption

Contact at government agency or agencies responsible for combating corruption:

General Directorate of Anti- Corruption & Economic & Electronic Security
Ministry of Interior
P. O. Box 26698, Manama, Bahrain
Hotline: 992

Contact at “watchdog” organization:

Sharaf AlMosawi
President
Bahrain Transparency Association
P.O. Box 26059
Phone: +973 39640929
Email: Sharaf115@gmail.com
Website: www.alshafafeyabh.org

Bahrain is an open, liberal Gulf state that enjoys close ties with the United States. Bahrain has experienced cyclical periods of violence. The most recent period of unrest began in 2011, when large-scale demonstrations and occasional violent clashes between protestors and security forces took place. Since 2011, Bahraini security forces have been intermittently targeted by individuals, including through the use of improvised explosive devices. The last such incident occurred in November 2017, when an explosion caused a fire at the main oil pipeline in Buri. In 2016 and 2017, the government dissolved the country’s two largest opposition political societies and closed the only opposition-leaning independent newspaper. On May 13, 2018, the Parliament implemented a law banning members of political societies dissolved by government order from running as candidates in elections. Since 2017, protests centered on sociopolitical or economic demands have largely dissipated or been controlled by Bahraini government authorities.

Neither demonstrators nor violent extremists have targeted Americans or Western expatriates. American citizens visiting Bahrain and companies interested in investing in Bahrain should visit the Embassy’s website to receive the most up-to-date information about the security situation and register with the Embassy’s consular section.

Bahrain’s Labor Law No. 36 of 2012 guarantees employees’ rights by requiring clear contractual terms for employing domestic staff, and prohibiting discrimination practices of wages based on gender, ethnicity, religion, or language. Bahrain’s Labor Law has also introduced enhancements for annual leave, maternity leave, sick leave entitlement, and resolution of labor disputes. Expatriate workersshould be registered by their employer with Labor Market Regulatory Authority (LMRA) and receive a valid residence permit and work permit. Employers are prohibited from employing foreigners without a valid work permit. To work in Bahrain, foreign employees should be medically fit, have entered the country lawfully, possess a valid passport, and retain residence and work permits.

As of the second quarter of 2019, LMRA estimated Bahrain’s labor force numbered 748,047 people, of which 594,944 were foreign and 153,103 were local workers. Eighty percent of the total workforce is comprised of foreigners, the majority being unskilled construction workers. The number of new regular work permits issued by LMRA during the second quarter of 2019 was 37,570, representing a decrease of five percent annually. According to Bahrain’s Information and e-Government Authority, foreigners comprised 52 percent of the Bahrain’s population in 2019. LMRA stated that Bahrain’s unemployment rate was 4 percent in the second quarter of 2019.

The government’s primary initiative for combating unemployment among Bahrainis is “Bahrainization,” a policy that encourages employers to hire Bahrainis instead of foreign workers in situations where this is possible. In 2009, under the initiative of the Crown Prince the Bahrain Economic Development Board launched “Bahrain Economic Vision 2030,” a long-term plan to raise Bahrainis’ standard of living, reform the government, education, and health sectors, and increase privatization, training and education of the Bahraini workforce to establish Bahrain as a regional center for human capital. For more information please refer to: http://www.mofa.gov.bh/img/partners/Vision2030Englishlowresolution.pdf.

Foreign firms occasionally experience difficulty obtaining required work permits and residence visas for expatriate employees due to Bahrainization efforts. In 2019, the GOB stepped up efforts to enforce Bahrainization targets. Decree No. 1 of 2019 stipulated that priority be given to Bahraini physicians, technicians, and nurses with the required qualifications and experience. Separately, the GOB issued an order on March 5, 2019 requiring employers pay a BD 500 fee every two years for every work permit beyond the allotted Bahrainization quota. Where problems occur, U.S. businesses are encouraged to appeal to the highest levels of the concerned ministries, and to consult with the U.S. Embassy.

In 2006 the King ratified the Labor Reforms Law, establishing two entities: the Labour Market Regulatory Authority (LMRA), and the capacity-building organization known as Tamkeen. The law imposed a monthly fee of BD 10 (USD 26.67) on each expatriate employed by a company. The revenues collected under this program are earmarked to provide job training for Bahrainis. The Prime Minister suspended the LMRA fee after the unrest of 2011 over pressure from the Bahrain Chamber of Commerce and Industry and reinstated it in 2013 as a legal amendment to the labor law. Companies pay BD 5 (USD 13.35) for the first five foreign workers and BD 10 (USD 26.67) for every employee over that limit. The Council of Representatives has attempted unsuccessfully to amend the fee structure, most recently in late 2017.

The Labor Law of 2012 allows an employer to terminate an employee in the event of the total or partial closure of an establishment. The employer must render a notice and reason for termination to the Ministry of Labour and Social Development at least 30 days prior to serving notice of termination to the affected employee. The amount of compensation due an employee for termination is set by law and is based in part on length of service.

In 2007 the Minister of Labour and Social Development introduced an unemployment allowance to be paid from a general labor fund. The fund is financed by deducting one percent from the wages of all workers and is the first such program in the GCC.

In 2002 the King approved the Workers Trade Union Law of 2002 that recognizes the right of workers to collectively organize and form trade unions and provides limited rights to strike. The law prohibits workers from striking in certain vital sectors including security, aviation, ports, hospitals, and utilities. With the exception of domestic workers, foreign employees are allowed to join trade unions. The law prohibits employers from dismissing an employee for trade union activities. In 2011, the King issued a decree that changed Bahrain’s labor law as it pertained to trade unions and federations. Union leadership heavily criticized the new law for some of its other provisions that appear to inhibit freedom of association. The 2012 law prohibits multi-sectoral labor federations and prohibits individuals convicted of felonies from holding union leadership posts. While the amendment also allowed for the formation of multiple trade union federations, it gave the Minister of Labour and Social Development the sole right to select the federation to represent the country’s workers in international fora and in national-level bargaining.

In 2010, the U.S. Department of Labor and the Bahrain Ministry of Labour and Social Development convened the first meeting of the U.S.-Bahrain Sub-Committee on Labor Affairs, as established under the U.S.-Bahrain FTA. At the meeting, they reaffirmed their obligations under the FTA related to internationally recognized labor rights, including their obligations as members of the International Labor Organization (ILO) and commitments stated in the ILO Declaration on Fundamental Principles and Rights at Work (1998). In July 2018, Bahrain achieved“Tier 1” statusin the U.S. Department of State’s Trafficking in Persons Report. It maintained this ranking in the 2019 report.

During the political and civil unrest of 2011, thousands of Bahraini employees were dismissed from their private and public-sector jobs. In June 2011, the AFL-CIO filed a petition with the Department of Labor accusing Bahrain of violating the labor rights terms of the U.S.-Bahrain Free Trade Agreement. The November 2011 Bahrain Independent Commission of Inquiry report concluded that the majority of dismissals were motivated by retaliation against employees suspected of being involved in demonstrations. By the end of 2012, the vast majority of dismissed workers in the public and private sectors were reinstated, with the Government working to resolve the remaining cases. In March 2014, the Minister of Labour and Social Development, the Bahrain Chamber of Commerce and Industry, and the General Federation of Bahrain Trade Unions signed a tripartite agreement to resolve the remaining worker reinstatement cases. Subsequently, the ILO dropped the complaint it initiated in 2011. Bilateral consultations between the U.S. and Bahrain – invoked under the Labor Chapter of the FTA in response to the 2011 AFL-CIO complaint are ongoing.

* Source for Host Country Data: www.data.gov.bh

Hadeel Hassan
Commercial Assistant
U.S. Embassy Manama
P.O. Box 26431
Bldg. 979, Rd. 3119
Block 331, Zinj
Kingdom of Bahrain
Telephone No. +973 1724-2700
E-mail address: manamacommercial@state.gov

Transparency of the Regulatory System

Kuwait does not have a centralized online location where key regulatory actions are published akin to the Federal Register in the United States. The regulatory system does not require that regulations be made available for public comment. The government frequently passes draft regulations to interested parties in the private sector, such as the Kuwait Chamber of Commerce and Industry or the Bankers Association, for comment.

The State Audit Bureau reviews government contracts and audits contract performance but does not publicly share the results.

Kuwait does not participate in the Extractive Industries Transparency Initiative (EITI), nor does it incorporate domestic transparency measures requiring the disclosure of payments made to other governments related to the commercial development of oil, natural gas, or mineral deposits. However, the Kuwait economy is almost wholly dependent upon oil, the extraction of which is deemed a responsibility of the government and is subject to close National Assembly oversight.

International Regulatory Considerations

Kuwait joined the General Agreement on Tariffs and Trade (GATT) in 1963 and became a founding member of the WTO in 1995. However, Kuwait is not a signatory to every WTO plurilateral agreement, such as the Agreement on Government Procurement. In April 2018, Kuwait deposited its Trade Facilitation Agreement instrument of ratification with the WTO after Kuwait’s National Assembly approved the agreement the previous month.

Kuwait has been part of the GCC since its formation in 1981. The GCC launched a common market in 2008 and a customs union in 2015. The GCC continues to forge agreements on regional standards and coordinate trade and investment policies. American standards and internationally recognized standards are typically accepted. For more information regarding GCC standards and policies, please refer to the following GCC website: http://www.gcc-sg.org/en-us/Pages/default.aspx

Legal System and Judicial Independence

Kuwait has a developed civil legal system, based in part on Egyptian and French law and influenced by Islamic law. Having evolved in a historically active trading nation, the court system in Kuwait is familiar with international commercial law. Kuwait’s judiciary includes specialized courts, including a commercial court to adjudicate commercial law. Residents who are not Kuwaiti citizens involved in legal disputes with citizens have frequently alleged the courts show bias in favor of Kuwaiti citizens. Holders of legal residence have been detained and deported without recourse to the courts.

Persons who have been charged with criminal offenses, placed under investigation, or are involved in unresolved financial disputes with local business partners have in some cases been subjected to travel bans. Travel bans are meant to prevent an individual from leaving Kuwait until a legal matter is resolved or a debt settled. Travel bans may remain in place for a substantial period while the case is investigated, resolved, and/or prosecuted. Failure to repay a debt can result in a prison term ranging from months to years, depending upon the amount owed.

U.S. firms are advised to consult with a Kuwaiti law firm or the local office of a foreign law firm before executing contracts with local parties. Fees for legal representation can be very high. Contracts between local and foreign parties serve as the basis for resolving any future commercial disputes. The process of resolving disputes in the Kuwaiti legal system can be subject to lengthy delays, sometimes years, depending on the complexity of the issue and the parties involved. During these delays, U.S. citizens can be deprived of income streams related to their business venture and be forced to surrender assets and ownership rights before being allowed to depart the country. Sentences for drug-related convictions can include lengthy prison terms, life sentences, and even the death penalty.

Laws and Regulations on Foreign Direct Investment

In an attempt to diversify the economy by attracting foreign investment and grow private sector employment, Kuwait passed a new foreign direct investment law in 2013 permitting up to 100 percent foreign ownership of a business – if approved by KDIPA. Without KDIPA approval, all businesses incorporated in Kuwait must be 51 percent-owned by Kuwaiti or GCC citizens and seek licensing through the Ministry of Commerce and Industry. In reviewing applications from foreign investors, KDIPA places emphasis on creating jobs and the provision of training and education opportunities for Kuwaiti citizens, technology transfer, diversification of national income sources, increasing exports, support for local small- and medium-sized enterprises, and the utilization of Kuwaiti products and services. KDIPA has sponsored 37 foreign firms, including six U.S. companies. In addition to KDIPA assistance in navigating the bureaucracy, available investment incentives include tax benefits, customs duties relief, and permission to recruit required foreign labor. Government control of land limits its availability for development.

In 2019, a set of criteria was introduced to assess applications and grant licenses to foreign investors. Decision No. 329 of 2019 enacted five main criteria for assessing licensing and granting incentives. The criteria covered the following: (i) transfer and settlement of technology, including tangible and intangible technological innovation and the enablement of knowledge creation; (ii) human capital, stressing job creation for nationals and employee development programs; (iii) market development; (iv) economic diversification; and (v) sustainable development in the areas of corporate social responsibility and environmental sustainability. Decisions on licenses and the granting of incentives are based on a “Points Scoring Mechanism” (PMS). Other recent legal measures to facilitate foreign direct investment and economic growth include Law No. 116 of 2014 regarding public-private partnerships (PPP) and a new Companies Law No. 1 of 2016. The PPP law created the Kuwait Authority for Partnership Projects (http://www.kapp.gov.kw/en/Home).

Competition and Anti-Trust Laws

Kuwait’s open economy has generally promoted a competitive market. In 2007, the government enacted the Protection of Competition Law No. 10 and by-laws in 2012 that facilitated the establishment of a Competition Protection Authority to safeguard free commerce, ban monopolies, investigate complaints, and supervise mergers and acquisitions. The Competition Protection Authority presented a restructuring plan with the assistance of the World Bank to the Cabinet in 2018, which is still under review. In some previous years, U.S. investors have alleged instances of discrimination.

The Commercial Agency Law No. 13 of 2016 removed exclusivity, enabling foreign firms to have multiple agents to market their products.

In 2016, the National Assembly passed a new Public Tenders Law No. 49. All bids on government-funded infrastructure projects (excluding military and security tenders) in excess of KD 75,000 (USD 250,000) must be submitted to the Central Agency for Public Tenders. The law requires that foreign contractors bidding on government contracts purchase at least 30 percent of their inputs locally and award at least 30 percent of the work to local contractors, where available. The law favors local sourcing by mandating a 15 percent price preference for locally- and GCC-produced items, however this provision may be waived on a case-by-case basis.

Expropriation and Compensation

Kuwait has had no recent cases of expropriation or nationalization involving foreign investments. The 2013 Foreign Direct Investment (FDI) Law guarantees investors against expropriation or nationalization, except for public benefit as prescribed by law. In such cases, investors should be compensated for the real value of their holdings at the time of expropriation. The last nationalization occurred in 1974.

Dispute Settlement

ICSID Convention and New York Convention

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

Investor-State Dispute Settlement

The FDI law stipulates that Kuwaiti courts alone are responsible for adjudicating disputes involving a foreign investor, although arbitration is permitted. Few contracts contain clauses specifying recourse to traditional commercial arbitration. The Kuwaiti judicial system recognizes and enforces foreign judgments only when reciprocal arrangements are in place.

International Commercial Arbitration and Foreign Courts

The recognition and enforcement of foreign arbitral awards occurs more expeditiously than the enforcement of foreign judgments. Enforcement of the former, however, must meet with the same reciprocity and procedural criteria of enforcing foreign judgments under Articles 199 and 200 of the Civil and Commercial Procedure Code No. 38 of 1980. Accordingly, an award passed by a foreign arbitral panel or tribunal may be enforced in Kuwait provided that: a) the country where the award has been rendered is a member of the New York Convention; b) the foreign award is rendered by a competent arbitrator in accordance with the laws of the country in which it was awarded; c) the parties have been promptly summoned to appear and duly represented before the arbitral tribunal; d) the award must become a res judicata according to the laws of the country in which it was awarded; and e) the award must not be in conflict with an ordered judgment that has been rendered by a local court in Kuwait and additionally does not contradict mandatory provisions or constitute criminal conduct, or violations to morality or public policy, under Kuwaiti laws.

Alternative Dispute Resolution (ADR) mechanisms include conciliation, negotiation, and mediation. These mechanisms depend on the parties’ goodwill to settle their disputes with or without the help of a third party.

Law No. 11 of 1995 on Judicial Arbitration for Civil and Commercial Articles, the relevant organizing and explanatory Ministerial Resolutions thereof, and Civil and Commercial Procedure Code No. 38 of 1980 outline the formation, operation, jurisdiction, and procedures of the arbitral panel, and the issuance of arbitral awards through the Kuwait Arbitration Center, located at the Kuwait Chamber of Commerce and Industry. They also define regulations for international conventions, free trade agreements, and the just application of the reciprocal clause between parties.

Bankruptcy Regulations

Bankruptcy is still governed under Law No. 68 of 1980, which does not meet international standards in covering the full range of companies, or in restructuring debt. While the 1980 law does not criminalize bankrupt individuals, indebtedness may result in incarceration, and a bankruptcy declaration limits political rights. A bankrupt individual may not serve as a candidate or elector in any political position, be appointed to a public post or assignment, or serve as director or chairman in any company until the individual’s rights are reinstated in accordance with law. Kuwait is working with the World Bank to draft bankruptcy legislation designed to assist businesses to recover from financial difficulties as an alternative to liquidation. The Council of Ministers approved new legislation to support competition and create bankruptcy protections and sent it to the National Assembly, whereas of May 2020 it was in committee.

Investment Incentives

Incentives under the 2013 FDI Law include tax benefits (15 percent corporate tax on foreign firms may be waived for up to 10 years), customs duties relief, land and real estate allocations, and permissions to recruit required foreign labor.

Other tax benefits exist. For example, entities incorporated in the GCC that are 100 percent owned by GCC nationals are exempt from paying a tax on corporate profits. Capital gains arising from trading in securities listed on Kuwait’s stock market are exempt from tax. Foreign principals selling goods through Kuwaiti distributors are not subject to tax.

Kuwait does not have personal income, property, inheritance, or sales taxes; the government is preparing legislation to implement a value added tax and certainexcise taxes.

Foreign Trade Zones/Free Ports/Trade Facilitation

The Kuwait Free Trade Zone was established at Shuwaikh port in 1999. The Council of Ministers approved legislation that would establish a new Free Trade Zone area as part of Kuwait’s Northern Gateway megaproject. The legislation is pending in the National Assembly. Many restrictions normally faced by foreign firms, as well as corporate taxes, would not apply within the free trade zone. KDIPA is planning to utilize existing legislation to develop two new free trade zones at Al-Abdali and Al-Nuwaiseeb. The Council of Ministers issued a resolution dissolving the Free Trade Zone status at Shuwaikh port because that area will be used for other purposes.

Performance and Data Localization Requirements

The government requires foreign firms to hire a percentage of Kuwaitis that varies according to sector. The percentages are as follows: banking: 75 percent

• banking: 75 percent
• communications: 65 percent
• investment and finance: 40 percent
• petrochemicals and refining industries: 30 percent
• insurance: 22 percent
• real estate: 20 percent
• air transportation, foreign exchange, cooperatives: 15 percent
• manufacturing and agriculture: 3 percent

Employers must obtain a no-objection certificate for a work permit for foreign employees from the Public Authority for Manpower (PAM) prior to the employee’s arrival in the country. Obtaining a no-objection certificate requires submission of the employee’s criminal history and a completion of a health screening through a Kuwaiti Embassy or Consulate. Upon arrival, the employee must obtain a work permit from PAM and complete health and security screenings before receiving final status as a resident foreign worker from the Ministry of Interior.

Kuwait does not require that foreign companies store data locally, or that foreign investors use Kuwaiti domestic content when manufacturing goods locally. Each company may determine whether and how it chooses to store data. Most governmental agencies follow International Organization for Standardization (ISO) certificate standards, which mandate the storage of data for five years. Banks and other financial institutions are required by the Anti-Money Laundering/Combatting the Financing of Terrorism Law 106 of 2013 to maintain transactions data for five years.

Real Property

Non-GCC citizens may own properties only under special conditions that require Cabinet approval. Kuwait ranked 45 out of 190 in Ease of Registering a Property in the World Bank’sDoing Business 2020 report.

Intellectual Property Rights

Kuwait has taken significant strides to improve intellectual property rights. Kuwait acceded to the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) in 1995 and the World Intellectual Property Organization (WIPO) Patent Cooperation Treaty in 2016. The government enacted the GCC Trademark Law in 2015. In 2019, Kuwait passed the Copyright and Related Rights Law and related Implementing Regulations. The Office of the U.S. Trade Representative (USTR) moved Kuwait from the Priority Watch List to the Watch List in its 2020 Special 301 Report because of the new copyright legislation and an increase in intellectual property enforcement actions. The Special 301 Report identifies countries that are trading partners that do not adequately or effectively protect and enforce intellectual property rights (IPR).

Right holders continue to raise concerns regarding the lack of transparency of administrative and criminal enforcement proceedings. The government did not prioritize the prosecution of criminal behavior in such cases nor reduce the undue delays in the judicial process.

The following descriptions characterize the protection of IPR in Kuwait:

• Trademarks: strong; trademark applications can be filed at the Kuwaiti Trademark Office, organized under the Ministry of Commerce and Industry. Kuwait applies the GCC trademark law.

• Patents: strong; the Kuwait Patent Office announced that it began accepting Patent Cooperation Treaty compliant national applications in March 2018.

• Copyright: medium; can be protected by the Ministry of Information/National Library of Kuwait. The IPR enforcement regime has improved, most notably in the following areas:

• The Ministry of Information (MOI) has conducted raids, seized pirated goods (such as DVDs), and referred cases for prosecution.In addition, it continued blocking Internet domains that allow downloads of pirated copyrighted materials and websites that sell counterfeit goods.

• The Criminal Investigations Department (CID) established a specialized IPR unit to combat counterfeit goods. Brand owners are able to bring complaints directly to this unit for action in cooperation with the Ministry of Commerce and Industry. The CID conducted raids and criminal proceedings on a range of pirated and counterfeit physical goods.

• Ministry of Commerce and Industry performed raids and seizures under the direction of the Assistant Undersecretary of Trade Control but focused more on small retail shops than more strategic targets like sources and suppliers of counterfeit goods.

• General Administration of Customs officials improved enforcement in part due to their close collaboration with U.S. Customs and Border Protection. Kuwait Customs’ Intellectual Property Rights Unit reported 340 seizures of counterfeit or pirated goods last year, enhanced outreach and communication with brand owners and copyright owners, and no longer permitted the re-export of seized counterfeit goods.

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

Resources for Rights Holders

Mr. Peter Mehravari
Intellectual Property Attaché for the Middle East & North Africa
U.S. Embassy Kuwait
Tel: +965 2259 1455
Email:Peter.Mehravari@trade.gov

Embassy list of local lawyers:
http://2016.export.gov/kuwait/businessserviceproviders/index.asp

Capital Markets and Portfolio Investment

Foreign financial investment firms operating in Kuwait characterize the government’s attitude toward foreign portfolio investment as welcoming. An effective regulatory system exists to encourage and facilitate portfolio investment. Existing policies and infrastructure facilitate the free flow of financial resources into the capital market. Government bodies comply with guidelines outlined by IMF Article VIII and refrain from restricting payments and transfers on current international transactions. In November 2015, the Capital Markets Authority issued a regulation covering portfolio management, but it does not apply to foreign investors.

The privatized stock exchange, named the Boursa, lists 172 companies. In February 2019, a consortium led by Kuwait National Investment Company that included the Athens Stock Exchange won a tender to acquire 44 percent of the Kuwaiti Boursa. In December 2019, the Capital Markets Authority sold its 50 percent stake in the Kuwaiti Boursa as part of an Initial Public Offering. The offering was oversubscribed by more than 8.5 times. Kuwait’s Public Institution for Social Security owns the remaining six percent of shares.

FTSE Russell upgraded the status of the Boursa to Secondary Emerging Market in 2017. In March 2019, MSCI announced a proposal to reclassify the MSCI Kuwait Index from Frontier to Emerging Markets. MSCI aims to implement the potential reclassification to coincide with the May 2020 Semi-Annual Index Review.

While the debt market is not well developed, local banks have the capacity to meet domestic demand. Credit is allocated on market terms. Foreign investors can obtain local credit on terms that correspond to collateral provided and intended use of financing. The private sector has access to a variety of credit instruments. The Central Bank restricts commercial banks’ use of structured and complex derivatives but permits routine hedging and trading for non-speculative purposes. In March 2017, the government issued USD 8 billion in five- and ten-year notes but was unable to secure approval from the National Assembly for issuance of 30-year notes.

Money and Banking System

The Central Bank of Kuwait reported that banking sector assets totaled KD 72.77 billion (USD 232.42 billion) in March 2020.

Twenty-two banks operate in Kuwait: five conventional local banks, five Islamic banks, 11 foreign banks, and one specialized bank. Conventional banks include: National Bank of Kuwait, Commercial Bank of Kuwait, Gulf Bank, Al-Ahli Bank of Kuwait, and Burgan Bank. Sharia-compliant banks include Kuwait Finance House, Boubyan Bank, Kuwait International Bank, Al-Ahli United Bank, and Warba Bank. Foreign banks include: BNP Paribas, HSBC, Citibank, Qatar National Bank, Doha Bank, Dubai-based Mashreq Bank, the Bank of Muscat, Riyadh-based Al Rajhi Bank (the largest Sharia-compliant bank in the world), the Bank of Bahrain and Kuwait (BBK), the Industrial and Commercial Bank of China (ICBC), and Union National Bank. The government-owned Industrial Bank of Kuwait provides medium- and long-term financing to industrial companies and Kuwaiti citizens through customized financing packages. In December 2018, the Ministry of Commerce and Industry began permitting more than 49 percent foreign ownership in local banks with the approval of the Central Bank of Kuwait.

Following the global financial crisis in 2008 when large losses reduced confidence in the local banking sector, the Council of Ministers and the National Assembly passed legislation to guarantee deposits at local banks to rebuild confidence.

Foreign banks can offer retail services. In 2013, the Central Bank announced that foreign banks could open multiple branches on a case-by-case basis. In 2017, the Al-Rajhi Bank opened its second branch. Qatar National Bank received CBK’s approval in 2014 and opened its second branch in 2018. Kuwaiti law restricts foreign banks from offering investment banking services. Foreign banks are subject to a maximum credit concentration equivalent to less than half the limit of the largest local bank and are prohibited from directing clients to borrow from external branches of their bank. Foreign banks may also open representative offices.

Foreign Exchange and Remittances

Foreign Exchange

The Kuwaiti dinar has been tied to an undisclosed and changing basket of major currencies since May 2007. Reverse engineering suggests that the U.S. dollar accounts for some 70-80 percent of this basket. Foreign exchange purchases must be processed through a bank or licensed foreign exchange dealer. Equity, loan capital, interest, dividends, profits, royalties, fees, and personal savings can be transferred into or out of Kuwait without hindrance. The Foreign Direct Investment Law permits investors to transfer all or part of their investment to another foreign or domestic investor, including cash transfers.

Remittance Policies

No restrictions exist on the inflow or outflow of remittances, profits, or revenue. Foreign investors may elect to remit through a legal parallel market, including one using convertible, negotiable instruments. Nevertheless, each investor must ensure compliance with Kuwait’s anti-money laundering laws. Time limitations or waiting periods do not apply to remittances. Kuwait is not known to engage in currency manipulation. The Central Bank advises buy, sell, and middle rates daily.

Sovereign Wealth Funds

The Kuwait Investment Authority (KIA) manages the Kuwait General Reserve Fund and the Kuwait Fund for Future Generations. By law, ten percent of oil revenues must be deposited each year into the Fund for Future Generations. KIA management reports to a Board of Directors that is appointed by the Council of Ministers. The Minister of Finance chairs the board; other members include the Minister of Oil, the Central Bank Governor, the Undersecretary of the Ministry of Finance, and five representatives from Kuwait’s private sector (three of whom must not hold any other public office). An internal audit office reports directly to the Board of Directors and an external auditor. This information is provided to the State Audit Bureau, which audits KIA continuously and reports annually to the National Assembly.

The 1982 law establishing the KIA prohibits the public disclosure of the size of sovereign wealth holdings and asset allocations. KIA conducts closed-door presentations for the Council of Ministers and the National Assembly on the full details of all funds under its management, including its strategic asset allocation, benchmarks, and rates of return. The Sovereign Wealth Fund Institute estimated that KIA manages one of the world’s largest sovereign funds with more than USD 533 billion in assets as of May 2020.

The energy sector is dominated by parastatals, as law precludes private participation in most sector activities. Outside the energy sector, Kuwait has few fully state-owned enterprises (SOEs). One notable exception is Kuwait Airways. No published list of SOEs exists. The government owns shares in various Kuwaiti companies through the Fund for Future Generations managed by the KIA or the Social Security Fund managed by Kuwait’s Public Institution for Social Security. SOEs are permitted to control their own budgets.

Privatization Program

The National Assembly has passed several privatization laws since 2008. One legal stipulation is that Kuwaiti employees have the right to retain their jobs in a privatized company for at least five years with the same salary and benefits. Another stipulation is that the privatization of any public service must offer shares as follows: 40 percent of shares reserved for Kuwaiti citizens;

• 40 percent of shares reserved for Kuwaiti citizens;
• 20 percent of shares retained by the government;
• five percent of shares distributed to Kuwaiti employees, both former and current; and
• the remaining 35 percent of shares sold at auction to a local or foreign investor.

Telecommunications is the largest service sector in Kuwait. The Ministry of Communications owns and operates landlines and owns a fiber optic network. Internet providers may access both landlines and fiber optic networks. Three private mobile telephone companies provide cellular telephone and data services to the country. The government owns a significant minority interest in each, but foreign companies own majority interests in two of them. In 2014, the National Assembly passed legislation creating the independent Communication and Information Technology Regulatory Authority (CITRA), in part to prepare for the liberalization of mobile communications and Internet markets. Officially opened in 2016, CITRA serves as the primary national telecom regulator and cybersecurity agency. CITRA also has a mandate to attract hi-tech investment.

Kuwaitis have a general awareness of expectations for responsible business conduct, including environmental, social, and governance issues. No specific government program is in place to require or encourage compliance. One aspect of responsible business conduct in Kuwait is commonly manifested through contributions to local charities and causes. The Kuwait Environmental Public Authority has been active in enforcing compliance and addressing environmental violations, since the passage of the Environmental Protection Law of 2014.

Corruption is criminalized, and several investigations and trials involving current or former government officials accused of malfeasance are active.

Transparency International’s 2019 Corruption Perceptions Index ranked Kuwait 85 out of 180 countries. Within the GCC, Kuwait ranked behind UAE, Qatar, Saudi Arabia, and Oman, ahead of only Bahrain. According to Transparency International, Kuwait’s numeric score of 40 (out of 100) indicated that the country has a serious corruption problem.

The often-lengthy procurement process in Kuwait occasionally results in accusations of attempted bribery or the offering of other inducements by bidders. In 1996, the government passed Law No. 25, which required all companies securing contracts with the government valued at KD 100,000 (USD 330,000) or more to report all payments made to Kuwaiti agents or advisors while securing the contract. The law similarly requires entities and individuals to report any payments they received as compensation for securing government contracts.

Kuwait signed the UN Convention Against Corruption in 2003 and ratified it in 2007. In 2016, the National Assembly passed legislation to establish the Anti-Corruption Authority, also known as Nazaha (integrity). The legislation was passed to comply with the United Nations Convention Against Corruption. Nazaha has sent several cases to the Public Prosecution Office for failure to comply with financial disclosure requirements.

Resources to Report Corruption

Contact information for the government agency responsible for combating corruption is as follows:

Mr. Abdulrahman Nimash Al-Nimash.
President
Kuwait Anti-Corruption Authority (Nazaha)
Shamiya, Block 2, Opposite Wahran Park, Kuwait City, Kuwait
Tel: +965 2464-0200/118
Email: contact@nazaha.gov.kw

The U.S. Embassy occasionally receives threat information indicating possible targeting of official and private U.S. citizens for terrorist attacks. Soft targets are vulnerable to terrorist attack, although many have made improvements to their perimeters and internal security. There have been no terror incidents in Kuwait since 2016. There have been no attacks targeting businesses or infrastructure. Since late 2013, Kuwait has seen no large-scale, politically motivated demonstrations. U.S. citizens are encouraged to enroll in the U.S. Department of State’s Smart Traveler Enrollment Program (STEP) for up-to-date information from the Embassy. The Department of State shares credible threat information through its Consular Information Program, including Travel Advisories, Alerts, and Country Information for Kuwait, available athttps://travel.state.gov/content/travel.htmlor the Embassy’s website:https://kw.usembassy.gov/.

Kuwait has a diverse labor force. According to the Public Authority for Civil Information (PACI), 2.5 million expatriate workers account for 86 percent of Kuwait’s 2.9 million workers. Many expatriate workers are low-paid laborers from other Middle Eastern countries, South Asia, and the Philippines working in Kuwait under a legally established “sponsorship” system. Abuse of the sponsorship system is widespread.

A number of white-collar workers from advanced countries occupy high-skilled positions in Kuwait, while many middle management positions are occupied by Egyptian, Lebanese, and South Asian nationals.

Kuwaiti nationals occupy most of the top management positions in the private and public sectors. Unemployment among Kuwaitis is quite low, despite the growing influx of young Kuwaitis moving into the labor force. The new entrants are reluctant to enter the private sector and cannot easily be absorbed by the government. According to the Public Authority for Manpower, the number of Kuwaiti citizens working in the private sector totaled 72,000 as of February 2020.

Given the fiscal deficit, IMF staff have stressed that limiting public sector employment growth should be part of broader public sector reforms and accompanied by efforts to boost private sector job and entrepreneurship opportunities for the youth.

Since 1991, the government has adopted inconsistent policies intended to limit growth of the resident expatriate population, however this population has continued to increase steadily. Lower-paid, unskilled workers often suffer unfavorable working conditions. The government has a labor tracking system to allow companies only enough work permits to be issued for pre-verified positions. The tracking system is designed to protect workers, following years of visa fraud whereby Kuwaiti sponsors could create ghost positions and sell the visas for personal profit. The consequence of the fraud was the importation of workers who then found themselves unemployed. These workers often remained in country working illegally. Unskilled foreign workers are restricted from transferring from one sponsor to another within the private sector for a minimum of two years, but college graduates may transfer after one year.

Kuwaiti workers have the right to organize and bargain collectively, but Kuwaiti law restricts the right of freedom of association to only one union per occupational trade. The law permits only one federation, the Kuwait Trade Union Federation, which comprises 15 of the 47 licensed unions. Foreign workers are permitted by law to join unions only as non-voting members after five years of work in the particular sector the union represents. Private sector workers have the right to strike; however, negotiation and arbitration are compulsory in the case of disputes. Public sector workers do not have the legal right to strike, though groups of public sector workers threatened to strike on occasion during the past few years. Kuwaiti labor law prohibits anti-union discrimination.

Separate Kuwaiti labor laws establish work conditions in the public and private sectors, except for the oil sector. Kuwaiti law prohibits forced labor. Workers in industrial and dangerous jobs must be at least 18 years old; youth under the age of 18 can work part-time in some non-industrial positions. A multi-tiered labor market ensures higher wages for Kuwaiti employees. In the private sector, the minimum wage is KD 75 (USD 250) per month. In the public sector, the minimum wage is KD 250 (USD 825) per month for Kuwaiti bachelors and KD 325 (USD 1,070) per month for married Kuwaitis, plus KD 50 (USD 165) for each child, compared to a standard monthly minimum wage of KD 90 (USD 295) for non-Kuwaitis in the public sector. Kuwaitis, whether employed in the private or public sector receive substantial government payments on top of their base salaries. The amended labor law of 2010 did not change the previous workweek maximum from 48 hours but extended annual leave to 30 days after six months of employment. Labor laws are not consistently enforced and disputes over the payment of salaries and contract switching are common, especially among unskilled workers. A different set of laws and regulations cover domestic (household) workers.

The International Labor Organization’s (ILO) Committee of Experts has longstanding criticisms concerning discrepancies between the Kuwaiti Labor Code and ILO Conventions 1, 30, and 87 regarding work hours and freedom of association. Areas criticized by the ILO include the prohibition of more than one trade union for a given field; the requirement that a new union have at least 100 workers; the regulation that workers must reside in Kuwait for five years before joining a trade union; the denial of the right to vote and to be elected to trade union leadership positions for foreign workers; the prohibition against trade unions engaging in political or religious activity; and the reversion of trade union assets to the Public Authority for Manpower in the event of dissolution.

During recent years, the Government of Kuwait has taken several measures to address human trafficking and to improve protections for workers. In 2016, the government passed several new amendments to the 2010 private sector labor law that increased penalties for those involved in visa trading and illegally employing workers.

Since 2007, labor laws have banned women from working between 10:00 p.m. and 7:00 a.m., except for sectors approved by the Public Authority for Manpower such as nurses. The law also banned women from working in jobs that are judged to be hazardous, rough, and damaging to health, as well as in immoral jobs that abuse women’s femininity and in places that exclusively serve men.

Kuwait’s Public Authority for Manpower assists all residents of Kuwait with private sector employment and labor disputes. Offices assist residents according to the location of the employer and are open Sunday through Thursday, 8:00 a.m. – 1:00 p.m. Some expatriate residents have reported that the offices were unable to provide any assistance. It is recommended that residents seeking assistance be accompanied by an Arabic speaker. Following is information on Public Authority for Manpower offices:

Capital Business Administration: Sharq,
Mohammad al-Haqan Street
Tel: +965 2246-6830 and 2246-6831

Hawalli Business Administration: Hawalli
Tunis Street, opposite Ahli Bank of Kuwait
Tel: +965 266-0229 and 2266-0228

Al-Farwaniya Business Administration: Dajeej
Adjacent to General Department of Criminal Evidence
Tel: +965 2431-9555

Al-Jahra Business Administration: Saad al-Abdullah (Amgarah)
Street 1, Block 10
Tel +965 9494-5446

Al-Ahmadi Business Administration: Al Ahmadi
Next to Kuwait Oil Company
Block 1, Street 20
Tel: +965 2398-2059

Mubarak Al-Kabeer Business Administration: Mubarak Al-Kabeer
Co-op #4, beside National Bank of Kuwait and Kuwait Finance House
Tel: +965 2543-8595

The Public Authority for Manpower offers Arabic and English responses via their Twitter handle: @manpower_KWT, or Instagram account: pr.manpower. The Authority attempts to answer inquiries within one business day.

Kuwait and the United States concluded an investment guarantee agreement in 1989, which facilitated the extension of programs from the Overseas Private Investment Corporation, now the U.S. International Development Finance Corporation (DFC). There are no active DFC programs in Kuwait currently. Kuwait is a member of the Multilateral Investment Guarantee Agency.

According to the 2019 World Investment Report published by the United Nations Conference on Trade and Development, Kuwait attracted USD 346 million in foreign direct investment in 2018, compared to USD 3.75 billion in foreign direct investment outflows.

According to the U.S. Department of Commerce Bureau of Economic Analysis, 2018 U.S. direct investment in Kuwait was USD 313 million, up from USD 296 million in 2017. Kuwait’s FDI position in the United States totaled USD 1.26 billion in 2018. Kuwaiti direct investment in the United States is primarily in real estate. Estimates of total Kuwaiti investment in the United States, including securities and real estate, range from USD 500 billion to USD 1 trillion.

*Host country source: https://www.cbk.gov.kw/en/statistics-and-publication/publications/quarterly-statistical-bulletin

Economic Section
U.S. Embassy Kuwait
P.O. Box 77
Safat 13001
Kuwait
+965 2259 1001
KuwaitDirectLine@state.gov

Policies Towards Foreign Direct Investment

Oman actively seeks foreign direct investment and is in the process of improving the regulatory framework to encourage such investments. The new FCIL allows 100 percent foreign ownership in most sectors and removed the minimum capital requirement. The law effectively provides all foreign investors with an open market in Oman, privileges already extended to U.S. nationals due to the provisions in the U.S.-Oman Free Trade Agreement (FTA), although the FTA goes further in providing American companies with national treatment.

The Government of Oman’s (GoO) “In-Country Value” (ICV) policy seeks to incentivize companies, both Omani and foreign, to procure local goods and services and provide training to Omani national employees. The GoO includes bidders’ demonstration of support for ICV as one factor in government tender awards. While the GoO initially applied ICV primarily to oil and gas contracts, the principle is now embedded in government tenders in all sectors, including transportation and tourism. New-to-market foreign companies, including U.S. firms, may find the bid requirements related to ICV prohibitive.

Limits on Foreign Control and Right to Private Ownership and Establishment

With the implementation of the United States-Oman FTA in 2009, U.S. firms may establish and fully own a business in Oman without a local partner. Although U.S. investors are provided national treatment in most sectors, Oman has an exception in the FTA for legal services, limiting U.S. ownership in a legal services firm to no more than 70 percent. The government has a “negative list” that restricts foreign investment to safeguard national security interests. The list includes some services related to radio and television transmission as well as air and internal waterway transportation.

With the implementation of the United States-Oman FTA in 2009, U.S. firms may establish and fully own a business in Oman without a local partner. Although U.S. investors are provided national treatment in most sectors, Oman has an exception in the FTA for legal services, limiting U.S. ownership in a legal services firm to no more than 70 percent. The government has a “negative list” that restricts foreign investment to safeguard national security interests. The list includes some services related to radio and television transmission as well as air and internal waterway transportation.

The new FCIL also contained a “negative list” of 37 additional sectors. The Ministry of Commerce and Industry (MOCI) is applying the new law on a reported case-by-case basis, and it remains uncertain whether a 100 percent foreign-owned company can now undertake an activity which is not on the negative list.

Under the old law, foreign nationals seeking to own 100 percent shares in local companies had to seek MOCI’s approval, which required a detailed business plan highlighting the capital investment and the projected benefits to the Omani economy, including the number of local jobs to be created; the old law also required a minimum of two shareholders and two directors and minimum capital of one million Omani rials (approximately $2.6 million).

Over the past year, Oman has banned non-Omani ownership of real estate and land in various governorates and other areas the government deems necessary to restrict under Royal Decree 29/2018. However, Oman has allowed the establishment of real estate investment funds (REIF) in order to encourage new inflows of capital into Oman’s property sector. The new regulations permit foreign investors, as well as expatriates in Oman, to own units in REIFs. In January, Oman’s first REIF (Aman) launched an initial private offering valued at $26 million for Omani and non-Omani investors.

Other Investment Policy Reviews

Oman has not undergone any third-party investment policy reviews in the past six years. The last WTO Trade Policy Review was in April 2014 (Link to 2014 report: https://www.wto.org/english/tratop_e/tpr_e/tp395_e.htm.)

Business Facilitation

The GoO has tasked the Public Authority for Investment Promotion and Export Development (Ithraa) with attracting foreign investors and smoothing the path for business formation and private sector development. Ithraa works closely with government organizations and businesses based in Oman and abroad to provide a comprehensive range of business support. Ithraa also offers a comprehensive range of business investor advice geared exclusively to support foreign companies looking to invest in Oman, based on company-specific needs and key target sectors identified under the country’s diversification program. In November 2019, Ithraa launched a new “Invest in Oman” portal with some information about investment opportunities.

The GoO has tasked the Public Authority for Investment Promotion and Export Development (Ithraa) with attracting foreign investors and smoothing the path for business formation and private sector development. Ithraa works closely with government organizations and businesses based in Oman and abroad to provide a comprehensive range of business support. Ithraa also offers a comprehensive range of business investor advice geared exclusively to support foreign companies looking to invest in Oman, based on company-specific needs and key target sectors identified under the country’s diversification program. In November 2019, Ithraa launched a new “Invest in Oman” portal with some information about investment opportunities.

MOCI has an online business registration site, known as “Invest Easy” (business.gov.om), and businesses can obtain a Commercial Registration certificate from MOCI in approximately three or four days. However, commercial registration and licensing decisions often require the approval of multiple ministries, slowing down the process in many cases. In 2019, MOCI set up the Investment Services Center (ISC) to integrate as many as 75 government agencies and private sector service providers into its “Invest Easy” portal in 2020 so it can serve as a single window for businesses in Oman. The various investment promotion entities and online portals appear to have overlapping and possibly redundant roles.

Outward Investment

The government neither promotes nor provides incentives for outward investment but does not restrict its citizens from investing abroad.

Investment Incentives

Oman’s offers several incentives to attract foreign investors such as competitive lease rates for certain types of companies established in recognized industrial estates, free zones, and specific locations, but only on a case-by-case basis. Oman established an independent tax authority under a royal decree issued in April. Oman has no personal income or capital gains tax.

However, some of Oman’s investment incentives have diminished in recent years. Most industrial and commercial consumers now pay cost-reflective tariffs for utilities. Oman’s overhaul of its corporate tax law in 2017 eliminated many tax exemptions for foreign investors. Oman taxes corporate earnings at 15 percent.

Foreign Trade Zones/Free Ports/Trade Facilitation

The government has established free trade zones to complement its port development projects in Duqm, Salalah, and Sohar. These areas include strategically located ports and are well connected with modern infrastructure and facilities. An incentive package for investors includes a tax holiday, duty-free treatment of all imports and exports, and tax-free repatriation of profits. Additional benefits include streamlined business registration, processing of labor and immigration permits, assistance with utility connections, and lower “Omanization” employment quota requirements. Foreign-owned firms have the same investment opportunities as Omani entities.

Performance and Data Localization Requirements

Since 1988, the GoO has had a labor market policy of Omanization, which includes employment quotas for Omani nationals.  These quota targets vary depending on the sector; they can be as low as 10 percent in the Special Economic Zone at Duqm (SEZAD) and as high as 90 percent, for example, in the banking sector.  Most government ministries have achieved Omanization rates at or near 100 percent.

Omanization targets are prevalent throughout the private sector but the government enforces them inconsistently. In practice, each company in Oman submits an Omanization plan to the Ministry of Manpower (MoM), which has the authority to reduce the requirements for some businesses and to adjust required Omanization percentages accordingly. In response to the economic fallout from the COVID-19 pandemic, the MoM adopted stronger measures to force companies to increase their employment of Omanis and also to ensure that Omanis are not terminated from their jobs.

Employers seeking to hire expatriate workers must seek a visa allotment from the MoM and Royal Oman Police (ROP). The MoM and ROP scrutinize specific visas allocations, and they often use opaque criteria. Foreign investors complain of the difficulty in hiring expatriates to the point that it frustrates or deters companies from investing in Oman. The ROP still requires expatriate workers to leave and remain outside the country for two years between changing employers (unless the initial employer agrees otherwise). Persons may seek exemptions to this rule from the ROP on a case-by-case basis.

In January 2018, the MoM issued a decree that imposed a six-month ban on visas for expatriates in 87 job categories across 10 private sector industries. The MoM has extended the dates for this ban several times and has added additional job categories to the visa ban. The decree does not apply to business owners registered with the Public Authority for Small and Medium Enterprise Development (Riyada) or to the owners insured by the Public Authority for Social Insurance.

Currently, Oman does not have any requirements for companies to turn over source code or to provide access to surveillance. However, the Telecommunications Regulatory Authority (TRA) requires service providers to house servers in Oman if they are to provide services in Oman. The TRA is the lead agency on establishing data quotas in Oman.

Real Property

Oman does not recognize or enforce securitized interests in property, both moveable and real. Mortgages and liens exist in the country. Foreign nationals are generally not able to own real estate in Oman, other than residential property located in a few designated Integrated Tourism Complexes. Individuals record their interest in property with the Land Registry at the Ministry of Housing. The legal system, in general, facilitates the acquisition and disposition of property rights.

There are lands reserved for tribal use and ownership, but there are no clear definitions or regulations governing these lands. These tribes legally own the land, as opposed to the government owning the land, and therefore control access and any commercial activities.

According to the World Bank, it takes 18 days on average to register property, and the cost of the registration process as a percentage of the property value (five percent) is lower in Oman than elsewhere the region. In 2018, the World Bank ranked Oman 52nd in the world for registering property, and Oman ranked higher than many other countries in the region.

Intellectual Property Rights

Oman has a relatively robust legal and regulatory framework for Intellectual Property Rights (IPR) protection. Oman was not included in the United States Trade Representative (USTR) Special 301 Report or the Notorious Markets List.

U.S. stakeholders have experienced difficulty getting appropriate agencies, including the Public Authority for Consumer Protection, the Public Prosecution, MOCI, and the ROP, to take IPR enforcement action. Adding to the lack of efficiency in IPR enforcement is the continued confusion about which government agencies are responsible for investigating different types of IPR violations.

Public Authority for Consumer Protection officials have confirmed that they do not accept responsibility for complaints arising from brand-owners; they only take action on consumers’ complaints. MOLA also confirmed that the Law of Copyrights and Neighboring Rights (Royal Decree No. 65/2008) stipulates that the MOCI shall be responsible for IPR enforcement at the retail level, including inspections and seizures.

Oman revised its intellectual property and copyright laws to comply with its obligations under the 2009 U.S.-Oman FTA. As a result, Oman offers increased IPR protection for copyrights, trademarks, trade secrets, geographical indications, and patents. FTA-related revisions to IPR protection in Oman built upon the existing IPR regime, already strengthened by the passage of WTO-consistent intellectual property laws on copyrights, trademarks, industrial secrets, geographical indications, and integrated circuits. The FTA’s chapter on IPR can be found at: https://om.usembassy.gov/business/u-s-oman-free-trade-agreement/texts-free-trade-agreement/.

Oman is a member of the World Intellectual Property Organization (WIPO) and is registered as a signatory to the Madrid, Paris, and Berne conventions on trademarks and intellectual property protection. Oman has also signed the WIPO Copyright Treaty and the WIPO Performances and Phonograms Treaty. Oman is also a signatory to the International Convention for the Protection of New Varieties of Plants.

Trademark laws in Oman are Trade Related Aspects of Intellectual Property Rights (TRIPs) compliant. MOCI registers trademarks and notes them in the Official Gazette. Local law firms can assist companies with the registration of trademarks. Oman’s copyright protection law extends protection to foreign copyrighted literary, technical, or scientific works; works of the graphic and plastic arts; and sound and video recordings. In order to receive protection for a foreign-copyrighted work, the rights holder must register the work with the Omani government by depositing a copy of it with the government and paying a fee.Trademarks are valid for 10 years while patents are generally protected for 20 years. Literary works, software and audiovisual content receive protection for 50 years.

For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at: https://www.wipo.int/directory/en/details.jsp?country_code=OM.

Resources for Rights Holders:

Ministry of Commerce and Industry – Department of IPR Enforcement
Director of Intellectual Property
Ahmed Al-Saidi
Tel: +968- 9942-1551
Fax: +968-2481-7412
E-mail: saidy3916@yahoo.com
Web: http://www.moci.gov.om/

Oman Chamber of Commerce & Industry
Dr. Al Fadhil bin Abbas al-Hinai, CEO
Tel: +968-2479- 9146
Fax: +96-2479-1713
E-mail: adheem@chamberoman.om
Web: www.chamberoman.om

U.S. Patent & Trademark Office
Regional IP Attaché
Pete C. Mehravari
Intellectual Property Attaché for the Middle East & North Africa
U.S. Embassy Kuwait City, Kuwait
U.S. Department of Commerce Foreign Commercial Service, U.S. Patent & Trademark Office
Tel: +965 2259 1455
E-mail: Peter.mehravari@trade.gov
Web: https://www.uspto.gov/learning-and-resources/ip-policy/intellectual-property-rights-ipr-attach-program/intellectual

United States Trade Representative
IPR Director for the GCC
Sung Chang
Tel: +1 (202) 395-9564
E-mail: Sung.E.Chang@ustr.eop.gov
Web: http://www.ustr.gov

U.S. Department of Commerce – International Trade Administration
IPR Lawyer
Kevin Reichelt
Tel: +1-202-482-0879
E-Mail: Kevin.reichelt@trade.gov
Web: http://www.trade.gov/cs/‎

Capital Markets and Portfolio Investment

There are no restrictions in Oman on the flow of capital and the repatriation of profits. Foreigners may invest in the Muscat Securities Market (MSM) so long as they do so through an authorized broker. Access to Oman’s limited commercial credit and project financing resources is open to Omani firms with foreign participation. At this time, there is not sufficient liquidity in the market to allow for the entry and exit of sizeable amounts of capital. According to the 2017 annual report on exchange arrangements and exchange restrictions of the IMF, Article VIII practices are reflected in Oman’s exchange system.

The Commercial Companies Law requires the listing of joint stock companies with capital in excess of $5.2 million. The law also requires companies to existence for two years before their owners can float them for public trading. Publicly traded firms in Oman are still a relatively rare phenomenon; the majority of businesses are private family enterprises.

Money and Banking System

The banking system is sound and well-capitalized with low levels of non-performing loans and generally high profits. Oman’s banking sector includes eight local banks, nine foreign banks, two Islamic banks, and two specialized banks. Bank Muscat, the largest domestic bank operating in Oman, has $28.1 billion in assets. The Central Bank of Oman (CBO) is responsible for maintaining the internal and external value of the national currency. It is also the single integrated regulator of Oman’s financial services industry. The CBO issues regulations and guidance to all banks operating within Oman’s borders. Foreign businesspeople must have a residence visa or an Omani commercial registration to open a local bank account. There are no restrictions for foreign banks to establish operations in the country as long as they comply with CBO instructions.

Foreign Exchange and Remittances

Foreign Exchange

Oman does not have restrictions or reporting requirements on private capital movements into or out of the country. The Omani rial (RO) is pegged at a rate of RO 0.3849 to $1, and there is no difficulty in obtaining exchange. In general, all other currencies are first converted to dollars, then to the desired currency; national currency rates fluctuate, therefore, as the dollar fluctuates. The government has consistently stated publicly that it is committed to maintaining the current peg. The government has stated publicly that it will not join a proposed GCC common currency. There is no delay in remitting investment returns or limitation on the inflow or outflow of funds for remittances of profits, debt service, capital, capital gains returns on intellectual property, or imported inputs.

Remittance Policies

Oman does not restrict the remittance abroad of equity or debt capital, interest, dividends, branch profits, royalties, management and service fees, and personal savings, but it does apply withholding tax to many of these transfers at a rate of 10 percent. Because Oman’s currency is pegged to the dollar, the GoO is unable to engage in currency manipulation tactics. Investors can remit through legal parallel markets utilizing convertible, negotiable instruments. There are no surrender requirements for profits earned overseas.

The GCC, of which Oman is a member, is a member of the Financial Action Task Force (FATF) and its regional body. In February 2019, Oman hosted a workshop on combating money laundering and terrorism in cooperation with FATF. The level of compliance of Oman’s anti-money laundering and counter-terrorist financing regime with the FATF Recommendations is comparatively high for the region, and the legal framework is sound. However, the government has not yet fully addressed a number of gaps, including completing the certification procedures for anti-money laundering/countering the financing of terrorism (AML/CFT), issuing AML/CFT regulations to the sectors identified in Oman’s CFT law, and designating wire transfer amounts for customer due diligence procedures.Statistics regarding suspicious transaction reports, investigations, and convictions are not widely available.

Sovereign Wealth Funds

The State General Reserve Fund (SGRF) is Oman’s principal Sovereign Wealth Fund. The SGRF joined the International Forum of Sovereign Wealth Funds in 2015 as a full member and follows the Santiago Principles. Omani law does not require sovereign wealth funds to publish an annual report or submit their books for an independent audit. Many of the smaller wealth funds and pension funds actively invest in local projects.

The SGRF focuses on two main investment categories: Public Markets Assets (tradable) that include global equity, fixed income bonds and short-term assets, and Private Markets Assets (non-tradable) which includes private investments in real estate, logistics, services, commercial, and industrial projects.

State-Owned Enterprises (SOE) are active in many sectors in Oman, including oil and gas extraction, oil and gas services, oil refining, liquefied natural gas processing and export, manufacturing, telecommunications, aviation, infrastructure development, and finance. The government does not have a standard definition of an SOE, but tends to limit its working definition to companies wholly owned by the government and more frequently refers to companies with partial government ownership as joint ventures. The government does not have a complete, published list of companies in which it owns a stake.

In theory, the government permits private enterprises to compete with public enterprises under the same terms and conditions with access to markets, and other business operations, such as licenses and supplies, except in sectors deemed sensitive by the Omani government such as mining, telecom and information technology. SOEs purchase raw materials, goods, and services from private domestic and foreign enterprises. Public enterprises, however, have comparatively better access to credit. Board membership of SOEs is composed of various government officials, with a cabinet-level senior official usually serving as chairperson.

SOEs receive operating budgets, but, like budgets for ministries and other government entities, the budgets are flexible and not subject to hard constraints. The information that the GoO published about its 2020 budget did not include allocations to and earnings from most SOEs.

Privatization Program

The GoO has indicated that it hopes to reduce its budget deficits by privatizing or partially privatizing some government-owned companies. Although the plan for privatization is not publicly available, the GoO has already begun to reorganize its some of its holdings for public offerings.

In March, State Grid Corporation of China (SGCC) acquired a 49 per cent stake in Nama Holding, a government-owned holding company for five electricity transmission and distribution companies. The government’s divestment of a portion of its ownership in telecommunications firm Omantel is one example of a past partial privatization. In this case, the government offered Omantel stock on the Muscat Securities Market, but only to Omani investors.

The government allows foreign investors to participate fully in some privatization programs, even in drafting public-private partnership frameworks. In July 2019, Oman established the Public Authority for Privatization and Partnership (PAPP), which is reportedly examining 38 public-private partnership projects for implementation. Forthcoming executive regulations for the new Privatization law reportedly will clarify the role of PAPP in public-private partnerships.

Responsible business conduct is generally referred to as corporate social responsibility (CSR) in Oman, where the term carries a different connotation than in other parts of the world. In Oman, CSR programs are organized, “extra-curricular” programs hosted and supported by a business entity to engender goodwill in the community and to provide a social benefit. Examples include: competitions in elementary and secondary schools for academic performance and artistic skill; sponsorship of charitable, academic, and social events; entrepreneurship incubators; and women’s or tribal empowerment events.

The press covers consumer rights violations, mostly the sale of expired food or counterfeit medicine or car parts. There is a general culture of accountability, and a sense that companies who violate these tenets of corporate social responsibility will suffer in business and market share.

There are no independent consumer organizations promoting CSR. However, many business associations, including the Oman American Business Center (the local AmCham affiliate), pursue CSR initiatives as a part of their annual activities.Companies generally follow CSR guidelines set forth by the Organization for Economic Cooperation and Development (OECD).In March, Oman’s Council of Ministers directed state-owned companies to allocate a portion of their CSR budgets to support training programs/employment of Omani citizens. Additionally, each government ministry has a department dedicated to facilitating CSR compliance and initiatives. The government has not waived regulations promoting CSR to attract foreign investment.

U.S. businesses do not identify corruption as one of the top concerns of operating in Oman.

The Sultanate has the following legislation in place to address corruption in the public and private sectors:

1) The Law for the Protection of Public Funds and Avoidance of Conflicts of Interest (the “Anti-Corruption Law” promulgated by Royal Decree 112/2011). The Law predominantly concerns employees working within the public sector. It is also applicable to private sector companies if the government holds at least 40 percent shares in the company or in situations where the private sector company has punishable dealings with government bodies and officials.

2) The Omani Penal Code (promulgated by Royal Decree 7/2018). In January 2018, the GoO issued a new penal code that completely replaced Oman’s 1974 penal code. Minimum sentencing guidelines for public officials guilty of embezzlement increased from three months to three years. The definition of “public officials” expanded to include officers of parastatal corporations in which the GoO has at least a 40 percent controlling interest. The new penal code may make Oman seem more investment-friendly, by virtue of modern references to corporations as legal entities, as an example. However, its language on money laundering is still ambiguous and descriptions of licit and illicit banking are unclear, potentially contributing to confusion about investment regulations.

A lack of domestic whistleblower protection legislation in Oman has resulted in the private sector taking the lead in enacting internal anti-bribery and whistleblowing programs. Omani and international companies doing business in Oman that plan on implementing anti-corruption measures will likely find it difficult to do so without also putting in place an effective whistleblower protection program and a culture of zero tolerance.

Ministers are not allowed to hold offices in public shareholding companies or serve as the chairperson of a closely held company. However, many influential figures in government maintain private business interests and some are also involved in public-private partnerships. These activities either create or have the potential to create conflicts of interest. In 2011, the Tender Law (Royal Decree No. 36/2008) was updated to preclude Tender Board officials from adjudicating projects involving interested relatives to “the second degree of kinship.”

It is not yet clear if Sultan Haitham will prioritize rooting out corruption. The late Sultan dismissed several ministers and senior government officials for corruption during his reign. In response to public protests in 2011, a royal decree expanded the powers of the State Financial and Administrative Audit Institution (SFAAI).

Oman has stiff laws, regulations, and enforcement against corruption, and authorities have pursued several high profile cases. In March 2019, local press and social media focused intensely on an embezzlement scandal and the subsequent arrest of employees at the Ministry of Education. The Courts have signaled that corruption will not be tolerated.

In an extra attempt to prevent and eradicate corruption in the Sultanate of Oman, Oman joined the United Nations Convention Against Corruption (the “UNCAC”) in 2013. Oman is not a party to the OECD Convention on Combating Bribery.

Resources to Report Corruption

State Audit Institution
http://www.sai.gov.om/en/Complain.aspx
Phone number: +968 8000 0008

There are no “watchdog” organizations operating in Oman that monitor corruption.

Oman is stable, and politically-motivated violence is rare. Incidents of violence were associated with Arab Spring-related demonstrations in 2011, including several demonstrations that resulted in blocked pedestrian and vehicle access to the Port of Sohar. Omani law provides for limited freedom of assembly, and the government allows some peaceful demonstrations to occur. The transition to power of Sultan Haitham on January 11, 2020 was peaceful, smooth, and well orchestrated.

Oman’s labor market is a significant factor for foreign business and investors to consider. Sultan Haitham made clear in his first royal decrees and nationally televised speeches that addressing unemployment among Omani nationals would be a top priority.

Unemployment figures in Oman vary, but the most severely impacted demographic is young men. There are no available statistics about employment in the informal economy, but this sector is mostly limited to agriculture and fishing in rural areas.

Omani national private sector employees often work in administrative or managerial roles carved out for them through Omanization. Most drivers and secretaries are required to be Omanis across all sectors. Generally speaking, there is a surplus of workers in desirable fields, such as information technology and engineering. There is a shortage of workers in labor-intensive sectors, particularly construction, due to Omanization laws curbing the number of foreign workers who can be brought in to fulfill these roles. Foreign workers play a significant role in the Omani economy. Indians and Bangladeshis alone constitute more than half of the workforce.

Omani citizens enjoy a high degree of protection, making labor dispute resolution very difficult and lengthy. Both the MoM and the courts have broad powers to reinstate Omani national employees or mandate a severance package that provides pay for several months or, in some cases, several years. Foreign workers may also appeal termination to the MoM but have less legal protection.

While unions are allowed to operate in the private sector, they are not very influential and do not engage in collective bargaining. Most unions only exist to ensure that employers provide government-mandated benefits to employees, such as required annual raises. Workers generally direct appeals for wage increases, by sector or throughout the economy, towards the government. During the Arab Spring protests in 2011, the government passed a law increasing worker benefits.

There were no significant organized private sector strikes in the past year. Several small-scale protests about the lack of jobs, inadequate unemployment benefits, and recruitment policies have occurred outside MoM headquarters in Muscat and Salalah over the last few years. The Omani government takes public concern about unemployment very seriously.

Oman is a member of the International Labor Organization (ILO). Oman has ratified four of the eight core ILO standards, including those on forced labor, abolition of forced labor, minimum working age, and the worst forms of child labor. Oman has not ratified conventions related to freedom of association, collective bargaining, equal remuneration, or the conventions related to the elimination of discrimination with respect to employment and occupation.

The international community has criticized Oman for insufficient efforts to detect, deter, and prosecute labor violations, including Trafficking in Persons (TIP). An Omani official who spearheads Oman’s efforts to institute reforms to combat TIP stated in February that Oman had decided “to migrate fully” from a sponsorship (kafala) system to a contract based employment system and that the No Objection Certificate (NOC) will no longer be required for employees to seek new employment. The Council of Ministers has reportedly instructed relevant ministries to initiate implementation.

The government did not enact any new labor-related laws in 2019, though the Supreme Committee on COVID-19 issued a series of guidelines in April to bolster Omani nationals’ employment and to authorize the termination of expat laborers in response to the economic slowdown. The government has not moved forward with a long-anticipated comprehensive labor law. Government officials have not shared publicly the contents of any proposed draft.

In 2018, total FDI inflow into Oman was $4.1 billion, an increase from $2.9 billion in 2017, according to the UN World Investment Report 2019. Oman’s National Centre for Statistics and Information (NCSI) is currently the only host country source of 2018 data on FDI. Total cumulative FDI at the end of the second quarter of 2018, was RO 9.7 billion (over $25.22 billion) compared to RO 8.3 billion (about $21.58 billion) from the second quarter of last year, a growth rate of almost 17 percent. The United Kingdom remains by far the biggest investor in FDI, followed by the UAE, the United States, Kuwait, and China (see Table 3).

Major foreign investors that have entered the Omani market within the last five years include SV Pittie Textiles (India), Moon Iron & Steel Company (India), Sebacic Oman (India), BP (UK), Sembcorp (Singapore), Daewoo (Korea), LG (Korea), Veolia (France), Huawei (China), SinoHydro (China), and Vale (Brazil).

* Source for Host Country Data: National Centre for Statistical Analysis, 2018 Q2.

Table 4: Sources of Portfolio Investment
Data not available.

Economic & Commercial Officer
U.S. Embassy, P.O. Box 202, Postal Code 115, MSQ, Muscat, Sultanate of Oman
+968-2464-3623, muscatcommercial@state.gov

Policies TowardsForeign Direct Investment

In pursuit of its National Vision 2030, the government of Qatar has enacted reforms to incentivize foreign investment in the economy.As Qatar finalizes major infrastructure developments in preparation for hosting the 2022 FIFA World Cup, the government has allocated USD3.2billion for new, non-oil sector projects in its2020budget.The government also plans to increase LNG production by64percent by2027.Significant investment in the upstream and downstream sectors is expected.In February 2019, national oil company Qatar Petroleum announced a localization initiative,Tawteen, which will provide incentives to local and foreign investors willing to establish domestic manufacturing facilities foroil and gas sector inputs.Moreover, in July 2019, theInvestmentPromotion Agency was established to further attract inward foreign direct investment to Qatar.These economic spendingand promotionplans create significant opportunities for foreign investors.

In 2019, the government enacted a new foreign investment law (Law 1/2019) to ease restrictions on foreign investment. The law,onceexecutiveregulationsare issued, willpermitfull foreign ownership of businesses in most sectors with full repatriation of profits, protection from expropriation, and several other benefits. Excepted sectors include banking, insurance, andcommercial agencies, where foreign capital investment remains limited at 49 percent, barring special dispensation from the Cabinet.The government is currently in the process of publishing regulations for the implementation of the new law.Until its issuance, theold lawrequiring 51% Qatari partnershipstill applies (Law 13/2000).Qatar’s primary foreign investment promotion and evaluation body is the Invest in Qatar Center within the Ministry of Commerce and Industry.Qatar is also home to the Qatar Financial Centre, Qatar Science and Technology Park,Manateq(Qatar’s Economic Zones Company),and the Qatar Free ZonesAuthority, all of which offer full foreign ownership and repatriation of profits, tax incentives, and investment funds for small- and medium-sized enterprises.

When competing for government contracts, preferential treatment is given to suppliers who use local content in their bids. To further boost local production amid an economic and political rift with neighboring Gulf countries, the government announced in October 2017 that it will favor bids that use Qatari products that meet necessary specifications andadhere totender rules.Participation in tenders with a value of QAR 5 million or less (USD 1.37 million) islimitedto local contractors, suppliers, and merchants registered by the Qatar Chamber of Commerce and Industry. Higher-value tenders sometimes do not require any local commercial registration to participate, but in practice certain exceptions exist.

Qatar maintains ongoing dialogue with the United States through both official and private sector tracks, including through the annual U.S.-Qatar Strategic Dialogue and official trade missions undertaken in cooperation with both nations’ chambers of commerce. Qatari officials have repeatedly emphasized their desire to increase both American investments in Qatar and Qatari investments in the United States.

Limits on Foreign Control and Right to Private Ownership and Establishment

The government has recently reformed its foreign investment legal framework. As noted above, full foreign ownership is now permitted in all sectors with the exception of banking, insurance and commercial agencies.Law 1/2019 on Regulating the Investment of Non-Qatari Capital in Economic Activity (replacing Law 13/2000)stipulates that foreigners can invest in Qatar either through partnership with a Qatari investor owning 51 percent or more of the enterprise, or by applying to the Ministry of Commerce and Industry for up to 100 percent foreign ownership.The Invest in Qatar Center within the Ministry of Commerce and Industry is the entity responsible for vetting full foreign ownership applications.The law includes provisions on the protection of foreign investment from expropriation, the exemption of some foreign investment projects from income tax and customs duties, and the right to transfer profits and ownership without delay.

Another recent foreign investment reform is Law16/2018 on Regulating Non-Qatari Ownership and Use of Properties, which allows foreign individuals, companies, and real estate developers freehold ownership of real estate in 10 designated zones and‎usufructuary rights up to 99 years in 16 other zones. Foreigners may also own villas within residential complexes, as well as retail outlets in certain commercial complexes. Foreign real estate investors and owners will be granted residency in Qatar for as long as they own their property. The Committee on Non-Qatari Ownership and Use of Real Estate, formed in December 2018 under the Ministry of Justice, is the regulator of non-Qatari real estate ownership and use.

There are also other FDI incentives in the country provided by the Qatar Financial Centre, the Qatar Free Zones, and the Qatar Science and Technology Park. A draft Public-Private Partnership law to facilitate direct foreign investment in national infrastructure development (currently focused on schools, hospitals, and drainage networks) was approved by the CabinetinApril, 2019and ispending the Amir’s final review.

U.S. investors and companies are not any more disadvantaged by ownership or control mechanisms, sector restrictions, or investment screening mechanisms relative to other foreign investors.

Other Investment Policy Reviews

N/A

BusinessFacilitation

Recent reforms have further streamlined the commercial registration process.Local and foreign investors may apply for a commercial license through the Ministry of Commerce and Industry’s(MOCI)physical “one-stopshop” or online through the Invest in Qatar Center’s portal.Per Law 1/2019, upon submission of a complete application, the Ministry will issue its decision within 15 days.Rejected applicationscan be resubmitted or appealed.In January 2020, MOCI announcedit wasstudying the possibility ofreducing the fees required to register companies, in addition to lowering tariffs and port fees to provide more incentives to the private sector.For more information on the application and required documentation, visit:https://invest.gov.qa

The World Bank’s2020Doing Business Report estimates that registering a small-size limited liability company in Qatar takeseightto ninedays.For detailed information on business registration procedures, as evaluated by the World Bank, visit:http://www.doingbusiness.org/data/exploreeconomies/qatar/

For more information onbusiness registrationin Qatar, visit:

• Ministry of Commerce and Industry’s Invest in Qatar Center:https://invest.gov.qa
• Qatar Financial Centre:http://www.qfc.qa/
• Qatar Free Zones Authority:https://fza.gov.qa/
• Qatar Science and Technology Park:https://qstp.org.qa/
• Qatar PetroleumTawteenProgram:https://www.tawteen.com.qa/
• Manateq:https://www.manateq.qa/

Outward Investment

Qatar does not restrict domestic investors from investing abroad. According to the latest foreign investment survey from the Planning and Statistics Authority, Qatar’s outward foreign investment stock reached USD109.9billion in thesecondquarter of2019. In2018, sectors that accounted for most of Qatar’s outward FDI were finance and insurance (40 percent of total), transportation, storage, information and communication (33 percent), and mining and quarrying (18 percent). As of2018, Qatari investment firms held investments in about 80 countries; the top destinations were the European Union (34 percent of total), the Gulf Cooperation Council (GCC, 24 percent), and other Arab countries (14 percent).

Qatar has59bilateral investment treaties (BITs), according to the United Nations Conference on Trade and Development (UNCTAD). Twenty-fiveBITs are in force, namely withArmenia,Belarus, Belgium-LuxembourgEconomic Union, Bosnia and Herzegovina, China, Costa Rica, Cyprus, Egypt, Finland, France, Gambia, Germany,Indonesia,Iran, Italy, Jordan,Montenegro, Morocco, Portugal, Romania, Russia,Singapore, South Korea,Switzerland, and Turkey. The most recent BIT was signed with Rwanda in November 2018but has not yet come into force. A full list of current BITs with the State of Qatar can be found at:http://investmentpolicyhub.unctad.org/IIA/CountryBits/171

While Qatar has not entered into a bilateral investment or trade treaty with the United States, the two nations established a Trade and Investment Framework Agreement (TIFA) in 2004.Additionally, as part of the GCC, Qatar has signed 12 treaties with investment provisions (TIPs), including one between the GCC and the United States in 2012, but this treaty has not yet entered into force.

Qatar does not have a double taxation treaty with the United States. In January 2015, Qatar became the first GCC country to sign a Foreign Account Tax Compliance Act (FATCA) intergovernmental agreement with the United States. In total, Qatar has over80agreements for the Avoidance of Double Taxation, including, most recently, with Ghana (November 2018) and Paraguay (March 2018).

Qatar has recentlyadvancedits taxation regime.InJanuary 2019, the government established theGeneral Tax Authorityas the central tax collection and compliance function of the government.In the samemonth, the government implementedtheGCC 2016 Excise TaxFramework Agreement, imposingconsumption-based excise taxeson select goods deemed harmful to human health,includingtobacco (100% excise tax), sweetened carbonated drinks (50%), energy drinks (100%), as well as special-category goods such as alcoholic drinks (100%), and pork (100%).The decision was promulgated in Law No.25 of 2018 and it applies to both locally produced and imported goods.As aGCC Member State,Qatarhasagreed to introduce a commonvalue-added tax (VAT) of five percent.In 2017, Qatar approved a draft law on theproposedVAT, but has not committed to an implementation timeline.To date,no VAT exists in Qatar.

Transparency of the Regulatory System

The World Trade Organization recognizes Qatar’s legal framework as conducive to private investment and entrepreneurship and enabling of the development of an independent judiciary system. Qatar has taken measures to protect competition and ensure a free and efficient economy. In addition to the National Competition Protection and Anti-Monopoly Committee, regulatory authorities exist for most sectors in the economy and are mandated with monitoring economic activity and ensuring fair practices.

Nonetheless, according to the World Bank’s Global Indicators of Regulatory Governance, Qatar lacks a transparent rulemaking system, as government ministries and regulatory agencies do not share regulatory plans or publish draft laws for public consideration.An official public consultation process does not exist in Qatar.The 45-member Shura Council (whichisstatutorilyobligated to have30 publicly-elected officials, butisin practicecomprised solely of direct appointees by the Amir) must reach consensus to pass draft legislation, which is then returned to the Cabinet for further review and to the Amir for final approval.Laws and regulations are developed by relevant ministries and entities.The text of all legislation is published online and in local newspapers upon approval by the Amir.All Qatari laws are issued in Arabic and eventually translated into English.Qatar-based legal firms provide translations of Qatari legislation to their clients.Each approved law explicitly mandates one or more government entities with the responsibility to implement and enforce legislation.These entities are clearly defined in the text of each law.In some cases, the law also sets up regulatory and oversight committees made of representatives of concerned government entities to safeguard enforcement.Qatar’s official legal portal ishttp://www.almeezan.qa.

Qatar’s primary commercial regulator is the Ministry of Commerce and Industry. Commercial Companies’ Law 11/2015requiresthatpublicly tradedcompanies submit financial statements to the Ministryin compliance with the International Financial Reporting Standards (IFRS) and the International Accounting Standards (IAS). Publiclylisted companies must also publish financial statements at least 15 days beforeannualgeneralmeetings in two local newspapers (in Arabic and English) and on their websites. All companies are required to keep accounting records, prepared according to standards promulgated by the IAS Board.

The Qatar Central Bank (QCB) is the main financial regulator that oversees all financial institutions in Qatar, per Law 13/2012. To promote financial stability and enhance regulatorycoordination, the law established the Financial Stability and Risk Control Committee, which is headed by the QCB Governor. According to the Law 7/2005, the Qatar Financial Centre (QFC) Regulatory Authority is the independent regulator of the QFC firms and individuals conducting financial services in or from the QFC, but the QCB also oversees financial markets housed within QFC.QFC regulations are available athttp://www.qfcra.com/en-us/legislation/.

The government of Qatar is transparent about its public finances and debt obligations. QCB publishes quarterly banking data, including on government external debt, government bonds, treasury bills, and sukuk (Islamic bonds).

International Regulatory Considerations

Qatar is part of the GCC, apolitical andeconomic regional union, notwithstanding an ongoing diplomatic rift with three GCC member states, Bahrain, Saudi Arabia, and the UAE since June2017.Laws based on GCC regulations must be approved through Qatar’s domestic legislative process and are reviewed by the Qatari Cabinet and the Shura Council prior toimplementation.Qatar has been a member of theWorld Trade Organization (WTO)since 1996 andusuallynotifiesitsdraft technical regulationsto theWTO Committee on Technical Barriers to Trade (TBT).

Legal System and Judicial Independence

Qatar’s legal system is based on a combination of civil and Sharia Islamic law. The Constitution takes precedence over all laws, followed by legislation and decrees, and finally ministerial resolutions. All judges are appointed by the Supreme Judicial Council, under Law 10/2003. The Supreme Judicial Council oversees Qatari courts and functions independently from the executive branch of the government, per the Constitution.

Qatari courts adjudicate civil and commercial disputes in accordance with civil and Sharia laws.International agreements have equal status with Qatari laws; the Constitution ensures that international pacts, treaties,and agreementsto which Qatar is a partyare respected and taken into account.Qatar does not currently have a specialized commercial court, but in June 2019 , the Cabinet approvedadecision to set upa court forinvestment and trade disputes.Pendingthe establishment of the new court,domesticcommercial disputescontinueto besettled in civil courts.Contract enforcement isgovernedby the Civil Code Law 22/2004.Decisions made in civil courts can be appealed before the Court of Appeals,or later theCourt of Cassation.

Companies registered with the Ministry of Commerce and Industry are subject to Qatari courts and laws—primarily the Commercial Companies’ Law 11/2015—while companies set upthrough QFC are regulated by commercial laws based on English Common Law and the courts of the QFC Regulatory Authority, per Law 7/2005. The QFC legal regime is separate from the Qatari legal system—with the exception of criminal law—andis only applicable to companies licensed by the QFC. Similarly, companies registered within the Qatar Free ZonesAuthorityhave specialized regulations.

Laws and Regulations on Foreign Direct Investment

Overthe pastfewyears, the Amir enacted Law 1/2019 on Regulating the Investment of Non-Qatari Capital in Economic Activity and Law 16/2018 on Regulating Non-Qatari Ownership and Use of Properties. These laws are aimed at encouraging greater foreign investment in the economy by authorizing, incentivizing and protecting foreign ownership.

The Ministry of Commerce and Industry’s Invest in Qatar Center is the main investment promotion body. It has a physical “one-stop-shop” and an online portal. Preference is given to investments that add value to the local economy and align with the country’s national development plans. For more information on investment opportunities, commercial registration application and required documentation, visit:https://invest.gov.qa

Separate laws and regulations governforeign direct investment at the Qatar Financial Centre (http://www.qfc.qa/), the Qatar Free ZonesAuthority(https://fza.gov.qa/),the Qatar Science and Technology Park (https://qstp.org.qa/), andManateq(https://www.manateq.qa/).

Competition and Anti-Trust Laws

Certain sectors are not open for domestic or foreign competition, such as public transportation and fuel distribution and marketing. Instead, semi-public companies have complete or predominant control of these sectors. Law 19/2006 for the Protection of Competition and Prevention of Monopolistic Practice established the Competition Protection and Anti-Monopoly Committee in charge of receiving complaints about anti-competition violations. The law, however, exempts state institutions and government-owned companies.

International law firms with 15 years of continuous experience in their countries of origin are allowed to set up operations in Qatar, but can only become licensed if Qatari authorities deem their fields of specialization useful to Qatar (the Cabinet may grant exemptions). Cabinet Decision Number 57/2010 states that the Doha office of an international law firm is allowed to practice in Qatar only if its main office in the country of origin remains open for business.

Expropriation and Compensation

Under current legislation (Law 1/2019 and Law 16/2018), the government protects foreign investment and property from direct or indirect expropriation, unless for public benefit, in a non-discriminatory manner, and after providing adequate compensation. The same procedures are applied to expropriated property of Qatari citizens. Law 13/1988 covers the rules of expropriation for public benefit.

In 2019, therewas oneexpropriation-related Cabinet decision. Expropriation is unlikely to occur in the investment zones in which foreigners may purchase or obtain rights to property, although the law does not restrict the power to expropriate in these areas.

Dispute Settlement

ICSID Convention and New York Convention

Qatar has been party to the 1958 New York Convention since 2011 and a member of the International Center for the Settlement of Investment Disputes (ICSID) since 2002. Qatar enforces foreign arbitral decisions concluded in states that are party to the New York Convention.

Investor-State Dispute Settlement

If investment disputes occur, Qatar accepts binding international arbitration.Nevertheless, Qatari courts will not enforce judgments or awards from other courts in disputes emanating from investment agreements made under the jurisdiction of other nations.

International Commercial Arbitration and Foreign Courts

The Qatar Financial Centre (QFC) features an Alternative Dispute Resolution (ADR) center.Although primarily concerned with hearing commercial matters arising from within the QFC itself, the QFChasexpandedthe court’s jurisdiction to enable it to accept other disputes at its discretion. The Qatar International Court and Dispute Resolution Center adjudicates disputes brought by firms associated with the QFC in accordance withEnglishcommon law.

Qatar’s arbitration law (Law 2/2017) based on the United Nations Commission on International Trade Law (UNCITRAL) gives Qatar’s International Court and Dispute Resolution Centre the jurisdiction to oversee arbitration cases in Qatar in line with recent local and international developments. The purpose of this law is to stimulate and strengthen Qatar’s investment and business environment.

There is no set duration for dispute resolution and the time to obtain a resolution depends on the case. The Qatar International Court and Dispute Resolution Centre publishes past judgments on its website (https://www.qicdrc.com.qa/the-courts/judgments).

In order to protect their interests, U.S. firms are advised to consult with a Qatari or foreign-based law firm when executing contracts with local parties.

Bankruptcy Regulations

Two concurrent bankruptcy regimes exist in Qatar. The first is the local regime, the provisions of which are set out in Commercial Law 27/2006 (Articles 606-846). The bankruptcy of a Qatari citizen or a Qatari-owned company is rarelyannounced,and the government sometimes plays the role of guarantor to prop up domestic businesses and safeguard creditors’ rights.The law aims to protectcreditors from a bankrupted debtor whose assets are not sufficient to meet the amount of the debts.Bankruptcyis punishable byimprisonment,but the prison sentence depends on violations of other penal codes, such as concealmentor destruction ofcompany records,embezzlement, or knowinglycontributing to insolvency.

The Qatar Central Bank (QCB) established the Qatar Credit Bureau in 2010 to promote credit growth in Qatar. The Credit Bureau provides QCB and the banking sector with a centralized credit database to inform economic and financial policies and support the implementation of risk management techniques as outlined in the Basel II Accord.

The second bankruptcy regime is found in the Qatar Financial Centre (QFC) Insolvency Regulations of 2005 and applies to corporate bodies and branches registered within the QFC.There are firms that offer full dissolution bankruptcy services to QFC-registered companies.

The World Bank’s Doing Business Report for 2020 gave Qatar’s resolving insolvency indicatorascore of38 out 100 because of thehigh cost associatedwith the processand2.8 years averagerequiredtocomplete foreclosure proceedings.

Investment Incentives

Qatar does not impose a personal income tax and the new foreign investment law (Law 1/2019) offers a variety of other incentives to foreign investors, which may include the following:

• Exemption from 10 percent corporate tax for a period of up to 10 years.
• Allocation of land by way of a renewable rent for a period of up to 50 years.
• Exemption from customs duties on the imports of necessary machinery and equipment.
• Exemption from customs duties on imports of raw materials or half-manufactured goods necessary for production and not available in the local market, for industrial projects.

Some industrial projects can be established in designated industrial zones governed by the Qatar Free Zones Authority, and are offered the following incentives:

• Exemption from 10 percent corporate tax for a period of up to 20 years.
• Zero custom duties on imports.
• Potential access to a USD 3 billion government-backed fund.

The Ministry of Energy Affairs determines the amount of foreign equity and the extent ofincentives for industrial projects, as stipulated by Law 8/2018.In February 2020,andin line with the government’s efforts to improve the ease of doing businessand enhance the investment environment forowners of small and medium-sizeenterprises(SMEs),the Ministry of Commerce and Industryin co-operation with Qatar Development Bank,launched the ‘Land and Industrial Loan’ initiative, offering loans andindustrialland to SMEs.

Foreign Trade Zones/Free Ports/Trade Facilitation

Qatar has several free zones and business facilitation options:

Qatar Financial Centre (QFC) is an onshore business platform that allows international financial institutions and professional service companies to establish offices in Qatar with 100 percent foreign ownership and full repatriation of profits. Locallysourced profits are subject to a 10 percent corporate tax. The QFC has its own independent regulatory regime based on English common law. The QFC Regulatory Authority acts as the regulator for financial firms operating in the QFC. The QFC Regulatory Tribunal and Qatar International Court hear and adjudicate cases, though these bodies’ judgments are only of value if enforced by Qatari courts against persons and assets in Qatar. Goldman Sachs International, Mastercard Gulf, Uber, and Oracle are among the companies registered with QFC.

The Qatar Science and Technology Park (QSTP) is a hub designed to undertake research and development and facilitate the transfer of expertise and technology. The hub offers grants and incubators to foreign and local innovators.Licensed foreign companies are permitted 100 percent ownership and full capital and income repatriation benefits. Companies operating at the QSTP can import goods and services duty free and export goods produced in the park are tax-free. Firms at the park are also exempt from all taxes, including the 10 percent income tax. The property of these businesses cannot be seized under any circ*mstance, but capital and other cash may be seized on the orders of a local court. Microsoft, ExxonMobil, GE,Cisco,and ConocoPhillipsare among QSTP member companies.

In 2018, the government created an independent Free Trade Zone Authority to oversee free zones in Qatar and offer opportunities and benefits to investors. The Authority currently administers two such free trade zones: RasBufontasnear the country’s international airport and UmAlhouladjacent to the country’s largest commercial seaport. Additionally, in 2011, Qatar establishedManateq, a state-owned company affiliated with the Ministry of Commerce and Industry, to manage and develop economic zones.Manateqhas oversight of one special economic zone (AlKaraana), four logisticsparks (​JeryAlSamur, Al Wakra,BirkatAlAwamerand Aba Saleel​), four warehousing parks ​(BuFesseela, BuSulba, UmmShaharaine1,and UmmShaharaine2) and one industrial zone (Mesaieed).

In the last two years, the Ministry of Commerce and Industry has also aimed to introduce a public-private partnership (PPP) law to further attract foreign investors. The draft law is currentlyunder judicial review.

Performanceand Data LocalizationRequirements

There are no laws that obligate the private sector to hire Qatari nationals, but the public sector and institutions working closely with the government on projects and joint ventures are requiredto hire Qatari nationals—these notably include energy companies operating in Qatar.Workforcelocalization policy (known as “Qatarization”) in the public sector is a main focus of the country’s National Vision 2030 and foreign investors wishing to operate fullyowned companies will be required to submit a “Qatarization” plan. Employers are allocated visa slots for the hiring of specific nationalities and such positions are non-transferable without approval of the Ministry of Administrative Development, Labor, and Social Affairs.

While Qatar does not follow a forced localization policy, when competing for government contracts, preferential treatment is given to suppliers that use local content in bids. Goods produced with Qatari content are also given a 10 percent price preference. As a rule, participation in government tenders with a value of QAR 5,000,000 or less (equivalent toapproximatelyUSD 1.37million)arelimitedto local contractors, suppliers, and merchants registered by the Qatar Chamber of Commerce,whiletenders with a value of more than this amount do not require any local commercial registration to participate, but in practice certain exceptions exist.

In February 2019, national oil company Qatar Petroleum announced a localization initiative,Tawteen, which, among other things, will require all suppliers for Qatar Petroleum and its subsidiaries, as well as bidders for select contracts, to be assessed by a third-party auditor to determine their In-Country Value (ICV) score. Qatar Petroleum and its subsidiary companies will assess the ICV score in addition to technical and commercial criteria when evaluating bidders. The formula for calculating a company’s ICV score may be found here:https://www.tawteen.com.qa/In-Country-Value-Policy/ICV-Formula-Calculation

Performance requirements for foreign investment in Qatar do not exist. Disclosure of financial and employment data is required, but proprietary information is not.

There are no known formalized requirements for foreign IT providers to turn over source code or provide access to surveillance.The information and communications technology(ICT) sectoris regulated by Qatar’s Communications Regulatory Authority, established as an independent body byAmiriDecree 42/2014, under the Ministry of Transport and Communications. Qatar is the firstGulf nation to enact a Data Protection Law 13/2016, whichrequirescompanies to comply with restrictions relating to the collection, disclosure, and safekeeping of personal data. The regulator responsible for enforcing the Data Protection Law is the Ministry of Transport and Communications.

Real Property

A set of laws, ministerial decrees, and resolutions make up the country’s jurisprudence on property rights and ownership.Law 16/2018 designates 10 zones in which foreign investors, companies, and real estate developers are permitted full property ownership.The law also allows foreign investors a right of real estate of up to 99 years in 16 other zones.Additionally, foreigners mayown villas within residential complexes, as well as retail outlets in certain commercial complexes.In December 2018, a committee was formed under the Ministry of Justice to regulate foreign real estate ownership and use.According to subsequent regulations announced in March 2019, non-Qatari real estate owners will be granted residency in Qatar for as long as they own their property.

Law 6/2014 regulates real estate development and promulgates that non-Qatari companies should have at least 10 years of experience and headquarters in Qatar to carry out real estate development activities within selected locations.

Property leasehold rights are enforced. Qatar’s Rent Law 4/2008 protects the lessee and regulates the lessor. There are a number of enforceable rights granted to the lessee including protection from rent hikes during the lease period and enforcement of the terms of the lease contract should the lessor transfer ownership. The lessor is also protected from tenants who violate their lease agreements. Qatar’s Leasing Dispute Settlement Committee enforces these regulations. The committee hears and issues binding decisions and all lessors are required by law to register their lease agreements with this committee.The Ministry of Municipality and Environment oversees the preparation of all records related to the selling, leasing, waiver, and bequeathing of real estate. A reliable electronic database exists to check for encumbrances, including liens, mortgages, and restrictions. In addition, all titles and deed records are kept in digital format.

Qatar was rankedfirstglobally for ease of registering property by the World Bank’s2020Doing Business Report:http://www.doingbusiness.org/data/exploreeconomies/qatar#registering-property

Intellectual Property Rights

Qatar’s intellectual property (IP) legal regime, albeit still developing in capacity, is robust and wide-ranging in terms of the number of laws protecting different types of IP rights. Qatar has signed many international IP treaties, which are implemented through Qatari laws and regulations. Qatar’s IP legislation includes the Trademark and Copyright Law (enacted in 2002), the Protection of Trade Secrets and Protection of Layout Design law (2005), and the Patent Law (2006). These laws grant foreign applicants the same rights as Qataris, provided they are nationals of a state that grants Qatar reciprocal treatment.

Intellectual property owners can apply for IP rights at the Ministry of Commerce and Industry, which is mandated (by Law 20/2014) to enforce IP laws and regulations. Within the ministry, an IP Protection Department has been set up with offices focusing on trademarks, copyrights, neighboring rights, patents, industrial designs, and innovations. The following are the periods of validity for the different types of registered iIP:

• Patents: Valid for 20 years from filing.
  • With regard to pharmaceutical products, the Ministry of Public Health requires registration of all products imported into the country and will not register unauthorized copies of products patented in other countries. Qatar alsorecognizes GCC patents on pharmaceutical products. To obtain patent protection in the GCC, pharmaceutical companies must apply for a GCC patent at the GCC Patent Office. Once granted, protection should extend to all the GCC countries.

• Copyrights:  Protected for 50 years after the author’s death.
  • Per Qatari law, failure to register at the Ministry of Commerce and Industry will not affect protection of the copyright. While the law does not protect unpublished works and does not criminalize end-user piracy, Qatar is party to the Berne and Paris Conventions and abides by their mandates concerning unpublished works. TheIP Protection Departmentworks with law enforcement authorities to prosecute resellers of unlicensed video and software.

• Trademarks: Valid for 10 years but can be renewed indefinitely, while trademarks unused for five consecutive years are subject to cancellation.
  • As part of the GCC Customs Union, inaugurated in 2015, the GCC approved a common trademark law and Qatar is taking steps to enact it.

The law on Intellectual Property Border Protection (Law 17/2011) forbids the import of any products that infringeonany intellectual property rights protected in Qatar and obligates the General Authority of Customs to take measures to prevent the entrance of infringing products.The law also permits IP rights holders to block the release of imported products that infringe on their rights, given sufficient evidence.In2017, the General Authority of Customs launched an electronic system to detect counterfeit goods coming into the country.The system is accredited by the World Customs Organization and has been introduced to limitimportationof counterfeit goods.The General Authority of Customs, the Consumer Protection and IP Protection Departments at the Ministry of Commerce and Industry, and the Ministry of Interior conduct surveys, search shops, and seize and destroy counterfeit products.

In2017, the Cabinet approved a draft law on the protection of industrial designs in an attempt to modernize existing Law 9/2002 on trademarks, trade indications, trade names, geographical indications, and industrial designs and templates.The new law has not come into force yet.

The existing Penal Codeimposes hefty fines onindividualsdealing in counterfeit products and imprisonment for offenders convicted of counterfeiting, imitating, fraudulently affixing, or selling products, or offering services of a registered trademark, or other IP violations. However, the level of awareness about intellectual property rights and enforcementis low among the public. The IP Protection Department in the Ministry of Commerce and Industry has taken the lead in promoting awareness through workshops and seminars.

The United States Trade Representative Office (USTR) does not consider Qatar a market that engages in, turns a blind eye to, or benefits from piracy and counterfeit products, nor is Qatar listed in USTR’s Special 301 Report.

Qatar is a member of the World Trade Organization and the World Intellectual Property Organization (WIPO), and is a signatory of several WIPO treaties.For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles athttp://www.wipo.int/wipolex/en/profile.jsp?code=QA.

Resources for Rights Holders

U.S. Patent & Trademark Office
Regional IP Attaché
Peter C.Mehravari, Intellectual Property Attaché for the Middle East & North Africa
U.S. Department of Commerce Foreign Commercial Service, U.S. Patent & Trademark Office
U.S. Embassy Kuwait City, Kuwait
+965 2259 1455
Peter.mehravari@trade.gov
Web:https://www.uspto.gov/learning-and-resources/ip-policy/intellectual-property-rights-ipr-attach-program/intellectual

United States Trade Representative
IPR Director for the GCC
JacobEwerdt
+1-202-395-3866
Jacob.p.ewerdt@ustr.eop.gov
Web: http://www.ustr.gov

A list of local attorneys that may be able to provide assistance in pursuing IP protections and enforcement claims in Qatar can be foundonthe U.S. Embassy Doha website:https://qa.usembassy.gov/u-s-citizen-services/local-resources-of-u-s-citizens/attorneys/

Capital Markets and Portfolio Investment

Foreign portfolio investment has been permitted since 2005. There is no restriction on the flow of capital in Qatar. The Qatar Central Bank (QCB) adheres to conservative policies aimed at maintaining steady economic growth and a stable banking sector. Loans are allocated on market terms, and foreign companies are essentially treated the same as local companies.

Currently, foreign ownership is limited to 49 percent of Qatari companies listed on the Qatar Stock Exchange. Foreign capital investment up to 100 percent is permitted in most sectors upon approval of an application submitted to the Invest in Qatar Center under the Ministry of Commerce and Industry.Foreign portfolio investment in national oil and gas companies or companies with the right of exploration of national resources cannot exceed 49 percent.

Almost all import transactions are controlled by standard letters of credit processed by local banks and their correspondent banks in the exporting countries.Credit facilities are provided to local and foreign investors within the framework of standard international banking practices.Foreign investors are usually required to have a guarantee from their local sponsor or equity partner.In accordance with QCB guidelines, banks operating in Qatar give priority to Qataris and to public development projects in their financing operations.Additionally, single customers may not be extended credit facilities by a bank exceeding 20 percent of the bank’s capital and reserves.QCB does not allow cross-sharing arrangements among banks.QCB requires banks tomaintain a maximum credit ratio of 90 percent.QCB respects IMF Article VIII and does not restrict payments or transfers for international transactions.

Qatar has become an important banking and financial services center in the Gulf region. Qatar’s monetary freedom score is 72.6 out of 100 (“mostly-free”) and it ranks 28th out of 180 countries in the 2019 Index ofEconomic Freedom, according to the Heritage Foundation. Qatar is ranked third in the Middle East/North Africa region in terms of economic freedom and its overall score is above the world average.

Money and Banking System

There are17licensedbanksin Qatar, seven of which are foreign institutions. Qatar also has 20 exchange houses,sixinvestment and finance companies, 16 insurance companies, and 17 investment funds.Other foreignbanksand financial institutions operateunderthe Qatar Financial Center’s platform, butthey are not licensed by the Qatar Central Bank(QCB)andare regulated by the Qatar Financial Center Regulatory Authority. The country is home to the Qatar National Bank, the largest financial institution in the Middle East and Africa, with total assets exceeding USD 229.1 billion.

TheQCB, as the financial regulator, continues to introduce incentives for local banks to ensure a strong financial sector that is resilient during economic volatility.TheQCB manages liquidity bymandatinga reserve ratio of 4.5 percent and utilizing treasury bonds, bills, and other macroprudential measures.Banks that do not abide by the required reserve ratio are penalized.QCB uses repurchase agreements, backed by government securities, to inject liquidity into the banks.According to QCB data, totaldomestic liquidityreachedUSD158.8billion inDecember of 2019.The IMF estimated that1.7percent of Qatar’s bank loans in2019were nonperforming.International ratings agencies have expressed confidence in the financial stability of the country’s banks, given liquidity levels and strong earnings.

Cryptocurrencytrading isillegal inQatar, per a 2018 Qatar Central Bank circular.In January 2020, the Qatar Financial Centre Regulatory Authority (QFCRA) announced thatfirms operating under the Qatar Finance Center are not permitted to provide or facilitate the provision or exchange of crypto assets and related services.

To open a bank account in Qatar, foreigners must present proof of residency.

Foreign Exchange and Remittances

Foreign Exchange

Due to minimal demand for the Qataririyaloutside Qatar and the national economy’s dependence on oil and gas revenues, which are priced in dollars, the government has pegged the riyal to the U.S. dollar. The official peg is QAR 1.00 per USD 0.27 or USD 1.00 per QAR 3.64, as set by the government in June 1980 and reaffirmed byAmiridecree 31/2001.

In implementingtheprovisionsofLaw No. 20/2019on Combating Money LaunderingandTerrorismFinancingandfollowing the issuance ofCabinet Resolution No. 41/2019,startingFebruary 27, 2020,travelers to or from Qatararerequired to complete a declaration formuponentry or departure, ifcarryingcash, precious metals, financialinstruments,orjewelry,valued atfifty thousand Qatari Riyalsor more($13,7000).

Remittance Policies

Qatar neither delays remittance of foreign investment returns nor restricts transfer of funds associated with an investment, such as return on dividends, return of capital, interest and principal payments on private foreign debt, lease payments, royalties, management fees, amounts generated from sale or liquidation, amounts garnered from settlements and disputes, and compensation from expropriation to financial institutions outside Qatar.

In accordance with Law20/2019onCombatingMoney LaunderingandTerrorismFinancing, the Qatar Central Bank requires financial institutions to apply due diligence prior to establishing business relationships, carrying out financial transactions,andperforming wire transfers.Executive regulationsfor this lawwerepublishedin December 2019and they promulgate thatoriginator information should be secured when a wire transfer exceeds QAR3,500(USD962).Similarly, due diligence is required when a customer is completing occasional transactions in a single operation or several linked operations of an amount exceeding QAR50,000 (USD13,736).

Qatar is a member of the Middle East and North Africa Financial Action Task Force (MENAFATF), a Financial Action Task Force-style regional body. Qatar will undergo its next MENAFATF mutual evaluation in 2021. In July 2017, Qatar signed a counterterrorism MOU with the United States, which includes information sharing, training, enhanced cooperation, and other deliverables related tocombating money laundering and terrorism financing.

Sovereign Wealth Funds

The Qatar Investment Authority (QIA), Qatar’s sovereign wealth fund, was established byAmiriDecree 22/2005. QIA is overseen by the Supreme Council for Economic Affairs and Investment, chaired by the Amir, and does not disclose its assets (independent analysts estimate QIA’s holdings at around USD 330 billion). QIA pursues direct investments and favors luxury brands, prime realestate,infrastructure development,andbanks. Various QIA subsidiaries invest in other sectors, as well.

In September 2015, QIA opened an office in New York City to facilitate over USD 45 billion allocated for investments in the United States over the course of five years. QIA’s real estate subsidiary, Qatari Diar, has operated an office in Washington, D.C. since 2014.

QIA was one of the early supporters of the Santiago Principles and among the few members who drafted the initial and final versions of the principles, and continues to be a proactive supporter of its implementation. QIA was also a founding member of the IMF-hosted International Working Group of Sovereign Wealth Funds. QIA fully supported the establishment of the International Forum of Sovereign Wealth Funds (IFSWF) and helped create the Forum’s constitution.

The State Audit Bureau oversees state-owned enterprises (SOEs), several of which operate as monopolies or with exclusive rights in most economic sectors.Despite the dominant role of SOEs in Qatar’s economy, the government has affirmed support for the local private sector and encourages small and medium-sized enterprise development as part of its National Vision 2030.The Qatari private sector is favored in bids for local contracts and generally receives favorable terms for financing at local banks.The following are Qatar’s majorSOEs:

Energy and Power:

• Qatar Petroleum (QP), itssubsidiaries, and its partners operate all oil and gas activities in the country. QP is wholly owned by the government. Non-Qataris are permitted to invest in stock exchange listed subsidiaries, but shareholder ownership is limited to two percent and total non-Qatari ownership to 49 percent.
• QatarGeneral Electricity and Water Corporation (Kahramaa) oversees all water and electricity activities and is majority-owned by Qatari government entities.Governmentofficialssignaledintentions toprivatize segments of the water and electricity sectors. A first step in this direction occurred when the Ras Laffan Power Company, which is 55 percent owned by a U.S. company, was established in 2001.As part of its National Vision 2030to diversify the economy, Qatar will boost investments in renewable energy, led byKahramaa, witha view to generate10 GW of solar capacity annually,or theequivalentof20 percent of Qatar’s electricity needs.

Aerospace:

• Qatar Airways is the country’snational carrier,wholly owned by the state.

Services:

• Qatar General Postal Corporation is the state-owned postal company.Several other delivery companies are allowed to compete in the courier market: Aramex, DHL Express, and FedEx Express.

Information and Communication:

• Ooredoo Group is a telecommunications company founded in 2013. It is the dominant player in the Qatari telecommunications market and is 68 percent owned by Qatari government entities. Ooredoo (previously known as Q-Tel) dominates both the mobile and fixed line telecommunications markets in Qatar.
• Vodafone Qatar, the only other telecommunications operator in Qatar at present, is owned by the semi-governmental Qatar Foundation, Qatari government entities, and Qatar-based investors. In 2017, Vodafone Qatar announced that it achieved 21percentmarket share in Qatar.

QatariSOEs may adhere to their own corporate governance codes and are not required to follow the OECD Guidelines on Corporate Governance. Some SOEs publish online corporate governance reports to encourage transparency, but there is no general framework for corporate governance across all Qatari SOEs. When an SOE is involved in an investment dispute, the case is reviewed by the appropriate sector regulator.

Privatization Program

There is no ongoing official privatization program for major SOEs. QatarAirwaysexecutives state the government plans to take the company public within the next decade.

There is a general awareness in Qatar of responsible business conduct.In 2007, Qatar created the Corporate Social Responsibility (CSR) Network, a research and reporting entity that publishes annual reports highlighting best practices and honoring CSR leaders in the country.Many companies in Qatar publicize their CSRinitiatives.

Sustainability is the focus of the National Development Strategy 2018-2022, released in March 2018; it is also an important goal of the National Vision 2030.Law 30/2002 is the main legislation protecting the environment. It prohibits the use of polluting equipment, machineries, and vehicles, and restricts the dumping and treatment of liquid or solid wastes to certain designated areas. The law also limits emissions of harmful vapors, gases, and smokebythe energy sector. This applies to all companies working in exploration and production of crude oil and natural gas.

The Ministry of Commerce and Industry has a dedicated Consumer Protection and Combating Commercial Fraud Department which has intensified its efforts in recent years by increasing the monitoring of records and inspection of stores and factories that sell or manufacture counterfeit goods. The Ministry prosecutes violators when business misconduct is detected or reported and announces these violations publicly.The Government of Qatar maintains a reporting regime for suspicious transactions and requirements for consumer due diligence and record keeping.

As an economy dependent on extractive industries, Qatar participates in theExtractive Industries Transparency Initiative (EITI). Nonetheless, the Qatari government has not improved transparency regarding its management of the petroleum industry, as no regulatory body oversees resources extraction or revenue management. Moreover, Qatar has no freedom of information law.

With regard to labor and human rights, Qatari law prohibits all forms of forced or compulsory labor andreservestwopercentofjobsingovernmentagenciesandpublic institutionsfor personswithdisabilities. The lawalso prohibits employment of children under 16 years old.The Ministry of Administrative Development, Labor, and Social Affairs (MADLSA);theMinistryofInterior;andthe National Human Rights Committee (NHRC) conducttrainingsessionsformigrantlaborersto educate themontheirrightsinthecountry. International media and human rights organizations continue to allege numerous abuses against foreign workers, including forced or compulsory labor, withheld wages, unsafe working conditions, and poor living accommodations. In January 2018, the United States and Qatar signed a government-level memorandum of understanding to exchange expertise and foster capacity building in combating human trafficking. In March 2019, the Department of Labor and MADLSA signed an MOU on labor, which focuses on two pillars:labor inspections and protecting domestic workers’ rights in Qatar.

Some non-governmental organizations (NGOs) in Qatar focus on labor rights and often work in conjunction with the government. Researchers from international NGOs such as Amnesty International and Human Rights Watch continue to visit and report on the country with limited interference from authorities. International labor NGOs have been able to send researchers to Qatar under the sponsorship of academic institutions and quasi-governmental organizations such as the NHRC.

Corruption in Qatar does not generally affect businessalthough the power of personal connections plays a major role in business culture. Qatar is one of the least corrupt countries in the Middle East and North Africa, according to Transparency International’s2019Corruption Perceptions Index, and ranked30out of 180 nations globally with a score of 62 out of 100, with 100 indicating full transparency.

Qatari law imposes criminal penalties to combat corruption by public officials and the government practices these laws. In recent years, corruption and misuse of public money has been a focus of the executive office. Decree 6/2015 restructured the Administrative Control and Transparency Authority, granting it juridical responsibility, its own budget, and direct affiliation with the Amir’s office. The objectivesof theauthorityare to prevent corruption and ensure that ministries and public employees operate with transparency. It is also responsible for investigating alleged crimes against public property or finances perpetrated by public officials.Law 22/2015imposes hefty penalties for corrupt officials and Law 11/2016 grants the State Audit Bureau more financial authority and independence, allowing it to publish parts of its findings (provided that confidential information is removed),whichit was not previously empowered to do.

In 2007, Qatar ratified the UN Convention for Combating Corruption (throughAmiriDecree 17/2007) and established a National Committee for Integrity and Transparency, (throughAmiriDecree 84/2007). The permanent committee is headed by the Chairman of the State Audit Bureau. Qatar also opened the Anti-Corruption and Rule of Law Center in 2013 in Doha in partnership with the United Nations. The purpose of the center is to support, promote, and disseminate legal principles to fight against corruption.

Those convicted of embezzlement and damage to the public treasury are subject to terms of imprisonment of no less than five and up to ten years.The penalty is extended to a minimum term of seven and a maximum term of fifteen years if the perpetrator is a public official in charge of collecting taxes or exercising fiduciary responsibilities over public funds.Investigations into allegations of corruption are handled by the Qatar State Security Bureau and Public Prosecution.Final judgments are made by the Criminal Court.

Bribery is also a crime in Qatar and the law imposes penalties on public officials convicted of taking action in return for monetary or personal gain, or for other parties who take actions to influence or attempt to influence a public official through monetary or other means. The current Penal Code (Law 11/2004) governs corruption law and stipulates that individuals convicted of bribery maybe sentencedup to ten years imprisonment and a fine equal to the amount of the bribe but no less than USD 1,374.

The Procurement Law 24/2015 is designed to promote a fair, transparent, simple, and expeditious tendering process.It abolishes the Central Tendering Committee and establishes a Procurement Department within the Ministry of Financethathas oversight over the majority of government tenders.The new department has an online portalthatconsolidates all government tenders and provides relevant information to interested bidders, facilitating the process for foreign investors(https://monaqasat.mof.gov.qa).

Despite these efforts, some American businesses continue to cite lack of transparency in government procurement and customs as recurring issuesencounteredin the Qatari market.U.S. investors and Qatari nationalswho happen to beagents of U.S. firmsare subject to the provisions of the U.S. Foreign Corrupt Practices Act.

Qatar is not a party to the Organization for Economic Cooperation and Development (OECD) Convention on Combating Bribery of Foreign Public Officials.

Resources to Report Corruption

In 2015, the Public Prosecution’s Anti-Corruption Office launched a campaign encouraging the public to report corruption and bribery cases, establishing hotlines and a tip reporting inbox and vowing to protect the confidentiality of submitted information:

Public Prosecution
Anti-Corruption Office
Hotlines: +974-3353-1999 and +974-3343-1999
aco@pp.gov.qa

Qatar is a politically stable country with low crime rates. There are no political parties,labor unions, ororganized domestic political opposition.The U.S government rates Qatar as medium for terrorism, which includes threats from transnational groups.

In June 2017,Saudi Arabia,United Arab Emirates, Bahrain, and Egypt severed diplomatic and economic ties with Qatar. This geopolitical riftdidnot alterthe political and security environment for U.S. investors in Qatar.

U.S. citizens in Qatar are encouraged to stay in close contact with the State Department and the U.S. Embassy in Doha for up-to-date threat information. U.S. visitors to Qatar are invited to enroll in the State Department’s Smart Traveler Enrollment Program to receive further information regarding safety conditions in Qatar:https://step.state.gov/step/.

According to the World Bank’sMigration & Remittances Fact Book 2016, Qatar has the world’s highestmigrant workersto populationratio, with foreigners making up around 90 percent of the country’s population. Qatar’s labor force consists primarily of expatriate workers. In the private sector, foreigners make up nearly 95 percent of the labor force per statisticspublished byQatar’sPlanning and Statistics Authority. Qatar’s resident population is estimated at 2.8 million as of February 2020, doubling in the last decade. Qatari citizens are estimated to number approximately 300,000 – around 11percent of the total population. The largest group of foreign workers comes from the Indian sub-continent. Men make up around 75 percent of the population.

Unemployment rates in Qatar are among the lowest in the world, with 0.1 percent unemployment rate for men and 0.4 percent unemployment rate for women as of the third quarter of 2019.TheMinistryofAdministrativeDevelopment, Labor, and Social Affairs (MADLSA) regulatesrecruitment of expatriate labor.Article 18 of LaborLaw 14/2004, gives priority to hiring Qataris in the private sector, unless hiring non-Qataris is necessary.AmiriDecree 44 for 2008, mandatesthataround 80 private companieshave no less than 20% Qataris in their workforce.The public sector and institutions working closely with the government on projects and joint ventures arerequired to hire Qatari nationals, examples includeenergy companies operating in Qatar.

Labor Law 14/2004 largely governs employment in Qatar andprovides for terminatingemploymentwithoutrequiringthe terminating partytogivereasons.Thelaw requiresemployers to pay employeesduewages and other benefitsin full, provided that employees performedexpectedworkdutiesduring the notice period, which variesbasedonyears of employment.Companies registered with Qatar Financial Centre (QFC) are governed bytheEnglish common law, and labor issues are administered by QFC’s Regulation 10/2006. The rules that govern recruitment and immigration of QFC employees differ from those that govern other expatriate employees in the country.

Law 12/2004 ofPrivate Associations and Foundations and subsequent regulations grant Qatari citizens the right to form workers’ committees in private enterprises with more than 100 Qatari citizen workers. Qatari citizens employed in the private sector also have the right toparticipate inapprovedstrikes, but the restrictive conditions imposed by the law make the likelihood of an approved strike remote. There are no labor unions in the country. Non-citizens are not eligible to form worker committees orgo onstrike, though according to an agreementbetween the MADLSA and the International Labor Organization (ILO), joint worker committees including 50-50 representation of workers and employers exist in a small number of cases for all medium to large-sized companies.Individualsworking in the government sector, regardless of nationality, are prohibited from joining unions. Over three-quarters of Qatari citizens are employed by the government. Workers at labor camps occasionallygo onstrike over non-payment or delayed payment of wages,however,thispracticeis technically illegal.

Local courts handle disputes between workers and employers though the process is widely regarded as inefficient. In an effort to speed up the process of resolving labor disputes, the government established Labor Disputes Settlement Committees headed by a judge and representatives from the MADLSA. As of March 2018, there are three such committees, all of which operate outside of the traditional Supreme Judicial Committee structure and are required to address any complaints within three weeks, though anecdotally we hear that a resolution can still take much longer than the three weekwindow.

A new lawthat wouldincreasethe minimum wage to approximatelyUSD300per month is currentlybeingdebated bytheShura Council.At present, a recommended minimum wage of USD 195 per month exists, but is not enforced.In addition, many embassies via bilateral work agreementsset minimum wages for their citizens.To combat the problem of late and unpaid wages, the government issued Law 1/2015 amending certain provisions of Labor Law 14/2004 on wage protection and mandating electronic payment to all employees subject to the local labor law.The lawdoes notapply todomestic workers.The government requires all employers to open bank accounts for their employees and pay wages electronically through a system subject to audits by an inspection division at the MADLSA.Employers who fail to pay their workers face penalties of USD 550 – USD 1,650 per case and possible prison sentences.Those penalties are, however,rarelyimplemented.The system currentlyapplies toover 1.4 million workers.

In an effort to eliminate forced labor, the government issued reforms to the sponsorship system(Law 21/2015), whichenablesemployees to switch employers at the end of their contract,withoutrequiring employer’spermission.In September 2018, QatarissuedLaw 13/2018, whichallowsworkerscovered by the Labor Lawto leave the country withoutrequiringexit permits from their employers.A new law in 2020willextendthis mandate to domestic employees and government workers, whonowcomprisethe majority of the workforce.The Qatari Cabinetproposedin2020 a new law to facilitateswitchingemployersby abolishing theprevious requirement for ano-objection certificatefrom the previous employer.The law will notgointoeffectuntil the draft isapproved bythe Shura Council and theAmiriDiwan.The Labor Law prohibits thewithholdingofworkers’ passportsby employersandstiffenspenalties fortransgressors.

To protect workers from fraudulent employment contracts, the Ministry of Interior signed an agreement with a Singaporean company in November 2017 to establish Qatar Visa Centers (QVCs) with thegoal ofsimplifyingresidency procedures for expat workers from India, Nepal, Sri Lanka, Pakistan, Bangladesh, Indonesia, the Philippines, and Tunisia, which togethercomprise80 percent of Qatar’s workforce. Inpartnershipwith both MOI and MADLSA,contracted companiesestablished QVCs in these countries to facilitate biometric enrollment, medical records verification, andsigningwork contracts beforecontractedworkers enter Qatar. To date, QVCs have been established in Sri Lanka, Pakistan, Bangladesh, Kenya, Philippines, Tunisia, and India.

Qatar is a member of the ILO andmaintainsthat its labor law meets ILO minimum requirements. In November 2017, Qatar made commitments to address some ILO complaints by launching a comprehensive three-year ILO technical cooperation program.In 2018, the ILO opened a Dohaoffice.

In January 2018, the Qatari Minister of Foreign Affairs signed an MOU with the U.S. Department of State during the U.S.-Qatar Strategic Dialogue. The MOU laidout plans for cooperation in combating trafficking-in-persons,including strengthening the labor sector to reduce instances of forced labor. In March 2019, the MADLSA signed a new MOU with the US Department of Labor to enhance cooperation in the fields of labor inspection and protecting domestic workers rights.

U.S. International Development Finance Corporation (DFC)has not maintained a presence in Qatar since 1995. Qatar is a member of the World Bank’s Multilateral Investment Guarantee Agency (MIGA).

* Source for Host Country Data:Qatar’s Planning and Statistics Authority
https://www.psa.gov.qa/en/

* Source:2018 Data form Qatar’s Planning and Statistics Authorityhttps://www.psa.gov.qa/en/

Table 4: Sources of Portfolio Investment
Data not available.

Economic Specialist
U.S. Embassy
22nd February Street, AlLuqtaDistrict, P.O. Box 2399, Doha, Qatar
+974-4496-6000
EskandarGA@state.gov

Policies Toward Foreign Direct Investment

Attracting foreign direct investment remains a critical component of the SAG’s broader Vision 2030 program to diversify an economy overly dependent on oil and to create employment opportunities for a growing youth population. As such, the SAG seeks foreign investment that explicitly promotes economic development, transfers foreign expertise and technology to Saudi Arabia, creates jobs for Saudi nationals, and increases Saudi Arabia’s non-oil exports. The government encourages investment in nearly all economic sectors, with priority given to transportation, health/biotechnology, information and communications technology (ICT), media/entertainment, industry (mining and manufacturing), and energy.

Saudi Arabia’s economic reforms are opening up new areas for potential investment. For example, in a country where most public entertainment was once forbidden, the SAG now regularly sponsors and promotes entertainment programming, including live concerts, dance exhibitions, sports competitions, and other public performances. Significantly, the audiences for many of those events are now gender-mixed, representing a larger consumer base. In addition to the reopening of cinemas in 2018, the SAG has hosted Formula E races, PGA European Tour professional golf tournaments, a world heavyweight boxing title match, and a professional tennis tournament. Saudi Arabia launched the Saudi Seasons initiative in 2019 with 11 tourism seasons held in each region of the Kingdom. The program includes events and activities specifically designed to complement the cultural, touristic, and historical touchstones of Saudi Arabia. As part of the Riyadh Season, the Kingdom organized a first-ever car exhibition and auction in Riyadh, which attracted 350 U.S. exhibitors.

The SAG is proceeding with “economic cities” and new “giga-projects” that are at various stages of development and is seeking foreign investment in them. In 2020, the Kingdom announced the opening of a NEOM Airport, an important milestone for opening the northwest territory for development. These projects are large-scale and self-contained developments in different regions focusing on particular industries, e.g., technology, energy, tourism, and entertainment. Principal among these projects are:

• Qiddiya, a new, large-scale entertainment, sports, and cultural complex near Riyadh;
• King Abdullah Financial District, a commercial center development with nearly 60 skyscrapers in Riyadh;
• Red Sea Project, a massive tourism development on the archipelago of islands along the western Saudi coast, which aims to create 70,000 jobs and attract one million tourists per year.
• Amaala, a wellness, healthy living, and meditation resort on the Kingdom’s northwest coast, projected to include more than 2,500 luxury hotel rooms and 700 villas.
• NEOM, a $500 billion long-term development project to build a futuristic “independent economic zone” in northwest Saudi Arabia.

Pressure on Saudi Arabia’s fiscal situation from the sharp downturn in oil prices and unexpected spending needed to respond to COVID-19 will have a negative impact on the budgets of ministries and state-owned entities. While it is unclear what the impact on specific development projects will be, fiscal pressure is likely to dampen the SAG’s ambitious plans in the near term.

The Ministry of Investment of Saudi Arabia (MISA), formerly the Saudi Arabian General Investment Authority (SAGIA), governs and regulates foreign investment in the Kingdom, issues licenses to prospective investors, and works to foster and promote investment opportunities across the economy. Established originally as a regulatory agency, MISA has increasingly shifted its focus to investment promotion and assistance, offering potential investors detailed guides and a catalogue of current investment opportunities on its website (https://investsaudi.sa/en/sectors-opportunities/).

MISA has introduced e-licenses for the first time as part of its ongoing efforts to provide a more efficient and user-friendly process. An online “instant” license issuance or renewal service is now being offered by MISA to foreign investors that are listed on a local or international stock market and meet certain conditions. Saudi Arabia recently opened the following additional sectors to foreign investors: (i) road transport, (ii) real estate brokerage, (iii) audiovisual services and (iv) recruitment and related services.

Despite Saudi Arabia’s overall welcoming approach to foreign investment, some structural impediments remain. Foreign investment is currently prohibited in 10 sectors on the Negative List, including:

1. Oil exploration, drilling, and production;
2. Catering to military sectors;
3. Security and detective services;
4. Real estate investment in the holy cities, Mecca and Medina;
5. Tourist orientation and guidance services for religious tourism related to Hajj and umrah;
6. Printing and publishing (subject to a variety of exceptions);
7. Certain internationally classified commission agents;
8. Services provided by midwives, nurses, physical therapy services, and quasi-doctoral services;
9. Fisheries; and
10. Poison centers, blood banks, and quarantine services.

In addition to the negative list, older laws that remain in effect prohibit or otherwise restrict foreign investment in some economic subsectors not on the list, including some areas of healthcare. At the same time, MISA has demonstrated some flexibility in approving exceptions to the “negative list” exclusions.

Foreign investors must also contend with increasingly strict localization requirements in bidding for certain government contracts, labor policy requirements to hire more Saudi nationals (usually at higher wages than expatriate workers), an increasingly restrictive visa policy for foreign workers, and gender segregation in business and social settings (though gender segregation is becoming more relaxed as the SAG introduces socio-economic reforms).

Additionally, in a bid to bolster non-oil income, the government implemented new taxes and fees in 2017 and early 2018, including significant visa fee increases, higher fines for traffic violations, new fees for certain billboard advertisem*nts, and related measures. On July 1, 2020, the SAG will increase the value-added tax (VAT) from five percent to 15 percent. The VAT was originally introduced in January 2018, in addition to excise taxes implemented in June 2017 on cigarettes (at a rate of 100 percent), carbonated drinks (at a rate of 50 percent), and energy drinks (at a rate of 100 percent).

Limits on Foreign Control and Right to Private Ownership and Establishment

Saudi Arabia fully recognizes rights to private ownership and the establishment of private business. As outlined above, the SAG excludes foreign investors from some economic sectors and places some limits on foreign control. With respect to energy, Saudi Arabia’s largest economic sector, foreign firms are barred from investing in the upstream hydrocarbon sector, but the SAG permits foreign investment in the downstream energy sector, including refining and petrochemicals. There is significant foreign investment in these sectors. ExxonMobil, Shell, China’s Sinopec, and Japan’s Sumitomo Chemical are partners with Saudi Aramco (the SAG’s state-owned oil firm) in domestic refineries. ExxonMobil, Chevron, Shell, and other international investors have joint ventures with Aramco and/or the Saudi Basic Industries Corporation (SABIC) in large-scale petrochemical plants that utilize natural gas feedstock from Aramco’s operations. The Dow Chemical Company and Aramco are partners in a $20 billion joint venture for the world’s largest integrated petrochemical production complex.

With respect to other non-oil natural resources, the national mining company, Ma’aden, has a $12 billion joint venture with Alcoa for bauxite mining and aluminum production and a $7 billion joint venture with the leading American fertilizer firm Mosaic and SABIC to produce phosphate-based fertilizers.

Joint ventures almost always take the form of limited liability partnerships in Saudi Arabia, to which there are some disadvantages. Foreign partners in service and contracting ventures organized as limited liability partnerships must pay, in cash or in kind, 100 percent of their contribution to authorized capital. MISA’s authorization is only the first step in setting up such a partnership.

Professionals, including architects, consultants, and consulting engineers, are required to register with, and be certified by, the Ministry of Commerce. In theory, these regulations permit the registration of Saudi-foreign joint venture consulting firms. As part of its WTO commitments, Saudi Arabia generally allows consulting firms to establish a local office without a Saudi partner. Foreign engineering consulting companies, however, must have been incorporated for at least 10 years and have operations in at least four different countries to qualify. Foreign entities practicing accounting and auditing, architecture, or civil planning, or providing healthcare, dental, or veterinary services, must still have a Saudi partner.

In recent years, Saudi Arabia has opened additional service markets to foreign investment, including financial and banking services; aircraft maintenance and repair; computer reservation systems; wholesale, retail, and franchise distribution services; both basic and value-added telecom services; and investment in the computer and related services sectors. In 2016, Saudi Arabia formally approved full foreign ownership of retail and wholesale businesses in the Kingdom. While some companies have already received licenses under the new rules, the restrictions attached to obtaining full ownership – including a requirement to invest over $50 million during the first five years and ensure that 30 percent of all products sold are manufactured locally – have proven difficult to meet and precluded many investors from taking full advantage of the reform.

Other Investment Policy Reviews

Saudi Arabia completed its second WTO trade policy review in late 2015, which included investment policy (https://www.wto.org/english/tratop_e/tpr_e/tp433_e.htm).

Business Facilitation

In addition to applying for a license from MISA, foreign and local investors must register a new business via the Ministry of Commerce (MOC), which has begun offering online registration services for limited liability companies at: https://mc.gov.sa/en/. Though users may submit articles of association and apply for a business name within minutes on MOC’s website, final approval from the ministry often takes a week or longer. Applicants must also complete a number of other steps to start a business, including obtaining a municipality (baladia) license for their office premises and registering separately with the Ministry of Labor and Social Development, Chamber of Commerce, Passport Office, Tax Department, and the General Organization for Social Insurance. From start to finish, registering a business in Saudi Arabia takes a foreign investor on average three to five months from the time an initial MISA application is completed, placing the country at 141 of 190 countries in terms of ease of starting a business, according to the World Bank (2019 rankings). With respect to foreign direct investment, the investment approval by MISA is a necessary, but not sufficient, step in establishing an investment in the Kingdom; there are a number of other government ministries, agencies, and departments regulating business operations and ventures. In 2019, MISA established offices in the United States, starting in Washington D.C., to further facilitate investment in Saudi Arabia.

Saudi officials have stated their intention to attract foreign small- and medium-sized enterprises (SMEs) to the Kingdom. To facilitate and promote the growth of the SME sector, the SAG established the Small and Medium Enterprises General Authority in 2015 and released a new Companies Law in 2016. It also substantially reduced the minimum capital and number of shareholders required to form a joint stock company from five to two. Additionally, as of 2019, women no longer need a male guardian to apply for a business license.

Outward Investment

Saudi Arabia does not restrict domestic investors from investing abroad. Private Saudi citizens, Saudi companies, and SAG entities hold extensive overseas investments. The SAG has been transforming its Public Investment Fund (PIF), traditionally a holding company for government shares in state-controlled enterprises, into a major international investor and sovereign wealth fund. In 2016, the PIF made its first high-profile international investment by taking a $3.5 billion stake in Uber. The PIF has also announced a $400 million investment in Magic Leap, a Florida-based company that is developing “mixed reality” technology, and a $1 billion investment in Lucid Motors, a California-based electric car company. In the first half of 2020, the PIF made a number of new investments, including in Facebook, Starbucks, Disney, Boeing, Citigroup, LiveNation, Marriott, several European energy firms, and Carnival Cruise Lines. Saudi Aramco and SABIC are also major investors in the United States. In 2017, Aramco acquired full ownership of Motiva, the largest refinery in North America, in Port Arthur, Texas. SABIC has announced a multi-billion dollar joint venture with ExxonMobil in a petrochemical facility in Corpus Christi, Texas.

Transparency of the Regulatory System

Saudi Arabia received the lowest score possible (zero out of five) in the World Bank’s 2018 Global Indicators of Regulatory Governance Report, which places the Kingdom in the bottom 13 countries among 186 countries surveyed (http://rulemaking.worldbank.org/). Few aspects of the SAG’s regulatory system are entirely transparent, although Saudi investment policy is less opaque than other areas. Bureaucratic procedures are cumbersome, but red tape can generally be overcome with persistence. Foreign portfolio investment in the Saudi stock exchange is well-regulated by the Capital Markets Authority (CMA), with clear standards for interested foreign investors to qualify to trade on the local market. The CMA has progressively liberalized requirements for “qualified foreign investors” to trade in Saudi securities. Insurance companies and banks whose shares are listed on the Saudi stock exchange are required to publish financial statements according to International Financial Reporting Standards (IFRS) accounting standards. All other companies are required to follow accounting standards issued by the Saudi Organization for Certified Public Accountants.

Stakeholder consultation on regulatory issues is inconsistent. Some Saudi organizations are diligent in consulting businesses affected by the regulatory process, while others tend to issue regulations with no consultation at all. Proposed laws and regulations are not always published in draft form for public comment. An increasing number of government agencies, however, solicit public comments through their websites. The processes and procedures for stakeholder consultation are not generally transparent or codified in law or regulations. There are no private-sector or government efforts to restrict foreign participation in the industry standards-setting consortia or organizations that are available. There are no informal regulatory processes managed by NGOs or private-sector associations.

International Regulatory Considerations

Saudi Arabia uses technical regulations developed both by the Saudi Arabian Standards Organization (SASO) and by the Gulf Standards Organization (GSO). Although the GCC member states continue to work toward common requirements and standards, each individual member state, and Saudi Arabia through SASO, continues to maintain significant autonomy in developing, implementing, and enforcing technical regulations and conformity assessment procedures in its territory. More recently, Saudi Arabia has moved toward adoption of a single standard for technical regulations. This standard is often based on International Organization for Standardization (ISO) or International Electrotechnical Commission (IEC) standards, to the exclusion of other international standards, such as those developed by U.S.-domiciled standards development organizations (SDOs).

Saudi Arabia’s exclusion of these other international standards, which are often used by U.S. manufacturers, can create significant market access barriers for industrial and consumer products exported from the United States. The United States government has engaged Saudi authorities on the principles for international standards per the WTO Technical Barriers to Trade Committee Decision and encouraged Saudi Arabia to adopt standards developed according to such principles in their technical regulations, allowing all products that meet those standards to enter the Saudi market. Several U.S.-based standards organizations, including SDOs and individual companies, have also engaged SASO, with mixed success, in an effort to preserve market access for U.S. products, ranging from electrical equipment to footwear.

A member of the WTO, Saudi Arabia notifies all draft technical regulations to the WTO Committee on Technical Barriers to Trade.

Legal System and Judicial Independence

The Saudi legal system is derived from Islamic law, known as sharia. Saudi commercial law, meanwhile, is still developing. In 2016, Saudi Arabia took a significant step in improving its dispute settlement regime with the establishment of the Saudi Center for Commercial Arbitration (see “Dispute Settlement” below). Through its Commercial Law Development Program, the U.S. Department of Commerce provides capacity-building programs for Saudi stakeholders in the areas of contract enforcement, public procurement, and insolvency.

The Saudi Ministry of Justice oversees the sharia-based judicial system, but most ministries have committees to rule on matters under their jurisdictions. Judicial and regulatory decisions can be appealed. Many disputes that would be handled in a court of law in the United States are handled through intra-ministerial administrative bodies and processes in Saudi Arabia. Generally, the Saudi Board of Grievances has jurisdiction over commercial disputes between the government and private contractors. The Board also reviews all foreign arbitral awards and foreign court decisions to ensure that they comply with sharia. This review process can be lengthy, and outcomes are unpredictable.

The Kingdom’s record of enforcing judgments issued by courts of other GCC states under the GCC Common Economic Agreement, and of other Arab League states under the Arab League Treaty, is somewhat better than enforcement of judgments from other foreign courts. Monetary judgments are based on the terms of the contract – e.g., if the contract is calculated in U.S. dollars, a judgment may be obtained in U.S. dollars. If unspecified, the judgment is denominated in Saudi riyals. Non-material damages and interest are not included in monetary judgments, based on the sharia prohibitions against interest and against indirect, consequential, and speculative damages.

As with any investment abroad, it is important that U.S. investors take steps to protect themselves by thoroughly researching the business record of a proposed Saudi partner, retaining legal counsel, complying scrupulously with all legal steps in the investment process, and securing a well-drafted agreement. Even after a decision is reached in a dispute, enforcement of a judgment can still take years. The U.S. government recommends consulting with local counsel in advance of investing to review legal options and appropriate contractual provisions for dispute resolution.

ICSID Convention and New York Convention

The Kingdom of Saudi Arabia ratified the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards in 1994. Saudi Arabia is also a member state of the International Center for the Settlement of Investment Disputes Convention (ICSID), though under the terms of its accession it cannot be compelled to refer investment disputes to this system absent specific consent, provided on a case-by-case basis. Saudi Arabia has yet to consent to the referral of any investment dispute to the ICSID for resolution.

Investor-State Dispute Settlement

The use of any international or domestic dispute settlement mechanism within Saudi Arabia continues to be time-consuming and uncertain, as all outcomes are subject to a final review in the Saudi judicial system and carry the risk that principles of sharia law may potentially supersede a judgment or legal precedent. The U.S. government recommends consulting with local counsel in advance of investing to review legal options and contractual provisions for dispute resolution.

International Commercial Arbitration and Foreign Courts

Traditionally, dispute settlement and enforcement of foreign arbitral awards in Saudi Arabia have proven time-consuming and uncertain, carrying the risk that sharia principles can potentially supersede any foreign judgments or legal precedents. Even after a decision is reached in a dispute, effective enforcement of the judgment can be lengthy. In several cases, disputes have caused serious problems for foreign investors. For instance, Saudi partners and creditors have blocked foreigners’ access to or right to use exit visas, forcing them to remain in Saudi Arabia against their will. In cases of alleged fraud or debt, foreign partners may also be jailed to prevent their departure from the country while awaiting police investigation or court adjudication. Courts can in theory impose precautionary restraint on personal property pending the adjudication of a commercial dispute, though this remedy has been applied sparingly.

In recent years, the SAG has demonstrated a commitment to improve the quality of commercial legal proceedings and access to alternative dispute resolution mechanisms. Local attorneys indicate that the quality of final judgments in the court system has improved, but that cases still take too long to litigate. In 2012, the SAG updated certain provisions in Saudi Arabia’s domestic arbitration law, paving the way for the establishment of the Saudi Center for Commercial Arbitration (SCCA) in 2016. Developed in accordance with international arbitration rules and standards, including those set by the American Arbitration Association’s International Centre for Dispute Resolution and the International Chamber of Commerce’s International Court of Arbitration, the SCCA offers comprehensive arbitration services to domestic and international firms. The SCCA reports that both domestic and foreign law firms have begun to include referrals to the SCCA in the arbitration clauses of their contracts. However, it is currently too early to assess the quality and effectiveness of SCCA proceedings, as the SCCA is still in the early stages of operation. Awards rendered by the SCCA can be enforced in local courts, though judges remain empowered to reject enforcement of provisions they deem noncompliant with sharia law.

In December 2017, the United Nations Commission on International Trade Law (UNCITRAL) recognized Saudi Arabia as a jurisdiction that has adopted an arbitration law based on the 2006 UNCITRAL Model Arbitration Law. UNCITRAL took this step after Saudi judges clarified that sharia would not affect the enforcement of foreign arbitral awards. The potential impact of the decision is that foreign investors and companies in Saudi Arabia have slightly more certainty that their arbitration agreements and awards will be enforced, as in other UNCITRAL countries. Whether (and how) Saudi courts will apply this latest interpretation of the relationship between foreign arbitral awards and sharia law remains to be seen.

Laws and Regulations on Foreign Direct Investment

In January 2019, the Saudi government established the Foreign Trade General Authority (FTGA), which aims to strengthen Saudi Arabia’s non-oil exports and investment, increase the private sector’s contribution to foreign trade, and resolve obstacles encountered by Saudi exporters and investors. The new authority monitors the Kingdom’s obligations under international trade agreements and treaties, negotiates and enters into new international commercial and investment agreements, and represents the Kingdom before the World Trade Organization. The Governor of the FTGA reports to the Minister of Commerce.

Despite the list of activities excluded from foreign investment (see “Policies Toward Foreign Direct Investment”), foreign minority ownership in joint ventures with Saudi partners may be allowed in some of these sectors. Foreign investors are no longer required to take local partners in many sectors and may own real estate for company activities. They are allowed to transfer money from their enterprises out of the country and can sponsor foreign employees, provided that “Saudization” quotas are met (see “Labor Section” below). Minimum capital requirements to establish business entities range from zero to 30 million Saudi riyals ($8 million), depending on the sector and the type of investment.

MISA offers detailed information on the investment process, provides licenses and support services to foreign investors, and coordinates with government ministries to facilitate investment. According to MISA, it must grant or refuse a license within five days of receiving an application and supporting documentation from a prospective investor. MISA has established and posted online its licensing guidelines, but many companies looking to invest in Saudi Arabia continue to work with local representation to navigate the bureaucratic licensing process.

MISA licenses foreign investments by sector, each with its own regulations and requirements: (i) services, which comprise a wide range of activities including IT, healthcare, and tourism; (ii) industrial, (iii) real estate, (iv) public transportation, (v) entrepreneurial, (vi) contracting, (vii) audiovisual media, (viii) science and technical office, (ix) education (colleges and universities), and (x) domestic services employment recruitment. MISA also offers several special-purpose licenses for bidding on and performance of government contracts. Foreign firms must describe their planned commercial activities in some detail and will receive a license in one of these sectors at MISA’s discretion. Depending on the type of license issued, foreign firms may also require the approval of relevant competent authorities, such as the Ministry of Health or the Ministry of Tourism.

An important MISA objective is to ensure that investors do not just acquire and hold licenses without investing, and MISA sometimes cancels licenses of foreign investors that it deems do not contribute sufficiently to the local economy. MISA’s periodic license reviews, with the possibility of cancellation, add uncertainty for investors and can provide a disincentive to longer-term investment commitments.

MISA has agreements with various SAG agencies and ministries to facilitate and streamline foreign investment. These agreements permit MISA to facilitate the granting of visas, establish MISA branch offices at Saudi embassies in different countries, prolong tariff exemptions on imported raw materials to three years and on production and manufacturing equipment to two years, and establish commercial courts. To make it easier for businesspeople to visit the Kingdom, MISA can sponsor visa requests without involving a local company. Saudi Arabia has implemented a decree providing that sponsorship is no longer required for certain business visas. While MISA has set up the infrastructure to support foreign investment, many companies report that despite some improvements, the process remains cumbersome and time-consuming.

Competition and Anti-Trust Laws

MISA and the MOC review transactions for competition-related concerns, including allegations of price fixing for certain products. The Ministry of Commerce has looked to the GCC’s reference pricing approach on subsidized products to assist the SAG in determining market-price suggested norms.

Saudi competition law prohibits certain vertically-integrated business combinations. Consequently, companies doing business in Saudi Arabia may find it difficult to register exclusivity clauses in distribution agreements, but are not necessarily precluded from enforcing such clauses in Saudi courts.

Expropriation and Compensation

The Embassy is not aware of any cases in Saudi Arabia of expropriation from foreign investors without adequate compensation. Some small- to medium-sized foreign investors, however, have complained that their investment licenses have been cancelled without justification, causing them to forfeit their investments.

Bankruptcy Regulations

In August 2018, the SAG implemented new bankruptcy legislation which seeks to “further facilitate a healthy business environment that encourages participation by foreign and domestic investors, as well as local small and medium enterprises.” The new law clarifies procedural processes and recognizes distinct creditor classes (e.g., secured creditors). The new law also includes procedures for continued operation of the distressed company via financial restructuring. Alternatively, the parties may pursue an orderly liquidation of company assets, which would be managed by a court-appointed licensed bankruptcy trustee. Saudi courts have begun to accept and hear cases under this new legislation.

Investment Incentives

MISA advertises a number of financial advantages for foreigners looking to invest in the Kingdom, including the lack of personal income taxes and a corporate tax rate of 20 percent on foreign companies’ profits. MISA also lists various SAG-sponsored regional and international financial programs to which foreign investors have access, such as the Arab Fund for Economic and Social Development, the Arab Trade Financing Program, and the Islamic Development Bank.

The Saudi Industrial Development Fund (SIDF), a government financial institution established in 1974, supports private-sector industrial investments by providing medium- and long-term loans for new factories and for projects to expand, upgrade, and modernize existing manufacturing facilities. The SIDF offers loans of 50 to 75 percent of a project’s value, depending on the project’s location. Foreign investors that set up manufacturing facilities in developed areas (Riyadh, Jeddah, Dammam, Jubail, Mecca, Yanbu, and Ras al-Khair), for example, can receive a 15-year loan for up to 50 percent of a project’s value; investors in the Kingdom’s least developed areas can receive a 20-year loan for up to 75 percent of the project’s value. The SIDF also offers consultancy services for local industrial projects in the administrative, financial, technical, and marketing fields. (The SIDF’s website is https://www.sidf.gov.sa/en/Pages/default.aspx.)

The SAG offers several incentive programs to promote employment of Saudi nationals in certain cases. The Saudi Human Resources Development Fund (HRDF) (https://www.hrdf.org.sa/), for example, will pay 30 percent of a Saudi national’s wages for the first year of work, with a wage subsidy of 20 percent and 10 percent for the second and third year of employment, respectively (subject to certain limits and caps).

American and other foreign firms are able to participate in SAG-financed and/or -subsidized research-and-development (R&D) programs. Many of these programs are run though the King Abdulaziz City for Science and Technology (KACST), which funds many of the Kingdom’s R&D programs.

Foreign Trade Zones/Free Ports/Trade Facilitation

Saudi Arabia does not operate free trade zones or free ports. However, as part of its Vision 2030 program, the SAG has announced it will create special zones with special regulations to encourage investment and diversify government revenues. The SAG is considering the establishment of special regulatory zones in certain areas, including at NEOM and the King Abdullah Financial District in Riyadh.

Saudi Arabia has established a network of “economic cities” as part of the country’s efforts to reduce its dependence on oil. Overseen by MISA, these four economic cities aim to provide a variety of advantages to companies that choose to locate their operations within the city limits, including in matters of logistics and ease of doing business. The four economic cities are: King Abdullah Economic City near Jeddah, Prince AbdulAziz Bin Mousaed Economic City in north-central Saudi Arabia, Knowledge Economic City in Medina, and Jazan Economic City near the southwest border with Yemen. The cities are in various stages of development, and their future development potential is unclear, given competing Vision 2030 economic development projects.

The Saudi Industrial Property Authority (MODON in Arabic) oversees the development of 35 industrial cities, including some still under development. MODON offers incentives for commercial investment in these cities, including competitive rents for industrial land, government-sponsored financing, export guarantees, and certain customs exemptions. (MODON’s website is https://www.modon.gov.sa/en/Pages/default.aspx.)

The Royal Commission for Jubail and Yanbu (RCJY) was formed in 1975 and established the industrial cities of Jubail, located in eastern Saudi Arabia on the Persian Gulf coast, and Yanbu, located in north western Saudi Arabia on the Red Sea coast. A significant portion of Saudi Arabia’s refining, petrochemical, and other heavy industries are located in the Jubail and Yanbu industrial cities. The RCJY’s mission is to plan, promote, develop, and manage petrochemicals and energy intensive industrial cities. In connection with this mission, RCJY promotes investment opportunities in the two cities and can offer a variety of incentives, including tax holidays, customs exemptions, low cost loans, and favorable land and utility rates. More recently, the RCJY has assumed responsibility for managing the Ras Al Khair City for Mining Industries (2009) and the Jazan City for Primary and Downstream Industries (2015). (The RCJY’s website is https://www.rcjy.gov.sa).

Performance and Data Localization Requirements

The government does not impose systematic conditions on foreign investment. For example, there are no requirements to locate in a specific geographic area (except for some restrictions on the distribution of retail outlets and the location of industrial activities). Investors are not required to export a certain percentage of output. There is no requirement that the share of foreign equity be reduced over time. Investors are not required to disclose proprietary information to the SAG as part of the regulatory approval process, except where issues of health and safety are concerned.

Although investors have not been required heretofore to purchase from local sources, the situation is changing. In line with its bid to diversify the economy and provide more private sector jobs for Saudi nationals, the SAG has embarked on a broad effort to source goods and services domestically and is seeking commitments from investors to do so. In 2017, the Council of Economic and Development Affairs (CEDA) established the Local Content and Private Sector Development Unit (NAMAA in Arabic) to promote local content and improve the balance of payments. NAMAA is responsible for monitoring and implementing regulations, suggesting new policies, and coordinating with the private sector on all local content matters.

Government-controlled enterprises are also increasingly introducing local content requirements for foreign firms. Aramco’s “In-Kingdom Total Value Added” (IKTVA) program, for example, strongly encourages the purchase of goods and services from a local supplier base and aims to double Aramco’s percentage of locally-manufactured energy-related goods and services to 70 percent by 2021.

In the defense sector, Saudi Arabia’s military is in the process of reforming its procurement processes and policies to incorporate new ambitious goals of Saudi employment and localized production. The SAG has shifted over the last two years away from offsets in favor of “localization” of purchases of goods and services and “Saudization” of the labor force. Previously, the government required offsets in investments equivalent to up to 40 percent of a program’s value for defense contracts, depending on the value of the contract. The SAG is currently mandating increasingly strict localization requirements for government contracts in the defense sector. The SAG’s Vision 2030 program calls for 50 percent of defense materials to be produced and procured locally by 2030, and simultaneously seeks comparable increases in the number of Saudis employed in this sector.

The government encourages recruitment of Saudi employees through a series of incentives (see section 11 on “Labor Policies” for details of the “Saudization” program) and limits placed on the number of visas for foreign workers available to companies. The Saudi electronic visitor visa system defaults to five-year visas for all U.S. citizen applicants. “Business visas” are routinely issued to U.S. visitors who do not have an invitation letter from a Saudi company, but the visa applicant must provide evidence that he or she is engaged in legitimate commercial activity. “Commercial visas” are issued by invitation from Saudi companies to applicants who have a specific reason to visit a Saudi company.

In the fall of 2016, the SAG implemented a series of significant visitor fee increases for expatriates whose countries do not have reciprocity agreements with Saudi Arabia, doubling the cost of a single-entry business visit visa to $533. (U.S. citizens are exempt from such increases on the basis of reciprocity.) The SAG also imposed higher exit and reentry visa fees for all foreign workers residing in the Kingdom, including U.S. citizens. Furthermore, in January 2018, the SAG implemented new fees for expatriate employers ranging between $80 and $107 per employee per month and increased levies on expatriates with dependents to a $54 monthly fee for each dependent (see section 11 on “Labor Policies”). In January 2019, fees on expatriate employees increased to between $133 to $160 per month, and levies on expatriate dependents increased to $80 per month. These fees are scheduled to increase again in 2020 to between $186 to $212, but no additional increases are planned beyond 2020.

Data Treatment

Saudi Arabia is undergoing a digital transformation as part of its Vision 2030 National Transformation Program strategy to enable private sector growth. Emerging technology spheres include significant investment in developing Artificial Intelligence (AI), the Internet of Things (IoT), cloud computing, and other information and communications technology (ICT) sectors. As such, data protection and cybersecurity laws and regulations are rapidly evolving.

Saudi Arabia aims to be the Middle East’s high-technology hub. While there is no dedicated data protection legislation in force in Saudi Arabia, personal data is protected under general provisions of Saudi law imposing strict obligations on businesses in relation to how, who, and when personal data can be collected, used, and stored.

Saudi E-Commerce Law applies to all e-commerce providers (domestic and international) that offer goods and services to customers based in Saudi Arabia. Its provisions regulate e-commerce business practices, requiring transparency and consumer protection, as well as protection of the personal data of customers, with the goal to enhance cybersecurity and trust in online transactions. Data retention is also restricted; service providers are not allowed to retain personal data any longer than required to complete business transactions for which data was collected. Also, sharing of data and customer information with third-party providers is prohibited without express permission.

Saudi Arabia’s Cloud Computing Regulatory Framework (CCF) governs the rights and obligations of cloud service providers, customers, businesses, and government entities, and includes principles of data protection. CCF divides customer data protection into four levels: from non-sensitive to highly sensitive, with security breach notification required to be given to customers, and in certain situations breaches must be registered with the Communication and Information Technology Commission (CITC), which regulates Saudi telecommunications. CCF regulations do not allow cross-border data flows by cloud service providers or customers of sensitive business content from private and government sectors, as well as highly-sensitive and secret content belonging to government agencies and institutions, unless expressly allowed by Saudi law.

Saudi Arabia’s Internet of Things (IoT) Regulatory Framework regulates the use of all IoT services and includes data security, privacy, and protection requirements. IoT providers and implementors must comply with existing and future published laws, regulations, and requirements concerning data management, which will likely continue to focus on cybersecurity and data security. The IoT Regulatory Framework specifies data security measures, such as limited retention and data localization for IoT services and networks, which are also regulated by the CITC.

Saudi Arabia’s Electronic Transactions Law imposes obligations on internet service providers (ISPs) to maintain confidentiality of business information and personal data in electronic transactions.

Saudi Arabia’s Anti-Cyber Crime Law seeks to protect the national economy by deterring cybercrimes such as destruction or alteration of data, illegal access to bank or credit information, interruption of computer and information network transmissions, and other disruptions to ICT infrastructure. The law also requires consent from individuals whose personal data or documents are to be disclosed.

Saudi Arabia’s Essential Cyber Controls (ECC) regulations are currently being drafted with input from multiple Saudi cybersecurity and ICT authorities, and for the first time, in consultation with large American cloud, ISP, and ICT industry representatives, who have provided feedback on how to protect consumer data while still enabling innovation and growth of the digital economy and cross-border trade.

There are no requirements for foreign IT providers to turn over source code or provide access to encryption. Other than a requirement to retain records locally for ten years for tax purposes, there is no requirement regarding data storage or access to surveillance.

Real Property

The Saudi legal system protects and facilitates acquisition and disposition of all property, consistent with the Islamic practice of upholding private property rights. Non-Saudi corporate entities are allowed to purchase real estate in Saudi Arabia in accordance with the foreign-investment code. Other foreign-owned corporate and personal property is protected by law. Saudi Arabia has a system of recording security interests, and plans to modernize its land registry system. Saudi Arabia ranked 19th out of 190 countries for ease of registering property in the 2020 World Bank Doing Business Report.

In 2017, the Saudi Ministry of Housing implemented an annual vacant land tax of 2.5 percent of the assessed value on vacant lands in urban centers in an attempt to spur development. Additionally, in January 2018, in an effort to increase Saudis’ access to finance and stimulate the mortgage and housing markets, Saudi Arabia’s central bank lifted the maximum loan-to-value rate for mortgages for first-time homebuyers to 90 percent from 85 percent, and increased interest payment subsidies for first-time buyers. This further liberalized stringent down-payment requirements that prevailed up to 2016, when the central bank raised the maximum loan-to-value rate from 70 percent to 85 percent.

Intellectual Property Rights

In 2017, Saudi Arabia established SAIP to regulate, support, develop, sponsor, protect, enforce, and upgrade IP fields in accordance with the best international practices. Over the past two years, SAIP has worked to consolidate IP protection capability, coordinated and led online and in-market IP enforcement efforts, worked to establish specialized IP courts, and promoted awareness of the importance of respecting IP and the consequences of violating another’s IP rights. SAIP cooperated with USTR and the U.S. Patent and Trademark Office (USPTO) over the past year, resulting in the signing of a Cooperation Arrangement in October 2018 between SAIP and USPTO. SAIP has made a commendable effort to increase transparency, join international treaties, improve stakeholder involvement in policymaking, and continue legislative development. Saudi Arabia Customs Authority has also significantly enhanced its IP enforcement efforts and capacity, having seized over 3 million counterfeit and other illegal goods in 2019, having partnered closely with trademark and copyright owners, and having systematically notified right holders of suspected shipments. Saudi Arabia was included in the U.S. Trade Representative’s (USTR) Special 301 Report’s “Priority Watch List” in April 2020 for the second consecutive year. USTR plans to conduct an Out-of-Cycle Review focused on addressing protection against unfair commercial use, as well as the unauthorized disclosure, of undisclosed test or other data generated to obtain marketing approval of pharmaceutical products. Saudi Arabia was not included in the 2019 Notorious Markets List.

Saudi Arabia was included in the U.S. Trade Representative’s (USTR) Special 301 Report’s “Priority Watch List” in April 2020 for the second consecutive year. USTR plans to conduct an Out-of-Cycle Review focused on addressing protection against unfair commercial use, as well as the unauthorized disclosure, of undisclosed test or other data generated to obtain marketing approval of pharmaceutical products. Saudi Arabia was not included in the 2019 Notorious Markets List.

Since 2016, the Saudi Arabia Food and Drug Authority (SFDA), which the Minister of Health oversees, has continuously granted marketing approval to domestic companies relying on another company’s undisclosed test or other data for products despite the protection provided by Saudi regulations.

The United States government also remains concerned about reportedly high levels of online piracy in Saudi Arabia, particularly through illicit streaming devices (ISDs), which right holders report are widely available and generally unregulated in Saudi Arabia. In June 2020 the World Trade Organization’s court decision sided with Qatar’s complaint that beoutQ, a Saudi-based rampant satellite and online piracy service had violated the IP rights of dozens of rights holders and has forced Saudi Arabia to establish enforcement methods to remove the readily available boxes. In August 2019, it was reported that BeoutQ ceased operations, although there continues to be reports of pirated boxes being readily available in country.

U.S. software firms report that the Saudi government continues to use unlicensed and “under-licensed” (in which an insufficient number of licenses is procured for the total number of users) software on government computer systems in violation of their copyrights. Other concerns include the lack of seizure and destruction of counterfeit goods in enforcement actions by the MOC, and limits on the ability of MOC to enter facilities suspected of involvement in the sale or manufacture of counterfeit goods, including facilities located in residential areas.

Resources for Rights Holders

Embassy point of contact:

Elizabeth Trobough
Economic Officer
+966 11 488-3800 Ext. 4270
trobaughem@state.gov

Regional IPR Attaché:

Pete C. Mehravari
U.S. Intellectual Property Attaché for Middle East and North Africa
Patent Attorney
U.S. Embassy Kuwait | U.S. Department of Commerce
Office: +965 2259-1455
Peter.mehravari@trade.gov

Capital Markets and Portfolio Investment

Saudi Arabia’s financial policies generally facilitate the free flow of private capital and currency can be transferred in and out of the Kingdom without restriction. Saudi Arabia maintains an effective regulatory system governing portfolio investment in the Kingdom. The Capital Markets Law, passed in 2003, allows for brokerages, asset managers, and other nonbank financial intermediaries to operate in the Kingdom. The law created a market regulator, the Capital Market Authority (CMA), established in 2004, and opened the Saudi stock exchange (Tadawul) to public investment.

Prior to 2015, the CMA only permitted foreign investors to invest in the Saudi stock market through indirect “swap arrangements,” through which foreigners had accumulated ownership of one per cent of the market. In June 2015, the CMA opened the Tadawul to “qualified foreign investors,” but with a stringent set of regulations that only large financial institutions could meet. Since 2015, the CMA has progressively relaxed the rules applicable to qualified foreign investors, easing barriers to entry and expanding the foreign investor base. The CMA adopted regulations in 2017 permitting corporate debt securities to be listed and traded on the exchange; in March 2018, the CMA authorized government debt instruments to be listed and traded on the Tadawul. The Tadawul was incorporated into the FTSE Russell Emerging Markets Index in March 2019, resulting in a foreign capital injection of $6.8 billion. Separately, the $11 billion infusion into the Tadawul from integration into the MSCI Emerging Markets Index took place in May 2019. The Tadawul was also added to the S&P Dow Jones Emerging Market Index.

Money and Banking System

The banking system in the Kingdom is generally well-capitalized and healthy. The public has easy access to deposit-taking institutions. The legal, regulatory, and accounting systems used in the banking sector are generally transparent and consistent with international norms. The Saudi Arabian Monetary Authority (SAMA), the central bank, which oversees and regulates the banking system, generally gets high marks for its prudential oversight of commercial banks in Saudi Arabia. SAMA is a member and shareholder of the Bank for International Settlements in Basel, Switzerland.

In 2017, SAMA enhanced and updated its previous Circular on Guidelines for the Prevention of Money Laundering and Terrorist Financing. The enhanced guidelines have increased alignment with the Financial Action Task Force (FATF) 40 Recommendations, the nine Special Recommendations on Terrorist Financing, and relevant UN Security Council Resolutions. Saudi Arabia is a member of the Middle East and North Africa Financial Action Task Force (MENA-FATF). In 2019, Saudi Arabia became the first Arab country to be granted full membership of the FATF, following the organization’s recognition of the Kingdom’s efforts in combating money laundering, financing of terrorism, and proliferation of arms. Saudi Arabia had been an observer member since 2015.

The SAG has authorized increased foreign participation in its banking sector over the last several years. SAMA has granted licenses to a number of new foreign banks to operate in the Kingdom, including Deutsche Bank, J.P. Morgan Chase N.A., and Industrial and Commercial Bank of China (ICBC). A number of additional, CMA-licensed foreign banks participate in the Saudi market as investors or wealth management advisors. Citigroup, for example, returned to the Saudi market in early 2018 under a CMA license.

Credit is normally widely available to both Saudi and foreign entities from commercial banks and is allocated on market terms. The Saudi banking sector has one of the world’s lowest non-performing loan (NPL) ratios, in the range of 2.0 percent for 2018. In addition, credit is available from several government institutions, such as the SIDF, which allocate credit based on government-set criteria rather than market conditions. Companies must have a legal presence in Saudi Arabia to qualify for credit. The private sector has access to term loans, and there have been a number of corporate issuances of sharia-compliant bonds, known as sukuk.

Foreign Exchange and Remittances

Foreign Exchange

There is no limitation in Saudi Arabia on the inflow or outflow of funds for remittances of profits, debt service, capital, capital gains, returns on intellectual property, or imported inputs, other than certain withholding taxes (withholding taxes range from five percent for technical services and dividend distributions to 15 percent for transfers to related parties, and 20 percent or more for management fees). Bulk cash shipments greater than $10,000 must be declared at entry or exit points. Since 1986, when the last currency devaluation occurred, the official exchange rate has been fixed by SAMA at 3.75 Saudi riyals per U.S. dollar. Transactions typically take place using rates very close to the official rate.

Remittance Policies

Saudi Arabia is one of the largest remitting countries in the world, with roughly 75 percent of the Saudi labor force comprised of foreign workers. Remittances totaled approximately $33.4 billion in 2019. There are currently no restrictions on converting and transferring funds associated with an investment (including remittances of investment capital, dividends, earnings, loan repayments, principal on debt, lease payments, and/or management fees) into a freely usable currency at a legal market-clearing rate. There are no waiting periods in effect for remitting investment returns through normal legal channels.

The Ministry of Labor and Social Development is progressively implementing a “Wage Protection System” designed to verify that expatriate workers, the predominant source of remittances, are being properly paid according to their contracts. Under this system, employers are required to transfer salary payments from a local Saudi bank account to an employee’s local bank account, from which expatriates can freely remit their earnings to their home countries.

Sovereign Wealth Funds

The Public Investment Fund (PIF, www.pif.gov.sa) is the Kingdom’s officially designated sovereign wealth fund. While PIF lacks many of the attributes of a traditional sovereign wealth fund, it has evolved into the SAG’s primary investment vehicle.

Established in 1971 to channel oil wealth into economic development, the PIF has historically been a holding company for government shares in partially privatized state-owned enterprises (SOEs), including SABIC, the National Commercial Bank, Saudi Telecom Company, Saudi Electricity Company, and others. Crown Prince Mohammed bin Salman is the chairman of the PIF and announced his intention in April 2016 to build the PIF into a $2 trillion global investment fund, relying in part on proceeds from the initial public offering of up to five percent of Saudi Aramco shares.

Since that announcement, the PIF has made a number of high-profile international investments, including a $3.5 billion investment in Uber, a commitment to invest $45 billion into Japanese SoftBank’s VisionFund, a commitment to invest $20 billion into U.S. Blackstone’s Infrastructure Fund, a $1 billion investment in U.S. electric car company Lucid Motors, and a partnership with cinema company AMC to operate movie theaters in the Kingdom. Under the Vision 2030 reform program, the PIF is financing a number of strategic domestic development projects, including: “NEOM,” a planned $500 billion project to build an “independent economic zone” in northwest Saudi Arabia; “Qiddiya,” a new, large-scale entertainment, sports, and cultural complex near Riyadh; “the Red Sea Project”, a massive tourism development on the western Saudi coast; and “Amaala,” a wellness, healthy living, and meditation resort also located on the Red Sea.

At the end of 2019, the PIF reported its investment portfolio was valued at $300-$330 billion, mainly in shares of state-controlled domestic companies. In an effort to rebalance its investment portfolio, the PIF has divided its assets into six investment pools comprising local and global investments in various sectors and asset classes: Saudi holdings; Saudi sector development; Saudi real estate and infrastructure development; Saudi giga-projects; international strategic investments; and an international diversified pool of investments.

In addition to previous investments in Uber, Magic Leap, and Lucid Motors, the PIF made a number of new investments in the first half of 2020. These include equity investments in Facebook, Starbucks, Disney, Boeing, Citigroup, LiveNation, Marriott, several European energy firms, and Carnival Cruise Lines. The Ministry of Finance announced in 2020 that $40 billion was being transferred from the Kingdom’s foreign reserves, held by the central bank SAMA, to the PIF to fund investments.

In practice, SAMA’s foreign reserve holdings also operate as a quasi-sovereign wealth fund, accounting for the majority of the SAG’s foreign assets. SAMA invests the Kingdom’s surplus oil revenues primarily in low-risk liquid assets, such as sovereign debt instruments and fixed-income securities. SAMA’s foreign reserves fell from $502 billion in January 2020 to $449 billion in April 2020. SAMA’s foreign reserve holdings peaked at $746 billion in mid-2014.

Though not a formal member, Saudi Arabia serves as a permanent observer to the International Working Group on Sovereign Wealth Funds.

There is a growing awareness of corporate social responsibility (CSR) in Saudi Arabia. The King Khalid Foundation issues annual “responsible competitiveness” awards to companies doing business in Saudi Arabia for outstanding CSR activities.

Foreign firms have identified corruption as a barrier to investment in Saudi Arabia. Saudi Arabia has a relatively comprehensive legal framework that addresses corruption, butmany firms perceiveenforcementasselective. The Combating Bribery Law andtheCivil Service Law, the two primary Saudi laws that address corruption, provide for criminal penalties in cases of official corruption. Government employees who are found guilty of accepting bribes face 10 years in prison or finesofup to one million riyals (USD 267,000). Ministers and other senior government officials appointed by royal decree are forbidden from engaging in business activities with their ministry or organization. Saudi corruption laws cover most methods of bribery and abuse of authority for personal interest, but not bribery between private parties. OnlyseniorControl and Anti-Corruption Commission (“Nazaha”)officialsare subject to financial disclosure laws. The government is considering disclosure regulations for other officials, but has yet to finalize them.Some officialshaveengagedin corrupt practices with impunity, and perceptions of corruption persist in some sectors.

Nazaha, established in 2011, is responsible for promoting transparency and combating all forms of financial and administrative corruption.Nazaha’sministerial-level director reports directly to the King.In December 2019, King Salman issued three royal decrees consolidating the Control and Investigation Board and the Mabahith’s Administrative Investigations Directorate under the National Anti-Corruption Commission, and renaming the new entity as the Control and Anti-Corruption Commission (“Nazaha”). The decrees consolidated investigations under the new Commission and mandated that the Public Prosecutor’s Office transition its on-going investigations to the new consolidated commission. The Control and Anti-Corruption Commission report directly to King Salman. The Commission recommends anti-corruption reforms, administers and audits anti-corruption databases and program, and investigates and prosecutes alleged corruption. Furthermore, the Commission has the power to dismiss a government employee even if they are not found guilty by the specialized anti-corruption court.

Some evidence suggests Nazaha has not shied away from prosecuting influential players whose indiscretions may previously have been ignored. In 2016, for example, it referred the Minister of Civil Service for investigation over allegations of abuse of power and nepotism. On March 15,Nazahaannouncedit would charge 298Saudiand foreign individualswith a range of corruption charges, including a majorgeneraland at least two judges.In April,Nazahaindicted eight individuals, including two individuals from Riyadh’s regional health directorate, on corruption charges relatedtocontracts for quarantineaccommodationsrelatedto the COVID-19pandemic.The Commission regularly publishes news of its investigations on its website (http://www.nazaha.gov.sa/en/Pages/Default.aspx).

SAMA, the central bank, oversees a strict regime to combat money laundering. Saudi Arabia’s Anti-Money Laundering Law provides for sentences up to 10 years in prison and fines up to USD1.3 million. The Basic Law of Governance contains provisions on proper management of state assets and authorizes audits and investigation of administrative and financial malfeasance.

The Government Tenders and Procurement Law regulates public procurements, which are often a source of corruption. The law provides for public announcement of tenders and guidelines for the award of public contracts. Saudi Arabiais an observer of the WTO Agreement on Government Procurement (GPA)

Saudi Arabia ratified the UN Convention against Corruption in April 2013 and signed the G20 Anti-Corruption Action Plan in November 2010.

Globally, Saudi Arabia ranks 51stout of 180 countries in Transparency International’s Corruption Perceptions Index 2019.

Resources to Report Corruption

The National Anti-Corruption Commission’s address is:

National Anti-Corruption Commission
P.O. Box (Wasl) 7667, AlOlaya – Ghadir District
Riyadh 2525-13311
The Kingdom of Saudi Arabia
Fax: 0112645555
E-mail: info@nazaha.gov.sa

Nazaha accepts complaints about corruption through its website www.nazaha.gov.sa or mobile application.

Saudi Arabia is a monarchy ruled by King Salman bin Abdulaziz Al Saud. The King’s son, Crown Prince Mohammed bin Salman, has assumed a central role in government decision-making. The Department of State regularly reviews and updates a travel advisory to apprise U.S. citizens of the security situation in Saudi Arabia and frequently reminds U.S. citizens of recommended security precautions. In addition to a Global Travel Advisory due to COVID-19, the Department of State has a current travel advisory for Saudi Arabia that was updated in September 2019. The Travel Advisory urges U.S. citizens to exercise increased caution when traveling to Saudi Arabia due to terrorism and the threat of missile and drone attacks on civilian targets and to not travel within 50 miles of the Saudi Arabia-Yemen border. The Travel Warning notes that terrorist groups continue plotting possible attacks in Saudi Arabia and that terrorists may attack with little or no warning, targeting tourist locations, transportation hubs, markets/shopping malls, and local government facilities. In the past, terrorists have targeted both Saudi and Western government interests, mosques and other religious sites (both Sunni and Shia), and places frequented by U.S. citizens and other Westerners.

Missile attacks have targeted major cities such as Riyadh and Jeddah, Riyadh’s international airport, Saudi Aramco facilities, and vessels in Red Sea shipping lanes. Houthi rebel groups operating in Yemen have fired missiles and rockets into Saudi Arabia, targeting populated areas and civilian infrastructure, and have publicly stated their intent to continue to do so. The Houthi rebel groups are also in possession of unmanned aerial systems (drones), which they have used to target civilian infrastructure and military facilities in Saudi Arabia. U.S. citizens living and working on or near such installations, particularly in areas near the border with Yemen, are at heightened risk of missile and drone attack.

Please visit www.travel.state.gov for further information, including the latest Travel Advisory.

The Ministry of Labor and Social Development sets labor policy and, along with the Ministry of Interior, regulates recruitment and employment of expatriate labor, which makes up a majority of the private-sector workforce. About 75 percent of total jobs in the country are held by expatriates, who number roughly 12.6 million out of a total population of approximately 33.4 million. The largest groups of foreign workers come from India, Pakistan, Bangladesh, Egypt, the Philippines, and Yemen. Saudis occupy about 96 percent of government jobs, but only about 25 percent of the total jobs in the Kingdom. Over one-third of Saudi nationals are employed in the public sector.

Saudi Arabia’s General Authority for Statistics estimates unemployment at 5.5 percent for the total population and 12 percent for Saudi nationals (Q3 2019 figures), but these figures mask a high youth unemployment rate, a Saudi female unemployment rate of 21.3 percent, and low Saudi labor participation rates (45.5 percent overall; 18.9 percent for women). With approximately 60 percent of the Saudi population under the age of 30, job creation for new Saudi labor market entrants will prove a serious challenge for years.

The SAG encourages Saudi employment through “Saudization” policies that place quotas on employment of Saudi nationals in certain sectors, coupled with limits placed on the number of visas for foreign workers available to companies. In 2011, the Ministry of Labor and Social Development laid out a sophisticated plan known as Nitaqat, under which companies are divided into categories, each with a different set of quotas for Saudi employment based on company size. Reforms enacted in 2017 refined the program to incentivize further the employment of women, individuals with disabilities, and managerial and high-wage positions. Each company is determined to be in one of four strata based on its actual percentage of Saudi employees, with platinum and green strata for companies meeting or exceeding the quota for their sector and size, and yellow and red strata for those failing to meet it. Expatriate employees in red and yellow companies can move freely to green or platinum companies, without the approval of their current employers, and green and platinum companies have greater privileges in securing and renewing work permits for expatriates.

Over the past few years, the SAG has taken additional measures to strengthen the Nitaqat program and expand the scope of Saudization to require the hiring of Saudi nationals. The Ministry of Labor and Social Development has mandated that certain job categories in specific economic sectors only employ Saudi nationals, beginning with mobile phone stores in 2016. The ministry has since broadened the policy to include car rental agencies, retail sales jobs in shopping malls, and other sectors. The ministry has likewise mandated that only Saudi women can occupy retail jobs in certain businesses that cater to female customers, such as lingerie and cosmetics shops. In 2017, the Ministry of Labor and Social Development began to phase in rules forbidding employment of foreigners in retail sales positions in 12 sectors, including: watches, eyewear, medical equipment and devices, electrical and electronic appliances, auto parts, building materials, carpets, cars and motorcycles, home and office furniture, children’s clothing and men’s accessories, home kitchenware, and confectioneries. Because many retail shops in sectors subject to Saudization are owned and operated by expatriates, these policies have resulted in numerous store closures across the country. Many elements of Saudization and Nitaqat have garnered criticism from the private sector, but the SAG claims these policies have substantially increased the percentage of Saudi nationals working in the private sector over the last several years, despite near-record unemployment levels.

In 2017, the Ministry of Labor and Social Development and the Ministry of Interior launched the latest phase of an ongoing campaign to deport illegal and improperly documented workers. The combination of Saudization and Nitaqat policies, new expatriate fees, increased visa and entry/exit permit fees, the increased VAT, and other measures that have raised the cost of living, has prompted approximately 1.9 million expatriates to depart the Kingdom over the past few years. These measures have also significantly increased labor costs for employers, both Saudi and foreign alike.

Saudi Arabia’s labor laws forbid union activity, strikes, and collective bargaining. However, the government allows companies that employ more than 100 Saudis to form “labor committees” to discuss work conditions and grievances with management. In 2015, the SAG published 38 amendments to the existing labor law with the aim of expanding Saudi employees’ rights and benefits. Domestic workers are not covered under the provisions of the latest labor law; separate regulations covering domestic workers were issued in 2013, stipulating employers provide at least nine hours of rest per day, one day off a week, and one month of paid vacation every two years.

Saudi Arabia has taken significant steps to address labor abuses, but weak enforcement continues to result in credible reports of employer violations of foreign employee labor rights. In some instances, foreign workers and particularly domestic staff encounter employer practices (including passport withholding and non-payment of wages) that constitute trafficking in persons. The Department’s annual Trafficking in Persons Report details concerns about labor law enforcement within Saudi Arabia’s sponsorship system is available at: https://www.state.gov/j/tip/rls/tiprpt/.

Overtime is normally compensated at time-and-a-half rates. The minimum age for employment is 14. The SAG does not adhere to the International Labor Organization’s convention protecting workers’ rights. Non-Saudis have the right to appeal to specialized committees in the Ministry of Labor and Social Development regarding wage non-payment and other issues. Penalties issued by the ministry include banning infringing employers from recruiting foreign and/or domestic workers for a minimum of five years.

Saudi Arabia has been a member of the Multilateral Investment Guarantee Agency since April 1988. Additionally, Saudi Arabia signed an Investment Incentive Agreement Washington, D.C. on February 27, 1975.

* Source for Host Country Data: Saudi General Authority for Statistics

According to the 2020 UNCTAD World Investment Report, Saudi Arabia’s total FDI inward stock was $236.1 billion and total FDI outward stock was $123.1 billion (in both cases, as of 2019).

Detailed data for inward direct investment (below) is as of 2010, which is the latest available breakdown of inward FDI by country.

*Source: IMF Coordinated Direct Investment Survey (2010 – latest available complete data)

Source: IMF’s Coordinated Portfolio Investment Survey (CPIS); data as of December 2017.

Economic Section and Foreign Commercial Service Offices
Embassy of the United States of America
P.O. Box 94309
Riyadh 11693, Saudi Arabia
Phone: +966 11 488-3800

Policies Towards Foreign Direct Investment

The UAE is generally open to FDI, citing it as a key part of its long-term economic plans.  The UAE Vision 2021 strategic plan aims to achieve FDI flows of five percent of Gross National Product (GNP), a number one ranking for the UAE in the Global Index for Ease of Doing Business, and a place among the top 25 countries worldwide and second regionally in the Global Competitiveness Index.  A letter issued by Dubai ruler Sheikh Mohammed Bin Rashid Al Maktoum (MBR) on January 4, 2020 outlinedthe ruler’s vision for 2020 and beyond, pledging increased government accountability and a push forgreater government efficiency.  The letter called for the formation of the Dubai Council, chaired by MBR and his sons, overseeing six sectors in Dubai:  the economy, services for citizens, governmental development, infrastructure, justice and security, and health and knowledge sectors.  UAE investment laws and regulations specific to Dubai are evolving to support the Council’s initiatives in these sectors.

While laws allow foreign-owned free zone companies to operate onshore in some instances, and permit majority-Gulf Cooperation Council (GCC) ownership of public joint stock companies, there is no national treatment for foreign investors, and foreign ownership of land and stocks isrestricted.  Non-tariff barriers to investment persist in the form of restrictive agency, sponsorship, and distributorship requirements, although several emirates have recently introduced new long-term residency visas and land ownership rights in an attempt to keep expatriates with sought-after skills in the UAE.  Each emirate has its own investment promotion agency.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign companies and individuals are limited to 49 percent ownership/control in any part of the UAE not in a free trade zone, except in specific economic sectors eligible for 100 percent foreign ownership.  These restrictions have been waived on a case-by-case basis.  The 2015 Commercial Companies Law allows for full company ownership by GCC nationals.  Neither Embassy Abu Dhabi nor Consulate General Dubai (collectively referred to as Mission UAE) has received any complaints from U.S. investors that they have been disadvantaged relative to other non-GCC investors.

Other Investment Policy Reviews

The UAE government underwent a World Trade Organization (WTO) Trade Policy Review in 2016.  The full WTO Review is available at: https://www.wto.org/english/tratop_e/tpr_e/s338_e.pdf

Business Facilitation

UAE officials emphasize the importance of facilitating business and tout the broad network of free trade zones as attractive to foreign investors.  The UAE’s business registration process variesbyemirate, butgenerally happens through an emirate’s Department of Economic Development. Business registrationsarenot available online.  Links to information portals from each of the emirates are available at https://ger.co/economy/197.  At a minimum, a company must generally register with the Department of Economic Development, the Ministry of Human Resources and Emiratization, and the General Authority for Pension and Social Security,with a notaryrequiredin the process.  In October 2019, Dubai introduceda‘Virtual Business License’ for non-resident entrepreneurs and freelancers in 101 countries.

In 2017,Dubai’sDepartment of Economic Development introduced an “Instant License”valid for one year, under which investors can obtain a license in minutes without a registeredlease agreement.In 2019, theDubai Free Zone Council allowedcompaniesto operate out of multiple free zones in Dubai through a single license under the “one free zone passport” scheme. In 2018, Abu Dhabi announced the issuance of dual licensesenabling free zone companiesto operate outside the free zones and to participate in government tenders. In 2018, Sharjah Emirate also announced that foreigners may purchase property in the emirate without a UAE residency visa on a 100-year renewable land lease basis.

Outward Investment

The UAE is an important participant in global capital markets, primarily through its sovereign wealth funds, as well as through several emirate-level, government-related investment corporations.

The United Nations Conference on Trade and Development (UNCTAD) lists the UAE as having 88 bilateral investment treaties, of which 51 are in force, and 37 signed agreements. There is no bilateral investment treaty between the United States and the UAE.  In 2019, the UAE signed bilateralinvestmenttreaties with Hong Kong and Brazil.

In June 2018, the UAE signed the Multilateral Convention to Implement Tax Treaty-Related Measures toPrevent Base Erosion and Profit Shifting to reinforce its position as a cooperative and transparent jurisdiction in combating avoidance of double taxation.  The UAE was added in March 2019 to an EU list of non-cooperative tax jurisdictions, but was removed from the list in October 2019, after tightening rules for establishing offshore corporations inthe country.

In March 2004, the United States signed a Trade and Investment Framework Agreement (TIFA) with the UAE to provide a formal framework for dialogue on economic reform and trade liberalization:  https://ustr.gov/sites/default/files/uploads/agreements/tifa/asset_upload_file305_7741.pdf.  As a member of the GCC, the UAE is also party to the U.S.-GCC Framework Agreement on Trade, Economic, Investment, and Technical Cooperation, signed in 2012. The Department of State negotiated and signed a Memorandum of Understanding creating an Economic Policy Dialogue (EPD) with the UAE Ministry of Foreign Affairs in 2012, to address a variety of topics including trade, investment, sector-specific cooperation, competitiveness, and entrepreneurship.  A CEO Summit process for the EPD was established in 2013, bringing recommendations from the private sector into the EPD discussions.  In 2019, the sixth U.S.-UAEEconomic Policy Dialogue was held in Washington, D.C., at which the two sides reaffirmed their commitment to deeper ties and the importance of the U.S.-UAE economic relationship in promoting regional prosperity and stability.

Transparency of the Regulatory System

As indicated elsewhere in this report, the regulatory and legal framework in the UAE is generally more favorable for local rather than foreign investors.

The Trade Companies Law requires all companies to apply international accounting standards and practices, generally the International Financial Reporting Standards (IFRS).  The UAE does not have local generally-accepted accounting principles.

Legislation is only published after it has been enacted into law and is not formally available for public comment beforehand, although the press will occasionally report details of high-profile legislation.  Final versions of federal laws are published in an official register “The Official Gazette,” usually only in Arabic, though there are private companies that translate laws into English. The UAE Ministry of Justice (MoJ) maintains translated laws on its website, but it is notkept current.  Other ministries and departments sometimes offer official English translations of laws on their websites. The official gazettes of the emirates of Abu Dhabi, Dubai and Sharjah are available online in Arabic.  Regulators are not required to publish proposed regulations before enactment, but may share them either publicly or with stakeholders on a case-by-case basis.

International Regulatory Considerations

The UAE is a member of the GCC, along with Bahrain, Kuwait, Oman, Qatar, and Saudi Arabia.It maintains regulatory autonomy, but coordinates efforts with other GCC members through the GCC Standardization Organization (GSO).  In 2018, the UAE submitted 51 notifications to the WTO committee, including notifications on antidumping, countervailing and safeguard measures.

Legal System and Judicial Independence

In the UAE constitution, Islam is identified as the state religion, as well as the principal source of domestic law.  The legal system of the country is generally divided between the British-based system of common law used in offshore free trade zones, and domestic law. Domestic law is a dual legal system of civil and Sharia laws – the majority of which has been codified.  Most codified legislation in the UAE is a mixture of Islamic law and other civil laws such as the Egyptian and French civil laws.

The mechanism for enforcing ownership of property throughoffshore or domestic courtsis generally considered to be predictable and fair.  As is the case with civil law systems, common law principles, such as adopting previous court judgments as legal precedents, are generally not recognized in the UAE, although lower courts typically follow higher court judgments. Judgments of foreign civil courts are typically recognized and enforceable under the local courts.The United States District Court for the Southern District of New York signed a memorandum withDubai International Financial Center (DIFC) courts that provides companies operating in Dubai and New York with procedures for the mutual enforcement of financial judgments.

UAE-based financial free zones, such as Abu Dhabi Global Market (ADGM), DIFC, and Ras Al Khaimah International Corporate Centre maintain wills and probate registries, allowing non-Muslims to register a will under internationally-recognized common law principles. In 2019, the DIFC Registry issued new Registry Rules (New Rules), which expand the geographic scope of the DIFC Registry and the applicable numberof witnesses.  The New Rules allow testators to include movable and immovable assets located in any part of the world into a DIFC will.

TheUAEconstitution stipulates that each emirate can decide whether to set up its own judicial system (local courts)to adjudicate local cases orrely exclusively onfederal courts.The Federal Judicial Authority has jurisdictionoverall cases involvinga “federalentity”with the Federal Supreme Court in Abu Dhabi, the highest court at the federallevel,having exclusive jurisdiction in seven types of cases:disputes between emirates, disputes between an emirate and the federal government, cases involving national security, interpretation of the constitution, questions over the constitutionality of a law, and cases involving the actions of appointed ministers and senior officials while performing their official duties.Although the federal constitution permits each emirate to have its own judicial authority,thefederal government administers the courts in Ajman, Fujairah,Ummal Quwain, and Sharjah, including the vetting and hiring of judges, and payment of salaries.Judges in these courts apply both local and federal law,as warranted. Dubai,Ras Al Khaimah, and Abu Dhabiadminister their own local courts, hiring, vetting, and paying their own judges and attorneys.The local courts in Dubai, Ras al Khaimah, and Abu Dhabi have jurisdiction over all matters that the constitution does not specifically reserve for the federal system.Abu Dhabi is the only emirate that operates both local (the Abu Dhabi Judicial Department) and federal courts in parallel.

Laws and Regulations on Foreign Direct Investment

There are four major federal laws affecting investment in the UAE: the Federal Commercial CompaniesLaw,theTradeAgencies Law, theFederalIndustry Law, and the Government Tenders Law.

The Federal Commercial Companies Law (Law No. 2, 2015) applies to commercial companies operating in the UAE. Federal Law No. 19 of 2018 eased restrictions on foreign ownership of companies incorporated onshore.The new law allows foreigners to own up to 100 per cent of the share capital in UAE companies operating in certain sectors, subject to licensing requirements. The Cabinet approved a list of economic sectors eligible for 100 percent foreign ownership including 122 economic activitiesin 13 sectors, includingindustrial, agricultural, and service industries. The Cabinet confirmed that each emiratemaydecide on the percentage of foreign ownershipit will allow in each sector. The Cabinetalso issued a “ Negative List” which enumerates sectors closed to foreigners, including oil exploration and production; investigation, security, military (including manufacturing of military weapons, explosives, dress and equipment); banking and financial activities; insurance; pilgrimage and umrah services; certain recruitment activities; water and electricity provision; fishing and related services; post, telecommunication and other audio-visual services; road and air transport; printing and publishing; commercial agency; medical retail (including pharmacies); blood banks and venom/poison banks.

Branch offices of foreign companies outside free zones are required to have a local agent with 100 percent UAE ownership, unless the foreign company has established its office pursuant to an agreement with the federal or emirate-level government. Apple and Tesla have opened stores outside free zones without local partners, having secured permission on an exceptional basis via a decree from the Ministry of Economy.  Existing commercial law allows companies to offer between 30 and 70 percent of their shares in an initial public offering (IPO), and eliminates the requirement to issue new shares at the time of the IPO.  The law also streamlines the process for forming a limited liability company by requiring between 1 to 75 shareholders (the prior requirement was between 2 to 50 shareholders).  Public joint stock companies are required to have 51 percent GCC ownership at the time of listing, and UAE nationals must chair and comprise the majority of board members of any public joint stock company.

In 2019, the emirates of Abu Dhabi and Dubai introduced economic incentives to stimulate theeconomy and attract foreign investments, including cutting and freezing fees on certain governmentservices, waiving fines, offering fee payment onaninstallment basis, and licensing businesseswithout physical locationsfor up totwo years.The Ministry of Economy has also formed a new FDI committee to unify licensing investment procedures in all emirates.

The Trade Agencies Law requires that foreign principals distribute their products in the UAE only through exclusive trade agents who are either UAE nationals or companies wholly owned by UAE nationals.  The Ministry of Economy handles registration of trade agents. Aforeign principal can appoint one agent for the entire UAE,or for a particular emirate or group of emirates.It remains difficult, if not impossible, to sell intheUAE without a local agent. The Trade Agencies Law’s provisionsapply to all registered commercial agentsare collectively set out in Federal Law No. 18 of 1981 on the Organization of Trade Agencies,as amended by Federal Law No. 14 of 1988 (the Agency Law).  Federal Law No. 18 of 1993 (Commercial) and Federal Law No. 5 of 1985 (Civil Code) govern unregistered commercialagencies.

On January 18, 2020, the UAE Cabinet announced a draft law for amending certain provisions in the Trade Agencies Law. The main amendments would allow family-owned companies to convert to public joint stock companies, and establish rules of governance and protection against default. The changes are intended to encourage UAE nationals to engage in business activities, and invest in public companies and their commercial agencies with the “least possible risk”. The changes offer protections for small shareholders and owners of SMEs, granting them statutory protection in cases of termination or non-renewal of agreements without “material reasons.”

According to the Central Bank Law, a bank incorporated in the United Arab Emirates must be 60 percent owned by UAE nationals.  The limit on foreign ownership of local banks is subject to approval by regulators on a case-by-case basis. Some major banks have been allowed to reach the maximum foreign ownership of 40 percent in recent years.  Foreign banks are only allowed to be licensed in the UAE as branches of foreign banks, with no more than eight local branches allowed per bank.

The Federal Industry Lawstipulates that industrial projects must have 51 percent UAE national ownership.  The law also requires that projects either be managed by a UAE national or have a board of directors with a majority of UAE nationals.  Exemptions from the law are provided for projects related totheextraction and refining of oilandnatural gas, and select hydrocarbon projects governed by special laws or agreements.

To register with the Abu Dhabi Securities Exchange, goto: https://www.adx.ae/English/Pages/Members/BecomeAMember/default.aspx

To obtain an investor number for trading on Dubai Exchanges, go to: http://www.nasdaqdubai.com/assets/docs/NIN-Form.pdf

Competition and Anti-Trust Laws

The Competition Regulation Committee under the Ministry of Economy reviews transactions for competition-related concerns.

Expropriation and Compensation

Mission UAE is not aware of foreign investors subjected to any expropriation in the UAE in the recent past.  There are no federal rules governing compensation if expropriations were to occur, and individual emirates would likely treat expropriations differently. In practice, authorities would be unlikely to expropriate unless there were a compelling development or public interest need to do so. In such cases, compensation would likely be generous to maintain foreign investor confidence.

Dispute Settlement

ICSID Convention and New York Convention

The UAE is a contracting state to the International Center for the Settlement of Investment Disputes(ICSID convention) and a signatory to the Convention on the Recognition and Enforcement of Foreign Arbitral awards (1958 New York Convention).

Investor-State Dispute Settlement

Mission UAEis aware of several substantial investment and commercial disputesoverthe past few years involving U.S. or other foreign investors and government and/or local businesses. There have also been several contractor/payment disputes with the government as well as with local businesses. Some observers have characterized dispute resolution as difficult and uncertain, and payment following settlements tend to be slow. Disputes are generally resolved by direct negotiation and settlement between the parties themselves, arbitration, or recourse within the legal system. Small, medium, and some larger enterprises fear being frozen out of the UAE market for escalating payment disputes through civil or arbitral courts, particularly disputes involving politically-connectedlocal parties. Some firms might feel compelled to exit the UAE market as they are unable to sustain the pursuit of legal or dispute-resolution mechanisms that can take months or even years to reach resolution. Arbitration may commence by petition to the UAE federal courts on the basis of mutual consent (a written arbitration agreement), independently (by nomination of arbitrators), or through referral to an appointing authority without recourse to judicial proceedings. There have been no confirmed reports of government interference in the court system that could affect foreign investors, but there is a widespread perception that domestic courts are likely to find in the favor of Emirati nationals over foreigners.

International Commercial Arbitration and Foreign Courts

The UAE government’s accession to the UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the Convention) became effective in November 2006.  An arbitration award issued in the UAE is now enforceable in all 138 member states, and any award issued in another member state is directly enforceable in the UAE. The Convention supersedes all incompatible legislation and rulings in the UAE.  Mission UAE is not aware of any U.S. firm attempting to use arbitration under the UN convention on the recognition and enforcement of foreign arbitral awards. While recognizing progress in compliance with this convention, some market watchers have raised concerns about delays and procedural obstacles encountered by firms seeking to enforce their arbitration awards in the UAE.

In June 2018, Federal Law No. 6 of 2018 on Arbitration came into force. The Federal Law on Arbitration is based on the United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration.    The new law is expected to bolster confidence in the UAE’s arbitration regime.

Bankruptcy Regulations 

A new bankruptcy law, the Federal Decree Law No.9of 2016, came into effect in December 2016and was applied for the first time in February 2019. The law covers companies governed by the Commercial Companies Law, most freetradezone companies, sole proprietorships, and civil companies conducting professional business. It allows creditors that are owed USD 27,225 or more,to file insolvency proceedings against a debtor30business days after notification in writing to the debtor.The law decriminalized “bankruptcy by default,” requiring companies and their owners in default for more than 30 days to initiate insolvency procedures rather than face fines and potential imprisonment. The Ministry of Finance initiated a review of the law in 2019.

A newbankruptcylaw for individuals,Insolvency Law No. 19of 2019, came into effect on November 29, 2019. The Law applies only to natural persons and estatesofthedeceased. The lawallowsa debtor to reach a settlement with his creditors without compromising the rights of the creditors byallowingan individual to seekcourt assistancefor debt settlementorto enter intoliquidation proceedings as a result of the inabilityto payfor an extended period of time. Under this law, a debtor facing financial difficulties may apply to the court for assistance and guidance in the settlement of his financial commitments through one or more court-appointed experts, or through a court-supervised binding settlement plan. If a debtor fails to pay any of his due debts for a period exceeding 50 consecutive business days, he shall apply to the court to commence liquidation proceedings for liquidation of his assets. However, observers allege that the law does not offer adequate protection to individuals, and non-payment of debt generally remains a criminal offense.

Dubai International Financial Centre (DIFC) enacted a New Insolvency Law on May 30, 2019. The law, which applies onlyto DIFCcompanies, introduces methods to deal with insolvency situations, including a new debtor in possession regime, appointment ofanadministratorin cases of mismanagement, and adoption of UNCITRAL Model Law, consistent with globally recognizedbestpractices.

The UAE Federal Government’s Al Etihad Credit Bureau (AECB) has partnered with local institutions to assist inassessingcredit risk.  In December 2019, Dubai Real Estate Centre (DREC), a prominent real estate and development firm in Dubai, announced it would use credit reports and scores from AECB to help assess the riskoftenantsfailing to fulfiltheir payment obligations on renewals of existing tenancy contracts.

Investment Incentives

All free trade zones provide incentives to foreign investors.  Outside the free trade zones, the UAE provides no incentives, although the ability to purchase property as freehold in certain prime developments could be considered an incentive to attract foreign investment.

Foreign Trade Zones/Free Ports/Trade Facilitation

There are numerous free trade zones throughout the UAE.  Foreign companies generally enjoy the same investment opportunities within those zones as Emirati citizens.  The chief attraction of free trade zones is that foreigners may own up to 100 percent of the equity in a free trade zone enterprise.  All free trade zones provide 100 percent import and export tax exemption, 100 percent exemption from commercial levies, 100 percent repatriation of capital and profits, multi-year leases, easy access to ports and airports, buildings for lease, energy connections (often at subsidized rates), and assistance in labor recruitment.  In addition, free trade zone authorities provide extensive support services, such as sponsorship, worker housing, dining facilities, and physical security.

Free trade zones have their own independent authority with responsibility for licensing and helping companies establish their businesses.  Investors can register new companies in a free trade zone, or license branch or representative offices. In 2018,theAbu Dhabi Department of Economic Development (ADED) introduced dualonshorelicenses for all Abu Dhabi free zone companies as part of stimulus package to attract foreign direct investments. However, free trade zones still have limited liability and are governed by special laws and regulations.  Companies in free tradezones seeking to operate within the UAE may be governed by the new Federal Commercial Companies Law, if the laws of the relevant free trade zone permitthem tooperate outside of the free zones.

Performance and Data Localization Requirements

The Emiratization Initiative is a federal incentive program that aims to increase the number of Emirati citizens employed within the private sector.  Exact requirements vary by industry, but the Vision 2021 national strategic plan aims to increase the percentage of Emiratis working in the private sector from five percent in 2014 to eight percent by 2021.  Most Emirati citizens are employed by the government or one of its many government-related entities (GREs).

All foreigndefense contractors with overUSD10 million in contract valueover a five-year period must participate in theTawazunEconomic Program, previously known as the UAE Offset Program.This program also requires defense contractors that are awarded contracts valued at more thanUSD10 million to establish commercially-viable joint ventures with local business partners, which would be projected to yield profits equivalent to 60 percent of the contract value within a specified period,usually seven years.

The UAE does not force foreign investors to use domestic content in goods or technology or compel foreign IT providers to turn over source code, but it strongly encourages companies to utilize local content.  In February 2018, the Abu Dhabi National Oil Company (ADNOC) piloted a new In-Country Value (ICV) strategy, which gives preference in awarding contracts to foreign companies that use local content and employ Emirati citizens.  In February 2020, the Abu Dhabi Department of Economic Development and ADNOC signed an agreement to drive ICV strategy and to standardize ADNOC’s ICV certification program across the Abu Dhabi Government’s procurement process. Following this agreement, businesses can make a one-time application for a unified ICV certificate that will now be applicable for the Abu Dhabi Government’s commercial evaluation process of goods and services procurement.  UAE government officials have indicated plans to expand the ICV program to other sectors of the economy, and to other emirates, in the coming years.  In 2019, Abu Dhabi Department of Economic Development introduced the Abu Dhabi Local Content (ADLC) initiative as part ofGhadan21, an accelerator program to encourage private sector participation in Abu Dhabi government tenders.

Real Property

The UAE government allows individual emirates to decide on the mechanisms through which ownership of land may be transferred within their borders. Abu Dhabi has generally limited ownership to Emirati or other GCC citizens, who may then lease the land to foreigners. The property reverts to the owner at the conclusion of the lease.However, in2019, the AbuDhabi Governmentissued Law No. 13 of 2019amending the rules on foreign ownership of real estate in the Emirate of Abu Dhabi.Effective April 16, 2019foreign individuals and companies wholly or partially-owned by foreignersare allowedtoown freehold interests in land located within certain investment areas of the Abu Dhabi Emirate for an unrestricted time period. The law also extends the right for public joint stock companies to own a freehold interest in land and property anywhere in the Abu Dhabi Emirate provided that at least 51 percent of the company is owned by UAE nationals. Prior to the issuance of this law, foreign owners’ interest in land was limited toa“Musataha,” a long-term lease of up to99years, renewable upon the agreement of both parties.

Although Dubai has identified restricted areas within its borders mostly in the older, more established neighborhoods, traditional freeholds, also known as outright ownership, are also widely available, particularly in newer developments.  Subject to very few regulations, freehold owners own the land and may sell it on the open market.  The contract rights of lienholders, as well as ownership rights of freeholders, are generally respected and enforced throughout the UAE, which in some cases has employed specialized courts for this purpose.

Mortgages and liens are permitted with restrictions, and each emirate has its own system of recordkeeping.  In Dubai, for example, the system is centralized within the Dubai Land Department,and is considered extremely reliable.  In September 2019, Dubai’s ruler issued a law, in which theReal Estate Regulatory Agency (RERA)cameunder the Dubai Land Department (DLD).According to the new law, DLD will replace RERA in the registration ofrealestate rental contracts.

The World Bank Ease of Doing Business Report notes that not all privately-held land plots in the economy are formally registered in an immovable property registry.Much of the country is unregistered desert;such land is generally owned by emirate-specificgovernments.Land not otherwise allocated or owned is the property of the emirate, and may be disposed of at the will of its ruler whogenerallyconsults with his advisors prior to disposition.The UAE doesnot have a securitization process for lending purposes.

Intellectual Property Rights

Intellectual property rights (IPR) holders face three main challenges in the UAE:  the trade and transshipment of counterfeit goods, unpredictable pharmaceutical patent protection, and the absence of a collective management organization (CMO) for royalty payments for copyrighted music. While some UAE enforcement authorities periodically seize and destroy counterfeit goods, concerns related to the re-export of seized goods, significant copyright piracy, and trademark infringement persist.  UAE police forces and investigators have generally been responsive when policing against pirated CDs, DVDs, and software, however, the failure to grant the necessary operating license to establish a CMO, which is allowed under the UAE’s 2002 Copyright Law and Ministerial Decision No. 133 of 2004, is a major obstacle to adequate enforcement of IPR.

The2019-2020 Global Competitiveness Report issued by the World Economic Forum ranked the UAE 19th globally on IPR protection, up from 26th in 2018-2019. The UAE’s legal framework for IPR is generally considered compliant with international obligations.  Emirate-level authorities such as economic development authorities, police forces, and customs authorities enforce IPR-related issues, while federal authorities manage IPR policy.  However, many of these laws are inconsistently implemented or enforced at federal and emirate-levels, criminal sentences are often non-deterrent, and enforcement actions require specific written complaints fromright holders.

In April 2017,UAE officials allowed domestic manufacture of generic versions of a pharmaceutical product still under patent protection in the United States.The UAE claimed that Decree No. 404, a measure providing reliable protection for pharmaceutical products with valid country of origin patents, is no longer valid.It is also unclear whether the UAE courts will consistently recognize patents granted by the Gulf Cooperation Council (GCC) Patent Office.

Dubai Police announced a total of297counterfeit casesin 2019,comparedto264in 2018. Enforcement authorities in the UAE’s northern emirates also conducted inspection campaigns during2019.Many counterfeit products in the UAE arepromoted via social media,andthe UAE Telecommunication Regulatory Authority (TRA) hasbeen active in tracking and blocking these accounts.In2019, TRA banned134websites for IPR violations, compared to152in 2018.In addition to enforcement efforts, the UAE continued to holdIPR-related public awareness events and reginal conferences.

The UAE did not enact any new laws related to IP protection in 2019. The UAE was included inboththe U.S.Trade Representative (USTR)2020Special 301 Report (https://ustr.gov/sites/default/files/2020_Special_301_Report.pdf)and the 2019Notorious MarketsList. (https://ustr.gov/sites/default/files/2019_Review_of_Notorious_Markets_for Counterfeiting_and_Piracy.pdf) The latter mentions twophysicalmarketplaces in theUAEthataregatewaysfordistribution ofChinese-sourcedcounterfeit goods to other markets in the region,includingNorth Africaand Europe.

Capital Markets and Portfolio Investment

UAE government efforts to create an environment that fosters economic growth and attracts foreign investment has resulted in: i) no taxes or restrictions on the repatriation of capital; ii) free movement of labor and low barriers to entry (effective tariffs are five percent for most goods); and iii) an emphasis on diversifying the economy away from oil, which offers a broad array of investment options for FDI.  Key drivers of the economy include real estate, energy, tourism, logistics, manufacturing, and financial services.

The UAE has three stock markets: Abu Dhabi Securities Exchange, Dubai Financial Market, and NASDAQ Dubai. The regulatory body, the Securities and Commodities Authority (SCA), classifies brokerages into two groups:those which engage in trading only while the clearance and settlement operations are conducted through clearance members,and those which engage in trading clearance and settlement operations for their clients.Under the regulations, trading brokerages require paid-up capital ofUSD820,000, whereas trading and clearance brokerages needUSD2.7 million.USD 367,000 in bankguaranteesisrequired for brokerages to trade on the bourses.

The UAE issued investment funds regulations in September 2012, known as the “twin peak” regulatory framework designed to govern the marketing of investment funds established outside the UAE to domestic investors, and the establishment of local funds domiciled inside the UAE. This regulation gave the SCA, rather than the Central Bank, authority over the licensing, regulation and oversight of the marketing of investment funds.  The marketing of foreign funds, including offshore UAE-based funds, such as those domiciled in the DIFC, requires the appointment of a locally-licensedplacement agent. The UAE government has also encouraged certain high-profile projects to be undertaken via a public joint stock company to allow the issuance of shares to the public.  Further, the UAE government requires any company carrying out banking, insurance, or investment services for a third party to be a public joint stock company.

In 2019, SCA issued a number of capital-related decisions.In May 2019, SCA issued a decision concerning the Capital Adequacy Criteria of Investment Manager and Management Company, which stipulates that the investment manager and the management  company must allocate capitalto constitute a buffer for credit risk, market risk, or operational risk, even if it does not appear as a line item in the balance sheet.

In 2019, SCAalsoissued adecisionconcerning Real Estate Investment Fund control, which stipulates thatapublic or private real estate investment fundshallinvest at least 75percentof its assets in real estate assets.According to this decision, areal estate investment fund may establish or own one or more real estate services companies provided that its investment in the ownership of each company and its subsidiaries shall not be more than 20percentof the fund’s total assets.

Credit is generally allocated on market terms, and foreign investors can access local credit markets. Interest rates are usually very close to those in the United States considering the local currency is pegged to the dollar.  There have been complaints thatGREscrowdout private sector borrowers.

Money and Banking System

The UAE has a robust banking sector with 49 banks, 27 of which are foreign institutions. The number of national bank branches declined to 656 at the end of 2019, compared to 743 at the end of December 2018, due to bank mergers and an ongoing transition to online banking.

Non-performing loans(NPL)comprised6.2 percentof outstanding loansin 2019, compared with5.7percentin 2018, according tofiguresfrom theCentral Bank of the UAE (CBUAE). Underanew reporting standard, the NPL ratio of the UAE banking system for the year-end 2018 stood at 5.6 percent, compared to 7.1 percent under the previous methodology. The CBUAE recordedtotal sector assets ofUSD839billionas ofJanuary 2020.

There are some restrictions on foreigners’ ability to establish a current bank account, and legal residents and Emiratis can access loans under more favorable terms than non-residents.

Foreign Exchange and Remittances

Foreign Exchange Policies

According to the IMF,the UAE has norestrictions on making payments and transfers for international transactions, except security-related restrictions. Currencies are traded freely at market-determined prices. The UAE dirham has been pegged to the dollar since 2002. The mid-point between the official buying and selling rate for the dirham (AED orDhs) is fixed at AED 3.6725 perUSD.

Remittance Policies

The Central Bankof the UAEinitiated the creation of the Foreign Exchange & Remittance Group (FERG), made up of various exchange companies, which is registered with the Dubai Chamber of Commerce & Industry. Unlike their counterparts across the world that deal mainly in money exchange, exchange companies in the UAE are the primary conduits for transferring large volumes of remittances through official channels.According to migration and remittance data from the World Bank, in2018the UAE had migrant remittance outflows ofUSD 42.2 billion. TheCentral Bankreportedmigrant remittances totalingUSD 44.9billionin 2019. Exchange companies are important partners in the UAEgovernment’selectronic salary transfer system, called the Wage Protection System, designed to ensure workers are paid according to the terms of their employment. They also handle various ancillary services ranging from credit card payments,tonational bonds, and traveler’s checks.

Sovereign Wealth Funds

Abu Dhabi is home to two sovereign wealth funds—the Abu Dhabi Investment Authority (ADIA), and Mubadala Investment Company—withestimatedtotal assets of approximatelyUSD $1 trillionas ofJune 2019.Each fundhasa chair and board members appointedby the Ruler of Abu Dhabi. President Khalifa Bin Zayed Al Nahyan is the chair of ADIA and Abu Dhabi Crown Prince Mohammed Bin Zayed Al Nahyan is the chair of Mubadala. Emirates Investment Authority,the UAE’s federal sovereign wealth fund, ismodest by comparison, with estimated assetsof aboutUSD 15 billion.The Investment Corporation of Dubai (ICD) is Dubai’s primary sovereign wealth fund, withanestimatedUSD 264billionin assets according to ICD’s June2019financialreport.

UAE funds vary in their approaches to managing investments.  ADIA generally does not actively seek to manage or take an operational role in the public companies in which it invests, while Mubadala tends to take a more active role in particular sectors, including oil and gas, aerospace, infrastructure, and early-stage venture capital.  ADIA exercises its voting rights as a shareholder in certain circ*mstances to protect its interests, or to oppose motions that may be detrimental to shareholders as a body.  According to ADIA, the fund carries out its investment program independentlyand without reference to the government of Abu Dhabi.

In 2008,ADIA agreed to act alongside the IMF as co-chair of the International Working Group of sovereign wealth funds, which eventually became the International Forum of Sovereign Wealth Funds (IFSWF).  Comprising representatives from 31 countries, the IFSWF was created to demonstrate that sovereign wealth funds had robust internal frameworks and governance practices, and that their investments were made only on an economic and financial basis.

State-owned enterprises (SOEs) are a key component of the UAE economic model.  There is no

published list of SOEs orGREs, at the national or individual emirate level. Some SOEs, such as the influential Abu Dhabi National Oil Company(ADNOC), are strategically important companiesand a major source of revenuefor the government. Mubadala established Masdar in 2006 to develop renewable energy and sustainable technologies industries. A number of SOEs, such as EmiratesAirlinesand Etisalat,the largest local telecommunications firm, have in recent years emerged as internationally recognized brands. Some but not all of these companies have competition.Insomecases, these firms compete against other state-owned firms (Emirates andEtihad airlines, for example, or telecommunications company Etisalat against du).While they are not granted full autonomy, these firms leverageties betweenentities they control to foster national economic development. Perhaps the best example of such an economic ecosystem is Dubai, where SOEs have been used as drivers of diversification in sectors including construction, hospitality, transport, banking, logistics, and telecommunications.Sectoral regulations in some cases address governance structures and practices of state-owned companies. The UAE is not party to the WTO Government Procurement Agreement.

Privatization Program

There is no privatization program in the UAE.  There have been several listings of portions of SOEs, on local UAE stock exchanges, as well as some “greenfield” IPOs focused on priority projects.

There is a general expectation that businesses in the UAE adhere to responsible business conduct standards, and the UAE’s Governance Rules and Corporate Discipline Standards (Ministerial Resolution No. 518 of 2009) encourage companies to apply socialpolicytowards supporting local communities. In February 2018, the UAE issued Cabinet Resolution No. 2 regarding Corporate Social Responsibility (CSR), which encourages voluntary contributions to a National Social Responsibility Fund. The Emirate of Ajman has made annual CSR contributions of USD 417 mandatory for all businesses. Many companies maintain CSR offices and participate in CSR initiatives, including mentorship and employment training; philanthropic donations to UAE-licensed humanitarian and charity organizations; and initiatives to promote environmental sustainability. The UAE government actively supports and encourages such efforts through official government partnerships, as well as through private foundations.The 2015 Commercial Companies Law requires managers and directors to act for the benefit of the company and makes any company provisions exempting a directors and managers from personal liability voidable.

In April 2015, the Pearl Initiative and the United Nations Global Compact held their inaugural Forum in Dubai. The Pearl Initiative is an independent, non-profit organization founded by Sharjah-based Crescent Enterprises working across the Gulf region to encourage better business practices. The UAE has not subscribed to the OECD Guidelines for Multinational Enterprises and has not actively encouraged foreign or local enterprises to follow the specific United NationsGuiding Principles on Business and Human Rights. The UAEgovernmenthas not committed to adhereto the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Afflicted and High-Risk Areas,nor does it participate in the Extractive Industries Transparency Initiative. The Dubai Multi-Commodities Center (DMCC), however, passed the DMCC Rules for Risk-Based Due Diligence in the Gold and Precious Metals Supply Chain, which it claims are fully aligned with the OECD guidance.

The UAE has stiff laws, regulations, and enforcement against corruption and has pursued several high-profile cases. For example, the UAE federal penal code and the federal human resources law criminalizeembezzlement andthe acceptance of bribes by public and private sector workers. The Dubai financial fraud law criminalizes receipt of illicit monies or public funds. There is no evidence that corruption of public officials is a systemic problem. The State Audit Institution and the Abu Dhabi Accountability Authority investigate corruption in the government. The Companies Law requires board directors to avoid conflicts of interest. In practice,however, given the multiple roles occupied by relatively few senior Emirati government and business officials, myriad conflicts of interest exist.Business success in the UAEalsostill depends much on personal relationships.

The monitoring organizations GAN Integrity and Transparency International describe the corruption environment in the UAE as low-risk, and rate the UAE highly with regard to anti-corruption efforts both regionally and globally.  Some third-party organizations note, however, that the involvement of members of the ruling families and prominent merchant families in certain businesses can create economic disparities in the playing field, and most foreign companies outside the UAE’s free zones must rely on an Emirati national partner, often with strong connections,who retains majority ownership.  The UAE has ratified the United Nations Convention against Corruption.  There are no civil society organizations or NGOs investigating corruption within the UAE.

Resources to Report Corruption

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

Dr. Harib Al Amimi
President
State Audit Institution
20th Floor, Tower C2, Aseel Building, Bainuna (34th) Street, Al Bateen, Abu Dhabi, UAE
+971 2 635 9999
info@saiuae.gov.ae

There have been no reported instances of politically-motivated property damage in recent years.

Despite an economic slowdown in 2019, unemployment among UAE citizens remains low. Expatriates, who represent over 85 percent of the country’s 9.6 million residents, account for more than 95 percent of private sector workers.  As a result, there would be large labor shortages in all sectors of the economy if not for expatriate workers.  Most expatriate workers derive their legal residency status from their employment.

A significant portion of the country’s expatriate labor population consists of low-wage workers who areprimarily from South Asiaand workin labor-intensiveindustries such as construction, maintenance, and sanitation. In addition, several hundred thousand domestic workers, primarily from South and Southeast Asia and Africa, work in the homes of both Emirati and expatriate families. Federal labor law does not apply to domestic, agricultural, or public sector workers.In 2014, the federal government implemented a law mandating a standard contract for all domestic workers.In 2017, the UAE issued a domestic workers law, which regulates their rights and contracts.Various regulations require businesses in certain sectorssuch asfinancial services to employ minimum quotas of Emiratis.

Under UAE labor law, employers must pay severance to workers who complete one year or more of service except in cases of termination under certain conditions described in Article 120 of the federal labor law, which relate to misconduct by workers. Expatriate workers do not receive UAEgovernment unemployment insurance. Termination of UAE nationals in mostsituations requires prior approvalfromthe Ministry ofHuman Resources and Emiratization.

A guest worker system generally guarantees transportation back to country of origin at the conclusion of employment. There have been no reports of excessively onerous visa, residence, work permit, or similar requirements inhibiting mobility of employees.In June 2018, the UAE cabinet approved a revamped repatriation scheme to replacetheUSD817guaranteeemployers had to depositper worker.Under the new system,repatriationinsurancecostsUSD16per year per employee.In November 2018, the UAE cabinet approvedfive-year residence visas for investors whopurchase property worthUSD1.4 million or more, and 10-year residence visas for individuals who investUSD2.8 million in a business.The government also introduced new visas for entrepreneurs, and specialized talent inscience, medicine and specialized technical fields.In 2018, the Ministry of Human Resources and Emiratization introduced a part-time workpermit, allowing employeeswho live in the UAE on a work visato undertake part-time jobs andtowork for multiple employers simultaneously.

Although UAE federal law prohibits the payment of recruitment fees, many prospective workers continue to make such payments in their home countries. In2018, the UAE government launched TadbeerCenters,publicly regulated but privately operated agencies that are meant to replacerecruitment agencies by 2020. There is no minimum wage legally mandated by the UAE; however, some labor-sending countries require their citizens to receive certain minimum wage levels as a condition for allowing them to work in theUAE.In January2020, the UAE government introduced asalary requirement for residents seeking todirectlysponsor a domestic worker, raising theminimum monthly salaryfromUSD 1,630 to 6,810.

Federal Law No. 8 of 1980 prohibits labor unions. The law also prohibits public sector employees, security guards, and migrant workers from striking,and allows employers to suspend private sector workers fordoing so. In addition, employers have the ability to cancel the contracts of striking workers, which can lead to deportation. According to government statistics, there were approximately 30 to 60 strikes per year between 2012 and 2015,the last year for which data is available. In December 2019,construction workers in Abu Dhabiengaged in an hours-longstrike, claiming theyhadnot been paid in monthsand that each was owed over USD 3,400.Thepoliceintervenedtodefuse the protests andarrestedsome of the workers for resisting. Mediation plays a central role in resolving labor disputes. The federal Ministry of Human Resources and Emiratization (MHRE) and local police forces maintain telephone hotlines for labor dispute and complaint submissions.The MHRE manages 11 centers around the UAE that provide mediation services between employers and employees.Disputes not resolved by the Ministry of Human Resources and Emiratization move to the labor court system.

The MHRE inspects company workplaces and company-provided worker accommodations to ensure compliance with UAE law. Emirate-level government bodies, includingtheDubai Municipality, also carry out regular inspections. The MHRE also enforces a mid-day break from 12:30p.m. – 3:00 p.m.during the extremely hot summer months. The federally-mandated Wage Protection System(WPS)monitors and requires electronic transfer of wages to approximately 4.5 million private sector workers (about95 percent of the total private sectorworkforce). There are reports that small private construction and transport companies work around the WPSto pay workers less than their contractual salaries. Domestic workers arenotpaid through the WPS, although the UAE governments hopes toincorporate them into the system beginninginthe third quarter of 2020.

Following the promulgation of similar legislation in Abu Dhabi, Dubai’s government fully implemented Law No. 11 in May 2017, which mandates employers provide basic health insurance coverage to their employees or face fines.  Dubai’s mandatory health insurance law covers 4.3 million people, and applies to employees residing in other emirates but working in Dubai.

The multi-agency National Committee to Combat Human Trafficking is the federal body tasked with monitoring and preventing human trafficking, including forced labor.  Child labor is illegal and rare in the UAE.  The UAE continues to participate in the Abu Dhabi Dialogue, engage in the Colombo Process, and partner with other multilateral organizations such as the International Organization for Migration and International Labor Organization in regard to labor exploitation and human trafficking.

Section 7 of the Department of State’s Human Rights Report (http://www.state.gov/j/drl/rls/hrrpt)provides more information on worker rights, working conditions, and labor laws in the UAE.  The Department of State’s Trafficking in Persons Report (https://www.state.gov/j/tip/rls/tiprpt/2018/index.htm) details the UAE government’s efforts to combat human trafficking.

The UAE does not have a bilateral agreement withDFCafter its agreement with OPIC was suspended in 1995 for not meeting statutory “taking steps” standards on worker rights.  The UAE is a VeryHigh Incomecountry as defined by OPIC’s statutes, and as a development finance agency,DFCgives priority to financing projects in middle and low income countries.

* Economic Report: Ministry of Economy

Data from the Annual Report of the Ministry of Economy(2019) indicates that the GDPfor2018inreal prices (base year 2010) were approximately USD $392.7 billion, while the estimatedGDPat current prices was about USD$414.1 billion in 2018.

According to the UAE Ministry of Economy’s Annual Economic Report 2019, the net annual FDI inflows to the UAE in 2018 were $10.4 billion, similar to 2017. The largest investors in the UAE were:  India, United States, UK, Japan, China, Saudi Arabia, Germany, Kuwait, France and the Netherlands.

Table 4: Sources of Portfolio Investment
Data not available.

Paul Prokop
Economic Officer
First Street, Umm Hurair -1, Dubai UAE
+971 (0)4 309 4918
prokoppg@state.gov