Long-Term Business Opportunities Await in Morocco

Francisco A. Laguna & Wojciech Kornacki

Morocco’s business and foreign direct investment opportunities are red hot. The World Bank reports that in the last 5 years, Morocco has been undergoing sweeping economic reforms which are expected to generate high potential growth in the country. Most recently, Morocco was listed in the top 48 most innovative economies in the world. The UK Trade & Investment Ministry reports that Morocco has been identified as a member of a group of “fast-growing nations described as ‘African Lions’.”

About Morocco

Map of Morocco Photo Credit: US CIA WF via Wikimedia Commons

Map of Morocco
Photo Credit: US CIA WF via Wikimedia Commons

Morocco is located in Northeastern Africa, between Algeria and Western Sahara. It is separated from Europe by the Mediterranean Sea. Spain and Portugal are its Northern neighbors. Its economy has been growing at the rate of approximately 4.5% since 2001. Its population of slightly over 33 million offers a qualified and relatively inexpensive labor force. Morocco also offers political and economic stability to potential investors – two key advantages – which prove elusive for other Northeastern African countries.

Strengths and Weaknesses of the Moroccan Market:

Morocco offers following strengths: (1) Strategic location between Europe and North and West Africa; (2) improving communication and transportation networks; (3) competitive labor costs; and (4) tax incentives and ease of repatriation for profits. Potential weaknesses include: (1) growing competition from non-EU countries; (2) corruption and bureaucracy; (3) informal economy; and (4) delays in implementing reforms. Despite the weaknesses, most experts agree that Morocco offers attractive growth and investment opportunities.

Free Trade Agreement

Moroccan government has prioritized the development of its renewable energy industry. This creates countless opportunities in infrastructure projects, safety, financing, security and other related industries. This picture shows solar cell panels in Eastern Morocco.   Courtesy of http:// http://en.wikipedia.org

Moroccan government has prioritized the development of its renewable energy industry. This creates countless opportunities in infrastructure projects, safety, financing, security and other related industries. This picture shows solar cell panels in Eastern Morocco. Courtesy of http:// http://en.wikipedia.org

Morocco is a signatory of the U.S.-Morocco Free Trade Agreement and other free trade agreements giving potential investors access to over 1 billion consumers world-wide. For U.S. exporters, this also means that almost all goods exported to Morocco are tariff free. According to the Moroccan Investment Development Company, Morocco has lower business taxes than China and Spain and lower export costs than Turkey and Egypt. Thus, smart and well-timed investment in Morocco may be less expensive, and has the potential to offer greater return in the future.

Solar and Renewable Energy Investment Opportunities

Morocco has recently completed Stage I of one of the world’s largest solar thermal power plants located at the edge of Sahara desert, near the town of Ouarzazate. Once the project is completed, Morocco will become a major world solar power. The new design allows the plant to deliver the energy at night as well. Recently, even NASA commented on the project.

Morocco is also heavily investing in wind and water energy projects. Direct foreign investment opportunities in renewable energy in Morocco will continue to expand in the years to come as Morocco is aiming to become energy self-sufficient, and eventually sell its energy to Europe.

Infrastructure Development Project Opportunities

Infrastructure projects as another investment opportunity in Morocco. In the last several years, Morocco has been spending billions of dollars to improve its transportation infrastructure to become more attractive to international investors. This includes expanding the high speed rail system, road system and electric power grid. The Moroccan construction industry is expected to grow at the rate of over 6% per year until 2020. Its proximity to Europe and ready access to many emerging markets in Africa make the country a regional project and infrastructure powerhouse, and US investors are looking at Morocco when exploring to expand in the region. Earlier this year, Renault and its partners announced that they would invest $1 billion in Morocco. Shell Vivo Energy, GlaxoSmithKline, Unilever, and many other companies already operate in Morocco.

Investment Opportunities in other Moroccan Industries

Morocco offers pristine beaches, Mediterranean climate, countless historic sites, and well developed and growing hospitality industry. In addition, its open skies policy has allowed many airlines establish direct flights to Morocco.  Courtesy of http:// http://en.wikipedia.org

Morocco offers pristine beaches, Mediterranean climate, countless historic sites, and well developed and growing hospitality industry. In addition, its open skies policy has allowed many airlines establish direct flights to Morocco. Courtesy of http:// http://en.wikipedia.org

The stock exchange in Morocco is the second largest in Africa and has recently partnered with the London Stock Exchange. This creates tremendous opportunities for banking, insurance, capital markets and public private partnerships.

The national Investment Development Agency reports that other sectors of Moroccan economy are also growing.  Between 2005 and 2010, the number of tourists visiting Morocco has increased by 3 million.

The new infrastructure, renewable energy and tourism projects also offer opportunities in fire safety, border control, surveillance, cyber security and greater education and training.

If you would like more information about investment opportunities in Morocco, contract TransLegal.

United Nations Offers Countless Global Business Opportunities

Francisco A. Laguna & Wojciech Kornacki

Each year, the United Nations Organization (“UN”) spends billions of dollars to support various missions and development projects around the world.  This creates numerous and ongoing international business opportunities for entrepreneurs willing to understand and operate within the UN procurement system.  The last decade shows that UN spending is only going to increase.

United Nations Basics

The UN is an international organization consisting of 193 member states.  It is organized into approximately 30 different specialized agencies, funds and programs, and each entity has its own procurement needs.

One of the four U.N. headquarters located in New York City.  Recent additions include to the U.N. complex include DC-1 and DC-2 located in the center of the picture.  Courtesy of http:// http://en.wikipedia.org

One of the four U.N. headquarters located in New York City. Recent additions include to the U.N. complex include DC-1 and DC-2 located in the center of the picture. Courtesy of http:// http://en.wikipedia.org

The mission of the UN is to preserve international peace and security, promote human rights and disarmament, and to take action to address health and humanitarian emergencies, terrorism, climate change, and sustainable development, among others.  This is primarily done by humanitarian missions, peacekeeping operations and various development projects, all of which require billions of dollars in annual expenditures on services and supplies.  The UN and its entities operate around the world.  Its four headquarters are located in New York, Vienna, Geneva and Nairobi.

United Nations Procurement of Goods and Services

According to the 2014 Annual Statistical Report on United Nations Procurement, the overall procurement needs of the UN exceeded to $17 billion in 2014.  The United Nations Office for Project Services (“UNOPS”) reports that between 2004 and 2014, UN procurement needs increased by about $10 billion.  This shows that UN expenditures are likely to grow in the future.

UN humanitarian mission in progress. UN troops are securing an airdrop of supplies in Haiti.  In the wake of the 2010 earthquake, multiple cargo planes flew missions to deliver food and supplies to Haiti.  Several years later, the UN mission still continues in Haiti.   Courtesy of http:// http://en.wikipedia.org.

UN humanitarian mission in progress. UN troops are securing an airdrop of supplies in Haiti. In the wake of the 2010 earthquake, multiple cargo planes flew missions to deliver food and supplies to Haiti. Several years later, the UN mission still continues in Haiti. Courtesy of http:// http://en.wikipedia.org.

In 2014, the UN spent approximately 52 % of its total expenditures on services and 48 % on goods.  The three most active organizations with the greatest procurement needs were the UN Children’s Fund (“UNICEF”), the UN Procurement Division (“UN/PD”) and the UN World Food Programme (“WFP”)   The United States is the greatest supplier of goods and services to the UN covering approximately 9% of all of UN needs.  India, Afghanistan, Belgium, and Switzerland follow.  Currently, there is a movement within the UN to procure more goods from the developing countries.

UN procurement in developed and developing countries is different.  In the developed countries, UN entities primarily focus on procuring information technology and telecommunications, financial and insurance, testing equipment, motor vehicles and parts.  In the developing countries, the UN procures personal care goods, domestic appliances, educational equipment, fuels, humanitarian aid services, and rural development services.  It is important to note that each UN entity has its own specific needs in different countries.

UN Procurement Opportunities

The UN Procurement Division divides business opportunities into Expressions of Interests (“EOI”), Requests for Information, (“RFI”) and Tender Opening Schedule.  Expressions of Interests are company responses to UN planned solicitations.  Requests for Information allow the UN to assess vendor capabilities and assist companies in preparing them for the planned procurements.  Tender openings mean formal openings of sealed bids or proposals.  The first step in taking advantage of the opportunities is to register.

Being successful in UN procurement necessitates careful attention to detail and a clear understanding of the organization’s requirements. Call TransLegal with your questions concerning UN procurement opportunities.

US Passes Trade Facilitation and Enforcement Act

Francisco A. Laguna

After more than two years of debate, last week, the United States Senate passed the Trade Facilitation and Enforcement Act of 2015 (2015 Trade Enforcement Act). The legislation contains the most far reaching set of changes since the Customs Modernization (MOD) Act. Of particular significance is the inclusion of brand new measures to protect intellectual property rights and to combat antidumping and countervailing duty violations, including a mandate that Customs and Border Protection (CBP) establish its own program for these purposes.

By U.S. Customs and Border Patrol

By U.S. Customs and Border Patrol

Surprisingly, the major provisions of the Act received almost universal support from the trade community. The House had passed the bill last year, but it got bogged down in the Senate because of an unrelated internet sales tax provision. While the provision remains in the final version of the law passed by the Senate, the Senate leadership in return has agreed to take up new Internet sales tax legislation this year. President Obama is anticipated to sign the legislation into law this week.

The 2015 Trade Enforcement Act makes some significant changes to the operations and programs of CBP, adds new provisions to the antidumping and countervailing duty laws, including new procedures to combat evasion of AD/CVD orders, and revamps the drawback laws.

This week, we begin a short summary of the more significant changes. We will continue our summary next week.

Trade Facilitation and Trade Enforcement (Title I)

Title I establishes a various trade facilitation and enforcement programs. It:

By WestportWiki - Own work, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=34507625

By WestportWiki – Own work, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=34507625

  • requires CBP to work with the private sector and other federal agencies to ensure that all CBP partnership programs provide meaningful trade benefits to program participants;
  • authorizes CBP programs, including customs modernization efforts such as the Automated Commercial Environment (ACE) and the International Trade Data System (ITDS), also known as the “Single Window” approach to collecting trade data;
  • formalizes the Commercial Customs Advisory Committee (COAC) and the Centers of Excellence and Expertise (CEEs);
  • creates a National Targeting Center (NTC) within the Office of Field Operations that will gather data and assess risk on each of CBP’s Priority Trade Issues (PTIs): 1) agricultural programs; 2) antidumping and countervailing duties; 3) import safety; 4) intellectual property rights; 5) revenue; 6) textiles and wearing apparel; and 7) trade agreements and preference programs;
  • requires CBP to develop criteria for assigning importer-of-record identification numbers; and
  • establishes a new importer program that directs CBP to adjust bond amounts for new importers based on the level of risk assessed by CBP for revenue protection. CBP is required to develop risk-based guidelines and procedures to ensure increased oversight of imported products of new importers, including new non-resident importers.

Import Health and Safety (Title II)

Title II creates an interagency import safety working group, chaired by the Secretary of Homeland Security. The group is responsible for developing a joint import safety rapid response plan to establish protocols and practices that CBP, in conjunction with other federal, state and local authorities, must use when responding to cargo that poses a threat to the health or safety of US consumers. Title II also requires joint exercises with these entities and training for CBP port personnel in enforcement of import health and safety laws.

Import-Related Protection of Intellectual Property Rights (Title III)

Enforcement of intellectual property rights remains one of CBP’s highest priorities. Accordingly, the provisions of Title III will be one of the most scrutinized areas of the 2015 Trade Enforcement Act. Specifically, Title III:

  • authorizes and directs CBP to share information with rights holders so that they could help to quickly identify whether a product entering the United States is in violation of a copyright or trademark. Rights holders could even examine and test the merchandise;
  • authorizes CBP to seize merchandise if it is found to be in circumvention of IPR laws;
  • requires CBP to notify an injured right holder if they are included on an annually revised, CBP-maintained list (i.e., if rights are recorded with CBP);
  • establishes a National Intellectual Property Rights Coordination Center within CBP to coordinate actions with other agencies and conduct outreach to importers; and
  • calls for an increase in IPR enforcement personnel.

Enforcement of Trade Remedy Laws (Title IV)

The Act adds significant new provisions to deter evasion of antidumping (AD) and countervailing duty (CVD) orders. Directed largely at steel imports, the new provisions, called the “Enforce and Protect Act of 2015” are likely to be invoked frequently by US producers combating imports under an AD or CVD order.

U.S. Customhouse, 555 Battery St, San Francisco

U.S. Customhouse, 555 Battery St, San Francisco

In particular, the new law establishes a whole new procedure within CBP which allows US producers or wholesalers, unions, foreign manufacturers or exporters, or trade associations of a covered product to file an allegation that a party has entered covered merchandise through evasion. Importers beware!  As soon as CBP can get this procedure up and running, it is likely to be very active.

Once a complaint is filed and accepted, CBP is required to conduct a formal investigationwith specific deadlines.

CBP can issue questionnaires just like in a trade remedy cases to importers and foreign producers.

Failure to respond will result in “adverse inferences” regarding the alleged evasion.

If evasion is found, CBP can suspend liquidation, order payment of duties owed, and pursue an enforcement action.

The new anti-evasion measures of Title IV also include various directives for CBP to target and investigate potential evasion of AD and CVD orders, including setting up a new Trade Remedy Law Enforcement Division to more aggressively investigate possible evasion cases, and conducting aggressive auditing of firms at high risk. Failure to cooperate in an investigation by an importer or foreign exporter may result in a finding of evasion.

Contact TransLegal with your questions concerning the Trade Facilitation and Enforcement Act of 2015.

India: Legislative Updates

Francisco A. Laguna

 This week, TransLegal begins a series on recent legislative changes in India.  In the following posts, we will analyze some of the more significant ones for foreign investors.  Today, we focus on changes to India’s External Commercial Borrowing rules.

Symbol for Rupee (INR) Photo Credit: Wikimedia Commons

Symbol for Rupee (INR)
Photo Credit: Wikimedia Commons

The Reserve Bank of India (RBI) has substantially revised the rules governing external commercial borrowing (ECB) to allow Indian businesses to borrow monies from certain foreign banks.  The new rules are found in the External Commercial Borrowings (ECB) Policy – Revised Framework, RBI A.P. (DIR Series), Circular No. 32, 30 November 2015.  They enter into force once published in the Official Gazette.

The new ECB rules classify ECBs into three categories, broaden the list of eligible lenders and reduce the restrictions on how ECB monies may be used.

Classification

ECB will now fall into three “tracks”, depending on the term of the loan and the currency of the loan:

Track I ECBs are defined short- to medium-term (3 – 5 years / 5 – 10 years), foreign currency-denominated loans, with an all-in-cost ceiling, over a 6-month LIBOR, of 300 basis points and 450 basis points, respectively.

Track II ECBs are also foreign currency-denominated with a minimum maturity of 10 years and an all-in-cost ceiling of 500 basis points.

Track III ECBs are rupee-denominated loans, with all-in-cost ceilings determined by then-existing market conditions.

Presidential Standard of India Photo credit: Wikimedia Commons

Presidential Standard of India
Photo credit: Wikimedia Commons

Eligible Lenders / Investors

Regardless of the track, eligible lenders now include long-term investors, such as regulated financial entities, insurance funds, pension funds and sovereign wealth funds. In addition, foreign branches and subsidiaries of Indian banks qualify as eligible lenders for Track I.

 

 

End Use

Track I ECBs may be applied, among things, to: import capital goods; purchase capital goods domestically; finance new projects, or expand or update existing projects; invest in foreign subsidiaries or joint ventures; acquire shares of public sector projects under the disinvestment rules; refinance existing trade credits used to import capital goods; refinance existing ECBs; finance general corporate expenditures; and pay for capital goods already shipped / imported but as yet unpaid.

Flag of India Photo Credit: Wikimedia Commons

Flag of India
Photo Credit: Wikimedia Commons

Except for ECBs from non-banking finance companies, long-term ECBs, whether foreign currency or rupee-denominated, can be used for any purpose except: real estate purchases or speculation; investing in capital markets or domestic equities; or to lend monies to third parties involved in such activities.

Track III ECBs from non-banking finance companies can be used exclusively for: making loans to entities in the infrastructure or construction section; making secured loans to domestic entities to acquire capital goods and equipment; and to acquire capital goods and equipment that will be leased or leased-to-purchase by domestic entities.

Eligible Borrowers

As indicated above, the new ECB rules were adopted to increase foreign capital flows into India and provide companies with increased funding sources, especially in the infrastructure sector.  However, the class of eligible borrowers has been narrowed. Previously, all corporates entities were to take out ECBs, subject to end-use restrictions.  The new rules limit eligible borrowers to companies in the manufacturing, software development, shipping, airlines or infrastructure sectors.

TransLegal assists companies navigate the complexities of the Indian legal and financial system.  Call us with your questions.  Next week, we’ll explore developments in Indian labor and employment laws.

Brazil: Fallen Market or Bright Future?

Francisco A. Laguna & Joshua Hassell

2014 was not the best year for Brazil.  Last year, Brazil, the world’s seventh largest economy, suffered a major economic downturn that threatened to become a full blown recession. There are some promising signs for Brazil’s future. The question is whether these signs are promising enough to make the country a good choice for foreign direct investment.

The International Monetary Fund projects a 0.1% growth in Q4 over Q4 for 2015 and a 2.2% growth in Q4 over Q4 in 2016. However, the majority of this projected growth can be attributed to factors outside the Brazilian economy and beyond the government’s control, such as falling oil prices and the general increase in the global economy.  The systematic opening of Iran will put further strain on oil prices, and all oil-producing nations will feel the effect.

National Congress, Brasilia Photo Credit: Eurico Zimbres via Wikimedia Commons

National Congress, Brasilia
Photo Credit: Eurico Zimbres via Wikimedia Commons

Additionally, most of Brazil’s projected numbers for economic growth are derived from the potential impact of harsh austerity measures. One such measure was a bill known as Provisional Measure 664, originally slated to tighten access to survivor pensions and worker compensation.  The measure was passed by the Brazilian Senate with a vote of 50 to 18.  However, it was extremely unpopular.  To garner public support, a series of riders that could result in an increase of public spending by up to 40 billion reais (~ US$ 12.4 billion) were attached to the draft measure allowing workers to qualify for full pensions at a younger age.  Brazilian President Dilma Rousseff is expected to veto these addenda.

President Dilma Rousseff Prime Minister of China, Li Keqiang By Marcelo Camargo/Agência Brasil (Agência Brasil) [CC BY 3.0 br (http://creativecommons.org/licenses/by/3.0/br/deed.en)], via Wikimedia Commons

President Dilma Rousseff Prime Minister of China, Li Keqiang
By Marcelo Camargo/Agência Brasil (Agência Brasil), via Wikimedia Commons

A second austerity measure, Provisional Measure 665, was passed in May 2015 and was originally supposed to save the Brazilian government 9 billion reais (~ US$ 2.4 billion) a year.  Again, however, riders attached to the bill effectively cut the government’s saving in half to 5 billion reais.  Currently, Brazil appears hesitant to pass the level of austerity measure required, and this could make it difficult for Brazil to achieve the results projected by the IMF.

Additionally the IMF’s recent consultation regarding Brazil illustrates that as of April 10, 2015 Brazil’s current account deficit had increased to 4.2% GDP a huge increase from the 2.4% GDP figure from 2012. Non-financial public debt also increased to 71% of GDP from almost half of that.

Furthermore, Brazil’s markets are highly noncompetitive due to a massive increase in interest rates to a six year high of 12.75 in order to combat rising inflation. Much of Brazil’s previous economic growth had been driven through consumption, and thus, the interest increases have a potentially huge impact on not only Brazilian corporations but the overall Brazilian economy. Many smaller businesses have reported significant losses from 2013 to 2015, which has resulted in a historically low consumer confidence rating.

Topographic Map of Brazil by Captain Blood at en.wikipedia (Transferred from en.wikipedia) [GFDL (http://www.gnu.org/copyleft/fdl.html) or CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0/)], from Wikimedia Commons

Topographic Map of Brazil by Captain Blood at en.wikipedia (Transferred from en.wikipedia) [GFDL (http://www.gnu.org/copyleft/fdl.html) or CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0/)%5D, from Wikimedia Commons

Despite all this, TransLegal clients continue to be drawn to the country because of its sheer size and potential.  This year, we have completed projects related to distribution agreements for animal feed, the registration of animal feed supplements, the sale of genetically modified products, the use of agricultural liming materials and a regulatory audit of a Brazilian company to be acquired by a foreign corporation to assure the company was in compliance with all regulations governing the manufacturing and sale of its products.

While Brazil may be doing better than in 2014, its short-term outlooks for 2015 and 2016 are not as bright as they might be.  Investors have to weigh for themselves whether the market is currently a viable candidate for FDI or, perhaps, whether they should use this period to establish their products in the market place and build brand recognition and in-country experience with conservative goals.

Call TransLegal with your questions concerning Brazil.  With offices in Brasilia and São Paulo, we are ready to assist you in Brazil.

Future Business Opportunities in Iran

Francisco A. Laguna & Wojciech Kornacki

Under normal conditions, a country with a well-educated population, a large middle-class, 9% of proven world oil reserves, 18% of proven global gas reserves and an abundance of strategic minerals would be an excellent place to invest.  Unless, the country is Iran, which is currently subject, rightly, to complex and multi-faceted international financial and other sanctions that have reduced its economy by about 15 to 20%.  This may change soon, however, as Iran attempts to end its economic isolation.

According to a 2007 Goldman Sachs report, Iran’s energy sector, technology, and human capital could make it particularly attractive for foreign direct investment.  Now that there is a possibility that sanctions may be lifted, many national and private investors want to position themselves to benefit from the new and very attractive market when (and if) it opens.  Countries such as China, Russia, Turkey and various European countries are already preparing for the sanctions to be lifted.

Currently, the United States and Iran are engaged in extensive negotiations over Iran’s nuclear program.  Depending on the outcome, certain sanctions could be lifted against Iran.  This would open its oil, gas, technology, human resources, natural resources, automotive, airline, hospitality and tourism, and many other industries to foreign direct investment, and it would create billions of dollars’ worth of business opportunities in Iran and the world.   Courtesy of http:// http://en.wikipedia.org

Currently, the United States and Iran are engaged in extensive negotiations over Iran’s nuclear program. Depending on the outcome, certain sanctions could be lifted against Iran. This would open its oil, gas, technology, human resources, natural resources, automotive, airline, hospitality and tourism, and many other industries to foreign direct investment, and it would create billions of dollars’ worth of business opportunities in Iran and the world. Courtesy of http:// http://en.wikipedia.org

The expectation is that once sanctions are removed, new opportunities will create billions of dollars’ worth of business for local and international companies.  Essentially, Iran could be the “next big thing” (once the sanctions are lifted) after the opening of the markets in Central and Eastern Europe.  Some of its regional trading partners expect that their economies will also grow once the sanctions are removed.

Investors are already holding discussing Iran’s oil industry and auto industry.  Indeed, many international energy companies are very interested in Iran, including Royal Dutch Shell Plc, British Petroleum and Total SA.

Not all sanctions will be lifted overnight, and some sanctions may continue for years to come.  In addition to keeping an eye on the international sanction regime, a prudent investor should also consider the following Iranian industries, once the sanctions are removed.

Banking: New businesses and residents will require both domestic and international banking services.  The international banking community has started looking at the country’s potential.  It will be interesting to see which banks move in first.  Will the Swiss join?

Iran’s domestically developed drone capable of traveling almost 2,500 miles.  Due to sanctions, Iran has been forced to develop its own technologies.  Collaboration between international and domestic businesses partners is estimated to create millions of dollars’ worth of business, once the sanctions are lifted.  Courtesy of http:// http://en.wikipedia.org

Iran’s domestically developed drone capable of traveling almost 2,500 miles. Due to sanctions, Iran has been forced to develop its own technologies. Collaboration between international and domestic businesses partners is estimated to create millions of dollars’ worth of business, once the sanctions are lifted. Courtesy of http:// http://en.wikipedia.org

Construction / Real Estate:  Many Middle Eastern businesses are interested in Iran’s real estate market.  The lifting of sanctions is likely to result in the return of some of the Iranian diaspora as well as representatives of multinationals and other companies that will invest in the country.  This will create the need for housing and, as the economy progresses, more luxury condominiums and residences with Western amenities.

Consulting Services: International businesses are likely to begin working to pre-position themselves in a post-sanctions Iran.  To be successful in the country, businesses will need reliable consultants to assist them navigate cultural nuances, language barriers and business practices, including the practice of gift-giving.

Natural Resources and Minerals: After years of sanctions, Iran desperately needs billions of dollars to make its oil industry profitable again.  In 1974, Iran pumped 6 million barrels per day; today, it only pumps 2.8 million.

Cube of Zoroaster.  Iran’s rich culture spans over thousands of years.   This tower-like construction was in the 5th Century BC.  Iran’s tourism and industry are likely to grow fast once the sanctions are removed.  Courtesy of http:// http://en.wikipedia.org

: Cube of Zoroaster. Iran’s rich culture spans over thousands of years.
This tower-like construction was in the 5th Century BC. Iran’s tourism and industry are likely to grow fast once the sanctions are removed. Courtesy of http:// http://en.wikipedia.org

Tourism and Hospitality: Before the Iranian Revolution, Tehran was touted as one of the most cosmopolitan cities in the region.  Years of isolation and religious extremism have crippled Iran’s tourism and hospitality sectors.  As Iran seeks to re-open itself to the world, it will have to modernize these sectors, and FDI is the perfect means of accomplishing this goal.  There is much work to be done, however, for these sectors to be viable contributors to the Iranian economy.  Currently, tourism in Iran accounts only for 2% of the entire GDP; in most countries, it is typically around 5%.

It will be interesting to see how the government will approach FDI in strategic sectors such as banking, minerals, natural gas and oil, as well as non-strategic sectors.  How will it allow such investments to be structured?  What ownership percentage will be permitted?  What about repatriation of capital / profits or termination of investments?  How will corruption manifest itself? Equally important, how will it treat different religious views and cultural morés?

If sanctions are lifted, Iran will be an emerging economy.  It will not have the bargaining power of economies such as China that can exact concessions from investors.  The manner in which the government treats international investors will largely determine the success of a post-sanctions Iran.  Given the political and religious turmoil plaguing the larger region and the very real threat of terrorism, corporations will be cautious of investing financial and human resources for a deal that is overly burdensome with uncertain financial returns.

If you are interested in learning more about future business opportunities in Iran and how to increase your chances of harnessing them, contact TransLegal or call 703-566-9427.

India: Legislative Updates

Francisco A. Laguna

 This week, TransLegal begins a series on recent legislative changes in India. In the following posts, we will analyze some of the more significant ones for foreign investors.

 Capital Markets

 The Securities Exchange Board of India (“SEBI”) has revised insider trading regulations. The new rules, contained in the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015, enter into force 16 May 2015. One major change introduced by the new rules is that people not in the brokerage sector cannot obtain from an insider, directly or indirectly, any unpublished, price-sensitive information related to a company listed, or proposed to be listed, on an exchange. Insiders are defined as people who have been associated for the prior 6 months with a company that is listed, or proposed to be listed, on an exchange, and who are is in possession of the company’s unpublished, price-sensitive information.

Citizenship Law

The Parliament issued the Citizenship (Amendment) Bill, 2015, which purports to grant the same rights and privileges to persons of Indian Origin as well as Indian citizens living abroad.

Coal Mines Bill

Parliament of India Photo credit: Wikimedia Commons

Parliament of India
Photo credit: Wikimedia Commons

The Lower House of Parliament, the Lok Sabha, approved the Coal Mines (Special Provisions) Bill, 2015. The law seeks to make the process of granting coal mine leases more transparent. The Upper House, the Rajya Sabha, has yet to pass the law. The leasing process has been criticized for lack of transparency and corruption.

Foreign Direct Investment – Generally

The Department of Industrial Policy and Promotion (“DIPP”) is proposing to raise the FDI threshold from 12,000 million rupees to 30,000 million rupees. The Government may increase the threshold at which Cabinet approval for foreign investments becomes necessary, making India a more attractive venue for FDI. The goal is to attract foreign investments, particularly in infrastructure and manufacturing sectors. Currently, investments exceeding the 12,000 million limit require the approval of the Cabinet Committee on Economic Affairs.

TransLegal has advised clients on foreign direct investment regulations in the food & beverage as well as the hospitality sectors.

Foreign Direct Investment – Housing Sector

The Government has relaxed the rules related to repatriating FDI in the housing sector. In December 2014, the Government implemented these new rules by decreasing the required built-up area and capital needs. In March 2015, the DIPP clarified that the existing three-year lock-in will no longer apply, and under normal circumstances, an investor can exit on an automatic basis upon completion of the project or after the construction of basic infrastructure, such as roads, water supply and drainage. The Foreign Investment Promotion Board (“FIPB”) can approve earlier exits on a case by case basis.

The minimum built-up area requirement for development projects has been reduced from 50,000 square meters to 20,000 square meters, and minimum capital investment by foreign companies has been decreased substantially from US$ 10 million to US$ 5 million. In addition, the government has introduced an exemption to the minimum floor area and the capital requirements when an investor / joint venture company commits at least 30 % of the total project cost to low-cost housing.

 Foreign Direct Investment – Insurance and Pension Sectors

 In March 2015, the Indian Parliament passed the Insurance Laws (Amendment) Bill, 2015. The bill raises the foreign direct investment (“FDI”) cap in insurance companies from 26% to 49%. This increased FDI cap directly increases the allowable FDI in the pension sector: the Pension Fund Regulatory and Development Authority Act ties FDI limits in the pension sector to those in the insurance sector. This increase presents important opportunities for foreign companies in both sectors.

National Stock Exchange of India Photo credit: Wikimedia Commons

National Stock Exchange of India
Photo credit: Wikimedia Commons

Import / Export Documentary Requirements 

In March 2015, the Directorate General of Foreign Trade (“DGFT”) issued a notification drastically reduced the mandatory documents required for importing and exporting goods to three (3) documents. For imports, the mandatory documents are: bill of lading / airway bill; commercial invoice / packing list; and bill of entry. For exports, the mandatory documents are: bill of lading / airway bill; commercial invoice / packing list; and shipping bill / bill of export.

Intellectual Property

India’s IP Office now allows electronic filing for new applications for design & geographical indications. Previously, e-filing was only available for trademarks and patent applications.

Labor Law

 The 2015 Union Budget proposes the following amendments to applicable labor laws. First, the government seeks to provide increased flexibility for employee contributions to the Employee Provident Fund (“EPF”). Employees would be allowed to choose to participate in the EPF or a New Pension Scheme (to be developed). The proposal also provides that employees with incomes below certain monthly thresholds would have the option not to contribute to the EPF, without affecting or reducing the employer’s mandated contribution. In addition, the amendments would allow employers to offer employees participation in the Employee State Insurance (“ESI”) or a different health insurance product duly approved by the Insurance Regulatory Development Authority (“IRDA”).

Money Laundering

Presidential Standard of India Photo credit: Wikimedia Commons

Presidential Standard of India
Photo credit: Wikimedia Commons

Amendments to existing laws have been proposed to prevent money laundering. Two independent laws have been submitted to address unaccounted-for monies held offshore and dubious domestic transactions. Persons found to violate the law will be subject to prosecution and steep penalties. To implement these measures, amendments have been proposed to the Prevention of Money Laundering Act (“PMLA”), 2002 and the Foreign Exchange Management Act (“FEMA”). Under the proposed amendments, concealment of income and assets and evasion of tax related to foreign assets will be subject to prison sentences of up to 10 years. Each transaction in violation of the law will be treated separately, and offenders will not be allowed to reach an out-of-court resolution through the Settlement Commission. Those found guilty of tax evasion will be subject to penalties of 300% the tax that would have been paid on the concealed income and assets.

Call TransLegal with your questions concerning Indian laws and regulations and how they may impact your proposed FDI projects.

United States Immigration Series Post No. 4 Temporary Work Visas to the United States

Francisco A. Laguna & Annapurna Nandyal

 Today, we continue our discussion of temporary work visas for the United States, focusing on H-1B visas.

 

US Embassy in Prague, Czech Republic Photo Credit: Kenyh Cevarom via Wikimedia Commons

US Embassy in Prague, Czech Republic
Photo Credit: Kenyh Cevarom via Wikimedia Commons

The popularity of the H-1B visa program has increased tremendously in recent years, resulting in Congressional action to enact temporary and permanent increases in the annual visa cap limits. Currently, there is an annual cap of 85,000 H-1B visas mandated by Congress. Certain numerical limitations are placed on the H-1B visas:

  • 58,200 visas are available for initial H-1B applicants
  • 6,800 visas are reserved for citizens of Singapore and Chile under free trade agreements
  • 20,000 visas are reserved for those with graduate degrees from U.S. institutions
  • No limits apply to the number of visas issued to universities, research institutions and non-profit organizations.
US Embassy in Phnom Penh, Cambodia

US Embassy in Phnom Penh, Cambodia

Each of the H-1B quota above applies to the fiscal year which begins October 1st. Applications for the upcoming fiscal year are accepted on April 1st of the preceding year. So for fiscal year 2016, the US Citizenship & Immigration Service (USCIS) begins accepting applications as of April 1, 2015. Cap limits are reached quickly: in 2014, the USCIS received 172,500 H-1B petitions for the 85,000 visas available. To address this excess interest, the USCIS allocates H-1Bs by using a lottery/random selection system.

Benefits of H-1B Visas

 

US Embassy in Santiago, Chile

US Embassy in Santiago, Chile

Holders of H-1B visas enjoy numerous benefits, unlike most of the non-immigrant visas:

  • Ability to extend their stay beyond the six-year limit in certain situations, for example, getting an employment-based green card
  • No requirement to show ties to their home country and filing for a green card will not jeopardize their visa status
  • Ability to change employers while the H-1B is valid
  • Ability to have more than one US employer, but each employer must file H-1B petition and the petition must be approved
  • Ability to attend school / college part-time or full-time without needing an F-1 visa, provided the H-1B is valid
  • Ability to bring their spouses and children to the US by obtaining individual H-4 visas.

Immigration Executive Action 2014

In November 2014, President Obama announced executive actions to immigration reforms. Part of Obama’s executive action streamlines legal immigration by allowing thousands of H-1B workers to apply for Legal Permanent Status (LPR). Additionally, the spouses of H-1B workers would be able to apply for work permits if certain conditions are met.

We will continue to update our readers on Obama’s executive action as it unfolds.

TransLegal is available corporations and individuals navigate the intricacies of the US immigration system. Call us with your questions.

The African Growth and Opportunity Act Continues to Grow Trade

Francisco A. Laguna & Wojciech Kornacki

In 2000, the United States opened its domestic markets to sub-Saharan African nations. At that point, no one expected that within 14 years, Africa would be exporting over $400 billion in goods and services to the United States. Currently, with the increased competition from the European Union and China, the US and its African partners are developing new trade and training opportunities that could benefit your business.

Background

Africa

Africa

 In 2000, the United States decided to expand, simplify and diversify its trade relations with sub-Saharan African countries. In part, this was in response to the trade agreements the EU signed with 79 countries in Africa, the Caribbean and Pacific during the same period. Through the African Growth and Opportunity Act, the United States unilaterally opened its domestic markets to the African countries in the sub-Sahara so long as the African countries reformed their economies and made them more transparent, among other requirements.

The benefit for US companies was that this created many new opportunities to provide credit and technical expertise to various sector in Africa. It also allowed many American companies to benefit from new business-to-business opportunities with the African businesses. Continue reading

Commercial Space Flight and Exploration Opportunities with NASA

Francisco A. Laguna & Wojciech Kornacki

The National Aeronautics and Space Administration (NASA) has opened the gates to commercial space flight, and, as a result, new business opportunities for the private sector are becoming available in the space industry. Before now, in the United States, all space travel was state-controlled, state-owned and taxpayer paid-for. Now, NASA is partnering with private businesses and high-technology companies to take space exploration and travel beyond the limits of any other government space agency. The first $6.8 billion in space travel contracts with Boeing and SpaceX are just a preview of what is yet to come.

The Evolution of NASA Continue reading